Is The Federal Reserve Insolvent?
With Geoffrey Batt
The ongoing troubles at the GSEs are no secret: it is public knowledge that Fannie had a 5.38% delinquency rate at December, while Freddie just passed the 4% threshold in January; both continue to rise rapidly each month. The fact that the mortgage-bond spread has just hit a record tight is merely an ongoing artifact of the Fed's endless meddling in the mortgage market, with the sole purpose of keeping rates artificially low, and preventing banks from being forced to take massive writedowns on their entire loan book. This is all well known. What, however, seems to have escaped public attention is what the impact of these delinquencies is on the one largest holder of Mortgage Backed Securities, the Federal Reserve. What also seems to have escaped the public is that the Fed is now the world's largest bank, with total assets near $2.3 trillion. We provide a weekly update of the Fed's balance sheet and while we briefly note the liability side, our, and everyone else's, attention, is traditionally focused on the asset side. Yet a more detailed look at the liability side reveals something very troubling, specifically that the Fed's capital, i.e. equity buffer, which as of most recently was $53.3 billion (a comparable metric for plain vanilla banks is their equity buffer, or Tier 1 Capital, or however the FASB wants to define it on any given day when it is covering up massive capital shortfalls) is in fact negligible and could well be substantially negative, if the Fed were to account for the rapidly rising level of delinquencies in its one largest asset holdings: the $1.027 trillion in settled MBS. And while there is no possibility of a run on the Fed, the reality is that the Fed now likely runs with a negative real capital balance, meaning that the US Federal Reserve is now essentially insolvent.
First, we present the Fed's assets broken down by key segments. The chart below shows the most recently disclosed asset holdings as per the H.4.1 statement. Of the $2.3 trillion in assets, the vast majority, or $1 trillion is held in MBS. As pointed out previously, this is only the settled amount - in reality the Fed has already purchased $1.22 trillion in MBS, which will settle over time. In practice, this merely means that the potential for asset impairment at the Fed is even greater by about 20%.The chart also shows what happens to MBS holdings if haircuts of 5%, 10% and 15% are applied.
Like any balance sheet, where there are assets, there are liabilities, and some version of capital/equity. The Fed's liabilities are two principal components: currency in circulation, which has been at about $900 billion for an extended period of time, and the much more relevant recently line item called "Bank Deposits", which has been popularized as Reserves with Federal Reserve Banks (or excess reserves). The Reserve line has increased from essentially nothing to nearly $1.3 trillion in the span of a few months. Furthermore, as more and more MBS purchased are settled, the excess reserve line will soon reach at least $1.6 trillion, if not more, if indeed Q.E. 2 is launched at some point in the future. The persistent discussions of potential inflation center precisely on the interplay between the green and blue blocks in the chart below: as long as the Currency in Circulation is flat, and Bank Deposits keep rising, the probability of inflation is slim to none. In essence, excess reserves exist only due to the Taylor rule implied negative Fed Funds rate. Should there be a material shift from green to blue, or from excess reserves to currency in circulation, that is when the hyperinflationary threat becomes all too real, as suddenly far too much money will chase a fixed amount of assets. This is also where the discussion about all the various mechanisms that the Fed has at its disposal to moderate tightening comes into play, whether it involves selling of assets, increase of the rate on reserves, or some combination inbetween (we point readers to yesterday's paper from the Minneapolis Fed which discusses these options, and the caveats associated with each). While the asset reallocation debate is very interesting, it is not the topic of this discussion.
The one item on the balance sheet that is often ignored, is the Fed's "Equity", or as it is defined, "Capital." As previously pointed out, this line item is currently $53.3 billion. It is shown graphically in the leftmost column of the chart below, which depicts actual Fed liabilities. Where the interesting part comes in, is when one analyzes what happens to the Fed's capital when the abovementioned MBS haircuts are applied.
A 5% realized haircut on MBS alone would result in a complete elimination of the Fed's capital balance. Applying a 10% or even 15% haircut, results in a capital deficiency of $50 billion and $100 billion respectively. This deficiency will grow as more and more MBS are settled, and as the serious delinquency rate on MBS keeps increasing (no danger in this moderating any time soon).
Now in an environment, such as the one we live in today, when mark-to-myth is the new normal, and when banks are encouraged to come up with creative ways to indicate that their Residential and Commercial Loan portfolios are worth par (despite recent disclosures by the FDIC), to assume that the Fed would do something that lowly depositor banks are told not to do, would be folly. Yet, for those who prefer to live away from Never Never land, and brave this thing called reality, just what will happen if and when the Fed finally does disclose that it is, for all intents and purposes, insolvent?
The pragmatics among you will say: this is irrelevant, the Fed can just print more money and fill in any capital hole. Well, yes and no. As an increase in cash would have to be offset by a comparable increase in some asset, it is not that simple. For a refined analysis of what would happen in that moment of clarity when the world realizes the world's biggest bank is broke, we turn to a presentation by Chris Sims, given before Princeton University, titled "Fiscal/Monetary Coordination When The Anchor Cable Has Snapped." We encourage all readers to read this powerpoint cover to cover, as it discusses precisely the issues were are faced with today: namely a monetary policy that has run amok, seignorage, exploding excess reserves, the impact of these on "power money", and, in general, a Fed balance sheet that is increasingly reminiscent of a drunk, rapid and schizophrenic bull in a China store.
Among other relevant things we note that as the author points-out that "Interest bearing deposits at the Fed do not (yet) count against the Federal debt ceiling" and "if substantial interest is paid on reserves, they could constitute a major leak in the US system for legislative control of debt creation or they are not backed by the full faith and credit of the US government, which has implications for inflation control" - the consequences here are material - with a $1 trillion plus in vacuum interest-collecting paper which in all other world would be counted toward the debt ceiling, the US debt subject to limit would increase from the $12.5 trillion currently to about $13.7 trillion. Add in $6 trillion from the GSEs and America is already at the dreaded $20 trillion threshold. And furthermore, what happens to the interest payments by the Fed should rates go up to 100 bps, 200 bps? On $1.6 trillion in excess reserves this is a material amount that would reinforce inflation in a circular loop, further justifying why the Fed is mortally worried about a rise in rates.
As for the topic at hand, we turn to pp 23-24 of the presentation:
- Central bank operations generate fluctuating levels of net earnings (seigniorage), most of which are turned over to the Treasury as revenue
- Central bank balance sheets sometimes go into the red. The Treasury may then recapitalize it by creating, and giving to the central bank, new government debt
- [The Fed's] Independence meant that the legislature and the Treasury did not complain [much] about seignorage fluctuations or about the effect of interest rate changes on the Treasury's interest expense
- Fed can always "print money" to pay its bills.
- There is no possibility of a run on the Fed, since its liabilities make no conversion promise.
- A commitment to a path for inflation or the price level makes the balance sheet matter.
- Without Treasury backing, the Fed must rely on seigniorage to raise revenues, and that can conflict with inflation-control goals.
So here is the crux of the issue: the only way to deal with a mark-to-market of the Fed currently is to embrace monetization. It is no longer a question of semantics, of who promised what: it is the only mechanical way by which the Fed can dig itself out of a capital deficiency. With GSE delinquencies exploding, and with the Fed (and Congress) singlehandedly facilitating imprudent lender policy by allowing ever more borrowers to become deliquent without consequences, the MBS delinquency rate will likely hit 10% over the next 6-12 months. At that moment, someone will ask the Fed: "what is the true basis of your capital account?" And when the Fed is forced to justify a valid response, is when monetizaton will begin.
Since the market deals in expectation absolutes, all it would take for rates to breach the inflection point black swan and commence going up, is the mere possibility of open monetization.
What we hope to show with this exercise is that no course of action, even the one currently employed by the Fed, can continue in perpetuity: you can't have infinitely low housing rates in an environment of exploding delinquencies, as even more MBS are onboarded on the taxpayer's balance sheet. The reality is that inflationary conerns will come to a fore, and have a material impact on rates, the second all these speculations are voiced in a more reputable arena. At that point the game will be up; the Fed's attempt to continue the status quo will be over, and the relentless rise up in rates will begin, culminating with the long-awaited Minsky moment.
As for the timing of this development? We will join the Bob Janjuah camp on this one. While few have the guts to take the money printer head on, doing so early is certainly suicidal. Yet with each passing day, all those who are fully aware that the Fed's course is one of self-destruction, grow bolder, until finally one day a new class of investors - the Fed vigilantes will emerge, looking for cheap opportunities to make a killing (think ABX) on the other side of the "Fed trade", which ultimately will lead to a systemic catharsis of unprecedented proportions.
At that point neither gold, nor lead will be in any way useful. Beta and gamma radiation will make sure of that.
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on Mon, 03/08/2010 - 20:22
#258543
What ever....Rally on
on Mon, 03/08/2010 - 21:07
#258604
Only a year ago, Chinese college students were laughing at Geithner.
Today all of ZH laughs at the American Empire's monetary "authorities". (Ok, excluding the few betting on deflation.)
Next year will the American people arrest those same "authorities"?
on Mon, 03/08/2010 - 21:27
#258643
yeh we all laugh, but it really isn't that funny is it? what we are talking about here is the destruction of the american way of life if you think about it. the writing is on the wall. the question is not if, but when.
on Mon, 03/08/2010 - 21:59
#258680
The tentacles of the vampire squid have been destroying the way of life for the American people at least back as far as the Clinton-era (thanks, Robbie Rubin).
The destruction of the Goldman Sachs' execs' way of life doesn't seem like much of a loss in comparison.
on Mon, 03/08/2010 - 23:35
#258801
Not to put too fine a point on it, but hasn't the Fed *always* been insolvent?
By the very nature of our monetary system it seems so... If 90 years ago every peice of paper issued by the Fed had been callable, and called in, the liabilities would have always outweighed the assets. The essence of the Fed seems to be an institution that is always technically bankrupt, but never in default.
The issue now seems to be that because they can hold off balance sheet crap indefinetly, the whole system is revealed that 'money' is worth whatever the hell the bankers say it is.
