• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

How The Federal Reserve Bailed Out The World

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Mon, 10/19/2009 - 14:54 | 103609 Cheeky Bastard
Cheeky Bastard's picture

Looking at the future, i kind of wish they didnt

And now, i will read the article.

Tue, 10/20/2009 - 16:13 | 104802 Anonymous
Anonymous's picture

The next round of the banking credit inplosion,
the overcommitted Fed may not be able to step in,
perhaps the reason for gold's runup.

Now fiduciaries realize they cannot stuff
what's left of $60 T global economy into gold,
so Big4 Asset Allocation sees a rush to dollars,
notes and oil...


Mon, 05/10/2010 - 23:15 | 342720 JW n FL
JW n FL's picture

Here in America, total debt compared to GDP now stands at around 280% to 300%. (By definition, these numbers are estimates, since it's impossible to arrive at a precise figure, but the latter is not needed in order to get the gist of what's going on.)

This is the highest debt-to-GDP ratio that the country has ever seen. By my calculations, as we exited 1929, debt-to-GDP was about 200%, though it did rise pretty dramatically while we were in the Depression, to about 300%. But by 1950 or so, the debt-to-GDP ratio came in at about 150%. It rose to some 220% in 1990. So obviously, our current ratio of total debt outstanding to GDP is the highest it's ever been (the Depression excepted).


Is it a hell of a LOT!!!! more due to offbook, offshore lending / swaps???? what is debt to GDP, today? 1,000% or more?

Fri, 05/27/2011 - 14:30 | 1317679 JW n FL
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http://goo.gl/FnxBZ  Treasury Direct $14 Trillion Debt


http://goo.gl/TMl74   $15 Trillion in Loans


http://goo.gl/EXzal   ='s $29T


Looks like I as Not so far off in my 1,000% range! unfortunately for ALL Americans!

Mon, 10/19/2009 - 14:59 | 103612 Slewburger
Slewburger's picture


Digitizing $ for Foreign liquidity = Disturbing.

On a side note.... Tyler do you ever stop?

Are those 10 hour breaks between posts for work... or sleep?

Mon, 10/19/2009 - 15:50 | 103665 Anonymous
Anonymous's picture

there's more than one

Mon, 10/19/2009 - 16:46 | 103743 Anonymous
Anonymous's picture

Aren't there 40 or something close to that number?

Mon, 10/19/2009 - 20:30 | 103939 Anonymous
Anonymous's picture

This is zen thing. The number is between zero and infinite.

Mon, 10/19/2009 - 17:09 | 103772 Slewburger
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Mon, 10/19/2009 - 15:09 | 103620 Prophet of Wise
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911 Operator: 911, What is the nature of your emergency?

Caller: Yes, I'd like to report a rape-in-progress.

911 Operator: In progress...you mean its happening right now?

Caller: Yes, operator...its happening right now! I am being sodomized right now.

911 Operator: Where is your attacker?

Caller: All around me from all sides.

911 Operator: Can you identify them?

Caller: No operator, they have been very very clever at concealing their identity.

911 Operator: Where are you?

Caller: I don't know anymore. I don't recognize this place.

911 Operator: Well we can't send help if you don't know where you are?

Caller: It wouldn't make much difference now. You wouldn't be able to restore my innocence and what's been done is done.

Mon, 10/19/2009 - 15:16 | 103626 E pluribus unum
E pluribus unum's picture

Does this mean that the banks really were insolvent (and still are) last year?


OMG - I am sooooooo shocked

Mon, 10/19/2009 - 15:24 | 103634 Don Smith
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Serious question - does anyone know how to find someone to lend 1- 2- year US treasuries if I wanted to short them and buy, say, Australian govies?

Mon, 10/19/2009 - 15:27 | 103641 Marla Singer
Marla Singer's picture

There's 2 year treasury note futures and their options...?

Mon, 10/19/2009 - 15:45 | 103659 Don Smith
Don Smith's picture

Thanks, good point.  I am looking at a Joe-Sixpack carry trade.  A leveraged play against the dollar.  I'm a small fry, and am looking at ways that a small investor can set up a levered position in currencies to ride this dollar wave down to its nadir, wherever that may finally be.

So, if I've got, say, $10,000 to throw at this, and wanted to short the dollar and use the proceeds to buy AUD or equivalent debt instruments (bonds, or even CDs) with max leverage, how does an ordinary guy do this?

Certainly, one route would be to buy $10K of 6-month calls on TBT, for example.  But theta can be a bitch, and the market can stay irrational ... yadda yadda. 

Or, I could convert to AUD and buy $10K in Australian Dollar denominated debt, which yields something more than the 1% I can get in a 2-yr treasury.  But that's a pretty lame trade, since there's no leverage, and I lose so much in transactional costs.

So, anyone have a play here?  (again, Marla, thanks for the futures idea, that was perfect for my detail-less post).

Mon, 10/19/2009 - 19:05 | 103863 Joe Sixpack
Joe Sixpack's picture

"I am looking at a Joe-Sixpack carry trade."


Everything is a carry trade now. Euro, dollar, silver,... and now, Me! Is that good or bad for me?

