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Dear Steve Liesman: Here Is How The US Financial System Really Works
Earlier today, Bill Frezza of the Competitive Enterprise Institute and CNBC's Steve Liesman got into a heated exchange over a recent Frezza article, based on some of the key points we made in a prior post "A Record $2 Trillion In Deposits Over Loans - The Fed's Indirect Market Propping Pathway Exposed" in which, as the title implies, we showed how it was that the Fed was indirectly intervening in the stock market by way of banks using excess deposits to chase risky returns and generally push the market higher. We urge readers to spend the few minutes of this clip to familiarize themselves with Frezza's point which is essentially what Zero Hedge suggested, and Liesman's objection that "this is something the banks don't do and can't do."
Liesman's naive view, as is to be expected for anyone who does not understand money creation under a fractional reserve system, was simple: the Fed does not create reserves to boost bank profits, and thus shareholder returns, and certainly is not using the fungible cash, which at the end of the day is what reserves amount to once dispersed among the US banks, to gun risk assets higher.
Alas, Steve is very much wrong. And as a tangent, it is truly deplorable how many "experts" have zero understanding of just what the interplay of the Fed and commercial banks is in money creation.
The biggest stumbling block that Steve seems to have is the dramatic shift in the historic interplay in money creation pre and post-Lehman. As we showed previously, where in the Old Normal, whereas every dollar of deposits (or low powered money, or however one wants to define them), was derived from an almost 1-to-1 correlation between new loan underwriting by commercial banks (seen here), something snapped the day Lehman filed. This can be seen in the chart below.
What happened after September 2008 is very obvious, and very dramatic: there was a major disonnect between deposits sitting in bank vaults, which continued to rise dramatically, and loans underwritten by commercial banks, which tumbled until early 2011, and have since attempt to stage a very weak and modest comeback. What is undeniable, however, and what once can check easily with the weekly H.8 statement - the Weekly update of Assets and Liabilities of US Commercial Banks, is that in the latest week, there was a $2.1 trillion difference between deposits ($9.317 trillion), and bank loans ($7.237 trillion) in the US banking system.
That much is undisputed.
Incidentally, there are less loans outstanding currently than there were the week after Lehman filed ($7.275 trillion). What is irrelevant here is why loan creation has lagged as much as it has: whether it is due to more stringent lending standards (supply), or due to far lower interest in debt-funded enterprise for loans (demand). That is a policy discussion (and one, by the way, that proves undisputedly that the US economy is much weaker now than it is purported to be as end consumers and business have far less desire to risk becoming indebted even in a zero interest rate environment) and not relevant to the subject discussed in this article.
Where things get tricky for most, certainly for Mr. Liesman, is grasping the genesis of the surge in deposits over loans.
For that answer, we go to the Fed, specifically the Chicago Fed, and its 1961 booklet, Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion, which incidentally is still the best reference for everyone who is desperately confused about money creation under fractional reserve banking (although, for obvious temporal reasons, it excludes all discussion of that critical subset of credit money created under Shadow Banking, which peaked at nearly $23 trillion in 2008 - luckily, that too is not relevant in this discussion).
And while we sincerely urge anyone with even a passing interest in fractional reserve banking, especially those who break down monetary theory to three letter acronyms that spell out "socialism" to read the entire booklet, there is one line that is absolutely critical. To wit:
Changes in the quantity of money may originate with actions of the Federal Reserve System (the central bank), depository institutions (principally commercial banks), or the public. The major control, however, rests with the central bank. The actual process of money creation takes place primarily in banks.
The punchline is bolded because that simple sentence is so very misunderstood by most. It is also why historically, deposits matched loans created by commercial banks on a dollar for dollar basis. Yet as can be seen in the chart above, this historic truth broke down to the right of the blue arrow, at which point money creation was no longer the purvey of the (commercial) banks.
So who created money? Why the Fed of course, courtesy of the $2+ trillion in excess reserves injected into the financial system since the week of September 15, 2008.
This should come as no surprise: after all the Fed has "purchased" some $2.2 trillion in assets over the same time period, which have been necessarily matched by an expansion in the two main Fed liabilities: currency in circulation and reserves, as the whole point of the Fed's ongoing purchases of US Treasurys, in addition to monetizing the US deficit and allowing the US government to operate without fear of a surge in bond rates (and a bond auction failure via the Primary Dealer-facilitated close loop that is the name for each and every Treasury auction as there will always be a buyer of last resort), is to provide the necessary and sufficient "collateral" to ever expanding reserves.
And while the amount of currency in circulation has risen by a very modest amount in the past 4 years, it is the amount of excess reserves that has soared by a massive amount - virtually the entire asset expansion on the left side of the Fed's balance sheet has gone to creating reserves parked with banks.
And as expected, mapping out a chart between the expansion in commercial bank deposits since the day of Lehman's failure and the amount of assets purchases by the Fed (which is explicitly almost a 100% identity to reserves created by the Fed) explains just where the incremental $2 trillion in money creation - i.e., bank deposits by reverse identity, has come from.
Naturally, if one were to account for the money that has gone into currency (i.e. M1) instead of reserve creation, the two lines would virtually overlap. Furthermore, for those purists confused by the peculiar slump in the black (deposits over loans) line around March 2010, the explanation is simple, and once again comes courtesy of the Fed (via the G.19):
Upward revisions to revolving consumer credit are due mainly to nonfinancial business. Prior to March 2010, securitized pools contribute positively to the revisions, while corresponding declines in finance company estimates somewhat damp their effect. After March 2010, finance companies contribute positively, while offsetting declines of securitized pools estimates somewhat damp their effect. The average revision from January 2006 through March 2012 is slightly less than 3 1/4 percent of its former value, with most revisions about $27 billion above the old estimates. In March 2010, the gap widens somewhat because of adjustments for the accounting rule changes, Statements of Financial Accounting Standards (FAS) Nos. 166 and 167, which cause finance company estimates to jump by more than the offsetting decline of securitized pools.
In other words, if it weren't for the securitized pool adjustment in March 2010, the black line would have been a straight horizontal one from January until September 2010, precisely as the total Fed asset expansion would suggest it should be.
* * *
The point of the above explanation is to demonstrate, simply and visually, that whereas deposit creation in the days before Lehman came primarily courtesy of banks, the days since Lehman have seen the Fed in the driving seat when it comes to deposit (money) creation.
At this point a tangential discussion might be required on the difference between high powered and lower powered money, or M1 and M2, but that would require a much broader dive into the mechanics of fractional reserve banking (one which will be satisfied by the Chicago Fed's booklet), but suffice to say, deposits are the fungible equivalent of money when being transacted from one low powered investment option (deposits in banks) to another (purchases of risk assets).
And, once again, like one week ago, we would have ended this conversation here because suggesting that banks abuse excess deposits for risky pursuits would be considered absolutely preposterous... if it wasn't for the stunning confirmation courtesy of that epic blunder by none other than Jamie Dimon's JP Morgan, and his Chief Investment Office (conveniently once again located in that mecca of underregulation London) implosion, just what it is that banks do with the excess between deposits over loans.
Allow us to paraphrase what we wrote last week:
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 (and potentially much greater - sadly there still has been no full disclosure by either the bank nor regulators just what JPM was invested excess deposits in) 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.
