It’s time for another quick look at the United States banking system. Whoops! Nothing happening there. Are they still alive?

Federal Reserve Bank Credit has increased by $1.2 trillion over the past twelve months. What has increased in the banking system? Excess reserves in the commercial banking system have increased by about $800 billion. Tracing this “stuff” a little further, in round figures, the currency in circulation outside of the banking system has increased about $100 billion over the past year, about $100 billion has gone to foreign central banks in liquidity swaps, so there is another $200 or so in funds that the Fed has pumped into the system that is somewhere in Treasury accounts. But who is counting?

I am still concerned with what the United States banking system is doing with the money that has been pumped into it. The answer is, very little!

Looking at the H.8 release

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There are three ways to get out of a debt crisis. First, you can work off the debt, but this takes a long time. An impatient public and an impatient government will not have the stomach the wait that would be necessary for individuals, families, and businesses to get their balance sheets in order so that a recovery can get started.

The second method is to inflate or reflate yourself out of the nominal debt burden you have created. The Federal Reserve is doing its best to create an inflationary environment so that the real value of the debt will be reduced and individuals, families, and businesses will feel comfortable enough to begin borrowing and spending once again.

The third way to reduce the burden of your debt is to repudiate the debt. That is, declare that you will not pay the debt and that those

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I was kind of dozing, idly dreaming of playing golf, where if I wasn’t putting the ball right into the cup from 25 feet away, then I was chipping it in from 25 yards out, wowing the crowd with deft wedge action, whereupon my caddy, a beautiful girl in a bikini and stiletto heels, would say, “Oooh! Nice one! You are so good that it gets me hot! I am panting for you, my Hot Mogambo Golfing Stud (HMGS)!”

Suddenly, I was jolted rudely awake by alarms ringing in the Mogambo Bunker Of Paranoid Delusions (MBOPD) at the news of a drop of $40 billion of Total Fed Credit last week. Wow! This is the “money” that magically appears, literally “out of thin air, as a new credit on the books of the banks, which they can then loan out some Huge Freaking Multiple (HFM) of that little bit of new

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'We should admit, in all honesty, that direct government support of the stock market achieved nothing', President Medvedev has said in a meeting with politicians from A Just Russia.  Putin's unified property tax, is, however, worth considering.  After three years of growth, Russian bank assets have contracted for the second month in a row, and retail deposits have decreased slightly.  In April inflation dropped to 13.2%.  VTB may buy back shares from minority shareholders who bought them at its 2007 IPO.  Sedmoi Kontinent stocks have soared by about 30%, the most in the history of Moscow trading, when it was reported that French retail giant Carrefour had agreed to buy a controlling interest; the company has reportedly signed a preliminary letter of intent to buy 75%.  Aspersions are being cast upon Gaz's attempts to enter a ...

Barring some dramatic – and unforeseen – news this week, expect investors to tread water until Thursday, when the government is expected to release the results of the bank stress tests it conducted on the 19 largest U.S. banks.

The stress-test results are expected to show that the 19 banks may have to raise between $100 billion to $150 billion – or even more – in new capital. Investors will cause the shares of the strong players to zoom northward, and will likely savage the shares of the weakest players.

“I can’t think of a time since I’ve been watching banks when there’s been so much uncertainty about the true value of a key set of assets,” Douglas Elliott, a fellow at the Brookings Institution, a Washington think tank, told Reuters.

The U.S. bank stress tests have transfixed the world financial markets for weeks, exacerbating the ongoing financial crisis – worsening the U.S.

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“The crash has laid bare many unpleasant truths about the United States. One of the most alarming is that the finance industry has effectively captured our government”, says Simon Johnson, a chief economist with the International Monetary Fund in 2007 and 2008. In an article entitled “The Quiet Coup” in the May, 2009 issue of the Atlantic magazine he (with James Kwak) goes on to say that “if the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform and if we are to prevent a true depression, we’re running out of time”.

America is in financial crisis but instead of the financial oligarchy being broken up to permit essential reform they are continuing to use their influence to prevent precisely the sorts of reforms that are …

It seems that the market’s 500 point positive reaction to the US Treasury’s Public Private Invesment Program was a resounding vote of confidence. Then again, given the many headfakes the market has given us over the last year (anyone remember October’s 900 point day?), the market doesn’t seem the greatest judge of fiscal policy effectiveness. So, what exactly is this new plan and why is it going to save the day? 

The Proposition The exact numbers seem to be conflicting. Some claim that the government will take an 85% equity stake. Others a 50% equity stake. What we do know is that the entire plan is to create upwards of $1 trillion in availability to buy so-called “toxic” assets off of bank books. $200 billion in equity capital will be contributed and the FDIC will provide a non-recourse loan to lever this capital up to 5x.

Can

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Highlights include Citigroup Inc. (C), Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and PNC Financial Services (PNC).With the last piece of the jigsaw puzzle (Geithner's Financial Stability Plan) placed on the table by the Treasury Secretary this morning, we thought it is time that we put the pieces together and summarize the bailout efforts (mired in alphabet soup) and their current status.Treasury's strategy is twofold -- recapitalize the big banks and get the toxic loans off the balance sheet of the banks.The intention of both the efforts is to make the banks (whose balance sheets have been battered by the huge losses on the risky loans made by them) financially strong so as to enable them to start lending again, which is essential to revive the ailing economy.The Bush Administration had introduced the Troubled ...

by Edward Hugh: Barcelonabr /br /blockquoteJoke - How do you know when a country is in crisis? Well, on the buses on the way to work, and in the bars and cafes during the mid morning break, everyone is reading the economy rather than the sports section in the local newspaper./blockquoteSeveral pieces of news out over the last week are relevant to the whole debate we are having about how to drag the Estonian economy (kicking and screaming it would seem) out of its current slump. In the first place the Estonian parliament passed a supplementary 2009 budget at the start of the week, in an attempt to address the ongoing crisis in the economy and the dramatic decline in revenues. The cuts were approved by 61 votes to 35 against in what was also an effective vote of confidence in the present government. So at least it is clear ...

Adele Ferguson | October 18, 2008 Article from:  The Australian

IN 2002, legendary investor Warren Buffett warned that derivatives were time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

Instead of heeding this oracle’s warnings, financial institutions rejoiced in these ticking bombs, which have now blown up, leading to estimates that the global banking system will lose up to $1.4 trillion before the crisis is over.

The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.

Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion, and even a 5 per cent drop in the value of the derivatives is beyond the rescue capability of the world’s central banks, according to financial author Bert Dohmen in his Prelude to Meltdown.

These

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