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The Biggest Banking Disconnect Since Lehman Hits A New Record
As regular readers know, the biggest (and most important) disconnect in the US banking system is the divergence between commercial bank loans, which most recently amounted to $7.32 trillion, a decrease of $9 billion for the week, and are at the same the same level when Lehman filed for bankruptcy having not grown at all in all of 2013 (blue line below), and their conventionally matched liability: deposits, which increased by $60 billion in the past week to $9.63 trillion, an all time high. The spread between these two key monetary components - at least in a non-centrally planned world - which also happen to determine the velocity of money in circulation (as traditionally it is private banks that create money not the Fed as a result of loan demand) is now at a record $2.3 trillion.
Which, of course, also happens to be the amount of reserves the Fed has injected into the system (i.e., how much the Fed's balance sheet has expanded) since the great experiment to bailout the US financial system started in September 2008, in which Ben Bernanke, and soon Janet Yellen, stepped in as the sole source of credit money. The only difference is that while the Fed is actively pumping bank deposits courtesy of the fungibility of reserves, loan are unchanged.
For those who still don't understand the identity between Fed reserves and bank deposits, here is Manmohan Singh with the simplest explanation on the topic:
When central banks buy securities, one of the immediate effects is to increase bank deposits, which adds to M2 (in the U.S., practically the Fed has bought from nonbanks, not banks). Whether banks maintain those added deposits as deposits, or convert them into other liabilities (or, by calling in loans, reducing or moderating the growth of their balance sheets), is an open question.
Actually it's not. As the JPM London Whale episode taught us, it is the excess deposits on bank balance sheets courtesy of the Fed, that serve as collateral for marginable derivatives (IG9, HY9, ES, etc) which then can and are used by banks to chase risk higher, often with leverage that runs into the orders of magnitude. In other words, as the chart below shows, in the past week, the Fed injected a net $69 billion in risk-ramping power on the commercial bank balance sheets, and, more importantly, since the failure of Lehman, this amount is a record $2.308 trillion.
So for those confused where the money comes from to ramp equities ever higher on a daily basis for the duration of QE, and why the S&P correlates (and "causates") exquisitely with the Fed's balance sheet, now you know. More impotantly: don't expect banks to lend out much if any real new loans as long as they can generate far greater and far less riskier returns simply by chasing risk in the capital markets.
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All TBTF banks are insolvent. QE ends and they'll all implode. So let's taper already and see what happens Ben, ya lyin' POS.
It's good to know that the entire financial world is one giant bankster daisy-chain.
Now, if you'll excuse me, I need to go chug a bottle of Robitussin DM.
And here she is Ladies and Gentlemen, Lady Macbeth (Janet Yellen).
Let the Monopoly game begin.
Every private bank is now a de facto member of the Plunge Protection Team.
Back in the day we called this "Deputizing the Posse".
Hopefully, given enough rope, they will hang themselves. No worries. Marshall Yellen has miles of it.
Nobody seems to give a damn anymore about fundamentals. It's all about optics, spin and market rigging.
This gap is really easy to explain...
$2.3 Trillion of those "deposits" were worthless mortgage-backed securities that had to be reinforced by gifts from the Fed.
That money, the disconnect is being used to finance the leveraged equity positions and derivative trading desks. Banks are leveraged to the maximum possible.
This is called, "increasing our collatoral" by the banks.
What this means to me that it might be time for more own personal bank run since the general one will not be at a time of my choosing. CLEARLY when that starts to happen all banks will close down immediately in the "National Interest" of America.
IF this doesn't illustrate how the banks are screwing us 9 ways to Sunday nothing else will.
Timmay, read about Yellen and what she really stands for from her old speaches, ignore anything she says now to appease Congress. And you will realize that what you fear will not be allowed to happen, whatever it takes. They will QE trillions per month if necessary but they won't allow a meltdown of their power base, the banks.
THE BIG DISCONNECT will lead to a new PRECIOUS METAL STORM:
The Calm Before The Precious Metals StormNot until Yellen is confirmed.
