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The Plot Thickens: More On The Weekly $88 Billion "Other" Outflow

Tyler Durden's picture




 

Following our observations last night that there was an $88 billion swing in the weekly "other" deposit account with the Fed, some have quickly come to the fore to "debunk" our observation that this is a rather curious swing in total notional, by claiming that this can easily be explained away using cash demands at the GSE level. There are two problems with this "explanation" - i) it does not actually explain the swing, and ii) it is incomplete. As noted previously, Fannie tapped the Treasury for $7.8 billion in Q3, while the quarterly Freddie Mac injection amounted to $6.0 billion. In other words the combined $13.8 billion cash draw need (assuming a deferral to the funds flow) would almost explain the $88 billion weekly shift... if only it weren't for the other $74.2 billion, which not even fully unmatched (i.e., assuming no new issuance) weekly debt maturity and interest repayment comes close to filling the gap. Furthermore, the "Other" cumulative delta for November and the YTD period is $61.5 billion and $115 billion, respectively, which is nowhere near close to explaining the total funding needs of these entities. What may explain the delta, and what these "debunkers" have missed is the full definition of the "Deposits with Federal Reserve Banks, other than Reserve Balances: Other (WOTHLB)" from the St Louis Fed which is as follows: "Other deposits at Federal Reserve Banks include balances of international and multilateral organizations with accounts at FRBNY, such as the International Monetary Fund, United Nations, International Bank for Reconstruction and Development (World Bank); the special checking account of the ESF (where deposits from monetizing SDRs would be placed); and balances of a few U.S. government agencies, such as the Fannie Mae and Freddie Mac." In other words, the GSEs may well be a part of last week's cash outflow package, but they certainly are not the full story, and other entities such as the IMF, the UN, the World Bank and the legendary in some circles ESF are all part of the "other" reserve "use of funds" destination. In other words, someone (presumably someone with some urgent window dressing needs), and it sure wasn't only (if at all) the GSEs, had a massive capital shortfall and had to resort to Fed deposits. And by the looks of things, these could have easily been "international" entities tasked with bailing out the world such as the IMF.

Lastly, and we are the first to point out that have no answers as to what or who is the ultimate use of cash, we merely note the move, even if the swing is explained entirely by the GSEs, the fact that someone or something needed $88 billion in the past week, an all time record, should probably be cause for concern.

 

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Sat, 11/26/2011 - 11:39 | 1915083 Tijuana Donkey Show
Tijuana Donkey Show's picture

And where is the GS frontrunning on this? If they aren't frontrunning, we know we're in too deep.

Sat, 11/26/2011 - 11:52 | 1915115 sunnydays
sunnydays's picture

Now how much is the U.S. constantly printing?  How are they able to keep printing right now and how many more dollars are actually in the market now?

Thank goodness the Euro has been going down hill and the dollar has stayed strong, otherwise what would we be paying for gas right now had other currencies not been falling apart?  $6 per gallon?

But the U.S. luck of the Euro will only last so long then hyperinflation.  I guess that is why a World War is about to be on it's way when Russia and China protect Syria. 

Sat, 11/26/2011 - 11:57 | 1915132 Pants McPants
Pants McPants's picture

If I understand it correctly, the US is "able" to print because printed dollars are primarily going to two places: China and (presumably) the EuroZone. 

In other words, the US is exporting inflation overseas.  There will be hell to pay when those dollars return to the US.

Sat, 11/26/2011 - 13:54 | 1915382 boiltherich
boiltherich's picture

Three places Pants, third being banks and financial institutions that then must park it in Fed accounts so it cannot leak into the economy to cause inflation, though some of it obviously is anyway.  Four if you count deficit covering of the federal government and that excess spending is money creation because they have to borrow from the fed to use it, the fed prints and gives it to bankers who are required then to use it to lend to the Treasury for government debt buying and park the bond/IOU's at the Fed. 

But, I think there is an overarching issue behind the whole story that is right up the OWS and Tea Party alley, that is that we cannot really claim to be in any way a free nation when we have to stoop to detective work that amounts to rampant speculation over the accounts of our government and it's levers of power.  What good is transparency in our justice department affairs, our military affairs, or any other function of government when that government can and does usurp power financially and monetarily and resorts to accounting chicanery to hide their actions from the people?  If we were really free there would be an 800 number anyone could call to get an explanation of any and all expenditures and account activities of the government, or at least the published tables put out by the government/Fed would have detailed explanations of where the money comes from and where it goes to.

 ADD:  Tyler, the last time there was such mysterious outflows, right before TARP/TALF was instituted, the Federal Home Loan Bank was being used to channel huge (the better part of a trillion) sums to preferred recipients of Fed/Treasury welfare.  The statements might only say "OTHER" uses of that 88 billion but I would look at the FHLB to see if they have some huge sudden inflow from the Fed or "Other" sources. 

Sat, 11/26/2011 - 17:22 | 1915921 SDRII
SDRII's picture

countrywide was tapping the fhlb in size. Bac as well

Sat, 11/26/2011 - 19:52 | 1916268 BoNeSxxx
BoNeSxxx's picture

But, I think there is an overarching issue behind the whole story that is right up the OWS and Tea Party alley, that is that we cannot really claim to be in any way a free nation when we have to stoop to detective work that amounts to rampant speculation over the accounts of our government and it's levers of power.

+100 Fucking BRILLIANT description of a core problem with The United States of Wall St.  And, in a subtle way, points to the outstanding work done by the Tylers each day.

The +100 is for you BTR.  The 'f*ing' is for that bitch Michelle who accused us all of having potty mouths this week. :-)

Sat, 11/26/2011 - 14:07 | 1915452 InternetInfidel
InternetInfidel's picture

Repatriations a bitch as we saw during that october rally.  But than again it did provide some nice opportunities for out of the money puts at attractive prices.

Sat, 11/26/2011 - 14:16 | 1915474 In Fed We Trust
In Fed We Trust's picture

My sources state that Obama is about to announce a $888 per person gift to every natural born citizen. They call it stimulus but i really think he is trying to buy 2012 votes. Maybe OWS brought a tear to the Presidents eye? Who knows, but the announcement comes Monday.

Merry Xmas

Sat, 11/26/2011 - 15:37 | 1915676 The Big Ching-aso
The Big Ching-aso's picture

 

 

 Only if they apply the $888 towards buying a new Volt?    It would definitely put a charge into the economy.

Sat, 11/26/2011 - 18:07 | 1916023 boiltherich
boiltherich's picture

Sure that is not $666 per NB citizen?  ($333 for disabled vets, half like last stim program) and does he get to define natural born?  Or, can we assume anybody with a computer and photoshop qualifies? 

Sat, 11/26/2011 - 23:00 | 1916625 Manthong
Manthong's picture

Good one..

We need a law that says only natural born citizens can play golf in the United States.

Sun, 11/27/2011 - 02:49 | 1916995 jonjon831983
jonjon831983's picture

Didn't bush do something like that?

Hong Kong gave $6000 HKD to every full citizen... but then I think HK is +ve.

Sat, 11/26/2011 - 22:22 | 1916553 RMolineaux
RMolineaux's picture

Just a wild guess:  Venezuela announced that it received its first shipment of gold being repatriated, last friday.  In order to free up this gold for delivery, it was probably necessary to pay interest and penalties on broken leases, along with any derivatives based on gold.  This may account for part of the "other" item on the Fed's balance sheet that Tyler is looking for. 

Sat, 11/26/2011 - 11:42 | 1915086 Rainman
Rainman's picture

Chairsatan is not satisfied with monetizing only junk paper made in the good ol USA. There is an entire world of opportunity.

