Posts Tagged ‘US dollar’


Legislation lays plans for alternate currency in aftermath of US dollar devaluation

Paul Joseph Watson
Infowars.com
Monday, February 27, 2012

Lawmakers in Wyoming have introduced a bill that would compel the state to prepare for a complete collapse of the federal government, laying plans for an alternate currency, a standing army raised via a military draft, and an aircraft carrier.


“House Bill 85 passed on first reading by a voice vote. It would create a state-run government continuity task force, which would study and prepare Wyoming for potential catastrophes, from disruptions in food and energy supplies to a complete meltdown of the federal government,” reports the Wyoming Star-Tribune.

Compared to the rest of the country, Wyoming’s public finances are in a relatively good condition, a fact that has spurred lawmakers to protect the state against contagion from other areas that could develop in the aftermath of a massive financial collapse.

The bill (PDF) lays the groundwork for how the state would respond in the event of a sudden devaluation of the dollar or “a situation in which the federal government has no effective power or authority over the people of the United States.”

“I don’t think there’s anyone in this room today what would come up here and say that this country is in good shape, that the world is stable and in good shape — because that is clearly not the case,” state Rep. Lorraine Quarberg, R-Thermopolis, said. “To put your head in the sand and think that nothing bad’s going to happen, and that we have no obligation to the citizens of the state of Wyoming to at least have the discussion, is not healthy.”

The bill has to pass two more House votes before it can be considered by the Senate. If passed, the task force would have until December 1, 2012 to submit a report to the governor detailing the continuity of government plan.

While authorities at both the state and federal level are making preparations for social dislocation, with FEMA recently ordering $1 billion dollars worth of dehydrated food, a total of 420 million meals, Americans who buy food supplies in bulk are being characterized as potential terrorists by the FBI.

Continuity of government plans implemented at the federal level are so sensitive that when the plan was last updated in 2007, Congressman Peter DeFazio was barred from seeing the details despite being a sitting member of the House Homeland Security Committee.

Peter DeFazio (D – OR) was asked by his constituents to see what was contained within the classified portion of the White House’s plan for operating the government after a catastrophic terrorist attack, but was denied access, leading him to comment, “Maybe the people who think there’s a conspiracy out there are right.”

Five years later, the biggest threat posed to America’s survival in its current form of government stems not from terrorists but from the country’s huge unsustainable national debt and the possibility of another economic collapse.

A USA Today article published yesterday quoted three separate financial experts who all concur that the worst of the financial turmoil is yet to come, with trend forecaster Gerald Celente warning of an “economic 9/11″ that will provoke mass civil unrest fueled by anti-government sentiment.

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John Mariotti
Forbes
February 24, 2012

There are a lot of senior citizens in the US now. The number is increasing by 10,000 every day as Baby Boomers turn 65—and start applying for Medicare and then shortly after that, for Social Security. These are the folks who once thought this would be the “Golden Years” when their years of hard work and savings and pension plans would let them live the good life, in places that are sunny and warm.

Then came the financial crisis and the stock market crash, the recession, and the “non-recovery.” Whatever “nest egg” they thought they had suddenly was mostly gone. Panicked, they sold their portfolio of securities on the way down, and then fearful of what came next, they didn’t buy back in on the way up. Thus they missed out on the stock market growth over the past 18-24 months. They are left with a much smaller “nest egg,” or none at all, and their pensions are either broke or being discontinued too.

As bad as that sounds, it’s not the “worst news.” The “worst news” is that President Barack Obama plans and policies constitute a multi-faceted “sneak attack on seniors.” Obama cleverly conceals this “sneak attack” while he assures seniors citizens he’s going to take care of them—and “nothing will change” for them. Nonsense!

Read more

 


Louis Woodhill
Forbes
February 24, 2012

Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.

Unfortunately, the talking heads that are trying to explain the reasons for high oil prices are missing one tiny detail. Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more.
$6 Gas? Steve Odland Steve Odland Contributor

What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.

