Wednesday, November 30, 2011
Here Is What Happened After The Last Global Coordinated Central Bank Intervention....................
Victory belongs to the most persevering.
It is the fight alone that pleases us, not the victory.
I look at victory as milestones on a very long highway.
A mind troubled by doubt cannot focus on the course to victory.
Men talk as if victory were something fortunate. Work is victory.
The moment of victory is much too short to live for that and nothing else.
The nerve that never relaxes, the eye that never blanches, the thought that never wanders, the purpose that never wavers - these are the masters of victory.
Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat.
Winners have a particular way to go about things, and that is what differentiates them from the rest. If you want to be a winner at whatever it is that you do, you need to start doing what winners do. Now there are a multitude of factors that can be looked at, but let's start with 5 simple ways to create a solid foundation for developing the proper mindset of being a true winner.
One of the first characteristics that we will find in winners is that they are willing to take action to solve their problem. Even before that, they acknowledge that there is a problem. Too many people will complain about a problem, and blame it on someone else. Since it is someone else's fault, they should fix it (not me). It is easier to complain than to take action and do something about it myself.
Nothing significant gets done by just thinking that it would be nice to do or to have someday. To be a winner, you must focus on the prize and be committed to accomplishing it. There will be many things that discourage you. Failures and 'knock-downs' will challenge your resolve. Passion is what will get you through to eventual victory.
3. Be Teachable
If you know everything already then there is no need to grow or improve. If you recognize the need to learn more – about everything – then you are teachable. This is an attitude. It is a desire to always learn, always improve. That is the only way to be a winner.
4. Be Willing to Stand Alone
A winner is often alone. It may be because they are hard at work practicing while others are watching TV. It may be because they are following their own vision for success rather than following the crowd. Because of their passion and willingness to take action, they already stand out from the crowd. They have to feel OK about that. Soon they will be alone at the head of their class or their business.
5. Love People
A winner will rarely be the person who avoids other people at all cost. The winner enjoys people. Even if she is an introvert, she will recognize that she can never succeed on her own. She understands that the gifts and inputs of other people will make her a better person. The winner will develop an attitude of caring for other people – both those who have few resources, and those who have more. There love will win people over and help them accomplish their goals in life.
These are just a sampling of some of the characteristics of winners. Hopefully, we can look at these and identify some that are a part of us, and some that we can strive to improve. That is all a part of how to be a winner. It means always moving on toward the goal.
Think about how many books and audiotapes and seminars, as well as all the articles online such as this one, that exist in the world. You'd think we'd have an overload of successful and happy people everywhere with all this information available. Here's the thing though. Most people will read a book or listen to an audiotape once, and get a little bit of a lift out of it, but then it's gone, and they figured that the content just didn't work for them. Let me ask you this, how often do you bathe? Well, that's how often you need to expose yourself to motivation and self improvement material. Motivation is not permanent, and neither is bathing!
Yes, we have all been told this over and over, how positive thinking is important. However, you need to look at positive thinking from another perspective. Truth is, positive thinking on its own will not move mountains. You can be the most positive person on earth but if you don't take action or, don't learn from your errors, and such, then it will all be in vain. But positive thinking is important because it is BETTER THAN negative thinking. With negative thinking, you don't even stand a chance to succeed. You are not even in the ballpark to make it happen. At least with positive thinking, the hope is there. A few tweaks, a few actions, a few lessons learned, and you are on your way to becoming a winner. Don't let yourself remain a victim of negative thinking. Embrace positive thinking, not because that in itself is life changing, but because it can provide you with the opportunity to figure out how to change your life and because it is plain and simply better than negative thinking.
Take care of your health
Let me ask you this question: If you had a million dollar race horse, would you feed it junk food and let it slip into poor health, or would you do everything in your power to feed it properly and keep it in the best shape possible? Well guess what, you are that million dollar race horse! Never forget that. Start treating your body and your health with the proper care that it truly deserves. Remember to always work harder on yourself than on anything else in your life. Your body and health is the "battlefield", where everything in your existence happens. Promise yourself to always maintain it in pristine condition and treat it better than you do anything else. Once you start doing that, then you will start being on track to developing the mindset of a real winner.
There may be a lot more bad news to come
Stock markets around the world soared yesterday. The Dow jumped more than 300 points.
