Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[LMGTFY]

So uh...

Bitfinex having to unwind everything would be kinda ugly right?

http://www.cftc.gov/PressRoom/PressReleases/pr7231-15

Coinflip is incorporated in the US; Bitfinex in Hong Kong.  I'm not sure we need to worry too much just yet, unless the HK government (or Beijing, applying pressure on HK SAR) adopt the same line as the CFTC.

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[Cconvert2G36]

So uh...

Bitfinex having to unwind everything would be kinda ugly right?

http://www.cftc.gov/PressRoom/PressReleases/pr7231-15

Coinflip is incorporated in the US; Bitfinex in Hong Kong.  I'm not sure we need to worry too much just yet, unless the HK government (or Beijing, applying pressure on HK SAR) adopt the same line as the CFTC.

I guess it comes down to what % of the swaps market is made up of customers in the US.

[ChartBuddy]

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[billyjoeallen]

The banks have effectively zero reserves

Uhm, the last time I looked, they had about $2.5 trillion in excess reserves (that is, above and beyond what they are legally required to hold).

Congratulations on taking a snip of a sentence without quoting the whole thing, Genius. I said the banks have effectively zero reserves "If you account for underperforming loans" 
This includes bonds from Greece, Puerto Rico, junk bonds, mortgages on homes with negative equity, etc.

What an asshole.

Dude, for someone I once mistook as intelligent, you sure post a lot of crap nowadays.  Are you just staying drunk 24/7 nowadays?

You really believe the banks have $2.5T plus required reserves in 'underperforming loans'?  That number is at least as big as the total current M1.

That graph is actually a lot more interesting than you seem to realize, in multiple ways.

Banks have more liabilities than just M1 (checking deposits etc). What about M2? CDs? 

DEFINITION of 'M2'
A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money" in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

Yes, money market funds. Ask the people with money market funds at Lehman Bros what happens when they break the buck. 

Also, why do you think they suspended mark-to-market accounting?  I think you know damn well almost every investment bank has a prop trading desk where they gamble in the markets.  And it's the bonds that may prove most problematic. Puerto Rico may end up being worse that Greece.

[galdur]

The FED is leveraged like 80-1 so it can´t really do jack. If they start hiking their capital base will simply evaporate in due course (bond price and yield move in opposite directions) if they continue QE their leverage will become even more extreme. Nothing to do but somehow keep kicking the same old can down the road.

Uncle Sam´s fiscal year ends Sept. 30 so I guess that debt ceiling will be at least a fleeting issue soon.

[Morecoin Freeman]

$220 And $300 have been important levels throughout 2015:

$300 in Nov.-Dec. ?

[ChartBuddy]

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[hdbuck]

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[xyzzy099]

Banks have more liabilities than just M1 (checking deposits etc). What about M2? CDs? 

DEFINITION of 'M2'
A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money" in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

Yes, money market funds. Ask the people with money market funds at Lehman Bros what happens when they break the buck. 

Also, why do you think they suspended mark-to-market accounting?  I think you know damn well almost every investment bank has a prop trading desk where they gamble in the markets.  And it's the bonds that may prove most problematic. Puerto Rico may end up being worse that Greece.

M1, M2, etc., in no way represent 'liabilities of banks'.  They are measures of how much money (in US dollars) exists.  M1 is all the money that exists in the form of cash and demand accounts, i.e., all the dollars in the world that are immediately spendable.  The other Ms add other money that exists but is not immediately liquid. like bank reserves, savings accounts, CDs, etc.

Your initial claim was basically that banks have 'underperforming loans' that exceed the actual amount of money that even exists.  While I guess this is theoretically possible, it seems to me to be highly unlikely.

In any case, the intent of my initial post was not to defend the solvency of the banks, but rather to bring attention to the unnaturally huge amount of excess reserves held by banks now - especially considering that the level of excess reserves has (naturally) been vanishingly close to zero throughout the history of banking - and maybe get someone to wonder why this has changed, and maybe even wonder what the implications of this change might be.

[ChartBuddy]

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[billyjoeallen]

Banks have more liabilities than just M1 (checking deposits etc). What about M2? CDs? 

DEFINITION of 'M2'
A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money" in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

Yes, money market funds. Ask the people with money market funds at Lehman Bros what happens when they break the buck. 

Also, why do you think they suspended mark-to-market accounting?  I think you know damn well almost every investment bank has a prop trading desk where they gamble in the markets.  And it's the bonds that may prove most problematic. Puerto Rico may end up being worse that Greece.

