Are we really broke?
There is no [mainstream] news coverage on this yet so this qualifies as a serious heads up.Note the second numeric column (See Chart Below). $40 Billion, has been since 1913, by law. Then notice it suddenly drops to $198 million and then two days ago the report lists the banks as minus $8.7 Billion, something which has never happened before.
How bad is it?
Think Weimar Republic. The Fed can no longer stop inflation because the banks can not secure new money with debt. People aren't buying debt anymore. Ergo, hyperinflation is the natural consequence.
Mark this day on your calendar.
This Federal Reserve chart, shows that the Net Free or Borrowed Reserves (NFORBRES) of Depository Institutions just fell off a cliff. Let's pray that there aren't any bank runs soon, because the till is empty!
http://pimpinturtle.com/2008/02/06/heads-up-federal-reserve-disaster-the...
I'd love to read it but I'm on hold with Nuvox to see what is going on with our T1 circuits. =\ Maybe someone could make some sense of it in the mean time.
If you go to the "Announcements" tab on that page, you'll find this:
Term Auction Facility:
In other words, the TAF stuff is in addition to the normal funds held in reserve, and in order to pay for it, the Fed has been liquidating securities and other holdings. But it has to be accounted for in the manner prescribed by Congress. So, when your baseline is regular holdings and you borrow that down, you get to zero. When you then add additional holdings through a new mechanism and they are borrowed, but you are required to figure in terms of regular holdings, you will by definition go negative by the amount of the new holdings loaned out.
That's how I read it. Since these are short-term bills, the money comes back in and cycles out again to different borrowers. Every single loan would have to fail within it's current term in order to bankrupt the Fed in the way implied. Every one.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
As a separate note, I'll point out to the Ron Paul fans that if the Fed were creating money in an inflationary way, they'd not bother to liquidate securities or have actual holdings, they'd simply *mint* the money electronically. The very fact that the Fed running out of money is a worry is counter to the claims made by Paul and others about the Fed.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
Nope. The Fed's just auctioning off more cash.
Alright then, just ignore it.
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Phew, my weekend is now clear of worry!
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The Fed isn't a normal bank. It can't go bankrupt. It has unlimited supplies of new money at will. It is using truly extraordinary measures to prop up failing banks, and it's robbing you of your wealth to do it.
There's a long thread, with a lot of data, here on Metafilter.
It's not actually doing that though, Malor, since it's still operating with collateral for everything it does. When you sell securities, you are not printing money.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
The collateral is worthless. Most of it has no market value, because nobody will buy it. The Fed is giving 85 cents on the dollar on what's, entirely literally, garbage of no determined value. This isn't a problem for them, because even if the banks fail and they end up holding the collateral, eh, no big deal. They can't be bankrupted. They can steal all the value they want from your pocket to stay afloat. Meanwhile, the banks have taken their impaired assets and monetized them into liquid cash, allowing them to start lending again (ie, inflating the money supply.)
You might as well scrawl 'fifty dollarz!' on a napkin... if you're a bank, the Fed will lend you $42.50 for it, allowing you to turn around and make about $1700 in new loans.
The Fed has not yet minted one single dollar above it's holdings in this crisis. It's not allowed to own junk bonds or low-rated securities.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
Robear, it's making massive liquidity available on poor collateral. That's printing money.
That article you linked appears to be pure propaganda.
'Physically holding securities whose value equaled..' is not true. The new TAF facility accepts garbage as collateral, giving 85 cents on the face-value dollar. It's a bailout, pure and simple.
Here's another likely untruth:
Banks don't do that unless they're in trouble. They have a lot of garbage on their balance sheets, and the Fed is secretly bailing them out so that Mr. Market won't punish them. This is, in a word, bullsh*t.
Banks have created money-like securities that other banks are holding and lending against. It's worthless garbage, but the Fed-provided liquidity is letting them function as though they had actual value, keeping the system solvent.... and causing more of these money-like garbage securities to be created.
