European Central Bank transacting primary market bond purchases – direct from companies…

The European Central Bank (ECB), has been a heavy-weight purchaser of corporate bonds via the secondary market (through various proxy dealers) – and in the process conveniently transferring corporate debt ‘off’ the books of struggling corporations… and onto the backs of tax-paying European citizens in the public sector.

A fair amount of those acquired corporate bonds are of questionable investment grade quality, and some with negative yields (in other words, they are paying corporations for the privilege of purchasing their debt.

The ECB should give European citizens the same direct (primary market) access to liquidity, at the same generous terms, that they are currently providing to corporations…

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ECB Reveals That 15% Of Its Bond Purchases Directly Funded Companies

ZeroHedge, Jun 21, 2017 – Excerpts:

After several members of the European Parliament criticized the ECB for a lack of transparency surrounding its corporate bond buying, suggesting some companies could be favored over others, today the central bank with the €4.2 trillion balance sheet released a bulletin providing additional details for European lawmakers on its corporate sector purchase programme (CSPP).

The highlights: the ECB now owns 952 securities amounting to €93.7 billion, or 14.1% of the total €664 billion outstanding, with the central bank adding that it is “well diversified over around 950 securities issued by around 200 issuer groups.” The report states that the breakdown of CSPP holdings by country of risk follows that of the CSPP-eligible bond universe very closely, and that there aren’t “any major deviations between CSPP holdings and their respective shares in the CSPP-eligible universe in terms of sectors of economic activity or rating groups.”

Looking  at  the  country  breakdown,  French  and  German  issuers  continue  to  dominate the bond count, consisting of 494 issuances worth €363bn in amount outstanding. Bonds from non-Eurozone corporates were also on the list, mainly by Swiss issuers (32 issuances worth €24bn). At the sector level, Utilities remains the top pick (250 issuances worth €161bn),  while non-cyclical  consumers  is  a  distant  second  (145  issuances,  €110bn  in  amount outstanding).

One key observation is that according to a separate analysis by UBS, the ECB now hold 229 bonds out of a total 952 (whose total notional outstanding is €664 billion), or 24%, which are rated BB+ or non-rated (NR), suggesting there may be a drift toward lower quality holdings, in effect making a quarter of the ECB’s corporate balance sheet a “bad bank.” Expect this number to grow as more European companies are downgraded and become fallen angels.

The ECB also admitted that 12% of corporate bonds holdings were purchased at negative yields. As of this moment, 85 (8.9%) of the 952 securities it owns are negative yielding.

But the most striking observation is that, as the ECB reports, “purchases under the CSPP are made in both the primary and the secondary markets” and adds that since its inception “15% of CSPP holdings have been purchased in the primary market”, in other words providing funds directly to companies, instead of merely transacting in the secondary market. Monthly net purchases during the period from June 2016 to May 2017 have ranged between just below €4 billion and just below €10 billion (see Chart B). Purchases were low ahead of the year-end, due to negligible bond issuance and low secondary market liquidity.

This is also known as directly funding companies, also known as “monetizing” debt, and while the ECB does not do that to sovereign debt (to the best of our knowledge) it clearly does so with private corporations.

This means that the ECB has subsidized handed out billions to a subset of mostly unknown corporate bond issuers, who sold bonds not to price-descriminate market players who do not create money out of thin air, but directly to the central bank.

And indicatively, while the ECB did not explicitly highlight it, in the last week for example, the ECB bought bonds issued by APRR, Engie, HeidelbergCement, Metso, Sagess and Saint Gobain. The full list of ECB corporate bond holdings can be found here, courtesy of UBS.

Source: ECB

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Global Central Banks have a unique opportunity to clean up debt at ‘ground level’ by granting direct access to liquidity, through a “Citizens Credit Facility,” that they have been doling out, often-times surreptitiously, to private corporations.

And here is a powerful economic blueprint for this unique opportunity:

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2368)

 

Consumer banking needs a profound ‘re-balancing.’ Solution: The Leviticus 25 Plan

A notable imbalance has developed in consumer banking, an imbalance that is easily correctable.

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Acting-Man, April 21, 2017

“The typical annual percentage yield (APY) on savings deposits is not 1 percent. It’s not even 0.1 percent. Rather, it’s about 0.01 percent; which is effectively less than zero after inflation.

