|To: Worswick who wrote (2754)||4/16/2021 5:56:09 PM|
|Interesting tale about Citadel/Rehypothecation|
TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short & trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE global financial economy is modeled after a fractional reserve system that is beginning to experience THE MOTHER OF ALL MARGIN CALLS.
THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has officially come full circle.
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|From: Worswick||4/19/2021 9:02:33 AM|
|Fun Facts |
The $2.3 Quadrillion Global Timebomb
BY TYLER DURDENMONDAY, APR 19, 2021 Egon von Greyerz via GoldSwitzerland.com,
Credit Suisse is hours from collapse and the consequences could be a systemic failure of the financial system...
Disappointingly, my dream last night stopped there. So unfortunately I didn’t experience what actually happened.
As I warned in last week’s article on Archegos and Credit Suisse, investment banks have created a timebomb with the $1.5 quadrillion derivatives monster.
A few years ago, the BIS (Bank of International Settlement) in Basel reduced the $1.5 quadrillion to $600 trillion with a pen stroke. But the real gross figure was still $1.5q at the time. According to my sources, the real figure today is probably over $2 quadrillion.
A major part of the outstanding derivatives are OTC (over the counter) and hidden in off balance sheet special purpose vehicles.
LEVERAGED ASSETS JUST GO UP IN SMOKE
The $30 billion in Archegos derivatives that went up in smoke over a weekend is just the tip of the iceberg. The hedge fund Archegos lost everything and the normal uber-leveraged players Goldman Sachs, Morgan Stanley, Credit Suisse, Nomura etc lost at least $30 billion.
These investment banks are making casino bets that they can’t afford to lose. What their boards and top management don’t realise or understand is that the traders, supported by easily manipulated risk managers, are betting the bank on a daily basis.
Most of these ludicrously high bets are in the derivatives market. The management doesn’t understand how they work or what the risks are and the account managers and traders can bet billions on a daily basis with no skin in the game but massive potential upside if nothing goes wrong.
DEUTSCHE BANK – DERIVATIVES 600X EQUITY
But we are now entering an era when things will go wrong. The leverage is just too high and the bets totally out of proportion to the equity.
Just take the notorious Deutsche Bank (DB) that has outstanding derivatives of €37 trillion against total equity of €62 billion. Thus the derivatives position is 600X the equity.
Or to put it in a different way, the equity is 0.17% of the outstanding derivatives. So a loss of 0.2% on the derivatives will wipe the share capital and the bank out!
Now the DB risk managers will argue that the net derivatives position is just a fraction of the €37 trillion at €20 billion. That is of course nonsense as we saw with Archegos when a few banks let $30 billion over a weekend.
Derivatives can only be netted down on the basis that counterparties pay up. But in a real systemic crisis, counterparties will disappear and gross exposure will remain gross.
So all that netting doesn’t stand up to real scrutiny. But it is typical for today’s casino banking world when depositors, shareholders and governments take all the downside risk and the management all the upside.
So let us look at the global risk picture in the financial system:
The $2.3 quadrillion above is what the world is exposed to when this timebomb explodes.
That is the total sum of global debt, derivatives and unfunded liabilities. When all the dominos start falling, and no one can meet their obligations, this is what governments are left to finance.
Yes, they will print this money and much more as deficits mount exponentially due to collapsing currencies. But the MMT (Modern Monetary Theory) clowns will then find out that printed money rightfully has ZERO value.
If these clowns studied history they would learn that MMT has never worked. Just check the Roman Empire 180-280 AD, France in the early 18th century, or the Weimar Republic, Zimbabwe, Argentina and Venezuela in the 19th and 20th centuries.
So when Fiat money dies, how much gold is required to repair the damage?
If we look at the cube below with all the gold ever produced in history, we see that it is 198,000 tonnes valued at $11 trillion.
Below the cube the total central bank and investment gold is shown. This amounts to 77,000 tonnes or $4.3 trillion. That sum represents 0.2% of the total debt and liabilities of $2.3 quadrillion as shown in the Timebomb.
The $4.3 trillion gold value is at a gold price of $1,750 per ounce. This minuscule 0.2% of liabilities obviously is far too small to support global debt. A 20% gold backing of total liabilities would be a minimum.
