A Return To Rate Normalcy Will Cost The Fed Hundreds Of Billions; The Fed Will Go "Negative Carry" In 2015: D-Day For America

Tyler Durden's picture

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
mikla's picture

Makes me wonder why Bernanke (or anyone) would want to be Fed Chair.

"Hey, look at the size of my ... stimulus!"

Shameful's picture

I think there is some appeal to being Fed Chairman.

Banking Syndicate: "Hey Shameful, would you like an infinite amount of money and power at your disposal with no oversight?"

Shameful: "Is the Pope Catholic? And making the world safe for pedophiles?"

Banking Syndicate: "Okay you can be Fed Chairman.  But you can't give yourself money directly.  But you can dole out money to anyone you want.  Oh and you have to listen to us and give us free money"

Shameful: "So I give you want you want, and in return I can give all my friends billions in loans collateralized by garbage?  And my friends are free to give me bribes and kickbacks when I retire?"

Banking Syndicate: "That's right.  Oh and you might have to take some public blame, but don't worry you are immune to any prosecution and can enjoy your later years in absolute luxury after reducing your host nation to abject poverty"

Yeah I can see how that deal would appeal to a few people.

Inspector Asset's picture

Tim Geithner announces the new and improved monetary policy for U.S. that was hammered out over the weekend with Lawerence Summers and received a two-thumbs up from the Obama administration. The new policy comes as a result of the new tough reforms coming out of DC against Wall Street due to the crisis in 2008. Tim Geithner, speaks excitedly about the new policy and states "unlike the past, this new reform package, and new monetary has plenty of transparency and oversight."

In fact the new policy is so simple that oversight may not be needed at all, as pointed out by Congress member Maxine Walters. It is better known on the hill as "The 3 rule system."

Rule # 1. If the investment is worthless (toxic) the Treasury shall buy it and pay full price. If a price is not known, then we shall make up a price.

Rule # 2. If the investment has any value at all, or has the potential to show value in the future than the Federal Reserve shall buy it.

Rule #3. If you not sure, call Goldman Sachs and let them decide. Give them a little time so they can make their investments, as needed, before the herds stampede in looking for a deal.

Geithner admits the plan may seem to simple, but argues "that sometimes complex problems require simple solutions, and oversight." "This plan being so simple, allows for that oversight that was lacking before."

When asked what happens when the FED balance sheet gets so big, would it pose a risk of being "To Big To Fail?" Geithner sniped back,

"Don't you worry about the FED, they will take care of themselves." "Long after America is bankrupted, just an example of course, the FED will still be here standing. Get it? They are a separate entity! "

Geithner closed out the interview saying "we should be more concerned about the actions of our own government, than snooping around the FEDS business."

When asked, by Congress Maxine Walters, "which government, do you work for?: Geithner lit up like an alien, seemed confused, and then left the room. He was unable to answer the question.



exportbank's picture

But Jim Grant was just on Bloomberg with a Be Happy report

No More Bubbles's picture

Grant has jumped the shark.  Everyone is a genius until they are revealed a fool......

Cheeky Bastard's picture

Whoever thinks this is a natural occurrence is sadly mistaken. It was all planned, managed and executed by the people whos names we will never know. It was an artificial system built upon mathematical concepts and ridiculous equations, false sociological, geopolitical and economic paradigms. The collapse will be swift, painful and catastrophic for we have far to long relied on abstract complexities to solve millennium long, albeit unsolvable problems. And the more abstract we became in our solutions the bigger were the problems which those same solutions put fort. It is an inescapable fact of certainty that exponential growth for the sake of exponential growth via proxy usage of FIAT currency and reliance on the apparatus that exploits the inefficiencies of a FIAT currency to provide as with stability and reasonable living comfort for a period of time longer than 200 years, will bring back civilization just a notch above paleolithic gathering societies once the 500 year long trend [which started with merchant bankers in Northern Italy] ends. The ridiculous philosophical solutions bring forth in theories such as postmodernism and global political unification will not cure the prevalent illness which is deeply rooted, if not the heart, in this system.

