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?
Courtesy of http://blog.milesfranklin.com/
Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration. Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.