Read more

 


The Economic Collapse
Thursday, February 16, 2012

You might not want to read this article if you have a weak stomach.  Most Americans have absolutely no idea what is going on in the dark corners of America, and when people find out the truth it can come as quite a shock.  Many of you will not believe some of the things Americans are doing just to survive.  Some families are living in sewers and drain tunnels, some families are living in tents, some families are living in their cars, some families will make ketchup soup for dinner tonight and some families are even eating rats.  Some homeless shelters in America are so overloaded that they are actually sending people out to live in the woods.  As you read this, there are close to 50 million Americans that are living below the poverty line, and that number rises a little bit more every single day.  America was once known as the greatest nation on earth, but now there is decay and economic despair almost everywhere you look.  Yes, money certainly cannot buy happiness, but the lack of it sure can bring a lot of pain.  As the economy continues to decline, the suffering that we see all around us is going to get a lot worse, and that is a very frightening thing to think about.

The following is a half hour documentary produced by the BBC entitled “Poor America”.  Trust me, this is a must watch.  Your heart will break as you hear some American children talk about what they have to do for food….

Wasn’t that video absolutely mind blowing?

Those of us that still live comfortably are often completely unaware of what life is like out on the streets of America at this point.

There are millions upon millions of Americans that have lost all hope and that are living on the very edge of life and death.

And more join the ranks of the hopeless with each passing day.  This upcoming weekend approximately 80,000 people in the state of Michigan will lose their unemployment benefits.

So what are those people going to do after that?

They have already been unable to find work month after month.  Their savings are most certainly gone.  Now the only money they had coming in is going to be eliminated.

Yes, I have written many times about how the U.S. government is absolutely drowning in debt and cannot afford to be giving out so much money.  My point here is to show the other side of the equation.  There are millions upon millions of Americans that are barely hanging on and there are no jobs for them.  The suffering that those families are going through is very real.

Millions of other families are trying to get by on the incomes they pull in from part-time jobs.  According to Gallup, the percentage of Americans that are working part-time jobs but that would like full-time jobs is now higher than it has been at any other time in the last two years.  The number of the “working poor” just continues to increase, but most Americans don’t have much sympathy for them because they “have jobs”.

Well, when you are making 8 bucks an hour it can be incredibly tough to make it from month to month.

Just look at how much it costs to buy the basic things that we need.

Without gasoline, most of us would not even be able to get to our jobs.  The price of gasoline has increased 83 percent since Barack Obama first took office, and it is poised to soar even higher.  Right now, the average price of a gallon of gasoline in the United States is $3.51.  Never before has the average price of gas gone above $3.50 so early in the year.  Many believe that we could set a new all-time record this summer.

But last year was bad enough.  In 2011, the average American family spent over $4,000 on gasoline.

So when you are making just a few hundred dollars per week, it can be a massive struggle just to put gas in your car and food on the table.

The article that I wrote the other day about the decline of Detroit really struck a nerve.  All over America, people can see similar things happening to their own neighborhoods.  People are scared and they want some answers.

Well, the truth is that we should have never allowed tens of thousands of businesses, millions of jobs and trillions of dollars of our national wealth to be shipped out of the country.

Just check out this stunning photo which compares the decline of Detroit to the rise of Shanghai, China.

Do you think that it is just a coincidence that Detroit is falling apart and that cities in China look sparkly and new?

No, the truth is that it is a natural consequence of our foolish economic policies.

There are hundreds of communities all over the country where third world conditions are setting in.  For example, the following is how one bloggerdescribes what life is like in a decaying suburb of Phoenix called Maryville….

Crime and gangs are widespread. Most houses have either fallen into disrepair, or been remade with outside walls sporting spikes and ironwork. Many of the front lawns are now just dirt (or worse, gravel), the pools green and lethal.

Now we stand on the precipice of another major global financial crisis.  Economic conditions in America are going to become significantly worse.  The politicians in Washington D.C. may make sure that the boys and girls on Wall Street are always taken care of, but there will be no bailouts for the large numbers of Americans that are about to lose their jobs and their homes.

If you want an idea of what is coming, just look at what is happening in Greece.  25 percent of the businesses have shut down, one-third of all money has been pulled out of Greek bank accounts and unemployment and poverty are absolutely rampant.

For years, a lot of prominent voices out there were screaming and yelling about the dangers posed by our soaring trade deficits and our soaring budget deficits.

But the American people did not listen.  They just kept sending the same politicians back to Washington D.C. over and over.

As a result, soon millions of those same Americans will find themselves doing things that they never dreamed that they would do just to survive.

