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Bullard Confirms QE Over $1 Trillion Would Result In Outright Debt Monetization, Which Geithner Said Would Never Be Allowed

Tyler Durden's picture


The Fed's preferred voicebox, WSJ's Jon Hilsenrath is out with another article discussing what the imminent QE2 may look like. The summary is that contrary to expectations for a "big bang" intervention, the Fed will instead do $100 billion in QE a month until such time as it deems fit. A few observations on this article.

  • First, this is not news, and was disclosed by Ambrose Evans-Pritchard about a week earlier.
  • Second, $100 billion a month is precisely what a $1 trillion QE action would amount to, as the Fed can not possibly do more than $25 billion of POMOs a month without thoroughly blowing up the stock market, courtesy of endless excess liquidity.
  • Third, as we discussed previously, not even Primary Dealers have enough Treasurys in inventory to satisfy this much demand (in fact, according to the New York Fed as of Sept. 15 PDs only had just over $60 billion in UST holdings on hand).
  • Fourth, piecemeal monetization of Treasurys will have a smaller impact on overall rates and MBS prepayments, both of which are key goals for the Fed. This is stupid because as Hatzius notes: "The more you commit to large amount of purchases up front, the bigger effect you're going to get." And if there is one thing the Fed is, it has never been shy about intervention.
  • Fifth, what will be the metric for the Fed to determine when enough is enough? Will the Fed merely set a DJIA threshold past which it will consider it's job solver (and forget all that bullshit about inflation and unemployment targets - even the San Fran Fed said that unemployment is about to go back above 10% and stay there for 2011). So what will be the Fed's cut off for indirect equity market intervention: 12K? 15K? 36K? And what about oil: $100? $200? Revolution?
  • Sixth, again as we discussed earlier, we most certainly expect rates to plunge upon any announcement, and MBS prepayments to spike. This means that the Fed will be forced to not only purchase $100 billion in USTs per month, but may have to almost double that to account for its shrinking holdings of MBS/Agencies.
  • Seventh, and most important, is Bullard's admission that even $100 billion of QE a month (and possibly up to $200 billion assuming prepays) is equivalent to outright monetization (as it adds up to $1.2 trillion a year) "Mr. Bullard says the idea of doing more than $1 trillion of purchases a
    year "gives me pause
    " because that is how much net debt the Treasury
    will issue this year, meaning the Fed would be financing it all.
    " In other words, the Treasury will have to issue ever more debt to satisfy the open mandate for demand (possibly all the way up to double the $1 trillion per year in issuance). That should not be a problem. What is however, would be the implicit lie that Tim Geithner will have committed by swearing on live TV that the Fed will not monetize debt. Alas, as Bullard confirms, the Fed would be doing just that. Which incidentally is precisely what the Weimar government was doing before the hyperinflation train took off.

In other words, Hilsenrath's speculation today does nothing to change our conclusion that very soon, the Fed's ravenous demand for assets will result in a break in the rates market, and will take equities, commodities (inversely) and last, but not least, the dollar with it.


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Mon, 09/27/2010 - 18:04 | 608374 kathy.chamberli...'s picture

first  bitchez†

disingenuous, word of the 21st century.

Mon, 09/27/2010 - 18:15 | 608403 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

They know if they do it all at once, trends would be in our favor for readmittance.  Preach the gospel, and dig in. 

PS, one of mine hangs lower too.

Mon, 09/27/2010 - 21:36 | 608770 kathy.chamberli...'s picture

did you have an accident?

Mon, 09/27/2010 - 18:36 | 608434 frankTHE COIN
frankTHE COIN's picture

Thats the way to Boxem out Wilt.

Mon, 09/27/2010 - 21:39 | 608775 kathy.chamberli...'s picture

wilt the stilt

chamb the flame

oh it just goes on and on.


Mon, 09/27/2010 - 18:06 | 608378 TooBearish
TooBearish's picture

100,000 billion is a big number TD!

Mon, 09/27/2010 - 18:10 | 608383 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Geithner says a lot of things.  Controlled demolition is not one of them.

Mon, 09/27/2010 - 19:29 | 608528 reading
reading's picture

This ought to give him a great reason to quit too...hopefully soon.

