A Very Scary Christmas And An Incredibly Frightening New Year

Can you hear that?  It almost sounds like a little bit of peace and quiet.  This year, the holiday season has been fairly uneventful, and for that we should be very grateful.  But it isn’t going to last long.  2012 is going to be a much more difficult year for the U.S. economy and the global financial system than 2011 has been.  So if things are going well for you right now, enjoy this little bubble of peace and tranquility while you can.  Because while things may look calm on the surface right now, the truth is that this is a very scary Christmas for financial professionals and world leaders.  Most of them know how fragile the global financial system is at the moment.  Most of them know that we are living in the greatest bubble of debt, leverage and financial risk that the world has ever seen.  As I wrote about the other day, world leaders would not be throwing huge bailouts around like crazy if everything was going to be just fine.  The truth is that we are rapidly approaching another financial crisis that may end up being even worse than the horrific crash of 2008.
Despite unprecedented efforts by the European Central Bank, the yield on 10 year Italian bonds is nearly up to 7 percent again.
Keep an eye on the yield on 10 year Italian bonds.  That is going to be one of the most important financial numbers in the world in the coming months.
But Italy is not the only problem.  The reality is that several European governments are teetering on the verge of default right now.  Meanwhile, confidence in the European financial system has been absolutely shattered and a devastating credit crunch has set in.  Nobody (other than the ECB) wants to loan money to the banks and the banks are massively cutting back on loans to businesses and consumers.  This is causing the money supply to fall.  The ECB is trying to hold things together with chicken wire and duct tape, but it isn’t going to work.
In major financial centers such as the City of London, this is a very scary Christmas and the outlook for the new year looks very frightening.  Because financial activity has dried up so dramatically, a number of firms are already shutting down.  The following comes from a recent Bloomberg article….

London’s stockbrokers are shrinking as Europe’s sovereign debt crisis and competition from international firms squeezes revenue and fees.
“This isn’t just a blip, this is much worse,” said Tim Linacre, who is stepping down as chief executive officer of Panmure (PMR) Gordon & Co., a 135-year-old brokerage. “It’s a desert for activity, which is why you are seeing some firms throw in the towel.”
In the past month, Altium Capital closed its securities unit. Evolution Group Plc (EVG), Merchant Securities Group Plc, Arbuthnot Securities Ltd. and Collins Stewart Hawkpoint Plc have all accepted takeover offers from larger competitors.
“It feels worse than any other time,” said Lorna Tilbian, an executive director at Numis Corp. who began her career in 1984. “All I hear about is people putting up a white flag.”

Many out there are wondering if we are about to face another crisis like the one we saw back in 2008.
Unfortunately, none of the underlying problems that caused that crisis were ever really fixed.
We did not learn from history so now we are in for another round of pain.
In fact, Chris Martenson believes that this next crisis will be even worse than 2008….

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?
No, it’s worse. Much worse.
In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.
Anyone who has paid attention knows that those “magic potions” proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.

Frightening stuff.
A couple of months ago, I wrote about the coming derivatives crisis that could potentially wipe out the entire global financial system.
When the next great financial crisis strikes, there is going to be a lot of focus on derivatives once again.
Top global financial authorities such as Ben Bernanke continue to insist that derivatives are perfectly safe.
But there are other voices in the financial world that are warning that we are heading for financial armageddon.  For example,just check out what Mark Faber is saying….

“I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don’t know: you can postpone the problems with monetary measures for a long time but you can’t solve them… Greece should have defaulted – it would have sent a message that not all derivatives are equal because it depends on the counterparty.”

That is very strong language.
Faber also believes that the stock market is going to get hit really, really hard during the coming crisis….

“I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification – some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you’d be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt.”

Some of the top financial officials in the entire world have also used some very scary language in recent weeks.
The head of the International Monetary Fund, Christian Lagarde, recently stated that we could soon see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”….

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating”

But most people are so busy opening up the cheap plastic presents under their Christmas trees (that were mostly made overseas) that they aren’t even paying attention to these warnings.
Look, when the money supply falls significantly it is almost impossible to avoid a recession.  Just look at the historical numbers.

