The Bank for International Settlements (BIS) has released its March 2014 quarterly review and determined that the world has gone on a spending spree that would make President Obama proud. A 40% increase since 2007 has seen the total debt exceed $100 trillion dollars for the first time ever.
The BIS is the central bank for the central banks of the world. They currently have 60 members as follows. Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Macedonia (FYR), Malaysia, Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Arab Emirates, the United Kingdom and the United States, plus the European Central Bank.
Here is a great place to visit to visualize just how much $100 trillion dollars is as the graphic illustrates the total U.S. unfunded liabilities of $114.5 trillion dollars – http://usdebt.kleptocracy.us/.
Visit Graph C on page 18 of the BIS report. The graph legend breaks down the make-up of the players comprised in the stats. FI = financial corporations; GG = general government; II = international institutions; NFI = non-financial corporations; NPISH = non-profit
institutions serving households. Easily the largest slice of the pie is comprised of domestic government spending.
You may note another interesting point in the report from page 99.
The Federal Reserve is experimenting with a new operational tool – the reverse repo – that could substantially reduce banks’ $2.5 trillion (and rising) claims on the Fed, even as the Fed continues to hold its bond portfolio. In a reverse repo, the Fed borrows overnight from a cash-rich counterparty like a money market mutual fund against the security of a bond from the Fed’s portfolio, which reached $4.1 trillion on 19 February 2014.
The new Fed Chairman Janet Yellen likes these reverse repos as well. But they haven’t always worked so well as Zero Hedge reminds us.
On Monday the Federal Reserve held a major reverse repo test, as was announced by the NY Fed and by Zero Hedge. We have subsequently received several unconfirmed reports that the conducted test has been a disaster (we have calls into the Federal Reserve to confirm or deny this, we are eagerly awaiting their reply). Presumably, after conducting various repos last year, a typical transaction would be in the $1 to $5 billion range. At around the time the financial system was being pulled apart, were two separate $50 billion repo transactions on September 18, 2008, a day when as Paul Kanjorski had highlighted earlier in the year the money market system nearly collapsed as a result of Lehman and AIG’s failure, and the Reserve Fund breaking the buck. Notable about Monday’s reverse repo “test” was that it was quite sizable: in the $100 billion ballpark, on parallel with the biggest liquidity extraction from 2008. The outcome was the discovery that the dealer community does not have the capacity to do reverse transactions of this magnitude. As a result the Fed was forced to go directly to the money market industry, which has been speculated as a key source of excess liquidity withdrawals, another topic we discussed previously.
Now what could possibly go wrong with the Fed raiding our retirement funds?