Benanke Will Hand Out $225 Billion In June

May 29, 2008

Elaine Meinel Supkis

Unbelievable numbers today! Even as the media and the central governments of the G7 nations struggle to pretend the banking crisis has been contained and all is well, out comes the news that the Fed's new, fancy window for handing out massive loans to banks in exchange for crummy, worthless CDOs! A whopping $225 billion worth! WOW. And the debt markets are still flashing red in the US and now, in Europe. The housing collapse has crossed the Atlantic. And now the bankers are launching a NEW risk-remover: a central clearing house for derivatives? HAHAHA. They think this will be the way to deal with the $500+ trillion Beast? I doubt this. Very much.

Fed to make fresh batch of bank loans

The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets. Swap spreads are spreading wider and wider. Even as faith in the Libor rates collapse.

The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.

The new round of auctions will be conducted on June 2, June 16 and June 30.

Also Thursday, the Fed -- in a separate program -- auctioned $16.4 billion in safe Treasury securities to investment firms, another effort aimed at easing credit problems. That operation drew bids less than the $25 billion being made available, which could be viewed as a sign of some improvement in credit conditions.

Let's get this straight: the Fed is feeding MORE MONEY in the form of taxpayer-backed Treasury securities...to INVESTMENT FIRMS? The same guys who have just bid up most world commodities to the heavens? And a sign that things are improving is, it was 'only' $16 billion? This news is right on the heels of announcing yet another rescue operation to keep our bankrupt banks running?

EACH of these auctions coming out of the brand new 'windows' poked into the Fed bank vault's walls is 'only' $75 BILLION @? This happens to be another $225 billion! Way back last summer, I predicted the amounts ladled out would be over a trillion and I was right, as usual. This $225 billion will be ladled out over the course of one month! Let's do some calculating: if this is done at this rate over the course of a year, it comes to $2.7 TRILLION.

It looks pretty obvious to me that the banking crisis, far from being over, is actually getting worse. Indeed, the housing markets which supposedly is the cause of this collapse is not doing well at all, is it? The rate of repos isn't climbing sky high only because the courts are utterly swamped with repo cases! So it is like a snake that ate a cow. Eventually the cow will be digested but the snake is still trying to swallow it. Far from being over, this process has barely begun.

I photoshopped a series of graphs from the Federal Reserve that tracks the 'Borrow' window they opened so wide this year. Click to enlarge:

This graph shows how the 9/11 bail out was pretty big. Bigger by far than any time in history. It was very unusual for the Fed to give even a billion back then. Seemingly, everything was fine after that spike. But was it?

We know that Bush told us to go shopping and Greenspan said, 'Here, have some free Funny Money™. The bankers went wild. The spread between mortgage amounts and what the Fed was giving them was humongous. One of the biggest spreads in banking history. So the bankers clamored to make more loans and to do this, they had to pass off the old ones because US savings had collapsed and the reserve ratios were really, really stinky.

In July, 2007, all was still seemingly well. Then, by the end of September, now that the Japanese carry trade was in a panic due to the dropping dollar and the rising yen, the Fed began to hand out loans to save the banking system. They, in turn, had to declare losses on the previous housing bubble they created. The BIS regulators had ordered the banks to price their loans realistically. And this was killing them. They had to cry to Bernanke and beg him for goodies. He opened the window to the Outer Darkness and began to churn out amazing amounts of Funny ™ in ernest.

Here is the BORROW chart from 12/12/2007, the seventh anniversary of the Supreme Court refusing to count votes in the 2000 election. We can see that things are going very, very badly suddenly! The money feeding into the bankrupt banking system. The amount is now over 4X greater than on 9/11/1.

Now we go to January 1, 2008. The Fed and the G7 have begun to crow that the whole thing was fixed and there was no emergency. Obviously, they were wrong. For by that date, a mere 19 days after 12/12, look at the charts!

It has doubled yet again! Not even during a month, in half a month. This was done to fix Xmas so the US public could go on a wild spending spree. Lurking in the shadows was very real inflation that was preparing to take off with a vengeance. After all, the Fed was feeding Funny Money™ to speculators at an increasing rate! Note also that this chart stops at $50 billion while the previous ones were at less than $10 billion.

Now look at today! WOW. I added some lines to this graph in red to show us where we are going: TO THE MOON, MARS AND OUTER SPACE! Boom! This is ridiculous.

