Promises Of More QE Are No Longer Sufficient: Desperate Banks Demand Reserves, Get First Fed Repo In 4 Years

via: ZeroHedge
by: Tyler Durden
August 3, 2012

While endless jawboning and threats of more free (and evenpaid for those close to the discount window) money can do miracles for markets, if only for a day or two, by spooking every new incremental layer of shorts into covering, there is one problem with this strategy: the “flow” pathway is about to run out of purchasing power. Recall that Goldman finally admitted that when it comes to monetary policy, it really is all about the flow, just as we have been claiming for years. What does this mean – simple: the Fed needs to constantly infuse the financial system with new, unsterilized reserves in order to provide bank traders with the dry powder needed to ramp risk higher. Logically, this makes intuitive sense: if talking the market up was all that was needed, Ben would simply say he would like to see the Dow at 36,000 and leave it at that. That’s great, but unless the Fed is the one doing the actual buying, those who wish to take advantage of the Fed’s jawboning need to have access to reserves, which via Shadow banking conduits, i.e., repos, can be converted to fungible cash, which can then be used to ramp up ES, SPY and other risk aggregates (just like JPM was doing by selling IG9 and becoming the market in that axe). As it turns out, today we may have just hit the limit on how much banks can do without an actual injection of new reserves by the Fed. Read: a new unsterilized QE program.

Continue Reading At: ZeroHedge.com

UBS Issues Hyperinflation Warning For US And UK, Calls It Purely “A Fiscal Phenomenon”

via: ZeroHedge
by: Tyler Durden
July 18, 2012

Supposedly warnings about the latent inflationary threat posed by simply ridiculous non-financial debt levels (as presented most recently here yesterday), not to mention financial debt (which as MF Global’s rehypothecated implosion demonstrated so vividly can be any number between minus and plus infinity, thank you London “regulators”) from the blogosphere can be ignored ($15 trillion melting ice cube that is shadow bankingwhich also doubles as the best inflationary buffer known to man, notwithstanding). After all, what does the blogosphere know: remember, Libor has been repeatedly proven to not be manipulated, as the mainstream media so strenly claimed year after year after year until it had no choice but to do a 180 and pretend its advertiser paid for lies in the past 3 years never existed. But when these same warnings emanate from the “very serious people” at UBS, economists with a Ph.D. at that, it may be a little more difficult to dismiss them. So here it is: “Hyperinflation Revisited” from Caesar Lack, PhD, economist.

Continue Reading At: ZeroHedge.com

“Trade-Off”: A Study In Global Systemic Collapse

via: ZeroHedge
by: Tyler Durden
July 15, 2012

And now a little something for everyone who consistently has a nagging feeling that at any second the world is one short flap of a butterfly’s wings away from complete systemic disintegration: according to David Korowicz of FEASTA, and his most recent paper: ‘Trade-Off: Financial System Supply-Chain Cross-Contagion: a study in global systemic collapse.” that just may be the case. Think of the attached 78-page paper as Nassim Taleb meets Edward Lorenz meets Malcom Gladwell meets Arthur Tansley meets Herman Muller meets Werner Heisenberg meets Hyman Minsky meets William Butler Yeats, and the resultant group spends all night drinking absinthe and smoking opium, while engaging in illegal debauchery in the 5th sub-basement of the Moulin Rouge circa 1890.  To wit: “Something sets off an interrelated Eurozone crisis and banking crisis, a Spanish default say, which spreads panic and fear across other vulnerable Eurozone countries. This sets off a Minsky moment when overleveraged speculators in the banking and shadow banking system are forced to unwind positions into a one-sided (sellers only) market. The financial system contagion passes a tipping point where governments and central banks start to lose control and panic drives a (positive feedback) deepening and widening of the impact globally. In our tropic model of the globalised economy, the banking and monetary system keystone hub comes out of its equilibrium range, crosses a tipping point, and is driven away by positive feedbacks to some new state…. it is very clear that we have learned almost nothing general about risk management as a societal practice arising from the financial crisis. We have merely adopted a new consensus, with a questionable acknowledgement that we will not let this type of crisis happen again. However, the argument in this following report is that we are facing growing real-time, severe, civilisation transforming risks without any risk management.”