 


The American Dream
Friday, February 10, 2012

When most people think about America’s debt problem, they think of the debt of the federal government.  But that is only part of the story.  The sad truth is that debt slavery has become a way of life for tens of millions of American families.  Over the past several decades, most Americans have willingly allowed themselves to become enslaved to debt.  These days, most of us are busy either going into even more debt or paying off the debt that we have accumulated in the past.


When your finances are dominated by debt, it makes it really hard to ever get ahead.  Incredibly, 43 percent of all American families spend more than they earn each year.  Even while median household income continues to decline (now less than $50,000 a year), median household debt continues to go up.  According to the Federal Reserve, median household debt in America has risen to $75,600.  Many Americans spend decades caught in the trap of debt slavery.  Large numbers of them never even escape at all and die in debt.  It can be a lot of fun to spend lots of money and go into lots of debt, but it can be absolutely soul crushing to toil and labor for years paying off those debts while making others wealthy in the process.  Hopefully this article will inspire many people to try to escape the chains of debt slavery once and for all.

Because the truth is that the American people need a wake up call.  Consumer borrowing rose by another $19.3 billion in December.  Right now it is sitting at a grand total of $2.5 trillion according to the Federal Reserve.

Overall, consumer debt in America has increased by a whopping 1700% since 1971.

We always criticize the federal government for going into so much debt, but we rarely criticize ourselves for our own addiction to debt.

Debt slavery is destroying millions of lives all across this country, and it is imperative that we educate the American people about the dangers of all this debt.

The following are 30 facts about debt in America that will absolutely blow your mind….

Credit Card Debt

#1 Today, 46% of all Americans carry a credit card balance from month to month.

#2 Overall, Americans are carrying a grand total of $798 billion in credit card debt.

#3 If you were alive when Jesus was born and you spent a million dollars every single day since then, you still would not have spent $798 billion by now.

#4 Right now, there are more than 600 million active credit cards in the United States.

#5 For households that have credit card debt, the average amount of credit card debt is an astounding $15,799.

#6 If you can believe it, one out of every seven Americans has at least 10 credit cards.

#7 The average interest rate on a credit card that is carrying a balance is now up to 13.10 percent.

#8 According to the credit card calculator on the Federal Reserve website, if you have a $10,000 credit card balance and you are being charged a rate of 13.10 percent and you only make the minimum payment each time, it will take you 27 years to pay it off and you will end up paying back a total of $21,271.

#9 There is one credit card company out there, First Premier, that charges interest rates of up to 49.9 percent.  Amazingly, First Premier has 2.6 million customers.

Auto Loan Debt

#10 The length of auto loans in America just keeps getting longer and longer.  If you can believe it, 45 percent of all new car loans being made today are for more than 6 years.

#11 Approximately 70 percent of all car purchases in the United States involve an auto loan.

#12 A subprime auto loan bubble is steadily building.  Today, 45 percent of all auto loans are made to subprime borrowers.  At some point that is going to be a massive problem.

Mortgage Debt

#13 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

#14 Mortgage debt as a percentage of GDP has more than tripled since 1955.

#15 According to the Mortgage Bankers Association, approximately 8 million Americans are at least one month behind on their mortgage payments.

#16 Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent.  Today, it is up around 4.5 percent.

#17 According to Dylan Ratigan, 46 percent of all mortgaged properties in Florida are underwater, 50 percent of all mortgaged properties in Arizona are underwater and 63 percent of all mortgaged properties in Nevada are underwater.

#18 Overall, nearly 29 percent of all homes with a mortgage in the United States are underwater.

#19 If you can believe it, the mortgage lenders now have more equity in U.S. homes than the American people do.

Medical Debt

#20 Medical debt is a major problem for a growing number of Americans.  One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.

#21 Sadly, the number of Americans that are protected by health insurance continues to decline.  An all-time record 49.9 million Americans do not have any health insurance at all right now, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.

#22 But even if you do have health insurance, there is still a good chance that you could end up with huge medical debt problems.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

Student Loan Debt

#23 Total student loan debt in the United States is rapidly approaching 1 trillion dollars.

#24 If you went out right now and starting spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#25 In America today, approximately two-thirds of all college students graduate with student loan debt.

#26 The average student loan debt load is now approximately $25,000.

#27 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.

#28 One survey found that 23 percent of all college students actually use credit cards to pay for tuition or fees.

#29 The student loan default rate has nearly doubled since 2005.

#30 Student loans made to directly to parents have increased by 75 percentsince the 2005-2006 academic year.