The Fed is rewarding incompetence, and they're stealing money out of your pocket to do it. This is moral hazard in letters so big it could be skywriting.
So, the whole US Federal Government monetary system is being propped up by fraud, and no one knows it but bloggers? Ockham's razor pits the idea that your interpretation is wrong against the likelihood of the government and the financial markets and the judiciary and the press and most economics professionals colluding to hide it. Seriously. That's the theory?
If it's skywriting, why is no one in a position of power paying attention? No offense intended.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
The facts are right there in front of you. It's not like this stuff is hidden, you can get almost all of it from official government web sites. It's just complex enough that most people don't bother.
Remember, these same authority figures that you seem to trust are the same people who were insisting that there was no housing bubble.
If you'll notice, what I'm telling you is internally consistent, and is predicting the deep economic distress we're in better than any mainstream source I've seen. You might want to think about why that is.
Really? Because we've been arguing about that here since before Ron Paul showed up in the discussion. The question of whether Bush's policies and the housing and credit markets are a problem has occupied pundits like Paul Krugman since Bush came into office, and possibly before. (Check out his Mar 12, 2000 column that describes the tech runup as a Ponzi scheme without a Ponzi - nor does he have to blame it on leaving the Gold Standard.) Remember the "jobless recovery"? The assertions that housing was a new bubble after the tech one? The worries about massive profits in the banking and securities industry a few years back? There are other more mainstream narratives that describe quite well what's happening and have for years. And they do it without misrepresenting the functions of the Fed.
That's the frustrating thing. You don't *need* to postulate a conspiracy theory to explain why lowering taxes while increasing spending is bad, or why reducing regulations on the securities industry leads to abusive instruments, or why stimulating home-buying without limit is likely to create a bubble. And you are confusing the factual explanations of how the Fed works with the musings of the "authority figures" on where the economy is going. Explaining how it works is not deceptive.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
There's no goddamn conspiracy theory here. It doesn't need one. It's just the facts, clear and present on their face, with no conspiracy required. Different, self-interested actors combine to make a system that is broken and careening toward collapse.
And Ron Paul is irrelevant.
Quit trying to smear by association; you use loaded words and subtle sneering to try to prove that I'm a nut, instead of trying to prove your own case.
Sigh. I'm not sneering and I'm not using loaded words. Sorry if you took it that way. Nor am I trying to "smear by association", I was under the impression you had defended Mr. Paul's interpretation of the import of the Gold Standard. And yes, I consider that over the months I've posted a LOT of information to prove my case.
I did however take the assertion that the government is flat-out lying to us to be a conspiracy theory.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
America’s Top Accountant Resigns: U.S. Comptroller General and head of the GAO warns of US bankruptcy
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Oh god, I don't know if I want to click on that link.
Being fangoriously devoured by a gelatinous monster.
Keeping the head in the sand is part of the problem. Plan 75 doesn't do much either.
edit: The dirty little secret everyone in Washington knows
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HOLY sh*t.
Well, for once I'm glad I was born in Mexico.
The man wears a bucket of KFC on his head. I wouldn't expect anything less. - Pred
Funny. I thought we were only responsible for the debt government asks us to pay, via taxes. And no one's sent me a bill for $175 large. Until we face up to the actual problem, and decide to actually take care of it, it's all just revolving debt. Which sucks, but it amazes me that the "fiscal conservatives" are the ones leading the charge to avoid paying off the debt.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
And here I thought the Fed was going to save us from sub-prime mistakes!
rabbit wrote:
1Dgaf wrote:
XBL: E Munnie
Yeah, I always chuckle anytime a politician talks about handling a budget surplus by giving people "their money" back. Uh, it's not your money. You already spent it. You might not know what you bought--or have anything to show--but you definitely spent it. If you think it's "your money," try this little experiment with your credit card bills and mortgage: don't pay them and see what happens.
