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IMF Eliminates Borrowing Cap On Rescue Facility In Anticipation Of Europe Crisis 2.0; US Prepares To Print Fresh Trillions In "Rescue" Linen

Tyler Durden's picture





 

Back in April, when we discussed the inception of the IMF's then brand new New Arrangement to Borrow (NAB) $500 billion credit facility, we asked rhetorically, "If the IMF believes that over half a trillion in short-term funding is needed imminently, is all hell about to break loose." A month later the question was answered, as Greece lay smoldering in the ashes of insolvency, and the developed world was on the hook for almost a trillion bucks to make sure the tattered eurozone remained in one piece (leading to such grotesque abortions as Ireland, whose cost of debt is approaching 6%, funding Greek debt at 5%). Well, if that was the proverbial canary in the coalmine, today the entire flock just keeled over and died: today the IMF announced it "expanded and enhanced its
lending tools to help contain the occurrence of financial crises." As a result, the IMF has as of today extended the duration of its existing Flexible Credit Line (FCL) to two years, concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords. Additionally, as the FCL has some make believe acceptance criteria (and with countries such as Poland, Columbia, and Mexico having had access to it, these must certainly be sky high), the IMF is introducing a brand new credit facility, the Precautionary Credit Line (PCL), which will be geared for members with "sound policies [which just happen to need an unlimited source of rescue funding] who
nevertheless may not meet the FCL’s high qualification requirements." In other words everyone. In yet other words, the IMF as of today, has a limitless facility to bail out anyone in the world, without a maximum bound in how much is lendable. One wonders who would be stupid enough to take advantage of the gullibility of IMF's biggest backers (the US), to borrow an infinite amount of money for any reason whatsoever... And just what all this means for the imminent explosion of the amount of money in circulation...Not to mention the brand new Ben Bernanke smokescreen of having a new justification to print a few trillion dollars when Europe unexpectedly collapses yet again.

In discussing the imminent need for its expanded "Crisis Prevention Toolkit" which also comes with 50cc's of adrenaline, ativan, a crash cart, and a defibrillator, Dominique Strauss-Khan (and that's Missus to you Bob Pisani), the corpulent bureaucrat said: “These decisions expand and reinforce the IMF’s crisis-prevention
toolkit and mark an important step in our ongoing work with our
membership to strengthen the global financial safety net. The enhanced
Flexible Credit Line and new Precautionary Credit Line will enable the
Fund to help its members protect themselves against excessive market
volatility
,” said IMF Managing Director Dominique Strauss-Kahn. What DSK did not mention is that it is precisely the mechanisms used by the Central Banking Cartel to rise the markets ever higher in light of increasingly deteriorating fundamentals, that are precisely what makes the markets excessively volatile, primary culprit of course being HFT, which is nothing but a government endorsed positive feedback loop.

There's more spin:

This strengthening of the Fund’s insurance-type instruments is aimed to encourage countries to approach it in a more timely fashion in order to help prevent a crisis and, also, help to protect them during a systemic crisis. Mr. Strauss-Kahn added that “the revamped financing toolkit rewards countries that implement strong policies. We expect that the availability of these credit lines to a broader spectrum of countries will contribute to a more stable international monetary system.”

So as the world drowns under trillions of excess debt, the IMF's solution is to throw quadrillions (or, technically, "as much as necessary") of new debt at the problem. And why not: when you have an out of control burning oil well, you nuke it (or so the legend says). And what works for geology surely works for unstable monetary systems, correct?

For the specifics of the actual adjustments as part of today's "repackaging" the IMF provided the following summary:

The enhancements approved today by the Executive Board include:

  • Doubling the duration of the credit line (FCL arrangements can now
    be approved for either one year, or two years with an interim review of
    qualification after one year, whereas they were previously either for
    six months, or one year with an interim review after six months);
  • Removing the implicit cap on access of 1000 percent of a member’s
    IMF quota, with access decisions based on individual country financing
    needs; and
  • Strengthening procedures by requiring early Executive Board
    involvement in assessing the contemplated level of access and the impact
    of such access on the IMF’s liquidity position.

The new PCL is available to a wider group of members than those that
qualify for the FCL. In practice, qualification is assessed in five
broad areas, namely: (i) external position and market access, (ii)
fiscal policy, (iii) monetary policy, (iv) financial sector soundness
and supervision, and (v) data adequacy. While requiring strong
performance in most of these areas, the PCL permits access to
precautionary resources to members that may still have moderate
vulnerabilities in one or two of these dimensions. Features of the PCL
include:

  • Streamlined ex post conditions designed to reduce any economic
    vulnerabilities identified in the qualification process, with progress
    monitored through semi-annual program reviews.
  • Frontloaded access with up to 500 percent of quota made available
    on approval of the arrangement and up to a total of 1000 percent of
    quota after 12 months.

And since the NAB, announced with much fanfare, capped out at $500 billion, and since almost 6 months since then have passed, the IMF is now determined to create its own version of Moore's law, by doubling the amount of borrowing availability under its biggest credit facility every six months. To wit, Bloomberg reports: "Talks are ongoing with member countries to raise the IMF
lending capacity to $1 trillion as part of G-20 discussions.
" The $1 trillion will subsequently be doubled to $2 trillion in January 2011, then $4 in June.... and you get the exponential lidea.

Also further confirming that at the end of the day it is the US that will foot these unlimited expenditures (Bernanke's inflationary wet dream has to start somewhere after all), "John Lipsky, IMF first deputy managing director, told reporters on a conference call today that the institution has enough money to fund the new credit lines. At the same time, he said he is confident that member countries will continue to demonstrate a commitment for the IMF to have the resources to make the new credit lines “credible and usable.” You hear that USA? Oh wait, it was your idea all along, we get it now. 

In other words, Europe - prepare: uncle Sam is coming to bail you out once again. Just please give him a reason: our banks demand it, and let's not forget, it is your patriotic duty to bail out US bank balance sheets via semi-hyperinflation. Tonight's move in the EUR and the CHF are a damn good (if on the surface counterintuitive) start.

Lastly, for those lazy readers who always scroll to the very bottom looking for a video clip summarizing all previously said, you are in luck. Here is the IMF's Reza Moghadam condescending, and blatantly lying to all who care, as to what the purpose of tonight's "Crisis Prevention Toolkit" expansion is.

