The Fed “IS” the Problem!

The link enclosed is a very good article on the Fed's casino behavior.  As a point of reference, Lehman Brothers' leverage ratio was 30:1 prior to its collapse in 2008.  The Fed's leverage ratio is currently 80:1.  The Fed has now become the world's most leveraged hedge fund, completely antithetical to its official mandates.

The rationale for the existence of central banks is price stability and protection of the soundness of its issuing sovereign currency.  The Fed added an official mandate of "full employment" (whatever that metric is).  The latest unwritten mandate is to artificially levitate financial markets to prevent the insolvent banking system from imploding.

But the Fed has backed itself into a corner, because its monetary stimulus has failed to revive an economy on life support.  QE is pushing on a string, with limited results--and worse, with increasingly negative consequences as the western economies are in the throes of a debt trap.  More debt begets more debt, which dampens economic growth.  All QE has done is add more toxic liabilities on to the Fed's balance sheet.

Households suffocating from huge debts don't take on more debt; they cut spending while lenders stop lending to them.  Yet, the US government continues on its spending and borrowing binge.  The Fed has reached its monetary cul-de-sac, and it's only a matter of time before the bond vigilantes attack all fiat currencies issued by over-indebted (or insolvent) governments.  The dollar, while being the cleanest shirt in the dirty laundry bin, won't be the only target.

Google how George Soros single-handedly destroyed the British pound sterling in 1992, as he shorted the currency on a bet the UK would devalue the pound, due to high inflation, high deficits, and relatively low interest rates.

http://blog.milesfranklin.com/the-fed-is-the-problem

Clearly Europe Has A Crushing Deflation Problem... Oh Wait

This is the fundamental problem with neo-Keynesian economists:  they believe deflation is the biggest impediment to economic growth.  It is, to a certain extent--to the banking system, for starters.  But to the masses, rising prices against a backdrop of declining incomes is destroying the middle class and under class.

Injecting liquidity to solve a debt problem worsens the vicious cycle of more indebtedness.

http://www.zerohedge.com/news/2014-10-04/clearly-europe-has-crushing-deflation-problem-oh-wait

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

Wall Street's big SAC Capital problem

This proves now big embattled SAC hedge fund manager Stevie Cohen is.  Because if SAC goes down, a lot of big banks will be going down with him.  My speculation?  Despite SAC's obvious shenanigans, a few managers will be scapegoated to create the illusion of justice.  Many will pay fines and admit no guilt.

The too-big-to-fail banks connected to SAC must be sanitized from any wrong-doing.  Wall Street needs to be portrayed as that shining example of capitalism, instead of the rotten, corrupt, rigged market it has become.

http://www.cnbc.com/id/100940427