* * *
Now, the conventional wisdom has always been that banks would lend out deposits: obviously something they have not done since the Lehman failure as we have been shown previously and in this post, and hence the "deposit to loan gap", and failing that, the deposits would be invested in only the safest securities - Treasurys and the like (sorry, not Italian or Spanish bonds).
Now it is possible that JPM did purchase "safe" securities, quite possibly hundreds of billions worth of bonds, or MBS, or agencies.
Did JPM transform its treasury purchases via repo into free cash, or did
it simply rehypothecate them in the bowels of the London financial netherworld where anything goes (something we know for a fact happened extensively with that other Primary Dealer
failure, MF Global) repeatedly off the books for even more free cash, is also unknown, and unclear. But that too, is irrelevant for the topic at hand. What we do know for a fact is that the firm, ultimately ended up with free, uncumbered fungible capital of some $423 billion to trade and risk at will as it saw fit.
That much is now also undisputed, and has been confirmed by page 24 of JPM's June 13 Financial Results appendix.
And none of this would have been public knowledge had it not been for the epic trade blunder at JPM's CIO. Or rather, any allegations that JPM was abusing excess deposits to trade on its own prop account would be simply dismissed as further ramblings of deranged fringe bloggers.
* * *
So to summarize what we know:
- We know that historically banks have created money (both low and high powered) and specifically, deposits, via loan creation. This process broke down in September 2008 when loan creation by commercial banks effectively ceased.
- We know that in the aftermath of Lehman, the Fed's reserves were the source of the money used by banks to boost their deposits, either by traditional or shadow bank transformation pathways, even as loans remained stagnant, and are now, nearly 4 years after Lehman, at a lower level than they were in late September 2008.
- We know that, as JPM has explicitly admitted, at least one bank has used the excess deposits over loans to engage in risky activity, and to trade on its own prop account, on at least one occasion, with a loss potential as large as $5 billion, and potentially far greater.
What We don't know how many other banks are using excess deposits to engage in risky activity, which may range from selling credit CDS (single name or index), to buying equity ETFs and REITs (like the Bank of Japan openly does), to buying outright stocks, to even buying real estate, or any other activity which obviously continues to be unsupervised by the Fed, especially in offshore jurisdictions (London).
So, dear Steve Liesman, now that you too know just who is funding the surge in deposits, and now that you too know, that bank(s) are directly taking advantage of this excess deposit pool to trade for their own account, perhaps you can ask the Chairman during his next press conference, what happens to internal bank hedge funds when the Fed starts unwinding its QE and by implications, results in a drop of at least $2 trillion in excess deposits over loans (a number which will likely rise to $3 trillion by the end of 2013, then $4 trillion by the end of 2014 and so on). But certainly ask him what would happen if instead of using excess deposits to invest in the S&P 500 (or Russell 2000 as the case may be), the banks were to lend said money out, and how far would the stock market plunge as a result.
Because, oddly enough, there are some people who are misguided and believe that the Fed still has some capacity to tighten, or even stop expanding its balance sheet, without destroying that house of cards - the S&P500/Russell 2000/DJIA - it has so carefully and lovingly created over the past 4 years.
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+100 :) Fuck its true. I thought that too, then thought "Aaaaaaaaaaaah Naaaaaaaaaaah......just hearing things." Fuck.....Freeza is a ZH'er!!
To think it was choice between Jason Alexander and Steve Liesman for George Costanza part in Seinfeld.
The Costanza Trade:
http://www.youtube.com/watch?v=cKUvKE3bQlY
.
There's no way that Liesman could ever have done the voice of Duckman.
he knows about shrinkage.
Steve LIE'S-MAN is willfully ignorant and made a deal with any Fed rep that when they are on CNBS that he is their go-to guy and promises to play ball and not ask the hard questions. Fed shill.
Free accomodations at Davos again.? Blowing Fed dick at the after parties. If I ever saw him in public I would punch him in his fuckin face. liar and a piece of shit.
heh...do you disrespect your fist enough to have it covered in the brown stuff?
I don't think Steve Liesman is a liar, just an economic idiot. But there are a lot of those out there (Bernanke, Krugman, Geithner, Larry Summers, Jared Bernstein, David Goodfriend, Robert Reich, et al). Liesman is a mainstream idiot, i.e. a Keynesian. Those folks a) dominate mainstream economic "thinking" and b) have to tapdance violently to avoid recognizing the utter absurdity of their "theory".
But it would be nice if Liesman would shut up for a minute and listen to somebody who knows something.
Bernanke, Krugman, Geithner, Summers,Bernstein,Goodfriend,Reich, Liesman
A banking Menorah
Willfully ignorant is also a description that applies.
I like Bill Bonner's explanation, "People will believe whatever is necessary in order for them to believe in who they think they are."
Notice, that's belief squared! (which is a massively reinforcing mechanism)
Once you've adopted an incoherent belief system, belief in its supporting lies is a given.
Besides, he's well paid for being so ignorant, and likely never mixes with anyone who would expose him to our uncomfortable reality.
An admirable piece of work, thank you.
One question, if Japan did essentially the same thing -- QE to the moon, why did their stock market fall for 20 years and ours didn't?
Perhaps one way the Fed can unwind is if a lot of individuals "inwind" (buy stocks again). Regardless, it will need to be done very carefully and very gradually, if they ever get the chance to start.
Japan was/is being "managed" by the bankers - I guess they were getting a little too cocky.
Next up....China.
It took 5-6 years to fall. It tripled from 85-90, then slowly just fell.
why did their stock market fall for 20 years and ours didn't?
"Our" stock market *is* falling in real terms.
As to why such a visible difference, I suspect it's because the Yen isn't the global reserve currency. We get to export a good chunk of our inflation all over the world--the Japanese didn't have quite the same option. We have a bit more slack in the line to match our inflation rate with the decline in real valuations.
Liesman has the liar's lisp... when he's trying to dance around an issue he knows he's wrong about or that he knows he doesn't know, he develops a lisp... huge tell, watch the video.
Was Steve Liesman actually getting a bit angry? Did I see a small purple blood vessel momentarily swell on his chrome dome? These are symptoms of denial, how one behaves when their virtual reality is suddenly threatened by reality. You have two choices Steve, you can keep sniffing blue pills and keep sticking them up your a-arse or you can wake up smell the god damned shitty coffee...
Frankly after this performance I couldn't give a funk what you do as long I never have to see you defend bullshit with ignorance again.
Liesman drinks Robusta with a handsome shit-eating grin.
He should have a hot cup of shut the fuck up to start off his mornings instead.
Make that two cups of shut the fuck up...he could drink it with Cramer.
How is Cramer so damn active in the morning?
Not sure anybody could survive using coke that many years. Must be "legal" scripts these days.
Liesman is a paid shill, a Jack Grubman for the Fed.
Excellent piece ZH! This is the shit that should be in our faces every day!! Its easy to forget about all this crap, and the next thing you know, 2 years have gone by and you see it again, and you freak out thinking "I can't keep track of this shit anymore! Its too much, too often.!" No wonder why trading has become subconsciously depressing, since even if you are making money nominally, deep down you know you are still getting screwed! fuckers!!