The only problem with this is the rest of the world has to play along, and not start demanding payment in actual, tangible 'things', e.g. machines, raw materials, food, or... (Waiting for GG, Chumba, et. al. to rant here).
I'm thinking the rest of the world will catch on in about one to two years.
on Tue, 03/09/2010 - 00:18
#258834
I rather suspect that the rest of the world has already caught on to the facts of life as they relate to the various aspects of dollar trapping. A most insidious version of MAD to be sure. Still, all will feel compelled to play along so long as the fed will gladly accept any and all trash from whatever source to keep the game going and by accepting this state of affairs the world remains along for the ride. After all, everyone else expects that the fed and by extension the citizens of the USofA will end up with all the trash. Until the fed has accumulated all of the trash that can be vacuumed up everyone else is going to play along and trade around the ebbs and flows until, as this article suggests an inflection point is broached. However, I am coming around to the idea that it will be difficult to garner enough opposing positions to the fed simply because those that make these markets (the member institutions of the various central banks) would simply refuse to play along and close the windows so to speak as the talking heads will revert back to the newly worn track of the root of all evil to those that do God's work is to be found in those that dare to speculate in financial markets. I have been saying for some months now that it will be the trade in tangibles and not their paper representations that will most likely prove to be the catalyst, along with the realization that everyone cannot devalue to zero while relying on exports at the same time.
on Tue, 03/09/2010 - 08:52
#259042
elegant proof of their intention to collapse the dollar... an implosion, from within, not from external factors but the purposeful acqusition of over leveraged assets that will bring the collapse.
meanwhile, the dollar rallies and gold drops. smells like a rat...
on Tue, 03/09/2010 - 07:14
#258989
Not to put to fine a point on it, say I'm the only bee in your bonnet!
Question : is the fed insolvent?
Answer : false, black bears are best
on Tue, 03/09/2010 - 11:00
#259140
Well, that's debatable. There are basically two schools of thought...
on Fri, 03/12/2010 - 17:07
#263724
yeah...I HOPE IT IS PULVERIZED LIKE THE 911 BUILDINGS. That's how much I care about this ridiculous system that has failed us for centuries.
on Mon, 03/08/2010 - 20:22
#258544
Insolvent?Oh yes.
on Mon, 03/08/2010 - 21:20
#258621
How can a printing press be insolvent?
on Mon, 03/08/2010 - 21:32
#258648
it cant, this entire post is retarded
on Mon, 03/08/2010 - 22:24
#258712
Of course a printing press can be insolvent! Look at Zimbabwe. They can't even buy the paper anymore to print their worthless dollars on. Just don't say that it can't happen here!
on Mon, 03/08/2010 - 22:32
#258728
^^ This.
on Mon, 03/08/2010 - 22:33
#258729
If you are asserting that hyperinflation shall come to pass, then what you are really saying is one of the following:
1. Collapse of civil society. SS retirees and unemployed can't afford $1500 loaves of bread. OR
2. Revolution - hang the bankers then the politicians. OR
3. WWIII.
Which outcome is most likely?
on Mon, 03/08/2010 - 22:38
#258734
All
on Mon, 03/08/2010 - 22:39
#258736
They're not necessarily mutually exclusive.
on Mon, 03/08/2010 - 23:14
#258785
The banksters behind the Fed, and who own and run Washington, will push us deeper into war, giving them increased martial law powers. Howard Zinn well illustrated this tendency in his excellent history. Expect another 9/11 false flag type maneuver soon, because they will do anything and everything to keep their grip on power.
Revolutionaries will be called/branded as terrorists, and shot. There is little chance of a real revolution working, we are already too far down the slippery slope. The best we can do is keep aside, keep a low profile, and try to be a constructive part of what is left after WW3, because just like Hitler, absolute defeat is the only thing that will stop them.
on Mon, 03/08/2010 - 23:37
#258803
There will be a currency crisis followed by 2-3 months of fairly intense chaos, then the 'reset' button will be pushed.
on Tue, 03/09/2010 - 06:10
#258967
yes, but watch their smug smiles disappear as they realise the reset button isnt working
on Tue, 03/09/2010 - 09:55
#259081
The hard part is the 25% interest rates that come with the new currency.
on Mon, 03/08/2010 - 23:44
#258811
I think you are being too pessimistic. Many things can/will stop the banksters. Among them...
1) China says enough,
2) rising commodity prices (energy, food) cause American workers to say enough (can't afford to drive to work),
3) foolish wars cause American troops to say enough,
4) nobody in America has money to pay taxes (we know GS doesn't pay),
5) the thieves decide to get out of the country while they still can
I don't know which one it will be, but I'm guessing China.
on Tue, 03/09/2010 - 00:34
#258842
3) foolish wars cause American troops to say enough,
Actually, the crisis within the ranks of the armed forces will come to pass when the issue of what constitutes a "lawful vs an unlawful order" under the UCMJ gets sorted out. I can say that a little appreciated state of affairs outside the ranks is the ongoing discussion within the ranks as to what actually constitutes lawful civil authority and the required actions under law when that authority has been deemed to be compromised rendering the orders from that authority unlawful. The wars of nonsense are simply sauce for this larger goose.
on Tue, 03/09/2010 - 09:09
#259051
In Rome, it was the Praetorian Guard that underwrote political power. If an aspiring Emperor didn't have the Guard under his wing, he had nothing.
Nothing has changed in the modern era, other than the pagan rituals have become less visible (but no less active) and orgies have gone electronic.
on Tue, 03/09/2010 - 16:32
#259355
Classic CD. I suspect that we are wondering who will pen this era's version of Marcus Annaeus Lucanus's classic on the civil war between Julius Caesar & Pompey. After all, in the post Vietnam era the whole of the American military has been imbued with the notion of being guardians of the constitutionally premised republic rather than the duty focus of the only force permitted in Rome, the Praetorian Guard. A rather different twist on this classic reference.
A more recent example can be drawn from our own national experience with the division of the Army in 1861 as officers, both commissioned and non commissioned along with the veterans were called upon to make a determination as to where their sense of duty was rooted. In this I would suggest that our civil war addressed some of the failures present in our nations founding, however it singularly failed to address this conflicted sense of duty within the ranks.
I would also suggest that the present era has taken the concept of conspicuous consumption, in all its forms to new levels of lewdness. After all, everything from bulimia, mass drug addiction and private/public debt to income levels far in excess of 100% are socially pervasive conditions and no longer simply limited to the upper governing and leading crusts of society.
on Tue, 03/09/2010 - 06:12
#258969
or
6) States start to break away from the union as the only way to regain genuine austerity and order
on Tue, 03/09/2010 - 09:56
#259083
Can't see the Pentagon allowing that.
on Tue, 03/09/2010 - 10:21
#259108
And if we read our history, we know that Hitler was, in fact, defeated.
Just like these tweakers will be.
I am Chumbawamba.
on Tue, 03/09/2010 - 17:19
#259714
You lost me at "9/11 false flag."
on Tue, 03/09/2010 - 11:14
#259148
Not at all.
on Tue, 03/09/2010 - 09:37
#259069
I love how you keep comparing the most powerful country in the world to a third world african "country". Go ahead, short the whole market and buy "gold bitches!" according to the economist 47 trillion dollars was destroyed during 2008 through deflation and loss of equity capital. We have not even come close to monetizing that amount yet.
on Tue, 03/09/2010 - 10:36
#259123
Take two people with a predisposition to drug addiction. One is wealthy, the other is of moderate income. But one thing they share in common: they LOVE cocaine.
Give each an endless supply of cocaine. Let them snort as much as they want. Whenever they ask for some, give them some.
Which one fails first? Which one fails second?
Moral: the bigger they are, the harder they fall.
I am Chumbawamba.
on Tue, 03/09/2010 - 18:55
#259849
from wiki: "The publication belongs to The Economist Group, half of which is owned by the Financial Times, a subsidiary of Pearson PLC. A group of independent shareholders, including many members of the staff and the Rothschild banking family of England,[8] owns the rest" I like the economist too, but you really should factor in who they are considering the family's past (and present) managing of the world.
on Tue, 03/09/2010 - 23:06
#260196
Your 3rd world African country, used to be one of the bread-baskets of Africa...until corruption raped it...couldn't happen here in the usa...our corruption levels are so low,low,low...not here in america...
on Mon, 03/08/2010 - 22:08
#258687
Exactly.
The Fed cannot be insolvent. All it has to do is PRINT MONEY.
What is it people don’t understand about printing money.
The FED might have a PR problem. But it is definitely NOT INSOLVENT.
The USA is insolvent. But that’s another matter.
on Tue, 03/09/2010 - 11:22
#259159
Ok, but what if the value of those money being printed drops faster than the Fed prints them? Print faster?
on Mon, 03/08/2010 - 22:32
#258727
It can be technically insolvent without being practically insolvent.
Also, Anon's post above is retarded.
on Tue, 03/09/2010 - 09:11
#259052
+1
on Tue, 03/09/2010 - 09:34
#259066
Anonymous post above correct, an institute that creates capital out of nothing cannot go bankrupt. That is why they have absorbed all of the bad debt on their books. As the capital is destroyed due to default, they will create more just as fast. I know nobody wants to hear it, but these guys are in charge of the situation.
on Tue, 03/09/2010 - 11:30
#259167
that's why there's a difference between being 'bankrupt' and 'insolvent'. money printed by the Fed represent growth on the 'liabilities' side of its balance sheet. now, any bank that would try to resolve its debt problem with adding more liabilities on its balance would go bankrupt - the Fed will not, but it will still be insolvent and the moment markets realize that, Fed's liabilities will significantly drop in value. now, look at a dollar banknote and read whose liabilities are those banknotes?
on Mon, 03/08/2010 - 23:03
#258747
How can a printing press be insolvent?
In chess the king can't be taken, but it can be cornered and then trapped.
All games end.
I would also add that you assume that everyone will continue to believe that a dollar is worth something.... full faith, no?
How powerful is a printing press if no one wants those dollars? What happens when dollars aren't worth working for?