Sat, 11/26/2011 - 11:50 | 1915113 ArkansasAngie
ArkansasAngie's picture

Now Ben ... I don't remember you asking for permission to do this.

I believe it is in the best interests of America that you step down immediately. 

 

Sat, 11/26/2011 - 12:57 | 1915287 DeadFred
DeadFred's picture

EVERY employee's job description includes the unstated responsiblity to make his/her immediate supervisor look good. Ben's immediate supervisor is who? Not the American public but some unnamed group of people who own the Fed and who also own many of the large TBTFs of the world. If the owners assets include Barclays, Deutsche Bank etc. then you can expect the Fed to step in to solve the European liquidity problem. I expect it, and this may be the first major sign it's started. I'm set to jump from puts on equities into other investments that will respond to Fed interventions as soon as the intervention starts to move. I have had little doubt they would intervene but 'when' has been the question. Maybe now?

Those of you who are good at this help us all out. When the Fed intervenes to stabilize things what asset classes will move? My suspect list includes stocks (up) PMs (up) and treasuries (down big) but my ignorance factor is large. Help us Obi Wan.

Sat, 11/26/2011 - 13:24 | 1915358 WonderDawg
WonderDawg's picture

The group of people who own the Fed are NOT unnamed. It is public information, but you have to do a little (very little) research to find them, because they'd prefer to be, as you say, unnamed. But I'll save you the trouble of research. Here's the org chart:

http://www.save-a-patriot.org/files/view/whofed.html

Sat, 11/26/2011 - 13:31 | 1915368 DeadFred
DeadFred's picture

Thanks, I've never seen that even if it's a bit old. Surprised to see so many Lehmans. I always assumed they were not in the club since they were allowed to die.

Sat, 11/26/2011 - 13:50 | 1915407 WonderDawg
WonderDawg's picture

It was published in 1976, but I strongly doubt anyone has sold their shares. And I thought the same thing about the Lehmans, why they were allowed to fail. I figured they must have volunteered to be publicly sacrificed out of some unidentified self-interest of the "group", and privately they have not suffered.

Sat, 11/26/2011 - 14:39 | 1915536 RiverRoad
RiverRoad's picture

Thanks Wonder Dog.  Would love to see an update with names of players through 2011 if in existance.

Sat, 11/26/2011 - 16:15 | 1915761 DeadFred
DeadFred's picture

If you assume the actual men on the list in 1976 were of power-position age, 50s and 60s, they are dead or decrepit now. Who took their places? My sense about nasty power-hungry sociopaths is that they make horrible parents so any of their children will be seriously damaged goods. So dynastic power transfer is somewhat unlikely unless a power structure is in place akin to the vizers and palace eunuchs that kept dysfunctional royal families from screwing up too badly. It would be fascinating to know how our new royal families keep themselves functioning, how similar they are to real human beings. Maybe in some other lifetime someone will write a book on it.

Sat, 11/26/2011 - 17:20 | 1915918 Excursionist
Excursionist's picture

I didn't bother verifying the information, but here's one guy's swag at the NY Fed's ownership (circa 2009):

http://www.nolanchart.com/article6061-the-federal-reserve-replies-on-its-stock-ownership-and-treasury-purchases.html

Conclusion is that BAC, C, WFC and JPM own about half.

Sat, 11/26/2011 - 14:34 | 1915511 Big Slick
Big Slick's picture

Chris Martenson had a great interview on his blog a few months ago with Eric Jansen (founder of iTulip).  In it he explains the tricky game by the Fed, who needs to continually work to appreciate (inflate?) certain asset prices in the "FIRE" economy (Finances, Insurance, Real Estate) all the while keeping inflation in the other economy in check (i.e. energy, wages, and other prices). 

It was a paradigm that was very enlightening. 

Despite this challenge to the Fed of playing this risky game, they are so big-stacked that they can make it happen (for now).

On that topic, another interesting theme throughout some of the great interviews on Martenson's site (David Stockman, Paul Brodsky, Turd Furgeson) as well as by Kyle Bass is the danger in betting against the Fed and certain interests of the Fed.  Timing is especially dangerous. 

So I like the way you're thinking, Dead Fred.  I'm really wary of any bet against the Fed. 

Even if it means appropriation, (401k, IRA, MF Global customers, or (again) making physical gold illegal) the Fed will be left standing at the end of the day.

My recent strategy is complete survival mode (PM, cash, equities w hard assets, and a few established co's w good dividends) - positions where I can align w the Fed BUT still be hedged if the bottom drops out.

(DISCLAIMER - these are the uninformed ramblings of a guy operating on my own)

Any constructive insights to these or other thoughts would be appreciated... Besides Tylers' awesome data gathering and analysis, the informed dialogue on these boards is the real value here!!

Sat, 11/26/2011 - 17:38 | 1915901 SHRAGS
SHRAGS's picture

Big Stick, thanks for the lead

Peter Warburton (author of Debt and Deulsion http://www.amazon.com/Debt-Delusion-Threaten-Economic-Disaster/dp/0977079333) did a good article on this point back on this point in 2001:

 Peter Warburton: The debasement of world currency: It is inflation, but not as we know it

http://www.gata.org/node/8303

 

(The Eric Janzen interview is here:  http://www.chrismartenson.com/blog/eric-janszen-we-are-witnessing-death-dollar/64317 

 

 

 

Sat, 11/26/2011 - 22:54 | 1916611 Big Slick
Big Slick's picture

SHRAGS - Thanks for posting the Eric Jansen interiew link.  At page bottom is the MP3 link and a list of other Martenson interviews.  I became aware of Martenson after Tyler linked to the David Stockman interview - MUST LISTEN (FYI: youngest Cabinet member in last 100 years)

And Brodsky summarizes a typical weekly US Treasury auction for those who may not know the mechanics of the process.  (Interesting also is his belief that Gold should be north of 10k/oz based on inflation and printing calculations following the USD's decoupling from Gold standard.

I have no relation to Chris M's blog, I have just found some of his interviews interesting and enjoyable. 

(Funny how its through serendipity that you find your favorite news outlets - I cannot remember how I found ZH.)

 

Sat, 11/26/2011 - 18:42 | 1916114 tumblemore
tumblemore's picture

"Timing is especially dangerous...I'm really wary of any bet against the Fed...the Fed will be left standing at the end of the day."

The first two are true *until* the end. At the end America and the dollar will have been destroyed and the world bounced into a world currency which over the following 100 years will do to the planet what the banking cartel did to America *or* America and the dollar will have been destroyed but the cartel fails to bounce everyone into a world currency in which case the people running the federal reserve crime syndicate will either be on the run or on trial.

Until then it may be best to try and guess in what way the fed will try to manipulate the markets and bet accordingly. For the time being you certainly don't want to treat the markets like they are actual markets. At the moment they are simply a mood manipulation mechanism for the central banks.

Sat, 11/26/2011 - 19:45 | 1916254 Doña K
Doña K's picture

Best way to do beat the Fed:

Sell everything except physical assets. Buy a variety of physical assets that you either like or you believe that they will hold value better than others and that can be easily sold in small segments. 

 

Sat, 11/26/2011 - 13:32 | 1915354 slewie the pi-rat
slewie the pi-rat's picture

hey, rain_man!

after they removed the governor from the steam engine (repealed glassSteagall) it  went on 'runaway' and blew tf upskie

so, the banksters who had blown it up grabbed all the money and gave themselves more power &tc,  and the benzelbub got a magic cape and wand, and a fuking bat_mobile in which he zoomz around Gotham, dispensing digits, justice, and tasty unicorn droppings

he did pretty well as far as running the banking system goes

Sat, 11/26/2011 - 11:50 | 1915087 GeneMarchbanks
GeneMarchbanks's picture

It's probably the (this time) International Mother Fuckers. None of this should surprise anyone ... SDRs are on their way.

