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The Financial System Is Running Out of Quality Collateral

BarnacleBob

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#1
Worry about the global economic slowdown and tumbling stock prices. Then, worry about the scarcity of the highest quality collateral( US, German, Swiss government securities) and the rising cost of finding them– and the resulting handcuffs being placed on monetary policy in helping financial institutions to provide credit. http://www.forbes.com/sites/robertl...-system-is-running-out-of-quality-collateral/
 

BarnacleBob

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#2
Another pressure point on bank profits is the haircut they must take on collateral they utlize to do their business. You used to be able to borrow 99.5% on the face value of Treasuries. Now you can only get 91 or 92% of face value. On corporates you used to get 95% of the value as collateral; now you only get 75%. And no one’s willing to utlize the huge volume of securities from Fannie Mae or Freddie Mac as collateral anymore.***** That rising cost together with the shortage of safe bonds means the extension of crdit must naturally be reduced. And the banks’ ability to play the interest rate curve to build capital will be reduced as well, stresses Smith. http://www.forbes.com/sites/robertl...-system-is-running-out-of-quality-collateral/
 

TAEZZAR

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#3
Thats because the banksters have it all in the basements of their castles !! :realmad:
 

BarnacleBob

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#4
Seems logical that as the system itself creates credit layer upon layer in the pyramiding process that "acceptable collateral" would begin to experience scarcity due to high demand caused by reflationary pressures.... Demand dynamics will begin driving up the cost of utilizing/using the remaining available collateral, which would I assume be expressed in a rising interest rate..... herein lays the Feds conundrum, the central bankers nightmare! T

Lets assume the Fed can print QE into infinity..... the catch 22 for them is that their high powered base money REQUIRES available "acceptable collateral" to initiate and/or jump start the fractionalization process required by the credit creation process.....secondly, when demand & scarcity create rising costs expressed as interest rate, lending duration will compress, which will marginalize the "borrow short, lend long" schemes....

IOW profit margins will shrink, banks, money markets, etc. will then only lend to the lowest risk, highest rated entities, which will eventually lead to a "credit contraction" as lenders will not be willing to roll over or rewrite new loans to replace maturing credit...... thirdly as interest rates rise the borrower may not qualify or may not be capable of repaying or absorbing the additional interest expense due to shrinking profits and rising operational costs.....

IF these events transpire, when systemic credit creation contracts, liquidity is reduced creating system wide margin calls..... When Greece, Cyprus, Spain, Italy, etc. began having liquidity & solvency problems the major issue wasnt really the money or the assets, the real issue was and is the removal of their sovereign bonds which stood as collateral in the credit creation process....

Once these bonds lost their "acceptable" ratings, systemic global collateral was reduced...... every time a sovereign bond falls below the acceptable rating global liquidity is, overtime reduced... this is why if Japan, China or EU nations should fall into a crisis, the entire world is effected by the crisis.....
 
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BarnacleBob

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#5
" Already plagued by the ‘Too Big to Fail’ (TBTF) problem back in 2008, the regulators have now succeeded in creating a new, even more dangerous situation I characterize as MAFID, or ‘Mutual Assured FInancial Destruction.’ Because all banks are swapping and therefore holding essentially the same collateral, there is now zero diversification or dispersion of financial system risk. It is as if there is one massive global bank with thousands of branches around the world, with one capital base, one liquidity ratio and one risk-management department. If any one branch of this bank fails, the resulting margin call will cascade via collateral transformation through the other branches and into the holding company at the center, taking down the entire global financial system." -- http://m.financialsense.com/contrib...st-greatest-financial-weapon-mass-destruction
 

BarnacleBob

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#6

BarnacleBob

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#7
Desperately Seeking $11.2 Trillion In Collateral, Or How "Modern Money" Really Works..... Over a year ago, we first explained what one of the key terminal problems affecting the modern financial system is: namely the increasing scarcity and disappearance of money-good assets ("safe" or otherwise) which due to the way "modern" finance is structured, where a set universe of assets forms what is known as "high-quality collateral" backstopping trillions of rehypothecated shadow liabilities all of which have negligible margin requirements (and thus provide virtually unlimited leverage) until times turn rough and there is a scramble for collateral, has become perhaps the most critical, and missing, lynchpin of financial stability.

