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Everything You Know About Monetary Policy Is Wrong... And Why This Is Very Bad News For Europe
For over a year we have been cautioning that even more than a "liquidity versus solvency" debate, the biggest unspoken factor (though slowly gaining prominence) not only for Europe, although manifesting itself there most prominently, but all across the developed world is the quality of the (deteriorating) asset base, thanks mostly due to the Fed's influence over corporate cash misallocation, and courtesy of the fact that the bulk of credit money creation in the past decade has come via the shadow banking system, broad asset collateral. Last year MF Global taught us that it is this shadow collateral which exists merely in ledger entries between fractional reserve entities (mostly broker dealers and hedge funds), that is now extremely scarce and has to be pledged and repledged in daisy chains of ultra rehypothecation, and which just like robosigning exists until it is actually called for delivery, when the entire collateral<->money linkage falls apart. It is this intersection of traditional monetary liabilities and new shadow aggregates that is completely undiscussed by conventional economic literature, and is why traditional monetary theory is completely helpless in coming up with credible and effective means of returning the world to a growth state. In other words, the Krugmans of the world are absolutely unable to explain how shadow banking should be accounted for when explaining something as simple as the leverage collapse, first in Europe, and then in the US (we have covered the collapse of shadow banking repeatedly, most recently here).
We are delighted that one entity - Aitken Advisors - has put together a presentation for all those who take their Econ 101 as cannon, and explained why everything most people know about traditional monetary policy is not only out of date but hopelessly wrong. We urge everyone to read this simple yet exhaustive explanation cover to cover, because only by understanding what it says, do we have any chance of properly addressing the fundamental problems that are affecting the developed world. Sadly, as anyone who will read this presentation will also comprehend, the one immediate implication is that the European Monetary Union is finished in its current iteration. Whether this EMU unwind will also lead to the collapse of all modern financial institutions remains to be seen but is certain unless the proper underlying cause is addressed and fixed, instead of merely treating the symptom: excess leverage...with even more leverage which guarantees a terminal collapse of everything modern society has fought hard to achieve over the millennia.
Below we summarize the key thoughts in a bulleting even Nobel prize winning economist can understand:
- In a financed financial system, collateral is money
- Large banks and dealers use and reuse collateral pledged by nonbanks, which helps lubricate the global financial system
- Post Lehman, there has been a significant decline in the source of collateral for the large dealers that specialise in intermediating pledgeable collateral
- This decline in financial lubrication likely has an impact on the conduct of global monetary policy
- ...but remember ‘subprime is contained?’ Why?
- New classical, new Keynesian, DSGE models: the crisis was not supposed to happen. Indeed, it could not happen.
- These models rule out extended economic disequilibria by assumption...
- ....and pay little if any attention to the factors now commonly believed to have both precipitated the crisis and to have contributed to its longevity
- Worse, recent regulations aimed at financial stability, focussing on building equity and liquidity buffers, reducing leverage, and segregation of margin will also reduce financial lubrication between banks and nonbanks
- -> The EMU is over
- How did EMU run out of eligible collateral? Where did that Euro 14 trillion of eligible collateral go?
- Answer: nowhere, and that is the problem
- Bigger firewalls? OR Creating the right incentives for buy-and-hold credit and fixed income investors to return to peripheral European credits with confidence?
- How about loosening collateral guidelines even further?
- The looser the collateral guidelines, the bigger the haircut, the less the bang for the ECB’s buck.
- New collateral guidelines = credit risk absorbed by national central banks
- Balkanisation of collateral guidelines across EMU = credit nationalism
....
- What should you do?
- If you think, like me, EMU is slowly and occasionally rapidly disintegrating before your eyes then the question you should be asking yourself every day is this: ‘How do I reduce my gross exposure to European credits and European banks to zero?’
- In the absence of adequate hedges, the answer is ‘never take the exposure in the first place’.
Alas, for most banks in Europe how fell for the siren song of the LTRO it is now too late.