CNBC: We'd like you to meet our guest Bill Frezza who will not be allowed to speak as we have Steve Liesman to do that for him.
But Frezza's demeanor and the look on his face as Liesman talked over him said it all.
.
Frezza looked like he was suppressing laughter the whole time Liesman was talking.
Why do CNBC journalists insist on giving opinions?
It's all they know.
I disagree- it's what they get paid for. Different. They know shit.
Journalists? No, no you mean pundits.
Liesman's naive view? He must be good , because he is only a tool propagandist. He knows.. he's just pulling your balls.
Banks should not be compelled to make loans. The PRIMARY problem is with a government that provides banks no cost money - whether they lend it or not.
It's smoke and mirrors, people.
The money is fake, it has been for awhile, but now it's fake AND badly managed.
Super uber hyper brilliant
It just confirmed my common sense logic. If nobody is buying stocks, then primary dealers are buying stocks using reserves.
People are not just not buying stocks, they are leaving the market in droves. Flows every year for the last 5 are huge out of stocks and into bonds...and yet, here the market rests, at a 5 year high. I understand that price is discovered at the margin, but with the tide running out as hard as its been, this market has performed a miracle or it is completely rigged.
Steve Liesman is as big a dick as ilene. Clueless fucking economic cunts. Morons!
Davos,
I gave you an up arrow for using clueless fucking economic cunts. The description could not be more succinct.
Thanks RustySilver, you should have been lurking on this thread,where I really told cuntlene what I thought of her work http://www.zerohedge.com/contributed/2013-01-06/my-name-michael-and-im-b...
The heat was too much for kitchen bitch who yanked her thread. ZH is a better place for it.
Where are all those FED gnerated deposits going in risky investments? Think Eurozone.
CNBC- First in Business Bullshit Worldwidetm
No wonder CNBS is loosing viewers,
It's an insult to get into a debate with Liesman. He's just a reporter.
A full of BS one at that.
How can take this George Costanza of the financial world seriously?
Steve actually believes he sits above the fray, enlightening his subjects (us) -- in truth, he's an unholy cross between Ed Asner and Yul Brynner -- the King of Siam running a failed television network (minus the perky brunette who "turned the world on with her smile.").
more like...
the clueless characters from the planet of Ferenginar.
So Bill is arguing that the excess reserves created by the Fed as a result of QE is being deployed by the banks to prop up equities and other markets?
Fed purchases $10B from JPM and then credits their reserve account. In that transaction JPM essentially exhanges MBS or Treas or whatever is being monatized for a credit to their account held at the FED. Exchanging an asset for an asset.
If the level of their excess reserve account doesn't decline, how are those funds being deployed to prop up markets? As I understand it, those funds are held at the FRB and earn a small amount of interest.
If those excess reserve account balances were to fall, I would be on board with you all.
Help me understand...
I really don't know for a fact, but I have a vivid imagination.
Well, pledge the funds held at the FRB as collateral for an off-the-books loan of some sort, use the funds obtained thereby to buy a bunch of stocks paying a 4% dividend.
Or maybe the funds on deposit at the FRB can be used as core capital, and the TBTF bank then releases other assets that had been used as core capital to buy risk securities.
The one thing I cannot imagine is that the TBTF banks would let 2.1 trillion dollars sit there at next to zero yield when unofficial inflation is running at about 8%, in a legal environment where nothing you can do is too heinous to cause meaningful civil penalties or criminal prosecutions for the human beings in charge of the chicanery.
The MBS are of questionable value. The Fed is currently buying $45 billion dollars of these each month, I believe. Who knows their real value? But the $45 billion paid out to the banks by the Fed has a definite value of $45 billion (obviously). It's cash for trash. That shores up the banks balance sheets.
I'd like to know the notional value of all MBS eligible for purchase and at what point the bulk of them will be held by the Fed rather than by individual banks. At that point, ignoring any other questionable assets, the banks will be whole again and perhaps that ocean of money will finally start to flow out as loans. That ought to nudge up inflation.
It's cash for trash.
aka securities laundering
aka monetizing
aka bullshit ...all nice and legal now.
Where'd the money come from for the Jamie Dimon chump bet against the Euro Soverign Bonds, (and that's what it was). It's frequently the case that a few million here or there at the right time in the right section of the market can make the chart look different; change the "tone" of the trading; etc. They don't have to spend the whole value of the rise in the S&P; that's not the idea here at all. they probably get most of this money back again; if you're big enough and you're wired in enough and you get phone calls from the right people, and you know nobody is going to investigate you or nose around; you can put a floor under the market; keep people from getting discouraged; cut off down trends; keep the algos happy; keep the hedge funds from piling on short; etc, etc. You can, in short, and they do, create a Bernanke Put.
Liesman may be correct in that reserves are sitting on the balance sheet of banks doing nothing or sitting in treasuries, or not, (big bank data is ugly).
http://investor.fisherinvestments.com/research-analysis/research-alert-Q... (chart 2)
Irrelevant though, as the formula for computing fractional reserve requirement for big banks is deposits/x = 10%. Note 10% is constant.. Even assuming that they are sitting on balance sheets and not being "hypothecated", the distortion in loans to deposits is at the very least a powder keg waiting to go off.
This chart, especially when broken apart into it's component parts, is a big-f'n-deal waiting to happen.
"And as a tangent, it is truly deplorable how many "experts" have zero understanding of just what the interplay of the Fed and banks is in money creation."
To me, it appears as the most mainstream requirement to NOT understand how "money" gets made out of nothing, and to especially not understand how that power was privatized.
The eventual breakdown of that system is an automatic consequence of the fundamental fraudulence. The REAL history is that militarism segued into the monetary system. What made War King, then made Fraud King. Therefore, we see the emergence of organizations which have privatized public powers, to be able to rob, or defraud, through legalized lies, which are backed by legalized violence. There is now a direct correlation in those factors, which is automatically accelerating, from the smallest Knights of Fraud, to the Lords of Fraud, to the Kings of Fraud, to the King of Kings of Fraud, which is the Bank of International Settlements.
The systems whereby private banks were able to legalize the debt engines of fractional reserve banking AUTOMATICALLY become runaway social insanities, headed towards psychotic breakdowns. 2007 was the last "normal" year, when the mainstream morons in the mass media could still pretend that system was acceptable and everything would continue to be alright. However, FROM THE START, the system was privatized power to rob and kill, which necessarily ran out of control, and which reached tipping points, where it threatens to collapse into chaos ... However, it continues to be even more hyper-extended by Fraud Kings taking over from the Knights and Lords of Fraud, while they then try to transfer more and more to the bigger and bigger organizations, based on more astronomically sized frauds, which even more people are forced to accept and go along with ... UNTIL ... ???
As the beginning of this clip pointed out, YET AGAIN, the biggest banks were able to pay a relatively trivial amount of money, to get away with previous criminals frauds, because the "rule of law" has become meaningless, after the Fraud Kings ARE the sovereign powers! The powers to rob, and back that robbery up with murder, ARE more than 99% privatized, ALREADY! THAT is the fundamental social fact that the mainstream deliberately denies and continues to ignore. THAT is the central social fact which becomes the overarching REALITY, which all other lesser stories operate underneath, while taking that for granted, in strange ways, since they continue to pretend it does not exist, although everything else only exists under that.
