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KILLER_CLOWN
06-14-2009, 08:51 PM
Bernanke’s Next Parlor Trick

MIKE WHITNEY
Counterpunch
Saturday, June 12, 2009

Federal Reserve boss Ben Bernanke is getting ready to pull another rabbit out of his hat and he’s hoping no one figures out what he’s up to. Here’s the scoop; the Fed chief needs to “borrow up to $3.25 trillion in the fiscal year ending Sept. 30″ (Bloomberg) without triggering a run on the dollar.

But, how? If the stock market keeps surging, investors will turn their backs on low-yielding US Treasuries and move into riskier securities hoping for better returns. The only way to attract more buyers to US debt is by raising interest rates which will kill the “green shoots” of recovery and make it harder for people to buy homes and cars. It’s a conundrum.

In the next year, China will buy roughly $200 billion T-Bills while the oil-producing states and the rest of the world will add about $300 billion to their cache. That leaves more than $2 trillion for the domestic market where cash-strapped investors are likely to avoid government debt like the plague. So, who’s going buy that mountain of low-yield government paper?

The banks.

The Fed has been helping the banks raise reserves for the last year. In fact, excess bank reserves have skyrocketed from $96.5 billion in August 2008 to $949.6 billion by April 2009. Nearly a trillion bucks in less than a year. But, why? Are the banks expecting to expand lending at the fastest rate in history in the middle of a depression?


Of course not. Master illusionist Bernanke is just arranging the props for his next big trick. The fact is, Bernanke anticipated the current wave of deflation and set up a straw man (the banks) to deal with it so it wouldn’t look like he was simply printing more paper to finance the deficits. As soon as rates on 10 year notes hit 4 per cent, the banks (that are borrowing money at 0 per cent) will probably start to purchase Treasuries and keep the housing and retail markets from crashing even faster. It’s called “the old switcheroo” and no one does it better than the Fed.

Bernanke pulled a similar stunt after Lehman Bros flopped and he and Paulson decided that it was time to dump $700 billion worth of garbage assets on the public. The Fed chief and Treasury figured out the only way they could hoodwink congress was to foment a crisis in the credit markets and then moan that if they didn’t get $700 billion to buy up toxic assets in the next 48 hours “there wouldn’t be an economy by Monday”.

Congress swallowed it hook, line and sinker, and weeks later funds were allocated for the Troubled Asset Relief Program (TARP) Of course, no one in the financial media noticed that the storm in the credit markets was NOT caused by “troubled assets” at all (for which TARP funds have NEVER been used) but by skyrocketing LIBOR and TED spreads and other indicators of market stress. Market Ticker’s Karl Denninger was the only blogger on the Internet who figured out that Bernanke had deliberately caused the crisis by draining over $100 billion from the banking system just 10 days after Lehman defaulted.

As soon as Paulson and Bernanke had pulled off their multi-billion dollar heist, the Fed chief created lending facilities (completely unrelated to the TARP) which provided government guarantees on money markets and commercial paper. This lowered LIBOR and TED spreads immediately and relieved the stress in the credit markets. The crisis had nothing to do with toxic assets. To this day, none of the junk securities have been purchased from the banks under the TARP program. $700 billion has vanished in a puff of smoke. Poof!


http://www.counterpunch.org/whitney06122009.html

SBK
06-14-2009, 08:54 PM
Am I the only one that thinks a move like this is pretty much a perfect example of why banks are in the mess they are today? Buying worthless assets?

KILLER_CLOWN
06-14-2009, 08:57 PM
Am I the only one that thinks a move like this is pretty much a perfect example of why banks are in the mess they are today? Buying worthless assets?

You're definitely not alone, each passing day more and more people are seeing the man behind the curtain.

banyon
06-14-2009, 08:59 PM
This seems like a reasonable guess as to what will happen and likely the reason we stopped tracking M3.

KC native
06-15-2009, 09:51 AM
Bernanke’s Next Parlor Trick

MIKE WHITNEY
Counterpunch
Saturday, June 12, 2009

Federal Reserve boss Ben Bernanke is getting ready to pull another rabbit out of his hat and he’s hoping no one figures out what he’s up to. Here’s the scoop; the Fed chief needs to “borrow up to $3.25 trillion in the fiscal year ending Sept. 30″ (Bloomberg) without triggering a run on the dollar.

But, how? If the stock market keeps surging, investors will turn their backs on low-yielding US Treasuries and move into riskier securities hoping for better returns. The only way to attract more buyers to US debt is by raising interest rates which will kill the “green shoots” of recovery and make it harder for people to buy homes and cars. It’s a conundrum.

