The One Table That Explains Why There No Longer Is Any Treasury Liquidity

Earlier today, former CLSA strategist Russell Napier mused about the centrally-planned capital markets, pointing out the historic move in bonds in the morning of October 15 about which he said:

On the 15th of October 2014, as this analyst celebrated his 50th birthday, volume in the US Treasury market surged, suddenly and without warning, to a record high. Old timers smiled knowingly, as Magwitch did from behind the headstones, and younger members put aside their Angry Birds and wondered what was wrong.


There it was — a real market come and gone in half an hour, like a pregnant panda at Edinburgh zoo. What did it mean and what should you do? You should pay attention to what happens to the direction of prices when volumes surge and markets work. When the veil is lifted, pay attention to what you see beneath. Last Wednesday, in the space of half an hour of active trading, the Treasury market had one of its most rapid rises ever recorded and equities fell sharply.


There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed. Such repression requires the artificial depression of interest rates but, crucially, it must be paired with boosting inflation above such rates. On October 15th 2014, if only for a few short minutes, market forces broke out and the failure of central bankers was briefly evident.

He may be right or wrong, but fundamentally there is a far simpler explanation of the events that took place that morning, one that requires just two words:

  • no liquidity

As we have been pounding the table since late 2012 when we explained how the Fed’s QE3 would absorb a record amount of 10 Year equivalents from the private market, what the Fed has done is take its holdings of all CUSIPs across the curve to above the level it that previously considered was the threshold limit above which bond market liquidity is impaired. We forecast most explicitly what would happen in May of 2015 when we wrote: “As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market… And Will Own All By 2018.”

Of course, the Fed knew all about this, which is why back in December 2010, in a little noticed move, the New York Fed raised the SOMA Treasury limit from 35% to 70% per CUSIP, meaning that while previously the Fed could only hold up to 35% of any given Treasury CUSIP, since then it was allowed to take its holdings to over two thirds of total! Indicatively, the number 35% was there because based on extensive literature, liquidity begins to collapse around the time there is just about two thirds of the original outstanding notional of any given issuance left in circulation.

So where are we now? Well, as of the most recent data, as compiled by Stone McCarthy, the amount of ten-year equivalents held by the Fed was $1.947 trillion leaving some $3.674 trillion in 10Year equivalents available to the private sector. Or, in percentage terms, just about 34.57% of all 10 Year equivalents outstanding.

However, as noted, that is a blended average of all Fed TSY holdings across the curve. Where things get really bad is when one focuses on what once upon a time was the On The Run issue, i.e., the most liquid bond on the Treasury curve: the 10 Year.

It is here where as Brean Capital’s Peter Tchir shows in the table below, that the Fed is now the proud owner of over half of the total outstandings in the entire 10-15 Year bucket!

In short: the simple reason why there is no more liquidity in cash Treasury securities (Treasury futures are a different matter entirely) is because the Fed is now the proud owner of a majority stake of what once was the most liquid maturity across the most liquid bond market in the world.

So the next time the market freaks out and bonds have a 12 sigma move, once the shock and awe passes, fee free to send your thank you cards to the Marriner Eccles building for destroying what once upon a time was the deepest, most liquid market in the world.

via Zero Hedge Tyler Durden

A Day After Tim Cook’s Veiled Threats, ApplePay Alternative Gets Hacked

Just yesterday Apple’s executives went on the offensive against retailers that refused to play by the Cupertino company’s rules with veiled threats. So it is ironic at best that today, Wal-Mart’s alternate-to-ApplePay mobile payment system – CurrentC – has been hacked. The company explains “within the last 36 hours, we learned unauthorized third parties obtained email addresses of some” of their clients…and “no other information.”

From CurrentC

via Zero Hedge Tyler Durden

Goldman Expects “Steady As She Goes” FOMC With QE Ending On Schedule

Of the last 150 years of developed market monetary policy, we suspect nothing will prepare market participants or Fed members for the twisted terms and double-speak the FOMC will try to unleash today as they attempt to ‘end’ the most extreme policy measures ever. Goldman Sachs’ ‘base-case’ for today’s FOMC is a “steady as she goes” message with few substantive changes in language and asset purchases ending on schedule… but Goldman warns, recent macro and market action might bias the Fed dovish.