Of course, there are more and more stories about how the banking "bailouts" were absurdities and travesties, e.g.
http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104
Secrets and Lies of the Bailout
By Matt Taibbi, January 4, 2013.
HOWEVER, THE MOST IMPORTANT THING IS THAT MOST PEOPLE WILL CONTINUE TO DELIBERATELY IGNORE THE CENTRAL FACTS OF HUMAN ECOLOGY, WHILE THEY WILL TALK ABOUT POLITICAL ECONOMY IN WAYS WHICH ARE RIDICULOUS, AND YET, THAT WILL STILL BE ALMOST UNIVERSALLY ACCEPTED BY THEM.
The bottom line is that money is backed by murder. The debt controls depend upon the death controls, and NOTHING ELSE makes sense, as the foundation for any and all discussions about these matters. The fiat money system ONLY works because it is legalized and enforced by sovereign powers of states, which means the police and armies FORCE everyone to accept the fraud, and to live their lives within that fraudulence. Furthermore, the covert triumph of the biggest gangsters, the banksters, WAS able to almost totally legalize PRIVATIZATION of those sovereign powers, so that the power to make money out of nothing, as the supreme form of ROBBERY, is enforced by We the People against themselves!
From a sublime point of view it is amusing how totally and deliberately ignorant the mainstream morons and masses of muppets are. From a sublime point of view, for those with a sufficiently macabre sense of humour, it is astonishingly amusing to listen to the pundits and politicians bullshit about everything, using transcendental poetry that operates as far away from social realities as it can possibly go! I have gradually gotten used to this situation, that the plainly obvious central social facts are the ones that are the least acknowledged and admitted within the public space.
In fact, the ONLY ways to fix the money system would require enough people understanding it as being a combined money/murder system. The reality is money is backed by murder. There are NO genuine solutions outside of those parameters. ... Of course, that seems almost impossible to comprehend, since the global system NOW is electronic fiat money frauds, backed by atomic weapons, and therefore, future wars & martial law, or civil wars & revolutions, are all inside of that utterly insane and irrational context, of lies backed by violence on ASTRONOMICALLY AMPLIFIED SCALES!
The WHOLE system is based on legalized lies, backed by legalized violence.
PUBLIC DISCUSSIONS ABOUT SOCIAL REALITY DIVERGE MORE AND MORE FROM REALITY!
That will continue to automatically get worse and worse, faster and faster, since THE REALITY is organized lies, operating organized robberies, and MUST NECESSARILY BE, and, with perfectly paradoxical consistency, that is what will most not be admitted nor acknowledged in any public debates within the systems that depend on doing all of that as covertly as possible, with the least number of people understanding that as possible. Every little story like this one is just one more step towards the psychotic breakdown of the established systems of privatized soverign powers to rob and to kill, automatically running out of control, while that is not understood by the vast majority of the people, because they do not want to understand, and the pundits, politicians, and the mass media, do not want them to understand!
Radical Marijuana said:
'That will continue to automatically get worse and worse, faster and faster, since THE REALITY is organized lies, operating organized robberies, and MUST NECESSARILY BE, and, with perfectly paradoxical consistency, that is what will most not be admitted nor acknowledged in any public debates within the systems that depend on doing all of that as covertly as possible, with the least number of people understanding that as possible'
HUH?
Like I said, ZeroAvatar, it is PARADOXICAL!
http://www.thefreedictionary.com/paradoxical
"Paradoxical" means:
"A seemingly contradictory statement that may nonetheless be true."
"Paradoxical" also implies:
"A statement contrary to received opinion."
In order to understand what I am saying one has to embrace that the Art of War was based on the FACT that success in war was based on DECEITS (which was why spies were the most important soldiers.) That has been what the historians and theoreticians about militarism have been saying from a long, long time, from ancient Chinese, e.g., Sun Tzu and Sun Bin, up through more recent European history, e.g., Machiavelli and Clausewitz, to the contemporary situation, as exemplified by more recent American and global history.
THE TRUTH IS THAT WORLD IS CONTROLLED BY HUGE LIES.
That is NECESSARILY SO, due to the basic ways that energy laws and systems theory work through human civilization. The real world was controlled by the people who were the best at being dishonest, and backing that up with violence.
Ask "who controls the world NOW," and the answer is the biggest banks, and the global systems that they have set up. They effectively control all of the world's biggest governments. The reasons why they do are the same as the history of war, namely, that deceits prevail as the most successful strategies. Therefore, our world is controlled by those Fraud Kings.
The paradox is that too much "success" of that kind leads to final failure! Everything comes as a package deal, with the worst and the best inseparably stuck together. That which made the Fraud Kings strong, and able to take control over governments, is also that which will go mad and destroy them.
Due to the real history of war, then seguing to become control over the symbol of social power "money," civilization is controlled by those who are the best at deceit. However, when the whole civilization IS controlled by FRAUDS, then that whole civilization becomes collectively more and more INSANE. What has happened is that the biggest bullies have been able to make their bullshit become the dominant social stories. Therefore, the mass media constantly pump out ridiculous propaganda, which is more and more obviously nothing but bullshit, BUT, BUT, BUT, that is still backed up by the established systems of coercion, i.e., the police and army. Therefore, everyone is forced to accept those frauds, and to build their lives around those central social facts. However, that means that everyone is forced to build their lives on the basis of believing in, or begrudgingly accepting, Huge Lies.
Becoming "successful" usually means spouting bullshit approved of by the biggest bullies, because one is working for those biggest bullies. The biggest banks ARE collectively a group of trillionaire mass murderers, which command overwhelmingly superior resources in order to continue to promote their established systems of lies, backed by violence. BUT, BUT, BUT, that means that the whole civilization is necessarily driven more and more insane, until there MUST result some sort of psychotic breakdowns, since the enforcing violence can never make the lies become true, but only force people to live AS IF those lies were true.
The PARADOX is that one must try to understand what is almost an INFINITE TUNNEL OF DECEITS, as the central feature of how society actually operates itself, as a toroidal vortex. Everything inside that system depends upon enough people being fooled enough to believe the biggest bullies' bullshit. That then keeps those bullies able to beat up those who refuse to agree with the Huge Lies that control civilization. That then keeps people who agree with those Huge Lies inside the well-established systems of organized lies, operating organized robbery, so that they benefit from their participation inside of those systems.
My paradoxical point is that social reality is ALWAYS organized systems of lies, operating organized robberies. It is NOT possible for reality to ever be anything else. Social realities are dynamic equilibria between different competing systems of lies, backed by coercion. The rise and fall of civilization is correlated with the rise and fall of the imperialistic information systems that promote their systems of lies, backed by coercion. The paradox is what made them, then destroys them too!
Too much success at creating too much money out of nothing, as debts, eventually destroys that system.
THAT is the paradox that this kind of Zero Hedge story was discussing! The Federal Reserve Board is digging itself into an impossible to get out of hole, because it has become the primary source of way too much money made out of nothing, given away practically for nothing to the biggest banks, which is distorting those systems to greater extents, which distortion has no sane solutions, because the NUMBERS ARE NUTS, since they are the result of too much triumphant fraud.
