The Fed Is Bailing Out Every Bank In The World

The Business Insider ^ | 11/21/09 | John Mauldin

[FromLori]

And setting us up for a massive stock-market crash, to boot.

Where the Wild Things Are is a beloved children's book and now a beautiful movie. But in the investment world there are really scary wild things lurking about in the hidden recesses of the economic landscape. Today we look at one of the unintended consequences of the Federal Reserve's low interest rate policy.

For quite some time, I have been arguing that we are faced with no good choices, not just in the US but in the entire "developed" world. I see a low-growth, Muddle Through world over the next years (with a double-dip recession just to liven things up). However, that does not mean that we will lack for volatility. Things could get volatile rather quickly. Let's quickly set the background.

It Is Not Just Japan Let's look at today's interest rate picture. Yesterday, we had the bizarre occurrence of banks actually paying the government to hold their cash. Three-month treasuries yield a miniscule 0.01% in interest. If you opt to buy a one-year bill you get all of 0.26%. You can see the entire spectrum below.

[FromLori]

ping PIC FROM FRONT PAGE

[dalebert]

money is no good thanks to fed

[Nervous Tick]

She’s excited because the three-month T-bill rate jumped fivefold from the .01% quoted in the article to .05% in the latest auction.

Green Shoots of Yield!

[Nervous Tick]

>> money is no good thanks to fed

Bummer. Send me all of yours and I’ll throw it away for you.

[screaminsunshine]

I have a good choice. Go back to Silver backed dollars. Disband the massive Federal agencys. Make people work for a living. Disband the IRS and Federal Reserve. Drop out of all the Trade Treaties and get to work.

[ClearCase_guy]

It would work.

We are in a deep, deep hole -- but I think we could get out (at least on to solid ground) in one presidential term if we just took our medicine and did the right thing. I'd like to see 10% cut in the federal budget, ever year, for at least 4 years. Cut, cut, cut, cut. No increases anywhere for any reason. No tax increases. Just cut the spending.

[screaminsunshine]

Yes but way too logical for the people in charge. They are insane.

[Nervous Tick]

>> I’d like to see 10% cut in the federal budget, ever year, for at least 4 years.

Yes! EVERY year!

Harness the power of compounding!

[timestax]

$$$$$$$$$$$$$$$ bump $$$$$$$$$$$$$$$$$

[C210N]

Here in mAss, I’ve been hearing lots of ads for reducing energy use by 3% per year for 10 years. “BUT we all gotta do it!” goes these annoying ads. Its so... in your face. Great to turn this around and apply it to the statists/worldists hold on government spending.

[org.whodat]

"This isn’t really news. There is a reason why the Fed lent $600 billion to European central banks – the Fed was making up for collapse of dollar funding from US money market funds. (see graph 6 on p.77)",

Of course I had some fool here claim this did not happen some time ago:

http://www.marketskeptics.com/2009/03/european-banks-desperate-to-avoid.html

[org.whodat]

http://www.marketskeptics.com/2009/03/european-banks-desperate-to-avoid.html

[Rockingham]

The Fed is doing what the central bank of the world reserve currency must do in a financial crisis: pump out liquidity to prevent a general collapse. When the liquidity crisis passes, the Fed must then withdraw liquidity to preserve value. We shall see if they do so on a timely and effective basis.

[FromLori]

Of course I had some fool here claim this did not happen some time ago:

I have encountered that same fool! And then he told me we will lost nothing on AIG ahaha.

http://www.economicpolicyjournal.com/2009/11/aig-bailout-not-only-bailed-out-goldman.html

http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html?inline=nyt-org

[org.whodat]

I told said fool that the fed deposited the money in Europe to forestall an immediate payment from AIG. It was beyond his comprehension.

[org.whodat]

By July 2009, when the bailout bill had reached $182 billion, an examination of state regulatory filings revealed more bad news. The dozens of insurance companies that make up A.I.G. showed signs of considerable weakness even after their corporate parent got the biggest bailout in history. In September 2009, the Government Accountability Office said that the bailouts had stabilized A.I.G., but that it was not clear the government would ever recoup its money.

The $182 billion is not the correct figure, they do not include the debt exchange deal with tarp and fed funds.

If anyone had a bit of sense they would close AIG and sell it off. It is nothing more than a hole to throw money in.

[FromLori]

I know but I don’t have the other figure so I just put that in to show how much we are liable for (the fool). I see you read the market skeptic I find some good things on there.

[The Comedian]

I'm sure that America's bankster-owned fiat currency will fair differently and better than every other identical instance of fiat currency in history.

After all, now we have Timmy Guitner and Kenya's Finest implementing the financial plans of that great American patriot, George Soros.

How can we possibly lose?

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[FromLori]

Exactly and we are not alone

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6608234/OECD-warns-Britain-risks-debt-spiral.html