And didn't fiscal conservatives once argue that having the government compete with businesses for access to credit was a bad, bad thing because it drove up the cost of said credit? I mean we're already spending eight cents of every tax dollar to service our current debt load.
Maybe the only way out of this force the federal government to be like state and local governments: they have to balance their budget. Though considering that the city of Vallejo, California just filed for bankruptcy, maybe that's not such a good idea.
I thought so too, until I read the plan.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
Serves you right, actually reading things! How are we supposed to reinflate the real estate bubble if you don't take us at our word?
rabbit wrote:
1Dgaf wrote:
XBL: E Munnie
I'm torn on the issue, in general the budget should balance. Temporary negative cash flows are allowable as long as they are temporary. On the other hand interdependency between nations on debt reserves are the "foundation" of the current relatively peaceful period, our economies are so intertwined that none of the major players can allow another major player to fail, because it will drag all of them down. That being said, we're either in the middle of the most brilliant way to burn off our debt, or the stupidest monetary policy I've ever seen (if it's leveraged someway into paying off our debt with near worthless dollars, then making the dollars worth the paper their printed on again we come out smelling like roses, if we just debase our currency and rack up even more debt then bring its value up again or don't bring up its value, we smell like the fertilizer). I can only hope that the current policy is an attempt to untangle that nightmarish entanglement (If we could someway secure a huge commodity stockpile (most likely gold) on the "cheap" pay off our debts with its currently inflated price (Golds what $1k an oz?), then set a defacto standard of that unit backing it at a much lower price we might come out well (note, this is off the top of my head, I haven't fully thought through all the ramifications of it yet).
Then again we could always start a war with some country that we owe boatloads of cash to (I'm looking at you China), and just declare the debt void.
"Also, I have four legs and am covered in wool. Baa!" *Legion* reveals his inner furry.
Trade deficit is one thing; internal debt is what I'm talking about. The trade deficit is normal for a producing country, and healthy, although it does tend to depress the dollar if I remember correctly. But the internal Federal deficit is a big issue, and we definitely need to address that. I'm with you in that deficit spending is a tool, not a condition.
You described the economy entanglements pretty well, that's something that's designed into the current system and we have to work with it.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
Trade deficits aren't a good thing. A country can support a small deficit essentially forever, as long as it's under the real growth rate of the economy, but large ones are not sustainable. The last time I saw the figures, our trade deficit was on the order of 7% of GDP.
Historically, Mr. Market punishes countries severely when they get to 5%.... but our status as the reserve currency appears to give us some extra leeway. But that's temporary, not a permanent thing. We can't sustain a 7% deficit forever.
Also note that because we pay for things by printing dollars and 'shipping' them overseas, this deficit is another form of debt. Foreign entities now hold in excess of six trillion dollars, which they can use to compete with us for goods and services. It's a kind of debt that's not immediately visible, and it's not carried on our books the same way that other debts are, but it's just as noxious and dangerous as those other sorts.
This is a very great deal of what's driving the commodity inflation; too many dollars, too few real goods. We're competing with our own overconsumption.
Looks like high exports *raise* currency values, rather than depress them. My mistake.
Malor, as noted a few weeks back, we haven't seen the weak dollar as an explanation for high commodity prices. There are real and structural reasons for those, as well as psychological ones in some markets (cocoa and oil, for example.)
Asserting as you did that there's an actual *scarcity* of "real goods" would trump any other explanation you gave. It also does not appear to be correct for oil, which is what we usually discuss here.
In my opinion, the claims that we are heading towards a wall have gone on enough that we should already have hit it, spectacularly. You can't keep threatening dire results because the system is completely broken, and then not acknowledge that it's more robust that you thought. It's all Chicken Little, no Sky Falling.
“Why are we talking about this in the White House? History will not judge this kindly.” Atty Gen'l John Ashcroft, on secret NSC torture guideline discussions.
Funny enough this just came up and thought it might spur the conversation a little.
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