Last week, amidst all the Middle East and Japan/China turmoil, the Fed quietly launched the anticipated sequel to QE2. So if continued/unlimited QE to the tune of $40 billion/month isn’t the definition of insanity from the Main Street’s perspective, maybe there are some subtle aspects that weigh heavily in favor of the Bankers and their Wall Street buds. On its face, the Fed’s move was supportive of risk assets/securities in general but that move is also going to undermine the value of the $. And maybe the only thing that will be eased, is the spoils on their way to the victor. To implement this latest round, the Fed is printing money, debasing the $ and devaluing the debt, rather than restructuring it. This was immediately, and predictably, followed by another US debt downgrade by Egan-Jones.

So the Fed is purchasing residential mortgage-backed securities (RMBS) at the monthly rate cited above. Let’s look at this from the Fed’s/Wall Street's perspective. RMBS are pass-through securities, meaning that they pass through payments from debtor/borrower to investors with the private lenders deducting a service fee from the payments. Once these underlying mortgage payments are in arrears, the securities that contain them are going to be sucked up by the Fed and paid for with the Fed notes that stream off the printing presses. The Fed then becomes the “bona fide purchaser” (BFP) of the assets. A BFP buys these securities and the mortgages bundled therein without notice of another’s claim to the asset and without actual or constructive notice of any defects in or infirmities, claims, or equities against the seller’s title. Generally, a BFP is not affected by the transferor’s/seller’s fraud against a third party and has a superior right to the transferred property as against the transferor’s creditor to the extent of the cash the BFP paid. So the Fed’s purchase cures all the shady financial/foreclosure bullshizl that preceded the Fed’s purchase. Sweet.

Some CnP statistics:

1,512,084 Foreclosure Homes @ $189,103 Average Foreclosure Sales Price = $286 billion

1 in every 681 homes went into foreclosure in August 2012

Link

In reference to Genesis 47 with the Fed acting as Joseph, maybe there is nothing new under the sun…. If the domestic economy/$ continue in their present trajectory, what will happen to the foreclosure rate? At $40 billion/month, how long will it be before the Fed is the landlord of a significant domestic real estate inventory?.......


Fed up?

You're a good American AuntyM

I want to comment on this topic but dont even know where to begin....

Lots of economic indicators are showing a downward trend, as in we are heading towards a double dip recession.

You'll keep Ford mechanics employed.

Well then......ban yourself.

Optimist.

I guess BofA is going to lay off 16k workers.

So is Fed ex.

Japan has been printing money for a couple decades and it does not seem to help.

Maybe, we could do another census...

If a bank can make money borrowing at the fed window for close to 0% and then turn around and buy short turn gov bonds why would you need employees?

The Fed window is the lender of last resort, and the is a certain stigma that comes along with active Fed borrowing, lower stock price.

B of A makes more that 50% of their income off of fees. We make about 2% off of fees.

My most likely scenario: A major bank like Morgan Stanley or Bank of America is deliberately bankrupted. The banks have already been told to make Living Wills which means they are preparing for bankruptcy by separating their good assets from their bad ones. The banks and the Insiders will then get free money from Bernanke to naked short Morgan Stanley stock to zero. They could also buy Credit Default Swaps. CDS are a special type of derivative that in this case could insure someone against a decline in Morgans stock price. But there are too many liabilities in the CDS market with no ability to pay claims, CDS night be avoided altogether as the plan is to take the markets down a little and not to flatten them all in one day. The Congress and the Federal Reserve would step in to bailout Morgan. The banks and the Insiders will buy all of Morgan’s remaining good assets for pennies on the dollar with subsidies from you. The Congress lets the taxpayers buy Morgan’s bad assets funded by even more Treasury bonds to finance this deal of the century while paying for it with money the banks created out of nothing. Since Morgan is to become a regulated public utility anyway, it does not matter if it goes bankrupt as long as the assets are stripped and the taxpayers are stuck with the liabilities. This process can be repeated with Bank of America and Citibank after the elections before it all goes south.

It has been noted by just about everyone that Ben Bernanke cannot raise interest rates. He says because he is worried about those poor homeowners. Nonsense. He is buying mortgages up so he can sell them at a discount to the bankers who will foreclose on you demanding 100 cents on the dollar for MBS they bought for pennies. The real reason Ben cannot raise interest rates is that the New York and London banks have hundreds of trillions of dollars in one sided bets that interest rates will not go up. That is why I keep saying that those 10% inflation numbers from Shadow Stats are worrisome. The other indicator of a sharp rise in inflation is the decline of the Petrodollar. China has announced it will buy oil in yuan and avoid dollars. The Chinese are negotiating to buy oil from Mexico in yuan. If foreigners have no use for dollars, they will dump them by buying commodities like food and oil. This will drive up oil and food prices so Americans and any nation that does not export food and oil will suffer. Higher prices will collapse the US economy. As I said before, once inflation hits 20%, there will be an international conference like Bretton Woods at which the dollar will be devalued by at least 40%. That will cut American wages in half between now and the end of 2013 or sooner. That is the long term risk.

