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A Record $2 Trillion In Deposits Over Loans - The Fed's Indirect Market Propping Pathway Exposed

Tyler Durden's picture


Perhaps one of the most startling and telling charts of the New Normal, one which few talk about, is the soaring difference between bank loans - traditionally the source of growth for banks, at least in their Old Normal business model which did not envision all of them becoming glorified, Too Big To Fail hedge funds, ala the Goldman Sachs "Bank Holding Company" model; and deposits - traditionally the source of capital banks use to fund said loans. Historically, and logically, the relationship between the two time series has been virtually one to one. However, ever since the advent of actively managed Central Planning by the Fed, as a result of which Ben Bernanke dumped nearly $2 trillion in excess deposits on banks to facilitate their risk taking even more, the traditional correlation between loans and deposits has broken down. It is time to once again start talking about this chart as for the first time ever the difference between deposits and loans has hit a record $2 trillion! But that's just the beginning - the rabbit hole goes so much deeper...

There are many reasons why the deposit hoard has continued to rise in the past 4 years, and according to the latest H.8 statement just hit a record $9.173 trillion as of December 12. This compares to $7.259 trillion in the week after the Lehman collapse: an increase of $1.9 trillion.

One contributing factor to this surge in deposits is the collapse in the Commercial Paper market (driven in big part due to the ongoing lack of counterparty faith as well as the ongoing Fed intervention in every possible market which has the paradoxical impact of eliminating confidence in the system and the desire by corporations to be able to fund themselves at a moment's notice come hell or high water) coupled with the unlimited insurance of various deposits courtesy of the government's Transaction Account Guarantee (TAG) program, which however will expire in 5 days, and which has made deposits the preferred pathway of preserving liquidity "dry powder" for both corporations and individuals.

But perhaps the biggest driver of the surge in deposits is the Fed's own ongoing liquidity tsunami, which using various traditional and shadow conduits has injected nearly the entire $2 trillion amount into the banking system (as Excess Reserves, Reverse Repos, Deposits with Federal Reserve Banks, and Other Fed Liabilities which combined conveniently amount to just about $1.8 trillion), which then via reflexive shadow pathways, most notably repo, has translated into an actual excess of cash to the bank's balance sheet: perfectly fungible cash which can then be used for any generic purpose: such as prop trading under the guise of "hedging" as JPM so vividly demonstrated a few months back. More on this in a second.

While the source of the cash for record deposits - i.e., the ever so incorrectly classified "cash on the sidelines" is debatable (but not much), one thing is certain: the total issuance of loans since the Lehman collapse in September of 2008 has barely budged and has increased by a whopping... -120.6 billion! That's a negative.

Indeed, in the past 4+ years, bank loan issuance has declined from $7.27 trillion to $7.15 trillion! To keep up with the increase in deposits, at least based on the historical relationship between deposits and loans, this number would have to be $2 trillion higher today, or some $9.2 trillion - money that would be going to individuals, households, and small, medium and large businesses to fund expansion and growth (instead the gross debt issuance frenzy we have seen over the past 3 years is only to refinance existing debt and lower rates: i.e., not only zero, but negative net issuance).

At least we can put to rest any debate whether banks are willing, able or even interested to lend out money in an unprofitable Net Interest Margin environment, such as that the Fed has created currently courtesy of ZIRP and courtesy of constant fronrunning of the Fed's purchases on the long-end.

If that was all, we could end this post here and tell readers to make up their own mind about what is truly happening behind the scenes. But there is much more to discuss about this record excess of deposits over loans. And the "more" is something that was only recently discovered, courtesy of a massive blunder by none other than JPM's Jamie Dimon. It is important to expose the "more" as it is in stark contrast with the conventional thinking adopted by much of the mainstream media (and even us until some time in May of 2012).

The conventional, or wrong way of thinking about the excess funding used by banks is best exemplified by this following headline from a August 20 Bloomberg article titled, "Banks Use $1.77 Trillion to Double Treasury Purchases."

In it the BBG authors note, correctly, that there was an excess $1.77 trillion in deposits over loans: a number which has since risen to $2.019 trillion as this post observes. Where the article is dead wrong is in its explanation of what the banks use said money for. Because while banks may or may not have used the excess cash for Treasury purchases (recall that we first highlighted that Primary Dealers held a record $140 billion in net Treasurys as of the latest week), the reality is that US Treasury paper is most certainly not what the final use of proceeds is.

Recall that as we have been describing for the past 3 years, a primary driver of "growth" in the US market, if not economy, has been the ability to transform asset and liability exposure off the books using various shadow conduits. The primary such conduit is and has always been repo funding (and various other forms of limited and/or unlimited rehypothecation made so popular after the collapse of MF Global). What repo does is it allows banks to exchange their holdings of Security X (in this case trasury) in exchange for nearly par cash courtesy of some custodian bank - and when it comes to the US non tri-party repo market there are only two: State Street and Bank of New York.

The biggest benefit of Repo financing is that the bank can still hold the original pledged security on its books for Fed "supervision" purposes, even as it obtains fungible cash equivalents via repo, cash which it can then use for whatever downstream purposes it desires such as purchasing stocks. This is where it gets confusing, and certainly confused our friends at Bloomberg who arrived at the wrong conclusion in their analysis.

A good summary of what really happens under the hood when account for repo comes from Citi's brilliant head of credit, Matt King, and his legendary note from September 5, 2008 "Are The Brokers Broken?" (which should be required reading for everyone), where he described the scheme as follows:

Paragraph 15 of the accounting rule FAS 140 stipulates that the amount referred to on the balance sheet statement need only be “collateral pledged to counterparties which can be repledged to other counterparties”. A further portion of the financial instruments owned – which is in many cases substantial – is reported in the 10-Q footnotes of “collateral pledged to counterparties which cannot be repledged”. An example might be tri-party repo, where until recently some custodians could not cope with the administrative complications of rerepoing received collateral. Although the assets themselves have always featured on the balance sheet, the fact that this non-repledgeable portion too is funded on repo is less widely appreciated. The combined volume – once it is arrived at – comes close to 50% of all financial instruments owned.

And this is where everyone loses the plotline, because the reality is that virtually half the balance sheet of US brokers can be repoed back to custodians, in the process leading to double, triple, and x-ple counting a single asset serving as deliverable collateral, and using and reusing (if need be), the cash proceeds, net of a token haircut (or no haircut in the case of English rehypotecation transactions), every single time purchasing riskier assets to generate a return on a return on a return of the original investment. In short: the magic of off-balance sheet accounting which allows brokers to abuse their already TBTF status and lever any underlying asset to the helt and beyond.

Think of Shadow Banking as your own in house synthetic structured product, allowing virtually unlimited leverage.

"Pure Hogwash!" One may say. "These are ridiculous allegations with no base in reality." One may add. We thought so too until the JPM "whale trade" fiasco happened, and all the dirt of the synthetic deposit-funding repo pathways was exposed for all to see.

Presenting Exhibit A, which comes directly from page 24 of JP Morgan's June 13 Financial Results appendix, in which the firm laid out, for all to see, just how it is that the Firm generated over $5 billion in prop trading losses in its Chief Investment Office unit - a department which had previously been tasked with "hedging" trades but as it turned out, was nothing but a glorified, and blessed from the very top, internal hedge fund, one with $323 billion in Assets Under Management! To wit:

The chart above shows the snapshot - from the horse's mouth -of how a major "legacy" bank, one engaged in both deposits and lending, decided to use the "deposit to loan gap" which had swelled to $423 billion at just JPM (blue box in middle), and led to $323 billion in CIO "Available For Sale securities."

What happened next is well-known to all: JPM's Bruno Iksil, together with Ina Drew and the rest of the CIO group (all of whom have since been dismisses), decided to put on a massive bet amounting to over $100 billion in notional across the credit spectrum (the one place where a position of this size could be established without becoming the entire market, although by the time it imploded Bruno Iksil was the market in IG9 and various other indices and tranches). The loss was just as staggering, and amounts to what is one of the largest prop bets gone horribly wrong in history.