To accommodate future rescue operations, I enlarged the graph a tad, like more than doubled it in height. The red square is where we are today in this massive, UNPRECEDENTED rescue operation. And I am betting this will double in JUST ONE MONTH. This is a very, very bad sign. Any system that doubles at this speed ends up in infinity. The fact that it overwhelmed all previous amounts in history long ago, was a bad sign. To see it heading into Derivative Beast territory whereby it doubles and doubles and doubles...this is a sign of HYPERINFLATION TO COME. In other words, the central bankers are trying to fix a broken system by feeding it Funny Money™. This money is not real and based on nothing except the Fed promising to tax the American public...in the future, of course, for all eternity.

This is how all empires collapse: they promise money changers and bankers outside of the empire future taxes. 100 years, 500 years of future taxes! This is always a sign an empire is about to bust apart and die.

Click here if you want to play with these graphs:

US and European debt markets flash new warning signals

The debt markets in the US and Europe have begun to flash warning signals yet again, raising fears that the global credit crisis could be entering another turbulent phase.

The cost of insuring against default on the bonds of Lehman Brothers, Merrill Lynch and other big banks and brokerages has surged over the last two weeks, threatening to reach the stress levels seen before the Bear Stearns debacle. Spreads on inter-bank Libor and Euribor rates in Europe are back near record levels.

Credit default swaps (CDS) on Lehman debt have risen from around 130 in late April to 247, while Merrill debt has spiked to 196. Most analysts had thought the coast was clear for such broker dealers after the US Federal Reserve invoked an emergency clause in March to let them borrow directly from its lending window.

HAHAHA. No wonder Bernanke revved up his helicopter today and offered these goofballs another $225 billion in free Funny Money™! If the US had China or Japan's FOREX reserves, he could still do this and not cause global inflation. But alas, he doesn't and can't. So off they go. They want cheap money! I read in the news that these same evil clowns are demanding Russia pay higher and higher rates! But NOT THEM! They want LOW RATES! No matter what. So the Fed dropped its rates to only 2% and they will then keep a straight face while 'borrowing' money from the Fed at a ridiculous rate THEY DO NOT DESERVE. For they were very, very risky in the past and the losses they caused due to handing out loans to everyone and their monkey's uncles, means they are bankrupt.

BANK---RUPT. Dead as dodos. Lying on a highway to hell. I like the 'coast is clear' part of this news story. 'Hey, we can play in the highway again!' these bankers yelled and they ran outside and got run over by a diesel truck driven by a pissed off trucker.

"The steep rise in swap spreads this week is ominous," said John Hussman, head of the Hussman Funds. "The deterioration is in stark contrast to what investors have come to hope since March."

Back in March, the Fed did something very, very stupid: they not only had the open window where the banks could come and dump garbage, they opened the doors and windows to the investment houses starting with Bear Stearns. Instead of dealing with the problem which was too much credit for too cheap, they ended up soaking up the excess lending of the previous 4 years! So the seeming good news back in March was merely 'more rate cuts by the Federal Reserve' and 'the Reserve will exchange junk CDOs for Treasuries.'

But the amounts that are at stake here are more than what the Fed can feed. So the temporary abatement of interest rates changed very little and we are again, right back where we were in January, in November and in August: the same banking collapse rises up yet again! The Fed, time and again, claimed 'Victory!' whenever they papered over this mess. They set out deliberately to force interest rates down in the teeth of raging inflation. This is akin to ordering the incoming tide to turn back. This is an elemental force which can't be fooled. The tricks and schemes being cooked up will fail for the simple reason, the alternative is infinity. They are trying so hard to make things drop to 0%. And this is causing infinity in the mirror world.

Both oil and gold are in retreat right now. I don't know if this is through strong arming the commodity traders in the big houses? I smell a conspiracy here. In other words, is the announcement of another $225 billion Santa Claus gift from Bernanke part of a secret back room deal? The biggest trading houses will funnel their funds elsewhere for the time being? And this is the pay off? Since all these things are done in strict secrecy, we won't ever know unless someone spills the beans.

The problem is, the yen is again falling in value. This will destroy our own economy. When the dollar was weak, our export numbers improved. Now they will continue on the bad trajectory. The US, trying to please our trade partners who are reaming us out, in order to get the 'old' banking system that was based for the last 10 years on the fake 0% Bank of Japan carry trade, will resume that destructive activity, won't they?

Libor Proxies Gain as Traders Seek Truth With Swaps

Traders are starting to use alternative measures for borrowing costs as the British Bankers' Association struggles to keep the London interbank offered rate as the global standard.