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Greenspan told Tom Keene this week that equities are the collateral of the financial system, hence that's why they are propped up. These guys don't even bother lying anymore.
http://www.businessweek.com/videos/2012-05-01/u-dot-s-dot-stocks-are-ver...
Another tidbit near the end -- Greenspan confronted with his own statements of 40 years ago that gold stands as the protector of property rights.
It won't be long now before even the TRUTH won't be believed anymore, on the rare occasion it can be found at all. The point of no return.
I have been shocked and appalled at some of the gross misstatements I have seen about America's economy in the comments sections. There are many inaccurate data providers out there including known liars like John Williams of "shadowstats" dot com.
Non-governmental sources of data should simply be banned. It is absolutely irresponsible to publish figures that deviate from official government statistics.
Come on MBD. I've seen you do better than that. I need some comic relief after getting clobbered on EUR/USD today.
Hey things are pretty bad here too. NASA just announced they're gonna try and land a man on Detroit. Hope he re-enters with his ass intact.
What is even more funny, as part of NASA's search for intelligent life, they are starting with Detroit. Any bets on what they will find???
10 bucks on crunchy monkey
Hey things are pretty bad here too. NASA just announced they're gonna try and land a man on Detroit. Hope he re-enters with his ass intact.
Well, baby steps. You gotta crawl first. Thus NASA is planning a manned mission to Cleveland.
CAPE CANAVERAL, FL—Hailing the dawn of a new era in long-distance highway travel, NASA officials unveiled Monday the agency’s ambitious plans to put a man on a bus to Cleveland, OH by early 2013.
The complex and dangerous three-day mission, dubbed “Chariot I,” is expected to pass through six states and include two brief transfers in Atlanta and Louisville in both directions, at a reported total cost of $360 dollars plus taxes and fees.
“For almost as long as our nation has existed, man has gazed upon a map of the eastern United States and dreamed of traveling to Cleveland, the largest metropolitan area in Ohio,” NASA administrator Charles F. Bolden, Jr. said at a press conference announcing the agency’s first major initiative since the discontinuation of the space shuttle program. “Until now, the immense physical and psychological risks involved in any manned mission had put that dream sadly out of reach.”
“But not anymore,” he added. “Next year we are going to Cleveland and back.”
Enlarge ImagePotential candidates must be rigidly trained to withstand more than 19 hours of vacantly staring out a bus window at a barren field.
Standing next to a scale model of the vehicle that will make the difficult 1,039-mile voyage—a Motor Coach Industries 102DL3 equipped with extra legroom, power outlets, and a wheelchair lift—Bolden discussed the details of the mission, which is set to carry a payload that includes one change of clothes and a paperback copy of Erik Larson’s The Devil In The White City.
According to Bolden, barring any weather-related delays or the driver not showing up for some reason, the bus will depart from a station in Orlando on a north-northwesterly path following the curvature of Interstate 75 though the inhospitable central regions of Georgia, Tennessee, and Kentucky. Once it reaches Cincinnati, the bus will alter its attitude due east and slingshot around the city, merging onto I-71 for the final 130 mile stretch to Cleveland.
“En route to Ohio the vehicle will pass through some of the most unforgiving environments known to science,” said Bolden, alluding to, among other areas, the barren vacuum of Appalachia with nothing going on for hundreds of miles. “But the dangers aren’t limited to outside the bus—whoever makes the journey will have to contend with a host of toxic smells; loud, unrelenting noises at all hours of the day and night; and highly unstable passengers with whom a lack of eye contact alone does not necessarily guarantee one’s personal safety.”
NASA Launches David Bowie Concept Mission
“And those don’t even account for less predictable difficulties,” Bolden added. “The entire mission can suddenly be brought to a halt by the driver’s decision to pull over for a smoke.”
