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Banks Warn The Federal Reserve They May Have To Start Charging Depositors Zero Hedge November 25, 2013

The Fed’s Catch 22 just got catchier. While most attention in the recently released FOMC minutes fell on the return of the taper as a possibility even as soon as December (making the November payrolls report the most important ever, ever, until the next one at least), a less discussed issue was the Fed’s comment that it would consider lowering the Interest on Excess Reserves to zero as a means to offset the implied tightening that would result from the reduction in the monthly flow once QE entered its terminal phase (for however briefly before the plunge in the S&P led to the Untaper). After all, the Fed’s policy book goes, if IOER is raised to tighten conditions, easing it to zero, or negative, should offset “tightening financial conditions”, right? Wrong. As the FT reports leading US banks have warned the Fed that should it lower IOER, they would be forced to start charging depositors. In other words, just like Europe is already toying with the idea of NIRP (and has been for over a year, if still mostly in the rheotrical and market rumor phase), so the Fed’s IOER cut would also result in a negative rate on deposits which the FT tongue-in-cheekly summarizes “depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.” If cutting IOER was as much of an easing move as the Fed believes, banks should be delighted – after all, according to the Fed’s guidelines it would mean that the return on their investments (recall that all US banks slowly but surely became glorified, TBTF prop trading hedge funds since Glass Steagall was repealed, and why the Volcker Rule implementation is virtually guaranteed to never happen) would increase. And yet, they are not: Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors. Banks say they may have to charge because taking in deposits is not free: they have to pay premiums of a few basis points to a US government insurance programme. “Right now you can at least break


even from a revenue perspective,” said one executive, adding that a rate cut by the Fed “would turn it into negative revenue – banks would be disincentivised to take deposits and potentially charge for them”. Other bankers said that a move to negative rates would not only trim margins but could backfire for banks and the system as a whole, as it would incentivise treasury managers to find higher-yielding, riskier assets.“It’s not as if we are suddenly going to start lending to [small and medium-sized enterprises],” said one. “There really isn’t the level of demand, so the danger is that banks are pushed into riskier assets to find yield.”All of the above is BS: lending has never been a concern for the Fed because if it was, then one could scrap QE right now as an absolute faiure. Recall that as we showed recently, the total amount of loans and leases in commercial US banks has been unchanged since Lehman, with the only rise in deposits coming thanks to the fungible liquidity injected by the Fed.

Furthermore, contrary to what the hypocrite banker said that “the danger is that banks are pushed into riskier assets to find yield”, banks are already in the riskiest assets: just look at what JPM was doing with its hundreds of billions in excess deposits, which originated as Fed reserves on its books – we explained the process of how the Fed’s reserves are used to push the market higher most recently in “What Shadow Banking Can Tell Us About The Fed’s “Exit-Path” Dead End.”


What the real danger is, is that once the Fed lowers IOER and there is a massive outflow of deposits, that banks which have used the excess deposits as initial margin and collateral on marginable securities to chase risk to record highs (as JPM’s CIO explicitly and undisputedly did) that there would be an avalanche of selling once the negative rate deposit outflow tsunami hit. Needless to say, the only offset would be if the proceeds from the deposits outflows were used to invest in stocks instead of staying inert in some mattress or, worse (if only from the Fed’s point of view) purchase inert assets like gold or Bitcoin. Which brings us back to the first sentence and the Fed’s now massive Catch 22: on one hand, shoud the Fed taper, rates will surge and stocks will once again plunge, as they did, in early summer, just to teach the evil, non-appeasing Fed a lesson. On the other hand, should the Fed cut IOER as a standalone move or concurrently to offset the tapering pain, banks will crush depositors by cutting rates, depositors will pull their money from banks en masse, and banks will have no choice but to close on a record levered $2.2 trillion in margined risk position.

Would You Date An Unemployed Man? 75 Percent Of Women Would Not Michael Snyder Economic Collapse November 25, 2013

If you are a man living in America today, to a large degree your value to society is determined by how much money you make. It should not be that way, but that is how our society works. And if you do not have a job at all and you cannot take care of your own family, then almost everyone looks down on you even if it is not your fault. Once you are unemployed, it becomes the number one defining factor in your life. Yes, there are a few people that may look at you in the same way, but in the eyes of most you will now be less of a man. Sadly, this is particularly true when it comes to romantic relationships. Unemployed


men tend to have unhappier marriages, they tend to divorce more frequently, and as you will see below approximately 75 percent of all American women do not have any interest in dating unemployed men. Unfortunately for American men, the decline of the U.S. economy in recent years has had a disproportionate impact on them. The past five years have been the worst years for employment for American men in the post-World War II era, and things are only going to get worse from here. Yes, unemployed women go through similar things. I do not mean to downplay the economic suffering of unemployed women at all. In fact, I write about it quite frequently. Today, however, I want to focus on how the steadily declining U.S. economy is affecting men. If you are a single man and you are unemployed, that automatically means that most single women will not be interested in you at all. At least that is what one very shocking survey discovered… Of the 925 single women surveyed, 75 percent said they’d have a problem with dating someone without a job. Only 4 percent of respondents asked whether they would go out with an unemployed man answered “of course.” “Not having a job will definitely make it harder for men to date someone they don’t already know,” Irene LaCota, a spokesperson for It’s Just Lunch, said in a press release. “This is the rare area, compared to other topics we’ve done surveys on, where women’s old-fashioned beliefs about sex roles seem to apply.” So what would happen if things were reversed and that same question was asked to men? Well, it turns out that there is a big difference. When men were asked that exact same question, the results were absolutely startling… On the other hand, the prospect of dating an unemployed woman was not a problem for nearly two-thirds of men. In fact, 19 percent of men said they had no reservations and 46 percent of men said they were positive they would date an unemployed woman. Perhaps traditional gender roles are not quite as dead as many people believe that they are. And as I mentioned earlier, the declining economy is hitting men even harder than it is hitting women. Yes, millions upon millions of women are deeply suffering in this economy. There is no doubt about that. But men are actually having an even more difficult time than women are. The following are 12 signs that the decline of the U.S. economy is having a disproportionate impact on men… #1 The labor force participation rate for men is now at an all-time low…


