A new chapter in the financial crisis

Discussion in 'Economy' started by gonegolfin, Mar 19, 2009.

  1. gonegolfin
    Offline

    gonegolfin Member

    Joined:
    Jul 8, 2005
    Messages:
    412
    Thanks Received:
    36
    Trophy Points:
    16
    Location:
    Austin, TX
    Ratings:
    +36
    The significant Fed monetization of government debt that I have been expecting and writing about for several years is now upon us. Today, the Federal Reserve announced that late next week a program of purchasing $300 billion of longer dated treasury debt will commence. Given that the Treasury will need to issue well north of $1 trillion (and maybe $2 trillion) in government debt over the next 12 -> 18 months, this is assuredly the opening salvo for the Fed. Foreign official institutions will not have the reserves to consume such supply and domestic savers will not fill the gap. Enter the Fed with a program to purchase massive amounts of longer term Treasury debt in the open market. The program will target the purchases of Treasury issues mostly with maturities between two and ten years.

    And so there is no confusion here ... contrary to what many information sources would have you believe, the Fed does not lend directly to the Treasury/Government. The Fed has no authority to lend directly to the Treasury and thus cannot participate in Treasury auctions or purchase government debt directly from the Treasury (except in the case where maturing issues in the Fed portfolio need to be rolled over into new issues). When the Fed makes outright purchases of Treasury debt, it does so through its team of primary dealers usually via competitive auction.

    If that is not enough, the Fed has increased its commitments to purchasing mortgage-backed securities backed by Fannie Mae and Freddie Mac (Agency MBSs). The Fed earlier announced a program to purchase $500 billion of these securities. That has now been upped $750 billion to a staggering $1.25 trillion. Additionally, purchases of Agency debt have been retargeted to $200 billion from $100 billion. The combination of the purchases of long term Treasury debt along with signification subsidzation of the mortgage securitization market will result in artifically low mortgage lending rates for a period of time and an artificial floor under housing prices.

    Gold saw over a $60 reversal from its lows today.

    I will write more about this in the coming weeks as it unfolds. Of particular interest will be how quickly and how much of this new reserve creation makes its way into both narrow and broad money supply.

    Fed to Buy $300 Billion of Longer-Term Treasuries (Update4) - Bloomberg.com
    Statement Regarding Purchases of Treasury Securities - Federal Reserve Bank of New York

    Brian
     
  2. wimpy77
    Offline

    wimpy77 Member

    Joined:
    Jan 21, 2009
    Messages:
    591
    Thanks Received:
    10
    Trophy Points:
    16
    Ratings:
    +10
    brian, most economist think in the short term what the fed did was a good thing but will pose problems down the line mainly with inflation which i agree with. how long will the fed institute this program and you predict a dollar collapse like some people jim rogers are predicting today.
     
    Last edited: Mar 19, 2009
  3. editec
    Offline

    editec Mr. Forgot-it-All

    Joined:
    Jun 5, 2008
    Messages:
    41,427
    Thanks Received:
    5,598
    Trophy Points:
    48
    Location:
    Maine
    Ratings:
    +5,617
    What if our government did nothing, as so many here think would have been the best course to follow?

    Would most (if not all) banks collapse?

    I suspect they might

    Are they doing it right now?

    I am truly not well informed enough to know.

    My instricts tell me that they are saving part of the economy (SOME SMALL SEGMENT of the monied classes) and foisting the cost of doing that onto the backs of ALL of us, rich and poor alike
     
    Last edited: Mar 19, 2009
  4. PoliticalChic
    Online

    PoliticalChic Diamond Member

    Joined:
    Oct 6, 2008
    Messages:
    55,829
    Thanks Received:
    15,654
    Trophy Points:
    2,190
    Location:
    Brooklyn, NY
    Ratings:
    +24,971

    Yes, it seems that a number of sources are worried about the current tripling of the money supply, and the coming inflation.

    Where is the foresight? What is going to happen to morgages of those elderly and others who still have a mortgage, and are faced with rampant inflation?

    And how do you counter inflation? Yup, government induced recession.
     