What’s more, if an individual loans $10,000 to the bank for an entire year, in the form of a certificate of deposit (CD), they’ll get an APY of about 0.35 percent. No doubt, an APY of 0.01 percent on deposits and 0.35 percent on 1-year CDs in the face of 16 percent APR on credit card debt is an utter insult.

Conversely, the banks have never had it so good. They borrow from the Fed at less than 1 percent interest. Then they buy U.S. Treasury notes – currently the 10-Year note is yielding 2.24 percent. After that they issue credit to consumers at 16 percent APR while paying 0.01 percent yield on savings deposits. Has there ever been a more questionable business that’s given every advantage under the sun?”

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There is one economic power-plan in America that levels the playing field.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2361)

It is time to eliminate debt at ground level and recapitalize the banking sector with… America’s #1 economic acceleration plan.

Banks Are Becoming Less Safe… Again

“…a safe, conservative bank maintains high levels of cash, especially relative to the total amount of deposits. But that’s not happening in the Land of the Free…  cash is falling while deposits are increasing. This is the OPPOSITE of what a responsible bank should be doing.”    ZeroHedge, Jun 13, 2017-  Excerpts:

“Banks that lack proper liquidity can rapidly run into catastrophic problems, forcing them to fire sale assets in order to raise cash, which in turns could trigger a solvency crisis.

In both of these scenarios, solvency and liquidity, cash is king.

(Note that “cash” can mean both physical currency sitting in a vault, as well as a bank’s electronic deposits at Federal Reserve and other cash equivalents.)

For solvency, cash is about as risk-free as it gets.

Anything that a bank does with your money is going to carry some level of risk. Buying bonds. Car loans. Student loans. Business loans. Residential mortgages.

These all carry certain risk of default. Cash doesn’t.

So a bank with higher levels of cash will typically have much lower risk to its solvency.

Simultaneously, a bank with a strong cash position is also liquid, and hence more likely to be able to honor its customers’ transactional needs.

Bottom line, a safe, conservative bank maintains high levels of cash, especially relative to the total amount of deposits.

But that’s not happening in the Land of the Free.

The Federal Reserve’s most recent report on “Assets and Liabilities of Commercial Banks in the United States” published last Friday showed a continuing trend in the erosion of bank safety.

This is a weekly report, so there’s tons of data. And the trend goes back now at least 2.5 years.

Since late 2014, for example, Fed data show that total cash assets at US banks has been in steady decline, dropping roughly 25% over that period.

But at the same time, total deposits at the banks has actually increased around 15%.

So you can see the issue: cash is falling while deposits are increasing. This is the OPPOSITE of what a responsible bank should be doing.

A conservative bank seeks to INCREASE or at least MAINTAIN the level of cash it has on hand as a percentage of customer deposits.

Banks in the US have been doing the opposite– decreasing their cash holdings while deposits have been rising.

Proportionally, the aggregate cash-to-deposit ratio in the US has fallen by 32% since late 2014.

That’s a steep drop.

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The Leviticus 25 Plan changes the game.  Entirely.

The Plan grants direct liquidity allocations to U.S. citizens via a Fed-structured Citizens Credit Facility.

This facility would be a mirror image of the half-dozen credit facilities that the Fed erected during 2008 to reliquify Wall Street’s banking sector, including the Primary Dealer’s Credit Facility, Term Securities Lending Facility, Commercial Paper Funding Facility, Term Auction Facility, and other liquidity pipes.

The Leviticus 25 Plan will generate massive debt reduction at the family level, which means that cash will be replacing a meaningful percentage of loan portfolio assets (including distressed and non-performing loans).

Banks will then enjoy a lower risk profile.  American families will enjoy a significantly lower level of financial stress.  Federal, State, and Local governments will experience vastly improved budget pictures.

There is no other plan that delivers the raw economic horse-power of this plan.

………………………………..

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2360)

 

Paul Bodsky, QB Asset Management, July 2012: Global debt load – “staggering.” When creditors fail, banks lose.

A LOOK BACK – July 2012:

Globally, there is approximately “$100 trillion in bank assets” (bank assets are primarily comprised of their loan base).  And for the U.S. those bank assets (loans)are about “$20 trillion held in the U.S. and abroad.”