The last 150 years (as we previously showed)…



And today’s preview…The main event today will be the FOMC statement.  

Our US economists expect the FOMC to make only minor adjustments to the statement. They expect the Committee to maintain its “considerable time” guidance and assessment of “significant underutilization” in the labour market while also drawing down their asset purchases to zero. While their base case is that the statement will acknowledge recent developments overseas, they do not expect the FOMC to shift its assessment of the domestic outlook.

In today’s Global Markets Daily, we examine the potential market impact of today’s FOMC.

Our view is that recent market moves, including the drop in oil prices, could cause a dovish shift by the FOMC on inflation. We see this as a risk for the Dollar, which – after a large move in the 2-year rate differential against it – has been held up by risk aversion and safe haven flows into the US. As a result, today’s Global Markets Daily argues that, even with the bounce back in the SPX, stocks offer better risk-reward into the FOMC than the Dollar.

The global growth scare has moved interest rates against the USD
Over the last month, global growth fears have taken over markets. As our most recent FX Views argued, this has weighed on the Dollar, with the 2-year rate differential – the key driver of the Dollar in recent months – falling the most since the “no taper” surprise in 2013. This is notable, given that recent growth fears come from outside the US (as opposed to inside). For example, the IMF’s recent World Economic Outlook lowered the 2015 growth forecasts for the Euro area, Japan and some emerging markets, but kept growth the same for the US. This is consistent with the analysis by Jan Hatzius and team, who find that the effects from a stronger Dollar are roughly offset by lower oil prices, keeping our bullish growth view intact. In short, it is rather puzzling that the 2-year differential has moved so sharply against the Dollar, given that the case for US cyclical outperformance has, if anything, become stronger. We next provide a highly approximate breakdown of what has driven rates markets so sharply against the USD in recent weeks.

Since October 3 (the positive payrolls surprise), the trade-weighted 2-year rate differential of the US vis-à-vis the majors has fallen 15bp, with three factors looking to be the main drivers:

Foreign growth drag: the surprise drop in German industrial production on October 7 (data for the month of August), which coincided with the SPX falling close to 1.5%, moved the 2-year differential nearly 3-4bp against the Dollar.


Dovish Fed speak: The FOMC minutes for September, published on October 8, and comments by Fed Vice Chair Fischer (October 9) at the IMF/World Bank annual meetings highlighted the negative implications for US growth and inflation from a stronger USD and drove the 2-year differential another 7bp against the USD.


Mounting Ebola fears: headlines over the weekend of October 11/12 reported a second Ebola case in Dallas, whereupon the 2-year differential fell another 3-4bp.

Of course, this attribution is highly approximate, but it is interesting for what matters and what does not. In the latter camp is the negative retail sales surprise that sent markets into a tailspin on October 15. After an initial knee-jerk reaction, the 2-year rate differential is essentially unchanged from before that release. Instead, rates markets seem to have put the greatest weight on dovish Fed speak, which accounts for roughly half the Dollar-negative move in 2-year rates, while the foreign growth drag and Ebola fears might make up the remainder.

Risk-reward into the FOMC favours SPX over the Dollar
Two weeks ago, we argued that a rise in risk aversion supported the Dollar even as rates markets moved sharply against it. At the time, we thought that this combination – a Dollar-negative move in rates versus a Dollar-positive rise in risk aversion – made things a bit tricky for the USD. Given that risk appetite was holding up the USD in the face of low US interest rates, a dovish shift from the Fed could leave the Dollar vulnerable in the near term. We now re-examine that view as we head into the FOMC.

