He "thinks the IMF could easily issue $5 Trillion or more in new SDR's when the next big financial crisis hits. They will have to in order to keep the system going because all the numbers will be bigger than the 2008 crisis. He added that the IMF did a trial run of issuing new SDR's in 2009 to test out the ability to add more when needed. He said adding $5 Trillion or more new SDR's would create massive inflation."
But, don't get too excited. Two of our best and brightest will attempt to discredit the sources of this info because these sources get paid to comment on the economy. Makes me wonder if they would decline legal representation in a court because lawyers get paid to argue the law.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Through electronic money creation, the fed owns those securities outright.
Their exit strategy can be read in a few of several speeches given by fed people in the past couple of years. If I recall correctly, they plan to hold the securities through to maturity where applicable, for example.
As noted in the OP link "the Fed has $57.6 billion in capital and $4. 4 TRILLION in assets. That correctly represents a leverage level of 75 to 1."
The FED's assets consist of paper promises that are primarily in the form of US Treasury debt (I.O.U.'s) and toxic Mortgage Backed Securities (more I.O.U's). It's not like they own stock in Apple. The FED basically bought a lot of bad private debt that threatened to take down the large banks. They then bought a lot of US public debt to help pay for the good dollars that the banks received.
"One man's debt is another man's asset."
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>It may just be me, but I think the FED may be a little different than Lehman. >>
Correct. They can create and not earn the money they use cover bad debt for other people. Keep in mind they did this for their "stockholders," the banks that own them. The FED's "stockholders" can sit on bad debt forever - they already received good money for it.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>It may just be me, but I think the FED may be a little different than Lehman. >>
Ya Lehman semi earned their money. The fed didn't.
Tough to tell how solid the MBS on the balance sheet are. They retired the original CUSIP numbers for most of them and created new ones. Not sure why that was needed . Kind of peculiar
<< <i> Tough to tell how solid the MBS on the balance sheet are. They retired the original CUSIP numbers for most of them and created new ones. Not sure why that was needed . >>
To hide the rot.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>It's not leverage if they own them 100% and each purchase was paid in full at the time of purchase. Leverage is 100% incorrect. >>
The FED is holding the debt they bought as assets (actually they are loans). The leverage ratio is calculated by dividing capital by the firm's average total consolidated assets. It is leveraged 75:1 (4.4 Trillion in assets/$57.6 Billion in capital).
Keep an open mind, or get financially repressed -Zoltan Pozsar
I buy 10,000 in 10yrs with cash, leaving $1 in the bank
My leverage is 0, not 10,000x.
Oh, and even the OP has a hint of what has happened, but missed it. The fed could create the money to pay for it. But the don't need to. QE is the creation of money to buy assets. See, they don't need to keystroke the money to pay for it because QE keystroked the money into creation before they bought it.
While people consider treasuries to be high grade , the MBS the Fed owns are the absolute dregs of what was out there or the original owners would haven't unloaded them
The Fed was designed to be autocoprophagous . The leverage , the MBS purchases , the ZIRP environment are just more radical expressions of its mandate.
"Subprime mortgages, subprime auto loans, and subprime student loans driven by preposterously low interest rates are the liquefying foundation of this fake economic recovery. Most rational people would agree that loaning money to people who will eventually default is not a good idea. But it is the underpinning of everything the Fed and government apparatchiks have done to keep this farce going a little while longer. It will not end well - Again." - Government Using Subprime Mortgages To Pump Housing Recovery
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>"Subprime mortgages, subprime auto loans, and subprime student loans driven by preposterously low interest rates are the liquefying foundation of this fake economic recovery. Most rational people would agree that loaning money to people who will eventually default is not a good idea. But it is the underpinning of everything the Fed and government apparatchiks have done to keep this farce going a little while longer. It will not end well - Again." - Government Using Subprime Mortgages To Pump Housing Recovery >>
The Federal Government should never have been involved in housing at all . There should be no Fannie no freddie no FHA loans no anything . All mortgage lending should come from private entities without implied backstop by any government.
That was always about deliberately distorting the market ever upwards , legitimizing theft at the local level via ever increasing property tax , destroying accounting standards, and keeping the fiat ponzi alive .
At no point was helping citizens or consumers the goal as was stated it was nothing but a smokescreen .
<< <i>As noted in the OP link "the Fed has $57.6 billion in capital and $4. 4 TRILLION in assets. That correctly represents a leverage level of 75 to 1."
The FED's assets consist of paper promises that are primarily in the form of US Treasury debt (I.O.U.'s) and toxic Mortgage Backed Securities (more I.O.U's). It's not like they own stock in Apple. The FED basically bought a lot of bad private debt that threatened to take down the large banks. They then bought a lot of US public debt to help pay for the good dollars that the banks received.
"One man's debt is another man's asset."