First MF now IMF... disgraceful.

Sat, 11/26/2011 - 11:43 | 1915090 hedonistbot
hedonistbot's picture

And what about those DSK allegations? NY review of books has an interesting investigation about that case and raises some pretty interesting questions about the whole thing.

Sat, 11/26/2011 - 12:20 | 1915175 Conrad Murray
Conrad Murray's picture

That is quite the avatar.

Sat, 11/26/2011 - 13:07 | 1915320 FlyingDutchman
FlyingDutchman's picture

It's also on the financial times.

Sat, 11/26/2011 - 11:45 | 1915092 holdbuysell
holdbuysell's picture

Indeed: All thing's being equal, the simplest explanation is that the Fed is bailing out Europe.

Sat, 11/26/2011 - 11:46 | 1915100 GeneMarchbanks
GeneMarchbanks's picture

via IMF.

RP* is vindicated...

 

* By RP, I mean Rick Perry of course.

Sat, 11/26/2011 - 11:49 | 1915110 LawsofPhysics
LawsofPhysics's picture

Yep, "Where is our money Lebowski?  Ehrrr I mean, where is our money Benernake?  Where is it it motherfucker?!?!?!?"

Sat, 11/26/2011 - 12:22 | 1915179 Manchu9Inf
Manchu9Inf's picture

Its never been "our money", its always been the FED's money.  they print it, they own it. 

Sat, 11/26/2011 - 12:31 | 1915193 LawsofPhysics
LawsofPhysics's picture

Wrong, the U.S. Taxpayer is on the hook the the entire balance sheet of the Fed, read the Federal Reseve Act of 1913 and all subsequent amendments.  The private cartel claims to "own" you by doing nothing but creating money out of thin air,  Fuck them, end the Fed, end the "ownership", end the fraudulent usury.  Wake up fucknut!

Sat, 11/26/2011 - 15:13 | 1915616 eatthebanksters
eatthebanksters's picture

How can the people of a country have any confidence in the integrity of the system, both legal and financial, when the government so blatantly thumbs its nose at both.  How do we invest with confidence when the market is manipulated?  How do we invest with confidence when big dogs like Corzine break laws and yet are not prosecuted...yet the little guy gets pounded for minor transgressions?  How do we have confidence with respect to owning property when banks have shown property ownership laws mean nothing?  How does the little guy on main street, the historic backbone of the greatest economy in the world and the largest job creator of the greatest economy in the world, how does he start a business, run a business or grow a business when the big banks won't loan money to him?  What will it take before the sheeple finally say enough of this shit?  Methinks TPTB are doing a good job of dividing us, and, allowing just enough of us to do well so that we don't unite against TPTB in our disatisfaction.  As a country, we are no better than our leadership...until the corruption inside the beltway is cleaned out we will live under the thumb of corrupt and self serving politicians and th eoligarchs they protect.  As long as we allow them to create dissention among us and as long as they are allowed to live by rules where uethical behavior is permitted, we will suffer.  We need to stop with our left/right dialogue and move onto more pressing matters common to all...when we clean the swamp known as Wshington D.C. of garbage and corruption, then we can go back to the left/right dialogue. We need real leaders in this country...we need to find them, recruit them and vote them into office and clean out the scum.

Sat, 11/26/2011 - 21:41 | 1916447 Manchu9Inf
Manchu9Inf's picture

Wrong, the FED prints the money and its only the medium we currently use to process transactions. As we all know the "money" stopped being money in 1913.  Until the current medium changes, I think we all know the can will only get kicked further down the road until there is a systems crash and something new emerges.  Until then the taxpayer is not on the hook for anthing other than his/her current tax bracket.   Go rant somewhere else and let the grownups talk, fucknut.

Sat, 11/26/2011 - 18:46 | 1916125 tumblemore
tumblemore's picture

Wrong.

The value of the money they print is extracted from the stock already in circulation i.e. our money. They have a legal monopoly on counterfeiting.

Sat, 11/26/2011 - 12:55 | 1915289 OldTrooper
OldTrooper's picture

It's down there somewhere.  Let me take another look.

Sat, 11/26/2011 - 12:00 | 1915140 DaveyJones
DaveyJones's picture

trying

Sat, 11/26/2011 - 14:09 | 1915453 ZeroPoint
ZeroPoint's picture

I thought Europe needed on the order of 2-6 trillion to cover. 88 billion is what Bernake spends on his morning latté.

 

Sat, 11/26/2011 - 21:50 | 1916463 DeadFred
DeadFred's picture

The ECB has said it would limit bond purchases to 20B per day. 88B would be a similar amount. If that's where this $$ is going they're going to need to do better. It ain't workin' too good.

Sat, 11/26/2011 - 11:46 | 1915094 LawsofPhysics
LawsofPhysics's picture

Endgame bitches.  Got cash and physical assets of all kinds?  What are the inept political puppets going to do now?  Talk about a coming fire sale, all things must go, including human souls.  Dare I say it - "hedge accordingly".

Sat, 11/26/2011 - 11:46 | 1915099 Roger O. Thornhill
Roger O. Thornhill's picture

This is starting to remind me of a "shell game." The one where you have three cups moving around and the ball keeps moving underneath - you never know where the ball will be. And a skilled con artist can always put the ball where they want it to be.

It used to be a popular con in NYC to fleece the tourists.

Sat, 11/26/2011 - 12:30 | 1915194 Spastica Rex
Spastica Rex's picture

It's been a popular con for millenia.

http://en.wikipedia.org/wiki/File:Conjurer_Bosch.jpg

One world grifterment.

Sat, 11/26/2011 - 11:47 | 1915104 LawsofPhysics
LawsofPhysics's picture

The ChairSatan needs to have his "Lebowski" moment.  Where the fuck is Ron Paul?  Everybody needs to be asking one question; "Where did the money go Bernanke?  Where is our money motherfucker?"

Sat, 11/26/2011 - 12:26 | 1915185 LMAO
LMAO's picture

And yet, I'm not particularly bothered about the Feds' "Other" Non-reserve balances that actually show on the chart and lack of explanation as to where these funds went.

I'm more concerned about the Feds' Other "Other" Non-reserve balances which, for obvious reasons, are not tracked on the said chart.

Sat, 11/26/2011 - 14:47 | 1915555 RiverRoad
RiverRoad's picture

And you can throw in MF Global there, too.  Nice accounting going on all around...

Sat, 11/26/2011 - 11:48 | 1915107 DaveyJones
DaveyJones's picture

 fake money for fake books for fake systems

thanks for staying ahead of them Tyler 

Sat, 11/26/2011 - 11:50 | 1915112 poydras
poydras's picture

One has to be impressed by such a large "other" entry in the context of the Fed's 2007 balance sheet.

Sat, 11/26/2011 - 11:50 | 1915114 rambler6421
rambler6421's picture

It was the Goldman Sachs Gang!

 

libertarian86.blogspot.com

Sat, 11/26/2011 - 11:51 | 1915116 New American Re...
New American Revolution's picture

Jail time for EVERYBODY!!!

Sat, 11/26/2011 - 11:53 | 1915119 jplotinus
jplotinus's picture

Hey Tyler,

As no one is paying mortgages anymore; and as the AGs haven't gotten the banks to cave yet, someone has to pay the piper. No?

Sat, 11/26/2011 - 12:05 | 1915150 luna_man
luna_man's picture

 

"As no one is paying mortgages anymore"...