Mon, 09/27/2010 - 18:09 | 608386 Rainman
Rainman's picture

There will be no formula or plan for intervention. Like TARP, the numbers are scribbled on a cocktail napkin. If it doesn't work, discard and get a bigger napkin.

A 10y T yield at 1.5 ain't looking crazy no mo.

Mon, 09/27/2010 - 18:11 | 608390 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

No, but buying the paper is!

Mon, 09/27/2010 - 18:13 | 608394 Miles Kendig
Miles Kendig's picture

That tril of prepays will just about fund the let to own shells that will hold the 50% LTV trash... while providing a stream to dip to help keep CRE afloat.

Mon, 09/27/2010 - 18:14 | 608398 LeBalance
LeBalance's picture

TD is thinking with his long counting system on. A thousand million is a milliard (instead of a billlion) [10^9]. A million million [10^12] that we commonly refer to as a trillion would be only a billion.  A thousand billion is a billiard [10^15] and a million billion is a trillion [10^18].  So now all you milliardonaires [10^9] have something to shoot for to be real billionaires [10^12].  Plus we can use our old friends (the counting words we know) for awhile yet before they too become obsolete.

Mon, 09/27/2010 - 21:41 | 608776 kathy.chamberli...'s picture

is zerohedge fan, kinda cramping your style?

Mon, 09/27/2010 - 18:14 | 608402 Everyman
Everyman's picture

Can someone explain to me that a person who is supposedly smart enough to help guide our nation's monitary policy, and is supposed to be principaled, ethical, et al.


Please explain to me, that when they lie to this level and steal from not only this generation but the next one as well, just to line the pockets of their GS and political elite friends,

how can they expect to remain "safe".  Somebody is going go after one of the elitist a-holes and take the very breath out of them.  The country is not going to sit by and let these criminals and theives advance the Bancruptcy of our Republic.

Are these guys that stupid in reality, or are they really "untouchable".

Mon, 09/27/2010 - 18:24 | 608417 LeBalance
LeBalance's picture

Sadly the elitist a-holes actually have a grasp on the real org chart of the US and who owns what.  They know who owns the FED and that the FED owns the US including every man, woman, and child.  Owns as in slaves.  They have begun to understand the rules and the actual service being provided here.

Most folks don't care to grasp what a Constitution is (a debt to be paid by those the delegates signed into the Group [US]).  Most folks don't care to grasp a whole lot of other very uncomfortable information.

(a) There is a small group of people.

(b) They own everything.

(c) They have all the power.

(d) They do exactly as they are told to do by the plan.

(e) If they deviate from the plan they get hammered and so does their entire family for generations (Kennedy).

These folks have been asked to make a substantial sacrifice to provide a service to others.  A service that you see everyday as you walk out the door.  They create the Matrix.

Mon, 09/27/2010 - 19:38 | 608545 goldmiddelfinger
goldmiddelfinger's picture

Didn't you see the million man perp walks resulting from the greatest bubble and meltdown in human history?

Mon, 09/27/2010 - 20:34 | 608639 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

million man perp walks

I dreamt that dream.  Then I woke up.  Shit.

Mon, 09/27/2010 - 19:39 | 608547 Pseudo Anonym
Pseudo Anonym's picture

well put, LeB. Some additional ideas who the puppet masters might be can be found in this source: . When will people stop being naive and quit blaming the Fed. That's what I want to know.

Tue, 09/28/2010 - 02:46 | 609269 Al Gorerhythm
Al Gorerhythm's picture

I'm Sparticus!

Mon, 09/27/2010 - 18:32 | 608428 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

No one is untouchable. Very hard to touch yes. And it would probably not be surprising if you think about it, but they can scurry around pretty well when the light comes on ...

Tue, 09/28/2010 - 01:10 | 608495 Village Idiot
Village Idiot's picture

"Are these guys that stupid in reality, or are they really "untouchable"."


I have been thinking of the movie, "Conquest Of The Planet Of The Apes."  Remember the visuals?  Remember the chimps?  We are the chimps.  We need to become Apes.


