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And Now Back To Reality, And $2 Billion Dollars Closer To A Debt Ceiling Breach

Tyler Durden's picture


As the market enjoys (and we use the term loosely) this brief lapse back into deflation, which given the economic contraction, so long anticipated at least by Zero Hedge, has finally materialized and put the ball straight back into Bernanke's monetary policy court, here is a brief reminder of reality: i) total debt subject to the ceiling increased by $2 billion overnight to $14,282,174, less than $12 billion away from a breach, and ii) more importantly, total securities held by the Fed increased by $27.3 billion in the past week to $2.5 trillion, an all time record. And yes, i) and ii) go hand in hand. Especially once the $2 trillion debt ceiling hike is announced.

Breaking point coming:

And the Fed:

Oh yes, and let's not forget this one:

Luckily, today, May 5, we discovered a new and yet undisclosed way to not have to worry about the $15 trillion in Treasury debt to be issued over the next decade, and the tens of trillions in debt that have to be rolled globally, so there is on longer a need to worry that the Fed will need to monetize anything ever again, and inflate its way out of a toxic debt spiral.

In other words, Bernanke now welcomes deflation with open arms. Or not.

Alternatively, as we have also been suggesting since January, 2011 is nothing but a mirror image (not enantiomeric, but superimposed) of 2010, and the very same H2 response by the Fed that we saw last year upon the onset of August 2010 economic doldrums, will occur yet again...

We leave the answer to our readers.


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Thu, 05/05/2011 - 16:58 | 1245146 JuicyTheAnimal
JuicyTheAnimal's picture

When will QE3 be announced?

Thu, 05/05/2011 - 17:02 | 1245153 mayhem_korner
mayhem_korner's picture

Right after the banks get their commodity calls in place.

Thu, 05/05/2011 - 17:05 | 1245170 JuicyTheAnimal
JuicyTheAnimal's picture

So next Wednesday. 

Thu, 05/05/2011 - 17:05 | 1245173 camaro68ss
camaro68ss's picture

you have to Deflate the USD to get it Cheap first

Banks buy the Silver Dip, you should too!

Thu, 05/05/2011 - 17:09 | 1245191 nope-1004
nope-1004's picture

And here I thought commodities were selling off because of, you know, "market forces", like lower unemployment, less money printing, more responsible gov't spending, solvency returning to the various States, and an improving economy.

The stage has been set for QE3.  It has to happen and I kinda wondered how they'd go about bringing it up in light of all the inflationary forces.  Now we know.  FRAUD.

If I were guilty of being a white collar criminal, I'd grow a beard and hide behind it too.  Helps the conscience deal with your actions.


Thu, 05/05/2011 - 17:14 | 1245214 6 String
6 String's picture

Shit! Frankly, I think you're right. I was thinking hiatus between QE2 and QE3 but with enough of a take down beforehand they can commence henceforth, which means Congress can continue the shell game of extend and pretend.

Fuck it. I going long, very long Silver. No hiatus, bitchez.

Thu, 05/05/2011 - 18:46 | 1245481 DoChenRollingBearing
DoChenRollingBearing's picture

Tick tock, tick tock, tick, tock

Sttrreeeeeeetttccchhh  ----  SNAP!

It does not seem we will have to wait long now.

I like gold better 6 String, but silver and other PMs are great places to hide as well (I own 'em all).  Diversification!

Thu, 05/05/2011 - 17:12 | 1245218 SheepDog-One
SheepDog-One's picture

Jooz like Bernank in the cabal have no conscience.

Thu, 05/05/2011 - 17:15 | 1245219 Worker Bee
Worker Bee's picture

Or,He throws up his hands and say "Fuck you, I tried,Im out bitches". He goes down in history trying to do everything he can trying to flight the deflation tsunami while congress gets the blame for The Greatest Depression.

Thu, 05/05/2011 - 17:20 | 1245241 SheepDog-One
SheepDog-One's picture

Well the Bernank was successful in inflating stocks and bonds and the rest of the overvalued crap, cant print jobs or a real economic recovery though unfortunately.

