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| User Info | The Warning Shot Fired Yesterday in forum [Ticker] | |||
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Genesis Posts: 71435 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/1580-T....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-05 08:01:38
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Hreardon Posts: 81 Incept: 2008-10-05
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The game of kick the can is quickly coming to an end
2009-11-05 08:10:31
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Deepsee100 Posts: 697 Incept: 2008-02-05 Paris
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Good call - as usual. PLEASE let interest rates rise..IMHO, at the moment its the only indicator that will show that things can get better and even though parts of the economy will suffer because of it, it's the most equitable purge I can think of. ---------- Other countries have their history. Brazil has football.
2009-11-05 08:14:34
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Sideler Posts: 805 Incept: 2007-11-10 
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Megalomanical Desperadoes. The Fed will take the correct action when hell freezes over.
2009-11-05 08:17:34
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Asimov Posts: 26716 Incept: 2007-08-26 
east tennessee
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Heh. I won't hold my breath waiting on congress to recognize reality. They have elections to worry about. They're not going to do a ******n thing but throw more money at the problem and hope it goes away - or holds off till after they are reelected. They don't care about the people anymore. They made that clear with the tarp vote, not just with actions but several TOLD US they don't care, openly and plainly, on the floor of the house. Yea. I think it's a lost cause. Documenting it, however, is not. Hopefully it will help direct the anger where it belongs and where it will do the most good when everything finally explodes in their face. I really hope that "explosion" is just voting them out of office, but my fear grows daily that it will be a real one. ---------- It's justifiably immoral to try to deal in a moral fashion with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente.
2009-11-05 08:21:15
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Bozonian Posts: 14033 Incept: 2007-09-01
PFT - Pure F'n Tin
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I submit that Congress will do whatever is easiest. Remember, Congress is really a bunch of incompetent political hacks who don't know what is right, but will do what it takes to prevent themselves getting strung up. We also know that they are pretty good about colluding with each other and external entities, even though they hate each other, for mutual survival. They will also try to maintain the status quo as long as possible, i.e., they would rather not bend and so in the end will break catastrophically. I see printing money, by whatever ruse you call it, as their solution. There just isn't any other possible given Congress' need to preserve the apparency of normality. At some point debts will be forgiven, people will essentially end up with partial ownership of free houses and the creditors will get minority equity stake in the house (so the owner can "feel" like he owns the house). If the system collapses by deflation, I'm not sure it will be like the 1930s. There are a lot more people now, a lot more ****ed off people who know who and what caused this, who will have nothing left to lose by doing something extreme. Congress is not willing to open that Pandora's box so giving out free money and assets will be the solution. **** the creditors, they are pretty weak in the Grand Scheme of things except maybe foreign governments who could hire assassins to extract revenge. ---------- I'm so depressed about outsourcing I called the suicide hotline and got a call center in Pakistan. They got all excited and asked me if I could drive a truck. Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice.
2009-11-05 08:21:27
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Snowman Posts: 1040 Incept: 2009-03-09
avoiding yellow snow
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"sound underwriting principles"....sigh, the good old days. We are still a small minority in the banking world, but the "we told you so's" get truer every day. The 1995 asset and debt levels is about right. So we are, where, currently, about 2000-2002? still a ways to go.
2009-11-05 08:24:01
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Mo Posts: 5502 Incept: 2007-06-26
Florida
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If Bernanke won't play their game, this administration and Congress will replace him. Based on Obama's and Pelosi's behavior after the elections, I think it's very clear that they see themselves as a permanent government. This is why they don't care what voters think. This is why the Press is afraid to criticize them. The country and its institutions are so weak, they'll just let anything or anyone who opposes them wither on the vine if they don't destroy them outright. ---------- "The World has been cancelled. It doesn't even look like the world. There is one island that is maintained and is said to be owned by the Sheikh and the rest looks like a pile of muck."
