hypertigers latest

[AndreaGail]

Sunday, March 27, 2011
Scapegoat Roulette


Banks don't loan money out. Banks increase the money supply at the request of the consumer. The reason why the total credit market debt or money supply has stopped growing is not because the banks have stopped lending...It's because consumers have slowed their requests for commerical banks to create money.

How money is created...

A consumer requests a commercial bank for a "loan"

There is no money to loan...it's credit.

The bank then creates a liability and an asset and attaches interest to it.

As the consumer pays off the "loan" (of their future income) the asset and liability shrink by the principle amount...or return back into thin air where it came from...and the banks keep the interest.

That's how commercial banking as you all know it has operated for over six centuries now.

On any given day in the year...over 3 Trillion dollars flows through New york...Globally it's easily close to 10 Trillion equivalent Dollars of volume a day.

The US money supply is around 52 Trillion Dollars...the global supply equivalent is close to 200 Trillion dollars.

It's all debt...owed ultimately to the top. Ultimately the money supply of the world is owned by the top and the bottom rents and the cost to pay the rent is hidden in the price of everything.

The minor amount of FED so called "money printing" doesn't even equal half of a typical average day's volume.

Yield rates are so low the top has been forced to make up the difference...

The yield game is over...top sucks from the bottom until the bottom is sucked dry...then poof.

All the strikes/revolutions and chaos are being unleashed to cover the revelation of the lower high that the top began engineering in 2008...after the G20 all the various authorities went back and implemented the greatest global Government economic intervention in history....massive record breaking deficit spending.

Then the top covered...

The top does all the buying and selling...the bottom just speculates.

The top is not the cause but in the chain leading back to the cause...the top is the cause...The Federal Reserve is the effect.

Last time around before they were in soup lines...they were crying that the fed was printing too much...after they were in the soup lines...they cried that the fed was not printing enough.


The FED "money printing" is an effect...Not the cause.

Food and Fuel supply has been carefully managed by the top so as to reduce the base of the derivatives markets.

The result is ultimately higher prices...

The money supply or total credit market debt has not increased at all in 3 years.

As far as I can tell all these increases are due to the cuts in supply in relation to demand.

The exports from China and various other consumer goods along with real estate has not significantly risen in price at all.

I ditched my last cathode ray tube last month...

The top lives off the yield from the bottom...In order to obtain the required yield within an environment of constantly dropping yields the past 30 years requires ever increasing volume.

The US consumer reached their maximum potential to sustain the volume in late 2007.

But the difference has to be made up somewere...

You could begin engineering rates higher...but that will just cause the already unsufficient volume to collapse further...tightening supplies of food and fuel won't hurt the ability of consumers to request commercial banks to increase the money supply.

Ulltimately the top can obtain higher yields this way...

Increasing the cost of food and fuel increases the demand for money.

Thats the trick that's been employed up to this point...It's been used in japan for 20 years...cheap slave labor electronic goodies...expensive food and fuel.

The FEDERAL RESERVE is facilitator.

One slight probelm...unlike Japan...this trick can not be sustained very long...

All that's going to happen is commodity prices are going to keep rising until maximum potential and then there will be a collapse.

The various scapegoats are already out there.

The global mass strike/revolutions and the soon to be realized and comprehended Japan meltdown..

[Rebel Yarr]

oh - so maximum potential and then collapse - who knew!>?!>!??

[dys]

One of his better posts...the law of diminishing returns from the perspective of TPTB. As Hoarder would ask, What comes next? The writing is on the wall for Agenda 21.

dys

[Silver Shield]

I believe he incorrectly diminishes the role of the Fed and does not fully acknowledge the power of the Fed.

First it is true that the amount of money/debt that the Fed is small compared to the total credit market but it's effects are huge when leveraged throughout the system.

Every dollar the Fed creates through debt is first highpowered money. Meaning a thousand dollar of fed money enables that receiptiant bank to loan out $10,000 if the bank has a 10/1 reserve ratio. When that $10,000 enters the retail banking system it can produce $100,000 in money/debt. That alone is significant and not acknowledged.

One caveat to this is that most of the money the Fed has been loaning out to have NO reserve ratio. Worse they are buying toxic assets that are worth nothing for 100 cents on the dollar in back door bailouts.

The Fed also pumps liquidity with other central banks in currency swaps and other behind the door operations.

The Fed also has the power to destroy by half or whole the entire purchasing power of the dollar overnight if they wanted to.

Another point is that the very fact that the Fed is the unlimited lender of last resort and .gov is the absolute spender of last resort proves that hyperinflation can and will happen without the consumer being the cause.

Every year debt must be increased to larger than the debt and interest accrued the year before or the system collapses. Any whiff of deflation will be met by the lender and spender of last resort doing what they do best.

This process along with the compounding effects of debt, bailouts for all, the finite resources of the world, and aging population of the world will lead to a worldwide hyperinflationary collapse of the dollar.

[mick silver]

well i am off to sell some silver ............................................ got you hahaha

[Sparky]

...
Every dollar the Fed creates through debt is first highpowered money. Meaning a thousand dollar of fed money enables that receiptiant bank to loan out $10,000 if the bank has a 10/1 reserve ratio.
...


I've been trying to understand this for years, but keep getting conflicting stories. I don't think this is true as stated. Here's how I understand it:

A 10:1 ratio means if a bank has $1000, it can loan $900. However, that $900 will ultimately get deposited somewhere, and that bank will be able to loan out $810. Then, of that $810, $729 can be loaned. And so on. If you repeat this process with perfect efficiency (i.e. all loaned money ultimately gets re-deposited), it will result in a total of $10,000 being loaned out by all the banks, from the original $1000.