Candidates for the first Chariot mission have already begun rigorous training at NASA’s Kennedy Space Center in a true-to-life bus simulator capable of replicating the 52 hours of intense jostling they will experience in a threadbare, minimally reclinable seat. The preparation also addresses specific scenarios such as reading on the moving bus without throwing up, using the vehicle’s disgusting bathroom in stop-and-go traffic, and diffusing a conversation with a man who is clearly going to Cleveland to stalk his ex-wife.
Sources said that of the original 48 applicants, more than three quarters have washed out and returned to their respective branches of the military. Those who remain will spend months training for Chariot’s several scheduled EVAs, or extravehicular activities, during which they will leave the bus for a period of time to pick up food and hang out at a highway rest stop.
“The EVA presents the greatest risk for something to go wrong, whether it’s forgetting where the bus is parked or encountering a ridiculous line at the KFC/Taco Bell,” said mission control specialist John Lawton, who will be in constant contact with the passenger via a direct cell phone line. “You’ve got to be ready to improvise on a moment’s notice, grabbing a slice at Sbarro or, in a worst case scenario, a cup of soft-serve TCBY, and then waiting by the bus until people start to come back.”
“Because if that thing pulls away and you’re not on it, it might be days before NASA can mount a rescue,” he added.
Speculating on what future trips might entail, Lawton said that if the first mission is a success, a three-man Chariot II crew could return to Cleveland by bus later in the summer. He suggested that down the line, perhaps with Chariot V or VI, a NASA team may be able to reach Tucson, where research shows there is a possibility of hailing a cab to the Marriott Courtyard.
“Right now we are committed to putting a man on a bus to Cleveland and bringing him back safely, but ultimately Cleveland is just a stepping stone,” Lawton said. “If all goes as planned, we’ll have voyages to the outer reaches of Chicago, Minneapolis, and beyond.”
“And who knows?” he added. “Maybe it will even happen in my lifetime.
http://www.theonion.com/articles/nasa-announces-plans-to-put-man-on-bus-to-clevelan,28024/
I call bullshit. Everyone knows that you can't send a man all the way to Cleveland. It just can't be done.
And bring him back safely? Do you know how crazy that sounds? Why not send him to the friggin' moon and back? Sure, that's not possible either, but it sounds a lot more believable than Cleveland.
Manned voyage to Cleveland - coming soon to a NASA soundstage.
It better be a union astronaut...
That's not MDB, its a clone.
best yet, MDB
Be careful MDB censorship is a two way street...
"Non-governmental sources of data should simply be banned. It is absolutely irresponsible to publish figures that deviate from official government statistics."
~~~
BALL DON'T LIE!
"It is absolutely irresponsible to publish figures that deviate from official government statistics."
Please explain why this is if the figures are more accurate than government figures. Thank you in advance.
Here's what concerns me:
Many of the views of these data sources and the zerohedge readership are of a conspiratorial nature and an even larger number have a distinct right wing tone, which infringes on their objectivity. In my opinion Zerohedge needs to make people with softer views feel more welcome. Besides, most of the ideologies on this board such as anti-bankerism, libertarianism, anarcho-capitalism and off-the-gridism, have been repeatedly shown to be false by both the media and professors at top academic institutions.
That's a little better.
Give him props for trying - it IS Friday and it was not a great day for many - I was OK on the hedge (TZA) but tubed on most everything else - but I thought he was just a little bit too much this time.
At best, you can't really be sure he is jiving...
MillionDollarBoner is always good for a laugh. He's a good robot. You can wipe Ben's jizz off your cheeks now
because media and professors at top academic institutions have been right on, right?
too blatant... it is close to impossible that you really mean what you type.
I think i'm in love with MDB
Toes the line and makes me laugh 'til I cry
Perfect wife material
Keep 'em coming MDB!
Its not a "Conspiracy Theory".......its a Business Plan! Just my 2c
Nemo
Absolutely. We need more Kumbayah, campfires and s'mores.
