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Old 03-28-2012, 09:38 AM   #41
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Damn. I can't see anything on that chart. It's all just black on my screen.
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Old 03-28-2012, 10:22 AM   #42
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basically.. the velocity of money has fallen off a cliff. if we ever see it normalize, inflation is going to go ballistic..
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Old 03-28-2012, 10:29 AM   #43
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Originally Posted by PMBug View Post:
Damn. I can't see anything on that chart. It's all just black on my screen.
Found one I can upload here:
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Old 03-28-2012, 10:58 AM   #44
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Looks like they need to spark some irrational exuberance in the economy.
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Old 03-28-2012, 11:06 AM   #45
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Originally Posted by PMBug View Post:
Looks like they need to spark some irrational exuberance in the economy.
Either this or they have the unintended consequence of a so called crack up boom ( http://seekingalpha.com/article/2512...-crack-up-boom ) - a stock market rally even if the sthf because of rising inflationary expectations due to money printing and accelerating velocity.
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Old 03-28-2012, 12:29 PM   #46
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As far as I understand it, the real inflation/velocity issue is on hold (read: broken) until the banks actually start loaning/distributing/spending the money they are sitting on that the Bernak has given them to bail them out.
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Old 03-28-2012, 03:29 PM   #47
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Or they can do it the old-fashioned way! Print!

$500 Corzines!
$1000 Obamas
$5000 Bernankes!

C'mon now guys, think BIG!
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Old 03-28-2012, 04:00 PM   #48
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Thisw i9s actually frightening. With the lowest velocity in around sixty years, and the highest bank reserves ever recorded, this can only end badly. Weimar? No, think building houses out of bundles of cash instead of bricks, because the cash is worth less than the same volume of bricks.

Gold and silver are the last refuge for us all. I believe I will see in my lifetime, the opportunity to buy a house for ten one ounce silver eagles. I further believe that we will see the worst violence on our soil since the civil war when it gets there.

The left is working overtime to blow the Trayvon Martin case in to something it was not, in a concerted effort to take away our constitutional right to keep and bear arms. This is even more frightening, because when the shit does hit the fan, a gun may be all that stands between you and the golden hord of Trayvon Martins, all looking for some payback and a reason to take down the man.
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Old 03-28-2012, 11:16 PM   #49
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Yeah, that's all I keep hearing about since coming back from Peru. Trayvon this, Trayvon that.

And, yes, right here in FloriDUH! Where else?

Hey! If I go out and buy a hoodie, does that make me BAD? Or at least LOOK bad?
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Old 03-29-2012, 09:52 AM   #50
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United States of Weimar:
The has FED bought a staggering 61% of all net US government debt issuance in 2011, says a former Treasury official:
Quote :
Demand for U.S. Debt Is Not Limitless
In 2011, the Fed purchased a stunning 61% of Treasury issuance. That can't last.
The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.
The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
Still, the outdated notion of never-ending buyers for U.S. debt is perpetuated by many. For instance, in recent testimony before the Senate Budget Committee, former Federal Reserve Board Vice Chairman Alan Blinder said, "If you look at the markets, they're practically falling over themselves to lend money to the federal government." Sadly, that's no longer accurate.

It is true that the U.S. government has never been more dependent on financial markets to pay its bills. The net issuance of Treasury securities is now a whopping 8.6% of gross domestic product (GDP) on average per annum—more than double its pre-crisis historical peak. The net issuance of Treasury securities to cover budget deficits has typically been a mere 0.6% to 3.9% of GDP on average for each decade dating back to the 1950s.
But in recent years foreigners and the U.S. private sector have grown less willing to fund the U.S. government. As the nearby chart shows, foreign purchases of U.S. Treasury debt plunged to 1.9% of GDP in 2011 from nearly 6% of GDP in 2009. Similarly, the U.S. private sector—namely banks, mutual funds, corporations and individuals—have reduced their purchases of U.S. government debt to a scant 0.9% of GDP in 2011 from a peak of more than 6% in 2009.
The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury's need to borrow and a more limited willingness among market participants to supply Treasury with credit.
The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction. Lessons from the recent European sovereign-debt crisis and past emerging-market financial crises illustrate how it is often the asynchronous adjustment between budget borrowing requirements and the market's appetite to fund deficits that triggers a shock or crisis. In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
Decisive steps must be implemented to restore the economy and markets to a sustainable path. First, the Fed must stabilize and purposefully reduce the size of its balance sheet, weaning Treasury from subsidized spending and borrowing. Second, the government should be prepared to lure natural buyers of Treasury debt back into the market with realistic interest rates.
If this happens, the resulting higher deficit may at last force the government to make deficit and entitlement reduction a priority. First and foremost, however, we must abandon the conventional wisdom that market demand for U.S. Treasury debt is limitless.