So, in effect, the upper limit on lending from the original $1000 is $10,000. However, it's misleading to say that a bank with $1000 can then loan out $10,000.

If someone disputes this, please provide a reference or explanation that clarifies the distinction between lending and subsequent re-lending.

[SHTF2010]

we all know TSHTF is coming

the $64,000 question is




WHEN ?

[dys]

...
Every dollar the Fed creates through debt is first highpowered money. Meaning a thousand dollar of fed money enables that receiptiant bank to loan out $10,000 if the bank has a 10/1 reserve ratio.
...


I've been trying to understand this for years, but keep getting conflicting stories. I don't think this is true as stated. Here's how I understand it:

A 10:1 ratio means if a bank has $1000, it can loan $900. However, that $900 will ultimately get deposited somewhere, and that bank will be able to loan out $810. Then, of that $810, $729 can be loaned. And so on. If you repeat this process with perfect efficiency (i.e. all loaned money ultimately gets re-deposited), it will result in a total of $10,000 being loaned out by all the banks, from the original $1000.

So, in effect, the upper limit on lending from the original $1000 is $10,000. However, it's misleading to say that a bank with $1000 can then loan out $10,000.

If someone disputes this, please provide a reference or explanation that clarifies the distinction between lending and subsequent re-lending.


The first thing is that I don't believe the reserve requirements are 10:1...instead, much higher depending on what source you trust. Also, I believe that it's a flawed assumption to assume that the loaned money "ultimately gets deposited somewhere" I'm sure some of it does, but some of it ultimately doesn't.
I've always found it helpful to think of a bank as having 2 accounts. The first account, the operating account, is money that they use for things like operating expenses, investments, payroll, savings, etc...it's the account that they figuratively write checks from. The 2nd account can't be used to for any of these things; the account has a perpetual 0 balance. Actually, it's a special account that can only be used for the purposes of loaning money. Even though it has no money in it, it does have a rolling 'overdraft protection' that is predicated on the current amount of funds in the operating account. After the bank issues a loan from their overdraft account, the debtor is then obligated to repay the loan. As the debtor repays the loan, the money or at least the interest goes into their operating account (HT would say the interest goes there, while the principle 'vanishes back to where it came from').
I'm sure this anology isn't perfect. To me the important thing to understand is that the bank risks nothing to get something; that something being either collateral and/or a portion of the utility from the borrowers labor.

dys

[MetalsMan]

we all know TSHTF is coming

the $64,000 question is

WHEN ?



According to HyperTiger and "Cyclist" (over at Kitco Forums)
this is when the whole system CRASHES and the SHTF:

2016/2017

This is when the next BIG WAR happens (WW3?), the
mainstream media brain-washed sheep will go to war,
blow up everything (liquidation) and only about
10% of us make it to the other side. (liquidation of
about 90% of the sheep)

Then the 10% of us left will be employed to build the next
"System" for the "TOP" (TPTB) and the system starts all
over again.

Fun. >:(

[DMac]

we all know TSHTF is coming

the $64,000 question is

WHEN ?



According to HyperTiger and "Cyclist" (over at Kitco Forums)
this is when the whole system CRASHES and the SHTF:

2016/2017

This is when the next BIG WAR happens (WW3?), the sheep
go to war, blow up everything (liquidation) and only about
10% of us make it to the other side.

Then the 10% of us left will be employed to build the next
"System" for the "TOP" (TPTB) and the system starts all
over again.

Fun. >:(




I thought Hypertiger originally claimed it was all going to end in 2003 or something like that, or so I read on some site gold..golfismoney.info? It didn't happen.

(If ww3 does happen, within 10 years is a good guesstimate)

[DMac]

Overall the essay is a rehash of things he's written several times already. At this point, if one is so wise, try a little creativity and work towards solutions.

Too much fatalism for me. Reminds me of Clif High ::)

[Sparky]

we all know TSHTF is coming

the $64,000 question is

WHEN ?



According to HyperTiger and "Cyclist" (over at Kitco Forums)
this is when the whole system CRASHES and the SHTF:

2016/2017

This is when the next BIG WAR happens (WW3?), the
mainstream media brain-washed sheep will go to war,
blow up everything (liquidation) and only about
10% of us make it to the other side. (liquidation of
about 90% of the sheep)

Then the 10% of us left will be employed to build the next
"System" for the "TOP" (TPTB) and the system starts all
over again.

Fun. >:(




For years now I've thought the "bottom" (whatever that may be) would occur as early as 2013 and as late as 2017. So I'm good with his 2016-17 prediction.

[Carl]

My $0.02 worth:

All money is currency but not all currency is money.

Fiat Currency:

Section 31 U.S.C. 5103, defines legal tender as "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."

Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.

Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

By law, Federal Reserve Notes (FRNs) are money, a tightly controlled, tangible product with severe penalties for their unauthorized reproduction and if the Federal Reserve's (Fed) balance sheet is to be believed, there are about $965 billion accounted FRNs in circulation worldwide, the majority of which are held overseas.

FRN's (a.k.a. Dollars) are the primary unit of account by which all public/private debt can be extinguished. They are also a medium of exchange.

Fractional Reserve Currency:

Commercial banks do not create money as defined by law. They create a "money substitute" a.k.a. "book keeping money", a.k.a. "electronic digits", a.k.a. "Credit", a fractionalized derivative of the primary money, Federal Reserve Notes that is measured in dollars. This practice is known as Fractional Reserve Banking (a practice that has been destroying economies, countries and lives for over 600 years).

Credit dollars are a debt-generated currency that is denominated by a unit of account (FRNs). Unlike money (by a strict definition), credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange. As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply.