Continue Reading At: ZeroHedge.com

Emerging Market Liquidity Flows At Crisis Levels

via: ZeroHedge
by: Tyler Durden
July 4, 2012

The growth in Emerging Market ‘External Liquidity’ recently was only ever slower in the quarters either side of the crash in 2008. This is a very worrying sign. EM nations are highly dependent on ‘external’ capital inflows (to smooth current account deficits) and have empirically been exposed to the ‘sudden stop’ nature of these inflows. It appears that Europe’s banking crisis and deleveraging is indeed having a critical impact on EM nations – which may oddly mean domestic policy adjustments will be necessary (raising rates to encourage capital inflows) that will further exacerbate the problems as global growth slows. This brings to mind our recent comments on the shadow banking system and the drop in deposits among traditional risk-hungry EM funding banks – as we note that the more deposit-free the banking system, the slower the funds will flow.The newer the debt- and asset-inflation-based ‘capitalism’, the faster it is impacted at the margin – and it appears many EM nations are being affected rather rapidly.

Source: ZeroHedge.com

Bank for International Settlements on Big Banks

via: TheIntelHub
by: James Hall
June 27, 2012

The shadow-banking component that adds to the risk of non-regulatory oversight just deepens the mystery behind the most powerful banking institution that runs roughshod over global finance. In order to gain an insight into the complexity of deception, examine the function of the BIS.

The granddaddy of all central banks, the Bank for International Settlement, latest BIS Annual Report 2011/2012, foretells future financial consolidation.

Watch the Banker to the World’s Bank: Time to Deleverage, video interview on CNBC.

From Chapter V. Restoring fiscal sustainability, in this report concludes:

“Sovereigns have been losing their risk-free status at an alarming rate. Fiscal positions were already unsustainable in many advanced economies before the financial crisis, which in turn led to significant further weakening. The deterioration of public finances has undermined financial stability, lowered the credibility of fiscal and monetary policy, impaired the functioning of financial markets, and increased private sector borrowing costs. Restoring sustainable fiscal positions will require implementing effective fiscal consolidation, promoting long-term growth, and breaking the adverse feedback loop between bank and sovereign risk.”

The section called, Box VI.A: Shadow banking, states:

“While definitions differ, the term “shadow banking” broadly refers to financial activities carried out by non-bank financial institutions that create leverage and/or engage in maturity and liquidity transformation. Thus, even though they are subject to different regulatory frameworks, shadow and traditional banks operate alongside each other.

Shadow banking exists because historical and institutional factors, the rapid pace of financial innovation and specialization have all increased the attractiveness of performing certain types of financial intermediation outside traditional banking. In normal times, shadow banking enhances the resilience of the broader financial system by offering unique financial products and a range of vehicles for managing credit, liquidity and maturity risks. But shadow banking also creates risks that can undermine financial stability in the absence of prudential safeguards.”

The bombshell news that raises alarm is the admission that “Too Big To Fail” is still the operative principle that drives the banking system into an unsustainable servicing of debt obligations. The cloak of the shadow banking practice, intended to circumvent usual regulatory standards, creeps along the soft underbelly of respectable central banking. When a collapse catches up with the racket of excessive leverage, the ensuing scandal is directed to some esoteric phantom operation that is expendable.

The analysis in Big Banks Take Risks Expecting Taxpayers To Cover Losses identifies who ultimately bears the risk of the world fiat, debt created, financial system.

“The report also emphasized the need to increase the safety of the banking system by pushing banks to be responsible for their losses, add to their financial buffers and avoid risky practices. It added that big banks still have an interest in using high-risk debt – so-called “leveraging” – to magnify any trading gains because they can expect taxpayers to step in and cover their losses if things go bad.

“Big banks continue to have an interest in driving up their leverage without enough regard for the consequences of failure: because of their systemic weight, they expect the public sector to cover the downside, ” said BIS. “Another worrying sign is that trading, after a brief crisis-induced squeeze, has again become a major source of income for large banks.”

Protecting the fractional reserve scheme, at all cost, is the true purpose of the BIS. Sovereign holdings, with their ensuing national debt owed to the banksters pays homage to the real owners of underlying collateral assets.

From a source in the essay, Revolution against Central Banks, explains a scheme of global magnitude for financial control.

“The BIS is taking national currency deposits from the 55 member/owner central banks and converting them to SDR’s on its own balance sheet. The SDR’s are “claims on the freely usable currencies of IMF members,” therefore, the deposits of the central banks become claims on those currencies–the deposits of the fiat central banks who can deposit as much as they feel at the BIS in whatever currency the chose–including the SDR’s allotted to their “nation,” as the central banks are the sole depositories for the national wealth/sellers of the national debt. The BIS is then paying out dividends to these same member CB’s in the form of SDR’s, which again can be used to claim currencies. By August 2009, they had just made up out of thin air almost twelve times the supposed global supply of SDR’s. They are truly acting like the “central bank of the world,” complete with printing!”