B9K9's picture

As the picture becomes clearer, it's easy to view these proceedings from the perspective of a banker. Once you place yourself in their shoes, one can see the various obstacles & challenges that had previously been blocking their objective(s).

First and foremost, the most important task was to institute broad based enfranchisement. That's because the only effective bulwark against the type of coordinated criminal enterprise we see today were statesmen. Once statesman were reduced to pandering politicians buying votes with taxpayer funds, it was child's play to manipulate and trick representatives to act against their constituents' best interests.

The other obvious goals were to own the media and control/shape educational processes and standards. After the republic had been reduced to a democracy, subject to mass propaganda and institutionalized 'education' (tell me again why the principle behind exponential math & compounding principle+interest isn't taught from 5th grade on), it was astoundingly easy for the money-lenders to pull off exactly what we now see occurring on a daily basis.

The money-elite never, ever lost sight of the ancient lessons taught about usury; they are iron clad laws that cannot be refuted. Just like civilizations from thousands of years ago, we are once again discovering the truth about the credit-money system.

Cheeky Bastard's picture


source: http://www.washingtonsblog.com/2009/08/physicists-untangle-complicated-webs-to.html


Inside Science - a news service supported by the American Institute of Physics - is breaking an important story:

A recent analysis of the 2007 financial markets of 48 countries has revealed that the world's finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system's vulnerability as it stood on the brink of the current economic crisis.

A pair of physicists at the Swiss Federal Institute of Technology in Zurich did a physics-based analysis of the world economy as it looked in early 2007. Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the "backbone" of each country's financial market. These backbones represented the owners of 80 percent of a country's market capital, yet consisted of remarkably few shareholders.

"You start off with these huge national networks that are really big, quite dense," Glattfelder said. “From that you're able to ... unveil the important structure in this original big network. You then realize most of the network isn't at all important."

The most pared-down backbones exist in Anglo-Saxon countries, including the U.S., Australia, and the U.K. ... But while each American company may link to many owners, Glattfelder and Battiston's analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.

“If you would look at this locally, it's always distributed,” Glattfelder said. “If you then look at who is at the end of these links, you find that it's the same guys, [which] is not something you'd expect from the local view.”

Matthew Jackson, an economist from Stanford University in Calif. who studies social and economic networks, said that Glattfelder and Battiston's approach could be used to answer more pointed questions about corporate control and how companies interact.

"It's clear, looking at financial contagion and recent crises, that understanding interrelations between companies and holdings is very important in the future,” he said. "Certainly people have some understanding of how large some of these financial institutions in the world are, there's some feeling of how intertwined they are, but there's a big difference between having an impression and actually having ... more explicit numbers to put behind it"...

The results will be published in an upcoming issue of the journal Physical Review E.

The physicists name names. As Inside Science notes:

Based on their analysis, Glattfelder and Battiston identified the ten investment entities who are “big fish” in the most countries. The biggest fish was the Capital Group Companies, with major stakes in 36 of the 48 countries studied.

While it is true that the paper in the Physical Review E has not yet been published, I have found a draft version of their article from February which shows that the top 10 list of most powerful financial institutions (from most to least powerful) is as follows:

1. The Capital Group of Companies

2. Fidelity Management & Research

3. Barclays PLC

4. Franklin Resources

5. AXA

6. JP Morgan Chase

7. Dimensional Fund Advisors

8. Merrill Lynch

9. Wellington Management Company

10. UBS

Other tidbits:

  • Non-American players Deutsche Bank, Brandes Investment Partners, Societe Generale, Credit Suisse, Schroders PLC and Allianz are also in the top 21 positions.
  • The government of Singapore is number 25.
  • The world's largest banking group - HSBC Holdings PLC - only chimes in at number 26.


The data analyzed in the study is from 2007, and the playing field may have changed substantially since then.

