zero hedge Wed 2009-10-14 12:12 EDT

Why Did U.S. SDR Holdings Increase Five Fold In The Last Week Of August?

...The big question mark at the end of August is when the U.S. International Reserve Position increased by almost 50%. The reason for this: a near quintupling of S.D.R. holdings on the U.S. balance sheet in the span of one week... By purchasing $40 billion in SDRs virtually overnight, what the Fed has done is to increase the value of the entire basket pro-rata, while in the process reducing the actual value of the dollar (which is a weighted constituent of the SDR basket). This was an operation to reduce the dollar's value: pure and simple. In many ways it explains why the DXY has continued its straight one way decline since the beginning of September, when many pundits assumed the market was finally going to tank on profit taking after Labor day. By performing this dollar adverse transaction, the Fed sent a loud and clear signal what the Fed was going to do going forward vis-a-vis the i) dollar and ii) its derivative, the stock market.

August; Folding; U.S. SDR Holdings Increase; weekly; Zero Hedge.

Jesse's Café Américain Tue 2009-10-13 20:27 EDT

Consumer Credit Contracting at Record Levels

Jesse

...The challenge facing Bernanke and the Obama economic team is how to get the US consumer spending again, if they cannot be paid a living wage, and if they can no longer be encouraged to borrow beyoned their means, by using their homes as a cash machine with variable interest rates, as they were encouraged to do by Fed Chairman Greenspan...There can be no denying that the Fed is promoting money supply growth in ways never seen before in the US. Whether they can be successful is open to question. We think they will keep at it until they break something.

consumer credit contracting; Jesse's Café Américain; record levels.

The Full Feed from HuffingtonPost.com Sat 2009-10-10 13:01 EDT

Elizabeth Warren: Serious Questions Remain About Obama's Loan Relief Plan

The Huffington Post News Editors

The Obama administration's effort to help homeowners avoid foreclosure may not achieve its goal of helping 3 million to 4 million borrowers and may simply delay mortgage defaults for many, a government watchdog group says. The Congressional Oversight Panel, charged with making regular assessments of the $700 billion financial rescue fund enacted last year, said the Treasury Department should consider whether to improve the current $50 billion program or adopt new programs to meet an expected rise in foreclosures fed by increased unemployment...

com; Elizabeth Warren; full Feeds; HuffingtonPost; Obama's Loan Relief Plan; Serious questions remain.

Tue 2009-09-29 11:43 EDT

The Post-Bubble Malaise

Mike Whitney

...the Fed is building excess bank reserves (nearly $1 trillion in the last year alone) with the tacit understanding that the banks will return the favor by purchasing Uncle Sam's sovereign debt. It's all very confusing and circular, in keeping with Bernanke's stated commitment to "transparency". What a laugh. The good news is that the trillions in government paper probably won't increase inflation until the economy begins to improve and the slack in capacity is reduced. Then we can expect to get walloped with hyperinflation. But that could be years off. For the foreseeable future, it's all about deflation...The question is, how long can the Obama administration write checks on an account that's overdrawn by $11 trillion (the national debt) before the foreign appetite for US Treasurys wanes and we have a sovereign debt crisis? If the Fed is faking sales of Treasurys to conceal the damage--as I expect it is--we could see the dollar plunge to $2 per euro by the middle of 2010...The consumer is maxed out, private sector activity is in the tank, and government stimulus is the only thing keeping the economy off the meat-wagon. Bernanke might not admit it, but the economy is sinking into post-bubble malaise.

Post bubble malaise.

Tue 2009-09-29 11:33 EDT

How Bad Will It Get?

Mike Whitney, CounterPunch

In the two years since the crisis began, neither the Fed nor policymakers at the Treasury have taken steps to remove toxic assets from banks balance sheets. The main arteries for credit still remain clogged despite the fact that the Bernanke has added nearly $900 billion in excess reserves to the banking system. Consumers continue to reduce their borrowing despite historically low interest rates and the banks are still hoarding capital to pay off losses from non performing loans and bad assets. Changes in the Financial Accounting Standards Board (FASB) rules for mark-to-market accounting of assets have made it easier for underwater banks to hide their red ink, but, eventually, the losses have to be reported. The wave of banks failures is just now beginning to accelerate. It should persist into 2011. The system is gravely under-capitalized and at risk...The economy cannot recover without a strong consumer. But consumers and households have suffered massive losses and are deeply in debt. Credit lines have been reduced and, for many, the only source of revenue is the weekly paycheck...The current recession has exposed the fault-lines dividing the classes in the US. Neither party represents working people. Both the Democrats and the Republicans are supportive of "social engineering for the rich"; regressive taxation and economic policies which shift a greater portion of the wealth to the richest Americans. The question of inequality, which has grown to levels not seen since the Gilded Age, will dominate the national conversation as the recession deepens and more people slip from the ranks of the middle class...After Obama's stimulus runs out, consumer spending will again sputter and the economy will slide back into recession.

bad.

Tue 2009-09-22 08:17 EDT

Guest Post: Sarkozy, Stiglitz & capitalism's inherent contradictions

Swedish Lex

The French Commission on the Measurement of Economic Performance and Social Progress presented its final Report written by Stiglitz and other leading economists at an event at la Sorbonne earlier today. The contents of Report is already being discussed widely but at least as relevant are the politics surrounding the Commission's Report and how France intends to use it to spearhead economic reform at home and abroad...at least in France, the financial crisis is alive and will be used to promote reform...Governments need to modify their behavior, first by changing how they account for the situation in society by including questions about the overriding purposes of society and public policy; ``our certitudes have evaporated, everything has to be put into question and re-invented''. Current methodologies fail to take externalities into account with the risk of booking developments as progress while, in reality, the opposite is true. Growth has in some regards destroyed more than it has achieved.

capitalism's inherent contradictions; Guest Post; Sarkozy; Stiglitz.

zero hedge Mon 2009-09-21 15:41 EDT

Federal Reserve Accounts For 50% Of Q2 Treasury Purchases

The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases. This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs...