Beyond that, the more the laiety can learn about the dangers repos pose to our fragile financial state the better. Evidently, the 2 main tri-party repo agents, Mellon and the morgue, would be foolish if they didn't take advantage of the info they have on their clients agreements. After all, trading on that info only makes the market "solvent", right?
Gone are the days when financial institutions could honestly call themselves trusts.
Pathetic.
The issue that I have with your posts is that they come across to me as simply spouting dogma, but offer absolutely no proof. If I wanted that, I could ONLY read outlets that get 100% of their news from Reuters (like all western mainstream media outlets do).
Unfortunately, and I really mean unfortunately, the idea that conspiracy "theory" is a ridicuous fantasy has been replaced by the realization that more and more of conspiracy theory has become documented conspiracy fact. Examples being the nonexistent Gulf of Tonkin incident and the USS Liberty incident, weapons of mass destruction in Iraq, each factually documented to have been very different than those wanting war had claimed.
A little closer to home, lets look at the Bear, Lehman and Merrill collapses, the intentional abuse of the required laws for the filing of mortgages and the MF Global incident, all of which would deserve prosecutorial interest if the people involved were not inside the "conspiracy". Crimes were comitted and documented by several writers and no one was prosecuted.
There are two main trains of thought. The first is that the people who are involved were simply greedy and incompetent, got in over their heads in an attempt to salvage their own income, their company's survival and the wellbeing of the country and the world. If that's the case, then oh well they did bad things and should be prosecuted, just like the guy who stole food to feed his family. The second possibility is that it is all intentional, at least from some level, most likely the lower levels are just ignorant dupes, but it feeds into a much greater and patently evil plan (if good and evil are judged by the actions of someone on others). IMO, both are likely true and people such as yourself either grossly ignorant or or grossly lying to protect your piece of the conspiracy is a subject for amusement.
I am not sure it is possibly to "re-educate" people without first passing through the truth.
MDB: Are you dating Charlie Munger?
Here Here.
Finally someone speaks some sense.
I also thinking that selling stocks should be banned because clearly that is also absolutely irresponsible behav
Central planning:we are doing it for your own good.
Hear, hear
MDB..
I see you had some paid monkeys hit the up arrow for bananas.
lol you have to read his comments as sarcasm
MillionDollarBonus: Kirshner in Argentina agrees and likely so does Krugman as he uses the "official" Argentine inflation figures to deflate nominal GDP while making the case for the brilliance of the Argentine economy. You know, not the "bad" inflation figures put out using real data: http://www.washingtonpost.com/world/americas/a-quiet-battle-over-argentinas-inflation-rate/2011/10/29/gIQAEiUjYM_story.html
Is MDB really David Axelrod or Larry Summers? Or does he just keep forgetting to end his stuff with /sarc?
He IS /sarc
That's the joke
Given the opinions & tone I suggest a comparison to Joe Wiesenthal or directly to Paul Krugman.
None of us really know :D
I see your shtick still continues to confound many ZH readers. Keep up the good work, I love sarcasm, especially when nerds don't get it. That means you Sheldon Cooper.
John Williams? He uses the same input stats as the government.
He just doesn't use the modern equations with fraud components. He uses the honest equations used by the government in past generations.
NewWorldOrange said:
We took the wrong step years ago.
http://www.youtube.com/watch?v=od0mpBewKbk
If you are a European bank you are fucked. Lets all pray that the US Banks have really decoupled from that nuke waiting to go off across the Atlantic. But once again I am thinking Bank Of America and CITICORP will royally screw this up, and blow up. They always seem to shoot themselves in the head.
Problem is that the US banks use really high powered ammo to shoot themselves with and we are all standing right behind them.
Thanks FourthStooging. Incredible song with amazing artwork.
Stay Gold!
"‘How do I reduce my gross exposure to European credits and European banks to zero?’"
Short the Euro, long gold. Not just a hedge, but a potential (likely) fortune in the making. Opportunity of a lifetime.