“American political opportunities are loaded against those who are simultaneously intelligent and honest.”
? Richard Dawkins
For sure! Just look at the history of Ron Paul, and how he was treated by the mass media during the primaries!
There are a handful of mass media conglomerate corporations, which are worth about a trillion dollars, pumping out professional lies and hypocrisy 24/7! But nevertheless, that system provides something like 90% of all the "news" that the public is told.
It is easy to put together videos demonstrating most of the major, powerful politicians, flip flopping and stating or doing the opposite things, over and over, and yet, they continue being given the "red carpet" treatment by the mass media. On the other hand, somebody like Ron Paul, who has provided consistent political commentary, with an excellent track record for being proven right, was deliberately trashed in numerous ways by the mass media during the Presidential primaries.
As is now well known, the banksters and their buddies deliberately bought up enough of the major newspapers, long ago, so that they could dominate the formation of public opinion. Indeed, in many ways, the mass media are overtly, as well as covertly, paid to be professional liars, and immaculate hypocrites. However, they already have a trillion dollars worth of accumulated investments in the positive feedbacks of making money from fooling people, while any other opposition operates with a relatively broken shoe string budget compared to that. Thus, there are elections where billions are spent by politicians, through mass media worth trillions, all of which has the purpose of controlling the powers of government, to serve the interests of those who are inside of that positive feedback of making that kind of money from lobbying, etc.! Meanwhile, there is another PARADOXICAL Catch 22, that the only people who could change the elections laws are those who benefit from the established systems being already runaway legalized corruption.
Therefore, in that REAL context, I can not see political opportunties for people to participate that were intelligent and honest. IF they did, then they would surely say things against the special interests, who already overwhelming dominate the established systems. Any honest and intelligent politician would be attempting to play in a game that is already rigged to the point to where it is tilted to be almost a vertical cliff! The more one knows about politics, the worse it gets!
That sentence is actually parsable, but yanno stoners...they can ramble sometimes...
Steve Leisman: the FED sycophant ala Jabba's rat.
...and the Fed will not stop until all their credibility is lost, and then, Americans will have lots of greenbacks to burn. So will China, Japan, and Middle East oil shieks.
A sorry state of affairs for the once greatest country in the world.
Liesman's use of "we" in reference to economists, is a sign of mental illness/delusion of granduer.
In this case "we" is a journalism major from Buffalo.
Mr. Frezza can't prove how the banks are using the unloaned funds granted to them by the Bernank.
OK, Steve, let's see you prove how those funds are being used.
What, the TPTF banks won't give anybody access to their books?
Oh well.
Let's all thank Iksel for giving us a glimpse at one TBTF bank. Personally, IMHO, all the fuckers are doing the same thing, otherwise the S&P would be in the toilet.
Yeah; he did exactly what they're not supposed to do; get your friggin name in the paper. He's not their favorite team member right now; i'm sure he takes a lot o shit about this. It's just like the Mafia, keep your business out of the papers; don;t cause no disturbance; and we promise we won't notice nothin.
Ironically, the Fed's actions, which at least in theory were intended to stimulate the economy, are the biggest impediment to a real recovery because the banks don't need to make loans to generate a profit in the Makin' It Rain Bernanke Bucks game; they can just gamble in the markets with their HFTs and fleece the public.
Maybe the banks have figured out that gambling in commodities ala QE2 will only end the game sooner because the inflation will eat away household discretionary income and therefore corporate profits, so it's better to just keep pumping stocks. But how does the game end? The GOP refusing to bump the debt ceiling would be one way, but that will never happen. Bernanke tightening would be another way, but that will never happen. Or could it? Isn't tightening also the leveling off of expanding? At some point, they will have a hard time justifying the needed exponential expansion of the balance sheet. Or maybe the bond vigilantes emerge and override Bernanke, driving up rates, making it better for the banks to return to loaning.
What will cause the inevitable reversal?
What will cause the inevitable reversal?
That "reversal" may turn out to be quite evitable. Wars are a pretty terrific way of replacing worn-out international financial systems.
Interest rates can't rise, or the country goes bankrupt. They could either lend money, or gamble with our money. They have to gamble until the debt is monetized.
IMHO; what will cause the tightening will be the external market. the so-called bond vigilantes. really, just the market for Bonds. Sooner or later they'll run out of suckers.
I would like to comment on the vid, but anything coming from CNBC is total BS. Can we stop quoting anyone from CNBC, this would be of enormous help.
Yeah, but the chart Tyler published in the course of the commenting is very good. I think it's good reporting; it's thought provoking and it shows what;s going on versus what the muppets are being told.
conclusion ..
.
"The inherent advantage of bigger banks – the permanent, ongoing bailout they are still receiving from the government – has led to a host of gruesome consequences. All the big banks have paid back their TARP loans, while more than 300 smaller firms are still struggling to repay their bailout debts. Even worse, the big banks, instead of breaking down into manageable parts and becoming more efficient, have grown even bigger and more unmanageable, making the economy far more concentrated and dangerous than it was before. America's six largest banks – Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley – now have a combined 14,420 subsidiaries, making them so big as to be effectively beyond regulation. A recent study by the Kansas City Fed found that it would take 70,000 examiners to inspect such trillion-dollar banks with the same level of attention normally given to a community bank. "The complexity is so overwhelming that no regulator can follow it well enough to regulate the way we need to," says Sen. Brown, who is drafting a bill to break up the megabanks.
Worst of all, the Implicit Guarantee has led to a dangerous shift in banking behavior. With an apparently endless stream of free or almost-free money available to banks – coupled with a well-founded feeling among bankers that the government will back them up if anything goes wrong – banks have made a dramatic move into riskier and more speculative investments, including everything from high-risk corporate bonds to mortgagebacked securities to payday loans, the sleaziest and most disreputable end of the financial system. In 2011, banks increased their investments in junk-rated companies by 74 percent, and began systematically easing their lending standards in search of more high-yield customers to lend to.
This is a virtual repeat of the financial crisis, in which a wave of greed caused bankers to recklessly chase yield everywhere, to the point where lowering lending standards became the norm. Now the government, with its Implicit Guarantee, is causing exactly the same behavior – meaning the bailouts have brought us right back to where we started. "Government intervention," says Klaus Schaeck, an expert on bailouts who has served as a World Bank consultant, "has definitely resulted in increased risk."
And while the economy still mostly sucks overall, there's never been a better time to be a Too Big to Fail bank. Wells Fargo reported a third-quarter profit of nearly $5 billion last year, while JP Morgan Chase pocketed $5.3 billion – roughly double what both banks earned in the third quarter of 2006, at the height of the mortgage bubble. As the driver of their success, both banks cite strong performance in – you guessed it – the mortgage market.
So what exactly did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even Too Bigger to Failier, increases risk, discourages sound business lending and punishes savings by making it even easier and more profitable to chase high-yield investments than to compete for small depositors. The bailout has also made lying on behalf of our biggest and most corrupt banks the official policy of the United States government. And if any one of those banks fails, it will cause another financial crisis, meaning we're essentially wedded to that policy for the rest of eternity – or at least until the markets call our bluff, which could happen any minute now.
