[Spock]

In the one year since the collapse of Bear Stearns, the Federal Reserve has created the following "Alphabet Soup" programs to fight this epic debt and derivatives collapse:

1. Maiden Lane, LLC (I and II) For Bear Stearns bailout.

2. Term Auction Facility (TAF)

3. Central Bank Liquidity Swaps (CBLS)

4. Primary Dealer Credit Facility (PDCF)

5. Term Securities Lending Facility (TSLF)

6. Term Securities Lending Options Program (TOP)

7. Asset-Backed Commercial Paper MMF Liquidity Facility (AMLF)

8. Commercial Paper Funding Facility (CPFF)

9. Money Market Investor Funding Facility (MMIFF)

10. Term Asset-Backed Securities Loan Facility (TALF)

11. Outright ownership stake in AIG

12. Numerous other "loans" to JPM, Citi and BofA after the Lehman Bros. collapse

13. Outright monetization of Fannie/Freddie MBS and debt

14. Outright monetization of U.S. Treasuries

15. Expansion of TALF to support the soon-to-be-announced Treasury/FDIC/Fed program to offload dead, toxic "assets" from banks.

Total amount flung or committed to be flung by the Federal Reserve:

Approximately ELEVEN TRILLION FIATSCOS!


In addition to the massive, unprecedented, insane amount of fiatsco-flinging by the Fed outlined above, the U.S. government has also been busy creating the following programs:

1. The original stimulus bill of 150 billion fiatscos which handed out checks directly to the sheeple

2. The "Bazooka Bill" of 800 billion fiatscos to bailout Fannie, Freddie and the FHLBs

3. The Troubled Asset Relief Program of 750 billion fiatscos

4. The second stimulus bill of 750 billion fiatscos


Total amount of flung or committed to be flung by Congress:

TWO-POINT-THREE TRILLION FIATSCOS!

...which brings the grand total of all fiatscos flung or promised to:

THIRTEEN-POINT-THREE TRILLION FIATSCOS!!!


So, after an entire YEAR of the Fed and Congress flinging fiat at the debt and derivatives collapse AND the total amount now OVER thirteen trillion fiatscos, here we sit.

Now, here are my questions:

1. WHY HASN'T THE PROBLEM BEEN SOLVED?

2. Why aren't the banks now solvent?

3. Why isn't lending back to 2005-2006 bubble levels?

4. Why have housing prices collapsed by thirty-percent?

5. Why are stock markets down fifty percent?

6. Why are so many businesses laying off workers and filing for bankruptcy?

And, I must admit that this massive, epic, unprecedented debt and derivatives collapse has exceeded even my gloomiest forecast--made in August, 2007--of three trillion fiatscos of debt destruction and ten trillion in derivatives decimation.

Furthermore, please keep in mind that I am ONLY counting the U.S. collapse, not the nearly-identical amount that Europe's financial systems have also melted down.

So, in actuality we are looking at:

OVER TWENTY TRILLION FIATSCOS IN DEBT AND DERIVATIVES COLLAPSE!

...worldwide. So far.

ALso, as I pointed out in a post yesterday, the central banks and governments haven't shown any sign that they will ever give up fighting this unprecedented worldwide collapse either. The U.S. Fed and federal government are in fact INCREASING their responses as opposed to backing off and allowing the collapse to run its course to the natural conclusion ("Great Disintegration I").

Moving forward to addressing the soon-to-be-announced Turbo Tax Timmy program to offload the dead, toxic "assets" STILL on the books of the banking system (which, as I pointed out above, SHOULD HAVE ALREADY BEEN DEALT WITH VIA ALL THESE PROGRAMS AND BAILOUTS), I can state with utmost certainty that this is nothing more than another attempt to offload on the taxpayer additional trillions of fiatscos of losses.

And you cant bet that we will NEVER be told exactly of what these "assets" consist, although I already know:

1. Completely worthless mortgages

2. Equally as worthless auto loans and leases

3. Just as worthless student loans

4. Other dead debt

5. All the myriad derivatives of the above (MBS/ABS, CDOs/Squareds/Cubeds/CDS) that were pyramided on top of the previously-listed dead debt

...all of which must total MORE than the thriteen trillion fiatscos flung or promised so far, or the financial system would have ALREADY been restored to order, right?

Right?

(Conclusion): We are so scroomed that it is becoming impossible to pretend otherwise anymore. Also, even IF the governments and central banks could possibly absorb all these losses, they will NEVER be able to either unwind all the dead debt and derivatives or, more importantly, re-incite the "Animal Spirits" required in the minds of the sheeple to bring the borrowing markets back to the:

FOUR TRILLION FIATSCOS PER YEAR, EVERY YEAR, YEAR-AFTER-YEAR

...amount required in the U.S. alone to keep the Ponzi Economy from continuing to implode, UNLESS TPTB decide to really pull the "Weimar/Zimbabwe Switch" and start maling one-hundred thousand fiatsco checks directly to the masses.

So, here are our stark choices:

1. Either "Great Disintegration I" continues despite all the efforts by TPTB (which it so far has)

...or:

2. TPTB manage to pull off "Weimar/Zimbabwe" for a few more years before we revert to #1 above

I wish I could come up with some other, more benign, scenario. But I can't.

[FransVanDongen]

Great post Ras!

The 'funny' thing is that before all the fiatsco flinging begun, back in 2007 I thought that only one thing on your list could already ignite hyperinflation and the death of the dollar.

Boy, have I learned a lot since then...

And as for your questions I guess you could answer them all with: the deflationists where right. The Fed, LLC can't do anything to stop this. Unless they start trowing dollars out of helicopters ofcourse, but it wouldn't surprise me if even those dollars would be stuffed in the matrass waiting for better days. Not to mention the fact that the Fed wants to stay in power, they will never give away their power, congress will have to take it from them. But if that will ever happen, nobody knows.