Unless gold first drops precipitously becuase people have to cash it in to meet margin calls...
That's kind of how I'm playing it. I expect most asset classes to tank when the margin calls get rolling. That'll be the time to load up.
Now you're talkin. That's economics.
Scary, "The overall effect may have been a $4-5 trillion reduction in
high-grade collateral circulating in the US financial system"
Norway’s sovereign wealth fund (which knows more about the issues in the EU than we do) is cutting it's exposure to European investments for a reason...
To be frank, the Norwegians are lousy investors. The oil money has made them fat, dumb, and too lazy to challenge the MPT bullshit their advisors sell them.
Well they were smart enough to vote against Greece’s debt swap this year because they disagreed with being subordinated to the European Central Bank.
http://www.bloomberg.com/news/2012-05-04/norway-dumps-ireland-portugal-b...
Cmutant: That would be a neat trick since Norway is neither a member of the Eurozone nor even of the EU. Just like you if you owned Irish or other sov debt you could dump it as well, and I suppose that could be called voting with your feet, but they have nothing otherwise to say about the EU/EZ/ESM.
How on Earth could my post have gotten two red arrows for stating plain facts? Norway is not in EU. Give that a red arrow retards.
Probably because neither Bloomberg nor I posted anything about Norway being in the EU. Try reading the article... again.
How do I reduce my gross exposure to European credits and European banks to zero?
cash under mattress and gold in the backyard. and an AK47
So where's the AK47 stashed?
I would suggest adding rope&lamp post for bankers&politicians.
Always good to have a supply of tar and feathers on hand.
for all the fragile, delusional, narcissistic bankers 'showing the instruments' will do.
Please be sure to distinguish between austerity measures passed and austerity measured implemented.
Great pull-back-the-curtain piece. Liquidity in the absence of solvency = an unending game of subordination and devaluation.
Brilliant.
If you don't have something people want/need or a tradable skill. You are insolvent, any questions?
That is off target.
US citizens have this problem of untradable thingies for their insolvency assessment.
They have stuff others would like but that they cant trade for power clinging causes.
By the way, an extorter/farmer is also as solvent as the extorted/farmed he/she lives off are solvent.
That is another issue that cripples US citizens'solvency.
Untradable stuff, extorted/farmed running out of steam, more the causes to examine than the tradable skills and unedulcorated demand on stuff
I was starting to get worried that AnAnonymous' posts were becoming coherant and had a point to them, then along came this post to get things right back on track.
Matt said:
He's just like Old Faithful, except with more unedulcoration.
Maybe I can translate:
That's pretty close.
"don't fight the fed" made a lot of money over the past few yrs...
And what about food? It's all contaminated with uranium and plutonium:
http://enenews.com/japan-expert-longer-clean-safe-food-after-fukushima-r...
Can't eat money. What happens when money - even gold - won't buy safe food or water?
The problem is your planning to buy. It should have already been stored.
Now placing you on the "not to important" dead list. Just letting you know in advance so there is no confusion as to what list your on.
You can't eat money but you can make teeth out of gold and silver!
George Washington had wooden teeth.
The teeth were Ivory, the gums were wooden.
As I recall, my ECON 101 class was an indoctrination into neo-classical Keynsian economics via my Paul Samuelson textbook and a grad assistant who worshiped at the altar of Keynes. This was the late 70's and thousands of Economics students across the county were subjected to what was at the time the "mainstream of economic thought." Is it any wonder that our economy is where it is now after so many where inculcated with this swill.
Right about the time "situational ethics" started being taught.
US citizen economics lead to that terminal point, no matter what.
You know, for the GD, Keynes was hardly to be blamed.
Peak theft. US citizens look around and see less and less to thieve from non US citizen fellows.
So now has to look at other US citizen fellows.
you are correct, and the real problem is that the chinese have become much better liars and theives.
good thing we re-collateralized the banks so they could pummel our assets.