Other than that, the bailout was a smashing success." m.t.
This article is from the January 17th, 2013 issue of Rolling Stone.
Read more: http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...
.
comment: tylers ! hammers ringing and the nails are
going down !
I dont know CNBC would not allow us to be mis informed so I belive Leisman's story (and I just bought the Brooklyn Bridge from some sap for a song) or is it Liesman
So to summarize what we know:
1. The market failed and died in September of 2008
2. Since that point we have been living in a FED induced fantasy.
3. This fantasy will continue until societal controls are fully implemented.
Already the NSA, FBI, and CIA have begun recruiting at public universities for employees in cyber-security and intelligence.
yeah; the lashings will continue until morale improves.
so are fkington post and zerohedge BFFs now??
you missed the false flag...HP pointed at ZH as the source and allowed itself ot be overtalked
Yep, right after (BI-the name that shall not be spoken).
Bill Frezza should have showed up wearing Lotta P.Huge's gold shirt. Blondie would have been all over him.
Steve "the suck ass, scrotum sucking, bald headed, fat, clueless, hapless puppet, douche bag, waste of oxygen, spineless joke, braindead, big mouth, arrogant fucktard" Liesman.(hope i didn't offend any similar trolls).
oh yeah, and beady eyed.........................
you missed out pompous and hated more than piers morgan
Curly, the third stooge of three stooges, has more crediblility than LIESman with most. At least Curly admits he is stooge, Liesman presents himself as some kind of economic genius. By the way, Harwood reminds us of Moe, and Larry goes to Kudlow.... . Becky, not to Quick, is PollyAnna, Cramer is from one flew over the cuckoos nest, and Kernen is JudgeSmails from caddy shack...why would anyone give these characters any due?>?
i wish south park would do a parody...now who would cartman, kyle, stan, kenny, chef, butters, mr garrison be in that show. i can figure out token
Dude; they;re on TV. Big Channel TV. That;s how credibility is spelled now. Sad, but that's my understanding of it.
Well I guess since I have to halfway go to the bathroom I can watch the Liesman clip this time.
The dudes name is LIES MAN.
If the guy you were listening to was Michael Fuckinliar would you listen?
"Next up is Mike Fuckinliar with the commodities report."
Liesman did it. Another successful dump.
I'm an idiot, and I get it. Amazing that the expert hasn't a clue.
Surely we can't be getting fleeced this easily?
Well, it looks easy. But it took a hundred years to perfect the corruption and the complete removal of the force of law. So, you know it was a bit of project. But yeah, right now, the big wheel practically turns itself.
Does anybody know why this and the previous ZH article use the $7.237 trillion loan figure from the FRB H.8, and not the $9.990 trillion bank credit figure (several lines above) ?
Because the balance is precisely the reserves being discussed here; reserves, which through a layer or two of shadow bank transformation, somehow ended up on JPM's balance sheet as prop trading capital, even though the banks REPORT them to the Fed as Treasurys and MBS.
Thanks.
Man anybody doesn't think the big five NY Banks aren't into the S&P500 like a bear in a peanut butter jar are really naive. I'm sure they get "suggestions" and coded conference calls; I'm sure they have empty office paper clients that can make trades when the market "needs them"; I mean come on; this is New Yawk we're talkin about, not twin forks Idaho. Look at the friggin chart of the S&P; yeah, they're in there; they buy 'em when it's needed and I'm sure they do it on instruction; I mean, are you kidding me or what? They're fuckin owned by the Fed. What the fuck t hey gonna do; say, no thanks, not this week. Ha. Fat chance.
We had this Fed intervention bullshit with Greenspan and look how that turned out. We got two massive bubbles and two crashes (internet and housing)
The JPM balance sheet chart is the key. If Liesman was right loans and deposits would be the same and there would be no 423 billion gap.
Loans to the Fed plus consumers plus businesses would equal deposits from the Fed plus consumers plus deposits.
What you don't see is the risk (DV01) of the balance sheet, nor do you see the amount pledged in collateral and rehypothecated, or the value of derivatives (gross and net) or the value of non-performing loans. We know the deposits are non-performing because the Fed sets the interest rate at zero!
In Liesman's world, the DV01 of the Fed action is zero in volume of money AND value of DV01. In the real world of fractional banking the volume of money AND value of the DV01 are both skewed to reflect the risk taken on "unencumbered" cash (Fed funds).
The key question for Liesman is "if the Fed loans to the banks are re-depsoited as reserves, what good are they doing to anyone and why aren't they being lent out to SME's?"
This is tied to the fact that the banks cannot find a (risk adjusted spread) use for the money since they know they canot competently monitor and lend the money out. Banks do not have the qualifications using their business models which failed so dramatically in the GFC.
pricing is the mysterious problem.
priced in what? notes of credit to an individual
making a "commitment" or the the core "commitment"
of a system made by the flunkies of the elite? the
government, bureaucracy.
either way it is a fiction and fictitious
economy based on vapors my friend. 2008
it failed, since then it is all stealing with
a seminal, archaic teutonic and radioactive dildo
to occupy your attention.
Hmmmf. Obviously some of the FED largesse is finding its way to CNBC. Liesman must be on retainer by CNBC to keep parroting what the FED wants what few people left who are still dumb enough to watch CNBC to hear.
Epic Post and Epic Threads!
MSM carrying water for the government again - acting as head mouth piece to defend government for using tax dollars to buy overpriced equities to keep this crap rolling.
Should be fun to watch when the music stops.
Whats next Liesman ? Stickiing your fingers in your ears and shouting " Nah, Nah , Nah.....". Overspeaking your guest is really bad form. It says a lot.
Nothing like farmland and beautiful gold and silver coins and bars.Just do yourself a big favor, never, never buy government debt.
Only a shill would give the big banks the benefit of the doubt at this juncture.
If Obama mints 3 $1T platinum coins, that will move money creation to the Treasury's Seigniorage account, and the Fed will be able to unload all its Treasury bonds.
I'll gladly splay you out and baste you tuesday for a golden island today!
If Liesman were a dwarf we would have fed him to the Orcs
Liesman is an intellectual dwarf and I bet I can throw him 25 feet. I just can't be bothered to finance a dwarf throwing contest in Jackson Hole
Investopedia explains 'Excess Reserves'
Financial firms that carry excess reserves have an extra measure of safety in the event of sudden loan losses or cash withdrawals by customers. This may increase the attractiveness of the company that holds excess reserves to investors, especially in times of economic uncertainty. Boosting the level of excess reserves can also improve an entity's credit rating, as measured by ratings agencies like Standard & Poor's.
Reserves need to be in liquid forms of capital such as cash in a vault, which does not create income. Banks will therefore try to minimize their excess reserves by lending the maximun allowable amount to borrowers.
Read more: http://www.investopedia.com/terms/e/excess_reserves.asp#ixzz2HLIgvWvE
.
EXCESS RESERVES:
The reserves (vault cash and Federal Reserve deposits) that banks have over and above what they are required by government to keep to back up deposits. The primary use of excess reserves, also termed free reserves, is for loans to consumers and businesses. Because reserves do not generate interest, revenue, or profit, banks are inclined to keep as few excess reserves as possible.
