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Welcome To The Fed's Theater Of The Absurd
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The world's most powerful central bank is relying on a novelty tune to maintain the hyper-speculative status quo.
Back in the Roaring 1920s, a novelty song entitled Yes! We Have No Bananas (1923) was a major hit. The song made fun of a fruit vendor who answered "yes" to every query--even when he didn't have the requested item--for example, bananas.
Today, in the Roaring Teens, the Federal Reserve has their own novelty tune: yes, we have no rate hikes.
Just like the always-positive fruit vendor in the 1920s who answered "yes" to every question, the Fed answers "yes" every time someone asks if they are indeed going to raise interest rates a smidgen.
Despite their automatic affirmative, we have no rate hikes. The reason why, oddly enough, goes right back to banana vendors--in this case, banana vendors in China, who are speculating on margin (i.e with borrowed money) in China's casino stock market.
The reason why the Fed is wary of raising rates isn't the real-world impact. As I have noted here many times, a quarter-point increase won't torpedo any auto loan or mortgage being issued to qualified buyers.
If a buyer can't qualify for a home loan because rates clicked up .25%, they have no business buying a house anyway--they are not qualified by any prudent lending standards.
As for subprime auto loans--the firms issuing these loans don't care if rates click up .25%--the subprime market world of high rates and high fees is unaffected by a tiny uptick in rates.
Who's affected by a meager .25% uptick? Speculators: every speculator from the banana vendors on the street to hedge funds gambling billions in foreign exchange markets is exposed to massive tidal forces unleashed by higher rates in the U.S.
If rates click up even one-quarter of 1%, vast carry trades are no longer profitable and the huge capital flows reverse. Suddenly, U.S. dollars are scarce and everyone has to dump whatever currencies they were gambling with to get USD. This selling crashes demand for emerging-market and periphery currencies while boosting demand for U.S. dollars. the net result is predictable: the U.S. dollar has gained and the emerging-market and periphery currencies have cratered.
The net result is absolute carnage in emerging market currencies--and as a knock-on effect, in emerging market stock markets as well. China appeared immune to these forces, but the $1 trillion in USD-denominated debt of Chinese corporations is one domino of several that are teetering as even the suggestion of higher rates in the U.S. is reversing capital flows from risk-on to risk-off--not just in emerging markets, but in China, too.
The Fed has lavishly supported speculators on a global scale since 2009. Now it has to sing the absurdist tune yes, we have no rate hikes: yes, the Fed wants to start "normalizing" zero-interest rates, but the moment it does so, trillions of dollars in speculative bets placed in the glory years of quantitative easing (QE) and ZIRP (zero-interest rate policy) go up in smoke, and the mad dash for dollars tramples everything in its path.
In the current Theatre of the Absurd, the world's most powerful central bank is relying on a novelty tune to maintain the hyper-speculative status quo. It would be humorous if it wasn't so tragic.
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Could someone go into more depth about how a tiny rate hike would have dramatic effects on carry trades?
I believe it's due to leverage. The carry trades are done with massive leverage. Think about something like 3X ETF that amplifies moves, carry trades do the same thing since you borrow the carry trade currency at insanely low rates, it lets you take on a lot more exposure for the same servicing cost. This works if you can invest the money elsewhere at higher rates, but if the rates change, it runs the leverage in reverse -- you can't service as much debt, so you have to borrow less, meaning you have to sell off the investments held due to the lower leverage.
Think of a rate hike as trigging the carry trade equivalent of a margin call.
Thanks. Any estimates on how big this iceberg actually is?
Trillions.
Think also of the leverage ratios, too, on what was collateralized. Lots of pressure is in the once considered reliable credit markets in China: Borrow in $'s for nothing, earn bp spread in Chinese debt while pledging that debt as collateral against other EM debt or equity at 60%... not to mention what's happening to the price of the real estate collateral you pledged to borrow the $'s in the first place.
All of this is dramatically worse if we consider if multiples were leveraged using the Chinese equivalents of layered CDSs.
Daisy chain margin calls ensue as we're now seeing with the first line guarantor Chinese shadow banks playing that game with marginal borrowers.
I looked at the math on this the other day - it's astounding.
Borrow 1MM at 5% for a 50k carry -> rated drop by half
2MM for 50K -> again
4MM for 50K -> again
8MM for 50K
In the zero bound rate environment we have leverage goes nearly to infinity (it's like a calculus limit).
Rates go to 0.2% (a tiny increase but still double) your debt service doubles and all hell breaks loose.
Massive waves of default and bankruptcy.
This is the entire idea behind negative rates.
The fed is trapped.
