I am still worried about what banks aren’t telling us.  Why?  Total Reserves in the banking system have increased by $857.8 billion over the twelve month period ending in May 2009. Excess reserves in the banking system have increased by $842.1 billion in the same time period.  The Federal Reserve System has overseen a 1,900% increase in total reserve in the banking system, year-over-year, for the year ending May 2009, and banks have chosen to sit on the injection almost dollar-for-dollar!

These figures come from the Federal Reserve statistical release H.3 “Aggregate Reserves of Depository Institutions and the Monetary Base.” I have used the “not seasonally adjusted” data.

This is unheard of! In May 2008, excess reserves were $2.0 billion and stood at 4.5% of the total reserves in the banking system. In May 2009, excess reserves totaled 93.7% of the total reserves in the banking system.

Unless

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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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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 ...

PKey Newsbr•nbsp;Russia’s central bank probably doubled spending of foreign reserves to defend the ruble from its biggest weekly plunge against the euro in more than four years. (Bloomberg)brimg alt= src=http://local.content.compendiumblog.com/uploads/user/7e88b461-578b-47f3-88ec-038e212ad053/a56c87c5-8253-45b7-aa80-26c89da2fa75/120208-1.JPG _width=75 _height=75brnbsp;br•nbsp;The Canadian dollar recovered some ground versus the U.S. dollar on Tuesday but remained range-bound and at risk of pressure from falling oil prices and political uncertainty in Canada. (Reuters)/P PQuotable brThe great question is whether the government will succeed in reinstilling the inflationary spirit of reckless abandon in American lenders and borrowers.nbsp; Debasement is what the authorities are driving toward.nbsp; It’s why they keep inventing new [lending] facilities.”br Jim Grant/P PFX Trading – Can you say 1% Treasury Bond Yield?nbsp; brThe Fed’s announcement that it will start buying Treasury bonds, along with everyone else in the world it seems, pushes the Fed into official Quantitative Easing (QE) territory.nbsp; /P Pnbsp;img alt= src=http://local.content.compendiumblog.com/uploads/user/7e88b461-578b-47f3-88ec-038e212ad053/a56c87c5-8253-45b7-aa80-26c89da2fa75/120208-2.JPG _width=75 _height=75/P PbrA recent article, dated October 10th, carried in the ...

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system. Such recapitalization - via the use of public resources - can occur in a number of alternative ways: purchase of bad assets/loans; government injection of preferred shares; government injection of common shares; government purchase of subordinated debt; government issuance of government bonds to be placed on the banks' balance sheet; government injection of cash; government credit lines extended to the banks; government ...