The economy is gone, we sold all our production overseas for loans, and there is no more real capacity to print and paper over it anymore, so time for 3rd worlding of america while the elite have been printed and inflated out of harms way to safety, everyone else stuck in deflation.

Thu, 05/05/2011 - 17:31 | 1245266 Worker Bee
Worker Bee's picture

The FED is not the government. What makes them stick around for the big boom? If I'm Bernakster,and Ive transferred trillion to my banker buddies knowing that the ship is sinking, I get out now. He says hes done everything he can but Uncle Sugar just wouldn't cooperate.

The FED is a parasite that feeds of the people..the government.. The FED is full and can now let us fight over the scraps of The Republic.

Thu, 05/05/2011 - 17:43 | 1245326 schizo321437
schizo321437's picture

Poisoned chalice.

Thu, 05/05/2011 - 17:01 | 1245149 Misean
Misean's picture

" will occur yet again..."

Given that adjusted monetary base, their just might be an ammo shortage this time 'round.

Thu, 05/05/2011 - 18:22 | 1245440 bothsidesnow
bothsidesnow's picture

Forget it this guy doesn't understand monetary base and the velocity equation. 

He's OCD on QE3.

Thu, 05/05/2011 - 16:59 | 1245151 MikeyKid
MikeyKid's picture

I told Cap One that there will be "dire consequences" if they didn't up my credit limit - specifically I wouldn't be able to make minimum payments on my OTHER Cap One credit card. They didn't seem to buy that one.


Thu, 05/05/2011 - 17:06 | 1245176 tekhneek
tekhneek's picture

I tried that too, but I went a different way.

I kept trying to explain that to the Chase bank rep although he might show that I owe $20,000, really, my debt subject to the limit is only $20, so, go suck satan's cock.

wankin' fuckin' bankerz.

Thu, 05/05/2011 - 17:08 | 1245152 Muir
Muir's picture


And this is not deflationary news how exactly?


edit: and I have been posting FRED2 data ( since 08!

And got kicked out of a blog for daring to say that the FED would succed in creating infaltion (posted Dec 08-Feb 09 in The Housing Bubble Blog)


But, again, how is this not deflationary news? (as has been much of the news for weeks.)

Thu, 05/05/2011 - 17:14 | 1245224 SheepDog-One
SheepDog-One's picture

Deflation in some things, inflation in others. How is it so hard to understand?

Thu, 05/05/2011 - 17:25 | 1245262 Muir
Muir's picture

What basket of goods do you get in exchange for whatever you hold, be it stock certificates, cash, land or PMs.

What can you trade for it?

No, it's frankly easy.




Thu, 05/05/2011 - 17:34 | 1245288 Shell Game
Shell Game's picture

100% correct. It is deflationary news.  That's what this 'for show' test is all about:

1. World inflation due to QE gets out of control.
2. People around the world start to 'Lose It'.
3. Market is released to natural forces (deflationary).
4. Public fearful as double dip deepens and IRA/401k values contract.
5. Bernanke 'has no choice' but to propose QE3.
6. Politicos and Public accept the fix.
7. Inevitable march toward hyperinflation re-commences..

Why? because this news and reaction will be very deflationary and TPTB want it to rear its ugly self, but will never allow it to win.

Thu, 05/05/2011 - 18:38 | 1245493 DoChenRollingBearing
DoChenRollingBearing's picture

Insightful scenario.

+ 1 oz Au

Thu, 05/05/2011 - 18:42 | 1245505 Bonesetter Brown
Bonesetter Brown's picture


I get the sense that too many people in the comments section have never dated or wooed a mate.  You have to play hard to get now and again.

The idea of "all inflation, all the time" complete misses the psychology and the politics of the thing.

And like any courting process, there is always the chance that something goes wrong during the dance, and the whole thing falls apart.

