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Congressman John Campbell's Moment Of Epiphany - Realizes US Is One Big Ponzi

Tyler Durden's picture




 

Zero Hedge first observed the duration mismatch in US Treasury holdings back in November 2009, when we highlighted the concerning amount of debt that the government has to roll every year courtesy of about 30-40% in outstanding paper that is of very short duration (under 2 years or so). We have also been pretty adamant that by now the US economic system is nothing but a ponzi scheme pure and simple. Today, we observe how this epiphany manifests itself when it occurs to a congressman, in this case John Campbell (California). The punchline: "I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel." Amen brother.

From John Campbell's website:

Treasury Bonds: I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less. Put another way, it means that we are rapidly approaching $4 trillion in U.S. debt that matures by 2014 or sooner. As I write this, the yield (interest rate paid) on a 2-year Treasury note is 0.645% or about 2/3 of one percent. The yield, at the same time, on a 10 year Treasury note is 3.4%, and on a 30 year is 4.55%. In bond parlance, this is called a "steep yield curve" where interest rates get much higher as you go farther out in time.

It's pretty clear why the Treasury is doing this. By issuing mostly short-term notes, the Treasury is paying less interest, thereby keeping interest costs and, consequently, the deficit down. In addition, the Federal Reserve is in the middle of its "quantitative easing #2" (QE2) under which it is buying $600 billion of our own Treasury debt over about a 6 month period. The Fed is not buying the short-term notes, but is buying 10 year maturities and longer in order to hold those rates down. And, since the Fed is earning the interest thereon (paid by the U.S. Treasury), it is improving its yield. We are currently running a deficit of about $130 billion per month, so the Fed is basically buying all of the new bond issuance from the deficit for almost 5 months.

What does this all mean? I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel.

We are printing money ($600 billion) to buy our own debt so that the full effects of the deficit are not felt. We are buying long-term bonds to artificially hold down the rates on those bonds since home mortgages and many other things are based on those rates. We are selling the short-term bonds at cheaper rates to hold down costs now, but are leaving ourselves open to huge cost increases when interest rates go up. And, we are at historic lows on these short-term bond rates. If they were to rise by 3 points (which would put them where they were at as recently as 2008), our deficit would increase by another $150 billion per year, even if the long-term rates stay the same. And, once the Fed ends QE2, even if it doesn't reverse it, the markets will then have to absorb a new influx of long-term bonds at a time when our ability to pay them is in question. The Fed can cure a bunch of this simply by printing a lot more money. That, however, will result in an inflationary period with major wealth destruction and economic malaise.

In the period between 2005-2007, we were sowing the seeds of the 2008 financial crisis through too much leverage in the private sector. But, very few people could see it coming. Today, we are sowing the seeds of another crisis with too much leverage in the public sector. This time, though, it's easy to see it coming.

h/t Bill

 

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Mon, 03/14/2011 - 13:47 | 1051014 Lazarus Long
Lazarus Long's picture

welcome to the fucking party asshole

Mon, 03/14/2011 - 13:55 | 1051063 B9K9
B9K9's picture

Amazing, huh? What a nice, concise summary. It's all there, spelled out in black & white.

And yeah, he's a little late, but better than never, no?

Mon, 03/14/2011 - 14:02 | 1051104 Dr. Richard Head
Dr. Richard Head's picture

Agreed.  I didn’t come to the party until summer of 2008.  I don't quite remember my Ah-ha moment as it relates to understanding the monetary ponzi phenomena, but I am 100% positive that a snapshot of my life prior to that moment was one of pure ignorance and running on debt (just like our “representatives”).  When the true reality of the ponzi manifested itself in my reality there was no turning back.  Surely it is a good sign, or maybe it isn’t.  Lip service rhetoric is a favorite weapon in the arsenal of our “leaders”.   

Mon, 03/14/2011 - 14:11 | 1051129 hedgeless_horseman
hedgeless_horseman's picture

Campbell better be quiet, or his fellow California congressman, Pete Stark, is going to throw him out a window:http://www.youtube.com/watch?v=UjbPZAMked0

Mon, 03/14/2011 - 14:15 | 1051184 Dr. Richard Head
Dr. Richard Head's picture

Gotta love Jan Helfeld. 

