Jim Rogers is never at a loss for words. And to the chagrin of central bankers he was interviewed by CNBC yesterday.
Along with calling for the abolition of the Fed he also explains how the most recent $200 billion transaction between the Fed and ailing banks is more than meets the eye — that the Fed now has entered into the real-estate business.
Among other notable quotes is Rogers rhetorically asking if Bernanke “will fly around in helicopter to collect rents” on the mortgages he just bought.
Finance professor Michael Rozeff also discussed this move in detail. Be sure to see his extensive archive as well.
See also: To Nationalize or Not to Nationalize. Via Paul Kedrosky
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This keeps up, I just may live to see the crack-up boom.
I own a bridge in New York to offer as collateral to the Fed. And I’ll throw in some swampland from the southern coast.
Jim Rodgers for President?
No more presidents! How about Jim Rodgers for commentator?
I own some equities in banks so that makes me as much of an expert as the Fed Chairman as I actually risk something. My take on this is worse than just “Nationalizing” banks. (What ever that means?)
The Fed is sending ALL the other banks a signal to throw caution to the wind and loan the hell out of it. The other banks NEED NOT WORRY!!!! If a bank makes bad loans the Fed wil steal the money from the rest of the economy through inflation and LAUNDER it through the purchase of worthless stuff. So both the bank and Fed WIN!!!!!!
If I could roll back the clock and be 15 again, I would want the Fed as my parent. Now that I am over 40 I am not so sure.
One of the commentators in the Jim Roger’s video were making a fuss about the Fed exchanging treasuries for MBS, rather than injecting money into the system. The commentator is right, but only on the technicality.
So, basically, all these banks exchange some $200b facevalue worth of garbage loans for $200b facevalue treasuries? Assuming my understanding of this facility is correct, then the money injections will come later as those banks sell treasuries for cash (to shore up their balance sheets). Selling depresses the price of treasuries which indicates a rise in interest rates. A rise in interest rates will have to be countered by printing in order to drive the IR back down.
Hence, money will be printed in the future, rather than now.
Whoopy, this is just a bailout in disguise. Disgusting.
In the TSLF news release, the Fed stated that it and other central banks were concerned with “liquidity pressures in funding markets.” To assume that this facility will help with liquidity pressures is to assume that a primary dealer will trade their AAA (like MBIAAA) rated MBS for Treasuries NOT to bolster reserves, but to sell the Treasuries and use the proceeds to add liquidity to the market for Jefferson County AL sewer bonds, but only for the 28-day length of the loan.
After the implementation of the TAF, designed to “address pressures in short-term funding markets”, there was a flight-to-quality to Treasuries while the rates banks charge for home and business loans rose. I’m sure the TSLF will be just as effective at accomplishing its stated goal.
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