Well since I am so good at selling bananas, buying apple seemed like a logical next step.
no chiquita for you. you go!!!!!
It sounds like you're qualified to start a republic.
nice one. Not sure if some get it but very slick comment.
I get jokes!
https://www.youtube.com/watch?v=Q27YiPRiewg
The cost of borrowing $usd would rise 25 basis points so traders would cover their carry trades. Trades they opened by borrowing $usd then selling it to buy investments denominated in other currencies thathave better returns.
The author of this article is partially correct. First of all a lot of the carry trade is hedged, because the $usd was strengthening vs the currencies it was being sold against. Secondly the emerging markets would love nothing more then to have their currencies weakened to export their deflation off shore.
Their might be some short lived $usd strengthening, but the market selloff will force bond buying, and then a even bigger stampede into PM's. The $usd will get crushed. The hedges on those trades will also unwind, and put pressure on any $usd buying.
As an example; Traders borrow $usd to buy Japanese equity markets. They convert $usd into Yen. Well they hedge the trade by buying calls in usd/jpy to offset the FX losses in the exchange rate. Otherwise their profits would be far smaller when they converted them back to $usd from yen.
Nice explanation Yen. Read this instead of the article above.
Thanks.
if you please --a time for "short lived" ----
That would depend on how severe the equity selloff is, and how the Fed.and other CB's react to it... Probably a matter of weeks.
I wish I had a crystal ball. :-)
A while back we had a story here about big speculators borrowing gold and pledging it as collateral to play the Japanese stock market, another form of carry trade.
Supposedly this was crushing gold and booming Japanese stocks. How would interest rates affect this carry trade?
A while back we had a story here about big speculators borrowing gold and pledging it as collateral to play the Japanese stock market, another form of carry trade.
What kind of of GLD was being "borrowed" then?... Or now for that matter to play the Japanese stock market???
If we're talking paper to PHYSS it's a ratio of (124 to 1)... Do the math at the current ASK...
Nice explanation Yen. Read this instead of the article above.
Beautifully wriitten summary and explanation by Yen -again.
I'm still confused. Why specifically do the traders borrow USD to buy yen to buy Japanese stocks why not borrow some other currency for example Euro? Or for that matter why not just borrow yen?
A Forex trade is the borrowing of one currency to buy another. You are 'short' the borrowed currency and 'long' the one you are buying.
Say you are in a Forex (foreign exchange) trade borrowing dollars to buy whatever. Each day the differences in interest rates must be paid to the other side of the trade. If you used dollars to buy Euros and the base rate for the Euro is .5% but the dollar is .25% then every day you have to fork over the difference (.25%) to the holder of the other side.
Forex trades are often highly leveraged too.
In Forex trading you want your currency (the one you bought) to strengthen and for the interest rates to rise. You want the one you borrowed to weaken and for interest rates to fall.
In every such trade involving dollars as the borrowed element the trade will go against you. You will have to pay higher intyerest payments and the dollar will strengthen. Your trade will be headed in the wrong direction and you will want out.
To get out you will be joining others and the whole currency market will be impacted. Dollars will become more valuable at a time when everyone in the trade will be trying to get them.
The terminology here is not what is used in Forex lingo but the basic ideas are right.
...and it is not just the Forex market, lots of carry trades will be impacted..
Shall they all get Rick Rolled until the end of time!
The reality of what’s driving economic activity and commodity consumption down…and why the Ponzi is failing.
In 2015, the flow of young and core (0-64yrs/old) annual global population growth is approx. 63 million…but only 4 million of that growth is in the “consumer” nations (34 OECD nations + China, Brazil, Russia). The 59 million remainder of the 0-64yr/old growth is in the ROW (“rest of the world”)…India, Indonesia, Africa, and M. East nations that consume relatively little compared to the West.
The flow of OECD + C,R,& B 0-64yr/old populations has fallen 90% from peak and will begin outright declining in the next couple years…and become progressively more negative thereafter. And the ROW 0-64yr/old annual growth will decline year in, year out from here.
Check the link for the demographic reality behind the coming breakdown…
http://econimica.blogspot.com/2015/08/depression-does-not-come-close-to.html
What I’m showing is that growth is not coming back in our lifetimes and using debt to buy time until growth picks up is beyond stupid…it is economic suicide. One of the only ways to protect your savings is likely the constant in the equation where debt is the ever increasing variable attempting to make up for collapsing consumer demand.
When you have 7+ billion people all competing for the limited resources required to maintain a decent standard of living, you don't need "growth" as there is already plenty of demand just to maintain the current status quo.
There is still plenty of demand for real assets and real resources.