50; Federal Reserve Accountable; Q2 Treasury Purchases; Zero Hedge.

Credit Writedowns Mon 2009-09-14 14:43 EDT

Murder-Suicide in Chimerica

Edward Harrison

threading the events of 2008 and 2009 together makes a compelling case that the Chinese -- U.S. marriage is coming apart...GSE collapse, Geithner's charges of Chinese currency manipulation, Chairman Wen slamming the U.S. as a profligate nation, stimulus bill buy-American provision, a steady drumbeat of ditch-the-dollar talk coming out of China, Chinese central bank head Zhou's call for a new international reserve currency, Obama's chinese tire tariff was ``proverbial serving of divorce papers''. Expect prices to rise, look for Chinese retaliation on U.S. poultry and auto products...This marriage is over. The question is whether it will end gradually and peacefully in divorce or violently in murder-suicide.

Chimerica; credit writedowns; murder suicide.

naked capitalism Fri 2009-09-04 18:45 EDT

Stiglitz Doubts Recovery Can Be Sustained

Joseph Stiglitz takes issue with the view of economists (well, economists surveyed by Bloomberg and the Wall Street Journal, which not surprisingly have a Pollyannish optimistic streak) that the economy is in or on the verge of a recovery. ``In most quarters, there is a feeling we should move away from the dollar system. The question is do we do it in an orderly way, or a chaotic way,'' Stiglitz said. ``The size of the deficit and the size of the balance sheet of the Fed have just increased the anxiety and the desire that something be done...'' Between the fall of the Berlin Wall and the collapse of Lehman Brothers was ``the short period of American triumphalism, where we dominated the global scene. That period is over,'' Stiglitz said.

naked capitalism; Stiglitz Doubts Recovery; sustained.

Bruce Krasting Fri 2009-09-04 18:31 EDT

Fannie Has .9 Trillion in Troubled Loans - 8K

Bruce Krasting

Fannie Mae's 8k has an interesting slide. It is a look at their questionable assets. The slide is not easy to read. It can be found in the 2009 Second Quarter Supplement, on page 5. The report describes FNM's exposure to problematic classes of mortgages on their book. That total comes to a whopping .9 Trillion. The total book of business is $2.7 Trillion, fully 32% of their book is troubled.

8k; 9 trillion; Bruce Krasting; Fannie; troubled loans.

zero hedge Wed 2009-09-02 20:01 EDT

Money On The Sidelines... 1930 Versus 2009

There is a saying, that everything new is just well-forgotten old. The same apparently is especially applicable to propaganda that seeks to part fools with their money. Today's brownie point question is: was the statement below just uttered by Larry Kudlow, or did it appear first more than 79 years ago? There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when ``cheerful sentiment is more firmly intrenched.'' Economists point out that banks and insurance companies ``never before had so much money lying idle.'' If you answered "the latter" you were correct. It first appeared on August 28, 1930 to be precise (and who knows how many times prior...

1930 Versus 2009; money; sidelined; Zero Hedge.

Zero Hedge Wed 2009-08-26 15:52 EDT

The Goldman VaR Exemption Question Escalates

Tyler Durden

It seems only yesterday that Zero Hedge had some questions in regard to Goldman's VaR Fed exemption. No response was received from 85 Broad. Today it appears several Congressmen, lead by Alan Grayson, are willing to drive a sharp stick pretty deep into the hornets' nest, by sending a letter directly to Wall Street Don Ben Bernanke, demanding an explanation exactly to the question of Goldman's VaR Exemption. Posted 2009-07-27.

Goldman VaR Exemption Question Escalates; Zero Hedge.

ClubOrlov Wed 2009-08-26 15:33 EDT

Welcome to Fuffland!

kollapsnik

In the unfolding global financial collapse, it is not just our accounts and balance sheets that come up short, but our language as well. What do you call a bunch of liar loans packaged into toxic assets and placed on the balance sheet of the Federal Reserve as collateral for rescue loans? J,K. Galbraith has proposed the term ``Bezzle,'' taking it to mean the eternal ebb and flow of questionable transactions within an economic cycle. Rational actors cut corners during easy times when they know no-one is looking, and then play nice again when the times change and someone starts paying attention again. But I believe that the phenomenon we are observing is something different: we need a word that describes the artifacts generated in response to irrational actors... A fuffle is an artful fake, an artifact specifically made to fool, beguile, seduce, or intimidate people into paying for it. Examples include suburbans houses and associated mortgage financing, SUVs, debt-financed college education, privately funded 401k retirement plans, US Treasury securities.

ClubOrlov; Fuffland; welcome.

Fri 2009-07-24 00:00 EDT

naked capitalism: Federal Reserve Inspector General Unable to Answer Basic Questions on Where the Trillions Went

Answer Basic Questions; Federal Reserve Inspector General Unable; naked capitalism; trillion went.

Fri 2009-02-13 00:00 EST

Mish's Global Economic Trend Analysis: Stunning Miss By Microsoft Calls Into Question Its Business Model

Business models; Microsoft calls; Mish's Global Economic Trend Analysis; questions; Stunning Miss.

Mon 2008-12-15 00:00 EST

London Banker: Fisher's Debt-Deflation Theory of Great Depressions and a possible revision

``I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided.''

Fisher s Debt Deflation Theory; Great Depression; London Banker; possibly revising.