In the short term we might have some economic shocks designed to squeeze that last few dollars out of the suckers before the bankers reduce us to Permanent Debt Slavery. That is their plan for you. I assume you have a plan for them.

Source

Bank Living Wills

At least the Commandeer will have a use for all those soldiers that he brought back home (to use for crowd control).

Stock pile, stock pile, stock pile.

I have a plan for those too big to fail bankers, but I'm having a problem convincing the American middle class that public beheadings on the Capitol Mall is the appropriate action. But if things get bad enough my plan will begin to gain some serious traction.

Americans are so sedate and apathetic that the most powerful banking CEOs could run off with billions and no one would do anything about it.

Then again, this has already happened to a lesser extent and no one cared, not even our worthless AG.

Would paying off the offenders be worthy of beheading?

Sounds like there is a need to start at the top.

Not much of a cut and paster. I live in this financial world every day, so most of this is first hand knowledge to me, but here goes a little C&P.

In 1977, Congress amended The Federal Reserve Act, stating the monetary policy objectives of the Federal Reserve as:
"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates." In a nut shell, control inflation and keep unemployment low.

I believe this strategy will continue to keep rates low for a while. Not sure just how much effect it will have on unemployment. Any other improvement is a side benefit. Most country's have a single edict for their version of the Fed, keep inflation low, so the US is a bit of an anomaly. The inventory of homes is dropping, close to 6 months now. Get that number to 4 months and you'll see some activity in the building sector, and recovery will start.

Don't care for CnP much either, but the compare/contrast of historical data with present realities can be of assistance in distilling economic theory....

Those who fail to learn from history....

I hope Andy is indeed correct about recovery, but given the fact that it is difficult to solve a debt crisis with more debt and high rpm printing presses, there will most likely be painful financial/economic change with an expansion of the wars that invariably go with the balancing of accounts.

Hope and Change....

One primary cornerstone of our economy is the housing industry. Not sure that was the case in Germany in the 1920's. They were also saddled by huge reparation payments after WW1, something we don't necessarily have, unless you are alluding to our bond interest payments (primary US debt) as our self inflicted reparation payments.

Not disagreeing with you entirely, but I see some efforts at recovery in the businesses I bank in different sectors. This is the worst recession and the longest recovery phase that the US has experienced in the past 100 years. The depression era of the 1930's was nothing compared to this in impact and length.

Wish we had a modern day FDR (warts, polio and all). Obama had his chance, and he punted.

The CEO of our company told me yesterday that they think what we have now is the "new normal"...the conditions we are fighting through may be as good as it gets for the forseeable future...Of course, if the majority of people in this country that seem to be fine with the way things are and don't worry that things will get worse, vote Obama and Company back in I suppose the new normal could get much worse for the half who work.

I completely agree about the new normal. In some ways it has made a lot of businesses better. They have become leaner, more careful, and effective with a closer eye on the big picture than they have had before. I know this is true for my outfit.

The new normal also has made the banking industry operate a lot closer to the vest, which in most instances is a good thing. I spend a lot more of my time now talking to loan officers on my client's behalf than I ever have before.

The primary cornerstone of our economy is the USD. And there's a currency war going on....

Some CnP insights:

For example, the U.S. dollar peaked at 160 on the Dollar Index back in 1985–the USD Index is comprised from a basket of our 6 largest trading partners. This index has lost 50% of its value since that time and stands at just 79 today. According to the economics of today’s central bankers, this should have engendered a U.S. manufacturing renaissance, a huge trade surplus and a vibrant economy. However, the U.S. economy has been mired in anemic growth for years. The trade deficit has been a chronic problem for decades and was $559 billion last year alone. And manufacturing as a percentage of the economy has dropped from 18% in 1985, to just 12% today.

You just cannot ignore the fact that governments and central banks are engaged in a global currency war. But we already know who the losers are in this battle; they will be the middle classes and the economies of the developed world. There will be no sustained economic growth until they make peace with their currencies and put aside the notion that prosperity can come from inflation.

Source

So how does the USD compare to this?

1792 Coinage Act

Read Section 19 and smell the cognitive dissonance in the morning.....