This page has been archived and commenting is disabled.

December 16, 2015 - When The End Of The Bubble Begins

Tyler Durden's picture




 

Submitted by David Stockman via Contra Corner blog,

They are going to layer their post-meeting statement with a steaming pile of if, ands & buts. It will exude an abundance of caution and a dearth of clarity.

Having judged that a 25 bps pinprick is warranted, the FOMC will then plant itself firmly in front of the great flickering dashboard in the Eccles Building. There it will repose to a regimen of “watchful waiting”, scouring the entrails of the “incoming data” to divine its next move.

Perhaps the waiting won’t be so watchful as all that, however. What is actually coming down the pike is something that may put the reader, at least those who have already been invited to join AARP, more in mind of that once a year hour-long special broadcast by Saturday morning TV back in the days of yesteryear; it explained how the Lone Ranger got his mask.

Memory fails, but either 12 or 19 Texas Rangers rode high in the saddle into a box canyon, confident they knew what was around the bend. Soon there was a lot of gunfire and then there was just one, and that was only because Tonto’s pony needed to stop for a drink.

Yellen and her posse better pray for a monetary Tonto because they are riding headlong into an ambush in the canyons of Wall Street. To wit, they cannot possibly raise money market interest rates—-even by 75 bps—-without massively draining liquidity from the casino.

Don’t they know what happened to the $3.5 trillion of central bank credit they have digitally printed since September 2008? Do they really think that fully $2.8 trillion of it just recycled right back to the New York Fed as excess bank reserves?

That is, no harm, no foul and no inflation? The monetary equivalent of a tree falling in an empty forest?

To the contrary, how about recognizing the letter “f” for fungibility. What all that “excess” is about is collateral, not idle money.

The $2.8 trillion needed an accounting domicile—so “excess reserves” was as good as any.  But from a financial point of view it amounted to a Big Fat Bid for existing inventories of stocks and bonds.

Stated more directly, Wall Street margined the Fed’s gift of collateral, and did so over and over in an endless chain of rehypothecation.

So that’s why December 16th will be the beginning of the end of the bubble. If the Fed were to actually raise money market rates the honest way, and in the manner employed by central banks for a century or two, it would have to drain cash from the system; and it would have to do so in the trillions in order to levitate the vast sea of money it has pinned to the zero bound.

Yet actually raising money market rates the honest way would amount to the opposite of what has gone before. That is, it would become the Big Fat Offer, triggering a selling stampede in the casino.

The front-running smart money of the bubble’s inflation phase would become a bow-wave of retreat; and the hypothecated chains of collateral would morph into a monetary black hole of margin calls and liquidations.

So the Keynesian monetary plumbers of the Eccles Building will try something truly stupid. That is, they will try to levitate the entire sea of money-like liabilities they have conjured over the last two decades, but especially since September 2008, mainly by paying higher rates of interest to banks on those $2.8 trillion of so-called excess reserves.

Well now. Will higher IOER (interest on excess reserves) cause money market funds to pay more to their long-suffering investors; or cause the repo rate on trillions of government and other fixed income securities to rise in sympathy; or lift the rate on short-term CP and the multiple other forms of wholesale money?

No it won’t. The Fed is fixing to call a rate rise but its preferred tool is powerless to make it happen. The so-called IOER scheme has always been a pointless crony capitalist sop to the Fed’s banking system constituency, anyway.

After all, we do not (yet) pay prisoners to stay in jail, but paying banks on idle reserves amounts to the same thing. Just where were they going?

The truth is, IOER payments were designed to compensate the banks for the regulatory cost of capital required to be set-aside against these assets under the new rules. So the banks got their capital costs subsidized and Wall Street got more fungible collateral in the bargain.

Yet wait until the cowboys on Capitol Hill figure this out. In not too many months down the road, the $100 billion per year of so-called “profit” which the Fed remits to the US Treasury will largely disappear, leaving one of many gapping holes in the Federal deficit that are lurking just around the corner.

That’s because even 100 basis points of IOER would cost $30 billion a year. On top of that there is also the mega-risk that prices of the $4.4 trillion of Treasury and GSE debt owned by the Fed will keep heading south, requiring it to carve out “reserves” from its earnings to offset the balance sheet losses.

The whole maneuver is a world class scam anyway, and indicative of the lunacy which passes for national policy. The Fed’s $98.7 billion of “profits” last year was generated by the $116 billion of interest paid to it by the US treasury and the GSE’s——less a goodly rake-off for system expenses and salaries and for funding contract research by say 85% of the monetary economists in the US who don’t already work for Wall Street.

Capture

Click to enlarge. (Source: The Federal Reserve.)

In any event, Congress will surely blow its top if the Fed uses up this $100 billion “deficit reducer” by paying IOER or other forms of bribes aimed at make pretend interest rate raising.

For instance, another so-called tool to effectuate rate normalization is the TDP or term deposit facility. Under that particular gem, banks may offer cash to the Fed for seven days in return for an interest rate that would presumably be above the money market rate or say 30 bps after Wednesday.

Now isn’t that brilliant! The regulated banks are drowning in excess liquidity—-so sopping up cash seven days at a time will not constrain their ability to lend in the slightest.

Nor would it elevate the money market rate of interest unless the Fed issues a humungous open-ended tender to the banking system to take any and all deposits offered. Exactly thereupon, however, the number of histrionics-filled hearings on Capitol Hill would be limited only be the number of TV crews available to cover them.

It would be perceived as, and in fact would be, a massive subsidy to the banking system. That is, a reward for not lending to main street America.

At the end of the day, the Fed will not be able to bribe the money market higher in a manner that is politically feasible. So it will be forced to repair to the old fashioned recipe——-draining cash from the Wall Street dealer markets.

Even on this matter, however, these Keynesian fools can’t manage to be honest about what they will be doing. They will offer up another tool called RRP or reverse repo; it will be described as an instrument to manage market liquidity in a manner consistent with its measured journey toward normalization.

Folks, RRP is nothing more than selling bonds with your fingers crossed.

Once they get started down this path in earnest, they will either keep rolling the RRPs, which is the same thing as selling down their $4.5 trillion inventory of treasury bonds and GSEs, or they will relent and admit the whole interest rate raising gambit had been a blithering failure.

When the US economy joins the worldwide slide into deflationary recession some time next year, this will all be academic anyway. But in the interim you haven’t seen nothing yet in terms of Fedspeak gibberish and cacophony.