If printing presses were all powerful, methinks fiat currencies would have a better track record historically.
on Mon, 03/08/2010 - 22:53
#258752
It's like this. When people have money you can counterfeit it and pretend that the savers are investing in something and earn the interest THEY would have gotten. When there's no savings then it become blatantly apparent that you are counterfeiting. You can use this tool to extract equity from the country at a nearly infinite rate. Once that equity is gone it's game over.
on Mon, 03/08/2010 - 23:41
#258796
Exactly. You are the only one that makes sense. Ive been hearing the same song and dance about Japan. You know what? They are still around and still printing money. Wake me up when the credit bomb explodes. This is worse than watching a Masterpiece Theater marathon... ZZZZZZ ZZZZZZ ZZZZZZ. More boring than watching flies have fuck. Come on Uncle Ben, Im on your side. Line my wallet with some more Cabbage
on Tue, 03/09/2010 - 10:29
#259114
"Insolvent" in this case means that they are unable to remove all the inflation they have created from the system. In order to prevent catastrophic inflation, a central bank must have assets on its books that can be sold to remove some of that printed money from the system. Since they paid face value for worthless paper that no-one wants, there is no longer any way to remove that excess liquidity.
At this point, the only thing that can possibly be done is for the FedGov to step in and start selling assets (national parks, whatever gold they have, etc) and destroy the proceeds under Fed supervision. This seems unlikely to happen, and even if it did, they probably couldn't raise enough to cover all of their liabilities.
on Tue, 03/09/2010 - 11:06
#259145
Thank you. "unable to remove all the inflation they have created from the system" this is the problem at hand.
The Chinese are interested in Yosemite but they will settle for Kings Canyon as long as they can clear cut it.
on Mon, 03/08/2010 - 20:25
#258546
I can't decide what I fear more - the truth never coming out or the truth coming out.
on Mon, 03/08/2010 - 21:41
#258658
"I can't decide what I fear more - the truth never coming out or the truth coming out"
Amen +1000
Audit the FED? Be careful what you wish for.
on Mon, 03/08/2010 - 23:38
#258806
Fuck yeah, audit it.
Rip the bandaid off, pulling slowly just extends the pain.
on Mon, 03/08/2010 - 20:25
#258548
Is that someone going to be the Chinese, since they hold so many dollars as reserves? Seems like they would have the most to lose from a full-bore monetization.
on Mon, 03/08/2010 - 20:35
#258556
Old news. Same discussion.
The Zimbabweization of the Fed was long ago complete.
on Mon, 03/08/2010 - 20:37
#258557
Hmmm .. though that this was something intelligent. Obviously not, the Fed have more creative accountants than GS in handling balance sheet issues and off-balance sheet issues. The latter being the single most important issue. At the end of the day they can transfer the majority of 'risk' assets through to a separate Trust and you wouldn't know any different. Even if you did so what?
They are independent and unauditable ... even if any bill to audit the Fed is passed the president would veto it.
If the audit was so damned important and supported by all and sundry why is it not LAW???
on Tue, 03/09/2010 - 01:01
#258855
What happens if the Fed siphons off all the toxin to a shell in Cayman Islands? Just ignores it in effect and carries it off the books forever? Since all of this are computer data, can extend and pretend go on into infinity?
on Tue, 03/09/2010 - 05:31
#258953
Why is it not law!?
Can you really not work that one for yourself?
on Mon, 03/08/2010 - 20:38
#258561
Interesting but irrelevant to any money making stategy
on Mon, 03/08/2010 - 21:50
#258670
how about getting a job or going to work.
on Tue, 03/09/2010 - 01:38
#258874
I think the word is "strategery", Einstein.
on Mon, 03/08/2010 - 20:38
#258563
The more the plans fail, the more the planners plan.
http://www.reagan.utexas.edu/archives/reference/timechoosing.html
on Mon, 03/08/2010 - 20:44
#258570
There is nothing more costly and useless as a Central Bank incapable of generating positive inflation. The Fed can't survive in deflation.
Odds are growing much longer, QUICKLY, that the FED will not survive this. They've got no money and not capital, political or otherwise. The US Government will be forced to foreswear the controversial institution that was never lawful in the first place. The treasury will resume its role as custodian of the national money, and long experiment in fractional reserve banking will come to its conclusion.
This is all highly deflationary. Especially for the value of the "Federal Reserve Note" - which is now a glaringly obvious I O U issued by a corrupt and illegal, and BANKRUPT institution with no money or political capital.
Its 4th and long for the Fed. Either they can double the money supply and jump-start another round of "growth" - or its lights-out. Escalating taxes to fund a police state to preside over a long-run deflationary contraction makes sense only in the mind of delusion.
The future is parabolic increases either hyper-inflation, or a long and drawn out escalation of bankruptcies, foreclosures, lawsuits, Congressional hearings, special prosecutors, and very long and harsh prison sentences for what can only be described as stealing, if not high treason.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs"
- Thomas Jefferson
on Mon, 03/08/2010 - 21:01
#258597
Madcow,
"Escalating taxes to fund a police state to preside over a long-run deflationary contraction makes sense only in the mind of delusion."
Delusion is the normal operational status of beltway bureaucrats, by whom the country is mainly run on a current basis. They never have to interface with constituents. Their only potential critics/constituents are Congress; but I digress. In a fish, or a fishy situation, the rot starts from the head. New York politicians are a good example, but there are plenty more.
on Mon, 03/08/2010 - 23:40
#258808
Meh.
Control will revert back to the states, where it always belonged.
Support your local sheriff.
on Mon, 03/08/2010 - 21:02
#258598
Madcow,
"Escalating taxes to fund a police state to preside over a long-run deflationary contraction makes sense only in the mind of delusion."
Delusion is the normal operational status of beltway bureaucrats, by whom the country is mainly run on a current basis. They never have to interface with constituents. Their only potential critics/constituents are Congress; but I digress. In a fish, or a fishy situation, the rot starts from the head. New York politicians are a good example, but there are plenty more.
on Tue, 03/09/2010 - 11:24
#259163
We heard you the first time.
How much spin and PR will it take to employ the number of mindless idiots that would be required to police it all? They would surly have to shut down the internet and take much greater control of all other media than they already have.
The mere thought of success under those conditions is delusional.
on Mon, 03/08/2010 - 21:03
#258600
Madcow, I generally would disagree with you, being a raving inflationist for years. But now, unless action is taken as the last of the QE impacts from Q4 09 are filtered into the system over the next 90 days, they might just pull the pin on deflation and blow their own balls off by putting the grenade in their front pocket.
I think they will make an insane move where they have to double or triple down or risk losing 3000 banks in very short order. The FDIC has gone to pilfering from state run pension funds in an attempt to find suckers, er, "investors" for their insolvent banks. The level of depravity at all levels is amazing but in the Fed with all the pinheads who call themselves "academics" you would think that they would have realized in December that the efforts put forth thus far were totally insufficient for the level of the decline. A Fed board which thinks that the economic conditions will be robust by Q4 illustrates a total lack of understanding as to how their own cooperative arrangements with the Legislative and Executive branches of government allowed the monies injected to be evaporated by waste and incompetence almost immediately.
I fear you are correct Cow, they will have to hyperinflate in the end and that will result in a nation with wages and personall assets trailing the rate of inflation and commodity prices by a factor of upwards of 100:1. We are either witnessing a deliberate attempt to kill the Fed for something bigger or the fundamental restructuring of our nation for other purposes, which a sizable majority will object to.
on Mon, 03/08/2010 - 21:28
#258644
At the first sign of this turboflation, I'm buying the entire State of California (including Pebble Beach and Muir Woods). I'm sure WFC will loan me the dough. When my debt becomes as valuable as a used condom on a Half Moon Bay beach, I'll come out of retirement, go to work at Starbucks for an hour and twenty-two minutes at minimum wage, and pay off the WFC note in full. Maybe I'll sell off Bakersfield to Lennar for some butt-ugly tract housing.
Then I'll declare myself Emperor, send Ahnold back to Austria, and let Charles Manson out of jail just to improve the level of civility in wider society.
on Mon, 03/08/2010 - 22:26
#258719
major hoot.
on Mon, 03/08/2010 - 22:54
#258755
Hey, if you sell Bakersfield to lennar, I'LL MOVE!!!
Hell, I think I'll move even if you don't. I hate this town!!!
on Mon, 03/08/2010 - 23:06
#258772
Oops I forgot to sign-out when I wrote this!!
on Tue, 03/09/2010 - 13:33
#259317
A man with a plan, now get started on that loan paperwork.
on Mon, 03/08/2010 - 22:11
#258692
Please note Jefferson never said that.
The word "deflation" was not a word about 1915. Nothing makes you sound like some guy just repeating stuff your read over the internet that you don't know, then repeating stuff you read over the internet that you don't know.
Here, I'll give you some things Jefferson actually did say that convey simular points for next time:
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the government and the people, to whom it belongs. Let the banks exist, but let them bank on treasury notes."
"And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
"The bank mania is one of the most threatening of these imitations. It is raising up a moneyed aristocracy in our country which has already set the government at defiance, and although forced at length to yield a little on this first essay of heir strength, their principles are unyielded and unyielding."
"The question will be asked and ought to be looked at, what is to be the resource if loans cannot be obtained? There is but one, “Carthago delenda est.” Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs. It is the only fund on which they can rely for loans; it is the only resource which can never fail them, and it is an abundant one for every necessary purpose. Treasury bills, bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation will take the place of so much gold and silver, which last, when crowded, will find an efflux into other countries, and thus keep the quantum of medium at its salutary level. Let banks continue if they please, but let them discount for cash alone or for treasury notes."
on Mon, 03/08/2010 - 23:55
#258821
oops
on Mon, 03/08/2010 - 20:45
#258573
insolvent ,, not yet ,, still about 100 million more folks to squeeze the blood from .
on Mon, 03/08/2010 - 20:47
#258578
Insolvent with a printing press in the basement? I think not. Morally bankrupt yes, but they'll never run out of virtual clownbux.
on Mon, 03/08/2010 - 20:48
#258579
Why is this news??? It is well known that the Bernanke Fed has been buying garbage, for years now, like a drunken sailor on shore leave in exchange for formerly gold-plated Treasuries, and printing so-called "money" hand over fist as well, in exchange for what are likely now nearly worthless Treasuries. None of this increase in "money" has yet led in any real sense to an increase in credit, hence the current deflationary environment. Nevertheless, it would be a very good idea to audit the Fed, finally, and end it as well (which would be a likely scenario once the final reckoning is in).