Further analysis using this new methodology may yield important information.For example, given the massive government intervention in the markets, it is important to ask who controls stock now



Now you tell me; if this isn't the ultimate proof who, how and when has the power, the resources and the capital to swing the markets in their own favor trough cooperation with other parties in this purely conspiratorial cartel of financial institutions then i really don't know what is and what further proof do the regulatory agencies demand. If this does not [and it didn't] in breaking ALL those players into smaller players with smaller market shares and ban on further consolidation via mergers and acquisitions [thats what happened with Deutsche Bank after WWII when it was broken into 3 smaller pieces but within 30 years via mergers and acquisitions it once again became Deutsche Bank we all know and hate today] like it was done to Standard Oil and AT&T. If for nothing else than for purely idealistic purposes the end of this monopoly/cartel on financial services would serve us tremendously if with nothing else than with the feeling of satisfaction and short-term inner peace. I have no illusion that this will actually happen since not only is the USA an oligarchy dressed in the cloth of free democracy but the world as a whole is increasingly becoming more and more oligarchical trough shear force and influence of covert reasons which lay beneath Americas foreign policy and structuralization of international financial domain. Add to that the paradigm of globalization and PC bullshit about equality of everyone and everything and the lack of self-control in the Individual itself you start to recognize that for those of us, who are putting a large amount of their time and energy in actually thinking about this day in day out from a sound and educated position, this world is faster and faster becoming the epitome of Hell itself.

Rainman's picture

Outfuckingstanding rant, CB !!

merehuman's picture

prison planet of infinite illusion

hayleecomet's picture

Well this pretty much sums it all up for me.  As each day passes it becomes clearer that the only route to survival is through individual self preservation.  Everyone I know thinks I'm a wacko because I'm preparing for the worst case scenario.

Thanks for this link, CB.


Thurifer's picture

Its like an old priest told me "Son, always remember what the Good Book says: we're going to f*ck things up so bad it will take God Himself to come down and straighten it out. "

Temporalist's picture

In my opinion a Yurt is better choice.  They are more durable, can be elevated, have windows, and will hold up through bitter winters and feet of snow.

tip e. canoe's picture

warping minds with schizophrenic confusion

Tethys's picture

Almost seems like a reflection of nature's law of evolution and survival of the fittest.  As the remaining entities become larger and fewer, the battles become more epic.  The recent crisis was just the latest round in which weaker, less connected banks such as Lehman, Bear Stearns, Wachovia, etc. were defeated and devoured by their competitors.  And weaker companies such as GM were assimilated into the government.  

Makes one wonder if the final battle will be between bloated govt. and borg-like GS - who now collaborate to eliminate competition, but will eventually have to face off. Or if the two are just different faces of the same multi-headed hydra, now finalizing its consumption of the remnants on a global scale.

As the old Kenyan proverb goes, when elephants fight, it is the grass that suffers.


Shameful's picture

Well if there is an ultimate showdown of ultimate destiny then it would be GS with it's tag team partner the Treasury vs JPM and it's tag partner the Federal Reserve.  In this throw down I got to go with JPM and the Fed.  Hard to bet against the Fed.

Granted they would be fighting over a husk of a USA and maybe world at that point, desperate to suck the last bit of juice out of the last producer.

Though I happen to think it's all same team.  They might bicker over who gets the finest choice of taxpayer meat but any real fight will happen far after a full meltdown/breakdown so it's totally academic at this point

dnarby's picture

You give them too much credit.

The central banks had a sweet deal going.  With the help of goverments, they could have remained a huge tick in the neck of the global economy, sucking, and sucking, and sucking the lifeblood of the host...  As long as the commercial and investment banks had stayed content to suck along with them.

But the commercial and investment banks got way too greedy, and bit the host in too many places, subsequently resulting in hemorrhaging all over and threatening the life of the host, which will be forced to ingest a purgative.  This purgative, while causing temporary discomfort, will eliminate the parasites for generations.

These guys are greedy AND stupid.

Thus the shock of Greenspan when he realized that financial institutions failed to act in their own best interest.  He couldn't believe these guys were stupid enough to fark up a BJ.

cougar_w's picture

Xactly. The key here was Greenspan; I think he was actually shocked and dismayed. He really thought the "smartest guys in the room" had any smarts.