In the next year, China will buy roughly $200 billion T-Bills while the oil-producing states and the rest of the world will add about $300 billion to their cache. That leaves more than $2 trillion for the domestic market where cash-strapped investors are likely to avoid government debt like the plague. So, who’s going buy that mountain of low-yield government paper?

The banks.

The Fed has been helping the banks raise reserves for the last year. In fact, excess bank reserves have skyrocketed from $96.5 billion in August 2008 to $949.6 billion by April 2009. Nearly a trillion bucks in less than a year. But, why? Are the banks expecting to expand lending at the fastest rate in history in the middle of a depression?


Of course not. Master illusionist Bernanke is just arranging the props for his next big trick. The fact is, Bernanke anticipated the current wave of deflation and set up a straw man (the banks) to deal with it so it wouldn’t look like he was simply printing more paper to finance the deficits. As soon as rates on 10 year notes hit 4 per cent, the banks (that are borrowing money at 0 per cent) will probably start to purchase Treasuries and keep the housing and retail markets from crashing even faster. It’s called “the old switcheroo” and no one does it better than the Fed.

Bernanke pulled a similar stunt after Lehman Bros flopped and he and Paulson decided that it was time to dump $700 billion worth of garbage assets on the public. The Fed chief and Treasury figured out the only way they could hoodwink congress was to foment a crisis in the credit markets and then moan that if they didn’t get $700 billion to buy up toxic assets in the next 48 hours “there wouldn’t be an economy by Monday”.

Congress swallowed it hook, line and sinker, and weeks later funds were allocated for the Troubled Asset Relief Program (TARP) Of course, no one in the financial media noticed that the storm in the credit markets was NOT caused by “troubled assets” at all (for which TARP funds have NEVER been used) but by skyrocketing LIBOR and TED spreads and other indicators of market stress. Market Ticker’s Karl Denninger was the only blogger on the Internet who figured out that Bernanke had deliberately caused the crisis by draining over $100 billion from the banking system just 10 days after Lehman defaulted.

As soon as Paulson and Bernanke had pulled off their multi-billion dollar heist, the Fed chief created lending facilities (completely unrelated to the TARP) which provided government guarantees on money markets and commercial paper. This lowered LIBOR and TED spreads immediately and relieved the stress in the credit markets. The crisis had nothing to do with toxic assets. To this day, none of the junk securities have been purchased from the banks under the TARP program. $700 billion has vanished in a puff of smoke. Poof!


http://www.counterpunch.org/whitney06122009.html

Hey at least it's not info wars but it's still far off.

First off, if the banks borrowed at 0 and then purchased treasuries at 4% and earned the spread it would do nothing for the housing market because they would just be parking that money. Beyond that, why would the banks buy treasuries at 4% when they can lend for 30 year fixed mortgages at 5.5% and up (and we're talking about traditional 20% down mortgages) that's leaving a lot of money on the table.

Second, this crisis was a result of the dreck that companies were holding. Credit disappeared because no one knew whether they would get their money back if they lent it to an institution that was levered up with a bunch of toxic assets on the balance sheet. If you are worried someone might not be around tomorrow then you sure as hell aren't going to lend them any money.

Third, the reason no toxic assets were bought is because if you actually bought the assets someone has to get hosed. If TARP paid market rates then the banks would have had to written down the assets they were holding and then we would have seen even more institutions become insolvent. If we paid what the banks were holding these assets at then the taxpayer gets screwed because we would be overpaying for assets.

BucEyedPea
06-15-2009, 09:52 AM
Is KCnative Bernanke? Or channeling him?

KILLER_CLOWN
06-15-2009, 09:57 AM
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KC native
06-15-2009, 10:04 AM
Is KCnative Bernanke? Or channeling him?

Listen you dumb bitch, I've repeatedly said I'm not a Bernanke fan. I guess you have to actually read to notice things like that though.

KILLER_CLOWN
06-15-2009, 11:54 AM
Faber: Bernanke is a “Criminal”, a “Mad Man”, a “Destroyer of Wealth”

Washington’s Blog
Monday, June 15, 2009

In an interview on King World News, PhD economist Marc Faber called Bernanke a “mad man”, a “destroyer of wealth”, and a “criminal”.

He also called Geithner a “liar”.


http://www.kingworldnews.com/kingworldnews/Podcast/Entries/2009/6/5_Dr._Marc_Faber.html

http://www.georgewashington2.blogspot.com/2009/06/faber-bernanke-is-criminal-mad-man.html

googlegoogle
06-15-2009, 02:00 PM
Listen you dumb bitch, I've repeatedly said I'm not a Bernanke fan. I guess you have to actually read to notice things like that though.

Bernanke actually thinks capitalism works unlike our little communist.

KILLER_CLOWN
06-15-2009, 03:41 PM
Bernanke actually thinks capitalism works unlike our little communist.

Capitalism? you must have meant socialism.