Not surprisingly, recent attempts to replenish assets (read collateral) backing shadow money, most recently via attempted Basel III regulations, failed miserably as it became clear it would be impossible to procure the just $1-$2.5 trillion in collateral needed according to regulatory requirements.

The reason why this is a big problem is that as the Matt Zames-headed Treasury Borrowing Advisory Committee (TBAC) showed today as part of the appendix to the quarterly refunding presentation, total demand for "High Qualty Collateral" (HQC) would and could be as high as $11.2 trillion under stressed market conditions.

In short, there is a unprecedented "quality" collateral shortage (for more on what the definition of quality is, read on). http://www.zerohedge.com/news/2013-...n-collateral-or-how-modern-money-really-works
 

BarnacleBob

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#8
And there you have it. All you have about money creation in textbooks, all fancy three letter theories that purport to explain the creation and reality of "Modern Money" are 100% wrong, because while they attempt to explain a theoretical world of money creation, what they all happen to forget and ignore is one simple thing: practical reality.

And practical reality is precisely what the TBAC had in mind when it wrote the above presentation of stark caution, because no matter what one says, there is a $11+ trillion collateral shortfall at any given second. A shortfall that can and will be triggered the second the central banks lose control of the financial system which every single day rests on a thread of stability.

Because the thought experiment we presented earlier can be extended one further: assume tomorrow the real black swan appears and all the liabilities: traditional and shadow, promptly demand collateral delivery. Well, the $11 trillion shortage would mean that risk values of, for example the S&P, would be haircut by a factor of, say, 75%. Or back to the proverbial 400 on the S&P500.

Still think owning real high quality collateral, not of the paper but of the hard asset variety such as gold, is a naive proposition, best reserved for fringe lunatic, tin foil hatters and gold bugs?

Go ahead then: sell yours. http://www.zerohedge.com/news/2013-...n-collateral-or-how-modern-money-really-works
 

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BarnacleBob

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#9
Peak collateral – a strange attraction: hen Lehman Brothers and AIG collapsed was it just a shortage of When Lehman Brothers and AIG collapsed was it just a shortage of liquidity? No of course not. That’s like saying a man with the plague died of liquidity? No of course not. That’s like saying a man with the plague died of a high temperature. Certainly he had a temperature when he died but it a high temperature. Certainly he had a temperature when he died but it was a symptom not a cause. Both was a symptom not a cause. Both Lehmans Lehmans and AIG were running out of and AIG were running out of collateral and without collateral for the oxygen of collateral and without collateral for the oxygen of repo repo and short term and short term funding, they began to suffocate. Once those two began to choke, the funding, they began to suffocate. Once those two began to choke, the money ran out for others. The collapse of money ran out for others. The collapse of Depfa Depfa and Hypo in Germany/and Hypo in Germany/Ireland, for example, was a direct result of them not being able to get the Ireland, for example, was a direct result of them not being able to get the funding they relied upon from their sugar-daddy funding they relied upon from their sugar-daddy funder funder , AIG. That created , AIG. That created a domino effect. AIG had run out of assets that it could pledge as a domino effect. AIG had run out of assets that it could pledge as collateral. It could not raise money that it could then use to lend to collateral. It could not raise money that it could then use to lend to HYPO/HYPO/Depfa Depfa . Hypo in turn had such poor assets they too had little or no . Hypo in turn had such poor assets they too had little or no chance of anyone accepting them as collateral. chance of anyone accepting them as collateral.