I don't fear a bank run, I fear having access to my own personal capital.
That is simply a chart of pent up inflation.
It is also a visual representation of how the FED's "inflation target" meme is nothing but an illusion. How do you keep inflation "low"? Stop the lending, and viola', you have the illusion that you have control over inflation, when in fact you have created a massive PENT UP DEMAND for inflation, quite the opposite.
The runaway deflation occuring is causing that gap to widen, ever increasing the demand for inflation, the illusory target is never achieved, the deflation continues unabated, and the gap continues to widen, UNTIL:
MATH shows back up (oh shit-) with a friend, an her name is PHYSICS, she is beautiful, but one hard bitch to deal with.............
"pent up inflation" was called "latent inflation" by Jens Parson in "The Dying of Money." It's the lag between monetary inflation and price inflation and the trigger is velocity. Very helpful description for those who get caught up in the silly fight about the definition of "inflation." Inflation is a process that can have long lags between cause (money supply) and effect (price inflation). So what we are seeing now is a narrow price expression of inflation in financial assets in stocks and bonds but spreading. I have believed for some time that the real velocity kick could come from overseas, foreign holders of Treasuries not rolling their positions but spending them. Loss of confidence => velocity => velocity^2 etc.
Yep, loss of reserve currency status means not wanting to save USD, but spend them.
On that topic:
China calls for new global currency BEIJING By Joe Mcdonald, AP Business WriterChina is calling for a global currency to replace the dominant dollar, showing a growing assertiveness on revamping the world economy ahead of next week's London summit on the financial crisis.
The surprise proposal by Beijing's central bank governor reflects unease about its vast holdings of U.S. government bonds and adds to Chinese pressure to overhaul a global financial system dominated by the dollar and Western governments. Both the United States and the European Union brushed off the idea.
http://abcnews.go.com/Business/story?id=7168919&page=1&singlePage=true
That article is several years old.
Note it has Geitner as Treasury Sec.
The BRICS have given up the IMF/SDR route, it was worth a try,but the USA
wasn't giving up hegemony that easily..
Good points. Excess bank reserves buying stocks and other financial assets doesn't increase GDP and therefore doesn't increase monetary velocity. Same goes for existing home sales in areas favored by immigrants flush with U.S. dollars. The Fed is going to keep on shoveling out dollars until the rigged inflation stats can't hide it anymore.
Don't forget the Nyquil.
"I get thrills from pills, but mostly chills from Robitussen and a bottle of Nyquil."
BTFATHD!
Benny won't see what happens because he'll be far away from the carnage.
It's all about getting out of dodge. I hope Yellen enjoys being the fall guy (or is it gal? I honestly don't know...) for when the banks blow up again.
Its mind-boggling that the TBTF's can be said to be insolvent and said to be making obscene profits at the exact same time.
Need to overlay the spx on that chart.
you morons on here react to these same charts/ same old news like it is new info every fuckin time...
BTW nope-dope, Ben is gone.
LOL
been a while since we've seen 300 on the dow
is it complete coincidence that the Fed holds $2.2 T Reserves which also happens to be the amount of Treasuries Fed holds now...started buying the same time the discrepancy began????
since the failure of Lehman, this amount is a record $2.308 trillion.
WOW- what if Rummy all of a sudden "found" the $2.3 trillion he lost on Sept. 10 in his sofa
QE has simply been a method for all foreign Treasury holders to move ever shorter on the duration while Fed literally buys all Notes / Bonds...5 yrs now of this program allowing holders to simply not rollover rather than sell...speedy exit of $5 T in foreign held treasuries from the Bill market coming soon? What a shock that would be...
A quid pro quo.
By the end of 2014 all those dollars come home to the US.
The timeline to SHTF is laid out for all to see.
Can you say hyperinflation ?
I can say Zimbabwe.