I have heard said elsewhere that the "captains of finance" are infants. Meaning indulgent, selfish, bored and in serious need of adult supervision. The evidence to support this observation is all around you.

If anything, it makes me more worried. I would like to think someone out there knows what the hell is happening.

Actually I doubt seriously that anyone out there has the first clue to what is happening.

All they can do is break you. Kiss your ass good-bye.

Ripped Chunk's picture

Many thanks Cheeky.

Needs to be said.


velobabe's picture

which started with merchant bankers in Northern Italy

cheeky your going to love this story.

i was engaged to george giannini.

only grandson of A.P. Giannini, founder,  Bank of America, Bank of Italy.

Amadeo Pietro Giannini.

what a loser, made me produce my baptism papers.

thought he had money but he really wanted mine.

lost dynasty. the mafia is still in charge plus the 5 burroughs are still in charge. from main to wall.

sexually he was a broke dick, just saying.


merehuman's picture

Velobabe, thats a good funny. Much thanks! LOL

Cheeky Bastard's picture

Yeah Italians are known to be overzealous when it comes to denomination and access to money. Also, some part of Italy resemble medieval Albania with all the customs they have and shit. If you wanna re-live the Middle Ages just go into Neapolitan suburbs. Its like Gaul in mid 5th century. Also i think the insanity might be gene-encoded and does not diminish as the centuries go by.

velobabe's picture

you turn me on†

did you hear a thing i said?

it's a dagger lennon.

i am so stoned.

i just don't know sorry

Cheeky Bastard's picture

you crazy bitch


i like you

velobabe's picture

fuck you every one of you

fuck you

just fuck you

sexually cheeky

Cheeky Bastard's picture

cocaine is one helluva drug eh

try mescaline with whiskey and chlorophyll next time


velobabe's picture

NO cheeky, i don't do drugs

it just comes naturally.

Hillbillyfreak's picture

So, what are you thinking.... Lakers or Cleveland?

Rainman's picture

The Fed drinks a river of MBS poison and continues to live. The absence of that pesky mark to market confusion sure has its rewards.

But sooner or later King Kash Flow will catch up to Ben too. Even the printer has limitations.

john_connor's picture

I think I have said this before, but the Fed is in the process of killing itself.  When the Fed becomes a net drain on Treasury (aside from the gangster interest we pay them just to issue cash), then politicians will panic.  It will be either 1) shut down the Fed or 2) get voted out of office.  And yes, it will probably be too late.  Just in time for the Boomers to retire and need their Social Security and Medicare checks in masse.

Cognitive Dissonance's picture

From the IRA article itself.

"But for us, the bottom line is that hedge funds often times are merely extensions of the dealers with which they interact. It is often difficult if not impossible to tell where the dealer's interests end and those of the hedge fund begin, especially when the dealer and the fund seem to be working in concert to create securities that are being sold to third parties."

Sounds like a crime family to me, with branches and spin offs and carve outs to "expand" their influence.

Ripped Chunk's picture

Hedge funds unregulated, that is where the criminal element will focus influence.

anonnn's picture

When confronting apparent conflicting, crazy or "stupid" data, one can posit how such data could actually align, quite sensibly, to those involved in creating the schemes.

The RichAndPowerful do share at least one certain intention. Namely, each is driven to maintain his kingly status by unending butressing and defense.

They worry, fear  and obsess over stability of their status and priviliges.

They are already rich, by definition, so do not seek more money beyond its utility for defense of their status.

There are other game-plans that may account for the data. E.g. Sacrificing the world's Reserve Currency to undermine opposition forms of government to create a more controllable tyranny, like OneWorldGov. [Standard Oil was known to sell gasoline at a loss to drive competitors out of business, then adjust prices accordingly.]

Note this is not necessarily true for the RichOrPowerful, such as Bill Gates or your Chief of Police.


anonnn's picture

The above does not ignore a Black Swan.

Re SEC v GS: One agency's Public Relations stunt might be the tiny breech for legal-eagles   to cheaply slip through expensive walls of obfuscation.

Such could very well birth a Black Swan.