What I find more interesting is that this post coincided with the one about gold, not Euros or other paper currencies, now being solicited for CDS trading, as well as the one about gold shortages in trading accounts. Looks as though the magic rabbit has finally headed for the hills...Happy trails to the ever-cheerful longs...
on Mon, 03/08/2010 - 20:53
#258584
whats ABX, Barrick?
on Mon, 03/08/2010 - 20:59
#258594
IS it any wonder they are doing everything in their POWER not to be audited???
Who owns the FED? JP Morgan, Goldman and the rest of the CROOKS! Oh Noooo, there are not any conflicts of interest here.
Has anyone seen Candidate Obama?? This is something that really would have pissed him off.
on Mon, 03/08/2010 - 21:44
#258663
Don't mistake the man in the office for the candidate. The candidate is just for show. Think of him as the nice furniture under the plastic cover in the room for guests.
on Mon, 03/08/2010 - 21:08
#258605
I has in essence never been solvent - It is a debt kiting scheme.
on Mon, 03/08/2010 - 21:08
#258606
Audit of Fed on hold.
http://www.huffingtonpost.com/2010/03/08/fed-audit-bitterly-oppose_n_490...
Not going to happen until Geithner is gone.
on Mon, 03/08/2010 - 21:30
#258646
Only cunts do shit like this:
"Secretary Tim Geithner, Assistant Treasury Secretary Alan Krueger and Gene Sperling, a counselor to the secretary, held a briefing Monday with new media reporters and financial bloggers during which they discussed the Fed audit and other topics. Under the briefing's ground rules, the officials could be paraphrased but not quoted, and the paraphrase could not be connected to a specific official."
on Mon, 03/08/2010 - 22:41
#258738
saw that too and was sick about it....
so much for the Obama brand of transparency.
Geithner is a phucking squirrel.
on Tue, 03/09/2010 - 01:24
#258865
Squirrels collect nuts, not pawn them off DH... Geithner is a squid absent the backbone..
on Tue, 03/09/2010 - 23:16
#260205
ha, Geithner cuts off the mfing nuts and then puts them in ur soup, absent a backbone???for who, maybe for you or me, but in his book we're expendable or in other words, stfu and eat this delcious soup i've made for you.
on Mon, 03/08/2010 - 22:44
#258743
Only those who crave access, but have no true interest in reporting the truth, accept those conditions under the delusion of an ability to "report" anything of value.
We all know who said what, exactly, but we can't tell you or we get kicked out of the club.
It's all so maddening.
on Tue, 03/09/2010 - 01:21
#258864
No doubt pup. Folks checking what remains of their balls to sit around a table with folks who have sold off their balls long ago. The question seems to be is if these officials are actually lawfully in power or not. Sooner or later more folks will begin to openly question the authority of those that rule via super constitutional means. BTW, good to see you...
on Tue, 03/09/2010 - 11:31
#259168
They are cunts. And this signals something is in the works. Can't wait to hear the pregame spin.
on Mon, 03/08/2010 - 21:12
#258610
fuck i'm singing with the choir, i'm buying some physical gold and platinum, right?
my other liquid asset is my wine.
on Mon, 03/08/2010 - 23:13
#258783
Wine is fine.
on Mon, 03/08/2010 - 23:23
#258790
Can I be your bike mechanic.
on Mon, 03/08/2010 - 21:15
#258612
you know I was thinking... If the Fed goes bust, the entire US debt could be wiped out, and nobody would say a thing. Because the Fed is PRIVATE, just like Lehman, so all this charade of inflating balance sheet maybe for self-destruction and wiping out the entire debt, and bankrupting the whole world
on Mon, 03/08/2010 - 21:22
#258628
I had wondered this in the past.
The US doesn't go bankrupt, the Fed does.
on Mon, 03/08/2010 - 21:33
#258655
The Fed becomes the bad bank.
on Mon, 03/08/2010 - 21:45
#258667
That is right.
Its like a booster rocket. Once it outlives its usefulness, it is jettisoned.
Maybe the folks from Jekyll Island gave us an escape route - knowing that, one day, it would all end in ruin. A circuit breaker. Sure, the Fed could blow up, but maybe it can be done safely ?
on Mon, 03/08/2010 - 23:14
#258784
Team ZH kicks ass.
on Tue, 03/09/2010 - 02:11
#258896
The Federal Reserve Board is an government agency (only the board, not the banks). The important decisions have been made by the board, i.e. the government, so if the Fed blows up it is unlikely that the US government could somehow escape unscathed from this.
on Mon, 03/08/2010 - 23:12
#258780
The problem is your "money" is part of that private money system. Read the top text on the face of that dollar bill in your pocket:
"Federal Reserve Note"
So spend all your "money" on hard assets that retain value before The Fed goes down. Otherwise you go down with it.
Sounds like taking delivery of gold does'nt it?
on Tue, 03/09/2010 - 02:03
#258891
Trash the Fed and start over along this approach:
http://www.swarmusa.com/vb4/content.php/184-Freedom-s-Vision-Monetary-Re...
on Tue, 03/09/2010 - 11:32
#259170
Wonderful thought, but unlikely.
on Mon, 03/08/2010 - 21:16
#258615
Ben Bernanke is an amalgamation of Nick Leeson, Yasuo Hamanaka, Brian Hunter and Jerome Kerviel. No, he is an abomination of all of the above, as Bernanke is the only one of the Unholy Five not (yet) prosecuted.
Dr. Ben Shalom Bernanke, the Biggest Rogue Trader of All-Time.
On our increasingly freshly printed dollar.
on Mon, 03/08/2010 - 21:32
#258649
hell, max keiser claims obama is a day trader in regards to the health insurer's are up today the health insurer's are down today. well maybe even drop the health and just say the insurer's are up today cause of me.
on Mon, 03/08/2010 - 23:13
#258781
He was en fuego today!
on Mon, 03/08/2010 - 21:19
#258619
did the sun rise today ?
if no one sees a printing press felled in the wood ...
on Mon, 03/08/2010 - 22:54
#258754
I'm sorry, at some point the environmentalists are going to get upset about the ink on the Treasuries and boycott the Fed.
on Mon, 03/08/2010 - 21:21
#258624
Isn't the Fed's ultimate strategy, despite what it says about its Repo program and the rest of it, to use its secrecy and audit-free lifestyle simply to conceal any defaults in its MBS holdings? This can be done by holding any and all of them to maturity. Suppose 15% of them fail. How will we know? I surmise that the figure the Fed uses now on its balance sheet is the par value of its purchases, even though that must already be inaccurate (because of delinquencies). If a tree falls in the forest and no one is there...its eems to me that was the Fed's plan all along. It's the ultimate Bad Bank, and if half of the crap they have is worthless, how are we to know? Meanwhile, the cash traded for trash continues to look like real money on normal bank balance sheets. Since the Fed isn't really a bank, it can hold that toxic sludge more or less forever, maybe even long enough for all the loans on its books to be made good by a rising housing market.Is the Fed going to initiate foreclosures?
on Mon, 03/08/2010 - 22:35
#258731
If that works so well why don't they make it standard procedure?
Treasury needs another trillion? Call Ben.
Fannie and Freddie (or the new one - Bwarny) need to offload a trillion of MBS? Call Ben.
Hell, The Fed can even start buying military aircraft and Girl Scout cookies.
on Mon, 03/08/2010 - 21:22
#258629
It will be insolvent when the people finally repudiate the worthless dollar.
on Mon, 03/08/2010 - 23:10
#258776
Winner winner chicken dinner. +100
on Mon, 03/08/2010 - 21:22
#258630
Looks like I need to go into debt to buy more gold.
on Mon, 03/08/2010 - 21:29
#258647
That's EXACTLY what you need - and should - do.
on Mon, 03/08/2010 - 23:20
#258787
I have 11 oz in Gold Eagles. I suppose I could charge up the old credit cards and double that. I have enough silver now. I don't want to dip into savings just yet. This spring I'm going to put in new carpeting, hardwood floors in the kitchen, new living room furniture, a new split rail fence to replace the panel fence I have now, and possibly one of those new-fangled metal roofs. My thinking is that it will all become either too expensive in the future, or nigh near impossible. If it looks like inflation/hyperinflation, I'll run out and spend every penny of savings immediately on things that'll last. I've doubled my tool-set, but I'll triple/quadruple it. Axes? I'll have 4. Hammers? 8. Nails and screws in every size. From hose-clamps to come-alongs, I'll have something. I have a handpump for the well. Maybe I'll buy another one. I don't have a dog, but my neighbors do, so I've already bought dogfood. They'll need it, and be willing to trade for it, I'm thinking.
I'll never run out of toilet paper. Not possible.
Put in 100 lbs of seed potatoes Saturday. About killed me. I have a tiller, but the yard is too small (2 acres) to justify a tractor, so the rows had to be built by hoe.
When I take down the panel fence I'm keeping the lumber to finish a chicken coop and to have something to burn in the fireplace. Really, I've just about planned it out as much as I can. Bought an AR15 and a 12-guage shotgun, to augment my .22, .357, and .38 Special. Let come what may, I'll have an extra pair of reading glasses 30 years from now. I'm really sick and tired of greed in the human equation of government. Time for more fear.
on Tue, 03/09/2010 - 11:34
#259178
Fuck yes!!!
Max out your Citi, Chase and BofA cards buying physical gold.