That would be 100X the current 0.2% or a gold price of $175,000.
I am not forecasting this level or saying that it is likely to happen. All I am doing is looking at the total risk that the world is facing and relating it to the only money that will survive.
Also, measuring the gold price in dollars serves no purpose because when/if this scenario happens, the dollar will be worthless and the gold price measured in worthless dollars at infinity.
FOCUS ON WEALTH PRESERVATION
Rather than focusing on a potential gold price measured in dollars, investors should worry about preserving their wealth in real assets held outside a bankrupt financial system.
Regardless of what price gold and silver reach, history proves that it is the ultimate form of wealth preservation.
It will not be different this time. Therefore, in the coming crisis, precious metals will be the best insurance to hold as protection against unprecedented global risk.
Gold’s rise since 2000 in no way reflects the massive money printing we have seen in this century.
Investors have the following choice:
1. Either they follow the coming crash in bubble assets like stocks, property and bonds all the way to the bottom which is likely to be 75-95% lower in real terms (measured in gold).
2. Or they protect their wealth in physical precious metals, stored outside a fractured financial system.
As always, history gives the answer as to which path to take.
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|From: ggersh||8/14/2021 11:13:16 AM|
“They (economists) must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.” Thomas Piketty, Capital in the Twenty-First Century
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.”
Laurence J. Peter
“Some student asked if he [Larry Summers] didn’t have essentially the same relationship with Bob Rubin. Wasn’t Summer’s opposition to capital controls just a sop to Wall Street banks, which wanted to recoup their risky investments regardless of how doing so affected the country in which they had invested?
'Summers just lost it,' said one audience member, a business school student. “He looked at the person and said, 'you don’t know what you’re talking about and how dare you ask this question of the president of Harvard?'”
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|To: ggersh who wrote (2761)||9/2/2021 12:02:54 PM|
On The Breeding Of Money - by Gordog bý Gordog
Some continue to delude themselves about the so-called US economy, which is nothing but a house of cards---and this meaningless, completely fabricated 'metric' of GDP. In real terms, China's economy is already bigger by half then the US. And that is being charitable.
Let us review some basic facts about how NUMBERS actually work. This is known as MATHEMATICS.
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|From: Worswick||11/5/2021 4:43:50 PM|
|The most difficult year for me since I started this thread over two decades ago |
I'm ready to take up the cudgel's again herewith.
Wall Street On Parade .. the best source now in this moment for the machinations of our gvt.
Zero Hedge seems to be "loosing the thread" I fear. Better they look at their model and tune it up lest their "private" Pay For Site doesn't work out and it is too expensive
Very best to you all
Stock Prices Are Dangerously Diverging: Mega Banks Close in a Sea of Red Ink as S&P 500 Hits an Historic Record
By Pam Martens and Russ Martens: November 5, 2021 ~
Yesterday, the S&P 500 and Nasdaq set new record highs for the sixth straight trading session. The Dow Jones Industrial Average, however, closed in the red. That’s because two high-priced bank components of the Dow, Goldman Sachs and JPMorgan Chase, closed in the red and helped to pull the index into negative territory. (The Dow Jones Industrial Average is a price-weighted index.)
As the chart above indicates, the declines in Goldman and JPMorgan were part of a major bank selloff yesterday – a striking and disturbing divergence from the broader indices. It would be impossible to have a healthy stock market going forward if the mega banks that finance the bulk of corporate activity descend into a downward spiral.
Among the worst bank performers yesterday were three foreign global banks that have a heavy presence on Wall Street: the British bank, Barclays (BCS), lost 5.56 percent; Swiss bank, Credit Suisse (CS), gave up 4.73 percent; while German mega bank, Deutsche Bank (DB), closed down 4.64 percent.
Foreign global banks are heavily interconnected to U.S. mega banks via derivatives. The banks serve as counterparties to each other in making private contract derivative bets on everything from credit defaults to equities to foreign exchange. These private contracts are known as bilateral over-the-counter (OTC) derivative trades and lack a central party clearing platform to stand behind the wager. This is what led to the collapse of the giant insurer, AIG, in 2008 and resulted in it being nationalized for a time by the U.S. government.
