Sunday, March 31, 2013

Analysis: Insider case against SAC manager may be tough to prove - Yahoo! Finance

Analysis: Insider case against SAC manager may be tough to prove - Yahoo! Finance

Or maybe it will be easy to prove the insider trading case! However, it probably will be likely that some additional corroborating evidence that could verify the testimony of a known liar. Insider trading is a fraud, though smaller than the LIBOR scandal and other frauds associated with bankers wanting to drive down interest rates.

Saturday, March 30, 2013

Straight Talk: It could let you dump AT&T or T-Mobile — Tech News and Analysis

Straight Talk: It could let you dump AT&T or T-Mobile — Tech News and Analysis

This older article doesn't include the new $30 Straight Talk plan, which is for 1000 minutes and something like 1000 texts. For old guys like me this is an awesome plan. They still have the unlimited $45 plan. Either way, you are on Verizon and save a bundle of money. 

Friday, March 29, 2013

Banks score major win in private Libor suits - Yahoo! Finance

Banks score major win in private Libor suits - Yahoo! Finance

Libor was manipulation of interest rates down in order to make the banks big bucks in counterparty swaps. Governments and businesses were screwed. I hate everything this "judge" stands for. 

Speculation, Liquidity and the Cost of Living

With the bailout of the Eurozone by the central banks, Fed included, liquidity is supplied by the central banks to the big European banks. That is the good part, as long as the assets the Fed gets back, held to maturity, are paying a reasonable return.
The bad part is that this international banker cartel refuses to put a damper on speculation in commodities that will increase with this liquidity unchecked.
It is one thing to bail out the banks with the reserve currency, the dollar, for the purpose of getting banks to trust one another again, and make the money markets sound. It is quite another to allow rampant speculation in commodities that must be stopped if main street, especially in the United States, is to have a financial chance at recovery. With proper regulation of the big banks, bailouts would become more infrequent and much less necessary.
Already, before the November 30 Euro bailout, Thanksgiving dinner in 2011 was the most expensive in 20 years. And with the bailout of the Eurozone, oil is up 2 percent right out of the gate to over 100 dollars per barrel. Treating important commodities like oil and food as if they were toys in the hands of the investment banks is madness. This is what Will Rogers warned against. This is what will start another bubble in these essential substances that will just really hurt main street USA.
The housing market replacement costs will increase and this will continue to freeze the new house market. The folks that build houses should be advocating the restraint in commodity prices. You can't replace the cost of an existing house without cutting corners when the supplies to build the houses goes through the roof. This action to essentially skyrocket building supplies will have the effect of insuring housing bubbles in the future because no one will be able to afford the houses. The more they go down in value, the more that the replacement costs will increase.
Builders and the real estate people will no doubt call for easy money lending as the only fix, the only way to jumpstart the new house market. The scam of the business cycle will claim even more victims who think they "own" their houses with a dollar down. As of now little credit is available to main street. The bankers would prefer to speculate on commodities than lend you a dime. That is until they are able to get the government guarantees they are after, so they can forget about your creditworthiness like they did in the last bubble.

Recipe for Disaster: The Formula That Killed Wall Street

Recipe for Disaster: The Formula That Killed Wall Street

This is one of the most important articles ever written that captures the danger of the formula that hid the real risk of mortgages all going bad at the same time through a bogus formula called the Gaussian Copula.

Thursday, March 28, 2013

One Supply Side Economist Who Will Restore Your Faith In Humanity - Business Insider

One Supply Side Economist Who Will Restore Your Faith In Humanity - Business Insider

This article makes me sick. My posts should tell it all:

 
Crony capitalism is the only game, JJG. With the new use for treasury bonds, as collateral for massive interest rate swap trades, and a keeping of this easy money away from Main Street, the criminals can steal for centuries.
And:



And Joe, this restores no one's faith in humanity, which is a bankrupt concept. Just because you and I agree that interest rates will stay low for longer than people can protest doesn't mean I think banks are good or humanity like Kudlow is good. These are bad people, Joe. Now go take a shower. You will feel cleaner.

Wednesday, March 27, 2013

The Price Of Gold Is Pointless - Business Insider

The Price Of Gold Is Pointless - Business Insider 

The gold bugs hate me regarding comments that I made on this article. But what is true is that gold has nothing to do with the real economy, nor does it have anything to do with the financial world. It has a place as good collateral, but it is not pristine. And low interest rates are here to stay.

I said in the comments:


We face a greater liklihood of deflation than we do of massive inflation. It is all about collateral: http://seekingalpha.com/article/1300741-we-face-derivative-collateral-deflation-and-ecb-banks-could-be-the-losers

The game has to stay as it is, because the Fed no longer can do a Volcker and raise interest rates.
and:

 Sorry to disappoint the gold bugs. However, gold is being looked at as pristine collateral [though it is not yet pristine collateral]. Gold has been released from tier 3 to tier 1 for the banks. So it has a place. But inflation is not the game and as my article above shows, there is a scam going on that assures demand for treasuries must continue oversubscribed.

and:

 People are selling gold and jewelry like it is going out of style and no one is buying either. Except the gold bugs and someone getting married. 

and:


If the Eurozone screws up I would take a dollar over silver anyday. People are not buying jewelry. I spoke to a jeweler and he said he keeps looking at his beautiful jewelry everyday and NO ONE IS BUYING.

When are people going to wake up. We have a deflationary situation here, but bankers would like to scam you and tell you otherwise.

I was met with really rude responses. The gold bugs are like a religion. As my article said, interest rates are not going up in any serious way. We will be in a slow growth situation for many, many, many years.

And while the effort to keep interest rates low is a sensible thing on the surface, the problem is that we have had many abuses and financial crimes in this process of  giving the financial giants the edge and power to control finance. I responded to a fellow who asked to name criminals regarding the ECB bailout, as if the banking system isn't criminal

You sound like Henry Blodget. The purpose of the central banks is to help the banks and steal from the people. The system is corrupt from the beginning. It isn't called money changing for nothing.

A fair return is not in the interest of the bankers. Keeping interest loans low and using scams to do it like LIBOR manipulation, the US MBS scam, off balance sheet banking, bogus Gaussian copulas and bogus risk management and forcing companies to take fixed high rates on interest rate swaps as a condition of loans, should all be enough to show that it is a giant criminal enterprise.

And, indeed it has proven to be a criminal enterprise. Low interest rates in and of themselves are probably not criminal, but the methods to achieve these low rates, and consolidate banking power, are criminal in many cases and close to criminal and unethical in other cases.

These are gods of finance, and they are not good gods. 

Here is the bottom line. There is more proof that treasuries are in massive demand than there is that they are not, which is the position of the gold bugs. The bonds are massively OVERSUBSCRIBED.

Tuesday, March 26, 2013

Monday, March 25, 2013

Both Kind of Bank Bailouts Suck

The Fed loaned money with no haircuts required to accounts in the Cayman Islands. I was furious as were many, who believed that the Fed was selling out the USA and the taxpayer. I wanted a piece of the bank bondholders and knew uninsured depositors should be at risk.

Well, I got what I wanted, not from the Fed, but from the ECB. This Cyprus resolution was a classic bank resolution. But now that I think about it, I am not so happy about this method of resolution either.

After all, the ECB put more risk into the banking system than did the Fed. People now will likely hide some money under the mattress, simply because the Eurozone banks are potentially risky places to keep a hoard of cash. And what about contagion to US banks?

So, why didn't the Fed help the ECB out more?

Dijsselbloem: Cyprus Deal Is A Template - Business Insider

Dijsselbloem: Cyprus Deal Is A Template - Business Insider 

We see markets tanking and there may be bank runs as well. The weaker Euro banks could be subject to the Cypriot Template. That means, you take the cash of the uninsured depositors. That can't be lost on the elderly and the companies who have excess money in these banks of Italy, Spain, Etc.