It seems to me we are moving back to a similar situation. You might ask, It seems to me we are moving back to a similar situation. You might ask, out of sheer exasperation, how it could be, given all the tough talk and all out of sheer exasperation, how it could be, given all the tough talk and all the new requirements for capital and risk management? How, after all the the new requirements for capital and risk management? How, after all the bailing outs and now ins, all the endless and global QE, all the new rules bailing outs and now ins, all the endless and global QE, all the new rules and capital buffers, that we do not seem to have really got anywhere and capital buffers, that we do not seem to have really got anywhere?***** Collateral is getting scarce. What Collateral is getting scarce. What truly truly is safe, has long ago been pledged is safe, has long ago been pledged mainly to the central banks. The rest has been ring-fenced into covered mainly to the central banks. The rest has been ring-fenced into covered bonds and other super-safe investments. None of it also pledged bonds and other super-safe investments. None of it also pledged elsewhere o elsewhere o r r re-re-hypothecated hypothecated onwards to prop up other loans – honest! onwards to prop up other loans – honest! Even the central banks have had to relax and further relax their rules Even the central banks have had to relax and further relax their rules about what about what they they will accept as safe will accept as safe enough enough to act as collateral for a to act as collateral for a central bank loan. Once it was genuinely AAA rated assets. Now if you central bank loan. Once it was genuinely AAA rated assets. Now if you have a beach towel from a Club Med holiday you once took, it’ll do. have a beach towel from a Club Med holiday you once took, it’ll do.

Once we had fiat money. Today we have super fiat. ultra fiat and super Once we had fiat money. Today we have super fiat. ultra fiat and super ultra zero-content fiat. ultra zero-content fiat.***** eak collateral is just a notion. The notion that at the time we want yield Peak collateral is just a notion. The notion that at the time we want yield and growth we are running out of collateral which is supposed to underpin and growth we are running out of collateral which is supposed to underpin the high yielding assets and loans. Such a shortage would cause the ponzi-the high yielding assets and loans. Such a shortage would cause the ponzi-like growth that is necessary to sustain a bubble, to stall and then implode. like growth that is necessary to sustain a bubble, to stall and then implode. I think our lords and rulers know this and have decided that it must not be I think our lords and rulers know this and have decided that it must not be allowed. And this – the need for collateral – is the reason for the endless allowed. And this – the need for collateral – is the reason for the endless QE. If this is even close to the mark, then recent murmurings about the QE. If this is even close to the mark, then recent murmurings about the Fed tailing off its bond buying will prove to be hollow. The Fed will quickly Fed tailing off its bond buying will prove to be hollow. The Fed will quickly find it cannot exit QE without precipitating precisely the disorderly find it cannot exit QE without precipitating precisely the disorderly collapse, to which it was supposed to be the solution. collapse, to which it was supposed to be the solution. eak collateral is just a notion. The notion that at the time we want yield Peak collateral is just a notion. The notion that at the time we want yield and growth we are running out of collateral which is supposed to underpin and growth we are running out of collateral which is supposed to underpin the high yielding assets and loans. Such a shortage would cause the ponzi-the high yielding assets and loans. Such a shortage would cause the ponzi-like growth that is necessary to sustain a bubble, to stall and then implode. like growth that is necessary to sustain a bubble, to stall and then implode. I think our lords and rulers know this and have decided that it must not be I think our lords and rulers know this and have decided that it must not be allowed. And this – the need for collateral – is the reason for the endless allowed. And this – the need for collateral – is the reason for the endless QE. If this is even close to the mark, then recent murmurings about the QE. If this is even close to the mark, then recent murmurings about the Fed tailing off its bond buying will prove to be hollow. The Fed will quickly Fed tailing off its bond buying will prove to be hollow. The Fed will quickly find it cannot exit QE without precipitating precisely the disorderly find it cannot exit QE without precipitating precisely the disorderly collapse, to which it was supposed to be the solution. collapse, to which it was supposed to be the solution. http://www.golemxiv.co.uk/2013/05/peak-collateral-a-stange-attraction/
 

BarnacleBob

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#10
Why is the IMF getting involved in the Eurocrisis, and why is its involvement taking the form of lending to individual member states of the Eurozone? One reason, which is the focus of most commentary, is the IMF's long-honed reputation for "conditionality" as a condition for lending. The ECB is simply not in a position to insist on conditionality, so if you think conditionality is needed, then you think you need the IMF.