Mr. Goodman is president of the Center for Financial Stability and previously served at the U.S. Treasury.
http://online.wsj.com/article/SB1000...googlenews_wsj

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Old 03-29-2012, 10:12 AM   #51
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Like Kyle said, "the ten yr is at two, what crisis?". What a setup. Can I stay solvent long enough for the market to become rational?
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Old 03-29-2012, 11:37 AM   #52
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61%.. dear lord.. and no one is talking about that much being monetized.

I'm going to post this on another forum.. Hope you don't mind SA

Last edited by DSAbug; 03-29-2012 at 11:58 AM.
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Old 04-04-2012, 07:15 AM   #53
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Originally Posted by Peter Schiff :
... Somebody is going to have to buy all of those bonds and if the Fed is not going to do it, who will? Right now, the Fed is doing QE. Whether they want to officially call it QE, they are doing it. They are doing Operation Twist and buying government bonds.

The Fed has to buy government bonds to keep interest rates from skyrocketing. As they stop, rates are going to go up and when they it will choke off the ‘recovery’ that is dependent on low rates.

So, if you take the Fed at its word, this is going to be a bigger disaster (than Europe). I think there is going to be more suffering. If you think that the riots are bad in Greece, wait until you see what the riots are going to be like here.
http://kingworldnews.com/kingworldne...is_Coming.html
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Old 04-04-2012, 08:43 AM   #54
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...that makes sense. I was wondering, what IDIOTS are buying US govt. bonds, supposedly in such a high demand, when even such a financial market's noob as meself can clearly see, US GOVT IS BROKEN, and besides, these bonds do not even match the inflation??? Why, is it not simpler just to stuck all that cash into the mattress, and take out 3-4% of it annually, and burn it in your backyard??

Now I know, what idiots are behind that. Makes a PERFECT sense!

What a nice centrally-planned economy, Lenin would be proud of his American commerades of today! That's just preposterous!

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Old 04-07-2012, 10:36 AM   #55
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Vampire Squid telegraphing the support for QE3?
Quote :
... Here is what is of absolutely critical importance in the just released Goldman letter, nested deep in Hatzius' final paragraph, where it would otherwise be missed by most:
Quote :
...we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields...
For those who are aware of the Fed's sentiment vis-a-vis the debate of stock vs flow of money effect, this will be a stunning revelation. Especially since it vindicates what we have been saying since day one, namely that when it comes to securities price formation in a centrally-planned regime, it is flow not stock that matters. And as those who follow the Fed's thinking know too well, the Fed is convinced it is stock, not flow that serves as a consistent catalyst for subjective risk valuation. The above quote is just the first crack in the Fed's thinking, because if Goldman now believes this, so will Bill Dudley, following his next meeting with Jan Hatzius at the Pound and Pence, and shortly thereafter, it will become canon at the Fed.

One way of visualizing what this means is to think of a shark which has to be constantly in motion in order to survive. Well, the allegory of Jaws can be applied to liquidity addicted capital markets. Translated simply, it means that it is irrelevant if the Fed's balance sheet is $1 million, $1 trillion or $1,000 quadrillion. A primacy of flow over stock means that UNLESS THE FED IS ACTIVELY ENGAGING IN MONETIZATION AT EVERY GIVEN MOMENT, THE IMPACT FROM EASING DIMINISHES PROGRESSIVELY, ULTIMATELY APPROACHING ZERO AND SUBSEQUENTLY BECOMING NEGATIVE!