Mon, 03/14/2011 - 14:53 | 1051380 Michael
Michael's picture

The federal government and the Federal Reserve Corporation can only provide an illusion of recovery. This country needs to stop living in fantasy land. It's pattern no longer even resembles two dimensional thinking, it represents myopic thinking.

Mon, 03/14/2011 - 16:22 | 1051772 asdasmos
asdasmos's picture

.

Mon, 03/14/2011 - 16:45 | 1051925 Dr. Richard Head
Dr. Richard Head's picture

Tell that to the customers of the Disney Stores.  Sames-store sales for Disney are blowing through the roof.  How many stuffed fucking mickey's does this world need?

Mon, 03/14/2011 - 14:04 | 1051122 MachoMan
MachoMan's picture

Not necessarily...  I'm still not sure whether austerity or printing is better...  given the inevitable conclusion of both...

Mon, 03/14/2011 - 14:42 | 1051308 pyite
pyite's picture

I thought I was the only one in this situation!  I had always been opposed to printing, until (and correct me if I have any of this wrong) I realized how the Fed gives money to banks for free which they then use to buy government bonds at 4%+.  Of course the people in this situation want 100% austerity.

Before I could go along with 100% austerity, it must be accompanied by a reversal of the 2005 bankruptcy crackdown - and in fact it should go way the other way and let anyone easily walk away from their debt as long as they have bankruptcy on their history and give up their house and other non-essential assets (keeping retirement funds is reasonable though of course).  Banks should go along with this as a condition for the bailouts.

The only solution to the financial crisis is a "jubilee" - and I don't see any way other than this to make it happen.  It is past time to embrace and plan for the deflation and get it over with quickly.

 

Mon, 03/14/2011 - 15:26 | 1051526 MachoMan
MachoMan's picture

We've long since passed the point where the problem was solveable through deflation...  at the very least it would take a massive, massive default on domestic entitlements.  I simply have not seen any evidence that taking our medicine at this point will somehow prevent us from a dollar collapse.  It would likely prevent an immediate collapse, but it will only delay the inevitable.  It seems to me that the path that prolongs our situation and allows us to prepare the most for the coming collapse would be preferred...  essentially, we all benefit from the time bought for the banks...  albeit some more than others.  In the end, I think repudiation is in our future...  I suspect we'll talk a big game with austerity, but we haven't the balls to materially implement it for any reasonable duration.

Mon, 03/14/2011 - 15:59 | 1051688 traderjoe
traderjoe's picture

Our National debts are based upon treason - the invalid counterfeiting of money by private corporations (the Fed and the fractional-reserve banks). Our debt should be repudiated and the Fed should be collapsed, and fractional reserve banking outlawed. Then, a true national currency of interest-free and debt-free scrip (like the Lincoln Greenback) can be offered. Ideally, there would be competing currencies and monies, like private and/or national PM-based backed notes like the Kennedy Silver Certificate. 

Why is our national currency printed by private businesses and then loaned to the government for its use? Well, we all know that/those answer(s)...

Mon, 03/14/2011 - 21:00 | 1052834 Mark McGoldrick
Mark McGoldrick's picture

Our National debts are based upon treason...

That is pure libertarian lunacy. If you're referring to the death sentence for debasing the currency (Coinage Act of 1792), it was overturned in 1965 by Johnson.  This is the society that you and your countrymen created and voted for.  This didn't happen overnight. You voted for it, and allowed our problems to manifest themselves as they are. Waking up at the bottom of the 9th inning makes you equally complicit in this lopsided society.  

All you libertarians need to stop your bitching and your overly dramatic whining.    

You already have the freedom to do anything you want. You want competing currencies?  You already have it.  It's called the 4X market. If you don't want your dollars - if the world doesn't want dollars - you (and everyone else) can simply exchange them for Swiss francs, Australian dollars, Canadian dollars, euros, yen, kroner, pounds, pesos, dinars, riyals, bahts, gold, silver or sea shells.  Or you can exchange your dollars for American stocks, bonds, munis, Asian stocks, Asian bonds, Euro bonds, real estate in Dubai, penny stocks, farms in Peru, cotton fields in China, or chemical companies like Warren Buffet just did.  