RockyRacoon's picture

A crime family, eh?  Well, cougar_w says:

I have heard said elsewhere that the "captains of finance" are infants.

Does that make them the "Bambino Family"?

Gordon_Gekko's picture

The point here is that mark-to-market accounting is an iron law. You cannot escape the losses just because you do not report them. 

It might be a problem for you and me, or even large companies, but I doubt an entity with the power to create money out of thin air using ledger entries AND engage in all sorts of fake "accounting" gives a shit about mark-to-market. The ONE and ONLY limitation on the Federal Reserve is the willingness of the populace at large to accept the bits of paper emanated by it as "money". The same goes for the TBTF banks ala JPMorgan - who are basically mini-Feds by themselves, what with practically ZERO reserve requirements and fake "accounting".

If the FRB loses $200 billion on mark to market, there will be $200 billion LESS that they remit to the Treasury Department every year.

"Lost" $200B? No problemo! Here comes a friendly "hedge fund"/"foreign entity"/"household" (cough, cough....Fed...cough). Need $200B? Here's $300B. Have fun! Just another ledger entry in the hidden books - just another day in the Fed-land.

Do you see what a TOTAL JOKE our "monetary system" is?

IBelieveInMagic's picture

The joke is really on foreign partners who continue to deliver real goods and services for bits of digits and paper that the Fed and US banks put out. The dollars do not represent any real production/assets that foreigners can claim in the future. The USG pays endless entitlements and concentrates in building it's defence while the sucker foreign suppliers deliver goods and services. This is a great arrangement for us!!!

Gordon_Gekko's picture

I hope you're enjoying the 20%+ unemployment rate, unaffordable "health care", underwater real-estate and stock market "investments" and cost of living that NEVER goes down. Indeed, things are fucking GREAT in the United States!

Oh, and what was that again? "Concentrate on defense"...right...you mean somebody actually needs to defend this? 


Yeah, we MUST "concentrate on defense" while 20% of the population is unemployed and/or homeless living in tent cities.

IBelieveInMagic's picture

Now imagine how things are in the rest of the world!

We have been consuming way beyond our needs/means and we have come to assume that is the normal. We have behaved like a bunch of greedy kids in front of a basket of chips just grabbing and stuffing ourselves before others get any.

All this ill gotten consumption has been enabled only with a strong army and a reserve currency. Say thanks for it!

Shameful's picture

Good point GG.  What people fail to realize is that the productive capacity is gone.  Sure they may be getting worthless pieces of paper but ultimately they will still have real things, and the ability to make real things.  All we will be left with is a bunch of broken toys, a shattered currency, an empty husk of an economy, and a reputation as the worlds villain.

No one can tell me how the jobs will come back. The legal and regulatory structure will keep them away if nothing else.  And look around you.  Would you rather hire a kid educated in our school system or roll the dice in another country, where even if the worker doesn't work out you have lower costs and legal/regulatory liability.

tip e. canoe's picture

psssst, shameful, the jobs aren't coming back...pass it on.

Shameful's picture

Well as long as we have the dollar we don't need jobs.  We just ship paper and and get assets in..and that will work until it doesn't and then the "fun" begins.  Will be a swell place when all the imports turn off...I'm sure that the American people will greet such changes with poise and decorum and our government will act responsibly.


IBelieveInMagic's picture

The fix is easy -- abandon the reserve currency status. We can then join the rest of the world in the real world.

I want to see which politician would support that move?

chindit13's picture

For Sale:  Fixer-upper in the middle of America's Cultural Heartland, this modified two story walk-up has a light and airy feel about it.  The possibilities are endless.  Lots of extras come with this property;  too many to mention!  Post modern landscape design, while not everyone's cup of tea, blends seamlessly with the natural environment.  Truly this property represents the new American Dream.  Attractive financing terms to fit your no income budget.  Call 1-800-H-WANGER!  This home will not last!  Hurry before it's gone forever!  Be part of America's housing recovery!

Hulk's picture

You forgot the price Chindit13.Its a million three! 

merehuman's picture

And its surrounded on all sides by mile long foreclosures, empty houses all.