A WORLD TURNED UPSIDE DOWN!!!!!!!!!

Friends, what kind of economy do we really have? This is some crazy shit . FOR SHIT'S SAKE the VERY policies employed to suspposed HELP US and the economy are STRANGLING it.....yet the stock market is oblivious to this ponzi scheme? If you thought we had imbalances before when this mutha cracks we'll be smokin crack to avoid reality.!!

WHAT kind of economy grows when BANKS aren't lending, standards are tightened, and consumer loan demand is weak too!!???? goodness gracious my head is going to explode!

Banks May Not Be Lending, But They Are Buying Treasurys (link)

On Thursday April 22, 2010, 2:16 pm EDT

Though banks continue to be hesitant to lend to consumers, they have stepped into the market for Treasurys that help finance the government's burgeoning debt.
With credit conditions still tight and Congress likely to clamp down on risk in the financial industry, banks are turning toward the safety of government debt, helping keep interest rates low but still not providing credit to consumers.
"Not only has lending been tight but demand for loans has been pretty small," says Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco. "The Treasury market offers banks an attractive alternative."
Surprisingly strong Treasury auctions in March had help from banks, which normally stay away from such events.
Banks snapped up $5.7 billion of the total $34 billion auctioned in 10-year notes and 30-year bonds, providing demand for auctions that many analysts thought would flop. The auctions occurred as inflation fears began to grow and amid signs that investor appetite for the massive supply of government debt was beginning to wane.
At the same time, bank credit fell 5.1 percent in the month and loans and leases dropped 6.4 percent, according to the Federal Reserve.
"The pattern suggests that banks have been starting to put their large cash balances to work, but is not an indication that bank balance sheets as a whole have started to grow," Deutsche Bank said in a research note.
The suggestion is that banks are using Treasurys as a way to get some return on their money that they might otherwise reap from making loans.
That banks would get so involved with long-dated securities came as additional surprise since they aren't usually such active participants at auctions and generally buy mostly short-dated notes. Under normal circumstances banks don't have much interest in keeping long-term rates low as that could compress the yield curve and cut into the profits they could make on lending.
Yet combined with their purchase of agency-backed debt such as mortgages and student loans, banks bought a total of $40 billion from the Treasury in March, according to analysts at Deutsche Bank.
But there's also another less-obvious reason banks could be stepping in to the Treasury market: A type of tacit quid pro quo with the Federal Reserve to keep short-term rates low by helping the government finance its debt through Treasury auctions.
Art Cashin, director of floor operations at UBS, noted after the 30-year auction suspicions among traders about who was doing the buying. In remarks to CNBC, he spoke of "all manner of conspiracy theories floating around. Is the Fed putting on a fake moustache and a raincoat and coming in as an indirect buyer?"
While there's disagreement among analysts whether the actions are part of an explicit pact between the two sides, some suspect a gentleman's agreement in which both sides benefit.
"Banks are stealing money from the public, giving consumers zero percent interest on deposits, and instead of turning over risk to the over-indebted consumers, they're loaning money to the government," says Michael Pento, chief economist at Delta Global Advisors in Parsippany, N.J. "I'm sure it's at the behest of (Fed Chairman) Ben Bernanke-we're going to keep rates low but you must facilitate the Treasury auctions going off smoothly."
The Fed funds rate is near zero, meaning that banks can borrow at almost no cost and lend out at the prevailing rate-or invest in vehicles such as Treasurys. (WORLD”S BIGGEST PONZI SCHEME?????????)
The 10-year yield edged over 4 percent in the days after the weak March auction for the benchmark note but has fallen precipitously since then, trading around the 3.75 percent area and helping to keep government borrowing costs down.
Even though many analysts believe the 10-year will eclipse 4 percent this year and probably settle in the 4.25 to 4.50 percent area, which would erode the value of fixed-income securities, others believe that with relatively tame inflation the longer end will represent value to investors.
"We're constructive on the long end of the market. I don't disagree with their security selection," said Rich Bryant, head of treasury trading at MF Global. "As long as the inflation picture is as benign as I think, we'll continue to see demand for the 10-year."
The danger to buying longer-dated debt is if inflation does begin to spiral and the banks as well as foreign governments decide they no longer desire Treasurys or want to help the government.
Pento says they'll have no choice once the government can no longer continue to monetize its debt by printing money and rates start to rise.
"I can assure you that supply and inflation will overwhelm interest rates and they will be heading higher for many, many years to come," Pento says. "It will be slow at first but it will grow more and more pernicious as we go along."
But in the interim, if banks continue to participate in auctions-Treasury is planning on announcing another round Thursday-that would help rates stay low for now.
Deutsche Bank expects the bank Treasury-buying to continue as the institutions avoid riskier assets, preparing for congressional action on regulations and an uncertain Fed climate with respect to what it will do with its key lending rate.
"[B]anks are operating in an uncertain environment with regard to future regulatory capital regime," Deutsche said. "Multiple proposed bank regulatory regimes...all differ substantially and face widely diverse prospects for enactment. The key for banks is to maintain flexibility while taking advantage of current opportunities."
But the longer-range picture is dangerous, says Pento, who forecasts the 10-year to hit 4.25 percent by the end of the year but on its way above 7 percent in three years.
"When inflation does come back, and it's on its way here, there is no way anybody, not even a bank, will be compelled to buy a Treasury that is significantly below the rate of inflation," he says. "What happens going forward when rates inexorably rise?"