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So what happens to the $4 trillion created since 2008?
MGLICKER
Posts: 7,995 ✭✭✭
My business college, dropout brain has wrestled with this one since Ben Bernanke became the little Monopoly fellow with the mustache that prints endless reams of play money.
Make no mistake, the fed has really purchased little in the way of bonds and notes in a real sense. He has only monetized the last 5 years of deficit spending.
Quadrupling the money supply in a short period, will that lead to a quadrupling of prices with 2008 as a base, or will all the loot mysteriously get reabsorbed by the fed?
Please comment.
Make no mistake, the fed has really purchased little in the way of bonds and notes in a real sense. He has only monetized the last 5 years of deficit spending.
Quadrupling the money supply in a short period, will that lead to a quadrupling of prices with 2008 as a base, or will all the loot mysteriously get reabsorbed by the fed?
Please comment.
0
Comments
I believe that the fed can extinguish the dollars by letting treasuries or MBS expire .
The feds balance sheet is available to be viewed but in practice its not very useful. For instance you would think because they are buying mortgage backed securities every month you could see what they bought and look up how they perform. It's complicated though because ,every mortgage backed security has a face value which decays over time .
Another problem is that the CUSIP labels will disappear due to this mortgage backed security sausage maker
If you read that it seems to imply that securities will be bundled and packaged into larger units. The only reason to do that is to hide where the stuff came from , either to make it hard to see what garbage they are buying or to make it easier to sell the sausage thats created further down the line. They are bankers after all and the whole "pig in a poke" thing is second nature to them.
The FED has no experience in withdrawing this amount of liquidity from the markets....especially ones teetering on the brink. Seen the Baltic Dry Index lately? It should be interesting to see they "try" to withdraw liquidity. While
they might have decreased their monthly bond buys by $10 BILL, they have probably covered that behind the scenes with currency swaps and derivatives.
The big banks are using this extra $3 TRILL as margin for betting with their prop accounts. It's like being staked a big time poker game where all you have to do is play but a silent partner keeps you stocked up in chips.
The bigger question is not how or if the FED unwinds that $3 TRILL in monetary base. But, if/how/when the 5 TBTF banks can unwind their $300 TRILL in otc derivatives w/o blowing up themselves or the financial system in
the process. And since 80% of those are interest rate swaps directly linked to an actual living and breathing TBond purchase, those are exceptionally sensitive. In any case there was a lot more than $4 TRILL created since
2008. The real number is probably closer to $15-$20 TRILL. You only have to look at the stock markets around the world since early 2009 to see where a lot of that went to. The winners of those AIG/Lehman/BSC/etc.
derivative bets had to put their winnings to work somewhere. We know what the FED has publicly posted. The more important and larger number is probably what they don't have to post or report. Just my opinion though.
Now, what's a buck ?
Who passes it ? Where does it stop ? When will it lose it's rack ? How does it work ? and why ?
It's just a matter of shoring up support for a monetary system, and corporate setting that was on the brink of collapse because of a number of "bills" that were failed attempts to fix what callouses and rolled up sleeves would have fixed years ago with a jobs bill instead of another war to chase the enemy of PEACE and FREEDOM away. As if the Soviets were successful in Afghanistan. That's their Viet Nam.
The "DOLLAR" is here to stay… at least for the foreseeable future. Maybe when we start talking in "google" amounts…. we will go digital. Oh wait, we already started that buck rolling, too.
We are making more millionaires on paper and that's a lot of serial numbers on bills, but how many are actually seen ? Do you think a billionaire can tell you every serial number on his FRNs ?
Nah, they think in percentages , not dollars and cents.
Politicians are taking a bigger slice of the pie from the working class. They produce no revenue and keep growing. Smart thinkers really are smart and smart entrepreneurs sell _ _ _ _ to the government through back door politics.
Excuse me ? What was the question again ? Oh I remember. Without being political, it's not the FED's doing. it is THE politician's "fault" From the words of a leader.
Keep an open mind, or get financially repressed -Zoltan Pozsar
The short answer:
There's no safe place to hide, so make sure you have a reliable water supply, a nice battle rifle, plenty of ammo, like-minded friends and adjust accordingly...