That type of derivatives hubris was supposed to have been reformed under the Dodd-Frank legislation of 2010 but, in reality, very little has meaningfully changed.
Causing particular angst in the banking sphere is the situation with Credit Suisse, Switzerland’s second-largest bank. It announced yesterday that it will close the bulk of its prime brokerage business that makes leveraged loans to hedge funds. The announcement comes after Credit Suisse owned up earlier this year to suffering $5.5 billion in losses when Archegos Capital Management, a family office hedge fund, blew itself up in March. (See our report: Archegos: Wall Street Was Effectively Giving 85 Percent Margin Loans on Concentrated Stock Positions – Thwarting the Fed’s Reg T and Its Own Margin Rules.)
In just the past year, Credit Suisse has been hit with the Archegos scandal; it paid $547 million to settle with criminal and civil authorities in the U.S. and U.K. for making an $850 million fraudulent loan in Mozambique where a significant part of the funds went for kickbacks to Credit Suisse employees and Mozambique government officials; it is being sued by investors for selling them billions of dollars of Greensill Capital debt as low risk – Greensill filed for insolvency in March. Just last month, the Swiss bank regulator, FINMA, reported that Credit Suisse had engaged in seven separate spying operations on its Board members, former employees and third parties.
Adding to banking woes is the fact that the Federal Reserve announced on Wednesday afternoon that it will begin this month to take away its bond-buying punch bowl (that has been suppressing interest rates) to the tune of $15 billion each month beginning in November. The Fed has been buying $80 billion a month in Treasury securities and $40 billion a month in agency Mortgage-Backed Securities (MBS) for a total of $120 billion each month.
The Fed left the door open “to adjust the pace of purchases if warranted by changes in the economic outlook.”
Also adding to bank stock concerns yesterday was an 8:30 a.m. report from the Labor Department showing that weekly jobless claims registered just 269,000 last week, the lowest showing since March of 2020. Investors holding bank stocks see this as evidence of a tightening labor market and a potential contributor to inflation that could force the Fed to hike interest rates earlier than anticipated.
Other central banks are already tightening via interest rate increases. On September 23, Norway’s Norges Bank became the first major G10 central bank to hike rates, imposing a quarter-point increase from its record low zero interest rate. It has indicated that another hike is likely in December.
South Korea’s central bank hiked rates in August by a quarter point to 0.75 percent, for the first time in three years. Brazil’s central bank lifted its key interest rate by 1.50 percent on Wednesday of last week – a half point more than anticipated by market watchers and the largest percentage increase since 2002.
This week saw more central bank action. After surprising markets in October by raising its interest rate by 40 basis points to 0.50 percent, on Wednesday of this week Poland’s central bank hiked rates by another 75 basis points to 1.25 percent. Yesterday, the Czech Republic raised its benchmark interest rate by 125 basis points to 2.75 percent.
And while the Bank of England surprised markets this week by keeping interest rate increases on hold, both the BOE and the Bank of Canada have signaled that rate hikes are coming sooner than previously expected.
Also impacting mega bank stock prices are news and rumors that hedge funds are taking losses on wrong-way bets on which way interest rates would move. Mega banks finance the highly-leveraged trading by hedge funds through their prime broker operations.
I hope you are all well amigos.
My best, as ever
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|From: Worswick||11/5/2021 5:14:35 PM|
|I have been pondering this article since it appeared last week .... at first after looking up Omarova on Wikipedia little tendrils of my unrest grew and grew... after I picked myself up off the floor and stopped laughing.|
Look her up yourselves people. Omarova is a very, very heavy lady.
Basically, this plan n(below) is an admission that our whole financial system is rotted beyond repair.
So the god people whom oversee America's future are planning a "bail in" of our entire financial system centered upon recapitalizing the country,
THIS IS A GIANT "BAIL IN" of all the financial "deposits" in America.
Think Roosevelt in the 1930's ....eventually 93% inheritance taxes, WPA projects, dams, bridges, crop guarantees, etc. etc.
An all in bail in would certainly cure the least of our problems of the last 25 years of derivatives of various sorts being wildly out of control. Are we up to a quadrillion yet?