The “Base Money” (which is “currency in circulation plus bank reserves held at Central banks”) behind those massive loan levels amounts to a mere “$8.5 to $9 trillion dollars.”  This degree of leverage in the global banking system means that currently, “We are in a baseless monetary system,” according to Brodsky.

More from Brodsky:  “The marketplace forces deleveraging, and there are two ways to deleverage. One is to let credit deteriorate on its own in the marketplace. And the other is to manufacture new currency or bank reserves. Those are the only two ways to deleverage a balance sheet.

What policy makers do not want to see is bank asset deterioration. That would lead to all sorts of bad things. You would see banks fail. You would see bank systems fail. You would see debtors fail and it would just feed on itself in an accelerating fashion. And so monetary policy makers have no choice but to deleverage in the other way, which is to colloquially print money; to manufacture electronic credits and call them bank reserves.

And to the degree that that extends into the private sector where debtors begin to fail en masse, that would increase failures of the bank assets in turn. And it would end the mortgage bond securities market, for example, and the leveraged loan markets, and end the private sector shadow banking system. So it does not work for anybody to have credit deteriorate. The only way to deleverage an economy is as we are saying: to create new base money with which to do it.”

Brodsky Summary:  “What policy makers do not want to see is bank asset deterioration. That would lead to all sorts of bad things. You would see banks fail. You would see bank systems fail. You would see debtors fail and it would just feed on itself in an accelerating fashion. And so monetary policy makers have no choice but to deleverage in the other way, which is to colloquially print money; to manufacture electronic credits and call them bank reserves.

And to the degree that that extends into the private sector where debtors begin to fail en masse, that would increase failures of the bank assets in turn. And it would end the mortgage bond securities market, for example, and the leveraged loan markets, and end the private sector shadow banking system. So it does not work for anybody to have credit deteriorate. The only way to deleverage an economy is as we are saying: to create new base money with which to do it.

The point here is you can either monetize debt or you can monetize (sell) assets. Or you revalue an asset on the balance sheet already of the Treasury or the Fed. And obviously that asset, we think, is gold. And that is the monetary asset that they have always reverted in the past. And that is the one we think that currencies, currently baseless currencies will be devalued against.

And so that we think is the mechanism that is ultimately going to play out whether in the marketplace or through some policy administered devaluation. Currencies are going to be devalued and that is where we sit right now. Timing this is impossible. We think the amount it would have to be devalued by, getting back to your original question, has got to be the amount of or something close to the amount of the gap (tens of US$ trillions) between bank assets and bank reserves. So it is a significant number.”

Full article / podcast from Peak Prosperity:  http://www.peakprosperity.com/podcast/79208/paul-brodsky-central-banks-are-nearing-inflate-or-die-stage?utm_campaign=weekly_newsletter_3&utm_source=newsletter_2012-07-07&utm_medium=email_newsletter&utm_content=node_title_79208

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Meet America’s great debt neutralizer, offering massive debt reduction in both public and private sectors.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2355)

June 2017: Tax receipts falling off, economic growth listless. There is a powerful economic solution to this smoldering misadventure…

Tax revenue growth is sluggish, economic growth – listless.  We are on a course where nobody wins…

It is time to think outside-the-box…

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State Corporate Tax Receipts Just Crashed The Most Since The Recession

ZeroHedge, June 9, 2017 – Excerpts”

“After flatlining for the past year, US income tax receipts – both at the federal government and on a state and local level – have been disappointing, and have posted a sharp drop since the start of the year, which is “sounding an alarm about the health of the US economy” in BofA’s words (in addition to the countless other alarms about the health of the economy, which however are ignored due to the record stock market).

As Bank of America highlights something we warned about last September, according to the Rockefeller Institute and CBO, US federal income tax receipts have come in about 3% below expectations this year.

In fact, corporate income tax receipts fell a sharp $7bn in 1Q, the biggest drop since the recession. Since corporate income tax receipts only make up about 14% of the total, there was still a modest gain in overall state and local tax receipts. While there has been particular weakness of late, the trend through last year was weak; according to the Rockefeller Institute, total state tax collections grew only 1.2% in FY16 (declined in real terms), the weakest performance since 2010.