Credit as currency is, quite simply, a promise to pay FRN's upon demand as well as over time. The everyday physical representation of that promise is the debit/credit card, which is the hallmark of modern computerized, fractionalized, debt driven commercial/investment banking. Literally billions of dollars' worth of transactions are conducted in credit currency each and every day without any thought given to the un-fulfill-able promise that backs its use or the inevitable consequences of its failure.

Our economy is totally dependent upon the continuing flow of digits, which necessitates the continued expansion of public/private debt as well as the continued expansion of assets and asset values, for its survival.

Unlike FRNs, which are an obligation of the government, credit currency is not, thus the need for the FDIC, which is as "Federal" as the Federal Reserve, a congressionally chartered consortium of private banks, the FDIC is a congressionally chartered subsidiary of the Federal Reserve that is funded primarily by member banks with allowance to borrow from the Treasury. The objective of the FDIC is to re-digitize credited deposits (positive credit) that have reverted to their natural state of bank debt upon its failure. In other words; the FDIC's function is to keep the illusion of "credit is money", and the banking system that issues and administers this "money substitute", alive.


A work still in progress.......



.

[kiffertom]

My $0.02 worth:

All money is currency but not all currency is money.

Fiat Currency:

Section 31 U.S.C. 5103, defines legal tender as "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."

Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.

Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

By law, Federal Reserve Notes (FRNs) are money, a tightly controlled, tangible product with severe penalties for their unauthorized reproduction and if the Federal Reserve's (Fed) balance sheet is to be believed, there are about $965 billion accounted FRNs in circulation worldwide, the majority of which are held overseas.

FRN's (a.k.a. Dollars) are the primary unit of account by which all public/private debt can be extinguished. They are also a medium of exchange.

Fractional Reserve Currency:

Commercial banks do not create money as defined by law. They create a "money substitute" a.k.a. "book keeping money", a.k.a. "electronic digits", a.k.a. "Credit", a fractionalized derivative of the primary money, Federal Reserve Notes that is measured in dollars. This practice is known as Fractional Reserve Banking (a practice that has been destroying economies, countries and lives for over 600 years).

Credit dollars are a debt-generated currency that is denominated by a unit of account (FRNs). Unlike money (by a strict definition), credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange. As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply.

Credit as currency is, quite simply, a promise to pay FRN's upon demand as well as over time. The everyday physical representation of that promise is the debit/credit card, which is the hallmark of modern computerized, fractionalized, debt driven commercial/investment banking. Literally billions of dollars' worth of transactions are conducted in credit currency each and every day without any thought given to the un-fulfill-able promise that backs its use or the inevitable consequences of its failure.

Our economy is totally dependent upon the continuing flow of digits, which necessitates the continued expansion of public/private debt as well as the continued expansion of assets and asset values, for its survival.

Unlike FRNs, which are an obligation of the government, credit currency is not, thus the need for the FDIC, which is as "Federal" as the Federal Reserve, a congressionally chartered consortium of private banks, the FDIC is a congressionally chartered subsidiary of the Federal Reserve that is funded primarily by member banks with allowance to borrow from the Treasury. The objective of the FDIC is to re-digitize credited deposits (positive credit) that have reverted to their natural state of bank debt upon its failure. In other words; the FDIC's function is to keep the illusion of "credit is money", and the banking system that issues and administers this "money substitute", alive.


A work still in progress.......



.

CARL YOU ARE MUCH APPRECIATED! i have a question. if the fed reaserve bank is a private bank not affiliated with the federal government, who owns the gold(if there is any) in ft. know? the fed reserve bank or the u.s. government?

[mick silver]

the top kill the bottom till there no bottom left then they start all over .

[TheNocturnalEgyptian]

CARL YOU ARE MUCH APPRECIATED! i have a question. if the fed reaserve bank is a private bank not affiliated with the federal government, who owns the gold(if there is any) in ft. know? the fed reserve bank or the u.s. government?


The fed is a private bank which has a congressional charter. It was chartered by the US congress but I believe that the congress has only a 1/5th stake in it, and the other 4/5th are private. I could be wrong on those numbers. Furthermore the "Board of Directors" or whatever for the fed is really only the liason between the owners of the fed and the US congress. They are in no way shape or form the true owners themselves.


Now to fort knox. My understanding is that hypothetically the gold in fort knox is owned by the US citizens. It's where all the gold, hypothetically, went from the confiscation of '33. We all know it didn't actually go there, but that is the official story.

Also knox hasn't been audited in over 40 years and it is required by law to be audited every year. So you tell me who the real owners are? Just something to think on.

[Trinity]

I thought Hypertiger originally claimed it was all going to end in 2003 or something like that, or so I read on some site gold..golfismoney.info? It didn't happen.

(If ww3 does happen, within 10 years is a good guesstimate)
[/quote]

His prediction was 2004 "the latest!" He/she/it also claimed in an argument with midas that he could take down the whole financial system with one finger. Once someone starts talking like that and continues to have followers then you are entering into how religious cults are started.

[Walter Mitty]

What HT said would happen, happened in 2008.
In order to keep debt increasing the banks gave home loans to practically
anyone who was breathing and off loaded them to suckers as MBS.
When that collapsed things went poof..
Only massive amounts of Fed & Fed.Gov intervention prevented
a hyperdeflationary collapse.
The bank run began and no one knew. Without Fed.Gov intervention they
estimate 5 trillion would have been pulled out of money market accounts.
But, all they did was postpone the collapse. They are trying to manage it.
It's QE2, QE3, QE4.....n or it all comes down immediately.
With QE2, QE3, QE4 things last a little longer but the end is
inevitable. Just my .02.