Libor, the benchmark for 6 million U.S. mortgages and more than $350 trillion of derivatives and corporate bonds, has been called into question since the Bank for International Settlements said in March some lenders may have understated borrowing costs to keep from appearing like they are in financial straits.

One option growing in popularity is overnight indexed swaps, a gauge of expectations for central bank rates. The Federal Reserve uses the one-month OIS rate to set the minimum bid level when it lends cash to banks through its Term Auction Facility. The Fed has auctioned $510 billion through the TAF since December.

So, the amount the Fed auctioned since December is now $510 billion? Add the June amounts and this will be $735 billion. So, in exactly half a year, it is three quarters trillion dollars? If this keeps up, by next January, it will be around $1.5 trillion. This happens to be the size of the Chinese FOREX reserves. Interesting and possibly connected in an underwater sort of way. Also, the BBA Libor setting system is only 24 years old. It is one of the many destructive things set up in the wake of Volcker raising rates to kill inflation. The G7 bankers swore they would never allow that to happen again. But it seems to me that the alternative system they created has done nothing about what caused this inflation [war and oil making a toxic mix]. It seems this Libor system is from the Plaza Accords era and was created to 'fix' the things the Plaza Accords were trying to fix. I once linked to the original text for those Accords.

It seems the other nations signing this wanted the US to balance our budget and to cut back on our oil consumption! We did the exact opposite, of course.

Bloomberg:

``OIS rates have the advantage that they are set off the fed funds effective rate, which is an overnight rate based on a volume-weighted average of trades that occur each trading day through the major brokers,'' Eric Liverance, head of derivatives strategy at UBS Securities LLC in Stamford, Connecticut, wrote in report dated May 27. ``There is no guesswork involved.''

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events, such as changes in the weather.

Rates quoted by Libor members show discrepancies and have little correlation with their costs of insuring debt from default. UBS AG, whose default-insurance costs rose 919 percent between July 2 and April 15 as it racked up $38 billion of writedowns and losses, quoted dollar-borrowing costs that were lower than its rivals on 85 percent of the days during that period, according to data compiled by Bloomberg.

This is SO unstable! Note that the new replacement for Libor rate setting is something that literally is based on changes in the weather???? Wow. Talk about asking for wild swings! As I look through history, I notice that when an Empire is strong, the value of the currency, the relative value of rare metals, etc. are STABLE. The value of gold is set in stone, for example. The fact that the bankrupt bank, UBS AG, lied about their stupendous interest rates due to their losses means simply, the head of that bank should be arrested and charged with fraud. Not that we set up an even more insecure, uncertain and very changeable system.

Bad Omens for Banks?

Nobody was expecting an easy year for U.S. banks, but many observers thought the bulk of the industry's credit troubles would come in the first quarter. Now, it seems the rest of the year may be even worse. Case in point: A May 28 announcement from KeyCorp (KEY). Mounting loan losses at the regional bank company suggest the banking industry's troubles with bad loans are just beginning.

Cleveland-based KeyCorp, which holds $97 billion in assets, says the year's net loan charge-offs—a measure of how much bad debt the bank may have to write off—could almost double previous predictions for 2008. The bank expected charge-offs of 0.65% to 0.9% of total loans just three weeks ago, but now says they could be in the range of 1% to 1.3%.

Despite housing and credit troubles galore, banks such as KeyCorp have been able to attract investors with generous dividends. On May 28, KeyCorp sported a dividend yield of 6.9%, while Wachovia's yield was 6.1%. Yields from Fifth Third and Regions Financial were even higher, at 9.1% and 8.1%, respectively. Those high yields suggest some investors expect dividends to be cut so banks can hoard capital. Otherwise, an 8% or 9% return would be irresistible to most.

Baird's George said the tough credit trends mean KeyCorp probably won't earn enough in the second and third quarters to cover its dividend. However, he wrote, "It appears that [KeyCorp] has adequate capital to maintain its payout, provided the earnings challenges are temporary."

If credit troubles are brief, banks can afford to maintain their dividends. Bank investors might overlook a brief dip in earnings, however severe. However, the longer the credit crisis continues, the more questions are raised about whether they have enough capital.

Bloomberg:

Banks routinely misstated borrowing costs to the British Bankers' Association to avoid the perception they faced difficulty raising funds as credit markets seized up, said Tim Bond, a strategist at Barclays Capital.

``The rates the banks were posting to the BBA became a little bit divorced from reality,'' Bond, head of asset- allocation research at Barclays in London, said in a Bloomberg Television interview. ``We had one week in September where our treasurer, who takes his responsibilities pretty seriously, said: `Right, I've had enough of this, I'm going to quote the right rates.' All we got for our pains was a series of media articles saying that we were having difficulty financing.''