Within no time the hapless 19 Federal Reserve Rangers will be debating about whether they have actually tightened in the first place; and whether any actual liquidity that they drain from Wall Street via TDF or RRP is meant to be permanent or just a short-term market stabilizing maneuver.

This much can’t be gainsaid. The combination of encroaching recession and even moderate liquidity draining moves will be enough to trigger Wall Street fainting spells, like those of this past week, and with increasing amplitude and frequency.

The fact, that the junk bond market is already falling apart and CCC yields have soared back to 17% is not just due to an isolated bust in the shale patch; its a warning that the hunt for yield that massive central bank financial repression triggered in the financial markets is about ready to become a stampede for the exists.

So get ready for the monetary gong show which starts next week.

This week’s Commerce Department report on total business sales and inventories further confirmed that the inventory to sales ratio is now decidedly in the recession red zone. This means that the Fed’s liquidity draining moves will join hands with rising risks of recession.

Can the third great bubble of this century survive a Fed that finally wants to get off the zero bound after its way too late, but can’t do it anyway without a massive crash inducing cash drain from Wall Street? And in the teeth of the next recession to boot?

Yes, the end of the bubble does begin on December 16th.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 12/12/2015 - 22:03 | 6916152 Tallest Skil
Tallest Skil's picture

In the last few years, I have learned, I have watched, and I have waited. Something unfortunate makes me feel that hoping for the Collapse to begin on Wednesday is too optimistic.

Sat, 12/12/2015 - 22:05 | 6916156 WayBehind
WayBehind's picture

Its not over yet. Its just the beginning! Buckle up and enjoy the ride!

Sat, 12/12/2015 - 22:14 | 6916182 Dollarmedes
Dollarmedes's picture

Will they or won't they? Ohhhh! The excitement is too much to bear! Pass the popcorn!

Sat, 12/12/2015 - 22:33 | 6916241 Stormtrooper
Stormtrooper's picture

Yes, don't bogart that joint my friend.

Sat, 12/12/2015 - 22:37 | 6916254 JamesBond
JamesBond's picture

"The next recession"....

I always find it amusing that financial writers continually ignore the fact that only debt has fueled the on-paper GDP numbers; we never left the recession!

I guess this is to be expected from the 'new-math' losers.  Should have gone to Kumon instead of the public school system.

 

jb 

 

 

Sat, 12/12/2015 - 22:49 | 6916286 Stainless Steel Rat
Stainless Steel Rat's picture

We're in the ol' M.C. Escher staircase bubble...

Sun, 12/13/2015 - 03:36 | 6916735 Fish Gone Bad
Fish Gone Bad's picture

NIRP and buy up the Yen to over 123. Markets go crazy and up.

Sun, 12/13/2015 - 09:27 | 6917008 MANvsMACHINE
MANvsMACHINE's picture

How many FOMC meetings has it been now where the expectation was for a 25 bp increase only to be passed on?

Why will it be different this time? Because 2 weeks ago some FED talking head said the conditions are right for it? They say the same thing every time but this time is gonna be different? Why? Conditions are so much better now?

The reason why they won't raise on Wednesday is the same reason why they haven't raised after every meeting for the past 5 years.

My finger is asking to be pulled....

Sat, 12/12/2015 - 22:54 | 6916310 Escrava Isaura
Escrava Isaura's picture

 

 

Stockman (he just can’t help his biases) When The End Of The Bubble Begins

 

Which bubble is he talking about: 80’s? 90’s? 2000’s? 2010’s?

 

Or the coming dollar bubble?

 

Sat, 12/12/2015 - 23:09 | 6916357 nmewn
nmewn's picture

Could be the Noam Chomsky bubble hard to tell ;-)

Sat, 12/12/2015 - 23:19 | 6916373 Escrava Isaura
Escrava Isaura's picture

 

 

Under Chomsky’s Libertarian Socialism that wouldn’t be bubbles and state interventions.

 

Sat, 12/12/2015 - 23:26 | 6916385 nmewn
nmewn's picture

Chomsky is about as Libertarian as I am a Socialist.

That is to say, zero.

Sun, 12/13/2015 - 09:09 | 6916981 giggler321
giggler321's picture

That's a nice name, sounds like a food product, Chomp, Chom - Sky...  hostess should forget snowballs and go with this

Sun, 12/13/2015 - 00:41 | 6916523 runningman18
runningman18's picture

There is no such thing as a "libertarian socialist"; the two philosophies cannot be reconciled. 

Sun, 12/13/2015 - 01:05 | 6916560 Escrava Isaura
Escrava Isaura's picture

 

 

Libertarian socialism … rejects socialism as centralized state ownership and control of the economy, as well as the state itself. It criticizes wage labour relationships within the workplace, instead emphasizing workers' self-management of the workplace and decentralized structures of political organization, asserting that a society based on freedom and equality can be achieved through abolishing authoritarian institutions that control certain means of production and subordinate the majority to an owning class or political and economic elite.

Libertarian socialists generally place their hopes in decentralized means of direct democracy and federal or confederal associations such as libertarian municipalism, citizens' assemblies, trade unions, and workers' councils.

All of this is generally done within a general call for libertarian and voluntary human relationships through the identification, criticism, and practical dismantling of illegitimate authority in all aspects of human life.

 

https://en.wikipedia.org/wiki/Libertarian_socialism

 

Sun, 12/13/2015 - 02:45 | 6916690 Manthong
Sun, 12/13/2015 - 09:25 | 6917003 nmewn
nmewn's picture

Ohhh Escarva, you really need to get some advice from your communist/socialist handlers about posting in the comments section, you purposely deleted/edited the very beginning of the wiki entry, here let me help and watch for the arrows...

"Libertarian socialism (sometimes called social anarchism, left libertarianism and socialist libertarianism) is a group of anti-authoritarian political philosophies >>>inside the socialist movement<<< that rejects..."

...now why would you do that, perhaps because they're socialists first and claiming to be Libertarian second? ;-)

Sun, 12/13/2015 - 13:08 | 6917629 A Nanny Moose
A Nanny Moose's picture

Sounds more like a response to the sudden awareness of the "violence inherent in the system." How would you feel if a small group of oligarchs profited massively from your "profit-less" religion?

