The Burning Platform

If you think the banksters aren’t working behind the scenes to keep the world’s economy afloat, think again.

If you think the banksters aren’t just about at the end of their rope, and all the plates they’ve been spinning aren’t about to crash, think again.

If you think the banksters are telling the truth, that creating $80 billion out of thin air each month is for a “jobs recovery”, think again.

If you think banksters have your best interests at heart, and your economic stability in mind, think again.

A very illuminating article about what Ben Bernanke has been doing with a vast quantity of cash lately: propping up banks in Europe. If the insolvent European banking system goes down, then the world’s economy goes down. Bernanke is sticking his fingers in the dyke in a big way. Truly amazing in amount and scope ($237 billion in the past month alone).

Regardless of the futile attempts to continue to prop up insolvent banks (and governments), this will come crashing down on their heads. Whether it’s currency or interest rate manipulation/devaluation, propping up exports, or simply giving I.V. cash to other banksters, there seems to be no limit to what our star central bankster won’t do. Ah, I’m gonna miss Ron Paul.

The Fed’s Bailout Of Europe Continues With Record $237 Billion Injected Into Foreign Banks In Past Month

Submitted by Tyler Durden on 02/09/2013

Last weekend Zero Hedge once again broke the news that just like back in June 2011, when as part of the launch of QE2 we demonstrated that all the incremental cash resulting form the $600 billion surge in the Fed’s excess reserves, had gone not to domestically-chartered US banks, but to subsidiaries of foreign banks operating on US soil.

To be sure, various other secondary outlets picked up on the story without proper attribution, most notably the WSJ, which cited a Stone McCarthy report adding the caveat that “interpreting the data released by the Federal Reserve is a bit challenging” and also adding the usual incorrect attempts at interpretation for why this is happening. To the contrary: interpreting the data is quite simple, which is why we made an explicit prediction: ‘We urge readers to check the weekly status of the H.8 when it comes out every Friday night, and specifically line item 25 on page 18, as we have a sinking feeling that as the Fed creates $85 billion in reserves every month… it will do just one thing: hand the cash right over straight to still hopelessly insolvent European banks.” So with Friday having come and gone, we did just the check we suggested. As the chart below shows, we were right.

Another way of showing what has happened: in the past 4 weeks, the Fed has injected a record $237 billion of cash into foreign banks with access to the Fed’s excess reserves: a number greater than both the cash influx surge seen after the Lehman collapse, and faster and more acute than the massive build up of cash during the spring and summer of 2011 when all the Fed’s brand new QE2 cash was once again, solely used to overfund European bank cash.

Another way of showing precisely what we said would happen, and what is happening: in the past month, as $237 billion in cash was being handed over by Ben Bernanke to foreign banks, cash to both small and large domestically-chartered banks declined.

The result is that of the record $1.8 trillion in cash sloshing within the US financial system (consisting of US and foreign banks), a record $955 billion, or 52.6% of total is now allocated to foreign banks.

Do we know that the cash in the US financial system is purely a result of the latest open-ended QE? Yes we do, because as the chart below shows, every dollar change in excess reserves created by the Fed is tracked tick by tick by the total amount of cash held by US and foreign banks. And as the yellow area – foreign bank cash – in chart further shows, all the cash generated by QEternity has gone straight to foreign banks.

Another way of showing this correlation: the change in excess reserves vs just the change in cash assets held by foreign banks. There is no doubt on which banks’ balance sheets the Fed’s “excess reserves” are appearing as cash.

Finally, as a reminder there was a second part in our forecast as to what these European banks will do with this fresh prop-trade funding cash courtesy of Bernanke – they will “push the EURUSD higher, until, as in the summer of 2011 it goes far too high, crushes German, and any other net European exports, and precipitates yet another wholesale bailout of Europe by the global central bankers. Just as the Fed did in 2011.”

Sure enough, it required the intervention of none other than Mario Draghi last Thursday to stop the massive, sharp ascent in the EUR in the past two months, which as we showed in the morning before the ECB’s announcement on Thursday, had resulted the EUR surge by over 10% on trade-weighted terms. The reason for this intervention: to prevent the collapse of what little is left of Europe’s export economy. However, unlike previously, now that Japan is also actively crushing its own currency to promote its exports over those from Germany and France, things will be just a little bit more acute as everyone scramble to be the exporter of only resort to what little import demand remains in a world where everyone is desperate to grow their trade balance through currency manipulation.

So whether European banks will continue buying the EURUSD, or redirect their Fed-cash into purchasing the ES outright, or invest in other even riskier assets, remains unknown.

What is, however, known beyond a reasonable doubt is that at least through this point, the sole beneficiary of the Fed’s open-ended quantitative easing which launched in September of 2012, and which was supposed to help lower US unemployment and raise inflation (it will certainly succeed in that eventually, and what a smashing success it will be), are once again solely foreign – read almost exclusively European – banks.

http://www.zerohedge.com/news/2013-02-09/feds-bailout-europe-continues-record-237-billion-injected-foreign-banks-past-month