Jubilee Prosperity

Along with ZH, we noticed something else we have long foreseen with 20 to 1 leverage unwinding: Dead Men Walking, Zombies.

The Fed has a little over $50 Billion of capital left to cover almost Two Trillion dollars of Agency and Treasury balance sheet fluctuations.

If they make more fiat money, long rates may surely rise, either from loose money or credit risk. Loose slips sink ships of State too.

Bond vigilantes including PIMCO began to stir by selling long paper as the Treasury began to extend maturities as long irates rallied from 2.519% a year ago to 5.066% suddenly last summer.

If long-term Agency Treasury paper held by the Fed and Reserve Banks drop just 2.5%, meaning a mere12.5 basis point rise in long-term interest rates from here, even the indefinite suspension of mark-to-market for most Big Bad Federal Reserve Banks may cause more than mere balance sheet hiccups or indigestion.

Bring on the MALOX.

Zero Hedge, those bad boyz, just dared call the Fed insolvent:

http://www.zerohedge.com/print/89295

How long will it take until enough more observe the Fat Cat Economic Czars or Fed Treasury Emperors may have no clothes?

Of course they can just create more Fiat money, or can they? Not if aforementioned vigilantes plus China, Germany, the House of Saud, Japan, Korea and even Russia have their way.

So far we have not had an outside move in the markets, which essentially went sideways between highs and lows for two years except gold.

http://stockcharts.com/charts/gallery.html?$gold

Gold is currently below December highs, having dropped as much as

-14% so far since then. Since Christmas we saw lower highs, lower lows and a lot of loud adherents we call golden calves, because they became born again bulls or Johnny Come Latelies after gold quintupled from 1999 and went up tenfold from 1975 when we bought gold around $105 when it was legalized again.

http://stockcharts.com/charts/gallery.html?$gold

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This entry was posted on Tuesday, March 9th, 2010 at 7:12 pm and is filed under Money doctor and Counselor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.