You can do anything you fucking want with your wealth - preserve it in whatever asset you wish.  If you're so frightened by the prospects of the US dollar, simply use a small portion as a medium of daily exchange (for its convenience), and exchange your left-over dollars for any wealth-preserving asset you wish.  

It's very simple - you simply need to manage your wealth, and there is no God-given right that your wealth must adjust for inflation. Gone are the days where you could "set it, and forget it."  Preserving your wealth is simply another wild card in the survival-of-the-fittest game, and true libertarians should embrace it as another filter to weed out the weak.   

You libertarians claim to want social darwinism and survival-of-the-fittest anarcho capitalism, right?  You got it - and the plutocrats are kicking your ass. Stop bitching about curve balls, and learn how to swing.  Darwinism and adaptation necessitates unfairness.  Those who can adapt win, which means that those who want to return to the 1800s will probably lose.  


        

Tue, 03/15/2011 - 02:34 | 1054538 Broker NotBroke
Broker NotBroke's picture

We're just poor sports is all...

 

Also, no fair. They're Pro players and most of the libertarians are swingin' without a Tee for the first time.

Tue, 03/15/2011 - 13:26 | 1056323 pyite
pyite's picture

All you libertarians need to stop your bitching and your overly dramatic whining.

...

you simply need to manage your wealth, and there is no God-given right that your wealth must adjust for inflation

As a libertarian I would have to respond by saying to get a medical marijuana prescription, smoke some, and relax.

It is easy to confuse micro-economic (how to preserve your wealth) vs. macro-economic issues (government policy).  On public news-related sites like this one, I always expect the discussion to be on the latter.  Admittedly, government policy is driven mainly by the micro-economic wishes of the upper crust rather than by what is best from a macro-economic perspective for the country as a whole.

 

 

Mon, 03/14/2011 - 14:25 | 1051226 asteroids
asteroids's picture

After two years can any one explaing why credit card rates still haven't fallen?

Mon, 03/14/2011 - 14:32 | 1051261 MachoMan
MachoMan's picture

because borrowers haven't gotten any more credit worthy?  [and the rates have to outpace real inflation].

Mon, 03/14/2011 - 18:00 | 1052277 Zero Govt
Zero Govt's picture

because the biggest monopolies in the world, Visa and Mastercard, are parasitical scum

Mon, 03/14/2011 - 20:15 | 1052750 MachoMan
MachoMan's picture

At some point there has to be a counter argument for consumption discipline...  looks like a two way street at best. 

Tue, 03/15/2011 - 13:31 | 1056351 pyite
pyite's picture

Rates have been at historical lows since 9/11 basically.

I'm sure the average APR is higher these days, though.  Credit card companies have to make money somehow if they want to stay in business; but these days a higher percentage of people can only get cards with higher rates.  However, if you have good credit you can still get quite low rates.  As the cliche goes, to borrow money at a good rate you just have to prove that you don't need it.

 

Mon, 03/14/2011 - 14:04 | 1051109 the phantom
the phantom's picture

HAHAHA... I just spit out my coffee with that aptly put comment.

Mon, 03/14/2011 - 14:04 | 1051113 Sudden Debt
Sudden Debt's picture

After 3 decades, one gets it. How many does it make to make them realize they should do something about it?

Mon, 03/14/2011 - 15:07 | 1051429 CPL
CPL's picture

Most people understand the problem of dogshit while at a public park, you'll find that 99.999% walk around/over/circle the dog shit instead of dealing with the problem which ispicking up the dogshit shit in a plastic bag and disposing of it.

 

The problem of public debt as dogshit, let's see if one of the politicos is brave enough to pick it up.

Mon, 03/14/2011 - 16:01 | 1051699 Hacked Economy
Hacked Economy's picture

Hey Sudden...
ZH isn't displaying my animated GIF avatar with motion...just a flat image.  How'd you do yours?  Is there a secret handshake I need to give to Tyler or something?