At this point, most Americans are up to their eyeballs in debt.  According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

Our entire economy has become based on credit.

Do you need a car?

Just get an auto loan.

Do you need a house?

Just get a mortgage.

Do you need to fill up your house with stuff?

Just get a credit card.

Do you need an education?

Just get a student loan.

In fact, if you are anything like a typical American, you probably have a mortgage you can barely afford, you probably have at least one auto loan, you probably have several credit card balances and you probably have a student loan that you deeply regret.

So what should you do if you are drowning in debt?

First, make a firm decision that you are going to break the chains of debt slavery once and for all.

Secondly, come up with a plan to reduce your debt.  Paying off debt that carries a high rate of interest first (such as credit card debt) is usually a good idea.

The big financial institutions want to get us into as much debt as possible, because all of this debt makes them incredibly wealthy.

Don’t play their game.

Yes, that may mean that you may have to put off certain purchases until you can come up with the money, but in the long run you will be much better off.

So do any of you have any debt slavery stories to share?  Please feel free to leave a comment with your thoughts below….

 


Greg Hunter
USAWatchdog.com
Monday, February 6, 2012

The most recent unemployment number is a total lie, and that lie was repeated all over the mainstream media (MSM).  Two sins were committed here, and I don’t know which one is worse.  The report was a sham, and the MSM reported that information without a single question about its accuracy.


In a story carried across the MSM spectrum, the Associated Press said, “In a long-awaited surge of hiring, companies added 243,000 jobs in January – across the economy, up and down the pay scale and far more than just about anyone expected. Unemployment fell to 8.3 percent, the lowest in three years.”  The report went on to say, “At the same time, the proportion of the population working or looking for work is its lowest in almost three decades. The length and depth of the recession have discouraged millions of people from looking for jobs. The better news of the past couple months has not yet encouraged most of them to start searching again.”  (Click here for the complete AP story.)

Here’s a headline for you.  If it were not for accounting gimmicks and what the government calls “seasonal-adjustments,” the unemployment rate would have gone up, not down!  In his latest report, economist John Williams from Shadowstats.com said, “January’s unadjusted unemployment rate rose to 8.8% . . . The only difference between those numbers and the headline 243,000 January jobs gain and 8.3% unemployment rate, is how the seasonal adjustments were applied.  There are serious issues with the current quality of those adjustments, and extremely small distortions in those seasonals can make big differences in the resulting headline data.”      

Read Full Story

 


Kurt Nimmo
Infowars.com
December 29, 2011

Earlier this month, Federal Reserve boss Ben Bernanke told senators the cartel has no intention of bailing out European banks. Bernanke told lawmakers that “he doesn’t have the intention or the authority” to bail out countries or banks.

Former Fed official Gerald O’Driscoll says Federal Reserve is covertly bailing out Europe.

Now we learn that the Fed is indeed in the business of bailing out European banks. It is secretly using a “temporary U.S. dollar liquidity swap arrangement” with the ECB and the central banks of Canada, England, Switzerland and Japan.

“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,” writes Ron Paul. “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.”

The Fed has a reputation for secrecy. Bloomberg News sued the cartel to obtain information on its emergency programs during the 2007 to 2009 financial crisis. Bloomberg, however, excluded foreign-currency liquidity swaps because names of commercial banks that borrowed under the program were disclosed to the public.

The latest action by the Fed reveals that fiat money created out of thin air is the problem. “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,” Ron Paul concludes.

Bernanke refuses to tell the American people where the money went:

 


Zero Hedge
December 18, 2011

Over the past month we have been closely documenting a major funding squeeze in the all important shadow economy – the “synthetic liquidity” conduit which far more than traditional sources of cash, has become all important for proper bank functioning over the past decade. Courtesy of adverse development in Europe, one by one various components of this unregulated funding scheme have become frozen necessitating the first of many central bank interventions on November 30 to provide liquidity to global banks, primarily to offset such shadow conduits as locked up commercial paper, repo and money markets. Logically, as noted over a week ago, European banks scrambled to obtain cheap dollars by borrowing over $50 billion from the Fed, and plug dollar shortfalls. Yet as all band aid measures designed to offset a broken liquidity equilibrium fail eventually, it was only a matter of time before we saw a direct bail out by the Fed of one or more banks in the aftermath of the November 30 global “bail out.” Sure enough, we have our first clue that “something” happened in the week ending Wednesday December 14 that involved an upgrade of the Fed’s indirect (and thus untargeted) bailout of global banks, to a focused, and very much targeted rescue of one (or more) banks. And with some additional diligence, it may be possible to narrow down the date of an actual bank bailout: Tuesday, December 13.