 

Hey, buddy, speak for yourself!...How long?  anybodys guess.

Sat, 11/26/2011 - 11:53 | 1915120 Frankie Cokeupt...
Frankie Cokeupthenozza's picture

Hanging out in Baja for the winter, fishing for yellowtail and keeping out of the Colorado cold, I wondered about the alleged horror of default so I googled the Argentinian default and paste for reading. Probably the Greeks read the same article.

"Because of everything Argentina has been through economically, they have an acute sense of what it means to be faced with huge debts, a future of deflation, a government that favours foreign banks over local citizens. Argentineans know the only way out of the crisis is some dramatic action.

Argentina has experienced 10 straight years of solid economic growth since it defaulted and abandoned its currency link with the US dollar. Every person I met said that this was the right thing to do. But interestingly they admit that they did not support the default and devaluation policy before it happened. Like many tens of thousands of Irish people, they could see that they couldn't pay all the debts and that they couldn't be competitive with a currency that pegs one to one with the dollar, but they were afraid to act. They were scared of the unknown. The entire establishment told them that if Argentina defaulted the country would never grow again.

In the event, Argentina defaulted and 70pc of their debts were wiped out. The currency fell dramatically. My friends, all of whom are local small business people in Mendoza, said the first two months were traumatic as no one knew what to do. But then the economy started to recover. Having had three years of recession from 1998 to 2002, the default happened in December 2002. By April, the economy started to grow and it has not stopped since.

Looking back, they all agreed, although they never wanted it to happen, that the default and the devaluation was the best thing for Argentina. The economy grew again and the people responded with a burst of entrepreneurial activity. They went back to basics. Exports took off and from having a perennial trade deficit, importing all sorts of finery with other people's money, Argentina began running a trade surplus. Agriculture and wine became competitive again and all the people I spoke to also said that there was a profound sense of national sovereignty when you stood up to foreign loan sharks which, in Argentina's case, was the IMF.

Argentina is clearly supportive of the dramatic course of action its government took in 2002, even though no one wanted to do it because everyone was scared of the future.

However, at a personal level, what about the millions of Argentineans who had dollar mortgages? Initially everyone with a mortgage panicked as the currency fell. They saw their mortgage repayments still in dollars but their pay in the new devalued peso. But then the government just cancelled all dollar mortgages and turned them into peso mortgages. So who paid? The foreign banks . The foreign banks who had made a fortune in Argentina lending in the boom, (sound familiar?) lost out.

And as for the local banks, didn't they get hammered? Well, yes they did, said all my friends (and one is a banker) -- "but they deserved it". The government just issued them with government bonds, IOUs to replace their dollars and they began lending pesos again. The football fans last night over a few beers said that it was all surprisingly straightforward, even though they worried that the world would end.

In classic fans' talk they compared economic problems to the problems of a team. If the team is losing and you know where the problem is either you fix it, change tactics and players or you continue to lose. Simple.

However, showing a keen knowledge of the realities of life inside a currency union as they had been for 10 years with the US, the local fans here told me that you can't do any of this without your own currency. Unless you can print money, backed by local government debt to reflate an economy suffering deflation and inject liquidity into an economy which has none, you are screwed. So they agreed that Ireland, Greece and Portugal have a choice: What are you going to do?

Argentineans have a much better understanding of economics and financial dilemmas than most citizens. The fans last night concluded that either we go for a massive default, together with the Greeks, Portuguese and others and stay in the euro or we leave the euro and default less spectacularly. They suggested that the price we should try to extract for staying in the euro would be a more significant default, because they understand the point is to improve your balance sheet so that you can start again. There is no point "half defaulting", they laughed; "it's like being half pregnant", quipped one fan.

As we left the Malvinas Stadium, I wasn't sure about taking advice from Argentinean football fans but the knowledge of our plight, the empathy and the sharpness of their analysis, was more impressive than much I have heard from so-called "experts" in Ireland. These people have lived through economic chaos which they never believed could happen to them and we are living through economic chaos which we never believed could happen to us.

That's why it's interesting to listen to them.

After all, the stuff you learn from experience can never be taught."

www.davidmcwilliams.ie

- David McWilliams

Irish Independent

 

Frankie Cokeupthenozza

Sat, 11/26/2011 - 12:02 | 1915144 GeneMarchbanks
GeneMarchbanks's picture

'The entire establishment told them that if Argentina defaulted the country would never grow again.'

That's usually the role of an establishment.

'They suggested that the price we should try to extract for staying in the euro would be a more significant default, because they understand the point is to improve your balance sheet so that you can start again. There is no point "half defaulting", they laughed; "it's like being half pregnant", quipped one fan.'

Absolutely. Half-defaulting is a dream cooked up by (full) retard Eurocratz probably in order to not trigger CDS. Either the CDS market proves no hedge, a sham therefore, or we get pay-outs to all those smart enough to hedge like the Greek banksters.

Sat, 11/26/2011 - 12:20 | 1915176 SamAdams1234
SamAdams1234's picture

If the euro defaults, it takes ALL the the Banks with it. The error was beliving all risk can be hedged. Now its one trip-up and there is no picking up the western finance based economies from the fall.   

Sat, 11/26/2011 - 12:29 | 1915187 Ahmeexnal
Ahmeexnal's picture

Argentina did not stand up to the loan sharks.
They gave their oil industry as collateral.
Most of the land is also now owned by the UN.
As is most of the water supply.

Same as the US.

Yes, it will be global this time.
Worse than the 1300s. That time, not only was debt wiped out.
Populations were wiped out as well.
The world is about to embrace a nuclear black death.

Sat, 11/26/2011 - 13:12 | 1915331 jm
jm's picture

Somebody needs Prozac.

Sat, 11/26/2011 - 12:18 | 1915170 the grateful un...
the grateful unemployed's picture

wanted to give you one point for hanging out in baja, and another for studying the Argentine crisis. i followed it at the time and actually made some nice trades on the Merval, through ADRs. one thing not mentioned is that the international community (Britian and America) wanted to punish Argentina, (Argentines tend to be bit arrogant) for the Falklands war.

the success of their economic restructuring had more to do with the health of the rest of the world, so there was no contagion at the time. and take note America, bond holders, mostly Italian widows and orphans took a 50% haircut, while the stock market did recover when foreign money (Carlos Slim) came in bought up assets at pennies on the dollar. Argentina's resources are now owned by other than domestic money, (but regional) and since then many rich Americans have also bought land there.

Argentina is considered to have SA's largest middle class, and we all know the middle class globally is disappearing as wealth disparity spreads. although the poor in some places like Mexico are a lot better off, that country has always had wealth disparity problems.

and (in light of the new information on Iran Contra) it bears repeating that Ronald Reagan was responsible for the LATINIZATION of American politics, which is a subject for a post, or a series of posts. now that we have come to end of our rope, and Americas assets are being bought by foreign wealth, indirectly through bonds, and directly, although our Congress did stop some things, such the UAE Port deal. LATIN economics forbids foreign ownership, which is largely why Mexico is not developing its resources, (with less than 100 million people, the drive toward immigration has always been the other way, and Bush was certain Mexico would collapse on his watch - so he build internment camps and a border fence (too bad he had no such premonitions about the children of the house of Saud, and 9/11)

Argentina is a long ways away, but their problems and solutions are worth our attention.

 

Sat, 11/26/2011 - 13:42 | 1915393 Mark123
Mark123's picture

I understand that things are falling apart again in Argentinian with inflation out of control.  While I agree that Ireland, Greece etc should flat out default and the banks, bondholders and shareholders of those banks should lose their shirts....I don't think you should use Argentina as a role model.