[Carl]

CARL YOU ARE MUCH APPRECIATED! i have a question. if the fed reaserve bank is a private bank not affiliated with the federal government, who owns the gold(if there is any) in ft. know? the fed reserve bank or the u.s. government?

All I can say on the subject of that gold is that it supposed to be ours (we the people's); the Fed was given, and has, no say over its disposition, that I'm aware of.

[Carl]

Most who bother to read what I posted will, in all likelihood, fail to grasp its implications.

[DMac]

http://piggington.com/files/images/high_horse_0.jpg

[DMac]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.

[Sparky]

Most who bother to read what I posted will, in all likelihood, fail to grasp its implications.




Then you should explicitly state the implications.

It reminds me of the reporting of the 2008 financial crisis, which used terms like "meltdown" and "collapse". Rarely did anyone explain what they really meant.

So, what are the implications, without using these vague buzzwords? I have my own interpretation, but it may not match what you are thinking. This gets back to the many interesting GIM/GSUS discussions trying to agree on a definition of SHTF.

[Sparky]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.


On deflation/inflation, I've come to appreciates Carl's argument for deflation, but I also know that the solution to deflation is inflation. In 2008-09 we saw a wave of deflation. Now we see some deflation mixed with commodity inflation. The game always ends with inflation.

[DMac]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.


On deflation/inflation, I've come to appreciates Carl's argument for deflation, but I also know that the solution to deflation is inflation. In 2008-09 we saw a wave of deflation. Now we see some deflation mixed with commodity inflation. The game always ends with inflation.


IIRC, Carl argued quite a bit on GIM that there would be no inflation since this is a deflationary credit crisis.

[Sparky]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.


On deflation/inflation, I've come to appreciates Carl's argument for deflation, but I also know that the solution to deflation is inflation. In 2008-09 we saw a wave of deflation. Now we see some deflation mixed with commodity inflation. The game always ends with inflation.


IIRC, Carl argued quite a bit on GIM that there would be no inflation since this is a deflationary credit crisis.


Yes. I'm saying he's half right.

[DMac]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.


On deflation/inflation, I've come to appreciates Carl's argument for deflation, but I also know that the solution to deflation is inflation. In 2008-09 we saw a wave of deflation. Now we see some deflation mixed with commodity inflation. The game always ends with inflation.


IIRC, Carl argued quite a bit on GIM that there would be no inflation since this is a deflationary credit crisis.


Yes. I'm saying he's half right.


I think he's half right too. I also think posting stuff like:



Most who bother to read what I posted will, in all likelihood, fail to grasp its implications.


is a dick move.

*edit*
This is where I think you and I disagree with Carl:

"The game always ends with inflation."

I agree with you on that point.

[Carl]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.
I sware, it wasn't condescension, it was a response provoking maneuver....... :o

And, I never said there wouldn't be any price inflation.

[DMac]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.
I sware, it wasn't condescension, it was a response provoking maneuver....... :o

And, I never said there wouldn't be any price inflation.


Fair enough then Carl. I rescind my dick comment :)

[Sparky]

Seriously, hyperinflation can't happen in a credit deflation environment :sarc:

Wal-Mart US CEO To America: "Prepare For Serious Inflation" (http://www.zerohedge.com/article/wal-mart-ceo-america-prepare-serious-inflation)

Condescension is an unbecoming trait for all people Carl.
I sware, it wasn't condescension, it was a response provoking maneuver....... :o

And, I never said there wouldn't be any price inflation.


I've never understood why we should care about any other type of inflation besides price inflation. If they double the money supply, but prices don't change, why does inflation matter?

[Carl]

I've never understood why we should care about any other type of inflation besides price inflation. If they double the money supply, but prices don't change, why does inflation matter?
There exists a myraid of reasons for price inflation only one of which is monetary, so it helps to discern the difference. Price inflation based upon the assumption that monetary inflation will quickly follow will be short lived if the 'money' doesn't. See: Iceland.

[Carl]

OH and Sparky, I'm curious to see what you think the implications are.

The Fed has been expanding and expending credit. Credit is the fractionalized derivative of FRNs and as such, they can't be used to expand fractional lending so the must seek expansion through yield in the market place.


.

[Sparky]

OH and Sparky, I'm curious to see what you think the implications are.

The Fed has been expanding and expending credit. Credit is the fractionalized derivative of FRNs and as such, they can't be used to expand fractional lending so the must seek expansion through yield in the market place.


.


I understand the implications, and they will be met with increasingly outrageous responses. I've explained before, they can achieve expansion simply by digitally adding $25,000 to every bank account in America, and charging it to the Fed's limitless balance sheet. They'll call it Future Growth Credit, or some such nonsense. There will be a rush to spend this "wealth" on a finite amount of resources. Their only challenge will be metering out the new un-earned money at a rate that leads to inflation rates that don't cause public alarm, probably high single digits with the occasional spike to 12-15% that will be viewed as anomalous. The same way we are now accustomed to $3.25 gas, and view spikes to $4 as temporary and tolerable.

I still don't understand the importance of non-price inflation, other than it is a signal for inevitable price inflation. Tell me why I should care.

[Ponce]

Prices going up everywhere........and I see more greed than need in those prices.

[Trinity]

Now he comes up with the wording "Price Inflation". This is what is to be expected of one who is trapped in a corner. AKA trying to bullshit your way out of a losing argument.

[keehah]

I also think posting stuff like:



Most who bother to read what I posted will, in all likelihood, fail to grasp its implications.


is a dick move.

It is a self inflicted cock block.
_____

For soft collapse I say stagflation till fiat money change that both leaves much of the local economy behind and erases or severely devalues financial assets.