Thu, 05/05/2011 - 23:10 | 1246269 ZFiNX
ZFiNX's picture

I just don't believe the people will go for QE3, nevertheless I believe it will transpire if current economic trends continue, and I think that Obama and his people recognize they will be punting the economic issue to the repubs if they follow through, I believe that there will have be some major event to pull the wool over the eyes of the people once again to distract from QE3.. i.e. An israeli strike on Iran. Obama has made it clear his strength is not going to be the economy, and given recent "successes", such as OBL and certain ME regime changes, he is deliberately changing the discussion to war, which will suit his perceived strengths much better, hence, a major military action may be imminent.

I do not believe the Repubs and Dems are on the same side, I believe they represent interests who are in a tug of war over who gets the most government paper, thus they are both for money printing. Occassionally the politicians change loyalties to MIC or TNCs as they politically see fit.

Fri, 05/06/2011 - 01:19 | 1246469 Shell Game
Shell Game's picture

I do not believe the Repubs and Dems are on the same side, I believe they represent interests who are in a tug of war over who gets the most government paper, thus they are both for money printing.

Bingo, friend.  They are both fiscally Left, in that they are both for easy money and continued printing.  People will go for QE3 because prices will have come down and financial fear will have risen.  The public has very passively tolerant and short memories..

Thu, 05/05/2011 - 17:00 | 1245157 101 years and c...
101 years and counting's picture

stocks down since feb 18th, during the period of about $300 billion in expansion.  so, if $300 billion isnt enough to goose the market (R2K), what will?



Thu, 05/05/2011 - 17:08 | 1245187 tekhneek
tekhneek's picture

That'd be QE3.

Thu, 05/05/2011 - 17:07 | 1245193 drink or die
drink or die's picture

$600 billion?

Thu, 05/05/2011 - 17:03 | 1245164 dark pools of soros
dark pools of soros's picture

after the dip spikes

Thu, 05/05/2011 - 17:01 | 1245165 camaro68ss
camaro68ss's picture

WEEeeeeee into Oblivion.

Buy the Silver Dip Bitchez!

Thu, 05/05/2011 - 17:06 | 1245188 cocoablini
cocoablini's picture

So, now that the Fed, comex, JP, Goldman, Geithner and others have squeezed the crap out of the silver market and crashed commodities does this save Timmy and the poor bond auctions of late.
And who the fuck bought 2 billion shares of UUP when the dxy was 72.8 and everyone was panicking. Another day, another manipulated bubble by the Fed crime syndicate. Who frontran that decision? And does Bill Gross feel like and idiot yet?

Thu, 05/05/2011 - 17:09 | 1245189 SheepDog-One
SheepDog-One's picture

WOW now I can see why the dollar got such a ride up today! Oh wait....

Yea things sure are different today, dollar worth so much more, PM's worth so much less, and that big huge 17quadrillion barrel new oil find and all.

Thu, 05/05/2011 - 17:07 | 1245197 cocoablini
cocoablini's picture

And Sprott bought physical and dumped shares. Love it!

Thu, 05/05/2011 - 17:11 | 1245200 6 String
6 String's picture

Apparently Asia gets it: Silver up Asian time, per usual. Will the 6:30 eastern time bear be back tonight?

What's the numbers? 200 trillion global "assets" consisting of 150 trillion in debt? Sure. Yeah. We can grow are way out of this organically, right?

Don't forget to BTFD in the 2000, too. Remember its a basket of small companies that will almost all (1999 of them at least) grow into Apple like valuations while the stalwarts become less relevant and turn into small caps. It's an unbelievable virtuous cylce. You gotta get on the ride.

Thu, 05/05/2011 - 17:17 | 1245227 tekhneek
tekhneek's picture

Horrible advice. BTFD in AGQ. When this correction is balanced out. I'd still get a 10% hedge in ZSL too, just in case.

Thu, 05/05/2011 - 17:33 | 1245275 6 String
6 String's picture

AGQ? LOL. On the other hand, waiting for silver to consolidate is good advice on yr. part. And ZSL is fine if you ask me if you simply want to hedge physical in case one is so very wrong. So mostly we agree.

More importantly, do you want to fuck (if you're not a chic than forget it)?

Thu, 05/05/2011 - 17:16 | 1245235 web bot
web bot's picture

If they in fact do QE3, then its economic suicide. There is no other way to characterize it.

