Ponzi Borrowing Facility Open

Creating a bottomless borrow pit for the banks didn't work so now the ponzi scheme enablers are mad it with a new witches brew, a nice little benefit of creating money from nothing. Now the Federal Reserve is creating an infinite river of credit for the trash that is commercial paper to flow on.

The Federal Reserve Board on Tuesday announced the creation of the Commercial Paper Funding Facility (CPFF), a facility that will complement the Federal Reserve's existing credit facilities to help provide liquidity to term funding markets. The CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers.

How does a construction worker put it; this is stupid, Mish says it better!

The credit markets are choking on credit, yet Bernanke is attempting to force more credit down everyone's throats. Logic dictates the solution cannot be the same as the problem.

Trapped in academic wonderland, such simple logic is far too complex for Bernanke to understand. Sadly, we are all forced to watch Bernanke flop about like a fish out of water attempting to solve a solvency problem with liquidity schemes like the TAF, PDCF, TSLF, TARP, ABCPMMMFLF, and now the CPFF.

Bernanke is pushing on a string. None of these measures can accomplish much other than to delay the inevitable and slow the recovery. I suppose it is possible Bernanke understands this (although I doubt it) and is simply scrambling for time, hoping to prevent a global crash now.

Let's remember what commercial paper is and how Ponzi finance works. Companies don't borrow the same way a working guy does, they sell bonds. If they sell a bond, when it matures they sell two bonds to cover it in then four bonds to repay the first two, then 16 to repay the the last four, and so on, forever they hope. The problem with hope is that it slams head long into the solid wall of reality at the Minsky moment, when the revenue obtained from those bonds is caught like a gazelle by a cheetah by the cost to repay those bonds. Or as smart guys learned in college, when the revenue generated by a unit of ponzi finance is equal to the finance cost. Once the financing costs exceeds the revenue generated the whole scam falls apart. This is what the Credit Crisis really is the collapsing of a Ponzi scheme, but the FED doesn't get it they think they can eat their cake and have it forever too, they think you can fix a credit crack addict with credit crack. Those silly smart guys in fancy suits don't know what a construction worker knows too dam well, that Master Card pays Visa pays American Express pays Discover, ... but STOPS Blam to go no further, end of the line pal.