 

 


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Mon, 08/30/2010 - 23:31 | Link to Comment NoVolumeMeltup
NoVolumeMeltup's picture

Iceland, Bitchez.

Tue, 08/31/2010 - 06:31 | Link to Comment MarketTruth
MarketTruth's picture

Simply A Reminder:

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." -- Alan Greenspan, 'Gold and Economic Freedom' in 1966.

Tue, 08/31/2010 - 07:11 | Link to Comment d2thdr
d2thdr's picture

Very true. Does Greenspan regret what he wrote(though it is very true)?

Tue, 08/31/2010 - 08:46 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

This was written during Greenspan's "innocent" stage of life, when he felt truth and virtue was worth more than a paycheck. Happily he outgrew this stage and progressed to "full whore" soon after.

Ironically in his twilight, he has morphed into the final stage of life, that of "old whore". In this last glorious blooming, where with little to lose he can return to those care free days of his youth, he is once again speaking about fiscal sanity and of protecting the weak from the selfish and arrogantly powerful.

At least until he is sent to sleep with the hot tub fishes.

Tue, 08/31/2010 - 10:25 | Link to Comment Gwynplaine (not verified)
Tue, 08/31/2010 - 12:57 | Link to Comment buzlightening
buzlightening's picture

Been doin that since jan'08!  Average physical silver price on hand under 14 bucks an oz!!  In bankster gangster land 100% possession is the law among the theiving lawless rat bastards!    Guns/ammo purchased in '08 inflated by 67%!  Food/water storage as I go looking for rock bottom bargains freeze dried; whatever inflated to who knows how much!!  Certainly won't find me standing in line for food stamps, welfare check, or goon government subsidized tent city housing coast to roast!! 

Tue, 08/31/2010 - 19:55 | Link to Comment Buck Johnson
Buck Johnson's picture

I totally agree with you reggie, spot on.  They are doing everything on both sides of the pond to keep the appearance of market cohesion and financial stability to the public.  But many of the insiders and the govt. know that European Union should be dissolved and go back to each having their own currency and also the US govt. is insolvent and will silently default on debt.

Mon, 08/30/2010 - 23:43 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Dam bursting!

Run for your life!

IMF = International MuthaFuchas

Tue, 08/31/2010 - 00:18 | Link to Comment midtowng
midtowng's picture

We're having fun now!

This is looking increasingly like the blow-off top in the failed, global fiat currency experiment.

 An entire generation of the world's wealth is destroyed for bankers and politicians? Oops! Sorry about that. We'll do better next time. Trust us.

Tue, 08/31/2010 - 04:39 | Link to Comment LeBalance
LeBalance's picture

"is destroyed for bankers and politicians?"

is *transfered to* the bankers and politicians?

..there, fixed it for you..

Tue, 08/31/2010 - 08:29 | Link to Comment doolittlegeorge
doolittlegeorge's picture

at first and both surprisingly and interestingly so.  not even the government can afford that however "along any time line" since as ZH so ably proclaims "you'll be dead if you do."

Tue, 08/31/2010 - 07:41 | Link to Comment The Rock
The Rock's picture

hmm, let's see... the IMF (International Murderers' Fund) is supposedly in a FiCkLe (FCL) PiCkLe (PCL)?

And the IMF is now determined to create its own version of Moore's law ---> Shall we call it "Zimbabwe's Law"?

Does doubling the amount of borrowing availability every 6 months eventually become a doubling every 24 hours?

Tue, 08/31/2010 - 07:50 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Aren't these the wiz kids who just offloaded 403 tons of gold!!!???? WTF?!

Brilliant, just brilliant.

Tue, 08/31/2010 - 08:31 | Link to Comment doolittlegeorge
doolittlegeorge's picture

to whom did they off load it to?

Mon, 08/30/2010 - 23:34 | Link to Comment kridkrid
kridkrid's picture

"proverbial coalmine in the canary"... I hope I'm not about to be that guy who says, "ummmm... it was the Japanese who bombed Pearl Harbor, not the Germans".... missing the reference, but shouldn't this read "proverbial canary in the coalmine"?

Mon, 08/30/2010 - 23:37 | Link to Comment Tyler Durden
Tyler Durden's picture

causation implies correlation

Tue, 08/31/2010 - 02:41 | Link to Comment ThreeTrees
ThreeTrees's picture

horse before cart?

Tue, 08/31/2010 - 03:58 | Link to Comment simone
simone's picture

Causation is not necessary for correlation.

Tue, 08/31/2010 - 04:39 | Link to Comment jeff montanye
jeff montanye's picture

causation implies correlation doesn't mean causation is necessary for correlation:  all correlations are "bigger" than just those produced by causation.  nevertheless events caused by other events are themselves correlated.

Tue, 08/31/2010 - 07:35 | Link to Comment simone
simone's picture

Correlations do not determine root causes.

Tue, 08/31/2010 - 09:37 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

We've crossed that bridge after we came to it?

Tue, 08/31/2010 - 09:05 | Link to Comment natkins
natkins's picture

Disagree, events caused by other events are not necessarily correlated.

Tue, 08/31/2010 - 07:59 | Link to Comment ToNYC
ToNYC's picture

They Shoot Horses Don't They?

Tue, 08/31/2010 - 08:14 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture

LOL!!  Good one!

Tue, 08/31/2010 - 08:31 | Link to Comment doolittlegeorge
doolittlegeorge's picture

and what an implication!

Mon, 08/30/2010 - 23:40 | Link to Comment CashCowEquity
CashCowEquity's picture

Gold is going to 15,000 per oz and Silver to $250 per oz now...

Tue, 08/31/2010 - 00:25 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

At some point don't be surprised with those prices for Gold and Silver.

fofoa.blogspot.com

...

So many lies and liars out there.  Whom to trust?  Gold, Silver, and maybe guns & ammo.  And get good with your spiritual situation (religion).

Everything keeps getting weirder by the day.  Diversify and get prepared...

 

Tue, 08/31/2010 - 00:40 | Link to Comment merehuman
merehuman's picture

Its still a circus. The merry go round was to fast for me.

I fell off.

Tue, 08/31/2010 - 10:15 | Link to Comment FEDbuster
FEDbuster's picture

I'm just sitting here watching the wheels go round and round,
I really love to watch them roll,
No longer riding on the merry-go-round,
I just had to let it go

John Lennon, Watching the Wheels

http://www.youtube.com/watch?v=_m8uoObnWQM

Tue, 08/31/2010 - 01:12 | Link to Comment RockyRacoon
RockyRacoon's picture

DCRB, things are looking really weird, eh?  Kinda like the folks who say we really don't want to be here when/if gold gets to $10K -- I'm thinking they may be right!

