some more scary stuff

I got here another informative yet frightening post by Karl Denninger at the market ticker. This time commenting on the latest missive from the federal reserve and what they really mean through the bureaucratic bullshit. here’s a bit of it cause there is no way i can do justice to figuring out that crap. Italics being Denninger’s interpretation.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.  To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.  The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.

We’ve got over a trillion in trash on our balance sheet now, which we promised would fix the problem but it didn’t do jack.  That’s because nobody in their right mind will borrow money when the economy is in the tank and debt levels are above sustainable maximums.  The only borrowers are people who are deadbeats, and that doesn’t help.  Instead of clearing this out by forcing the bankrupt to take their medicine our “solution” is to attempt to devalue the currency by explicit monetization.  We have little choice in this matter because the most-recent TIC data that has been published, along with what hasn’t been published (yet) but which we have, shows that foreigners have given us the finger in buying any more of our agency, corporate and sovereign debt.  In short, we’re screwed – within months – and we know it.

Ultimately Bernanke and co. are still lying their asses off, Karl mentioning how Bernanke was on 60 min.  a few days ago claiming the market will be recovering by 2010 while his latest statement seems to be entirely contradicting that impression, though its not like many, many other people,let alone economy experts, could have pointed out that claiming the “recession”(come the fuck on this is a depression you delusional ass-hats) would be over by the end of 09 is ridiculous.

For the rest of the post Karl goes into just what they are doing so damned badly and how it won’t work. not to mention how when they fed can no longer issue anymore bonds cause foreign countries and there is no longer a demand for the US dollar(there is already some talks between russia and china about alternatives) will not buy them( which by some indications and hidden by bullshit benny, is already starting to happen) the us will have to fall back on a diminishing tax base and start cutting current spending. He breaks down current gov spending and gives some nasty predictions on what might be happening sooner or later:

Assume we can cut half of the defense budget, and we’ve got $800 billion left.  Cutting “other spending” (that is, all other programs) by 50% would leave us with about $500 billion net-net for social programs – forcing a reduction of about sixty percent in Social Security, Medicare and Medicaid – all at once.

In short this would wind up costing us roughly a 50% across-the-board cut in every program within government on an immediate basis.  That in turn would force further reductions in GDP, which would further shrink tax revenues.

Holy shit, 60 percent off of the already fucking pathetic US health care and retirement programs, they are so royally screwed.  Also, if the US monetary system collapses, as the worlds reserve currency EVERYBODY will take the massive hit. That’s’ why they call it the global financial crisis. This is the doomsday scenario, and Dennenger sees only a death spiral and even recommends some emergency preparedness  for individuals.

scary fucking shit.


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