Sun, 12/13/2015 - 12:20 | 6917431 fwiw imho
fwiw imho's picture

"asserting that a society based on freedom and equality can be achieved through abolishing authoritarian institutions that control certain means of production and subordinate the majority to an owning class or political and economic elite"

blah, blah blah.   Another theoretical construct created in an ivory tower that exists outside of reality.

Sat, 12/12/2015 - 22:28 | 6916223 two hoots
two hoots's picture

This is the part I wish all would wake up to, it's what keeps these scammers doing the 5 Star life style traveling speaking circuit, paying their buds and in operation with no accountability. They laundry their key stroke $ for real working taxpayer dollars provided by the US Treasury.

"—less a goodly rake-off for system expenses and salaries and for funding contract research by say 85% of the monetary economists in the US who don’t already work for Wall Street."

Sat, 12/12/2015 - 22:30 | 6916224 two hoots
two hoots's picture

..

Sat, 12/12/2015 - 22:43 | 6916265 Escrava Isaura
Escrava Isaura's picture

 

 

Do you need help posting?

 

Sat, 12/12/2015 - 22:50 | 6916293 nmewn
nmewn's picture

Prolly a mobile device, they suck for ZH in my experience.

Sat, 12/12/2015 - 22:53 | 6916307 two hoots
two hoots's picture

Yep, away from the desktop that scripts forever.

Sat, 12/12/2015 - 23:07 | 6916351 nmewn
nmewn's picture

Figured as much, tough surly crowd tonight, be careful ;-)

Sat, 12/12/2015 - 22:52 | 6916298 two hoots
two hoots's picture

No thanks, , seem to be exceeding expectations. Guess that's what is called 100% and ...a bunch more?

Sat, 12/12/2015 - 22:57 | 6916314 Escrava Isaura
Escrava Isaura's picture

 

 

Sorry. I didn't know about mobile. Never use it.

Anyway, you got our attention.

God luck with that thing......mobile.

 

Sun, 12/13/2015 - 01:48 | 6916616 slimycorporated...
slimycorporatedickhead's picture

mobile.. thats going to go over like a led zeppelin

Sun, 12/13/2015 - 13:09 | 6917643 A Nanny Moose
A Nanny Moose's picture

Have cell phones reached your country yet?

Sat, 12/12/2015 - 22:30 | 6916225 two hoots
two hoots's picture

...

Sat, 12/12/2015 - 22:34 | 6916226 two hoots
two hoots's picture

.....

Sat, 12/12/2015 - 22:31 | 6916227 two hoots
two hoots's picture

....

Sat, 12/12/2015 - 22:35 | 6916228 two hoots
two hoots's picture

Guess I was serious?

Sat, 12/12/2015 - 22:37 | 6916256 nmewn
nmewn's picture

lol

Sun, 12/13/2015 - 00:27 | 6916501 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

"...the Collapse to begin on Wednesday..."

I thought it started in September.

Sun, 12/13/2015 - 03:50 | 6916747 OldPhart
OldPhart's picture

2007 or 2008?

Sun, 12/13/2015 - 05:26 | 6916797 Tall Tom
Tall Tom's picture

1929

Sun, 12/13/2015 - 09:14 | 6916991 old naughty
old naughty's picture

many believe it started earlier than 1913 and began executing then in earnest (or dis-honestly)...

so we had a century (102 years to be exact) to learn to deal with it but we didn't...

so we're xxxked.

Sun, 12/13/2015 - 08:54 | 6916959 Borrow Owl
Borrow Owl's picture

The beginning of the Collapse has already happened.

Everything else is just a matter of details and timing.

 

Sun, 12/13/2015 - 13:35 | 6917775 roadhazard
roadhazard's picture

They will not fuck up Xmas. Besides Star Wars starts the 18th. It's all good.

Sat, 12/12/2015 - 22:08 | 6916155 Soul Glow
Soul Glow's picture

The kicker is the Fed needs to implement the poilcy before the statement, thus selling roughly $500B worth of securities the night before the announcement.

They can't make the statement and then say, "Tonight we will sell the securities" because then the front running will leave them with a revenue loss comparitively.  

They will need to sell, and say "Last night we sold".  They are a bank afterall, and the mission of a bank is to make a profit.  This is also the reason why they have balked time and time again.  It's like feinting a punch, or making a pump fake; one tries to catch the opponent offguard.  

Sat, 12/12/2015 - 22:08 | 6916167 nmewn
nmewn's picture

Now the CNBC whiners are crying "There's nothing to say Mr.Yellen will go .25%! We've just gotten conditioned to .25% in increments, it could be just .10 or .15%! Buy stawks!"...lmao!

Babies in clown suits.

Sat, 12/12/2015 - 22:18 | 6916189 scintillator9
scintillator9's picture

Yes indeed, Mr. Yellen could go up to 0.50%, or, why not go full Volcker and hit 15% just to make things interesting.

It would be hilarious to see my savings account interest resemble some of the "default" interest language on my credit card bill statements.

Sat, 12/12/2015 - 22:49 | 6916287 nmewn
nmewn's picture

Yeah I hear ya.

I get a good chuckle out of the "lure" in the mailers they send me..."With your oustanding credit rating we're offering you a 0% rate for (usually 12 months) and 0% on balance transfers!"

Then the fine print that is, in all honesty a little larger than years ago..."AFTER THAT...12.9-18% blah blah blah"...hoping of course that you get the card and rock along for a year AND FORGET and let it start having recurring monthly balance.

I pay mine monthly so I'm like whatever but some people don't and get hung out, which of course opens up the cottage industry of DEBT CONSOLIDATION!

Jeebus, 99% of the time I pay cash and avoid the entire fraud.

Sat, 12/12/2015 - 23:53 | 6916439 Miffed Microbio...
Miffed Microbiologist's picture

We had 20k on our HELOC when we put a new roof on the house. When we had more than 30k in our bank accounts the phone started to ring off the hook from the bank. They wanted to add 100k immediately to our line of credit and a sucker rate for new loans. We laughed hysterically at their proposals and paid of the loan.

The best gift parents can give their children is understanding the dangers of debt and impulse purchases. Their are numerous ways to be enslaved and once in a foothold trap, do you want to chew off your leg to escape?