News out of Europe says they're working on a fix to resolve the crisis there. Reports here say the holiday season may be off to a strong start. Sales on "Black Friday" may have hit a record.
So, is that it? Is the crisis over? Is it time to ramp up your equity exposure, take on more risk?
Here are ten reasons to be skeptical. This sure looks like a dead cat bounce.
1. The market was due a rally.
Black Friday -- the day after Thanksgiving -- alone saw online sales of $816 million, and another strong Cyber Monday could already be in the works, according to comScore, which tracks online holiday spending.
2. The report from Italy, one of the items sparking bullish sentiment, has already proven a crock.
3. The reports from northern Europe are absurd.
4. Are the Germans suddenly reflationists?
5. Italy is still in trouble.
Companies that provide the plumbing for the $4 trillion-a-day foreign-exchange market are testing systems that could handle trading of previously shelved European currencies,
6. China's real estate market is looking ominous.
7. The U.S. consumer is still broke.
8. Millions here are still out of work.
9. Meanwhile equities still aren't cheap.
10. The economic outlook is gloomy.
IF HOPE, OPTIMISM AND LIES GIVE RISE TO WORKABLE SOLUTIONSM THEN WE ARE ALL FINE. IF NOTM IT IS MUCH WORSE THAN MOST WOULD EVER IMAGINE.
This Is The Reason The House Prices Will Fall Another 8% Next Year................... AN ABSOLUTE MUST READ AND WATCH
This Is The Reason The House Prices Will Fall Another 8% Next Year
Bank of America Merrill Lynch senior U.S. economist Michelle Meyer appeared on Bloomberg TV to talk about the housing market recently, and her outlook wasn't too bright.
Meyer named tight credit and poor economic conditions for the housing downturn. She then added that she doesn't expect it to end anytime soon.
In fact, she went on to say that her team's baseline scenario for housing prices is drop of 8% next year, with the only real growth coming from distressed home sales.
"I think the most effective policy we can see is one that deals with the foreclosure inventory after it's gone through the process...there's a lot of homes in the shadows, and an efficient process to clear those homes could really be a win-win with for the market."
Nor will housing construction pick up the slack for new homes. "The challenge with new home sales is that builders are competing with a lot of the existing properties that are selling at a deep discount. So I actually think that housing demand could pick up next year but most of the demand will be for the distressed properties that are selling at a discount rather than new construction homes."
Taken together, she says, the housing industry probably won't turn around for a good two years. IT WILL BE MUCH LONGER THAN THAT! IT WILL BE WORSE IN TWO YEARS THAN IT IS RIGHT NOW!
Indeed, with Europe's entire banking system insolvent (even German banks need to be recapitalized to the tune of over $171 billion) the outcome for Europe is only one of two options:
1) Massive debt restructuring
2) Monetization of everything/ hyperinflation
These are the realities facing Europe today (and eventually Japan and the US). Either way we are talking about the destruction of tens of trillions of Euros in wealth. The issue is which poison European powers that be will choose.
I believe we are going to see a combination of the two with deflation hitting all EU countries first and then serious inflation or hyperinflation hitting peripheral players and the PIIGS.
In terms of how we get there, I believe that in the next 14 months, the following will occur.
1) Germany and possibly France exit the Euro
2) ALL PIIGS defaulting on their debt
3) Potential hyperinflation in the PIIGS and peripheral EU countries
Regarding #1, we are already beginning to see hints of this development in the press:
DEATH OF THE EURO: SECRET PLOT TO WRECK THE CURRENCY
Ministers are understood to be deeply concerned that French President Nicolas Sarkozy and Germany's Chancellor Angela Merkel are secretly plotting to build a new, slimmed down Eurozone without Greece, Italy and other debt-ridden southern European nations.
Well-placed Brussels sources say Germany and France have already held private discussions on preparing for the disintegration of the Eurozone.
As usual, his points are very sharp and worth considering.
Taylor on the outlook for the euro:
"It is absolutely incredible. It's a death struggle for this currency. It is really worse than I could have dreamed it being. And unfortunately it has a bleak outlook ahead."
On whether there will be a breakup of the euro:
"Probably. Some parts of the euro will have to be out. There is no way Greece or Portugal can stand it."
