Banking/Financials dropped big today ($BKX 2.36%)
Related??
"Crack Smoking Part Deux" [re: The Fed, Treasury, etc.]
..."We'll start with the fact that these charlatans get the cycle backwards - Treasury sells the debt first, not the other way around, and to do so it must find someone who has surplus in dollars - the currency in which the Treasuries are funded.
Let's next run this little claim to exhaustion in an attempt to see if this is a clear-cut Ponzi Scheme - ask yourself why Treasury doesn't just print up and sell the entire $14 trillion in GDP every year.
That would instantly absorb all excess capacity and result in an immediate and monstrous economic boom, right?
Well, no, it would not.
Were Treasury to attempt to do this it would discover what the words "failed auction" mean in short order, as there simply isn't enough existing surplus (electronically or otherwise) to absorb that supply."
"...See, we haven't printed anything. "QE" where the reserves created are immediately deposited with The Fed is a circle-jerk. There is no money-printing going on until and unless the reserves created enter the economy in some form. So long as they remain on deposit with The Fed it is simply a pass of a $20 bill from them to you and back to them - the net monetary impact is zilch.
To add insult to injury, Bernanke got the exact opposite reaction he was looking for! By "buying" Fannie and Freddie (along with Treasury) paper he didn't support price and suppress coupon - to the contrary, as this chart shows, as soon as he started "QE" the 10 year Treasury yield went higher, not lower, and it was the end of "QE" that marked the top the 10 year Treasury rate!
Again: Why?
That's simple: Credit creation against nothing (that is, not backed by actual hard collateral - that is, surplus already produced in some form), is simply a naked short against the monetary system. That is, the writer of such a position is agreeing to deliver money he does not yet have and may not be able to acquire, with nothing other than his word behind that promise.
It doesn't matter if that short is created by a government or a private actor, with one important distinction: in a fiat currency system government can decide to emit unbacked currency to satisfy a naked short, where private parties cannot."
"...Remember, a naked short is self-limiting because the shorted item doesn't actually exist. That is, it is counterfeiting in the purest sense; you're selling something you don't have and may not be able to acquire. The important fact to remember, however, is that a naked short will eventually unwind, and when it does, the depression of price that occurred when it was created will be reversed.
Printed additional "shares" (or currency), on the other hand - that is, raw, unbacked emission - does the opposite - it creates permanent debasement.
Likewise, the argument that "QE" reduced or capped rates is exactly backward. It did no such thing - it in fact caused rates to rise - that is, it supported bank THEFT via interest from ordinary Americans - exactly the opposite of the claimed intended effect!"
[more...]
http://market-ticker.denninger.net/
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