"Where there is fire, there is smoke.
And in that smoke, from this day forward, my people will crouch, and conspire, and plot, and plan for the inevitable day of Man's downfall.
The day when he finally and self-destructively turns his weapons against his own kind.
The day of the writing in the sky, when your cities lie buried under radioactive rubble!
When the sea is a dead sea, and the land is a wasteland out of which I will lead my people from their captivity!
And we will build our own cities, in which there will be no place for humans except to serve our ends!
And we shall found our own armies, our own religion, our own dynasty!
And that day is upon you NOW!"

However, as the apes raise their rifles to beat Breck to death, Lisa (Natalie Trundy), Caesar's beloved and later wife, voices her objection; "NO!" other than Caesar, she is the first ape to speak. Caesar reconsiders and orders the apes to lower their weapons, saying:

"But now... now we will put away our hatred.
Now we will put down our weapons.
We have passed through the night of the fires, and those who were our masters are now our servants.
And we, who are not human, can afford to be humane.
Destiny is the will of God, and if it is man’s destiny to be dominated, it is God’s will that he be dominated with compassion, and understanding.
So, cast out your vengeance. Tonight, we have seen the birth of the Planet of the Apes!"

Edit:  Caesar for President.

Mon, 09/27/2010 - 20:31 | 608633 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Disease called AVARICE combined with terminal BAGHDAD BOB SYNDROME.  All the symptoms are present.

Mon, 09/27/2010 - 22:11 | 608837 StychoKiller
StychoKiller's picture

Time for a large dose of "Defaulta", then!

Mon, 09/27/2010 - 18:16 | 608404 eatthebanksters
eatthebanksters's picture

I think its time to go out and buy those big sacks of rice and beans...what do you think will happen to the politicos and banksters when the shit hits the fan?

Mon, 09/27/2010 - 21:32 | 608759 Maos Dog
Maos Dog's picture

Killed by their own butlers


Mon, 09/27/2010 - 22:11 | 608839 StychoKiller
StychoKiller's picture

Sushi chefs are very good with knives.

Mon, 09/27/2010 - 18:16 | 608405 tahoebumsmith
tahoebumsmith's picture

Kinda reminds me of my bankrupt neighbor that has lost 2 homes to foreclosure, owes 100's of thousands to creditors and has a $600k tax lien. When he's out with his friends, he throws $100 bills on the bar and buys drinks for everybody. Just pretending he still is the man that he isn't...Wakes up the next day with a hangover and realizes he spent the weekly grocery money...And you wonder why his kids hate him?

Mon, 09/27/2010 - 18:22 | 608412 Rainman
Rainman's picture

I'm glad you said " he "........thought it might be my sister-in-law.

Mon, 09/27/2010 - 19:17 | 608508 Village Idiot
Village Idiot's picture


Mon, 09/27/2010 - 21:48 | 608786 dlmaniac
dlmaniac's picture


Mon, 09/27/2010 - 18:27 | 608422 LeBalance
LeBalance's picture

Can you say debtor's prison?  Coming to a thrifty guy near you.

Or maybe you'd like to pay with a kidney?  A lung?  :)

Mon, 09/27/2010 - 19:40 | 608554 Missing_Link
Missing_Link's picture

A guy like that has KIDS?

Ugh  ...  Shouldn't be allowed to breed.

Mon, 09/27/2010 - 20:46 | 608665 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Shouldn't be allowed to breed.

Uh, there's a political system for that.  Not a political system that I'd be in favor though.

Tue, 09/28/2010 - 04:06 | 609403 Snidley Whipsnae
Snidley Whipsnae's picture

Like the soccer mom sister of my wife. Still buys a new mini van every two years and it literally never stops rolling...she rolls one upside down auto loan into the next. Shuffles her two kids from one event to the next. Keeps piling up credit card debt, eats only fast food but never has twenty bucks in her wallet. When she withdraws money from an ATM it's never more than twenty bucks!

Her hubbys income is about 90K and she used to work as a part time teacher. Refied their home, took another loan to add a nice screened they couldn't come up with two grand if their lives depended on it...and I don't think they knew the country was in a recession until her part time teaching gig went away...clueless. But, she has a degree from UCF in psychology.


Mon, 09/27/2010 - 18:19 | 608409 traderjoe
traderjoe's picture

This is all so sad. We are approaching the end-game. I look forward to the other side, but it did not have to be this way (though the die was cast in 1913). 

