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Strategies & Market Trends : The Residential Real Estate Post-Crash Index-Moderated -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (27574)	6/30/2011 2:17:08 PM
From: DebtBomb	Respond to of 119360

"We all go down together" LMAO. QE2 Is Over, Now What? "There's nothing else the Fed can do." This is the obvious yet still depressing observation of Bert Ely, the eponymous Bank Analyst of Ely & Co. Echoing testimony he gave before the House Committee on Financial Services and observations shared by Barry Ritholtz at his must-read website, Ely told Breakout the Fed is out of ideas and ammunition. The dual mandates of stimulating employment while controlling inflation are in conflict with one another at this point. The stimulus didn't stimulate job growth but inflation is perking up it's head, suggesting QE3 isn't in the works and would be pointless anyway. As is the case with so many of Wall Street's "conspiracy theories" the truth is directly in front of those who think. Remember all those icky toxic assets from the financial crisis? As it turns out, they didn't exactly disappear but rather were swallowed by the Federal Reserve. On the upside, sort of, the funding for a decent portion of the Federal debt comes not from Treasury but the banking industry. Ely says "the banking industry, through it's deposits at the Federal Reserve, essentially is financing a not-insignificant portion of the Federal Debt as well as the Fed's other assets." By his calculation more than $1.6 Trillion of bank deposits are on the Federal Reserve's balance sheet. Furthermore Ely's description of the interrelationships between the Federal Reserve and the banking industry have created a logic-loop akin to an Escher painting or the movie Inception. Trying yet another metaphor; America's Financial Overlords attempting to lift the economy up by it's own ears and calling it levitation, or "growth" as the case may be. "Too big to fail" is now an adorable anachronism. Neither the Fed nor the banks can fail alone at this point, obviating the idea that the Fed will do anything it can to save banks as failing to do so would be suicidal. Like the gentlemen of the Titanic or the Billy Joel song, failure of the banking system, Treasury or the Federal Reserve means "we all go down together." "We're in uncharted territory we've never been through anything like this before," said Ely. Sure we have. Ask the Romans, Egyptians, Mayans or Aztecs about the inevitability of cultural failure. Better yet, take 3-seconds to run a search on U.S. Central Banks. Every attempt has failed or been dissolved every generation, on average, in the 235 years since the birthday we'll celebrate on Monday. In 2 years it will mark a century since Woodrow Wilson founded the current Federal Reserve. With every firework explosion you watch on Monday the current Federal Reserve will move slightly closer to its inevitable implosion. Happy 4th of July! finance.yahoo.com

To: Les H who wrote (27574)	6/30/2011 4:38:53 PM
From: Les H	2 Recommendations Read Replies (3) \| Respond to of 119360

China caught hiding treasury purchases THE 'GUARANTEED' BID The United States sells its debt to investors through auctions that are held weekly - sometimes four times per week - by the Treasury's Bureau of the Public Debt, in batches ranging from $13 billion to $35 billion at a time. Investors can buy the bonds directly from the Treasury at auctions, or through any of the 20 elite "primary dealers," Wall Street firms authorized to bid on behalf of customers. The Treasury limits the amount any single bidder can purchase to 35 percent of a given auction. Anyone who bought more than 35 percent of a particular batch of Treasury securities at a single auction would have a controlling stake in that batch. By the beginning of 2009, China, which uses multiple firms to buy U.S. Treasuries, was regularly doing deals that had the effect of hiding billions of dollars of purchases in each auction, according to interviews with traders at primary dealers and documents viewed by Reuters. Using a method of purchases known as "guaranteed bidding," China was forging gentleman's agreements with primary dealers to purchase a certain amount of Treasury securities on offer at an auction without being reported as bidders in that auction, according to the people interviewed. After setting the amount of Treasuries the guaranteed bidder wanted to buy, the dealer would then buy that amount in the auction, technically on its own behalf. To the government officials observing the auction, it would look like the dealer was buying the securities with the intent of adding them to its own balance sheet. This technicality does not preclude selling them later in the secondary market, but does influence the outcome of bidding in the auction, by obscuring the ultimate buyer. In fact, the dealer would simply pass the bonds on immediately to the anonymous, guaranteed bidder at the auction price, as soon as they were issued, according to the people interviewed. The practice kept the true size of China's holdings hidden from U.S. view, according to Treasury dealers interviewed, and may have allowed China at times to buy controlling stakes - more than 35 percent - in some of the securities the Treasury issued. The Treasury department, too, came to believe that China was breaching the 35 percent limit, according to internal documents viewed by Reuters, though the documents do not indicate whether the Treasury was able to verify definitively that this occurred. Guaranteed bidding wasn't illegal, but breaking the 35 percent limit would be. The Uniform Offering Circular - a document governing Treasury auctions - says anyone who wins more than 35 percent of a single auction will have his purchase reduced to the 35 percent limit. Those caught breaking auction rules can be barred from future auctions, and may be referred to the Securities and Exchange Commission or the Justice Department. huffingtonpost.com