When the statement comes asking for a minimum payment of $388.00 write "fuck yourself" you across it with a sharpie and mail it back to the scumbags.
on Mon, 03/08/2010 - 21:25
#258638
This is deja vu all over again circa the Fall of 1720, just insert many more John Blunt wannabees, light speed computers, blah, blah and blah and the lighting speed of this collapse will be simply astonishing...I sense a shifting wind coming out of the North...
on Mon, 03/08/2010 - 22:17
#258704
Chumly, you are way to old. lol
on Tue, 03/09/2010 - 11:35
#259179
I'm beyond old....I'm ancient!
on Mon, 03/08/2010 - 21:25
#258639
I hate rhetorical questions in titles....
on Mon, 03/08/2010 - 21:25
#258640
The fed is funding their 4.5% MBS agency portfolio at <.25%. All the fed has to do is stop forwarding their interest payments to the treasury and they can fill in that capital hole pretty quickly. This is old old news.
on Mon, 03/08/2010 - 21:26
#258641
So are you saying that alchemy doesn't work? There goes my Pb calls.
on Mon, 03/08/2010 - 22:24
#258715
LOL!! That's one of the wittiest comments I've read in a long time...
on Tue, 03/09/2010 - 11:36
#259182
+!!
on Mon, 03/08/2010 - 21:27
#258642
Thanks TD and Geoffrey for this piece....obvious that a lot of work and brains went into it. Your efforts are appreciated and important!
on Mon, 03/08/2010 - 21:28
#258645
As of today both Fannie and Freddie are prepaying (bondholders) and aquiring bad loans out of the MBS pools. I think there is very little collateral in the Fed's hands that is more than 120 days late. This is going to continue I think. Fan and Fred will continue to cleanse out the crap from the stuff that is now public/in Fed inventory.
So this means the losses revert back to the agencies and Treasury has to to foot the bill once a quarter to make up and realized shorfall in equity.
So the taxpayers get fucked. Not the Fed. But the Fed does help. The deficit that is created by the losses at the Agencies is financed/monitized by the Fed. This was the $300b purchase of Treasuries that the Fed bought as part of QE.
Think of it like this. The Fed bought a CDS contract from Treasury to cover the default risk(s) of the collateral in the MBS. The Fed paid $300b for the insurance policy. Treasury misprised the CDS and is now looking at a loss of at least $600 billlion (minus the 300 makes net cash loss of only 300b).
This way the $600b only cost us $300b today and the other $300b will be funded by the Fed for a very long time. Sweet deal for all.
And you think Greece fucks with the books?
on Mon, 03/08/2010 - 22:44
#258741
thanks for that insight Bruce.
on Mon, 03/08/2010 - 23:11
#258777
"And you think Greece fucks with the books?"
Zactly.
on Tue, 03/09/2010 - 04:28
#258942
Okay I follow you here . But isn't there only 30 billion left on the table to keep doing this? Is the point coming where the US treasury(taxpayers) will be 100% responsible for any and all future losses above(dollar for dollar) and beyond this and who is going to buy the bonds from treasury if not the Fed ? or is QE2 going to occur ? And if it does will the FED be the only buyer left of US treasuries as QE2 commences ? - How much more MBS crap is out there did these Fed fannie purchases even put a dent in what is outstanding ?
on Tue, 03/09/2010 - 10:10
#259094
Bingo.
People forget that ALL losses to the Fed pass through to the Treasury.
This is why I kept sayin that the FY09 deficit was far larger than they said, because nobody knew what losses were embedded on the Fed's sheet.
Any loss the Fed takes will be made up by the Treasury; even the USTs that the Fed bought with QE are owed interest. It's a giant circle-jerk. However, they are desperate to keep the credit creation game going by any means.
on Tue, 03/09/2010 - 11:39
#259186
Thanks Bruce. Well illustrated.
"So the taxpayers get fucked" Exactly what will and has happened over and over again. Not even news anymore.
on Mon, 03/08/2010 - 21:33
#258650
http://www.youtube.com/watch?v=NZR64EF3OpA
on Mon, 03/08/2010 - 21:35
#258656
according to Calculated Risk
"Some Praise for the Fed" (seriously)
"I think the Fed deserves praise for the successful completion of the short-term liquidity facilities. As NY Fed Executive VP Brian Sack noted today: ..."
http://www.calculatedriskblog.com/2010/03/some-praise-for-fed.html
(CR seems to quite like this Sack Dude)
on Mon, 03/08/2010 - 21:41
#258660
http://www.businessinsider.com/stiglitz-the-fed-is-corrupt-and-dominated-by-big-banks-2010-3
Stiglitz: The Fed Is Corrupt And Dominated By Big Banks
on Mon, 03/08/2010 - 21:49
#258669
"#
# Central bank balance sheets sometimes go into the red. The Treasury may then recapitalize it by creating, and giving to the central bank, new government debt"
this is total rubbish
on Mon, 03/08/2010 - 22:05
#258685
Now I visualize it, DOW 36000 is totally possible thanks to QE v5.0... The ethernal rally...
BUY BUY BUY!!
on Mon, 03/08/2010 - 22:11
#258691
of course it's insolvent.. the whole system is running on obfuscation because the alternative is apocolypse
on Mon, 03/08/2010 - 22:11
#258693
Does this mean instead of "Federal Reserve Notes" we're going to have to rename them to "Bankruptcy Notes"?
on Mon, 03/08/2010 - 22:42
#258737
Actually, instead of "Federal Reserve Notes" we get a nice shiny holographic "FED Card" linked to the IRS. The amount on the card is what ever the FED says it is. And the IRS taxes you based on what you spend.
on Mon, 03/08/2010 - 22:11
#258694
Is The Federal Reserve Insolvent?
If you have to ask
You'll never know (chorus)
Funky motherfuckers
Will not be told to go
I feel so good
Can't be understood
Booty of a hoodlum
Rockin' my red hood
"If You Have To Ask"
Red Hot Chili Peppers
on Mon, 03/08/2010 - 22:16
#258700
No. The Fed is not insolvent. Their liabilities are dollars. So long as their are Legal Tender Laws, meaning you must accept Federal Reserve Notes as payment for all debts, the Fed cannot be insolvent.
on Mon, 03/08/2010 - 22:23
#258711
Just wait till the other shoe from the mortgage crisis drops- the adjustible and teaser rate loans which will hit in late 2010 and through 2011.
Find financial advisors: http://www.claroconnect.com
on Mon, 03/08/2010 - 22:28
#258723
I think by the time these problems are resolved, Bernanke is going to wish he was never reconfirmed to be FED chairman. Three governor seats are vacant; anyone that aspires to fill them is going to their ruin in the premier "third rail" institution of the banking cartel. Kiss your career & reputation goodbye.
on Mon, 03/08/2010 - 22:48
#258749
Okay, I've had enough.
All this bullshit is just that, bullshit.
Even a simpleton like me knows the Fed is insolvent.
Wait. I didn't say that right.
Insolvent is meaningless.
Printing press is meaningless.
The system is meaningless. Anything that touches us and we touch them is meaningless. All of it is based on nothing. But we puff up with hubris and lies and posture and pretend it is all okay. Let me whisper this one in your ear (it ain't). Don't tell Ben, he is stark raving crazy, a mad printer...
We have all taken the red pill (gotta give ZHers that), but blue pill land keeps beckoning us back into the matrix (also spelled matricks). Everytime we discuss a "financial instrument" a chart, a graph, a stat, we fall back into the shit again. Reggie posted some interesting stuff that begs the question "How underwater can underwater get?" Isn't there a point it does not matter anymore? Isn't there a point where it is all fairytales?
ALL OF US PEONS ARE HOPING TO HOLD ON TO SOME TINY BIT OF VALUE WE THINK WE SAVED, EARNED OR OTHERWISE CONNED (traded) OUR WAY INTO. (I need your ear again, I must whisper this even more softly, god forbid they know we figured it out. The real word is security, we are trying to hold on to some security we thought we had [holy fuck, we don't]).
That will all depend on who we can get to believe what we have has value, and what we believe is valuable. It is a narrative that has power because we give it power, even gold.
The system is broken and they are pretending. Ben is the maddest of printing hatters. He is buck naked but we don't tell him and we get to live, eat, breathe and shit another day. But that is all that is left, to go through the gestures and pretend. Bail out Greece. Whatever, "Give the debt to me, I'll take it, I'll pay it off. Go out and play now, I've got it covered." That makes as much sense as any asshole poster here.
We are beyond had. We are beyond fucked. We are beyond martial law (they will try, I know). You ready for it?
We are on our own. There is no system.
on Mon, 03/08/2010 - 23:09
#258775
"Ma-Tricks". I like that one!
on Mon, 03/08/2010 - 23:31
#258797
How 'bout "make-tricks". LOL.
I'm done with the academic rationalization of my imminent demise. I'm secured, as much as I can be. I'll go down with the house when "they" arrive to confiscate my chickens. They won't take my chickens without a fight to the death. How simple is that?
on Tue, 03/09/2010 - 01:26
#258868
they wont confiscate my chickens either. i love my chickens.
on Mon, 03/08/2010 - 23:35
#258802
Damn right we are trying to hold on to a bit we saved! That's the whole reason I'm in PMs and getting stockpiles if/when the system breaks. Modern society has taught us to be the grasshopper and not the ant. We, the ants, are trying to figure out how to keep our stores out of the hands of the hoard of grasshoppers. Which is why paper assets are suspect. Think of how easy it would be to seize brokerage accounts, and various retirement assets. All done without firing a shot or entering a home. Cash in your mattress, Zimbabwe Ben can take it from you without entering your home. We have entered a world where we can be robbed by people sitting at a computer who never have to physically take anything from us.
on Mon, 03/08/2010 - 23:44
#258812
That's why we must have gold, silver, and a garden. Maybe a few chickens. I can see myself selling eggs in 5 years. If you can, invest in a couple big dogs. You have to have a sidearm.
on Tue, 03/09/2010 - 13:52
#259343
Gold is for optimists. Holding FRNs is for fools.
I will stick "investing" in the basics water, food, medicine, weapons and knowledge.
on Mon, 03/08/2010 - 23:38
#258804
Rant on, MsC!
on Tue, 03/09/2010 - 00:37
#258815
So what's on the other side of beyond? We all dropped the ball. We barked and growled and drooled like rabid dogs (or Paul Kanjorski), but we didn't bite. We let these fucktards get away with it, and in doing so we hastened our own destruction. We should have summoned up the cajones and stormed the Bastille. How long have we pretended that blogging and FOIA requests and "exercising our democratic right to vote" can actually achieve anything?
