Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb? - By Tyler Durden (28/9/11) PDF Print E-mail
Tyler Durden   
Wednesday, 28 September 2011 08:56

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Forget Gold—What Matters Is Copper - By Gonzalo Lira (27/9/11) PDF Print E-mail
Gonzalo Lira   
Tuesday, 27 September 2011 09:32

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Operation Twisted Logic - By Detlev Schlichter (27/9/11) PDF Print E-mail
Detlev Schlichter   
Tuesday, 27 September 2011 09:28

Mises Daily 

Last week the US Federal Reserve delivered no real surprises. Its new policy was expected by the market and those members of the public who still follow the central bank's every move with interest and, I can only assume, in the misguided belief that it has the answer to our problems. As part of "Operation Twist" the Fed will purchase $400 billion of long-dated government bonds and sell an equivalent number of short-dated securities from its extensive portfolio over the coming nine months. The operation is aimed at lowering long-term market rates and flattening the yield curve. In their infinite wisdom, the bureaucrats on the central bank's policy-setting committee decided that here was another set of market prices that required their astute adjustment, or at least gentle guidance.

The Fed has recently acquired quite a taste for correcting market prices. Remember that the goal of the first round of debt monetization — euphemistically called "quantitative easing" — was to free bank balance sheets from the toxic waste accumulated during the boom and thus prevent banks from unloading unwanted mortgage securities in the marketplace at distressed prices, which would not only have burned a considerable hole into their capital but would also have revealed the lack of true demand for these securities. This required the printing by the Fed of a brand new $1 trillion — give or take a few hundred billion — and provided a nice subsidy to the hard-pressed American financial system. The second round of debt monetization — QE2 — was squarely aimed at manipulating the prices of Treasury securities. Treasury yields were simply not in line with what the committee deemed appropriate for the planned recovery and had thus to be massaged to lower levels. Another $600 billion had to be printed for this initiative.



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Twist Paves The Way For QE III - By Peter D Schiff (26/9/11) PDF Print E-mail
Peter D Schiff   
Monday, 26 September 2011 09:44

Financial Sense

Earlier this week the Federal Reserve ignited a firestorm in the global markets by admitting that the U.S. economy is facing downside risks. Although it continues to sugar coat the unpleasant reality, never has such a stunningly obvious statement resulted is so much turmoil.

Once again we are seeing the knee-jerk market reaction to seek refuge in the perceived safety of the U.S. dollar and U.S. Treasuries. However I expect investors will soon discover that such assets are firmly in the eye of the storm.  As the tempest moves on, those enjoying the dollar's current stability may soon find themselves battered by a category five monster.

Market disappointment was compounded when the Fed failed to follow up its dire outlook with a new round of quantitative easing (QE). Instead, through a policy entitled "Operation Twist" the Fed promised to sell $400 billion of short-term Treasuries and use the proceeds to buy an equivalent amount of long-term Treasuries. The markets evidently perceived this "balance sheet neutral" policy as too timid.



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A Billionaires' Coup In The US - The Debt Deal Will Hurt The Poorest Americans, Convinced By Fox And The Tea Party To Act Against Their Own Welfare - By George Monbiot (26/9/11) PDF Print E-mail
George Monbiot   
Monday, 26 September 2011 09:41

The Guardian

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding.

Partly as a result of the Bush tax cuts of 2001, 2003 and 2005 (shamefully extended by Barack Obama), taxation of the wealthy, in Obama's words, "is at its lowest level in half a century". The consequence of such regressive policies is a level of inequality unknown in other developed nations. As the Nobel laureate Joseph Stiglitz points out, in the past 10 years the income of the top 1% has risen by 18%, while that of blue-collar male workers has fallen by 12%.



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