Murmurs From the 10-Year Note

Repost on UST/Fed/Treasury  and how they could possibly try to extricate themselves in this upside down world.  I'm expecting almost anything at this point

http://www.tfmetalsreport.com/comment/189076#comment-189076

TF asks..."The Fed now owns nearly 70% of the outstanding 10-year note inventory. They are that market. There is hardly anyone left besides the Fed and the Fed is out of cash to keep it going."

What if the Fed owned as much UST debt as possible and then retired the Treasuries debt voluntarily?

In my mind, they've prepared and have a clue what they think they can do and probably have planned on doing once they maxed their credit card out. It might just be the gold angle that I mention below. Maybe not, but something extraordinary is going to happen and none of us knows what type of historic slight of hand will take place.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Is it possible that the U.S will never have to face or declare a default if the Fed is on the hook and not the US Treasury Dept.

My line of thinking is that if the Fed is a private banking entity within the US and has been buying UST's consistently and in great numbers. Estimated to be about 70% of all UST's out there in total with 30% pr so held by other countries.

My thinking is if the Fed takes the hit on US debt (instead of the holders of UST's abroad) the US Treasury (and technically the US) would be off the hook for any default or debt hangover. It would be extinguished by a private hands, albeit the biggest CB in the world, but nonetheless considered private by themselves and everyone to some degree. That's the premise and structure that it was built upon.

Why would the Fed do such a thing and risk it's reputation by absorbing the 'loss' in UST's?

What if the US Treasury has been giving/selling gold to the Fed all along in lieu of the Fed buying all of the UST debt they've been buying up and in an increasing amount to this date?

If the Fed is perceived to be weakened by taking on such a huge paper UST loss on it's books (many trillions) then wouldn't it also be able to benefit from any or all gold it might have in it's possession at the time the USD comes under fire as weaker at the same time that gold starts to reverse course the other way in price/valuation as all paper currencies come under fire and the path to trust and value is then replaced by gold? Much higher priced gold that the Fed now has?

If the Fed has been sold/given all the US gold as collateral then they would have (by far) the most on the planet and would then be able to continue the USD FRN (or whatever it may be called) in the future.

And whom do you think would have some use right now for lots of leveraged gold right now that is in the hands of the worlds largest private/CB? The bullion banking cartels? It's not real hard to project how it would be easy for this to take place among these big entities on a level we are just starting to recognize or witness crumble all around us.

They would have instant credibility as they would be the one holding the gold who also took the UST loss on the chin. But would there have ever actually been a loss of money that was created from nothing to buy something (UST) that was created from nothing? Nope. It's all been recycled as it was created from nothing and served the purpose.

In the end, the Fed could hold the US Treasury gold as a separate entity and then be quite credible and relevant once again going forward after they (The Fed/TPTB) decide to readjust the valuation to gold in a crazy amount. More then $50k as a starter guess. Maybe much, much higher. And the Fed would have the most gold by far to do so.

Fed wins either way. Holders of all UST's get insulated somewhat from the Fed taking the hit as they buy up more and more of the US Treasury's own debt and then take the loss for everyone (seemingly). US taxpayer citizens lose all the way around.

The question is...if a debtor (The Fed) voluntarily forgives a debtee (U.S. Treasury) is it a real default or just simply loan forgiveness like a ripped up IOU?

What if the US Treasury is only left with a outstanding 2o-30% UST debt obligation to everyone else? That greatly reduced number sounds pretty manageable to me.

It's a sick scenario and one I could see playing out in that manner or one similar. We're witnessing the greatest and largest shell game in history imho.

OK I'll watch them. I just don't see how that statement can be made considering those who own the Fed control the US government by proxy and thus, the US Treasury.

and that's when we're done buying.

This came up early and I'm still too lazy to find it: When the price of PM's goes vertical, it would be psychotic to sell it. Instead, put it up as collateral for loans to purchase income-producing assets.

(This is to continue the discussion of gold at 55k from the SSSS thread)

Wealth is a dynamic thing. In order to become more wealthy we deploy our wealth and turn it in into capitals to invest in certain sectors in order to generate more wealth so in fact WEALTH SELDOM SITS STILL, which is why I am certain that gold at 55K (or whatever peak price that might be) will come out and enter the market somewhere.

Imagine I were living in a primitive village, say, 7000 thousand years ago. If I had enough gold to guarantee three meals a day I would be considered wealthy. I, however, would not be satisfied with just having three meals a day b/c I, like everyone else, am in constant pursue of higher standard of living. 

I notice this Allen guy having an idea of clothing. Then there's Bob wanna build better shelters with woods. Carr is thinking of a vegetable farm. David suggests live stocks. Evans is good at making tools. Ferry ... Gooden .... Helen... ... Now I can invest my gold into one of the above promising business. If I get it right I will be rewarded. The business output would benefit the whole village. My gold can now buy more than just meals so my standard of living goes up. I become more wealthy by investing my wealth. It is such wealth and growth dynamics that raised our collective standard of living so we don't regard three meals a day as being wealthy nowadays.

