Archive for the ‘US Treasury’ Category
Everybody is talking about the cuts in government spending with the $85 billion in forced spending cuts in military and social programs. $85 billion amounts to little more than a 2% cut in $3.8 trillion (or $3,800 billion) in federal spending per year. Didn’t most working Americans just suffer a 2% pay cut with the expiration of the Social Security tax holiday? How many times have we heard that thousands of government jobs will be lost to sequestration? The so-called Great Recession destroyed at least 8 million private sector jobs, and if you count the underemployed and discouraged workers, it’s easily 23 million.
Why are government employees being considered as some sort of sacred cow? What many are feeling was summed up with a recent comment on the USAWatchdog.com site from “Chuck O.” He wrote, “I’ve retired after 44 years working. Throughout the entire period, I lived through no fewer than 10 lay-offs and cut-backs. I have yet to see any appreciable lay-off or cut-back in the federal work force (EVER). I feel it is about time “they” should take a “hit.” How about a 20% cut back on ALL salaries? “They” need to share in the austerity. We all should have the same insurance benefits, too. “Their” retirement program and health insurance is way out of line; cut it back. A 20% cut would be way better than NO PAY at all. 20 % could really help lower the debt. I’m really getting KILLED by this money printing. In the 12 years I’ve been retired, my dollars have lost more than 30 % of their purchasing power. Obama’s crew hasn’t a clue. My wife and I have BOTH had to go back to work at 70 years old.”
With foreigners increasingly shunning Treasuries and the dollar, the only way to keep all those government jobs is to raise taxes on the private sector or print money. The Republicans caved on tax increases at the beginning of the year, so that option is closed. Now, we are left with the Federal Reserve’s “open-ended” money printing operation that creates $85 billion a month out of thin air. A little more than half of that amount ($45 billion) goes to buy Treasury bonds to finance the federal government. The rest ($40 billion) goes to the continued banker bailout that buys their sour (and I think fraudulent) mortgage debt. The money printing is what’s causing Chuck O’s “30%” loss in purchasing power for his retirement dollars. As the money printing continues, the buck will buy less and less.
Why doesn’t the President divert just 2 months of the $40 billion the Fed creates every month to continue the banker bailouts to stop most of the $85 billion of spending cuts? In case you haven’t noticed, the bankers are a sacred cow. The big banks have gobbled up trillions in bailouts already, and there is no end in sight. After all, the Fed action is “open-ended.” The banks are the reason why the U.S is in financial trouble, and the continuing banker bailout is why the economy will never get better. The only reason why the economy has not collapsed is the Fed can print money to buy sour debt that no one else would touch.
Because of all this money printing, the rest of the world is in the process of shunning the dollar and the U.S. Treasury. It looks like gold, or some other gold-backed currency, will facilitate global trade in the not-so-distant future. Jim Willie of GoldenJackass.com says when the world stops using the dollar, it’s game over. In a recent post, Mr. Willie wrote, “The gold trade finance concept ushers in a new alternative system long sought in order to create a more viable equitable sustainable financial structure. The banking system should serve trade, not the reverse. Hence the UST Bond will slowly vanish from the global banking system, and the US Dollar will lose its global reserve status. The end result is an unavoidable slide by the United States into the Third World.” (Click here for the complete GoldenJackass.com post.)
You want to see what an “unavoidable slide by the United States into the Third World” looks like? Behold the bankrupt city of Detroit that recently became a ward of the State of Michigan. Detroit’s bond debt alone is a whopping $14 billion. I doubt it’s worth pennies on the dollar, if that much. You are not hearing much about this in the mainstream media (MSM). Maybe it’s because this is what socialism looks like when you finally run out of other people’s money. In a recent post on the FinancialSurvivalNetwork.com, Kerry Lutz wrote, “The city’s day-to-day operations are in total meltdown. Many police calls go unanswered. Large sections of the city are dark at night because thieves have stolen the streetlights’ copper wiring for scrap. Public education is a euphemism for warehousing and babysitting the criminal youth of tomorrow. Packs of wild dogs are found throughout the city. In many areas, garbage collection is a luxury that can no longer be afforded, and street cleaning is non-existent.” (Click here for the complete FSN post.)