Now the JPM spin is well-known: the CIO was merely there to "hedge" exposure, as a direct prop bet would be illegal as per the Volcker Rule, not to mention the avalanche of lawsuits and the regulatory nightmare that would ensue if it became clear that the firm was risking what amount to deposit capital to fund massive, highly risky prop trading bets. Which, when one cuts out the noise, is precisely what JPM did of course, especially since the "hedge" trade blew up just as the market tumbled in the spring of 2012, a time when it should have otherwise hedged the balance of the firm's otherwise bullish posture. That it did not do this refutes the logic that this was a hedge, and confirms that what JPM was doing was nothing short of using an internal, heavily shielded hedge fund, which had $323 billion in collateral as investible equity, to trade away, knowing very well no regulator would dare touch JPM. This is further compounded by the fact, that as one of only two Tri-Party repo dealers in the market (and by far the greater of the two, the second one being the innocuous Bank of New York Mellon), JPM could run circles around both the entire market, and the Fed, if it so chose, courtesy of its monopoly position in the repo market.

* * *

So where does that leave us?

Well, instead of JPM's "deposit to loan gap" discussion, whose massive loss (but, but, hedging...) was the dominant topic on the airwaves for a large part of the summer of 2012, we have the US financial system's "deposits to loan gap" - amounting to some $2 trillion - to contend with. But the punchline is that whereas JPM's decided to express its prop risk using fixed income instruments, and certainly not to buy simple boring Treasurys as the Bloomberg article speculated earlier, nothing prevented JPM from simply bidding up other risky assets "as a hedge" such as stocks, or crude, or slamming silver, or doing anything else it was perfectly entitled to do using the repledging mechanics of the repo system. And since Jamie Dimon has not yet given a full P&L breakdown listing CUSIP by CUSIP just what instruments JPM depositors were funding - either directly or indirectly - nobody actually knows just what securities the CIO was long or short.

The question then becomes: just how are the remaining hundreds of depositor US banks expressing their own iteration of the JPM CIO "deposits over loans" problem? Are they all trading CDS in the IG or HY space? Are they using repo proceeds from TSY purchases to generate fungible cash? Or are they simply using the cash directly and using it to big up risk assets?

All these questions will remain unanswered as it is in both the banks' and, therefore, regulators' best interests to keep the accounting behind repo, pledging and hypothecation transactions as is - nebulous, complicated and even contradictory (especially when it comes to FAS 140 whose paragraph 15 (d) makes borrowed versus pledged transactions off balance sheet, while paragraph 94 makes them on balance sheet), as overhauling the reporting requirements would expose just how much double-, triple-, quadruple- and more dipping America's major money centers are engaged in when it comes to propping up the market: dirt that would put the result of any "Audit the Fed" outcome to shame.

And after all, why should the Fed dirty its hands when it can simply provide the banks with the cash resources to do what they need without it having to engage in what is certainly illegal based on any of its charters. Because while the Liberty 33 Plunge Protection Team may, on occasion, engage the Citadel trading desk to buy ES at times when nobody else will step up, it certainly will not have to do so all the time if it were to flood banks with $2 trillion (soon to be $3, then $4 trillion as QE4EVA drags on and on and on...) in perfectly fungible capital, which can be metamorphozed from innocuous Excess Reserves to perfectly tradeable cash using two or three simple shadow banking transformations.

In that regard, we have to thank Jamie Dimon and his firm for being the biggest beacon of light in 2012, because without the generous contribution of the JPM CIO desk, and its explanation of how the "deposit to loan gap" we would all still be in the dark, and just like Bloomberg, assume naively that all a bank does with excess trillions in deposits, is to buy boring old treasurys.

Instead, we now know the truth, and for that Jamie - you have our sincerest gratitude.

* * *

Finally, the indirect implication of all this is for all those demanding that the "money on the sidelines" leaves the sidelines and is once again used by companies. The problem is that said money is already used by banks as prop trading capital: likely all $2 trillion of it (and if re-hypothecated, more) - in other words, if instead of being used by banks to prop up corporate stocks and risk in general, companies revert to the old mentality of actually reinvesting in themselves - i.e, CapEx spending, hiring new people, even M&A and generally growth - the fungible cash used by banks as investing capital will be redeemed and result in commensurate sales of stocks. Which means that should said "sideline capital" ever be pulled back by the same companies who are now granting, unbeknownst to them, direct asset management duties of said cash by the US banks, then watch out below, at least in the S&P. Which, as the Fed has made all too clear, is the only thing that matters in the New Normal.


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Wed, 12/26/2012 - 16:17 | 3096998 HD
HD's picture

I have NEVER seen a chart like that. Unbelievable.

Wed, 12/26/2012 - 16:23 | 3097002 idea_hamster
idea_hamster's picture

As long as Fed member banks pay ~0% to borrow from the Fed and "earn" 0.25% on excess reserve deposits with the Fed, there is little reason to expect this trend to reverse.

But that's just a symptom of the broader problem:  the idea that the Finanstocracy has their own rule on interest spreads while we all get socked with negative real returns fits quite nicely with the real "new normal" -- one rule for the wealthy, another for the plebes.

The image, however, speaks volumes.

Wed, 12/26/2012 - 16:32 | 3097048 Divided States ...
Divided States of America's picture

Basically this means that it may not be even safe to keep your deposits in the TBTF banks. Under the mattress may be safer....and remember to make sure that your wealth is in rock solid shiny form.

Wed, 12/26/2012 - 16:47 | 3097101 ZerOhead
ZerOhead's picture

Shiny is preferable to paper however Lehman is dead so that all other TBTF's could live... and don't forget that

your matress doesn't own the Federal Reserve and the regulators.

Wed, 12/26/2012 - 17:22 | 3097222 SafelyGraze
SafelyGraze's picture

"Lehman is dead so that all other TBTF's could live"

that is a beautiful message to share during this blessed holiday season

on sep 15 (aka Lehmanday) the people purchase D-rated securities and then begin fasting

Wed, 12/26/2012 - 17:33 | 3097273 Manthong
Manthong's picture

Ok Class.. What words do these letters spell ?





F D I C  F U L L I N S U R A N C E E N D S I N F I V E D A Y S  

Wed, 12/26/2012 - 17:40 | 3097318 francis_sawyer
francis_sawyer's picture

Can I buy a vowel?

Wed, 12/26/2012 - 18:32 | 3097495 Ness.
Ness.'s picture



Wed, 12/26/2012 - 18:42 | 3097525 francis_sawyer
francis_sawyer's picture

Does that mean there are TWO new sheriffs in town?...

Wed, 12/26/2012 - 22:34 | 3097996 flacon
flacon's picture

J O N   -   C O R Z I N E

(the honorable)

Thu, 12/27/2012 - 02:06 | 3098268 strannick
strannick's picture



Wish I had a Hedge Fund with .3 trillion AUM and only Bart Chilton and the rest of the CFTC Inspecter Clouseaus to regulate me. (It was the CFTC -Commisioner Jill Sommers in particular- who gave Corazine the green light, though Im not sure if Sommers was actually wearing a ''Free John Corazine'' T-shirt at the time.

Thu, 12/27/2012 - 06:53 | 3098426 TwoShortPlanks
TwoShortPlanks's picture

Exactly who/what the fuck is ZeroHedge...a media outlet for the 'Committee Of 300' or something? I really don't care, but this isn't half a dozen people rooting through financial garbage, this is Think Tank (Intelligence) type digging.

Thu, 12/27/2012 - 08:05 | 3098481 GetZeeGold
GetZeeGold's picture


Exactly who/what the fuck is ZeroHedge...a media outlet for the 'Committee Of 300' or something?


So are you looking for a fight or what bitch?

Thu, 12/27/2012 - 09:16 | 3098552 TwoShortPlanks
TwoShortPlanks's picture

I fight hard targets, not soft....sorry!

Fri, 12/28/2012 - 03:28 | 3101054 awakening
awakening's picture

I do that all the time, bitch of a thing has a mohs rating of 7 to get through to unearth the good stuff ;)

Mon, 01/07/2013 - 20:39 | 3131258 smlbizman
smlbizman's picture

he does not know the first rule of fight club, does he.....