I think we are all describing the same elephant, just still unsure of its breed and health.

[Carl]

I understand the implications, and they will be met with increasingly outrageous responses. I've explained before, they can achieve expansion simply by digitally adding $25,000 to every bank account in America, and charging it to the Fed's limitless balance sheet. They'll call it Future Growth Credit, or some such nonsense. There will be a rush to spend this "wealth" on a finite amount of resources. Their only challenge will be metering out the new un-earned money at a rate that leads to inflation rates that don't cause public alarm, probably high single digits with the occasional spike to 12-15% that will be viewed as anomalous. The same way we are now accustomed to $3.25 gas, and view spikes to $4 as temporary and tolerable.

I still don't understand the importance of non-price inflation, other than it is a signal for inevitable price inflation. Tell me why I should care.
I don't know what to say to that Sparky, very imaginative.

[Carl]

Now he comes up with the wording "Price Inflation". This is what is to be expected of one who is trapped in a corner. AKA trying to Bullshit your way out of a losing argument.
The is no "now" involved in my wording, I've said it all along.

It's called COST PUSH INFLATION.

Look it up.

[Carl]

Here are some of the implications:

The Fed can't have FRNs printed up as it pleases, it must back each FRN dollar put into circulation with an unemcumbered asset, primarily Gold Certificates and US Securities.

The Banks can't order FRNs as they need, they must purchase them, dollar for dollar, from the Fed with unemcumbered assets, primarily Gold Certificates and US Securities.

FRNs are the basis of Fractional Lending, what is lent is credit, not FRNs.

This means that banks could not afford all the FRNs they would need to cover the credited deposits in the event of a bank run.

Because the Fed has to back all new FRNs with unemcumbered assets, primarily Gold Certificates and US Securities, they will not be responding to a bank run crisis with printed FRNs. Just as in the 1930s, the majority are going to lose everything.

Credit Currency is not Money but all debts incurred with its use are legally binding. This is the bankster's golden ticket, they get your stuff while they gave you nothing.

Most importantly: Credit As Currency Always Fails.

That's just a few off the top of my head,...

[Bigjon]

http://seekingalpha.com/article/235299-qe2-more-effective-than-qe1
QE2, the Federal Reserve’s program to buy an additional $600 billion of Treasuries (along with an estimated $200 to $300 billion in re-investment of maturing securities), should be far more effective than QE1 because this latest installment of Quantitative Easing will ultimately create what the original program did not: velocity of money.

With QE1, the Fed's newly printed dollars were used (for the most part) to purchase illiquid assets such as mortgage backed securities from the large commercial banks. Whether by choice or not, the cash received for these securities is being held on deposit at the Federal Reserve Banks (i.e. the Fed bought assets from the large commercial lenders who are just keeping that cash at the Fed).

You can see this by looking at the Fed's balance sheet (the weekly H.4.1 report). As of November 4, term and other deposits held by depository institutions at all Federal Reserve Banks was still nearly $988 billion, down just $77.3 billion from one year ago. In normal times, this number varies between $8 and $14 billion or so.

We can speculate on the reasons why the large lenders are keeping their powder dry at the Fed. For one thing, the banks are still reluctant to lend. Also, the deposits are receiving 0.25% interest. Another possibility might have to do with the ultimate disposition of all this paper; while not repo agreements, the Fed likely does not envision holding these assets to maturity (and it may want to sell them relatively quickly if and when the need comes to tighten policy), which means that the door to the banks buying these assets back is probably still open, especially since the cash to do so is readily available.

What all of this means, however, is that in essence, QE1 created very little velocity of money because the cash created in the first program is not moving through the system. For whatever reason, a large percentage of QE1 cash is doing nothing more than sitting at the Fed collecting 0.25%.

With QE2, the Fed is not buying an illiquid asset from a bank; what they are buying is an extremely liquid asset from its dealers, and they are doing so with newly created money. The fact that Treasuries are totally liquid means that the Fed's new QE2 money will circulate into the system and do a far better job at creating money velocity than the cash used for QE1 as long as the following condition is met (which it will be):

To simplify things, let's say we have 2 bidders at a Treasury auction, each with $100 billion to spend. Along comes the Fed with $100 billion that it just printed and buys all the Treasuries at that particular auction. The 2 bidders that got shut out are not going to keep that cash in their pockets; it is a virtual certainty that they are going to buy something else, especially because speculation is rampant that the dollar is going to be depreciating due to the Fed’s actions. So, what these bidders will do is buy Treasuries in the secondary market, if that's what they want. They can also buy stocks, which is what I am sure the Fed is hoping they will do. They can get into commodities and help to create some inflation (which is also what the Fed wants). Or gold. Or whatever they want.

So now, you have $100 billion x 3 in the system, not $100 billion x 2, because the Fed's money is newly printed money and because the 2 buyers that were shut out at the auction will not be staying in cash. But what is essential is that the dealers who sold the Fed its Treasuries have no reason to hold that money at the Federal Reserve Banks (as the large depositories are doing), because they have no need to hold reserves.

In other words, the Fed will not need its dealers to hold cash because when the time comes to tighten policy (selling Treasuires back to its dealers in order to drain cash from the system), the dealers will be able to buy whatever amount the Fed requires them to as the secondary market into which they can off-load their inventory is extremely deep and liquid (unlike the market for mortgage backed securities).

So, it is likely that dealers are going to do what dealers do-circulate the money received from the Fed, money that otherwise would not have been there because it is newly created, thereby generating what QE1 did not: velocity of money. But that is not all.

The Zero Hedge blog came to an interesting conclusion vis a vis what the Fed's primary dealers do with the cash by analyzing the Permanent Open Market Operations of the Federal Reserve Board of New York.

