Fun With Hockey Sticks

The debtor nation.

I think these charts from the Federal Reserve bank of St. Louis speak for themselves.

The first chart shows total borrowings of depositor institutions from the Federal Reserve.

The second chart shows non-borrowed reserves of depository institutions plus TAF credit

Reserves can be negative? Who would have thunk it?

Credit is not liquidity. Liquidity based on credit is not capital, it is debt. Yet central banks continue to pump trillions of dollars, Euros, etc. into illiquid, and in many cases insolvent, commercial banks in an attempt to prop them up. Central banks do this by selling bonds, and bonds = debt.

Money used to be a store of value, but no longer. Money is someone elses debt. With the help of the Federal Reserve, the U.S. Treasury creates money by selling bonds, which are nothing more than liens on the future productivity of taxpayers. This money mirage must be the extraordinary popular delusion of our time.

This crisis will end when banks and other financial institutions stop kneeling at the begging bowl of state intervention, and politicians stop placing taxpayer gifts in the bowl for them to take. I can't imagine it ending any other way, nor can I imagine it ending any time soon. Sadly, we only call for real change when we're truly at the end of the line. I don't think we're there yet. I don't think we're anywhere close.

Prior to the day of real sea change, markets will continue to do what they do best; clean up the leveraged excesses created by the mathematical geek squads on Wall Street. The purge phase of the low interest rate, easy money/credit/debt cycle is unavoidable.

Before this primary bear market turns around we'll most likely retest the 2002 lows, if not torpedo through them on the downside, and based on the changes we'll most likely see in the world of lending and finance, it will probably take a decade or more to get back to some semblance of real world values. Unfortunately, millions of people will continue to watch their 401k's, pensions and portfolios decline in value. We'll wonder what happened to the value of our assets, then come to grips with the scope of our liabilities.

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Today, the Dutch government bought a 10 billion Euro stake in ING Groep. ING has stopped paying a dividend and its management won't get bonuses this year. ING shares fell 27% on Friday.

Dutch Finance Minister Wouter Bos said ING was a "healthy company".

LOLzzz. You can't make this up.

FAIL.