>>
In 2012 I though the FED's game plan was to take a lot the leveraged and toxic debt (such as MBS) and dump it into Fannie and Freddie (ie unload it on taxpayers). At that time they removed the cap on what they could put into Fannie and Freddie. Never really kept track of just how much junk was dumped there.
I really don't care how the FED or the TBTF banks type up their balance sheets. It's still smoke and mirrors. And nowhere on those balance sheets is a proper marked to market accounting of their otc derivatives. Considering that Lehman and BSC failed on their derivative's blowing up, it's an important point. Balance sheets are well-designed to hide corporate malfeasance. And the TBTF/FED "balance" sheets put those guys to shame....lol. Judging from the FED's balance sheet, reports of OMO's, REPO's, etc.....they don't do anything with gold swaps, leases, etc.
<< <i>Comparing Lehman and the Fed is nonsense. The concept of leverage for the Fed's balance sheet is meaningless.
If there was any concern about the Fed precious metals would be skyrocketing in price. Last check, they are not.
The Fed is the central bank of the United States Government. >>
I agree its meaningless , but only because of the fact lehman couldn't bail itself out. Thats why I referred to the Fed as autocoprophagous.
Why would metals skyrocket? Paper metals aren't a hedge against the activity of the Fed and physical demand has no affect on prices. Metals are powerless until after a disaster.
If a serious disaster was likely, I would expect precious metals to climb in anticipation. Precious metals rose in 2010 and 2011 in anticipation of inflation which never materialized.
Someone said that money is made by "anticipating the anticipators."
<< <i>If a serious disaster was likely, I would expect precious metals to climb in anticipation. Precious metals rose in 2010 and 2011 in anticipation of inflation which never materialized.
Someone said that money is made by "anticipating the anticipators." >>
Whats going on within the Fed is all new to everyone. There is room in such a complex system for everyone to be wrong and more than just once. Inflation can certainly happen. Many of us felt wrongly that deflation could be a problem . It seems obvious though that prolonged deflation is impossible in a system of unbacked fiat dollars which also happen to be the worlds reserve currency .
bronco2078
Posts: 9,964 ✭✭✭✭✭
Comments
He "thinks the IMF could easily issue $5 Trillion or more in new SDR's when the next big financial crisis hits. They will have to in order to keep the system going because all the numbers will be bigger than the 2008 crisis. He added that the IMF did a trial run of issuing new SDR's in 2009 to test out the ability to add more when needed. He said adding $5 Trillion or more new SDR's would create massive inflation."
But, don't get too excited. Two of our best and brightest will attempt to discredit the sources of this info because these sources get paid to comment on the economy. Makes me wonder if they would decline legal representation in a court because lawyers get paid to argue the law.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Through electronic money creation, the fed owns those securities outright.
Their exit strategy can be read in a few of several speeches given by fed people in the past couple of years. If I recall correctly, they plan to hold the securities through to maturity where applicable, for example.
The FED's assets consist of paper promises that are primarily in the form of US Treasury debt (I.O.U.'s) and toxic Mortgage Backed Securities (more I.O.U's). It's not like they own stock in Apple. The FED basically bought a lot of bad private debt that threatened to take down the large banks. They then bought a lot of US public debt to help pay for the good dollars that the banks received.
"One man's debt is another man's asset."
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>It may just be me, but I think the FED may be a little different than Lehman. >>
Correct. They can create and not earn the money they use cover bad debt for other people. Keep in mind they did this for their "stockholders," the banks that own them. The FED's "stockholders" can sit on bad debt forever - they already received good money for it.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>It may just be me, but I think the FED may be a little different than Lehman. >>
Ya Lehman semi earned their money. The fed didn't.
Tough to tell how solid the MBS on the balance sheet are. They retired the original CUSIP numbers for most of them and created new ones. Not sure why that was needed . Kind of peculiar
<< <i> Tough to tell how solid the MBS on the balance sheet are. They retired the original CUSIP numbers for most of them and created new ones. Not sure why that was needed . >>
To hide the rot.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Leverage is 100% incorrect.
<< <i>It's not leverage if they own them 100% and each purchase was paid in full at the time of purchase. Leverage is 100% incorrect. >>
The FED is holding the debt they bought as assets (actually they are loans). The leverage ratio is calculated by dividing capital by the firm's average total consolidated assets. It is leveraged 75:1 (4.4 Trillion in assets/$57.6 Billion in capital).
Keep an open mind, or get financially repressed -Zoltan Pozsar
My leverage is 0, not 10,000x.
Oh, and even the OP has a hint of what has happened, but missed it. The fed could create the money to pay for it. But the don't need to. QE is the creation of money to buy assets. See, they don't need to keystroke the money to pay for it because QE keystroked the money into creation before they bought it.
