Art Cashin Asks If Fed Will Buy Muni Bonds Next

Tyler Durden's picture

Following our last poll which saw the vast majority of Zero Hedge readers agreeing that the next iteration of monetization (not if but when) would focus on municipals, today Art Cashin agrees that in a world in which things are right out of Alice in Wonderland, with Bernanke in the role of the Mad Bearder, this is precisely what could happen.

From Art Cashin's market commentary:

Does Jerry Brown Have Bernanke’s Phone Number? – A reader of these Comments picked up on our re-examination of Mr. Bernanke’s 2002 speech on how to fight deflation. We noted that Mr. B had suggested that the Fed had the power to buy foreign bonds if it chose to do so.

The gentleman pointed out that Bernanke also suggested that the Fed could even buy the bonds of municipalities or public corporations.

Given that the recent bond offering by California appears to have been given the cold shoulder by the public, might they turn to the Fed?

As Alice might say – things just get curiouser and curiouser.

Other things that tickled Art's fancy include Ireland...

The Gamble To Save Ireland – The battle to stave off contagion in the European sovereign contagion is a very high stakes game, indeed. Here’s a view from Ambrose Evans-Pritchard in the U.K.’s Telegraph:

The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.

In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.
“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said.

Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.

He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.

The article goes on to detail some of the strains already introduced into the system by the crisis.

Despite this morning’s hopeful news out of Ireland, we may just be kicking the can down the road a bit.

...And on Joe Hill and sundry rabble-rousing.

On this day in 1915, a Swedish immigrant's share of the American Dream came to a violent end. He had been born Joseph Hagglund, or maybe Hillstrom (the State Department records are not available). He had come to America in 1902 but found neither joy nor profit working the mines. He tried a variety of other menial jobs but to no avail.

Believing labor was getting a raw deal, he joined the radical "Industrial Workers of the World" (dubbed the Wobblies by those who thought they were Anarchists). But, even anarchists were too structured for this free spirit. So he hung out on the fringes of the effort-part hobo and part cheerleader. And he wrote songs. Many were anti-management, some celebrated the road (Hallelujah, I'm a bum) and a few ridiculed the clergy (he warned of promises of Pie in the Sky when you die).

His songs became instantly famous and made him instantly infamous. And, when anyone dared to speak against the establishment, they were branded with his Americanized name (What are you - - another Joe Hill?).

But, when a stockbroker and his son were shot dead in Utah, authorities arrested Joe Hill on the evidence that he was in the same county and also had a bullet wound. Hill claimed his wound was the result of a semi-romantic episode. Nevertheless, he was convicted of murder and at his request sentenced to a firing squad rather than hanging. Hundreds, including President Wilson, begged for clemency. But, on this day, he was brought to the prison yard. His last words ran something like - - you got guns boys - - shoot'em. Over 35,000 people showed up at his funeral. And at labor demonstrations over the next 30 years more people spoke of seeing Joe Hill than have recently seen Elvis.

To mark the day, take in a film about a recent mover and shaker. But remember Marshall McLuhan's caveat to separate the medium from the message. It keeps the historical from the hysterical and will let you appreciate the subject properly.

Traders tried to go out for popcorn yesterday, but the movie droned on without human intervention. Frozen in anticipation of the unknown the boys hung out by the newstickers awaiting the drop of an entrail or two on the geo-political front.

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Mr Lennon Hendrix's picture

So he voted in last week's poll?

What Will The Fed Buy Next?:

Instant Karma's picture

If the Fed continues to buy crap for dollars, or, just print dollars, at some point will people decide that dollars are worthless?

Turd Ferguson's picture

The Turd quietly chuckles to himself.

rocker's picture

Nice call on Silver Turd. You did well for ZH followers.

pamriallc's picture

remember that all of the "hand wringing" on the *crap* the Fed buys for its balance sheet is not "loss" on the whole, and when you're the institution controlling the money supply, your timeframe is.... basically perpetual.  interest paid on the current holdings will go a long way toward the Fed recouping its losses, and that with capital appreciation as the entirety of its holdings won't fail, means that in the longer term, the Fed will demonstrate a positive "net" return on its current (and future) inventory of bonds.


shawn a. mesaros,   pamria, llc

traderjoe's picture

Uh, huh. Yes, it's always nice when Uncle Benny buys toxic crap at full price from your fellow 'money-changers'. Makes them feel flush again. Sure hope some of that wealth trickles down to the masses, at least to overcome that dollar debasement. 

