Fed Watch Thread

[flow5]

Bernanke’s payment of interest on excess reserves (on the liability side of the FED’s balance sheet) was designed to offset the expansion of the trading desk’s liquidity funding (transfusions), on its asset side. But $1,192,169T in IOR's didn't prevent reflation, the decline in the exchange value of the U.S. dollar, a resurgence of the CRB index to new all-time highs, nor a $1,400 gold price.

IORs aren’t term deposits. Interest is paid based upon the member bank’s maintenance period. The stability (asset turnover) of these fed liabilities (and bank management practices), is new & unstudied.

IORs may be un-used & idle but they can still be withdrawn on demand, without notice, without income penalty (like money under a mattress), & they also possess the potential quality/property of money (i.e., they still potentially represent a store of value, a medium of exchange, & a unit of account).

Under QE2 excess balance turnover is, hypothetically, relative to the FOMC’s remuneration rate on IORs, i.e., based on the policy interest rate peg’s competition, vis a' vis, other short-term money market yields & returns.

The definition of excess reserves originated in the 1920’s and any prior significance has changed (un-used legal lending capacity). Likewise the definition for excess reserves is inextricably tied to the definition of the money stock.

Is Bernanke injecting liquidity or not? Is excess reserve accumulation, or declining interbank balances, just a timing issue?

And I find Bernanke’s thesis:

(1) “as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks”,

in direct contradiction to:

(2) “Reducing the quantity of reserves will lower the net supply of funds to the money markets, which will improve the Federal Reserve's control of financial conditions by leading to a tighter relationship between the interest rate on reserves and other short-term interest rates”.

[flow5]

The last vestige of legal reserve, and reserve ratio requirements, against the Federal Reserve Note, demand deposit, and inter-bank demand deposit liabilities, of the Reserve banks was eliminated in 1968.

Today, the Federal Reserve Note has no legal reserve requirements, and the capacity of the Fed to create inter-bank demand deposits (held at the District Reserve Banks), has no legal limit. These IBDDs are owned by the member commercial banks; they are bank legal reserves and can be converted dollar-for-dollar into Federal Reserve Notes.

The volume of FRBIBDDs is almost exclusively related to the volume of Reserve Bank credit. When Federal Reserve Banks expand credit, for example by buying U.S. obligations, the balance sheets of the Banks reflect an increase in earning assets, and an equal increase in IBDD liabilities, i.e., costless legal reserves.

[flow5]

Now all we need is for stock prices to fall:

"on the same driver?"

Yes

An analogy: Rising prices increases total revenue; decreasing prices reduces total revenue. If that conclusion seems obvious, it isn't. In the demand schedule of all products & services, there is an elastic segment. At some level, an increase in price reduces total revenue, and vice versa.

[flow5]

"Is the Federal Reserve independent?

I know, I know, ask a silly question, expect a silly answer, right?

Although the Federal Reserve would continue to pretend it is an independent entity, the fact is it has become another political wing of the federal government. If you did not think so, let's juxtapose recent comments by Fed officials to real developments within the bond market. How so? Let's navigate as Bloomberg reports, Fed Officials Said Recovery Insufficient to Alter QE2,……
Fed officials said at the meeting that Treasury yields climbed because of “an apparent downward reassessment by investors of the likely ultimate size of the Federal Reserve's asset-purchase program, economic data that were seen as suggesting an improved economic outlook, and the announcement of a package of fiscal measures that was expected to bolster economic growth and increase the deficit,” the minutes said.

Really? Are we to believe these Fed officials as to why rates climbed over the last six weeks of the year?

1. “An apparent downward reassessment of the likely ultimate size of the Federal Reserve's asset-purchase program”? NOT a CHANCE!! Confirmed in today's release.

2. ”Economic data that were seen as suggesting an improved economic outlook”? Heh? Seriously? STOP IT!! Confirmed in today's release.

3. “The announcement of a package of fiscal measures that was expected to bolster economic growth and increase the deficit”? Yes. This is true.

The Fed officials go one for three. In pro baseball, they may win the batting title. In the real world of central banking, they strike out and lose continued credibility.

Why did interest rates really go up over the last six weeks of the year?

1. Sovereign credit issues in the EU drove rates in peripheral nations (Ireland, Spain, Portugal, Italy) sharply higher and our rates moved in sympathy. (Although a politicized Fed would not want to draw attention to this!!)

2. Nations in Asia raised rates to stem increasing inflationary expectations from potentially overheating economies. (Although a politicized Fed would not want to draw attention to this!!)

3. The municipal bond market sold off very sharply given credit concerns in general and the discontinuation of the Build America Bond program specifically. (Although….I know, I know, you get it about the Fed being politicized.)

While we did not learn about these developments from today's Fed release, what did we learn?

Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

Add it all up and we continue to experience our “walking pneumonia economy.”

Navigate accordingly."

Larry Doyle

Read more: www.benzinga.com/11/01/752983/the-federal-reserves-political-gamesmanship#ixzz1AAgqHnka

[flow5]

Though net Treasury issuance should easily exceed $1 trillion next year, heavy government borrowing isn't exactly competing with a flood of other borrowing. New corporate bonds are still mostly being used to refinance old debt, the mortgage market is anemic, and the market for exotic debt securities is anemic and unlikely to get much stronger anytime soon. And for at least half the year, the Fed bond-buying programs will take out most, if not all, of the new Treasurys. "It won't be a big challenge to soak up all that Treasury issuance,"

[flow5]

Money Supply
Definition..
-The monetary aggregates are alternative measures of the money supply by degree of liquidity. Changes in the monetary aggregates indicate the thrust of monetary policy as well as the outlook for economic activity and inflationary pressures.-

Why Investors Care
In recent years, the various money supply measures have not mattered to most investors - though that has changed somewhat recently. The monetary aggregates (known individually as M1, M2, and M3) used to be all the rage when the Fed did not publicly announce it interest rate target because the data revealed the Fed's (tight or loose) hold on credit conditions in the economy. The Fed in the past issued target ranges for money supply growth at its first report to Congress each year. In the past, if actual growth moved outside those ranges it often was a prelude to an interest rate move from the Fed. Today, the Fed no longer sets money supply targets due to a variety of changes in the financial system and the way the Federal Reserve conducts monetary policy. Monetary policy is understood more clearly by the level of the federal funds rate.

But with the Fed cutting the fed funds rate to essentially zero in December 2008, markets began to look for other ways (other than rate changes) for viewing the progress and impact of quantitative easing - and tracking the money supply became one of numerous methods of seeing how the Fed's further injections of liquidity were filtering through the economy.

Importance
This indicator has had low importance during the Fed's publicly announced interest rate targeting period but has gained a little more stature during quantitative easing since the fed funds rate has been at essentially zero.

Interpretation
Markets focus on measures of money supply that are relatively liquid - M1 and M2. These are basically cash, checking deposits, and savings types of accounts. However, both measures are somewhat volatile on a weekly basis and monthly data give a better picture of how much liquidity the Fed has injected into financial markets has been converted into readily spendable forms.

Source
Federal Reserve Board of Governors

Availability
Thursdays.

Coverage
Data are for week ending on Monday two calendar weeks prior to release (April 6, 2009 data released April 16, 2009).

Revisions
Yes.

[flow5]

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
01/03/11 0.11 0.15 0.19 0.29 0.61 1.03 2.02 2.74 3.36 4.18 4.39
01/04/11 0.12 0.14 0.19 0.28 0.63 1.04 2.01 2.72 3.36 4.21 4.44
01/05/11 0.13 0.14 0.19 0.31 0.71 1.16 2.14 2.86 3.50 4.34 4.55
====

The ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT) is showing the largest gains.

