Excess Reserves on the Move, Down 11% in Two Weeks!

Has the great migration of excess reserves out of the Federal Reserve and into the economy finally begun? It could be. Total reserves fell dramatically from $2.53 trillion to $2.28 in the last two weeks. I don’t know where they went or how the Fed sucked them out of the system. It must have something to do with the rise in interest rates but I’m not sure what.

The weekly money supply total is steady from two weeks ago, so the missing reserves so far don’t seem to be showing up in the money supply. However, the H3 release, which shows total reserves, measures until January 6 and the H6 release only through December 28. So it could be that when the H6 catches up, we will see the ripples of that $250 billion drop in total reserves starting to show up in the money supply.

The 1-week average should be carefully monitored over the next 2 weeks especially, to see if it moves up as total reserves move down. If it does, we are in for a monetary flood. If it doesn’t, then the Fed has figured out a way to drain excess reserves without affecting the money supply. If that’s true, the Fed must be selling assets in return for cash that it is retiring.

Any Fed experts out there who have a clue as to what is going on here?

Anti Fed Economics Goes Mainstream as Jared Blikre Does it Again

Something amazing is happening at Yahoo Finance. It’s a tool I use almost daily for stock research, but the articles and commentary are generally blah mainstream Keynesian Fed cheerleading nonsense.

Not anymore.

I reported on Jared Blikre last week, who actually made mention of the excess reserves problem at the Federal Reserve. This is an enormous financial elephant in the room that will eventually (and soon) destroy the dollar. I suspected he may have Austrian leanings. That is now confirmed.

Blikre is a friend of Bob Wenzel, and Austrian economist and publisher of EconomicPolicyJournal and TargetLiberty. I emailed Blikre’s last article to Bob and it turns out he had already linked to the very article I sent him 5 days before I even found it on the Yahoo front page. That means it was floating as the feature Yahoo Finance article for 5 whole days, though there are probably IP based permutations and algorithms governing who sees that article as the feature and who doesn’t.

So yes, we have someone high up at Yahoo Finance reporting on actual relevant financial news out of the Fed. On December 31, Blikre struck again, detailing some strange goings on in the Fed funds rate and humongous overnight treasury auctions that signal something’s up. It reads like a slightly toned-down version of a Zerohedge piece, but Blikre clearly has a deep understanding of the mechanisms of Fed operations and money creation that even I am unfamiliar with.

Read Blikre’s piece in full. It’s real financial journalism.


The Excess Reserves Problem Actually Makes it Into Yahoo Finance Front Page!

I’ve been railing about this problem for 3 years. There are currently over $2.5 trillion in excess reserves sitting at the Fed. Here’s the graph.

Eventually those reserves are going to come out into the banking system and absolutely flood the entire world with a tsunami of dollars. The effect on price inflation will be extreme.

What surprised me, even shocked me to a degree, was that this story was actually featured on the Yahoo Finance front page today. My mouth was hanging open, because I have never seen a mainstream report on this. The author even uses the term “price inflation” to differentiate it from “inflation”. The former, inflation, means an increase in the unbacked money supply. The latter, price inflation, means a rise in prices as a result of inflation of the money supply.

Only Austrian economists differentiate the terms, because only Austrians are logical about economics. Everyone else is practicing voodoo. I have to think there is an Austrian, or an Austrian-leaning journalist at Yahoo. The guy’s name is Jared Blikre. I’ll be doing more research on him to see if there’s a mole from our side at the MSM, or if this is just a fluke.

In a world where money is debt and debt is garbage

Here’s a shout out to Bill Still, a strange guy (who isn’t strange these days?) I debated once when some monetary reform group headed by Crackpot Israeli Academic Chicagoan Friedmanite Monetary Totalitarian Socialists invited him to Israel to speak with Moshe Feiglin, and he had me take up the liberty side.

Still is obsessed with an accidental feature of the monetary system, a problematic one but an accidental one nonetheless – that money comes into existence through debt. This is true. It means that the creators of money buy bonds with the money they create, and whoever they give the new money to (always government) always owes the money back to the Fed.

Every dollar in existence is owed back to the Fed because it represents a government bond that was purchased. The government will get the money to repay the bond by taxing us. Therefore, every dollar that exists, that you have, will be paid back to the Fed at interest.

This sounds bad, and it is. But it is not a necessary part of the current fiat monetary system. Why not? Because the Fed does not have to buy bonds with the money it creates. It could buy anything it wants. It could buy my old dilapidated desk chair, or the desk I’m working on right now that I found abandoned on the street before Pesach.

If it bought real assets instead of debt, then no one would have to pay the money back. It could circulate indefinitely. It wouldn’t represent debt. It would just be value stolen from taxpayers that was used to buy my desk.

The real evil is not that money is debt. That is just an added layer of evil on top of the main sickness, which is that printed money – ANY printed money that must be used by law to pay taxes, whether it is printed initially to buy debt or a desk I found in the garbage, is theft of value from the previous holders of that money.

So Bill Still wants to change printed money from money used to buy debt, to money that is just injected into the economy used to buy nothing. Just distributed. For free. And he thinks this would solve everything. The guy is nuts, and his followers are obsessed with a purely accidental feature of the monetary system.

But my shout out to Mr. Still is that insofar as money is debt these days, however accidentally, and debt is garbage, then money is garbage. When the debt loses all nominal value because it simply cannot be repaid anymore, then the money goes with it.

And debt is losing value fast now in Europe.

G20 Sets the Stage for a Global Bail-in, OR: The Protocols of the Elders of Global Finance

Today we’re going to pick apart some Newspeak. Here’s the relevant paragraph, from an article in Reuters about the leaders of the most powerful financial institutions all coming together and conspiring about how to rob the entire human race of all its savings and transfer them all to governments, all in one shot.