Spooky stuff.

Tue, 08/31/2010 - 07:39 | Link to Comment Tense INDIAN
Tense INDIAN's picture

i think Silver is going much higher than that.....Amero is going to be backed by Siver ...and we all know the silver price suppression by JPM.......

Tue, 08/31/2010 - 10:08 | Link to Comment Ahmeexnal
Ahmeexnal's picture

But...but...but the USD is backed by cocaine!

Now that's a strong currency, ain't it not?

Tue, 08/31/2010 - 08:32 | Link to Comment doolittlegeorge
doolittlegeorge's picture

and your point is?

Mon, 08/30/2010 - 23:46 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Perhaps we could locate the wayward Mr. Zhou by searching the offices of the IMF. With their ever-expanding role, they could really use a man of his many talents.

Tue, 08/31/2010 - 01:04 | Link to Comment THE 4th Quadrant
THE 4th Quadrant's picture

Just discussing that very topic earlier today. Someone has a reward waiting for buying all of that junk....

[Do you know of any islands purchased by a squid]

Mon, 08/30/2010 - 23:51 | Link to Comment Hall 9000
Hall 9000's picture

"The IMF last year already had to rebrand the flexible credit line after it failed to attract a single country. Mexico, Poland and Columbia have since applied and qualified for a total IMF commitment of about $US72 billion. They each renewed this year although none had drawn on the credit lines."

http://tinyurl.com/3xh8yyo

Mon, 08/30/2010 - 23:58 | Link to Comment Shameful
Shameful's picture

Good on them.  I was sorta hoping the dollar would outlive the Euro by a few months, but all the fiat currencies have to die someday I guess.  It's not like we are going to pay it back, it just further rockets us to publicly acknowledged insolvency.  Can't wait till the IMF has to borrow from the US, to bail out the US.

Tue, 08/31/2010 - 00:20 | Link to Comment midtowng
midtowng's picture

The dollar will be the last fiat currency standing, but not for very long. And it will probably be replaced by another global fiat currency system.

Tue, 08/31/2010 - 00:35 | Link to Comment hugolp
hugolp's picture

And it will probably be replaced by another global fiat currency system.

This sounds scary because it sounds possible. We will have coordinated bubbles all around the world, and then, when the bubble go bust, global crisis at the same time. Its going to be so much fun.

Tue, 08/31/2010 - 01:10 | Link to Comment THE 4th Quadrant
THE 4th Quadrant's picture

The new currency is not going to be a currency per-se. Instead debit/credit cards will succeed the old paper & coin system. Bye bye black money.

Tue, 08/31/2010 - 09:10 | Link to Comment aerojet
aerojet's picture

I don't see how that would be a likely possibility given that so much of what pols and oligarchs do is somehow dirty, it would seem like cash would be a preferred method of payment.  I also look at how much of the US runs on the cash economy and doubt that cash is going anywhere anytime soon.  Fast food joints will take credit/debit cards now, but most of their intake still has to be from cash purchases.

 

Tue, 08/31/2010 - 10:23 | Link to Comment FEDbuster
FEDbuster's picture

Imagine the 41 million in the USA on food "stamp" debit cards could be joined by billions in worldwide food stamp program.  Not sure how that would work when the American family of four receives more in food stamps in one month than most around the world EARN in pay for a full year, but the masters will work out something equitable for all the slaves.  My guess is Americans will have to aquire a taste for rice and beans six days a week.

Tue, 08/31/2010 - 09:12 | Link to Comment SheepDog-One
SheepDog-One's picture

Right, 4tfQuad, anyone thinking a Phoenix currency like Amero or Boncor will be backed by anything has to be nuts. Theyll be 'backed' by your slavery. If you do good work for Our Beloved Leader, then you might get a few credits put on your chip. There will be no 'savings'.

Tue, 08/31/2010 - 08:40 | Link to Comment doolittlegeorge
doolittlegeorge's picture

"coordinated bubbles"?  scary or hilarious?  who needs a canon when all you need is a pea shooter.

Tue, 08/31/2010 - 00:31 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Shameful, as always great to read your comments again.

Because of a tsunami of bearing orders arriving in Peru (without notice or documents), I had to send a BUNCH of money to suppliers overseas.  While that hurts me "here" (less money) it may help me there (if I exfiltrate to Peru).

Keep your options REAL OPEN re your own life.  Be aware, cautious and even semi-paranoid.

Let us know in the ZH community what you think of any foreign places you explore!

Tue, 08/31/2010 - 08:41 | Link to Comment doolittlegeorge
doolittlegeorge's picture

sometimes you can explore foreign places without getting off the couch, too.

Tue, 08/31/2010 - 09:06 | Link to Comment Pondmaster
Pondmaster's picture

Nova Scotia - great - main drawback , its an island . Moderate winters . Not over populated 

Tue, 08/31/2010 - 09:27 | Link to Comment BurningFuld
BurningFuld's picture

Hummm  An Island with a land bridge. (?)

Tue, 08/31/2010 - 11:47 | Link to Comment living on the edge
living on the edge's picture

DoChen,

I have never been to Peru but I am scratching my head as to why move there. Please enlighten me. I have been researching Belize and Costa Rica but I really need to visit first hand to make a decision. Your thoughts!

Tue, 08/31/2010 - 09:22 | Link to Comment SheepDog-One
SheepDog-One's picture

We'll all pay for the printing in the street riots and battlefields of WW3, economic collapse means the people have to go, only way to increase the value of currency now is mass population reduction.

Tue, 08/31/2010 - 00:00 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Who the fuck mowed down the green shoots ???

Tue, 08/31/2010 - 00:10 | Link to Comment JLee2027
JLee2027's picture

Bush of course. Or maybe it was Karl Rove. Wouldn't surprise me if Cheney told them to do it.

Tue, 08/31/2010 - 00:12 | Link to Comment Hall 9000
Hall 9000's picture

 "The fundamentals (of the economy) are strong; we're just in a rough patch right now."

http://www.upi.com/Top_News/2008/02/01/Bush-says-economy-in-rough-patch/...