Demand for Paper promises(financial "products") and plastic toys... NOT SO MUCH.
Demand is not desire, it is the desire plus the ability to pay. It is in our lifetimes thus far demand has been a function of credit provision, but as you know, we are approaching the Minsky Moment ... the deleveraging will not exhibit time symmetry with the leveraging that necessitated it.
Semantic horseshit. People will work to improve their station in life, real work requires real resources, period.
Laws - this is a flow issue. Look at the flow of a nations core population (15-64yrs/old) vs., say oil. What is clear in nearly every country I've researched is that as the core population growth peaks and begins its decline debt skyrockets and oil consumption collapses...despite total population often still rising.
This was true in Japan, almost all EU nations, US and now same in China. Once core populations flow of growth is broken and certainly when it turns outright negative...demand collapses.
For whatever reason, the flow of core consumers is more important than the stock...or first rule in a Ponzi, always make sure there is a steady flow of new "customers"
Shut down the flow of oil and watch what happens to the current standard of living in the U.S.
Still a big importer despite that "demand collapse".
You got one thing right, the spice must flow.
Indeed, semantics is meaning, and you are using an incorrect meaning.
"People will work to improve their station in life, real work requires real resources, period."
For better or worse; I completely agree. People will also, given the opportunity and a perceived reasonable expectation of a net benefit, try to get something for nothing, or try to pay tomorrow but buy today. In other words, they will use credit. Resources are finite, but credit is too. We are both resource and credit-constrained. The result is no possibility of growth - massive credit expansion was the only thing enabling the illusion of demand. Actual demand, which includes the ability to pay. I'm certain that you of all people would agree that without the ability to pay, there is no commerce - suppliers do not willingly give away their product just because people want it.
consumption and demand is all about flow of key demographic groups rate of change (rate declining and turning to outright declines for15-64yr/olds) layered with flow of credit, wages, savings. Even changes at the margin have massive outsized impacts on consumption and demand...but these are not minor changes.
Collapsing consumer demand is the result of credit rationing which is the result of a shortage of anything that provides a real return (including labor) which is the result of the disappearance of abundant cheap resource capital and thermodynamics.
Population intensifies the effect, it means more people competing for less of everything.
The populations of non-developed countries consume less because they are more credit-constrained and for no other reason.
"more people competing for less of everything." - so, plenty of demand.
"The populations of non-developed countries consume less because they are more credit-constrained" -- Complete bullshit. Perhaps these people should simply keep all their resources for their own development...
What a disingenuous douchebag. America is still enforcing the petrodollar via the barrel of a gun you stupid fuck. We don't ask what these developing countries want in exchange for their resurces, we simply kill them and take what we want for the most part. Especially in the middle east.
Someone's angry.
I merely tell it as it is. I would love to see in my lifetime a large economy attempt to go its own way and impose true Stalinist-degree protectionism. It has never worked. We have North Korea to observe. They use empty threats and counterfeit dollars to attempt to make up for their lack of creditworthiness.
Nowhere and never did I imply or suggest that the system is correct, natural, fair, just, right, or good. The fact that there is only a single country without a privately owned Western-aligned central bank, however, should give you some pause.
Comparatively few of the world's nations were actually forced to accept dollars and very few were forced to accept the industrialization that requires western finance credit and dollars, the WB/BIS/IMF, UN, NGOs, neoliberalism, etc. The initiative was their own. They saw or heard of 1950s American suburbia and wanted in on it no matter the cost. No further explanation conspiratorial or otherwise is necessary.
All humans are biologically lazy, energy conservation is a winning adaptive behavior. Similarly, and I should not need to say it, we did not evolve in an environment with credit and debt. Like carbs, the vast majority if offered simply cannot refuse, the promise of something for nothing is overwhelmingly powerful.
The petrodollar system is not particularly unfair, and Americans are certainly happy to exercise their dollar privilege, but so is everyone else. We are seeing this bear out in real time right now in currency markets, EM capital flight, treasuries, you name it.
Whether you believe it to be natural, political, economical, military, or whatever, the difference in consumption rates is a pure function of ability to gain credit. Credit constraint obvious.
Wall Street and Washington (with a little help from City of London, etc.) control global provision of credit by all means available. Largely non-manufacturing service-oriented consumptive first-world economies are deemed more creditworthy than their opposites.
I already addressed your misunderstanding of demand, which is an extremely common one as us first-worlders have never known a credit-constrained existence - it is simply assumed that credit can be had to enable demand. As you can plainly see, credit-rationing in the first world has begun and policy tools have been proven completely inadequate. ZH covers this in just about every article, though 99% of the commenters haven't connected the dots.