Just like the goofy news put out by the Fed back last Thanksgiving, they were opening a NEW window so bankrupt banks could borrow secretly. The central banks and all the other banks are terrified their stocks will fall and there will be a run on their banks. And if they told the truth, they got hammered. So everyone lied. Now, the fact that they are all lying bastards should be obvious. The ones who tried honesty couldn't complain that they were seen as in trouble for they WERE in trouble! Deep trouble! With a capital T. But instead of dragging out the other banks and telling the world, 'We are ALL bankrupt!' they retreated into their safe shells and began lying again.

Now what angers me the most is, the Fed is NOT supposed to enable lying. The Fed is supposed to protect the banking system, not help banks in default to fool savers and lure them into putting money where it is being destroyed! The bankers are supposed to be sober and careful! They are supposed to be protecting the interests of the savers who have only one tool in retaliation: withdrawal of savings! If a saver thinks a bank is making a profit and thus, will give him or her a return on these savings, they have nothing to fear. But if a bank is bankrupt, they can lose everything!

The fix set up by Roosevelt in 1933 was to create the FDIC which insured banks that followed certain strict laws and rules and he also set up the SEC that enforced these rules. Then and only then, could they operate! Now, all these FDIC banks have destroyed the banking system to thoroughly, they are ALL BANKRUPT simultaneously. And the Fed struggles to fix this with fake cures. The real problems have not vanished, they have been transfered to the Fed itself! Which is now asking our government that is $10 trillion in arrears, to fix this huge financial hole!

Banks launch central clearer for derivatives

Efforts to tackle the risk surrounding privately negotiated credit derivatives will take a step forward on Thursday when 11 of the world's biggest investment banks announce the creation of the first central clearer for the opaque contracts by September.

The absence of a central clearer has made such contracts risky because there is no guarantee that parties will pay out.

This systemic risk has fuelled the global credit crunch, prompting regulators to step up pressure on banks to show they are trying to make the system more dependable.

Another stupid fix that fixes nothing at all! Nay, it MAKES IT WORSE. They want to isolate the $500+ trillion Derivatives Beast? HAHAHA. I seriously doubt this is possible. What they want is for it to exist, not die! And they will feed it and have it double in size every year till...INFINITY! Again, this is impossible. Instead of admitting this wretched system is fatally flawed, they want to contain it while using it as a risk sinkhole. Not only is there no guarantee the 'parties' will pay out, THEY CAN'T! This is obvious! Just to operate day by day, they are sucking up in Europe and the US far more than a trillion dollars and it is growing as fast as the Derivatives Beast. And this is no surprise, this IS the Derivatives Beast seen from behind! Namely, it is probably the same creature!

I look at things through a mythological mirror. This enables me to cut through the mess to figure out relationships and to foretell the future. In this case, the fact that all the major banks in the West are bankrupt is crucial. Once we accept this fact, a lot of other things come clear, too.

Gold has been beaten down yet again, back into the mid-$800 level. This is psychological. The Chinese are not buying gold right now, they have a massive earthquake to deal with! And the Indians are being hammered by inflation so they can't put free loot into gold, either. And the major investment banks promised the Fed they would not buy gold and oil in huge amounts, either. So as I warned people, the closing of all exits is part of the deal when the banking system collapses. This is why the main tool remains political action. And the US and Europe are far from ready to do this. Everyone wants a return to the messed up status quo still.

Historical Markit ABX.HE Graphs

This graph shows the collapse in value in the official Markit credit default system set up last year to track and reveal the real value of those various hack and slash real estate deals sold by all the pirates on Wall Street. The AAA tranche has collapsed in value from 100% to barely 50% and this, only because the Fed rescue of Bears Stearns filled the marketeers with the hope that they will be saved by Bernanke. So prices went up a bit. Only we can see the decline is resuming and accelerating.

Now to the A and BBB tranches: into the deepest depths they dive! The A ABX.HE numbers are at a miserable and obviously unsustainable 10% and dropping. Not far from the absolute bottom. And the BBBs are below 5%. This is beyond a miserable return. Remember: these things lose more than 'absolute' value on the way downwards. People holding these things lose a LOT of money! Especially since this is part of the system set up to remove 'risk' and thus is attached in many ways to other things that are also collapsing.