Miffed

Sun, 12/13/2015 - 01:31 | 6916592 cherry picker
cherry picker's picture

Miffed, you are right, however 'they' are making it extremely difficult to make purchases without financing.  Over here a person has to pay more for a car if paid in cash than through payments, or so it seems.

On the other hand, when I was a kid, homes were smaller and if there were any new cars it was usually people in their late thirties or older who could afford one.  If everyone saved to pay in cash, think about how many would be out of work.  It is a weird time we live in and for those of us who grew up in a different era it goes against our common sense.

Sun, 12/13/2015 - 08:48 | 6916950 FredFlintstone
FredFlintstone's picture

I believe it to be true that they will give you a better deal on the price of a car if they think they are making it up on the terms of a loan. So you negotiate hard plus get it financed and then pay it all back in a month or two.

Sun, 12/13/2015 - 08:40 | 6916937 Agstacker
Agstacker's picture

Be sure to mail back those empty envelopes so they have to pay postage, I do.

Sun, 12/13/2015 - 10:14 | 6917115 Buster Cherry
Buster Cherry's picture

I LOVE doing that!

Sun, 12/13/2015 - 09:33 | 6917020 petolo
petolo's picture

What's a savings account?

Sat, 12/12/2015 - 23:53 | 6916392 herkomilchen
herkomilchen's picture

Selling the day before would be a problem.  Average daily trading volume in treasuries is $500B.  Selling an entire extra day's worth of volume would tank the bond market.

The Fed has no interest in making a profit.  The Fed can't keep profit, has to give it all to the Treasury, so profit is pointless.  But the Fed can print money and is not accountable for however much if it gets lost (whoops!).  So the Fed is incentivized to lose a lot of money to Wall Street buddies.

Tipping off those buddies on when the Fed is buying to intentionally enable them to front run is a key method of how the Fed is able to transfer printed money wealth to the cartel members that own the Fed without the transfer showing up on any financial statement.  Then the governors can retire to enjoy multi-million dollar annual salaries for life from the institutions they tipped off in exchange for giving speeches as a way of cutting the governors in on some of the money they printed.

Sun, 12/13/2015 - 08:42 | 6916943 Agstacker
Agstacker's picture

(c) Exemption From Taxation. Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.

 

These guys piss me off more and more each day.

Sun, 12/13/2015 - 10:51 | 6917187 two hoots
two hoots's picture

Wait, wait, wait....stop right there...what do you mean by:

"The Fed can't keep profit, has to give it "ALL" to the Treasury, so profit is pointless"

The FED keeps about $1,800,000,000 ($1.8B) for operating expenses, petty cash, travel expenses, paying for crap research, i.e their klan.   Then it sends the remaining back to treasury.  Hell, I'd gladly print keystroke money, laundry it with Jack Lew for $1.8B and let him keep the remaining fiat.  All unaccountable, no audit and nothing, yet, to stop it. I'm not envious of their individual success but the collective day to day operation needs the light of day.

Sat, 12/12/2015 - 22:04 | 6916158 nmewn
nmewn's picture

#StawkaPhobia ;-)

Sat, 12/12/2015 - 22:06 | 6916165 lordbyroniv
lordbyroniv's picture

blow jobs and titty fux on me everybody!!!

 

lets go out with a bang !!!11111111

Sat, 12/12/2015 - 22:10 | 6916169 Tallest Skil
Tallest Skil's picture

Sure, you say that now, after the market price of a prostitute's services have collapsed. You're no philandering philanthropist; you're just a market opportunist!

Never mind a degenerate. :p

Sat, 12/12/2015 - 22:38 | 6916246 tom a taxpayer
tom a taxpayer's picture

Breaking News: Grandma Yelling arrested for prostitution

An undercover NYPD officer arrested a 69 year old "Grandma Yelling" prostitute plying her trade in broad daylight in front of the NYSE. The arrest triggered coordinated raids by the NYPD vice squad grabbing hundreds of "johns" in the NY financial district,. In a post-arrest briefing, the undercover arresting officer Harry Hard shook his head and said, "In my 20 years in vice work I've never seen anything this sick. Grandma Yelling keeps promising raises to the Wall Street limp  wieners. Then she doesn't raise them, but they still keep licking her high heels, or even her sensible, comfortable sneakers. I don't get paid to analyze 'em, just arrest 'em." Chief Inspector Frank Luger announced that the NYPD SWAT raid on 200 West Street broke up a world-wide pimping organization (Goldman Sachs aka Gimme Your Pension Fund) and captured the Head Pimp Llyod Blanksarefine. Lugar said the two year sting operation was ultra secret and "we even didn't tell our federal friends because one of them law dogs might open his big yap in a bar  with a NY Times cub reporter cutie."

Sat, 12/12/2015 - 22:14 | 6916180 A Lunatic
A Lunatic's picture

A .25 rate hike is hardly the end of the world, unless of course you are addicted to free money while talking out the corner of your mouth........

Sat, 12/12/2015 - 22:16 | 6916186 willwork4food
willwork4food's picture

But 50 bp might become noticed.

Sat, 12/12/2015 - 22:17 | 6916187 rsnoble
rsnoble's picture

Taking bets:  crash followed by hike reversal within days and a 2000pt rally on xmas eve.  Anyone? LOL.

Sat, 12/12/2015 - 22:19 | 6916192 rsnoble
rsnoble's picture

Or, no crash, and instead a huge rally resulting into a new high going into xmas based on "things are so fucking great the Fed's were able to raise rates!!!!".

Everyone and their mother is talking this is the end.  Very well could be but I wouldn't bet the house short.

Sat, 12/12/2015 - 23:03 | 6916336 nmewn
nmewn's picture

Anyone short through the weekend is a fool, all it takes is a comment (or no comment at all) to run your stop.

My Saturday Night bet is they'll take every retailers short out first thing (up), then down again and blame it on tax selling at the end of the day...lol.

Imagine that, it's not real until you sell ;-)

Sun, 12/13/2015 - 00:33 | 6916511 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

My money is on:

Bomb scare, meeting canceled, ISIS blamed, Christmas saved, spend, spend, spend, hike in January.

Everybody's happy.

Sun, 12/13/2015 - 09:10 | 6916983 old naughty
old naughty's picture

you are betting on too many horses, only one winner.

Sat, 12/12/2015 - 22:23 | 6916191 FreeShitter
FreeShitter's picture

No rate hike on the 16th or ever again. Nirp will be the next mechanism to further their goals.