Unfortunately, money supply numbers all over Europe are falling dramatically right now as an article in the Telegraph recently noted….

All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months.

Confidence in the banking system in Europe has never been this low in the post-World War II era.  Sadly, most people simply do not understand how bad things have gotten for major European banks.  One Australian news source recently put it this way….

“If anyone thinks things are getting better, they simply don’t understand how severe the problems are,” a London executive at a global bank said. “A major bank could fail within weeks.”
Others said many continental banks, including French, Italian and Spanish lenders, were close to running out of the acceptable forms of collateral, such as US Treasury bonds, that could be used to finance short-term loans.
Some have been forced to lend out their gold reserves to maintain access to US dollar funding.

The outlook is very ominous.
Financial professionals all over the globe are telling us what is coming if we are willing to listen.
The following comes from a report recently produced by Credit Suisse’s Fixed Income Research unit….

“We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

The first six months of 2012 are going to be a very key time.  National governments and big European banks are scheduled to roll over huge mountains of debt.  But if they can’t find any takers that could bring the global financial system to a moment of great crisis very quickly.
The following is how former hedge fund manager Bruce Krasting recently described the problem that Italy is facing….

At this point there is zero possibility that Italy can refinance any portion of its $300b of 2012 maturing debt. If there is anyone at the table who still thinks that Italy can pull off a miracle, they are wrong. I’m certain that the finance guys at the ECB and Italian CB understand this. I repeat, there is a zero chance for a market solution for Italy.

But even if we don’t see a formal default by a major European nation such a Italy, that doesn’t mean that major European banks are going to make it through the crippling recession that has now begun in Europe.
Charles Wyplosz, a professor of international economics at Geneva’s Graduate Institute, is absolutely convinced that we are going to see some major European banks collapse….

“Banks will collapse, including possibly a number of French banks that are very exposed to Greece, Portugal, Italy and Spain.”

Authorities in Europe are saying the “right things” publicly, but privately they are preparing for the worst.
As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only “just a matter of time”….

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

Yes, we are heading for a huge financial collapse and massive economictrouble.
So enjoy the good times while we still have them.
They are not going to last too much longer.

 By Michael Snyder
BlacklistedNews.com

Lehman Banker, Budget Expert Picked to Steer Spain’s Economy

(Updates with resignation from boards of Endesa, Banco Mare Nostrum in fourth, eighth paragraphs.)

Dec. 22 (Bloomberg) -- Spanish Prime Minister Mariano Rajoy named a former Lehman Brothers Holdings Inc. banker and a budget professor as his finance chiefs, tasking them with overhauling an economy that risks being engulfed by the debt crisis.

Luis de Guindos, former deputy finance minister and head of Lehman in Iberia, was sworn in as minister for economy and competition today. Cristobal Montoro, budget minister when the People’s Party was last in power, returns to the same post with further responsibility for public administration. Rajoy created the roles to replace Elena Salgado, who did both jobs in the last government as well as being deputy prime minister.

The PP government inherits from the Socialists a stagnant economy with a 23 percent jobless rate and a banking industry that is squeezing credit at the fastest pace on record. Spain’s financing costs last month approached the level that pushed Greece, Ireland and Portugal to seek bailouts, and the European Commission expects the nation to miss its budget goal this year.

De Guindos, 51, comes from the PricewaterhouseCoopers and IE Business School Center for Finance in Madrid, which he led. He was a board member of Endesa SA, a Spanish power company, until resigning today, and had been a partner at AB Asesores, the brokerage Morgan Stanley bought in 1987.

“De Guindos is pragmatic, he understands markets and understands that the problem Spain has to solve is about financing,” said Fernando Fernandez, who also teaches at IE in Madrid. “Montoro is a very good administrator, he’s austere, implacable, and more of an operator than an ideologue.”

Bank Capital

“It’s a serious and compact team,” Baldomero Falcones, chairman of Fomento de Construcciones y Contratas SA, said in an interview today. “They have a golden opportunity to enact a series of reforms.”

The PP won a national election last month and pledged a “cleanup” of the banking system during its campaign. FAES, a research organization linked to the party, recommended creating a bad bank to free lenders of toxic assets, and Rajoy asked for at least two academic reports on how to create such a vehicle, according to two people with knowledge of the matter.

