I am and will -- for a very long time.
Agreed!There are none so blind as those who choose not to see.
---Futilitist
The Etp Model Has Been Empirically Confirmed
- Thread starter Futilitist
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Well, I'm not going to sell my 28 mpg Optima and buy a 67 Camaro or anything. Car fuel economy doesn't change overnight, but people will be buying more SUVs now.
You have more than one doomsayer posting in this thread. The one that predicts the end of civilization because the price of oil is dropping is brain dead.......And the long-forecast collapse of the world's economies continues
http://www.bbc.co.uk/news/business-35160448
http://www.bbc.co.uk/news/business-35111020
exchemist
Valued Senior Member
I have not read anything to suggest that loans to the fracking business are anything out of the ordinary for banks. I see no reason why banks should not be able to weather losses on investment in fracking, just as they do on a host of other investments that fail for one reason or another.
Why is there such hysteria around this subject? Or do you have actual evidence that the banks' exposure to fracking is on a scale as great as the subprime mortgage fiasco? It seems most unlikely to me.
In post 1115, Billy T said: " Shock & Awe for banks who granted the frackers large loans is coming too - Possibly a problem larger than Lehman's debts - economic recession worse than 2008's."
Let me explain in simple terms what and why this 2 trillion in good US Treasury bonds, held by the Fed will be, if needed, transfered to banks and other big lenders before 1:15PM ET each business day.
Many of the lending banks (and others) have actually made a lot of very bad loans, often to "fracking oil industy" of the USA. With the >75% drop in the price of oil, and supply growing when Iran starts selling huge volume, there is no way these loans can be repaid.
Saudi Arabia, has cut its budget - preparing for years of reduced income and made it very clear that there will be no productions cut, not even when Iran starts exporting large volumes. Saudi King does not like Iran, the US frackers or Russian producers. Russia is helping Assaid as is Shiite Iran. Tension are climbing, now that both Saudis and Iran have broken diplomatic realtions.
Oil price of WTI is now below $30/ barrel and Brent will soon be too. The banks holding trash (loans that can not be repaid for many years, if ever) are not able to close the day with this trash on their books - Too obvious that they are insolvent, so before 1:15 they send the trash to the Fed and get "good paper" in exchange via the Fed's ON RRP operation. - It is "smoke and mirrows" to hid the fact that the banking system is at least 100 times worse off than when Lehman went under.
To get an accurate (but complex to read) understanding of how sick the US economy is - held up by 3/4 of a trillion dollars of "window dressing" on 31Dec2015 See: http://news.yahoo.com/-475-billion-y...1085.html?nf=1
On September 10, 2008, five days before filling for bankruptcy, Lehman announced a loss of $3.9 billion. Instructive to see how that compares to the 475 billion the Fed did on 31Dec 2105 in RRPs (Swaps giving US Treasuries to inolvent banks and firms in exchange for their deeply under water loans with buy-back contract reversing the exchange in a few hours)
475 /3.9 = 121.8 so in some sense US economy is more than 100 times worse off now than when Lehman almost crashed it all!
SUMMARY: A huge amount of trash (non-performing loans) is being "papered over" daily by Fed's ON RRPs.
Yes here is the NY Fed's statement (hard to understand on first reading, so I explain what it means below the statement)
https://www.newyorkfed.org/markets/opolicy/operating_policy_151216.html said:
Let me explain in simple terms what and why this 2 trillion in good US Treasury bonds, held by the Fed will be, if needed, transfered to banks and other big lenders before 1:15PM ET each business day.
Many of the lending banks (and others) have actually made a lot of very bad loans, often to "fracking oil industy" of the USA. With the >75% drop in the price of oil, and supply growing when Iran starts selling huge volume, there is no way these loans can be repaid.
Saudi Arabia, has cut its budget - preparing for years of reduced income and made it very clear that there will be no productions cut, not even when Iran starts exporting large volumes. Saudi King does not like Iran, the US frackers or Russian producers. Russia is helping Assaid as is Shiite Iran. Tension are climbing, now that both Saudis and Iran have broken diplomatic realtions.
Oil price of WTI is now below $30/ barrel and Brent will soon be too. The banks holding trash (loans that can not be repaid for many years, if ever) are not able to close the day with this trash on their books - Too obvious that they are insolvent, so before 1:15 they send the trash to the Fed and get "good paper" in exchange via the Fed's ON RRP operation. - It is "smoke and mirrows" to hid the fact that the banking system is at least 100 times worse off than when Lehman went under.