But there is a second reason also, which has been neglected in most commentary, and that has to do with solving the collateral crunch currently underway in the Eurozone. The breakdown of unsecured interbank markets has meant that whatever interbank lending is still taking place involves a transfer of collateral. But this is only one source of the demand for collateral......... A second source of demand for collateral is the discount lending by national central banks to their own private bank clients.

And a third source is the Eurosystem lending between national central banks, which takes place more or less automatically through the operation of the TARGET2 payments system.

That's a lot of collateral! Some of it can probably be used more than once
each time it is used there is another haircut, and the haircuts are getting bigger all the time. Consequence, collateral crunch. http://ineteconomics.org/blog/money-view/imf-and-collateral-crunch
 

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#11
Central bankers reject collateral shortage warnings....... LONDON (Reuters) - Financial industry warnings of a looming shortage in collateral due to tougher trading and banking rules are unfounded, a committee of central bankers concluded in a report on Monday.

The demand for collateral like high quality government bonds to back derivatives transactions has risen sharply due to reforms to make derivatives trading safer.

Banks no longer trust each other with unsecured funding and demand collateral, which has push up demand for it along with new rules forcing banks to build up buffers of cash to withstand a run.

The International Swaps and Derivatives Association has said derivatives may need as much as $10 trillion (6.62 trillion pounds) in initial margin on trades but a report from a committee of central bankers has questioned this.

"Current estimates suggest that the combined impact of liquidity regulation and OTC derivatives reforms could generate additional collateral demand to the tune of $4 trillion spread out over the next several years," said the Committee on the Global Financial System in a report.

"Hence, concerns about an absolute shortage of high quality assets appear unjustified," the committee said, adding that the supply of such assets used for collateral in 2012 was about $48 trillion to $53 trillion.

The report said was hard for investors to see how much of a bank's assets are "encumbered" - not freely available for sale if the bank needed cash quickly in a crisis. http://news.yahoo.com/central-bankers-reject-collateral-shortage-190359970.html
 

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#13
Exclusive: IMF’s Singh warns of collateral drought threat to global liquidity.......Q. What do you make of some recent commentary that has used your research to build a case against, among other things, repo, re-hypothecation and the shadow-banking system?

A: I don’t think that people are linking the big and small pictures.

Re-hypothecation is not a four-letter word. The financial system needs lubrication, and collateral chains help markets get completed. They connect the hedge fund with assets with someone who needs collateral. The question is do we need short or long chains? People can argue that financial stability improves with shorter chains, but if the chain is down to two counterparties, then there is a clear risk of liquidity drying up.

We have tracked a $5 trillion reduction in global source collateral and associated chains. These are big numbers. Monetary policy cannot be achieved in a vacuum and collateral chains cannot be ignored. http://www.euromoney.com/Article/29...teral-drought-threat-to-global-liquidity.html
 

platinumdude

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#14
....
Still think owning real high quality collateral, not of the paper but of the hard asset variety such as gold, is a naive proposition, best reserved for fringe lunatic, tin foil hatters and gold bugs?
Given the proposition of one of these meltdowns, do you think hard US currency will trump gold initially?
 

