US federal reserve officially pulls the plug on too big to fail

Folks, nobody knows when a Ponzi scheme will collapse but you can bet that you are in the late innings of the game (the con game that is) when the con game operators begin to change the rules in ways to protect themselves.  According to this somewhat dated article, the fed officially stated back in December that it no longer has the charter of being lender of last resort to its own banking system.

In other words, this is the official end of the federal reserve making a market in US debt.  Think about what the role of a market maker is from a stock trading perspective.  He's there to provided liquidity to the markets.  He's there to be a buyer of the shares if no other buyers exist and a seller of shares if no other sellers exist.  Without this the spread in a $30 stock could be 1%,2% or even more.  Perhaps much more in many cases, especially in smaller companies.  Their common shares could trade like options with 10% spreads between bid and ask being common.

In fact, I have written many times that it would eventually move back in that direction once the herd finally realize that gold is not the pet rock (i.e. fad).  It's paper assets and the trading of them and the insuring of them and the bundling of them that is the fad.  We think it is normal today but it is not historically normal to put so much faith and trust into something so ethereal and pity as paper or electronically tracked "assets".

But as long as there is liquidity, people will do it.  In any market, liquidity reflects confidence.  Not value, mind you, just confidence.  If people are confident about being able to liquidate something on demand without too big a loss then they will store their value in it.

So this move by the fed is going to eventually be a big deal.  The fed is essentially saying that it is not going to risk its own operations trying to save the banks who loaned money to anyone for any reason without any real idea of how the borrower was going to be able to repay.  I suggest that when the central bank makes a move like this that it sees a good reason for it.  For example, if student loans were going to be forgiven or if all the rules change so that student loans can be defaulted on then the banks are going to take a beating, the system is going to collapse and the fed will want to be there when the Earth stops moving to re-start their fake money Ponzi from scratch, this time likely with more powers than before.

By the way, look how the financial press calls these things coming from the fed "Laws".  They are not laws.  They are banking system rules but they carry penalties that the state will back up using police with guns and jail cells and so the fed is now effectively a member of the legislative body without any checks and balances from the executive or judicial branches.  The fed is a shadow government.

When the shit hits the fan, the herd will have acted intelligently if it goes after these people individually and charges them with crimes against humanity.