At some time, the middle of the yield curve will follow suit - ProShares UltraShort Lehman 7-10 Year Treasury ETF (PST)

[flow5]

POMO Over As Primary Dealers Just Issued (December 28) 5 Year UST En Masse
Submitted by Tyler Durden on 01/06/2011 11:19 -0500

While the slide in the ES following today's POMO is not to surprising (there are almost no economic data catalysts that can by fudged by either the BLS, Census Bureay or the Commerce Department today so POMO on meant buy, and POMO off means sell), is not surprising, what is shocking is the brazen arrogance of the Primary Dealers to flip what is pretty much an asston of the just issued 5 Year PM6 5 Year, which was auctioned off a week ago, and of which the primary dealers are flipping like deranged homeowners at the top of the housing bubble, without even a pretense of keeping the bond for at least a week or two! This is the purest definition of monetization: of today's $6.8 billion POMO, more than half, or $3.5 billion consisted merely of flipping precisely this CUSIP. Nobody, not even primary dealers, want to hold any recently issued government paper anymore. If even the PDs are expecting a total collapse in the Treasury market, does that means stock are a buy?
====

The important point is that the "free market" is able to "price" Treasury Debt. We do know, and the Treasury-FED also knows, what these debt obligations are currently worth to the PDs & their clients.

[flow5]

WASHINGTON | Thu Jan 6, 2011 2:13pm EST
(Reuters) - A top Republican on Thursday said he will push for legislation paring back the Federal Reserve's mandate to focus solely on controlling inflation, not ensuring full employment.

Representative Paul Ryan, the new chairman of the House of Representatives' budget committee, made the comments a day after his party took formal control over the House.
Republicans have made no secret of their desire to impose more limits on the U.S. central bank and have been critical of it on a number of scores, including its plan to buy an additional $600 billion in government bonds to try to speed up a sluggish economic recovery.
Opponents of that action, including a number of Republican lawmakers, say the program risks weakening the U.S. dollar and sowing the seeds of inflation without doing much to lift economic growth and lower unemployment.
The Fed currently has a dual mandate -- keeping inflation curbed and promoting full employment -- but Republicans in both the U.S. House of Representatives and the Senate have pledged that they will try to change that.
Representative Mike Pence of Indiana has said that he intends to introduce legislation in the House to narrow the Fed's mandate to keeping inflation at bay. Sen. Bob Corker, an influential Republican on the Senate Banking Committee, has also backed the shift.
When Pence and Corker announced their support for changing the mandate last year, a Fed spokeswoman said the central bank was not seeking a change and that the dual mandate was appropriate.

[flow5]

No surprises: U.S. dollar index up, gold down, crude down, stocks down, CRB index down, bonds up...continuation of the trend.
====

Re: Fed Watch Thread
« Reply #20 on Dec 25, 2010, 4:47pm »

Even given the slightly skewed $75b POMO schedule additions (i.e., back-end purchases of Treasury's heavily loaded in JAN), short-term money flows peak in JAN. And long-term money flows should bottom in FEB-MAR. Stocks are thus SCHEDULED for a pull-back.

=====
« Reply #46 on Dec 31, 2010, 9:20am »

Gold's still a sell (esp. in JAN) because (1) U.S. dollar index should rise (vis a' vis interest rate differentials), (2) seasonals, (3) Bernanke & co. is going to have to begin thinking about "tightening".

[flow5]

"Note: Special caution should be taken in interpreting week-to-week changes in money supply data, which are highly volatile and subject to revision."

"p preliminary"

====

I've always wondered about the FED's abilitity to count. How can dollars appear & then dis-appear? - a timing issue?

====

And if you can't count them how are you going to control them?

[flow5]

BARRON's:
By Murray Coleman
Currency ETFs, which debuted in 2005, now have assets topping $6 billion. With some 30 different funds now investing in different markets across the globe, investors can take advantage of higher rates in smaller emerging markets, points out Javier David in a report on alternative investments for Dow Jones Newswires.

How much more bang can you get for the buck overseas? At the end of 2009, one-month deposit rates in Brazil were at 3.6%. In China, they were at 0.8% and in the U.K. 0.5%, according to WisdomTree Investments (WSDT).

The fund shop runs a family of currency ETFs, including the WisdomTree Dreyfus Chinese Yuan Fund (CYB) and its South African Rand Fund (SZR).

As the U.S. dollar has rebounded since the Fed confirmed its quantitative easing program to buy $600 billion in bonds, the greenback has rebounded.

As a result, the currency ETF market has slowed since early November, David notes in his report. According to the National Stock Exchange, currency ETF assets finished the year down from $7.7 billion in 2009.

But emerging markets with strong fundamentals are continuing to attract investment dollars, says Jeremy Schwartz, director of research at WisdomTree.

He pointed out that the South African Rand ETF has returned a cumulative 36.16% since it launched in 2008. In the past year, Schwartz noted that it had gained roughly 15%.

“There is no safe haven and no single acceptable reserve currency,” he said in the report. “There’s a reason why China is diversifying, because there is no safe asset.”

[flow5]

DAILY AVG IN MILLIONS
Two weeks ended % CHANGE IN WEEKLY AVERAGES


Dec/29/2010 Dec/15/2010…….………………………. 13-wk…26-wk…52-wk


Total reserves…$1,060,974…$1,097,067… ……=11.2.…..-5.6……...-5.5

Nonborrowed reserves…1,015.632…1,051,375=13.6……-1.4.………5.9

Required reserves…69,778… 72,219……………….....=6.6…..16.3….…10.6

Excess reserves…991.195… 1,024,848…….………=6.3..….-7.0….….-6.5

Borrowings from Fed…45,342…45,689……………(-)36.5.…-67.9……-72.3

Free reserves…945,853…979,159……………….…..…=8.6……-2.6………5.5
===================

Bullish figures = excess up, non-borrowed up, borrowings down, total up, free up (other things being equal - but they aren't).
Bearish figures = required down.

[flow5]

Securities Holdings as of January 5, 2010
($ thousands)

Summary T-Bills T-Notes & T-Bonds TIPS Agencies

Security Type Total Par Value

US Treasury Bills (T -Bills) ...........................................18,422,636.7
US Treasury Notes and Bonds (Notes/Bonds).......... 956,554,063.7
Treasury Inflation-Protected Securities (TIPS)1........49,742,567.2
Federal Agency Securities2........................................147,460,000.0
Mortgage-Backed Securities3 (Settled Holdings).....992,141,090.8

Total SOMA Holdings .................................................2,164,320,358.4

Change From Prior Week 14,795,000.0

===============

"On August 10, 2010, the Federal Open Market Committee directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities (agency MBS) in longer-term Treasury securities. The most recent H.4.1 data release indicates that outright holdings of domestic securities in the System Open Market Account (SOMA) totaled $2.054 trillion as of August 4, 2010"

SOMA is NOW UP $110b since the start of the first reinvestment of principal & interest announcement (@ 2,054T)

[flow5]