Exhibit A – Reserve Bank Credit

Two years ago, when discussing the transition of the world to one coordinated, centrally-planned regime we said that the only financial statement of any importance, updated weekly, is the Fed’s H.4.1, or the “Factors Affecting Reserve Balances” which traces that flow of “last resort” cash from the Fed to the various organization that make up the reserve bank, primary dealer, and various other financial entities under the Fed’s Lender of Last Resort umbrella. Simply said, anything abnormal in this weekly report of “flow and stock” (a simplistic distinction where the Fed is far more focused on what the absolute level of reserve numbers is, whereas Zero Hedge and the market believe it is the “flow”, or marginal change, that determines, artificially, asset prices) would confirm our speculations that the Fed has stepped into into its now traditional role of bailing out the world.

The first thing that caught our attention was the all important total reserve bank credit – the most important big picture metric announced by the Fed on a weekly basis. As the chart below shows, after having plateaued with the End of QE2, and remaining stable during the duration of the “sterilized” Operation Twist (as it should), in the week ended December 14, total reserve credit soared by a whopping $81 billion or the most since May 27, 2009 when the Fed was actively undergoing the early stages of QE1 damage control.

Did The Fed Quietly Bail Out A Bank On Tuesday? Reserve%20Bank%20Credit 0

So what was the reason for this huge jump in reserve credit? Two things – on one hand we had the already long-ago telegraphed increase in Fed liquidity swap lines by over $50 billion, or from $2.3 to $54.3 billion to be exact. However that does not explain the remainder. So where did the other $30 billion in credit expansion come from?

Exhibit B – The Plot Thickens: First Net MBS Bulk Purchase Since QE1

It appears that in addition to reverting to such an “old school” QE1 global bailout mechanism as FX swap lines, the Fed also did something it had not done in a long time, or since QE1 to be exact: it bought a boatload of Mortgage Backed Securities, an act it last engaged in on a net basis back on August 11, 2010, which in turn was a delayed settlement of an earlier purchase. As a reminder, the Fed’s balance sheet settles any MBS purchases on the mid-month update so while the big spikes in the chart below between January and July 2010 are indicative of broad MBS purchases by the Fed under the auspices of QE1, when it was out purchasing a total of $1.25 trillion in MBS in hopes of lowering mortgage rates and stimulating housing, and thus employment (something it failed at miserably), in the mid-month week just ended, the Fed bought, and settled concurrently, an unprecedented $31 billion in MBS.

Did The Fed Quietly Bail Out A Bank On Tuesday? Weekly%20Fed%20MBS%20Change 0

Obviously $31 billion jump in settled MBS purchases is notable considering the pattern of previous MBS net flows since August 2010. But under what auspices did the Fed go ahead and buy this whopping amount of Mortgage debt? And why?

As New York Fed itself tells us:

Agency MBS Tentative Purchase Amounts and Historical Operational Results

 

The Desk’s tentative agency MBS purchase amounts associated with the reinvestment of principal payments from agency debt and agency MBS in agency MBS are shown in the table below. The numbers listed are subject to change, should the Federal Open Market Committee (FOMC) choose to alter its guidance to the Open Market Trading Desk (the Desk) at the New York Fed during the monthly period or if market conditions warrant. The amounts listed are approximately equal to the amount of principal payments from agency debt and agency MBS expected to be received over the monthly period, adjusted for any variations from prior periods, as described more fully in the FAQs.

 

In addition, in order to ensure the transparency of its agency MBS transactions, the Desk will publish historical operational results, including information on the transaction prices in individual operations, at the end of each monthly period.

Specifically, in the period between December 13 and January 12, the Fed had permission to buy, wait for it, $30 billion.

Did The Fed Quietly Bail Out A Bank On Tuesday? FRBNY%20Purhcases%2012.17

And yet, there is a discrepancy as in a subpage detailing gross and net purchases the Fed reveals only $7.550 billion in net MBS purchases for the week ended December 14.

