As A Reminder, Here Is What Happened To Risk Following The Surge In Fed Discount Window Borrowings

Tyler Durden's picture

Since for all intents and purposes the ECB's LTRO is equivalent (and likely accepts even 'looser' collateral) to the Fed's massive (for its time) liquidity injection following the failure of Lehman, a good question is what happened to stocks after the Discount Window usage spiked back in the fall of 2008. Spoiler alert: nothing good.

Needless to say, Goldman, which obviously recommended the actions at both the Fed and the ECB courtesy of its employees at both locations, is well aware that such discount window expansions are clearly temporary in nature, and the next and final inevitable step, is all out unsterilized liquidity injections via Large Scale Asset Purchases, aka QE.

So just how long until the bond vigilantes push Draghi to this inevitable next inflation ushering move?

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French Frog's picture

But surely it is different this time lol

knight99's picture

Oil is going to bitch slap all CBs in the face. Watch the Bernak mouth quicker when he has to explain the oil markets.

Ghordius's picture

oil? the blood of the empire? the stuff that supports the USD? I'm not sure...

disabledvet's picture

hahahahaha. "the mighty empire of North Dakota." That's a good one!

thedrickster's picture

Nah, the CBs will get a pass from the propagandists that set public opinion on such topics.

Evil speculators and Ayatollahs will bare the brunt.

battle axe's picture

Hello HYPERINFLATION!!!!! We have been waiting for you...

stika's picture


bdc63's picture

I agree.  At least here in the US the bond vigilantes are an extinct species.  RIP.


disabledvet's picture

not INSIDE the bank. JP Morgan just published the profits they make from interest rates swaps--never done before. That's called "the real rate" not some b.s. "government rate" that "is conditional on the fact that we get to evict you and then offer you terms of surrender." And people wonder why Obama's poll numbers are "fragile"....must be all that "government forebearance"....

Ghordius's picture

I don't know if this is the right moment for any "bond vigilantes". those mythical creatures are nowadays quite often hedgies, and they live on the margin more than others...

no, I think they will wait more...

The Axe's picture

Tyler, i guessing the amount was actually reported wrong by the media..its now 718billion euros?

French Frog's picture

529.5 billion euros x exchange rate at the time of the data release (1.3465) = 713 billions $ (near your number - is that where confusion comes from?)

I am Jobe's picture

Full Speed ahead - ECB and FEDS must buy the respective Printing companies- HPQ, Cannon Xeroz. Might be cheaper and than to source it out. O  I forgot, they don;t have the espeertise even to plug the fucking thing. Great Minds , yeah right.

j0nx's picture

Plenty of other 3rd world countries to send THEIR jobs to when the cost of living increases have finished running their course through India. I predicted 11 years ago that it would take 10 years before India would find itself in the same outsourcing/offshoring situation that America was in 10 years ago. Looks like my prediction should have been more like 15 years instead of 10. That's what these vultures will do. Outsource jobs to a new country whenever the old country inflates its way to 'prosperity' and labor there is no longer cost effective.

Dr. Engali's picture

How can there possibly be bond vigilantes when the fed or the Ecb will just ease them out of existence? I expected them
To punish the fed long ago but just the opposite is true. As soon as yields get to high they will let the stock market drop and spook buyers right back into the bond market.

disabledvet's picture

because whether or not you need banks anymore governments must have all debts repaid. from "Meet the Cleevers" to "meatcleaver" just a few short years no less! I do agree from a market perspective "it pays to be diversified"...even though market prices are in the process of surging.

Dick Darlington's picture


Bring the Gold's picture

People really bringing the 80's music video thunder this morning...and on that note lets not forget about (RE market in) the Land Down Under:



Ahwooga's picture

I do find it staggering that there aren't even a few more people out there who are questioning what, just under the surface if you bother even taking half a look, is clearly a bad thing. This market can't seem to catch a decent offer and until it does, risk-on isn't going anywhere. Don't get me wrong, it isnt what should happen, it just appears to be what will happen. As soon as one major gets the fear and looks for a lifeboat there won't be near enough to go around. Question is, with all the bad news and all the spurious one-off bits of positive headline grabbing being interpreted as bullish enough that almost no-one seems to be questioning any of it, what is going to be bad enough to make any of this long-only mentality disappear?