As to Omarova's credentials:
Mind you for 6 years Omarova worked at a top NY law firm Davis, Polk, Wardwell, THAT IS ... certainly one of the marque "arrangers" of America. She has Moscow PHd. Cornell academic, US gvt appointee, etc.
None of Omarova's credentials fit easily together so one might give those a think for a bit.
House Hearing: PricewaterhouseCoopers Signed Off on Evergrande’s Books, Which Counted “Unbuilt and Unsold Properties” as Assets ?
Biden’s Nominee Omarova Has a Published Plan to Move All Bank Deposits to the Fed and Let the New York Fed Short Stocks
Pam Martens and Russ Martens: October 26, 2021
This month, the Vanderbilt Law Review published a 69-page paper by Saule Omarova, President Biden’s nominee to head the Office of the Comptroller of the Currency (OCC), the Federal regulator of the largest banks in the country that operate across state lines. The paper is titled “The People’s Ledger: How to Democratize Money and Finance the Economy.”
The paper, in all seriousness, proposes the following:
(1) Moving all commercial bank deposits from commercial banks to so-called FedAccounts at the Federal Reserve;
(2) Allowing the Fed, in “extreme and rare circumstances, when the Fed is unable to control inflation by raising interest rates,” to confiscate deposits from these FedAccounts in order to tighten monetary policy;
(3) Allowing the most Wall Street-conflicted regional Fed bank in the country, the New York Fed, when there are “rises in market value at rates suggestive of a bubble trend,” such as with technology stocks today, to “short these securities, thereby putting downward pressure on their prices”;
(4) Eliminate the Federal Deposit Insurance Corporation (FDIC) that insures bank deposits;
(5) Consolidate all bank regulatory functions at the OCC – which Omarova has been nominated to head.
Republican Senator Pat Toomey has been running a Red Scare campaign against Omarova, who was born in the Kazakh Soviet Socialist Republic (now Kazakhstan) and attended Moscow State University on a Lenin Personal Academic Scholarship.
The real threat that Omarova poses to U.S. financial stability, that Democrats should be calling out, is that she wants to further concentrate all major aspects of the U.S. banking system in the hands of the Federal Reserve, a captured regulator whose 12 regional bank tentacles are, literally, owned by the banks. (See These Are the Banks that Own the New York Fed and Its Money Button.) Omarova offers not one scintilla of a suggestion about restructuring the Fed so that it is not owned by or controlled by the banks.
In her paper, Omarova characterizes the current relationship between the Fed and the banks as the Fed running a “franchisor ledger” to assist its franchisee-banks. But as the Fed’s secret $29 trillion bailout of the mega banks on Wall Street and their foreign derivative counterparties proved following the financial crash in 2008, it’s actually the banks that are cracking the whip and the Fed amicably doing their bidding. That means that the mega banks are the franchisor and they’ve shifted their faux bank examinations and faux stress tests to the Fed, for appearances sake.
This point is further demonstrated by the fact that during the Fed’s 2007-2010 bailouts, most of the Fed’s emergency lending programs were farmed out in no-bid contracts to the very banks being bailed out. JPMorgan Chase, a five-count felon, continues to have a contract with the Fed to serve as custodian of more than $2 trillion of the Fed’s agency Mortgage-Backed Securities (MBS).
As further proof as to who owns whom, the Federal Reserve Board of Governors has outsourced its major functions to the privately-owned New York Fed, whose largest private shareholders are the mega banks, JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of New York Mellon.
One New York Fed bank examiner, Carmen Segarra, was so outraged at what she witnessed at the New York Fed that she went to the Spy Store, bought a tiny tape recorder, and secretly recorded 46 hours of audio. Segarra filed a federal lawsuit, charging that when she attempted to write a negative examination of Goldman Sachs, she was first bullied by her colleagues at the New York Fed and then fired for refusing to change her examination results.
As additional proof that the New York Fed does not function anything like a public servant, the President of the New York Fed receives a larger paycheck than the President of the United States. According to the Fed’s 2020 Annual Report, the President of the New York Fed, John Williams, makes a salary of $506,300. The President of the United States and Commander in Chief, who is elected by the people, makes $400,000. The CEOs of the mega Wall Street banks rotate on and off the New York Fed’s Board of Directors.