Sun, 12/13/2015 - 02:09 | 6916644 duck dodgers
duck dodgers's picture

NIRP confuses me...would someone please explain it to me.

Sun, 12/13/2015 - 02:28 | 6916668 83_vf_1100_c
83_vf_1100_c's picture

  I'm not sure anyone knows. I think it just means the banks get paid by the Fed to borrow money.

Sun, 12/13/2015 - 05:53 | 6916823 nosam
nosam's picture

NIRP how banks purple nirple depositors.

Sun, 12/13/2015 - 09:12 | 6916952 Arnold
Arnold's picture

This is the clearest explanation I could find.

As far as ramifications of the policy, it is a crapshoot (see Denmark).

The Federal Reserve is having a difficult time overcoming bad numbers and inertia to lift off of Zero for their clients, Nirp can be somewhat beneficial to the clients when there is no economic momentum.

And of course a net negative to us working, saving folks.

 

I woke up this morning and realized that I am loosing (say) 2% of every dollar I deposit in my bank.

To heck with that, I'm going to spend that dollar on something that gives me some return.

I think I'll buy stocks (you pick'em real estate, vehicle, other people's debt, etc.).

Factoring in the Federal Reserve Bad inflation numbers , you were already loosing money  by depositing dollars in the banking system, at pitiful interest rates.

I am not sure why any Award Winning Economist would think that Nirp would stimulate the economy, when Zero was only effective in narrow sectors.

 

http://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp

Sat, 12/12/2015 - 22:21 | 6916198 deKevelioc
deKevelioc's picture

Yes, the end of the bubble does begin on December 16th.

Certainly hope so.


Sat, 12/12/2015 - 22:22 | 6916201 Bryan
Bryan's picture

"The Fed cannot and will never raise rates."

Sat, 12/12/2015 - 22:24 | 6916209 DaveA
DaveA's picture

They've kept this swindle going far longer than any sane person thought possible; they'll keep it going a few more years. Then what?

We've seen many countries collapse before. The currency becomes worthless, skilled professionals flee, and the masses starve as the food they would have eaten is instead sold to people who can still pay for it.

But what happens in a global collapse? Where does all the wealth go, to Mars? How can e.g. food become unaffordable if there's no one outside the collapse zone bidding against you for it?

Sat, 12/12/2015 - 22:54 | 6916309 robertocarlos
robertocarlos's picture

If you can't pay for it the farmer pours it down the drain or burns it.

Sat, 12/12/2015 - 23:31 | 6916395 DaveA
DaveA's picture

It's always better to be producing than not producing. E.g. the Saudis don't destroy their oil or even leave it in the ground when the price collapses; they pump even more to try to recover their old income.

Those who keep their farms operating will eat, and those who keep producing something farmers need will eat, and so on. And those who keep inner-city Obama voters confined to the inner city so they don't fuck shit up, will eat.

Sun, 12/13/2015 - 06:34 | 6916839 Tall Tom
Tall Tom's picture

When you can no longer afford to purchase that which is needed to continue producing then your production stops.

 

The food will rot in the fields as the cities burn up during the riots.

 

The Death Spiral is a RECURSIVE FUNCTION. It's form is Exponential. The outcome occurs as a direct cause of Compoind Interest and Modern Banking,

 

(Don't you like those Mandelbrot Fractals?  When the Boundary Condition is blown then they do not work.  But there is some beauty in death, It is fascinating after all...In 2008 the Boundary Conditions were blown. This is a ZOMBIE ECONOMY.)

 

http://natureofcode.com/book/chapter-8-fractals/

 

Another fundamental component of fractal geometry is recursion. Fractals all have a recursive definition.

 

Exponential Growth is followed by an Exponential Collapse. That is the Natural State of affairs. You can only delay Natural consequences for a time.

 

But nobody...NOBODY,,,dances for free.

 

Isn't that horrifically beautiful?

Tue, 12/15/2015 - 01:44 | 6924747 DaveA
DaveA's picture

In a barter economy the farmer is king; he buys his supplies with food or promises thereof. The useless eaters in the cities, employed in make-work service-sector jobs or just collecting welfare, will be eating out of dumpsters. But the real, i.e. food-producing, economy will continue to function, though possibly at reduced capacity.

I realized this when I saw a news story about a Russian prison camp. In a country that suffered *two* recent hyperinflationary collapses (1993, 1998, and another now), one convict was planting a field of barley not by hand but with a 20-foot-wide sowing machine!

Sat, 12/12/2015 - 22:25 | 6916215 Amish FinEng
Amish FinEng's picture

You English and your fucking bubbles.

When are you going to get your shit straight?

Sun, 12/13/2015 - 01:36 | 6916600 sunny
sunny's picture

When the Vatican announces that the Pope is pregnant.

Sun, 12/13/2015 - 03:56 | 6916751 OldPhart
OldPhart's picture

Hard to happen when the Cardinals and Preists are pounding the wrong hole.

Sat, 12/12/2015 - 22:26 | 6916217 Jack Oliver
Jack Oliver's picture

FED has ZERO credibility - ZERO is where it will remain !

Sat, 12/12/2015 - 22:40 | 6916260 Escrava Isaura
Escrava Isaura's picture

 

 

Fed is fighting for dollar hegemony—to impoverish the rest of the world.

 

Sat, 12/12/2015 - 23:13 | 6916364 nmewn
nmewn's picture

Thank goodness the Chi-Coms are fighting back!

Sat, 12/12/2015 - 23:27 | 6916390 Escrava Isaura
Escrava Isaura's picture

 

 

They are.  But, China’s biggest challenge is yet to come.

 

It’s when Russia goes down fighting two wars in the Middle East and on its borders.

 

While Russia’s, make that the word most precious prize, oil, is sold below $30 dollars a barrel.

 

Which is good to China.

 

China will be in a conundrum. And Russia in a no win situation.

 

Will China back Russia?

 

Sun, 12/13/2015 - 01:10 | 6916567 scaleindependent
scaleindependent's picture

THAT is the real question, isn't it?

 

What will China do when it comes down to it.

On one hand, if they support Russia then they will lose its' biggest market, the USA and EU.

If they support the US, then they may get a chunk of Russia when its all said and done, as Russia will be partitioned off. But if they do then they will be vassals of the US.

 

Hmm... Choices.