So obviously while the temporal matching is still not precisely clear, what is clear is that in the week ended Wednesday, The Fed provided a whopping $81 billion in additional reserve credit between FX swaps and MBS purchases, the latter having no other purpose than to release even more liquidity to banks which have simply converted one illiquid security, into another: cash. This answers the important question of “why” the Fed did what it did. It is also unclear whether this outlier transaction was demand driven or forced by the Fed. All that will be confirmed once we get the official breakdown of MBS POMO on January 13. Incidentally, here is what typical MBS purchases and sales look like on a monthly basis (excel table).

While these two balance sheet outliers would have in themselves made for curious observations, if insufficient to draw any particular conclusions, it is Exhibit C that puts things into perspective.

Exhibit C – Average Discount Window Borrowings

When the Fed updates its H.4.1 every Thursday at 4:30 pm, it provides two sets of data: an average over the period, and a period end number. And if one was looking to find a flashing red light within Bernanke’s book, which has always without fail been a big change in Discount Window borrowings (either Primary, Secondary or Seasonal Facility), looking at the period end number would have shown nothing out of the ordinary: there was a modest $42 million borrowed from the Primary Credit Discount Window facility on the day ending December 14, Wednesday, far less than previous 2011 outliers. However, things rapidly change when one observes the average usage of the Discount Window for the past week.

The result is as follows: a $393 million surge in average borrowings:

Did The Fed Quietly Bail Out A Bank On Tuesday? Discount%20Window%2012.14 0

And since we know that of the 7 days that make up the average period, one can be eliminated (as there was no borrowings on Wednesday), the implication is that on one day in the week ended December 14, the Fed lent out up to a whopping $2.5 billion (as the $393mm is an average 6 day number) to a bank in the form of last recourse cash via the Discount Window.

Confirming just this speculation is Barclays’ Joseph Abate:

After months of virtually no use of the Fed’s discount window, borrowing jumped to an average of $400m/day in the week through Wednesday. The Fed reports only the weekly average of daily borrowing and the daily amount outstanding on Wednesday.From these figures, we estimate that on one day last week, total discount window borrowing reached $2.5bn. Of course, the same $400m/day weekly average could have been achieved with a bank borrowing $900mn on Friday. It is unclear what prompted this pick-up in borrowing from the Fed. There was neither a spike in the fed funds rate nor any disruption in the repo market, so we are a bit puzzled.Of course, under Dodd-Frank, the borrowing bank’s name will be released – after two years.

Yes, the name of the bank that received what amounts to a Fed bailout will be released in two years, but no, we disagree that there was no disruption in the Repo Market. Perhaps Joseph forgets that the Fed lends out Discount Window cash to “eligible” entities out of Europe… where the repo market is in total collapse and wholesale disarray.

Furthermore, the borrowing was from the Primary Credit facility, or that reserved for stable banks, not Secondary Facility eligible names which have to pay an addition 50 bps in punitive interest. And since the bulk of Primary Credit eligible banks domestically already are swimming in $1.6 trillion in fungible excess reserves (which is the reason why discount window borrowings have been so modest ever since QE1 unleashed a liquidity tsunami for the bank, which serves no other reason than to plug capital shortfalls – it certainly is not being lent out) it is obvious that the Fed is now back to its old job of bailing out banks. And not just any banks – European banks.

Terms & Features
To access the Discount Window, eligible depository institutions first must execute the necessary documentation and pledge collateral to the Federal Reserve.

 

Feature
Primary Credit
Secondary Credit
Rate
Above the FOMC’s target for the federal funds rate. Primary credit rate plus 50 basis points

Term
Overnight Short-term, usually overnight. Can be extended for a longer term if such credit would facilitate a timely return to reliance on market funding or an orderly resolution of a failing institution, subject to statutory requirements (FDICIA restrictions).

Eligibility
Depository institutions in generally sound financial condition; same as eligibility for daylight credit. Depository institutions that do not qualify for primary credit.

Use
Generally no restrictions.
May be used to fund sales of federal funds.
As a backup source of funding on a very short-term basis, or to facilitate an orderly resolution of serious financial difficulties.

Administration
Ordinarily no questions asked. Reserve Banks will collect information necessary to confirm that borrowing is consistent with regulatory requirements.

Eligibility
Depository institutions to which the law grants access to the Discount Window and which the Federal Reserve deems generally sound are eligible to obtain primary credit. Reserve Banks determine eligibility on an ongoing basis using supervisory ratings and capitalization data; supplementary information, when available, may also be used.

