Infinite Unknown

Dollar to fall to metals in upcoming rallies, rate hikes soon wont be able to fix economic problems, real inflation understated for years, USDX contracts plummet, why arent people fleeing from the stock market… Exchange Traded Funds are a disaster, losses from global write downs, Fed still invited to intervene in spite of failures

The dollar has once again collapsed. Get ready for the next dollar debacle and the coming rally in gold and silver which have just broken out. The elitists have lost all credibility. The would-be lords of the universe have told so many pathological lies that no one “in the know” believes anything emanating from the forked tongues of Buck-Busting, Bear-Bashing, Big-Ben Bernanke and Hanky Panky Paulson. If our Fed Head and Treasury Secretary had been characters in the Walt Disney movie entitled “Pinocchio,” their noses would have quickly grown to lengths that could have been wrapped around the earth’s equator several times. God would have had to reverse the earth’s rotation to extricate them.

Wall Street tells us the odds favor two quarter percent rate hikes to the Fed funds rate by the end of the year. We ask whether that would be before or after the economy collapses? If before, the Fed’s rate hikes will destroy what is left of our economy, and the dollar will collapse, thereby erasing any benefits from the rate hikes. If after, you will see rate cuts instead of rate hikes as the Fed attempts to save the fraudsters on Wall Street who are not even remotely close to recovering from the credit-crunch despite what the elitists might tell you to the contrary. We ask who the morons are that make up these odds, and what planet they come from. They give aliens a bad name. These index predictions are just another form of jaw-boning and disinformation.

As soon as the economy starts its final descent into Davy Jones’ Locker, which is likely to occur in the very near future, the Fed and the US Treasury will unceremoniously toss the so-called “strong dollar” policy into the nearest financial dumpster in order to save the economy and the fraudsters. Accompanying the “strong dollar” policy on its way to the dumpster will be the next round of derivative toxic waste that is on its way courtesy of the upcoming surge in fallout from tanking real estate markets in a process that will see the Fed blow what remains of its general collateral in exchange for such waste. Once the Fed’s general collateral is exhausted, we will be ushered into a new hyperinflationary era characterized by direct monetization of US treasuries to fund our deficits and to absorb more toxic waste as it continues to pour down on elitist financial institutions like Niagara Falls.

A few measly quarter percent cuts will do absolutely nothing to slow the acceleration of inflation, especially if the Fed keeps the M3 at current levels. Only a double-digit Fed funds rate and greatly reduced M3 could have any eventual and meaningful impact on the inflation that is built into the system for at minimum the next year and one half at levels in the area of 15% to 18%, and even then the impact will not be felt until the current baked-in inflation has run its course. Direct monetization of treasuries to replenish Fed collateral and to absorb our growing deficits will put inflation beyond the point of no return, as will the breaking of OPEC dollar pegs.

As you can see, there is no way that any of the proposed diminutive rate hikes will have a positive impact on the economy, on the dollar or on the balance sheets of the fraudsters. Therefore, there will not be any rate hikes. Any increase in the Fed funds rate would be accompanied by an economic catastrophe of epic proportions that would occur as a direct result of the raising of that rate. Any rate hike would take a year to a year and a half to have an impact on inflation. By the time the anticipated Fed rate hikes could have any kind of impact whatsoever, the economy will already be in a state of rampant hyperinflation, and would be well on its way to depression, far too late to save the dollar or the economy. Ergo, the new elitist motto will soon become: “Damn the inflation, full greed ahead!”

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Tags: Bear Stearns, Ben Bernanke, Depression, ECB, Fed, Federal Reserve, Gold, Henry Paulson, hyperinflation, Hyperinflationary Depression, Inflation, JPMorgan, Lehman Brothers, M3 money, Recession, Silver, Stock Market, Treasury, Trichet, U.S., Wall Street

June 19 (Bloomberg) — High-net worth individuals, those coveted financial-services customers with at least $2 million to invest, are shifting assets from brokerages and large global banks to smaller, more conservative alternatives.

“For the first time in my career, I saw concern about the location of one’s assets,” said Robert Balentine, the head of Wilmington Trust Corp.’s investment management group. “We’ve seen tangible evidence of very wealthy clients shifting assets out of brokerage firms in great numbers.”

Trust companies like Wilmington are benefiting from record subprime-infected losses at companies led by Zurich-based UBS AG, the world’s biggest money manager for the rich. UBS clients probably withdrew a net $39 billion during the past three months after the company reported more than $38 billion of writedowns and credit-market losses in the past year, London-based analysts at JPMorgan Chase & Co. estimate.