Jan 6 2010   ;;;;; 3020 
Jan 13 2010   ;;;;; 3020 
Jan 20 2010   ;;;;; 2761 
Jan 27 2010   ;;;;; 2761 
Feb 3 2010   ;;;;; 2755 
Feb 10 2010   ;;;;; 2752 
Feb 17 2010   ;;;;; 2747 
Feb 24 2010   ;;;;; 2747 
Mar 3 2010   ;;;;; 2741 
Mar 10 2010   ;;;;; 2741 
Mar 17 2010   ;;;;; 2690 
Mar 24 2010   ;;;;; 2693 
Mar 31 2010   ;;;;; 2688 
Apr 7 2010   ;;;;; 2716 
Apr 14 2010   ;;;;; 2706 
Apr 21 2010   ;;;;; 2706 
Apr 28 2010   ;;;;; 2662 
May 5 2010   ;;;;; 2662 
May 12 2010   ;;;;; 2665 
May 19 2010   ;;;;; 2663 
May 26 2010   ;;;;; 2643 
Jun 2 2010   ;;;;; 2643 
Jun 9 2010   ;;;;; 2548 
Jun 16 2010   ;;;;; 2548 
Jun 23 2010   ;;;;; 2474 
Jun 30 2010   ;;;;; 2475 
Jul 7 2010   ;;;;; 2473 
Jul 14 2010   ;;;;; 2472 
Jul 21 2010   ;;;;; 2469 
Jul 28 2010   ;;;;; 2468 
Aug 4 2010   ;;;;; 2458 
Aug 11 2010   ;;;;; 2457 
Aug 18 2010   ;;;;; 2458 
Aug 25 2010   ;;;;; 2458 
Sep 1 2010   ;;;;; 2434 
Sep 8 2010   ;;;;; 2434 
Sep 15 2010   ;;;;; 2429 
Sep 22 2010   ;;;;; 2427 
Sep 29 2010   ;;;;; 2407 
Oct 6 2010   ;;;;; 2407 
Oct 13 2010   ;;;;; 2400 
Oct 20 2010   ;;;;; 2400 
Oct 27 2010   ;;;;; 2396 
Nov 3 2010   ;;;;; 2396 
Nov 10 2010   ;;;;; 2365 
Nov 17 2010   ;;;;; 2365 
Nov 24 2010   ;;;;; 2366 
Dec 1 2010   ;;;;; 2366 
Dec 8 2010   ;;;;; 2360 
Dec 15 2010   ;;;;; 2361 
Dec 22 2010   ;;;;; 2359 
Dec 29 2010   ;;;;; 2359 
Jan 5 2011   ;;;;; 2378 
====

Contractual clearing balances backed up slightly, probably seasonals, but also could be a sign of a decrease in bank liquidity and a possible sell-off...didn't back off in 2009

[flow5]

TREASURY DAILY YIELD CURVE:
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
01/03/11 0.11 0.15 0.19 0.29 0.61 1.03 2.02 2.74 3.36 4.18 4.39
01/04/11 0.12 0.14 0.19 0.28 0.63 1.04 2.01 2.72 3.36 4.21 4.44
01/05/11 0.13 0.14 0.19 0.31 0.71 1.16 2.14 2.86 3.50 4.34 4.55
01/06/11 0.13 0.15 0.18 0.30 0.68 1.11 2.09 2.80 3.44 4.31 4.53
01/07/11 0.13 0.14 0.18 0.29 0.60 1.02 1.96 2.69 3.34 4.25 4.48

Friday Jan 7, 2011, 4:49 PM
======

Another inflection point.
======

ZEROHEDGE: Primary Dealers know all about fight or flight. And boy are the flighting. After yesterday more than half of the POMO consisted of one single CUSIP, with the bond auctioned off just a week earlier accounting for well over 50% of the entire operation, today the New York Fed, following our ridicule that Brian Sack allows such bond flipping it is virtually borderline criminal churning decided to add the most recently auctioned off CUSIP, the PLP8s of 12/15/2013 on the exclusion list, meaning PDs were stuck with their holdings in the name. The Fed, however, did not prevent any of of the previously auctioned off securities from being monetized. And what a selling frenzy those were: of today's $7.2 billion POMO, 75% of the operation consisted of the monetization of the two most recently permitted securities: the 3 Years auctioned off in November (PU8), $3.4 billion worth, and October (PB0), for $2 billion. This is a stunning rush to get the hell out of dodge, and confirms that Primary Dealers can not wait to sell every single piece of paper purchased recently via the PD auction take down. What this also means, is that any pretense the Fed had that it was not monetizing debt directly is now gone. Brian Sack should just expand the SOMA allocation per auction, and add the Fed as a legitimate 4th bidder party: after all nobody is fooled by the Treasury->Primary Dealer-> Fed charade any more. And at least that way, the PDs will stop collecting commissions on arbitrary bid/ask spreads.

=====

2 more POMOs on the 10th & 11th. $7-9B each day. But $7.119b on the 7th, $6.780b on the 6th, $1.5b on the 5th, $1.6b on the 4th, & $7.79b on the 3rd, have all FAILED to MOVE Stocks. Inflation expectations today entered a inflection juncture.

=====

Short-term money flows peaking. Long-term money flows free-falling.

[flow5]

Governor Elizabeth A. Duke (one of the 7 Board of Governors):

"I should note that the linkage between the monetary aggregates and either real economic activity or inflation has been very weak over recent decades. The lack of a reliable relationship between the monetary aggregates and the economy led the Federal Reserve to abandon M1 as a key policy instrument in the early 1980s and then to reduce the role of M2 as a policy instrument in the late 1980s and early 1990s. Indeed, in a 2006 speech about the historic use of monetary aggregates in setting Federal Reserve policy, Chairman Bernanke pointed out that, "in practice, the difficulty has been that, in the United States, deregulation, financial innovation, and other factors have led to recurrent instability in the relationships between various monetary aggregates and other nominal variables."3
==========

They are dead WRONG.
==========

www.federalreserve.gov/newsevents/speech/bernanke20061110a.htm

This speech demonstrates Bernanke's LACK OF KNOWLEDGE & thus his incompetence as Chairman.

"It would be fair to say that monetary and credit aggregates have not played a central role in the formulation of U.S. monetary policy since that time,"

[flow5]

Bernanke again:

"velocity (the ratio of nominal income to money) to predict long-run inflation trends"

This is a contrived figure (make believe). Only money that is actually exchanging hands - is statistically able to measure aggregate monetary purchasing power.

[flow5]

"Greenspan Challenges Critics to Prove Him Wrong"

economistsview.typepad.com/economistsview/2011/01/greenspan-challenges-critics-to-prove-him-wrong.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29

====

Video where Greenspan denies all knowledge, i.e., denies all wrong-doing.

[comokate]

Important and relevant information; thank you Flow-

[flow5]

An excessive increase in the money stock will "drive" (1) interest rates higher, (2) the exchange value of the dollar higher, (3), gold lower, & (4) stocks lower.

[flow5]

Fed Withholds Collateral Data for $885 Billion in Financial-Crisis Loans
By Caroline Salas and Matthew Leising - Dec 1, 2010 11:00 PM CT
BLOOMBERG:

The Fed today released details identifying thousands of transactions including bonds bought under its mortgage purchase program and asset-backed commercial paper pledged under its Asset-Backed Commercial Paper Money-Market Mutual Fund Liquidity Facility.

The Federal Reserve withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans, denying taxpayers a measure of the risks they faced from its emergency aid.

The central bank yesterday released data on 21,000 transactions from $3.3 trillion in emergency lending to stem the financial crisis. July’s Dodd-Frank law required the Fed to disclose the names of borrowers, the size and interest rates of loans, and “information identifying the types and amounts of collateral pledged or assets transferred.”

For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.

“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”

Fed spokeswoman Susan Stawick in Washington declined to comment.

Public Disclosure

The public disclosure of the lending data should have been prevented because it could spur runs on the banks listed, said Darrell Duffie, a finance professor at Stanford University.

