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The Beginning Of The Ponzi End: As Of Today, The Biggest Holder Of Us Debt Is Ben Bernanke

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Crazy - yet people are still converting other currencies/assets to buy US Dollar bonds with maturities longer than 3 months?

Why on earth would anyone loan their wealth as a dollar denominated debt to the US government on anything more than an extremely short term basis when that government is engaged in monetising away the debt?

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Can anyone explain to me why this is a bad thing? I can understand that it is distorting the yield curve, which is bad, but the debt itself, is effectively locked away, is it not? It really becomes similar to an intergovernmental transaction now, no?

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Can anyone explain to me why this is a bad thing? I can understand that it is distorting the yield curve, which is bad, but the debt itself, is effectively locked away, is it not? It really becomes similar to an intergovernmental transaction now, no?

It means the FED is taking profits that Private Bankers would normally have.

the whole idea of the FED and central banks is to fix short term problems, and assure financial stability.

If debt is just taken over by the FED, it means the tools they have been using to date to get stability, have failed to work, and now they are effectively printing away debt, yet at the same time, sucking wealth out of the normal scheme of the economy....the question is...how do they repatriate this money to the economy, where it serves a useful purpose.

Its bad.

Now you can explain the yield curve to me....

Edited by Bloo Loo

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It means the FED is taking profits that Private Bankers would normally have.

the whole idea of the FED and central banks is to fix short term problems, and assure financial stability.

If debt is just taken over by the FED, it means the tools they have been using to date to get stability, have failed to work, and now they are effectively printing debt, yet at the same time, sucking wealth out of the normal scheme of the economy....the question is...how do they repatriate this money to the economy, where it serves a useful purpose.

Its bad.

Now you can explain the yield curve to me....

Thanks Bloo. I find the whole thing confusing. The yield curve, as I understand it, is the curve created by plotting the yield (Y-axis) of a given maturity against the age of the maturity. If flat, the market expects deflation, if steep, inflation.

The FED has distorted this. It was very flat early on, and recently bulged in the middle (almost unheard of). FED is trying to steepen it, from my understanding.

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Thanks Bloo. I find the whole thing confusing. The yield curve, as I understand it, is the curve created by plotting the yield (Y-axis) of a given maturity against the age of the maturity. If flat, the market expects deflation, if steep, inflation.

The FED has distorted this. It was very flat early on, and recently bulged in the middle (almost unheard of). FED is trying to steepen it, from my understanding.

the yield curve is essentially the price of money. Price-fixing money (as with anything) generally ends in some disaster or another

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Thanks Bloo. I find the whole thing confusing. The yield curve, as I understand it, is the curve created by plotting the yield (Y-axis) of a given maturity against the age of the maturity. If flat, the market expects deflation, if steep, inflation.

The FED has distorted this. It was very flat early on, and recently bulged in the middle (almost unheard of). FED is trying to steepen it, from my understanding.

Im sure others will know far more about this problem than I, and Im sure a few sides of A4 could cover all the issues.

As for confusing us...that is the intention.

Course, if Bernanke is buying all the T-Bills out there, then that must falsify the signals from the Yield curve, also the bid/offer ratios at TBIll sales, and just about everything else.

COurse, it could never happen in the UK

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Can anyone explain to me why this is a bad thing? I can understand that it is distorting the yield curve, which is bad, but the debt itself, is effectively locked away, is it not? It really becomes similar to an intergovernmental transaction now, no?

good man - its not a bad thing. Its part of a process that needs to happen, the eventual sublimation of money, which is explained in my current blog post.

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It means the FED is taking profits that Private Bankers would normally have.

As I understand it, and correct me if I'm wrong, the FED is essentially a private bank in that it is privately owned by a club of banks who themselves have private shareholders. Am I correct in assuming that the interest that is paid on the Treasuries bought with printed money will be a profit that the FED makes and will be paid out to the member banks and ultimately to the owners of those banks? Does anyone know the answer?

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As I understand it, and correct me if I'm wrong, the FED is essentially a private bank in that it is privately owned by a club of banks who themselves have private shareholders. Am I correct in assuming that the interest that is paid on the Treasuries bought with printed money will be a profit that the FED makes and will be paid out to the member banks and ultimately to the owners of those banks? Does anyone know the answer?

yes you are wrong. profits made by the FED are remitted to the treasury.

same for the BoE.

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Im sure others will know far more about this problem than I, and Im sure a few sides of A4 could cover all the issues.

As for confusing us...that is the intention.

Course, if Bernanke is buying all the T-Bills out there, then that must falsify the signals from the Yield curve, also the bid/offer ratios at TBIll sales, and just about everything else.

COurse, it could never happen in the UK

The yield curve is not a natural phenomenon. Risk free debt securities, what we call nominal bonds are not natural, and therefore one cannot use them to construct a real world term structure around which the rest of the real economy lending and borrowing might coalesce.

The ultimate fate of the yield curve is thus to flatten and flatten (c.f. japan) and thereby to become irrelevant to real world concerns, just like it is in japan.