When the first phase of this calamity was unfolding, how many of us knew that subprime/Alt-A/housing bubble would end badly? We wrote letters then, too. And what did it do? Not a damn thing. So we did the only thing left to us, which was to profit from the decline. All well and good, but we paid tax on those gains that went to the architects of the collapse. Ironically, they came out ahead more than us.
Two years have passed and all that has changed is more of our wealth has been transfered to the clowns that caused this debacle, whether it's the bankers (predominantly) or our fellow citizens who behaved badly. Failure, greed and incompetence have been rewarded in spades, and prudence has been gang raped by a gaggle of pus dripping phalluses.
You say there is no system. Probably true. What is definitely true is that there is no solution within the system. We either sit and wait for the asteroid to hit, or we salvage what we can and rid ourselves of the vermin who are eating us away from the inside.
Sadly, I know what we will choose. Fifty years of "good living" has robbed us of the testosterone we would need to do what aggrieved people have done since the dawn of time. Would that we had the courage of the Macabees, or the people of Eastern Europe two short decades ago. There are people who need to be Ceaucescu'd, but we are all cowards. We deserve what we will get because we refuse to stand and fight for what we know is fair and just. We think we are Gandhi standing up to the Brits who knew their empire was collapsing, while in point of fact we are being herded and abused by pure scum who are completely and totally self-serving. We refuse to save our own society, or ourselves. So we go back to barking and growling and drooling, blogging and writing letters, filing FOIA requests, but all the while stocking up on KY Jelly and zithromycin.
Historians will look back on us and say we deserved to be selected out by Darwinian Socialism because we were unfit. We were, and we are, weak. The meek only inherit the Earth in fairy tales and superstitions.
on Tue, 03/09/2010 - 01:33
#258871
Let the games begin.
Instead of Bastille = 85 Broad
List of foks to be "Ceaucescu'ed" -
Lord Blankfiend
"Diamond Jim" Dimon
Robert Rubin
Henry Paulson
Tim Geithner
Helicopter Boy
Bawney Fwank
The list goes on and on....
No firing squads - tumbrils, guillotines, trees and boiled rope only,
please....
KrvtKpt. Laughing Swordfish
aka Robespierre
on Mon, 03/08/2010 - 23:51
#258818
MsCreant, precisely. In essence, we are all screwed. There is no security, solvency, currency, or solid backing & standards in our system. Our system is a delusion, ended before you or I were born by others for someone elses agenda or their own. It's amazing this delusion has lasted this long, 233 years, and we actually tried to export the delusion to others as the world standard of capitalism at its finest. Some actually believed the delusion we proposed as we fought to spread "free market capitalism." Well, the joke's on us I'm afraid. There is no Mom, apple pie & Chevrolet; only an illusion.
What to do? Start with representatives that are not beholding to special interests or their own delusional lust for power. Who elects these politicos year after year after year when they are crooked & corrupt? Obviously, the US citizens who can't or won't see thru the delusion as they have their own agendas that are less than honest or co-dependent in the delusion.
"We the people" have to change the country. We have very few chances left to do it. If the public fails to change it, it ends. When it ends, it will unravel at a speed that will astound us all. Such is the natural order of change.
on Tue, 03/09/2010 - 01:35
#258873
Damn how I miss your perspectives when they are absent MsCreant. Sooner rather than later the number of folks who openly and wantonly flip the finger to the unlawful and super constitutional system currently in place will reach a point of critical mass. I trust all is progressing with you. Peace
on Mon, 03/08/2010 - 23:09
#258759
Fed vigilantes! Necessary and inevitable. But on what time frame and under what conditions? It's a good thing (well, at this point anyway) that the Fed in reality owns the government (at least when advantageous).
But when does it fall? I have to think other central bankers must be asking themselves the same question, which returns us to Liar's Poker with a vengence.
Such interesting days to live in.
What's especially sad is that if the likely wars ensue, these sick fucks will regard millions of lost lives as incidental externalities.
Ever wonder why Capitalism is just a little suspect to some people? Look at the types it promotes.
What can you say except bon appetite without running afoul of its basic premises?
Oh, the paradox.
on Mon, 03/08/2010 - 23:43
#258809
This is not capitalism. This is Central Planning. If capitalism was at hand we would have no Fed, many failed banks, many failed and resurrected institutions, and be the absolute envy of the world.
on Tue, 03/09/2010 - 02:06
#258893
I endorse this post.
on Tue, 03/09/2010 - 09:28
#259059
+2
on Tue, 03/09/2010 - 11:42
#259190
If we had capitalism there would not be so many failed banks and zombie institutions because they would have NEVER TAKEN THE RISKS IN THE FIRST PLACE. Moral Hazard made all of this possible, thanks to the central planning you speak of.
You know I agree with you, just had to take it a step backwards.
on Mon, 03/08/2010 - 23:07
#258769
It all is, the system is; FDIC, FED, NBA, MLB, PCP, all of the culture, the people, the police, the schools, man dogs are even going, "WTF?!?!" The banksters are praying...PRAYING...Canter Fitzgerald's Hollywood Futures market can pop em up untill China unpegs and devalues the doelarr. Then the bubble gets pumped again! Go Go godget gold...witches!
on Mon, 03/08/2010 - 23:07
#258773
I agree. Tyler, you discount that Blackrock has over $3T in assets. JPM has over $2T. Ditto for BAC & C. WFC and GS are above $1T or darn near close. These are the US OWNERS of the Federal Reserve. Since the Fed wont disclose who owns them, we have to go off a very old list. GE, the old National City (now PNC). I wouldn't be surprised if the old Standard Oil (Rockerfellers) have a % share. Standard Oil is primarily XOM, CVX, and BP.
Sum up the total asset base of these companies, you are looking at $12T easy. THESE ARE JUST THE US OWNERS.
What about the British (whom bailed out the original JPM in the run of 1908 that eventually convinced the public, they needed saved and needed a Bank to prevent runs-hahahah!). I would guess Barclay's Capital and other UK banks might have a %.
What about Switzerland? The lone independent state during WWII and again, the bastion of banking secrecy (notwithstanding the US Treasury scare, but the UST eventually backed down from prosecuting everyone on the list!).
Tyler, don't be niave. The Fed is far from broke.
on Mon, 03/08/2010 - 23:15
#258786
Even if bankrupt, who will foreclose ?
on Mon, 03/08/2010 - 23:25
#258792
The owners of the Fed have probably pocketed 5 dollars for every dollar of capital in the Fed and they could probably care less if the Fed fails and the party is over. The owners probably have tonnes of private gold and currency as well as miles of real estate and many body guards with machine guns.
on Tue, 03/09/2010 - 10:15
#259101
Yes, it isn't as if they cannot study the oligarchies in other collapsed or heavily stratified societies to determine how to live best.
on Tue, 03/09/2010 - 00:14
#258832
The MBS may be the only thing the Fed owns which is worth something.
Think about this. The Fed can print dollars. So owning IOU's for dollars doesn't really get the Fed anything.
If the dollar should become worthless, the only thing the Fed might own which would be worth something might be some of those MBS.
The defaulted ones.
The non-defaulted MBS are IOUs and would be paid back with worthless dollars, however defaulted MBS might have a hold on actual real property.
What else does the Fed own?
on Tue, 03/09/2010 - 00:14
#258833
Tyler,
Check this out:
http://www.newyorkfed.org/markets/pomo/display/index.cfm?fuseaction=preannouncements&opertype=agny
Outright Agency Coupon Purchase, March 9, 2010, 10:30am
" Following the conclusion of this outright, the Open Market Trading Desk (“the Desk”) will adopt a practice of conducting outright agency coupon purchases once every two weeks. The Desk may alter this practice as market conditions warrant."
Isn't this what will become known as QE2? Maybe I don't get it.
on Tue, 03/09/2010 - 00:54
#258854
Er... all the Fed has to do is buy more Treasuries (or for that matter, buy more MBS). Instant solvency.
on Tue, 03/09/2010 - 02:02
#258890
USA brought it on themselves by promoting trade with China as the cheapest manufacturer while not insisting on a level playing field. Eventually the scales had to tip. Sub prime, loans, toxic debt instruments, whatever, the assets and cash ended up in China. Simple maths. If a man in USA can make a computer for a weekly wage, and a man in China does it for a 10th of that, and lives in a one room apartment with his family in China, then who is going to lose? Common sense 101, trade on a balanced playing field. Floating rates, wages rates, etc. If not, suffer the consequences. Now as the story goes, the pension funds are going to buy the toxic debts. Why? Because the people cannot control these funds and they are not transparent. USA is spending the people silly, raising taxes, debts and now their pensions. End of USA as we all know it.
on Tue, 03/09/2010 - 02:37
#258913
A quick note here is in order. Some readers seem to have missed the nuance of this post. The question is not, despite what the title implies, whether the Fed is insolvent. That is obviously rhetorical. The real question is what is the cost of solvency. As the fed continues purchasing non-UST securities, which are getting increasingly impaired in a deflationary environment, the only offset to the capital deficiency is, logically, the purchasing of ever more assets, presumably of the UST variety, but with Ben at the helm, Agency and MBS, and even corporate purchases seem likely. This process leads to lower rates and, implicitly, to even more pronounced disinflation, thus, greater impairments (as deflation is the near-term outcome), and so forth, in a closed loop, with the inflationary spring getting more and more coiled (which would presumably drive equities higher, in the paradox discussed by Seth Klarman, whereby both bonds and equities yield greater returns at the same time). This is the real question: the Fed has now found itself in a Catch 22, whereby QE leads to monetization, which would lead to further QE, simply to prevent capital shortfalls. And the offset is greater excess reserves, because the dominant force is the asset composition, not the liability side (at least, that is our view). Within 5 years we anticipate the ratio of currency to excess reserves to be well below 25%. How this fine balance, which like a gyroscope now stays balances until such time as angular momentum disappears (in this case, indirect and PD purchasing of Fed securities gives way completely first to covert and then overt Fed monetization) will play out, is the true topic of future history textbooks.
on Tue, 03/09/2010 - 04:22
#258941
took the words right out of my mouth!
on Tue, 03/09/2010 - 04:29
#258943
Buying assets to prop up asset values is a short-term fix and seriously perverts the monetary system in favor of fed insiders. The end game is where they sell the assets back to their friends at pennies on the dollar. Ethically repulsive and morally bankrupt. The system doesn't have to work, it just has to have the appearance of a working system.
on Tue, 03/09/2010 - 04:36
#258945
So it's QE to infinity then.