De Guindos would apply stricter provisioning rules on banks to reflect a decline in land prices, he said in an interview in Madrid on Nov. 11. Banks that need capital and can’t raise it themselves should get funds from the government or the European Financial Stability Facility, he said. Guindos was a board member of Banco Mare Nostrum, which was formed in 2010 from a merger of savings banks, before resigning today.

‘Eliminating All Doubts’

Asked whether Spain should create a bad bank, he said: “What’s important to me is eliminating all doubts from the point of view of the valuation” of land, “and then we’ll have to see what the other alternatives are.”

He also says austerity must be accompanied by measures to overhaul the economy and return it to growth and job creation.

“The first half is going to be tough,” he said in the interview. “But if the government quickly comes out with an overall plan that can change expectations, then the second half could be much better.”

Rajoy, who secured the largest parliamentary majority any Spanish party has won in three decades on Nov. 20, has given scarce details about his plans for the economy. While he has promised to “reshape” the public sector, he still hasn’t said how he will cut the deficit while keeping a pledge he reiterated this week to raise pensions. The Cabinet meets tomorrow and plans to pass spending cuts on Dec. 30.

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Montoro, 61, helped eliminate a budget deficit of 7 percent of output and shepherd Spain into the euro when he served in the last PP government that ruled for eight years through 2004. This time he also has responsibility for public administration, which Rajoy wants to scale down to avoid overlap between regions, city halls and the state. Montoro will be in charge of making the regions meet their budget goals.

A professor of public finance at the University of Cantabria, Montoro led the party’s economy team in opposition. He now has to make sure Spain meets its commitment to reducing the budget gap to 4.4 percent of gross domestic product next year compared with the 6.6 percent shortfall estimated by the European Commission for this year.

“Montoro knows he must play second fiddle to de Guindos,” said Javier Diaz Gimenez, an economics professor at the IESE business school who was taught by Montoro as an undergraduate. “But this role is his cup of tea -- he comes from a public finance environment.”

‘By Law’

Montoro has said that Spain doesn’t need help from the European Central Bank, which has been buying Spanish bonds since August, and should prohibit budget deficits “by law.” Spain’s 10-year bond yielded 5.32 percent today, compared with more than 6 percent before the ECB started propping up the market.

“We don’t need them to come and help us,” he said on Aug. 8. “We need to earn our right to economic stability.”

Rajoy chose a member of the European Parliament who has specialized in economic issues, Jose Manuel Garcia Margallo, as foreign minister, and Soraya Saenz de Santamaria as deputy prime minister. Jose Manuel Soria, an economist, is minister for energy, industry and tourism, and Fatima Banez leads the labor ministry. Pedro Morenes is defense minister.

--With assistance from Angeline Benoit in Madrid, Editors: Fergal O’Brien, Jeffrey Donovan
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

Sesame Street for Pakistan, studying the effect of cocaine on birds' sex lives, and Stonehenge for Pagan Air Force Cadets: Billions of federal dollars 'wasted' as U.S. debt explodes

Billions of federal tax dollars were wasted on apparently frivolous and unnecessary projects in 2011, even as the national debt ballooned to more than £15trillion.
For example, $10million was spent on a remake of Sesame Street for Pakistan featuring a hard-working donkey, called Baily, who longs to be a pop star.
More than £175,000 was spent on a study into the link between cocaine use and risky sexual practices - in Japanese quail.

Doing it for the kids: U.S. taxpayers spent $10million funding a remake of Sesame Street for Pakistan, called SimSim Humara

And, incredibly, a billion dollars was handing home improvement tax credits to people who don't own homes - including prisoners and children.
These are just some of the $6.9billion worth of apparently frivolous, publicly funded projects identified in a report published by Republican Senator Tom Coburn of Oklahoma.
Dubbed the 'Wastebook Report', it identifies 100 taxpayer funded programmes it says the U.S. doesn't need and, worse, can't afford.