Sunday, March 24, 2013

Bank Forecloses On Elderly Woman Over $49 in Unpaid Taxes Reverse Mortgage!

Activist Post: Bank Forecloses On Elderly Woman Over $49 in Unpaid Taxes

This story is a good reason to avoid a reverse mortgage if at all possible. And I would avoid any company doing what this company is alleged to have done. 

What Is A Russian Oligarch? - Business Insider

What Is A Russian Oligarch? - Business Insider

This article shows how, even in Russia, the banksters always win. They got the spoils of the shift from communism to capitalism. Linette, the author of the article stated that the lesson learned was that you need to be in the right place at the right time.

I posted that that was not the lesson:

 No Linette, the lesson is the bankers always win. We see that in Cyprus, in the rates your dad receives in his passbook account, etc. It is theft, plain and simple.

Derivatives, even more than the national debt, have made it impossible for central banks to raise interest rates or else the member banks will be destroyed. So, instead of giving a fair return they steal what they have to to survive. From you and I Linette. 

and

 
Linette, if there was a free market, and no one knew which way interest rates were going, then there could be a market for interest rate derivatives. But the banks know they must stay low, and they always take that position and the floating rates while everyone else is afraid interest rates will rise and they take the fixed rate and lose money. It is a scam of the highest order.

It is the opposite of a free market. It is banksterism.


Municipal Bond Insurance | Financial Guaranty | Muni Bond-Are These Guys Thugs?

Municipal Bond Insurance | Financial Guaranty | Muni Bond

This is the scumbag company that is attacking Calpers in the Stockton bankrupcy case. This company says Calpers should share the pain, but must know Calpers stands first in line in a municipal bankruptcy. That is California law. This company is located in a low tax haven, Bermuda and guarantees loaned money that comes from Wall Street.

So this is how it works: big corporations don't pay taxes, then they invest offshore with folks in Bermuda. Then the folks in Bermuda use the money that should have gone to taxes to guarantee the bonds of cities who must borrow instead of collecting the taxes in the first place! What a rip off! Oh, I am perfectly assured that this is all legal.

Assured Guaranty then goes around stating how Calpers is bad and how Calpers should not reap the rewards. But that is the law. Assured Guaranty either didn't know the law or wants to lean on Calpers and US politicans to change the law so that the Wall Street lenders, their clients, can be first in line to collect!

But it stinks. Assured Guaranty should just keep their opinions to themselves.

Here is their article that is trying to influence citizens to turn on Calpers and treat these thugs like they are the good guys. But they aren't. 

Cyprus Should Take the Bank Holdings and Create a State Bank

If the leaders of Cyprus are serious about keeping their economy afloat, they should sovereignly take the deposits in the existing troubled bank. They then could set up a state bank, with accounts guaranteed with no confiscation whatsoever.

That would put the EU in its place. It would stop Merkel's mad desire to just steal money from the accounts.

Turkey warns Cyprus of 'new crisis' if gas revenues included in solidarity fund

ekathimerini.com | Turkey warns Cyprus of 'new crisis' if gas revenues included in solidarity fund

Turkey says the Greek Cypriots cannot just make a deal to use natural gas deposits as collateral for any loan scheme that would capitalize the banks. So, while the ECB wants some guarantee of capitalization for the banks to reopen, the Turks are making sure that it is not done in a way that destroys the value of the natural resources of the nation.

Perhaps the Turks are trying to save the Cypriots from themselves? 

CVS threatens to fine employees who refuse to take health assessment - Boycott CVS!

CVS threatens to fine employees who refuse to take health assessment - Silicon Valley Business Journal

CVS is acting like Merkel in Germany, forcing employees to share private information just like Merkel forces a confiscation of private banking accounts in Cyprus. Perhaps a boycott of CVS would be in order if the company decides to go fascist on this. 

Because Of Cyprus A New Movement To Demand Collateral Before We Deposit Money

With the advent of turmoil in Cyprus, what we need to understand for ourselves is just how the banking system works. The lesson we need to know is about the status of the money we deposit in the banking system. Well, it is clear that these deposits are loans to the banks. The money is not technically ours while it is in the banking system.

Banks are not for keeping our money safe as a primary task. Banks are for borrowing and lending to make profit.

Well, we know that the ECB has demanded a confiscation of some money from the accounts in Cyprian banks. We know that the deal is being worked out and that the trump card is owned by the ECB. It has the power just to shut the banks down. It isn't your money in there anyway. It doesn't belong to you, the people of Cyprus or the wealthy Russians.

So, in the face of this confiscation, it is my view that people should not deposit money into banks without some collateral in return. After all, banks require collateral when they lend. Why should we not require the same? The collateral could be a set percentage of the bank equity and the depositors should be first in line ahead of the bank bondholders if the bank goes under.

Secured bondholders have collateral pledged to them. What makes them special and of greater importance than the depositors who are lending the bank their hard earned dollars?

Have you noticed that the bondholders never take a hit when banks are on shaky ground? After all the pledge of collateral makes the banks care about these folks. You depositors? The banks could care less about you.

When you think about it, the system of banking is quite perverse. With the turmoil in Cyprus, we learn that plan B of the bank bailout regime is to confiscate bank accounts the world over. If there is fatigue in the bailout plan A, the confiscation of taxpayer money, then plan B represents a whole other risk to many.

Ellen Brown has said that this plan B bailout has been in the works since the Asian crisis of 1997! And Ben Bernanke, when pressed as to whether this solution would be applied to the United States said it would be highly unlikely. So it isn't off the table here, either. And the US interest rates are so low that the confiscation here is ongoing. Joe Kernen of Squawk Box said that the Cypriots would have made a better return with the confiscation in the past 10 years than American savers without an explicit confiscation!

So, the bottom line is, we are creditors to the banks, and put our money into the banks with risk. Therefore, we should have a collateral position, in my opinion.

So we have austerity in the form of bad returns on our savings, just like there is austerity of another form in Italy, Spain, Ireland, etc.

At the very least, savers should be boycotting banks with all or part of their money, as a protest over not having a better stake in the banks besides a measly return that amounts to nothing.

Bypassing the banks for state banks who have the interest of main street at heart would be a second movement of protest that is worthwhile. Ellen Brown has been in the forefront of this movement.
The lack of respect that banks show to their depositors could be fixed by people just buying safes and leaving some of the money at home. Over time, the bankers would have to fight for your deposits. There is no competition now at all.

When a bank lends to another bank, secured collateral is required. When a private creditor, you and me, lend to banks in the form of deposits, it is against the law for the bank to provide us with collateral. Isn't that convenient?

And not only that, but we stand second in line to trillions of dollars of derivatives if the FDIC insurance ever had to kick in with the Bank of America. That is Ben Bernanke just failing to give an ounce of respect to insured depositors. FDIC could prove useless if you have your money in Bank of America!

This turmoil in Cyprus and a renewed interest in how banks work is bad PR for banks. It is likely to cause diversity out of bank accounts and could hurt the bottom line of the banks.

And as Ellen Brown said, if JP Morgan can behave badly in gambling with depositor money in the whale fiasco, where does that leave the less successful TBTF banks regarding their behavior?
Companies with lots of cash should be demanding bank collateral for all of us. Their money is potentially at risk. That means your stocks in these companies are at risk. Can you imagine a large US corporation losing 500 million dollars to a billion dollars in a confiscatory haircut of banks here?

The fact that plan B is a reality proves there is much more risk in the system than is admitted to. Investors should behave accordingly.

Update: Fed president Fischer said that bailins would be proposed. He did so on August 11, 2014. That means of course, that the Cyprus issue could hit home with your money depending on whether this is adopted. In order to prosper, be careful how much money you trust to the banks!