S&P Lowers the Boom on 1,326 Alt-A RMBS Classes

Bring on the Alt-A downgrades: Standard & Poor’s Rating Services said Wednesday evening that it had slashed the ratings of 1,326 Alt-A residential mortgage-backed securities, after recent data is proving performance of Alt-A loans originated in 2006 and 2007 to be particularly problematic. The downgrades affect $33.95 billion in issuance value and affect Alt-A loan pools securitized in the first half of 2007 — roughly 14 percent of S&P’s entire Alt-A universe in that timeframe.

Perhaps more telling were an additional 567 other Alt-A classes put on negative credit watch by the ratings agency.

A review of affected securities by Housing Wire found that all of the classes put on watch for a pending downgrade are currently rated AAA, suggesting that S&P’s confidence in thin overcollateralization typical of most Alt-A deals is quickly waning. The total dollar of potential downgrades to the AAA classes in question would dwarf Wednesday’s downgrades, which affected only mezzanine and equity tranches.

Basically, there are far fewer AAA stuff now. Far from the losses ending, they are increasing. It is getting much, much worse. The hopes of the big banking houses that these losses would be made good via the Derivatives Beast pouring trillions of dollars back into empty bank vaults is fading. They are only now just beginning to realize, the Beast is pretend. A legend, not real. It is mythological, not rational. It will vanish in a puff of smoke when they stretch out their hands, begging it to hand over trillions of dollars.

If 14% of the Alt-A universe is pretty much gone, we know that much of the bad stuff was intermixed within the supposed AAA classes. So they will, like a ship with a hole blasted in the hull, sink. And if this 'dwarfs' the $34 billion downgrade, we must assume the amount is around $2 trillion? After all, this is close to the amount the central bankers poured down this huge hole from their new windows.

South American nations to seek common currency

Brazilian President Luiz Inacio Lula da Silva said Monday that South American nations will seek a common currency as part of the region's integration efforts following the creation of the Union of South American Nations (Unasur) last week.

"We are proceeding so as, in the future, we have a common central bank and a common currency," said Lula in his weekly radio program, noting that this process will "not be fast."

Asia, the OPEC oil Arabs and the Asians are all discussing this very same thing. This is because the US dollar no longer is the world's main currency. It is dying rapidly and not due to falling in value. The BANKS are dying. And this is killing the dollar. I don't know if any of these frightened countries will succeed. But the fact that ALL the parts of the planet are discussing this right now is a sign that our days are certainly numbered. It is only a matter of time when the Fed has to give it up. But I fear we may try to start a war with Iran. Which would be our death sentence.

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Comments

[GMG]

Dear Elaine,

I think you offer your readers amazing clarity on the current banking situation. You raise an interesting point- "How will the Fed/Govt react when it essentially runs out of moves?" I agree that this could be the impetus for war. This is the main reason why McCain must not be elected. So, you see, it is very difficult to exclude politics from money matters. Your discussions on how they all relate are extremely helpful. I'm grateful.

Take care,

GMG

[Greg]

http://www.brasschecktv.com/page/149.html

this is a good one!!!

enjoy

:)

WTC 7 "Just pull it"

[Anthony]

My back envelope calculation. After the $225B, the fed will only have about $300B of reserve? The rest is funny paper?

But at current rate $300B will only last another year...

And we are anticipating China lashing out in nasty way after olympic. (or something. bottom line with that kind of money, we are not prepared against major financial catastrophy)

[Elaine Meinel Supkis]

Not another year. Another six months or less! That is the amazing part. We are entering the end game here.

[Robert Sczech]

Regarding WTC7: It is an amazing video. Thanks for posting this link. Few people know it, but a reputable professor of structural engineering at the ETH in Zurich (Switzerland) said in public that the collapse of WTC1 and WTC2 was a case of demolition. Whatever the truth is, here in the US, we decided a long time ago to delegate the truth to the dustbin of history and go on with business as usual.

Regarding demands of higher interest rates to be paid by Russia: Contrary to the US (which is the greatest debtor in the world), Russia is a net creditor nation to the world. The Fed must keep interest rates low in order to manage the huge interest bill to be paid by the US to its foreign creditors. The interest paid by Russia is peanuts in comparison to the interest paid by the US.

Regarding reserves of the FED: these are irrelevant. Congress can provide them at a moments notice by authorizing the US Treasury to issue more treasury bonds. In a few years, it will not make much of a difference what assets the FED holds because the distinction between funny money and treasury paper will be only academic.