Do you really think Detroit can turn things around without big cuts and sacrifice? They keep telling us about how the cuts will hurt and they need to be done in a “smart way.” I’ll bet Detroit would have liked to have tackled their financial problems in a “smart way” and made all of those “smart cuts.” Every time I hear the “smart cut” argument, I think, okay, give me $85 billion in “smart cuts” this year and every year for the next 10 years. I also keep hearing that we need to fix our financial problems long term and not now during this “fragile recovery.” Haven’t the powers been telling us this for years? You can see how well it has worked.
Remember, what is going on with the $600 billion in new taxes and $1.2 trillion in spending cuts (total of $1.8 trillion) is less than half of what the bi-partisan Simpson-Bowles debt commission came up with in 2010. The Simpson-Bowles plan was around a $4 trillion combination over the next 10 years, and even that only slowed the growth of our debt. Everyone keeps asking about the pain caused by the spending cuts. They are asking the wrong question. Everyone should be asking: What happens if the U.S. doesn’t cut spending? I think the answer is Detroit.
Greg Hunter – USA Watchdog
More Fed Follies…. Paper
“The combination of a massively expanded central bank balance sheet and an unsustainable public debt trajectory is a mix that has the potential to substantially reduce the flexibility of monetary policy,” the economists write. “This mix could induce a bias toward slower exit or easier policy, and be seen as the first step toward fiscal dominance. It could thereby be the cause of longer-term inflation expectations and raise the risk of inflation overall.”
There is no flexibility and it is the direct and proximate consequence of Congress and The Adminstration ignoring the fundamental realities of arithmetic — specifically, the properties of exponents — that have led to this.
This is clearly a “CYA” paper from Mishkin and others — they know what’s coming and are very, very interested in making sure they don’t hang (at least politically) for it.
As for the conclusion:
“The bottom line is that no matter how strong the commitment of a central bank to an inflation target, fiscal dominance can override it,” the authors of today’s paper warned. “Without long-run fiscal sustainability, no central bank will be able to keep inflation low and stable.”
“While fiscal dominance is not an immediate risk, there are important elements in the current makeup of U.S. fiscal and monetary policy that suggest increasing attention will be paid to this risk in the years ahead,” the authors said.
Ok, prove it.
Stop all asset purchases right now and leave the market alone.
Let’s see where rates go and what that does to Treasury’s financing costs.
My assertion that they’re trapped can be falsified. They won’t do it, because they know I’m right and was in 2007 and 2008, that they were wrong five years ago, and that their influence is no longer a matter of monetary policy, it is a matter of fiscal necessity — and cannot be reversed without Congress first shutting off all deficit spending and being willing to pay the interest coupon on the existing debt that already exists.
This means a roughly 50% cut in government spending (ex-interest), a doubling of current collected taxes (not rates; due to lawful avoidance you’d have to raise rates much more than by a factor of two!) or some combination of the two.
The only way we can stop what is rapidly becoming an inevitable fiscal crack-up coupled with or worse, initiated by the inability of the bottom two quintiles’ ability to buy basic necessities is to put a stop to this crap right now.
Every day that this continues is another day that the exponential arithmetic compounds and the pain that has to be accepted to get out of the box becomes worse.
We’re not far from the point where this debate will become academic and no amount of “reform” or “change” will matter at all.
At that point loss of control by both The Fed and Government become inevitable.
MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that they are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
Oh I see.
Jeffrey Lacker, the head of the Richmond Fed, originally raised the allegation during a Fed conference call in August 2007, and he stuck to his 5-year-old claim against the current U.S. treasury secretary in a statement provided to Reuters on Friday.
“From conversations I had prior to the video conference call on August 16, 2007, I was aware of discussions among a few large banks about borrowing from their discount windows to support the asset backed commercial paper market,” Lacker said in the statement. “My understanding was that (New York Fed) President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives.”
If you or I were to do something like this we’d go directly to jail, especially if we traded on it, and it is clear that many people did.
If you remember, this was the infamous August 17th Discount Rate Cut that buried myself and a huge number of other people who were short (and correctly so) at the time. The market inexplicably rose into the close on the 16th — and then the hammer came down on the 17th before the open.
So may I ask two questions:
- Why is Geithner not under indictment?
- Why have none of the other FOMC members been held to account for misprison on this event, which they all heard on the conference callincluding the Chairman, and thus have all been aware of — and done nothing about – for the last five years?
Mother should I trust the government?
Answer: Not as far as you can throw it.
