Is The Fed Enabling Foreign Central Banks To Swap Out Their Agency Debt Into Treasuries?

Zero Hedge ^ | 8/26/09 | Chris Martenson

[Revel]

This is how the fed is probably going about selling treasury debt. (Printing and laundering) Not good for the dollar at all. Click on the link for the whole article.(lots of charts)

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"Another quite intriguing piece by Chris Martenson "The Shell Game - How The Federal Reserve Is Monetizing Debt" reveals some of the intricacies of the Fed's monetization game and, by digging deeper into the Fed's Custody Account, demonstrates not just how the Federal Reserve is enabling foreigners to swap out of Agencies into Treasuries, but how it is implicitly monetizing a markedly larger portion of debt than is assumed."

CUT

"And here is where the concept of the appropriately coined Shell Game comes into play:

These are the three critical points to remember as you read further:

1. The US government has record amounts of Treasuries to sell.

2. Foreign central banks, which have a big pile of agency bonds in their custody account, would like to help but want to keep things somewhat under the radar to avoid scaring the debt markets.

3. The Federal Reserve does not want to be seen directly buying US government debt at auctions (and in fact is not permitted to, but many rules have been 'bent' worse during this crisis), because that could upset the whole illusion that there is unlimited demand for US government paper, but it also desperately wants to avoid a failed auction.

For various reasons, the Federal Reserve cannot just up and start buying all the Treasury paper that becomes available in record amounts, week after week, month after month.

Instead, it uses this three-step shell game to hide what it is doing under a layer of complexity:

Shell #1: Foreign central banks sell agency debt out of the custody account.

Shell #2: The Federal Reserve buys those agency bonds with money created out of thin air.

Shell #3: Foreign central banks use that very same money to buy Treasuries at the next government auction."

More:

http://www.zerohedge.com/article/fed-enabling-foreign-central-banks-swap-out-their-agency-debt-treasuries

[Revel]

http://www.zerohedge.com/article/fed-enabling-foreign-central-banks-swap-out-their-agency-debt-treasuries

[ken21]

bump.

[FromLori]

Related

http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806

[FromLori]

They are also talking about it on Commodity Traders but the original source of the article was Chris Martenson

http://commoditytradealert.com/blog/?p=2549

[The Magical Mischief Tour]

I tell ya our economy is nothing more than one big smoke and mirrors ponzi scheme

[FromLori]

Thats for sure I just worry about when the house of cards gets knocked down.

[KoRn]

Does Bernanke still have to face confirmation after being reappointed to his chairmanship? There’s no way in hell that should happen. His confirmation vote is worthy of a filibuster, at least until the Fed completely opens up its books, and exposes their entire operations to the American people.

Of course if that happened he probably wouldn’t get confirmed anyway. I’m convinced Bernanke is going to destroy the country trying to do what he thinks will “save” the economy.

[TruthConquers]

Jesse Cafe Americain:
Capital Flight: A Plunge in Foreign Capital inflows Precede the Break in US Financial Markets: http://jessescrossroadscafe.blogspot.com/2009/08/plunge-in-foreign-capital-inflows.html

Get ready to crash!!!

[Revel]

Right. Tyler wrote the zero hedge piece, and yet it was all based on what Chris did. It gets confusing. Yet the linK to Chris is right on top at zero hedge. Thanks for the info and additional links.

It has been more than obvious that something like this was going on. Nothing else makes any sense when you look at the treasury and debt numbers.

No wonder they don’t want to be audited.

[spyone]

The fed and treasury are scrambling. Things hold up until they don’t. That time is approaching. Pretty friggin scary what the implications of this are.

[Revel]

There is a lot of discussion on this here too:

http://www.tickerforum.org/cgi-ticker/akcs-www?post=108421

[Revel]

I agree, but I am sure that he will be confirmed. No problemo.

[FromLori]

Thanks I have to look through it all

[FromLori]

Did you see this?

http://www.americanbankingnews.com/2009/08/26/rbc-capital-markets-up-to-1000-banks-could-shutter-from-2008-2012/

[ckilmer]

One possible result of the abandonment of these efforts is a wholesale flight out of the dollar and into other assets. To US residents, this will be experienced as rapidly rising import costs and increasing costs for all internationally-traded basic commodities, especially food items. For the rest of the world, the results will range from discomforting to disastrous, depending on their degree of dollar linkage.

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Hey this means that US manufacturing will come home, US exports will increase, the US will buy more home grown food, the US balance of trade will right itself.

[tired1]

Thanks, that’s one of the best articles I’ve read. Explains many things, particularly the requirement for ever increasing growth.

Back in 1984 I wrote an econ paper predicting the Soviet collapse because they had UN data published along those fraudulent lines. IE, if the numbers are lying then there’s a good reason for it.

I got a B-

[FromLori]

Here is another all may find interesting

http://www.jrdeputyaccountant.com/2009/08/guest-post-new-york-fed-attempts.html

[Palin Republic]

The question arises, where are the agencies that the Fed is purchasing at such as gluttonous pace coming from? Absent an audit of the Fed, one can merely speculate, but likely is one of the primary motivations for the Federal Reserve Chairman and the Secretary of the Treasury to claim that any additional openness into the activities of the Fed would be "problematic to the country."

We must get HR1207 to the floor! Go AuditTheFed.com Go!