BLATANT Monetization Uncovered

Originally posted by Hastobemoretolife
reply to post by yellowcard

 

I'm pretty sure the Fed Buying Treasuries is illegal, or was or who knows anymore.

The Fed did the same thing this time they have always done they made credit cheap to get to where people had to borrow more and more money to stay competitive in the market. Eventually the bottom falls out of the market because of the bubble created and people can no longer afford the debt.

Now how the fed controls treasury prices is by regulating the cost of the treasuries, by either making them cheaper to buy, or more expensive to buy. That is the way the Fed is supposed to regulate the money supply.

Oh... you know what. This reminds me of an analogy I once heard about the regulation of the money supply from from the inverse kinda perspective.

If you imagine wealth flowing through the economy as a river that passes by all of us. As long as the river flow is rather consistent or predictable, folks will settle down by it and become more sedentary.

But every once in a while, a bubble occurs, where you an "over-exuberant" amount of wealth flowing through much faster than normal, then it wipes out the dwellings along the edge, a new edge forms for a while, with much more built up around it because it's now twice the size or higher...

All the while, other rivers which were normally fed by this amount of capital, well their rivers start drying up, because more and more of the wealth in the system is being pulled through those feeding the bubbles. Mind you this is in a relatively closed system. It's like boom and bust.

Now when this happens on a smaller scale, it's not that big of a deal, because folks will just pick up and move to the other bigger rivers being formed, thus reinforcing this bubble.

When the flow into the recently gorged river settles down, or the bubble bursts,the bust occurs, that wealth is being redistributed into other areas of the relatively closed system and it's being redistributed in a fashion that has been naturally selected by both the markets and the actual commerce at the local levels. The area that ballooned during the most recent flood of money will often not recede completely, just equalize itself in a way that's more organically informed.

My issue was always, how do you regulate the flow so that bubbles occur, but the force is harnessed in a way that the busts don't annihilate entire swaths of market sectors...

Now following this analogy a little further, even though adding more throughput to the system through the process of increasing the size of the closed system, namely through lowering interest rates or... even printing more money than normal, this could be the answer, if they work the interest rates at the same time for long enough time to generate interest in our debt again.

And given the population growth that keeps occurring this almost makes sense to print more money, but only if it's done right, and with a quick ear to the ground to know when to stop and when to start in small increments as you try to dial in the next area of equilibrium. Then you just hold on tight until another bubble forms.

In reality, Greenspan should have been increasing interest rates long ago... he fostered the housing bubble. But here was the problem... it was his way of trying to resolve the problem caused by the dot-bomb bubble. In reality, we probably should have kept interest rates the same and just threw more cash into the system at the end of it.... the reason? Entire new markets were created. They need that increased flow through the increase of the system to maintain themselves as our entire society grew.

What is going on now is when we went off the gold standard in the 70's our economy turned into a huge ponzi scheme and just like Madoff you run out of investors to buy the debt.

One of the reasons we took ourselves off the gold standard was in order to grow. Or we could have just devalued gold... but we had to account for population growth and market growth in some way.

But if it's not done right it can cause serious problems. But it has to be done, slowly over time, and in very pointed ways, unless you don't have any population growth :-)


Now Madoff was a closed system contained in a closed system, and thus was siphoning off of others without regard for the larger system. That's a bit different. than running an economy.

So now what is happening is the fed is buying the debt with the money they create to keep things afloat, and they hope people don't find out about it well looks like they just did.

Yep, and this becomes the other tactic... not just artificial flow to sustain recently popped bubbles in small areas, but now actually fully eating your own tail.

so you have three real tactics...

1. Lower Interest Rates to encourage people to be interested in debt in order to grow markets, IF, and it's a BIG IF, you have people interested in purchasing debt.

2. Increase Interest Rates in order to encourage people to purchase debt. This should have been done whilst the money was being printed... I am at a complete and utter loss why it wasn't. The housing sector be damned, we had an economy to rescue, so no one else can get a loan because the rates are too damned high... you need to get people INTERESTED in the debt WE ALREADY HAVE!

At the end of the day you have to make debt profitiable to both the loaners and debtors :-)

3. And that's where number 3 comes into play. Buying your own debt.

I'm not really sure how I feel about that to be honest...

The situation we are in is nothing like the Great Depression we didn't have anywhere between a quarter of a Quadrillion dollars and a Quadrillion dollars in out standing debt floating around, and there is no mechanism to continually print money and keep the system afloat they did they already played that card.

See that's why I say, raise interest rates, and then re-securitize the current debt with new debt so that one covers the other, and sell it as a package deal.

Not like in the housing market where they had adjustable rates and crap. At a fixed rate.

It is a very concerning situation we have here...

Look folks, let's get down to basics. There are really only a few questions that need to be answered here on this post. First, what will be the result of this insane fiscal policy by the FED? Second, how long will it take for the whole thing to fall off the egde of the cliff?

