Wednesday, September 25, 2013

US Federal Reserve in Desperate Panic

Hat Trick editor Dr Jim Willie reports in his latest column that the US Fed is in utter panic regarding its own liquidity and solvency. 
The problems facing the US monetary system are legion, but the most recent problems plaguing the private banking cartel are its very foundations – capital. The bank has purchased well over 3 trillion USD of troubled and vacant assets whose values have failed to recover to the fairy land par value at which the Fed carries the garbage. With a highly leveraged capital base at under 3%, even small rises in interest rates have magnified impact on capital losses.
Willie reports through his sources that an emergency meeting was held among the regional banks on September 5, 2013 to discuss the deteriorating capital structure, rising interest rates, and its inability to defend the dollar. One of the consequent actions from the meeting was to sell bonds and MBS even at a loss to raise liquidity.
Another problem facing the bond market is its limited incestuous configuration where the big 4 banks trade among themselves in frenzied flash trading to create the illusion that prices for bonds are higher than they actually are. Unfortunately that strategy is running on fumes, the duration of which is short – measured in months.
On top of all these problems, the Fed is under increasing pressure to not only maintain bond prices and buy all US Treasury issuance, but to also purchase the coming torrent of dumping of Treasuries by foreign holders. We believe that this is what spawned the juvenile taper talk because the Fed was trying to ease away from domestic buyer of first and last resort in order to make room for foreign redemptions. The Fed is running out of “tools.”
Willie opined that the Fed was paying interest on excess reserves to have a stash of cash to prop up its insolvency, an opinion we had advanced circa 2009. We also believe that it was one of its tricks to keep the massive money printing from flooding the banking system, turning the money into instant hyperinflation.
Although it has been out of the news, Willie mentioned again the enduring nature of the London Whale trade which caused JPMorgan much embarrassment, loss, and fines. But the problem has not gone away and the losses are treble what the criminal firm reported.
This issue – impending doom at JPMorgan – may well have been the catalyst sparking the emergency Fed meeting in September. There is no way that any agency in the world could staunch the losses at JPMorgan or make its depositors whole – even with a massive bail in.
The United States has earned enmity worldwide for its vast criminal enterprise stemming from the banking cartel which defrauded home owners (MERS fraud), borrowers (LIBOR fraud), and hedgers (COMEX fraud), the latter of which is well on the road to extinction. We believe that it will no longer make a futures market a year from now.
While Willie holds great hope for a return of the gold standard, it is not entirely the blessing it is made to be. Gold is scarce, certainly in the West, and will cause many hardships for the 99% who have limited means. As the great William Jennings Bryan pleaded, do not crucify the people on a cross of gold, or thrust a crown of silver in his brow.
The US people could alleviate much of its bankster induced trauma by demanding the abolition of the Fed, allowing the US Treasury to issue US Notes without borrowing from the Fed or any bank.
The happy talk from the newsfakers should not dissuade prudent people from anticipating the decimation of the US Fed and the banking system within the next 12-18 months. We have been amazed at how long the charade has been kept alive, but when the Fed is in peril because of its capital ratios, we know the end is nigh.

Jim Willie, Flash Trading Hits USTreasury Bonds,, 9/25/2013, accessed 9/25/2013
Copyright 2013 Tony Bonn. All rights reserved.

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