That's a whole lot of mental masterbation. Control of the supply chains is far more important.
History is very clear on precisely what happens when trade stops. Some people will have access to the resources to maintain that high standard of living (consumption), most will not. Same as it ever was. "Credit" is dependent on faith. Once fraud is the status quo, possession is the law and all bets are off with respect to things like "credit" and FIAT.
Good luck with that ph.d. in eCONomics...
LMFAO!!!
Consumption and demand are not solely credit dependant.
I, for one, have no debt. Yet I still demand and consume. Plenty of banks offer me credit, but I dont use it. All of my consumption is preceeded by productivity, and much of it is followed by intoxicity.
You're both pretty close to agreement. In other werdz: TANFL!
The truck never made it...
https://www.youtube.com/watch?v=4Uz_TQbWubs
Well the sick gvt just declared war on the FAMILY, and as of now is (in) trouble, now the family has rights and will present them in court. Be there or be square.
Now seriously think about this folks, don't wonder why countries hate
us, we hate our own citizens, we declare war on our own citizens, if we
do that, what do you think the sick gvt will do to other people, in
non allied countries?
They will declare financial war on all those who don't agree with the
hard line approach, this is what the end of a gvt default looks like,
the next remaining months are to be, HELL ON EARTH.
Are we stilling buying the dips, I forgot?
I'll just leave this here (since drunk posting would require walking over the cafe and drinking), but to the best of my knowledge no one has repealed the Law of Rinse, Repeat (with regard to the actions or idiocy of the elite and the FOMC).
http://www.zerohedge.com/news/2014-10-17/handelsblatt-four-german-banks-...
OK, so before I went out for drinks I packed as many obscure and crass references to both finance and sex into a single post as Money McBags used to, except that the soothing eye candy has been replaced by painful existentialism, theoretical physics, an American fairy tale, and a thought experiment (or few)...
In one sentence- it boils do "Why can't they kick the can again?"
There are two lines of evidence which might indicate that it is actually possible.
1) They've done it before (Rinse, Repeat)
2) There is an esotericism and duality to public financial discourse that is often not appreciated. Just as when adults talk about sex at the dinner table with children present- when serious financiers and economists talk shop on television, a single set of words can have multiple meanings based on one's perspective, and neither perspective is necessarily wrong even though they may appear mutually exclusive.
Thinking that the only two options are that either "I am right and the Fed is wrong" or "the Fed is right and I am wrong" is dangerous, particularly when other options include "both the Fed and I are right" or "both the Fed and I are wrong". For simplicity I'll ignore the option that "both the Fed and I are both right and wrong."
So without getting into the existentialism or theoretical physics (too much more), while drunk posting after 3am... most people on ZH are at least vaguely familiar with Berspankme's Congressional testimony, or at least the choice sound bites such as gold is a "barbarous relic" and subprime is "contained". However, just as there is more to those individual quotes, there's actually more a lot more to his testimony (which very few ever actually read) such as Washington needs to bring the budgets under control, and the Banks need to strengthen their balance sheets, and on, and on.
Taken in their totality, the testimony is Absurdist and evidence of nothing. The traditional prognosis among ZHers is collapse (suicide) but there have been some people arguing for collapse (and for the same valid reasons) since Nixon closed the gold window in 1971, and there are others who have advocated the same ends (collapse) by different means in countless preceding generations. The traditional characterization of the alternative prognosis among ZHers to collapse (suicide) is adeus ex machina from the Fed (transcendence). Transcendence has failed to deliver us as long as suicide as failed to destroy us. By deduction, acceptance of the Absurdism would appear to to be the default solution that we will Rinse and Repeat (again).
If so, what would this future look like? The status quo certainly cannot be maintained indefinitely. Paradigms shift, and nations ascend and descend with the changing of the epochs. I think a certain subset of ZHers will be in Beckett's Hell waiting for Godot to finally deliver suicide, while certain central bankers will be in Sartre's Hell with Huis Clos. However, there is a great undefined and uncertain middle ground between the two extremes (both of which are, literally and metaphorically... Hell).
...
(At least) one of the "work from home" spammer accounts that infest ZH got deleted earlier today and took with it something I posted in the reply chain - that is the primary meaning of "something written earlier which no longer exists in this universe"
"If so, what would this future look like?"
Same as today, only tomorrow's version.
Money McBags was the best! His vulgar and perverted posts were filled with bibles of knowledge and truth. Miss that sick prick!
Money McBags is always here looking out for you and remains as steadfast as janet yellen's gunt. 'Til we meet again, enjoy the tits: http://bit.ly/1dEPDpN
Oooh you Kid!
