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Friday, March 4, 2011

E-minis [Update 12:20PM]

[Update 12:20PM: Here is an astonishing story and statement from a "Treasury Official" http://www.marketwatch.com/story/treasury-tarp-ranks-among-best-crisis-responses-2011-03-04

He made many statements as if assuming the fiscal crisis has been permanently solved. Here is an example:

“The direct fiscal cost of all our interventions, including the actions of the Federal Reserve, the [Federal Deposit Insurance Corp.] and our efforts to support [Fannie Mae and Freddie Mac], is likely to be less than 1% of GDP.” 

This is extremely misleading of course. Just one look at how the FED's balance sheet that has gone exponential over the last 3 years and how total treasury debt has also ballooned, one can conclude even if they can say "TARP costs next to nothing", they are merely showing the empty right pocket and leaving the burgeoning (burgeoning promissory IOU notes that is) left pocket in the dark.  

Thats what a Ponzi scheme manager does. Its his job to convince that all is well and the "investments" are sound.  But its all a lie.  In fact, one can consider that the Federal Reserve, US Treasury, and to a certain extent, Primary dealers are now all one and the same hedge fund.  Through sleight of hand and a myriad of complicated mechanisms, they basically are now passing the paper from one pocket to another in an effort to conceal the real deal: That Madoff was correct http://www.libertariantoday.com/2011/02/madoff-comes-clean-says-corrupt-federal.html, the Government is running a Ponzi scheme and every effort has been made to conceal that fact from Joe Q. Public.

But in fact a collusion of three or more entities will not last forever. The ongoing social mood bear market will  ensure this unholy trinity between the banksters is a transient one.  When social mood wanes again, and the first sign of things getting rough who will fold and run?  How will the Fed realign their balance sheet without tossing the Treasury overboard or a Primary dealer or 2?  Will a primary dealer cut and run and try and leave the Fed the bagholder?   Its a game of musical chairs at the moment and like that Citi CEO who once said in 2007, "As long as the music is playing you have to dance...."   

But when the music stops, there is not enough chairs...

Regardless, it is however a sign of extreme optimism that after 24 months and now recovering financial markets that seem "safe", one has come out and expressed that safe sentiment by declaring the financial crisis "over". Although he did not term his statements that way, one can make the inference thats what he essentially meant.  The optimistic trend is entrenched enough to embolden, particularly our government overlords.
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