Fri, 12/28/2012 - 02:00 | 3100992 MeelionDollerBogus
MeelionDollerBogus's picture

c-c-c-COMBO breaker

Supreme Victory

for ness

Thu, 12/27/2012 - 02:24 | 3098279 SAT 800
SAT 800's picture

You have a wry sense of humor.

Wed, 12/26/2012 - 22:46 | 3098019 WTFUD
WTFUD's picture

Lehman isn't dead buddy just check the " nominee" accounts as far away as the Oz ASX and they live on!! TBTF can never die; just hibernate in another Ponzi entity.

Thu, 12/27/2012 - 09:21 | 3098561 eclectic syncretist
eclectic syncretist's picture

Who's really sucking on the government tit?  It's the banks more than any other person or entity, by far.

Wed, 12/26/2012 - 19:34 | 3097654 Element
Element's picture

Notice how the wavy post-ZIRP blue line is getting ready to roll over into another decline?

No wonder they're pumping the sewers full of 'liquidity'.

Wed, 12/26/2012 - 19:42 | 3097680 Dapper Dan
Dapper Dan's picture

Interesting story.

More $100 bills in circulation than ever before,

Interview by Kai Ryssdal

Marketplace for Friday, November 23, 2012

If we bet you that almost 80 percent of U.S. greenbacks in circulation are $100 bills -- would you take that action?

Well, it's true. According to Matt Phillips, at least. He reported a story recently in Quartz, the new business website from the Atlantic. He found that the percentage of U.S. currency printed as $100 bills has steadily increased over the past 40 years.

Turns out, those Benjamins are being used for all sorts of things. They're popular in the black market and could be used to launder money. But they're also hoarded by people in developing countries where local currencies aren't as strong as the dollar.

Exactly how many of those $100 bills are floating around overseas? It's difficult to know for sure but Phillips says recent estimates suggest about 25-30 percent of U.S. currency is outside of the United States.

If this surprises you, you're not alone. Phillips says this "does seem to fly in the face that we were going to have a cashless economy," especially based on how people tend to shop in this country. "If you were going to make a purchase in the U.S. for a couple hundred dollars, you'd probably still use...plastic of some sort to do it. That's part of one reason why people think it might be a foreign phenomenon."

And one fun fact from Phillips that didn't make it into the interview that aired? The Federal Reserve ships $100 bills overseas on pallets, each one stacked with 640,000 bills. That means each pallet is worth about $64 million.

No mention in the audio version either that the 100 bills could in fact be held by US citizens under their matteress

Wed, 12/26/2012 - 20:01 | 3097712 blunderdog
blunderdog's picture

      But they're also hoarded by people in developing countries where local currencies aren't as strong as the dollar.

Maybe we just need to invade all those countries to take back our money and give it to our TBTF banks and everything would be all hunkey-dorey...

Thu, 12/27/2012 - 00:10 | 3098145 jekyll island
jekyll island's picture

Don't fret about it. They will be sending them back en mass soon.

Wed, 12/26/2012 - 20:53 | 3097802 MaxMax
MaxMax's picture

Around me in northern NJ, many stores won't take anything larger than a $20 because of the high rate of counterfeit $50's and $100's. 

Wed, 12/26/2012 - 20:57 | 3097812 Tyler Durden
Tyler Durden's picture

As first reported here back in October: "We Don't Want Your Steenkin' $1, $5, And $10 Dollar Bills"

Thu, 12/27/2012 - 06:28 | 3098415 tabasco71
Thu, 12/27/2012 - 07:00 | 3098434 Sorynn
Sorynn's picture

Keep enough to pay your monhtly bills in the system and remove the rest in one useful form or another.

Thu, 12/27/2012 - 08:00 | 3098473 Widowmaker
Widowmaker's picture

I wouldn't put "money" in ANY bank at the present. Convert it to ANYTHING.

America has seen this greasy pinstripe play end before.

All the kings horses and all the kings men couldn't put shattered confidence back together again.


Thu, 12/27/2012 - 08:02 | 3098477 nmewn
nmewn's picture

Exactly, convert it to anything, that time is now while they're still in the dressing room putting on their makeup.

The play is about to start ;-)

Wed, 12/26/2012 - 16:33 | 3097056 Banksters
Banksters's picture

Check out credit growth vs real wages since 1970.   The vast majority of Americans are being parasitized by the banks.   The first rule of parasitism, which bernank and his minions understand, is this:  Don't KILL your host.   



Wed, 12/26/2012 - 17:36 | 3097290 Sudden Debt
Sudden Debt's picture

just watched a documentary about the Boomerang generation in Europe.
young people till 37 years old who return to live with their parents because they can't afford living on their own anymore.

Wages for young people are dropping faster than ever before and they can't even afford to rent anymore.
And that will show how the future of the housing market will look like in 10 years from now... way way way lower than now. inflation or not.

it's clear the banks hold the power. untill there's a generation with guts that kills them off.
luckely, that generation isn't here yet.

Wed, 12/26/2012 - 18:24 | 3097465 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

I, for one,really appreciate your comments on Europe's situation.

Wed, 12/26/2012 - 21:33 | 3097867 FreedomGuy
FreedomGuy's picture

What I bet they (the boomerang kids) don't get is that the government is the architect of their problem rather than their economic savior. Remember the first rule of leftist government: All government failures or shortcomings require more government to fix. All of life's problems are fixable with enough taxes and government rules.

When you see Hollande win in France during a depression/recession you can be sure that the leftist fantasy is well entrenched. They cannot see that their collectivist society and beliefs cause their problems any more than the Muslim radicals believe their philosophies are keeping them in the stone age. The problem is always someone or something else.

One day a country will come along that believes in minimal control, government limits, individual responsibility and the general moral superiority of liberty. This country will outstrip the rest of the world in productivity and personal satisfaction and settle for all time the superiority of liberty versus collectivism and autocracy.

Okay, maybe not for all time.


Thu, 12/27/2012 - 03:29 | 3098314 californiagirl
californiagirl's picture

And then all the enterprising, industrious people will move to this fabulous country, raise families, and spoil their kids rotten with their success. And the kids will grow up lazy, self-involved and entitled and decide that wealth needs to be spread around, that Marx was not such a bad guy, and the government should fix everyone's problems like their parents did for them.

Thu, 12/27/2012 - 08:27 | 3098495 Debt-Is-Not-Money
Debt-Is-Not-Money's picture


The best that any organization can be is when it is first created be it a country, a corporation, a religion, etc. As time progresses the parasites, termites, and vultures become established weakening and eventually killing their host.

Thu, 12/27/2012 - 03:52 | 3098323 abettertomorrow
abettertomorrow's picture

There once used to be a Country, alike you say

if I'm not wrong the name of it was USA

from all the world they came along

to see the land of free, brave and strong

but then the sirens commence singing the oldest song

to take upon the weaks the mariners among

and now just have a look around the place

to see how all is falling in disgrace

never mind who happened to rule whether elephant or donkey

they like to turn the whole into a business of monkey


Wed, 12/26/2012 - 17:40 | 3097315 neidermeyer
neidermeyer's picture

I used to be disgusted , now I'm just amused...

Wed, 12/26/2012 - 17:56 | 3097378 Salon
Salon's picture

I am mad as heck.

And I will probably take a lot more

Wed, 12/26/2012 - 19:38 | 3097666 RockyRacoon
RockyRacoon's picture

I'm mildly irritated.

And all bent over for more.

Wed, 12/26/2012 - 22:17 | 3097959 derek_vineyard
derek_vineyard's picture

rocky---- play hard to get

Thu, 12/27/2012 - 09:35 | 3098576 TwoShortPlanks
TwoShortPlanks's picture

I'm waiting for the lights to go out. Popcorn at the ready!


Wed, 12/26/2012 - 19:39 | 3097614 Radical Marijuana
Radical Marijuana's picture

Me too, neidermeyer, I have nothing left but my macabre sense of humour to laugh at evil. However, it too is getting worn out.

