Excess Reserves

Tyler Durden's picture

Another Conspiracy Theory Becomes Fact: The Fed's "Stealth Bailout" Of Foreign Banks Goes Mainstream





Back in June 2011, Zero Hedge first posted: "Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went" Of course, the conformist, counter-contrarian punditry promptly said this was a non-issue and was purely due to some completely irrelevant micro-arbing of a few basis points in FDIC penalty surcharges, which as we explained extensively over the past 3 years, has nothing at all to do with the actual motive of hoarding Fed reserves by offshore (or onshore) banks, and which has everything to do with accumulating billions in "dry powder" reserves to use for risk-purchasing purposes. Fast, or rather slow, forward to today when none other than the WSJ's Jon Hilsenrath debunks yet another "conspiracy theory" and reveals it as "unconspiracy fact" with "Fed Rate Policies Aid Foreign Banks: Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank"

 
Tyler Durden's picture

The Goldman Tapes And Why The Delusion Of Macro-Prudential Regulation Means The Next Crash Is Nigh





There is nothing like the release of secret tape recordings to clarify an inconclusive debate. Actually, what the tapes really show is that the Fed’s latest policy contraption - macro-prudential regulation through a financial stability committee - is just a useless exercise in CYA. Macro-pru is an impossible delusion that should not be taken seriously be sensible adults. It is not, as Janet Yellen insists, a supplementary tool to contain and remediate the unintended consequence - that is, excessive financial speculation - of the Fed’s primary drive to achieve full employment and fill the GDP bathtub to the very brim of its potential. Instead,  rampant speculation, excessive leverage, phony liquidity and massive financial instability are the only real result of current Fed policy.

 
Tyler Durden's picture

Central Banking Is The Problem, Not The Solution





At the heart of the problem is the fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources — land, labor, capital — are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures? All that government produces from its interventions, regulations, and manipulations is false signals and bad information.

 
Tyler Durden's picture

G-20 Post Mortem: Hopes, Fears, & Dashed Exepctations





We, like Bloomberg's Richard Breslow, were bemused this weekend by the communiques from the wisest men in the room at the G-20 meeting. On one side of their mouths they warned of "excessive risk-taking," in markets noting that there were "mounting economic risks" also. On the other hand, stories continue to print of US equity strength implying optimism over global growth - despite the ongoing collapse in consensus GDP expectations. However, away from this hope and fear, it was the almost coordinated responses of the PBOC (Chinese Finmin Lou Jiwei signaling not to get carried away with stimulus expectations), ECB (Visco saying may not need additional QE step since EUR had dropped 'enough'), and finally the BOJ (Iwata saying Abenomics misunderstood, USDJPY 90-100 'fair); all dashing market expectations of a smooth hand over from a feckless Fed to a free-printing rest-of-the-world. Stocks (and carry) responded by selling off.

 
Tyler Durden's picture

USDJPY Opens At 6-Year Highs, Extreme 'Relative Strength' Signals 30% Drop Potential





USDJPY has been on a tear in recent weeks. Since China unleashed QE-lite, JPY and CNY have greatly diverged with USDJPY breaking above 109 and pushing six-year highs. This recent 'relative strength' is the most extreme overbought for the currency pair since early 2001 - which saw USDJPY plunge 30% in the following six months. The tick-for-tick rise in Japan's stock market also broke a 9-month almost-perfect analog with the last time the nation raised its consumption tax. Perhaps even more worrying in the world of FX trading, ECB Governing Council member Ignazio Visco told the G-20 that it may not need to add stimulus measures after steps in the past three months pushed down the euro.

 
Bruno de Landevoisin's picture

FED Water-Boy Hilsenrath carries the FOMC Gatorade





During the FOMC pregame show, they punctually trotted out Johnny Waterboy Hilsenrath via SpreeCast, the sparkling new-media darling interactive webcast platform, to serve up another fresh jug of spiked reinvigorating Gatorade to his favorite NY Stock Market team.

 
Tyler Durden's picture

Obama Outperformed Reagan? Hardly!