Saturday, March 23, 2013

The Cyprus Bank Tax | Bankers Anonymous

The Cyprus Bank Tax | Bankers Anonymous


Bond holders of the banks always get treated better than the depositors, which is not the way it should be. Depositors should start demanding some collateral from the banks for the privilege of receiving a loan from the depositors. After  all, it isn't your money once the bank gets its hands on it! 

Friday, March 22, 2013

Gold Not ‘Antifragile’ Enough for ‘Black Swan’ Author | Michael Santoli - Yahoo! Finance

Gold Not ‘Antifragile’ Enough for ‘Black Swan’ Author | Michael Santoli - Yahoo! Finance

Taleb makes the case that the safest stores of value are not gold, which has doubled in value in a few years. No, he looks at silver, cash (ie. treasury bonds), non speculative ag land, etc.

Truth is, I agree with him. While gold has been moved to tier one from tier 3 on the balance sheet of banks, the most pristine collateral for the purposes of backing interest rate swaps, etc, is the treasury bond of highly rated nations, like the US, Japan and Germany.

There is, as I have said here, a shortage of good collateral. Treasuries fulfill that purpose as long as there is not too much rehypothecation. The most certain way that treasury bonds will keep low yield, and steal from savers in order to secure pristine collateral, is the printing of more of those bonds.

I know that sounds crazy, but it is true. 

What is good for our economic system is not necessarily good for main street. However, we aren't certain failure of the system would be better. It probably would bring chaos.

A Safe And A Shotgun, Or Public Sector Banks? The Battle Of Cyprus - Seeking Alpha

A Safe And A Shotgun, Or Public Sector Banks? The Battle Of Cyprus - Seeking Alpha

If governments no longer want to bail out bankers, then plan B is to tax your bank deposits.

Boycott the banks! 

Thursday, March 21, 2013

Is it Time for Floating-Rate Bank Loans? - Yahoo! Finance

Is it Time for Floating-Rate Bank Loans? - Yahoo! Finance

This article is pure bull. Fear of interest rates rising when they don't rise is irrational. Investors who want to invest in these variable bank loans in an effort to protect against rising interest rates are playing a fools game, IMO.

Not only are the businesses who receive these loans possibly highly leveraged and potentially weak to the point of default, but the banks know interest rates aren't going to rise and sucker investors into these funds. Beware is a prudent warning.

I an not an investment counselor nor am I an attorney. Seek advice of those before making investment decisions.

Tuesday, March 19, 2013

Restoring Confidence in an Age of Fractional Reserve Banking

The Fed has admitted that there is a leverage bubble, and this comes with interest rates being too low and from fractional reserve lending in a risky environment. There is risk in the banking sector when collateral is subpar. There is risk when banks are way bigger than the GDP of a nation, as in Cyprus.

But it is tough to maintain confidence when the ECB seeks to tear down confidence by raiding bank accounts. This is unacceptable bank behavior and is purely confiscatory. This could happen elsewhere in the poorer Eurozone countries and makes keeping money in a bank dangerous. Since the ECB has spoken of taking insured deposits as well, no deposits are safe.

It is destroying confidence in the banking system to seek to have government or bank depositors pay for the insolvency of banks. It is high time the bondholders of the banks pay as well. But that never seems to happen.

In a low interest rate environment, capital gets misallocated. Yet we will have low interest rates for a long, long time, as that is how banks are making their money nowadays. This is a dangerous state of affairs for other investors, as they will no doubt seek protection from high inflation that will never come. Add that to this ECB raid on deposits and Will Rogers looks right when he admonished people to never trust bankers.

Sunday, March 17, 2013

Cyprus Bailout Risks Europe Bank Runs - Business Insider

Cyprus Bailout Risks Europe Bank Runs - Business Insider

Instead of going after the owners of the banks in Cyprus, the bondholders, they go after the governments in austerity. And now they go after the depositors by stealing part of their savings. 

Saturday, March 16, 2013

Emailed a Guy at Seeking Alpha About Canada and Collateral

I posted this email to a guy who frequents Seeking Alpha. He lives in Canada and is concerned about the housing bubble there and the tight money on main street here in the USA. He has posted at Business Insider as well.

Hey Doug, I have about 21 articles here. Read about collateral here where I say that treasuries, unlike what gold bugs say, are in massive demand for collateral for ccp (clearinghouse) trades.

The PMI [article] may prove to be like y2k or it could be a big deal. I learned about it from a real estate broker in Las Vegas.

I guess in Canada you have the 5 year roll over mortgage which is really easy money.

It is a momentum ponzi created by the banksters and their friends no doubt.

My article here shows that the Fed, missing the tool to raise interest rates like Volcker had, has to keep everything slow growth: How the Fed Is in a Box in Terms of Creating Sound Collateral. Read the two newer ones as well which show more of what they are up to.

I think low interest rates are controlled by JPM and the interest rate swap market. People take protection from interest rate rises and the banks take the other side, betting interest rates will stay low. The Fed has to keep interest rates low.
 [Otherwise the banks would be on the wrong side of the bet!]
 Inflation [fighting] tools that are left are capital requirements and open market operations and slow growth. They don't let much money flood main street, hence you see slow Christmas sales, etc. It is a form of austerity.

Doug, I don't have a crystal ball, but we have high cost of living through speculation on futures markets, and we have austerity. It could last for a long long time.
The interest rate swap market is massive in relation to the mortgage backed securities market. It is the biggest game in town and the Fed has to win and main street loses some. However, the alternative is another bank meltdown like in the S & L crisis only way bigger. The Fed should just come clean and admit all this and see if the people in the US accept it or not.  

Friday, March 15, 2013

FHA; Is May 6, 2013 the Day of Reckoning for the New Housing Bubble?

FHA; Is May 6, 2013 the Day of Reckoning for the New Housing Bubble?

I posted this at Patrick.net. This sums up in a nutshell my view about neoclassical versus Keynesian economics. A plague on both their houses would be in order!


It isn't about Keynes versus Neoclassical economists. Krugman has been both. As a neoclassical economist he said that we should have a housing bubble in 2002. His neoclassical model says lending does not cause risk to society. Boy was he wrong! Neoclassical's wanted supply side funding that lead to the housing speculation.
Now Krugman is a Keynesian. Keynes only works where you have bank regulation like Glass-Steagall, limiting speculation in futures markets. We don't have that now. So the money would go to drive up prices of goods we buy. That won't help main street.
So, a plague on both economics houses. They are both wrong under the wrong circumstances.

Live Blogging JP Morgan Senate Hearing – a Rogue Institution on the Hot Seat

Live Blogging JP Morgan Senate Hearing – a Rogue Institution on the Hot Seat � naked capitalism


Rogue institution? Well, in one sense that is JP Morgan. It is just that congress will rant and rave and do little to stop the TBTF banks and their desire to sock it to everyone else including future homeowners.

If more regulation by governments that are supposed to be sovereign slows down these supersovereign banksters, it would be a good thing. But is our government powerful enough? That is the question. 

Greenspan: No 'Irrational Exuberance' in Stocks Now - Yahoo! Finance

Greenspan: No 'Irrational Exuberance' in Stocks Now - Yahoo! Finance

Here is the problem I have with Greenspan. He knows the stock market has been pushed up with thin trades of a few people. He knows there is speculation in the markets.

And he wants more bank capital. He didn't seem to care at Basel 2, so why would he care now? Is he trying to rewrite his biography which includes the fact he said you could get a "better deal" by getting an adjustable mortgage? He couldn't be trusted then and he shouldn't be trusted now. 

CCP | derivatiViews; No Margin for Error

CCP | derivatiViews

This blog takes the position that rehypothecation of collateral offered to clearing houses is a good thing, because there will be large collateral requirements otherwise. However, it is worth noting, IMO, that rehypothecation, or the pledging of the same collateral over and over again is probably risky. 

I carry this blog on my blogroll because I am interested in the positions it takes regarding collateral.