The black market for handguns in the EU must be growing..
'Balkanisation of collateral guidelines across EMU = credit nationalism'
Weak. Aitken Advisors = City operation = the hyper-hypothecators.
Collateral is only as good as you can get at it for collection...
Think of Fly Guy...
Unfortunately the losers will be regular folks without political or judicial cronies.
The individual and the household will be required to surrender collateral, whether it be their property, assets, or entitlements they worked and paid into for 40-50 years.
"Austerity" is just another name for robbing collateral from individuals who never gained from the legerdemain of bankers, corporations, and politicians.
Two glaring indicators that point clearly to citizens being forced to bail out the kleptoligarchy are the passage by the Supreme Court of the following:
That is all you need to know; you own nothing and all banker/government debt will be paid via confiscation of what you think is yours.
Well then who is more scared the person who owns nothing and has nothing more to lose or the person who has everything to lose.
The person who has been responsible and tried to save.
The more people there are dependent upon the kleptoligarchy the more their power base is assured.
This is why the FED and the banks, insurers, and other corporations are supported by both the right and the left at the expense of the plebians.
The individuals below the 1% lose; the 1% win. This is why the bailouts were shoved down our throats, and why the ECB and European governments are supporting the banksters along with the Washington/Wall Street cabal.
Being dependent upon an oppresive fascicorprotocracy is not winning, though many are led to believe it.
The dual promise upfront is liberty and choice along with social programs; a mandate doomed to fail - realized by the mammon lusters - foolishly believed in by the naive and somnolent dreamers/idealists.
Incessant and meaningless elections are held with much foaming at the mouth and more promises when in reality the master equivocators relentlessly politic their way to mediocrity and more of the same.
Privatized gains and socialized losses along with the gradual dissolution of the rule of law necessitates the two-headed hydra of continued hollow promises, money printing, theft, currency debasement, stagflation (biflation, hyperinflation), ethereal economic theories instead of principles, data fudging, propaganda, and bread and circuses.
Lol from the presentation ''2) for investors: keep that collateral in a segregated account''. Hahaha get it out of the banking system or loose it all to the kleptocrats. Amazing that this so called professional still doesnt get it. Cognitive dissonance, hard to break. What a buch of suckers paying for this kind of advise.
The only Euros my balance sheet is exposed to are Silver Euros.
Now that shit is just plain funny!!!
Repeat of that Lehman moment.
Collateral value in the REPO market.
POOF
In a financed financial system, collateral is money
Collateral is liabilities.
Finally, a ZH piece that makes economic sense!
For those who want to read more, see Steve Keen in particular. His approach to debt plus a realistic understanding of govt finances (MMR, see Cullen Roche) is the key to being ahead of the herd.
Actually if you really understood what this piece says, it implies that MMT, MMR and all those other monetary rationalizations of a reserve currency status (which incidentally always ends) predicated by balance of power, are complete garbage. Read the following, which explains what happens in the real world, not in some contrived, convoluted and senseless theory. Alternatively, if you feel like ignoring it, just build yourself a death star for $852 quadrillion and grow the world's economy to super turbo prosperity.
Words are hard for some people Tyler. They need more pretty pictures.
Some 2010 comments from Edward Harrision of Credit Writedowns ... one of the few economics blogs I can still bare to read ... sometimes ... not for long:
--
--
--
But Edward still argues in 2012 for a blending of MMT with Austrian-school economic processes (and let's not forget legal and political processes). In the final analysis he can't bring himself to accept that fiat dollars are dying and are not the way to go in the post Depressionary phase, so wants to insist that fiat, printing and floating exchange rates are a better option, in comparison to a return to a gold standard.
Oh yeah, he also doesn't want a FED that prints or expands it's balance-sheet, at public expense, or engages in defacto creation of a centrally-planned zombie-state and jobless ekonomi, minus a real revenue stream.
He can intellectually reconcile these positions ... apparently ... but you need MMT ... apparently.