Our base case for today could be called “steady as she goes”:

(i) the FOMC ends QE3 with a final taper;


(ii) the “considerable time” forward guidance is adjusted only minimally, dropping the reference to asset purchases; and


(iii) other changes are small, with the “significant underutilization” phrase to describe labour market slack staying on, a possible acknowledgement of weaker growth abroad, but an unchanged risk assessment for the US that keeps the “nearly balanced” wording.

In our view, such a business as usual statement signals that, despite a weaker global growth outlook, the Fed remains optimistic on the US. In our view, this would see front-end rates and SPX rise, while the Dollar could well tread water, as the move in front-end rates is offset by improving risk appetite (as growth worries in the market abate on the Fed’s business as usual message).

On the dovish side, the main risk is an introduction of downside risks to inflation, which could weigh on front-end rates and the Dollar, while sending SPX higher. Even though market pricing has pushed the first Fed hike into Q4 2015, this scenario could see sizeable market moves since it would inevitably re-start a debate over the Fed’s reaction function. We think this scenario is unlikely, given that survey-based measures of inflation expectations remain stable and that the FOMC is more focused on core rather than headline inflation. It is also possible that the Committee downgrades its risk assessment for US growth, but again we see this as unlikely given that we are tracking Q3 above 3%. While an extension of asset purchases beyond this meeting was flagged by St. Louis Fed President Bullard, we think communication just prior to the start of the blackout period has made it clear that this will likely be the final taper.

On the hawkish side, any change in the “significant underutilization” language (for example, to “slack remains elevated”) would see the front-end interest rates and the Dollar move up, while SPX would likely fall, weighed down by rising rates and, potentially, a move up in risk aversion. Given that this language only went into the statement in July, this is unlikely at this stage, in particular since this meeting does not have a press conference. A hawkish surprise would also be no acknowledgement of weaker global growth. Again, given that this was perhaps the main talking point at the recent IMF/World Bank annual meetings, we see this as unlikely.

Goldman’s Exit 101…


Source: Goldman Sachs

via Zero Hedge Tyler Durden

Why Every Banker On Wall Street Suddenly Wants To Be Jefferies’ Managing Director Sage Kelly

Because, allegedly, according to a divorce complaint filed by his admittedly “cocaine-snorting” estranged wife and mother of two, former UBS healthcare banker poached by Jefferies in 2009, Sage Kelly (henceforth known as the “defendant”) is quite an entertaining, all around swell guy who singlehandedly would have boosted Spain’s GDP by several basis points.

Here are the details from her recently filed affidavit.