EuroCCP and EMCF merge | Securities Finance Monitor

EuroCCP and EMCF merge | Securities Finance Monitor

CCP's are the clearing houses for derivatives that were before just two party contracts. The clearing houses are middlemen who take collateral in exchange for clearing the trades between parties. This new business requires a lot of collateral, a lot of good collateral preferably. That makes pristine high quality treasury bonds in demand so uncle Ben Bernanke can continue to sell treasury bonds, his main and most important job.

The clearing houses could help, unless bad collateral floods the system, or unless the clearing houses take too much risk.

Thursday, March 14, 2013

Why Bitcoin lives in a “legal gray area” | Ars Technica

Why Bitcoin lives in a “legal gray area” | Ars Technica

I am not familiar with Bitcoin and do not use it. However, Chuck Schumer is a well known bankster b**ch. He knows that if people lose confidence in the dollar and go to another currency, the little game is over. He knows. He bends over to Bendoverben Bernanke daily.

Sorry to be crude, and normally I don't like that, but Schumer needs to come clean. He is a NY politician who depends on banksters for his livelihood. He knows that among the biggest drug money launderers in the world are the world's big banks. 

Wednesday, March 13, 2013

Interest Rates Will Stay Low In The Midst Of Bad Bank Behavior And Paul Ryan's Mistake

Will Rogers was the most popular man in America in the Great Depression. He said:
"Borrowing money on what's called 'easy terms,' is a one-way ticket to the Poor House. If you think it ain't a Sucker Game, why is your Banker the richest man in your Town? Why is your Bank the biggest and finest building in your Town? Instead of passing Bills to make borrowing easy, if Congress had passed a Bill that no Person could borrow a cent of Money from any other person, they would have gone down in History as committing the greatest bit of Legislation in the World." WA #14, March 18, 1923
and:
"I have been trying my best to help (the President) and Wall Street "Restore Confidence." Confidence, is one of the hardest things in the World to get restored once it gets out of bounds..." WA #362 Dec. 1, 1929
*****
A lying financial system is certain to scare away investors and could create a credit crisis. Bank contagion is about banks lying to one another. Collateral not being where it is supposed to be is just a lie, and we have had a few of those recently.

It had been reported last September that Steel pledged as collateral in China came up missing.

It has been reported that Germany has given the Fed 7 years in order to retrieve her gold. Either the gold is not there or it has been pledged as collateral and is tied up.

It has been said that the GLD is not made up of gold, but rather of promises to supply gold. Gold bugs can comment.

Turns out gold has been made into a tier one asset effective Jan 1, 2013, although some stocks are tier one so gold is not considered a pristine asset.

And all this relates to what was supposed to be good collateral.

The bigger lie has to do with the posting of bad collateral. There is no shortage of bad collateral. There is so much bad collateral that interbank trading has slowed. The velocity of money has plunged proving that interbank lending and MainStreet lending has slowed.

The effort to change bad collateral into good takes the form of transformation of assets, and securitization of same. Transformation gives hedge funds and traders cash for bad collateral with a haircut. This can build in a lot of risk to the banks. It has not yet gotten to be a large process but could.

The bigger and more important process is that of changing bad collateral into collateral good enough to use in securitization. Investors want good MBS. They demand good MBS after the housing crisis.

Bad collateral was deposited in the money markets. That was part of the shadow banking system that generated the bad collateral, bogus CDOs in the first place. Getting from there to a revitalized securitization market is a major goal of the Fed. If the banks lend to households, they don't want to keep the loans once the lending standards are lowered.

So, the solution will be to have government guarantees of all mortgage loans as the banks want. The NY Times reported on this awhile back. The banks have threatened to do away with the 30 year mortgage if they don't get this guarantee. If you have noticed, most big banks with the exception of Wells Fargo have fled the mortgage business!

So, there will likely be a guarantee of most mortgages at some point. I have said that Bernanke could force this to happen.

Yet, as we see the GSE's getting ready to enter the securitization business again, we see that business being spun off to a private entity. The plan, according to regulator Edward DeMarco, is to keep securitization separate from the government.

Yet we know that is a lie. We know that regardless of GSE involvement, the big banks want a guarantee of all mortgages or the securitization market will not work on a large scale. It is called the Bernanke Backstop because Ben Bernanke testified that in the event of a wind down of the GSE's a government guarantee would be necessary going forward.

So, why do the banks and investors want a guarantee of most or all mortgages going forward? It is easy if you look at the housing market.

The housing market is very unstable. Even Mr. DeMarco said we are nowhere near normalcy. I would venture to say that we won't be near normal for years to come, if ever. The housing market is based upon cash purchases and some 3.5 percent down payments through FHA, which is having trouble. Dr Housing Bubble Blog has said that the FHA 3.5% down is leverage of 30 percent. That percentage is what brought banks down in the credit crisis, and what brings many households down.

The skin-in-the-game mortgage, 20 percent down or at least close to that, was what made the housing market stable in the last century. That stability is gone, vanished. It has been estimated that well over 40 percent of houses are owned by folks over 55 years old.

I should also add that besides real estate derivatives, there is a derivative that makes up the bulk of all derivatives, north of 400 trillion dollars. Those are interest rate swaps, where counterparties swap fixed rate securities for short term adjustable rate securities.

We know that in the housing crisis, the inability of people to swap teaser rates for long term fixed rates brought the housing market down. That is small bananas compared to the massive interest rate swap market. Can you imagine the margin call effect of having to cover the rise in short term bonds you have as a hedge?

Joe Weisenthal has said the Fed has this all under control and interest rates will be low for a long, long time. And it seems true that the Fed has slow growth as part of the plan, watching what the Fed does, rather than what it says, and inflation is curbed.

And Ben Bernanke has said he does not owe savers a living.

Inflation is an illusion, in this economic system. Is the Fed lying about the function of interest rate swaps? It is said that the interest rate swap market is actually the driver of demand for the US treasury bonds, insuring low rates. Inflation must be controlled by tight money on MainStreet, because the Fed can no longer jack up interest rates to stop inflation.

So, in summary:
1. We have gold as tier one but not pristine.
2.We have lies about collateral even existing or it has been rehypothecated.
3. We have a shortage of pristine collateral. As the government pays off bonds, and fewer countries have good credit, this becomes a larger problem going forward.
4. We have the big banks wanting MBS to be that pristine, AAA collateral, made possible by a government guarantee.
5. We have collateral transformation which is risky.
6. We have a massive interest rate swap market that is dependent on low interest rates and may force low interest rates.
7. We have an unstable housing market that relies on loans difficult to pay back, hence the need for securitization.*
8. We have a Fed that no longer needs to raise interest rates to stop inflation. It just walls off the money printed from MainStreet.

It doesn't all fit. As a business model it has to be close to a racket. We see that in number 6 we see that big companies, pension funds, insurance companies, etc, all buy protection from the Fed through the purchase of interest rate swaps. This has the effect of driving interest rates down.

By hedging against inflation, the big companies actually maintain our bonds for collateral in great demand, driving interest rates down. Obviously these companies have faith that the Fed can control inflation! They get low interest rates in return for this protection.

But the alternative of anarchism to stop this mafia-like system is chaos. I have a prediction below as to how this will work out.

*Securitization is theoretically ok if it is based upon sound lending and the need for cash to make more sound loans. But the banking system knows that not enough people can afford sound loans. Yet this process moves toward its goal of more risk in real estate, while attempting to make the banking system safer.

Yet we have Joe Weisenthal of Business Insider saying that the credit crisis is over and we are in a bull market. We have a constant mantra in the media that all is well. Dick Bove is bullish on the banks.