  5. Paulie
    Offline

    Paulie Platinum Member

    Joined:
    May 19, 2007
    Messages:
    31,553
    Thanks Received:
    4,854
    Trophy Points:
    1,130
    Ratings:
    +15,399
    People with debt are not necessarily hurt all that much from inflation. Inflation can help to eat away at the debt, and the interest particularly, and can help save you money. The problem is all the other things that need to be bought. What you can do to counter it is since you KNOW it's coming, stock up on what's cheap now. Build a supply so that when prices go up you don't need to purchase as much at that time.

    And buy precious metals.
     
  6. Neubarth
    Offline

    Neubarth At the Ballpark July 30th

    Joined:
    Nov 8, 2008
    Messages:
    3,751
    Thanks Received:
    199
    Trophy Points:
    48
    Location:
    South Pacific
    Ratings:
    +199
    How do you cook precious metals if you are hungry and there is no food to be had? I say use your precious metals and diamond rings and anything else you can sell now to get title to some farm land out in the country far away from any Big City and any highways leading to and from same. Fortify that land with a redoubt and stock it with plenty of ammo and explosives to be used for self defense.

    Civil order will break down within a year. If the rampaging hordes of pillaging and raping and murdering beasts from the decaying cities come out to your land, kill them and use their bodies for fertilizer for fruit trees that you plant.

    Remember, you will be the king of your land. In your kingdom trespassers can be shot on sight unless they be fair maidens interested in being one among your many wives.

    Now, Paulie, since you are Gay, I guess you can have your boyfriends.
     
    Last edited: Mar 19, 2009
  7. wimpy77
    Offline

    wimpy77 Member

    Joined:
    Jan 21, 2009
    Messages:
    591
    Thanks Received:
    10
    Trophy Points:
    16
    Ratings:
    +10
    inflation can be countered by raising interest rates among other things
     
  8. wimpy77
    Offline

    wimpy77 Member

    Joined:
    Jan 21, 2009
    Messages:
    591
    Thanks Received:
    10
    Trophy Points:
    16
    Ratings:
    +10
    you are just a down right asshole.
     
  9. Terral
    Offline

    Terral Terral Corp CEO

    Joined:
    Mar 4, 2009
    Messages:
    2,490
    Thanks Received:
    91
    Trophy Points:
    83
    Ratings:
    +91
    Hi Gone:

    Maybe you will teach me a thing or two about what the illegal FED is doing here . . .

    In other words, you are talking about the privately-owned FED printing up more paper to purchase Treasury Debt, when the U.S. Government is broke and the U.S. Treasury (chart) says the US Debt exceeds 65.5 Trillion Dollars (story). However, the real story is that the USA was 99.2 Trillion Dollars in debt as of August 11, 2008 of last year (story); and the real Debt is obviously higher than 100 Trillion Dollars as we speak. The illegal FED is not ‘buying’ anything at all, because printing money only creates more DEBT and devalues all the dollars in our pockets. Ron Paul knows what is really going on:

    [ame="http://www.youtube.com/watch?v=MpQlB3f9Al4"]YouTube - Ron Paul "The Federal Reserve Is the Culprit![/ame]

    The idea that the FED is going to ‘purchase’ anything is amusing, especially when this privately-owned central bank is not even supposed to exist and the Treasury itself is supposed to be in the business of printing US money by authority of Congress under Article 1 Section 8 of the U.S. Constitution (link). The FED pays itself ‘interest’ for lending out OUR OWN MONEY and creates NO WEALTH for anyone but FED shareholders who have been siphoning off U.S. wealth since 1913. My uncle (rip) handed me a copy of Gary Allen’s book entitled “None Dare Call It Conspiracy” (link) in the early 1970’s, so I have been watching these cartoon characters rape and pillage and steal wealth from Americans for over thirty years. I bought my first home for 20,000 dollars in the mid 1970’s and the same house today sells for about 150,000 dollars. Do you know why? :0) I do.