Seriously, what a ridiculous pile of drivel. 

AR15AU's picture

I don't see why...  They were able to engineer a Bagholder frenzy in GM this afternoon, surely with a little CNBC magic, every moron pension fund will be scrambling to snap up high yielding Harrisburg bonds. 

carbonmutant's picture

There are a lot of agencies standing line for a piece of $600B

NOTW777's picture

when do they start using the word "laughingstock" with this administration

Amish Hacker's picture

I think the word "Laughingstocks" is already being used, to describe our current equity markets.

Ripped Chunk's picture

Along with big chunks of MBS's. Rates heading north quickly this week.

They should buy it all !!  Treasuries, Agencies, Munis, GM Stock etc. etc. JUST BUY IT ALL. ALL OF IT !!!


Yikes's picture

Muni's? MBS's? and Treasuries?  Oh my!  That's a lot of bailing.  We're in the land of OZ people.

Ripped Chunk's picture

Black & White or Color part?

John McCloy's picture

You bet your buns Art. Once the precedent has been set to bailout the world there can be no hesitation on Munis. They will not do it piecemeal however.. they will bundle it up into one nice multibillion dollar package within months.

Spalding_Smailes's picture
Will Buy Muni Bonds Next




Oh regional Indian's picture

I really enjoyed reading the Joe Hill part. We all have a little Joe Hill in us, eh?

The question of Muni's is a little rhetorical, directly or indirectly somehow is the real question.

I suspect the latter. 


Panafrican Funktron Robot's picture

I think I'm amongst the minority position here who don't think they bail out the muni debt.  What better way to engineer a federal takeover of some of the largest states in the union than to allow them to go bankrupt.  A state is only as sovereign as it's balance sheet.

rosiescenario's picture

Ah, but what if some states decide then to secede? Perhaps here in sunny California we will need to go to the Chinese to support our munis? We have far more in common with them than we do with New Yorkers or the Beltway people. We already provide a great deal of their higher education needs (which are partially financed by munis), we invent and develop what they ultimately manufacture, we sell them 100% of all our cotton (along with many of our other ag products), and we share their entrepreneurial spirit...unlike the East Coasters.

While we are at it, might as well combine CA with Mexico since we have no true border with them anyway.

knukles's picture

Hey, note Van Rumppie's (Coincidence, bet he doesn't even know Barney...) comments above, that the end of the EU and Euro is nigh, unless everybody buckles down and does whatever he and his other self appointed leaders can't figure out needs to be done other than admit the whole thing's a fucking failed charade.


Get this, it gets even better!

It was only about a week or so ago that the same Van Rumppie was saying that the world of individual nations states is gone and the time has come for the (NWO) new multinational global alignment.

Fuckin'-A.  What a great do as I say, not as I fail.

Brussels used to be such a quaint wonderful place years ago.

max2205's picture

Fed will have to buy GM stock here soon down $1.00 from 1st print

I know we should be patriotic and idiotic and stand behind our govt BUT hope the market and all surrounding it burn to a crisp. Then we can start over

johngaltfla's picture

If he doesn't buy munis, the world crashes and burns.....

uptick1028's picture

I'm sure Bill Gross and the Pimco crew are loading up on munis with ebery Moodys downgrade since they already got the wink from Big Ben!,

Coldfire's picture

Bermonkey is simply doing what he said he would. Love him or loathe him, his actions are consistent. Bermonkey is an idiot, in the true sense. And if his policies continue, hyperinflationary collapse is a certainty. Printing more claims on assets in the context of a static or shrinking asset base is as insane and dangerous as it looks. I doubt 1 person out of 1,000 can see this now.

PiratePiggy's picture

Regardless of your polticis, this classic folk song from the 60s by the legendary Mr. Phil Ochs is am outstanding peice of work and sums up Joe Hill in an awesome ballad


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Fox Moulder's picture

The Fed is supposed to be required by law (remember that?) to be limited to securities backed by the US government. That is most likely why the Treasury agreed to back Fannie and Freddie for three years. I wonder if the Build America Bonds might be a back door to allow it to buy munis. The BAB program scheduled to end soon, but it couls always be extended.

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