Lots of people have written about how ridiculous it is that the Federal Reserve  claims its loans to the European Central Bank are "secured."
The problem is that the loans are only secured by euros that exist only in electronic form on a database in Frankfurt, where the ECB is based. If the ECB ever defaulted on the loan, we wouldn't be able to collect our collateral without invading Europe. If we smashed Europe to reclaim our collateral, the value of the euro would fall to zero anyway.
The entire ECB swap operation sounds like magical monetary theory. But nothing really gets swapped except digits in databases.
Read it at CNBC | NetNet
A Brief Lesson in Banking History
by John Carney
8 comments:
Tom: So what if the ECB did default? The loan is just an electronic entry at the Fed in DC, is it not. If the Fed wrote it off, would it have any real effect? It may have perceived effects, like QE does. Regards, Jim Thomson
James, it would never come to that. The loans would be "restructured." Governments can do as they please. It's just bookkeeping to them, and they control the book.
The whole EZ kerfuffle is silly in that regard. The books could be just changed there too. But the bankers don't like letting on that this is how things actually work since their scam would be over.
I'm not sure it's even possible to default.
If the ECB doesn't repay the loan at maturity, it just rolls into a new loan automatically. There's no limit on how many times it can roll over, which means that it could be a loan that never actually matures.
The only way to default, I guess, would be for the ECB to declare its intention never to repay.
So they are trying to dazzle us with bullshit, as most of us already know. It's why the numbers the bankers and their bidders/politicians throw out to the sheeple keep getting bigger and bigger while each time Shirley don't show up for the date. It's an ugly hag that goes by the name of exponential math, and she's ready to blow your wad on expensive things like food and gas. Who woulda thunk it?
Even CNBS can't let this stinker pass without a line ot two about the theft. I know, it's all notional just like CDOs, so as long as the counterparty is good, so are you. We know what happens when the chain is broken.
The banks are once again in the repo market with subprime paper. BS and Lehman both blew up when their subprime collateral blew up, and they were unable to make the margin call. Good luck with all of it.
John, CNBS stands for Cable News Business Show. :>). With stars like Steve Lies-man who would ever question the hard reporting that he produces? Of course you will find him so far up the ChairSatan's arse that it takes a 5ton come along to pull him free to give us all of his insights, but I guess they call it digging for a story for a good reason. Breathless from it really.
Just checked M1 Money Multiplier which was updated yesterday afternoon. It's rolling over again to see if we can continue with lower highs and lower lows because who wants to break a chart that is a case example for what a downtrend really is. It's bi-monthly while M2 and MZM Velocity are quarterly reports. They chit the bed years ago as well, and they are at multi-decade lows as I type this.
These tell you all you need to know concerning first use of money, as the bankers are doing swell well J6P gets bent over the table while being told it's for his own good.
I don't guess Lies-man will cover these stats, as it exposes too much truth to the sheeple. We can't have the serfs questioning why the bankers are making so much money while the sheeple cover all the bankers mistakes.
Robosigning anyone? They are going to pay the fines with bailout money not yet spent. They are paying a big fat goose egg for the payoff, I mean settlement. We dear taxpayer are footing the entire foiken' bill. How about covering that angle?
Tom, I would agree with it doesn't matter, but then all Empires in the dust-bin of history all suffer currency debasement, as a symptom of their decline. Not some of the time. Every time. It may not be the single cause of their destruction, but I assure you it's a big enough part to matter. Einstein said it so much better than me.
As I mentioned to Matt when the debt ceilings was recently upped, the $1.2 Trillion wouldn't last until the election and that Treasury would be raiding pension funds once again to limp into the election. Seems I was right.
Obama Revises CBO Deficit Forecast, Predicts 110% Debt-To-GDP By End Of 2013, Worse Deficit In 2012 Than 2011
http://www.zerohedge.com/news/obama-revises-cbo-deficit-forecast-predicts-110-debt-gdp-end-2013
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