Thursday, November 17, 2011

This Isn't Bad; It's Ugly

Addison Wiggin in Forbes:

"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis."

We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out.

....What worldwide mayhem would ensue if Greece didn't pay back 100 centimes on the euro?
That's a rhetorical question, since the balance sheets of European banks are even more opaque than American ones. Whatever the actual answer, it's scary enough that the European Central Bank has refused to entertain any talk about the holders of Greek sovereign debt taking a haircut, even in the form of Greece stretching out its payments.

That was the preferred solution among German leaders. But it seems the ECB is about to get its way. Greece will likely get another bailout — 30 billion euros on top of the 110 billion euro bailout it got a year ago.

Nope, that's not all.  That's just Europe.
Wiggin then mentions the nuke-device in D.C.

...The Fed's entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets.

"As the size of the Fed's balance sheet ballooned," continues Mr. Pento, "the dollar amount of capital held at the Fed has remained fairly constant. Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet.

As he states, that's a 51-to-1 ratio.

The Fed could recapitalize, of course, by 1) printing money, or 2) getting some sort of  T-Bond--meaning that Congress would 'print the money'.  So you get a choice:  tax by inflation, or tax by taxation.  

The Fed sure as Hell is not going to sell shares to Saudi Arabia, nor any other foreign country.  

Or will they?


J. Strupp said...

"The Fed could recapitalize, of course, by 1) printing money, or 2) getting some sort of T-Bond--meaning that Congress would 'print the money'."

That's the idea.

Remember, we have the ability to print money and create a moderate level of inflation. The Euro Zone is politically incapable of doing so. I'll take our chances over the Eurozone any day.

Saint Revolution said...

At the peak of the mortgage crisis, banks were leveraging at 30-40 to 1. This blew the bottom out of M1 and contributed greatly to the "debacle-ized" economy we now have come to know and loathe as "The Great Recession". In reality, this was all "engineered" as it has been 5 times before since the early 1900s but that's another story.

The buck doesn't stop at the banks. It LITERALLY starts and stops at the Fed. How the hell can the Fed remonstrate its "children" at 30-40 to 1 and leverage its own assets over 50 to 1?!

First the Fed prints worthless money. Now it is backing worthless derivatives with worthless money AND considering printing MORE worthless money to prop up a worthless balance sheet already full of worthless assets.

Leave it to a freemason.

Gee...and gold is skyrocketing in demand again. Ya think?! "Course, gold cannot continue to impute part of its value from pure demand. It's value HAS to be relative to its own parity in the currency standard. That means a limited amount of gold supports only A LIMITED AMOUNT OF PRINTED GREENBACK MONEY.

Hey, Bernancke! Ya gotta stop having the Fujitsu guys coming in on a daily basis! There's no more need for any more printers and copiers!

Actually, the New York Fed touches one key on a keyboard and, voila, more new money!

Read more: Clinging To A Bankrupt Monetary System


"...“If ideas could file for bankruptcy,” James Grant muses in the latest edition of Grant’s Interest Rate Observer, “the modern model of money and banking would have beaten MF Global Holdings to the courthouse. The concept of leveraged finance in a world of paper money and socialized risk deserves rehabilitation under an intellectual Chapter 11.”.

The world’s monetary model is bankrupt — both intellectually and in fact. But if ever there were an institution that was too-big-to-fail, it is the institution of paper currencies. It is too-enormous-to-fail, which is why the world’s central bankers will stop at nothing to rescue it.

In general, the central banks are borrowing and/or printing money to buy “distressed assets". By removing these distressed assets from the marketplace, the central banks hope to clear away some of the rot in order to “stabilize” the financial system and, by extension, the value of the currencies they print.

But since central banks are functionally outlawing bankruptcy for every large institution and government in the Western world — along with a few of those in the Eastern world, the rot remains…and it’s spreading. The rot is not only undermining economic activity, it is also undermining the entire global monetary system.
Throwing good money after bad — even newly printed, pretty good money — does not really clear away the rot; it merely smears it around…like a dry windshield-wiper smears bird-droppings..."

By the way, James Grant is a genius and well worth researching.

Saint Revolution said...

In simpler terms, our Fed is a dog chasing its own tail...

...with complete freemason dipshits for masters.

I always knew freemasons were nefarious.

I just never really took them for as completely stupid as they really are.

Even our freemason founding fathers would be laughing at these keystone freemason policy maker toeheads.

We're in trouble, boys. Real trouble.

The cavalry ain't comin'.

Buy more ammo. And guns.

J. Strupp said...

Can you Mises drones keep your comments to less than 5,000 words?

It's all so odd.

Saint Revolution said...

You got anything REAL to add Strupppppphhhtttt or is that retort of yours sounding as much like phlegm as your last name?

How about I hock a Mises drone loogey your way, you liberal piece of toe jamm.

Whatsamatta you?

Too many words for your ADD?

Way too many concepts for you to Google to figure out what's going on?


Vaccinations now available at Walgreens.

Anonymous said...

Whew, what kind of meds from Walgreens is the venerable Saint swallowing these days?? Try a couple deep breaths and settle down.