2009-11-05 08:30:06
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Creditcalmass Posts: 1145 Incept: 2008-06-04 4 train, NY Online
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Quote:The Fed will take the correct action when hell freezes over. Correct action for who? The country? Never. For the Fed? Coming to a debt market near you! (unless there is a plan in place to have the Fed sacrificed in order to preserve the banking cartel)
2009-11-05 08:41:48
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Tesla Posts: 8182 Incept: 2008-04-03
Delaware
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the principal of asymmetric information = the principle of asymmetric information on it's balance sheet = on its balance sheet OK, maybe I'm missing something big, but help me out here. If 1T of this crap detonates on the Fed balance sheet, why do they care, really ? Don't they just replace it with "funny money" ie QE because they can ? What, in fact, is the consequence of 1T in unrecoverable debt at the Fed, in light of the fact that they have the power to print if "necessary", taking "extend and pretend" to new levels ? ---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-11-05 08:42:01
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Bluebird Posts: 524 Incept: 2008-05-02
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Genesis said in the ticker "I believe The Fed sent a message to Congress yesterday in recognition that the wall is fast approaching at 120mph: do the right thing and do it now - or else." They haven't done the right thing yet, they won't now either. We're going get the 'else' 
2009-11-05 08:42:21
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Phirang Posts: 8824 Incept: 2008-10-25
bar khoba's revenge
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You basically have two choices: gold over 1200 or SRS over 100. Choose one. ---------- The Treasury can issue debt on your behalf because the State can and will stomp the wealth out of you and your family.
2009-11-05 08:43:58
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Infidel Posts: 2973 Incept: 2007-08-27
orlando, fl
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Come March it will be the Fed vs. Politicians in a epic struggle for self preservation, a battle royal cage match to the death. Let me go out on a limb here and pick the loser. The United States Citizen, we will be crushed as they both fall out of the top of the cage onto our ring side seat. ---------- Today, there is a name for the political doctrine that rejoices in scarcity of everything except government. The name is environmentalism. George Will
2009-11-05 08:45:13
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Eternalblue Posts: 4230 Incept: 2007-08-09
sokali
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I am reaLly curious how this will end, the very act of the fed ending purchases causes the stuff to fall in value..
---------- my miniblog; http://economicpsychosis.blogspot.com/
2009-11-05 08:46:13
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Bluebird Posts: 524 Incept: 2008-05-02
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Not only will stuff fall in value, but also wages, and lots more unemployment. This is not going to end pretty.
2009-11-05 08:48:34
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Onchaos Posts: 70 Incept: 2008-10-09 Virginia
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120 MPH, terminal velocity of a free falling human being. Not many walk away from that when a chute fails to open.
---------- Freedom is chaos - give it to me anyway!
2009-11-05 08:59:49
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Stx_jay Posts: 958 Incept: 2008-04-06
St Croix, USVI
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Quote:The Federal Reserve's statement is, I believe, a clear statement and warning to the Congress and Treasury: Figure out what to do with these two firms, and do it, prior to the end of the first quarter of 2010, or we will cut them off and stand back, as we're not going to be the one holding the grenade when it goes off. I disagree completely with this conclusion. The Fed has pulled the pin with their insane purchases (i.e., bald monetization) and now they hold spoon clutched tightly to their chests with no other sucker to pass it to. How can they possibly pass this risk onto the market/others?! Can you imagine what will happen to bond prices should over a trillion dollars of supply hit (and of course the Fed is no longer a buyer but a net seller)? Boom. Nope, they are the market and they are stuck with it. Hell, even allowing their purchases to simply runoff over a period of many years will in itself cause mortgage rates to spike. This is because they aren't in there distorting the market anymore with buys of fresh issues. If it's a warning shot, it's the lamest on record. Obama and gang are old school Chicago hacks and if there's one thing they know, it's a credible blackmail threat. This kind of hardball game isn't for academics. Ben owns this one for the history books, but of course the American people will have deal with the actual consequences. ---------- Let's sing along to the old AC/DC song, shall we? Cos I'm / TNX / I'm Dynamite / TNX / And I'll win the fight / TNX / I'm a power-load / TNX / Watch me explode
2009-11-05 09:00:27
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Statusquojoe Posts: 2397 Incept: 2008-11-20
Land of the fees Home of the slaves.
