It Is Failing: ALL OF IT

I have tried to warn people since the summer of 2007 that you cannot "print" your way out of a credit over-expansion, nor can you deny the ultimate contraction in the economy and assets.

Bernanke and other policymakers, including both the Bush and Obama Administrations, have tried to deny reality.

You can't.

The Bond Market has had it with the games, and despite a "good" auction today signaled its disgust with the lies, the unending deficits and both bonds and stocks sold off at the same time:



I know I keep pointing out this chart, and what it means, but you can't ignore it. It is, in fact, everything.

This chart is not signaling economic recovery when on the same day the TNX jumps by 5% the market declines by 100 DOW points.

Guys, this is the start of the bond market dislocation that I have written about for the last two years. It may stop or it may accelerate, but this much is certain - even if it stops here the dream of a 4% mortgage that Bernanke has hawked as the "key" to housing stabilization is not going to happen.

When we got down into the mid 4s I told people close to me to either lock or refinance and do it now. Some did, some were holding out for that 4% number.

How's that look now?

Let me show you what happened on eRATE's real-time mortgage rate quoter this afternoon:



This was precipitated by a near-collapse in MBS paper about the same time the /ZN (10 year Treasury futures) took a huge dump.

You saw that right - the 30/fixed is now being quoted at 6.5%, up nearly 30% in one day.

I'm sure this will "settle down" a bit, but that sort of dislocation is what happens when you transfer the risk of insolvency to the Federal Balance Sheet and start playing games at The Federal Reserve.

By the way, this makes the payment for a $200,000 note at 5% worth only $170,000 at 6.5%.

Bluntly: Bernanke's screwing around just cost you 15% of the value of your house IN ONE DAY.

When the Treasury Market dislocates risk premiums go to the moon and EVERY sort of duration credit gets more expensive all at once.

The market calls all bets, Bernanke went all-in with 2-7 off suit, the flop came up A-A-K and the bond market is grinning.

Anyone care to bet what the bond market has for hole cards?

This will translate into corporate funding costs and when it does you're going to see a staggering impact on Corporate America, triggering another monstrous wave of bankruptcies.

THE GOVERNMENT MUST STOP THE STUPIDITY NOW; WE ARE HEADED FOR A NEAR-EXACT REPEAT OF THE 1930s WHEN FUNDING ESSENTIALLY DISAPPEARS.

BERNANKE'S TAMPERING HAS DONE NOTHING BUT MAKE THE PROBLEM WORSE!

Disclosure: Getting short everything and soon will be shorter than a mosquito if the government keeps this crap up.

China warns Federal Reserve over 'printing money'

China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed's direct purchase of US Treasury bonds.

By Ambrose Evans-Pritchard
Last Updated: 1:52PM BST 27 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed's leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

more:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5379285/China-warns-Federal-Reserve-over-printing-money.html