According to ZH:

The same primary dealers who were the benefactors of the Fed’s guaranteed UST bid instead used the end of quarter, FRBNY-facilitated window dressing to not only not offload coupons, but to dump everything else, and use the proceeds to buy stocks thereby explaining both the massive ramp into the end of September, and also the ongoing attempt to flush NYSE shorts.

Now, how much of an effect this will ultimately have on the real economy is certainly open to debate (in nominal terms, if the Fed gets to $900 billion by June 2011, it will have added 6.11% in cash relative to 3rd quarter 2010 GDP). It could very well turn out that, much as the stimulus, the initial $900 billion of new purchases and rollovers will be too small to have the desired effect. But the FOMC has left the door open to doing more and with Mr. Bernanke at the helm, there should be little doubt that additional Quantitative Easing will occur should conditions warrant.

However, it is my opinion that over time, what we can expect to see is the economy growing faster than it otherwise would have, which means that stocks and commodities should continue to do well as the dollar depreciates.

Disclosure: Long the dollar for now, but planning to get short again as the weak dollar trend resumes.

[Sparky]

I think you just have the wrong failure mode Carl. FRNs have to be backed by US securities, e.g. Treasuries. The Treasury can't print FRNs, but it can print Treasuries and exchange them for FRNs. I don't see why you view that an impediment to generating credit. You haven't told us why they wouldn't do that. They have demonstrated their complete willingness to take outrageously short-sighted action and put the entire financial system at risk. Politically, they have no other choice.

Bank run scenario: People go to take FRNs out of the bank at an unsustainable rate. Bank announces cash limit of $300, but all debit purchases are honored. Fed relaxes reserve requirements to quell panic, and even backs all debit transactions, regardless of available reserves. Once the public understands that their purchasing ability is unaffected in this modern world plastic paradigm, they no longer give a $hit, and stop trying to pull FRNs. Problem solved. Insane and idiotic? Of course it is. But I don't understand how you don't see this is exactly what they will do.

The long term result will be serious inflation which would chip away at the value of all non-tangible assets across the board, or a system collapse which would cause disproportionate losses of wealth across the population. I happen to think it will be the former, but I don't rule out the latter.

Please tell me why you don't think this will happen. You keep saying they can't create enough credit. Why not? Their capacity is limitless. Not limitless without consequence, but limitless.

[Bigjon]

Carl is clueless how the system operates.

QE2 positive and negative effects on the economy (http://the-us-microeconomics.blogspot.com/2010/11/qe2-positive-and-negative-effects-on.html)


On 11/3/2010 the United States Federal Reserve announced that they are going to spend 600 billion dollars to purchase short term treasury bonds. Fed will buy $75b a month through June. On Oct 28, 2010 Bloomberg reported that the Federal Reserve had surveyed bond dealers for forecasts regarding how much asset purchases they expect from its second round of quantitative easing (QE2), and how much they expect such purchases to effect the market. I think they were better off if they just write a blank check to the Wall Street.

The Fed has re-embarked on a policy of quantitative easing. Its first round of quantitative easing, QE1, started in November 2008 and ended in March 2010.
What did Fed achieve by QE1?
The Federal Reserve purchased $1.25 trillion of agency mortgage-backed securities (MBS) and about $175 billion of agency debt. With QE1, the Fed's newly printed dollars were used (for the most part) to purchase illiquid assets such as mortgage backed securities from the large commercial banks. The cash received for these securities is being held on deposit at the Federal Reserve Banks. What all of this means, however, is that in essence, QE1 created very little velocity of money because the cash created in the first program did not move through the system. On the other hand due to absent of Mark-to-market accounting rule Fed over paid MBS and banks pocketed huge sums of money. Oh yes! they did it.

What does Fed hope to achieve by QE2?
Indeed, I'm not sure that the Federal Reserve or anybody else fully understands how quantitative easing works. The typical explanation between economists is that the Fed's purchases of longer-maturity securities will bring down the interest rates on these securities. The lower interest rates on longer-maturity securities will then induce the nonbank private sector to borrow and spend more. Also, the lower interest rates on longer-maturity securities will make equities more attractive investments at the margin, thereby causing a really in equity prices, which, in turn, will induce the private sector to increase its current spending on goods and services via a wealth effect. Fed hopes by purchasing treasury bonds keep the interest rate low, therefore when Option ARMs resets homeowners could take advantage of lower interest rate which theoretically could save many homeowners from defaulting on their mortgages.

What's wrong with QE2?
1) Liquidity traps: "After interest rate has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control." - John Maynard Keynes, The General Theory.

2) Lowering interest rates hurts savers, retirees, and even small-town banks that cannot access the monetary pumping from the Fed and must rely on their depositors. The Fed argument on helping home owners won’t be as easy as it sounds, because when home owners are 30-40% under water they cannot refinance; therefore low interest rate would not do any good. It makes more sense to use strategic default instead of continuing paying mortgage of a house that its value has fallen sharply.

3)Hyper inflation and dollar devaluation. Printing so much money would cause the dollar loses its value and ultimately we could have a very high inflation in the US. We are privileged to print a piece of paper and call it dollar and export it to the rest of world to import goods. What could happen to our economy if Bernake cause the dollar to loose its status as world reserve currency? What could be the side effects of money printing policies? The rest of the world does not need this extra liquidity, and this is where the second problem emerges. Several emerging economies, such as Brazil and China, are already close to overheating; and the euro zone and Japan can ill afford further appreciation in their currencies.