  • During the period of the parties’ courtship, defendant snorted lines of cocaine on virtually each occasion in which plaintiff and he socialized with defendant’s friends, colleagues, and business associates (including but not limited to, Ben Lorello, John Park, Dung Nguyen, Michael Gerardi, Trip Wolfe, Mark Monroe, and Dan Klock, all of whom also snorted lines of cocaine. Over the years, the group – of which defendant acted as “ringleader” – expanded to include Mark Hosny, Clay Segall, Bjorn Koch, Mark Beer, Max Newland, Ned Grace, Andrew Fisher, Sloane Angell, David Cooney, Michael Jaffe, and Peter Maiden), all of whom also snorted lines of cocaine and many of whom ingested other illegal drugs with defendant. (These individuals are collectively referred to below as “Defendant’s Drug Cohorts.”)
  • During the period of the parties’ courtship, defendant snorted heroin at The Tavern, a club in Southampton, New York, causing defendant to be so disoriented that without shoes, defendant attempted to walk – barefoot – a distance of several miles from The Tavern to the horne in which the parties were then renting a “share house.”
  • Commencing in or about 2003, defendant began to purchase cocaine and other illegal drugs from a “high-end” drug dealer, Glen (“Defendant’s Drug Dealer”).
  • From time to time during the period from in or about 2003 through in or about 2008, defendant purchased ecstasy tablets from Defendant’s Drug Dealer.
  • During the period from 2003 through 2008, defendant ingested ecstasy tablets so often and in such large quantities that he developed an inordinate tolerance. On numerous occasions, defendant ingested 2 or 3 ecstasy tablets within a period of several hours.
  • During the period from 2008 through 2014, defendant ingested Molly, a powder form of ecstasy. Defendant routinely stored Molly and cocaine in bags (or, from time to time, in squirt bottles designed and manufactured to contain a nasal spray) in the NYC Apt and in the Sag Harbor Residence.
  • Commencing in 2011, defendant began to use and abuse a hallucinogenic drug, “mushrooms.” Often, defendant ingested enormous quantities of “mushrooms” at the NYC Apt or at the Sag Harbor Residence. On one occasion in the summer of 2011, defendant and several of Defendant’s Drug Cohorts (including, but not limited to, Mark Hosny) continually ingested “mushrooms” throughout the day at the Sag Harbor Residence, while the Children were present – a day designated and celebrated by defendant as “Mushroom Day.”
  • In or about 2007, defendant ingested an extraordinarily dangerous, illegal drug known as “Special-K” at the Sag Harbor Residence, while Cameron was there. Defendant became so discombobulated and depressed – thus, entering and experiencing the phenomenon called a “K-Hole” – that he desperately clung to Cameron for several hours, causing Cameron to have palpable feelings of fear for her father’s well-being.
  • Continuously during the period from 2008 through May 2014, defendant abused cocaine, and he routinely purchased cocaine in large quantities from Defendant’s Drug Dealer, which defendant often distributed to and shared with a group of individuals – the core of which consisted of Defendant’s Drug Cohorts.
  • Upon information and belief, ln May 2014, defendant and several of Defendant’s Drug Cohorts engaged in a several-day, illegal “drugfest” in Las Vegas, Nevada in which they ingested various illegal substances, notably cocaine, and engaged in numerous forms of wild behavior, including but not limited to, engagement in sexual relations with prostitutes.
  • During the foregoing period, defendant’s abuse of illegal drugs, as well as alcohol, often caused him to “pass out,” including, for example, at a group gathering of defendant’s associates at Jefferies and Company, Inc., at the Sag Harbor Residence in the summer of 2011 or 2012, to urinate in the parties’ bed or on the wall in the parties’ bedroom, or to defecate in the parties’ bed or on the floor adjacent to the parties’ bedroom (on one occasion causing plaintiff and Cameron, who was suffering from the flu but who witnessed a doorman helping to carry defendant into the NYC Apt and depositing him onto the parties’ bed, to jointly clean-up defendant’s fecal matter) .

And then there’s this as summarized by the Post:

Christina, 39, said [Sage Kelly], 42, was trying to woo Aegerion Pharmaceuticals honcho Marc Beer the night she wound up having sex with Beer — and “sexual contact’’ with his prancing, big-breasted girlfriend, according to the papers.


The former Ralph Lauren event planner said the sex jaunt occurred in a hotel room at the Ritz-Carlton in Boston in 2012 after a booze- and cocaine-fueled evening.


Soon, Sage and I were having sex with each other on one bed, and Marc and his girlfriend were having sex on the other bed,’’ Christina says in her affidavit.


“Then, Marc said, ‘Let’s switch,’ ” she claims in the papers. “Marc suggested that his girlfriend and I have sex with each other.


“Mindful of [Sage’s] goal of securing business from Marc, I felt responsible not to disappoint Marc. So, his girlfriend and I had sexual contact for a few minutes, while Marc and Sage watched.


Then, Marc’s girlfriend joined Sage on our bed, and Sage and she started to have sexual relations.


Then, I joined Marc on his bed, and he and I engaged in sexual relations,’’ Christina said in the sworn affidavit.


“Following that evening, Marc Beer has been an important client of Sage and, presumably, a substantial reason for Sage’s enormously successful career at his current investment bank, Jefferies and Company Inc.,’’ she said.


Christina, a graduate of Manhattan’s tony Horace Mann School, said her husband of 12 years routinely pestered her into engaging in threesomes.


She also alleged his sexual conquests outside their marriage included a romp with the wife of co-worker Dung Nguyen in the swimming pool at the Kellys’ family vacation home in Sag Harbor, LI.