By any objective standard of decency and accountability, the BIS is the ultimate clearinghouse of worldwide debt for the New World Order. Need proof, just reflect on the diversion used by a captain from one of the most powerful “Godfather” family of investment banking.

Finally in, Time to Stop Expecting So Much From the Fed?, Goldman Sachs strategist Jim O’Neill told CNBC:

Even the central bank for central banks, the Bank for International Settlements, is playing down the power of the Fed and other central banks.

“It would be a mistake to think that central bankers can use their balance sheets to solve every economic and financial problem,” the BIS said in its annual report.

“In fact, near-zero policy rates, combined with abundant and nearly unconditional liquidity support, weaken incentives for the private sector to repair balance sheets and for fiscal authorities to limit their borrowing requirements,” the report said.

World consumers are being pick-pocketed in the graveyard of financial ruin. Strip away the skin of a decayed corpse and what remains is the stark skeleton of a dead paper monitory system. The life-support methods used to keep the interest payments accruing, only forestall the day of reckoning. The end game for the central bankers is foreclosure on pledged guarantees. Currency swaps will become a recall of national fiat species and a replacement with a float of a new world coinage.

National governments are mere public diversions from the real power behind the thrones.

For additional information on the BIS, visit the Facebook Group, BIS (Bank for International Settlements) awareness.

James Hall writes for BATR

Source: TheIntelHub.com

Europe’s “Monetary Twilight Zone” Neutron Bomb: NIRP

via: ZeroHedge
By: Tyler Durden
June 27, 2012

Just because ZIRP is so 2009 (and will be until the end of central planning as the Fed can not afford to hike rates ever again), the ECB is now contemplating something far more drastic: charging depositors for the privilege of holding money. Enter NIRP, aka Negative Interest Rate Policy.

Bloomberg reports that “European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. while cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive,cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15… “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight.“

There is only one problem when comparing the Riksbank with the ECB: at €747 billion in deposits parked at the ECB as of yesterday, the ECB is currently paying out 0.25% on this balance, a move which may or may not be a reason for the depositor banks, primarily of North European extraction, to keep their money parked in Frankfurt. However, once this money has to pay to stay, it is certain that nearly $1 trillion in deposit cash, currently in electronic format, would flood the market. What happens next is unknown: the ECB hopes that this liquidity flood will be contained. The reality will be vastly different. One thing is certain: inflating the debt is the only way out for the status quo. The only question is what format it will take.

Continue Reading At: ZeroHedge.com

On The Verge Of A Historic Inversion In Shadow Banking

via: ZeroHedge
By: Tyler Durden
June 25, 2012

While everyone’s attention was focused on details surrounding the household sector in the recently released Q1 Flow of Funds report (ours included), something much more important happened in the US economy from a flow perspective, something which, in fact, has not happened since December of 1995, when liabilities in the deposit-free US Shadow Banking system for the first time ever became larger than liabilities held by traditional financial institutions, or those whose funding comes primarily from deposits. As a reminder, Zero Hedge has been covering the topic of Shadow Banking for over two years, as it is our contention that this massive, and virtually undiscussed component of the US real economy (that which is never covered by hobby economists’ three letter economic theories used to validate socialism, or even any version of (neo-)Keynesianism as shadow banking in its proper, virulent form did not exist until the late 1990s and yet is the same size as total US GDP!), is, on the margin, the most important one:in fact one that defines, or at least should, monetary policy more than most imagine, and also explains why despite trillions in new money having been created out of thin air, the flow through into the general economy has been negligible.

Before we get into the nuances, here, courtesy of Zoltan Pozsar is a reminder of the nebulous entity under discussion which is the definition of “baffle them with bullshit.” We recommend only Intel chip technicians try to make any sense of this schematic.

As another reminder, US Shadow Banking liabilities – a combination of Money Market funds, GSE and Agency paper, Asset-Backed paper, Funding Corporations, Open market paper and of course, Repos – hit a gargantuan $21 trillion in March 2008. They have tumbled ever since, printing at just under $15 trillion at the end of March 2012, the lowest number since March 2005 when shadow banking liabilities were soaring. This is an epic $6 trillion in flow being taken out of credit-money circulation, with a $143 billion drop in Q1 alone!(blue line on the chart below).

In fact over the past 16 quarters there has not been a single increase in the total notional contained within shadow liabilities.The chart below shows perfectly just where the credit bubble popped: a bubble which has affected shadow banking far more than normal credit transformational conduits.

Finish Reading Article At: ZeroHedge.com