Government leaders are expected to agree in November that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue, industry and G20 officials said.

The bonds, known as “gone concern loss absorption capacity” or GLAC, are seen by regulators as essential to stopping the world’s 29 biggest lenders from being “too big to fail”.

Here’s the translation into English:

There’s this problem with banks that have gotten so big, thanks to government coddling and favors, that to let them fail would endanger the government itself. Therefore, up until now, every time they almost fail, which happens repeatedly because they are all fractional reserve banks that lend out demand deposits, the government bails them out by raising taxes and printing, and giving the money to the banks in what is called, colloquially, a bail out. In 2008 it was $700 billion in taxes (remember the TARP act?) and $16 trillion in printing, 22x the taxes spent on the banks.

The problem is, relying on taxpayers to back banks is politically unpopular, so instead of having to rely on the government to transfer tax money to banks through direct taxes and inflation, governments are enabling the banks to steal from depositors directly without using the government as its thieving middleman.

GLAC bonds will be backed by none other than demand deposits, in other words the money you deposit in your checking account. You can’t just invent capital out of nothing if you are not a central bank and do not have the ability to steal through inflation. So in the event of serious financial stress, these GLAC bonds will be on the balance sheets of banks listed as assets to pay off creditors.

Got that? Thanks to G20 governments, the biggest banks now have the ability to pay off their creditors with the money you deposit in your checking and savings accounts by calling that money a “GLAC Bond” and declaring it an asset.

Now taxpayers do not have to be robbed by government in order to pay off bankster debts. Now they can be robbed directly by the banks themselves through GLAC bonds. Remember Cyprus in 2013? When the Cypriot government took a percentage of everyone’s deposits to pay off its debt?

It just went global.

The Protocols of the Elders of Global Finance

The trillion dollar coin approach to middle east peace

There have been rumors and shmumors about America’s intention of minting a “trillion dollar coin” and sticking it in the Federal Reserve in order to bypass the so-called debt ceiling, which is more of a debt elevator. I couldn’t help but think of the Simpsons episode where the government prints a trillion dollar bill and Mr. Burns and Homer escape with it and somehow it ends up in the hands of Fidel Castro and the country survives on the wealth of the trillion dollar bill.

It is rare that I am dumbfounded, but this time I really am. I don’t know what to say. The mere possibility of the minting of a trillion dollar coin is so despicably absurd that I’m overloaded with a litany of potential sarcastic remarks that none of them can fit through the door of my mouth as they’re all crowding together simultaneously and are now jammed in the back of my throat and I can hardly breathe. Jon Stewart did a pristine job I must say.

Let me just start by saying that the source of this problem is that some primordial government, when it came in and seized the local mints and splayed the king’s face over all the coins, decided to give the monetary unit a proper name instead of a weight. For example, “dinars” instead of “ounces”. Then the Alice-in-Wonderland concept of “face value” was born, which doesn’t really exist. If instead of “dollars” the term for money was “grams” then money would be tied to weight instead of fancy shmancy names like “dollar” and the possibility of printing a gram of money or a “trillion gram coin” would be a lot more difficult for the government to do. So they had to rename the monetary unit to some imaginary term.

Two obvious questions are these, reductio ad absurdums, but it’s hard to engage in those when the premise you are attacking is itself so intensely absurd on its own:

  1. If you’re going to mint a trillion dollar coin, why not mint 16 of them and pay off the national debt?
  2. Why make it out of platinum? Why not elephant dung?

Better yet, you want mideast peace, right? And you love foreign aid and meddling. Then by God go all out! Why use it for such a petty thing as raising the “debt ceiling”? I say give the trillion dollar elephant dung to Israel, and then we can buy all of Syria, Jordan, Lebanon and Egypt and every single Arab in the country, pay them outrageous salaries to tap dance for us, and give them each their own personal trained pet chimpanzee to give them manicures and shiatsu massages and build them all gold-plated ivory mansions so they’ll be happy and won’t have to do anything after the daily tap dance for the Jews? Everyone over here will be rich, obviously, and therefore at peace. And the chimpanzee population will have a big boon.

There’s only one problem. How are we doing to break a trillion to get all this done? The local Five and Dime? Or the Five and Trillion?

And you want to use it to get around your stupid debt ceiling?

My Lord the world has lost its mind.

And don’t forget, there is nothing qualitatively different between a trillion dollar coin, and a one dollar bill.

The Fed OD’s on QE3 and bonds go down, the real crash is beginning

The Fed today announced it would print money until the economy recovers. Ergo, it will print money forever, because printing money prevents economic recovery.

Gold and silver went berzerk today. But bonds did not. They went down. You’d expect, after an announcement that the guys who print money are going to be buying bonds with it, that the value of bonds would go up. If a company is bought out by a bigger company, then the stock goes up, because said bigger company is buying a bunch of stock of the smaller company being bought out. This is what happens in normal markets.

Unless…unless nobody wants any of the shares of the smaller company to begin with and they all think the big company is insane to buy up the smaller company because all they sell is solar powered flashlights, so everyone sells all their shares to the bigger company and the stock actually goes down even though the big company is buying it up because EVERYONE ELSE is selling their shares to the bigger company too.

This is what happened today. The government is selling pieces of paper that promise to pay you dollars in the future. They are selling “stock” in dollars. But dollars in the future are worth a lot less than dollars in the present. Nobody wants dollars in the future. They’re like solar powered flashlights. So they’re all selling them to the fed. And bonds went down, even though the biggest buyer just stepped in and said we will buy bonds forever.

This is it folks. The real crash is starting right now. If bonds are going down today of all days, interest rates are on their way up That means the interest on the national debt is about to go through the roof. Every bailed out bank is going to fail. Again. And this time there won’t be any more bailouts.