On why the euro is not back down to $1.20 given its bleak outlook:
"What's stupid is that the ECB is holding it up. Why are they holding up the euro? One of the problems, besides the ECB, is the banks are shrinking, and the banks are selling all of their offshore assets and bringing them back to Europe. That means in fact there is a persistent buyer of euros and it's their own financial institutions."
On why the euro spiked in October and went back down in November:
"It is really hard. For me the outlook is bleak, but there is always the hope that the bleaker it gets the more the governments are going to wake up and do something. It gets to be this bipolar situation. The worse it is, then by God something will happen. That is what happened yesterday. We had articles coming out over the weekend saying that Europe had 10 days to live. The next thing you know, boom, the euro is way up. If it is that bad, [Angela] Merkel has to wake up and do something."
On the yen:
"The market does not know what the hell to do with Japan. Things are very quiet in Japan. The economy is not growing very much. We have gotten over the earthquake thing. Toyota made the comment yesterday they will have to move business offshore. It looks to me like the dollar yen is going to rally slightly. On the other hand, when Europe collapses, then money will move back into the yen because it is safer than Europe. People are scared of the United States because God knows what Bernanke is going to do. Of the four currencies, you've got Europe and England is very close. The U.S. has Bernanke to worry about. Japan is just sitting there. It's like a rock. It is not growing or shrinking, it is just there. It is safe in a way."
NOT ONE OF THE BIG CURRENCIES IS SAFE!
NONE OF THE BIG BANKS ARE SAFE!
Do you want to know the real reason banks aren't lending and the PIIGS [Portugal, Ireland, Italy, Greece, Spain] have control of the barnyard in Europe?
It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States. WHATEVER SCARY SOUND THEY PLAY DURING ESPECIALLY SCARY MOVIE SCENES, YOU SHOULD BE HEARING IT AFTER THE PRECEDING STATEMENT.
In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.
The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS).
Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.
Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.
The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.
The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble. THAT'S EXACTLY WHY NO SOLUTION HAS BEEN FORTH COMING, THERE IS NO SOLUTION, NONE!
5 Charts That Show That Suddenly Something Is Going Wrong With The Consumer.........................
The charts did contain a red flag: For the first time since the recovery began, there were clear signs that in Q3, consumers started falling behind on paying their debts.
This is notable for the reversal in the pattern.
Before you assume its Dodd-Frank regs, the services in question are 1) Checking account; and b. Savings account.
Astonishing . . .
ASK YOURSELF WHAT CHASE IS AFRAID OF.....? 600 TRILLION DOLLARS WORTH OF DERIVATIVES AND TOTAL FINANCIAL INSTABILITY, LEADING TO COLLAPSE COMES TO MIND.
SURE EVERYTHING WILL WORK OUT JUST FINE!
THE BANKS ARE TERRIFIED OF CONTAGION!
Tuesday, November 29, 2011
1. Figure out what you're so passionate about that you'd be happy doing it for 10 years, even if you never made any money from it. That's what you should be doing.
2. Always be true to yourself.
3. Figure out what your values are and live by them, in business and in life.
4. Rather than focus on work-life separation, focus on work-life integration.
5. Don't network. Focus on building real relationships and friendships where the relationship itself is its own reward, instead of trying to get something out of the relationship to benefit your business or yourself.
6. Remember to maximize for happiness, not money or status.
7. Get ready for rejection.
8. Success unshared is failure. Give back — share your wealth.
9. Successful people do all the things unsuccessful people don't want to do.
WHY SUCH A BIG BOUNCE YESTERDAY................ HOW DANGEROUS IS A MARKET THAT RUNS ON RUMORS AND BULLSHIT?
Forget any overly complex and meandering explanation you have heard about today's market action. The real reason for the bounce is simple: oversold market coupled with yet another short squeeze (NYSE Group biweekly short interest data showing shorts spiking in the first two weeks of November due out today).
Sitting On The Edge - We have been saying for weeks that we, along with Secretary Geithner, are concerned that European leaders have no mechanism in place to handle any sudden acceleration of the crisis. Basically, there is no financial fire department and no sign of one being hired.
Moody's and others are indicating that time is running out and it may be a matter of days. ICAP, the currency trading facilitator, said it is testing its systems for a return to the drachma or even the Deutsche mark. Italian PM Monti admitted that the breakup of the Eurozone has been broached at meetings with top leaders.