Sun, 12/13/2015 - 02:04 | 6916635 duck dodgers
duck dodgers's picture

The kings of the earth may make plans, but God will do what he wants.

Sun, 12/13/2015 - 09:09 | 6916979 old naughty
old naughty's picture

The kings of the earth already made plans and executing them.

god (which one?) don't have to do anything because it's all our fxxk-ups; only we need (and should) fix them !

Sun, 12/13/2015 - 09:41 | 6917038 Arnold
Arnold's picture

Shiva, Destroyer of Worlds.

 

 

http://www.hinduwebsite.com/hinduism/siva.asp

Sun, 12/13/2015 - 10:25 | 6917142 Michigander
Michigander's picture

Oh PLEASE...God will do what he wants! You still hope for that grand unicorn in the sky? Please name on thing that god has done according to the duck dodgers insights. Wait, no wait, let me help you with that.

 61,911,000 Murdered: The Soviet Gulag State 
 35,236,000 Murdered: The Communist Chinese Ant Hill 
 20,946,000 Murdered: The Nazi Genocide State 
 10,214,000 Murdered: The Depraved Nationalist Regime

 5,964,000 Murdered: Japan's Savage Military 
 2,035,000 Murdered: The Khmer Rouge Hell State 
 1,883,000 Murdered: Turkey's Genocidal Purges 
 1,670,000 Murdered: The Vietnamese War State 
 1,585,000 Murdered: Poland's Ethnic Cleansing 
 1,503,000 Murdered: The Pakistani Cutthroat State 
 1,072,000 Murdered: Tito's Slaughterhouse

Yea, there's a god alright...NOT!

Sun, 12/13/2015 - 13:27 | 6917738 DosZap
DosZap's picture

Michigander

Oh PLEASE...God will do what he wants! You still hope for that grand unicorn in the sky? Please name on thing that god has done according to the duck dodgers insights. Wait, no wait, let me help you with that.

 61,911,000 Murdered: The Soviet Gulag State 
 35,236,000 Murdered: The Communist Chinese Ant Hill 
 20,946,000 Murdered: The Nazi Genocide State 
 10,214,000 Murdered: The Depraved Nationalist Regime

 5,964,000 Murdered: Japan's Savage Military 
 2,035,000 Murdered: The Khmer Rouge Hell State 
 1,883,000 Murdered: Turkey's Genocidal Purges 
 1,670,000 Murdered: The Vietnamese War State 
 1,585,000 Murdered: Poland's Ethnic Cleansing 
 1,503,000 Murdered: The Pakistani Cutthroat State 
 1,072,000 Murdered: Tito's Slaughterhouse

Yea, there's a god alright...NOT!

 

Guess you aren't familiar with the term FREEWILL?.MAN did this to MAN, GOD does not intervene until it's HIS timing.The day of recockoning is coming, and from my view pretty damned soon, all the cards are falling in place.

Started with Abel & Cain dude, and it's been balls to the wall since Ishmael was separated from Abram.

Sun, 12/13/2015 - 16:35 | 6918557 duck dodgers
duck dodgers's picture

"GOD does not intervene until it's HIS timing"

The bible says God is always at his work.

Sun, 12/13/2015 - 10:22 | 6917130 Michigander
Michigander's picture

.

Sun, 12/13/2015 - 10:25 | 6917135 Michigander
Michigander's picture

.

Sun, 12/13/2015 - 01:35 | 6916598 McCormick No. 9
McCormick No. 9's picture

It seems the general consensus at this point is that Russia has made a fatal blunder, and backed the loser, Assad. After all, how can the Russkies beat the combined forces of the US, Turkey, Saudi Arabia and the Gulf Monarchies, with all their money and exceptionalism?

Of course, Israel is leading everyone by the nose. So, if you want to see how this could pan out in Russia's favor, that's one place to look. Israel is perfectly capable of doing something really stupid, like storming the Al Aqsa Mosque. Then all the muzzies will freak out and forget about Assad entirely.

Another weak point in the Grand Coalition scheme is Yemen. Those hardy little fuckers could seriously distract the Saudis after a while, as they invade deeper and deeper into Saudi territory.

Then of course there is the economy. China bought commodities like a drunken sailor, now what will it do with them? No-one has any money to buy anything China makes. Oops. Re this article, if the Fed raises rates, that will have a ripple effect on the Chinese bond market. Talk about fraud and corruption. 

Sudden penury coupled with a modern army is a bad mix. That's a lot of pissed-off Chinese.

Well, hard to tell which way it will go, except one thing's for certain. It will get worse.

Sun, 12/13/2015 - 02:11 | 6916650 LoveTruth
LoveTruth's picture

" ..It seems the general consensus at this point is that Russia has made a fatal blunder,... "

Who are those except you say so? I mean credible people.

Russia's government unlike ours is comprised of smart professionals.

Russia won't lose the war they had to enter. Russia is morally right to fight the cutthroats ISIS, most of the west (not the governments) supports her.

The whole world knows now who created ISIS and are pointing their fingers at the right direction - Saudi Arabia, Turkey, Bahrein and Obama's admin.

 

 



Sun, 12/13/2015 - 03:49 | 6916744 Fish Gone Bad
Fish Gone Bad's picture

One really really **small** nuke going off would be a game changer. As much as the world seems to think radiation (at least from Fukushima) is not dangerous, it actually is.

Sat, 12/12/2015 - 22:28 | 6916222 Seasmoke
Seasmoke's picture

I for the life of me don't understand why the week BEFORE Christmas is when they decided to raise, when they should have raised many months earlier or easily could have pushed it into 2016. The timing is just fucking too strange to ignore. People distracted ?? Two 3 day long weekends ??? There is a reason they have this week planned !!!

Sat, 12/12/2015 - 22:41 | 6916262 Escrava Isaura
Escrava Isaura's picture

 

 

Christmas are for the Goyim/Gentiles. Who cares?

 

Sat, 12/12/2015 - 23:00 | 6916329 Usurious
Usurious's picture

why do you have a green face?

 

It's not that easy bein' green
Having to spend each day the color of the leaves
When I think it could be nicer bein' red or yellow or gold
Or something much more colorful like that

It's not easy bein' green
It seems you blend in with so many other ordinary things
And people tend to pass you over 'cause you're
Not standin' out like flashy sparkles on the water
Or stars in the sky

Sat, 12/12/2015 - 23:32 | 6916402 Escrava Isaura
Escrava Isaura's picture

 

 

Because I realized that my face doesn’t reflect an escrava —Brazilian Portuguese for slave— as well as this picture that I came across in the internet.