M1, M2, etc., in no way represent 'liabilities of banks'.  They are measures of how much money (in US dollars) exists.  M1 is all the money that exists in the form of cash and demand accounts, i.e., all the dollars in the world that are immediately spendable.  The other Ms add other money that exists but is not immediately liquid. like bank reserves, savings accounts, CDs, etc.

Your initial claim was basically that banks have 'underperforming loans' that exceed the actual amount of money that even exists.  While I guess this is theoretically possible, it seems to me to be highly unlikely.

In any case, the intent of my initial post was not to defend the solvency of the banks, but rather to bring attention to the unnaturally huge amount of excess reserves held by banks now - especially considering that the level of excess reserves has (naturally) been vanishingly close to zero throughout the history of banking - and maybe get someone to wonder why this has changed, and maybe even wonder what the implications of this change might be.

You really are frustrating.  Every dollar in existence was LENT into existence either by the Fed expanding it's balance sheet to buy bonds or by fractional reserve lending. You know this.  Of course there is more debt than money, because ALL that money has to be paid back at interest.

M2 is almost all liabilities of the  bank, just as M1 is.  I can't even think of an exception to this except M0
which as you know is a tiny fraction of M1.  And who gives a rip what your intentions were? You were responding to MY post and after arguing against a point I never made, you want to change the subject. 

ALL banks have more liabilities than they can meet if they all come due at the same time. That's been known for ages, since I was a kid watching It's a Wonderful Life. What is new is that the loans are massively undercollateralized by markets being propped up artificially. This ranges from mortgages being propped up by the FED buying MBSs to government bonds bought by the Fed from primary dealers days after auction. 

Now you could say "who cares if the loans are undercollaterized as long as the payments are being made?" but that's what I'm getting at. The loans AREN'T being repaid in a growing number of cases ranging from sovereigns (Greece, PR) to payday loans.  You can't see this immediately because of the churn. It's perfectly normal and healthy to refinance at a lower rate, but some are borrowing at HIGHER rates just to make payments on earlier loans at LOWER rates. This is clearly unsustainable.  Honest accounting would show all of those loans as worthless.  The PRIMARY reason for ZIRP is to hide this state of affairs and it's why it can't ever end. 

[xyzzy099]

You really are frustrating.  Every dollar in existence was LENT into existence either by the Fed expanding it's balance sheet to buy bonds or by fractional reserve lending. You know this.  Of course there is more debt than money, because ALL that money has to be paid back at interest.

M2 is almost all liabilities of the  bank, just as M1 is.  I can't even think of an exception to this except M0
which as you know is a tiny fraction of M1.  And who gives a rip what your intentions were? You were responding to MY post and after arguing against a point I never made, you want to change the subject. 

ALL banks have more liabilities than they can meet if they all come due at the same time. That's been known for ages, since I was a kid watching It's a Wonderful Life. What is new is that the loans are massively undercollateralized by markets being propped up artificially. This ranges from mortgages being propped up by the FED buying MBSs to government bonds bought by the Fed from primary dealers days after auction. 

Now you could say "who cares if the loans are undercollaterized as long as the payments are being made?" but that's what I'm getting at. The loans AREN'T being repaid in a growing number of cases ranging from sovereigns (Greece, PR) to payday loans.  You can't see this immediately because of the churn. It's perfectly normal and healthy to refinance at a lower rate, but some are borrowing at HIGHER rates just to make payments on earlier loans at LOWER rates. This is clearly unsustainable.  Honest accounting would show all of those loans as worthless.  The PRIMARY reason for ZIRP is to hide this state of affairs and it's why it can't ever end. 

You made a statement that was demonstrably false - that banks effectively have no reserves now - which is literally the polar opposite of the truth, as they actually have more excess reserves than ever in history.  You can theorize that their real liabilities are still greater than even this record level of reserves until you go blue in the face if you want to, but it won't change the fact that you clearly just didn't realize that banks actually have record reserve levels now.  Own your wrongness and move forward.

And AGAIN - I really don't care about the argument as to whether the the banks are solvent or not...  I just wanted to point out the anomalous level of excess reserves, and you gave me the opportunity to do that.  Thanks

[ElectricMucus]

billyjoeallen: Read this or shut up:
http://www.newyorkfed.org/research/current_issues/ci15-8.pdf

inb4 they are lying.



oh boy what an old hat.