Regarding Hyperinflation: There is too much loose talk about hyperinflation and not enough distinction between low (benign) inflation, moderate inflation, high inflation and hyperinflation. In order to have hyperinflation, prices have to double every few hours or every few days. Doubling of prices within a few months is not hyperinflation, it is only a case of high inflation. Right now, we still have low inflation. Gas at $4 per gallon is still very cheap and still undervalued. The correct price of gas has to be at least as high as the cost of any alternative production of gas via renewable energy sources. Gas would have to sell at $20 per gallon in order to be expensive. Too many armchair economists (which includes academic economists) do not understand the thermodynamics of energy production which is very unfortunate since it leads to all kinds of confusion about rising prices of fuel. In my opinion, prices of fuel were artificially low in the past. The present rise of oil and energy in general is not a case of inflation. It is a case of economic adjustment to the realities of thermodynamics.

[Paul S]

The WTC7 vid (www.brasschecktv.com) has been removed.

[Elaine Meinel Supkis]

The WTC: unlike the professor, I have watched the demolition of towers before this, close up. NEVER EVER do they collapse from the top down. It is the reverse. Good gods! There is endless stupidity about the WTC! People just don't want to look at reality. Those buildings were crappy and built dangerously. Had little internal hard structure so it pancaked. NO one should build like that again. Gah.

Many a badly built structure has collapsed in the past! It isn't all that amazing or unusual. But then, people love to imagine these bombs and thus, will be stuck in this mode of thinking forever. I am baffled as to why.

I don't see these people, NOT ONE OF THEM storming the White House! Eh? Yup. This is all noodling around the internet, a new toy. If this were REAL, you guys would be putting your lives on line to stop the bombers. RIGHT?

Of course. The utter lack of action, the refusal to do the logical next step shows us this is a game, not serious.

[Bear of Little Brain]

Great (and terrifying) graphs, Elaine.

Whilst I agree that politics is fair game here, I think we could save a lot of heat without any light by NOT having any posts on 9/11. Except this one! ;-)

I do not agree with you, but have deleted my previously-intended response. I watched the whole atrocity live, from the time my neighbour told me that a (the first) plane struck. I watched people fall (or jump) to their deaths (you can't edit real-time). I watched their lives being extinguished. I must have spent hundreds of hours trying to figure out what was really happening there. I think all of us feel our viewpoint is valid. Nothing is to be gained by opening a 9/11 discussion here. No doubt you will have started a torrent of postings, but let us end it here. IT SERVES NO PURPOSE.
(There, you've made me raise my voice.)

Can we agree on a 9/11-free forum? There are other places for "discussing" that.

[RobG]

Over at Automatic Earth (http://theautomaticearth.blogspot.com) is a link to Marketwatch.com

"The Federal Reserve is actively considering creation of a lending facility that would accept "very safe" foreign collateral from "sound" global banks in case of a widespread liquidity crisis, Fed Vice Chairman Donald Kohn said Thursday.

A new global discount window is "under active study," Kohn said. "It is possible that over time, major central banks could perhaps agree to accept a common pool of very safe collateral, facilitating the liquidity management of global banks," he said, stipulating that such loans only be made to sound institutions.

Kohn's suggestion came in prepared remarks wrapping up a special conference in New York on liquidity in money markets that was sponsored by the New York Fed and the Columbia Business School."

I say, define 'safe'. If LIBOR and other benchmarks are fudged, anything can. No wonder Elaine calls them traitors.

[Bear of Little Brain]

RogG:
Wow. Just skimmed through the article and the comments (some very good), then tried to wade through the linked text over at the Fed site. What is REALLY going on here? A banking coup d'etat? Is it an attempt to forestall some almighty collapse? It's beyond me.
It is apparent that the central banks are colluding in something.

From Marketwatch:
'A new global discount window is "under active study," Kohn said. "It is possible that over time, major central banks could perhaps agree to accept a common pool of very safe collateral, facilitating the liquidity management of global banks," he said, stipulating that such loans only be made to sound institutions.'

"Very safe collateral"? Like the stuff they're taking now? "Sound institutions"? Like Bear Stern's, maybe Citi soon? Who's he kidding?

From the prepared text (my reading of the sub-text is either, "We are oh so f***d" or, "Out of crisis we shall make opportunity"):
"Globally active banks manage their positions on an integrated basis around the world, and pressures originating in one market are quickly transmitted elsewhere. Central banks should consider how to adapt their facilities to help these institutions mobilize their global liquidity in stressed market conditions and apply it to where it is most needed. That approach will require the consideration of arrangements with sound institutions in which central banks would accept foreign collateral denominated in foreign currencies. Those arrangements are under active study and a number of issues need to be resolved. It is possible that over time, major central banks could perhaps agree to accept a common pool of very safe collateral, facilitating the liquidity management of global banks."