"Deposits," "savings" and "capital" are becoming increasingly meaningless concepts as the runaway fraud of making "money" out of nothing finds more and more excuses to do that! The biggest banks had a trajectory of becoming such totally dominant top predators, that their transformation into fatally overbearing parasites is unstoppable. They ARE going to kill their host populations. The illusions that one could have "savings," that one "deposited" to be accumulated as "capital," to be productively invested, was already shot to hell in principle. When privatized fiat money, made out of nothing, as debts, was first legalized and enforced by governments, the runaway triumph of fraud backed by force was already set in motion, and automatically avalanched.

Fractional reserve banking was always FRAUD. However, it originally was more limited, so that "deposits," "savings" and "capital"were still relatively meaningful concepts for mainstream people. Abstractly speaking, the People were political idiots to allow that system to get going in the first place, but actually they were victims of the runaway triumph of the application of the methods of organized crime, taking control of their governments, in ways that they could not prevent. However, since those mainstream morons were effectively brainwashed to believe in bullshit, and they relatively benefited from participating in the organized systems of lies and robbery that was the economic system, they kept on participating in that vast charade, or pantomimed political economy, which pretended to be all kinds of productive things, that it more and more was less and less in reality. Therefore, OF COURSE, those mainstream morons in the middle class are being wiped out. OF COURSE, "deposits," "savings" and "capital" are becoming relatively meaningless, as the runaway triumphant financial frauds that are controlling the actually existing systems automatically get bigger, faster.

Anyone who seriously attempts to explain to the mainstream morons, the masses of muppets, that "money" is being made out of nothing, and that all their "savings," that they may "deposit" as "capital" to invest, are becoming automatically diminished in significance, will find that the People do not understand, and more importantly, do not want to understand. Ordinary people, according to my experiences of talking face to face with many thousands of them, for many decades, can not understand the realities of monetary system, because they do not want to understand. They do not participate in learning about that, because they do not want to participate. They were brainwashed to believe in bullshit so totally that it is practically impossible for them to even begin to imagine that everything they believed is bullshit. They do not want to even begin to consider that ...

According to my experiences, it is NOT possible for the vast majority of the People to go through the paradigm shifts in perception that they would need to go through, to begin to understand the fundamentally fraudulent financial accounting systems, that have taken control of their lives, and which they pay for, to be enforced against them. Therefore, charts like this are simply indicating the exponential growth of a runaway system of almost totally triumphant financial frauds, which emanates from the heart of the money system itself. It is only going to get way, way worse, until too much of its own success will destroy itself. However, for the foreseeable future, I see nothing that can be practically done to prevent that. The only thing left is to laugh at the evil. The sad absurdities of the vast majority of the People being convinced to believe in ridiculous bullshit social stories have no practical ways to be overcome. The mainstream morons that believed in "deposits," "savings" and "capital" are getting systematically destroyed by the runaway triumph of organized crime, taking over the government, and then legalizing even more lies, backed up by more violence.

I WISH there was something better that was actually possible, than go from being disgusted to being amused, however, as far as I can tell, there is no other coping strategy than to develop one's macabre sense of humour ... although that too is being overwhelmed and worn out by the sheer magnitude of the runaway triumph of absurd lies in control of civilization. HOWEVER, according to several decades of political experiments and activities, that I engaged in, and continue to do, the vast majority of the People are Zombie Sheeple, who do not want to understand. Furthermore, most of those who pretend to educate them are almost always urging everyone to become better Sheep, as the "solutions" to these problems of the runaway triumph of fraud going from marginal predation, to endemic parasitism, that is now out of control towards killing the host.

The productive prey used to be able to meaningfully work to have "savings," to make "deposits," which then were invested in productive ways. However, the legalized, privatized ability to make "money" out of nothing has automatically picked up speed, and has systematically taken control of everything. Those who had the power to make money out of nothing, OF COURSE, found more and more excuses to do that, and therefore, that financial fraud was gradually able to take over everything, until the basic concepts of "deposits," "savings" and "capital" became laughably disconnected, vain absurdities.

Wed, 12/26/2012 - 20:03 | 3097719 blunderdog
blunderdog's picture

     Fractional reserve banking was always FRAUD.

Fractional reserve banking is very useful, expedient, and efficient when placed in the hands of angels.

Wed, 12/26/2012 - 21:34 | 3097868 Jendrzejczyk
Jendrzejczyk's picture

Thank you for defying the commonly held stereotype that anyone associated with hemp is incapable of rational and intelligent dialogue.


Wed, 12/26/2012 - 21:38 | 3097874 FreedomGuy
FreedomGuy's picture

Good points, although I disagree categorically with a few minor points. The basic problem is that almost nothing is real, solid, comprehensible and decipherable in the modern world of finance and banking. Because it is all so heavily manipulated it is hard to know where to put real capital. That is why at the end it is better to own "things" that are concrete, whether it is PM's, farm land or a percentage of your uncle's business.

The question is when it crashes, how it crashes and how to be prepared in a modern society.

Thu, 12/27/2012 - 08:16 | 3098484 Widowmaker
Widowmaker's picture

The murder of JFK removed silver from your coins and put fraud in your fiat.  

Perhaps you should be asking deeper questions as "money" in its current form is totally null and void.  You can buy something because "they" let you?

True (tangible) wealth was replaced by power, but by whom, shitizen?

Wed, 12/26/2012 - 18:06 | 3097414 Snidley Whipsnae
Snidley Whipsnae's picture

The Fed is trying to help the TBTF banks recap themselves... Not working out too well is it?

Wed, 12/26/2012 - 19:57 | 3097706 californiagirl
californiagirl's picture

The FED, with Geithner's help, seems to have done quite a good job so far buying crap (Fannie/Freddie MBS) from the banks and dumping the current and future losses on the U.S. taxpayers via increased national debt issued to fund continuing back-door bailouts.  This long, slow process will continue for many more years.  In the mean time, phony accounting has created "excess reserves" out of thin air so the TBTF banks can pretend they actually have capital.  The FED and regulators will continue to look the other way as the TBTF use all kinds of fraudulent and illegal methods to pilfer more capital for themselves from every source possible. Certainly, "fixing" LIBOR was only a small part of the illegal activity going on.  Why are the banksters not being prosecuted?  They have the silent consent from central bankers and governements to raise capital using any means necessary, damn to taxpayers.

Thu, 12/27/2012 - 08:25 | 3098488 Widowmaker
Widowmaker's picture

FASB 157.

Keeping thieves out of jail since 2008 (arguably 1999).

Wed, 12/26/2012 - 21:36 | 3097872 ball-and-chain
ball-and-chain's picture

Just the opposite.

It's very believable.

The FED is a criminal organization run by the Ivy League Mafia.

It won't be happy till it steals the lollipop from every baby in the world.

Wed, 12/26/2012 - 16:22 | 3097018 CClarity
CClarity's picture

TBTFs amassing fiat for when TSHTF.  Nothing more.  Never intended to help the little folk those irrelevant 98%ers.

Still, I think they'll be a little surprised when the genuine uprisings get going.  Inevitable that they will happen.

Wed, 12/26/2012 - 16:42 | 3097090 NotApplicable
NotApplicable's picture

Pull-ease! Genuine uprisings are their best efforts. Think of them as collections of self-propelled tools, requiring only the slightest bit of activation energy to ignite.

TPTB have one, and only one, trick. They destroy support systems. Sometimes this requires agents, while other times, they just have to apply pressure until people break on their own.

Wed, 12/26/2012 - 17:52 | 3097363 Manthong
Manthong's picture

"They destroy support systems."

.. States rights and power (US/ 17th Amendment),  local community (LE militarization and DHSization), family (abortionization), church (secularization), morality (homofication).

OK.. I invented some words but it is all true.

 Oh, and the national inventory of personal firearms is about the only significant roadblock left.

Wed, 12/26/2012 - 18:19 | 3097451 DosZap
DosZap's picture

Oh, and the national inventory of personal firearms is about the only significant roadblock left.

May be way off base, but millions of shelves are bare in less than 90 days, and the Mfgrs are backlogged at least 8-10+ weeks.In reality FAR more.

Ammo,any semi's,  of any kind is/has been depleted in the past 30 days faster than I have ever seen it in my life.(Makes '94, look like childs play, and if you did not watch that, you would be awestruck,if you had.