Discussion below (registration required to post)
Just because the biosphere is going to be toast at some point within the next 100 years doesn’t mean we can’t have some serious fun now. There’s certainly no dearth of hilarious news to go around. When I was called for jury duty last year, I told the lawyers and court officials that I was a writer. They asked me whether I wrote fiction. No, I said, I never write fiction and rarely read it. I told them Real Life is always better than fiction. Having seen a lot of things, they could only agree.
What you’re about to read is not fiction. This is really happening. We don’t make this stuff up. I’ll quote fromBloomberg’s Treasury Scarcity to Grow as Fed Buys 90% of New Bonds.
Even as U.S government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds.
The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found. At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets [T-bills] according to JPMorgan Chase & Co…
The Fed has pumped money into the financial system by purchasing more than $2.3 trillion of Treasuries and mortgage- related securities in three rounds of policy called quantitative easing. The latest program announced Sept. 13 involves buying $40 billion a month in mortgage securities, and has no end date or fixed total amount.
A “number” of Fed officials said the central bank may need to expand its purchases next year, according to the minutes of the Federal Open Market Committee’s Oct. 23-24 meeting. Bond traders predict policy makers will announce at their Dec. 11-12 meeting that they will make new Treasury purchases next year of about $42.9 billion a month, according to the average estimate of primary dealers surveyed by Bloomberg News.
Surely there is a level of absurdity at which serious commentary is no longer required. Not only have we reached that level, but I believe we have moved well beyond it. The Federal Government borrows money. To cover that new debt, the Central Bank prints up some crisp new bills in large denominations and purchases the debt. What could be easier? And to make the deal even sweeter, so-called primary dealers (financial institutions, aka. the big banks) make a boatload of money acting as middlemen in those purchases. How sweet it is!
But there must be—harrumph! harrumph!— some Very Serious Purpose behind this transparent scam. And indeed there is. In fact, there are several Very Serious Purposes.
Even after U.S. public borrowings outstanding grew from less than $9 trillion in 2007 as the U.S. raised cash to pay for spending programs designed to pull the economy out of the worst financial crisis since the Great Depression, rising demand coupled with a drop in net supply means bonds will be scarce.
“The shrinking amount of bonds in the market is lowering rates and not just benefiting the Treasury, but providing lower rates for private-sector decision-makers as well,” Zach Pandl, a senior interest-rate strategist in Minneapolic at Columbia Management Investment Advisers LLC, which oversees $340 billion, said in a Nov. 30 telephone interview.
“The Fed is not creating this scarcity to help out the Treasury, it’s primarily to get the economy going.”
[Bond] buyers range from central banks to financial institutions stocking up on high-quality assets to meet the Dodd-Frank financial-overhaul law and global regulations set by the Bank for International Settlements.
They’re helping the Fed and the Obama administration keep borrowing costs at all-time lows for everyone from consumers to Walt Disney Co…
U.S. 10-year yields fell seven basis points, or 0.07 percentage point, last week to 1.62 percent in New York, according to Bloomberg Bond Trader prices. The benchmark 1.625 percent note maturing in November 2022 rose 22/32, or $6.88 per $1,000 face amount, to 100 3/32.
Programs to pay for the bailout of the financial system, an extension of unemployment benefits and to bolster housing helped cause the size of the U.S. taxable debt market to swell 27 percent since 2007 to$31.3 trillion, according to Nomura Holdings Inc. The figures exclude money-market securities such as commercial paper…
Although I put it in the red font, I want to make sure you get the joke. The total size of the U.S. taxable debt market, excluding money-market securities is
And in case you missed it, Walt Disney, which has lost money for 18 consecutive quarters, is doing its bit in America’s Heroic War on Solvency.
Walt Disney sold a record amount of debt last week at the lowest interest cost it’s ever paid. The company issued $3 billion of bonds on Nov. 27 in a four-part offering with coupons ranging from 0.45 percent on three-year debt to 3.7 percent for 30-year securities.
The issue was the biggest in the 89-year history of the Burbank, California-based company.
Anything else I might say would be superflous. Real life is always better than fiction.
Well, OK. There are rare exceptions. I’ll let Jim Abrahams and the Zucker brothers take it from here.
By the way, is there anyone on board who knows how to fly a plane?