Perhaps they could start with gold.

"Oh, what a tangled web we weave, when first we practise to deceive."

As I said, it's all beyond me. There again, as granny used to say, "Some people are just too clever for their own good."

[Bear of Little Brain]

RogG? RobG. Sorry

[DeVaul]

I agree with Bear. I am sick of the 9/11 conspiracies. We are now facing the imminent prospect of all-out nuclear war over the control of oil fields in other countries. Let's discuss that.

So Greg, regarding your WTC 7 posts:

"Just pull it!"

[Bear of Little Brain]

A light-bulb just lit up. Maybe Kohn IS thinking gold. That Ben Steil/CFR paper on "The End of National Currencies" had this:

"So what about gold? A revived gold standard is out of the question. In the nineteenth century, governments spent less than ten percent of national income in a given year. Today, they routinely spend half or more, and so they would never subordinate spending to the stringent requirements of sustaining a commodity-based monetary system. But private gold banks already exist, allowing account holders to make international payments in the form of shares in actual gold bars. Although clearly a niche business at present, gold banking has grown dramatically in recent years, in tandem with the dollar's decline. A new gold-based international monetary system surely sounds far-fetched. But so, in 1900, did a monetary system without gold. Modern technology makes a revival of gold money, through private gold banks, possible even without government support."

The full paper is here:
http://www.foreignaffairs.org/20070501faessay86308-p0/benn-steil/the-end-of-national-currency.html
or
http://tinyurl.com/yssnry

But they're trying to suppress the private gold banks ("money laundering"), so are they going to use the idea for themselves? Hmmm.

BTW, while googling for Steil's paper, I found this wonderful video of Mr. Bubbles, sometime last year (posted October, 2007). In this video, it is apparent that he has always been a closet gold man. Amazing. The recording quality is dreadful, but the material is priceless. Well worth watching.

http://www.youtube.com/watch?v=caIgP3Mnb6g

[Michael]

About the only positive thing I see has come out of the way the Fed and Treasury have handled the implosion of the gigantic cheap credit speculative party of the last 25 years is the opportunity for American citizens to see behind the veil of deception.

No one in the U.S. (or any other G7 country can claim now they do not understand that the SOLE PURPOSE of the Fed and Treasury is to feed most of the wealth of their nation directly into the hands of bankers and financiers; and then to protect the wealth of the bankers and financiers from free market consequences when their gambles have turned bad.

NOTHING matters as much to the government of this country as keeping the financial masters of the universe well fed and free from facing the consequences of their own actions.

It has always been thus, since 1789 (yes, Washington, Hamilton, and most others used their government positions to enrich speculators and to speculate themselves). The only exception was Andrew Jackson, who was an evil egomaniac, but who at least refused to use the government as a tool of the banks and speculators.

[Elaine Meinel Supkis]

Revolutions come in cycles. We are entering such a cycle. Barely. But definitely. The problem is, we have no 'Das Kapital' or Benjamin Franklin or other leaders who can tell us how to deal with today's problems and how to forge a new relationship with humanity. Remember, the promises of the Declaration of Independence were violated instantly when slave owners signed it!

Civil wars and revolutions is what happens when the elites are coddled too much while mucking up too much.

[Greg]

Devaul what was the defining reason that you are in all these countries killing innocent people, and getting ready for nuclear war???? isnt it because of the WAR ON TERROR and what was the significant event that triggered all this, oh thats right the new pearl harbour 911. But hey lets not talk about that, lets just accept the warren commissions report as fact and stick our heads in the sand eh???

you make me sick devaul, you speak with no moral integrity ive seen your rants about blacks, jews and women...you make me sick!

No Elaine i dont see you storming the white house regarding the nuclear war and the end game either WHY NOT?????? IT SEEMS PRETTY IMPORTANT!!!!

so dont throw rocks from your own glass house. The same people who perpetrated 911 are now stealing all your money and laughing at you, but i dont see you doing anything about it, except for repeating the same bi laden consiracy theory that bush, cheney and rumsfeld espoused............must be true if dubya says so eh elaine??????

[Elaine Meinel Supkis]

I have stormed the White House and Congress in the past! I will do it again in the future. Gads. I actually go to DC to raise hell regularly. Of course, sometimes I can't do it. Like right now due to domestic problems so I harass them from the internet.