Tue, 08/31/2010 - 01:32 | Link to Comment Caviar Emptor
Caviar Emptor's picture

"Rarely is the question asked: Is our children learning?" — Florence, South Carolina; January 11, 2000

Tue, 08/31/2010 - 08:23 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture

LMAO!!!!

Tue, 08/31/2010 - 04:44 | Link to Comment Sudden Debt
Sudden Debt's picture

the CNBC goats

Tue, 08/31/2010 - 10:29 | Link to Comment FEDbuster
FEDbuster's picture

The "green shoots" were just government induced weeds, the economic Roundup has taken care of them.

Tue, 08/31/2010 - 00:01 | Link to Comment ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

Is seems the mechanisms being "enhanced" by the international bankers work to transfer the unpayable debts of one nation onto the taxpayers of another, just as the unpayable debts of corporations were transferred onto taxpayers within the US in 2008.

 

So when trying to imagine when of this all must necessarily implode, wouldn't one approach be to try to imagine how much capacity for debt service exists amongst all taxpayers world wide?  Once this capacity is exhausted, the end must come as a matter of simple arithmetic.  Of course, a "black swan" event could sink us sooner, but it would seem that the precedent has been set so that none of us in any nation will avoid shouldering an increasing share of all existing and all new debts until we all are no longer able to do so.

 

Someone must be trying to quantify the limit.

 

No Bravo today?  Gold was down a buck wasn't it?  Shouldn't he be here?

Tue, 08/31/2010 - 00:26 | Link to Comment Spitzer
Spitzer's picture

That depends on where you look. Yahoo finance had gold at $3401 for some strange reason. http://www.youtube.com/watch?v=IGKAveMY0kc

 

 

Tue, 08/31/2010 - 09:09 | Link to Comment centerline
centerline's picture

Has there been any information released about that anomaly?  Or is it just being "ignored" so far (LOL)?

Tue, 08/31/2010 - 00:00 | Link to Comment Hang The Fed
Hang The Fed's picture

What, is the IMF taking its cues from Helicopter Bennay now?  "O NOES, YOU-ROPE IZ BOUTZ TO SHITZ DA BED!!  FYYERR UP DA PRINTINGS PRESSEZ!!"  I can't tell whether the tears coming out of my eyes are from gut-wrenching laughter or abject depression.  But, I'm sure that Goldman would like to compile those tears into a CDO, then take out a CDS on it.

Tue, 08/31/2010 - 08:49 | Link to Comment doolittlegeorge
doolittlegeorge's picture

oh they have a far simpler plan than that.

Tue, 08/31/2010 - 00:01 | Link to Comment sschu
sschu's picture

Is is fair to say that all $$ eventually end up in the US?  I guess some are stashed away in international banks for a while.  So rates will stay low, treasury's and stocks will increase in price and commodities will skyrocket.

Doesn't sound to good for middle America ....

sschu 

 

 

Tue, 08/31/2010 - 08:50 | Link to Comment doolittlegeorge
doolittlegeorge's picture

this is interesting.  i would not use the word "fair" however to describe this process.

Tue, 08/31/2010 - 00:08 | Link to Comment GoinFawr
GoinFawr's picture

"Is seems the mechanisms being "enhanced" by the international bankers work to transfer the unpayable debts of one nation onto the taxpayers of another, just as the unpayable debts of corporations were transferred onto taxpayers within the US in 2008."

Effing exactly. Spot on Bevin, so get ready for the following:

http://www.youtube.com/watch?v=unkIVvjZc9Y

(language warning)

Regards

Tue, 08/31/2010 - 00:07 | Link to Comment Hephasteus
Hephasteus's picture

WTF is he talking about. He's part of a ponzi financial system that by necessity deteriorates into what we have now. Broke banks, broke businesses, broke governments. Bondholders so rich they can't possibly collect what is owed because it just doesn't FUCKING exist due to the mathematical modeling mismatch. As much stink as is made about accounting fraud it really doesn't matter. The ENTIRE system is accounting fraud. I'm going to laugh my ass off when the story about how everything is bankrupt and we were forced to restructure our debt into SDR's and carbon credit starts newsing when it's been the plan for 10 freaking years.

Tue, 08/31/2010 - 00:20 | Link to Comment Rusty Shorts
Rusty Shorts's picture

SDR's...U.S Postal Service now accepts.

Tue, 08/31/2010 - 00:30 | Link to Comment GoinFawr
GoinFawr's picture

Shit. So no 'Amero' then?

Tue, 08/31/2010 - 08:00 | Link to Comment Treeplanter
Treeplanter's picture

The new money will be called Gidget.  Sandra Dee with a surfboard.  

Tue, 08/31/2010 - 08:01 | Link to Comment Treeplanter
Treeplanter's picture

The new money will be called Gidget.  Sandra Dee with a surfboard.  

Tue, 08/31/2010 - 00:09 | Link to Comment loub215
loub215's picture

What the F@*k!

Didn't anyone learn anything in the last 20 years?!

Sovereign Liar Loans?! Nth power leverage?!

Give me a break! We're doomed...

Disclosure: Long Common Sense, short the ruling class!

:^)

Tue, 08/31/2010 - 00:09 | Link to Comment system failure
system failure's picture

Time to invest in silk paper and ink companies for this printer press explosion demand from around the world. WTF, this is how we solve kicking the can down the crooked trail to prosperity road to riches of the nth power. Gold should be only in such demand soon enough. Too bad we won't know what value to place on it since currencies are going to be kicked down the road with the passing wind.

Tue, 08/31/2010 - 00:18 | Link to Comment system failure
system failure's picture

and God only knows, who the next person will be Time Magazines "Freaking Man of the Year in 2010," certainly not Helicopter Ben.

Tue, 08/31/2010 - 05:35 | Link to Comment cossack55
cossack55's picture

Depends on how much he can print how fast.

Tue, 08/31/2010 - 01:18 | Link to Comment Moneygrove
Moneygrove's picture

U S Dollar printed on crane paper. paper/cotton

Tue, 08/31/2010 - 00:11 | Link to Comment iPood
iPood's picture

So US will be lending the IMF money to let the IMF bail out the US (with an IMF loan) when the time comes? :-)

Tue, 08/31/2010 - 08:54 | Link to Comment doolittlegeorge
doolittlegeorge's picture

yes.

Tue, 08/31/2010 - 00:11 | Link to Comment Hang The Fed
Hang The Fed's picture

HAHAHAHAHAHAHAAAAA!!!  Holy shit, it's really true!  The solution to a debt-fueled economic collapse is...MOAR CREDITZ!!