A quiet deposit of gold in the Bank Of Gaia, and a proactive attitude towards change seem like good ideas to me.
Demonstrating a friendly and positive demeanor towards those we interact with in the face of the coming changes may be the biggest and most important contribution one can make.
on Tue, 03/09/2010 - 10:23
#259110
Bingo.
Has Japan stopped QE?
The issue, Tyler, and there really hasn't been a lot of verbiage on this in terms of philosophical posts on ZH, is that the debt-based system has reached a point where real yields of actual economic activity are at or near zero.
At this point, leverage is the only way to generate a nominal return. I submit that real economic activity is now unprofitable. China is living proof; they build things now that nobody needs. Empty cities, idle factories, just to build something. Those loans are guaranteed losses, IOW, 'negatively profitable.'
This implies actually negative real rates of return.
Against this backdrop, of negative economicalness, nobody *should* lend and nobody should borrow. Credit has reached saturation.
At this point, the interest claims of today begin to consume the money supply. While real economies cannot continue to grow unabated, accounting ledger entries such as compound interest CAN!
The Fed has to inject money somewhere just to pay today's interest.
The issue is larger than "solvency" and capital ratios...it's an an artifact of the systemic basis of the Fed and creditmoney system at its core.
Nobody bothered to think through and discuss what would happen if/when the real economy PEAKED. The interest component MANDATES growth and it is clear now that this cannot be achieved. How can credit growth exist in a climate of NO RETURN? That is where we find ourselves.
on Tue, 03/09/2010 - 13:10
#259281
Travis, I'm not sure if you subscribe to the theory of the NWO, but some believe there are those who DID think about the end of growth. In the following article, Richard Moore makes an interesting point that not only did the PTB fully understand what happens when growth ends, but that they have made the appropriate preparations in order to benefit & prosper from the transition to stasis:
http://www.marketoracle.co.uk/Article17568.html
on Tue, 03/09/2010 - 20:00
#259949
Capitalism was handy in an era of rapid growth. For an era of non-growth, a different game is being prepared.
This is what it all boils down to. It's terrifying, and inevitable. I wish that the people who played the game determined what new game they would play but they're too busy... playing the game.
Thanks for the link, B9K9
on Wed, 03/10/2010 - 00:43
#260272
"what is the cost of solvency?"
The doelarr.
on Tue, 03/09/2010 - 02:39
#258915
If you accept what this system offers, you will continue to provide labor until it devours the principle of labor itself. That is just dumb, UN-American, UN-Constitutional and UN-Holy.
Personally, I have stopped providing labor for this pathetic monetary criminal enterprise. I await my idiot fellow Americans in uniform to point their weapons at me, the weapons some fools still working gave them (majority employed by Government and Wal Mart) the foundation to hold weapons against me. I can here the order now, by order of the President, Barak Hussein Obama, ''GO TO WORK''. Thats when I say again, ''NO!''.
What we have, here and now, is called a sealing, as in ''the prophetic mark of the beast global monetary system of the City of Babylon.
There is a reason why the scriptures says ''Babylon is fallen, is fallen''. The first one became so corrupt it fell to an anointed invader, the night the writing on the wall happened. The kingdom of Babylon was found wanting because, it destroyed the value of an honest days work. That same principle inversion has come to this new world order generation. (a measure of wheat for a penny) This is defined by the prophetic strong delusion which comes, upon the leaders of the nations because, they do not love the truth, they love the delusion of their will above the Laborer of the harvest. Americans had every tool required to sustain order, the Republic, independence, freedom, liberty and justice but, Americans are lost, over run by their own collective delusions. They are too weak and pathetic now to be of any use for themselves and they offer nothing but contempt for the Constitution. This generation has proved that beyond a shadow of doubt. The Fed's ''balance sheet'' is a testimony against every American still showing up to work as usual, instead of standing fast to resolve this insane criminal banking system hell bent on some ridiculous ancient NWO suicide, ZERO Enterprise adventure, designed to establish a single system for the world at the expense of life, liberty, independence, freedom.
You can be sure, the crisis shall come, the ensuing call of peace will also come upon the table after what ever generated crisis kills a bunch of people. That call for peace will last about half as long as one would normally hold their first home in a normal market. From what I see, Iran is the burnt offering and the peace call will be the scapegoat with a mark on it. When you see that happen, it should wake your dusty butt up. Right about now is the time to get the provisions you may need to hold fast for a few years, during the next four and a half years or so, that is unless you accept the mark of the beast.
on Tue, 03/09/2010 - 03:59
#258937
You can't be insolvent if you can print you own money... add journal entry cash $1,000,000,000,000. There, were solvent again. Happy. Don't ask me about inflation or currencies, those aren't my departments.
on Tue, 03/09/2010 - 09:51
#259078
History says you are wrong. Why didn't Weimar, Argentina, Zimbabwe print their way to prosperity? Why doesn't everyone just print money and we can all quit working?
on Tue, 03/09/2010 - 04:44
#258947
Secession!!!
That is your only hope.
(small is beautful)
on Tue, 03/09/2010 - 04:44
#258948
(Secession & repudiation)
on Tue, 03/09/2010 - 05:02
#258952
Cause of Today's Economic Crises: Too Much Thrift
In this essay I want to propose that the ultimate of cause of today's economic crises is that we have too much thrift. This view is very similar to John Maynard Keynes' Paradox of Thrift. What I want to show is that this is not a paradox at all but confusion about what saving money really means and what consequences it has. I want to explain this confusion by way of examples and not using technical economic jargon usually used by economists. But before I can go into why too much savings leads to a disaster in the modern economy I need to clarify what I mean by savings and what money is by way of an example:
A baker produces ten loaves of bread. He consumes one loaf of bread. He barters one loaf of bread with his neighbor, the dairy farmer, for one gallon of milk. He barters three loaves of bread for one bushel of wheat with his other neighbor, the wheat farmer for wheat for next batch of loaves he will produce tomorrow. He gives one loaf of bread to the poor. He is now left with four loaves of bread. Now, he wants to be able save these loaves for his old age. So he goes to the market and sells his excess four loaves of bread for four pieces of gold. He saves the gold in his mattress. He does this because he will need loaves of bread in old age when he is physically unable to work.
Note that I am going to define pieces of gold as money for now. Because it is easier to understand. We will then expand the discussion to include fiat money. The baker saved four loaves of bread. That is his savings. Note that it is more proper to think of savings as the loaves of bread rather than the pieces of gold under his matteress. The baker is not really interested in pieces of gold but he is convinced that he can exchange them for loaves of bread when he retires. Because of this belief the pieces of gold give him psychological comfort and peace of mind that he physically owns the asset which he can exchange for loaves of bread.
Note that when he gets to his old age and goes back to the market and attempts to exchange the pieces of gold for loaves of bread he will get back loaves of bread based on the market price (in terms of pieces of gold) at the time of exchange. By acquiring pieces of gold (which is the most liquid asset in the baker's civilization) he has effectively acquired equity shares in the world economy (at least in his gold based money example economy of the baker). The market price (in terms of pieces of gold) of the loaf of bread at the future time will depend on the balance of equity shares (money) trying to purchase (bid up the price) of loaves of bread and the supply of loaves of bread at that time. Note that it is not the absolute supply of equity shares (pieces of gold) that matters what matters is the number of equity shares trying to chase (purchase) the supply of loaves of bread at that time. Another way to make the same point is this: The price of loaves of bread will not increase even if more equity shares are created and handed out unless receivers of the equity shares actually attempt to spend the newly created equity shares.
Another way our baker could have attempted to save his loaves of bread for the future is by exchanging his four pieces of gold for shares of Google stock. This gives our baker a chance to acquire even more loaves of bread if Google makes good profits in the future. Of course, the baker is taking a risk. Google may not be able to make good profits.
Now apply this situation to all excess producers participating in the world markets (by excess producers I mean people like our baker who produce more loaves of bread than they need for current consumption but would like to consume their output in the future). As people become more and more productive there is more and more excess production (if consumption does not increase in tandem with efficiency increases) then this excess production will be directed (by capital markets) to produce more and more assets which can be exchanged ultimately for consumer goods in the future. This is how we get a boom. Bust happens when excess producers realize their assets (like dot com company shares or residential and commercial real estate holdings) will not yield as much return as they expected and may even give a negative return. Rightly, excess producers then rush to safety of the most liquid asset (cash). This causes asset prices to fall and induces managers to reduce investment spending causing unemployment. But this does not mean our ability to produce goods and services has diminished.
If investment slows down and consumption does not increase production must decrease to match the new level of investment. But what usually happens during a period of reduced investment is that consumption slows down as well (unemployed and those fearing unemployment spend less) reducing demand even more and reducing production even more even though our capacity to produce has not diminished during a bust. Slow down of economic activity feeds on itself devastating the economy. In short, too much thrift devastates the economy.
On top of this productivity (output per labor hour) is continually increasing (and has rocketed upwards in the past 100 years). We will have more and more unemployment unless one of following or combination of the following occurs to a sufficient degree to stem the tide of slowdown of investment activity and improving productivity.