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#15
This is a great read: QE increases the amount of reserves in the system and reduces the amount of other forms of safe security, particularly various forms of government debt. Since the financial crisis, borrowing and lending between banks and non-banks has become more-or-less completely collateralised, with the debt of highly-rated sovereigns being the preferred choice of collateral. There is also a scarcity of collateral due to collapse of US MBS issuance, increasing shortages of high-quality sovereign debt due to sovereign downgrades, and regulatory changes encouraging buildup of safe asset reserves and hoarding of collateral. One of QE's effects is to reduce even further availability of safe collateral and therefore increase its price. THIS IS DELIBERATE. The stated intention of QE is to depress government bond yields to make them less attractive to investors and therefore nudge those investors towards riskier assets. Unfortunately this also increases the cost of the collateral needed by banks and non-banks to obtain funding, including from central banks. It could be argued that whatever encouragement increased reserves give to banks to lend is offset by the increasing cost and scarcity of the collateral needed to obtain the funds to settle lending. It's a wash. Which brings me to the problems with monetary policy. The first thing to note is that as the increased availability of funds is balanced by increased cost and scarcity of collateral needed to obtain funds, QE makes no difference to liquidity in the financial system. This point has been brilliantly (and repeatedly) made by Peter Stellaand the IMF's Manmohan Singh, but it seems no-one is listening. The extra reserves provided by QE are in no sense expansionary. If anything, QE is contractionary, because it reduces the velocity of money in the financial system. When collateral is scarce, funding flows are impeded. There may be more actual funds available, but if they aren't moving, they aren't any use. http://coppolacomment.blogspot.com/2013/05/theres-problem-with-transmission.html?m=1
 

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#16
" Does the Federal Reserve really control the money supply?" * Even after all that quantitative easing, the money supply has still shrunk.

In fact, quantitative easing may be choking off shadow credit creation. As the Fed buys more and more assets, there are less assets left in the market that can be used as collateral for credit creation. This so-called "safe-asset shortage" is one factor that has driven the price of Treasuries as well as corporate bonds and even junk debt to record highs. If choking off shadow credit creation and replacing shadow money with traditional money was the Fed's implicit goal, then it is succeeding. But the money the Fed has issued since the crisis hasn't even made up for the shrinkage. http://m.theweek.com/article.php?id=244899
 

BarnacleBob

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#17

BarnacleBob

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BarnacleBob

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BarnacleBob

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#21
This well-pondered thread bumped for relevance...

It is becoming more apparent that Fed policy has created a precariously unstable market. Every level higher in Jenga brings closer the inevitable collapse.

Will the Government let a financial meltdown happen?

No, I don't think so. When the Fed runs out of bullets, the White house will step in with E.O's and policy's and martial law. We are only in round one of a long term battle.

The Banks and Fed and CB's will all cause the crisis . . governments will then have their Back Swan to close the final loopholes in the NWO. Good Stuff Barnacle....
 

Strawboss

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#23
This part of the financial system is definitely not my area of expertise. Still trying to wrap my mind around it...

But, I have a simple question (which might be a very ignorant one).

Cant they simple redefine what is "acceptable collateral" to fit their needs?
 

andial

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#24
In fact, quantitative easing may be choking off shadow credit creation. As the Fed buys more and more assets, there are less assets left in the market that can be used as collateral for credit creation.
Of course being a Gold bug I would suggest using Gold (or Silver) as collateral to fill the void. But I doubt that will happen. China or other emerging countries issuing more bonds?
 

Silver

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#25
This part of the financial system is definitely not my area of expertise. Still trying to wrap my mind around it...

But, I have a simple question (which might be a very ignorant one).

Cant they simple redefine what is "acceptable collateral" to fit their needs?
Quote from one of BB's previous posts in this tread - his text is difficult to read because of technical issues on his end, but he links his posts.

http://www.golemxiv.co.uk/2013/05/peak-collateral-a-stange-attraction/

"Collateral is getting scarce. What truly is safe, has long ago been pledged mainly to the central banks. The rest has been ring-fenced into covered bonds and other super-safe investments. None of it also pledged elsewhere or re-hypothecated onwards to prop up other loans – honest! Even the central banks have had to relax and further relax their rules about what they will accept as safe enough to act as collateral for a central bank loan. Once it was genuinely AAA rated assets. Now if you have a beach towel from a Club Med holiday you once took, it’ll do.

Once we had fiat money. Today we have super fiat. ultra fiat and super ultra zero-content fiat.

Why do you think China is buying more and more gold? I wonder if China isn’t preparing for a contingency of a currency implosion and is making sure it has the necessary gold reserves to market the Yuan as the only ‘gold’ backed global currency."
 