 

Argentina is just using currency devaluation to rob its citizens all over again.  If you really want to solve the problems, after a big default you have to replace the financial system and currency with something that makes it difficult for the crooks to rig the system again (against their own population).

Sat, 11/26/2011 - 13:47 | 1915404 Joaquin Juarez
Joaquin Juarez's picture

Argentina is one of the wealthiest countries in the world in terms of natural resources to export.  A lot like Austrailia.  Ireland and Greece, on the other hand, have next to nothing to export.  Ireland does have labor they can devalue but Greece does not even have that.  They do have a shipping industry but it is mostly off-shore.  In 1913 Argentina was the third richest country in the world.  You don't want to know what Ireland looked like in 1913 and during the 19th century it lost half its population to famine and emmigration. 

Sat, 11/26/2011 - 14:36 | 1915525 decon
decon's picture

I recall Argentina nationalized all pensions and retirement accounts into their bonds prior to default.  Wonder what that did to retirement plans?  Was that money used to soften the blow to creditors?

Sat, 11/26/2011 - 11:55 | 1915123 Hansel
Hansel's picture

THE FREE MARKET IS GLORIOUS!

Sat, 11/26/2011 - 11:56 | 1915125 bnbdnb
bnbdnb's picture

Dexia.

Sat, 11/26/2011 - 11:56 | 1915127 vast-dom
vast-dom's picture

Bottom line: Teh Fed is breaking the law while destroying markets and taxpayers.

Sat, 11/26/2011 - 13:15 | 1915337 DeadFred
DeadFred's picture

Wecome to the real world

Sat, 11/26/2011 - 12:00 | 1915129 max2205
max2205's picture

Good money buying Italian debt. We'll get it back aka GM

And good for a 50 point gap up in ES

Sat, 11/26/2011 - 12:04 | 1915146 GeneMarchbanks
GeneMarchbanks's picture

Larry Fink rejoice you fucking putz!

Sat, 11/26/2011 - 11:57 | 1915130 luna_man
luna_man's picture

 

 

TENACIOUS!

 

MY MAIN MAN

Sat, 11/26/2011 - 12:00 | 1915138 Seasmoke
Seasmoke's picture

best i can tell, the whole world has been Corzined

Sat, 11/26/2011 - 12:01 | 1915142 ISEEIT
ISEEIT's picture

Oh come on now! Just some adjustments to the rules. Nothing for we mere sheeple to concern ourselves with. Stop all this endless concern for what those in charge of the world are up to. They've done a splendid job for nearly 100 years now and so I am a bit preplexed by all of this alarmist skeptism.

Just go buy some shit and stop trying to undermine America's first very own black president!

Sat, 11/26/2011 - 12:09 | 1915155 DaveyJones
DaveyJones's picture

get out and give that economy some pepper

Sat, 11/26/2011 - 12:02 | 1915143 The 100 Trillio...
The 100 Trillion Dollar Man's picture

Where on the chart, you say? A Dexia (as they would say in Greece)

Sat, 11/26/2011 - 12:05 | 1915145 Quinvarius
Quinvarius's picture

This is where the Fed does the big print, but lies about it, so every banker is on the wrong side of the trade.  Classic and predictable Fed idiocy.  Lay a trap for the banks you are trying to bail out.

Sat, 11/26/2011 - 12:03 | 1915147 bob_dabolina
bob_dabolina's picture

I took the $74.2 billion and no you may not have it back

-Jon Corzine

Sat, 11/26/2011 - 12:05 | 1915149 css1971
css1971's picture

Y'know... 115 billion doesn't even sound like a lot any more.

Sat, 11/26/2011 - 18:54 | 1916145 Bansters-in-my-...
Bansters-in-my- feces's picture

$115 Billion sounds like aLOT ,if is on a Bill with YOUR name on it.

Sat, 11/26/2011 - 12:06 | 1915152 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

New mandatory collegiate economics material: Murray Rothbard, "Man, Economy and State. with power and market"

 

if you read this you will understand the great fallacy which America is........

Sat, 11/26/2011 - 12:19 | 1915171 Conrad Murray
Conrad Murray's picture

One of the best resources on the web for finding reading material that matters is Mises.org

Here is the link to Rothbard's work to get one started:

https://mises.org/literature.aspx?action=author&ID=299

Sat, 11/26/2011 - 12:32 | 1915197 TheAkashicRecord
TheAkashicRecord's picture

This text from Mises.org helped shaped my political views (not Rothbard though) 

The Income Tax: Root of all Evil

http://tiny.cc/wa7v3

 

 

Sat, 11/26/2011 - 12:13 | 1915161 ACjourneyman
ACjourneyman's picture

It's amazing to think that with the printing of trillions of dollars in 10 years, we are going to have years of deflation before hyperinflation. I would think we would go directly to hyperinflation but I believe we will not.

Sat, 11/26/2011 - 12:20 | 1915174 LawsofPhysics
LawsofPhysics's picture

It will depend where you live, and in particular how far away from food and fuel you are.  As real wages collapse and the purchasing power of fiat gets crushed, by the simple need to print to service debt alone, I can see many desperate but organized locals disrupting supply chains into major cities unless certain bribes are paid.  This is already stardard operating procedure in most major cities in Russia, China, Brazil, and India.

The end game is clear folks, the real owners want everyone working for Chinese wages - parity bitches.  

Sat, 11/26/2011 - 12:40 | 1915222 i-dog
i-dog's picture

Doesn't hyperinflation only occur when there is excessive currency being carried around in wheelbarrows by locals? The Bernank seems to be soaking up cash from the street while "printing" massive numbers of 1's and 0's for offshore banks ...?

Sat, 11/26/2011 - 12:15 | 1915166 RobotTrader
RobotTrader's picture

Hilarous.

FNM and FRE losses going exponential

Fed Balance sheet getting hockey sticked higher and higher

Yet the world keeps piling into U.S. Treasuries and they shun stocks of companies like AAPL and GOOG who have huge earning power and no debt.

Or behemoths like XOM that pay a 2.5% dividend and make billions per quarter.

And they would rather have Fiat Paper than hard assets, as oil and unleaded gasoline prices continue going down, evidenced by plunging gasoling prices in Los Angeles:

http://66.70.86.64/ChartServer/ch.gaschart?Country=Canada&Crude=f&Period...$/G

The lust and thirst for U.S. paper continues on, showing no signs of stopping.

 

Sat, 11/26/2011 - 12:20 | 1915172 DaveyJones
DaveyJones's picture

"Keeps piling?"  Is that why Hillary was on her knees to the Chinese to buy them please?

Sat, 11/26/2011 - 12:36 | 1915204 Dr. Engali
Dr. Engali's picture

My question is what secrets did the Chinese extract this time to keep buying debt ?

Sat, 11/26/2011 - 12:43 | 1915215 Max Fischer
Max Fischer's picture

 

 

Indeed, lust for your Uncle Gorilla paper is incredible.  Last Monday, the two year notes were 4 times oversubscribed at world record low rates.  Then, on Tuesday, the 5s and 7s were at world record low rates and 3 times over subscribed. One must stand in awe of Bernanke's ability to parallel park this multi-trillion dollar ship between two cliffs (inflation and deflation) on either side, and do it so perfectly in the middle of a hurricane.  

Funny how everyone is focused on hyperinflation and the imminent collapse of the US dollar, when, clearly, the bond market feels differently.

Max Fischer, Civis Mundi 

 

Sat, 11/26/2011 - 12:48 | 1915259 GeneMarchbanks
GeneMarchbanks's picture

Wow. MDB, Hamy, Robo all rolled into one.