I always liked the art of Salvador Dali, I just never expected it to represent the markets.... http://www.arts-wallpapers.com/art-wallpaper-org/artist/salvador-dali-ar...
this article is shit. the ffr doesn't affect auto loans or mortgages. in fact the interest rate on mortgages might go down if the ffr went up. there are a handful of reasons i can cite as to why they really won't raise rates but fuck it even the authors of these pieces would be too stupid to put it together.
I believe the author received majority of his facts from cnbc.
1930's: "My shoe shine boy says..."
2015: "My bannana vendor says..."
Speculators LMAO!!!!!!!
i just wonder how long they can keep the fake low inflation numbers theater going
Until the old people on social security starve to death.
They are the ones who have the bananas...so no problemo....
When the voices number enough to call 'LIE!!' on the inflation chicanery, they'll be number enough to call it on the entire Farce. That's when it all comes down man...
The FED simply said they need more info to do a gargantuan hike .25%, as in they waited all semester to start the end of term paper and are now asking for an extension, indefinitely.
There's always money in the banana stand.
Ten cents gets you nuts.
Not Deez Nuts. He won't sell out. Deez Nuts for pres!
always good for a laugh, i tell comics, if youre struggling tell a Uranus joke, I was flying around the solar system last night and I saw Uranus. yeah a little rate hike ripples through the vastly over leveraged part of the economy like a boulder rahter than a pebble in a pond. ultimately these carry trades always find some other avenue but the unwind is tough. i think we worry too much about the fed, in a few years it will be as inconsequential as the labor secretary, whose figures they were linked to.
When all is said and done, there are always temporary reasons not to raise rates. Weekly/daily headlines, etc.
But still the most important basis for the overwhelming/continuing fight between "not raising" and "raising" remains the same (not the only, but the most important):
- Not Raising: Vastly increased cost of debt service.
- Raising: The fact that when the real shit hits, the Fed after "raising" can pretend it still has its original ammunition on hand to act. Which has traditionally been adjusting interest rates to achieve it's dual mandate.
F*ck The Fed. They've already blown it so the above is irrelevant now. Beyond repair, just a matter of when.
hes trading bitcoin.
Life under criminal putin regime can get absurd. But in same time it’s an example how North Korea get to it’s absurd regime. Where everything is upside down and hate propaganda rules the day. I guess Russians are going that direction.
Look, putin regime with it’s propaganda announcing that Western products are banned and should be replaced with local products or imported from other countries. Those Western products that are found in shops are destroyed on site in most bizarre situation – like running over 3 packages of ducks meat and burning 50 ducklings.
Russian officials ‘burn 50 ducklings smuggled across Ukraine border’
And that Russia will survive all sanction even if that means to live without food.
Kremlin hard-liner: Russians would ‘rather starve’ than surrender Putin to Western aggressors
That is what putin regime elite & it’s controlled propaganda telling to Russians.
Now, in same time putin regime elite is buying Western Luxus products
Vladimir Putin’s spokesman in luxury watch scandal; Russian bloggers cry corruption after Kremlin press secretary flashes £400,000 timepiece at his wedding
Travels to Western countries with Western Luxury yachts:
After Wristwatch Scandal, Putin’s Spokesman Grilled Over Luxury Yacht
Sends their children to study in Western schools and lives in Western countries:
Educating Their Children Abroad Is the Russian Elite’s Guilty Secret
They don’t use Russian medical services but instead for some reason they choose Western medical treatment.
Russians Should Show Mercy to Kobzon
Of course they can offered it because they steal money from Russians 24/7
16 Eye-Popping Examples Of Alleged Corruption At The Sochi Olympics
Russia Awards Lucrative Crimea Bridge Contract to Putin’s Crony
In normal country this would not be possible as people would protest against stealing their money and for these double standards putin regime lives in. But under putin regime rule – there isn’t such problem for elite because criminal putin regime just like hitler is in control over mass media in Russia:
How the Media Became One of Putin’s Most Powerful Weapons
And putin regime propaganda even attacks Western world:
Bad news for Putin as support for war flags beyond Russia’s ‘troll farms’
Woman who sued pro-Putin Russian ‘troll factory’ gets one rouble in damages
So here you go – people in Russia is living in crazy world under putin regime hate and lies propaganda. I just hope they will wake up before they are not led to North Korea style regime. But for one thing I am sure – there will be revolution in Russia. I just hope people of Russia will win it – not the corrupt elite.
Yeah, so what does this have to do with the price of sparkplugs?
Well here we go. Blame it on the speculators.
Ok so when does Bernanke go to jail?