More reading along these lines at:

http://liminalhack.wordpress.com/2010/11/08/the-philosophers-stone/

and then for response to criticisms of the above by the fair mirage:

http://liminalhack.wordpress.com/2010/11/12/the-alchemist-strikes-back/

Of course the notions outlined herein are repugnant to contemporary culture and consciousness, but nevertheless they represent the actuality of how our civilization is actually constructed and therefore understand the procession of recent events.

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Half the BoE profits go to the Treasury. I guess the other half go into Merv's pension fund.

Interesting question as to who pays BoE salaries. Does HMG government pay them or does the bank self fund? I can't see how the latter could work but probably someone like Alan B'Stard could tell us how that actually works.

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yes you are wrong. profits made by the FED are remitted to the treasury.

same for the BoE.

But not entirely it seems:

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

From their own website - http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm

6% is a pretty good return when you get your money at close to 0%.

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The yield curve is not a natural phenomenon. Risk free debt securities, what we call nominal bonds are not natural, and therefore one cannot use them to construct a real world term structure around which the rest of the real economy lending and borrowing might coalesce.

The ultimate fate of the yield curve is thus to flatten and flatten (c.f. japan) and thereby to become irrelevant to real world concerns, just like it is in japan.

More reading along these lines at:

http://liminalhack.w...osophers-stone/

and then for response to criticisms of the above by the fair mirage:

http://liminalhack.w...t-strikes-back/

Of course the notions outlined herein are repugnant to contemporary culture and consciousness, but nevertheless they represent the actuality of how our civilization is actually constructed and therefore understand the procession of recent events.

just read the first one, about the golden goose....someone talking about a "return" on Gold.

AFAIK, there is no "return" on Gold....it is just itself.

Also, I f the analogy was to money, then there is no return on £1 note...

but if you print many more notes into a stable market, the value of the notes will go down.

we dont have a golden goose, but we do have the ability to print £1.

The Fed buying most of the debt now,, one would think it has bought its own issue...but it cant do that...it has bought private credit that private forces have issued.

question then, if its deflation in the amount of credit that is the problem the FED is trying to address, then surely, being the largest holder of bank credit, it is Exacerbating the problem by taking credit out of the system?

If it were taking its own issue, then that would be an extinguishing of current commitments.

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just read the first one, about the golden goose....someone talking about a "return" on Gold.

AFAIK, there is no "return" on Gold....it is just itself.

Also, I f the analogy was to money, then there is no return on £1 note...

Not to paper cash, but there is a return to the electronic equivalent - its called the base rate.

but if you print many more notes into a stable market, the value of the notes will go down.

that has not been the experience the last 40 years. Before the crisis the pound was trading at a high of near $2.10 despite the fact that this high was preceeded for decades by the printing of extra pounds each year.

we dont have a golden goose, but we do have the ability to print £1.

a government bond which is risk free pays a return in pounds. Risk free assets should not pay any return at all.

government bonds are not risky in nominal terms when backed by a printing press.

The Fed buying most of the debt now,, one would think it has bought its own issue...but it cant do that...it has bought private credit that private forces have issued.

the fed does not issue its debt, except as currency. perhaps that is what you meant.

at the discount window the fed issues credit of currency in exchange for private collateral.

question then, if its deflation in the amount of credit that is the problem the FED is trying to address, then surely, being the largest holder of bank credit, it is Exacerbating the problem by taking credit out of the system?

monetising government debt is not taking credit out of the system. its a myth that lack of demand for credit is the problem. The problem is lack of demand per se. That problem could be extended by extending more credit if a borrower can be found or it can be solved by requiring that investors invest in real world assets which have carrying costs (and thus pay wages to someone somewhere) as opposed to investing in risk free assets with no carrying costs which pay a return, which removes demand and does nothing to increase wages.

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all urban civilizations are constructed in this fashion.

Just started reading your blog Scepticus, like this quote, gives me a warm familiar feeling for some reason:

"The only stable resolution for this one world currency masquerading as many monies is for it to achieve an interest rate of zero everywhere, and then for the various sovereigns to stop printing it."

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Half the BoE profits go to the Treasury. I guess the other half go into Merv's pension fund.

Half the after-tax profits of the BoE’s Banking Department go to HM Treasury, but all of the Issue Department’s profits are payable.

If you include Corporation Tax paid, in 2009/10 this resulted in £625m being paid into the Government’s coffers out of a total BoE profit of £722m (86.6%).

In 2008/09, £2,767m was paid out of profits of £3,183m (86.9%).

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snip

monetising government debt is not taking credit out of the system. its a myth that lack of demand for credit is the problem. The problem is lack of demand per se. Tsnip

I see you and The Bernanke have a directly opposing view of the cause, and hence the cure for the great depression. He's aiming to cure the wrong thing IMHO.

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I see you and The Bernanke have a directly opposing view of the cause, and hence the cure for the great depression. He's aiming to cure the wrong thing IMHO.

IMO opinion benanke knows exactly what the situation is and I would guess he sees it basically the same as I lay out in my blog. It is after all rather obvious if you stop and think about it.

But he can't come out and say that now can he?

Thats the advantage of being an anonymous nobody.

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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