There is much more in the full filing below. Of course, since this is a divorce proceeding and Kelly’s wife, Christina, will do everything in her power to cast her soon to be ex-husband in the worst possible light, one should certainly take any and all of the allegations above with a baggie of blow. That said, virtually all of Wall Street wishes every single word above is true, because just like that, Sage Kelly, upon information and belief, became the idol of every banker on Wall Street where the pinnacle of self-actualization always concludes with the two substances that are Europe’s Pro Forma GDP best friend: hookers and blow.

Full filing below:

Sage Kelly Complaint by zerohedge

via Zero Hedge Tyler Durden

The Fed is Absolutely Terrified of Something… What Is It?

What is the Fed so terrified of?


For five years we’ve been told that the world was in recovery. “Analysts” and pundits have trotted out every explanation imaginable for why things are in fact great and the markets should go straight up.


On top of this endless and mind-numbing chatter, the Fed has spent over $4 trillion… an amount larger than most sovereign economies. To put this into perspective, the Fed could have spent less money buying EVERY SINGLE ITEM OF ECONOMIC OUTPUT FROM GERMANY FOR A YEAR.


Between this insanity and the endless chatter of the world being great we have to ask… if things are SO great… why is it that even a 10% correction in stocks triggers panic from the Fed?


See the small dot in the chart below? That is the massive drop that caused both Janet Yellen and Fed President Bullard to verbal intervene to hold the markets up. They couldn’t even stomach a dip that barely registers on the five-year monster bull market without assuring the markets that they’d help.



It’s absolutely insane especially when you consider that stocks could have fallen to 14000 on the Dow and STILL been in a bull market.



All of this tells us, in no uncertain terms that the Fed is absolutely panicked about something. What it is, we cannot know for certain, but given that the general public is now aware of the abject fraud, corruption, and incompetence surrounding the bailouts and Fed policies, we can only assume it’s something BIG.


The reality is that the Fed never fixed the last crisis. It never addressed the financial system’s leverage. It never implemented any meaningful reform. The only thing it did was create another bubble.


And we all know how bubbles end.


Don’t let the second round of the financial crisis crush your portfolio… we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.


You can pick up a FREE copy at:


Best Regards

Phoenix Capital Research







via Zero Hedge Phoenix Capital Research

Mortgage Purchase Applications Plunge To 19-Year Lows

Presented with little comment.. because realistically what is there to say about a so-called ‘housing recovery’ when the volume of applications for home purchases is the lowest since August 1995. Keep believing that lower rates will support home prices… keep believing the Fed’s QE worked… or face facts, this is not your mother’s housing market any more…

The Recovery…


The long-term…


The transmission channel is officially broken…


Charts: Bloomberg

via Zero Hedge Tyler Durden

US Dollar Tumbles Ahead Of FOMC

Whether it is European banks (Greece and Italy) plunging again, lower-than-expected crude inventories, or expectations of an uber dovish Fed this afternoon, the US Dollar has suddenly gone bidless against the major currencies.

USD dumped…


Decoupling from stocks…



Charts: Bloomberg

via Zero Hedge Tyler Durden

Good Riddance To QE – It Was Just Plain Financial Fraud

Submitted by David Stockman via Contra Corner blog,

QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In round terms, this official counterfeiting spree amounted to $3.5 trillion— reflecting the difference between the Fed’s approximate $900 billion balance sheet when its “extraordinary policies” incepted at the time of the Lehman crisis and its $4.4 trillion of footings today. That’s a lot of something for nothing. It’s a grotesque amount of fraud.

The scam embedded in this monumental balance sheet expansion involved nothing so arcane as the circuitous manner by which new central bank reserves supplied to the banking system impact the private credit creation process. As is now evident, new credits issued by the Fed can result in the expansion of private credit to the extent that the money multiplier is operating or simply generate excess reserves which cycle back to the New York Fed if, as in the present instance, it is not.