Mon, 03/14/2011 - 14:09 | 1051142 FreeMoney Bernie
FreeMoney Bernie's picture

Its the dah factor

Mon, 03/14/2011 - 16:01 | 1051700 Al Gorerhythm
Al Gorerhythm's picture

I thought it was the gah factor.

Mon, 03/14/2011 - 14:52 | 1051336 Lazarus Long
Lazarus Long's picture

sorry about the foul language, but this is a four term congressman and a Certified Public Accountant if he just realized what's going on, the the above remarks are very kind.

Mon, 03/14/2011 - 15:24 | 1051527 Cactus Rocky
Cactus Rocky's picture

He's also a car salesman who made his dough working for his dad's dealerships. And he made sure car dealers were exempt from any fin reg. And he won the seat that Christopher Cox left in order to take his pillow and blankey over to the SEC. Those two are the Real Douchebags of Orange County.

Mon, 03/14/2011 - 22:00 | 1053196 robobbob
robobbob's picture

he's just hedging his bets so when the mobs come he can claim he was right with them

Mon, 03/14/2011 - 14:52 | 1051369 detersbb
detersbb's picture

Is it not refreshing that the last ones to realize that the government operations they preside over are in fact a ponzi scheme are the ones running it?  Is it surprising to see the last ones to realize they are the foxes are the foxes themselves guarding the hen house?

Mon, 03/14/2011 - 16:17 | 1051760 Al Gorerhythm
Al Gorerhythm's picture

Exoneration play.

Mon, 03/14/2011 - 13:46 | 1051020 nope-1004
nope-1004's picture

Ponzinomics.

God Bless Americans....  not their leaders leading them over a cliff.

 

Mon, 03/14/2011 - 14:00 | 1051090 Chris Jusset
Chris Jusset's picture

The Ponzi-driven US economy is a house-of-cards held together by Congress's rampant deficit spending and Banana Ben's relentless money printing.  Each day, increasing numbers of bandaids must be applied to this teetering house-of-cards to prevent the Ponzi scheme from collapsing.  Ben Bernanke is one of the few men to out-Ponzi Bernard Madoff.

Mon, 03/14/2011 - 14:51 | 1051361 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Never underestimate the power of printing money. However, one has to wonder what would happen if the printing presses were to suddenly stop.

Mon, 03/14/2011 - 15:04 | 1051421 Chris Jusset
Chris Jusset's picture

The lesson of history is that ONCE THE PRINTING PRESSES START, THEY NEVER STOP.  Once you go down the road of feeding a bottomless debt with money printing, you can never leave.

 

Similarly, once Charles Ponzi and Bernard Madoff decided to create pyramid schemes rather than foster genuine, bona fide business ventures, they committed themselves irrevocably to continually and increasingly feed the pyramid scheme by enlisting more suckers.

 

This will not end well.

Mon, 03/14/2011 - 15:29 | 1051542 Dooud
Dooud's picture

And ALL Ponzi schemes end the same way, someone holding the bag, which is empty. The problem is that this is the 1000x mother of all Ponzi's, just waiting for it's black swan moment to collapse. I need to make sure I have a 5 year MaryJane supply....... Tangibles, man,

Mon, 03/14/2011 - 16:05 | 1051722 Al Gorerhythm
Al Gorerhythm's picture

Maalox.

Tue, 03/15/2011 - 02:33 | 1054535 WaldenPondzi
WaldenPondzi's picture

The Dude is correct. Even if your not a weedsmoka, take some of those FRN you're plannin' on spending on Silver & Gold and buy some Ganja! There's plenty of people out there who will take some green (the tangible kind) over even the shiny stuff...

Mon, 03/14/2011 - 13:54 | 1051030 TWORIVER
TWORIVER's picture

.

Mon, 03/14/2011 - 13:58 | 1051067 The Profit Prophet
The Profit Prophet's picture

.

Mon, 03/14/2011 - 13:51 | 1051035 artinlight
artinlight's picture

well said

well said

Mon, 03/14/2011 - 13:54 | 1051052 TemporalFlashback
TemporalFlashback's picture

First Pimco, now Cambell. Something must be in that Orange County drinking water.