They will do everything in their power to make inflation grow smoothly and stabilize around 5% on the CPI while real 1980's technique CPI will settle around 20% per year. They will keep that for 10 to 15 years. At the end 1 gallon of gas will be 60 dollars.
That ploy didn't work to well after the Nixon shock,
Once it starts,inflation is impossible to control.This time they cannot use interest rates without
bankrupting most western govts.
No,this is the endgame ,and they know it.
Thats why the looting is out in the open.
I disagree. This is the end of Act II or prelude to Act III. Act III itself involves things like dictatorship and war.
I've been reading too much ZH. I was asleep a few hours ago and had this crazy dream where there was this false flag cyber attack and nuclear meltdown in Chicago. A convenient reason to annex Canada and perhaps Mexico, since a large part of the US would be "inhabitable" and they would need (in Hitlers words) "lebensraum". That's where the 80 FEMA camps came in, to "store" all the canadians/and/or/mexicans who would pose a threat from the inside. They would use DHS with their 1.2 billion bullets to round them all up. I hope I look back at this post in a few years and laugh at how silly this dream was.
I need to stop spending time on this site, it's making me uncomfertable and sleep with having these crazy dreams.
perhaps all those $2.2 T previously Treasury holders now holding dollars are glad to buy up equity ownership of global corporations and the like??? Faster the rolloff continues from Treasury market the faster the equity markets melt up.
That number jumped out at me, too. Always wondered why Rumsfeld felt the need to disclose/announce that missing Pentagon amount on MSM tv on 9/10/01..
Officially, it was 'improperly' accounted for. Which is weasel-speak for probably stolen. The NSA could look into this, but that's not their job - they exist to protect the government from cynics (like us). It's not like congress is ever going to investigate the ultimate fate of that money. Why bother? The DOD will just lie to them just like they did in the NSA hearings.
To put that $2.3T in persepctive, that was around $15,000 for every working person in the U.S.
Congress should draw a red line in the sand to declare the DoD a terrorist organization if it steals... er, improperly accounts for... say, $1000 of taxpayer money per taxpaying citizen per year at any given time. At the very least, they should be audited and any improperly accounted for money should be clawed back irrevocably by U.S. taxpayers. I bet they would clean up their accounting really damn quick.
The $8.8B CASH (crisp, new $100 bills) of Iraqi oil revenue and aid money that the DoD lost (after they lost the Iraqi war) belonged to the Iraqi citizens. Population around 28M at the time, so only around $320/Iraqi citizen theft by the DoD. Small by U.S. standards, but the Iraqi per capita income was only around $2,000. DoD later claims to have accounted for much of the money in their usual laughable fashion, but their contractor crony pals were the ones seen running around with wheelbarrows of shrink-wrapped C-notes that did not come from the Iraqi central bank in payment for anything.
The Commission on Wartime Accounting says the DoD only wasted $34B of U.S. taxpayers money in Iraq, so that's only$225 or so per working U.S. taxpayer. But that's not 'bad accounting;' that's real cash money - gone.
Since the cold war, DoD is estimated to have blown $100B in sunk costs (=spent with no benefit) on equipment contracts that it later cancelled. Considering all the money wasted above, I kind of feel better about that amount. "Hell, only $100B since the cold war because the DoD or congress changed their minds? That's CHEAP by government waste standards"
When it goes, its gonna go quick.
In other words, the US does not have the "strong" banking system desired by Ms. Yellen, banking being taking on deposits and then making productive, profitable loans at low risk levels. What we do have is the financialization of EVERYTHING thanks to QE.
Aren't these motherfuckers rich enough yet? Lets see TRILLIONS to ummmmm around 400 people and MILLIONS thrown out of their homes. When are the MILLIONS going to LYNCH the 400 and the entire corrupt political motherfuckers?? It's time isn't it??
Any velocity of money = hyper inflation.
The banks can never lend, and the FED can never stop monetizing.
Collapsing closed loop, with the noose around the taxpayer's neck.
+1 Ding, ding, ding, ding, ding!
Winner, winner, chicken dinner.