Some other questions to ask. because of China's position in the whole nasty goings on, what do they do? Do they say, "no more buying of US debt", and let the chips fall where they may? Do they wait to see what other countries do? As I see it, at some point soon, the FED's ponzi scheme gets exposed to the public , like bernie Madoff. It's about the same kind of scam, and they are good at running it. It also seems, that at some point, the whole thing blows up in their face. I think when the results of the treasury auctions is absorbed by the press, and the right questions are asked enough, the jig will be up. The FED can only keep things under wraps for so long. Again, I don't think we have long to wait. The grease is getting hot in the frying pan.

I haven't seen it anywhere on this thread yet but a link to the source that both Zero Hedge and Denninger are siting is here.

Chris Martensen Blog

A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using "primary dealers" and "POMOs" and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.

Look at the two spreadsheets and the CUSIPs on them the debt was auctioned last week and POMO'd this week. If that isn't monetization i don't know what is.
This is literally the type of crap that third world banana republics and tinpot dictatorships do to give the illusion of solvency.

EDIT TO ADD:

Looks like this was originally mentioned in an oped at financial sense.

Lending a helping hand at Financial Sense

It makes you wonder if the Fed is not encouraging primary dealer participation in these auctions by making it abundantly clear that the Fed will absorb a sizeable portion of their inventory quickly, while still assuring dealer profits. This is about as close as it gets to the Fed lending directly to the Treasury, without actually doing it.

[edit on 6-8-2009 by jefwane]

Bernake Perjury?

www.youtube.com...

Add to that list of articles, The Fed's UST-POMO Pyramid Scheme Exposed

The question is did the Fed implicitly tell the primary dealers they are merely holding the treasuries for a flip, and that it would acquire them immediately. Absent this $4.8 billion in effectively monetized bonds, what would the Bid To Cover have been for the primaries? Would this have been the second practically failed auction for USTs after the deplorable 5 year auction results a day prior? One wonders if there would have been 62% indirect interest in these bonds (which the day before had a measly 32.5% indirect bid) if the purchasers were aware of the Fed's immediate prompt monetization of a large part of the directs' balance.

It is truly a sad state of affairs when the Fed has to manipulate public and media perception in this way, and has to cover up for the complete lack of interest in US Treasuries.

ETA: Monetizing Debt

In the United States, and in many other countries, the government does not have the right to issue currency to pay its bills. In this case the government must finance its deficit by issuing bonds to the public to acquire the additional funds to pay its bills. However, if these bonds do not end up in the hands of the public, the only alternative is for them to be purchased by the central bank. For the bonds not to end up in the public hands the central bank must conduct an open market purchase. This action by the central bank increases the monetary base, through the money creation process. This process of financing government spending is called monetizing the debt.[1] Monetizing debt is a two step process where the government issues debt to finance its spending, the central bank purchases the debt from the public, and the public is left with high powered money. When government deficits are financed through this method of debt monetization the outcome is an increase in the monetary base, or the money supply. If a budget deficit persists for a substantial period of time, then the monetary base will also increase, shifting the aggregate demand curve to the right leading to a rise in the price level.[2]

To summarize: a deficit can be the source of sustained inflation only if it is persistent rather than temporary and if the government finances it by creating money, [through monetizing the debt], rather than leaving bonds in the hands of the public.[3]

In this case, the current activities, the monetization is going to finance FEDERAL SPENDING PROGRAMS.

[edit on 8/6/09 by redhatty]

a new fool is born every second.

They WANT you to believe inflation. This is their sneaky way of "letting it slip out"....oops. Oops, my arse.

So with this supposed inflation, the market will ramp even higher, and more and more of Plumber Joe and Nurse Sue's will put their money back in the market.

THERE IS NOT ENOUGH DOLLARS IN THE ENTIRE WORLD TO SATISFY THE DEBT WE HAVE INCURRED. OUR DEBT IS IN THE TENS OF TRILLIONS OF DOLLARS. THE MONEY SUPPLY (DOLLARS) ARE LESS THAN 500 BILLION.

YOU DO THE MATH, AND THEN TELL ME WE ARE HEADED FOR INFLATION.

WE ARE HEADED FOR DEFAULT.

Deception is an evil thing when it orchestrated with such fine creativity.

You will be swept off your feet...soon...by deflation.

Good luck.

[edit on 6-8-2009 by allclear]

This all seems to fit really well with what we have been told.

I know some don't like Alex Jones, but so far he has it right in the
Obama Deception movie.

The last part about getting everyone back in and letting it dump hard to the bottom sure looks like a fit now.

I think that will be the moment of SHTF I guess.