Folks haven't spent multiple milllons of Benniebux to turn in jackshit.

The beauty part of this is, most never owned in their lives, and now are hoarders.

Thu, 12/27/2012 - 03:48 | 3098320 IamtheREALmario
IamtheREALmario's picture

Not to state the obvious, but one of the ways wars accelerate is to put the arms that the government has purchased and stockpiled into the hands of the people (semi-accidentally through poorly guarding them or completely intentionally). When this happens increasingly armed citizens tend to turn on the wrong targets and deluded and brainwashed people kill each other. Mission accomplished for those who think themselves in charge.

Are we at a fever's pitch yet with bloodlust in our eyes?

Let us pray.

Wed, 12/26/2012 - 19:32 | 3097645 Kayman
Kayman's picture

"TBTFs amassing fiat for when TSHTF.  Nothing more."

And/or $2 trillion is a good proxy for the haircut coming on their marked-to-fantasy assets. 

ps. I saw a JPM ad the other day.  Something about JPM supporting free enterprise, the American way of life, cotton candy and unicorns...

Thu, 12/27/2012 - 02:52 | 3098295 glenlloyd
glenlloyd's picture

I saw it too, and was disgusted by that BS propaganda

Wed, 12/26/2012 - 19:42 | 3097679 azzhatter
azzhatter's picture

yep and the uprising will explode quickly.

Wed, 12/26/2012 - 20:02 | 3097716 Element
Element's picture

'Early adopters' (OWS etc) always are seen to be fools when they get burned for being too early. But when that sentiment finally goes mainstream it will be unstoppable.

Nevertheless, I've said since early 2009 that it's not the first or the second great-recessions you have to worry about, it's the third great recession that's really going to be the global game-changer. We still haven't gotten into the second one properly yet, still playing footsies with it, and trying to fend it off. Frankly, I was expecting the second one in mid-2011, so it's been held-off quite effectively up until now. But the act of holding it off for this long has also ensured that the trajectory, both into and out of the second recession will be that much shallower, so much more damaging for capital, businesses, employment, and the toxic sewer-pipe system called 'banks'. But most of all, this slow plunge in has severely damaged confidence everywhere. Even the most buoyant parts of the global economy have little confidence now.

Alas, every market and currency is based on confidence. So not just out of bullets, out of the very stuff needed to generate greater-fools. So a second great recession may in fact be much more damaging and protracted than a sharper double-dip in 2011 would have been. Maybe we'll see "three-for-one" car deals from Detroit this time?

Wed, 12/26/2012 - 16:24 | 3097026 Glass Seagull
Glass Seagull's picture



Alchemy realized, not with chemistry, but with double-entry accounting and fiat money schemes.

Wed, 12/26/2012 - 17:34 | 3097279 sampo
sampo's picture

I suppose we should immediately start machine-gunning the Finance ministry of China with this information. Anyone with me?

Wed, 12/26/2012 - 22:15 | 3097956 SgtShaftoe
SgtShaftoe's picture

They likely already know. They're just quietly buying gold until the opportunity for their perfect moment.

Wed, 12/26/2012 - 19:11 | 3097601 Winston Churchill
Winston Churchill's picture

Less alchemy,more a Rube Goldberg(Heath Robinson)nighmare Deus et Machina,

that is hell bent on survival, killing itself doing so.

Wed, 12/26/2012 - 20:08 | 3097029 francis_sawyer
francis_sawyer's picture

And so you really want to hold your joobux on deposit... In a bank...???... I guess that's a question whilst trying not to presume it's not rhetorical...


Edit: As of (7:08 PM)... It appears that 6 JUNKERS would prefer to hold their wealth in the form of 'joobux' in the banking system... Shalom... I wish you all the best of luck in your folly...

Wed, 12/26/2012 - 16:28 | 3097033 mayhem_korner
mayhem_korner's picture



When awareness finally comes, the ATMs are going to unload like a 1-year pent-up dood after a handful of cialis.  Money velocity unleashed will revalue everything quickly.

Wed, 12/26/2012 - 16:30 | 3097046 DoChenRollingBearing
DoChenRollingBearing's picture

$500 more out of the ATM again on the way home...

Wed, 12/26/2012 - 16:39 | 3097081 mayhem_korner
mayhem_korner's picture



Your gonna be a regular ol' banker, DCRB.  Twice a week we pull $40 - $100 of "cash back" at the local grocers, etc.  Much harder for folks to "notice". 

ps.  Make sure to convert a few of those envelopes to other currencies.  ;)

Wed, 12/26/2012 - 16:46 | 3097100 NotApplicable
NotApplicable's picture

Shoot, $500 out of an ATM is nothing anymore. Hit a couple of stores and fill up the gas tank, and it's gone before you get home.

Wed, 12/26/2012 - 17:13 | 3097196 spinone
spinone's picture

Don't worry, they'll print more.

Wed, 12/26/2012 - 18:27 | 3097474 DoChenRollingBearing
DoChenRollingBearing's picture

@ NotA

Yes, true.  Some 15 years ago, my ATM cash withdrawal limit was $300, but that could almost buy 1 ounce of gold.  $500 now?  Less than 1/3rd of an oz...

Wed, 12/26/2012 - 18:59 | 3097569 DosZap
DosZap's picture

Yes, true. Some 15 years ago, my ATM cash withdrawal limit was $300, but that could almost buy 1 ounce of gold. $500 now? Less than 1/3rd of an oz...

I  had the $300.00 limit also, and I finally went in and confronted the bank, and said WHO say's it has to be that?.

The answer I got was it's bank policy, and mostly for your protection, I said, well I can change banks, and I want to know HOW high your prepared to raise my daily limit, as $300.00 isn't dick,and I will take my chances with my own protection(no debit cards for this fool).

I had it raised to a $1000.00.............a few years went by, and one day I swung by the ATM(this is after '08), and hit $800.00, would not allow it, I kept hitting it in 100 buck increments till finally it gave me $500.00.

Pissed, I parked went in and asked WHO changed my withdrawal limit, and WHY was I not notified?.

They said NEW Bank policy, and I no longer had an option, even though I still had plenty of fiat in that bank.

Bottom line, folks were hoarding even then,and they were keeping W/D's to a min.

Thu, 12/27/2012 - 02:55 | 3098297 glenlloyd
glenlloyd's picture

speaking of ATM's, I've noticed a move afoot here to install new ATM's without deposit capability......moving closer to digital currency it would seem.

Wed, 12/26/2012 - 16:27 | 3097034 The worst trader
The worst trader's picture


Wed, 12/26/2012 - 16:27 | 3097035 stocktivity
stocktivity's picture

It's all Bullshit!  Why should banks loan? They can borrow from the Fed near zero % and buy treasuries and collect the interest. Quite a racket. The Fed prints money out of thin air...the bank borrows this printed money for free...the banks buy treasuries and collect the interest from the Fed (which buys them up by printing more money out of thin air and pays the banks the interest on the treasuries out of even more money printed out of thin air).  Fuck you Bernanke! You're destroying us.

Wed, 12/26/2012 - 18:29 | 3097484 AUD
AUD's picture

Buying Treasury bonds IS loaning, to the government.

Wed, 12/26/2012 - 19:07 | 3097592 klockwerks
klockwerks's picture

Depositing money in your saving or checking is loaning the bank money. Received a 20 page+ little book with VERY small print about 6 months ago from Chase. Decided with all that small print they didn't want me to read it, so I did. Bottom line, once you deposit YOUR money it's a loan to them and becomes their money. Glad I only use my acct to make monthly bills etc and keep very small balance. It went on and on about "the rules" Kind of interesting

Wed, 12/26/2012 - 19:49 | 3097691 RockyRacoon
RockyRacoon's picture

I'm no attorney, and I've never played one on TV, but as as I recall, a court case long ago established that once you put money into a bank you have in effect LOANED the money to the bank.  The money, being fungible, is theirs to do with as they please.  You have no call on it under a plethora of scenarios.  Dat money be gone.  If you get any of it back it's simply due to the generosity of your depository institution.  Remember the redemption rules just passed a little while back for money market funds?  It's all coming (or NOT coming) to a financial institution near you!