They are lending, in the form of student loans. They are modifying home loans and makng them non recourse loans (or recourse, I forget). All new loans come with no default options. So anyone taking a loan is in effect hanging themselves.
I'm begining to think I chose a bad time to grasp macro-economics. Seems this entire fucking system a nothing more than a Pandora's box.
Young people are so screwed these days. Full Recourse student loans, Obamacare premiums, oh and there is all that debt we owe....
In their 20s people are still very idealistic. 30s generally you get more political (as you start paying more tax?). 40s, well, you should be a full blown cynic by then. So I say we give this current generation 5 years tops before the light bulb goes off. Of course it will all go to hell in the next what, 6 weeks. Rude awakening, any one?
-Winston Churchill
Not really appropriate because the last thing in Pandora's box was Hope.
Okay, I understand how bank lending leads to an increase in the velocityof money and in the QE environment leads to hyper-inflation. But why does this mean that the fed has to continue to print? Because a taper leads to a decreased value of the market and therefor derivatives?
Also, in this ZIRP environment, can't the fed just increase interbank interest rates?
One more question, since the fed started paying interest on deposits the banks have with them, couldn't that have created the down-turn as the banks would have put more money with the fed instead of loaning it, thereby sharply decreasing the velocity of money?
$400 tn in interest rate swaps start to trigger around 3.25% on 10yrUSTs.
They have to print to keep the interest rate down or else its KABOOM now instead
of later..
They have to maintain both a floor and a ceiling on oil prices or it's game over inside of one week. Creation of creditmoney by banks, directly and indirectly, increases demand for oil, and that's a big no-no. From a monetary perspective, this simply means keeping credit(money) creation low and relying on slow and steady inflation (relative, of course) to keep energy/stored energy product demand low(er), which is exactly what we're seeing. It's the classic "slow boil".
Apart from this (the distinction is important) the role of the Fed is really just to fight (credit) deflation - without triggering (monetary) hyperinflation, because usury is its business model. Q.E.(D.) The Fed can win battles against credit deflation, it can't win the war on energy deflation (unless Ben is hiding a new fusion reactor plant in the basement of the Marriner Eccles building ...) and in fact has no intention or illusions of doing so.
News Out....
Nial Farage was just traded to the GOP, in a straight up exchange for John Boehner.
Nial farage? Is that Nigel Farage's brother?
Anal Roberts was Oral's brother, too.
Holy shit...parliament will eat that crybaby's lunch!
Have you seen the shit they flip each other? Maybe they just wanted a punching bag? If so, give him hell, lads.
That said, I'll take that trade for sure.
Meanwhile we have fat assed motherfuckers like Warren (Slimebag) Buffet floating around on 400 foot yachts in complete oppulence. Drone bomb that motherfucker, he's a financial terrorist.
How much of that 2.3 tril is the primary dealer club committing to their short gold and short vix portfolio? What is the notional value of all that short paper they are holding on behalf of the fed ? I guess it doesn't mater when you can print the money out of thin air to manipulate what ever they set their sites on. What in the end will cause this grand illusion to end.. when reality finally hits and we realize it was all pixel magic detached from the physical world ?
"I'm sorry sir, unfortunately we cannot process cash withdrawals of more than $100 today. If you need further explanation, feel free to call our customer service representative at 1-800-CYP-RESS".
U
Just make more student loans! They can't be discharged into bankruptcy! 100% safe! Winning!
Depends, what is your or better the Bank's concept of Winning.
I gave 10, 000, 000, 000 in loans, that may be returned in 50-60 years and only about 70% of them.
So see, when you start to work count the numbers, not everything is so rosy, even with the discriminating clause.
Are you willing to give this ( or any for that sake ) money under such (optimistic) conditions.
I will not. But hey, IF the money is not mine. I will gladly give it and will count it as I am Winning.
. . . but stones can't be made to bleed either.
But humans yes. If you don't pay, the cops will come and get you. Or the bank will seize the parents stuff.
Only if the parents co-sign, right?