Joe must be the new Will Rogers, helping to restore confidence. Only difference? Will Rogers was frank about it. He said:
Now I am not unpatriotic, and I want to do my bit, so I hereby offer my services to my President, my country and my friends to do anything, outside of serving on a commission, that I can in this great movement. But you will have to give me some idea of where "confidence" is. And just who you want it restored to." DT #1035, Nov. 19, 1929
Bernie Madoff proved that a racket can last a long time if you lie enough. The question is how much and how damaging is the lying that is going on today in the larger financial system? Oh, and how long this can be sustained without another loss of confidence? However, confidence in treasury bonds seems unshakeable.

Don't forget, in the Great Depression, speculation was curtailed, and Glass-Steagall was passed and rehypothecation was limited. But now we have Mary Fricker saying that the Repo Market, central to Fed bank control and shadow bank lending is inherently unstable.

The Repo Market allows the Fed to directly manipulate shadow banking so that the Fed is not in the ivory tower being a force for good while the shadow banks are rebels. No, the Fed is directly involved in the ongoing mortgage instability.

Based upon this knowledge, we know the Fed can run this Ponzi housing scheme under its control for quite a long time. We can watch all short term debt schemes as a way to raise cash for the next shadow bank housing bubble.


So, investing in real estate and even in banking, while not for the faint of heart, could bring rewards, until this short term shadow bank lending gets red hot, or it becomes a millstone around the neck of counterparties. Then watch out. But will the interest rate swap market trump the mistakes?

Watch the Millenials. If the young are shunning mortgages and credit, this could actually limit the bubble and the damage. Watch wages, and if they are growing, housing has a chance to appreciate long term. Otherwise, it is just a momentum play. It could be a long duration momentum play. But invest with caution if loans become too easy and the populace bites.

Can banks continue to make money with low interest rates? They won't lend much, as repo markets don't take consumer loans, unless the Bernanke Backstop is applied. So they will be zombie like and we will behave like Japan, if the theory of interest rate swaps holding down bond rates is true.

However, banks could, if interest rates remain low, lend at no money down, but would likely not have teaser rates available unless interest rates rise. So, this is my prediction:

If the banks trust this model of low interest rates for as long as interest rate swaps do their job, they will jump into the residential loan business and start lending with gusto.

Watch for the Bernanke Backstop being applied to the new private securitization companies, and once that happens, bankers will be able to feel free to lend to anyone with easy terms, knowing that they won't get killed in the future, like the S & L's did, with rising interest rates.

The Fed cannot really raise interest rates too high in order to contain inflation. Of course, the Fed will have to come up with other mechanisms to stop any potential inflation besides raising those interest rates. I have shown how this is within the realm of the Fed now. The Fed can do as Japan can does, control interest rates by maintaining slow growth, higher bank capital requirements, even in times of contagion and uncertainty about stocks and the economy.

And interest rates are controlled by strong demand for treasury bonds, as companies buy inflation protection. Buying inflation protection in the form of interest rate swaps actually serves to control interest rates, because pristine collateral is required to back these swaps.

Paul Ryan has said that the only reason Treasury Bonds have low interest rates is because the Fed buys the bonds. That is patently false. The reason it is false is because the Treasuries would be in great demand for interest rate swaps anyway.

The Fed buys them in order to take bad, or less good collateral off the balance sheets of the banks in exchange for the treasuries it has. The demand would be there even if the Fed did not do this bailout.

Even if the system is dirty and rotten regarding the housing market and stocks as mentioned at the beginning of the article, and there is massive volatility possible, it appears that the bond market is as solid as a rock.

Maybe Ryan wants some other collateral being used in place of treasuries to fund this interest rate swapping. However, there is not enough gold mined in the entire history of the world to supply this demand. So, people like Ryan need to explain how this necessary component of lower interest rates will be backed in the future.

It is my view that Paul Ryan cannot trust the Fed to keep inflation under control, and others have come to the same conclusion about him. Investing with the assumption that the Fed cannot keep inflation in check could be an expensive mistake, based on the solid history of the Fed in this age of massive derivatives. Inflation is under control.

Ryan wants inflation to be controlled by rising interest rates. But, while that would be great for savers, it is not necessary to control inflation. It would make many items even more expensive.

And raising interest rates, as Paul Volcker did in the last century, could bust the banks, and make the Savings and Loan Crisis look like a stroll in the park as all the banks with low interest loans on the books would be immediately insolvent.

As far as investment decisions go, this is a difficult time for the small investor. He gets little value investing in bonds, as yield is low. They are so low that the little inflation there is exceeds the yield.

The big companies buying inflation protection benefit by interest rate swaps. They benefit from this swap as their costs of borrowing for business growth and maintenance stay low. The act of buying the swaps actually allows the Fed to keep interest rates low!

The average investor does not borrow that much. So it is not such a benefit for him unless he takes out a mortgage to buy a house. If gold is a no win investment as many have said, then corporate bonds and REITS look like the most sound low-interest-rate-environment investments.

I posted this at an article on SA regarding other ways the Fed has to control inflation:

 I maintain they don't have the first of the following three options since they can't raise interest rates much: the discount rate, reserve requirements and open market operations
Entitlement programs are a control over inflation because they allow for very slow growth without rebellion. 
Update: I come down on the side of those who want rates to rise even though large raises in rates are unlikely. I emailed this to Ellen Brown on the subject:

We face two problems with low interest rates. First, savings are decimated. Second, banks won't lend for houses when interest rates are low because they will be destroyed once interest rates rise. So, there should be rates that are reasonable, not too low or high. When Janet Yellen says she hates the gap between rich and poor increasing, she has increased that gap because the middle class cannot get loans for houses and cannot get a return on their savings. I realize that raising rates would destroy the US budget, but defense spending is out of control and the rich don't pay nearly enough in taxes. So that could be fixed. The low rate regime insures the gap between rich and poor will increase.






Disclaimer: This article does not offer professional investment advice. I am not a financial advisor nor am I an attorney. Seek those out before making any investment decisions. I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 

Scott E.D. Skyrm � April Collateral Shortage – Preview

Scott E.D. Skyrm � April Collateral Shortage – Preview: There was a severe shortage of quality AAA collateral in 1997 to 2000 when the government ran surpluses. A balanced budget for a long time would force the repo market to use collateral that was likely compromised and not pristine AAA collateral. With the need for collateral for interest rate swaps, balancing the budget of the US government is not really a good idea.

Tuesday, March 12, 2013

Is Money Velocity Picking Up? - Seeking Alpha

Is Money Velocity Picking Up? - Seeking Alpha

For anyone who worries about inflation, don't. Money velocity is not picking up. How can it when the Fed refuses to help main street? 

Thanks To Japan We Know How Central Banks Can Control Inflation - Seeking Alpha

Thanks To Japan We Know How Central Banks Can Control Inflation - Seeking Alpha

Here is my newest article on Seeking Alpha. I believe we are nearly Japan. The Fed will use the same remedies to keep interest rates low as Japan does. Huge demand for interest rate swap collateral will keep bonds in demand and the Fed has other means to keep inflation in check. Mark my words. 

Monday, March 11, 2013

Banks saved, but Europe risks "losing a generation" - Yahoo! Finance

Banks saved, but Europe risks "losing a generation" - Yahoo! Finance

Here is the problem, the banks, in order to be saved, sacrificed many young people. And growth must be slow for the banks to be maintained, because the Central Banks no longer have a means of fighting inflation by raising interest rates. They have to keep interest rates low to protect their loans and their interest rate swaps. So we, MainStreet, are screwed. 

We're Betting Big on Real Estate: Blackstone CEO - Yahoo! Finance

We're Betting Big on Real Estate: Blackstone CEO - Yahoo! Finance

So, why would Blackstone announce this? Does Schwarzman want to dump RE now? This should be monitored. He has ruined real estate for the masses by pushing up prices. 

