Counterparties
Guest Post: Why the Fed Can't Stop Fueling The Shadow Bank Kiting Machine
Submitted by Tyler Durden on 06/03/2013 17:53 -0400- AIG
- American International Group
- Bank Failures
- Central Banks
- Commercial Paper
- Counterparties
- Countrywide
- Excess Reserves
- Fail
- Fannie Mae
- Federal Reserve
- Fractional Reserve Banking
- Freddie Mac
- Gross Domestic Product
- Guest Post
- Lehman
- Lehman Brothers
- MF Global
- Moral Hazard
- Nationalization
- None
- notional value
- Quantitative Easing
- Repo Market
- Shadow Banking
- Too Big To Fail
Fractional reserve banking is unlike most other businesses. It's not just because its product is money. It's because banks can manufacture their product out of thin air. Under the bygone rules of free market capitalism, only one thing kept banks from creating an infinite amount of money, and that was fear of failure. Periodic bank failures remind depositors of the connection between risk and reward. What is not widely appreciated is that the ensuing government bailouts allowed an underlying shadow banking system to not only survive but grow even larger. To the frustration of Keynesians, and despite an unprecedented Quantitative Easing (QE) by the Federal Reserve, conventional commercial banks have broken with custom and have amassed almost $2 trillion in excess reserves they are reluctant to lend as they scramble to digest all the bad loans still on their books. So most of the money manufactured today is actually being created by the shadow banks. But shadow banks do not generally make commercial loans. Rather, they use the money they manufacture to fund proprietary trading operations in repos and derivatives. No one knows when the bubble will pop, but when it does a donnybrook is going to break out over that thin wedge of collateral whose ownership is spread across counterparties around the world, each looking for relief from their own judges, politicians, bureaucrats, and taxpayers.
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Japan Foreshadows Next Global Crisis
Submitted by Asia Confidential on 06/01/2013 10:15 -0400The wild ride in Japan's bond market is a prelude to what will happen in other developed markets.
- Asia Confidential's blog
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Mystery Surrounding Collapse Of Hong Kong Mercantile Exchange Deepens; Four Arrested
Submitted by Tyler Durden on 05/25/2013 22:30 -0400
A week ago, when the brand new Hong Kong Mercantile Exchange suddenly shuttered after being in operation for only two years, urgently settling what little contracts were outstanding, many questions were left unanswered. Such as: how it was possible that the exchange, expected by many to become the new preferred trading venue for Asian precious metals and to steal the CME's crown, could close on such short notice. This mystery deepened further after reports that the exchange barely had seen any volume, with allegedly only a tiny 200 open contracts remaining to be settled upon shuttering. Now, the confusion surrounding the HKMex closure has taken another big step for bizarrokind following news that not only have at least four HKMex senior executive have been arrested having been found to be in possession of false bank docs for nearly half a billion in dollars, but that government itself was forced to "shore up confidence" in CY Leung, Hong Kong's 3rd Chief Executive, whose former top aide was none other Barry Cheung Chun-yuen, founder of the HKMex.
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Bank Balances And Gold
Submitted by Tyler Durden on 05/20/2013 14:59 -0400
There has been a growing shift in favour of assets relative to bank deposits. This was initially encouraged by zero interest rates, but more recently there is little doubt that Cyprus’s bail-in has accelerated the trend. This helps explain why, for example, Italian 10-year bonds are on a 4% yield. The reason, doubtless reaffirmed by the Cyprus bail-in, is that investors with cash balances think over-priced sovereign debt is less risky than adding to their euro deposits. However, some of depositors’ cash balances post-Cyprus will have gone into physical gold and silver, which explains why the bullion banks operating in the futures markets and the central banks behind them are so keen to dissuade us that gold and silver is a safe haven.
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Tesla Announces Offering Of Common Stock, Convertible Notes
Submitted by Tyler Durden on 05/15/2013 16:19 -0400Several moments ago, TSLA (hardly) surprised the world when it filed an open-ended S-3 (Shelf) statement, as many had expected it was only a matter of time before the company used the recent surge in its stock price to sell shares. Then, a few moments later, TSLA once again (hardly) surprised the world when it announced a joint $450 million convertible bond and 2.7 million share common stock offering. And because a dilution is not a dilution if the founder is participating in the common offering (buying his own equity at an unprecedented price to "anchor" it as a benchmark- sure why not - after all he is making much on all the other equity he has in the firm that he is not buying, as a result), the stock is trading up after hours.
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Ben Bernanke Speaks - Live Webcast
Submitted by Tyler Durden on 05/10/2013 09:22 -0400- Ben Bernanke
- Ben Bernanke
- Bond
- Commercial Paper
- Consumer protection
- Counterparties
- Credit Default Swaps
- default
- Equity Markets
- Federal Reserve
- Financial Regulation
- Great Depression
- Monetary Policy
- Prudential
- ratings
- Real estate
- Recession
- Repo Market
- Reserve Primary Fund
- Securities and Exchange Commission
- Shadow Banking
- Stress Test
- Subprime Mortgages
- Transparency
The Chairman is about to take the lectern to discuss bank structure and competition at the SIFI conference at the Chicago Fed. His prepared remarks are likely to be a little less exciting than the Q&A where the world will be watching for the words "buy, buy, buy", "mission accomplished", or "taper". Charles Evans will be his lead out man. Finally, since Bernanke will be discussing shadow banking, or the source of some $30 trillion in shadow money always ignored by Keynesians, Monetarists and Magic Money Tree (MMT) growers, a topic we have discussed over the past three years, here is the TBAC's own summary on how Modern Money really works.
