US Treasury Admits Collateral Problem In Bond Market; Considers Issuing Ultra Long-Dated Bonds

Great...bond market investors are shunning long-dated US Treasury bonds due to obvious risks (currency, inflation, credit/downgrade, interest rate, reinvestment), so the Treasury in its wisdom (and desperation) are thinking about issuing 100-year bonds, God forbid.  In fact, among all the bond risks, liquidity is probably the only one where there is no risk.  Although, with hyperinflation, TOO MUCH liquidity would turn into the biggest problem of them all.

http://www.zerohedge.com/news/2014-07-18/us-treasury-admits-collateral-problem-bond-market-considers-issuing-ultra-long-dated

Desperately Seeking $11.2 Trillion In Collateral, Or How "Modern Money" Really Works

http://www.zerohedge.com/news/2013-05-01/desperately-seeking-112-trillion-collateral-or-how-modern-money-really-works

The CME On Gold As Collateral And Its Unsurprising London-Based Custodian

http://www.zerohedge.com/news/cme-gold-collateral-and-its-unsurprising-london-based-custodian

Ponzi Comes Full Circle: ECB Will Rate Sovereign Bonds It Accepts As Collateral

http://www.zerohedge.com/news/ponzi-comes-full-circle-ecb-will-rate-sovereign-bonds-it-accepts-collateral

Europe’s debtors must pawn their gold for Eurobond Redemption

To those who insist gold is NOT money, you've been  checkmated.

http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html

Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. "The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations," said the proposal. 

This demand could enflame opinion in Italy and Portugal. Both states have kept their bullion, resisting the rush to sell by Britain and others. Italy has 2,451 tonnes of gold, valued at €98bn in March.

Gold? Sure, We’ll Take More of That, Says CME

This further legitimizes gold as a currency, valuable enough to be used as collateral. 

http://blogs.wsj.com/marketbeat/2011/10/03/cme-boosts-limit-for-gold-used-as-collateral/ 

The step is the latest in a string of moves by exchanges and other financial services firms to increase the use of gold as collateral, which essentially places the precious metal in the top tier of asset classes.

"Gold is money.  Everything else is credit." - JP Morgan, testifying before Congress in 1912

"Gold and silver is the only money the elite rely on." - Lindsey Williams

Football Legend Cristiano Ronaldo To Be Used As ECB Collateral

http://www.zerohedge.com/news/football-legend-cristiano-ronaldo-be-used-ecb-collateral

JPMorgan takes gold collateral, inflation in focus

http://www.reuters.com/article/2011/02/07/us-jpmorgan-gold-idUSTRE7162SG20110207

J.P. Morgan Chase said on Monday it would accept physical gold as collateral with its counterparties as a growing number of clients look to use bullion as a hedge against inflation.

Good luck on JPMorgan returning clients' bullion when the proverbial crap hits the fan.

Exchanges are accepting gold bullion as collateral

Yes, but you can't eat gold.

http://www.zerohedge.com/article/ice-starts-accepting-gold-initial-margin-collateral-all-energy-and-cds-trades

Financial hurricane to collapse the system

This is a concise explanation of the pending mortgage fraud crisis--and resultant collapse of the financial system.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/10/6_Norcini,_Sinclair_-_Financial_Hurricane_To_Collapse_the_System.html

“That collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected. The banks cannot go and get it.

Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million. So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.

They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%. The sales pitch would emphasize the fact that this CDO was backed by real collateral. In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.

Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear. The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.

Consequently, they are then barred from foreclosing on the property. Because they can no longer foreclose on the properties, the CDO is now effectively worthless.

The hedge funds and the pension funds cannot now sell these CDO’s on the open market, so how are they going to recover their original investment? Perhaps you may say that won’t be a problem because these instruments were insured. The problem is now the credit default swap or the insurance policy that was purchased to protect against default assumes that the insurer has the financial wherewithal or resources to make good on the claim.

If there were only a small number of these problem CDO’s this would not be an issue. But as the number of the foreclosures continue to skyrocket, and more and more banks are prohibited from seizing the collateral behind the property, the sheer magnitude of the number of claims presented to the insurer will overwhelm their balance sheet.

In effect what you have is an insurance company which doesn’t have enough money to pay off the claims. Compounding the problem is the fact that the CDO’s and credit default swaps related to these claims form a mass network of interdependence. This then ripples through the entire system and creates a domino effect which can cause the failure of entities creating the next financial crisis.

Ultimately the Federal Reserve will be asked to step in and buy up the now worthless CDO’s and put those on its balance sheet. In order to do this the Federal Reserve will have to engage in massive quantitative easing, taking onto its balance sheet the worthless CDO’s in exchange for newly issued treasuries.

Mortgage meltdown mess

http://www.zerohedge.com/article/mortgage-meltdown-mess-update

This is all going to end badly. All those mortgage-backed securities and related derivatives will be exposed as worthless, with no collateral backing them. Guess what that does to bank balance sheets? And the investors who invested in them? Can you say pension funds?

Financial Meltdown II is coming to a neighborhood near you.

Silence over tri-party repo market

http://www.cnbc.com/id/39340131/