 

Examination Rating
(CAMELS or equivalent)
Capital Designation

Generally
Eligible for
1, 2, or 3
Adequately or well capitalized
Primary credit

4 or 5
Any
Secondary credit

Any
Less than adequately capitalized
Secondary credit

 

Common Borrowing Situations
The new Discount Window programs offer an enhanced opportunity for eligible depository institutions seeking an efficient solution to meet unexpected, short- term funding needs.

 

Likely Situations for Borrowing Primary Credit

Generally, there are no restrictions on borrowers’ use of primary credit. Here are some examples of common borrowing situations:

  • Tight money markets or undue market volatility
  • Preventing an overnight overdraft
  • Meeting a need for backup funding, including a short-term liquidity demand that may arise from unexpected deposit withdrawals or a spike in loan demand
  • Arbitrage opportunities

 

Conclusion

We know two things with certainty: In the week ended December 13 (14th excluded) one or more banks, most likely European, borrowed up to $2.5 billion from the Fed’s Primary Credit Discount Window. And since US banks are drowning in dollar-based liquidity, any need to approach the Discount Window now, in the context of trillions of Excess Reserves, carries with its exponentially greater stigmata than it ever did during Lehman days. Also, in the week ended December 14, the Fed did a mid-month settlement of $31 billion in MBS purchases – a transaction which allowed a Primary Dealer to source critical liquidity, based on $30 billion in buyback authorization granted for the period beginning December 13. What we do not know for fact is whether the $30 billion in MBS purchases was completed on Tursday or Wednesday, and whether this is a delayed settlement for previous purchases, although due to the mid-month settlement process, it is possible that any transaction could have settled immediately. And for those seeking a specific “bank bailout” date, the 13th looks quite reasonable: it was the first day when an MBS purchase was permitted and it was the last day when a bulk Discount Window loan could have been performed.

But wouldn’t the market learn of even a hushed European bailout? And wouldn’t there be a massive sell off if it became clear that exactly two weeks after the Fed’s coordinated broad bailout of European banks, it had to engage in another, far more politically tenuous bailout, this time via a $2.5 billion free money loan to a cash scrambling bank? Well, if the news was leaked at 2pm on Tuesday it sure would explain the market reaction…

Did The Fed Quietly Bail Out A Bank On Tuesday? Dec%2013

So while much of the presented above is circumstantial, perhaps the next time Congress is debating with Ben Bernanke just how good it is for the US taxpayers to bail out European banks, someone can ask him just who it was that the Fed once again bailed out the week of December 14. Because America obviously does not have enough problems of its own…

 


Capitol Confidential
Big Government
November 23, 2011

In a move that grabbed attention among the technology and retail business communities, three senators—Sen. Mike Enzi (R-WY), Sen. Dick Durbin (D-IL) and Sen. Lamar Alexander (R-TN)—introduced legislation aimed at allowing states to require online-only, out-of-state retailers to collect and remit to states tax on sales made to residents of those states.

In a press release, the three senators touted their legislation as an effort to give states “the option to collect sales and use tax revenues from out-of-state sellers through a new, simplified tax system,” but “only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements.” The Enzi-Durbin-Alexander bill also “exempts sellers who make less than $500,000 in total remote sales in the year preceding the sale.” It reportedly has the support of big bricks-and-mortar retailers like Wal-Mart and Home Depot, as well as Amazon.com.

In multiple states around the country over the past year, legislators and officials have been looking to sales made by out-of-state, online-only retailers as a potential revenue stream capable of being tapped in order to help fill budget holes. California has been notably aggressive in pursuing a so-called “Amazon Tax,” which would force retailers like Amazon.com and O.co to collect and remit to the state sales tax on sales made to Californians.

Read more

 


The American Dream
Wednesday, November 9, 2011

Yes, most Americans realize that the economy is not doing well right now, but most of them also believe that this is just a “temporary” downturn.  The mainstream media tells us over and over that a “recovery” has either already begun or that one is right around the corner.