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Desperately Seeking $11.2 Trillion In Collateral, Or How "Modern Money" Really Works
Submitted by Tyler Durden on 05/01/2013 19:30 -0400- Ben Bernanke
- Black Swan
- Bond
- Capital Formation
- Capital Markets
- CDO
- Central Banks
- Collateralized Debt Obligations
- Counterparties
- Fractional Reserve Banking
- Gold Bugs
- Housing Bubble
- Lehman
- M2
- Market Conditions
- MF Global
- Monetization
- None
- Reality
- recovery
- Shadow Banking
- Sovereigns
- Steve Liesman
- Treasury Borrowing Advisory Committee
Over a year ago, we first explained what one of the key terminal problems affecting the modern financial system is: namely the increasing scarcity and disappearance of money-good assets ("safe" or otherwise) which due to the way "modern" finance is structured, where a set universe of assets forms what is known as "high-quality collateral" backstopping trillions of rehypothecated shadow liabilities all of which have negligible margin requirements (and thus provide virtually unlimited leverage) until times turn rough and there is a scramble for collateral, has become perhaps the most critical, and missing, lynchpin of financial stability. Not surprisingly, recent attempts to replenish assets (read collateral) backing shadow money, most recently via attempted Basel III regulations, failed miserably as it became clear it would be impossible to procure the just $1-$2.5 trillion in collateral needed according to regulatory requirements. The reason why this is a big problem is that as the Matt Zames-headed Treasury Borrowing Advisory Committee (TBAC) showed today as part of the appendix to the quarterly refunding presentation, total demand for "High Qualty Collateral" (HQC) would and could be as high as $11.2 trillion under stressed market conditions.
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Guest Post: Bitcoin As Cryptographic Gold?
Submitted by Tyler Durden on 04/25/2013 20:57 -0400
The crypto-currency Bitcoin is still merely a speck on the global monetary landscape. It is young, experimental, and for all we know, it may ultimately fail to break into the monetary mainstream. However, on a conceptual level some are willing to call it a work of genius and arguably the most exciting development in the field of money for more than 130 years. The outcome is probably binary: Either Bitcoin ultimately fails and the individual Bitcoins end up worthless. Or Bitcoin takes off and Bitcoins are worth hundreds of thousands of paper dollars, paper yen, paper euros, or paper pounds. Maybe more. Those who buy Bitcoin as a speculative investment should consider it an option on the future success of the crypto-currency. We still consider gold to be the essential self-defense asset in the ongoing paper money crisis. The brand-new crypto-currency Bitcoin has to first earn its stripes as a monetary asset by proving itself as a ‘common’ medium of exchange. That is why we view Bitcoin very differently from gold, although the attraction of both has its origin in the demise of entirely elastic, politicized state fiat money. In the meantime, the debasement of paper money continues.
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Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
Submitted by Reggie Middleton on 04/01/2013 06:17 -0400- Anglo Irish
- Bad Bank
- Bank Run
- Bear Stearns
- Ben Bernanke
- CDS
- Chicken Little
- Counterparties
- Countrywide
- default
- ETC
- European Central Bank
- European Union
- Fail
- Financial Services Authority
- fixed
- Greece
- Gross Domestic Product
- International Monetary Fund
- Investment Grade
- Ireland
- Lehman
- Lehman Brothers
- Non-performing assets
- ratings
- Ratings Agencies
- RBS
- Real estate
- Reality
- Reggie Middleton
- Regional Banks
- Royal Bank of Scotland
- Sovereign Debt
- United Kingdom
It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity.
- Reggie Middleton's blog
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Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into Depression
Submitted by Reggie Middleton on 03/25/2013 11:29 -0400The IMF offered Cyprus a bailout with no specific amount or even range and no time period while in the process gutting confidence in the banking system by robbing depositors and imposing losses on bondholders. A Damn good plan if I ever heard one!!
- Reggie Middleton's blog
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Liar, Liar Banking System On Fire! Watch As I Spit Fact That Burns Down The Sham Formerly Know As The EU Banking System
Submitted by Reggie Middleton on 03/23/2013 08:21 -0400Choice excerpts: "Have we forgotten what a bank is & what they are used for?" "The rules haven't been changed, they've been revealed!" Liar... Liar... Ass on Fire!!!
- Reggie Middleton's blog
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Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
Submitted by Reggie Middleton on 03/18/2013 11:53 -0400I was a little early, but just as I promised, those European bank runs are coming as expected. Wait until I release my newest EU crash analysis, Lehman x 3, nearly guaranteed!!!
- Reggie Middleton's blog
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IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out!
Submitted by testosteronepit on 03/16/2013 16:23 -0400“Financial stability has not been assured”
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Guest Post: Gold Manipulation, Part 3: "The Systemic Risk Of Gold Manipulation"
Submitted by Tyler Durden on 03/16/2013 14:22 -0400
This is the third and last of three articles we are posting on the price suppression of gold. In the first article we showed that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. Mainstream economics, framed by the Walras’ Law, believes in global monetary coordination which, to be achieved, necessitates that gold, if considered money, be oversupplied. The second article showed, at a very high (not exhaustive) level, how that suppression takes place and how to hedge it (if my thesis is correct, of course). Today’s article will examine the systemic impact of this suppression and test the claim of the gold bugs, namely that physical gold will trade at a premium over fiat/paper gold, commensurate with the credit multiplier created by the bullion banks. (Hint - it is)
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Part II | Stress Test Follies & Zombie Love
Submitted by rcwhalen on 03/10/2013 10:27 -0400You could even make a case that QE is part of TBTF. Chew on that for a while Shirley.
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