Mon, 03/14/2011 - 14:09 | 1051152 cossack55
cossack55's picture

Thanks California for giving us such a phucking wunderkind. That is about 256 brain-dead dolts from the soon-to-be-former west coast.  Sadly, my (what do you call them when they only represent themselves and TBTF banks?) empty-suit/heads are not any better.

Mon, 03/14/2011 - 15:38 | 1051592 docj
docj's picture

Well, that's the point. Right?  At least this dope maybe, kinda-sorta gets it.

My CongressCritter (Lynch, D-MA09) is still talking the happy skittle-shitting rainbow recovery happy-talk and my next-town-over CongressDouche (that would be Barney Freaking Frank, D-MA04) still insists Fannie and Freddie are A-OK.

Mon, 03/14/2011 - 13:53 | 1051053 nobusiness
nobusiness's picture

Wall Street tired of Japan talk.  Time to rally.

Mon, 03/14/2011 - 14:06 | 1051130 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

While you were writing someone puked blood on your pom poms.

Mon, 03/14/2011 - 13:55 | 1051057 Agent P
Agent P's picture

He's a fourth term Congressman and CPA, and he just figured this out?

Mon, 03/14/2011 - 13:59 | 1051079 Milton Waddams
Milton Waddams's picture

Cut him a little slack, he has a BA in Economics.

Mon, 03/14/2011 - 14:09 | 1051147 Mad Max
Mad Max's picture

I understand that formal training in economics now qualifies you as mentally disabled.

Mon, 03/14/2011 - 14:10 | 1051160 cossack55
cossack55's picture

Had he completed his Doctorate of Economics he would have figured it out by 2034.

Mon, 03/14/2011 - 14:24 | 1051223 eatthebanksters
eatthebanksters's picture

Only if he did his studies at Harvard...

Mon, 03/14/2011 - 14:24 | 1051211 sodbuster
sodbuster's picture

Yeah- but he still wouldn't have a fucking clue if he had a PHD from an Ivy League school.

Mon, 03/14/2011 - 14:07 | 1051136 I am more equal...
I am more equal than others's picture

Remember most congressmen are attorneys.  Attorneys are the non-productive portion of society that live off the protection racket - protecting you from other attornies.  Ponzi schemes are a natural progression in organized crime - opps - law.  You write the law - you enforced the law - you write more laws - you enforce more laws - you write even more laws - you enforce even more laws - sounds like a ponzi to me.  It morphed from laws to money long time ago when lawyers started to multiply like rats... I guess this will be our Dark Ages - and the plaque is debt, too much debt.  Let deleveraging begin!  3 bp?  Lets go 300 bp and destruct this thing like it needs to be destroyed....

Mon, 03/14/2011 - 14:17 | 1051190 MachoMan
MachoMan's picture

Cause and effect backwards...  it goes money -> laws...  not vice versa.  [It also goes laws -> increasing number of lawyers, not vice versa].

Further, please explain how any semblance of our legal system can persist without attorneys...  you going to represent yourself?  No more judiciary? 

Although there are conflicting numbers, here is an issue for you to consider...  http://sbmblog.typepad.com/sbm-blog/2010/07/how-many-of-the-founding-fat...

I think the issue is a little more complex...  (considering all laws are not simple manifestations of coerced/bribed power holders).

Mon, 03/14/2011 - 16:44 | 1051928 I am more equal...
I am more equal than others's picture

Cause and effect... effect and cause... you may be right.  I'm not advocating a system without laws or attorneys.  I'm advocating a system with fewer attorneys.  Tort reform, major tort reform would be a great step towards that end.  Jurisdiction shopping should be illegal.  Finding mindless, medicated citizens who have no critical thinking ability to judge complex issues is a serious problem. 

Yes, I agree this is a complex problem.  My problem is the system is too complex.  Does it take such a volume of laws, some outright ridiculous, to have a functioning society?  How much water can be flushed?  Light bulbs?  Some lobbiest (attorney most of them - I have several friend who do that line of work) with their clients agenda and check finds the right people and bam! you get some shitty law.  Congress thinks, wow, people still get their toilets and lights and we did something to 'save' the planet.  Bull Shit!  Now you flush 3-times to do what normally would be once - you get hazardous waste after the light bulb dies.  Well thought through.  No consequences, no one to say - 'hey, asshole, you're responsible for this idiotic stuff, repeal it!'  No, now that same congressman is a lobbiest doing the same crap.  Incestuous bunch. 