On a federal level, it will impact the amount the government has to borrow to fund its deficit, therefore determining when the government will hit the debt ceiling. This is quite relevant today since the debt ceiling was officially reached on 17 March and has been extended using extraordinary measures. However, the weakness in tax receipts could create challenges, pulling forward the date that the debt ceiling is hit. This was likely a motivating factor for Treasury Secretary Mnuchin to ask Congress to raise the debt ceiling before the Congressional summer recess begins on 28 July. In our view it is possible this becomes another point of conflict in Washington in coming weeks.

But most importantly, economists care about tax receipts because it is one of the few unvarnished, unadjusted, and realistic data points regarding the health of the overall economy. Tax receipts are a function of income creation in the economy: a slow-down in tax receipts indicates a slowing in income creation and therefore overall economic performance. Growth in federal tax receipts trends with the growth in aggregate payrolls (aggregate hours worked x earnings), which is why the recent deterioration in federal tax receipted is especially troubling.

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It is now time for an economic plan where everyone wins.

The Leviticus 25 Plan.

According to the CBO, our government is on track to add a minimum of $3.497 trillion to the national debt over the next five years, an average annual deficit or $699.4 billion.

The five year accumulating deficit increases, totaling $3.497 trillion, will be weighed down further with a related interest expense (2.23% per annum) amounting to $200.96 billion, for a total of $4.196 trillion.

The Leviticus 25 Plan generates a total government recapture benefit over the first five years of the program (federal income tax refund recapture plus federal expenditures recapture) of $8.56 trillion, an average of $1.72 trillion per year.

The Leviticus 25 Plan recapture provisions thereby generate an average annual budget surplus over the next five years of $1.02 trillion per year ($1.72 trillion – $699.4 billion) plus additional savings of $200.7 billion in unrealized interest expense.

The annual $1.02 trillion surplus during each year (2017-2021) will be used, in turn, to reduce the Federal Reserve Citizens Credit Facility balance sheet from the initial expansion event.

The Leviticus 25 Plan is unquestionably the most powerful economic acceleration plan in America.  It is the only economic plan that pays for itself over 10-15 years.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2354)

U.S. – June 2017: staggering debt, liquidity problems. Solution: The Leviticus 25 Plan

The U.S.. economy has been crawling along in recent years.  Debt pressures are building…

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**$20 Trillion Debt – It’s Time To Start Believing In The Impossible

  ZeroHedge, Mar 28, 2017 – Excerpts:

Nearly every major western government is bankrupt with woefully unsustainable finances.

The United States leads the way with $20 trillion in debt and a total negative net worth of MINUS $76.7 trillion, according to its own annual financial report.

The US government loses money each year with no end in sight, posting a staggering loss of $1.05 trillion in 2016.

And relative to the sizes of their own economies, Japan, Greece, Italy, Spain, France, and the United Kingdom are not far off.

Moreover, pension funds across the world are in dire condition.

In the United States, Social Security and Medicare report each year that their programs are rapidly running out of money and have even calculated the date of their own insolvencies.

This isn’t some wild conspiracy theory, these are public reports signed by the Treasury Secretary of the United States.

We also see major risks with global central banks.

As I wrote to you just three days ago, the Federal Reserve is nearly insolvent.

And as they continue to increase interest rates throughout this year, they will effectively engineer their own bankruptcy.

In addition, major financial markets are extraordinarily overvalued.

Stocks in the United States trade at valuations only seen just prior to major crashes.

And as the Wall Street Journal reported just -this morning-, “insiders”, i.e. key shareholders and managers who have inside knowledge of their businesses, are actively selling their stocks.

Economic growth in most of the developed world has also fallen flat– just 1.6% in the United States in 2016, 1.4% in Canada, and 1.9% in Germany.

These are hardly inspiring numbers, especially given that inflation is rising around the world.

According to the US Labor Department, inflation reached 2.7% last month, which was higher than 2.5% in January, which was higher than 2.1% in December, which was higher than 1.7% in November.

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America’s economic powerhouse solution:

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2349)

The answer to America’s liquidity problems: Grant U.S. citizens the same access to direct liquidity extensions that was provided to Wall Street’s financial sector 2008-2012. The Leviticus 25 Plan

Let’s do a brief review…
 
     During the peak of the housing boom, mortgage tranches were packaged and securitized as Mortgage Backed Securities (MBS)  –  and peddled as income-producing investments by major investment houses.  Participating parties like Goldman Sachs and others also purchased ‘insurance’ to hedge their risk profiles in the event of a housing market ‘swan dive’ – and a potential collapse of the underlying payment streams supporting the value of these MBS investments vehicles.
 