In the report's opening statement, Senator Coburn writes: 'Over the past 12 months, Washington politicians argued, debated and lamented about how to reign in the federal government‘s out of control spending.
'All the while, Washington was on a shopping binge, spending money we do not have on things we do not need, like the $6.9 billion worth of examples provided in this report.
'The result: Instead of cutting wasteful spending, nearly $2.5billion was added each day in 2011 to our national debt, which now exceeds $15 trillion.'

Senator Tom Coburn, from Oklahoma, alongside his Wastebook report

Many of the most expensive projects outlined in the report actually benefit those in other countries - or are, at least supposed to.
The U.S. sent $18million in foreign aid to China, a country that has lent the U.S. government $1trillion and is its largest creditor.
Bajan businessmen did well out of the U.S. taxpayer, with USAID spending $1.35million to Barbados's Cave Hill School of Business to promote entrepreneurship.
Local politicians in India - the world's fifth largest economy - benefitted from a $425,642 study into how they can improve their PR.
And Indonesians were able to enjoy the best in U.S. dance, after $30,000 was spent sending a New York-based dance troupe to perform in the country.
The military-industrial complex was also a significant beneficiary.
In Iraq, nearly $4.4billion was frittered away in 2011 alone on wartime contracting waste and fraud, according to a congressional report.
And more than $200million was spent in 2011 (out of a total $3billion spend) building an alternative engine for the F-35 fighter plane which the Pentagon then decided it didn't need.

Religious sensitivity: The Air Force Academy spent more than $50,000 building this Stonehenge-like worship centre for pagan cadets

Artistic: The National Science Foundation spent £300,000 teaching the public about the origins of matter through the medium of modern dance

Politicians looked after themselves well too, of course. The report reveals that $35.38million of taxpayer cash was handed to the two main political parties for their own parties - despite Congress enjoying a dismal 9 per cent approval rating - the lowest ever.
Senator Coburn concludes: 'The year 2011 will be remembered as a period of unrest as outraged Americans of all political stripes — tea party patriots on the right and Occupy Wall Street activists on the left — took to the streets in anger and disgust with the direction of our nation.
'As you look at these examples, regardless of your personal political persuasion, ask yourself: Would you agree with Washington these represent national priorities or would you agree these reflect the wasteful spending habits that threaten to bankrupt the future of the American Dream?'
Click here to see the senator's report in full

AND HERE'S A FEW MORE TAXPAYER FUNDED FOLLIES

• The National Science Foundation spent £300,000 teaching the public about the origins of matter through the medium of modern dance.
• The foundation also spent $130,987 on a study into how dragon robots can help preschoolers develop language skills. It was just the first payment of a four-year $923,00 grant.
• And it also spent nearly $500,000 on a study looking at whether people trust what they read on Twitter.
• The Air Force Academy spent $51,474 on a Stonehenge-like worship centre for students there 'whose religions fall under the broad category of "Earth-based"'.
• 
  Nearly $1million was spent by the federal government creating an online soap opera called Diary Of A Single Mom starring, among others, Billy Dee Williams.
• Nearly $100,000 in federal stimulus funds was spent providing kindergarteners with iPad 2s (pictured right), despite widespread opposition from parents who worried it would undermine teachers.
• Researchers at Columbia university were handed $606,000 for a study into how online dating affects sexual behaviour.
• The Oregon Cheese Guild received $50,000 in taxpayer funding to promote the Oregon cheeseindustry by creating a statewide 'Cheese Trail'.
• Lecturers from Eastern Illinois and Kent State Universities went on an epic pilgrimage to England to trace the steps of Chaucer's Canterbury Tales, costing taxpayers $136,555.
• Chinese drinkers have the federal government to thank after it paid $111,000 to fund a delegation of beer experts to give lessons to Chinese breweries. 

 

Read more: http://www.dailymail.co.uk/news/article-2077922/US-wastes-billions-Sesame-Street-Pakistan-effect-cocaine-birds-sex-lives.html#ixzz1hcCnT870

Fed’s Once-Secret Data Compiled by Bloomberg Released to Public

Dec. 23 (Bloomberg) -- Bloomberg News today released spreadsheets showing daily borrowing totals for 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis. It’s the first time such data have been publicly available in this form.