Bottom line: if deflation slips in to the mindset of the people and the bankers we have to sit it out untill the end.

[Ursino]

FransVanDongen, on Mar 22 2009, 07:08 AM, said:

Great post Ras!

Bottom line: if deflation slips in to the mindset of the people and the bankers we have to sit it out untill the end.

I hate to keep kicking the puppy but deflation would allow
no 'END'. We are in too deep. All we can do is keep digging.
The dousing stick said there was water here someplace.

[AZRainman]

Thanks Ras.

Inflate game has started. The dollar recently dropped like a rock and we haven't seen such a plummet since the Plaza Accord of 1985.

How long can they inflate till it blows up is the question.
How long will people remain dumb as bricks is another.

[TheWolf]

Ursino, on Mar 22 2009, 02:20 PM, said:

I hate to keep kicking the puppy but deflation would allow
no 'END'. We are in too deep. All we can do is keep digging.
The dousing stick said there was water here someplace.

The inflation game decidedly ended in 2006 after decades of activity ending in a prolific blowoff from 2003-2006. It will not be resurrected much like any other Ponzi parabolic metric returning to the mean after skewed by many standard deviations.

Take a look at the following.




One would assume at a quick glance those figures are straight from the Zimbabwe central bank website and that US citizens are trading Chevy Suburbans for loaves of Stroehmann bread at their local black market bazaar.

Quite the contrary, and more to the point, the “assets” towards which these fiats have been directed at have not flinched. Housing, credit card debt, LBO debt, etc have followed an unabated straight down path to Armageddon.

Why, because the following graph is infinitely (quite literally) more important, and the Fed can do little in regards to altering this trend short of concocting Hollywood sets so as to convince the populace otherwise:

[Spock]

Wolfie,

Thanks for sharing those terrifying charts--which by the way, didn't come from some conspiratist/survivalist Website, but rather from the "Belly of the Beast" itself:

The Federal Reserve.

Now, my greatest fear at this point is what additional Draconian measures the Fed and feds will concoct to re-ignite the former four-trillion fiatsco per year "Animal Spirits" in the minds of tens of millions of sheeple.

"Animal Spirits" that would then impel these now-frightened lambs to abandon all fear and start signing death pledges for McMansions, McHummers, McVacations and McStocks.

And to incite this mindset, TPTB could very well resort to the desperation moves of:

1. Taxing PRINCIPAL in savings accounts.

2. Going after "GHS"-types and pulling an AIG-like punative taxation on us.

3. Telling us short-term Treasury holders that either "Go buy GOOG stock or we'll just convert your one-month T-bill into a 30-year bond".

...and who knows what else.

Let us remember that desperate people do desperate things.

And this Fed and Administration are absolutely desperate to get the sheeple borrowing, spending and splurging again.

[Ursino]

Wolf:

Great charts. Thanks.

But remember most Ponzi schemes don't have Nuclear weapons,
Aircraft carriers, the World's reserve currency and basically the
whole world tied into it's scheme in a way that won't be easy
to get out of.

[definitionofbear]

AZRainman, on Mar 22 2009, 08:34 AM, said:

Thanks Ras.

Inflate game has started. The dollar recently dropped like a rock and we haven't seen such a plummet since the Plaza Accord of 1985.

How long can they inflate till it blows up is the question.
How long will people remain dumb as bricks is another.

The dollar drop against the Euro is not a great measure of anything
regarding inflation. It is more a measure of your confidence in the Euro.
Besides, the pound didn't drop to new lows against the Swiss Franc
after they announced QEezee before USA.

So I'm not sure these QEezee price blips mean much.

http://quotes.ino.co..._PSF.M09.E&v=d3

[bearking]

Not only that, but they got away with it so far. I may turn into a gold bug after all.

Too big for me to comprehend Spock. Thanks for the post. I'm speechless.

[TheWolf]

Ras I don’t disagree whatsoever but would add two points. The measures that the Fed et al must take will first of all need to come fast and furious as it is painfully obvious their responses to date have been lagging and ineffective. Secondly, as you indicated those measures will at some point decidedly cross the line of unabashedly autocratic (not that we are not there yet) where the fiscal gains will dwarf the losses in societal/political upheaval. And when population management usurps economic management then there is little left to debate re: economic policy as it truly no longer matters.

And on that point, ursino, you are correct. That is why it is tantamount above all to keep the last bubbles afloat – the joined at the hip forces of dollar hegemony and the Treasury market, which allow the United States to what any sane person would agree is a terrorist military budget totaling more than the rest of the world combined.

[bearking]

here's some bad math for ya. Suppose instead of giving all this money to banks, the Fed/Treasury gave it all to working people as spending money (e.g. true helicopter drop). Let's say the Fed/Treasury just gave $10 Trillion dollars to 100 million or so working people (just to make the math easier). Wouldn't that be about 100,000 per person? How would you like a tax rebate of that size?!! That might put a dent in deflation. Just a thought.

[TheWolf]

[Bluzbear]

Seems to me that putting a punitive tax on PM's will

1) Cause the price of real (physical) to explode.

2) Cause existing metal to go into hiding.

3) Make it impossible to find. Comex will be cleaned out, goodnight Comex.

The natural book balancing mechanism (gold price) is all they have left to ultimately repair the meltdown. Completely turning off the balancing will simply be lights out for the current gov't.

[quillbear]

what is the "ratio" on the m1 money multiplier chart? it doesn't say what is being compared. why does that chart reflect that nothing short of potemkin villages will convince people to start spending (i agree with your sentiment - there has been a permanent, or at least very long-term, change in consumer behavior - but i don't understand how the chart proves that thesis)?