All who hold assets in Banks and Trade the Market are responsible!!!
Until people.....ALL people begin to pull ASSETS/DEPOSITS......nothing will change!
Bernanke/Yellen will CONTINUE to transfer the savings of America to the 2%!!!
I get a chuckle out of all the trading comments.....one comment they are talking trades.....then next comment they are talking about "bringing down the system and the corruption in the market"!!!
Look in the mirror!:)
Its called schizophrenic zerohedger.
(Sorry, forget to include "fuck" into my sentence)
Ah !! HA !! That is the last piece of the puzzle. Now I get it.
A lower loan:deposit ratio is fine with me --- less than 100% is better than over 100% (where some were before the crisis).
Except that those deposits probably aren't sitting idle. They'll buy even riskier derivatives with them. Which is the lever that makes the banks TBTF.
Pretty sure bank deposits are not in derivatives. If they are, that is a federal government failure. A bank's non-bank funds might be in derivatives.
the last 3 books i read: g edward griffen the creature from jykell island, adam smith weath of nations, f a hayek the road to serfdom. i am looking for more technical knowledge, any suggestions
"Extraordinary Popular Delusions and the Madness of Crowds" by Charles MacKay.
http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds
Read anything from Murray Rothbard. For a long and dry history and explanation of why all bank credit systems fail try Money, Bank Credit, and Economic Cycles by Huerta de Soto. For an Ivy League dissection of financial crises through the ages try This Time is Different Eight Centuries of Financial Folly by Rheinhart and Rogoff.
Over on youtube try the Money As Debt 2 Promises Unleashed series and also The Money Masters series. Good luck and cheers.
Reading Mises and his monks is as misleading as reading Keynes.
Some people are only capable of being mislead. And some people can't actually "read".
Capitalism, Socialism, and Democracy - Joeseph a Schumpeter
"Towards a Reconstruction of Utility and Welfare Economics" (Murray rothbard)
***i am looking for more technical knowledge, any suggestions***
"Das Kapital" - Karl Marx
"When Money Dies"; Adam Fergusson
And the more technical "Dying of Money" by Jens O. Parsson
The Open Society and it's Enemies - Karl Popper
Options, Futures and Other Derivatives - John C. Hull
Monsters and Magical Sticks: There's No Such Thing as Hypnosis? - Steven Heller
None Dare Call It Conspiracy
Gary Allen
That's the one that shook my shit up.
Or anything by Jim Marrs.
If you're in the mod for something a bit more esoteric...
The Boomer Bible
And/or
The Book of the SubGenius
The GAPs sales are down, the consumer is dying.... this whole thing is one big joke that will end soon enough.
PS, gold and silver are on SALE
Wait.
Just another couple of weeks.
Options day is coming.
DOH!
"...Biggest banking disconnect since Lehman..."
Stock bubble part III: dot com, housing, and what do we call this one - the retiree/savings/401K/IRA entire career/life bubble?"
All the bubbles were built using the savings of workers and feeding off of their assets, but is this the one that breaks the back of anyone fool enough to let Wall Street gamble with their savings in the casino and let Washington drive us pell-mell down the road to perdition?
The majority seem to have been dopes enough to let it go this far, but with enough pain perhaps perception?
The sheeple have one last fleecing coming before being turned into mutton.
The mirage of wealth will disappear as quickly as it did in Zimbabwe.
I don't know where you are... somewhere close to D.C. obviously, because around here the wealth has already disappeared.
Rainbows, Unicorns...markets up forever! Or till we run out of paper.
you forgot to zero out the FED pile of printed fake money?
And why the Fed cowardly capitulated to the taper-off crowd last September, because the Banks would have pulled liquidity to the bond and equity market.
Now, we have hired a breast feeding dove to lead the Fed. Everyone, I mean everyone knows printing/digitizing will never cease. Look at poor cowardly Bullard telling the markets that the Fed will NOT taper in October. He wants to act like a man. This is now a full-on comedy of PhD know-nothings!!!!!!