To download a zip file of the spreadsheets, go to bit.ly/Bloomberg-Fed-Data. For an explanation of the files, see the one labeled “1a Fed Data Roadmap.”

The day-by-day, bank-by-bank numbers, culled from about 50,000 transactions the U.S. central bank made through seven facilities, formed the basis of a series of Bloomberg News articles this year about the largest financial bailout in history.

“Scholars can now examine the data and continue the analysis of the Fed’s crisis management,” said Allan H. Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh and the author of three books on the history of the U.S. central bank.

The data reflect lending from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, the Term Auction Facility, the Term Securities Lending Facility, the discount window and single-tranche open market operations, or ST OMO.

Bloomberg News obtained information about the discount window and ST OMO through the Freedom of Information Act. While the Fed initially rejected a request for discount-window information, Bloomberg LP, the parent company of Bloomberg News, filed a federal lawsuit to force disclosure and won in the lower courts. In March, the U.S. Supreme Court decided not to intervene in the case, and the Fed released more than 29,000 pages of transaction data.

Additional Data

The Fed later supplied additional data to fill in gaps in its initial response. Bloomberg News is updating an interactive graphic it first published in August to add the new information.

Congress required the Fed to post data to its website in December 2010 on six broad-based programs, its assistance to Bear Stearns Cos. and American International Group Inc. and more general information on its mortgage-backed securities purchases and so-called foreign-currency liquidity swaps. Those data were presented in spreadsheets that made it difficult to gauge how much individual banks were borrowing from the various programs on any given day.

Some reported totals from media outlets and government studies varied widely. In connection with today’s release, here’s a by-the-numbers explanation of the variations:

$1.2 trillion -- The Fed’s actual lending to banks and financial companies at its single-day peak, Dec. 5, 2008, through the seven programs Bloomberg News studied in depth.

Emergency measures that targeted specific companies -- Bear Stearns, AIG, Citigroup Inc. and Bank of America Corp. -- were excluded from Bloomberg’s analysis because they were previously disclosed. Loans to these companies from the other seven programs were included.

Bloomberg excluded foreign-currency liquidity swaps because names of commercial banks that borrowed under the program haven’t been disclosed to the public.

$1.5 trillion -- The Fed’s own number to represent its peak lending. This amount included the foreign-currency liquidity swaps, according to the Fed website. Under the swap lines, the Fed lends dollars to foreign central banks, which in turn lend the money to local banks. Only the names of central banks involved in the transactions have been made public.

The Fed’s tally of peak lending differed from Bloomberg’s in other ways, too. It included the Term Asset-Backed Securities Loan Facility, or TALF, which Bloomberg excluded. That program’s borrowers were investors rather than banks. Also, the Fed didn’t include ST OMO. Bloomberg did, based on a March 7, 2008, news release in which Fed officials said they would use the program “to address heightened liquidity pressures in term funding markets.”

$7.77 trillion -- The amount the Fed pledged to rescue the financial industry, according to Bloomberg research that examined announced, implied or actual upper limits on lending and guarantees. This number, which represents potential commitments, not money out the door, was first published in March 2009, when it peaked.

“One of the keys to understanding why we’ve avoided another Great Depression, so far, is to see how bold the Fed was in 2008 and 2009,” said Niall Ferguson, a Harvard University history professor. “That boldness consisted of a range of contingency commitments that backstopped the banking system. Just because they weren’t used doesn’t mean they weren’t important.”

After Bloomberg included the $7.77 trillion figure in a Nov. 28, 2011, story, some media outlets mischaracterized it as the Fed’s actual lending. The Fed, in a Dec. 6 memo accompanying a letter Fed Chairman Ben S. Bernanke wrote to lawmakers, called those mischaracterizations “wildly inaccurate.”

$6.8 trillion -- The potential amount the Fed might have lent if “all eligible program applicants request assistance at once to the maximum permitted under the program guidelines,” according to a July 21, 2009, report by the Treasury Department’s Special Inspector General for the Troubled Asset Relief Program, or TARP.

In that report, the officials monitoring the Treasury Department’s $700 billion bailout fund attempted to determine the Fed’s “total potential support” related to the financial crisis.