Thu, 05/05/2011 - 17:22 | 1245242 Worker Bee
Worker Bee's picture

That's a pretty chart but like Ive been saying credit is money. Bernanke wouldn't be "printing" if he wasn't fighting I dunno, massive deflationary forces?

Credit is money.

Thu, 05/05/2011 - 17:32 | 1245270 Muir
Muir's picture

" credit is money"


Said the same words here many times (exact words.)

It's lost on the lemmings.

But it's still fun to post.-

Thu, 05/05/2011 - 17:40 | 1245310 Tyler Durden
Tyler Durden's picture

Of course he is printing to fight deflation. And QE2 brought us an 80% jump in oil. So when the next (and very likely finaly) round of deflation hits, as it did today suddenly, what happens next? Is there a new Fed playbook that came into existence yesterday? So, assuming there isn't, the Fed will print, print, print more [credit|money] until the DXY goes below 70, then 60, then 50, and so forth, all as bouts of hyperdeflation and hyperinflation cycle with increasing amplitude and frequency until Weimar is a sad dress rehearsal joke.

Thu, 05/05/2011 - 17:55 | 1245367 Muir
Muir's picture


"Is there a new Fed playbook that came into existence yesterday? So, assuming there isn't, the Fed will print, print, print more"


That's one assumption too many.





Thu, 05/05/2011 - 18:01 | 1245382 Muir
Muir's picture


maybe that was too cute.

There's no doubt that your posts are brilliant (and I've at least said so many times, as have many others)

It's not as if I am a Deflationista, I have not been.

It's not as if I have not seen the data before, I have seen the FRED2 data since late 08 and thought that the Bernak would succeed (when no one did.)



Thu, 05/05/2011 - 18:53 | 1245556 TheJudge2012
TheJudge2012's picture

As I've understood the banking cronies go under if the debt ceiling isn't raised. Withdrawal leads to debt ceiling increase, and in the meantime they get to keep a lid on gold and silver. I've never seen a pm take down of this magnitude go straight back up anyway. If they let the pain go on until summer pm doldrums Blythe may not have to write so many checks for June expiry coming up.

Thu, 05/05/2011 - 18:01 | 1245375 Worker Bee
Worker Bee's picture

Tyler, Seems to me that Bernankster sees that Qe has become a drag on GDP and that his great experiment has failed. He turns around, puts the ball in Uncle Sugars court and says "see I tried and you guys fucked it up". If hes is willing to let hyper-inflation collapse the economy,and that will be directly related to his actions, why not let deflation collapse the economy and lay the blame in the congress critters laps?



Thu, 05/05/2011 - 18:53 | 1245476 Hearst
Hearst's picture

"why not let deflation collapse the economy and lay the blame in the congress critters laps?"


Because the Federal Reserve (especially Bernake) has repeatedly and publically promised not to let deflation happen, and their actions back this up. Bernake has gone even further publically confessing the Fed's failure to stave off deflation durring the Great Depression, promising it wont happen again,  and assuring us of his unique adeptness with helicopter drops of fiat should the time come!


Deflation will end the Fed faster than hyperinflation will.  Hyperinflation will conveiently be blamed on those evil Asian foreigners who 'broke their agreement with Washington by selling their US Treasuries.'  That you can coun't on.  And it might not be limited to Asia.  


RT gives  us another view on why Gaddafi was targeted and it is the sam sad Saddam Hussein story all over again..


Thu, 05/05/2011 - 18:51 | 1245544 Worker Bee
Worker Bee's picture

Two assumptions here.

1. He intends to keep his promise.

2. He is able to keep his promise.

Why when he promise to not allow deflation he is trusted , but when he says there will not be inflation he isnt being honest?

Thu, 05/05/2011 - 19:08 | 1245606 Hearst
Hearst's picture

Allowing deflation to take root will end the Fed.  The blame will be laid squarely on the shoulders of the same institute who confessed to the same failure eighty years ago.