Maybe he needs another bout of 'recession' to fully get there ... you know, that thing that happens if you ever stop printing the next deficit.
Probably this one as well: EMT
http://en.wikipedia.org/wiki/Endogenous_money_theory
Increasingly it is becoming obvious that this has become a huge game of Calvin Ball. The plebs are too ingrained in habits and essentially glad to pretend along. The truth is all can quietly put away their 'models', nonsensical analogies using behaviour of sub-atomic particles to demonstrate uncertainty while adding the illusion of intellectual gravitas, Lorenzian theory etc.
When the first shot is fired, it all seems to not matter anyway.
It will never be a problem until your local store stops accepting paper money. And they will only stop when their suppliers stop accepting fiat garbage. Keep going up the chain. Right now everyone is satisfied that the problem is at least several links from affecting them.
That is the point.
And the bottom people wont stop accepting USD because they have the US military commanding them to.
Only when the bottom guys throughout the world, (globalism), run out of fuel (various inputs) to feed the US citizen machine the scenario described might happen.
Wont happen before more than 45 years. Hedge accordingly. Consume as much as you can. Dont conserve.
Holy Crap, this is the most eloquent, purposeful post yet! I think I even understand it, and maybe even agree to some extent! Am I going crazy, or is there really such a severe variation in writing from this poster?
BTW, I give it more like 5 years at the lower range and 20 years at the upper range. Once the interest paid on US debt exceeds total tax revenues, things will come unhinged quite quickly, I believe.
current money printing and debt accumulation points to that very fact; debt slavery means we are running behind the curve individually and those who continue to consume are hooked, lined and sinkered to feed the beast. Its a catch 22 situation as are all empires; until they fall through unsustainability.
I think it is the reserve status that we have been tugging on to pull us out of this, not the effectiveness of any real-world stimulus. Since 2008, there has been a significant drive away from the dollar's hegemony. Further, the United States is demonstrating that it cannot stop the herd. The death blow will come with the collapse of oil-priced dollars.
I was referring to the understanding that money is endogenous (M0 lags M2), that the Fed can and does control the entire Tsy yield curve (but not the money supply), and that govt debt is indeed different from private debt in very important ways when that govt is a currency issuer. However, I don't recall saying anything along the lines of "the govt can save us by printing"; I just said most people don't understand how money actually works in today's financial system -- including neoclassical economists, which is to say almost all of them. The best the govt can do is cushion the blow a little during balance-sheet recessions, while keeping an extremely close eye on inflation.
You're getting closer. Keep reading.
When economies or countries no longer "make things" and income increasingly comes from simple monetary return on monetary investment, or financialization, capital must become increasingly misallocated. This is not just happenchance, it is engineered by folks like the Rothchilds or Rockefellers.
Any attempts to allocate capital into more productive, job-producing, endeavors meet with shouts of "wealth redistribution" or "socialist". As if the financial elites did not become increasingly wealthy due to the very same things.
All you need to know is that everything you know is wrong.
http://www.youtube.com/watch?v=05av9iJvgiQ
In a financed financial system, collateral is money
Everything is solved then, just print away!
How do I reduce my gross exposure to European credits and European banks to zero?
Um, don't put usa clownbux into a Fidelity money market account?
Is this a trick question?
Gee whiz ... these Aitken guys have something (important) to say but their presentation is beyond incoherent, why not a comic book?
Come right out and say collateral is puffed up with cheap credit (not so cheap any more): it isn't worth very much and continuous 'faking it' by finance causes collateral to lose what worth is left. What remains of credit is unsecured (and over-leveraged).
Is it that hard?
The bottom line is the world is becoming a cash market.
BTW, don't blame the central banks for this, they are playing the hands they have been dealt by finance and greedy 'masters of the universe'. All you need to know is that CBs are collateral constrained.