 The ‘insurance’ was purchased (primarily from AIG) in the form of Credit Default Swaps (CDS).  And, thanks to some nifty deregulation orchestrated by Robert Rubin (Treasury Chief under Clinton), AIG was not required to carry any meaningful level of reserves to back the Credit Default Swaps – to pay their counterparties if the Mortgage Backed Securities market… ‘went south.’ 
 
It did just that, and the rest is history.  Housing tanked.  MBS’ tanked.  And AIG had no reserves  with which to pay Goldman and others.  Had normal bankruptcy proceedings prevailed, Goldman Sachs would likely have received just pennies on the dollar in settlement – for placing a huge ‘blind bet’ on an investment that had no reserves backing it up.
 
But – the U.S. Government stepped in, and through an arbitration process, brokered a settlement of 100 cents on the dollar, amounting to a direct cash transfusion of a cool $12.9 trillion – from the U.S. taxpayer – to Goldman Sachs.  
 
And then the real ‘fun’ began.  The investment banking heavyweights, Goldman Sachs and J.P. Morgan, were ‘fast-tracked’ for “federal bank charters.’  Their newly acquired status as commercial banks allowed them to joined in with “Bank of America, Citigroup, J.P. Morgan Chase and other banking titans who could go to the Fed and borrow massive amounts of money” at near-zero percent interest. 
 
“The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008.  “They had no other way to raise capital at that moment, meaning they were on the brink of insolvency,” says Nomi Prins, a former managing director at Goldman Sachs. “The Fed was the only shot.”
 
“In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. 
 
Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.”
 
“You’re borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way,” says the manager of one prominent hedge fund. “It’s free money.” 
(Source:  Wall Street’s Bail out Hustle – Matt Taibbi,  2-17-10)
 
And that is one of the primary justifications for the Leviticus 25 Plan  – granting U.S. citizens the same direct access to the Federal Reserve discount window – that was bestowed upon Goldman Sachs, J.P. Morgan, and certain other banking titans. 
 
After all, it is ‘our money.’  And granting U.S. citizens direct access to liquidity extensions from a Federal Reserve special “U.S. Citizens Credit Facility,”  would clean up liquidity issues at the family level: $75,000 per U.S. citizen at zero percent interest – with a specified  ‘recapture provision.’
 
The Leviticus 25 Plan pays for itself over a 10-15 year period.  It would generate $1.02 trillion budget surpluses each of the first five years.  It would reignite economic growth, providing family income earning jobs, eliminating massive tracts of debt at ground level, and restoring economic liberty in America.
 
America, currently, has no other viable option.

 

“He who will not apply new remedies must expect new evils.” – Sir Francis Bacon

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2341) 

     It would “strenghten the base” in America.

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Ill winds blowing for U.S. and European banking sectors. Global economies need this powerful new dynamic: The Leviticus 25 Plan

The banking sector is showing some early signs of fatigue.  Pervasive economic weakness and flat yield curves are leading the way into sector stagnation.

If another series of default waves roll in, things could once again get ‘dicey.’

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Banks Tumble After BofA, JPM Warn Revenue Will Be Down As Much As 15%

The banking sector is sliding after JPM CFO Marianne Lake warned that contrary to expectations for an ongoing rebound in revenue and profits, the bank’s second quarter revenue has been 15% lower from a year ago. And while she said that US economic figures are “solid, not stellar”, she blamed the same thing that has been the nightmare of daytraders everywhere: collapsing volatility.  ZeroHedge, May 31, 2017

Deutsche Bank Downgrades European Banks To Underweight

In what some may find an amusing change in outlook by the bank that less than a year ago was on insolvency’s door, its stock at record lows, this morning Deutsche Bank downgraded its peers, other (ostensibly more sound) European banks, to underweight from benchmark on expectations that fading euro-area growth momentum will weigh on the sector over coming months.   ZeroHedge, May 30, 2017

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Global economies need robust economic growth, and to that end, there must be massive debt elimination at ground level.  There must be improved loan demand, credit-worthy borrowers and sound collateral.

There is one power-charged plan to reignite growth in the system:

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2336)