My favorite pick for the Fed theme song:
“Is That All There Is”
https://www.bing.com/videos/search?q=is+that+all+there+is&qpvt=is+that+all+there+is&FORM=VDRE
Well, um, ... I agree with what CHS is trying to say, I think, but I'm not sure I much like what he actually did say. If rates bump up, actually a few lower-qualified borrowers do get squeezed out. Does it matter? Um, that's harder to say. The Fed's econometric models are apparently pretty continuous, so they think it matters to some basically linear degree, so on these points CHS is wrong.
But where I agree with CHS (so maybe he's right, or maybe we're both wrong) is that this shouldn't matter to the Fed, because of the fundamental damage being done to the US economy, world economy, and world political environment by ZIRP. They kind of know that, but I think they have carefully omitted it from their quantitative models.
And that's where they are now, blind piano player in a whorehouse, can't stop playing even when the place is on fire.
Seems clear we should have harsh words for the FED and it's manipulation. They are only serving banks and giant corporations without really admitting the damage to Federal Govt due to no check on it's spending or wealth transfers to corporations... and certainly the FED is no serving households.
"The Fed has lavishly supported speculators on a global scale since 2009. Now it has to sing the absurdist tune yes, we have no rate hikes: yes, the Fed wants to start "normalizing" zero-interest rates, but the moment it does so, trillions of dollars in speculative bets placed in the glory years of quantitative easing (QE) and ZIRP (zero-interest rate policy) go up in smoke, and the mad dash for dollars tramples everything in its path."
This is very silly.
Malinvestment & Moral Hazard are not new concepts. Why the hell should households give a damn about the carry trade. I get that we have social programs for the poor, but that doesn't mean we should ignore the lack of good paying jobs and safe income from interest on savings... and the risk of banking collapse destroying our wealth.
Seems like we are in a number of bubbles and too many are fixated on them instead of facing Economic and Banking Reality in the form of weakness, civil unrest, social agitation, and the 'gaming' of our banks that will lead to a new crisis.
http://www.zerohedge.com/news/2015-08-19/there-no-other-end-bad-one-its-... (Nice Graphs and Analysis)
World's most powerful central bank is PBOC, not the Fed. PBOC can walk the walk, levitate markets and set shorts to work in chain-gangs. Feds are jaw-boning pussies. Who's afraid of the Big Bad 0.25% hike?
It appears that the Fed is sticking its toe in the water on the question of raising rates. For many months, the interest rate on short term treasury bills was at zero or 0.01 percent. In just the last week, three and six month t-bills have awoken and are trending slightly higher. Six month bills are now quoted at 0.20 percent. It appears that the FOMC trading desk at the New York Fed is back in business. Movement has also occurred in the Federal Funds market, that in recent years has become totally moribund. It would be interesting to know what level of interest rate the Fed is currently paying on excess reserves (which includes the coin and currency in the vaults of commercial banks), and what it intends to do with it.
You can't raise rates when the default is at the end of the plank, now start walkin sucker.
"As clearly articulated by the Federal Open Market Committee (FOMC) in its Policy Normalization Principles and Plans, the Federal Reserve intends to use the payment of interest on excess balances to move the federal funds rate into the target range established by the FOMC."9--page 7
"The Board is publishing final amendments to Regulation D to facilitate the transmission of monetary policy through the rates of interest paid on balances of eligible institutions at Reserve Banks by permitting interest payments on certain balances to be based on a daily rate rather than on a maintenance period average 11 rate. The Board believes that these amendments should help to enhance the role of such rates of interest in moving the federal funds rate into the target range established by the FOMC."--page10&11
(5) The rates for IORR and IOER are: Rate Effective IORR ¼ percent 12/18/2008 IOER ¼ percent 12/18/2008--page 15
Published on April 13(13, of course!).
From; http://www.federalreserve.gov/monetarypolicy/files/bcreg20150618a1.pdf
"The final rule is the same as the proposal that was published on April 13. It will become effective on July 23, 2015, the beginning of the first reserve maintenance period more than 30 days after publication in the Federal Register. The Board's notice is attached."
From; http://www.federalreserve.gov/monetarypolicy/20150618a.htm
It looks like they'll ramp up rates and sell their Treasury holdings to the foreign 'stampeders'.Thanks for the info, Dave. I was not aware that the Fed was paying interest on both required and excess reserves of the commercial banks. I was always puzzled by the apparent contradiction between the expansion of money by the QE's and the Fed's (new) offer of interest on reserves of the commercial banks. It now becomes more clear that the QE's were targeted at the housing market where, with the help of speculators, house prices were prevented from falling precipitously. But, of course, corporations embarked on their buy back programs for the benefit of their managers, while prejudicing the future solvency of their own corporations. It remains to be seen whether the Fed can manage short term rates by manipulating the interest it pays on reserves, rather than its traditional operations in the short term treasury market, or as a suppliment thereto. It will also be interesting to see whether the Fed can maintian its own solvency in the face of these payouts to its friends in the commercial banks. I have heard rumors to the effect that the Fed may "call" for a capital infusion from its "stockholders."
