Eric Sprott: The Fed Is A Ponzi, The Treasury Purchase Data Is A Lie

[AllentownJake]

http://www.zerohedge.com/article/sprott-calls-fed-ponzi-scheme-half-trillion-treasury-purchasers-are-unaccounted

I've been hesitant to post this due to the fact it contains some speculation, however, I think some of the Data in this report are of concern. Specifically the purchase of US debt by the "Household" Sector in 2009. I'm going post a brief excerpt of this analysis for people who are interested. Again this is speculation as the catchall Household sector does not give adequate detail in Fed reports. An alarm bell for an auditor is an unexplained jump in any category.

From the article

So who was the third large buyer? Drum roll please,... it was "Other Investors". Afterpurchasing $90 billion in 2008, this group has purchased $510.1 billion of freshly minted treasury securities so far in the first three quarters of fiscal 2009. If you annualize this rate of purchase, they are on pace to buy $680 billion of US treasuries this year - or more thanseven times what they purchased in 2008. This is undoubtedly the group that made theUS deficit possible this year. But who are they? The Treasury Bulletin identifies "OtherInvestors" as consisting of Individuals, Government-Sponsored Enterprises (GSE),Brokers and Dealers, Bank Personal Trusts and Estates, Corporate and Non-CorporateBusinesses, Individuals and Other Investors. Hmmm. Do you think anyone in that grouphad almost $700 billion to invest in the US Treasury market in fiscal 2009? We didn’teither. To dig further, we turned to the Federal Reserve Board of Governors Flow ofFunds Data which provides a detailed breakdown of the owners of Treasury Securities toQ3 2009.

Within this grouping, the GSE’s were small buyers of a mere $5 billion thisyear;

Broker and Dealers were sellers of almost $80 billion;

Commercial Banking were buyers of approximately $80 billion;

Corporate and Non-corporate Businesses, grouped together, were buyers of $11.6 billion, for a grand net purchase of $16.6 billion.

So who really picked up the tab? To our surprise, the only group to actually substantially increase their purchases in 2009 is defined in the Federal Reserve Flow of Funds Report as the"Household Sector". This category of buyers bought $15 billion worth of treasuries in 2008, but by Q3 2009 had purchased a whopping $528.7 billion worth. At the end of Q3this Household Sector category now owns more treasuries than the Federal Reserve itself.

[rgbecker]

1. Where does China come in? Isn't it possible all the money that

moved out of the stock market (it was a big sellers market for the last year) went to Treasuries? In your list of "Other Investors" I don't see Household sector...would that be Individuals? What other catagories, beside "Other Investors" are included in the "Treasury Bulletin"?

Very interesting post, Thanks.

[AllentownJake]

2. China comes in as other nations

That was the largest buyer at 600+ billion which was a 23% increase over 2008.

The issue is that the House Hold Sector was a catch all with only 15 billion last year, the transparency issue is that you would expect the Fed to provide more detail on a sector that now contribute 500+ billion.

[rgbecker]

3. Just read the article.........Oh!

[AllentownJake]

6. Yes I'm looking forward to Ben answering where that 500 billion came from

I suspect Grayson will be asking in the next Fed hearing for the House.

[Red Knight]

4. They are going to bankrupt the country

They're making a money grab up at the top and running for the door.

We're screwed.

Everything the government does now is designed to funnel large sums of cash to large private entities with very little going to main street.

Maybe some crumbs will drop out of there pockets while they're dashing away.

We can only hope.

[AllentownJake]

5. The President's choice of advisors

Shows that he believes in a neo-liberal Keynsian theory which is a bastardization of Keynes and Friedman.

The theory doesn't combine the strengths of either theories, it embraces the worst of Keynsian theory with the worst of Friedman's theory and is essentially Feudalism.

[glitch]

10. Well put. nt

[Greyhound]

12. But, but, but, they "paid back" the TARP!!1!

Fucking idiots...

[Pharaoh]

7. Correction

Capitalism is a Ponzi............

[Vidar]

8. K&R.

[DonkeyHoTay]

9. Bump this must-read thread!

Another K&R.

[Greyhound]

11. As with most of the news that will really effect their lives, the people are not interested

in things like this, all those numbers & stuff.

The ramifications of this are potentially staggering, yet...
:kick: &R

[AllentownJake]

13. You know I continue to try

Spitting into the wind, maybe he'll lie again. Sigh.

[OnceUponTimeOnTheNet]

14. Night kick.

I rec'd. this morn.

[earthboundmisfit]

15. K&R

This is a BIG deal - hope we get to hear more about it.

[AllentownJake]

16. Don't hold your breath

Why do you think Bernake shits his pants at the idea of Grayson's audit the Fed.

[Greyhound]

17. One more time. n/t

[AllentownJake]

18. Thanks

I'd prefer this was on the front page than my current OP....we can't choose what people like.