The Euro will remain a ghost in the machine long after it is dead. To let it go up too much or down too much vs other paper means heavy duty derivatives payouts and bank failures. Central Banks will maintain the relative values of all paper fiat currencies come Hell or high water. All paper money in the FOREX system is therefore the same exact thing. And it is all worthless.
Repowatch is all about collateral daisy chains and the perils of securitized banking.
Dig it: http://repowatch.org/about-repo/
Who knew that the hole in the fence was a 1989 appeals court ruling said that loan securitization didn't violate Glass-Steagall?
martin armstrong latest says there will be a shocking announcement within the next 60 days. i took that as being from the gov
My bet is Declaration of War with the Antares Empire, simultaneously announced by America, EU, China, and Russia.
This excellent piece demonstrates ZH’s intellectual leadership, versus academe. INET, eat your heart out.
US finance and economic journals are controlled by the banksters. Publishing anything in US academic journals that disproves economic dogma is IMPOSSIBLE!
Liquidity is now used to rationalize every crime and misbehavior in the markets as if it was the Holly Grail in and of itself.
Fuck liquidity.
Gold is the best and ultimate collaterall.
Would love to see a bi-metallic monetairy system,
with gold used as capital and silver as currency.
Seeing a lot of stupid gold versus silver debate
on ZH.I am glad I own both and acummulate both
while trying to understand their historical role as
mediums of exchange.Still learning.
The Gods of the Copybook Headings can't be denied for long.
Not sure precisely why (though I have a hunch), but I immediately thought of the following Kafka aphorism (reproduced from memory, but it’s likely very close) after reading this piece:
COURIERS
They were given the choice of becoming either kings of the couriers of kings. The way children would, all elected to be couriers. Thus, there are only couriers who hurry about this world shouting messages that -- as there are no kings -- have long since become meaningless. They would like to put an end to this miserable life, but dare not, on account of their oaths of service.
Collateral, schmatteral. Under Francois Hollande's direction, the ECB will monetize all State debt outright. They will monetize until the opressive debt is inflated away.
"In a financed financial system, collateral is money"
No. Haven't we learned anything from MF Global? Your collateral is their gambling money. Commingled, rehypothecated, transferred, and ultimately dissolved in a magic trick that leave clients fighting over ownership whilst the thieves retire to the Hamptons. Better to opt out completely out of the system, leaving no paper trails (If that is at all possible in this world) that leads back to your stash of whatever you deem to be life insurance (Gold, silver, food, guns, ammo) against an uncertain future.
In a financed financial system, somebody else's uncollectable debt is "money", as well as the ridiculous expectation of productivity sometime in the future by the lobotimised spawn of the fat fucks who who live at McD's, and their even fatter spawn after that who have to be fed, medicated, clothed, "educated", and sheltered on my fucking taxes or the inflation shoving magic money from the banks (Easy loans), which amount to the same thing. It is a system run by the leeches, for the leeches, by the leeches. All sucking the life blood out of this small planet, merrily murdering any poor sods with natural resources, and exploiting the other poor sods who only have their labour to give us. That's capitalism in a nutshell: The exploitation of those below your socio-economic ladder, and I make no apology for successfully exploiting the system at times, but I don't have to like it either.
Guess old Uncle Eb got it right...
"Collateral don't mean nuthin' 'cept when you need to get yer money back."
His qualifications as an economist are opposable thumbs but he might be on to something.
Then again, he doesn't read the NY Times either.
Collateral isn't money. Money is money and collateral is collateral.
When collateralized debts fail, the supply of money and collateral both shrink. The reduced supply of collateral makes people less willing to lend, which suppresses money supply growth, but isn't itself any additional loss of money supply.
Rehypothecation is simply the sharing of collateral by creditors. Multiple credits are secured by one and the same piece of collateral. Hence the higher risk of ending up like MF Global clients holding a short straw. Most of the collateral contraction is a result of hedge funds realizing this risk and banning their primary custodians from rehypothecating their margin collateral.