[ChartBuddy]

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[billyjoeallen]

You made a statement that was demonstrably false - that banks effectively have no reserves now - which is literally the polar opposite of the truth, as they actually have more excess reserves than ever in history. 

Hey Dipshit, WHY do you think their balance sheets show such excess reserves? Interesting, right? curious, right?  Why would they just keep that money lying around doing nothing?  Doesn't make sense, does it?

That's what I've been trying to tell you: IT'S AN ACCOUNTING FRAUD

No sane businessman would let their money sit idle like that if their whole damn business was lending money. 
So why are they doing it? Because that money has already been spent, that's why.  It's already spoken for.  It's to cover their asses when the loans they know are no good have to be written down. But....here's the really scary part:  as much as it is (and it's a shitload, no doubt) it's still not enough. The bad loans are even bigger.

The Fed doesn't really care about "full employment" or "price stability". It is owned by the member banks and does their bidding. If the Fed doesn't pump, the whole damn thing deflates. But there's no patch. No plug for this bad loan hole. All they have is a pump so the hole keeps getting bigger.

The word is "effectively". I'd hoped you were smart enough to know what a qualifier is, but my hope was misplaced.

[xyzzy099]

You made a statement that was demonstrably false - that banks effectively have no reserves now - which is literally the polar opposite of the truth, as they actually have more excess reserves than ever in history. 

Hey Dipshit, WHY do you think their balance sheets show such excess reserves? Interesting, right? curious, right?  Why would they just keep that money lying around doing nothing?  Doesn't make sense, does it?

That's what I've been trying to tell you: IT'S AN ACCOUNTING FRAUD

No sane businessman would let their money sit idle like that if their whole damn business was lending money. 
So why are they doing it? Because that money has already been spent, that's why.  It's already spoken for.  It's to cover their asses when the loans they know are no good have to be written down. But....here's the really scary part:  as much as it is (and it's a shitload, no doubt) it's still not enough. The bad loans are even bigger.

The Fed doesn't really care about "full employment" or "price stability". It is owned by the member banks and does their bidding. If the Fed doesn't pump, the whole damn thing deflates. But there's no patch. No plug for this bad loan hole. All they have is a pump so the hole keeps getting bigger.

The word is "effectively". I'd hoped you were smart enough to know what a qualifier is, but my hope was misplaced.

Well, at least you are consistent:  Wrong again.

They are not letting the money sit around doing nothing - well, not exactly.  It is making money for them still because, in the same bill in which congress authorized $800B in 'fiscal stimulus', they also authorized the federal reserve to pay banks (i.e., themselves) interest on their excess reserves, with your and my tax dollars.  You and me are paying fat cat bankers billions in interest every year to hang onto their own money.  You may also notice that almost instantly after passage, the amount of excess reserves rose to ~$800B - that number sounds familiar   And when the Fed added $1.3T in monetary stimulus in QE1, and then another $600B in QE2, excess reserves (interest-bearing accounts for the banksters) went up accordingly.

If you believe in the monetarist principles the Fed operates from, there is some logic behind the policy - it allows them to now control interest rates from both the supply AND demand sides - whereas before they only could influence supply.  Nevertheless, the sheer volume of current excess reserves is becoming a potential problem even for the Fed, as there is potential for very negative political blowback since the interest is becoming a significant budget item now.

BTW - the name-calling is pretty childish.

[billyjoeallen]

Let's say I have an I.O.U from a hobo for a million dollars. Does that make me a millionaire? Obviously not. Ok, so let's say I have an I.O.U from someone else who works at Burger King for a million dollars, and this burger flipper has an I.O.U. from a hobo also for a million dollars. Does THAT  make me a millionaire? No. But what if I have an I.O.U. for a million bucks from Mr. Monopoly who has $500,000 in cash, two million in debt outstanding and a bunch of I.O.Us from hobos on his asset ledger. Does THAT make me a millionaire? um, what do you think?

So do you call that half a mil that Mr. Monopoly has "excess reserves"??  

I'm using hyperbole here to make a point. Ultimately, the health of the economy is not Wall Street or even the nice end of Main Street. It's some schmoes who work at the factories, refineries and offices with zero equity mortgages, 72 month car loans and a stack of credit cards.  When those guys start to miss payments, the dominoes start falling. It's what happened in 2008. It's what's happening now.  The interest the central banks like the FED pay on reserves is there to keep the lights on and payroll met. It doesn't make them solvent. It doesn't make them profitable. It makes them undead zombies going through the motions.

[ChartBuddy]

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