Unca Walt

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#26
Once we had fiat money. Today we have super fiat. ultra fiat and super ultra zero-content fiat.

Why do you think China is buying more and more gold? I wonder if China isn’t preparing for a contingency of a currency implosion and is making sure it has the necessary gold reserves to market the Yuan as the only ‘gold’ backed global currency."
I feel/fear you are right, bro.
 

Silver

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#27
I feel/fear you are right, bro.
China in the drivers seat terrifies me - can't think of a worse scenario.

http://etfdailynews.com/2013/05/09/china-accelerates-gold-accumulation/

"World’s largest gold producer and second largest consumer China’s total gold usage reached 320.54 metric tonnes in the first quarter, China Gold Association said. According to CGA, purchases of gold bars surged 49% to 120.39 tonnes while jewelry gained 16% to 178.59 tonnes. Gold consumption in China soared 26% in the first three months of 2013 from a year ago amid strong bullion sales and rising jewelry demand."
 

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#28
This part of the financial system is definitely not my area of expertise. Still trying to wrap my mind around it...

But, I have a simple question (which might be a very ignorant one).

Cant they simple redefine what is "acceptable collateral" to fit their needs?
Always remember, "the system WILL NOT be revised, altered or amended by THOSE that receive the greatest benefits from its broken and corrupt state of existence!" CUI BONO = "who benefits" from maintaining an improperly organized economic system? Hint: Its not the banks, nor is it Wallstreet, these corpora fictas are just gaming the gamers to their benefit, but they dont really control the game.... they influence the game, but they are tied to the hip with the gamers to carry out their influence..... their existence is a reciprocating existence, one cannot exist without the other, vis-a-vis.... alas the bail-outs and the REQUIREMENT for legal tender, not laws, but ADMINISTRATION............NOW, on the subject of "ACCEPTABLE COLLATERAL" ..... its NOT the CB's that determine acceptable collateral, its the money markets, pension funds, insurance co.'s, etc. a.k.a. institutional investors that determine acceptable collateral.... the CB's merely soak up the bad collateral thru purchases as the lender of last resort to maintain financial stability....this is accomished by keeping the players playing at all costs....as there really isnt a true cost to fiat money is there when prices are contained? W/O bail outs, QE, ZIRP, etc. the players would move to tangible assets in the commod market revealing the true cost of money to the public at large..... The hedge funds are the principle borrowers of credit in the system, they see events transpiring in the credit markets first.... the hedgers went short AU & AG almost a week prior to BERNANKE ANNOUNCING THE TAPER......WHY? The hedgies experienced rising costs expressed as interest rates in the credit/collateral markets..... traditionally rising interest rates divert gold into paper to capture yields.... the tell - tale sign is that the Fed doesnt control rates as they waited almost a week to announce their so-called tapering to explain why rates were rising! LMAO....
 

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#29
The Fed did not lose control, they never had control in the first place! Big myth "dont fight the Fed" what crap.... they have insider knowledge and exploit it to create their legitimacy and accountability..... they are a fraud and con job! Ok, with that established, the Fed can ONLY determine "acceptable collateral" for ITSELF, and no one else! The MARKET determines what acceptable collateral is or isnt, not the FED! Of course IF the Fed will buy junk collateral @ face value, the market will oblige the Fed and sell them junk..... but the second the Fed withdraws its bid for junk collateral, that class of collateral dissappears.....
 

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#30
There is a dog, at one end is the head, at the other is the tail, the market, which outnumbers the Fed by many multiples is the head, the Fed is the tail, the tail ALWAYS follows the head! These shysters want YOU to believe they are the markets and you OWE them reciprocation for their services..... what a con, what a swindle!
 

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#31
In answer, the Fed ONLY defines "acceptable collateral" when systemic risk is pervasive.... under certain "EMERGENCY CONDITIONS" the Fed will drop its acceptable collateral policy and buy what is deemed "junk" collateral to support the banking system when their schemes implode...... keep in mind that without a banking system there is no need for the Federal Reserve System, in this respect, AGAIN the banks are the head of the dog, the Fed is the tail..... Independent my arse!
 

