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The Fed as the ultimate enabler tied the fate of the USD to the Euro
US Dollars held at the balance sheet of the Euro banks in step 6 of the figure above, as an asset.
The collapse of the Yankee bond market (i.e. the market for bonds denominated in US dollars, where the borrowers are non-US resident corporations), caused by corporate defaults in the Euro zone will unmask the exposure that the Fed has to the fate of the Euro zone. The dollars that end up with the Euro zone banks get recycled in multiple ways and one of them is via the Yankee market (another one is of course the USD loan market).
It should be clear therefore that this whole transfer of wealth will ultimately (and irresponsibly by the Fed) end up exponentially (through leverage) affecting those holding their savings in US dollars.
The Feds want interest rates low so people can take out loans and go into debt. To the many senior citizens out there who had modest incomes most of their lives but saved and expected reasonable interest income this is akin to a fiscal drive by shooting.
When all you have is a hammer, everything looks like a nail.
The FED's former responsibility was to "stabilize the value of the dollar" - combined with being that cash source to prevent runs on banks, etc, from being destabilizing.
Somewhere, it became a tool of the Democrat party, and now it serves one function... to push money into the economy the only way it has. Long ago, it passed the "destabilizing" point. It just hasn't happened yet. It will, though.
IMO if McCain or Romney would have won they would have done the same thing or very similiar anyway. It's not like the Fed was properly run under Bush.
The Fed wants to DISCOURAGE savings.....please go out and buy that 3K dollar stainless steel fridge.
The Fed wants to funnel money into the stock market, thus fueling a "recovery", LOL.
If the banks are flush with cash............and they can get any money they need very, very cheaply..........why would they pay anybody more for a savings account or CD???????
The government doesn't want anybody saving money. They want us all out there spending away and getting in debt...........so then we become dependent on them as they slowly destroy the country and turn us into the USSA. Cars for clunkers was another example of this. Handing homes to folks who couldn't afford the payments another. Get us all enslaved in debt is the goal it appears. Then you go to the credit card world and the evil bankers just love it. Oh hell yeah will give you a card even though you don't have a penny to your name. That is how they get folks. A while back they made it harder to claim bankruptcy too if I recall correctly. They want you buried in debt.............we don't have any printers to make our own money like the fed does though.
So the article makes sense but can someone here please explain why Feds interest Rates for CD's (log term) are so abysmally low?????
In a lousy economy, why is the FED opting to discourage savings?...
Risk intolerance
Justin Krane, president of Krane Financial Solutions, a financial planning firm in Los Angeles, also has some suggestions for investors who are fed up with low long-term CD rates, yet can't tolerate any risk.
Track rate indicators. Short-term CD rates depend largely on how the Federal Reserve manages the benchmark federal funds rate, which is expected to be kept low though late 2014. On the other hand, long-term CD rates are more about inflation, including both the current pace and the future outlook or expectations. The bond market and 10-year Treasuries can be good indicators of inflation trends, Krane says.
Watch out for risk. Some investors abandon CDs and instead buy dividend-paying stocks, preferred stocks, preferred-stock funds, junk bond funds, emerging-market bond funds or floating-rate bond funds to chase higher yields. But Krane points out that those investments aren't apples-to-apples substitutes for CDs due to their higher risk profiles.
"If you're going to buy a CD, buy a CD," he says. "If you want exposure to the stock market, buy the stock market."
The whole corporate model is based on debt. This allows control and profit at the top. Traditional views on how people think Money Mechanics work simply don't apply anymore. It is all abstracted, derivatized and monetized and played with by those same few at the top. In their eyes they have the best of both worlds.
This paints a pretty clear picture of what is happening.
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Originally Posted by CDusr
The Biggest Banking Disconnect Since Lehman Hits A New Record
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So for those confused where the money comes from to ramp equities ever higher on a daily basis for the duration of QE, and why the S&P correlates (and "causates") exquisitely with the Fed's balance sheet, now you know. More impotantly: don't expect banks to lend out much if any real new loans as long as they can generate far greater and far less riskier returns simply by chasing risk in the capital markets.
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