Central Banking 101: What the Fed Can do as "Lender of Last Resort"

By Ellen Brown:

We’ve seen behind the curtain, as the Fed waved its magic liquidity wand over Wall Street. Now it’s time to enlist this tool in the service of the people.
The Fed’s invisible hand first really became visible with the bailout of AIG. House Speaker Nancy Pelosi said in June 2009:

"Many of us were, shall we say, if not surprised, taken aback when the Fed had $80 billion to invest -- to put into AIG just out of the blue. All of a sudden we wake up one morning and AIG has received $80 billion from the Fed. . . . So of course we're saying, Where's this money come from? ‘Oh, we have it. And not only that, we have more.’”

How much more -- $800 billion? $8 trillion?

The stage magician smiles coyly and rolls up his sleeves to show that there is nothing in them. “Try $12.3 trillion,” he says.

That was the figure recently revealed for the Fed’s “emergency lending programs” to bail out the banks.

“$12.3 trillion of our taxpayer money!” shout the bemused spectators as pigeons emerge from the showman’s gloved hands. “We could have used that money to build roads and bridges, pay down the state’s debts, keep homeowners in their homes!”

“Not exactly tax money,” says the magician with his mysterious Mona Lisa smile. “When did you have $12.3 trillion in tax money sitting idle?”

Not only did he not use “tax money;” it seems he hardly used “money” at all. He just advanced numbers on a computer screen, amounting to credit against collateral, replacing the credit that would have been advanced by the money market before the Fatal Day the Money Market Died. According to CNNMoney –

“[T]he Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the Wall Street crisis . . . . All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%. . . .

“In addition to the loan program for bond dealers, the data covered the Fed's purchases of more than $1 trillion in mortgages, and spending to back consumer and small business loans, as well as commercial paper used to keep large corporations running. . . .

“Most of the special programs set up by the Fed in response to the crisis of 2008 have since expired, although it still holds close to $2 trillion in assets it purchased during that time. The Fed said it did not lose money on any of the transactions that have been closed, and that it does not expect to lose money on the assets it still holds.”

Or so it is reported in the media.......read on

The Shape of the World in 2020

From the Global Intelligence Report:

None can foretell the future, and yet the shape of what we face can be shrewdly estimated with enough attention to historical trends; with broad contextual understanding; and with sufficient insight into the character of leaders, their societies, and the structures which define their basis.

These estimates will be tempered by the sudden acts of nature, the sudden emergence of true leadership from unexpected quarters, or key breakthroughs in science. Still, we can hazard reliable views on the shape of the world in, say, a decade — in 2020 — if present trends and characters remain, and on a knowledge of certain baseline levels of wealth and capability which presently exist.

In 2011, the world will probably remain beset by the lingering of the present crisis of currency levels and economic performance. This is essentially a mass psychological crisis, based around the perceptions which create trust, particularly trust in asset values and institutions......read on

Nic Lenoir On Why The Euro Is About To Crash And Burn

From Nic Lenoir of ICAP (as posted on Zerohedge.com)

Today 6 countries in Europe were the theater of riots. I highlighted in the past that voting turn-out has been on the rise in the past 8 years after a steady decline the 3 previous decades. During the credit boom fat and happy citizens had no time to vote, too busy producing or even more so consuming. Now with unemployment through the ceiling and poor economic perspectives people have started voting again. The next step is that they realize that no one in the political spectrum currently has any guts or brain and therefore no one offers a real credible fair solution, at least for now. When they do they burn things up. Because things are a little worse in Europe economically, and because the people there actually do realize the people in power are monkeys, they have now reached that stage of realization where burning things up is the logical response. Don't think the US will remain immune to this symptom of the new normal (unlike El Erian I have not revised up my forecast, and my concern is not slow growth but civil war). For proof there was a viral video going around yesterday with a man threatening a school board with a gun after his wife lost her job, and it sadly ended in a shooting. Sadly I have very much expected these incidents to become common place and it is certainly going to get a lot worse. I almost wonder if the most fair, clairvoyant, charismatic, and pro-active politician could help us prevent true chaos. I suppose the real question is will someone come along directing the blame abroad to deflect the anger of civil unrest towards an international war. Do not shoot the messenger, I am simply outlining what I consider the most likely scenario. I pointed out in 2008 that the two biggest market crashes of the 20th century were 1907 and 1929... it does not take a genius to do the math......read on

Wikileaks Documentary

John Williams - On the coming US Hyperinflation

Weekend chill out

This weekends chill out is dedicated to all the paper bugs desperately fleeing the US equity and bond markets and finding safe harbour in gold and silver.

Yuan-Ruble Trading Starts on Moscow's Micex as Russia, China Shun Dollar

From Bloomberg:

Moscow’s Micex exchange started trading the yuan against the ruble for the first time today, as Russia and China seek to reduce the use of dollars in trade.

The ruble closed at 46.3405 per 10 Chinese yuan by 11 a.m. in Moscow, after opening at 46.35 per 10 yuan shortly after 10 a.m. By the end of trading the volume of transactions amounted to 4.92 million yuan ($738,850), or 22.78 million rubles, according to the index’s data.

Both China and Russia have called for the dollar’s role in global trade to be diminished since the global financial crisis, and Russia is promoting the ruble as a reserve and trading currency within the former Soviet Union. China is allowing greater use of the yuan, which is not yet fully convertible, in international transactions as it seeks to reduce its reliance on the greenback. Asian exchanges that trade palm oil derivatives and gold are starting to accept yuan for payment and collateral....read on

Martin Armstrong - Saving the Day after Tomorrow

The latest essay from the cycles guru Martin Armstrong........read it here

What The Silver Vigilantes Understand That You Probably Don’t

From the Across The Street blog:

Sorry about the insulting headline, but every last shred of evidence I can find suggests that the most people remain utterly clueless about silver, despite the efforts of the silver vigilantes, led by Max Keiser and Mike Kreiger. Their brilliantly simple plan (go get some physical silver) promises to topple the criminally insane fraud that has become US economy. It doesn’t require politicians or regulators to lift a finger either, you simply take advantage of what is undoubtedly an artificially low price. I can completely understand anyone who is skeptical of that last statement; I’m sure you’ve been burned before, but that doesn’t mean you should stop seeking truth.

Part 1. A little math.

I’m not sure when performing basic arithmetic made you a conspiracy theorist, but here we are.

The 2009 World’s population was about 6.8 Billion. According to the Silver Institute, total silver supply in 2009 was 889 million ounces. That means there was .13 ounces of silver produced for every human being on the planet. That looks like this:

Yep, your fair share of Worldwide silver production is a little less than the silver content of two pre-1965 dimes. That’s all. A bargain at about four bucks when you consider the amazing properties of this element. FYI: World oil production per capita is 190 gallons....read on

Keiser Report