Sadly, the truth is that the U.S. economy is in much worse shape than most Americans think.  Yes, there will be economic “peaks and valleys” as we move along, but it is absolutely imperative that all of us understand that we are in the middle of a long-term economic decline that has been caused by decades of horrendous decisions.  Thousands of businesses and millions of jobs have left the country and they aren’t coming back.  Last year, 23 manufacturing facilities a day were shut down in the United States and we have lost more than 56,000 manufacturing facilities since 2001.  Without enough good jobs to go around, millions of American families have lost their homes and millions of American families have been pushed into poverty.  Less good jobs also means that there are less people to pay the taxes we need to keep government services going.  Government debt at the local, state and federal levels has exploded as the tax base has dwindled.  We have become a nation that is very good at consuming wealth but that is not very good at creating wealth.  Just “tweaking” a couple of things here or there is not going to get our economy back “on track”.  We need fundamental changes to the way that we are doing things, and there are currently no signs that this kind of change is going to happen any time soon.

But many Americans don’t even realize what is happening.  As I wrote aboutrecently, Americans are increasingly being segregated by income.  If you live in a “good neighborhood”, there is a decent chance that you might not know anyone that is having financial problems right now.  If you live in a “bad neighborhood”, it might feel like you are living in the middle of the Great Depression.

We live such insulated lives today.  We all get into our cars, go to work, get back into our cars, drive to the store, get back into our cars and drive home.  For most of us, interactions with other human beings are fairly limited.  Our perception of what is going on “in the real world” is greatly shaped by what the mainstream media tells us.

And the mainstream is constantly telling us that everything is going to be okay.

But is that the truth?

The following are 14 statistics which prove that the U.S. economy is in much worse shape than most Americans think….

#1 According to U.S. Representative Betty Sutton, America has lost an average of15 manufacturing facilities a day over the last 10 years.

#2 Sadly, it looks like this trend is picking up momentum.  During 2010, an average of 23 manufacturing facilities a day closed down in the United States.

#3 Since 2001, the U.S. has lost a total of more than 56,000 manufacturing facilities.

#4 There are way too few jobs and this is leaving a lot of people out in the cold.  The average amount of time that a worker stays unemployed in the United States is now a whopping 39 weeks.

#5 Only 48 percent of all unemployed Americans are currently getting unemployment checks from the government.  Early last year, that number was at 75 percent.

#6 There doesn’t seem to be much hope that the job market will improve significantly any time soon.  One recent survey found that 77 percent of all U.S. small businesses do not plans to hire any more workers.

#7 Without enough good jobs to go around, millions of Americans are losing their homes.  Over the past four years, more than 100,000 homes in Las Vegas alone have been lost to foreclosure.

#8 As the economy struggles, new home sales continue to suffer as well.  In fact, new home construction is poised to set a brand new all-time record low in 2011.

#9 As family budgets get tighter, Americans are saving less money and a significant percentage of them say that they have no extra money left to spend at this point.  The savings rate in the United States in September was the lowest that it has been since December 2007, and according to one recent survey one-third of all Americans say that they have absolutely no spare cash to spend on anything right now.

#10 According to one recent survey, one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

#11 If you can believe it, extreme poverty is now at the highest level that the U.S. government has ever recorded.  Today, more than one out of every seven Americans is living in poverty and more than 20 million of them are considered to be living in extreme poverty.

#12 State and local governments all over the country have gotten into massive debt problems.  At this point, the municipal bond market in the United States is coming apart at the seams.  The following is a brief excerpt from a recent articlethat appeared on biggovernment.com….

Moody’s Credit Rating Service just announced the ominous trend that credit quality in the municipal bond market is falling at the fastest rate since the collapse of Lehman Brothers in 2008. Data released showed that 5.3 times as many municipal bonds were credit downgraded over the three last months than were upgraded.

#13 Today, more Americans than ever are relying on the government in order to survive.  A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.

#14 Young people in particular have been hit really hard by this economy.  If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

#15 The “wealth gap” between older Americans and younger Americans continues to grow.  According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.

If you are doing good in the economy, you should be very thankful because there are tens of millions of Americans out there that are deeply, deeply suffering.

Most Americans understand that something is wrong with this country.  According to a recent Fox News poll, 76 percent of all Americans are “dissatisfied with how things are going in the country”.  At the beginning of this year, that number was only at 61 percent.

So obviously frustration is rising and a lot of Americans are extremely pessimistic right now.  But most of them also believe that things will get better soon if only they vote the “correct” politician into office.

So what do you think?

Do you believe that you have the answer to the economic problems facing this country?

If so, please feel free to leave your “economic plan” in the comments section below….