They will keep the metals stuffed until through her confirmation, if they possibly can.
The SPY calls, not mandatory for Congress to make public (if not mistaken) up 100%-200% today alone.
What on this rotting, Fed-controlled, disease of a planet would stop the corrupt political 'representatives' from gathering together, telling one another to place their bets, then announcing "we're now willing to negotiate" and bingo...
Holiday jackpot for all.
Ohhh, a light bulb finally went off, after many many years: It's always and only been about one thing: The Money. I mean I realized it was 99% about cash. But no, it's 100% about Almighty Dollar.
This BS "debt ceiling" is nothing but an utterly made up shit show to make millions for congress. No exaggeration whatsoever.
Good work if you can get it,,,and you're a spineless worthless piece of shit.
thanks marathoman, ebworthen, and ricky bobby for the help
the biggest disconnect is the stock market to reality, surging today, lol
So the Banksters work for the FED which works for the US or is it
the US works for the FED which works for the Banksters?
Beside the collateral for derivatives and ramping the whore S&P, why would they lend it! The Uncle Joo gives a nice bps on IOER.
Reminder:
No Joo is ready to lend a goy at near zero. PERIOD
House of Rothschild rules the joos and the joo bankers own america... all facilitated through the Federal reserve and the lack of a gold standard. Bush, Obama, they're just lackies. Bet those Star of David/ Rothschild zionist cunts 'own' Rand Paul too! (heard it here first)
BTW, this is decades old news.
VACATE BITCHES!!!
March 3 (Bloomberg) -- President Barack Obama said falling share prices may mean bargains for investors with a “long-term perspective.”
Obama, who is seeking to boost public confidence in his strategy to pull the U.S. out of recession, spoke a day after stock markets tumbled. The Dow Jones Industrial Average yesterday dropped below 7,000 for the first time since 1997. The Standard & Poor’s 500 Index closed at the lowest level since October 1996.
“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” Obama said at the White House today while meeting with British Prime Minister Gordon Brown on battling the global recession.
March 3, 2009
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBndLi5PmOvc
What did he know and when did he know it?
Hang on aren't excess reserves at an all time high? That could be related to this disconnect.
http://research.stlouisfed.org/fred2/series/EXCRESNS
Discontinued Series? What the fuck? Are these fuckers trying to hide something?
The only banking disconnect I care to see is a banker disconnect, from each his head.
Tell ya who wants to disconnect, those evil babylonians in the Washington District of Criminals.
Pass and spread this news around about the Truckers, Bikers, Vets, and Boaters all going to protest against the rancid wicked horrible evil nasty corrupted putrid stinking murdering warmongering profiteering satanist/luciferic scumbag puss drinking govt criminals. Hopefully, they will arrest some of them too.
https://www.facebook.com/ridefortheconstitution
http://ridefortheconstitution.org/
Get on board everyone. Do your dangdest now to make yourself heard and to stop the tyranny of a runaway babylonian govt that constantly lies to, and deceives the American people. WE ARE SICK AND FARKING TIRED OF ALL THE DARNED CORRUPTION!!! Now is the time to stop the soterobama health care act and to get rid of the DC criminals. ALL OF THEM!! The double-edged Sword of Truth and Justice must be unsheathed to do the right-up and proper job NOW!!!
Just don't look at it.
Like Rooster Cogburn riding his horse into the ground to take care of Mattie's snakebite, BTFD (selectively) until it about to fall over then pull the trigger. Yellen should give it an adrenaline shot to keep it running for a while. It's risky but risk is where the money is. We will not default.
BUY until SNAKE Pliskin shows up....then SELL EVERYTHING!!!!
Deposits are bank liabilities and loans are assets to a bank, right?
Very good reporting. And I wasn't aware of it. Good for you Tyler.
BTFD the United States of America has been conquered by the globalists and the Constitution has been replaced by the will of the elite.
Many have already signed up for a one way ticket to Mars.. I'm headed underground.