Tue, 10/20/2009 - 10:58 | 104332 Joe Sichs Pach
Joe Sichs Pach's picture

I would say neutral my friend.  Definitely neutral...

Wed, 10/21/2009 - 10:23 | 105484 NumisEX
NumisEX's picture

Whoh, bizzaro world. A half a case of Joe

Mon, 10/19/2009 - 15:25 | 103639 faustian bargain
faustian bargain's picture

It's gonna take me a while to read this epic post.

Mon, 10/19/2009 - 17:59 | 103810 Brian Griffin
Brian Griffin's picture

An extra adderall is in store for this old dog. 

Mon, 10/19/2009 - 15:30 | 103644 waterdog
waterdog's picture

One mystery down, one more to go. I was right about Limey's central bank. Anyone heard from him lately?

Mon, 10/19/2009 - 15:31 | 103645 Ruth
Ruth's picture

More PROOF THE FED NEEDS AUDITED and probably DISMANTLED IN TIME.  Do I trust politician to be responsible with that task, since they cannot keep their noses clean themselves?  We must count on the few who have balls enough to take on the task....we better start realizing which battles are worth it.   FED AUDIT, FIN INDUSTRY REGULATION, JOB CREATION, HEALTHCARE AND PROBABLY IN THAT ORDER.

Why should be bail out the universe?  GS and their baby squids should be our first domestic (financial) terrorists to be looked at, FED and their cohorts would be our first international terrorists.

Oh, AND now that we know more and it's just as expected....WHEN ARE WE CLAWING THE MONEY BACK?  WE NEED NEW RULES FOR NEW INFORMATION! 

Mon, 10/19/2009 - 15:36 | 103646 Yossarian
Yossarian's picture

the trade de jour is once again the dollar funding one, although unlike before when the Yen was the carry currency of choice, this time it is the dollar itself, positioning banks for the double whammy of not just a dollar funding shock, but one coupled with a potential massive and historic short squeeze. 


Can you please explain that- how is it different to the Yen carry trade other than being on a much larger scale?  It seems that the best hope to get out of this would be to pray that the reflation works and the cash flows from the $assets will allow foreign banks to pay back their central banks who can then close their swaps with the US Fed.  This might mean years of deleveraging...unless rates rise to levels sufficient to attract Asian exporting nations to mitigate this deleveraging by providing short-term funding.  Perhaps they will switch out of T-Bills...

Mon, 10/19/2009 - 16:08 | 103694 jm
jm's picture


As a carry trade, the world not only benefits by dollar decline, it actively seeks to drive it down.  As a reserve currency, the dollar is a de-risking asset, a flight to safety so to speak.

When whoever needs dollars because they are squeezed meet those rushing for dollars to derisk, the effect will not be swish, as they say.

Mon, 10/19/2009 - 15:34 | 103649 digalert
digalert's picture

Why didn't Grayson just say to Bubble Ben that we sold happy boxes of shit abroad, in effect screwing them. When the whole scam was exposed, uncle Ben chose to pay them to cover their losses, thereby screwing the US taxpayers. Is that not in fact what happened?

Mon, 10/19/2009 - 17:41 | 103790 Rollerball
Rollerball's picture

That's how I see it.  Taxpayers get "punked" (by) back stopping private-to-public debt swaps as a hedge against:  a) WWIII; b) sovereign default of the global "carry" trade; c.) both a) and b)?  Grayson, like Ron Paul, knows how far they can go before ending up like JFK.  Hooray, the Fed audit is unnecessary now, thanks to the new transparency of it's owner(s) at the BIS! Thanks BB for saving Zion's moneychangers.  You're my hero Nero, I mean Neo!  

Mark 11:15–19

Matthew 21:12–1

Luke 19:45–48

John 2:12–25


Mon, 10/19/2009 - 18:41 | 103850 rr_
rr_'s picture

BIS owners own the FED or FED owners own BIS now?    The crisis was coincident with a BIS mandate for reserve asset quality.

Mon, 10/19/2009 - 20:13 | 103922 Gilgamesh
Gilgamesh's picture

The same owners for both the Fed and the BIS.  This rabbit hole is deep and shallow at the same time.

Mon, 10/19/2009 - 22:08 | 104032 Rusty Shorts
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Proverbs 9:11-13


In those days Alan Grayson arose, and ye he spake, he sayeth, where is our goddamned money, so sayeth the Alan Grayson.

Tue, 10/20/2009 - 10:12 | 104303 Anonymous
Anonymous's picture


Mon, 10/19/2009 - 15:38 | 103650 starfish
starfish's picture

Support HR1207: Audit the FED.

Mon, 10/19/2009 - 15:41 | 103654 TraderMark
TraderMark's picture

Good post, love the supporting details.

p.s. if anyone wants to chime in on why their neighbors, work associates, friends or whomever are completely apathetic to our generational theft please contribute a comment.

I spend weekends banging my head against the wall trying to figure it out and still fail.  Maybe I am just living in the Matrix.