While people consider treasuries to be high grade , the MBS the Fed owns are the absolute dregs of what was out there or the original owners would haven't unloaded them
(Why print it when it's going to be spent via account transfer instead of paying a cashier and expecting change?)
The Fed was designed to be autocoprophagous . The leverage , the MBS purchases , the ZIRP environment are just more radical expressions of its mandate.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>"Subprime mortgages, subprime auto loans, and subprime student loans driven by preposterously low interest rates are the liquefying foundation of this fake economic recovery. Most rational people would agree that loaning money to people who will eventually default is not a good idea. But it is the underpinning of everything the Fed and government apparatchiks have done to keep this farce going a little while longer. It will not end well - Again." - Government Using Subprime Mortgages To Pump Housing Recovery >>
The Federal Government should never have been involved in housing at all . There should be no Fannie no freddie no FHA loans no anything . All mortgage lending should come from private entities without implied backstop by any government.
That was always about deliberately distorting the market ever upwards , legitimizing theft at the local level via ever increasing property tax , destroying accounting standards, and keeping the fiat ponzi alive .
At no point was helping citizens or consumers the goal as was stated it was nothing but a smokescreen .
The intent is to make taxpayers cover for their banking malfeasance. It seems to be working, but for how much longer?
I knew it would happen.
<< <i> the MBS the Fed owns are the absolute dregs of what was out there
The intent is to make taxpayers cover for their banking malfeasance. It seems to be working, but for how much longer? >>
30 years often get refi'd or the house sold in an average of 10 years.
In 2018, I'd love to hear an interim status report on the performance of the fed's MBA they are holding.
Also, from that graph, the fed is holding about $2Tril in QE related Treasury debt.
Would the Fed ever practice "debt forgiveness" on that extra $2Tril? Just tell the treasury to "forget about it?"
One should probably learn to read and understand the FEDs balance sheet rather than rely on the interpretation of a third part. Just sayin'.
Knowledge is the enemy of fear
<< <i>As noted in the OP link "the Fed has $57.6 billion in capital and $4. 4 TRILLION in assets. That correctly represents a leverage level of 75 to 1."
The FED's assets consist of paper promises that are primarily in the form of US Treasury debt (I.O.U.'s) and toxic Mortgage Backed Securities (more I.O.U's). It's not like they own stock in Apple. The FED basically bought a lot of bad private debt that threatened to take down the large banks. They then bought a lot of US public debt to help pay for the good dollars that the banks received.
"One man's debt is another man's asset."
In 2012 I though the FED's game plan was to take a lot the leveraged and toxic debt (such as MBS) and dump it into Fannie and Freddie (ie unload it on taxpayers). At that time they removed the cap on what they could put into Fannie and Freddie. Never really kept track of just how much junk was dumped there.
I really don't care how the FED or the TBTF banks type up their balance sheets. It's still smoke and mirrors. And nowhere on those balance sheets is a proper marked to market accounting of their otc derivatives. Considering that Lehman and BSC failed on their derivative's blowing up, it's an important point. Balance sheets are well-designed to hide corporate malfeasance. And the TBTF/FED "balance" sheets put those guys to shame....lol. Judging from the FED's balance sheet, reports of OMO's, REPO's, etc.....they don't do anything with gold swaps, leases, etc.
Has a very large standing fighting force and also
Can imprison you and
Tax you into submission.
Lehman doesn't , can't and wasn't able to.
All is well.
Box of 20
for the Fed's balance sheet is meaningless.
If there was any concern about the Fed precious metals would be skyrocketing
in price. Last check, they are not.
The Fed is the central bank of the United States Government.
<< <i>Comparing Lehman and the Fed is nonsense. The concept of leverage
for the Fed's balance sheet is meaningless.
If there was any concern about the Fed precious metals would be skyrocketing
in price. Last check, they are not.
The Fed is the central bank of the United States Government. >>
I agree its meaningless , but only because of the fact lehman couldn't bail itself out. Thats why I referred to the Fed as autocoprophagous.
Why would metals skyrocket? Paper metals aren't a hedge against the activity of the Fed and physical demand has no affect on prices. Metals are powerless until after a disaster.
climb in anticipation. Precious metals rose in 2010 and 2011 in
anticipation of inflation which never materialized.
Someone said that money is made by "anticipating the anticipators."
<< <i>If a serious disaster was likely, I would expect precious metals to
climb in anticipation. Precious metals rose in 2010 and 2011 in
anticipation of inflation which never materialized.
Someone said that money is made by "anticipating the anticipators." >>
Whats going on within the Fed is all new to everyone. There is room in such a complex system for everyone to be wrong and more than just once. Inflation can certainly happen. Many of us felt wrongly that deflation could be a problem . It seems obvious though that prolonged deflation is impossible in a system of unbacked fiat dollars which also happen to be the worlds reserve currency .