Wed, 12/26/2012 - 20:09 | 3097731 blunderdog
blunderdog's picture


The idea has been that demand-deposits are placed above "all other creditors" when the bank fails.  With massive derivative plays on the books, it's a good bit fuzzier to me, but the depositors are generally understood to be above the shareholders and bondholders in the list of folks who get paid. 

Is there a word for (market cap) / (deposits)?

Thu, 12/27/2012 - 10:15 | 3098651 unununium
unununium's picture

You need to update your priority list. It is clearly now

Counter parties
Bond holders
Dollar holders worldwide

Fixed it for ya.

Wed, 12/26/2012 - 16:27 | 3097037 Shell Game
Shell Game's picture

Bernanke, fuck you and your spawn.




Wed, 12/26/2012 - 16:28 | 3097040 yogibear
yogibear's picture

Wait until the flood of fiat US dollars come in from outside. Dump the dollar time. 

It will be amusing to watch the fear in Fed's eyes. First, let's see Japan's blowup.


Wed, 12/26/2012 - 16:36 | 3097066 youngman
youngman's picture

We all are thinking that JAPAN will be first...but watch might be something completly is a shell game now...its above the table now...with the rest of the world watching from the outside...and they do not want to lose...they can´t...they are just starting up....

Wed, 12/26/2012 - 17:53 | 3097365 Ricky Bobby
Ricky Bobby's picture

Canary in the Coal Mine - JAPAN

Wed, 12/26/2012 - 16:30 | 3097044 Atlantis Consigliore
Atlantis Consigliore's picture

Watch Godfather III,  FED monetizing RE, and mortgages, $ 45 B a month; thats  4 Million homes a year;

The FED is the Church largest landowner landlord in Europe;  kick the can, FED is the Landlord 8 M homes rent is due, vote and health care included.

Wed, 12/26/2012 - 16:38 | 3097078 fuu
fuu's picture

$85,000,000,000/mo in a week.

Wed, 12/26/2012 - 16:32 | 3097049 Cognitive Dissonance
Cognitive Dissonance's picture

We ain't seen nuttin' yet. Desperate Fed men WILL do desperate things.

Wed, 12/26/2012 - 19:50 | 3097696 RockyRacoon
RockyRacoon's picture

Starving (and armed) folks outside their gates get fairly desperate as well -- as history has shown.

Wed, 12/26/2012 - 16:32 | 3097050 jmcadg
jmcadg's picture

What we need to start 2013 is a good old fashioned bank run.

Wed, 12/26/2012 - 16:37 | 3097069 the not so migh...
the not so mighty maximiza's picture

DHS has hollow points for that.

Wed, 12/26/2012 - 18:13 | 3097428 DosZap
DosZap's picture

DHS has hollow points for that.

LOL, not near as many as the plebes.Not in 20yrs could they get that much.

Wed, 12/26/2012 - 16:33 | 3097055 youngman
youngman's picture

We are now only proving what we knew for the last couple of years....when we would watch the markets go up on bad news...the fix is in...there was an agreement made with the banks and the government that if we save you work with us...the fake market keeps the wealth affect up...and watch the headlines saying that gold and silver were bad investments this year...bad bad is good...paper is good...PM´s are bad because that is the "faith" destroyer of curriencies....but....other countries know it..and the gold and silver is moving to their shores...

Wed, 12/26/2012 - 18:27 | 3097477 Snidley Whipsnae
Snidley Whipsnae's picture

I am bideing my time waiting for a day when I hear "Failure To Deliver", "Force Majure", "I don't care if you stood for delivery, take this paper or get nothing!", "What do you mean we can't inspect/audit our central bank gold stored in the US?"... or, something similar.

It will come... It's getting closer every day. The Mid East and SE Asia are already conducting trade in gold... but some of the trade is hidden by claims of 'central bank of _____ purchased _____ tons of gold during the last quarter to add to their reserves. Check out what Turkey, Iraq (right under our noses), India, China, Iran, etc are doing. Also check out the premium above spot in SE Asian/Mid East mkts as compared to Western mkts. Straping the physical price of PMs to the manipulated spot price of paper PMs is getting more difficult by the day.

Continue to enjoy each day as much as you can... Once the SHTF there will be little joy in Mudville.


Wed, 12/26/2012 - 22:05 | 3097932 mkkby
mkkby's picture

Count me as grateful for the idiots who trade paper gold instead of real.  If not for that fraud we wouln't be able to get it so cheap, if at all.  The central bank of mkkby is steadily increasing it's reserves to be stored in vault lake.

Wed, 12/26/2012 - 22:43 | 3098012 DoChenRollingBearing
DoChenRollingBearing's picture

Excellent comment Snidley, + 1.

Wed, 12/26/2012 - 21:16 | 3097845 El Hosel
El Hosel's picture

Right youngman, Just after the "Flash Crash" the "markets" were nuetered and put on a very short leash.... we can't afford reality, its all Ponzi pie in the sky all the time. Its all there for the whole world to see, no accounting, no accountability, no problem... all markets are in the Bernanke bag.

Wed, 12/26/2012 - 16:35 | 3097063 negative rates
negative rates's picture

Lest we forget, a lot of that money will have to find a home this year or risk a loss if the worst should happen.

Wed, 12/26/2012 - 16:37 | 3097071 Catullus
Catullus's picture

Why use depositor cash to purchase treasuries when you can use it as collateral to open interest rate swaps that lose money in the event interest rates rise? You can be effectively levered long the treasury market, knowing that the Fed will provide unlimited cash to prop it up. Especially when all you do is create an accounting entry as Treasury issues new debt.

Hey Alan Greenspan, we're getting closer to "proving it" that the Greenspan Put existed and still exists.

Wed, 12/26/2012 - 16:38 | 3097075 Bay of Pigs
Bay of Pigs's picture

What a fucking joke.

So gold and silver are in a "bubble"? LOL, yeah okay. And who is wearing the tin foil hat on this?

Wed, 12/26/2012 - 16:43 | 3097092 SmoothCoolSmoke
SmoothCoolSmoke's picture

I'd love to see Larry "the Fed is not pumping the markets" Kudlow explain that chart. 

Wed, 12/26/2012 - 16:45 | 3097097 davidsmith
davidsmith's picture

This will go on for $40 trillion more.  Then there is nothing more to loot.  But even this chart shows you: that will take some time.

Wed, 12/26/2012 - 16:50 | 3097113 Pseudo Anonym
Pseudo Anonym's picture


...excess of cash to the bank's balance sheet: perfectly fungible cash which can then be used for any generic purpose:

is the way jpm will cover their silver/gold naked shorts

Wed, 12/26/2012 - 16:55 | 3097135 JR
JR's picture

Thanks, Tyler, for this incredible revelation. The calamity here stems from the ability of a private entity to create money for itself out of thin air; fiat currency corruption is corroding not only our markets but our political system; it is the theft of the wealth of America.

With a printing press, even tax revenue is not necessary to bloat the Leviathan banking cartel.

To the nation’s detriment, the private International Bankers that own the Federal Reserve Bank don’t really need our earned money.  They are creating their own—out of thin air – hence the negative low interest rates on savings.

It is a sobering thought that the government and TBTFs can operate, even at current level, without levying any taxes whatever, except for the fact that they want a redistribution of income and to keep alive Americans’ faith in the currency.  As G. Edward Griffin said in 1994, “All it (the government) has to do is create the required money through the Federal Reserve System by monetizing its own bonds.  In fact, most of the money it now spends is obtained that way.”

Griffin, in The Creature From Jekyll Island, wrote: “If the idea of eliminating the IRS sounds like good news, remember that the inflation that results from monetizing the debt is just as much a tax as any other, but, because it is hidden and so few Americans understand how it works, it is more politically popular than a tax that is out in the open.