Mon, 03/14/2011 - 20:16 | 1052273 MachoMan
MachoMan's picture

Tort reform, in its present manifestation, has been ongoing since the 70s.  In short, it has been a total failure and its motives have been nothing short of naive (handouts to insurance companies in large part, denials of inflation for certain).  [I am presently involved in litigation where I hope to have the last material bits of our recent tort reform laws declared unconstitutional, so I am having to do a bit of research on the subject].

I have a theory that I do not see pursued by most people regarding large jury awards (which make up an incredibly small percentage of the awards, but garner all the attention).  I think large jury awards are simply functions of the wealth gap and you can correlate large jury verdicts with the wealth gap, at least through the credit bubble burst.  In essence, you have juries from the particular venue of trial pitted against foreign defendants that royally screwed the pooch.  Essentially, the jury is exacting justice against a multinational bad actor.  Sometimes, business SHOULD be put out of business...  it's as simple as that.  God knows our regulators won't do the job.  [see what will happen when the BP cases go to trial...  it will be fugly...  and, in all likelihood, much deserved].  Whether it be for the degree of reprehensibility of the action or simply in proportion to their perceived degree of wealth...

Obviously, the issue of runaway juries/their respective intellects, etc., are things fundamental to our legal system...  In other words, there's no getting around it.  As a result, the Supreme Court, on down the line, has set guidelines for "acceptable" punitive damage awards...  at least insofar as due process is concerned.  I believe the general threshold is 9.99x compensatory.  Much into double digits and I think you start to "shock the conscience" of the court.  In short, the court system has already policed itself in many regards...  of course, this doesn't get much media attention. 

We are in total agreement on the complexity of society.  As both an accountant and lawyer, I wish that I was out of a significant amount of business...  seriously.  I think most people simply cannot cope with the complexity of society, the rate of technological advancement (becoming necessary to be able to utilize to compete), and the sheer lunacy/number of laws.  I am a lawyer and I can't tell you dick about a significant portion of our legal code...  I think most citizens have no idea the fundamental criminal laws they break daily...  speeding is an easy one, but you can be pulled over/cited for just about anything... 

The neat part about complexity...  I have a thesis that our complexity is largely credit driven.  As credit goes, I think the complexity of our lives will be peeled back proportionately.  Fear not, it's a self healing problem.  Although, there will be ancillary, simultaneous problems arise...

Mon, 03/14/2011 - 14:08 | 1051148 MachoMan
MachoMan's picture

Ding ding ding.  Although, in his defense, I don't think ponzinomics is on the CPA exam (wasn't on mine).  Basically, holy shit, I'm a congressman!  Now what the fuck do I do?  Oh yeah, dick...  and get paid for doing dick...  awesome.

A whole many EUREKA! moments are going to be had in the coming months...  but, upon closer scrutiny, there is absolutely, positively no plausible explanation other than gross negligence, presuming the truth of the asserting party.  But yet we somehow wonder why we're shitcanned.

Mon, 03/14/2011 - 14:14 | 1051169 cossack55
cossack55's picture

Many of these scum won't have that moment until the blade has been released. Better late than never.

Mon, 03/14/2011 - 14:28 | 1051247 MachoMan
MachoMan's picture

I don't think cleaning house is going to do any good until we fix our structural problems...   Their replacements are going to have the same opportunist gene they do...  The worst part about it is how do you have a viable democracy when the vast majority of the population is brainwashed, severely indebted, over medicated, under educated, and doesn't give two shits about it?  Like Carlin's routine, these people were all created in america...  the problem is literally our entire culture.  Further, without the ability to make capital expenditures (given we have to waste all our milk and boob time on the banks [and public employees, yes, eat my ass too]), how does anyone expect to solve structural deficiencies?  [presuming the government can even do so].