Clients may say “if UBS can’t manage its own capital, then what the hell are they going to do with mine?” said David Maude, a financial services consultant in Verona, Italy, who calls UBS the “Rolls Royce” of the industry. “It does tarnish their reputation, certainly.”

UBS contacted 2.5 million Swiss consumer and wealth- management customers last month after losing 11.5 billion francs ($10.9 billion) in the first quarter and seeing a net withdrawal of 12.8 billion francs in its asset and wealth-management units.

The company has responded with “proactive, ongoing communication” with clients, said Jim Pierce, co-head of UBS’s U.S. Wealth Management Advisory Group, in an e-mailed response to questions. UBS is “willing to have the difficult conversations,” Pierce said.

U.S. Market

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Tags: Bear Stearns, crash, Depression, financial crisis, investment, JPMorgan, Meltdown, mortgage crisis, Mortgages, Recession, UBS

WASHINGTON - The credit crisis triggered by bad home loans is spreading to other areas, forcing banks to tighten credit and probably extending the credit crisis that’s dragging down the economy well into next year, and perhaps beyond.

That means consumers are going to have an increasingly difficult time getting bank loans for car purchases, credit cards, home equity credit lines, student loans and even commercial real estate, experts say.

When financial analyst Meredith Whitney wrote in a report last October that the nation’s largest bank, Citigroup, lacked sufficient capital for the risks it had assumed, she was considered a heretic.

However, Whitney was proved correct: Citigroup pushed out its CEO, sought foreign investors and slashed its dividend. Her comments now carry added weight on Wall Street, and she has a new warning for ordinary Americans: The crisis in credit markets is far from over, and it increasingly will affect consumers.

“In fact, we believe that what lies ahead will be worse than what is behind us,” Whitney and colleagues at Oppenheimer & Co. wrote in a lengthy report last month about threats faced by big national banks, including Bank of America, Wachovia and others.

The warning is scary considering what’s already behind us in the credit crisis - the resignation or firing since last August of CEOs at almost every large commercial or investment bank; the Federal Reserve lowering its benchmark lending rate by 3.25 percentage points; a Fed-brokered deal to sell investment bank Bear Stearns; and weekly auctions of short-term loans from the Fed worth billions of dollars to keep credit markets functioning.

(Got Gold and Silver? - The Infinite Unknown)
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Tags: Bear Stearns, Citigroup, Credit Crisis, Depression, Fed, Federal Reserve, mortgage crisis, Mortgages, Recession, Wall Street

Worldwide, it is $596 TRILLION dollars *. The derivatives market dwarfs the real market for goods and services, and acts likes an unregulated black market.
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A couple of months ago, a financial analyst who sells derivatives told me that fears about a meltdown in the derivatives market were unfounded.
Yesterday, he told me - with a very worried look - “THE DERIVATIVES MARKET IS UNWINDING!”

What does this mean? What are derivatives and why should you care if the market is unwinding?

Well, it turns out that the reason that Bear Stearns was about to go belly-up before JP Morgan bought it is that it had held trillions of dollars in derivatives, which were about to go south. (The reason that JP Morgan was so eager to buy Bear Stearns is that it was on the other side of these derivative contracts — if Bear Stearns had gone under, JP Morgan would have taken a huge hit. But the way the derivative agreements were drafted, a purchase by JP Morgan canceled the derivative contracts, so that JP Morgan didn’t experience huge losses. That is probably why the Fed was so eager to broker - and fund - the shotgun marriage. JP Morgan is a much larger player, and if Bear’s failure had caused the derivatives hit to JP Morgan, it probably would have rippled out to the whole financial system and potentially caused an instant depression).

In addition, the subprime prime loan crisis is intimately connected to the unwinding of the derivatives market. Specifically, loans were repackaged into derivatives called collateralized debt obligations (or “CDO’s”) and sold to both big and regional banks and investment companies worldwide. The CDO’s were highly-leveraged — many times the amount of the actual loans. When the subprime loan crisis hit, the high leverage magnified the fallout, and huge sums of CDO derivatives became essentially worthless.

Do you remember when wealthy Orange County, California, went bankrupt in 1994? Yup, that was because it had invested in bad derivatives.

And, according to a recent article by one of the world’s top derivative insiders, the market for credit default swap (”CDS”) derivatives is also unraveling.

And reported just today, Lehman Brothers is now on the edge, due to exposure to derivatives.