1. Why do they think more QE will work if the 1st (and QE2 lite) didn't?

2. Just a few months ago everyone was discussing the Fed's "exit strategy"? Remember that? There can be no exit from a $2 trillion + cumulative QE. 

Mon, 09/27/2010 - 18:26 | 608421 Miles Kendig
Miles Kendig's picture

heh  Oh yes there can be an exit.  In fact I'll venture to say there will be an exit at some point.

Mon, 09/27/2010 - 18:25 | 608419 Goldenballs
Goldenballs's picture

So desperate to keep a failing system going.The elites are totally out of control in their quest to keep their power and wealth.

Mon, 09/27/2010 - 22:14 | 608845 StychoKiller
StychoKiller's picture

Just like with Hitler and the Brown-Shirts, the general populace will be cheering "Krystalnacht" foisted upon the banksters!

Mon, 09/27/2010 - 19:26 | 608420 knukles
knukles's picture

Nothing more than being caught with their pants down, in the round robin beggar thy neighbor global devaluation game. 
Overprint and it'll go to shit.

Perfectly fits the textbook positioning of Keynesian economics;
-economic theory underlying political reality of the moment
-devalue in order to increase exports (formally announced public policy, populistically adroit)
-cheaper dollar makes imports more expensive thereby stoking inflation (and/or expectations thereof)
-when defeating deflation has been isolated as FED priority (ref; last FOMC minutes)

All ties together rather neatly.

"I can print more money than you can."
Even explains the newly instituted programs of foreign central banks to borrow dollars opposite their own currencies.  (Which is another disaster waiting to happen.... Leveraged Central Bank currency speculation, but another story for another time, eh?)

I can't wait.

Lay in the popcorn and gold (PM) positions, Shirley. 


PS.  T'would also be consistent with a higher or abandoned pegging of gold at artificially low prices.

Mon, 09/27/2010 - 18:31 | 608425 Tic tock
Tic tock's picture

Can someone explain how it can be a preferred monetary policy to engender Hyperiflation?

Mon, 09/27/2010 - 18:53 | 608462 Rainman
Rainman's picture

It's like the scene of Butch and Sundance blowing up the safe on the train they hijacked. "Use enough dynamite there, Butch " ?? Butch would have preferred to use less hindsight.

Mon, 09/27/2010 - 18:35 | 608433 NumberNone
NumberNone's picture
  • Fifth, what will be the metric for the Fed to determine when enough is enough? Will the Fed merely set a DJIA threshold past which it will consider it's job solved So what will be the Fed's cut off for indirect equity market intervention: 12K? 15K? 36K? 

    CNBC poll today...Which will make America feel better Dow 12K or 8% Unemployment?  Imagine the Fed's disappointment that the unemployment rate won.  82% to 18%.  Keep trying Fed...I'm sure Dow 16K will do the trick!   

    I'll run the same poll at 11PM on the 30th at my local Walmart. 

    Mon, 09/27/2010 - 18:39 | 608440 frankTHE COIN
    frankTHE COIN's picture

    Hyperinflation = $ 20,000 for a loaf of bread and the overthrow of Govts.

    Mon, 09/27/2010 - 19:06 | 608491 Quinvarius
    Quinvarius's picture

    Sounds like strong trend.  I'll take 2.

    Mon, 09/27/2010 - 19:41 | 608555 goldmiddelfinger
    goldmiddelfinger's picture

    I've buried white bread and lunch meat nearby

    Mon, 09/27/2010 - 18:44 | 608446 Robslob
    Robslob's picture

    In order to be fair shouldn't we cutt off the free money first THEN ask them if they would rather work for it vs. not have it at all?

    Mon, 09/27/2010 - 19:05 | 608489 belogical
    belogical's picture

    The FED bought I believe a trillion worth of mortgages from the banks at or near 100 cents on the dollar. If that liquefy another trillion, that makes two. If I'm not mistaken the housing market is six trillion. So the FED could have cut everyones mortgage by 30% and saved us a whole lot of trouble. Instead their funneling money the elite. Milking every last dime from the American people. Thank GOD for the second amendment, because sooner or later we're gonna need it.  