But the fact that the new reserves generated during QE have cycled back to the Fed does not mitigate the fraud. The latter consists of the very act of buying these trillions of treasuries and GSE securities in the first place with fiat credits manufactured by the central bank. When the Fed does QE, its open market desk buys treasury notes and, in exchange, it simply deposits in dealer bank accounts new credits made out of thin air. As it happened, about $3.5 trillion of such fiat credits were conjured from nothing during the last 72 months.

All of these bonds had permitted Washington to command the use of real economic resources. That is, to consume goods and services it obtained directly in the form of payrolls, contractor services, military tanks and ammo etc; and, indirectly, in the form of the basket of goods and services typically acquired by recipients of government transfer payments. Stated differently, the goods and services purchased via monetizing $3.5 trillion of government debt embodied a prior act of production and supply. But the central bank exchanged them for an act of nothing.

Contrast this monetization process with honest funding of government debt in the private market. In the latter event, the public treasury taps savings from producers and income earners and re-allocates it to government purchases rather than private investments. This has the inherent effect of pushing up interest rates and, on the margin, squeezing out private investment. It is a zero sum game in which savings retained from existing production are reallocated.

To be sure, the economic effect is invariably lower investment, productivity and growth down the line, but the process is at least honest. When the public debt is financed from savings, government purchase of goods and services are funded with the fruits of prior production. There is no exchange of something for nothing; there is no financial fraud.

And it is the fraudulent finance of public deficits which is the real evil of QE because the ill effects go far beyond the standard saw that there is nothing wrong with central bank monetization of the public debt unless is causes visible inflation of consumer prices. In fact, however, it does cause enormous inflation, but of financial asset values, not the CPI.

Despite the spurious implication to the contrary, central banks have not repealed the law of supply and demand in the financial markets. Accordingly, their massive purchases of the public debt create an artificial bid and, therefore, false price. Moreover, government debt functions as the “risk free” benchmark for pricing all other fixed income assets such as home mortgages, corporate debt and junk bonds; and also numerous classes of real assets which are typically heavily leveraged such as commercial real estate and leased aircraft.

In short, massive monetization of the public debt results in the systematic repression of the “cap rate” on which the entire financial system functions. And when the cap rate gets artificially pushed down to sub-economic levels the result is systematic over-valuation of all financial assets, and the excessive accumulation of debt to finance non-value added financial engineering schemes such as stock buybacks and the overwhelming share of M&A transactions.

Needless to say, the false prices which result from massive monetization do not stay within the canyons of Wall Street or even the corporate business sector. In effect, they ride the Amtrak to Washington where they also deceive politicians about the true cost of carrying the public debt. At the present time, the weighted average cost of the $13 trillion in publicly held federal debt is at least 200 basis points below a market clearing economic level—–meaning that debt service costs are understated by upwards of $300 billion annually.

At the end of the day, the fraud of massive monetization makes the rich richer because it drastically inflates the value of financial assets—–roughly 80% of which is held by the top 5% of households; and it makes the state more bloated and profligate because its enables the politicians to spend without imposing the pain of taxation or the crowding out effects which result from honest borrowing out of society’s savings pool.

In the more wholesome times before 1914, the Federal government didn’t borrow at all. During the half-century between the battle of Gettysburg and the eve of World War I, the public debt did not rise in nominal terms, and amounted to just $1.5 billion or 4% of GDP at the time of the Fed’s creation.  Even then, the Fed was established as only a “bankers bank” which could not own a dime of public debt, but instead existed for the narrow mission of liquefying the banking market by means of discounting solid commercial paper on receivables and inventory for ready cash.

The modern form of monetization arose in the service of financing war bonds, not managing the business cycle, levitating the GDP or boosting the labor market toward the artifice of “full employment”. These latter purposes reflect a century of “mission creep” and the triumph of the statist assumption that governments can actually tame the business cycle and elevate the trend rate of economic growth.

