regarding the Fed loaning to foreigners(smokey/mannfm11)

Re: mannfm11's insight below	smokey	NEW 12/12/2007 7:44:34 PM
Responding to selecto's post regarding the Fed loaning to foreigners, mannfm11 wrote: "Believe it or not, it is because they evidently don't have enough dollars." This got smokey's mind to thinking. Sincethe foreign banks' reserves are denominated in sovereign or regionalcurrencies, their need for dollars must be to cover dollar-denominateddebts incurred when they bought this toxic waste. This is a dollar-denominated credit contraction with the US banks at the very center of the filthy liquid circling the drain. Thecompound interest banking system has always been theoreticallyinsolvent but at this point it is technically insolvent at least as faras the dollar is concerned. That is, the dollar debt that has beencreated cannot service the dollar debt which has been created. Sincethe dollar is not based in a nationalized banking system wherein thefederal government can simply print dollars to service debt as inWeimar Germany, the Federal Reserve banking system can only try toservice existing debt by creating new debt. This creation of newdebt works as long as the debt is invested in appreciating assets whichcan pay for the compound interest charged by the system. Creditcontractions occur when the enough assets purchased by past debtdepreciate to the point where the payments on the old debt cannot coverthe compound interest attached to the new debt incurred to cover theold debt. The reason that this new Central Bank auction planwill fail is because, since it was created within a compound interestbanking system, any new debt must incur not only the debt but also apremium set by the highest bidder. To smokey's warped mind, thisagreement sure does sound like a scheme to consolidate the US bankingsystem into one or two survivors. But since this plan was born out of necessity the word "scheme" may not be appropriate. They're just frantically trying to stuff rolls upon rolls of toilet paper into the drain to try to stop the flow. Gurgle... Gurgle...