FED: Central banks worldwide are lowering SWAP rates - stocks, pms, bonds going bananas

[HOLLYWOOD]

Well... Inside trading all over again, oh, too bad the SEC can't monitor all of the Euro/UK/Japanese phone/email/IM/etc records. They the SEC could prosecute those that don't give payola to the government criminals.

Same garbage all over again... Not only do they control the chip, tables, and casinos, they control politicians, cities, and states.

The entire economy is Kabuki Theater

Comment of the morning was an interview at the Capital building with Democrat Congressman Cuellar of Texas, when asked about the Lottery money swaps of the Federal Reserve bailing out Eurotrash.

Cuellar, "We shouldn't be bailing out Europe, We should Be propping-up the economy here."

 

[pmbug]

PPT to the "rescue". Stealing your children's wealth to save the banks and a seriously flawed monetary system.

 

[swissaustrian]

RON PAULs take:

Statement on the Fed's Continued Euro Bailout
The Fed's latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed. Under current law Congress cannot examine these types of agreements. Those who would argue that auditing the Fed or these agreements with central banks harms the Fed's independence should reevaluate the Fed's supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.

Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis. Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance. Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars. These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.

The Fed is behaving much as it did during the 2008 financial crisis, only this time instead of bailing out politically well-connected too-big-to-fail firms it is bailing out profligate government spending. Citizens the world over deserve better than this. They deserve sound money that cannot be manipulated and created out of thin air by central planners who promise printed prosperity. Fiat money caused this European crisis and the financial crisis before it. More fiat money is not the cure. The global fiat currency system has proven itself a failure, we need real monetary reform. We need sound money.

http://paul.house.gov/index.php?opt...inued-euro-bailout&catid=16:speeches&Itemid=1

 

[JoshLowry]

They should add a date to that page.

 

[swissaustrian]

CNBC interview on it:

 

[Steven Douglas]

PPT to the "rescue". Stealing your children's wealth to save the banks and a seriously flawed monetary system.

Children's wealth is not nearly enough. These last few raids on children's piggy banks are nothing but icing on a very tall future-dependent debt cake they have managed to bake for themselves, making the children minor "contributors" at this point. Because everything they do is based on future wealth promises and expectations, they have become cannibals of the unborn, as the untold expected wealth of generations of children to come has already been counted and is being traded. They are stealing yet more children's wealth to delay the collapse of a wealth siphoning machine that systematically stole the wealth of both generations past and generations yet to come.

 

[unknown]

Seems like a great time to start WW III.

 

[seraphson]

Seems like a great time to start WW III.

Well, all the cards are pretty much laid out on the table. We have trillions of dollars of debt, a good portion china owns, an endless war that serves no one while not helping anyone, the E.U. is going under; the Euro is done and with it some heavy shockwaves to most all other countries, a bomb exploded next to an iranian nuke enrichment center I believe, Amerika is entering/is a Fascist state and the nice indefinite detention bill was passed by the senate to celebrate it. I feel like I'm missing something though; like I'm one card short on making this royal flush happen...

 

[The Goat]

Well, all the cards are pretty much laid out on the table. We have trillions of dollars of debt, a good portion china owns, an endless war that serves no one while not helping anyone, the E.U. is going under; the Euro is done and with it some heavy shockwaves to most all other countries, a bomb exploded next to an iranian nuke enrichment center I believe, Amerika is entering/is a Fascist state and the nice indefinite detention bill was passed by the senate to celebrate it. I feel like I'm missing something though; like I'm one card short on making this royal flush happen...

Maybe the Federal Reserve could print you up a card to make that royal flush happen.

 

[Kodaddy]

I know this has been brewing for some time, but is this IT? Has the collapse actually started? Is it about to get really chaotic really soon?

 

[swissaustrian]

I know this has been brewing for some time, but is this IT? Has the collapse actually started? Is it about to get really chaotic really soon?

It indicates that money markets are disfunctional. The last time this happened was in 2008 after the Lehman collapse. We didn´t have a Lehman type collapse. MF Global can´t be compared to Lehman. I think central bankers to a "lesson" from 2008 and intervened earlier. Does this mean that it´s not going to get as bad as 2008? In terms of asset prices, maybe. For the economy and the average joe, no.

 

[devil21]

Looks like Iran is officially under attack now. Timing seems too close to be coincidental.

 

[TomL]

Originally Posted by The Goat
So can we expect a short run of "good economy" before the election in 2012? with some scary headlines coming out around December 2012 right before these lines are shut off?

I don't really think it will last that long.

Neither do I. What the banks have done was create a liquidity bubble. When reality sets in, the bubble will burst.

Who in the world are these stupid people anyway.

The best thing to do, in my opinion, is to let the markets go through their corrections, i.e., ups and downs until it settles down. The way for that to happen is for countries like the U.S. to get their fiscal house in order. And President Obama doesn't seem to be interested in that.

We could very well see a market crash when the bubble bursts.

 

[ctb619]

This is a pretty good Q&A by Reuters on dollar liquidity swaps.

LINK

Q. What did the central banks actually do?

A. They made it easier and less costly for banks to get U.S. dollars. The central banks already had in place agreements -- going back to December 2007 and emergency actions they took in the early days of the global financial crisis -- to swap local currencies with the Federal Reserve for dollars for, typically, up to three months. On Wednesday, they reduced the charge for doing that and extended the size and timing of the swap lines.

The lower price should encourage European commercial banks to go to the European Central Bank to borrow, through repurchase trades, the dollars that came from the swaps. The ECB also announced that it was reducing the amount of margin the banks have to post on those deals.