    Mon, 09/27/2010 - 19:11 | 608500 gwar5
    gwar5's picture

    Once they start down this road the result will be the same because of expectations. Won't matter if the dollar is euthanized slowly with a pillow or with a nuke.

    I do wish to express my gratitude to the Fed for killing me softly.

    Mon, 09/27/2010 - 19:24 | 608515 Waterfallsparkles
    Waterfallsparkles's picture

    Why does the FED think that the Value of the Stock Market determines the Health of the Economy?  It appears that the Stock Market is doing fine but the rest of the Coutry is falling off a cliff.  Isn't there something else that they could do to help the people of the country other than pump the Stock Market?

    Mon, 09/27/2010 - 20:16 | 608602 Prof Gulliver
    Prof Gulliver's picture

    They are helping the people: Their people. Y'know, the bankers and brokers and realtors in Manhattan and the Hamptons. The rest of the country not only doesn't count to them, they don't even exist.

    Mon, 09/27/2010 - 19:26 | 608516 Pillage
    Pillage's picture


    "A leading public proponent of a baby-step approach, James Bullard, a 20-year Fed veteran who has been president of the St. Louis Federal Reserve Bank since 2008, says he has made progress convincing his colleagues to seriously consider that approach"



    .......waterboarding when the market expects the electric chair

    Mon, 09/27/2010 - 19:28 | 608526 Pillage
    Pillage's picture


    Economy goes up stocks go up

    Economy gets worse.........fed baby steps it all the way down



    Buy the top! I've got a ton to sell and no volume to sell it on.

    Mon, 09/27/2010 - 19:33 | 608535 Pillage
    Pillage's picture

    How much hiring has and circumventing of deflation has this achieved?

    Across all operations in the schedule listed below, the Desk plans to purchase approximately
    $27 billion. This is the amount of principal payments from agency debt and agency MBS expected to be received between mid-September and mid-October.

    Mon, 09/27/2010 - 19:39 | 608550 Waterfallsparkles
    Waterfallsparkles's picture

    Being on Welfare is today being Wealthy.  You get Free Housing thru Section 8 Housing, You get Monthly Payments for your expenses, You get free cell phones and around 250 minutes, You get free health care thru Medicare, You can get energy assistance, You get Food Stamps.  You can work on the side for cash.  You have no worries as all of your expenses are paid every month like clock work.  You cannot run out of Money as the Government is there to take care of all of your needs.

    People on Welfare do not care about taxes being increased as they do not pay taxes.  They do not worry about food inflation as their food stamps will go up.  They do not have to worry about losing their home because the Government guarantees the payment for their residence.

    It is better today to be on Welfare than a Middle Class Citizen. 

    Mon, 09/27/2010 - 19:47 | 608575 goldmiddelfinger
    goldmiddelfinger's picture

    Just like Obama, Spend a trillion ya don't have on political graft and call it stimulus, spend a trillion on a new health care Trojan horse/entitlement and call it debt reduction when it isn't and then say WOW look at the deficit. We need to raise taxes to pay for these crazy Republican wars!

    Mon, 09/27/2010 - 20:28 | 608626 Rainman
    Rainman's picture

    Obama printed a " get out of trouble free " card for hisself. Backed by the full lack of faith and credibility of the GOP. Too bad it's not accepted anywhere < snark >.

    Mon, 09/27/2010 - 20:49 | 608647 Ned Zeppelin
    Ned Zeppelin's picture

    Lowering rates will not cause MBS loan paydowns.  Prepayments are possible only if the residential properties can be refinanced.  But the problem isn't rates, it's loan to value ratios.  Unless the real estate asset values climb, they never get to 80/20 or 90/10 to permit the refi. That's why the refi market is not on fire - if it were easy, everyone would shift down to the current low rates.  But they can't  - L/V prevents it.  

    And lower interest rates do nothing for commerce - consumers are unemployed, if they are employed, they're not getting higher wages, they are still overburdened with debt, the super-low rates do not affect the rates Americans pay on credit card, auto loans and other similar debt.  And without the consumer, there is a giant hole in the economy that will not go away.  