Most of the difference between the TARP watchdog’s tally and Bloomberg’s involves one program, TALF. The inspector general attributed its $900 billion capacity to the Treasury, which was guaranteeing some of its lending. Bloomberg grouped TALF with the Fed, which created the program.

$16 trillion -- The “total transaction amounts” for Fed lending included in a July 21, 2011, study by the Government Accountability Office, a non-partisan investigative agency that reports to Congress. The Fed’s Dec. 6 memo said it was inaccurate to describe that amount as the total of its lending and guarantees, as some websites did.

The method the GAO used to produce that total differed from Bloomberg’s approach. Bloomberg built spreadsheets to show each borrower’s daily amounts outstanding, and then found the day on which those amounts peaked. The GAO tallied all cumulative loans to arrive at $16 trillion. Its report noted that the total didn’t reflect how loans’ terms varied under different Fed programs.

If a bank borrowed $1 billion overnight for 100 nights, Bloomberg’s analysis would show that the bank had a $1 billion balance at the Fed for 100 days; the GAO method that produced the $16 trillion total would sum up those transactions to $100 billion, even though the bank never owed more than 1 percent of that total.

$1.14 trillion -- A different total for Fed lending that the GAO included in the same July 21, 2011, report. The calculation is similar to, not the same as, Bloomberg’s method of arriving at its peak lending figure. The GAO accounted for differences in loan terms by multiplying each loan amount by the number of days the loan was outstanding and then dividing by the number of days in a year. Bloomberg’s figure represents peak lending on a single day.
$13 billion -- An estimate of the income that 190 banks could have made from investing the Fed loans they took. To arrive at the figure, Bloomberg found the banks’ tax-adjusted net interest margin -- that is, the difference between what they earn on loans and investments and what they pay in borrowing expenses. Such data was available for 190 of the 407 borrowers. That information is included in today’s release.

In those cases, Bloomberg multiplied each bank’s net interest margin by its average Fed debt during reporting periods in which they took emergency loans. In that calculation, Bloomberg excluded loans from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility because that cash was passed along to money-market funds.

Penalty Rates

In its memo, the Fed said it was incorrect to write, as Bloomberg did, that banks “reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.”

“Most of the Federal Reserve’s lending facilities were priced at a penalty over normal market rates so that borrowers had economic incentives to exit the facilities as market conditions normalized, and the rates that the Federal Reserve charged on its lending programs did not provide a subsidy to borrowers,” the Fed said.

An October 2008 report by Daniel Thornton, a vice president at the Federal Reserve Bank of St. Louis, said the primary credit rate, which is paid by most borrowers from the Fed’s discount window, had been “consistently lower” than the certificate of deposit and Eurodollar rates since March 2008.

‘Generally Low’

Rates that banks paid at the Term Auction Facility, a lending program created in December 2007 to augment the discount window, “have generally been low relative to rates that depository institutions would have had to pay otherwise,” Thornton said in the report.

David Skidmore, a Fed spokesman, declined to comment on whether Fed programs provided a subsidy relative to actual market rates during the crisis.

Bloomberg’s income-estimate method isn’t perfect. It assumes that the banks used their Fed loans in the same way they did their other capital, for example. Still, in the absence of precise data, the approach provides an indication of banks’ income from their Fed loans.

“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” said Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.

--With assistance from Bradley Keoun and Sharon L. Lynch in New York. Editors: John Voskuhl, Robert Friedman
To contact the reporters on this story: Phil Kuntz in New York at pkuntz1@bloomberg.net; Bob Ivry in New York at bivry@bloomberg.net.
To contact the editor responsible for this story: Gary Putka at gputka@bloomberg.net.

Email sent out by Roger Weigand (Trader Rog) to David Morgan (Silver-Investor) - Something Odd is happening with the Banks in Europe and exchanges Today 12/24/11

David Morgan

David Morgan of Silver-Investor.com  

sent me an email today from Roger Weigand of WeBeatthestreet.com .                          Roger Weigand

Both  of them are metals experts and always keep their eyes on what is happening in the investment area of metals and mining.   