    Everything costs more because the FED continues charging interest on the same money each time our currency circulates through the system. If the prime rate is five percent, they take out five cents on every dollar at loan origination and the market gets 95 cents for paying a seller for the borrower. The seller puts the money back into the bank, which is shipped back to the FED, and here we go again and again and again, until the FED must print up even more worthless dollars to resupply the system ‘and’ devalue all the dollars. Then the same international bankers lend us back OUR OWN MONEY against the National Debt to receive interest for the ‘second’ time. :0) The USA cannot compete with other countries in the Global Market (like China), because they have no bloodsucking FED siphoning off their wealth. In fact, these countries without a FED must continuously print money, to keep up with our illegal FED, or suffer the consequences of a ‘strong’ currency that reduces export potential. Now that the owners of the FED (they pulled off 9/11) have stolen all of your wealth, they are coming to enslave you and your children once this U.S./Global Economic Implosion Cycle is complete.


    The FED prints up money that is backed BY NOTHING. The ‘purchasing’ you are talking about is nothing more than an elaborate Ponzi Scheme (Wiki = I explain here) based upon suckering new buyers in to invest their private capital, so our creditors can receive interest payments on loans against our out-of-control National Debt. You are describing how the FED is about to place more ‘debt’ on our children and grandchildren by printing up even more worthless dollars for lending out to somebody for even more interest . . .

    So, who gets caught holding the ‘bad paper’ bag, when housing prices slide another 50 percent? These people are privatizing profit and socializing risk and our children are left holding the check. All of these FED retards (Bernanke and the whole lot) need to be stood against the wall and shot . . .

    Really? The FED is just going to ‘purchase’ trillions of dollars of debt by printing up worthless paper and charging We The People even more interest, when 1 Trillion dollars is about 1/100th of the National Debt. The reason we are talking about the FED finding a way to place this debt on our children is because everyone else is broke, because of the cotton-picking FED. :0)

    I disagree 100 percent. The biggest problem we have in the USA right now is most people are focusing on the ‘symptoms’ and not the real cause of the Mortgage/Foreclosure Crisis; which in reality has nothing to do with the banks at all (explained here and here). These idiots in Washington DC and Wall Street have been dumping trillions of dollars into the banks and the unemployment numbers keep escalating higher and house prices continue going lower. Offering lower rates to people does not good when they have no JOB and you allow too much outsourcing and too many Foreign Nationals (legal and illegal) to run around ‘displacing’ U.S. workers from JOBS. The USA will import another 1.5 MILLION foreigners into the country this year and next year and the next year, because Congress and the Obama Fascist/Socialist Regime are apparently destroying the US middle class on purpose . . .

    I saw a “For Sale” sign on the side of the road yesterday for a house selling for “44,000 dollars.” The Economy is IMPLODING and people are becoming more desperate and housing prices are definitely going DOWN no matter what the FED does to inflate the money supply. This deflation spiral in housing prices has NOTHING to do with monetary policy at all. Zip, zero, nothing. The bottom rungs of the US Consumer Base have already imploded and we are seeing the service sector collapsing now, which in turn will lead to fewer professional JOBS ‘and’ these are the people who are supposed to be making offers on your house that is for sale. The value of your house has NOTHING to do with what Bernanke does at this point, but how much disposable income the ‘buyers’ for houses have in your own neighborhood in the collapsing economy. Imploding house prices mean a higher percentage of homeowners are going under water every day, which means fewer and fewer potential buyers in your neighborhood. Why should I pay 350,000 dollars for your house, when I can buy the one down the street for 44,000 dollars? :0)

    New reserve? Lordy . . . All of this money comes with a price tag adding more DEBT to the economy, because all of those FED retards you see on the TV actually create no wealth at all. These bankers are figuring a way to get ‘toxic assets’ off of their balance sheets and onto the National Debt that is now over 100 Trillion dollars and heading towards 200 Trillion dollars. I do not believe that the FED can print money as fast as the real National Debt is climbing ‘and’ eventually those holding our debt will figure that out ‘and’ start dumping U.S. dollars; until the ones in your pocket are worth less than the paper itself.

    My two cents,

    GL,

    Terral
     
    Last edited: Mar 20, 2009
  10. raceright
    Offline

    raceright Member

    Joined:
    Feb 28, 2009
    Messages:
    387
    Thanks Received:
    33
    Trophy Points:
    16
    Location:
    Long Island
    Ratings:
    +33
    Na he is pretty fuckin funny but as in all humor there is a degree of truth
     

Share This Page