“Inflation can be likened to a game of Monopoly in which the game’s banker has no limit to the amount of money he can distribute.  With each throw of the dice he reaches under the table and brings up another stack of those paper tokens which all the players must use as money.  If the banker is also one of the players –and in our real world that is exactly the case –obviously he is going to end up owning all the property.  But, in the meantime, the increasing flood of money swirls out from the banker and engulfs the players.  As the quantity of money becomes greater, the relative worth of each token becomes less, and the prices bid for the properties goes up.  The game is called ‘monopoly’ for a reason.  In the end, one person holds all the property and everyone else is bankrupt…”

Wed, 12/26/2012 - 17:10 | 3097180 fuu
fuu's picture

"The Bank has 32 houses and 12 hotels, but never runs out of money. If necessary, the Banker can create more money to give to players."


Wed, 12/26/2012 - 20:11 | 3097500 francis_sawyer
francis_sawyer's picture

 "the ability of a private entity to create money for itself out of thin air"


'PRIVATE ENTITY'... what a conveniently obfuscated term to 'COIN' to dilute for the purposes of need of delicate words in the area of mass consumption...  

Wed, 12/26/2012 - 20:10 | 3097736 blunderdog
blunderdog's picture

This is the justification for all that crazy big-gummit "regulation" they used to do of banking institutions.  But over time folks forgot, and the bankers didn't like that stuff anyway, so they eventually convinced everyone they deserved to be set free with promises they'd make everyone rich.

Finance has always been a sales game.

Wed, 12/26/2012 - 16:59 | 3097153 TonyCoitus
TonyCoitus's picture

Wish there was a "for dummies" link that would explain in plain english what the heck this says.  I get the gist of it, but could never explain it to someone dumberer than myself.

Guess I missed too many days of school.

Wed, 12/26/2012 - 17:17 | 3097208 EARLPEARL
EARLPEARL's picture

lot of scared people scared to invest so they put their money on deposit in banks...the banks take that money and gamble with it...if bank loses government bails them out...

Wed, 12/26/2012 - 17:42 | 3097326 dick cheneys ghost
dick cheneys ghost's picture

Here is what is says in a nutshell.................Banksters are crooks and Buy more Gold & Silver

Wed, 12/26/2012 - 20:11 | 3097738 blunderdog
blunderdog's picture

Uh, no, they'd never teach anything about this stuff in SCHOOL.  C'mon.  Go back to coloring dinosaurs.

Thu, 12/27/2012 - 07:44 | 3098461 Catullus
Catullus's picture

Google "The Mystery of Banking" by Murray Rothbard. You get a pretty simple T-account look at how this works.

Or you could also go to Khan and watch some videoes.

Wed, 12/26/2012 - 17:09 | 3097170 Everybodys All ...
Everybodys All American's picture

All of this is well and good. The market runs off of one program and it is located on Bernanke's desktop. Nothing but prop trading from the Fed. Period. These guys are destroying the free market system. Whether intentional or not that will be the outcome.

Wed, 12/26/2012 - 17:08 | 3097174 delivered
delivered's picture

So let's get this straigth. Fed prints cash and funnels it to the banks (either via buying their garbage assets or lending to the banks at 0%). Banks use it first to purchase US treasuries instead of deploying it into the real economy (or Main Street). Banks then decide the net interest margin spread from US treasuries is too slim so they pledge the US debt they own as assets and leverage up into higher yield investments (via repos or whatever vehicle they can find). All the while, they can keep the BS off the balance sheet and claim they own US treasuries - which of course is the ultimate insult given that US Debt is backed by no real collateral, no secondary repayment sources (other than the fed), and negative cash flow streams for as far as the eye can see.

Just shows you how broken the capital markets are and the utter lack of proper deployment of capital in the market. Of course, it's always been much easier to gamble than to invest (and actually spend some time with a real business and understand their capital needs) so why would we except anything else from the banksters operating accross the country.

Let's face it, somewhere and somehow, one of these hedges is going to end up backing one of the final nine for the World Poker Tournament in Vegas next November. Somebody will figure out how to create a new product to play along as they'll stop at nothing to feed their gambling addiction.

Wed, 12/26/2012 - 17:21 | 3097221 TrustWho
TrustWho's picture

Just a more convoluted process that the Zimbabwean central bank has perfected!

Wed, 12/26/2012 - 20:12 | 3097742 blunderdog
blunderdog's picture

The use of the "free market" prevents corruption of the process.  Heh heh...

Wed, 12/26/2012 - 17:13 | 3097195 tickhound
tickhound's picture

The system seems prepared to inject new money (loans) with no real requirement to pay it back.  BofA Customer INSISTENCE calls like... "take this new money, and we'd PREFER you pay it back, but it's not necessary."

Ben gets Economic Prize for a $20 trillion balance sheet.  Public remains skeptical, but hopeful... confident the system is not broken, just the politics.  When asked who Ben is... 4% knew, 10% didn't know, 86% didn't know, didn't care.


Wed, 12/26/2012 - 21:30 | 3097793 Element
Element's picture

Warning: due to rising costs and unexpected demand complementary barf-bags will no longer be supplied at this site.

Wed, 12/26/2012 - 17:29 | 3097251 Muppet Pimp
Muppet Pimp's picture

TD: A true king among men.  More excellent sleuthing.  Thank you for your service sirs.

Wed, 12/26/2012 - 17:36 | 3097292 Downtoolong
Downtoolong's picture

the Goldman Sachs "Bank Holding Company" model

I think it’s time for every person over the age of 18 to phone Goldman and ask for directions to their nearest branch so they can make a deposit or buy a CD.

Barring that, since Goldman has so much power and influence over the world of sovereign finance these days, maybe it’s time everyone set down and asked themselves these two basic questions:

What exactly does Goldman do for a living, fun and profit?

Considering so many of my tax dollars flow into their fees, commissions, and trading margins, what exactly have they done for me lately?

Wed, 12/26/2012 - 23:13 | 3098070 Dr. Sandi
Dr. Sandi's picture

Nobody really knew what Al Capone did, specifically. But he did make a ton of money.

Tax free too, if you don't consider prison time as paying the IRS.

Goldman Sachs learned from the master and figured out to do it bigger and better without directly hiring gunmen.

Wed, 12/26/2012 - 17:40 | 3097317 Miss Expectations
Miss Expectations's picture

Fuckin' Whale!

Wed, 12/26/2012 - 17:41 | 3097324 Downtoolong
Downtoolong's picture

the Goldman Sachs "Bank Holding Company" model

I think it’s time for every person over the age of 18 to phone Goldman and ask for directions to their nearest branch so they can make a deposit or buy a CD.

Barring that, since Goldman has so much power and influence over the world of sovereign finance these days, maybe it’s time everyone set down and asked themselves these two basic questions:

What exactly does Goldman do for a living, fun and profit?

Considering so many of my tax dollars flow into their fees, commissions, and trading margins, what exactly have they done for me lately?

Wed, 12/26/2012 - 17:45 | 3097337 yogibear
yogibear's picture

The American Dollar is backed by the "full faith and credit of "Harvey" the imaginary rabbit.

Wed, 12/26/2012 - 23:17 | 3098076 Dr. Sandi
Dr. Sandi's picture

Just because OTHER people didn't see him doesn't mean Harvey wasn't real.

Just because some of us don't believe in 'full faith and credit of the Untied Snakes Govenment" or Santy Claus doesn't mean that the true believers aren't affected by the idea itself.

And if you get enough people to believe in any fraud, it becomes real enough to generate plenty of money.

Wed, 12/26/2012 - 17:50 | 3097354 rsnoble
rsnoble's picture

And why is this a surprise?  Anyone should've known it would be a huge amount of $ that was used to prop up planet Earth's own blackhole---WallStreet.

Funny thing is this blackhole seems to be infinetely deep they're shoveling the shit in by the truckload and the market is going nowhere.  

Same thing over and over, drop a few hundred points and then have weeks of rallies getting right back to where we are.

Of course calling tops has been a fools game but you know there is some history of bull runs ending on great news. Maybe the fiscal cliff BS will finally be the blowoff top of our generation.

It's pretty apparent things are fkd up pretty bad now and I have no doubts whatsoever that gun control is more of a timing of these events.  Gona be a lot of pissed off people end up losing that pension you worked so hard for etc.

My general opinion is fuck the US gov't, collapse please.  They'll suck us to death trying to stay alive it doesn't matter anymore.  Granted the redneck response to an attack from China could suck but oh well. LOL.