You, sir, are one clever derivative.

Sat, 11/26/2011 - 15:48 | 1915701 slewie the pi-rat
slewie the pi-rat's picture

he's trying to be precocious like his avatar, but i don't think he'd be quite as good in the movie...

maybe when he grows up...if somebody doesn't pound him into the ground, first...

don't be shy!

Sat, 11/26/2011 - 12:51 | 1915274 Tyler Durden
Tyler Durden's picture

German Bunds were at all time records until literally days ago. Then they have a so-called failed auction with the result being a market plunge and a worldwide panic.

Cognitive biases can be painful to unwind.

Sat, 11/26/2011 - 12:57 | 1915294 GeneMarchbanks
GeneMarchbanks's picture

'Cognitive biases can be painful to unwind.'

Quote of the week.

Sat, 11/26/2011 - 13:07 | 1915307 Max Fischer
Max Fischer's picture

 

 

Germany has had multiple failed Bund auctions, and given that you've reported on it before (including this article from early 2010), it shouldn't be any surprise. 

http://www.zerohedge.com/article/failed-bund-auction-having-spillover-ef...

Respectfully......

Max Fischer, Civis Mundi

 

Sat, 11/26/2011 - 13:41 | 1915389 jm
jm's picture

Seems that bunds are liquid enough.  It is tough to explain the poor showing other than a widespread urge to get out of euro assets in contrast to dollar and SEK deonominated paper this time around.

 

 

Sat, 11/26/2011 - 13:54 | 1915421 slewie the pi-rat
slewie the pi-rat's picture

2 years is a long time, max

ask the libyans;  the egyptians;  prez0

if someone were to hint at the suggestion that it is different, this time, would that be ok w/ you?

well, it just might be.  different

you write of "the bond market" as if it were a monolith, but perhaps you are just being sloppy, lazy, and/or ignorant

tyler has put up hundreds of pieces since the one you found abt "germany"

if the bond market weren't changing and v. possibly leading equities into the outhouse and beyond, would he be quite so fastidious abt doing so?

Sat, 11/26/2011 - 14:40 | 1915540 Big Slick
Big Slick's picture

Question, Tyler: is there any way that Germany's failed auction could have been coordinated by the Fed as a Sicilian message for them to stop with the selling of US Treasuries?

 

Sat, 11/26/2011 - 14:46 | 1915551 Max Fischer
Max Fischer's picture

 

 

No.  That's paranoid, conspiracy-driven nonsense.  Germany had 7 or 8 failed Bund auctions in 2008, alone.  Then they had 2 back to back failures in early 2009.

This is nothing new. 

Max Fischer, Civis Mundi

Sat, 11/26/2011 - 15:07 | 1915611 Big Slick
Big Slick's picture

Thanks for the reply, Max.  I wasn't aware of that history and was just wundrin'.

Sat, 11/26/2011 - 15:15 | 1915587 slewie the pi-rat
slewie the pi-rat's picture

doesn't seem logical2me, mrSlick

if the buba-banksters can't sell their german buba-bunds, they might be more apt to sell Ts to raise funds?

Sat, 11/26/2011 - 13:17 | 1915342 besnook
besnook's picture

in an ironic twist the only way to save the whole system is to prop up the dollar. the dollar is sound because it has the unlimited ability to print so in a perverse preservation of capital scheme, all buyers of dollars can be guaranteed they will recoup their investment as long as everyone agrees that evweryone agrees the dollar must be bought ....this works until someone disagrees with the agreement.

 

don't think about it too much. you will have nightmares realizing the whole world is one bad usa bond auction away from dante's happy place.

Sat, 11/26/2011 - 15:06 | 1915604 RiverRoad
RiverRoad's picture

In the end it's all about credibility.  When that goes it's curtains.  And that goes for the US dollar too.

Sat, 11/26/2011 - 13:38 | 1915381 sosoome
sosoome's picture

He may have done a good job "parking",  but between two cliffs is about the worst place you'd want to "park" a ship.

Sat, 11/26/2011 - 16:12 | 1915757 Wixard
Wixard's picture

Funny how everyone is focused on hyperinflation and the imminent collapse of the US dollar, when, clearly, the bond market feels differently.

 

Cooked inflation numbers, 40%+ debasement since the mid 80s and a looming bank crisis? Lets not forget oil issues, the possibility of more bailouts and basically negative interest rates and you're BULLISH on treasuries? 

 

What happens when the masses and government demand printing after europe chokes and the banks get shocked?  

 

 

It's impossible to say when or if hyperflation comes in any form, but one thing is for sure: The debt debacle for the US, Europe, and the overall chinese econ issues are not finished. They just started. One headline could pop that market real quick. 


Sat, 11/26/2011 - 19:06 | 1916182 tumblemore
tumblemore's picture

The federal reserve is exporting inflation so it makes sense to be in dollars...until the end when America gets hit with instant Weimar and the cities turn into a vision of hell.

Sat, 11/26/2011 - 18:23 | 1916058 Everybodys All ...
Everybodys All American's picture

... and one day coming out of seemingly no where this paper that everyone desires oh so much. That paper that pays next to nothing in yield will like all other fiat be sold with those same two fists. Bubbles end in tears and yes this is a bubble that is getting scary stupid.

Sat, 11/26/2011 - 12:18 | 1915169 JW n FL
JW n FL's picture

 

 

http://www.youtube.com/watch?v=JFtpXbWp9Cc

Uploaded by on Nov 26, 2011

This week Max Keiser and co-host, Stacy Herbert, discuss unemployed Wall Streeters looking for financial firms that practice 'integrity and honesty' and hedge fund managers crying 'boohoo' that JP Morgan has seized their MF Global funds. In the second half of the show, Max talks to Danny Schechter about plunder, the crime of our time, inspiring an economic justice movement.

Sat, 11/26/2011 - 12:19 | 1915173 asteroids
asteroids's picture

It's brutally simple. There's too much credit and debt and not enough cash. As the credit and debt become worthless folks will try to convert it into cash/gold/silver/oil or whatever. Cash is the most fungible. There just isn't enough of it to go around. Expect the dollar to skyrocket. Keep a few doubloons handy too.

Sat, 11/26/2011 - 13:34 | 1915375 jimmyjames
jimmyjames's picture

It's brutally simple. There's too much credit and debt and not enough cash.

*************

Deflation explained-

As long as credit money is being destroyed faster than cash money can replace it-we will be in deflation-

There is another money that will come to the forefront over this-the first letter starts with a G-

Sat, 11/26/2011 - 12:22 | 1915180 Winston Smith 2009
Winston Smith 2009's picture

A possible clue as to what the "other" spikes are being caused by: in Apr 2010, the Greek sovereign debt crisis was big in the news. That corresponds with the other major spike in the graph at 4/2010:

28 Apr 2010 - Greek debt crisis spreading 'like Ebola' and Europe must act now, OECD warns

http://www.telegraph.co.uk/finance/financialcrisis/7644709/Greek-debt-cr...

Sat, 11/26/2011 - 12:31 | 1915181 Eireann go Brach
Eireann go Brach's picture

Fed Robbery..

Sat, 11/26/2011 - 12:27 | 1915186 Eireann go Brach
Eireann go Brach's picture

Or Obama bought turkeys for everyone on food stamps in America, with a note stuffed inside the turkey "gobble gobble vote for me or no turkey for you" so half the population got a 20 pound turkey paid for by Bennie Bucks!

Sat, 11/26/2011 - 12:29 | 1915191 TheAkashicRecord
TheAkashicRecord's picture

The Fed was participating in Black Friday?