#2 During the last recession, men lost twice as many jobs as women did. All of the jobs that women in the United States lost during the last recession have been regained, but only about 70 percent of the jobs that men lost during the last recession have been regained. Meanwhile, the size of the overall population continues to grow rapidly. #3 The inactivity rate for men has risen even higher since the end of the last recession and is now hovering near an all-time record high‌

#4 Since 2010, about a million construction workers have either been forced to switch industries or have disappeared from the labor force entirely. This has had a disproportionate impact on men. #5 Back in the 1950s, more than 80 percent of all men in the United States had jobs. Just before the last recession, about 70 percent of all men in the United States had jobs. Today, only 64 percent of all men in the United States have jobs‌


#6 Back in the 1980s, more than 20 percent of the jobs in the United States were manufacturing jobs. Today, only about 9 percent of the jobs in the United States are manufacturing jobs. This has had a disproportionate impact on men. #7 According to the Economic Policy Institute, the U.S. economy loses 9,000 jobs for every 1 billion dollars of goods that are imported. A disproportionate percentage of those job losses tend to come from male-dominated industries such as manufacturing. Since 1975, the United States has run a total trade deficit with the rest of the world of more than 8 trillion dollars, and right now there are more than 102 million working age Americans that do not have a job. #8 Between 1969 and 2009, the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation. #9 According to the Economic Policy Institute, the “real entry-level hourly wage for men who recently graduated from high school” has declined from $15.64 in 1979 to $11.68 today. #10 Thanks to Obama administration policies which are systematically killing off small businesses in the United States, the percentage of self-employed Americans is at an all-time low today. This has had a disproportionate impact on men. #11 According to CNN, American men in the 25 to 34-year-old age bracket are nearly twice as likely to live with their parents as women the same age are. #12 According to Time Magazine, unemployed men are significantly more likely to get divorced than employed men are. When a man cannot take care of his own family, it can be absolutely soul crushing. Though many would like to deny this, the truth is that men are still considered to be the primary breadwinners in society today. When a man finds that he cannot provide what his family needs no matter how hard he tries, it can be really easy to descend into a spiral of despair, depression and self-pity. Unfortunately, the U.S. economy is not producing nearly enough jobs for everyone anymore and it never will again. Meanwhile, the quality of our jobs continues to decline at a staggering pace. What all of this means is that the number of Americans living in poverty is going to continue to grow, and there will be lots more men that feel worthless because they can’t provide for their families. The following is one example of a single dad that is forced to turn to the government for assistance because he cannot provide for his children on his own…


It means Lyman Curtis, single dad of five kids, will only be able to reliably heat his home in Dexter, Maine, for the first half of this winter, maybe through February. After that, Curtis will drive to the local gas station to buy kerosene oil in 5-gallon increments — all he can afford to buy at one time. “I know a lot of people who do it that way, because there’s just not enough money to heat your home and pay for groceries in your everyday life,” said Curtis, 38, who is the primary caregiver for his kids and relies on disability benefits and food stamps to survive. Nobody should ever look down on someone like Lyman Curtis. He is doing the best that he can. At this point our economy is kind of like a very twisted game of musical chairs. If your family is doing well at the moment, you should not be too complacent because the next time the music stops you might be the one that loses a job. In recent years, millions upon millions of Americans have lost good jobs, and in most cases it was due to forces beyond their control. And as the economy continues to deteriorate, Americans are going to become even more angry and even more frustrated. In fact, one recent survey found that 60 percent of all Americans “report feeling angry or irritable“. But we have not even reached the next major wave of the economic collapse yet. How “angry” and “irritable” will people feel once millions more Americans lose their jobs? That is something to think about. So what do you think about all of this? What do you think about the fact that most women would not even consider dating an unemployed man?


Federal Government Books $41.3 Billion In Profits On Student Loans David Jesse Detroit Free Press November 25, 2013

The federal government made enough money on student loans over the last year that, if it wanted, it could provide maximum-level Pell Grants of $5,645 to 7.3 million college students. The $41.3-billion profit for the 2013 fiscal year is down $3.6 billion from the previous year but still enough to pay for one year of tuition at the University of Michigan for 2,955,426 Michigan residents. It’s a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion. “It’s actually neither accurate nor fair to characterize the student loan program as making a profit,” Education Secretary Arne Duncan said during a July conference call with reporters after the Free Press and other news media reported on profits from student loans. The department did not return calls or e-mails seeking comment before the story was published, but issued a statement today. “The administration has taken steps to improve college affordability, and thanks to collective efforts, students and families are paying lower rates on their loans today than they would have otherwise,” Stephen Spector, U.S. Department of Education spokesman said in an email to the Free Press. “More must be done to bring down the cost of college, and we look forward to continuing to work with Congress, institutions, borrowers, and other stakeholders to make college more affordable.” Read more

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Banks Warn The Federal Reserve They May Have To Start Charging Depositors