On a side note, the IMF is now seeking qualified candidates for financial advisory positions, on a global scale.  Please bring your own crayons to the interview, and you are asked to refrain from filling your own shoes with drool while waiting.  Thank you, and have a nice afterlife, because THIS life is being torpedoed in a way that makes the sinking of the Lusitania look like a fart in a hurricane.

Tue, 08/31/2010 - 08:55 | Link to Comment doolittlegeorge
doolittlegeorge's picture

you forget the pet chimps and some guy in a gorilla suit.

Tue, 08/31/2010 - 00:15 | Link to Comment LostWages
LostWages's picture

From one of the lazy ones, thanks for the video recap.

Once the sheeple realize Uncle Benny and the Inkjets are the primary funding for the Euro bailouts, the end of the Fed will come even sooner.

As much as I wish to see the end of the FED, it scares me to think Bwarny Frawnk et all might be setting monetary policy for the US.

Tue, 08/31/2010 - 08:56 | Link to Comment doolittlegeorge
doolittlegeorge's picture

it's called "Operation New Dawn" my friend.  I say again, "Operation NEW DAWN."

Tue, 08/31/2010 - 00:14 | Link to Comment JLee2027
JLee2027's picture

I hope enough in Congress stand up and start yelling "NO" when the IMF wants funds.

Tue, 08/31/2010 - 08:56 | Link to Comment doolittlegeorge
doolittlegeorge's picture

really?  you want your Congressman to say no to your money?  That would interesting.

Tue, 08/31/2010 - 00:18 | Link to Comment Pillage
Pillage's picture

But but but they passed the stress test so they must be ok! Let's just give em a blank check Freddie and Fannie style!

Tue, 08/31/2010 - 00:28 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Schoolhouse Rock

Tyrannosaurus Debt:

 

We've got to try to tame the debt
And bring it down to size
To let it grow unchecked like this
Is certainly unwise
The debt's a monster problem
That we really can't ignore
I guess we should be grateful
That it's not a carnivore
We've got to keep on servicing
Our trillion dollar pet
It's got a monster appetite
Tyrannosaurus Debt

A fiscal misadventure
With trillion dollar dentures
Tyrannosaurus Debt

Tue, 08/31/2010 - 05:39 | Link to Comment ex VRWC
ex VRWC's picture

Did you write this? Lets make a protest song out of it. Economicprotestproject.blogspot.com.

Tue, 08/31/2010 - 09:01 | Link to Comment doolittlegeorge
doolittlegeorge's picture

Lolly, lolly, lolly get your adverbs here.

Come on down to Lolly's get your adverbs here.

You're gonna need 'em if you write or read

Even if you think about it.

Tue, 08/31/2010 - 00:28 | Link to Comment AhhhItBurns
AhhhItBurns's picture

1:28 "Lending Tool Kill"

Was that a Freudian slip?

Tue, 08/31/2010 - 01:32 | Link to Comment Yardfarmer
Yardfarmer's picture

you noticed that too! i thought it was lending kill tool

Tue, 08/31/2010 - 00:31 | Link to Comment plocequ1
plocequ1's picture

Tyler, Cant you show one those special Debt charts with those pretty colors to show how this is not going to work? Denninger has at least five of them. Please, someone show how this insanity not going to work. Im getting antzy

Tue, 08/31/2010 - 09:44 | Link to Comment Hephasteus
Hephasteus's picture

Haven't you been paying attention. Morgan stanley. Partial debt repudiation. We'll forgive some of your debt. Here's your SDR.

Scammed politicians have a few things in common.

They think they need these people. They think they owe all they have to them.

They think a fake monetary system that always builds up more debt than it can POSSIBLY repay is worthy of being backed up by a law or an agreement.

It's simple. Nation after nation must drop out of the collective madness. Internalize like iceland did for christ sakes they killed off mcdonalds nobody has ever been able to do that.

No restructuring of debt. No returning debtors phone calls. If you find anything in your country that stinks of CIA/IMF put it in a box and ship it home. It's going to hurt but it will beat continual persistant contraction of power onto you. Ever tightening nooses and control. These people don't let ANYTHING limit them.

Tue, 08/31/2010 - 00:31 | Link to Comment Spitzer
Spitzer's picture

Europe needs to learn something from David Bowie, be afraid of Americans

http://www.youtube.com/watch?v=vRV2SqiYt6Q

Tue, 08/31/2010 - 02:20 | Link to Comment Kali
Kali's picture

Spitzer-excellent!  I haven't seen that in ages!

Do Chen - "Be aware, cautious and even semi-paranoid"   Exactly.  Been feeling that way for 35 yrs.  It gets tiring. 

But - It's a-coming. Real soon.

Tue, 08/31/2010 - 00:42 | Link to Comment matthew1182
matthew1182's picture

Remember it was the treasury's decision to bail out Fannie and Freddie.  They even let Fannie Mae raise $7B in preferreds 60 days before nationalizing [wiping out the equity].  I don't blame the Fed or IMF for any of the sh*t that is going on.  We can blame it on politicians, we can blame it on central bankers but it is our own system that we allowed to grow.  I'm 27 years old and my parents' generation is the most corrupt in the history of the world.  I feel like Bud Fox, the only legit people I know are my parents and I owe them a big apology.  Anyhow, we are at the end of our civilization, we're in the materialistic stage.  We love our stuff but the more stuff we buy the less happiness we find.  We'll buy ourselves right into a revolution.  We revolted from the throne and we will need to implode the entire system to start over from scratch.  From the 2 tiered accounting structure of the Comprehensive Annual Financial Reports (you can just include all FASB accounting) to the WWE-like political system, we can't escape this pending complete collapse in society.  The media has done a great job of aiding the government in the past 25-30 years.  Some one big is going to step up and fight the oligarchy.  He/she will be killed but it will open our eyes.  Stop blaming the IMF and the Fed, you all let this happen and you'll watch all your corruption bring down the great American Empire.  Hope you enjoyed your drugs in the 70s.

Tue, 08/31/2010 - 00:46 | Link to Comment Azwethinkweiz
Azwethinkweiz's picture

You're the ONLY other 27 year old I've met that thinks this way....all my friends are too busy getting drunk watching Jersey Shore to give a sh*t.