Guillotine the Fed. Audit the heads.
Zion is a scheme, not an ethnicity.
We audited the Fed, they don't have any money___, only fiat money which is then translated into dollars. Timers bitches, the end is near, and I mean NEAR.
I said, "Audit the heads."
Whatever may or may not be in the Fed is irrelevant.
If you arrest the fiend that mugged you, whether your property is still in his possession is immaterial to bringing him to Retribution for his crimes against you..
It is the heads that need to go.
Zion is a scheme, not an ethnicity.
Weren't interest rates meant to be going up in 2013 then 2014? Whats taking so long.. lol
Are we still predicting dates? Ok..hmmm...raise rates on Friday, issue QE on Monday. Right? Soooo right! Now, which Friday?
"This selling crashes demand for emerging-market and periphery currencies while boosting demand for U.S. dollars"...
"D-E-F-L-A-T-I-O-N".
"Suddenly, U.S. dollars are scarce and everyone has to dump whatever currencies they were gambling with to get USD."
Thank you. I found myself debating a FED shill over at CNBC over this point. He refused to even acknowledge it's existence.
"It would be humorous
if it wasn't so tragic."
Human civilizations NECESSARILY operate according to the principles and methods of organized crime, because they are NECESSARILY controlled by their murder systems, which become the most socially successful through being the most deceitful and treacherous. I emphasize that there ARE, and MUST BE, some death control systems, in which the murder systems are the most extreme manifestations. Those are the deeper reasons for how and why we appear to be living inside of Wonderland Matrix Bizarro Worlds.
The existing political economy is based upon governments ENFORCING FRAUDS by privately controlled banks. The Federal Reserve Board is the leading National King of Fraud, operating inside of the globalized systems wherein the Bank of International Settlements is the King of Kings of Fraud. Those political problems are way more profound than those who can continue to believe in false fundamental dichotomies, and the related impossible ideals, are willing and able to face. Those who are able to continue to think using those old-fashioned DUALITIES are then able to rely upon Hanlon's Razor, to interpret the apparent "absurdities" as due to some levels of incompetent stupidities, and therefore, are then able to promote bogus "solutions" which do not face what the real problems are: MONEY IS NECESSARILY MEASUREMENT BACKED BY MURDER.
Human beings have developed systems of artificial selection which were driven by natural selection pressures. Those have become INTENSELY PARADOXICAL, due to their social successfulness becoming NECESSARILY based upon being able to back up lies with violence. Human history has been primarily enabled by progress in physical science, which was channeled through political systems that manifested the principles and methods of organized crime on larger and larger scale, at roughly overall exponential rates.
Welcome to tipping points, where those tides turn ???
The Federal Reserve Board FITS inside overall history,
as stated by historian Carroll Quigley:
"powers of financial capitalism
had another far-reaching goal,
nothing less than to create a
world system of financial
control in private hands
able to dominate the
political system of
each country and
the economy of
the world as
a whole ..."
That system was "to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements. ...The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. ... It must not be felt that the heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up, and who were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks."
Central bankers work like organized crime works.
After more fully facing those FACTS, "we should" start using more UNITARY MECHANISMS to understand how and why those are the FACTS, and then, propose solutions which are consistent with how and why THOSE ARE THE FACTS. However, instead, authors like Hugh-Smith are able to continue with their relatively superficial analyses, which then enables them to continue to promote their relatively superficial "solutions," which are bogus, because they usually NEVER go past their presumptions based on Hanlon's Razor.
We do NOT live inside of a Wonderland Matrix Bizarro World by accident. Furthermore, it is NOT solely due to the ruling classes that we are living inside of that Wonderland Matrix Bizarro World. Rather, it is due to the NECESSARY NATURE of the death control systems that we are living inside of a social situation that appears as: "It would be humorous if it wasn't so tragic."
The appearance of the "Theatre of the Absurd" is due to human beings and civilizations operating as entropic pumps of energy flows, which MUST match the principles and methods of organized crime. The history of successful warfare was based upon backing up deceits with destruction, which then gradually morphed to become the current political economy based upon governments ENFORCING FRAUDS by privately controlled banks.