Last week, Adam Hartung qualified for the "Mark Twain Award" if there was such a thing. In his article, "Obama Outperforms Reagan On Jobs, Growth & Investing," Adam goes to some length to try and show that unemployment rate, the S&P 500 and economic growth are currently better under the current administration than they were during the Reagan administration. Unfortunately, that is not the case. When considering that President Obama has been able to achieve real economic growth of just 2.04% annually despite historically low levels of inflation and interest rates combined with massive government interventions and balance sheet expansions; it makes his overall performance even more disappointing.

 
Tyler Durden's picture

JPMorgan Stunner: "The Current Episode Of Excess Liquidity Is The Most Extreme Ever"





"The ECB's quantitative expansion is hitting the financial system at a time when broad liquidity is also very high. The rise in excess liquidity, i.e. the residual in the model of Figure 3, is supportive of all assets outside cash, i.e. bonds, equities and real estate. The current episode of excess liquidity, which began in May 2012, appears to have been the most extreme ever in terms of its magnitude and the ECB actions have the potential to make it even more extreme, in our view.... These liquidity boosts are not without risks. We note that they risk creating asset bubbles which when they burst can destroy wealth leading to adverse economic outcomes. Asset yields are mean reverting over long periods of time and thus historically low levels of yields in bonds, equities and real estate are unlikely to be sustained forever."- JPMorgan

 
Tyler Durden's picture

Are US Consumers Evil Hoarders?





A recent Fed paper reports that the Fed's wild money printing orgy has failed to produce much CPI inflation because “consumers are hoarding money”. It is said that this explains why so-called "money velocity" is low. Sadly, they are misinformed: In short, “hoarding” cannot possibly harm the economy. The same, alas and alack, cannot be said of money printing.

 
Tyler Durden's picture

"A Printer And A Prayer" - The Three Problems With The Fed "Liquidity Coverage Ratio" Plan





Today we learned that as part of the domestic "macroprudential" effort to ensure firms don't run out of cash in a crisis, the so-called Liquidity Coverage Ratio, US regulators said banks likely will have to raise an additional $100 billion to satisfy the new requirement, the WSJ reported. The disclosure is part of the final draft of the so-called Liquidity Coverage Ratio, released by the Fed earlier today, and which was promptly passed on a 5-0 vote Wednesday that will subject big U.S. banks for the first time to so-called "liquidity" requirements. The Federal Deposit Insurance Corp. and the Treasury Department's Office of the Comptroller of the Currency adopted the rules later in the day.  On the surface, this is all great macroprudential news: forcing banks to hold even more "high quality collateral" is a great idea, to minimize the amount of money taxpayers will have to fork over when the system crashes once again as it certainly will thanks to the unprecedented Fed micromanaging interventions over the past6 years. There are just three problems...

 
Tyler Durden's picture

Investor Net Worth Drops To New All Time Low, NYSE Reveals





While in July margin debt did dip modestly from near all time highs hit back in June when total margin debt was virtually tied with the previous record, at $464 billion, it was that other metric tracked by the NYSE, namely Investor Net Worth, calculated by subtracting margin debt from the notional represented in free credit cash accounts and credit balances in margin accounts, that was the notable highlight in the July report: at a negative $182.1 billion, a decline of $6.3 billion from the prior month, investor Net Worth has never been lower.

 
Tyler Durden's picture

The G-20's Solution To Systemically Unstable, "Too Big To Fail" Banks: More Debt





Another day, another brilliant scheme from the think-tank that is the G-20: prevent systemic collapse from TBTF banks loaded up with record amounts of debt by forcing them to... issue more debt.

 
Tyler Durden's picture

Goldman Post-Mortem: Minutes Have More Hawkish Tone





The July FOMC minutes generally had a slightly hawkish tone, warns Goldman's Jan Hatzius, emphasizing that labor market slack had improved faster than expected and that the labor market was now closer to what might be considered normal in the longer run. Overall, these remarks suggest that the change in the labor market language found in the July FOMC statement - shifting focus to broader labor market indicators rather than the unemployment rate specifically - was not intended to be a dovish change, as some commentators thought at the time. Finally, some participants noted some evidence of stretched valuations in specific markets.

 
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