To get an accurate (but complex to read) understanding of how sick the US economy is - held up by 3/4 of a trillion dollars of "window dressing" on 31Dec2015 See: http://news.yahoo.com/-475-billion-y...1085.html?nf=1
On September 10, 2008, five days before filling for bankruptcy, Lehman announced a loss of $3.9 billion. Instructive to see how that compares to the 475 billion the Fed did on 31Dec 2105 in RRPs (Swaps giving US Treasuries to inolvent banks and firms in exchange for their deeply under water loans with buy-back contract reversing the exchange in a few hours)
475 /3.9 = 121.8 so in some sense US economy is more than 100 times worse off now than when Lehman almost crashed it all!
SUMMARY: A huge amount of trash (non-performing loans) is being "papered over" daily by Fed's ON RRPs.
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I can't even. 
Billy, you just pulled two semi-random, unconnected numbers out of the air and divided them. It's not just wrong, it's gibberish.
Your claim was that the banks are worse off than during the surprime crisis due to impending defaults. So the facts you must compare are the debt levels!
I'll conclude for now based on the random gibberish you posted that this is just another baseless apocalyptic fantasy.
Billy, you just pulled two semi-random, unconnected numbers out of the air and divided them. It's not just wrong, it's gibberish.
Your claim was that the banks are worse off than during the surprime crisis due to impending defaults. So the facts you must compare are the debt levels!
I'll conclude for now based on the random gibberish you posted that this is just another baseless apocalyptic fantasy.
exchemist
Valued Senior Member
And where, in all this, is any evidence that it is loans to fracking that (allegedly) overburden the banks? This looks to me like the standard QE that the Fed has been engaged in practically ever since the subprime blowout, i.e. long before fracking came on the scene.
We just have to take your word for it, do we? Or do you have any actual evidence for your claim?
So far I see no reason to revise my view that this is just more hysteria.
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I used fracking loans more as a specific example of loans from corporations that are very unlikely to ever be re-paid. I agree that about 2 or more trillion of increased government debt is a greater danger to the economic system, but unlike the private holders of bad loans, (banks, et.) the government can and is just printing money to pay the government's debts. They can continue this so long as there are buyers of new treasury bonds. That is probably quite a few years, as the dollar is the least dirty shirt, at least until China backs it bonds with gold. {That will be tested, to make sure they do, but once that is establish in a relatively small fraction of their bonds, the holders of those bonds with want to continue receiving interest, not be needing to pay gold storgae fees. I. e. the fraction of Chinese debt financed by gold-backing will slowly increase. - It does not hurt that China is the worlds largest producer of gold ~ 40% more than No. 2}
It is not "hysteria" yet. That only comes when the average Joe understands that the government is devaluing the purchasing power* of the dollar by excessive use of the printing presses OR, non-Fed bond buyers realize there are better (safer) alternatives to US treasury bonds. Some, including the Chinese, have already concluded that a few years ago - ceased to buy US bonds, often buying farm land or other real (not paper) investments instead.
* I.e. that although he makes much more than his parents did, he can not live as well - can not save for his old age or send his kids to college, as they did.
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exchemist
Valued Senior Member
Well, that's not quite how it came across in what you originally said: "Yes and the Shock & Awe for banks who granted the frackers large loans is coming too - Possibly a problem larger than Lehman's debts - economic recession worse than 2008's." That appears to suggest it is fracking loans, specifically, that will be the next Lehman's disaster. But I suppose I can re-read it and construe it differently, so fair enough.
But, if you agree that fracking debt per se is not that big an issue, your point becomes a general lament about the over-indebtedness of western economies, and the use of QE to kick the can down the road. That's an arguable point of view, I grant you. But now we're into the dismal "science" of economics - a.k.a. the continuation of politics by other means......
My phrase "who granted the frackers large loans" does not say "banks are in trouble because they lent to frackers (although some probably are) - It identifies some who made very bad loans. I don't know how or who all, needed 475 BILLION dollars of ON RRP aid from the Fed at end of 2015.Well, that's not quite how it came across in what you originally said: "Yes and the Shock & Awe for banks who granted the frackers large loans is coming too - Possibly a problem larger than Lehman's debts - economic recession worse than 2008's." That appears to suggest it is fracking loans, specifically, that will be the next Lehman's disaster. But I suppose I can re-read it and construe it differently, so fair enough.