Mon, 10/19/2009 - 16:26 | 103719 Anonymous
Anonymous's picture

TM, I share your frustrations. I attended a dinner last night for a group to chat with two candidates for the local school board (top rated public school in our state.) Neither of them could even begin to explain fractional reserve banking. Before the night was over both began to grasp the need to include such instruction in our public schools.

One brick at a time.

Mon, 10/19/2009 - 20:08 | 103919 Howard_Beale
Howard_Beale's picture

Good for you...keep it up.

Mon, 10/19/2009 - 21:29 | 104002 Miles Kendig
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Excellent.  Every journey is a series of individual discreet steps.  Thank you for this one.

Fri, 10/30/2009 - 15:57 | 115489 Anonymous
Anonymous's picture

In the 1770s in the thirteen colonies the second most popular category of books (after religious material), was Law!

The ordinary literate citizen was primarily concerned with questions of faith, morality and law!

That's what it takes to make a real revolution.

Mon, 10/19/2009 - 16:38 | 103735 Boop
Boop's picture

Because they don't know it's going on? 

Mon, 10/19/2009 - 16:50 | 103752 MinnesotaNice
MinnesotaNice's picture

Yes... this content came from a paper issued by the BIS... however don't lose sight of the fact that Bernanke sits on the Board of the BIS... and the Board guides policy and what is disseminated by the BIS...

Mon, 10/19/2009 - 19:57 | 103848 Miles Kendig
Miles Kendig's picture

Which makes this particular paper, who released it, the material discussed with it, and the matter of its discussion all brilliant tells. I doubt rather seriously the BIS would have done so without significant reason MnNice.

Inquiring minds would love to know what prompted the BIS to such action.

Mon, 10/19/2009 - 20:42 | 103952 Anonymous
Anonymous's picture

Because Bernanke wants Noble.

Captcha Q: -26 times 29 equals ?
Please add calculator app. to the website.

Mon, 10/19/2009 - 15:42 | 103658 Cognitive Dissonance
Cognitive Dissonance's picture

Simply the newest version of a very old trick. Run the damn system to the breaking point and then create a panic to cause people to react in a way you expect them to.

Make sure you have your buddies and cohorts positioned to take advantage of this massive shift and then sit back and watch the fun.

Wash, rinse and repeat as often as the fools will let you.

Mon, 10/19/2009 - 16:06 | 103691 Anonymous
Anonymous's picture

We are all just 'marks' in an advanced game theory. Probable reactions have already been calculated and accepted based on risks i.e. collateral damage. Create circumstances... execute... prevent sensible conclusions. Welcome to the new reality.

Mon, 10/19/2009 - 19:58 | 103867 Miles Kendig
Miles Kendig's picture

Same as the old reality.  Game theory however advanced only goes so far.  Usually not very far hence the need of those whose models are predicated upon it find their position requires frequent episodes of wash, rinse & repeat cycles.

Thanks for the rating.

Mon, 10/19/2009 - 19:26 | 103876 Cheeky Bastard
Cheeky Bastard's picture

game theory is the biggest voodoo shit of modern day economics that it is simply unbelievable that people actually use it, or even pay attention to it. you may ask why. it is simple; the MAIN axiom ( well more of a BS speculation, or a contingent or false premise ) of game theory is that all the participants are rational. FAIL.

Mon, 10/19/2009 - 21:50 | 104018 Benthamite
Benthamite's picture


"It has been said that man is a rational animal.  All my life I have been searching for evidence which could support this."

-B. Russell


Tue, 10/20/2009 - 03:31 | 104174 JacksWastedLife
JacksWastedLife's picture

What's wrong with the Nash Equilibrium and related ideas?

Tue, 10/20/2009 - 03:37 | 104176 Cheeky Bastard
Cheeky Bastard's picture

the MAIN axiom ( well more of a BS speculation, or a contingent or false premise ) of game theory is that all the participants are rational. FAIL.


here you go, i bolded it for you.

Tue, 10/20/2009 - 08:57 | 104234 Cognitive Dissonance
Cognitive Dissonance's picture

"the MAIN axiom ( well more of a BS speculation, or a contingent or false premise ) of game theory is that all the participants are rational. FAIL."

When you look at game theory or efficient markets theory they all rely on a "rational" player or investor or whatever.

It does stroke our ego's nicely (mental masturbation at its finest) to think we irrational animals are really very rational in all our affairs, doesn't it?

Tue, 10/20/2009 - 09:01 | 104240 Cheeky Bastard
Cheeky Bastard's picture

i have always been more proud of my irrational side and my animal heritage, then my human side. yes it is awesome to know how to solve differential equations, but that capability ain't worth shit when it comes to survival. we are just animals, with a concept of god, and hence, we think were are not animals. yes it is that simple.

Tue, 10/20/2009 - 15:03 | 104648 Miles Kendig
Miles Kendig's picture

Yaskov:  The human species has lived on this world for some millions of years.  For all but a small fraction of that time we have lived as hunters.  Hunting.  It was your way of life until you walked away from it.  I am offering to return it to you.

Kendig thinking:  Who says I walked away from all of it Yaskov?  Indeed, it is time to write about my last 20 years in the ghetto.  Thanks for the idea old associate.

I must admit that there is a difference between the south of the US and the south of France..

Cheers CB

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