Just really strange...  and, obviously, if there were easy answers, we'd probably have implemented them already...  eventually I think people just get so fed up they end up desperately making a change...  regardless of whether for the better (most people play checkers while death plays chess).  I have significant reservations about whatever change we choose...  but, I'm hopeful it will be "change I can believe in" [for a change]... 

Mon, 03/14/2011 - 13:54 | 1051058 The Axe
The Axe's picture

Its only a ponzi if you get caught!  Sound economic policy if you don't!!! LOL

Mon, 03/14/2011 - 13:54 | 1051059 Ruffcut
Ruffcut's picture

Damn, They must of thought that with, only one ron paul trash talking the ponzi, they now have room for another, out of hundreds of "public" servants.

Mon, 03/14/2011 - 14:15 | 1051181 TBT or not TBT
TBT or not TBT's picture

Didn't you mean public "servants".

Mon, 03/14/2011 - 13:54 | 1051060 Flakmeister
Flakmeister's picture

It must be getting bad when a generic congress-critter can figure it out...

Mon, 03/14/2011 - 13:58 | 1051072 vote_libertaria...
vote_libertarian_party's picture

So do we put him down as a 'no' or a 'yes' to lift the debt ceiling?

Mon, 03/14/2011 - 14:04 | 1051124 whatsinaname
whatsinaname's picture

Of course a yes. Since he "understands" it !!

Mon, 03/14/2011 - 13:57 | 1051073 sterman7
sterman7's picture

That's one down.  How many more to make a difference??

Mon, 03/14/2011 - 14:04 | 1051106 LFMayor
LFMayor's picture

none.  All ur votes belong to us.  The game is rigged.

Mon, 03/14/2011 - 13:57 | 1051075 JJJones
JJJones's picture

At least he gets it.  Unfortunately, most Americans never will until the store shelves are empty...

Mon, 03/14/2011 - 13:59 | 1051077 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It is not a ponzi.  Ponzi would imply there is an underlying asset.  The Fed has on its balance sheet MBS, dollars, swaps (Euros, etc), and gold, or rather "gold", as that "gold" could be neither in vault nor be gold (tungsten, cough cough).  This is a fiat ponzi, or more eloquently, a fake ponzi.

Mon, 03/14/2011 - 14:06 | 1051135 Flakmeister
Flakmeister's picture

Ponzi relies on an endless stream of suckers to keep the cash moving... The assets are fictional...

Mon, 03/14/2011 - 14:16 | 1051191 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The first loan of recourse, by the central banks, is gold, yet where is the gold?  A ponzi has an underlying asset, this one is gold, once again, 'where iz zee gold, Labowski?'

Mon, 03/14/2011 - 14:30 | 1051257 Flakmeister
Flakmeister's picture

  I'll quibble with you....I think we are actually talking about 2 ponzis that are interconnected. Lets call one the currency ponzi, i.e. the preferreds and the entitlement ponzi, the common...

You can have one without the other but a full fledged looting and pillaging is best performed with both in operation...

Mon, 03/14/2011 - 15:36 | 1051585 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What is an entitlement other than a concept?  What is a concept but an idea?  What is an idea, if not applicable? 

Mon, 03/14/2011 - 14:14 | 1051179 cossack55
cossack55's picture

So rather than Charles Ponzi, would that mean Chucky Ponzi? 

Mon, 03/14/2011 - 14:19 | 1051196 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

haha.

a Chuck E Cheese ponzi.

Mon, 03/14/2011 - 13:57 | 1051080 Greater Fool
Greater Fool's picture

Wow, glad to know those boys up there in Congress are paying such close attention.

Now where's his blog post about how cutting funding to NPR and NEA is just political grandstanding, and if we actually want to fix this crap we have to lower entitlement and military spending?

Mon, 03/14/2011 - 13:59 | 1051081 Dick Darlington
Dick Darlington's picture

I have a wet dream where the European political elite would say that EMU is a one big ponzi scheme designed to make a few very rich and the rest of us debt slaves. But then again just by looking today's headlines from the ponzimasters like Rehn or Juncker, methinks it will stay as a wet dream. Only the final collapse will bring the truth out for everyone to see.

