Oil's energy contribution has declined by about 12% since 1999. The world's economies have also declined by about 12%. (Using conventional metrics, which are time delayed determinations, this will only be seen in hind sight). The massive destruction of asset values now occurring testifies to it happening.
Peak is well behind us, world economies have peaked and will continue to decline.
Yeah. No kidding. Sorta smells like somebody left a dead possum in the living room.
Perhaps you forget your deodorant? _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Assuming they can find buyers for all of that toilet paper, isn't that the equivalent of dumping $400 billion into the economy via the fractional reserve mechanism?
I might be wrong about this but I don't think this action increases total bank reserves, since increasing treasury deposits at the Fed draws reserves from the system, offsetting the increase in reserves that occurs when the Fed buys the debt.
Somebody correct me if I'm wrong... _________________ "Who knows what the Second Law of Thermodynamics will be like in a hundred years?" - Economist speaking during planning for World Population Conference in early 1970s
Assuming they can find buyers for all of that toilet paper, isn't that the equivalent of dumping $400 billion into the economy via the fractional reserve mechanism?
I might be wrong about this but I don't think this action increases total bank reserves, since increasing treasury deposits at the Fed draws reserves from the system, offsetting the increase in reserves that occurs when the Fed buys the debt.
Somebody correct me if I'm wrong...
Yeah this is just high level money. It would have to trickle down through the fractional system of lending over many months to blossom and loan activity in general is quite restrictive so no this wont blossom into a ton of money...not in this economy. Now if people start dumping gov bonds from overseas there will be nobody to buy them but the fed (and it's their job to if nobody else does) and that in return will create ridiculous amounts of high level money, enough to cause hyper inflation. _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Wed Sep 17, 2008 6:14 pm Post subject: Re: Fed prints $40 billion
Ok, this is not easy to explain.
The Fed & Treasury developed a plan after the credit crisis started in July 2007. Basically in the event that the demand for highly liquid securities like Treasury bills greatly exceeded demand, the Treasury was to launch an emergency issue of new Treasury bills.
When interest rates on one month Treasury bills fell to 0% (zero) this morning, the plan was activated. The Treasury rather quickly sold $40 billion in new one month Treasury bills.
If the Treasury has excess funds, it usually deposits them with the Fed, as was the case today with eth $40 billion it received from the bill sale.
To lend money for its various schemes, the Fed could choose to sell its existing assets or just basically print up new money. Mostly over the last year, it has sold Treasury bills it owns and lent money to banks/brokers/mortgagers/insurers – but also printed up new money. The Fed statement Thursday night will tell us whether the new Treasury money was lent out somewhere.
Anyway, the Treasury & Fed at this point are just trying to prevent interest rates on US treasuries going negative. Perhaps needless to say, negative interest rates for the dollar would not be attractive to foreigners. Gold would seem more appealing. Gold could even go up $80 in one day as money leaves dollars.
So the answer as to whether this is inflationary or deflationary depends on what the Fed does with the money and whether it affects the value of the dollar.
Most likely, this is just one more step in the debasement of the dollar - that is replacing the backing for the dollar with private debts and assets instead of US treasury bills. _________________ It's already over, now it's just a matter of adjusting.
The Treasury announced Wednesday it would sell $60 billion in cash-management bills on Thursday under a program designed to raise cash for the Federal Reserve.
WSJ
Another $60 billion coming tomorrow. Money is fleeing the financial system and going in to Treasuries.
I don't know who will be left with all the garbage no one wants, but I think eventually it will end up at the Fed. _________________ It's already over, now it's just a matter of adjusting.
Floyd Norris
September 17, 2008, 12:00 pm
Flight to Quality
A money manager advises that the ultimate flight to quality is under way, and he cannot find Treasury bills to buy. He told me that he had to go out to December to find a T-bill that he could purchase with any yield at all, and that was well under one-tenth of a percentage point. The others, if they could be purchased at all, were available only for the amount they will be worth when they mature.
What is going on here? I suspect there is a run on money market funds, or at least the ones that do not own only super-safe assets. With the money going into Treasury funds, they must find very-short-term Treasuries to buy.
But that run may have more serious consequences. Many money funds own asset-backed commercial paper that they seem to have rolled over time and again. The assets backing the paper may be very hard to sell even close to par if the conduit that issued the paper cannot get alternative financing. If that paper is sold, the new market value could force other money market funds to break the buck, and away we go in another downward spiral.
One way to halt that spiral could be for banks to take the funny paper as collateral for loans, and then pledge it at the Fed to secure loans. (The Fed has liberalized its lending rules.)
And in the end, the government may end up owning a lot of very dubious paper.
NY Times blogs _________________ It's already over, now it's just a matter of adjusting.
Treasury draws up bills and auctions them. Result: Buyer's bank loses reserves, Treasury deposits money received with Fed. At this stage, there is no net change to asset or liability side of Fed balance sheet, but total bank reserves have fallen. Effectively, bank reserves have been converted into treasury deposits.
Then the Fed buys bills and causes bank reserves to increase, offsetting the decrease in reserves. Net result: an equal increase in A&L sides of Fed balance sheet, but no change to the monetary base, provided the treasury deposits are "frozen" and not spent. If they are spent, reserves increase and the result is similar to direct monetisation. The Treasury can control whether this is inflationary or not.
Quote:
The new Treasury Supplementary Financing Program announced on Wednesday will help the Fed finance its loan to AIG, note the analysts at UBS. The Fed will allow its balance sheet to expand, but the impact on banking system reserves and the monetary base will be neutralized or sterilized by the Treasury depositing special T-bill auction proceeds in its account at the Fed. In short, the expansion will not be equivalent to printing money.
Link _________________ "Who knows what the Second Law of Thermodynamics will be like in a hundred years?" - Economist speaking during planning for World Population Conference in early 1970s
Posted: Thu Sep 18, 2008 12:21 am Post subject: Re: Treasury "helping" Fed
And then children, on September 17, 2008, the United States admitted there was a new fourth branch of government, the Financial Branch.
Unlike the other three branches, there were no checks and balances on this branch. Our Founding Fathers never conceived of the kinds of things this branch of government does day after day. The new branch of government is what really controls the country, with no democratic process involved whatsoever. They are very good at doing amazing things with money. They are even better at doing things with debt!
And that's why each of us in America has a Debt Card. No, Billy, not a Debit card. It's the other one, with the picture of the President on it. The Debt card shows how much money your government spent on your parent's behalf before you were born, plus everything spent on your behalf after you were born up to right now - and that is how much money we all now owe the US Government. On Sept 17, 2008, the day the new branch of government was officially recognized, almost $300 of was spent for every man, women and child in the United States - in just that one day!
See how the numbers keep changing? All the cards a linked to the Master Debt Counter in Washington, so you can see what is happening to your future as it happens.
Study hard, children, so you can get good jobs, and start to spin that number the other way. Your future children are counting on you. _________________ 100% of the electricity needed for this post was generated by ME.
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