Derivatives are the Elephant in the Living Room

The subprime mortgage crisis is bad, and is hurting many people, and slowing the economy. High oil and food prices are bad, and are hurting many people, and bringing down the economy. But — according to top insiders — derivatives are the elephant in the room . . . the single largest threat to the U.S. and world economy.

One reason is that, according to Paul Volcker, the former chairman of the Federal Reserve, the entire modern financial system is based upon derivatives, and the financial system today is entirely different from the traditional American or global financial system because derivatives - a relatively new concept - now underly the entire fabric of the financial system. In short, many of the people who know the most about derivatives say that the current system is a house of cards built upon derivatives.

Moreover, as mentioned above, the subprime and derivatives crises are closely linked. Similarly, Britian’s New Statesman newspaper links derivatives and rising food and commodity prices: Continue reading »

Tags: Alan Greenspan, Bear Stearns, Ben Bernanke, Commodities, Derivatives, Derivatives market, Fed, Federal Reserve, Food, Food Prices, G. W. Bush, JPMorgan, mortgage crisis, Mortgages, Paul Volcker, U.S.

Fed auctions $75 billion to banks to ease credit woes, total is $435 billion since December

WASHINGTON (AP) — Battling to relieve stressed credit markets, the Federal Reserve said Tuesday it has provided a total of $435 billion in short-term loans to squeezed banks since December to help them overcome credit problems.

The central bank announced the results of its most recent auction — $75 billion in short-term loans — the 11th such auction since the program started in December.

It’s part of an ongoing effort by the Fed to help ease the credit crunch, which erupted last August, intensified in December and January and took another turn for the worst in March.

The housing, credit and financial crises have weakened the economy and threaten to push it into recession.

In the latest auction, commercial banks paid an interest rate of 2.220 percent for the loans.

There were 71 bidders for the slice of the $75 billion in 28-day loans. The Fed received bids for $96.62 billion worth of the loans. The auction was conducted on Monday with the results released Tuesday.

In mid-December the Fed announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump. A global credit crisis has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses. Continue reading »

Tags: Bear Stearns, Credit Crisis, Economy, Fed, Federal Reserve, financial crisis, Inflation, Recession

As banks look to shore up their balance sheets in the wake of the credit squeeze, Philip Aldrick asks whether it is all short-term trickery

Investors gather in New York’s financial district after the stock market crash of 1929, which heralded the onset of the Great Depression

‘We are in the midst of the worst financial crisis since the 1930s,” warns the eminent financier George Soros in his latest book, The New Paradigm for Financial Markets. It’s a rather extreme view, but the man who broke the Bank of England is not alone in his dark funk. At a recent event, one banker laced Soros’s sentiment with a little gallows humour, ruefully predicting “10 years of depression followed by a world war”.

Comparisons with the great crash of 1929 are inevitable and the parallels manifold. Then it was an over-inflated stock market that burst before wider economic malaise ushered in the Great Depression.

This time, in the words of Intermediate Capital managing director Tom Attwood, sub-prime was merely “a catalyst” for the inevitable pricking of the credit market bubble as “disciplines were bypassed in favour of loan book growth at almost any cost”. Again the talk is of recession, certainly in the US and possibly in the UK.

Perhaps the most intriguing parallel, though, is the crude attempt at self-preservation made by the investment trusts in 1929 and the banks now.

In the great crash, investment trusts with vast cross-holdings in each other tried to stem their collapse by buying up their own stock in what the economist JK Galbraith in his book, The Great Crash 1929, described as an act of “fiscal self-immolation”. At the time, “support of the stock of one’s own company seemed a bold, imaginative and effective course,” Galbraith wrote, but ultimately the trusts were just “swindling themselves”.

Modern economists have compared the trusts’ actions with what the banks are now doing. “They seem to be just papering over the cracks,” says Brendan Brown, chief economist at Mitsubishi UFJ Securities. Continue reading »

Tags: Bear Stearns, Citigroup, Depression, Deutsche Bank, Economy, financial crisis, George Soros, Inflation, mortgage crisis, Mortgages, Recession, Stock Market, U.K., U.S., UBS, War

May 30 (Bloomberg) — Federal Reserve Board Vice Chairman Donald Kohn raised the possibility of giving Wall Street securities firms permanent access to loans from the central bank, as long as regulators tighten oversight of the companies.

Kohn also advocated continuing Fed auctions of funds to commercial banks and loans of Treasuries to Wall Street dealers even after markets stabilize. Such channels would stay open “either on a standby basis or operating at a very low level,” he said in a speech in New York yesterday.