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=excess%20reserves
I can't really tell how technically sound steve is, however, he seems to clearly want to muddy the waters when someone gets to the crux of how our system works. Treasury securities are not only cash but have such high leverage that a fraction of 2 T can have a significant purchase power in all risk markets. The FED can try to sterilize the Treasury issuance while allowing the revolving pool that the Primary dealers and others have to leverage increases on the margin which in turn increases the risk assets on the margin year by year. The banks build equity capital and slowly rise out of their 2008 holes. Good, now why don't they lend to you and me...well you and me have nothing to leverage, i.e., no collateral. Up until this year, real estate, has not been healthy enough for banks to make alot of loans. They only loan against equity and their hasn't been much. They will loan to the non financial sector of the Russell 2000, but most don't need the money because they can finance out of cash flow, treasury, etc. In fact, I am shocked more companies are not borrowing at 2% to buy back their own stock...shows you that managers think their companies are generally fairly valued against expected opportunity. What the FED did in the last 4 months is really clever. They told the market that this system had now switched to full on monetization, helped the President get re-elected as the system was sensing that a Romney win would shut down this M2-M3 conveyor belt. The market dropped 20% in May based on the end of QE 2 and the FED has bluffed the market, the Congress, and the voting public, and are now showing signs that QE4 is not necessary. Does anyone believe this President gets re-elected if the market drops 20% in October....The questions are not whether it is unfair for the FED to buy crap MBS and hold it for 5 years until it runs off or is no longer crap, while the seller gets to forclose on the real middle class americans. The questions are: will the real estate market get healthy enough so that small business creation can ignite upon the positive equtiy. What do the demographics tell us...Will natural gas, oil and the required infrastructure allow the US to export more goods, services and energy while buying us the time to come up with the world's next round of innovation.
Steve: THE WORLD IS FLAT....SWEAR TO GOD....
yea, I've got 2T lying around DOING JACK SHIT! RIGHT!!!!
steve is thinking commercial banks. the tbtf
are not commercial banks anymore.
.
there is this ..
http://smallbusiness.chron.com/investment-bank-vs-commercial-bank-3450.html
Investment Bank Vs. Commercial Bank
by David Ingram, Demand Media
"
Risk Tolerance
Investment banks have a higher risk tolerance due to their business model and the relative weakness of government regulation in the industry. Commercial banks are much less tolerant of risk. Panic can ensue if families and businesses lose their checking and savings accounts, so commercial banks have an implied fiduciary duty to act in the best interest of their clients, not to mention the tight strings attached to commercial banks' FDIC insurance.
History and the Future......
According to BU.edu, institutions that mixed commercial and investment banking activities contributed in part to the great depression of the early 20th century. The Glass-Steagall Act, part of the Banking Act of 1933, mandated the complete separation of commercial and investment banking activities, which seemed to yield stable results until its repeal in 1999 by the Gramm-Leach-Bliley Act. Since then, large banks have been free to engage in both types of banking under one roof, which is believed to have been a large contributing factor to the bust of the internet bubble in 2000 and 2001 and the beginning of the global recession in 2008. Whether or not Congress will act to separate the two activities, seemingly so volatile when used in tandem, remains to be seen.
Benefits of Combination .....
Banks mix commercial and investment activities to realize significant benefits. Acting as an investment bank, an institution can help a company sell an IPO, then use its commercial division to extend a generous line of credit to the new corporation. The generous loan allows the new company to finance rapid growth and boost its stock price. The bank can then reap the benefits of increased trading revenue and snag more commissions from future stock offerings." ..
I don't know who's a bigger hand puppet, Liesman or Cramer.
Whaddaymean by all this then? It was a fail?
http://www.scpr.org/blogs/economy/2013/01/07/11881/bank-america-continues-end-its-countrywide-proble/
Nothing new here.
LIESman loves sitting on his "sit and spin" with a 12" dildo attached to it.
Oh really?
http://www.ironicsurrealism.com/2013/01/04/outrage-bank-of-america-holds-licensed-american-gun-manufacturers-deposits-we-believe-you-should-not-be-selling-guns-on-the-internet/
First mistake, "hypothecated according to ZH article" do not mention ZH on CNBC!
Second mistake, to state that money is fungible is a top that one line.
Third mistake is to think that banks are banks like in its a wonderfuked life.
Fourth mistake anyone from a Competative Ent Institute place is a nudnik to SLcnbc!
Fifth mistake to agree to disagree is a f/g cop put.
Sixth mistake, low rates will not make debt disappear.
Seventh mistake, orthodoxy becomes unconscious ala SLcnbc.
Eight and final thought the markets are not anything like they were pre-crisis and never again will they ever be except if we drive a stake into the heart of the FED! It is unothodox to think otherwise.
Dear Zerohedge,
My employment contract precludes me from reading Modern Money Mechanics or reading your website.
Signed,
Steve Liesman
+1
A worthy "Tyler" post. Good to read.
Incidentally, isn't this why Keynes (and others... pageing Bagehot) called upon Central Banks to be the "Lender of last resort"? They just failed to mention whom the recipient should be. Turns out it's the banks. Oops.
And never mind the part about punishing rates, old chap, that was a typo.
I like pets. They are good company. I feed them, and they love me unconditionally. If they piss on the house, they get punished, and quickly learn to obey my command...for the food, house and protection I give them.
Liesman is a pet of the status quo; a very good pooch.
Pets you say? That’s an understatement newengland. Sorry, my youth sometimes resurfaces.
Porno For Pyros - Pets
Uh, yeah, the Kook-man from Princeton has been a raving loon for a decade+. He's only important because so many ignoramuses read him and take what he writes seriously. The economist profession, such as it is, dismissed him as an incoherent ranter and pervericator a while ago. The trillion dollar coin, a piece of MMT crackpottery, is now supported by BusinessInsider, a venue of Dem and FOB hacks and cronies.
This is an excellent article and makes ZH worth reading, even if every post is not quite up to this level :)
I can see why the Fed has started more net asset purchases, as the excess deposits available for banks to prop up various securities markets is getting squeezed. The Fed's balance sheet has been virtually flat for a year. That chart is damning and shows plainly what QE is all about -- it's not about growth or unemployment. It's about inflating any and all capital markets, to promote the absurd (and repeatedly discredited) "wealth effect," as well as continuously bail out the large banks.
Oh Steve, why didn’t you use the Miss Barbara on Romper Room in 1971 moment to explain the Bank for International Settlements????
Benny hill slapping Steve Liesman
Long Do-Bee's.
Liesman may as well be reading the official Bernanke/Krugman Keynesian talking points in relation to Fed Policy.
Your right Steve.. That digitized cash is just sitting around doing nothing.
It is not being used by the PDs prop trading desks
It is perfectly fair to legalize entities to have money at nothing to lend out at interest (the same banks which caused this disaster through underwriting fraud)
They are not stealing 600 billion a year from savers now that we are on 4 years of ZIRP
The fact that loans being down are irrelevant
Banks are not globally fighting Basel and have won
The DOJ has sent all of zero people not named Stewart and Raj to jail
They have not laundered drug money in the past
They have not had mark to market in 4 years
Silver suppression is not occurring
At what point does it become so laughable people stop watching??
