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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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.

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. 

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.

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. 

SDRII's picture

countrywide was tapping the fhlb in size. Bac as well

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. :-)

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.

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

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.

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? 

Manthong's picture

Good one..

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

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.

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. 

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.

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. 

 

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.

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

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.

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.

RiverRoad's picture

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

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.

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.

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!!

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 

 

 

 

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.)

 

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.

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. 

 

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

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.

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.

FlyingDutchman's picture

It's also on the financial times.

holdbuysell's picture

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

GeneMarchbanks's picture

via IMF.

RP* is vindicated...

 

* By RP, I mean Rick Perry of course.

LawsofPhysics's picture

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

Manchu9Inf's picture

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

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!

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.

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.

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.

OldTrooper's picture

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

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.

 

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.

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".

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.

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?"

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.

RiverRoad's picture

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