Kuroda Says Bank of Japan Will Consider Buying Derivatives

Kuroda Says Bank of Japan Will Consider Buying Derivatives - Bloomberg

Massive deflation abyss is causing the BOJ to think about buying derivatives. This can be risky, but surely the banks that buy interest rate derivatives have a vested interest in keeping interest rates low. So, if that is the case, how will the BOJ stop inflation if it happens? After all, raising interest rates while holding a boatload of adjustable swaps doesn't seem smart. 

Saturday, March 9, 2013

Subprime mortgage crisis - Wikipedia, the free encyclopedia

Subprime mortgage crisis - Wikipedia, the free encyclopedia:

From the site, an argument I have made since 2009. [Too bad so sad Faux News pundits. You got it wrong. Some admitted it, and from memory I believe it was Stossel and Cavuto. Yet they dwelled on the CRA for political reasons.]: 


The Financial Crisis Inquiry Commission reported in January 2011 that "the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans – a proxy for subprime loans – had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law."[64] Critics claim that the use of the high-interest-rate proxy distorts results because government programs generally promote low-interest rate loans – even when the loans are to borrowers who are clearly subprime.[149] Several economist maintain that Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations.[2][27]

Has NPR Joined Peter Peterson's Crusade Against Social Security and Medicare?

Has NPR Joined Peter Peterson's Crusade Against Social Security and Medicare? | Beat the Press

Pete Peterson is an evil man. There I said it. He refuses to see the problem of income inequality, which he has a part in, and would rather focus on generational inequality. But main street is composed of all generations and the real battle is between Wall Street and the rest of us, not a dividing of main street, which Wall Street pays for!

From Dean Baker's blog:

Peter Peterson, the Wall Street investment banker, has been most visible in this effort, committing over $1 billion of his fortune for this purpose. Recently he enlisted a group of CEOs in his organization, Fix the Debt, which quite explicitly hopes to divert concerns over income inequality into concerns over generational inequality. It argues that programs like Social Security and Medicare, whose direct beneficiaries are disproportionately elderly, are taking resources from the young.
If the young fall for this baloney of a very bad man, then all is lost in the war, for more fairness in our economic system. And don't be fooled young and old, the war was started by predators from Wall Street. 

Will there be a steady supply of homes for sale from aging baby boomers in this decade?

Will there be a steady supply of homes for sale from aging baby boomers in this decade? Who will they sell to and at what price? � Dr. Housing Bubble Blog

People 55 and older own 49.5 percent of the houses in the USA. That bodes ill for the housing market going forward. Sure, there will be a spike, and there is a bubble, but sustaining people in homes when prices are going up and wages are declining are a banker's dream. But that is all it is, a dream. 

Wall Street’s latest idea - FT.com

Wall Street’s latest idea - FT.com

Collateral transformation is different than turning MBS into pristine collateral. Collateral transformation is the newest bankster rage. They take bad collateral and penalize you for the lack of quality in the collateral. That is not what Ben Bernanke wants to do with MBS. He wants those guaranteed by the government.

Indeed, even this crap collateral could end up being guaranteed by the government if the banks teetered on the brink again. That would be a disaster. 

Johnson & Johnson Could Tap The Huge Diabetes Market With New Drug Approval - Seeking Alpha

Johnson & Johnson Could Tap The Huge Diabetes Market With New Drug Approval - Seeking Alpha

Type two diabetes is a problem. I have it. But I highly suggest you exercise your way out and only try a drug as a last resort. Why? Because these drugs can be particularly dangerous. Diabetes sucks, but the drugs can be worse than the disease. Hopefully we won't hear about a bunch of problems emanating from this new diabetes drug. 

The U.S. economy is ready to take off, says... - Seeking Alpha

The U.S. economy is ready to take off, says... - Seeking Alpha

While I hope this is correct, one wonders how the economy can "take off" while wages remain depressed and are hurt by global competition? Tell us Larry Fink, how this is can be when our banks refuse to lend. Or they lend in ways that assure ponzi, easy money loans. That is coming for sure.

I don't like it, going from bubble to bubble Larry Fink. I don't think that is a way to run a country. 

Thursday, March 7, 2013

Ben Bernanke's Diabolical Plan To Turn Mortgage-Backed Securities Into Pristine Collateral - Seeking Alpha

Ben Bernanke's Diabolical Plan To Turn Mortgage-Backed Securities Into Pristine Collateral - Seeking Alpha

Here is my newest article from Seeking Alpha. I believe I have succeeded in predicting how Ben Bernanke will allow interest rates to rise and how he will create more pristine collateral. From the article:

I wrote an article on Business Insider a long time ago showing how the TBTF banks wanted all mortgages guaranteed going forward. Ben Bernanke has a plan to force this reality upon the American government.
In the Knights of the Round Table, the magicians could turn lead into gold. That is exactly what Ben Bernanke wants to do, and it could cause massive uncertainty going forward, or bring in a period of financial bliss.

Shame on You Rick Santelli: A Little Bubble History

Here is a little history of Santelli and the banks worth reading as we ready for the next housing bubble:

The problem with Rick Santelli is that he had no clue about what happened in the housing crisis. He had no clue because he didn't understand that people were told lies as they took on toxic mortgages. First, they were often told that the mortgage rates were fixed. But more importantly, they were told that the mortgages will be able to be refinanced later. They were not told that house prices could decline, and the real estate agents were in on this as I listened to David Lereah (NAR) continually state that Real Estate willl bounce back because it rarely goes down.
Now I resisted these loans, and so did my daughter, because we were afraid to pay more for a house than it was worth. In other words, many of us understood that what must go up must come down. And we know what we are worth and what we could buy and it was unnatural for us to think we could qualify for mansions when we were not wealthy.
But persuasive real estate agents and mortgage agents were telling lies about the ability for real estate to always go up and about the certainty that you could refinance at a later date. Santelli seems to think that people should all have discerned these scams as obvious lies. I don't agree. I think that Santelli is really shilling for the banks here and is protecting the banks. He lives to protect the banks even though as a video below shows that he sometimes rails against the TBTF banks. In that respect, all of CNBC knows that their bread is buttered on the protection of Wall Street.
Wall Street is corrupt, Santelli. You are a part of it. You should be doing like Dylan Ratigan, who left CNBC because he spoke about getting clawbacks from bankers and about putting them in jail. I think the big bankers and the shadow banking system that they supported were predators. IF SANTELLI REFUSES TO SEE THAT HE IS A BLIND MAN.
Santelli grudgingly, like myself, accepted the bank bailouts. However, he did not adequately explain that the bankers were at fault, along with the central banks, for the housing bubble scam in the first place! He blames the borrowers and that is just wrong.

The problem with Jim Cramer, Rick Santelli and all the rest is that they have a vested interest in protecting the big banks. Santelli does occasionally state that the too-big-to-fail banks should be allowed to fail. But I don't believe that at the "end of the day" he would defend the consumers instead of the banks. That is proven by his position on the liar and adjustable loans, where Santelli defended the banks against the consumers who were clearly scammed.
CNBC, INCLUDING RICK SANTELLI, does not acknowledge that the central banks and the big international banks are at fault for the credit meltdown in a PLANNED EFFORT, that the big banks either bankrolled the shadow banking system or they purchased the shadow banks like Scumtrywide (Countrywide) and World Savings and Loan in order to protect themselves. The New World Order protects itself and we hope for it's failure as I wrote here!
We know that the big banks had investment arms that continually peddled crap bonds made up of liar loans. The Wall Street crowd supports these big banks. The ponzi housing scam originated in Basel, Switzerland at Basel 2. The ponzi scam of off balance sheet banking came from Basel 2. The Fed colluded in this behavior.
I have spoken about manipulation and the links below will give information in more detail. I don't see Rick Santelli attacking the financial system itself, and calling, as Dylan Ratigan did, for incarceration of the potentially guilty parties, including Goldman Sachs people.
So until CNBC decides to attack the big banks and Wall Street for its misdeeds, then we just need to boycott stocks. The market is manipulated. Here is a list of markets that are manipulated:
1. The Stock Market. The plunge protection team has been established by Ronald Reagan to prevent major declines in the market. It is still in place by law. The plunge protection team works until it doesn't and then the ones who know and are on the inside profit by declines. Volume is very low these days on the stock market, and Goldman Sachs and other traders are likely taking advantage of these low volumes to drive stocks up.
2. The bond market is manipulated by the Fed and central banks, who allowed Basel 2 ponzi off balance sheet banking, who buy treasuries to keep interest rates artificially low.
3. The oil market is manipulated as prices went from 32 dollars a barrel to 80 dollars while demand DECREASED.
4. The housing market is manipulated by two events. First, inventory is being withheld by the banks. Second, short sales are being discouraged by the banks, who prefer the tax advantages of foreclosures.I don't see Rick Santelli advocating the walking away from mortgages.
5. The commodity markets besides oil are being manipulated. China and others are hoarding commodities such as copper, even though construction is declining.