The New York Fed is so deeply in bed with the Wall Street mega banks that instead of using a misconstrued franchisor-franchisee analogy, Omarova should have thought along the lines of Stockholm Syndrome: the Fed is completely enthralled with its captors. So enthralled, in fact, that one of the first things that former Fed Chair Janet Yellen did after leaving the Fed was to sign up at a speakers’ bureau and grab millions of dollars in speaking fees from Wall Street.
With that as a backdrop, this is what Omarova proposes in her paper:
Deposits at Commercial Banks Would Be Replaced with FedAccounts:
“In principle, FedAccounts can be made available as an alternative to bank deposit accounts, upon a person’s request. As explained below, however, the more effective option would be to transition all deposits to the Fed. Functionally, all FedAccounts will be essentially identical. For purely administrative purposes, however, it would be advisable to differentiate among ‘individual’ and ‘entity’ accounts. For U.S. citizens, Individual FedAccounts would be opened automatically upon birth or naturalization. These accounts would also be credited automatically with regularly received federal benefits: social security payments, tax refunds, and all other disbursements that depend on one’s citizenship status. For qualifying resident aliens, Individual FedAccounts would be opened and closed upon request, rather than automatically, but otherwise would function in the same manner. Entity FedAccounts could also be administratively divided into separate categories, depending on whether the holder is a government unit, a nonprofit organization, or a business entity incorporated or operating in the United States.”
The New York Fed Would Overtly Insert Itself into the Stock Market:
“Under this proposal, the Federal Reserve Bank of New York (‘FRBNY’) would conduct regular purchases and sales of a broad range of securities and other tradable financial assets with an explicit view to modulating volatile swings in what has been defined elsewhere as ‘systemically important prices.’
“To this end, the FRBNY would establish a separate trading portfolio replicating, as closely as practicable, the market portfolio. In effect, this portfolio would be an index fund reflecting the proportional values of all financial asset classes constituting the financial market as a whole. Once the fund is established, the Fed would conduct its current daily tracking of the nation’s financial markets.
“If a particular asset class—such as mortgage-backed securities or technology stocks—rises in market value at rates suggestive of a bubble trend, the FRBNY trading desk will short these securities, thereby putting downward pressure on their prices. This type of action would tend to tighten the flow of speculative credit to the asset class in question, because (1) speculative profit prospects would be diminished by the price drop; and (2) the Fed’s engineering the drop would signal to the market its determination that current prices of the asset in question are artificially inflated and accordingly best suppressed. Conversely, the FRBNY will go long on particular asset classes that appear to be artificially undervalued in order to avoid unnecessary market dislocation. It will follow the same process in targeting broader market-price fluctuations.”
One can only imagine what a field day hedge funds are having with this idea. They could simply jump on board whatever the New York Fed is shorting and drive the share price to zero. The fact that Omarova specifically mentions technology stocks as potential shorts has likely caused Google and Microsoft to call an emergency session with their lobbyists.
The Fed is already artificially suppressing interest rates by buying up $120 billion a month in Treasury debt and agency Mortgage-Backed Securities (MBS). Omarova would now add to its portfolio the ability to manipulate stock market prices. The fact that Omarova would commit this idea to paper, let alone publish it in a legal journal, shows an incredible naivete about how members of Congress, investors, and even average Americans would react to the idea of bureaucratic control of stock prices.
The Fed’s Ability to Confiscate Money from Depositors’ FedAccounts:
“Implementing a contractionary monetary policy by debiting FedAccounts, in turn, presents a different set of ex ante institutional choices aiming to minimize the economic and political fallout from what is likely to be perceived as the government ‘taking away’ people’s money. This tool is to be reserved only for extreme and rare circumstances, when the Fed is unable to control inflation by raising interest rates and deploying its new asset-side tools, discussed below. It is nevertheless important to have a mechanism in place for draining excess liquidity from these accounts with minimal disruption of productive activity.”
The most important question that Democrats should be asking right now is who vetted this nominee for Biden.
Obiously, Dark Vader... Darth's brother.
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