    QE should make the stock market go up, correlating perfectly to the decline in relative value of the USD. If that is your goal, have at it. But it is already widely recognized as a amarket built on quicksand, and it will become more so. 

    And "baby step" QE violates Ned's Rule, that QE must be announced as specific in amount and, to some extent, duration - it must be "closed" rather than "open-ended."  QE 1.0 was specific, even 1.5 is limited to recycling the same dollars of assets from QE 1.0.  $100 billion a month "until further notice" violates Ned's Rule.  Open-ended QE is an invitation to currency collapse.

    Mon, 09/27/2010 - 20:50 | 608676 sawyer
    sawyer's picture


    Mon, 09/27/2010 - 21:08 | 608709 tecno242
    tecno242's picture

    at what point do investors think "Hey.. this kind of action means the FED is desperate and scared shitless.."

    instead of..

    " YAY! more liquidity! Buy everything!"

    Mon, 09/27/2010 - 21:13 | 608718 Bruce Krasting
    Bruce Krasting's picture

    In 1969,70,71 and 72 I marched on Washington. I was a frustrated young man who hated the Viet Nam War.  It does not make me feel any better that history proved me right.

    Now I am an old man but I still would march on Washington to stop the Bernanke madness. It will not make me (us) feel anybetter when in five or so years the catstrophe that Bernanke will trigger happens and we can say, "I told you so".

    These measures are not needed. America stands alone in the money printing insanity. Bernanke's QE will destroy everthing we thought was important. And we won't get it back for a long time.

    Mon, 09/27/2010 - 23:40 | 609016 RoRoTrader
    RoRoTrader's picture

    The shit you are talking about Bruce is pretty fucking's trancendance of arching power which I admit to not understanding, although believe what I see.

    How and where it comes to rest is another story, but my gut feeling is it is at the point of doubt; 'cannot beat them then join them', indecision time.

    Maybe there is some real leadership out there beyond the rag tag that can step up, but it has yet to resolve itself.

    Only lonely thoughts from the roro.

    Mon, 09/27/2010 - 23:54 | 609046 RoRoTrader
    RoRoTrader's picture

    Bruce, you are a sophisticated, experienced mind. What is it Bernanke et al is/are out to destroy and why?

    Not to be smart about it, but how much longer do you think it will take? destroy.

    Tue, 09/28/2010 - 02:46 | 609268 tom
    tom's picture

    Hear hear. Tyler, please consider dumping the "flag as junk" feature, it's too convenient for the intellectual cowards who don't have the courage to stand up for their opinions.

    Tue, 09/28/2010 - 03:49 | 609360 Snidley Whipsnae
    Snidley Whipsnae's picture

    Deleted by poster. My bad for misunderstanding the 'flag as junk' comment.

    Tue, 09/28/2010 - 03:16 | 609320 Snidley Whipsnae
    Snidley Whipsnae's picture

    Bruce, Great Post. I too was in Nam. Lots of my buddies came back from Nam in body bags...for what? So defense contractors could make megabucks, so some colonels could be promoted to generals. When it finally ended I was glad that we left Nam in disgrace...because I was dumb enough to think that we would never engage in another senseless war. I was dead wrong.

    When I returned to the States I protested the war. People threw garbage at me. Prior to the invasion of Iraq I stood on corners with signs of protest. People gave me the bird and yelled insults...Americans had become too lazy to throw garbage. 

    People are ignorant of war unless they have been under enemy fire. I saw my buddies blown to pieces and had to pick up the pieces and put them in body bags. I killed people and now I wonder how I could have ever been so simple, so young, so ignorant. Whoever junked your post certainly has not been there. Ten minutes of enemy attack can seem like a lifetime. The posters here that think shooting at people will be exciting and fun are in for a real shock if they find themselves under heavy fire. I can tell their ages by the false bravado in their posts. I think they believe war is like electonic games. There is no honor in war, only regret and a lifetime of sad reflection and bad dreams. Excellent post, please keep up the good work.

