Infinite Unknown

- And You Thought The Fed Was Bad (ZeroHedge, April 3, 2012)

When one cuts out all the noise, the only true purpose of aggressive (or not) central bank asset expansion, is to be a “buyer” of last resort of sovereign debt funding. Think of it as the source of credit money demand (and hence supply) when every other sector is deleveraging, and when a given Treasury authority needs to pump trillions in debt into the market but when nobody can afford to lever up and buy said incremental debt. Call it monetization, call it funding the deficit, call it whatever: that’s what it is. And when people think of monetization, they think, first and foremost of the Chairman, who recently was caught praising the fiat system at a university named for a person who said the following prophetic line: “Paper money has had the effect… it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” Irony aside, when one cuts to the chase, and ignores even further noise about monetization being direct, indirect, sterilized, shadow, etc, there are just two metrics that are relevant: change in sovereign debt and change in Central Bank Assets. In this regard, of the US’ $5.5 trillion in sovereign debt increase, the Fed matched Geithner for $2.0 trillion of the total, or 37%. An admirable number and certainly better than the BoE’s 29%. Yet who gets the absolute top prize? Why none other than the ECB, which with $2 trillion in expansion (of which about 60% took place under Goldman apparatchik Mario Draghi in just the past 6 months) represents a whopping 63% of total Eurozone sovereign debt expansion of $3.1 trillion!

And yes, the fact that the EURUSD is not trading sub parity is for one simple reason: the market expects that Bernanke will, quite soon, match Draghi dollar for euro, in this sheer madness.

And just to not lose sight of the big centrally-planned picture…

source: citi

Tags: Ben Bernanke, Bonds, Debt, ECB, Economy, EU, Europe, Fed, Federal Reserve, Government, Politics, Quantitative Easing, U.S.

- Guest Post: You Ain’t Seen Nothing Yet – Part One (ZeroHedge, April 2, 2012)

Tags: Barack Obama, Ben Bernanke, Collapse, Debt, Economy, Fed, Federal Reserve, GDP, Global News, Government, Obama administration, Politics, Society, U.S.

- Must Read: Jim Grant Crucifies The Fed; Explains Why A Gold Standard Is The Best Option (ZeroHedge, Mar 30, 2012)

Tags: Banking, Ben Bernanke, Bonds, Debt, Economy, Fed, Federal Reserve, Global News, Gold, Government, Politics, U.S.

Doomed!

– Demand for U.S. Debt Is Not Limitless (Wall Street Journal, Mar 27, 2012):

In 2011, the Fed purchased a stunning 61% of Treasury issuance. That can’t last.

The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.

Continue reading »

Tags: Barack Obama, Ben Bernanke, Bonds, Debt, Fed, Federal Reserve, Global News, Government, Politics, Quantitative Easing, U.S.

This really is the Greatest Depression.

- Amidst the Deepest Slump since the Great Depression, Obama is Touting an “Economic Recovery” (Global Research, Mar 31, 2012):

While the United States remains mired in the deepest slump since the Great Depression, President Barack Obama is touting a modest improvement in employment over the past several months to boost his electoral prospects in November.

The three-month period from December through February has, according to the Labor Department, seen a net gain of 744,000 jobs, the largest for any three-month stretch since 2006. The official jobless rate has fallen from 9.1 percent in September to 8.3 percent in February.

It is necessary to place these gains within the context of the catastrophic collapse in employment that followed the Wall Street crash of 2008, which has left the US economy with 5 million fewer jobs than at the official start of the recession in December 2007. At the height of the crash, US businesses were cutting more than 744,000 jobs every month.

While the US economy added 335,000 net new manufacturing jobs in 2010 and 2011 combined, it lost 1.6 million manufacturing jobs between January 2008 and March 2009, a reduction of 10 percent. The current level of 12 million manufacturing jobs is down 7.5 million from its peak in 1979.

Continue reading »

Tags: Bailout, Barack Obama, Ben Bernanke, Economy, Fed, Federal Reserve, Global News, Government, Obama administration, Politics, Society, U.S., Wall Street

- It’s Official – The Fed Is Now Buying European Government Bonds (ZeroHedge, March 27, 2012):

As if the ‘risk-less’ dollar-swaps the Fed has extended to any and every major central bank were not enough, William Dudley just unashamedly admitted that the Fed now holds ‘a very small amount of European Sovereign Debt’. Explaining this position, as Bloomberg notes:

• *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES
• *DUDLEY: HIGH BAR FOR ADDITIONAL PURCHASES OF EUROPE DEBT

Dudley, testifying to a House panel, noted that he doesn’t see more efforts by the Fed to buffer the US from Europe’s tempests and believes European banks are deleveraging in an orderly manner. So not only is the US taxpayer bailing out Europe via the IMF (as we noted here a week ago using Greece as an intermediary) and the Fed is providing limitless USD swap lines but now we join the ECB in monetizing European government bonds – something we warned might happen back in December 2010. As for being a small amount – wasn’t MF Global’s holding relatively small too? And aren’t we getting a little full from all this buying?