“That’s a very destructive process,” he said. Still, with the data released, “if you’re justified in getting the information, then you’re justified to get enough information to judge the risk the Fed took,” he said.

Under its definition of the “ratings unavailable” category for collateral posted under the PDCF, the Fed said that “in some limited cases, ineligible collateral was pledged, but it was reviewed with the clearing banks for exclusion from future pledges.” The central bank didn’t elaborate.

The secrecy surrounding Fed bailouts led lawmakers to demand disclosure after the central bank approved aid dwarfing the federal government’s $700 billion Troubled Asset Relief Program.

Collateral Pledged

The loans extended to primary dealers under the PDCF by the New York Fed were recourse loans, meaning the potential liability of borrowers who defaulted was greater than the value of the collateral pledged, according to the Fed. Primary dealers are the firms authorized to deal in government securities directly with the Fed. At its peak, borrowing under the facility came to about $156 billion.

It is “specifically impossible” to know how much risk taxpayers were taking by looking at pools of collateral grouped by asset class and rating, said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” published in May by Oxford University Press.

“I need to know the individual composition because a $2 billion pool can be one asset of $2 billion, which would be very risky, or 2,000 assets of $1 million each, and that’s not risky at all,” Raynes said. “The spirit of Dodd-Frank was not respected, and they used the vagueness in the wording of the law to weasel out of fulfilling their duty to the American people.”

Corporate Debt

Over the life of the PDCF, $1.5 trillion of collateral with “ratings unavailable” was pledged, according to the Fed data. That’s larger than the $1.39 trillion of municipal debt pledged. Corporate debt posted totaled $2.35 trillion.

A total of $8.95 trillion was lent over the life of the PDCF, backed by $9.67 trillion in collateral.

The Fed released details identifying thousands of transactions including bonds bought under its mortgage purchase program and asset-backed commercial paper pledged under its Asset-Backed Commercial Paper Money-Market Mutual Fund Liquidity Facility.

The central bank also omitted details on individual securities pledged as collateral under its Term Auction Facility and its Term Securities Lending Facility, which was announced on March 11, 2008, as the first program under which the Fed planned to lend to non-bank dealers.

The Fed authorized its New York branch to establish the PDCF on March 16, 2008, the same day it made commitments to convince JPMorgan Chase & Co. to buy troubled dealer Bear Stearns. A run on New York-based Bear Stearns was seen as threatening the stability of global markets, and the PDCF for the first time allowed dealers to borrow on a collateralized basis from the New York Fed.

Lehman Collapse

In September that year, as Lehman Brothers Holdings Inc. was on the brink of filing for bankruptcy, the PDCF was expanded to accept all types of collateral pledged in tri-party repo deals, including high-yield, high-risk securities and equities. The previous program only accepted investment-grade debt securities.

The first peak of PDCF lending occurred in April 2008 at nearly $40 billion, according to the New York Fed. As financial markets improved, banks reduced their balance-sheet risk and the PDCF pricing became less attractive, usage of the facility fell off and stopped in mid-July that year.

Borrowing then leapt to over $140 billion in mid-September 2008 from no activity the previous week, according to the New York Fed. The program ended Feb. 1 this year.

Under the TSLF, dealers could swap investment-grade securities, including mortgage bonds, for U.S. Treasuries for 28 days. Usage peaked at $235.5 billion in October 2008, and the program was also closed in February.

======

I used to think Ron Paul was crazy. But I no longer believe anything that comes from the FED. For instance, the FED doesn't follow the "Blue Book's" governmental accounting, auditing, and financial reporting standards, & it would obviously not pass any normal corporate audit of its books (I worked at 3 Fortune 500 companies (timesharing, data, & voice), in accounting for 17 years).

Its on-line Federal Reserve Bulletin has now effectively eliminated the "paper trail" & thus any accounting trail. I.e., all statistical revisions are overlaid & iterations are seldom kept.

I.e., I am accusing the FED's executive staff of deliberately covering up their mistakes. And the fact that Bloomberg had to sue under the Freedom of Information Act - but the FED still withheld "Collateral Data for $885 Billion in Financial-Crisis Loans" is just "Grist for the Mill".

[flow5]

MAULDIN: "Which makes using past data a bitch. I wish they would keep the data consistent or just create another series, if they think it is that important"

Bruce Krasting has the same complaint.

Richard G. Anderson and Robert H. Rasche reconstructed the monetary base showing that total reserves didn't rise when the money supply expanded at a 20% clip (when reserve requirements were binding).

Then Bernanke revised legal reserve figures for the 2008 period to show (coverup) the fact that he single handedly drove the economy into this depression

[flow5]

Bond Distress Tumbles to Lowest Since '07 on Refinancings: Credit Markets
By Bryan Keogh and John Detrixhe - Jan 9, 2011 4:00 PM CT
BLOOMBERG:

The percentage of corporate bonds considered in distress is the lowest in more than three years as the U.S. economic recovery gives fixed-income investors the confidence to lend to the riskiest borrowers.

The number of junk bonds trading at yields at least 10 percentage points more than government debt fell to 215, or 8.6 percent of the total, as of Jan. 7, the least since October 2007, according to Bank of America Merrill Lynch’s Global High- Yield Index. Debt of Las Vegas-based Caesars Entertainment Corp., the world’s biggest casino operator, and credit-card processor IPayment Inc. are no longer judged to be in distress for the first time since 2008.

Confidence is improving at a faster pace than after the last recession ended in November in 2001, as Goldman Sachs Group Inc. expects economic growth to lead to “rapid” gains in U.S. corporate profits. Back then the distress ratio, which reached a low of 1.2 percent in February 2007, took 26 months to drop to 7 percent, compared with just 18 months this time.

“We’re going to see positive growth,” said Matthew Freund, senior vice president of investment portfolio management at USAA Investment Management Co. in San Antonio, where he helps oversee $46 billion. “It’s going to be enough to satisfy the markets.”

‘Overweighting’ Junk

High-yield bonds, rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s, are among JPMorgan Chase & Co. strategists’ top picks for 2011. They recommend “overweighting” bonds with CCC ratings, or holding a greater percentage of the debt than is contained in benchmark indexes.

Optimism in the U.S. contrasts with the sovereign debt turmoil in Europe that has kept bond distress levels elevated at almost 20 percent of the market. America’s distress ratio fell to 7.1 percent from a 2010 high of 15 percent in June. In Europe, the ratio slipped to 19 percent from as high as 32 percent that same month. Most of Europe’s distressed bonds are subordinated debt from financial companies.

Elsewhere in credit markets, global corporate bond sales totaled $79.4 billion last week, led by a record $49.7 billion in the U.S., according to data compiled by Bloomberg. The surge in sales wasn’t enough to keep relative yields from shrinking by the most since the period ended Dec. 10. Prices of leveraged, or speculative-grade, loans rose to the highest in two years and spreads on emerging-market debt shrank.

General Electric Co.’s finance unit sold $6 billion of notes in the largest offering in 11 months, Bloomberg data show, as a private report showed service industries expanded at the fastest pace since May 2006.

Economic Recovery

“We’ve had a lot of good news come up economically, at least within the U.S., so that’s put some wind behind the sails,” said Thomas Chow, who helps oversee $120 billion of fixed-income assets at Philadelphia-based Delaware Investments.

The extra yield investors demand to own corporate debt worldwide instead of government securities was 167 basis points on Jan. 7, down from 169 at the end of 2010, Bank of America Merrill Lynch data show. Investment-grade spreads in the U.S. stood at 163, after dropping to 162, the narrowest since May. Yields overall worldwide were 3.89 percent.