My point to you is not only does he intend and is able to keep his promise, anything but would end the creature from Jackyl Island far faster than hyperinflation would.  With hyperinflation there's much more blame to spread around.  It's easier politically, less obvious than outright default, and with the right lies and market manipulators in the right chairs, the current monetary system experiment can grind slowly on.  Until of course those evil Asians cause hyperinflation.

Thu, 05/05/2011 - 19:16 | 1245641 Worker Bee
Worker Bee's picture

So deflations end the Fed? I guess The Great Depression was an exception?


Thu, 05/05/2011 - 19:20 | 1245665 Hearst
Hearst's picture

You checked the debt levels of this country recently?  Not default on all THAT (via hyperinflation)?  Now that would be an exception..

Fri, 05/06/2011 - 09:43 | 1246902 cranky-old-geezer
cranky-old-geezer's picture

You give Bernokio much more credit than I do. 

I don't think it's about fighting price deflation.   Falling prices would be good for the economy and people in general.   

I think it's about keeping the Ponzi financial system going, keeping the huge derivatives bubble inflated, keeping those huge banker bonuses going, and transfering wealth to the banker class in a broader sense.  QE is Bernokio's method of doing that.

"Quantitative Easing" is one of the dumbest phrases I've ever heard. Pure bullshit. It's a silly goofy lame cover phrase for massive Weimar-style currency printing & credit expansion, ALL of it going to the federal government and Wall Street bankers, NONE of it going to the people in general.

QE is a silly goofy lame cover phrase for WEALTH TRANSFER.   

THAT'S what Bernokio's job is. THAT'S what his marching orders are.

And yes I agree he'll keep at it till the dollar is worthless. 

Who cares about the damn debt ceiling?  What a joke. It'll be 100 TRILLION eventually. One way or another. Publicly declared or publicly covered up. Then 200 TRILLION. And keep right on going.

The entire American economy is operating on borrowed money now.  Because little or no real wealth is being created anymore.  Our manufacturing base has been shut down, dismantled, and shipped overseas. 

All we have left to keep velocity going is a service sector.  It may keep velocity going but it doesn't create wealth.  

Since little or no real wealth is being created anymore, WEALTH TRANSFER is the name of the game now. Transfer as much wealth from other people to yourself as possible.

That's what Bernokio is doing for the federal government and Wall Street.  Transferring as much wealth as possible from the people in general to the federal government and Wall Street.

That's what ALL OF US are doing too.  Transferring as much wealth as possible from other people to ourselves. 

Because we're not creating any new wealth anymore.

Thu, 05/05/2011 - 17:31 | 1245277 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Looks to me like silver is in backwardation even as close as Jul '11 contract.

Looks like COMEX is about to be revealed as the crime scene it is.

Thu, 05/05/2011 - 17:33 | 1245283 Worker Bee
Worker Bee's picture

I just don't understand how otherwise intelligent people,that rightly note that the FED fucks everything up,somehow is going to be able to beat deflation. But but but the fed are a bunch of idiots and cant do shit right...yet hes going to fight the biggest deflationary cluster-fuck ever,even imagined!

Fri, 05/06/2011 - 12:26 | 1245816 Shell Game
Shell Game's picture

One of the best answers to your question on the internet.  It's not an easy read, but it is a hugely rewarding read:

Thu, 05/05/2011 - 17:37 | 1245287 r101958
r101958's picture

Maybe they will be able to announce QE3 after they announce the 'unexpected' UE% tomorrow of 9.2?

Thu, 05/05/2011 - 17:38 | 1245300 LookingWithAmazement
LookingWithAmazement's picture

Mish does not expect hyperinflation, thinks even about a strenghtening dollar next months.

Thu, 05/05/2011 - 17:39 | 1245309 fellatio is not...
fellatio is not fattening's picture

I'm sleeping and missing something.  The premis now is that if there is deflation that the Fed would have to do a QE3 so as to re-inflate?  Eventhough you and I can see inflation in everything we buy?  Please help me here, my opiates are just kicking in and alls a blur

Thu, 05/05/2011 - 17:41 | 1245314 Tyler Durden
Tyler Durden's picture

The only thing that matters to the chairman is the Russell 2000, as a proxy for the wealth effect. Everything else is irrelevant.