Wed, 12/26/2012 - 18:12 | 3097360 ekm
ekm's picture

It's been one year already I've been saying this, since MFG collapse.

I just do not have the talent of the writer to express it in this wonderful way.


It's common sense. It's a closed loop system. Money can't dissapear.

There is physical limit to it. It can continue until the money is created by buying the whole stock market. That's what happened in 2007-2008.

Wed, 12/26/2012 - 18:05 | 3097405 yogibear
yogibear's picture

We see how Japan blows up first.

Wed, 12/26/2012 - 18:06 | 3097412 buzzsaw99
buzzsaw99's picture

makes one wonder how they pay interest on those deposits. [/sarc.]

Wed, 12/26/2012 - 18:17 | 3097442 Darth Mul
Darth Mul's picture

Looks like I picked the wrong week to stop taking amphetamines.


Golly, my head hurts.


My 2 cents is this - IT'S ON FUCKING PURPOSE.  Bernanke et al know exactly what they're doing, and its devaluing the currency and buying up real assets - not paper, not fucking bonds payable in paper, but real shit.


And when the next war comes, a war cooked up by banks and war profiteers long ago [A strategy for Israel in the 1980s, A Clean Break, and the rest of the neocon, "Zionist" Straussian pseudo-philosophical megalomania going back to the 1950s].......... they'll run through and redistribute 2 trillion inside 18 months.


I fear that the point at which people begin to understand that there is no political solution to the Banker Occupation Government we have will be well after the guns are gone and all of you are doing your recommended reading in the Hope Camps.

Wed, 12/26/2012 - 20:18 | 3097751 blunderdog
blunderdog's picture

Well, I'm an apocalyptic myself, but if we take a moment to assess the "meta" version of a commonly shared perspective, we get this:


  Step 1: Shit is fucked up and bullshit.
  Step 2: -----
  Step 3: We're all disarmed and paupers and in FEMA camps and OH NOEZ!

It's definitely worth maintaining a dismal and cynical point of view, but I believe you'll prosper best (in whatever sense you want) by remembering that it is still only ONE point of view.

Wed, 12/26/2012 - 18:19 | 3097449 Wakanda
Wakanda's picture

"..we have to thank Jamie Dimon and his firm for being the biggest beacon of light in 2012..."

Big wet kiss goin' out to JD and the boyz and girlz at JPM for letting us in on this angle of the big scam.  Luv y'all rascals!

Mucho thanks TDs, this is why I read ZH.

Wed, 12/26/2012 - 18:23 | 3097462 q99x2
q99x2's picture

Banksters busted. I'm sure Holder will get paid his share once he reads this article.

Anyhow BTFD.

Wed, 12/26/2012 - 18:23 | 3097464 rsnoble
rsnoble's picture

Just a quick note, this has been going on for sometime now and im shocked by some of the comments like this is all breaking news.


Even worse try telling this to an 'average' person.  And not while you're at Walmart lmao.

Wed, 12/26/2012 - 18:30 | 3097487 cynicalskeptic
cynicalskeptic's picture

Banks WILL NOT loan money.  Know a number of small businesses that are doing well (one a gun shop doing astounding busioness looking to redo/expand its shooting range) but they cannot get ANY loans for expansion - in fact they've seen existing credit lines cut or cancelled.

Wed, 12/26/2012 - 18:35 | 3097502 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Scary part is that I don't think ANYONE in the Gov't or the Treasury or the Fed is smart enough to realize at this level exactly what's going on. Fed is oblivious, just there for the member banks, full of a bunch of Ph.Ds, like priests explaining that the Earth is the center of the universe. Treasury has Timmy at the helm, also there to protect banks and campaign contributors. And Congress? Is there a single Congressman who is anywhere close to understanding all this? LOL.

So that leaves Tyler and ZH readers to...sound the alarm?

(it's like some kind of nightmare porno film and you're locked in the chair with your eyelids propped open like Malcolm McDowall in Clockwork Orange...and all the bad screwing takes an awful long time)

Wed, 12/26/2012 - 18:46 | 3097540 francis_sawyer
francis_sawyer's picture

When all else fails, there's nothing much left except for some, 'Singin' in the Rain'...

Wed, 12/26/2012 - 21:12 | 3097835 WmMcK
WmMcK's picture

And Beethoven, droog.

Wed, 12/26/2012 - 18:48 | 3097541 francis_sawyer
francis_sawyer's picture

Don't say that I didn't try to warn anybody about it... I won't be party to it, but it's gonna happen...

Wed, 12/26/2012 - 20:12 | 3097739 klockwerks
klockwerks's picture

There is a very thin line between telling the lie and then it goes to believing the lie. Which stage are they ALL at?

Wed, 12/26/2012 - 18:39 | 3097518 Quinvarius
Quinvarius's picture

Hedges are supposed to lose money.  So Jamie Dimon calling the whale trade a hedge is quite humorless.

Wed, 12/26/2012 - 18:46 | 3097538 Desp
Desp's picture

Can someone explain to me the chart that has everyone freaked out?

Wed, 12/26/2012 - 18:50 | 3097550 WhiteNight123129
WhiteNight123129's picture

This is a great post, congrats Tyler.


Wed, 12/26/2012 - 19:02 | 3097553 Widowmaker
Widowmaker's picture

Here is how the average citizen can "hedge" like JP Morgan. 

Don't shave for a week.  Dress down.

Go to a bank's drive up ATM during peak business hours and withdraw the maximum amount for one transaction (typically $500).

Immediately pull around front and take fraud fiat above and exchange for quarters.  Bring a bank bag.

That's it, you have just traded fraud for physical and get to walk right by all other patrons with a bank bag full of coin.

I recently did just this and had to endure the purplexed teller asserting that because I was not a member of said bank that she could not exchange the cash for the coin, but since it was Christmas, yadda yadda.  Pure horse shit.

Nearly all vending machines (pinch rations) laundry mats, and other automated convenience machines use quarters (as opposed to Kyle Bass' Nickel).

I encourage every American to do just this, particularly at the TBTF criminal enterprises masquerading as "banks." 

Fuck every Congress-sucking motherfucking one of them -- starting with a run on quarters.

Wed, 12/26/2012 - 19:03 | 3097577 DosZap
DosZap's picture


That's it, you have just traded fraud for physical and get to walk right by all other patrons with a bank bag full of coin.


What did I miss?, you simply traded fiat paper for fiat coins?.

What did that achieve?.

Wed, 12/26/2012 - 19:28 | 3097602 Widowmaker
Widowmaker's picture

Fiat only concerns the amount stamped/printed on them.  Ever wonder why a gold eagle has the $50 short of 10 generations stamped on it?

The trade is paper for tangible, fungible metal (.75 copper .25 nickel), in denominations that have utility in a crisis (which gold and silver lack except for large purchases).

Also, this usually requires a trip to the vault, paperwork and other staff to complete.

Wed, 12/26/2012 - 20:21 | 3097757 blunderdog
blunderdog's picture

Copper's cheaper than $10/roll, but at least you can use the quarters to bludgeon someone to death before you buy another ice-cold Coca Cola.

Thu, 12/27/2012 - 05:03 | 3098343 Uber Vandal
Uber Vandal's picture

@ DosZap:

Were people using wheelbarrows and carts full of paper, or coins, in photos of Wiemar Germany or more recently Zimbabwe?

Does a series 1957 one dollar Silver certificate in average condition have more value than a beat up 1921 D Morgan dollar?


Wed, 12/26/2012 - 18:58 | 3097560 Never One Roach
Never One Roach's picture

Thank you for the splanation. I had to read it several times to understand (and calm myself) each time.

Q: So what breaks this illegitimate operation>? I mean, when does it fail? Will it take another Lehman's? Seems there are too many powerful interests benefiting from this racket.

What's for sure that at some time we will see more inflation then we see now...but timing it is difficult.

Wed, 12/26/2012 - 19:23 | 3097628 Widowmaker
Widowmaker's picture

It has ALREADY failed.  The only thing floating is hopium vapor.

The only thing preventing a crash is awareness.

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