The S&P/LSTA U.S. Leveraged Loan 100 Index rose 0.78 cent to 93.69 cents on the dollar, the biggest weekly increase since April 2. The index reached its highest level since January 2008 last week.

In emerging markets, relative yields narrowed 5 basis points to 239 basis points, according to JPMorgan index data. Spreads, which have contracted from last year’s high of 359 in May, have fluctuated between 217 and 279 the past three months.

U.S. Growth

The U.S. economy will grow 2.6 percent in 2011 and 3.2 percent in 2012, compared with 1.5 percent and 1.8 percent for the 17 nations that use the euro, according to separate Bloomberg polls. Employers in the U.S. added more jobs for a third month in a row in December, helping the unemployment rate fall to a 19-month low of 9.4 percent from a quarter-century high of 10.1 percent in October 2009, according to Labor Department data released Jan. 7.

“Investors in the U.S. are growing more confident in the recovery, while in Europe, sovereign fears continue to weigh on markets,” said Suki Mann, a credit strategist at Societe Generale SA in London.

U.S. growth and a large “output gap” is likely to lead to corporate profit gains of 20 percent to 25 percent this year and 15 percent to 20 percent in 2012, Goldman Sachs economists led by New York-based Jan Hatzius said in a Jan. 6 client note. The gap is the disparity between a country’s current growth rate and its potential.

Defaults Decline

The trailing 12-month global speculative-grade default rate fell to a two-year low of 3.1 percent in the fourth quarter, from 13.1 percent a year earlier, Moody’s said Jan. 7. It said the rate may reach as low as 1.9 percent by December.

“The story of 2010 is how few defaults were actually recorded,” Albert Metz, a managing director of credit policy research at Moody’s, said in the report.

As defaults fell, the so-called distress ratio dropped from 11 percent at the end of November and 16 percent in August, Bank of America Merrill Lynch index data show. The rate reached a record-high 84 percent in November 2008.

The extra yield investors demand to own Caesar’s 10.75 percent notes due in 2016 rather than government debt shrank to 9.64 percentage points on Jan. 3 from more than 83 percentage points in February 2009, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The spread on Nashville, Tennessee-based IPayment’s 9.75 percent debt due in 2014 tightened to 9.64 percentage points on Jan. 5 from as high as 26.73 percentage points in March 2009. That’s the smallest spread since June 2008.

Company Profits

“Corporate profitability is near record highs, the high- yield bond default rate is near record lows, and loan delinquency rates are stabilizing,” JPMorgan strategists said in a Jan. 5 report. The decline in distress is further “reinforcing the fundamentals” of economic recovery by helping companies raise money and avoid default, Grace Koo, a strategist at JPMorgan in London, said in an interview.

Spreads on U.S. high-yield debt should shrink about 51 basis points from current levels, she said. The bonds may return 10 percent this year as spreads contract as much as 150 basis points on “favorable liquidity conditions,” according to Bank of America Merrill Lynch strategists including Jeffrey Rosenberg in New York.

The extra yield over government debt for junk bonds fell to 526 basis points on Jan. 5, the least since November 2007, according to Bank of America Merrill Lynch’s Global High-Yield Index. The spread climbed to 536 basis points Jan. 7.

Distress has eased as more junk-rated companies are able to tap the bond markets for financing, said Peter Ehret, the Houston-based head of high-yield investments and a senior money manager at Invesco Ltd., which oversees $611 billion in assets. Global high-yield sales soared 74 percent to $366.8 billion in 2010, according to data compiled by Bloomberg.

“That’s allowing a lot of refinancing, which is taking risk down,” he said.

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By JON HILSENRATH And NEIL KING JR.
Federal Reserve Chairman Ben Bernanke on Friday ruled out a central bank bailout of state and local governments strapped with big municipal debt burdens, saying the Fed had limited legal authority to help and little will to use that authority.

"We have no expectation or intention to get involved in state and local finance," Mr. Bernanke said in testimony before the Senate Budget Committee. The states, he said later, "should not expect loans from the Fed."

The $2.9 trillion municipal-bond market has been stung recently by worries that some cash-strapped cities or states won't be able to pay off or roll over debt. Costs have risen broadly for municipal borrowers. The market also faces challenges from the expiration of the Build America Bonds program, which helped cities and states borrow $165 billion at interest rates held down by federal subsidies.

Some analysts speculate the Fed could jump into the market by purchasing muni debt or lending to struggling borrowers.

The Fed only has legal authority to buy muni debt with maturities of six months or less that is directly backed by tax or other assured revenue, which makes up less than 2% of the overall market. The Dodd-Frank financial-regulation law enacted last year further tied the Fed's hands, Mr. Bernanke noted, by barring the central bank from lending to insolvent borrowers or pursuing bailouts of individual borrowers. Mr. Bernanke played down the risk of a major municipal-bond crisis, noting that muni markets have been functioning normally, with healthy trading volumes and lots of issuance. But he said that if municipal defaults did become a problem, it would be in Congress's hands, not his.

"This is really a political, fiscal issue," he said.

Lawmakers also are drawing a line in the sand. Senior House Republicans say they will oppose any state requests for money. "If we bail out one state, then all of the debt of all of the states is almost explicitly put on the books of the federal government," House Budget Committee Chairman Paul Ryan said Thursday.

At least three House committees are planning hearings on local budget woes. Rep. Devin Nunes (R., Calif.) plans to introduce a bill to require states to disclose the size of their public-pension obligations in order to keep their federal tax-exempt bonding authority.

The bill will explicitly bar state and local governments from receiving help from the federal government to cover their pension obligations.

"There are 242 Republicans, and I can't imagine one that would be in favor of a bailout," Mr. Nunes said.

Many Democrats are wary as well. "We need to be prepared with a plan in case we are approached by one or more states," said Sen. Kent Conrad, (D., N.D.), chairman of the Budget Committee. Neither the House nor the Senate would be "very interested in bailouts to states," he added.

In 2010, there were five municipal bankruptcy filings, down from 10 filings in 2009, according to a report from Bank of America Merrill Lynch. Through Dec. 1, there was $4.25 billion of municipal debt in default, which represents 0.15% of the total market, the report said.

On a recent broadcast of CBS's "60 Minutes," Meredith Whitney, a banking analyst who recently turned to analyzing state and local finances, said the U.S. could see "50 to 100 sizable defaults," in 2011 amounting to "hundreds of billions of dollars."

Mr. Bernanke described that as a "pessimistic view" that he didn't entirely agree with.

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(Reuters) - One thing's for sure: no one at the Federal Reserve is leaping out of their chair to defend the central bank's mandate to ensure full employment from proposals it focus solely on delivering price stability.

As it currently stands, the Fed is assigned by law "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."

But some members of Congress are unhappy with the Fed's recently launched $600 billion bond buying program, which officials at the central bank say is needed in part because unemployment has been stuck at elevated levels for almost two years.

Republican lawmakers eager to deliver spending cuts and stripped-down government in the wake of electoral gains in November resent the Fed's readiness to rev up its printing presses. Some think the Fed is straying into fiscal policy, which should be the responsibility of Congress, and feel a stricter focus on inflation would clear things up.

Fed Chairman Ben Bernanke in testimony to Congress on Friday voiced no objections to the debate.

"We're not seeking any change. We think the current mandate is workable," he said. "That being said, we think it's entirely appropriate for the Senate and the Congress to consider what mandate they want to set."

Even Fed officials who have argued for aggressive efforts to spur stronger economic growth appear to agree that a simpler mandate might be an advantage.

