Speculative cash flow? (by mannfm11)

Speculative cash flow?	mannfm11	NEW 11/21/2007 6:23:53 PM
Thereis a lot put on this page about fed repo's. The system isn't too keenon the idea of giving up its good assets if it can help it, even inthis kind of situation, so what is happening here? I amprobably going to get some correction here, but I would have to assumethat any kind of banking transactions that left the country would haveto have the same effect as a domestic transaction on the creditcreating bank. The recent credit problem have clearly amplified theinvesting of any foreign money into treasury securities. Any treasurysecurities I know of are funded through the federal reserve, so anymoney paid for treasuries has to go into the Fed, thereby drainingreserves from the system. This money would either have to be replacedby expenditures by the Federal Government or by Federal reserve marketactions. Overseas central banks quite often purchase treasuries. Allwe have to do is look at the market and see the disparity betweentreasury rates and the value of all other securities on the market.Stocks and other forms of financing are falling out of favor. Thus weare seeing a decline in the dollar due to there being nothing of valueto buy with them that has any liquidity and return. I think this isstarting to enter the European market as well, witnessed by theweakness of both against the yen. The carry trade continues, but it isstarting to deflate Japan and I think it is starting to really exertstrong pressure on the yen shorts, as long positions have to be takenin the futures to hedge the trade. It is hard to tell whatcomes next, but I get the idea that the flow of goods and services tothe United States are going to have to fall significantly, as the junkdealers cannot peddle financing securities for this stuff toforeigners. I honestly believe we are going to find Europe has beenfinanced in much the same way, giving rise to plenty of credit forspeculation in China and other Asian countries. Plus, it is prettyclear that crony capitalism is alive and well in China and theirbusiness finance stands on as perilous a base as the California homemarket. It won't take much to topple this mess and choke the entirecredit game. Getting back to where I started, the claim isthis money is being used to prop the market for stocks and other items.That is a side effect, but the truth is that it is being used toreplace funds lost in trade and returned as investment in treasuries. Chad a fed funds liability I believe of $400 billion the last I looked.You guys might look at their financials to verify. I also recall asizable multi hundred billion liabiity from BOA as well and I wouldhave to believe from about every large institution in the US. I highlydoubt this money is owed to the small banks around the US, but to theFed itself or to its depositors of receipts from Fed purchases oftreasuries. This is a damn tough spot for these banks to be in becauseit really means the Fed holds their best assets in some form ofliabilities to the Fed. It also means they owe the system high poweredmoney. This isn't M-13 we are looking at here. I get thefeeling that as time goes on, we are going to see the link between thefed funds liabilities of these big banks and international trade anddebt. I believe this is a large part of the crux of the credit crunch,the failure of the banks with the largest liabilities to be unable toattract the deposit of these liabilities. It is probably why Schumerwanted Bush to force the China door open for C, to get these depositsback. If is probably why the door was kept shut, to keep this insolventrag out of the pockets of Chinese. Now all this isspeculation, but it is clear that suddenly there is a sizable marketincrease for one thing US, treasury bonds and a drop off the face ofthe earth of everything other than quite possibly Multinational stock.The US government can't default because they couldn't ever wage waragain and would lose their usefulness. Who needs a government thatcan't wage war beside a group of people with enough sense to realizethere isnt' any sense in blowing their efforts and themselves up for agroup of indusrialists and bankers.