Tue, 08/31/2010 - 00:51 | Link to Comment Spitzer
Spitzer's picture

I don't want to lose credibility in the financial world(if I had any) but I am under 30.

Tue, 08/31/2010 - 14:05 | Link to Comment MachoMan
MachoMan's picture

29, watch jersey shore, and appreciate the few sane/honest/remotely objective persons (including the parents) left.  You're not alone, just outnumbered. 

Tue, 08/31/2010 - 01:11 | Link to Comment CoopDeluxe
CoopDeluxe's picture

I'm 29.  I can't talk about this shit with anyone else.  They all think I'm crazy.  Sorry, gotta run to the fantasy football draft!

Tue, 08/31/2010 - 01:45 | Link to Comment Caviar Emptor
Caviar Emptor's picture

If I were your age I'd be pissed. But later on as I would age, I'd find out that my parents weren't so corrupt, just duped into trusting a false God. 

Tue, 08/31/2010 - 01:46 | Link to Comment RockyRacoon
RockyRacoon's picture

You guys can rebuild -- and do a fine damn job of it.

Tue, 08/31/2010 - 10:46 | Link to Comment Colonel Boyle
Colonel Boyle's picture

I am well below 25 and my smartest peers IRL can't/won't understand any of this until it is too late.

Tue, 08/31/2010 - 12:06 | Link to Comment living on the edge
living on the edge's picture

Colonel,

The vast majority cannot and will not understand the severity of our situation because they insist on believing what crap we are fed via the news media. Congrats for figuring it out, for what it's worth. Just take that insight and prepare for the shit storm facing us all. Best of luck! 

Tue, 08/31/2010 - 01:53 | Link to Comment Incubus
Incubus's picture

I'm old enough to realize the futility of caring. 

 

Tue, 08/31/2010 - 06:28 | Link to Comment LePetomane
LePetomane's picture

Hey, you stole that from a Valentine's card.

Tue, 08/31/2010 - 09:03 | Link to Comment doolittlegeorge
doolittlegeorge's picture

bless that bleading heart.

Tue, 08/31/2010 - 02:48 | Link to Comment Temporalist
Temporalist's picture

I am quite glad there are a bunch of you under 30s looking at the state of the world and coming to discuss it.  You need to tell everyone anyway, don't be discouraged if they call you crazy, give real facts and reasons for your beliefs.  There are many more of you/us out there and as the masses are awakened things will change faster.

The people around the world are the only thing that will make a real difference.  We are the only ones that can fix what is broken.

Tue, 08/31/2010 - 07:19 | Link to Comment d2thdr
d2thdr's picture

However, the youngsters might need to overcome the present crisis. When the situation gets really bad, some giants will emerge among men, who hopefully will carry the hopes of millions. fingers and toes crossed.

Tue, 08/31/2010 - 04:47 | Link to Comment Sudden Debt
Sudden Debt's picture

Somebody seems upset that he didn't get the latest Iphone from mom and dad me think :)

Tue, 08/31/2010 - 08:17 | Link to Comment Treeplanter
Treeplanter's picture

A lot of us enjoyed our drugs in the 60s as well.  When Acapulco was Gold.  And the odds of getting high quality LSD was much better than since.  In the 70s we discovered very good home grown in Guatemala.  Just keep it in your socks until you get far away from Juan Law.  Was BC bud that strong in the 80s?  I can't remember.   Have yet to find anything better in the USA.  That's embarrassing for our national honor.  My daughter says XTC not worth the come down.  I never checked.  I don't trust chemists anymore.  I'd  offer you a toke, Matt, but this crap from Mexico is not worth crossing the room.   I do miss the West Coast.

Tue, 08/31/2010 - 09:05 | Link to Comment doolittlegeorge
doolittlegeorge's picture

trust me.  our chemical engineers have never been better.  now for a discussion of that silly little "choice thing"....

Tue, 08/31/2010 - 09:28 | Link to Comment Treeplanter
Treeplanter's picture

Yes, I should have said black market chemists.  I don't really enjoy the strycnine rush, made me quit acid long ago.  Mushrooms are far more mellow anyway.  Matt, get you some good BC shrooms and tell us what you think.  My Dad, the Sarge, set up a little bootlegging operation in Brownwood, TX, just before shipping out to North Africa with Patton's armada.  My mother shut it down when a hooker showed up at 8 AM looking for booze.  Nothing says free enterprise like the black market.  

Tue, 08/31/2010 - 09:59 | Link to Comment grunion
grunion's picture

Based upon the the sweeping, generally self-centered, judgemental, dismissive attitude, you evidence in your writins; without doubt I can say you are going to enjoy very interesting times and I am glad I am not you.

Tue, 08/31/2010 - 00:44 | Link to Comment AUD
AUD's picture

The RBA www.rba.gov.au releases its IMF International Reserves & Foreign Currency Liquidity today at 4.30pm EST.

Will be interesting to see if there's another jump in the RBA's SDR 'assets'.

Tue, 08/31/2010 - 00:49 | Link to Comment Threeggg
Threeggg's picture

Nikkei may need the first Trillion

Down over -3% tonight

Tue, 08/31/2010 - 00:49 | Link to Comment Rob Jones
Rob Jones's picture

I always thought that people were smoking them.

Tue, 08/31/2010 - 00:51 | Link to Comment Rob Jones
Rob Jones's picture

The green shoots, I mean.

Tue, 08/31/2010 - 00:54 | Link to Comment thermroc
thermroc's picture

“the revamped financing toolkit (giant slushfund) rewards countries (bribes criminal associates) that implement strong policies (continue to conspire in the ponzi)"