The steps are "designed to both remove the stigma and costs associated with the use of cross border swap lines," according to a report from bank analysts at Keefe, Bruyette & Woods.

 

[TomL]

Is there lazy man/laymen's term version of what exactly going on here?

Yeah, the world banks just took the global economic problems and swept them under the rug, IMO.

 

[TomL]

OK, so what I read from "offering liquidity in foreign currencies as a *contingency* measure" is hey, we're probably gonna bailout the E.U. by printing more money, using American tax payers' money, or both. Am I correct?

The Fed has been doing that. Giving money to rest of the world, then confiscating American tax dollars to pay for it. Then they print phony money to replace what they stole from the America taxpayer.

 

[TomL]

Seems like a great time to start WW III.

Nope. Just another Revolutionary War.

 

[DRHChi]

The difference between September 2008 and now is US banks are well capitalized, overly capitalized actually, and individuals in the US have less debt. Europe will likely toe the line between hyper inflation and GPD destruction for many years - it will likely be a slow bleed with inflation outpacing slow but positive GDP growth. The easiest way to mask a recession.

To me this is a loud proclamation confirming the global commitment to inflation, which we knew existed anyway. Inflation should mean equities move higher. It's ironic, but the best way to protect yourself is to get as much exposure as possible.

This happened in September 2008 after they did the exact same thing:

 

[gonegolfin]

OK, so what I read from "offering liquidity in foreign currencies as a *contingency* measure" is hey, we're probably gonna bailout the E.U. by printing more money, using American tax payers' money, or both. Am I correct?

It is important to understand that with these Central Bank swaps conducted by the Fed, bank reserves are created when the swaps originate (money is not "printed", this notion is incorrect ... money supply does not increase via the introduction of the swap). Bank reserves are then drained (destroyed) when the swaps mature. This draining of reserves when the swaps mature is no different than when the Fed sold treasuries to sterilize its lending programs pre-September 2008 (they wanted to remain reserve neutral at the time). It is also no different than when a repurchase agreement unwinds. When a repurchase agreement is purchased by the Fed, this creates banking reserves. When the agreement matures, these reserves are then drained.

The first period of significant Central Bank swap creation was during the eruption of the financial crisis in Q4 of 2008. Outstanding Central Bank swaps at the Fed were at their peak in late 2008/early 2009 (around $600 billion) ... and were slowly wound down from then. By the end of 2009 these swaps were virtually nil. The result was that there was significant reserve creation due to this program ... followed by significant falling bank reserves beginning in early 2009 through the end of the year (as the swaps matured).

So, these swaps are quite different from outright asset purchases (permanent expansion of the Fed balance sheet) ... including the fact that the Fed does not take on credit risk. They closely resemble the Term Auction Facility (TAF) used in 2008 ... though these loans were sterilized by the Fed selling treasuries from its portfolio. However, if these swaps were to become open-ended indefinitely, they would theoretically become more like outright Fed asset purchases from a balance sheet perspective. This would be a first, if it were to happen. I do not think this would happen ... I would think that if the Fed wanted permanent balance sheet expansion, it would simply purchase assets, rather than deal with the onerous task of managing the swaps.

In the past, this has been a good time to be long shorter term treasuries (immediately before these swap lines ramp) ... because a significant amount of these Dollars find their way into shorter term treasuries. You want to be out before the swap lines mature ... because these treasuries will be sold to pay off the Dollar loans.

Brian

 

[Mogambo Guru]

It is important to understand that with these Central Bank swaps conducted by the Fed, bank reserves are created when the swaps originate (money is not "printed", this notion is incorrect ... money supply does not increase via the introduction of the swap). Bank reserves are then drained (destroyed) when the swaps mature. This draining of reserves when the swaps mature is no different than when the Fed sold treasuries to sterilize its lending programs pre-September 2008 (they wanted to remain reserve neutral at the time). It is also no different than when a repurchase agreement unwinds. When a repurchase agreement is purchased by the Fed, this creates banking reserves. When the agreement matures, these reserves are then drained.

The first period of significant Central Bank swap creation was during the eruption of the financial crisis in Q4 of 2008. Outstanding Central Bank swaps at the Fed were at their peak in late 2008/early 2009 (around $600 billion) ... and were slowly wound down from then. By the end of 2009 these swaps were virtually nil. The result was that there was significant reserve creation due to this program ... followed by significant falling bank reserves beginning in early 2009 through the end of the year (as the swaps matured).

So, these swaps are quite different from outright asset purchases (permanent expansion of the Fed balance sheet) ... including the fact that the Fed does not take on credit risk. They closely resemble the Term Auction Facility (TAF) used in 2008 ... though these loans were sterilized by the Fed selling treasuries from its portfolio. However, if these swaps were to become open-ended indefinitely, they would theoretically become more like outright Fed asset purchases from a balance sheet perspective. This would be a first, if it were to happen. I do not think this would happen ... I would think that if the Fed wanted permanent balance sheet expansion, it would simply purchase assets, rather than deal with the onerous task of managing the swaps.

In the past, this has been a good time to be long shorter term treasuries (immediately before these swap lines ramp) ... because a significant amount of these Dollars find their way into shorter term treasuries. You want to be out before the swap lines mature ... because these treasuries will be sold to pay off the Dollar loans.

Brian

Welcome back, Brian!! That was a long round of golf!

I was just thinking the other day how nice it would be to hear from you on whats going on.

Have you read Rickard's "Currency Wars" yet? Thoughts on what he has been saying lately?

Good to hear from you.