youngman's picture

and the volumes are way if you add in the HFT´s....that is really bad for the markets....risk on.....risk off...its more like people bailed out..and just the computers are playing now

disabledvet's picture

this market's a "raging pit bull in his little doggy cage." trying to manage a "just so" recovery is prima facie ridiculous and not merely "not doable"--but that doesn't stop this iteration from trying. LAND is the answer.

solgundy's picture
Ok. As we are literally days away from the global financial meltdown just look at what is being broadcast on MAINSTREAM media!   Geithner Is A Criminal! So How Is It He COULD Face Criminal Charges?
  This adds serious credibility to Ben Fulford who wrote last week that Geithner was arrested and released. Before this broadcast even I was skeptical of the Fulford report but now it all seems very possible if not likely.  
  Although the topic of this report may be stunning for those of you who are still asleep, the REAL revelation in what happened in this broadcast was not the exposure of Tim Geithner but rather what Shep Shepard gives up in a TOTAL MSM mental lapse at 3:40...   "It's clear that the banks run the country...the country doesn't run itself."
youngman's picture

Bond Vigilantes....are no more...China could dump all of their treasuries in one day...the Feds would just buy them up...the Fed CANNOT have interest rates will be their death nell....the bond "market" is over....there is no market...just what the Fed wants.....and if you want a 10 year for go girl.......


So now money will rush into the returns...the EU first....then "junk" bonds......but soon they will all be to 1-2%.....and commodities will take over I think..and big..the "funds" have to make 8% to survive......and they will try....they will not make it...but its their job to try..or at least tell you they are are going to make when GS invents a package of Lemonade stand loans that are supposed to pay 8%...they will buy them....and tell you they are making the big yes they will sell like every fund manager has to make the 8%.....a big circle jerk...

its going to get scary very fast I think....a RUSH TO RETURNS.....


disabledvet's picture

"and the euro rallies on the news." gold, silver...while "they still can." the holy grail of "controlling price." ever elusive. shall we begin with intent? i.e. "our debts are so huge are intent is to drive down interest rates such that...

BW's picture

Treasuries will continue to rise until default.

spiral_eyes's picture

correct. how can we expect them to fall when the fed is artificially constricting their supply?

BlackholeDivestment's picture

...speaking of reaping the whirlwind on a lol (quick) quantum leap day, the butter and flies affect of operation Ben twister is a killer. You may want to move more than your assets out of harms way. 

Looks Like Branson got hit bad. They just issued a two day in advance notice of 50% chance of tornadoes returning to same areas. Deadly Weird and wild weather. 

13 known tornadoes 

Blizzards Meet Tornadoes

crawl's picture

Isn't this bullish that 800 european banks pawned their bad loans to get cheap money to buy sovereign debt? What could possibly go wrong with this plan?

What happens if the pledged collateral drops in value? Is this recognized by the ECB as an impairment or ignored for the sake of saving face?

disabledvet's picture

welllll....from "i'm broke" to "so are you!" indeed! KEEP BIDDING UP THAT EURO DEADBEATS!

youngman's picture

I think the countries outside the bailout countries..I.E. the EU or the USA......will start selling their bonds......get out of them before they are worthless as they can see the central banks will print to infinity...and they will have financial isolation is the future....its going to get will be the dollar will lose its reserve will first inflate...then the TPTB will change it....and the new powers will be the countries with the commodities......

gatorengineer's picture

Print Money (0.7T) and Gold Drops........ EXXXXXCELLLLENNNNNNNT

Carl LaFong's picture

Ultimately, the competition for funds between governments will drive interest rates higher. However, the governments will be so desperate that they will start requiring pension plans (inlcuding things like IRAs, pvt pensions, etc.) to buy government paper.  This will be done under the guise of "protecting" the citizens. Currency controls are not far away now.  Fiat currencies are losing their luster. People in US tend to forget that the fiat currency experiment in the US is only about 40 years old and that gold and silver were considered money for thousands of years before that.  The public "screwall" system in the US has done an excellent job in dumbing down the population and depriving them of understanding the history of money the effect of its ultimate debasement by ALL governments. Sad.... 

Raging Debate's picture

Thanks for the chart Tyler. I was trying to remember how the Primary Dealer banks borrowing from the Fed at the discount window and subsequent blow-up in oil back in 2008 affected equities.