Sat, 12/12/2015 - 23:15 | 6916367 nmewn
nmewn's picture

I finally looked up the word "Goyim"...so that means you are celebrating Christmas or aren't? ;-)

Sat, 12/12/2015 - 23:47 | 6916432 Escrava Isaura
Escrava Isaura's picture

 

 

Hell no. Family ordeals are something that I gave up while back. I am an introvert. Severe case.

I don’t need people. They get in my way. And they make me exhausted. But, I am very social. My friends love me. But sometimes they hate my bluntness. So I walk I fine line around them, so I keep it always short. In family gather it’s impossible. But they are in Brazil. And I am in DC Metro area. Lucky me.   

 

Sun, 12/13/2015 - 09:30 | 6917014 nmewn
nmewn's picture

DC metro area, never would have guessed...lol.

Sun, 12/13/2015 - 10:36 | 6917158 Escrava Isaura
Escrava Isaura's picture

 

 

Because I am a Classical Liberal—State intervention because people are too stupid. Hedges is a Classical Liberal, but for other reasons.

 

Noam Chomsky believes Classical Liberalism leads to authoritarianism. Unfortunately, Chomsky is right.

  

Sun, 12/13/2015 - 11:16 | 6917253 nmewn
nmewn's picture

Classical Liberals believe in small government and laissez-faire economies, not state intervention into every aspect of everyone's life.

So anyways, you're a DC goyim eh?

I'm reminded of the old Saturday Night Live skit with Belushi and Akroyd playing Tom Snyder...the battered masturbator...lmao!!!

Sun, 12/13/2015 - 00:12 | 6916469 Pomkiwi
Pomkiwi's picture

Gives them the time scope for a bail in and 'bank holiday' if necesary. Expect the unexpected and be prepared for anything is my motto.

Sat, 12/12/2015 - 22:30 | 6916233 Bossman1967
Bossman1967's picture

Hike Wend nirp friday QE4 monday all is fixed Merry Christmas from old yellen & Co

Sat, 12/12/2015 - 22:32 | 6916238 PutinLover
PutinLover's picture

December 16, in all likelihood, is the day the market gets its second wind (except for precious metals, of course - expect to see Silver Eagles added to the long list of detritus dispensed at "door buster" events everywhere).

There's nothing fundamentally wrong with the economy, something Zeroes have had a difficult time learning.

Sun, 12/13/2015 - 10:14 | 6917112 Michigander
Michigander's picture

I kinda like Putin too, right now. Other than that, you're dumber than a box of rocks.

Sun, 12/13/2015 - 11:38 | 6917305 AGAU
AGAU's picture

I wouldn't even take the stupid pet rocks if they were giving them away, these barberous relics aren't even backed by anything.

Sat, 12/12/2015 - 22:33 | 6916242 Moccasin
Moccasin's picture

Optimism and pessimism are self fulfilling prophecies. It is aways a matter of timing. 

Sat, 12/12/2015 - 23:25 | 6916384 yellensNIRPles
yellensNIRPles's picture

I've learned enough at this point that I'm optimistic about my pessimism. It was the previous lack of understanding combined with pessimism that used to bother me.

Sat, 12/12/2015 - 22:41 | 6916261 Milestones
Milestones's picture

Kinda like the plot of Hemmingways " For Whom the Bell Toll" ---It tolls for thee.

Milestones

Sat, 12/12/2015 - 22:42 | 6916264 robertocarlos
robertocarlos's picture

Bugs Bunny cartoons are now verboten. They are rascist.

Sun, 12/13/2015 - 01:39 | 6916603 Proofreder
Proofreder's picture

Wascist, you idiot!

Sun, 12/13/2015 - 07:40 | 6916886 ayyy lmao
ayyy lmao's picture

Wascally wascist, doc.

Sun, 12/13/2015 - 09:47 | 6917056 Arnold
Arnold's picture

Between Daffy and Elmer, the Speech Impediment Foundation should have shown outrage before this.

Sat, 12/12/2015 - 22:52 | 6916297 Canadian Made
Canadian Made's picture

Dec 16, Fed increases, makets rally, PMs down, Fed holds , markets rally, PMs down. 18th and 19th, now thats going to be more interesting. tick tock

Sun, 12/13/2015 - 04:00 | 6916755 OldPhart
OldPhart's picture

PMs down?  With certainty...just bought a pound of eagles.

Sat, 12/12/2015 - 22:57 | 6916316 InnVestuhrr
InnVestuhrr's picture

I believe that one of the several major reasons why the FED does not want an independent public audit is that they have a MUCH HIGHER level of exposure to the USD that they swapped/exchanged/loaned to foreign central banks and commercial banks than the market thinks,

AND

that a very large amount of these "euro-dollars" have been loaned out in developing countries in USD denominated loans to get higher yields.

Sun, 12/13/2015 - 13:39 | 6917786 Yes_Questions
Yes_Questions's picture

SHISH!

Sat, 12/12/2015 - 23:00 | 6916326 harrybrown
harrybrown's picture

Zionist jews will do what is in jews best interest...Right Mr Yellen Co...

Sat, 12/12/2015 - 23:00 | 6916327 Cabreado
Cabreado's picture

Lies and obfuscation will work for a while longer, there is nowhere else to go anyway.

What a shame...
what to do with all this artificial wealth, while nobody's minding the store.

Sat, 12/12/2015 - 23:06 | 6916332 earleflorida
earleflorida's picture

nothing that a savant induced quant can't get his mind around[?], as in a isoperimetric problem solving bubble buster...             https://math.berkeley.edu/~hutching/pub/bubbles.html

 

Sat, 12/12/2015 - 23:04 | 6916340 DOGGONE
DOGGONE's picture

2 charts that are easily clear to most people!
http://showrealhist.com/yTRIAL.html

Sat, 12/12/2015 - 23:21 | 6916375 buzzsaw99
buzzsaw99's picture

oh please. the fed isn't going to raise rates or do any of that other ridiculous bullshit.