We don't have sufficient time to go into the nuances of what this revolutionary run-on sentence means on this good Friday, suffice to say that it makes virtually all the literature on modern monetary theory (in practice of course, the theoretical part is such gibberish that only fans of MMT and Neo-Keynesianism care about it - something nobody actually in the market gives a rat's ass about) obsolete. It also means that absent "flow" or instantaneous Fed monetization engagement at any given moment, risk will collapse, regardless of the actual size of the Fed's balance sheet (which of course has other structural limitations). What is most critical is that this one statement from Hatzius sows the seeds of doubt, and provides a decoupling between prevalent risk prices, and explicit levels of historical Fed monetization. Because what the ascendancy of the flow model means is that unless the Fed is willing to telegraph that it will monetize devaluing assets in perpetuity, thus providing the "flow", the Fed is assured at failing at its only real mandate: keeping the Russell 2000 pumped up.

And while the Fed may be happy to sacrifice its balance sheet at the altar of Dow 36,000 just to preserve the Wealth Effect fallacy, the other counterliability, the US Treasury stock, which by implication will have to rise as it will be the security monetized the most to keep the deficit funded, may not be quite as pliable, and eager to rise parabolically, especially in a time when more and more question the reserve status of the USD, when faced with the ascendancy of the CNY.

Finally, the market still having a trace of discounting left in it, will become quite aware of all these considerations and deliberations, and will promptly demand a practical application of the "flow" model. Which also means that absent constant, ongoing monetization, either sterilized or not (although as we pointed out earlier this week, the opportunity for ongoing sterilization by the Fed is now almost finished as it will have just 3 months of short-end bonds left to sell past June), stocks will crash.

Unwittingly, Goldman may have just resorted to the nuclear option to force the Fed to engage in monetization much faster than it would have otherwise done so, by diametrically changing how Goldman, the Fed, and thus the market perceives Fed intervention.

Or maybe it was all too "wittingly"...
http://www.zerohedge.com/news/its-la...ges-rules-game
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Old 04-08-2012, 04:10 PM   #56
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QE3 helps no one but stock and bond holders. It will effectively stop any "recovery" dead in it's tracks. The inflation that will be unleashed will cause any up-tick in productivity or whatever to be eaten alive.

PM's bhowever, will go absolutely bananas. I say bring it the fuck on.
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Old 04-09-2012, 08:30 AM   #57
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Originally Posted by ancona View Post:
QE3 helps no one but stock and bond holders. It will effectively stop any "recovery" dead in it's tracks. The inflation that will be unleashed will cause any up-tick in productivity or whatever to be eaten alive.

PM's bhowever, will go absolutely bananas. I say bring it the fuck on.
Well.. We need higher rates in order for non US government entities to be willing to by our bonds.

Higher rates would kill the government's budget plans. With interest already around 7% of expenses (almost 10% of revenue) a spike up in that number would be devastating. They have to kick the can down the road, debase and hope for a miracle to maintain the current standard of living.
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Old 04-12-2012, 08:20 AM   #58
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Quote :
Last night it was uber-dove Janet Yellen, today it is uberer-dove, former Goldmanite (what is it about Goldman central bankers and easing: Dudley unleashing QE2 in 2010, Draghi unleashing QE LTRO in Europe?) Bill Dudley joining the fray and saying QE is pretty much on the table. Of course, the only one that matters is Benny, and he will complete the doves on parade tomorrow, when he shows that all the hawkish rhetoric recently has been for naught. Cutting straight to the chase from just released Dudley comments:"we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks... To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established. But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery. On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012." Translate: NEW QE is but a CTRL-P keystroke away now that all the inflation the Fed usually ignores continues to be ignored.
...
http://www.zerohedge.com/news/dudley...door-wide-open

With Fed peeps, the messaging is important irrespective of any facts. They are currently signalling support for more intervention. Yellen indicated ZIRP to last though 2015 BTW.
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Old 04-12-2012, 03:52 PM   #59
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ok, dumb question

why are the banks sitting on all that free money ?

Yes i know they are technically broke and they have to be able to pretend they are solvent by holding a % of their nominal loan book and they are scared to lend to each other

but if the CB's are prepared to bail em out in perpetuity with ever more printing, why tf cant they push money out for dumbass consumer loans at 3%, or even 1%, if thats what it would take to get borrowing and spending moving .......

ok so everyones mortgage can be renegotiated as well and the banks could be worried that their revenue of unearned interest will be reduced but if their supply of free money is assured, then it would seem to be quite simple to make it attractive to lend/borrow

great for a bit of inflation too ........

so what am i missing ?
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Old 04-12-2012, 03:57 PM   #60
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Rblong,
They are sitting on it because they have to. They have to have a certain margin of cash to cover the minimum requirements on their leverage.
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