Wednesday, March 6, 2013

Coppola Comment:The Strange World of Negative Interest Rates (must read)

Coppola Comment: The strange world of negative interest rates

Here is the most significant statement in this must read article as scarcity of collateral and Fed MBS purchases are already with us:

  As safe collateral became scarce, central banks would inevitably extend the range of acceptable collateral to other bank assets, such as mortgages.....eventually all forms of lending would be pledged to the central bank in return for funding. Banks would no longer carry the risk of that lending: in the event of default, the loss would rebound to the central bank to whom the asset was pledged, and the state - not the bank - would take the loss. The ECB is already a long way down this path even without negative rates.

This is the Fed's plan, to force the state (the nation) to be responsible for all lending losses as the central bank takes on all the risk. I suggest the state better stop this or the state will be engulfed by losses. This applies no less to the United States as it applies to the Eurozone.

How The Fed Is 'In A Box' In Terms Of Creating Sound Collateral - Seeking Alpha

How The Fed Is 'In A Box' In Terms Of Creating Sound Collateral - Seeking Alpha

This is my newest article on Seeking Alpha. It is exclusive to Seeking Alpha and it explains the process by which the Fed creates good collateral in exchange for bad collateral. Good collateral is scarce, and bad collateral does very bad things to bank lending, interbank lending, and ultimately the economy. 

But the banks are still loaded with toxic collateral, and their weakness and fear of risk is causing main street to wither. Their profits come from speculation, which further hurts main street.

The Fed has failed, and now we are facing a Great Depression if something does not change. The worst case is a slow growth world, with not enough money on main street. That is a best case scenario. 

Collateral management - Wikipedia, the free encyclopedia

Collateral management - Wikipedia, the free encyclopedia

82 percent of collateral is cash and government securities. There is a shortage of good collateral. This collateral is used to back traders, runs on banks, speculation, interbank lending, etc.

This collateral is the currency of the financial system. Unfortunately, profits based off this collateral are in speculation that hurts main street. That is the problem. There is no real investment by the TBTF banks into the real economy!

So, on the one hand, with trillions in derivatives, collateral shortages become problematic, and on the other hand, having good collateral hurts main street badly as commodity prices soar.

Once banks run out of good collateral, they use less good collateral, like mortgage backed securities, stocks, gold, and corporate bonds. Then if those lose value, the banking system freezes up and interbank lending is curtailed. Speculative commodities futures drop in value. 

Main street gets a reprieve from high prices but you could lose your job.Your house price goes in the toilet as well.  As long as your house value is tied to bankers using bad collateral in the absence of good collateral, it isn't very stable is it?

Great system isn't it? NOT.We know that bad collateral deposited in the money market shadow banking system resulted in the housing crash of 2008. We know that bad second mortgages caused the contagion (banks not trusting each other) that started the Great Depression.

Tuesday, March 5, 2013

JP Morgan: The $592trillion Ponzi scheme is a time bomb ticking under your house

JP Morgan: The $592trillion Ponzi scheme is a time bomb ticking under your house | Mail Online

Increasing the money supply by loans for speculation at the expense of main street just sucks. Yet the banks are doing that very thing today. Add to this the revelation that CDS swaps insured everyone (including the insurers) in order to play this game and you see why the only party not insured, your government, had to pay up.

We are held hostage to a ponzi scheme that forces bubbles to happen, that forces main street and your government to pay continually. The bankers need more good capital and more bad capital if they can't find good capital. What better way to do this than to bid up house prices, cause a crash, and force the government to have a deficit, and issue more bonds. 

To make it palatable to the American people, the bankers want the safety net pared back. That way there is a bigger backstop for them, and more bonds will be issued without the rich having to pay their fair share of taxes. 

Peter Schiff And The Coming Housing Collapse: The Fed, Instead Of Lehman, Owns The Mortgage Market - Forbes

Peter Schiff And The Coming Housing Collapse: The Fed, Instead Of Lehman, Owns The Mortgage Market - Forbes

I responded to this article in this way because I don't have a crystal ball:

Here is the problem. There is a lack of quality AAA paper. There is a need for it in order to keep banks making profits lending to traders, etc. There is a real economy that is deflating and a bankster economy that is inflating.

So, I can see Bernanke's point of view.

It would be nice to get rid of the derivatives market and we would not need Bernanke to do what he is doing. But we can't. We are stuck with it.

So, then Schiff could ultimately be right. The next housing bubble (which is starting with cash hedge funds) to create more collateral could be short lived. Then the crash would be on, big time.

But if that is the case, cash would be king not gold. You can't eat gold.

Sometimes I don't know what to think about Schiff.

Important Update:

I have written an article on Seeking Alpha detailing how Ben Bernanke plans to produce more quality collateral as banks seek to protect themselves going forward. Congress will have to go along with slapping a guarantee on the mortgage backed securities or face a crashing stock market and Bernanke's wrath. Bernanke intends to make MBS into pristine collateral.

Thererfore, Schiff's guarantee of a housing crash will likely be preceded by a housing bubble worse than the cash only bubble we have now.

The Fed's Big Secret - Quantitative Easing Isn't Free - Seeking Alpha

The Fed's Big Secret - Quantitative Easing Isn't Free - Seeking Alpha

I disagree with this article on Seeking Alpha. I believe that the Fed, as I commented, will keep the economy  growing at a rate slower than snail's poop. The Fed will lose a butt load of money, oh, I mean the taxpayers will lose a butt load of money bailing out the Fed, if the interest rates are allowed to rise and even less quality collateral exists to pump bank profits.

A housing bubble will be the only way the Fed can get rid of all these mortgage backed securities, and interest rates will be allowed to rise. But everyone is ready for a housing bubble and the millenials are forewarned.

So it would seem that the Fed is in a box, and can't get out. We will see how events work out. For now, cash is king.  

Monday, March 4, 2013

Are the Damn Bankers Running Out of Collateral? Article List

I recommend you bookmark this page in order to preserve these articles in one place. Then follow what these articles are following, the collateral, in order to see the fate of the banks and the economies of the world. The drying up of sound collateral, with only risky collateral taking its place is a recipe for a financial crisis.

One wonders how long we will have this crisis of collateral. We know that the crisis of collateral is always the catalyst for banks no longer lending to each other, for a credit crisis to occur. This is the way it happens folks.

Will we get past the current crisis of collateral, or will the banks freeze up again, putting the world economy in jeopardy? We face deflationary, not inflationary, risks in this collateral squeeze environment.

One wonders how long this relentless chipping away of sound collateral will continue and what it will ultimately do to interbank lending. Failure of Interbank lending is the ultimate source of financial contagion and the onset of a credit crisis. Yet banksters are up to their old tricks, 1. hiding bad collateral, and 2. seeking more risky collateral. 