But history refutes that conceit. In the early post-war period, central bank interventions mainly caused short term bouts of unsustainable credit growth and an inflationary spiral which eventually had to be cured by monetary stringency and recession. In the process of repetition over several decades culminating in the 2008 crisis, the household and business leverage ratios were steadily ratcheted upwards until the reached peak sustainable debt.

Now the credit channel of monetary policy transmission is broken and done. The Fed’s most recent massive monetization and “stimulus” has therefore simply inflated financial asset values—-meaning that the Fed has become a serial bubble machine.

There is a better way, and it contrasts sharply with the systematic fraud of QE. That alternative is called the free market, and at the heart of the latter is interest rates which are “discovered” by the market, not pegged and administered by the central bank. Stated differently, the free market requires that all debt and other forms of investment be funded out of society’s pool of honest savings—-that is, income that is retained out of production already made.

Under that regime there is no fraudulent bid for public debt and other existing assets based on something for nothing. Markets clear where they will, and interest rates are the mechanism by which the supply of honest savings and the demand for investment capital, including working capital, are balanced out.

Needless to say, free market interest rates are the bane of Wall Street speculators and Washington spenders alike. They can spike to sudden and dramatic heights when demand for funds to finance government deficits or financial speculation out-run the voluntary pool of savings generated by society. So doing, they bring financial bubbles and fiscal profligacy up short.

In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don’t bother to inform our monetary politburo. As soon as the current massive financial bubble begins to burst, it  will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance.

But this time may be different. Perhaps even the central banks have reached the limits of credibility—- that is, their own equivalent of peak debt.

“I think QE is quite effective,” Boston Fed President Eric Rosengren said in a recent interview with The Wall Street Journal, describing the approach as an option for dealing with an adverse shock to the economy.

via Zero Hedge Tyler Durden

Rosneft “Radical” Sanctions Retaliation Proposal Sends Russian Bonds, Currency Plunging

10Y Russian bond yields have broken above 10%, trading at the highest yields since 2009 as the Ruble plunges once again to fresh record lows against the dollar. These significant moves come on the heels of two notable headlines overnight. First, German exports to Russia slumped 26.3% YoY in August (down a stunning 16.6% year-to-date with vehicle exports plunging 27.7%) as sanctions batter bilateral trade. Secondly, Rosneft has proposed what is being described as “radical” reactions to the West’s sanctions, which the Kremlin has (for now) denied.

Bonds and Ruble are tumbling…


As German exports to Russia collapsed (via Xinhua)

German exports to Russia dropped significantly in August as the Ukraine crisis hit their bilateral trade, official data showed on Wednesday.


In August, German exporters delivered goods worth 2.3 billion euros (about 2.9 billion U.S. dollars) to Russia, the German Federal Statistical Office (Destatis) said. Compared to the same month of previous year, the exports slumped by 26.3 percent.


From January to August, German exports to Russia fell by 16.6 percent year on year. Vehicles and motor vehicle products was hit the worst, suffering a decline of 27.3 percent.


The drops showed a deteriorating bilateral trade between the two countries. From 2010 to 2012, German exports to Russia enjoyed high growth every year. In 2011, the exports rose by 30.8 percent.

And Rosneft unveils new “radical” sanctions (via Interfax)…

Russian presidential aide Andrei Belousov said he had received proposals from Rosneft on how to react to Western sanctions, and these proposals are being reviewed.


“I would say that the radicalism of the proposals for now exceeds the sharpness of today’s situation,” Belousov told journalists on Wednesday.


“We are in the process of studying [the proposals],” he said.


Commenting on Rosneft’s proposals, Economic Development Minister Alexei Ulyukayev said: “It’s a very complex document, complexly formulated. I don’t think it is grounds for making any decisions.”

The Kremlin has denied the rumor

Russian presidential spokesman Dmitry Peskov denied on Wednesday reports that Russian oil major Rosneft allegedly prepared proposals on new retaliatory sanctions.


“This absolutely does not correspond to reality, this information that Rosneft allegedly prepared proposals of anti-sanctions nature,” Peskov said.