Oh well, better to have "stuff" than money right now...........

you can't hide much in the computer age.....but here me out cause i think one of the U.S strengths (petro dollar) could be used to increase the recycling of for oil payments in dollars back into treasury's

the fed will monetize this is no secret.........john mauldin talks about this often ....jim willie knows they will monetize more than they say.....it's really not a big shocker

the biggest issue i see that could lead to a Currency problem faster is not any type of monetary inflation from monetization because the banks are not lending the money out (hello!).......and the treasury is not printing 1000$ notes (hello!).......the issue is that when ^ other gov'ts get the fed's hand tipped to them that they will step in and buy larger amounts of the us's own gov't debt^ this gives the foreign countrys a chance to step away from the buying without a rapid loss in the rate they get in return for the dollar.... because the fed will be there to buy up the difference to insure interest rates don't get that high.....because this would topple the commercial real estate and residential real estate market yet again and that is not small potatoes

should foreign gov't become absent from more gov't auctions we may just
use the banks to short the heck out of stocks and send some safe haven money into treasury's......and bring buyers back OR we could use the big banks to SHORT THE DOLLAR ......and then send oil prices UP UP AND AWAY........now since we have the PETRO DOLLAR.....and other country's need dollar to PAY for their higher oil prices....we would have more buyers of gov't debt since the petro dollar recyling = country's use the dollars they get paid for the oil they export (OPEC) to purchase more U.S gov't debt which is conveniently denominated in dollars.....should they balk at this .......we may try and destabalize the PTB in their country's and give them heck.


[edit on 6-8-2009 by cpdaman]

reply to post by cpdaman


In other words.

We still get screwed.

[edit on 6-8-2009 by j2000]

I will attempt to embed this as I don't think anyone commented on it and Bernake should do hard time for lying to Congress about this.





[edit on 8/7/2009 by sad_eyed_lady]

So what do we as citizens do?
Do we even have a choice?

Hundred of thousands of people are entering the unemployment lines month after month. Like a domino effect, all of our industries are related. For instance; I am in the Insurance Industry and as people become unemployed and make the tough budget decisions such as 'do I buy food and cloths for my family or pay rent, or insurance, etc.' - the necessary cuts are made and products are not purchased, bills are not paid in turn causing other people to lose their jobs because the companies they work for are not making money.

It really feels like nothing more than a matter of time before we are all effected by this domino effect in some way or another.

We all take comfort in our daily routine, we try to take this issue out of our minds. Every day in my office we wait for the notice to come down from corporate. Its happened Four times and I have been lucky enough to dodge the bullet, a few friends haven't. I know my time will come though and I will be the one being asked to leave.

It seems as though, with all the events taking place across the county, that the country is slowly killing itself. Billions of bail-out money going to companies that are not saving jobs/economy. Government programs that greatly increase our debt. Alabama wanting National Guard to help with any issues that present themselves. Furlongs taken by local Gov. Employees. Tent cities. Sheriffs and Police Chiefs in California taking their leave. States struggling to balance budgets releasing inmates. Forgiven Governments turning away from buying American T-bills, T-Notes and T-Bonds, etc. I can go on at length here but I think everyone gets the point. We have this odd American Community Survey that wants to know how many times I flush the my toilet and if I drive to work with the same car every day? Why such odd questions? What is going on here?

I think we all have a wide spectrum of questions and I don't feel as though any of us will get an answer to any of them. In fact I know we are a little nervous asking these questions in public out of fear of being arrested or put on some list. Is this what America has become. We all wait for the axe to fall when the SHTF in hopes that we are fine on the other side....



[edit on 7-8-2009 by Mr.Hyde]

Very important information. Star and flagged.

Everyone on mainstream is talking recovery and housing price increases. This shows that this is far from the case.

Bernanke says FED will monetize debt


Bernanke Perjury?

[edit on 7-8-2009 by Pentothal]

So im paying back the debt to the banks, the government has created ?

Thats f´ed up.
And it seems that this always has been the purpose of taxes.

But why? i´m the injured party in all this . why should i pay?


Greetings from Germany

[edit on 7-8-2009 by Dynamitrios]

Thank you so much sad eyed lady.american citizens will soon have their eyes ripped wide open as chaos rains down in 2010. It will take six more months for the consequences to be felt.

I guess my biggest question is whether or not to take both flu shots.

The proletariat is just beginning to show signs of revolution at town hall meetings. The govt. Is trying to dismiss it as a small group of organized instigators.

When they realize its average citizens involved in the revolt, the virus will be released. I've heard that the two-shot series of vacinations are meant to save the children so they can be soldiers and govt. Workers.

Parents may be given a different series and those who refused the initial series will be forced to commit suicide with a special cocktail for instigators.

If our entire financial system colapses, it will be much worse than 1929. People today have less empathy for their fellow citizen. Drug use both legal and illicit is much higher. The population of schizophrenics and mentally ill who were locked up in asylums in the 1930's, roam the streets today.millions of illegal immigrants seethe with envy and hatted for citizens and will take perverse joy in aiding the collapse.

Have a great day!

reply to post by sad_eyed_lady


They're propping it up for the American people as much as anyone else or am I missing something.

Originally posted by ActivePatriot

The real danger? I wonder what China will do when we can't pay our debts.

Can we give them Kalifornia?

Just sayin'