It happene about 3 years ago and none of these clowns will be around to be hoisted on their own pitard.
Nothing they can do will prevent what is coming.. We are at Spaceball ludicrous speed of plate spinning, lies, free cash at half a decade now to create the illusion of an economy. It will end just like it almost did with Lehman in a matter of days.. The only difference will be that no policy will save us or those who they allowed to be the frogs in the boiling water.
Liesman will be in a GE capital jet to St. Barths.
All I know is, I am human, and If someone gave me an "extra 1 trillion dollars" that "I didn't need and was going to sit in my wallet collecting dust", I would take a long LONG drive to Las-Vegas , and I would put atleast HALF on black.
WHY?
WHY NOT? its "extra" money!
Last I checked, people managing banks are also "human" ... more or less.... depending by what standards you go by.
As far as the Mega Coin is concerned, all that happens is simply that it shifts interest expense from the Treasury to the Fed.
Bill tells CNBC to read the ZH article (where the source material comes from). Let's see if CNBC reacts in any way, if only subtle.
Bottom line is that from all the raised voices and commotion on the CNBC side that let Bill speak very limitedly after his opening points, speaks volumes that Bill (ZH) hit a nerve.
A well-done-sleuthing job to ZH.
nothing's funnier than watching santelli kick liesman to the curb..
they should have a youtube channel dedicated to santelli making an ass outta liesman.. there must be 100's of episodes by now.
Tyler,
I appreciate the article and frankly, it fits with my understanding of what has occurred. But I also ran your article by someone who has a much better understanding our monetary and banking system than I do, and he disagreed with your view that primary dealer reserves at the fed (the deposit to loan gap), by whatever conversion (repo, hypothecation, etal) is theorized, can be used to speculate with. His specific reply is below. Can you please comment. Thanks.
" Reserves are not used for anything except settling payments. The Fed determines the amount of reserves exogenously. And the reserve levels are purely monetary policy, not fiscal. Banks can leverage their balance sheets in various ways. Reserves are an asset for the bank. So the point ZH makes is pertinent. The funds are fungible. Capital is capital. BUT, before QE the bank has the same capital position that it had before because QE is a simple swap. So, the bank is no more capable of making loans or speculating than it could have before. Reserves don’t change the banks capital position. That is the point ZH is missing.
Hope that helps."
Well kick me in the ass if I get this wrong but here it goes...
The reserves are finally made whole, previous to QE, these reserves weren't up to snuff, they were toxic piles of MBS pooh. With real reserves, the bank can bid the S&P to the moon. Probably not with the reserves, but with other money on hand. Way more lucrative than loaning it out to small businesses.
Also, aren't the banks (since 2008) paid interest from the fed for these reserves? And even reserves in excess of the 10% required? This locks up real money that could be lent out to businesses. Paying interest on excess reserves effects a tight monetary policy -- sort of the reverse of what is advertised.
good points and ...
"..Worst of all, the Implicit Guarantee has led to a dangerous shift in banking behavior. With an apparently endless stream of free or almost-free money available to banks – coupled with a well-founded feeling among bankers that the government will back them up if anything goes wrong – banks have made a dramatic move into riskier and more speculative investments, including everything from high-risk corporate bonds to mortgagebacked securities to payday loans, the sleaziest and most disreputable end of the financial system. In 2011, banks increased their investments in junk-rated companies by 74 percent, and began systematically easing their lending standards in search of more high-yield customers to lend to." .. m.taibbi
Tyler, please reply. Thanks, krb
i do believe the FED thru JPM has been causing the downdraft in the PM market as well no?
Dear Tyler Durden,
A good way to solve this problem would be a nice US BANK MARATHON Worth $2Trillion or more to curtail their moral hazard.
nevermind, i forgot about chair satans printer.
As usual, every "interview" involving Steve Liesman is an interview of Steve Liesman, not the guest. Arrogance, hubris, smug.
If Liesman thinks the banks are not investing with excess reserves, how does he think they are making money? It sure ain't through lending, and it sure ain't through holding treasuries. Yet, banks are doing ok supporting their too big to fail selves.
.
"Quantitative Easing and Monetary Policy are two separate things...not related." - Steve Liesman
stunning...absolutely stunning.
Liesman is the dullest tool in the CNBC shed.
He is a hoe with a cracked handle and a cheaply forged bent head.
To believe or state that trillions of FED gravy is not being gambled by the TBTF banks is beyond naive.
Liesman is either a complete and utter fool or an agent of intentional misinformation and deceit.
You used to work on the basis of what banks paid for Deposits which provided households with Interest Income - but the divergence between Deposit Interest and Credit Interest is so wide as to make clear that The Fed is providing unlimited Deposits at low cost to Preferred Banks and turning the Household Sector into Debt Slaves by removing their Income Streams and intensifying the Debt Burden...........
All Bill Frezza had to do was mention the case of the CIO office of JPM and Liesman's gums would have been flapping like a goldfish with nothing intelligible or sane coming out of his mouth.
the half bald guy is fukcing retarded
Would the last person out of the Keynesian Asylum please wake up Steve Liesman and give him his pill? Thanks. And you might want to double check that Krugman actually left.
Sept 2008 was the top of the bubble, so it's a miracle (well, not really) that loans are anywhere near that high.
Here is an interesting twist in the pseudo-theological economic debate on which ZH takes a very hard line in favour of the AUstrian model as opposed to the Keynesian tradition :
The IMF Admits It Was Wrong About Keynesianism - Business Insider
Not saying that IMF is the holy Jersualem of true economic thinking, nor Keynesianism the Holy Grail of economic modelling.
Pseudo science is what it is.
LIESman: nomen est omen.
Did you hear Frezza give multiple shout-outs to Zero Hedge?! Keep up the excellent work, TD.
Was that wry smile on Bill Frezza's face there because he knew he was debating with a talking head, which apparently doesn't have an OFF switch? ha-ha
Steve Liesman is Steve the Lies Man. And with all the money and informational resources of the TBTF banks behind him to back his argument he still manages to lose it. Now that's entertainment.
By the way, why does the monetary system need to be so damned complicated anyway? Can't we all just agree to study astro physics, organic chemistry, or neuro science instead? I promise, I'll do anything to get out from under this shit.
It isn't laws of nature that led us to this point. The banks made this system up because they want it this way.
They're not doing Gods work. They expect God to work for them.
When the valve is wide open and the water isn't coming out of the tap, the water must be going somewhere. And, if it isn't trickling down on you, it's probably flooding someone else.
Why would the Fed print all this money to presumably stimulate the economy if they knew and could clearly see it had no where to go in the economy? Isn't that a failure of the Fed by definition?
And why didn't the government ask this simple question of Wall Street Banksters and the Fed on the thousands of occassions they had the opportunity to do so? Isn't that a failure of government by definition?
there will always be a buyer of last resort
if this is true, then interest rates will never rise...right?
and another shout out to ZH on excess reserves by rick santelli today...i think ZH should charge for its quality, at least get asked for permission prior to CNBC's use of editorial/comments. Good to know ZH is on an equal footing with the WSJ on macro!