“Preparations of any proposals are out of the question,” Peskov said. “This is not true that there are some proposals from Rosneft.”

*  *  *

It seems someone is really upset as Sechin news just reported: Rosneft to file lawsuit against Kommersant daily – the entity that broke the story.

via Zero Hedge Tyler Durden

Oil Residue The Size Of Rhode Island Covers Gulf Of Mexico Seafloor As Result Of Macondo Well Disaster

Ever since the April 2010 disaster on the BP-operated Macondo well in the Gulf of Mexico, there was one big outstanding question: where did the bulk of the oil gol? Now, thanks to a research team led by David Valentine, a microbial geochemist at the University of California, Santa Barbara, sampled more than 534 locations near the spill site, gathering more than 3,000 individual samples, we know the answer: the oil spill – some 10 million gallons of coagulated oil – left an oily "bathub ring" on the sea floor of the Gulf of Mexico, about 25 miles from the well, that's about the size of Rhode Island.

The researchers found an area of 1,250 square miles (3,237 square km), mostly southwest of the Macondo well, where a thin sheen of oil rests in patches on the top half-inch of the seafloor, according to the NSF.

The reason why the massive spill was never visible on the ocean surface? "Based on the evidence, our findings suggest that these deposits are from Macondo oil that was first suspended in the deep ocean, then settled to the seafloor without ever reaching the ocean surface," Valentine said in the statement.

"This analysis provides us with, for the first time, some closure on the question, 'Where did the oil go, and how did it get there?'" Don Rice, the program director of the National Science Foundation's Division of Ocean Sciences, told Live Science in a statement.

More from Live Science:

The droplets of oil started out 3,500 feet (1,067 meters) below the ocean surface and were caught by deep-ocean currents before raining down another 1,000 feet (305 m) to the seafloor, Valentine said. This hydrocarbon rain explains the damage suffered by coral around the site, he said.


"The pattern of contamination we observe is fully consistent with the Deepwater Horizon event but not with natural seeps," Valentine said.

Unfortunately, there is more: a major portion of the spill has still not be accounted for and much of the deep ocean oil is still missing. The portion Valentine and his colleagues traced represents only 4 to 31 percent of the oil thought to be trapped in the depths of the ocean (up to 16 percent of the total oil spilled).

AP adds that according to Valentine the spill from the Macondo well left other splotches containing even more oil. He said it is obvious where the oil is from, even though there were no chemical signature tests because over time the oil has degraded.

"There's this sort of ring where you see around the Macondo well where the concentrations are elevated," Valentine said. The study, published in Monday's Proceedings of the National Academy of Sciences, calls it a "bathtub ring."


Oil levels inside the ring were as much as 10,000 times higher than outside the 1,200-square-mile ring, Valentine said. A chemical component of the oil was found on the sea floor, anywhere from two-thirds of a mile to a mile below the surface.


The rig blew on April 20, 2010, and spewed 172 million gallons of oil into the Gulf through the summer. Scientists are still trying to figure where all the oil went and what effects it had.

Needless to say, BP is not enthused and hardly wants this walk down memory lane recreated which is why the oil giant questioned the conclusions of the study. In an email, spokesman Jason Ryan said, "the authors failed to identify the source of the oil, leading them to grossly overstate the amount of residual Macondo oil on the sea floor and the geographic area in which it is found."

It's impossible at this point to do such chemical analysis, said Valentine and study co-author Christopher Reddy, a marine chemist at Woods Hole Oceanographic Institute, but all other evidence, including the depth of the oil, the way it laid out, the distance from the well, directly point to the BP rig.

And, of course, there is the logical question: who else had a massive oil spill in the GOM in recent years?

And while some of the oil has been found, the question where the rest is remains, as does the far more important question: what was the spill's impact on sealife and sea-currents in the Gulf? One may need to wait many years until that particular answer is revealed.

Source: Fallout plume of submerged oil from Deepwater Horizon

via Zero Hedge Tyler Durden