<< <i>the FED bought a lot of debt with it. The real question is what happens to that debt. >>
True, but the debt issue is misleading at best. Congress cannot print money, only the Federal reserve can. So instead of Congress authorizing the printing of say $1T to cover the 2014 deficit, they have to issue paper, which the Fed buys back with damp digital currency.
Instead of $17T in debt, it really is $13T, with a huge float of a $4T plus money supply.
In theory, the US could make itself debt free by buying up all the outstanding notes and bonds with continuously weakening Dollars..
Seems like that is the plan.
All certainly good advice, but would be a hell of a way to live.
<< <i>There's no safe place to hide, so make sure you have a reliable water supply, a nice battle rifle, plenty of ammo, like-minded friends and adjust accordingly
All certainly good advice, but would be a hell of a way to live. >>
Proper preparation for hard times does not preclude enjoying a quality life. I vividly recall watching Detroit burn in 1967. A week of rioting, many dead and curfews for several days.
2 Weeks later my dad bought his first firearm. I bet he wished he had owned one sooner.
<< <i>I'm not condeming what was said by Coinboy MGLICKER, just saying it's not the way I first think to live out my life...in fear. >>
We all have our own perception of risk, which is sometimes mistaken for fear.
I encourage my close friends to stock up on long shelf life foods that they will consume anyway. Stuff like canned soup and tuna and pasta. Most shrug off the advice, so I store extras for them. They cannot imagine a day when the local Kroger will not be brimming with food and safe passage to the store and back will be assured.
We take for granted the business as usual history that this great country has afforded us. But I do recall the 3 hour gas lines in the 1970's and the empty gun shops of 2009 and 2012. Look around the globe and you will see many examples of disrupted food and water supplies, and streets which are unsafe to navigate.
A bit of preparation makes life easier to enjoy.
<< <i>the FED bought a lot of debt with it. The real question is what happens to that debt. >>
<< <i>
<< <i>the FED bought a lot of debt with it. The real question is what happens to that debt. >>
True, but the debt issue is misleading at best. Congress cannot print money, only the Federal reserve can. So instead of Congress authorizing the printing of say $1T to cover the 2014 deficit, they have to issue paper, which the Fed buys back with damp digital currency.
Instead of $17T in debt, it really is $13T, with a huge float of a $4T plus money supply.
In theory, the US could make itself debt free by buying up all the outstanding notes and bonds with continuously weakening Dollars..
Seems like that is the plan. >>
One has to think outside the monetary box over the past 15 years. Derivatives have changed everything. In essence, the CB's and TBTF banks have created their own $1 QUAD monetary system outside the rules of all
normal monetary policy. And this stuff is someone's liability and therefore "debt-money." I look at the $1 QUAD notional in derivatives as a minimum of $40 TRILL in debt creation outside the system (assuming 30-1 leverage).
The banks have maneuvered this debt around to act as collateral and generate profits as long as they can mark their value to model and not to market. You don't need congress to appropriate money or debt when you have
your own debt-money system that works around them.
Bank Regulator Bill Black: "JPM's fraud is epic, unprecedented in world history." .....starts at 8 min 30 sec. Good video on how the Big Bank CEO job works....in BB's opinion we've become a cheater-take-all society (24:00). Why can't a guy like this be our Washington representative? I love the way he thinks. SOT is the "anti-canary in the coal mine"....now that's funny (26:00)...."don't waste one second worrying about fraud." Current system is ungovernable....it has already largely imploded . Is there any reason for this guy to lie? He won huge credibility points in the Savings and Loan crisis of the mid-1980's when he sent over 1,000 bank/financial felons to jail. How many felons convicted since the 50X larger 2008 banking crisis? 0.
Some funny Fed math , From the agency MBS purchase archive archive
Net purchases from October 31 through November 6: $13,600 million
Net purchases from November 7 through November 13: $11,200 million
Net purchases from November 14 through November 20: $14,400 million
Net purchases from November 21 through November 27: $14,400 million
Net purchases from November 28 through December 04: $11,000 million
Cut the last week to say $5,000 million so part of December isn't counted.
That is 58.6 billion NET in MBS in November not 45 billion .