MERIT TO NARROWER OBJECTIVE

"In a clean discussion of what the appropriate role for a central bank is, I can see some merit in looking at a narrower objective," Chicago Federal Reserve Bank President Charles Evans told reporters after speaking to a conference here on Friday.

Evans, who rotates into a voting slot on the Fed's policy-setting panel this year, is one of the more outspoken supporters of the central bank's bond buying program.

However, he said monetary policy is best suited for dealing with inflationary issues and is not easily targeted at specific sectors of the economy that need help.
Like Evans, St. Louis Fed President James Bullard has also approached the debate from an academic perspective.

While Bullard says the conversation is worth having, he has declined to say whether he would support or oppose a change.

"It's interesting," he said in November. "The ECB (European Central Bank) has a price stability mandate ... The only thing a central bank can do in the long run is control the long run rate of inflation, so from that point of view it makes sense to have single mandate."

Fed officials have long argued that delivering low and stable inflation is the best way to ensure maximum employment over time. With inflation running well below the implied target of close to 2 percent the Fed shoots for, easy monetary policy is called for by both sides of the central bank's mandate.

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Evans said he is comfortable with the Fed's dual mandate and believes an emphasis on helping the weak job market is currently appropriate.

"I think at the moment, if we had a single mandate for price stability, I would be arguing for exactly the same policies," he said.

QE QUALMS

But top Republicans think a narrower brief might restrain a Fed that has become too activist. Mike Pence, No. 3 Republican in the House said the Fed's dual mandate had "failed."

"With no explicit plan for when or how this quantitative easing will be withdrawn, the Federal Reserve could do more for the American economy by focusing singularly on maintaining the value of the dollar and protecting the purchasing power of Americans," Pence said in November.

Bob Corker, a Senate banking committee member, is another supporter. However, with the Democrats in control of the White House and the Senate, a move to strip the Fed's employment mandate would be unlikely to gain sufficient backing to become law.

"It would be difficult politically to support a move right now that could be seen as saying that unemployment is unimportant," said Douglas Elliott, a Brookings Institution fellow.

Fed nominee Peter Diamond, an MIT professor and a Nobel laureate, has said retaining an employment mandate is essential to the role of the U.S. central bank. Even central banks that have only price stability as their objective find themselves taking policy steps in response to the unemployment situation, he said.

Republicans have blocked Diamond's nomination twice on the grounds he lacks experience. President Barack Obama nominated him for a third time last week.

With unemployment expected to remain stubbornly high for years, the Fed may be happy to no longer be held directly accountable for a difficult assignment.

"One of the things about having a mandate is that you'll be judged by it," Elliott said. "If part of your job is to keep unemployment down and it's high, people will yell."

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JOHN MASON:

The second application of “Quantitative Easing” on the part of the Federal Reserve System has now been on the books for several months. So, what has been going on at the Fed over this period of time?

One difficulty in examining the period running from the middle of November to the first of January is the “operating” factors that impact bank reserves due to the holiday season and end of year activity.

One such operating factor is that individuals and businesses build up their cash holdings seasonally in order to meet the needs of the holiday purchases. The Fed usually supplies this currency “on demand.”

In addition, due to pending government disbursements, the United States Treasury usually builds up its General Account at the Federal Reserve, the account the Treasury writes checks against.

In the four week period ending January 5, 2011, currency outstanding rose by almost $3 billion and the General Account of the U. S. Treasury rose by $86 billion, a total of $89 billion in reserves that the Fed had to replace in the banking system through its purchase of securities. These were all “operating factors” the Federal Reserve had to deal with.

In the thirteen weeks ended January 5, 2011, currency outstanding rose by about $22 billion and funds in the Treasury’s General Account rose by $56 billion. Furthermore, there was an accounting adjustment related to the AIG bailout operation which withdrew another $27 billion from the banking system in the third quarter of 2010 that also was replaced by the Fed’s purchase of securities, bringing the total of off-setting Fed purchases during this time period to $105 billion.

Therefore, the “net” purchases of securities held outright by the Federal Reserve rose by almost $50 billion over the last four weeks, and rose by about $120 billion over the last thirteen weeks.

As a consequence, commercial bank Reserve Balances at Federal Reserve banks decreased by $28 billion over the last four weeks but rose by around $33 billion over the last thirteen weeks. (Totals don’t add precisely because of other “operating” factors, but these are minor relative to the major changes that I have highlighted.)

The net effect of Federal Reserve operations on bank reserves over these time periods has been relatively minor: consequently excess reserves held by commercial banks remained relatively steady.

On the other hand, the significant QE2 changes in the Federal Reserve’s balance sheet have come in the composition of the Fed’s portfolio of securities held outright. In the last four weeks ending January 5, 2011, the holdings of mortgage-backed securities and Federal agency holdings fell by $31 billion. The Fed’s holdings of U. S. Treasury securities rose by about $81 billion, hence the total amount of securities held by the Fed rose by almost $50 billion, as reported above.

Over the last thirteen weeks, the portfolios of mortgage-backed securities and Federal Agency securities dropped by slightly more than $93 billion while the holdings of U. S. Treasury securities rose by $212 billion. Total securities held outright by the Fed increased by almost $120 billion, as reported above.

I would argue that up to this point in time, quantitative easing has had very little impact on commercial bank reserves and consequently on changes in liquidity or bank lending. Mostly, the Fed has just replaced maturing Federal Agency issues and maturing mortgage-backed securities with Treasury securities. Otherwise, much of the Fed’s operations during this time have been “operational” in nature.

Now, let’s step back a bit, since we are at the beginning of a new year and review what happened to the Fed’s balance sheet over the past year.

Reserve Balances that commercial banks hold at Federal Reserve banks rose by only $9 billion from January 6, 2010 to January 5, 2011. Not much change for all the talk going on about the Fed’s actions.

The question then is “what was the most significant change that took place on the Fed’s balance sheet during the year?”

My post of April 9, 2010 discussed a new strategy for getting reserves into the commercial banking system. This “new” strategy had to do with the creation of something called the U. S, Treasury Supplementary Financing Account. (See my post “The Fed’s New Exit Strategy?”.)

Well, the Treasury's Supplementary Financing Account increased by $195 billion in the calendar year of 2010. This account “absorbs” bank reserves, in the same way that moving funds from Treasury Tax and Loan accounts at commercial banks into the Treasury’s General Account at the Federal Reserve transfers bank reserves. Thus, to replace these reserves, the Federal Reserve had to buy securities in the open market to “supply” bank reserves. This, in essence, is “printing money” to substitute for the Federal Debt.

After taking into account other transactions, the Fed supplied about $202 billion in reserves to the banking system which offset a net $193 billion in factors “absorbing” reserve so that commercial bank reserve balances at the Federal Reserve only rose by the $9 billion stated above.

Excess reserves in the commercial banking system actually fell from December 2009 to December 2010 by about $67 billion. Given that excess reserves averaged around $1.0 trillion for most of 2010, the $67 billion drop does not seem particularly significant. The decline did not seem to have much impact either on bank lending or on money market interest rates.

Excess reserves may have fallen during the year because banks needed more required reserve to cover the continued shift in deposits within the financial system from time and savings accounts to demand deposits and other checkable deposits. My last comments on this phenomenon were posted on December 8, 2010: “America Continues to Go Liquid”. This shift in funds results in an increase in required reserves because banks have to hold more reserves behind demand deposit accounts and fewer reserves behind savings deposits.