Sat, 12/12/2015 - 23:27 | 6916389 trueFacts
trueFacts's picture

the FED wants everybody to default, ...especially wall street and corporations. in the end game, the only thing that matters is who gets ownership of real things after all the paper is worthless.  senior creditors win, even though they may be crying the sky is falling (when they really want the sky to fall).  this is why the CEOs have been leveraging to the hilt, secretly preparing the end game for their creditor ovelords. the paper is worthless, ...the ownership of the oil, gas, farms, water, ships, and factories is what really counts when the game ends ...and only one chair remains in musical chairs.   it is just a matter of when, not if.  IMO

Sun, 12/13/2015 - 01:09 | 6916564 tricorn teacup
tricorn teacup's picture

When paper becomes worthless ownership may revert to whoever can back a claim by force of arms.

Sun, 12/13/2015 - 03:51 | 6916749 Lurk Skywatcher
Lurk Skywatcher's picture

Its a shame then that most forces will only fight if they are paid in paper. A force that fights for a promised reward after death however...

Sun, 12/13/2015 - 09:25 | 6917004 Borrow Owl
Borrow Owl's picture

Those who can make you believe absurdities can make you commit atrocities.

                                                     -- Voltaire

 

Sat, 12/12/2015 - 23:28 | 6916394 yellensNIRPles
yellensNIRPles's picture

Maybe we raise rates, maybe we don't... but eventually you get to see our NIRPles. 

~YellensNIRPles

Sat, 12/12/2015 - 23:59 | 6916447 luna_man
luna_man's picture

 

 

I hope the CRIMINALS raise it!...Just to see if the markets, notice.

 

will stay "short" any how

Sun, 12/13/2015 - 00:58 | 6916550 bluskyes
bluskyes's picture

When someone survives hundreds of rounds of Russian Roulette - you have to ask if there ever was a bullet in the chamber.

Sun, 12/13/2015 - 01:54 | 6916625 JamaicaJim
JamaicaJim's picture

Yeah Yeah...

Never underestimate the Powers That Fuckin Be....

This shit show - however- is gonna get damned interesting in the up comin New Year...

Long Newman's Own Picture Show Popcorn....and a Barcalounger

Sun, 12/13/2015 - 02:01 | 6916632 scatha
scatha's picture

Stockman, truly understands what insane shit FED got itself into only to cover butts of its cronies and political stooges. But he misses one major point.

The global capital markets, due to very actions and policies of FED, is now so concentrated that can be truly manipulated by the remaining few players who tell FED what to do and how to arrange things to cover their asses. Nd they are moving they capital around as I write.

And hence what it will look as an instability of the markets due to FED moves in reality is a choreographed move to steal the wealth from remaining independent investors/PE/hedge funds with wealth about $100-$1000 millions and massive retirement funds that will be starved on collateral to keep their egregious bets which were forced upon them by ZIRP.

This coming market instability however will be a smoke screen for massive hold up of the savings of productive part of the society and cutting welfare state, both holding the only surviving bottom of the real economy about to be crushed to the abyss.

Without exaggeration FED provide cover story to genocidal policies of Wall Street oligarchs against population.

More on that can be found at:

https://contrarianopinion.wordpress.com/economy-update/

Sun, 12/13/2015 - 02:20 | 6916660 enloe creek
enloe creek's picture

How come no one caught the warning from San bernadino? It was a Christmas party.  They gotta be thinking about christmas. Parade of roses maybe too

Sun, 12/13/2015 - 04:25 | 6916770 DeusHedge
DeusHedge's picture

Despite not being sure one way or the other whether using gdp or supply and demand as an endogenous variable is the correct route, the public school system and affirmative action has served me well. I can add and subtract, and my presence here is justified, read a concise guide to economics it's an excellent book. Obviously people here are near-professional financially, but I'm putting my money in SDOW. Hoping i don't get sued... not literally

Sun, 12/13/2015 - 05:00 | 6916786 Percy Crump
Percy Crump's picture

Yes the rates will be raised starting with .50%  .....low interest rates work both ways, and banks think they aren't making enough money on 4% (and less) loans.

Rates will be raised back to normal (about 5%) within the next 4 years.  Fed knows that QE is/was a failure.

As the expression goes....'hide 'an watch.'

Sun, 12/13/2015 - 07:38 | 6916885 XXL66
XXL66's picture

This week S&P will break 2000 direction 1500.

 

Sun, 12/13/2015 - 07:43 | 6916887 pndr4495
pndr4495's picture

Why do I have the sense that what is happening in The United States is that The Federal Resrve System through The New York Fed's trading desk is shearing that part of the population who think they know how to trade, including any robotic system? I believe The Fed has been destroying "money" for a long time in order to accelarate the rate of deflation. Ask anyone who must adhere strictly to a monthly budget if there is any excess disposable income to play around with. 

Sun, 12/13/2015 - 09:30 | 6917013 overmedicatedun...
overmedicatedundersexed's picture

criminal banks, that is all you need know. oh and no controlling legal authority (not the DOJ, SEC or Congress) libor is spelled liebor right?

the criminals (reptiles) have the MSM to tell us all how ,"double double good everything is"  (see the end of "trading places")

fiat is the crime. wealth from nothing. a weapon to buy any value producing business, and they have.

Sun, 12/13/2015 - 10:26 | 6917144 Able Ape
Able Ape's picture

Santa will NOT put Thallium into the punch bowl...No rate rise...

Sun, 12/13/2015 - 10:40 | 6917169 pff136
pff136's picture

Oh, isn't this interesting? Dec. 16. The anniversary of the real Tea Party in American history. hmm.

Sun, 12/13/2015 - 11:34 | 6917291 Herdee
Herdee's picture

I'm just quoting old Ben, "Interest rates will never normalize during my lifetime." I take it that he's telling the truth to the government?

Sun, 12/13/2015 - 13:20 | 6917695 DosZap
DosZap's picture

"How come no one caught the warning from San bernadino? It was a Christmas party.  They gotta be thinking about christmas. Parade of roses maybe too"

 

Wondered that myself, WHAT good is all the NSA, and metadata mining, and emails/texts/phone calls, etc,etc. when FAROOK (was well established with a KNOWN radical Islamist) now in jail, and he and Pancho Villa were planninfg some shit in 2012?.NUMEROUS flags were waving all over 2-3 years prior, SO why didn't all this FANCY GOVERNMENT DATA /PRIVACY SHIT work?.

Do NOT follow this link or you will be banned from the site!