But I advocate taking this forwards. Anyone with passions should do this. When, for example, the 2000 election failed, I went to DC to twist arms about counting the votes. When I arrived, NPR and the other news media talked about me for about one hour then noticed no one was following me around so they shut up.

I was the person who broke the story that one of the GOP senators was defecting to the Democratic party! And I told the GOP head of the Senate, he was doomed.

But again: NO ONE CAME WITH ME even though I talked about it on the forums and many people promised.

But that DIDN'T STOP ME. Even one person can shove the wheel of history forwards if they try hard enough. What I see here is the 9/11 people hassling neighbors and friends while NOT hassling the people in DC. Get the difference?

Frankly, I hope to be more active in this sense in the future. I love going around, making things actually happen.

[DeVaul]

"you make me sick devaul, you speak with no moral integrity ive seen your rants about blacks, jews and women...you make me sick!"

What the hell are you talking about?

I am not FOR war or invading other countries and have spoken against this many times. Everyone here knows this.

There are no rants about Jews, blacks, and women, and you cannot produce them.

I do not need to "speak with moral integrity" to indicate that I am REALLY tired of the 9/11 conspiracy discussions. We all know the government enabled it. That is enough right there to hang them all for treason. Anymore is just wasted breath.

I think, in light of your vicious, unfounded rant above, that you should take a long look in the mirror to see whether YOU speak with any moral integrity.

[Bear of Little Brain]

Greg, DeVaul

This is the problem with 911, and why it is best left to other forums. It is too emotive for us to deal with in blog comments here, and only serves to channel our anger into a place where it can have no effect instead of somewhere that it could (a gallows, for example). It plays into the hands of the perpetrators.

You both seem to have the same views on 911, yet end up attacking each other. I hope you can agree to it being a misunderstanding. Now I risk being stoned by both of you! :-)

Peace, bro's.

Just for information, I had seen that video some time ago elsewhere. Bringing it to our attention was well intentioned. I just think the events surrounding 911 are too far off-topic for this particular blog. I think we need an executive decision on future 911 material though, Elaine. It's your site.

[DeVaul]

Well, I agree Bear, and this is why I asked Greg to can it -- albeit not nicely, but Elaine has already asked many, many times to end this discussion of exactly how the buildings collapsed and I am really tired of reading about it. Civil engineering does not interest me on this blog.

Now, this does not even begin to address Greg's outlandish portrayal of me in his long rant. If someone agrees with his opinion of me, I would like to know who it is and why. I have never attacked someone in such a manner as that before ever on this blog or anywhere online simply because they ridiculed my "signature" line or questioned my conviction about a particular incident. That is why Greg is upset, but that is no excuse for making up things about me.

I can always resort to name calling also, but I don't. I have enough respect for someone else's blog to not engage in that kind of behavior.

[Elaine Meinel Supkis]

I luv ya, DeVaul.

[Anthony]

http://www.thetrumpet.com/index.php?q=5184.3453.0.0

According to a recent Merrill Lynch & Co. report, the U.S. Treasury Department has effectively given Gulf Arab oil producers the green light to break their currency peg to the dollar and instead rely on a currency basket for their financial stability. This report reveals that the Treasury Department issued its own report to Congress admitting that the record inflation rates among Gulf Cooperation Council (gcc) states were, at least partially, because of their currencies’ peg to the dollar. The Treasury also stated that the U.S. government now believes the dollar is strong enough to thrive without the support of the Gulf states. But this green light may well be a harbinger of a massive stampede away from the dollar to other currencies like the euro or yen.

Merrill Lynch & Co. says that both the United Arab Emirates and Qatar will probably break their dollar peg and move to a currency basket within the next few months. Kuwait already enacted both of these measures over a year ago, and Saudi Arabia may do the same before the end of next year.

The long-term prospect is much bleaker.

Gulf state initiatives to diversify their foreign exchange holdings amount to a vote of “no confidence” in the dollar. In effect, this will signal the last days of the dollar’s reign as the world’s reserve currency. Gulf states would stop buying U.S. treasury bonds as a means of regulating their own currencies and instead may even start selling their current dollar holdings. Over the long-term, the breaking of the petrol-dollar peg would mean reduced global demand for dollars, and thus the long-term value of the dollar would likely be biased to the downside. However, if other countries with large dollar reserves, like China and Japan, were to try and offload some of their dollar holdings before the dollar further devalues, a dollar crisis could develop and then the immediate consequences for the American economy would be disastrous.

[Gary W]

Don't feed the troll.

[Gary W]

Don't feed the troll.

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