It can also be noted that Americans continued to decrease their holdings of Retail Money Funds” (about $30 billion since September 2010) and Institutional Money Funds (about $50 billion over the same time period). Low interest rates and the need to be liquid seem to be dominating the asset holdings of many.

The Fed’s Quantitative Easy in supposed to keep longer term interest rates low so that the economic recovery can accelerate and unemployment can be brought down. The yield on the ten-year Treasury security was around 2.40 percent in early October before the specifics of QE2 were announced. Over the last two weeks this security has been trading around 3.40 percent. Optimists are claiming that this rise in rates is a good sign, a sign that the economy is getting stronger and that inflationary expectations are beginning to grow.

Guess I am not that confident. My experience is that you cannot force long term interest rates below where the market wants them and then maintain them at this lower rate without continually increasing the liquidity being forced into the system. Otherwise, these interest rates will tend to rise of their own volition. At this time I have not seen the Fed actually propping up the financial markets with the “new wave” of liquidity needed to maintain the lower long term rates attained in late summer

[flow5]

Commodity 1 Month Change 12 Month Change Year to Date Change

Commodity Agricultural Raw Materials Index ;;;;; 3.69% ;;;;; 34.53% ;;;;; 32.62%
Commodity Beverage Price Index ;;;;; 3.96% ;;;;; 8.99% ;;;;; 10.70%
Commodity Price Index ;;;;; 5.70% ;;;;; 23.39% ;;;;; 19.71%
Commodity Fuel (energy) Index ;;;;; 6.03% ;;;;; 20.77% ;;;;; 15.79%
Commodity Food and Beverage Price Index ;;;;; 6.46% ;;;;; 24.65% ;;;;; 25.47%
Commodity Food Price Index ;;;;; 6.77% ;;;;; 26.79% ;;;;; 27.48%
Commodity Industrial Inputs Price Index ;;;;; 3.86% ;;;;; 31.33% ;;;;; 27.78%
Commodity Metals Price Index ;;;;; 3.97% ;;;;; 29.62% ;;;;; 25.24%
Commodity Non-Fuel Price Index ;;;;; 5.17% ;;;;; 27.86% ;;;;; 26.60%
Crude Oil (petroleum), Price index ;;;;; 6.48% ;;;;; 20.13% ;;;;; 16.73%
Coal, Australian thermal coal ;;;;; 7.32% ;;;;; 38.38% ;;;;; 18.55%
Coal, South African export price ;;;;; ;;;;; ;;;;;
Crude Oil (petroleum) ;;;;; 6.55% ;;;;; 20.33% ;;;;; 16.88%
Crude Oil (petroleum); Dated Brent ;;;;; 7.16% ;;;;; 22.94% ;;;;; 20.20%
Crude Oil (petroleum); Dubai Fateh ;;;;; 6.43% ;;;;; 18.00% ;;;;; 16.25%
Crude Oil (petroleum); West Texas Intermediate ;;;;; 5.84% ;;;;; 19.68% ;;;;; 13.77%
Indonesian Liquified Natural Gas ;;;;; 0.00% ;;;;; 3.93% ;;;;; 1.93%
Natural Gas ;;;;; 12.12% ;;;;; -20.57% ;;;;; -27.30%
Russian Natural Gas ;;;;; 0.23% ;;;;; 35.35% ;;;;; 15.02%
Cocoa beans ;;;;; 4.70% ;;;;; -13.38% ;;;;; -13.49%
Coffee, Other Mild Arabicas ;;;;; 4.11% ;;;;; 52.27% ;;;;; 53.70%
Coffee, Robusta ;;;;; 0.40% ;;;;; 31.70% ;;;;; 30.94%
Tea ;;;;; 6.17% ;;;;; -5.90% ;;;;; 3.97%
Barley ;;;;; 5.85% ;;;;; 25.75% ;;;;; 29.33%
Maize (corn) ;;;;; 6.17% ;;;;; 52.52% ;;;;; 50.12%
Rice ;;;;; -1.17% ;;;;; -11.42% ;;;;; -10.24%
Sorghum ;;;;; 9.01% ;;;;; 33.20% ;;;;; 36.95%
Wheat ;;;;; 11.89% ;;;;; 48.84% ;;;;; 52.34%
Bananas ;;;;; -1.14% ;;;;; 12.07% ;;;;; 14.71%
Oranges ;;;;; -12.08% ;;;;; -28.61% ;;;;; -33.53%
Beef ;;;;; 9.34% ;;;;; 34.74% ;;;;; 27.82%
Poultry (chicken) ;;;;; -0.11% ;;;;; 3.93% ;;;;; 2.82%
Lamb ;;;;; -2.39% ;;;;; -3.19% ;;;;; -3.40%
Swine (pork) ;;;;; 8.44% ;;;;; 11.30% ;;;;; 2.23%
Fish (salmon) ;;;;; 15.27% ;;;;; 39.01% ;;;;; 36.31%
Shrimp ;;;;; -1.26% ;;;;; 7.23% ;;;;; 9.17%
Sugar ;;;;; 7.54% ;;;;; 24.82% ;;;;; 41.85%
Sugar, European import price ;;;;; -2.37% ;;;;; -3.85% ;;;;; -3.42%
Sugar, U.S. import price ;;;;; -0.83% ;;;;; 21.85% ;;;;; 28.45%
Coconut Oil ;;;;; 12.73% ;;;;; 123.31% ;;;;; 118.75%
Fishmeal ;;;;; -4.18% ;;;;; -5.86% ;;;;; -8.88%
Olive Oil, extra virgin ;;;;; -2.53% ;;;;; -21.99% ;;;;; -19.30%
Palm Kernel Oil ;;;;; 10.64% ;;;;; 119.54% ;;;;; 107.29%
Palm oil ;;;;; 10.60% ;;;;; 60.97% ;;;;; 57.85%
Peanut Oil ;;;;; 1.48% ;;;;; 47.06% ;;;;; 33.21%
Groundnuts (peanuts) ;;;;; 4.55% ;;;;; 18.95% ;;;;; 11.93%
Rapeseed Oil ;;;;; -2.48% ;;;;; 28.86% ;;;;; 27.62%
Soybean Meal ;;;;; 3.05% ;;;;; 12.13% ;;;;; 18.92%
Soybean Oil ;;;;; 7.58% ;;;;; 39.32% ;;;;; 44.17%
Soybeans ;;;;; 5.17% ;;;;; 27.54% ;;;;; 34.76%
Sunflower oil ;;;;; 5.05% ;;;;; 29.42% ;;;;; 31.67%
Coarse Wool ;;;;; -1.01% ;;;;; 12.83% ;;;;; 4.46%
Copra ;;;;; 13.89% ;;;;; 126.72% ;;;;; 120.23%
Cotton ;;;;; 8.22% ;;;;; 119.12% ;;;;; 117.36%
DAP fertilizer ;;;;; 1.00% ;;;;; 64.79% ;;;;; 38.92%
Fine Wool ;;;;; -0.66% ;;;;; 30.56% ;;;;; 26.46%
Hard Logs ;;;;; -2.16% ;;;;; 15.76% ;;;;; 18.58%
Hard Sawnwood ;;;;; -0.49% ;;;;; 12.69% ;;;;; 13.17%
Hides ;;;;; 1.78% ;;;;; 20.66% ;;;;; 17.17%
Potassium Chloride ;;;;; 3.93% ;;;;; -11.28% ;;;;; -0.11%
Rock Phosphate ;;;;; 0.00% ;;;;; 55.56% ;;;;; 43.59%
Rubber ;;;;; 10.22% ;;;;; 68.89% ;;;;; 54.00%
Soft Logs ;;;;; 3.12% ;;;;; 29.11% ;;;;; 31.79%
Soft Sawnwood ;;;;; 3.12% ;;;;; 10.63% ;;;;; 16.51%
Triple Superphosphate ;;;;; 1.89% ;;;;; 103.66% ;;;;; 59.49%
Urea ;;;;; 2.38% ;;;;; 43.66% ;;;;; 36.03%
Aluminum ;;;;; 1.40% ;;;;; 8.04% ;;;;; 5.67%
Copper, grade A cathode ;;;;; 8.21% ;;;;; 31.19% ;;;;; 24.23%
Gold ;;;;; 1.51% ;;;;; 22.55% ;;;;; 24.38%
Iron Ore ;;;;; 0.00% ;;;;; 80.20% ;;;;; 80.20%
Lead ;;;;; 2.04% ;;;;; 3.74% ;;;;; 2.59%
Nickel ;;;;; 5.53% ;;;;; 40.76% ;;;;; 30.94%
Silver ;;;;; 10.54% ;;;;; 66.47% ;;;;; 65.48%
Tin ;;;;; 2.76% ;;;;; 67.45% ;;;;; 47.39%
Uranium ;;;;; 6.07% ;;;;; 36.48% ;;;;; 38.38%
Zinc ;;;;; 0.18% ;;;;; -3.65% ;;;;; -5.27%
===