                                                                  

I have had the pleasure of interviewing both previously about the "Red Alert" email regarding the plans of confiscating metals by the government, for the IMF and One World Currency.  fyi - Roger has communicated with me that I could post the email here.

                                                                                                  

It seems something is going down with the banks in Europe today.  Here is Roger's email sent out to other  experts in the metals (Gold and Silver) field.

Here is the email:




Trader Tracks Situational Alert Saturday, 12-24-11 -Christmas Eve at 740am PST - roger wiegand -Traderrog:

"We have received a report of unusual banking activity. Banking screens on 138 different currencies are show 00.000.  Some rate fluctuations are beginning to appear. There have been no answers on this activity but banks have been notified to expect a large change in currency rates." (quote not attributed to protect the source).  

In our view, what is happening is a massive devaluation in probably the Euro Currency relative to the values versus individual nations. The ECB loaned over $600 Billion (produced out of thin air with no collateral) last week to European Central Bank Member Nations. We think this next step is to re-configure the values of the Euro within each member country. 

Obviously the little broken ones like Greece, Portugal and Ireland will be de-valued MORE relative to Germany and France. Last report we got said the consortium of countries amounted to 27 total.  The B.I.S., the Bank for International Settlements in Basel, Switzerland is the bankers' bank. The BIS is very secret about their work and activities. They are probably the orchestra leader in this event. 

We also noticed later Friday that the ECB is taking a $40 Million dollar lease in a New York City Building. Are they moving the whole headquarters from Brussels, or is this a newer and bigger expansion of the ECB?  I think its an expansion and the IMF is fin charge for sure in charge. The IMF is gathering cash from member nations to cover their activities in propping-up Europe and who knows who else. This is all part of the grand scheme moving to a One World Government and One World Currency. 

In our view, when the credit and bond markets break-down, the global Super-Crash is underway in an expansion of Greater Depression II.  Read your history from 1900 to 1918. This is being exactly replicated from 2000 to 2020. The Panic of 1908 was repeated in our Panic of 2008. The bigger world war begins on schedule from 2013-2014 to 2018. We think the gold and silver rally can peak in 2017 but perhaps extend all the way to 2024. 

After Obama is re-elected next year, we forecast a larger expansion of demonstrations not only throughout the world but in major cities in the USA. The calls for impeachment will reach new screaming levels after the dirtiest political campaign in history. There will be lawsuits and re-calls with lots of voter fixing and tampering. We think Romney is the GOP candidate and he will not have one chance in a one million to be elected. 

Someone has filed a $1 Trillion Dollar lawsuit in this mess and there is a lock-down on information relative to the suit and to the impending (we think) devaluation. It is obvious to us that this is being done over the Christmas holiday so markets cannot react as they are closed.  Many will not open until next Tuesday after the designated Monday, Christmas holiday in the USA. 

If my prognosis is correct, this could be a real market mover and perhaps a real market shocker. If I am correct in my surmising what these people are doing, precious metals might rally in a vicious snap-back valuation on fear and security. Gold and silver are being technically pressured to the high side anyway. If this event proves to be true, hang on to your hat. I would not be trading anything but watching first to see what markets do in Asia on Monday evening on Bloomberg in America. -Traderrog

The Perfect Heist: Why Government Theft Continues To Go Unnoticed

The Daily Reckoning via businessinsider.com 

 

This week, we doff our caps to the folks at the European Central Bank. They’ve pulled off the perfect heist.

The euro-feds have opened the valves…turned on the spigots…and let nearly a half trillion euros worth of liquidity flow directly into the very same banks that have proven they can’t be trusted with a penny.

But that’s how a zombie system works. The living give. The monsters get.

And since, at this stage of the credit cycle, the living don’t have much to give, the feds turn on the printing presses.

Then, from whom does the money come?

Gotta come from someone, no?

That’s right… When you borrow it, it comes from the people who lend it. When you tax it, it comes from the taxpayers. But whom does it come from when you just print it up?

Well, at first it appears to come from no one. Nobody reaches in his pocket and finds fewer dollars. Nobody’s pocket has been picked. But how could that be? Nothing comes from nothing. You add a zero to a zero and you still have a zero.