Now look at a modern day nation such as China. They have gold and are productive. They see Saudi Arab having crude, Russia  / Australia / Canada / Africa having natural resources, Germany / Japan / US having high-tech. These nations are their "Allen", "Bob", "Carr", "David"... What are they gonna do, sitting on their gold? No very likely b/c they too are in pursue of higher living standard. They will more likely trade with the above nations using gold. Once they import the goodies from them they produce stuff and sell it back to the world market to earn their gold back. Such dynamics creates a growth and wealth cycle making them more wealthy.

You see be it at individual or national level, wealth has to be deployed to generate more wealth or at least maintain it, which is why I believe gold wealth will enter the market. Gold won't be "emptiled" like liquidation but quite a bit will come out

Here's a portion of something that might help.

Your better off going to the link.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The Evolution of Treasury Cash

Management during the Financial Crisis

Paul J. Santoro

The U.S. Treasury and the Federal Reserve System have long

enjoyed a close relationship, each helping the other to carry

out certain statutory responsibilities. This relationship proved

benefi cial during the 2008-09 fi nancial crisis, when the

Treasury altered its cash management practices to facilitate

the Fed’s dramatic expansion of credit to banks, primary

dealers, and foreign central banks.

Understanding the relationship between Federal Reserve credit policy and Treasury cash

management is important because the relationship illuminates an important but sometimes unappreciated interface between the Treasury and the Fed. It also underscores the SYMBIOTIC relationship between the two institutions, in which each assists the other in fulfilling its statutory responsibilities.

Subsequent sections of this article will detail the changes in Federal Reserve operating procedures and Treasury cash management during the crisis. The first section, however, presents a framework for the analysis by reviewing the core missions of the Treasury and the Federal Reserve and explaining how each institution seeks to fulfill its mandate.

The Missions of the U.S. Treasury and the Federal Reserve

The Treasury

A principal mission of the U.S. Treasury is collecting income taxes and other taxes prescribed by statute and funding the financial commitments of the U.S. government.

5 In the course of fulfilling this mandate, the Treasury undertakes a variety of debt management operations, including refinancing maturing debt with new issues, selling additional debt when expenditures exceed revenues, and retiring debt when the reverse is true.

As noted earlier, the Treasury maintains accounts at the Federal Reserve and at private depository institutions to buffer day-to-day fluctuations in cash flows that cannot be accommodated efficiently with debt management operations.

The Federal Reserve

A principal mission of the Federal Reserve System is managing the U.S. money supply and credit market conditions to promote maximum employment with stable prices and moderate long term interest rates.

Prior  to the fall of 2008, the Fed sought to carry out this mandate primarily by (1) targeting the interest rate on overnight loans in the federal funds market and (2) managing the supply of reserves available to the banking system to stabilize the federal funds rate at the target rate. Officials purchased (sold) Treasury securities, either outright or through repurchase agreements when they wanted to add (drain) reserves to keep the funds rate from rising above (falling below) the target. In the course of responding to the crisis, the Fed provided unprecedented quantities of central bank credit to banks, primary dealers, foreign central banks, and others. The increase in assets on the Fed’s balance sheet generated a corresponding increase in central bank liabilities. Currency in circulation expanded modestly, from $835 billion on September 10, 2008,

to $890 billion at the end of the year, but deposits at the central bank ballooned from $38 billion to $1.2 trillion,far beyond what depository institutions were required to hold. As described below,

the Fed and the Treasury adopted a variety of novel procedures to prevent the expanding quantity of reserves from driving the federal funds rate to zero.

The Interface between the Federal Reserve and the Treasury

At first impression, the Federal Reserve and Treasury mandates might seem sufficiently distinct that the two institutions should be able to function independently of each other. However, the Treasury funnels most of its receipts into, and it disburses most of its payments from, the Treasury General Account (TGA). Thus, there is a continuous flow of funds from private depository institutions to the TGA and back again. During fiscal year 2010, $11.6 trillion fl owed into, and then out of, the TGA.

Flows of funds between the TGA and private depository institutions were important prior to the crisis because the TGA is maintained on the books of the Federal Reserve; increases in TGA balances stemming from Treasury net receipts drained reserves from the banking system and, in the absence of offsetting actions, put upward pressure on the federal funds rate.

Conversely, decreases in TGA balances resulting from Treasury net expenditures added reserves to the banking system and, absent offsetting actions, put downward pressure on the funds

rate. This dynamic created an important interface between Treasury and Federal Reserve operations. The sections that follow describe first how Treasury and Federal Reserve officials cooperated to manage the interface before the crisis, and then how the interface has changed since the onset of the crisis and the expansion of the Fed’s balance sheet....

http://www.newyorkfed.org/research/current_issues/ci18-3.pdf

The answer lots of people want to know about...question #1 straight from the horses mouth.

•  
• Is the Federal Reserve Act going to expire?
•  
• Who owns the Federal Reserve?

•  
• Does the Federal Reserve ever get audited?
• What does it mean that the Federal Reserve is "independent within the government"?
• What is the FOMC and when does it meet?
• Is the Federal Reserve accountable to anyone?
• How is the Federal Reserve System structured?

http://www.federalreserve.gov/faqs/faq.htm

Nice find DPH.  And to think I used to gobble up shows like that with awe and pride.