The Federal Reserve Board is the American NATIONAL KING OF FRAUD, inside of a globalize civilization controlled by the KINGS OF FRAUD. Their social successfulness depends upon the vast majority of people having been conditioned to not only not understand that, but moreover, feeling that they do not want to understand that. Inside the context where there is almost nothing but the core of organized crime, dominated by the best organized gangsters, the banksters, there is simultaneously almost nothing surrounding that which is publicly significant than layers of controlled opposition.
"The absolute best controlled opposition is
one that doesn't know they are controlled."
-- Cognitive Dissonance
Of course, that applies to almost everyone whose material is published on Zero Hedge, while even more so on mainstream media. There tends to be deliberate ignorance and denial of deeper reasons regarding how and why the FACTS are that entities like the Federal Reserve Board are due to triumphantly runaway, organized crime gangs, having created situations whereby governments ENFORCE FRAUDS by privately controlled banks. Those deeper reasons are that MONEY MUST BE MEASUREMENT BACKED BY MURDER.
Social systems based upon ENFORCING FRAUDS require that those systems deliberately ignore the principle of the conservation of energy as much as possible, as well as misunderstand the concept of entropy in the most absurdly backward ways possible.
Thus, it is gross understatement to merely state that:
"Welcome To The Fed's Theater Of The Absurd."
The degree to which our civilization has become a Wonderland Matrix Bizarro World is several orders of magnitude more so than those who can continue to operate within taking for granted most of the biggest bullies' bullshit world views. What actually exists now are globalized systems of electronic monkey money frauds, backed by the threat of the force from apes with atomic bombs. The human artificial selection systems have developed the most extreme contradictions possible, due to natural selection pressures driving social successfulness to become based upon backing up deceits with destruction, which the morphed into ENFORCING FRAUDS.
While that is obviously the case, to anyone who bothers to look at the FACTS, the deeper reasons regarding how and why those are the FACTS tend to not be admitted and addressed by those who continue to want to use old-fashioned DUALITIES, rather than start using more UNITARY MECHANISMS regarding that. All of those who continue to rely upon old-fashioned false fundamental dichotomies, then also continue to promote bogus "solutions" based upon impossible ideals, despite that those impossible ideals actually make the opposite happen in the real world.
Those who continue to think by presuming DUALITIES continue being forms of controlled opposition, which is why their analyses continues to be too superficial, and their suggested "solutions" too superficial in matching ways. Meanwhile, the debt slavery systems operated by the KINGS OF FRAUD continue to automatically drive their numbers towards becoming astronomically amplified debt insanities, which therefore threaten to provoke death insanities, because those debt controls were always backed by the death controls.
Those who do not admit and address those FACTS continue to indulge in the superficial analysis based upon presuming Hanlon's Razor is correct, despite that doing so requires ignoring an overwhelming abundance of evidence to the contrary. Of course, after doing that, then those kinds of intellectual indulgences also enable those who do that to not have to admit and address the deeper issues are NECESSARILY the death control systems.
Thousands of years of human murder systems being most successfully done through the maximum possible deceits and treacheries have created a civilization which appears to be a Wonderland Matrix Bizarro World, based upon ENFORCING FRAUDS, which more and more suffers from the underlying issues that being able to enforce frauds never stops those frauds from still being false, and therefore, the more that civilization becomes controlled by systems of ENFORCED FRAUDS, the more psychotic that civilization becomes.
The most INTENSE PARADOXES with respect to the combined human money/murder systems are due to the degree that those aspects of the artificial selection systems are NECESSARILY operated by the best available professional liars and immaculate hypocrites, which, of course, applies to those operating the Federal Reserve Board. Furthermore, there were valid reasons for how and why natural selection pressures drove the development of those kinds of artificial selection systems.
Various articles republished on Zero Hedge, like
Why Are So Many People Freaking Out About A Stock Market Crash In The Fall Of 2015?are about the debt slavery systems driving through debt insanities, which threaten to provoke death insanities. However, by and large, one almost NEVER encounters any genuine solutions being publicly presented, since those MUST be based upon developing better death control systems to back up better debt controls, which might emerge through those situations where the debt insanities have provoked death insanities.
What actually exists are the dynamic equilibria between different systems of organized lies operating robberies, inside of which entities like the Federal Reserve Board have become the American National King of Fraud, whereby those frauds enable symbolic robberies. That NECESSARILY exists because human beings both individually and collectively operate as entropic pumps of energy flows, and that NECESSARILY developed to become deliberately misunderstood in the most absurdly backward ways possible.
It is NOT any accidental mistake that one may state:
"Welcome To The Fed's Theater Of The Absurd."
& "It would be humorous if it wasn't so tragic."