Yesterday European stocks and U.S. futures spiked sharply. The pundits are trying to pin the spike on everything from Black Friday sales to an IMF bailout of Italy. We think the spike is the reaction of a very oversold market to the resurfacing of the Sarkozy based rumor of a treaty deal for fiscal linkage. But, even if it's true, can it be implemented quickly enough for a situation thought to be days away from crisis or climax?
The IMF bailout, already denied, was always unlikely since the U.S. is a key player in the IMF. Using U.S. funds for a European crisis is unthinkable in the current political environment. As to Black Friday, look what was said about last year's Black Friday last November. Also, how could it help Europe so much?
Lastly, European bond markets are more placid and skeptical than their equity cousins. That supports the oversold causation thesis.
In his opening segment on Mad Money last night Jim Cramer warns that Europe could easily spoil any party we're having in the US due to the collapse in credit.
He walks through a fairly long (but very basic) explanation of what credit is, and how central it is to the economy, before (around the 6:30 mark) declaring that we're in "DEFCON 3, two stages from a financial collapse so huge it's hard to get your mind around."
In the video below, he continues to expound on his point from the first video.
BE SURE TO WATCH THROUGH THE COMMERCIAL
FINALLY THE WALL STREET SHILL GETS SOMETHING RIGHT, IT SURE TOOK LONG ENOUGH!
It is freely accepted by investors as fact that U.S. corporate balance sheets are the stronger than ever before in history. This view is largely driven by the significant amount of cash (checking deposits, savings deposits, money market funds, commercial paper holdings) on corporate balance sheets. Our difficulty with this view is that no single line item on a balance sheet is a sufficient indication of "strength." Most useful measures are derived from ratios at the very least, and ideally calculations across a variety of dimensions.
The best line item on corporate balance sheets today is typically "Cash and Equivalents." But while the amount of cash and cash-equivalents on U.S. (nonfinancial) corporate balance sheets has increased significantly, particularly relative to the cash-strapped lows of 2009, corporate cash is certainly nowhere near historical highs relative to debt. As a side note, probably the dumbest use of balance sheet data that we hear from time-to-time is when analysts talk about the P/E multiple of a stock "after you back out the cash," as if the cash line item can meaningfully be subtracted from the market cap of the equity. Really? If a company issues a billion dollars of debt, and then holds the proceeds in cash, does that suddenly make the stock "cheaper" because we can now back out that cash from the company's market cap? Um, no.
While cash holdings are relatively high compared with total assets and net worth, even those figures are in the range of 5-10%, only about 3 percentage points above historical norms. Cash levels are "high" in the sense of being a larger percentage of total assets than normal, but the "excess" cash amounts to roughly $700 billion, versus total assets of non-financial corporations of about $28.6 trillion. The excess is fairly second-order from the standpoint of overall balance sheet "health."
The best that can be said is that corporations are fairly liquid here, but this is a much different statement than saying that corporate balance sheets have "never been healthier in history." In evaluating overall balance-sheet health, it is important to consider the overall debt burden of corporations.
As the following chart shows (based on Federal Reserve Flow of Funds data), the debt burden of U.S. corporations is near all-time highs, having retreated only modestly since 2009. Debt burdens are elevated regardless of whether they are measured against total assets or net worth. Certainly, corporations are presently benefiting from very low interest rates on corporate debt, which substantially reduces the servicing burden of these obligations. But the combination of high debt levels and low servicing burdens does create a potential risk to corporate health in the event that yields rise in future years. Overall, the picture is fairly stable at present thanks to low yields and high levels of cash-equivalents, but it is important for investors to keep in mind that cash can burn fairly quickly during economic downturns, and debt is not spread evenly across corporations.
The bottom line is that at an aggregate level, corporate balance sheets look reasonable, but are certainly not "stronger than they have ever been in history." Cash levels are elevated, but this is at best a second-order factor (with excess cash representing only a few percent of total assets), while debt remains near record levels relative to total assets and net worth. In any event, balance sheet risks should be evaluated on a business-by-business level, rather than accepting the blanket notion that cash levels are so high that nobody needs to worry about corporate credit risk.
The Root Cause of Market Failure Lies In Higher Education..........................AN ABSOLUTE MUST READ!
A little noticed Associated Press news story last week reported that China now plans to phase out college majors that consistently produce unemployable graduates. Any program in which 60% of the graduates failed to find work for two consecutive years would face funding reductions until supply was brought back into balance with demand.