It's interesting this was made 5 years after removing the silver from our coinage.

And a little eye candy and some gas fracking tidbits to consider.

Two things on my mind about seemingly super abundant shale gas deposits

* What if the fracking is so damaging to the aquifir that they have to stop it and suddenly halt it as a practice? Domestic NG and other by-product gases/liquids would skyrocket I think.

* Absent a ban on fracking in the U.S. and it continues unabated.... is it possible that huge industrial size trucks and equipment related to mining could be run on LNG at a more affordable price? Bringing down mining and explorations costs due to higher and  mostly imported fuels seems likely. I know that Caterpillar is working with some other company (WPI) to design and produce huge engines that run on LNG.

Just a couple idle thoughts worth $2 maybe...

I, like a lot of you, have studied all of the usual suspects:  Rothschild, Trilateral, Bilderberg, Agenda 21, Knights Templar, Masons, Zionists, The Bible, etc, etc, etc................................

I have also done my fair share of study on the histories of money and banking, religion, Science, Physics, Quantum Physics and Astrology/Astronomy.  I have read Empire of Debt, Jekyll Island, A Century of War, etc, etc................................

I continue to learn all I can in the never ending quest we all have to figure some stuff out that has been nagging ordinary people since forever.

It becomes fairly obvious that fiat money will again collapse and when the currency is worthless, PM's are priceless, I get it.

Here is what I don't get, and certainly have not done because I truly don't get it:

All of my debt is denominated in US FRN's.  It seems to make perfect sense to all of us to not be in debt to the banksters, so we talk about getting out of debt and agree and will be debt free, except for my mortgage, in Nov.   I also don't believe in leaving any FRN's in the bank other than enough to cover my bills.  So in those rare months where I have a surplus that the government has not yet stolen, I trade my fake money for real money and save in silver that I store at the bottom of the ocean.

I have read about several monetary crashes, and one thing they seem to have in common is a period where debt becomes very easy to pay because it is denominated in the currency and all of a sudden there is a whole bunch of it around.  So yes, goods become expensive but the debt stays the same.

It seems to me that the best place to be when TSHTF is deeply in debt denominated in fake money, that you have used to buy real money at historically low prices because of a decades if not centuries(1+) price suppression scheme.

It seems to me to be a miracle of God, that one can still leverage fake, illusory, bullshit credit that is about to implode, for real money that has been money for thousands of years.

Now, I realize one needs to service the debt until the implosion, but is that the only reason more people don't do this? 

At some point, a whole lot of dollars are going to be returned to our shores because they won't be needed to purchase oil, at that point, I think there will be a whole bunch of fiat to pay off debt and keep your PM's.

Plus, it would be a whole lot of fun to go to Provident and buy some of everything rather than the onesey-twosey path I am on now.  Don't get me wrong, the onesey-twosey path adds up after five years and I am not complaining, but while Johnny Redpill is maxing out his credit cards and equity on Big Screen TV's, I-pods, and poison food, why not max mine out on PM's?  I would rather pick out a bunch of silver and gold coins than watch FOX news in high def and get the living crap scared out of me while I dip GMO cornchips in round up resistant tofu.  I just think that in a hyperinflationary collapse, debt will be easy to pay, as long as the bankers are not running away from you as you try to pay off your slavery in worthless paper.

Thanks!

I'm looking for the full version...

Is the financial crisis over, or are we heading towards disaster?
End of The Road portrays eleven influential commentators within the finance and investment communities, as they share their knowledge of our current financial structure. Through each of their narratives, a story is built which chronicles the current economic dilemma and paints a picture of the world's financial future.

The Last Days of Lehman Brothers is a British television film.
The drama was inspired by the real events that occurred over the weekend leading up to the bankruptcy of Lehman Brothers on 15 September 2008. Investment bank Lehman Brothers is in trouble after a turbulent six months and the leaders of the three biggest investment banks on Wall Street met at the Federal Reserve Bank of New York. American Treasury Secretary Hank Paulson declares that the company is not too big to fail and that there will be no bailout using public money.

My answer is to not load up my debt waiting for the system to collapse so I could "win".

I would rather not worry about servicing the debt than having the goodies that I would buy to put me into debt.

I will be able to buy the things that seem important now pretty cheap after the system collapses.

The catch is nobody knows when the collapse happens.   I would of bet a bunch of silver in 2005 that it would of fell apart by 2010........It didn't,  and I'm happy about that!

I also realize that it could last MUCH longer than any of us think.

I didn't think we would see $28 silver again when it was at $48...........   The more I think about it the more I want to get plastered.

Mojitos sound good. Get plastered with me. I'm on the swing....

Not my kind of crowd.

I would of been in about 3 different fights before I even saw that swing.

El Gordo and Lumpy, thank you for the great responses.  One thing that has held me back so far is that I just don't have the balls to do it.

Yes, it would be perfectly rational to come to the conclusion that the best move would be to max out all of your credit buying PM's then either

1) Default on the debt and keep the PM's

2) Plan to pay it off later with cheaper dollars.