    Tue, 09/28/2010 - 11:01 | 610061 TBT or not TBT
    TBT or not TBT's picture

    "History" may have proved you right, but history won't.   Opposing the expansion of communism.... and anything running in that general direction of out of control statism and social engineering, was  then and still is the right way forward.  A big mistake in those conflicts was respecting the sovereignty of neighboring thug states while we went about it.   The same mistake caused and is causing huge numbers of deaths in the ongoing occupation of Iraq.  We know where the sophisticated shaped charges are coming from.  Studiously ignoring while doing nothing about it doesn't solve the problem.  We also know what publishing our rules of engagement, and court martialing our spec ops people for punching a terrorist in the nose, and mirandizing illegal combattants does for us.   It secures victory for the other side.

    In the case of marching on Washington, the Bernanke shenanigans won't be the proximate cause for any huge march on Washington.    People will march and protest like that over the secondary and tertiary results of the Treserve policies, casting all sorts of aspersions as to the causes of the effects they're mad about.   Very few in such crowds...and there will be plenty of these large protests in our future (witness the enormous Glen Beck spiritual revival themed protest in DC the other day) will be cognizant or motivated by what Bernanke or the FASB or Basel III or the ECB or Fannie/Freddie or especially our out of control Congress has done, with the Supreme Court's blessing since FDR's time, to cause the troubles being protested.  

    No, any really big movements will be about much simpler and vaguer sorts of "vibes" if you will, like the pursuit of "peace" was for example.  "Peace" connoted tie-dye, hippie, free love, kumbaya, new era, narcissistic "my generation" sorts of motivations, and the related protests and marchers utterly lacked and totally dodged solutions as to how to defeat tyranny.   The latter, and the true peace that can come out of it, requires comfort with the word "victory".   Not cool.

    Such will be the mushy muck of any big protests in DC following the economic train wreck caused by statism and central control:  messages breaking down to a very short bullet list of misdirected whining.  To get back to prosperity and freedom(what people want), the self-appointed elites(the Bernankes and the Pelosis) in their far away capitals must become irrelevant and powerless.

    Tue, 09/28/2010 - 11:59 | 610328 BobWatNorCal
    BobWatNorCal's picture

    I marched on Washington then too, but I would be loth to say "history proved me right".
    Maybe that is because I've met so many people from Vietnam here in the US, and have read about (tho not visited) the society they left behind.

    There is a lot of propaganda out there about the Vietnam War. It takes a discerning mind to pick out the bits of truth.

    Tue, 09/28/2010 - 13:57 | 610717 kathy.chamberli...'s picture

    oh, i marched in '69 i think, it is all a blur. i remember meeting someone from the bronx. he showed me the ghetto. i actually wasn't participating for peace. more like just to do something fun and exciting. i think i was with the heavies out of harvard. yeah, cause harvard provided buses leaving cambridge to D.C. i can't believe i was employed by harvard as a secretary for about 2 weeks. didn't really work out. oh yeah, i was living with my brother's wife and my sister. i got out of that one. oh my brother served two times. really interesting times. still pretty blurry. well have a nice day, cause i really really am off to a shaky start this morning. please don't reply.

    Mon, 09/27/2010 - 21:27 | 608744 ShankyS
    ShankyS's picture

    Turbo said he'd never monetize debt, but he's short on time in his post and the next fearless leader may come in with the monetization mandate.

    Mon, 09/27/2010 - 22:00 | 608822 Youri Carma
    Youri Carma's picture

    Have to give credits to Bob Chapman cause he allready said a month ago: The FED will inject 5 trillion dollars into the economy during the next 2 years , they are are going to create this money out of thin air as usual and this will cause an inflation over 14% , which means gold and silver will go up....

    Tue, 09/28/2010 - 00:13 | 609079 Young
    Young's picture

    May they burn in hell.

    Tue, 09/28/2010 - 03:29 | 609340 Snidley Whipsnae
    Snidley Whipsnae's picture

    I second your wish...and, I don't see how the last thirty years of credit expansion, and attendent serial bubbles, could have happened by 'accident'.

    In a time span of over 200 years the money supply grew by less than in the last 20 years. How can that possibly be an accident? Can the govs decision to increase home ownership from 64% to 68%, which was the decision that started this financial meltdown, have been an accident? Did bankers suddenly forget that poorly structured loans to poor credit risks usually go bad?