This Chinese hand may not be invisible, but it would be one that Adam Smith would recognize. Isn't it amazing that even self-identified communists are figuring out that markets only work when adjustment mechanisms act to reduce surpluses and shortages? Destroy those mechanisms and unemployable college graduates pile up as fast as unsold electric cars.
The back story is a simple one illustrating the old adage: He who pays the piper calls the tune. In a world turned upside down, China's rulers want to make sure the young cadres they educate at the people's expense actually find jobs in the private economy. Here in the U.S., where outstanding government guaranteed student loans have recently passed the $1 trillion mark, education policy is geared not toward maximizing the employability of graduates, but toward garnering votes for politicians.
How so? After years of cultural bombardment, a college education has gone from being a means to an end - a successful career - to an end in itself. Parents who don't send their children to college lose status. American kids feel both entitled and pressured into getting a college education regardless of whether they have the intellectual capacity to profit from it, the work ethic to manage it, or the money to pay for it.
Alternative means of career training, like apprenticeship in trades that remain in demand - because, after all, you can't fly in Chinese plumbers - get no social respect. This despite the fact that skilled plumbers, with a little hustle, can out-earn most liberal arts majors.
Countless politicians now call college education a "right," alongside food, housing, and medical care. They pander to the education establishment, promising to deliver diplomas no matter how much of other people's money they have to spend. Meanwhile, the intelligentsia looks askance when college students are encouraged to choose a major based on practical expectations of future employment, suggesting instead that students should follow their muse.
To finance this so-called "right" to a college education a Government Sponsored Entity known as Sallie Mae, originally the Student Loan Marketing Association, was created in 1972 to issue below market rate student loans guaranteed by the federal government. Like its cousin Fannie Mae in the home mortgage business, lending practices were guided by political considerations, not sound economics. Just as Fannie Mae fueled an unsustainable housing bubble, Sallie encouraged runaway college tuition increases. And just as the federal government was forced to nationalize Fannie Mae when the bubble bust, Uncle Sam has now nationalized the college loan business with an eye on disguising the coming tsunami of student loan defaults.
Such policies have consequences. Too many aspiring young museum curators can't find jobs? The pragmatic Chinese solution is to cut public subsidies used to train museum curators. The free market solution is that only the rich would be indulgent enough to buy their kids an education that left them economically dependent on Mommy and Daddy after graduation. The progressive American solution is to seek increased public funding to build more museums.
When such make-work spending fails - as it must during periods of fiscal belt tightening - do progressives encourage mal-educated kids to look around, see what needs doing, and start businesses of their own? No. They urge them to take to the streets to bang drums and chant slogans.
The system is nearing breakdown, which will come when student loan defaults finally push the federal agency that guarantees such loans into bankruptcy. At that point, we will have to face the fact that capping off adolescence with a four-year party at taxpayer expense is a luxury we can no longer afford.
College participation rates will have to go back down to historical norms. Slots will have to be reserved for students that can actually profit from them, restoring graduation rates to where they were before colleges were flooded with people who don't belong there, including illiterate freeloaders. Selection will have to be based on merit, not social engineering. Loans will have to be restricted to majors that confer capacity to pay the loans back. Dead-end programs used to train the next generation of professors - whose only skill will be to teach more such dead-end programs - will have to be limited, funded not by taxpayers but by ideological philanthropists with a hankering for fineries like literary criticism and gender studies.
This may seem like common sense to most people, but it strikes horror into the hearts of the liberal professoriate. After years of feathering their nests so they can produce students trained only to bite the hand that feeds them, perhaps it's time to serve up a few helpings of horror.
It appears that FineWine is trending, because barely 30 minutes have passed since we posted the correlation chart between wine and gold, that Newedge sends out a comparable correlation chart showing that if one uses Wine as a leading, or even coincident, indicator for overall risk and (alcohol infused) liquidity, then the bottom is about to fallout of stocks. From NewEdge: "Bottoms up! One of our "fringe" indicators, the Fine Wine Index (based on the 100 most actively traded wines at global auctions) continues to sag here, making a fresh 1 year low for October.... Adding to the long list of indicators failing to corroborate the recent "risk on" animal spirits."
Monday, November 28, 2011
According to unverified reports from La Stampa, the IMF is preparing a 600 billion euro ($794 billion) loan for Italy. The paper has refused to state where it got the information.