But, if you agree that fracking debt per se is not that big an issue, your point becomes a general lament about the over-indebtedness of western economies, and the use of QE to kick the can down the road. That's an arguable point of view, I grant you. But now we're into the dismal "science" of economics - a.k.a. the continuation of politics by other means......
Fracking loans will be a "big issue" for some whose loan portfolio was too concentrated there. Many of these loans were made when oil was $100/ brl. You can't even blame, much, the lending agent - they were hit by an unforceable "black swan."
BTW I would not be surprised if fracking loans did trigger a general collaps of faith because almost all understand that these loans can not be repaid - that puts a "dent" in the confidence, about other loans being repaid too - especially if it becomes widly known the the total of the OverNight RRPs was 475 billion dollars.
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exchemist
Valued Senior Member
Yes OK. So a few minor players with an unbalanced loan portfolio may feel the draught. No big deal, then. I agree with that.
Actually, I Googled it, and it is a brand new Fed tool, created after the last recession. I'll have to read up on it to decide if it is good or bad, but it should be entirely unsurprising that its use as a tool is growing, since it was just introduced. Indeed, if we assume this tool is "bad", then "the situation" has gotten infinitely "worse" since 2008. Not that that is meaningful...
Yes, you did, Billy. You said precisely that issue is a problem larger than Lehman.
Twice.
You appear to me to be flopping around here. I'll give Futilitist one thing: at least his message is consistent/coherent!
Yes I believe that Shock & Awe is comming to the banks who make excessive fracking loans, and to many non-banks too, but very likely to those banks the fracker loan injured first.
What I am clearly most concerned is with the 475 Billion dollars (more than 100 times the Lehman debt) that the Fed had to hid "paper over" at the end of 2015 - A very large number of the US corportations are in excessive debt - essentialy insolvent - if the Fed were not helping hid their debts (475 billion) with Over Night loans in the Fed's Reverse Re-Purchase / ON RRP / agreements
I don't think it is just the banks. They alone can not be in need of 475 billion in overnight loans.
As they say: when the tide goes out, we'll see who has been swiming without their trunks - which companies are insolvent for a total of 475 billion dollars.
As if a problem worse than Lehman's wasn't enough?
Billy, I don't think you have the slightest clue what that $475B even is, but again [broken record], if you have a source describing the actual problem, I'd be happy to read it.
Billy, I don't think you have the slightest clue what that $475B even is, but again [broken record], if you have a source describing the actual problem, I'd be happy to read it.
It was created by the NY Fed during the two day meeting (15 & 16) December 2015 - I quoted them in post 1125, but it is not an easy read to understand - I had to read it several times befor I did. - Why I "translated" their text into less complex English in post 1125.
I'll google ON RRP and see how it is described there (but original source - the NY Fed is better authority than some Google writers.)
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Read the quote of the NY Fed in post 1125 first. Then: https://www.yahoo.com/?err=404&err_url=http://news.yahoo.com/-475-billion-y...1085.html?nf=1 To see where the 475 bilion figure comes from.As if a problem worse than Lehman's wasn't enough?
Billy, I don't think you have the slightest clue what that $475B even is, but again [broken record], if you have a source describing the actual problem, I'd be happy to read it.
I see it: near as I can tell, it isn't even bank debt and given that it is brand new, there is no basis for describing it as a worsening problem (if it is even a problem at all).
And given that this is a nightly program, it could be cancelled tomorrow with essentially no impact.
Did you get to a Yahoo page about the 475 billion? - I tried to revisit the page I read a couple of weeks ago and it has been taken down. Almost as if actively suppressed. Also I scanned some of the Google hits on ON RRP, and they seem to be asserting that the fed only sells securites for cash - does not take bad loans off the hands of the lender before the close of books each day as was originally stated.
If the fed only accepts cash then this new program is not just hiding "papering over" bad assets on bank and other's books at the close of day - not a danger to the economy. I wish I could re-read the Yahoo paper that led me to believe the fed was acepting low quality paper for US treasury notes. - but is gone now.
It is hard to believe that banks and cororate America, had 475 billion in cash to send to the Fed for a 0.25% interest (annual rate).
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