Sat, 11/26/2011 - 12:53 | 1915279 JPM Hater001
JPM Hater001's picture

They bought a waffle iron at Walmart.

Sat, 11/26/2011 - 12:34 | 1915203 Cursive
Cursive's picture

In other words, someone (presumably someone with some urgent window dressing needs), and it sure wasn't only (if at all) the GSEs, had a massive capital shortfall and had to resort to Fed deposits. And by the looks of things, these could have easily been "international" entities tasked with bailing out the world such as the IMF.

The FRB is going to save the world with our USD?  There better be some fucking congressional hearings and soon.  BTW, this alone is reason for the OWS to gain some sympathy from Tea Partiers.  Wake up, America.  It' s a global banking cabal.  End the Fed now!

Sat, 11/26/2011 - 12:56 | 1915291 Winston Smith 2009
Winston Smith 2009's picture

Please read:

The Great Swindle (From Both Right and Left)

http://market-ticker.org/akcs-www?post=198116

Sat, 11/26/2011 - 13:19 | 1915346 OldTrooper
OldTrooper's picture

BTW, this alone is reason for the OWS to gain some sympathy from Tea Partiers.

I think the OWSers do have some sympathy from tea partiers.  OWSers get even more pity, though, for stupidly demanding that the enabling institution (government) of our gulag casino 'do something' about their partner in crime.

Sat, 11/26/2011 - 12:39 | 1915217 Amish Hacker
Amish Hacker's picture

We can only hope that the money was spread out among a number of different borrowers, because if the whole wad landed at the IMF, it's going to buy a lot of global pain.

Sat, 11/26/2011 - 12:47 | 1915253 buzlightening
buzlightening's picture

ZHers are very well informed.  The papering over of failed debt from the USDinker, Ezero, and most likely another SDR failed attempt, says one thing.  When the wicked rule the people mourn. 

Sat, 11/26/2011 - 12:48 | 1915262 boyplunger
boyplunger's picture

nailed it

Sat, 11/26/2011 - 13:00 | 1915298 Steroid
Steroid's picture

Money was needed to buy the shiney for Hugo!

Sat, 11/26/2011 - 13:05 | 1915313 onlooker
onlooker's picture

Public Notice: Report to the Home Land Security anything that is suspicious.

 

If anyone sees a danger to the safety of our Nation and to our National Security by the foul play, conspiracy, criminality, plots and actions that have led to the depletion of  revenues and assets of the USA and are impacting the ability of the Military and industrial complex, actions that have endangered the safety of this Nation and other Nations of the World, suspicion that the financial sectors such as The Federal Reserve and the US Treasury and major banks have, and/or are functioning to the determent of the Citizens and the Constitution  and the Local and State and Federal Governments---- then, I suggest you think about the situation and a method within the existing frame work of the system to lawfully address and demand that law be restored to this Nation.

 

It is now proven that we can not function as a lawless society and Nation.

 

 Secret and opaque government and financial systems can no longer be tolerated.

 

It is time for the present governing administration to make Change to keep this Nation from the obvious devastation ahead. It is time for the citizens and media to demand change. We can not wait until the next election. NOW is the time for all citizens (in or out of government) to come to the aid of their Country.

Sat, 11/26/2011 - 17:05 | 1915872 earleflorida
earleflorida's picture

"Pepe Escobar", says:

http://www.atimes.com/atimes/others/Escobar.html

Pick your poison? 

all the while julian assange sits in a clammy holding cell waiting  extradition for the 'Black Rose of Death' to perform her, 'reset-frontal-lobotomy' - can't let this happen,... folks

god bless you "Julian Assange"!

jmo

Sat, 11/26/2011 - 13:15 | 1915332 nostromo17
nostromo17's picture

 

Wild guess....  The euro climbed above $1.35 after the International Monetary Fund beefed up its lending instruments and unveiled a new six-month liquidity line to help countries with solid policies that may be at risk from the euro-zone crisis.
http://www.reuters.com/article/2011/11/22/markets-global-idUSN1E7AL1UA20111122

 

 

Sat, 11/26/2011 - 13:25 | 1915360 zerozam
zerozam's picture

Yeah, but the 88 billions doesn't cover this

"The ECB's weekly limit-free handout of funding underscored the widespread problems on Tuesday with 178 banks requesting a total of 247 billion euros. That was the highest since mid-2009."

Sat, 11/26/2011 - 13:27 | 1915364 justtotaketheedgeoff
justtotaketheedgeoff's picture

Is there any way to learn of an electronic run on the banks as it is happening or must we wait for a Kanjorski moment?

Sat, 11/26/2011 - 13:51 | 1915390 TheArmageddonTrader
TheArmageddonTrader's picture

An interesting mystery.

We do need to be looking for things that never happened before Sep. 2008, because this "other non-reserve deposits" number never got much past $1b before then.

There was a small move in this number after Sep. 11 01, but only from about $300m to about $1.12b. So even major stress to the financial system did not much move this number. Apparently it's not only the stress we're looking at here, it's the response.

I don't see any evidence yet of a connection to the IMF or World Bank. Treasury funneled all kinds of bailout money via the IMF and WB to various countries in 97-01 but this number barely moved.

I do see an obvious connection to European stress but I can't explain exactly how it works. The three latest major moves upward in this number were in April 2010 (first Greek bailout), June 2010 (first European bank stress tests), and a prolonged one that has been ongoing since June 2011 (second Greek bailout and so much more).

GSE bailouts would affect this number and they didn't happen before Sep. 08, but they can't explain anywhere near $88b in a week, and their timing doesn't jibe at all with the two major spikes in 2010.

I also think we can rule out that this is money coming directly from the Fed. If it were, there should be $88b growth somewhere also on the asset side of the Fed's balance sheet.

So wtf is this exactly? Whose deposits at the Fed are these? I don't see how any of the organizations on that list can be responsible for these huge moves.

Sat, 11/26/2011 - 14:23 | 1915492 jimmyjames
jimmyjames's picture

So wtf is this exactly? Whose deposits at the Fed are these? I don't see how any of the organizations on that list can be responsible for these huge moves.

**************

Could it be more garbage like this-so called "deposits" marked as cash redeemable at full dollar value when in fact they are basically worthless?

****************

Reuters) - A $29 billion trail from the Federal Reserve's bailout of Wall Street investment bank Bear Stearns ends in a partially deserted shopping center on a bleak spot on the south side of Oklahoma City.

The Fed now owns the Crossroads Mall, a sprawling shopping complex at the junction of Interstate highways 244 and 35, complete with an oil well pumping crude in the parking lot -- except the Fed does not own the mineral rights.

The Fed finds itself in the unusual situation of being an Oklahoma City landlord after it lent JPMorgan Chase $29 billion to buy Bear Stearns last year.

That money was secured by a portfolio of Bear assets. Crossroads Mall is the only bricks and mortar acquired through bailout. The remaining billions are tied up in invisible securities spread across hundreds, if not thousands, of properties.

It is hard to be precise because the Fed has not published specifics on what it now owns. The only reason that Crossroads Mall has surfaced is that it went into foreclosure in April.

http://uk.reuters.com/article/2009/10/21/us-usa-fed-bailout-idUSTRE59K01...

**************

Plosser didn’t elaborate on how the Fed would dispose of the $1.25 trillion of mortgage-backed securities it plans to purchase through March. The Fed is also buying up to $200 billion of housing-finance debt as part of efforts to lower interest rates and revive home-buying.

This month the Fed is completing $300 billion in purchases of long-term Treasuries, begun in March and aimed at lowering private borrowing costs.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.yk2qqz5l48

Sat, 11/26/2011 - 15:05 | 1915599 TheArmageddonTrader
TheArmageddonTrader's picture

Thanks, that's an idea.