But that small detail is of no consequence to traders hungry for some green on the screen after November saw $4.7 trillion wiped out from global equity values. If we were to open here, markets would gap up nearly 2%, breaking a seven-day losing streak for US equities.
The bailout rumors are just that — rumors. Note that the U.S. is a major funder of the IMF, and a bailout of Italy with US Taxpayer dollars wont go over well in an election year.
AN AWESOME MUST WATCH VIDEO CLIP
Why Did The Fed Inject Banks With A Record Amount Of "Other" Cash In The Past Week?
For all its obscurity, the Fed's balance sheet is relatively simple: on the right there are the liabilities such as currency in circulation (which is relatively flat at around $1.1 trillion but rising slowly (for now) every week), and excess reserves, at $1.5 trillion, or the money that is "parked" with banks and is the topic of so much consternation: will it ever spill out into the broader economy, won't it, and if not why not, and if yes, will it cause hyperinflation, and other such tangential ruminations. Then on the left we have the assets, or the "stuff" that backs the currency in circulation and excess reserves, such as Treasurys and MBS, which total $2.6 trillion, and which are the primary variable in every Large Scale Asset Purchase episode also known as Quantitative Easing: should the Fed "print", or said otherwise, "purchase" assets, then the excess reserve number goes up first, with a hope that it will slowly spill over into currency in circulation and other broader monetary aggregates. Lastly, there is also the Fed's capital account or "shareholder equity" for purists, but since the Fed can never in theory be undercapitalized by conventional definitions, this is merely a placeholder. Another broad way of looking at the Fed's assets is "factors that supply reserve funds" or "source of cash", and liabilities as "factors that absorb reserve funds" which is, logically, "use of cash." The key assets and liabilities noted above are the major components of the "flow" - they move glacially up and down, and are priced in well in advance of such moves. It is the marginal, or far small number that matter, and that fluctuate materially from week to week, that are not priced in, and are thus market moving. One such curious liability which we pointed out recently is the Fed's reverse repo agreements with foreign banks: in the week following the MF Global bankruptcy these soared to a record $124.5 billion. Basically, foreign banks scrambled to procure a record amount of US Dollars while repoing Treasurys and who knows what else with the Fed, an indication that other conventional liquidity conduits had frozen in the days following the Halloween MF massacre. Since then the Fed's Reverse Repo balance has moderated to more normal levels as Treasurys have gone out of repo with the Fed. Yet something more troubling has just been spotted. In today's one-day delayed issue of the Fed's H.4.1, literally the very last number on the very last subpage in the weekly update reveals something quite disturbing. Namely the Fed's "other" non-reserve based factors absorbing liquidity. And specifically, the actual number, which rose by an unprecedented $88 billion in one week to an all time high of $115 billion for the week ended November 23! We wonder: in this day and age of trillions in fungible excess reserves, and discount window stigmata, just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?
Why is this troubling? Because unlike reserves, this number is effectively not defined, and there is no clear transposition between assets and liabilities, not to mention that "other" could mean virtually anything. So in SOME ways this could simply be a plug to a plug (such as Fed Capital), and reading too much into it may simply be an exercise in futility. On the other hand, what we do know, is that by the generic definition of factors absorbing liquidity, in the past week, a domestic financial institution (because unlike last time around, this was not a foreign-based need for cash) was the willing and ready recipient of an incremental $88 billion in "reserves" - read cold, hard cash.
We wonder: in this day and age of trillions in fungible excess reserves, and discount window stigmata, just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?
"If society consumed no energy, civilization would be worthless. It is only by consuming energy that civilization is able to maintain the activities that give it economic value. This means that if we ever start to run out of energy, then the value of civilization is going to fall and even collapse absent discovery of new energy sources."
Dr. Tim Garrett, University of Utah
The New Oil Cycle is Suffocating Economic Growth
The Rescue Myth
V isually, we can think of demand in this phenomenon as being in a kind of contracting triangle. Every time consumption resumes after a previous demand crash, it hits the ceiling at a lower level. This is the point where, if you find yourself living in the age of biomass and wood, you get rescued by coal. For example. This is also the point where, if you are living in the age of oil, it's less likely you get rescued.
Normalcy Bias and the Problem of Growth
The Vulnerability of Having Sovereign Debt As Your Core Asset