In my opinion quantitative easing(QE2) is just a different way to inject money into insolvent financial institutions. It would be a political suicide to tell to American taxpayers that they want to bailout insolvent banks once again therefore they are going to use QE2 as a cover up. Bernake wants to help Zombie banks by buying Treasury bonds. In last couple months banks has bought huge sums of treasury bonds, and they will be the sellers to Fed. So when Fed buys bond financial institutions are going to pocket the money. Bernanke argues that QE2 could cause the wealth effect, it means when the stocks value increase people should feel wealthy therefore there is a chance they are going to spend more, and spending more would jump start the economy. I don't buy his argument because stock market rallied about 80% since March 2009 but there is no wealth effect so far! What is the guaranty we get it this time? If he is right why Japan central bank could not get any wealth effect after a decade of quantitative easing?

[Carl]

I think you just have the wrong failure mode Carl. FRNs have to be backed by US securities, e.g. Treasuries. The Treasury can't print FRNs, but it can print Treasuries and exchange them for FRNs. I don't see why you view that an impediment to generating credit. You haven't told us why they wouldn't do that. They have demonstrated their complete willingness to take outrageously short-sighted action and put the entire financial system at risk. Politically, they have no other choice.

Bank run scenario: People go to take FRNs out of the bank at an unsustainable rate. Bank announces cash limit of $300, but all debit purchases are honored. Fed relaxes reserve requirements to quell panic, and even backs all debit transactions, regardless of available reserves. Once the public understands that their purchasing ability is unaffected in this modern world plastic paradigm, they no longer give a $hit, and stop trying to pull FRNs. Problem solved. Insane and idiotic? Of course it is. But I don't understand how you don't see this is exactly what they will do.

The long term result will be serious inflation which would chip away at the value of all non-tangible assets across the board, or a system collapse which would cause disproportionate losses of wealth across the population. I happen to think it will be the former, but I don't rule out the latter.

Please tell me why you don't think this will happen. You keep saying they can't create enough credit. Why not? Their capacity is limitless. Not limitless without consequence, but limitless.
I've been saying all along that the Fed has been, and continues to, expand and expend credit, some $14 trillion (measured in Dollars) so far. The limitation placed upon the Fed's ability to create credit dollars out of thin air is the assets they use to back them.

Because the FRN's value is currently tied to the credit dollar's value, the value of both have declined and will, most probably, continue to do so. There will be a point in time where the intangible credit dollar (a promise to pay real dollars) will no longer be accepted, anywhere and I believe that point is fast approaching. That will be the impenetrable limit to the Fed's ability to "create credit out of thin air".

Also, limits placed upon people's ability to retrieve FRNs from their credited accounts will place a premium on dollars over credits.

[Sparky]

I've been saying all along that the Fed has been, and continues to, expand and expend credit, some $14 trillion (measured in Dollars) so far. The limitation placed upon the Fed's ability to create credit dollars out of thin air is the assets they use to back them.

Because the FRN's value is currently tied to the credit dollar's value, the value of both have declined and will, most probably, continue to do so. There will be a point in time where the intangible credit dollar (a promise to pay real dollars) will no longer be accepted, anywhere and I believe that point is fast approaching. That will be the impenetrable limit to the Fed's ability to "create credit out of thin air".

Also, limits placed upon people's ability to retrieve FRNs from their credited accounts will place a premium on dollars over credits.


We agree in principle, but not on the details.

You say that the FRNs must be backed by assets. The U.S. has such a vast amount of immeasurable resources, it will be difficult to tell when an unacceptable level has been reached. How do you put a price tag on the entire National Park system? NASA? The federal property and buildings in Washington DC alone? Every U.S. miltary base across the globe? Every piece of equipment, every computer, every weapon, every fighter plane and aircraft carrier?

So the whole idea of an imminent rejection of the credit dollar based on insufficient assets is pure conjecture. It's timing and impact is too intangible. It could take a year or another generation. The most likely flag to cause panic sentiment would be prolonged severe price inflation. Again, I don't know why I care about any other type of inflation, because it's price inflation that sets things into motion.

As for the demand on FRNs, it's true that putting a limit on them places a premium on them over credits. But the banks have spent decades training people to trust plastic over FRNs. Most people under 40 don't even like FRNs. They want to eliminate them entirely.

[Carl]

We agree in principle, but not on the details.

You say that the FRNs must be backed by assets. The U.S. has such a vast amount of immeasurable resources, it will be difficult to tell when an unacceptable level has been reached. How do you put a price tag on the entire National Park system? NASA? The federal property and buildings in Washington DC alone? Every U.S. miltary base across the globe? Every piece of equipment, every computer, every weapon, every fighter plane and aircraft carrier?

So the whole idea of an imminent rejection of the credit dollar based on insufficient assets is pure conjecture. It's timing and impact is too intangible. It could take a year or another generation. The most likely flag to cause panic sentiment would be prolonged severe price inflation. Again, I don't know why I care about any other type of inflation, because it's price inflation that sets things into motion.

As for the demand on FRNs, it's true that putting a limit on them places a premium on them over credits. But the banks have spent decades training people to trust plastic over FRNs. Most people under 40 don't even like FRNs. They want to eliminate them entirely.
FRNs are backed by spicific, unemcumbered assets which are Gold Certificates and U.S. Securities. As for the rest of that stuff you wrote, I haven't a clue where you got those notions.

When one FRN buys you what one thousand credits buys you, people will gravite to the FRN.

Sparky,

[Carl]

Carl is clueless how the system operates.
Well if you're going to make claims of that nature then you should at least attempt to back them up with something more substantive than a web site that spews meaningless rhetoric, proving it doesn't know shit from shinola on the subject.

