I had planned to write today about Janet Yellen’s first FOMC meeting but what’s the point? Because this is her first one, all markets have been scripted in ironclad fashion to portray “the picture.” The picture of health, stability and “all is well.” Another $10 billion taper seems to be the most logical scenario as Janet Yellen cannot really “show her wings” right out of the starting gate. No, not angel wings…the wings of a “dove.” I will let her “coo” publicly before writing about her.
In other news, the “TIC” numbers for January were released yesterday which showed a small outflow of international funds compared to an expected inflow. This now makes at least 3 months of capital outflow where foreigners liquidated Treasuries. As you know, the Fed has purchased over 70% of Treasury issuance for going on 2 full years now but I’ll get to that in another writing. I’m not sure how or why but the Treasury had to “correct” their data and released a corrected version just hours after the first issuance. Actually, the “why” part I do understand and I’ll point it out later in this piece. A very good synopsis was put together by Zero Hedge.
As they say in the article, the correction was not some sort of “typo” error, no, nearly everything was changed…and changed BIGTIME! As Zero Hedge puts it “everything is made up” so knowing exactly what the “capital flows” were (are) is total guesswork.
The most interesting aspect of the last couple of reports shows that the tiny country of Belgium is now the 3rd largest holder of Treasury bonds (actually the 4th if you include the Fed as is proper). Belgium? Belgium increased their holdings by a whopping $100 billion over the last 2 reported months. To put this in perspective, their annual GDP is only…you guessed it…about $100 billion. Please remember that “GDP” is an annual number …the “increase” in holdings was performed over just 2 months! To put this in further perspective, were Belgium a U.S. state they would be about number 35 or 36 by size of GDP. This would be like Arkansas, Nebraska or Delaware stepping up to the plate and plunking down $100 billion in 60 days. That’s right, there are 35 states that are larger than Belgium by economic activity yet Belgium is now the 3rd largest holder of U.S. debt. Are there any U.S. states that could stand (and actually settle) for a $100 billion trade(s)? Nah, I’m pretty sure not.
You must ask the question, did Belgium just happen to have an extra $100 billion lying around that they decided to increase their holdings by 50% in 2 months? “Where” exactly did this “$100 billion” reside prior? Maybe it was sitting in copper or iron ore in China which is what caused these two to crash in January (and since then)? Seriously, where did this type (size) of money come from? Another question that no one seems to have asked is that if there was a capital outflow in January…how is it that Treasury bonds increased in price and yields decreased? Rates went from over 3% down to 2.66% by the end of the month…how is this even possible?
If you plan to conjure up an answer to this, please don’t tell me that it was “domestic” purchases unless you include the Fed as a “domestic” because the Fed has purchased over 70% of all Treasury issuance since 2011 and now THE single biggest buyer.
This is the second time we have seen this “$100 billion” figure thrown around by the Treasury…or Fed. Last week we saw that the Fed’s “holdings for foreign accounts” drop by $100 billion in one week. Who sold this? Was it Russia doing a little “sidestep” to avoid a freeze or confiscation by Washington? Was this $100 billion gobbled up by the ECB themselves and held by them so that it comes off of the Fed’s “held” books? Where could they have gotten this much capital anyway unless they were “reserves?” Initially there was also speculation that the $100 billion drop was of Chinese origin, I guess we’ll have to wait until the March numbers are “made up” to find out? Actually, there are only 12 foreign governments that own $100 billion or more so the list of possibilities is quite finite.
Seriously, this is truly a bad thing. I say a “bad thing” because it really looks like the Fed and Treasury are just making numbers up as they go without regard to any logic whatsoever. As each new set of numbers come out, they cannot be logically reconciled with what the numbers “were.” Taking this train of thought one step further then one must ask a few other nagging questions.
Questions like: If the numbers do not make any logical sense then what else is wrong “under the hood?” Is it outright fraud and misrepresentation? If it is fraud…then what is a dollar really worth? If Treasury bonds and the dollar have been falsely reported on then what is the true situation? These are all “nuts and bolts” type questions…then there are “motive” questions like the one word question “why?”
The “why” part is the easy part. “Why” did a little kid’s dog eat his homework? Because it was never done. “Why” have we not had an audit of our gold reserves since the 1950’s? Because it was less than reported and may be all gone by now? “Why” do the Treasury and Fed need to fudge numbers? This one is also simple…because they don’t add up with or without a calculator.
I am going to say that this is a simple case of “lying” to cover up past lies. The problem as you know with lies is that more must be told to cover past ones. You would think that with as “technologically advanced” as we have become…the “lies” would be good enough or “better” than they are because we are now at the point where some farm boy with an 8th grade education can see through them without even scratching his head! I’ll leave you with one last question, do you think this farm boy “saves in” or “counts his net worth” …in dollars? Or maybe land, hogs or even silver dollars?
If indeed the federal reserve is using Belgium as a front in buying U. S. Treasury’s, they truly are gasping at straws, sidestepping the inevitable with whatever means are available. And when these other means become less & less available, be prepared, for those in power will not easily give it up, not without first taking away from whomever they can, so as to continue on until they can’t.
Amazing to see what’s going on under the hood. More amazing is to see the system floating along with nary a hiccup. The perception management game is out of this world! Now we have descended to the 8th grade level where more can observe the duplicity, but still there are no real repercussions.
I guess it really is a trust game. Very few people want to look at it as clearly as you do, Bill. Most are playing pretend games (below the 8th grade level) and want it to keep going. What else do Americans have to look forward to? If we stay children, then we can continue to believe all is nice and there are no dark futures.
We are living on borrowed time for sure. We will look back at this time with great nostalgia, so might as well go out now and party. The end game will come soon enough.
Hey Bill about your question as to the gold audit and on the note talking about true lies? Here is your answer in this video by Koos Jansen called “The Federal Reserves Own Gold Certificates. Its under 5mins and this is all people need to hear and know when it comes to gold in America. Like you said if the books and balances are a lie, then whatever Treasury and the FED puts out must be Lies also.
If Belgium is buying these Treasuries it must be through the branch of the IMF and EU. We can see they sure know how to recycle their trash. Sad part is now they are feeding it to an uneducated public as truth.
not the IMF, they are headquartered in Washington.
Why Belgium? Why not a country more believable like Germany? This is getting scary.
Brussels is where the EU is headquartered.
My deceased grandfather who was born in the 1890’s told me that he use to put limburger cheese under the hood on top of an automobile engine (what an awful smell he said it made).
When you raise the hood of the financial condition of the USSA, the stinch is horrible !!!
Once the lying started, which was many years ago, it was not possible to tell the truth, unless you wanted a complete replacement of Congress. The liars will do any thing to stay in office !!!
I’m glad you summed this up Bill. It is exactly what I suspected but never actually defined in my head. I about fell off my chair when I read about the continued taper of another so called reduction of $10 billion per month. Now I know how the Russians felt when they received word about the sanctions. It really is disgusting how inept our leaders are. What a laughing stock the US has become for all the world to see; from idiotic foreign policy, to inconsistent economic data to manipulated markets and the regulators not being able to find anything actionable. The entire US as a whole is a gigantic joke of a nation. I think Putin is dead on with his comment that the world would be much better off without the US. We don’t produce anything and only consume finite resources that we “pay” for with printed money that is not worth the paper its not printed on! It looks to me like North Korea has more integrity than the US laughing stock.
Belgium? Don’t think so:
interesting, sounds logical but Treasury lists “Belgium” as number 3