Thu, 05/05/2011 - 18:45 | 1245513 DoChenRollingBearing
DoChenRollingBearing's picture

Hmm, an interesting tidbit I have never seen before.  Worth thinking about.


Tyler, I would think that lots of ZH-ers have pointed you to the recent FOFOA piece re Hyperinflation.  Yes, it is long and dense, but he would counter-balance the silver bulls here.

Thu, 05/05/2011 - 18:58 | 1245562 Gold 36000
Gold 36000's picture

Why do you waste your time with FOFOA?  He and FOA and A have been wrong for 12 years now.  Just burn the place down already!

Thu, 05/05/2011 - 19:05 | 1245591 DoChenRollingBearing
DoChenRollingBearing's picture

I think he is a solid thinker re gold, maybe the best.  Some things take time.

Gold IS, after all, the wealth held by the central banks.

Fri, 05/06/2011 - 10:19 | 1247367 cranky-old-geezer
cranky-old-geezer's picture


It's about keeping the federal government and Wall Street operating on wealth transferred from the rest of the nation via Weimar-style currency printing (inflation), under the lame cover phrase "Quantitave Easing".

Fri, 05/06/2011 - 10:23 | 1247402 cranky-old-geezer
cranky-old-geezer's picture


It's about keeping the federal government and Wall Street operating on wealth transferred from the rest of the nation via Weimar-style currency printing (inflation), under the lame cover phrase "Quantitave Easing".

Thu, 05/05/2011 - 18:09 | 1245398 Worker Bee
Worker Bee's picture

Something else Ive been thinking about..we all see that the lame stream media looks at any increase in activity as an improvement. But we see that improvement from a low level. Another words a "positive" employment report from already depressed levels is not back to normal levels but only slightly improved from shit. So is the inflation we are seeing in fact a positive tick upwards but from already very depressed levels? Any thoughts?

Thu, 05/05/2011 - 18:14 | 1245418 friendly manitoba
friendly manitoba's picture

isnt it about NOW  that we find out that a bunker or a banker  or broker needs to be bailed out again ... if there are about 240,000  contracts o/s and the price has dropped $10 an oz and margin requirements are up from  $11,000 to $30,000  - some speculators must be broke now -  looks like the bubbles keep on coming 

Thu, 05/05/2011 - 18:35 | 1245492 RockyRacoon
RockyRacoon's picture

Are we going to chase this all the way down to the $2 level? 

It's over folks.   We're now talking less than rounding errors.

Thu, 05/05/2011 - 18:46 | 1245521 DoChenRollingBearing
DoChenRollingBearing's picture

Agreed Rocky.

Probably very little time to finish those preparations...

Get cracking everyone!

Thu, 05/05/2011 - 18:54 | 1245559 Gold 36000
Gold 36000's picture

So does this mean the revolution is on again?  Please say yes.

Thu, 05/05/2011 - 20:45 | 1245976 Bicycle Repairman
Bicycle Repairman's picture

Suppose, just suppose this isn't the end of the world.

Thu, 05/05/2011 - 22:18 | 1246195 HungrySeagull
HungrySeagull's picture

It's not.

My spouse suggested we stock up on ammo, food etc. I laughed at her when she did a few years ago thinking here we sit in the land of plenty with supercenters of walmart glory 15 miles in which ever direction you choose to go.

I was asleep then. Lulled by the buzz of the plenty.

Now I lost "Weight" and know how to keep the house going in the floods, lost power, storms etc. We are literally in battle and no longer worry about anything. Today is done, tomorrow is not gauranteed and we are all but a heart beat away from not worrying about this anymore.

So what if the bills are getting big? Stop playing in the Retail buying trinkets and bling and start doing what you need to do to prepare.

100 things to disappear first is a good google start.

Fri, 05/06/2011 - 03:53 | 1246591 dust to dust
dust to dust's picture

 Hold silver and gold long. Invest in TSX:V. It's all going to make positive gains down this long road. Fiat money is doomed.  

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