The Money Printing Facade Is Cracking

Investment Research Dynamics

Yesterday I sent an email around to some colleagues in which I suggested that something nasty is going on behind the scenes in the financial system that is not yet apparent.   The bond market was closed yesterday but Treasury futures opened in th early evening and the 10-yr traded down to 2.25%.   This time last year the yield was 2.75%.  Despite the jump in the SPX today, which always happens on POMO Tuesday, the 10-yr is now down to 2.23%.

The “improving economy/housing market” does not hold up when the yield on the 10yr is collapsing like this.  This is not a short-squeeze.

My buddy thinks it could be Citicorp who’s in trouble right now.  Interestingly, Jack Lew is a former Citicorp crook who was inserted in the Treasury Secretary seat.  Recall that Henry Paulson – former Goldman CEO – was put in that seat ahead of Goldman Sachs being bailed out in 2008.    The parallels with 2008 going on right now are a bit spooky.   But let the population worry about an Islamic “boogie man” and a few cases of Ebola so they don’t see what’s really developing.

The hidden problem developing could well be this:   Greek bond and stock prices plunge.

If Greece collapses, it will light the fuse that will trigger a bigger credit default swap counterparty derivatives explosion than occurred in 2008.   It’s no coincidence that the big banks just signed a new derivatives agreement that prevents any bank from unilaterally grabbing collateral from a counterparty who defaults:  LINK.

This agreement does not end the “Too Big To Fail” era like that article claims. This allows the Central Banks to determine which banks get to fail and which banks get saved when the derivatives bombs start to detonate.  This essentially legally ratifies the process that determined the fate of Lehman and Bear Stearns and saved Goldman, JPM and Citigroup.

Nothing happens by coincidence in a system that is tightly controlled by a central organization.  In this case, the Fed/ECB/U.S. Government.