Tags: Bailout, Ben Bernanke, Bonds, Debt, ECB, Economy, EU, Europe, Fed, Federal Reserve, Global News, Government, IMF, Politics, U.S.

- The Fed Is Losing The “Race To Debase” (ZeroHedge, Mar 25, 2012):

As we pointed out about a month ago, in “While You Were Sleeping, Central Banks Flooded The World In Liquidity” as the world was focused on headlines whether or not the Fed would step up as it always does when the market is sliding, and unleash the monetary floodgates, it was not Ben Bernanke, but eveyrone else that hit CTRL+P and took the place of the Fed, of note the primary central banking peers among the Final Four – the ECB, the BOE and the BOJ. And why not: after all the hope was that since electronic money is electronic money, and can be moved from point A to point B at the push of a button, it would be used primarily to reflate stocks around the world, but mostly where the path has least resistance – the US. What was not accounted for was that money would also be used to inflate commodities such as oil – a key factor when delaying further US-based easing in an election year. However, more than even record for this time of year gas prices, there was one even more important outcome from this chain of events. As the following chart from Willem Buiter shows, in its fake attempt to show monetary restraint, the Fed has gone straight into last place in the “race to debase.” Needless to say, in a world with $25+trillion in “excess” debt (debt which would need to be eliminated simply to reduce global debt/GDP to a “sustainable” 180% per BCG), last is a very bad place to be…

Of course, our frequent readers will note that this is the same chart that we have presented, however in the form of the main correlation chart for 2012 as we have dubbed it – i.e,  the ratio between the size of the ECB and the FED vs the EURUSD. What is probably also quite disturbing is that the Fed is “losing” even after expanding by a massive 232% in the past 5 years, a number that is only topped by the Bank of England. To quantify, the Fed is now responsible for “only” 20% or so of US GDP, compared to 30% for the ECB and BOJ. To further quantify, to get back to first place in the race to debase, the Fed will have to do at least another $1.5 trillion in QE.

Also, having become a buyer of last reserve for credit money, it is easy to see why one should be outright skeptical of US GDP “numbers” – from 6% of US GDP, the Fed now accounts for a whopping 19% – this is “growth” that would not have happened unless the Fed, via debt monetization would have allowed it. Said otherwise, net of Fed deleveraging (if it ever unwinds its balance sheet of course), US GDP would be a 13% lower!

Not only that but as the chart above shows, global GDP has about $6 trillion in “one-time, non-recurring” growth factored in. Continue reading »

Tags: Bank of England, Bank of Japan, Barack Obama, Ben Bernanke, Bonds, Debt, Dollar, ECB, Economy, Euro, GDP, Global News, Government, Politics, pound, U.S.

YouTube Added: 14.01.2012

Tags: Ben Bernanke, Fed, Federal Reserve, Global News, Government, Iraq, Politics, Ron Paul, Saddam Hussein, U.S., Watergate

Must-see!

On inflation:

- Inflation Calculation Leaves Out Food, Energy Prices (NPR)

- A Tale Of Two Inflations: Why US CPI Is Flawed And Why Bernanke Will Maintain ZIRP As Revolutions Rage (ZeroHedge)

- Ron Paul To Ben Bernanke: “People Lose Trust In The Government Because You Lie To Them About Inflation”(ZeroHedge, Feb. 29, 2012):

Anytime Ron Paul sits across from Ben Bernanke you know sparks will fly. Sure enough, they did: starting 3 mins 50 seconds into the clip below, Ron Paul, guns blazing, asks the Chairman if he does his own shopping, if he is aware of what true inflation is, and if he knows that Americans don’t trust the government because they are being lied to about inflation. And it only gets better, once Paul starts brandishing a silver coin. The punchline: “The Fed will self-destruct anyway when the money is gone” – amen. And ironically letting the Fed keep on doing what it is doing will achieve that in the fastest possible way. In fact, letting the system cannibalize itself with no further hindrances may be the best option currently available – just go to town.

YouTube Added: 29.02.2012

Tags: Ben Bernanke, Economy, Fed, Federal Reserve, Global News, Gold, Government, Politics, Ron Paul, Silver, Society, U.S.

ROFL!

- Ben Bernanke: “The ECB Is Well Capitalized” (ZeroHedge, Feb. 29, 2012):

This will be one of those “one picture is worth a thousand words” posts.

A quick preface:

During Congressional testimony, Ben Bernanke defended the Fed’s FX swap lines by saying that the ECB was “well-capitalized.” So instead of spending countless words explaining why that may not be quite so, we will merely show the bank’s total assets (net of LTRO 2) and its capital and reserves (link). The adjusted balance sheet is pro forma for today’s LTRO 2, which we noted earlier will add at least €311 billion in net assets to the ECB’s balance sheet, and potentially much more. Assuming the minimum, it means the ECB’s balance sheet will now hit €3 trillion. The capital backing these assets is €82 billion across the entire Eurosystem. In other words, the ECB’s leverage is 36.6x. This according to Ben Bernanke is “well-capitalized.”

And visually.

Tags: Ben Bernanke, ECB, Economy, EU, Europe, Fed, Federal Reserve, Global News, Government, Politics, Society, U.S.