And yet, the zombie banks now have 489 billion more euros in their vaults. That’s what it said in Thursday’s Financial Times.

“Banks snap up 489 billion euros in ECB loan offer.”

This money certainly seems real. The banks can lend it. Spend it. Toss it out the window or down the drain. They can light cigars with it. They can use it to wrap gold coins before sending them out as Christmas presents.

Let’s see, we saw an ad. Mercedes Benz CL class 2011-2012 autos are selling, in round numbers, for $100,000. With this money, you could buy about 6 million of them. Which is probably more or less what will happen to the money.

But what concerns us today is not where it goes but where it came from. Did it come from space? From another galaxy? No? Then, isn’t all wealth on earth owned by someone? Yes? Then, it must have come from some humans somewhere on Earth.

But who?

Here’s an answer: Each unit of currency represents a claim on resources. Now, there are enough new units to claim 6 million new Mercedes. We infer that people who had claims on them previously have less of a claim now, because there are only so many new Mercedes available. And since those claims arose from the value of the currency they earned and saved, we further infer that the value of the new money must have been stolen out of the value of the old money. What else can you call it but theft? People who had euros previously now have less purchasing power (at least theoretically). They never agreed to let their money be clipped. They never even knew what was happening to them.

But since we’re in a Great Correction…and since Europe is entering a recession…and since recessions and corrections are basically deflationary (prices fall as demand eases)… the old currency holders aren’t likely to notice…or raise a stink about it.

It may be larceny, but it’s grand larceny. Heck, it’s great larceny. The perfect heist. The poor victims don’t even know they are victims. They have as much money in their pockets and bank accounts on Friday as they had on Monday. And if prices rise slightly, not one in a hundred will blame the ECB.

Meanwhile, over in the USA, the criminal gangs can’t seem to get organized.

Late yesterday came a report that a deal had been struck to extend the payroll tax by 2 months. But a bigger problem is coming up. Just wait ’til next year. Here’s Bloomberg with a full report:

Payroll Tax Tiff Times 25 Awaits Congress in ‘Utter Dysfunction’

Dec. 22 (Bloomberg) — The brinksmanship in Congress over a payroll tax-cut extension may end up looking like a quaint disagreement by next December, when lawmakers must grapple with a fiscal policy debate at least 25 times more costly.

Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences.

“The prospects are bleak,” said Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York. “I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.”

The year-end 2012 series of deadlines on tax and spending policy stems from Congress’s tendency to push problems into the future with temporary solutions. This year alone, lawmakers have flirted with a federal government shutdown three times, almost defaulted on the US debt for the first time in history and allowed aviation taxes to lapse for two weeks.

Trillions at Stake

The $4 trillion in expiring tax cuts and $1.2 trillion in potential spending cuts dwarf the $200 billion at stake in the current fight over the payroll tax cut and other provisions, including expanded unemployment insurance. Those items, if extended for another year, would expire at the end of 2012.

Bill Bonner
for The Daily Reckoning

The Perfect Heist: Why Government Theft Continues to Go Unnoticed originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.

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World banks brace for euro collapse

Banks are preparing for a possible euro collapse.

Banks around the world are preparing for the possible collapse of the euro as fears of the European debt crisis increase.

Several banks are even installing systems capable of coping with trading in old European currencies.

Meanwhile finance firms, corporations, and different governments have also turned to plans that aim at preparing them for harsh times.

Regulators have asked banks in the US and UK to provide updates on readiness levels in case of a possible euro collapse.

Some corporate firms have also started transferring their cash on a daily basis out of European countries, including debt-ridden Greece instead of once every two weeks.

Europe has for months grappled with an economic and financial crisis. Insolvency now threatens in-debt countries such as Greece, Portugal, Italy, Ireland and Spain.

Since its formation, the European Union had been a haven for those seeking refuge from war, persecution and poverty in other parts of the world.

The worsening debt crisis, however, has forced European governments to adopt harsh austerity measures and tough economic reforms. Tens of thousands of Europeans are migrating from their homelands as a result of these difficulties.

There are fears that more delays in resolving the eurozone debt crisis could push not only Europe, but also much of the rest of the Western world back into recession.

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