[Bigjon]

Carl is clueless how the system operates.
Well if you're going to make claims of that nature then you should at least attempt to back them up with something more substantive than a web site that spews meaningless rhetoric, proving it doesn't know shit from shinola on the subject.


Sigh...

You don't get it and never will get it.

The Fed has never been audited so who is to say what backs FRN's?

The Fed is all about appearances and deception.

They have deceived you that is for sure.

All the credit issued by the Fed is primary money and is expandable.

The Fed put a gun to congresses head and congress said how big a bond do you want, we will give you anything you demand.

[Tumbleweed]

http://piggington.com/files/images/high_horse_0.jpg


Dmac that must be in mongolia but what the hell is that animal the guy is sitting on?

[Walter Mitty]

I do not understand how "money" creation by the Fed to purchase Treasuries
is going to ramp up the Velocity of Money.
HT's primary thesis is that the population in general is responsible for growth vis-a-vis borrowing money into existence through the fractional reserve system.
People borrow money for 5 years , 7 years, 30 years and that fuels growth.
There is no one left to do that. Not in the quantities necessary to re-ignite the Roaring 20's.(or the roaring 90's)
The primary dealers take cash, buy Treasuries then turn around and sell Treasuries to the Fed? Where is the gain? How does that increase velocity of money?
The only people to benefit will be the wealthy hedge funds who will borrow
to try and get arbitrage in the forex markets or to buy commodities on margin.
Can you say Rape of the general population?
Are wages rising? Unemployment going down substantially? Housing starts are they roaring back?
The only thing masking the depression and preventing a full blown Greatest Deflationary Depression deflationary collapse is Welfare, Food Stamps , Unemployment Compensation and 60% of the work force working for Government's (Federal ,State, City) at some level.
To assert QE2 or 3 or 4 is going to increase velocity of money is absurd in my opinion.

[Carl]

Sigh...

You don't get it and never will get it.

The Fed has never been audited so who is to say what backs FRN's?

The Fed is all about appearances and deception.

They have deceived you that is for sure.

All the credit issued by the Fed is primary money and is expandable.

The Fed put a gun to congresses head and congress said how big a bond do you want, we will give you anything you demand.
Sigh....

It's sad that you would much rather believe in boogey men and scary tales rather than the actual realities that drive the subject.

I guess, each to his own.....

[Horn]

Prices going up everywhere........and I see more greed than need in those prices.


Say it again.

[Carl]

I do not understand how "money" creation by the Fed to purchase Treasuries
is going to ramp up the Velocity of Money.
HT's primary thesis is that the population in general is responsible for growth vis-a-vis borrowing money into existence through the fractional reserve system.
People borrow money for 5 years , 7 years, 30 years and that fuels growth.
There is no one left to do that. Not in the quantities necessary to re-ignite the Roaring 20's.(or the roaring 90's)
The primary dealers take cash, buy Treasuries then turn around and sell Treasuries to the Fed? Where is the gain? How does that increase velocity of money?
The only people to benefit will be the wealthy hedge funds who will borrow
to try and get arbitrage in the forex markets or to buy commodities on margin.
Can you say Rape of the general population?
Are wages rising? Unemployment going down substantially? Housing starts are they roaring back?
The only thing masking the depression and preventing a full blown Greatest Deflationary Depression deflationary collapse is Welfare, Food Stamps , Unemployment Compensation and 60% of the work force working for Government's (Federal ,State, City) at some level.
To assert QE2 or 3 or 4 is going to increase velocity of money is absurd in my opinion.

The M1 Money Multiplier closely tracks velosity.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=MULT&scale=Left&range=Max&cosd=1984-02-15&coed=2011-03-23&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Bi-Weekly%2C+Ending+Wednesday&fam=avg&fgst=lin&transformation=lin&vintage_date=2011-04-02&revision_date=2011-04-02

[Horn]

The M1 Money Multiplier closely tracks velosity.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=MULT&scale=Left&range=Max&cosd=1984-02-15&coed=2011-03-23&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Bi-Weekly%2C+Ending+Wednesday&fam=avg&fgst=lin&transformation=lin&vintage_date=2011-04-02&revision_date=2011-04-02



If that chart doesn't scream inflate or die, what does?

[osoab]

Was kind of expecting Hypertiger to show up and discuss. :dunno

[keehah]

Was kind of expecting Hypertiger to show up and discuss. :dunno


He stops in from time time to comment on a thread.

But I think he is a few years past repeating for the drones what he has already said. ;D

[oldmansmith]

The M1 Money Multiplier closely tracks velosity.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=MULT&scale=Left&range=Max&cosd=1984-02-15&coed=2011-03-23&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Bi-Weekly%2C+Ending+Wednesday&fam=avg&fgst=lin&transformation=lin&vintage_date=2011-04-02&revision_date=2011-04-02



If that chart doesn't scream inflate or die, what does?




That chart screams "dead."

[Horn]

Was kind of expecting Hypertiger to show up and discuss. :dunno


He stops in from time time to comment on a thread.

But I think he is a few years past repeating for the drones what he has already said. ;D


We could always try insulting to incarnate... but I think he's just as confused & in uncharted territory as everyone else. ;)

[Spectrism]

There is no "backing" of FRNs. All they promise to do is give you another FRN when you turn in an FRN.

There really is nothing to stop them- except the imaginary concept of Congress- from printing away. They are already launder these treasury purchases through member banks. We have no idea what they are sending to foreign or domestic banks.

There are no rules for these scumsuckers.

[Horn]

We have no idea what they are sending to foreign or domestic banks.

There are no rules for these scumsuckers.


Well they can't just give them away free of charge, yet.

Or at least not until the chains are set & dried in concrete.

Maybe when gas hits $7 a gallon?