Fed pumps 47.25 bln dlrs into US banking system

Things seem to be getting very serious just about everywhere:

Credit "Heart Attack" Engulfs China and Korea

Interbank Covered Bond Trading Halted on Volatility

It may be a good thing that it's a holiday weekend in the US.
.

Thanks for the update, Gools! I think that these latest reports should give ATSers a more complete picture of the closed loop nature of the world's banking system. There's a video in this thread that mentions it, but these latest real world events serve to create a much more vivid picture of how the financial system works. Different currencies? Sure. Different system. Absolutely not.

I would say that those who have very little money and no investments should pay close attention to what is happening. One day the markets will return to health and that will be the time to join in and ride the beast for the next 20 years using what was learned during these times to one's advantage. These are rough times for sure, but I think this is the best time to learn. When things go wrong the information is much more usable and transparent, unlike during bull sessions when hype rules the day.

Originally posted by HimWhoHathAnEar

Originally posted by cpdaman
latest trends suggest money is flowing from high risk moderate reward stock markets to lower risk lower reward bond markets.

Many analysts are predicating multiple rate cuts and further agressive measures from the fed, with fed funds rate going down toward 3.5 percent (at least) by the middle of next year.

Wouldn't the rate cuts make the 'lower reward' of bonds dip into a negative when factoring in the inflation of said cuts?

I see gold and silver through the roof and government confiscation (1933 style) not far behind.

on it's "head" my statement seems counter intuitive (that i admit)

and some of the money may be heading overseas to higher yielding bonds and foreign currency's appreciating, BUT their has been a flight to safety in U.S treasury bills as well (and don't get me wrong a TON of people believe the markets are destined to rise forever, especially the "emerging markets".

The "big wigs" See a violent freeze up of liquidity on the horizon IMO, they know that the reward of gaining less than 10% (if they time this liquidity drought) perfectly is not worth the risk of being left holding over valued assets when the music stops and trying to rush to the exits (which could cost them 50% or more *potentially*

The safe haven of tresury bills or bonds yielding 3 or 4 percent (even with depreciation eating away at least the full amount of above mentioned yield) is "safer" especially when they are SO CONFIDENT the asset prices will drop to values that are *exponentially* more than any depreciation which will ensure a buying opportunity of a lifetime.

The models and arguments for either hyperinflation or deflation appear to me as framed false dichtomy. they only make sense in a vaccum, not in reality, liquidity drying up will lead to asset price deflation, heck when the psychology of deflating asset values hits, most people will say uh oh the government t is going to try to devalue the currency and fast (bonds, notes, whatever) guess what people will do. SELL THEM! and spend it on gold or silver or food, because they no they are being devalued. . Sure prices for imported goods will rise because the currency is being devalued, but dollar denominated assets will be DUMPED i.e sold like the plague and what will people pay for them ...not much....because they don't have much money to buy them with, also with depreciation they know they will be less valuable the next day. If people were employed then any money printing may be able to flow into higher wages, but most jobs are for goods that are luxury items or at the least "accessory's" and people have more than enough then they need. Most People have limited disposable income , so when they see the market (stocks) fall they will tend to stop spending what little they have and consumer spending will slow to a crawl based on the psychology of fear, and this will hurt businesses and employment, as employment get hurts the cycle recycle's. I'm not sure how business wages could go up in this type of enviornement. I could be missing something though.

because as asset prices have inflated over the recent years either we deflate back to the "norm" or we inflate our debt (personal debt) away to make it appear less. the only way to inflate out is with rising wages i don't see this happening in the face of a consumer slowedown and less disposable income. I mean heck some thing will get more expensive but there are mostly import's i.e oil, and chinese and japanese imports. but not our service sector jobs wages. (and i conced this will probably have global implications/ suffering widespread as well, not just domestic)

what do you do with people massively unemployed? after cutting back on spending and besides this being an economic emergency ( and you can bet the constitution will be supsended as this is a national emergency)

i mean alot of people will move back in w/ their parents (who hopefully have a paid off residence and enough fixed income to pay property taxes, electricity , food,etc. I imagine the large food chains will still be in business because well people need food, it is really not a want, individual items may become stocked more toward the basics.

anyone heard of anything that is already built and ready for use, connnected by railways, in case of a national emergency the likes of which this hollowed out economy has never seen? detainment camps. has anyone noticed the higher the standard of living the better the illusion of democracy their usually is, well what would that say for the laws necessary to maintain order when the standard of living gets sucked into the toilet. will you be able to question the govt? will gold be confiscated? will dissenters be targeted? will you fall in line, if you don't have access to clean water or enough food, when stores are looted and the power goes out? Can you survive in nature instead? will brother turn against brother?

sorry for the rant and i would feel better if someone could show a fault in my logic (understanding a fault does not necessarily change the conclusion, perhaps certain details, actually , hopefully more)

some jobs i think that may be stable in the above scenario would be medical personel, law enforcement, food retailers and clerks, some gas station clerks detainment center personel


p.s i just had a more pleasent thought that the slowdown in liquidity and asset prices could be drawn out (in the real world not just formula's), and consumer spending slowdown is gradual allowing the remedy, " money printing " to be translated into employment at a quickening pace, while slowly consumer price inflation drowns people in bankruptcy and disposable income slowly erodes away , employment slowly worsens, the poorest groups will fall as the debt is slowly deflated and the deflated asset values come down and meet in the middle (sorry if parts of this better alternative still show suffering, but the hole we have dug is not going to be gotten out of without pain. and upon furthe examination the key is if in the real world not a vaccum, the markets can be unwound slowly (and i guess that is dependant on some people thinking the fed will always keep asset prices high (I think the key is that (liquidity slowly drys up) the fed lowers rates gradually and KEEPS DOING SO, sacrificing the currency may be the better option, than the total chaos of a deflationary depression, and we literally may have no other options. Iwhich obviously no one would want to point out) This may be dependant on people refusing to sell when losses appear and avoid a herd of panic selling, or suspending the markets until enough economists try to convince people to leave their money in (it's just a "correction")

if this latter example does NOT become closer to realityand instead the former does, the motto
order out of chaos will have it's limits tested.