Tue, 08/31/2010 - 01:34 | Link to Comment Yardfarmer
Yardfarmer's picture

it can be stated that the IMF penchant for public relations far supercedes any serious attempt at economic analysis. The press conferences and public statements which attended the annual IMF/World Bank annual spring meeting with G20 finance ministers is an obvious example of the kind of doublespeak which is the euphemistic, ambiguous, and obscure stock in trade of government and military propaganda intended only for mass consumption. In this respect the IMF/G20 assurances concerning the so-called recovery of the world economy are nothing more than a smokescreen intended mostly to provide cover for the continuation of criminal economic policies which brought about the necessary pre-conditions for the financial collapse. This will bring the Bretton-Woods agreement of 1944 to its intended denouément, namely the debasement and eventual devaluation of all Western currencies and the subsequent supplanting of the Anglo-American/European economic model with a pan-Asian industrial production and banking matrix colonizing and exploiting the vast labor pools and untapped resources of China, South Asia and Africa in tandem with replacing the US$ with the establishment of a new reserve currency with the IMF Special Drawing Rights (SDR) as its basis. For the IMF/World Bank has a very distinct and pronounced agenda which it holds in common with the colonial empires of imperial conquest, which is nothing short of the complete domination of the world financial system in the name of neo-liberal economic policies. Its public persona as the guarantor of economic stability and the fluent exchange of goods, services, and capital only masks predatory economic policies devoted to the evisceration and exploitation of the social and economic order of the many developing nations who have the misfortune to have been the object of the IMF's destructive programs.As the financial meltdown enters what an IMF economist recently called "its second phase", comparisons are being made between the Greek crisis and the collapse of Lehman Brothers in September, 2008. As the sovereign nations of Europe increasingly become targets for the institutional investors, hedge funds, and bond rating agencies and are picked apart in the process, the IMF will inevitably become the lender of last resort much as the Federal Reserve has become the source of an endless hurricane blizzard of monetization in the United States. With most of the so-called developing world firmly in its grip, the IMF will now be free to concentrate on the EU which has become the latest and most lucrative platform for the enrichment of its conglomerate partner corporate and financial institutions. It remains to be seen who will emerge victorious in the battle between the investors, who stand to take enormous losses in the event of a Greek default, and the ordinary citizens, who stand to suffer the privations and indignities of the extraordinary and unprecedented austerity measures which the international creditors along with their IMF allies are howling for, ostensibly to reign in the exponentially growing levels of debt service, which threaten to inundate not only Greece, but the entire Eurozone as well as the largest debtor nation on earth and the insolvent state governments in the United States. Given the natural predilection for human greed especially in the financial class and in the presence of binding legal contracts for the payout of trillions of dollars to various counter parties in OTC derivatives financial instruments, massive civil and social unrest seems not only likely but inevitable with the corresponding overwhelming reaction from police and military forces to "restore order". april 24 2010 http://kushmonster.blogspot.com/2010/04/question-greek-public-majority-o...

 

Tue, 08/31/2010 - 01:25 | Link to Comment sbenard
sbenard's picture

I confess that I read this one rapidly, but I don't recall the article mentioning that the largest donor nation to the IMF is the United States, but it seems to be implied. Thus, by providing infinite borrowing capacity, the American people are now saddled with infinite liability! The word "catastrophe" is a gross understatement for what is coming! The term bondage is no exaggeration!

Tue, 08/31/2010 - 06:59 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Indeed.    The central WTF going through my mind while reading this was, where do they think they get the authority to draw infinitely on our taxes to offer an infinite backstop to irresponsible foreign countries?    I remember something about taxation without representation, back in civics class, or history, or government, or somewhere.   

Congress ought to Just Say No.   Make a resolution slapping these uppity foreign nozzles.    Our taxes protected Europe's weak welfare states for 70 years, and that flew politically because it was our security too, our military being paid for.   But bailing out their faltering, demographically doomed welfare states directly?    No.  

No gold for whiny, spoiled, workophobic, impotent euro pansies!       Too long for a bumber sticker, I know.

Tue, 08/31/2010 - 09:06 | Link to Comment doolittlegeorge
doolittlegeorge's picture

really?

Tue, 08/31/2010 - 01:26 | Link to Comment hamurobby
hamurobby's picture

Primary charges will blow base charges.

its coming.

Tue, 08/31/2010 - 01:30 | Link to Comment walcott
walcott's picture

what's another 5 trillion? It doesn't matter anymore anyway.

It's been pure bullshit for 3 years so what makes anybody think anything is going to change?

Tue, 08/31/2010 - 02:04 | Link to Comment Incubus
Incubus's picture

Under the spreading chestnut tree
I sold you and you sold me
There lie they, and here lie we
Under the spreading chestnut tree

 

 

Tue, 08/31/2010 - 02:24 | Link to Comment Kali
Kali's picture

Incubus, you're scarin' me.

Tue, 08/31/2010 - 05:31 | Link to Comment ex VRWC
ex VRWC's picture

Write some lyrics at economicprotestproject.blogspot.com. I will help turn them into prootest songs and we can learn it together. Time for some music to memorialize what is going down. Nice, acoustic music anyone can sing with a guitar. Without such modern conveniences like, say, power or computers...

Tue, 08/31/2010 - 10:44 | Link to Comment FEDbuster
FEDbuster's picture

One of my favorites from a year ago:

http://www.youtube.com/watch?v=yge311sFhC8

 

Tue, 08/31/2010 - 09:08 | Link to Comment doolittlegeorge
doolittlegeorge's picture

it doesn't matter...and then it does.  and then it doesn't matter...and then it does.  Just remember when Captain Kirk yells "Scotty I need warp speed in 3 minutes or we're all dead" then it does.

Tue, 08/31/2010 - 01:41 | Link to Comment palmereldritch
palmereldritch's picture

From the article:

"John Lipsky, IMF first deputy managing director, told reporters on a conference call today that the institution has enough money to fund the new credit lines...”

and just 2 days ago: 

IMF's Lipsky-Reserves may be unable to meet needs

http://www.reuters.com/article/idUSNLLSJE6EB20100828

 

Aug 28 (Reuters) - There is some question about whether existing currency reserves can meet the demands of nations gathering reserves, the International Monetary Fund's First Deputy Managing Director John Lipsky said on Saturday.

"There is no doubt regarding the dollar's dominant role for years to come," he said.

"But an evolutionary process toward increased (IMF Special Drawing Rights) use could be feasible and worthwhile. More frequent SDR allocations could expand the pool of such assets available for external financing," he added.

Also:

http://www.eurasiareview.com/201008287508/reconsidering-the-internationa...

 

 

Sounds like they’re launching a currency crisis virus factory and have the curative SDR vaccine already to inoculate any dupes willing to become their zombie bitches.

Thesis-Antithesis-Synthesis

 

Get a free H1N1 vaccine with every SDR, while quantities last!

 

Tue, 08/31/2010 - 01:57 | Link to Comment Apostate
Apostate's picture

I am extremely skeptical that the IMF will be able to get any such scheme through.

The IMF has tried in the past to promote SDRs. It has failed.

The system was too low-trust then. It's even lower-trust now.

No chance survival for the IMF.