The remarks go beyond Fed Chairman Ben S. Bernanke, who has indicated the central bank would shut lending to investment banks when the credit crisis passes. Lawmakers and regulators are debating how to approach the supervision of investment banks in the aftermath of the Fed’s rescue of Bear Stearns Cos. in March.

“If you are a bondholder in one of these Wall Street firms, you know you have a big `Sugar Daddy’ now called the Federal Reserve that’s going to back you up,” said Jeff Pantages, chief investment officer of Alaska Permanent Capital Management in Anchorage, which oversees $1.8 billion in assets.

“But if you are a stockholder this kind of worries you” because investment banks “will be more highly regulated and won’t be able to use leverage as much as” before, he said.

Kohn said he hasn’t decided whether securities firms should continue to gain access to loans from the central bank.

More Extensive

“The more extensive the access, the greater the degree to which market discipline will be loosened and prudential regulation will need to be tightened,” Kohn said in his speech to a conference hosted by the New York Fed. “Unquestionably, regulation needs to respond to what we have learned about the importance of primary dealers and their vulnerabilities to liquidity pressures.” Continue reading »

Tags: Bear Stearns, Ben Bernanke, Fed, Federal Reserve, U.S., Wall Street

“The Fed no longer publishes figures for M3.”

Excursion:

Mr. Bernanke has pledged to bring increased transparency to Federal Reserve policymaking, but the recent Fed decision to discontinue compiling and releasing the M3 monetary aggregate figure casts doubt on this promise. M3 is widely used by economists, policy makers, and investors as the most accurate and reliable true measure of the money supply.

Ron Paul, known as a congressional expert on monetary policy, reminded Mr. Bernanke that inflation is always a monetary phenomenon, resulting from an increase in the money supply as ordered by the Fed itself. M3 has risen more than twice as fast as M2 and GDP in recent years, illustrating that real inflation is much higher than the government admits through its CPI statistics. The troubling possibility is that the Fed discontinued M3 for the simple reason that it wants to conceal the extent to which the money supply- and hence price inflation- really grows.

Paul is preparing legislation that will compel the Fed to continue publishing M3, and plans to introduce the bill in the Financial Services committee later this month.

Source: Ron Paul

(PS: Core inflation excludes costs of food and energy goods, the very items that are the most visible prices for most consumers! - The Infinite Unknown)

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Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed’s loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

Policy makers have increased the attractiveness of direct loans as they seek to alleviate the impact of the credit crunch. Fed Chairman Ben S. Bernanke said two days ago that while markets have improved, they remain “far from normal,” adding that the central bank is prepared to increase its twice monthly auctions of funds to banks. Continue reading »

Tags: Bank of America, Bear Stearns, Ben Bernanke, Fed, Federal Reserve, GDP, Inflation, M3 money, Ron Paul

“Even if the capital markets crisis resolves, it does not mean that this country will not go into a bad recession,” said CEO James Dimon, whose bank saw its first-quarter profit fall by half due to the recent collapse of the U.S. mortgage market. “The recession just started.”

“We don’t know if it’s going to be mild or severe,” he continued, speaking at a conference in New York hosted by Swiss bank UBS AG. “We’re thinking there’s a third of a chance that it’s going to be pretty bad … closer to the 1982 recession than the very mild recessions we had in 2001 and 1990.” Continue reading »

Tags: Bank, Bear Stearns, JPMorgan, Mortgages, Recession, UBS

Ben Bernanke, chairman of the U.S. Federal Reserve, arrives at the Federal Reserve building for a Federal Reserve Open Market Committee meeting in Washington, April 29, 2008. Photographer: Brendan Smialowski/Bloomberg News

May 2 (Bloomberg) — A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.

There is “a potential crisis in the student-loan market” requiring “similar bold action,” Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.

Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke’s actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd’s request today, expanding the swaps to include securities backed by student debt.

“It is appalling where we are right now,” former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced “a backstop for the entire financial system.”

Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.

The Fed’s loans to Bear Stearns were “a rogue operation,” said Anna Schwartz, who co-wrote “A Monetary History of the United States” with the late Nobel laureate Milton Friedman.

`No Business’

“To me, it is an open and shut case,” she said in an interview from her office in New York. “The Fed had no business intervening there.” Continue reading »

Tags: Bear Stearns, Ben Bernanke, companies, Congress, Credit Crisis, Fannie Mae, Fed, Federal Reserve, Freddie Mac, IMF, JPMorgan, Lehman Brothers, Merrill Lynch, Milton Friedman, Mortgages, Treasury, Wall Street