[edit on 22-11-2007 by cpdaman]

Celente -- who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May -- told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse.

"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."

www.upi.com...

One can't go wrong with stocking the pantry and items that can be bartered with. Even if nothing happened it would lighten the grocery bills for sometime. A commodities investment if you will. By buying these things ahead of time you're removing the inflation you will pay for them later.

True and it is the prepared man who has a option B, even if it is uncertain, it is certainly a possiblily one should have a plan for.

I wonder what tools the federal reserve may use to keep asset price's from falling from the credit crunch. such as lower reserve requirements at banks ( so they can lend out more?)



www.lewrockwell.com...

from the above a anonomous economist told the reporter

the Fed "could theoretically buy anything to pump money into the system" including "state and local debt, real estate and gold mines – any asset."

hmm so the fed could devalue the dollar, buy putting more into the supply, and then foreclose on anything it wants in america in exchange for dollars of depreciating value

so the credit crunch may lead to the bankers foreclosing on america (american owned assets) for "our own good" brilliant.

[edit on 25-11-2007 by cpdaman]

reply to post by Gools



add to that synopsis, another 'wild card' in the financial engineering deck of cards.

the major banks (citi, BoA, et al) that get new money from the FED
have certain rules and requirements to continue their lending practices
that creates credit expansion which provides the banks their profits
& the bankers high salaries.

One of the Banks requirements is to have enough deposits &/or collateral
to back the loans (credit) they make to businesses & individuals...

its a money moving and accounting shuffle, but thats how the complicated
process works...
for months now the banks have been schemeing to change the rules some

enter FASB rule 151, dealing with the member banks disclosure of risks
and assets they hold & own (as the required cash/collateral for making loans)

it turns out that the banks (and i suppose with a nod from the FED)
have decided for a 1 year deferral for certain non-financial assets
?how can that help?....i'll explain further down the post
see: www.marketoracle.co.uk...



Item 2: see; www.freerepublic.com...

A federal US judge sets aside a claim by the Deutsch Bank National Trust Company, on 14 individual homes in Cleveland OH for mortgage default.

Why? because the subprime mortages were divided up into more than
a single investment bond /derivitive...and the DeutschBank had no
Mortgage deed or note....
they have only a document of "Intent to convey rights in the mortgage"


i conclude that all those subprime bad loans scattered in all sorts
of CDOs (collateralized debt obligations) SIVs (structured investment vehicles) will be taken out of the 'bad' category showing the Banks
net worth...

as those (presently unsaleable bad paper loans )
will temorarily be listed as 'non-financial assets"
and exempt in the formula which regulates the Banks ability to make
interest generating loans. Otherwise the banks would go bust!

A delay of months or up to a year could allow banks & the FED
to paper over the massive losses of the uncontrolled credit/debt
expansion.
its just another slight-of-hand tactic, pretty much like the subprime dirivitives that have contaminated most every debt instrument created
since the 2002-2005 (several Trillion$) expansion, by 20% or more of the original overstated values


thanks for plodding thru this unpolished attempt of revealing the
' Newest Trick ' by the financial elites

Few non-bankers have heard of FAS 157 and 159, yet these are the regulations that will set the terms on which the banks will value their assets. The trouble with FAS 157 and 159 is that they are perfectly reasonable regulations in themselves which could have disastrous, though unintended, consequences.

What are FAS 157 and 159? They are the new United States (Federal) accounting standards that have been introduced to regulate the valuation of bank assets. These valuations are of crucial importance because they are the basis of all bank lending: no assets, no lending; no lending, no bank. According to an informative article in The Financial Times, the new standards will apply fully from Thursday. Many US banks have adopted them already. All US quoted banks will have to publish asset figures in conformity with FAS 157 by next spring.

www.timesonline.co.uk...

Looks like honesty is becoming compulsory at the wrong time for the fractional loan sharks.

Edit to add : I see from St Udios post that these regs, or at least 157, have been delayed for a year. Justice delayed. Seems to be in time with the European shut down of interbank commerce. Will these delaying tactics fool investors though? We'll see!

[edit on 25-11-2007 by HimWhoHathAnEar]

Originally posted by HimWhoHathAnEar


What are FAS 157 and 159? They are the new United States (Federal) accounting standards that have been introduced to regulate the valuation of bank assets.

Looks like honesty is becoming compulsory at the wrong time for the fractional loan sharks.

no, you or i might see the appearance of Honesty & Sunshine
but that's not necessarily the case....
just as mentioned in the preceeding post...
the money manipulators have OKed another three-card-monty plan
to hide or exclude what's defined as "non-financial assets" for 1 year.

perhaps nobody else will rationalize like myself- - -that a major
portion of the monies/bonds covering the sub-prime loans, AKA
'bad paper' the banks and investments banks are 'Writing Off'
will no longer be in the equasion......or at least diverted from accounting
for up to one year!



[edit on 25-11-2007 by St Udio]

Scandalous! But do you think that not implementing these new laws will save them? After all they are under intense scrutiny from every side. And they will have to adopt the regs at some point. So in the year coming up they may try to air some of the dirty laundry to lessen the blow in November.