Tue, 08/31/2010 - 09:16 | Link to Comment Hephasteus
Hephasteus's picture

They are doing a pretty damn good job of getting the drug lords in south america to eat the balls off mexico's government so they can force the north american union.

They are out there maiming killing, destroying, lying. Day in and day out and there plans are having some extra resistance but they will likely bulldoze it down. Until mexico sends hilary clinton home shot full of heroine and a note attached to her to keep your lying cunt out of our country they are going to get slowly erradicated.

Tue, 08/31/2010 - 12:13 | Link to Comment grunion
grunion's picture

+10

Tue, 08/31/2010 - 01:58 | Link to Comment Caviar Emptor
Caviar Emptor's picture

SDRs are in danger of not cutting it if quadrillions in new dollars get printed.

Creditors just won't accept anything less than gold/silver. Anything else will just get printed up before the bills come due

Tue, 08/31/2010 - 03:25 | Link to Comment hamurobby
hamurobby's picture

And what if they dont print dollars and they just let debt take over? what then? What would we do then? What if they dont accept gold nor silver?

Tue, 08/31/2010 - 09:34 | Link to Comment doolittlegeorge
doolittlegeorge's picture

do you mean "the Government" or "Wall Street" as the "they"?  Government's not accepting gold as legal tender is nothing new.  Wall Street not accepting gold......

Tue, 08/31/2010 - 02:11 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Nikkei closes dn 3.6% (!) Lowest since April 2009. Yipes. !

IMF might be bailing East before West. 

Tue, 08/31/2010 - 02:46 | Link to Comment John McCloy
John McCloy's picture

 oo boy..Nothing makes me happier than waking up at 2:30 in the morning to see that someone pulled a drive-by on the futures. Let's hope we have seen 10,000 for the last time in years.

"Farewell and adieu to you fine Spanish ladies, Farewell and adieu all you ladies of Spain.

For I've recieved orders to set sail to Boston and never more shall I see you again"

I think were gonna need a bigger printer.

Tue, 08/31/2010 - 07:46 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Nope, just more zeroes. 

Tue, 08/31/2010 - 08:46 | Link to Comment LMAO
LMAO's picture

 

"Well, if we're looking for a shark we're not gonna find him on the land"

 

LMAO

Tue, 08/31/2010 - 02:54 | Link to Comment Illya Kuryakin
Illya Kuryakin's picture

Ben can print it but only congress can put it into circulation.

Tue, 08/31/2010 - 04:27 | Link to Comment Mark Beck
Mark Beck's picture

Man from U.N.C.L.E. had the coolest theme. Illya Kuryakin has got to be one of the best spy names.

http://www.youtube.com/watch?v=iH0YdU1L2yU&feature=related

The 60's were so creative when it came to TV shows. Everything from the Outer Limits to The Time Tunnel to Star Trek to my favorite Combat.

Mark Beck

Tue, 08/31/2010 - 03:14 | Link to Comment cobber
cobber's picture

is the IMF is the most unaccountable of organisations? When (not if) this all goes to $hite do these guys keep their jobs advising as "consultants" or perhaps they end up as luminaries on at some over priced university.. though with the above there may not be any universities left..

Tue, 08/31/2010 - 03:22 | Link to Comment Moonrajah
Moonrajah's picture

Okay, I get it. The preverbial can was stuffed with C4 and cautiously sent rolling down the road for some dumb shmuck to kick it further. The first one that comes to mind is USA.

Tue, 08/31/2010 - 03:59 | Link to Comment Mark Beck
Mark Beck's picture

As per the article:

"In other words, Europe - prepare: uncle Sam is coming to bail you out once again. Just please give him a reason: our banks demand it, and let's not forget, it is your patriotic duty to bail out US bank balance sheets via semi-hyperinflation. Tonight's move in the EUR and the CHF are a damn good (if on the surface counterintuitive) start."

Fundamentally there is a difference between a loan and a bailout. TARP was a bailout when it morphed into an asset (Bad debt) buy. The IMF is proposing extending credit which will either be paid back or not (default). This is not the same as buying worthless assets. Perhaps you could explain the linkage here in relation to the word bailout.

I think the IMF move is the last token kick the can. However, as soon as there is a default of some type, the party is over for all sovereign debt.

Another point is Ben will have his hands full with the US debt spiral. He may extend some token swaps but the US situation, especially after the elections, will turn into a FED hell. There will be nothing left but finger pointing between the FED and the Administration. No, Ben will be much too focused on events at home.

For some reason everyone I talk to dismisses the danger of credit downgrades through municiple defaults. The only real sustainable answer is to cut the size and expense of government to match revenue. Increasing fees and taxes will not be effective for the amounts needed.

So what happens to the T bond market when some US municipalities default? What would happen if a state were to default? So Ben could be faced with collapse from within. He will be unable to address this. The only effective solutions are not an option for the politicians until crisis, and then it will be too late to rescue the bond market.

Mark Beck

Tue, 08/31/2010 - 05:46 | Link to Comment cossack55
cossack55's picture

The answer lies in the following question:

How many FRNs can one fit inside a Blackhawk or a CH-47 and what is the estimated distribution time from 5,000 feet?

Tue, 08/31/2010 - 06:29 | Link to Comment Catullus
Catullus's picture

I think this point needs to be expounded. The IMF isn't the enabler of fractional reserve banking -- the central banks are. So an IMF bailout or loan or whatever one wants to call it is a reactionary event. Their whole purpose of the IMF is to prevent a local liquidity crisis from going global. The Asian crisis is the best example. But they're not going to jump out in front of a crisis for fear of the bailout being the causality. Someone needs to tip the scale into liquidity crisis.

I get the feeling that someone is bleeding in the dark on the interest rate and fx swaps. Further, I don't think the IMF is sophisticated enough to know how to handle it. That's the main difference between now and 1998.

The soveriegn debt crisis is independant of the IMF. It could trigger a liquidity event or be triggered by a liquidity event. But the IMF will focus on the liquidity event only.

Tue, 08/31/2010 - 08:13 | Link to Comment Miss Expectations
Miss Expectations's picture

"I get the feeling that someone is bleeding in the dark..."

Sounds a bit like hemophilia.

The main symptom of hemophilia is bleeding. Mild cases may go unnoticed until later in life, when they occur during surgery or after trauma.

So, instead of the IMF trying to stop the bleeding or getting the blood to clot, it is instead hooking up  a bottomless IV.

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