    I am not buying the accident excuse. I will buy a planned econmic takedown of the world economy for reasons that are not yet entirely clear to any of us...except the people that planned it.

    Tue, 09/28/2010 - 06:03 | 609466 Ned Zeppelin
    Ned Zeppelin's picture

    What appears to be a plan can also be a case of gross incompetence.  Elites habitually and inevitably ignore facts, because they get in the way of their greed. 

    Tue, 09/28/2010 - 00:44 | 609144 tom a taxpayer
    tom a taxpayer's picture

    Tyler - Could you clarify some items in this statement: "In other words, Hilsenrath's speculation today does nothing to change our conclusion that very soon, the Fed's ravenous demand for assets will result in a break in the rates market, and will take equities, commodities (inversely) and last, but not least, the dollar with it."

    1.  "very soon, the Fed's ravenous demand for assets will result in a break in the rates market": What is direction of the break? Is the "break in the rates market" referring to 1) a drop in yields on Treasuries, 2) a drop in long term mortgage rates, or ?  In the medium-to-longer term, yields and mortgage rates would likely rise, but since you are talking short term, my guess is you are talking about a drop in Treasury yields and/or mortgage rates, correct?

    2. "very soon....will take equities, commodities (inversely), and the dollar with it": Does this mean equities would go up or down?; commodities would go up or down?; and dollar would go up or down? My guess is the sentence is saying "very soon...equities and the dollar would go down, but commodities would go up. However, since some folks think equities and commodities might go up while the dollar goes down, it would help if you could clarify or expand a little on what you are forecasting as a result of the Fed's ravenous demand for assets.  

    Tue, 09/28/2010 - 01:40 | 609214 Grand Supercycle
    Grand Supercycle's picture

    S&P 500 FINANCIALS INDEX - an important chart:

    Tue, 09/28/2010 - 03:37 | 609344 tom
    tom's picture

    The Fed board members really do think we're all a bunch of idiots, don't they? This is the complete substance of their argument: QE2 wouldn't be debt monetization because we wouldn't be buying the Treasuries directly from Treasury. Okay, so I didn't drink coffee because I didn't bring the money to the counter, I gave it to my friend and he brought it up.

    And is somebody actually making the argument that QE2 wouldn't be debt monetization if the volumes weren't big? What's that, I didn't have sugar in my coffee because I only put in one cube?

    Actually the numbers being discussed in this article are higher than the market is expecting, not lower. $100b a month of QE is not small. There were only five months when QE1 matched that pace, three of which were October-December 2008, while credit markets were imploding.

    I don't see anything limiting how fast the Fed can buy Treasuries. If the Fed decides it wants to monetize the entire roughly $120b per month of net issuance, or even more, ie to monetize all net issuance plus part of the outstanding debt, there's no reason why it couldn't achieve that. It's just a matter of offering a high enough price.

    Even just $60b a month of QE would be inflationary in my opinion.

    Tue, 09/28/2010 - 07:17 | 609506 pamriallc
    pamriallc's picture

    regulators are in place specifically to create stability.  street cops are in place to keep the hordes at bay.  parents are in place to keep a household full of children from running amuck.  geithner is doing precisely that.  in the face of complete chaos he is again reflecting stability while knowing that there are several more quarters of heavy adjustment ahead of us.  you can't change the fact that its raining.  you can only be reflective that it will in fact stop at some point and hand out some umbrellas.  there you go.  shawn mesaros, pamria, llc 

    Tue, 09/28/2010 - 11:46 | 610275 sbenard
    sbenard's picture

    I loved Rick's statement: "Quantitative easing can't exist without the monetization process!"

    Quantitative easing IS monetizing the debt!

    Tue, 11/16/2010 - 10:47 | 730653 daniel
    daniel's picture

    i love zerohedge policy cheap hosting

    Tue, 12/14/2010 - 04:40 | 804010 paragshah12
    paragshah12's picture

    If wealth can be created just by printing (or clicking in this case) currency and give it to the government to spend into a real-life physical economic world of people’s blood and sweat, then there is no need for industry, for tax collection, for education, for creativity and innovation. Wiemar Germany would not need to elect Hitler to solve problems, and no nation or empire would fail.

    Do NOT follow this link or you will be banned from the site!