The deposits at the Fed held by US branches of foreign banks count as reserve deposits, so those aren't contributing to this "other non-reserve deposits" line.

But can foreign banks directly deposit dollars at the NY Fed, not through their US branches? If they can, that would ikely count as "other non-reserve deposits" and could explain this.

Worth looking into.

Sat, 11/26/2011 - 14:20 | 1915483 RiverRoad
RiverRoad's picture

And where do "Fed deposits" come from?  Why none other than the US Taxpayer of course.  Shouldn't we be allowed some tax credits for all this charitable giving???

Sat, 11/26/2011 - 15:27 | 1915655 The Big Ching-aso
The Big Ching-aso's picture

 

 

Yes, you'll get credits back in the form of safety-net entitlements which depending on your present age may or may not occur.

Hope this makes you feel better and more secure going forward.      Good luck to you.

Sat, 11/26/2011 - 16:10 | 1915750 Hansel
Hansel's picture

From the bill:

(b) Applicability to United States Citizens and Lawful Resident Aliens-

(1) UNITED STATES CITIZENS- The requirement to detain a person in military custody under this section does not extend to citizens of the United States.

(2) LAWFUL RESIDENT ALIENS- The requirement to detain a person in military custody under this section does not extend to a lawful resident alien of the United States on the basis of conduct taking place within the United States, except to the extent permitted by the Constitution of the United States.

Not that this bill will stop the Pres from kidnapping citizens, but I don't see the part about it applying to Americans or U.S. territory.

Sat, 11/26/2011 - 15:41 | 1915688 JR
JR's picture

This is where you go and search the suspect’s house and the stolen goods are there.

Sat, 11/26/2011 - 17:28 | 1915931 Charles Mackay
Charles Mackay's picture

Contrary to what some others say above, my wild guess is that this is some type of government or international agency deposit – quite possibly the IMF gearing up for some Euro bailout plan.  There also is an alternative explanation - one or more governments that need to make payments for oil from Libya, Iran, Syria, etc., don’t want to deposit the money anywhere else for safety reasons.   However oil payment worries would not account for the total of $115 billion as of Wednesday – unless OPEC as a group does not want to use the Euro or even the US banking system right now. 

More specifically, the Fed might be preparing for, or already be in some complex deal, possibly involving derivatives, to re-lend to IMF, a new Euro agency, or perhaps to the secretive Exchange Stabilization Fund.  Keep in mind, direct lending to Euroland will not go over well in Congress right now.

Sat, 11/26/2011 - 18:08 | 1916026 quacker
quacker's picture

All that has ever been required to bring down the Fed, EVER .. from the very moment of its conception has been for the bulk of the American people to actually understand what it is and what it does.

The Fed is a self-killing organization. That's why from minute 1 it was given a phony baloney name, big marble buildings, an official looking emblem etc. .. to disguise it as something that it is not.

The great bulk of the people don't even know that it is a private banking cartel.

Everyone interested in this needs to keep following the money. There is no better way to destroy that criminal cartel than to just keep exposing, in a straight forward factual way exactly what it is doing. Self-destruction is baked right into it.

The truth of it will set us free from it.

Sat, 11/26/2011 - 18:26 | 1916073 boiltherich
boiltherich's picture
I did not have a lot of time this morning to comb through the FHLB accounting statements for quarter and 2010 year end posted Nov. 10, but one thing that did catch my eye was a reduction in notional value of derivatives held from almost 6 trillion to less than three.  They are pretty thoroughly hedged but on that kind of derivative pile with all the VIX we have seen lately I would not at all be surprised if the Fed/Treasury had to channel 80-100 billion through the FHLB to cover losses on 2011 year end derivatives.  Remember we are in 2012 FY now.  FHLB funds a lot of the GSE activity particularly related to RE. 

If anybody is going to find it and report it I am thinking it will be the Tylers.  But 88 billion is such a small needle in such a mammoth global haystack that it could have been anything, a gift to Pakistan for all we know.  Prefunding for the Iran-Israeli war?  A down payment on replacement mini nuke bunker buster bombs we are about to run short on?  No matter what it is, be it pure theft in the form of a gift to Hank Paulson or the purchase of a few dozen new stealth bombers, it is still a very thin sliver on the pie chart of corruption that is now our government and banking system.

Sat, 11/26/2011 - 23:58 | 1916742 Charles Mackay
Charles Mackay's picture

Good point.  The US actually spent $100 billion very quickly to cover AIG's derivative losses a few years ago, so isn't is possible at least that much could be spent on just providing collateral for mark to market coverage for FHLB, Fannie Mae and Freddie Mac?

However this would not be an appropriation authorized by Congress, so they might not want it to get too much publicity.

Sat, 11/26/2011 - 18:40 | 1916103 PulauHantu29
PulauHantu29's picture

excellent financial investigative work!

Sat, 11/26/2011 - 20:04 | 1916283 Psquared
Psquared's picture

This is backdoor funding front and center. You cannot call it anything else. When the fed buys Treasuries they are funding the government so it can spend over and above appropriations. By buying FNM and FRE bonds they are providing funding to GSE's which Congress has not seen fit to appropriate. That is why the Federal Reserve Act limits purchases to instruments carrying the full, faith and credit of the U.S. The convoluted argument that GSE bonds do carry such a guarantee misses the point and intent. The FRB was NEVER, EVER intended to provide dollars to anything other than the treasury. Loan a dollar get a treasury bond.

What baffles me is that no one has yet brought a suit to challenge this backdoor funding and ultra vires act by the FRB. If it is a question of taxpayer standing there are ways around that which no one seems to want to explore.

Auditing the FRB was front and center 2 years ago and now it has disappeared from public view. The momentum has completely disappeared and it is no longer in the public conciousness. I am convinced that 50 years from now historians will write that the failure of these accountability actions precipitated the collapse of western economies.

Sat, 11/26/2011 - 21:31 | 1916428 penisouraus erecti
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"This country is in bankruptcy, we have to deal with it, we can't remain in denial" Dr. Ron Paul, 11/20/11

Sat, 11/26/2011 - 22:04 | 1916502 davepowers
davepowers's picture

on its face they've just moved a deposit at the FED from 'banks' to 'other' entities, like a bank shifting your savings account into another name.

but what happens next - if 'other entity' calls up the FED and say 'send me the money (like a withdrawal from your former savings account, the FED must come up w/ the money some place. 

They could sell assets, but good luck with that in today's market.

Or, they can simply borrow the money from the banks in the form of crediting the reserve accounts with a bigger number.

there would be your 'leakage' as the banks who originally held the reserves (but which were reduced by $85 bn this week) see their reserves pumped back up, while the 'money' shown as credited to 'other' is reduced as said money is transferred out.

 

Sun, 11/27/2011 - 00:04 | 1916759 PulauHantu29
PulauHantu29's picture

Take a look at line 10:

http://www.treasury.gov/press-center/press-releases/Pages/tg1362.aspx

Does this mean foreigners are buying tresuries again?

Sun, 11/27/2011 - 02:01 | 1916949 jimmyjames
jimmyjames's picture

Does this mean foreigners are buying tresuries again?

**********

I would guess foreigners are hedging heavily now with US equivalents against their own spiking yields-especially after the recent shock of the German bund making an unprecedented u-turn-

Sun, 11/27/2011 - 12:10 | 1917489 RockyRacoon
RockyRacoon's picture

If this is a non-event, one would think that the Fed would quickly step forward and explain the financial machinations.    Have we heard any explanation?  No?  Then it's not a non-event.   Stay tuned to this channel for further updates.

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