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I tend to agree with Tesla above, the Fed has no real counter party risk, their balance sheet represents the relative strength of the dollar only (and general sanity). Would love an explanation as to how I am misunderstanding this concept.
---------- "In short, you are the definition of moral hazard." Senator Bunning to Bernanke Last modified:
2009-11-05 09:03:07 by statusquojoe
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Jonathryn Posts: 1 Incept: 2009-02-02 Connecticut
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This is a very interesting post, like an infinite force moving against an immovable object. But since we know how cynical all the parties are, and how they will never do what's right, what is the most logical conclusion as we follow this path to the event horizon? Will the Fed just print a bunch of FRNs? What form would emergency legislation take? How would the crisis affect the value of the dollar, gold, equities, and the commodities market? What kind of reaction could we expect from foreign holders of our debt? What are the consequences aside from obvious market pandemonium?
2009-11-05 09:05:14
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Snowman Posts: 1040 Incept: 2009-03-09
avoiding yellow snow
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Tesla: yes they can QE to cover whatever trash they've got. Up to a point. $1t probably won't break the investor's confidence though. It gets increasingly more difficult for Fed to say obligations are covered in the full faith and credit of the United States when they are really saying "our obligations are covered by the full faith and credit of worthless mortgage paper, triple-Axel-loop derivatives and other interesting assets conjured up by the idiots on Wall Street". I've seen estimates that investor appetite can still absorb a few trillion of this nonsense (excluding the banks who buy the t-bills through interest free loans) just because they don't have much else to choose from. I guess the Fed is starting to say: Look, I've eaten too much Viagra, any more and my dick will explode. Something to that effect.
2009-11-05 09:06:27
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Fugitivekind Posts: 613 Incept: 2007-08-20
Boston
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Absolutely fantastic ticker!
---------- "I refuse to leave our children with a debt they cannot repay, and that means taking responsibility right now, in this administration, for getting our spending under control." Barack Obama, Feb. 29, 2009
2009-11-05 09:07:19
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Statusquojoe Posts: 2397 Incept: 2008-11-20
Land of the fees Home of the slaves.
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Snowman, so again you are saying in effect the only real counter party risk to the Fed's balance sheet is the strength of the dollar?
---------- "In short, you are the definition of moral hazard." Senator Bunning to Bernanke
2009-11-05 09:09:02
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Jamesbond Posts: 296 Incept: 2009-01-31 Nearing the event horizon
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Quote:Rather than solving the problem we have Barney Frank making public statements that intentionally making bad loans is a policy - when The Fed is the one buying the paper generated by those bad loans! At least Barney Frank is telling the truth. With brutal honesty, perhaps he should have said: "Consistent with our ubiquitous policy to 'extend and pretend,' the US Govt intends to continue to facilitate the making of knowingly bad loans, and to allow the Fed to purchase the paper generated by those bad loans." Quote:Property prices must contract to sustainable values. If this causes banks to fail, so be it. If this causes consumer bankruptcies for those who used their homes as ATM machines, so be it. If this causes me to lose half of the "value" in my home, so be it. 
2009-11-05 09:09:08
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Leicestersq Posts: 44 Incept: 2009-10-12 UK
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Great Ticker This one. I wonder if Karl has correctly translated this, and it is a warning to Congress. Here in the UK, we have QE as well. You may or may not like it, but the policy is one that has been agreed by the government, and carried out by the Bank of England, and I think that they have stuck to buying Gilts. Who in the US authorised the Fed to buy Mortgage Backed stuff? Why did they buy this stuff? Was it Bernanke, who did it to stop all the banks going under? Did the President know? Who is in charge of Monetary policy there? Surely the purchase of a trillion dollars worth of non Government securities would have to be agreed by someone in the Government? If not, I hazard a guess that the dollar is going to the moon, in dollar terms at least.
2009-11-05 09:09:25
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Digalert Posts: 60 Incept: 2009-09-19
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but, but, but the home buyer tax credit has been sweetened and extended...
2009-11-05 09:20:01
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