REAL INFLATION

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Gingrich seeks bill allowing state bankruptcy to avert bailouts
Move afoot to help states escape benefit obligations
By Doug Halonen
January 10, 2011, 12:01 AM ET
Post a CommentRecommend (71) See also
Advisers see opportunity in public plans' shift
Former House Speaker and possible GOP presidential contender Newt Gingrich is pushing for federal legislation giving financially strapped states the right to file for bankruptcy and renege on pension and other benefit promises made to state employees.

Proponents of the measure — which include Americans for Tax Reform, a Washington lobby group that fights tax increases — said the legislation is desperately needed to clear the way for struggling states to slash costs before they go belly up, and should be regarded as a preemptive move that could preclude the need for massive federal bailouts.

“It's in the short-term and long-term interests of government workers and taxpayers to start those reforms now, rather than having to pick up the pieces after a crash landing,” ATR President Grover Nor-quist said in an interview.

“We are working with people inside and outside of Congress on this issue,” said Joe DeSantis, a spokes-man for Mr. Gingrich, whom Mr. DeSantis said is considering a bid to be the Republican presidential candidate in 2012.

Mr. Gingrich discussed the proposal in a Nov. 11 speech before the Institute for Policy Innovation, an anti-big-government group based in Lewisville, Texas. According to a transcript of the speech on Mr. Gingrich's website, www.newt.org, he said: “I ... hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy, so that states like California and New York and Illinois that think they're going to come to Washington for money can be told, you know, you need to sit down with all your government employee unions and look at their health plans and their pension plans and, frankly, if they don't want to change, our recommendation is you go into bankruptcy court and let the bankruptcy judge change it, and I would make the federal bankruptcy law prohibit tax increases as part of the solution, so no bankruptcy judge could impose a tax increase on the people of the states.”

Concerns about the funded status of public pension plans are increasing because the aggregate public pension plan funding level dropped to 80% for the fiscal year ended June 30, 2009, the most recent year for which data are available, from 85% a year earlier, according to the National Association of State Retirement Administrators, Baton Rouge, La.

States whose plans have the lowest funded status ratios, also as of June 30, 2009, were Illinois, with 51%, and Kansas, Oklahoma and New Hampshire, each with 59%, according to an analysis of state pension fund annual report data by investment bank Loop Capital Markets LLC, Chicago (Pensions & Investments, Dec. 13).

Vow to fight proposal
State and union officials vow to fight the bankruptcy initiative, which they fear would undermine state autonomy and be used to reduce promised benefits to government workers.

“I am unaware of any public pension plan that is requesting federal assistance,” said Keith Brainard, NASRA research director.

“Exaggerated reports on the financial condition of public pension plans are being used as a scare tactic to justify federal intervention,” Mr. Brainard added.

Said Mark McCullough, a spokesman for the Service Employees International Union, Washington: “This is another right-wing attack on behalf of their (the GOP's) anti-middle class, big-business donor base.

“It would amount to not just another attack on working families, but an attack on everyone from investors to retirees who would see the economy reel from the ripple effects of state bankruptcy as they pursue the goal of making American workers expect no better pay or benefits than workers in the developing world.”

So far, proponents of the legislation said they have not yet recruited a congressional sponsor for the proposed measure. “We're still shopping for the guy who is going to carry it,” Mr. Norquist said.

Nonetheless, union executives are concerned that the proposal — which has been promoted on conservative websites recently — is part of a well-orchestrated and hitherto underground campaign now surfacing as Republicans settle into leadership positions in the new Congress.

“This idea carries major negative financial implications for the states, their creditors and the companies that do business with them,” said Charles Loveless, director of legislation for the American Federation of State, County and Municipal Employees, Washington. “A state going into bankruptcy would send shock waves through the states and could very well undermine our fragile national economic recovery,” he said.

“It is incredible to me that proponents of this portray themselves as advocates of state rights when what they're really doing is driving states into the ground,” Mr. Loveless added. “It's clearly in an effort to renege on public employee collective bargaining contracts.”

Need to backstop benefits
The bankruptcy proposal also raised concerns in some corners because there's no agency to back up the pension benefits of state workers the way the Pension Benefit Guaranty Corp. backstops benefits for participants in corporate-sponsored pension plans, said Babette Ceccotti, a partner at Cohen, Weiss and Simon LLP, a New York law firm that specializes in labor and employee benefit issues.

Proponents of the state bankruptcy legislation “are proposing the cuts, but not a safety net for people's retirement security,” she said.

But Mr. Norquist said that, assuming the proposal becomes law, not every state would file for bankruptcy — a right that municipal governments already have under Chapter 9 of the U.S. Bankruptcy Code.

“If you don't have this (a state bankruptcy process), you have New York, Illinois and California running off the rails because there's no way to fix their problems ... They've got these contracts with government workers that you can't alter,” Mr. Norquist said.

He said restructuring benefit obligations doesn't necessarily mean cutting the amount of money a retiree gets; it could involve freezing a public defined benefit plan and enrolling new employees in a defined contribution plan.

Rep. Devin Nunes, R-Calif. — who introduced legislation late last year that would require state and local plans to disclose their finances to the U.S. Treasury — had no immediate comment on the bankruptcy proposal, said his spokesman, Andrew House. “He's aware of the proposal, but has yet to take a public position on the issue,” Mr. House said.

The Nunes bill, which also would bar federal bailouts of public plans and deny a federal tax exemption for bonds issued by governmental entities that don't comply with the new disclosure requirements, will be reintroduced on Jan. 19, Mr. House said.

Mr. House said finances of state and local governments will be a hot-button issue on Capitol Hill this year. “The whole area of how to deal with soaring debt at all levels of government and the consequences to the national economy will be the subject of hearings in multiple committees,” Mr. House said.

Rep. Paul Ryan, R-Wis., who co-sponsored Mr. Nunes' bill, and became chairman of the House Budget Committee earlier this month, was also mum on the bankruptcy proposal.

“Congressman Ryan certainly shares the concerns that state governments across the country are failing to live within their means, just as he has expressed continued concern for Washington's fiscal recklessness,” said a spokesman for the Wisconsin lawmaker. “But the congressman has yet to decide how to address the state issues.”
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