1. Increase investment activity. But this won't occur unless #2 below occurs.
2. Increase our consumption. Increase demand for goods and services.
3. Decrease our labor hours. Work less.
4. Do projects which will "use up" excess production.
All the stuff about too much debt (public and private) , falling asset prices and printing money is just accounting entries. We should use accounting to manage the reality around us to improve our lives and not to get confused about what is going on with the production process itself. Bad private debt should simply be liquidated. Falling asset prices does not mean that our ability to produce real goods and services is diminishing. It is in fact it is steadily increasing and has been for hundreds of years. Federal debt can be paid off with newly printed money (this is akin to converting debt to equity). Inflation will only occur if receivers of the new money actually spend it and even then if we run-up against the capacity of the world economy to deliver the demanded output.
Transfer (sale of) of treasury debt to external entities will only become a problem when the United States dollar stops acting like a global currency.
Since the dollar is (at least right now) a defacto global currency it is acting like equity shares in the economic output of the world economy. Of course, United States will not be able to maintain the position of being the sole power to issue equity shares (money) as productive capacity of other major nations increases. There are several ways to resolve this:
1. Trade less. Yes, this will slow down productivity increases. USA will build up less national debt and there will be less unemployment in the U.S. This option is not a long term resolution.
2. Share the power to issue global equity with other major nations and/or major emerging nations on some kind of a formula which everybody is comfortable with. This is a long term solution but requires a major shift in thinking.
3. United States can try to maintain USD as the only legal tender in major international transactions by force (as it does for domestic economic transactions via legal tender laws). This is not a long term solution but may be useful in the short term.
on Tue, 03/09/2010 - 08:18
#259022
Pure Keynesian drivel. This was proven wrong 80 years ago.
If the baker saves his excess capacity of bread in gold, and the supply of gold remains relatively constant to the supply of bread which is increasing. Then over time, the purchasing power of gold to bread will increase. Or said another way, the amount of gold that will be required to purchase a loaf of bread will decrease (the price falls).
By saving money, you actually believe that the purchasing power of whatever you're saving will increase relative to the supply of future goods you wish to purchase. The reason savers would prefer a stable money supply is that the calculation of future goods available to be purchased becomes much easier.
The boom cycle you're referring to distrupts this calculation through the creation of new money (ususally through the credit process). The only thing that occurs with money printing is pulling consumption forward and changing the time preferences for consumption. But you're also decapitalizing everyone around you who decides to cash out their savings for consumption. Said another way: you can not consume your way into prosperity.
The bust occurs when people realize there's not enough capital to pay for the current production of goods. People begin to recapitalize themselves by saving money, lowering their consumption and lowering demand for current goods. Printing money at this stage mistakes the effect for the cause.
on Tue, 03/09/2010 - 09:38
#259071
+1
Good comment.
Also wanted to mention Steven Keen, whose work shows how credit-driven economies actually functions.
If you're still a Keyensian in this day and age, it's because you're a religeous moron (in the "economic" sense).
on Tue, 03/09/2010 - 05:39
#258955
Money, fiat money particklelerly, is a Religious Icon, just like the rosary, the Koran, the Bible.
IF 90% of the world population believe in things that they cannot prove, like the Resurrection, Virgin Birth, a Cow is not just a steak on hoofs, heaven, hell, a flat earth, the infallibility of The Gnome in Rome, not eating meat on Friday, swearing will consign you hell,72 virgins, chopping off the hands of a minor thief, a politician, what they read in the newspaper and on blogs, a dead but very flawed english princess, rock and roll, drugs, etc. then believing that money is solution to their problems isn't so much of a stretch. And for true believers even when there is irrefutable proof that challenges their beliefs, all would rather go to their graves with their beliefs intact than admit that they were wrong to hold them.
on Tue, 03/09/2010 - 06:31
#258973
The BEST THING that could happen to the US is to stop printing money in any form....
The US ....like Greece ....would be forced to live within its means...
And perhaps when not given these easy out alternatives...will do the required restructuring....
Enough already....
on Tue, 03/09/2010 - 06:31
#258974
soon enough the american people will "Iceland" the Fed and vote no in repayment of their debt
fuck em
on Tue, 03/09/2010 - 14:06
#259358
Our economic system exposed in less than one minute, and you will laugh: http://www.youtube.com/watch?v=7GSXbgfKFWg
on Tue, 03/09/2010 - 15:01
#259446
indeed, LOL
on Tue, 03/09/2010 - 06:50
#258980
This mode of analysis - gold coins, bakers, loaves of bread is incredibly naive.
Lets say the guy with the gold coins is routinely mugged by the infamous wall street ninjas. The baker is routinely robbed of his loaves etc.
After a while - sure the ninjas will have a lot of gold coins. the question is why would any rational person expend personal labor, creativity or risk any capital - if they feel the system is rigged and they are being routinely mugged? Huh?
No bread is produced, no one really works -no one trusts anyone else - least of all the "authorities". The whole shebang breaks down and your gold - well good luck with that shiny metal .
Its not about money - its about trust,fairness, social norms, customs, rspect and a willingness to be part of a functioning society. If you lose that - money has no meaning.
Then whatchoo gonna do with dem gold coins eh? mebbe swallow a couple and try to flee to some place where they dont know you? Huh?
on Tue, 03/09/2010 - 06:58
#258983
We all now know the Fed and the banking sytem are Parasites.
The only question is are they "good" parasites.
"good" parasites, successful parasites must ensure they dont kill off the host. This is yet to be seen.
on Tue, 03/09/2010 - 07:16
#258991
Good if the FR is insolvent. A bunch of bankers and financiers created crap financial products. Now's a good time to re-read A Summary View of British America, August 1774, contemplate what Thomas Jefferson might have thought, and maybe American patriots want to dial back to 1774.
Alexander Hamilton wanted America goverened by financial elites. Jefferson disagreed.
on Tue, 03/09/2010 - 07:41
#258999
The nuclear option is becoming more and more likely either through direct price raising purchases of Gold by the US Treasury / FED or the BIS allowing a open auction of Physical only Gold by states and/or large non state actors
{ COMEX being in the US and the LBMA being in London leaves the ECB and the BIS with "the nuclear option" if things ever get desperate enough to use it. This nuclear option is A) for the BIS to begin operation of a public "physical only" market for gold to be used by the really giant participants, primarily sovereign entities and billionaires, and B) for the ECB to use the price discovered by the BIS in its quarterly reserve asset "marked to market" adjustments.
Such a move would put Greece, and all the PIIGS for that matter, in a much better position almost overnight. Of course it would have devastating effects on the value of the dollar and the rest of the paper gold market.}
The above passage is taken from a very interesting article below
fofoa.blogspot.com/2010/02/greece-is-word.html
on Tue, 03/09/2010 - 10:44
#259132
LOL...fofoa is saying the same stuff that got me banned from TF a couple years ago.
I see it the same way; default or devaluation and that political realities make default infeasible. This was my central argument for the inflation case.
The math makes deflation inevitable; people make inflation inevitable. But there is no way out now.
I'm glad to see collective recognition now emerging on this.
on Tue, 03/09/2010 - 08:16
#259021
Have forwarded a gift for their inspired leadershit to geithner,orszag,bernanke,summers,fink,paulson,greenspan,
rubin,friedman,fuld,frank,cassano,thain,dodd,mozillo,o'neal,bush,clinton,and rainieri
http://3.bp.blogspot.com/_NhB2OM8hE1A/SekweRMKDGI/AAAAAAAAACM/_Gg0cV_jaio/s1600-h/sheepdip.jpg
on Tue, 03/09/2010 - 08:24
#259026
Stupid is as stupid does.
- Next Fed Chairman - Gump
on Tue, 03/09/2010 - 08:42
#259037
Mises.org brought up the same issue over a year ago without the benefit of hindsight:
http://mises.org/daily/3281
"The Insolvency of the Fed"
on Tue, 03/09/2010 - 09:09
#259049
No worry; the tax payer has your back, Mr. Fed.
on Tue, 03/09/2010 - 09:35
#259067
Yes, the Fed like many other institutions is technically insolvent. However, it will never be allowed to fail. The Fed, the government and our corrupt politicians will ensure that unless we force a change in the system. That change can be found at SwarmUSA.com. It is spelled out in Freedom's Vision and promoted by The American Party PAC. Go there, read what is on the site and if you agree with the concepts set forth please join the movement. If we do not force change in the system the middle class will be eventually regulated to the status of serf and we will be ruled by a plutocracy in a soci/fascist style government.
on Tue, 03/09/2010 - 09:37
#259068
TD please fix Sims' attachment - it cannot be viewed or downloaded as PDF.
on Tue, 03/09/2010 - 10:10
#259095
No. they have negative equity with infinite ability to print.
on Tue, 03/09/2010 - 10:32
#259117
HAHA. Gold Beyotches!
http://www.youtube.com/watch?v=rq0Ez7DZSnI
on Tue, 03/09/2010 - 10:36
#259121
I wouldn't worry about gamma radiation - I say this again: debt is an ACCOUNTING ENTRY.
It's a paper artifact. It, by itself, has NO force and effect in the real world except what WE give it.
We are facing an existential crisis in PAPER and specifically in the future's ability to pay today's coupon, and nobody seems to see this forest.
The bottom line is that the energy peak has created a real economic peak in terms of output...it has rendered growth impossible. If we discover a new growable source of energy, then our system can continue growing. We can make more things, drive more cars more miles, etc. This is what "economies" are. Until/unless that happens, we face inevitable contraction.
I have talked about this for years now; the forecast is sustained global recession. This is how it must be. But, in the meantime, we CANNOT allow fucking accounting entries to precipitate the destruction of our societies!
There does appear to be a good development out in the real world, that people are walking away from debts. Contrary to what the "prudent" think, these people ARE being prudent! Debt is a state of mind. We the People have to cast off this system before it destroys us. We need a critical mass of the rejection of debt, right down to the core of our monetary system.
on Tue, 03/09/2010 - 13:22
#259302
trav7777,
You hit the nail on the head man, ENERGY PEAK, it's the one thing nobody is talking about, but it is the underlying, fundamental problem we face. We are looking at a catastrophic depletion of oil in the next 10-15 years, industry experts, such as Kenneth Deffeyes is predicting a 90% drop in oil production by 2020. 10 years from today, we will literally be living in a different world...if we are still living.
http://www.youtube.com/watch?v=QovBLFZhQME