Dave Cohen – Decline of Empire
(Reuters) – The Treasury Department and Federal Reserve were blindsided and angered by New York’s banking regulator’s decision to launch an explosive attack on Standard Chartered Plc over $250 billion in alleged money laundering transactions tied to Iran, sources familiar with the situation said.
By going it alone through the order he issued on Monday, Benjamin Lawsky, head of the recently created New York State Department of Financial Services, also complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions, several of the sources said.
What’s complicated here? The facts appear to show that the bank didn’t give a damn about what the United States law said or what regulators thought. That’s what the email context appears to demonstrate.
Treasury and the US Government in general have a long history of looking the other way and simply imposing tiny fines and hand-slaps for conduct that would land any other entity in front of a court on felony charges. Just try doing business with blacklisted Iranian firms yourself and see how fast you get locked up!
The law either applies to everyone or it is a joke. We have myriad examples over the last few years of “handslap” sorts of fines imposed for conduct that were you or I to engage in it would earn us a long and very unpleasant date with Bubba in a nice gray cell.
A spokesperson for the Federal Reserve said it had been working closely with various prosecutorial offices on matters involving Iran and other sanctioned entities, but could not comment on ongoing investigations.
White House Press Secretary Jay Carney said the government takes alleged violations of sanctions “extremely seriously” and the Treasury remains in close contact with federal and state authorities on the matter. The Treasury declined to add to that comment.
Obama’s administration, like Bush’s before him, have done exactly nothing about all the various and blatantly apparent violations of the law by financial institutions. There are only two sanctions that work when it comes to corporations — you either jail the people involved (literally) or you revoke or suspend corporate charters. Any sort of monetary penalty is ineffective because it is just passed through to customers; this is particularly true when the firm involved is considered “essential” in some way — such as a bank or pharmaceutical company.
Proof that these “fines” do not deter behavior comes in the fact that despite consent decrees and agreements not to offend again virtually all of these firms are in fact recidivists; worse is that most are three-time losers which for ordinary people exposes them to “three strikes” laws that imprison them for life.
New York is right and the US Government and Fed are both not only wrong, they’re willing co-conspirators.
Barofsky: ‘Geithner Admitted To Us Privately That Obama’s Housing Policy Was DESIGNED To Sacrifice Homeowners In Order To “FOAM THE RUNWAY” For The Banks’
This is a doozey…
More secrets revealed about Geithner’s penchant for protecting Wall Street. From a July 24 appearance on MSNBC’s Morning Joe, that left the panel stunned in disbelief.
I bet Tim wishes he didn’t throttle Barofsky that one day…
Neil won’t stop torching the Treasury Secretary, everywhere it seems. I’ve got at least 10 Barofsky clips from the past week. Granted, it is a book tour, but praise the Rain Gods,because Geithner is being torched early and often by the ex-SIGTARP with a massive chip.I’ve written it before. Geithner tried to bully the wrong dude. As a general rule, it’s probably best not to threaten former Federal prosecutors. Exposing scumbags like Geithner is Acapulco beach-side, Dos Equis drinking, leisure and vacay to Barofsky, who dealt with death threats from Mexican and Colombian drug lords as a normal part of his old gig.
Neil Barofsky Transcript:
Some of the other goals that Congress insisted so that TARP could get passed, things about preserving home ownership and helping deal with the foreclosure crisis, promises that were made by Treasury that were later abandoned. You have a housing program that was supposed to spend $50 billion to help struggling homeowners. And as I detail in the book, Geithner admitted to us that it was really more about, in his words, “foaming the runway” for the banks. And the result? A program that to date has spent around 3 of the 50 billion dollars.
What he said was that the banks could handle a certain number of million of foreclosures over a certain period of time and any more than taht would put them in jeopardy, and this program would help “foam the runway,” help stretch out the foreclosure crisis. And that’s why more money has been spent, more TARP money went to American Express, a credit card company, than went to help all the struggling homeowners.
The HAMP bait-and-switch that Geithner organized inflicted real pain on real Americans:
The most disturbing parts of Barofsky’s book are stories of Americans who were made worse off by Obama’s bailouts. One California business owner who could have sold his house at a loss, but maintained some savings and his credit history, was enticed into a HAMP trial modification that was supposed to cut his payment in half. Instead, thanks to HAMP, he lost his house, his savings, his credit and his business.
Keep this in mind while Obama prattles on about his undying support for the middle class.