Chilling spike in bank borrowing from the Fed
How much are banks borrowing from the Federal Reserve Bank?
First, look at the historical chart from 1919 through December 2007:
The spike near the center is when banks borrowed $8 million during the savings and loan failures in the 1980′s.
Now look at the same chart run through November of 2008:
To get an idea of the severity of the borrowing, look at the scale along the left edge. Those are hundreds of billions. The oscillatiing spikes from the first chart are undiscernable at this resolution of scale. With this much borrowing, what are these notes worth? More people are asking the question, can the US Treasury default?
At Davos, the China made clear statements that it was considering US investment risky, and stated their intention to 
pull back from further US investments. If our largest creditors are pulling back, the only remaining money source is the printing press, which means the money really is not money at all.
We have come close to defaulting on US debt in the past, but only pulled out of the crisis through creative accounting of protected accounts, and by changing the laws regarding debt limits. This time, more investors are betting on the reality of a default, as evidenced by the price of default swaps.