AgAuGal

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#32
the so called financial wizards have conjured up an unsustainable fiat model they try to pass off as the only option......a financial galloping gertie....slow ripples in the beginning of failure to unsustainable financial stresses, seeing ever increasing number of stories of financial failure. Not sure what the end game is but I do believe real has to be considered as insurance for financial disaster.
 

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#33

BarnacleBob

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#34
It appears the 30 plus year bull market in bonds is done and rates should start moving up on balance. Bernanke did say low rates until mid 2013 and that is exactly what we got.
The question is, is this just a short term break in the bond bull, and secondly can the global economy withstand a UST Bond crash? I believe that the global monetary authorities will keep the UST market alive until there is an ACCEPTABLE alternative that all parties involved will accept..... I certainly DO NOT believe the U.S. political and monied elites will accept an alternative no matter the circumstances..... therefore I anticipate that such an occurence will likely lead to a full scale shooting war to defend the reserve & seinorage status & priviledge for the dollar..... hope I'm wrong.....
 

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#35
..... its NOT the CB's that determine acceptable collateral, its the money markets, pension funds, insurance co.'s, etc. a.k.a. institutional investors that determine acceptable collateral...
I lost my home so that CALPERS, the world's largest retirement fund, would not have to deal with the realities of the fraud-based mortgage backed securities which are the backbone of their fund.

More reality dictates that the California Attorney General used her own hired guns (CALPERS beneficiaries) in order to squelch my attorney, and thus kill the lawsuit that would have killed the banksters. Epic and egregious conflict of interest!

But preserving CALPERS is more important than revealing the truth.

The rabbit hole is immensely and vacuously deep, and EVERYBODY is in on the game.

EVERYBODY knows the Beast Monetary System is based on digital fraud, and EVERYBODY plays along to "git some."

And so it will be until the end.
 

BarnacleBob

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#36
Its a dash for cash as liquidity dries up creating THE PERFECT BOND STORM: Citi.... What drew investor attention this week most notably - as we discussed all week was Cash lagging CDS. As Citi explains, in general, we are seeing cash bonds underperforming CDS in our sectors in the most recent market volatility. The rate-fear driven selloff, which led to substantial outflows in HY funds including ETFs, are putting more pressure on cash prices as investors are selling bonds to raise cash. http://www.zerohedge.com/news/2013-06-30/perfect-storm-bonds
 

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#38
Derivatives have also been used as collateral, rumor has it that 30% of these derivatives arent worth the paper their written on..... 30% of a $quadrillion is $333 trillion..... yikes! Got Gold?
 

AgAuGal

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#39
Then 'they' will squash us like 'bugs' cause we did not think it wise to play in their game.....

I lost my home so that CALPERS, the world's largest retirement fund, would not have to deal with the realities of the fraud-based mortgage backed securities which are the backbone of their fund.

More reality dictates that the California Attorney General used her own hired guns (CALPERS beneficiaries) in order to squelch my attorney, and thus kill the lawsuit that would have killed the banksters. Epic and egregious conflict of interest!

But preserving CALPERS is more important than revealing the truth.

The rabbit hole is immensely and vacuously deep, and EVERYBODY is in on the game.

EVERYBODY knows the Beast Monetary System is based on digital fraud, and EVERYBODY plays along to "git some."

And so it will be until the end.
 

BarnacleBob

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#40
Is The Load of Cash Fannie and Freddie Dumped On The US Treasury Coming Back To Investors? Here we go into the backside of the feedback loop.... FNM & FRE just paid a $66 billion dividend into the US Treasury......sounds great doesnt it? What it really means is that $66 billion of debt will be paid down, which means $66 bb in collateral will be withdrawn from the system...... http://wallstreetexaminer.com/2013/...-on-the-us-treasury-coming-back-to-investors/