We even have the banks pawning off toxic collateral to the Fed, to the pension funds and probably, eventually, to the Treasury of the United States.  See Baghot's Rule.

We already have seen how the Fed will not be transferring expected payments to the treasury, because of likely losses on the Fed's balance sheet. So the sneaky way of getting around this would be for the Treasury to take on toxic loans to our taxpayer balance sheet. Then the Fed can get clean treasuries in return and take on more crappy bank loans, and may even be able to make the transfer payments to the Treasury like nothing shady ever happened! 

Here is a helpful collection of articles relating to bankers (sters) running out of collateral:

Primer on International Banking Collateral and Power

Uncertainty Over Collateral Upgrade Trades

The Financial System Is Running Out of Quality Collateral

Big Banks Hide Risk Transforming Collateral for Traders

Banks Tap Pension Funds for Liquidity (Good Collateral)
  
Ray Dalio on Spanish Collateral

ECB Collateral Soup Kitchen

Collateral Damage: Deutsche BAnk, Unsung Credit Risk, and The Story Behind the Ben_Artzi Claims

The Curious Case of Liquidity Traps and Missing Collateral-Part 1

The Curious Case of Liquidity Traps and Missing Collateral-Part 2 

Snapshots of Dysfunction in a Fiat Money World

When Interest Rates Turn Upside Down

The Strange World of Negative Interest Rates

Thanks to Japan We Know How Central Bankers Can Control Inflation

Interest Rates Will Stay Low in the Midst of Bad Bank Behavior and Paul Ryan's Mistake

We Face Derivative Collateral Deflation and ECB Banks Could Be the Losers

Gold and Low Interest Rates 

The above article, the Curious Case of Liquidity Traps asserts that the safe collateral cannot be created without central bank intervention. Yet central bank intervention pushes money out of the real economy and into the hands of the uber rich. If that is not sustainable, we will have banks hiding bad capital. And the Fed and central banks probably wink at that.And so they wink at the creation of financial bubbles, and housing bubbles.

Apparently the bankers and central bankers exist to either steal from MainStreet through QE (the creation of sound collateral) or through the absence of QE (through housing and financial bubbles and the creation of unsound collateral)! Or maybe the Fed will try to have both, QE and a housing bubble at the same time! This will give the appearance of stability, but with collateral shortages there could be a massive collateral crunch on the way, some say by 2016.


To me, these articles show that the banksters are back to their old tricks, hiding risk. Hiding risk is what made the last financial crisis. They even want to dump toxic assets which have no market and have a value that is anyone's guess on our pension funds like Calpers and on insurance companies. Are you kidding me? How can this fraud continue! 

 

 

Stalled Las Vegas Strip project to get new owner - Yahoo! News

Genting buys Echelon for $2 billion Resorts World Las Vegas - Business - ReviewJournal.com

Good news for Las Vegas, as Genting, a deep pocket casino owner from Singapore is buying the old Stardust property from Boyd Gaming.

The project started there ground to a halt in the Great Recession and this project will go a long way in removing blight from the north end of the strip, besides providing new visitors to Las Vegas and more jobs, sorely needed. 

Sunday, March 3, 2013

Simple Primer on International Banking Power

Simple Primer on International Banking and Collateral Power

This is one of most important articles. It is always shown at the top of my blog. While others have said similar things, I see this quest for banking power as a huge conspiracy against the nations and the people. The banks have gobbled up all the quality collateral and are hungry for more. They seek risky collateral when that can lead to financial catastrophe. They seek to have that risky collateral guaranteed by the governments, leading to the moral hazard of wanting still more risky collateral.

I hope you take the time to read the article, and realize that with the derivatives gone wild and with the refusal to unwind these derivatives, lies massive danger to the financial system the world over. Derivatives are the disease and the medicine, toxic collateral assets, can kill the patient and won't cure the disease.

Saturday, March 2, 2013

Matt Busigin On Peak Capitalism - Business Insider

Matt Busigin On Peak Capitalism - Business Insider

There are lies, Damn lies, and statistics. This article represents the lies, damn lies through statistics.

Here are some things I said about the chart, which shows transfer payments from government to the private sector are fairly stable:

But transfer payments also include bailouts of banks, right? What about banks ability to borrow at zero and buy bonds that yield more? Are those counted as transfer payments? If not, Joe, why not? 
and:
  
Also banks make massive profits on interest backed securities, that governments are forced to pay because of low interest rates. Those are transfer payments and I bet those take a mighty toll on mainstreet. And what about speculation in commodities? Speculation comes from transfer payments to Wall Street, but act as a tax on mainstreet as gasoline is about a buck fifty higher than it would be without the speculation.

I think you need to take a closer look at the transfer payments and what they really are.

and in response to a new world order guy who supports the article I said:

 Excess reserves can be used for interbank lending, freeing up other assets for massive speculation that hurts mainstreet. Wouldn't a New World Order Guy know that?

and the new world order guy said social security will one day be too expensive. I said:

 Yeah, we will only be able to fund the banks. Isn't that what austerity is all about, New World Order?? You make me sick.
Here is the bottom line, GDP grows, but more is being funneled to the banks than ever before in the form of interest backed securities, QE, easy terms at the discount window, etc. And less is being transferred to mainstreet, plus they pay a tax for bank speculation

A person named Millie Cooper said this as well regarding the transfer payments:

The interesting point is: SSI/Medicare/Medicaid or Welfare/Unemployment are related to wages, because the employed pay them with their tax dollars, not the corporates which have 5% tax rate in reality after all tax dodging.

How come wages are going down but the transfer payments are going up? The deficit. The capitalists are not paying their share unlike the post lied. And the readership is too stupid to figure this out themselves. 

As big finance gets huge, it will swallow up the wealth of the rest of us. How far that can go before it breaks is anyone's guess. Could it be permanent? I leave that for economics professors to figure out. But there is a war, and it is being waged by big finance against the rest of us. And here is why it is being waged, the constant quest for secure assets to be used as collateral, all the while pushing for risky loans that become secure through government backstops. 

If the assets go bad, or the government is unable to backstop the assets without destroying financial well being of the nation, then it will be time to hang the bankers, assuming the nation survives. I leave that assumption to the economists to figure out as well.



Friday, March 1, 2013

Hedge Fund Druckenmiller says Old Steal from the Young, Diverting Their theft

Druckenmiller On Entitlement Transfers - Business Insider

This article is pure crap. For one thing, the bankers are stealing from the rest of us. For another, it is the hedge fund/banker way to divert attention off their stealing through speculation in futures contracts leading to higher gasoline and food costs. The banksters want to divide us. It is disappointing that Henry Blodget allows this crapola to be published on Business Insider. It is pure crap. 

I emailed Julia La Roche, the author of this article with the following message:



Julia,

I am sure you have showered after posting that Druckenmiller filth but realize that his buddies stole trillions from the wealth of seniors,

that his buddies are bidding up the costs of gasoline and food, and that this con of dividing us is what the banksters do.

If you consider the banksters as being international you are nothing but a traitor to America Julia.

Gary Anderson
Las Vegas, NV

The-Mom-Store: Central Valley Business Times: House Bubble Is Investor Driven

The-Mom-Store: Central Valley Business Times: House Bubble Is Investor Driven


Here is a warning to women and men about why you need to buy a house beneath your means or rent and save the rest. Read about volatility in the housing market and what it can do to your financial future. 

Spending Cuts Signal Austere Future for Domestic Programs - Yahoo! Finance

Spending Cuts Signal Austere Future for Domestic Programs - Yahoo! Finance

A little austerity probably won't hurt, but we can't go the way of Spain, Italy, and the UK, where austerity is so massive that it is killng everyone but the wealthy financially. However, if the House of Representatives, controlled by the Republicans, insists on greater austerity, all bets are off and we could have a worldwide recession.