Mon, 03/14/2011 - 14:01 | 1051089 vas deferens
vas deferens's picture

I see a Ponzi scheme said Captian Obvious!!

Mon, 03/14/2011 - 14:02 | 1051094 gwar5
gwar5's picture

The Wunderkinds in congress already know Social Security is a Ponzi.

It is surprising they are surprised they find the entire system is too.

Full Faith and Credit  = oxymoron.

Mon, 03/14/2011 - 14:00 | 1051096 Yield2Greatness
Yield2Greatness's picture

Too much power in the hands of a single man.  Bernack is a danger to the long term future of the USA.

Mon, 03/14/2011 - 14:12 | 1051158 Bam_Man
Bam_Man's picture

What long term future?

Mon, 03/14/2011 - 14:00 | 1051097 gorillaonyourback
gorillaonyourback's picture

Before I made an argument for a deflationary spiral see this but after listening to the extremely insightful Jim Rickards listening to him I am now doing a 1800 turn. Apparently helicopter Ben has completely fooled the public into thinking that in June the QE2 will end but with the arguments Jim Rickards makes we are in for perpetual QE. 

A little history of how we got here, the meat and potatoes at the end.

Here is how it works.  The Government initially says for example we need 500 billion dollars for the government expenditures such as defense, Medicare pensions etc,   Treasury prints up 500 billion sends the bonds over to the Fed Reserve and the Fed Reserve prints up 500 billion dollars and gives it to the government and the Federal Reserve gets the 500 billion in Treasury bonds.

The Federal Reserve and Treasury take the bonds and have an auction.  The bonds are auctioned off to the public. There are 3 types of buyer’s direct bidders (money managers), indirect bidders (central banks) and primary dealers (large brokerage houses). But a funny thing here is that the ones who are selling the bonds are the same ones buying the bonds in the case of the central bank (Federal Reserve). And at last auction in Feb 2011 the central bank (Federal Reserve) took down 70% of all the bonds. This is how they manipulate bond prices and yield.  It would be like me having a garage sale and I secretly have a friend standing around bidding up the price of all the crap I’m selling,  if I don’t like the price some poor sucker offers me, my friend comes around and bids up the price.

So moving on to what quantitative easing (QE2) is all about. In the middle of last year the interest on the outstanding bonds not held buy the indirect bidders was too high.  The interest payment on those bonds were too high and a large percentage of the money coming into the government was going to just pay the interest on the outstanding bonds  also the 2-10 maturing bonds were coming due so the principle was going to have to be paid too.  So Federal Reserve decided to start retiring as many bonds as possible and they started buying bonds on the open market with a vengeance (POMO).  Bill Gross made a killing, he bought a bond at 90 dollars and the FED gave him 102 dollars for it. The fed did this to a tune of 600 billion dollars.  THE MAIN POINT IS THIS, QE2 WAS DONE TO REDUCE THE INTEREST PAYMENTS FROM GOVERNMENT SINCE IT IS INSOLVENT, not to create liquidity to jump start the economy which was only a secondary hope it could.

The term monetizing the debt comes from this, printing money to buy as many outstanding bonds as you can.

A shortened explanation of the, Troubled Asset Relieve Program (TARP).  TARP was meant to purchase mortgage backed securities (MBS) for simplicity basically underwater mortgages that the banks held on their books.  BUT HERE is the kicker, let’s say someone bought a house for 500K dollars and now it’s worth 300K the FED through TARP gave them the bank 500K for the damned thing. There is more disgusting crap for the taxpayer to know about but this paper is not about that. Maybe I’ll do that later, look into AIG if you want to ruffle your feathers. ( I added this for reason later)

So here we are today the fed has let’s say 1.6 trillion in monetized bonds on their books and another 9 billion in mortgages for a total amount 2.5 trillion maybe 3 trillion by June. You can’t audit these fuckers but the consensus is that around 3 trillion is the right number. The feds balance sheet a few months ago, showed about 2.3 trillion, so by June it could well be 3 trillion. So here are the meat and potatoes.  Perpetual QE comes like this, the principle and interest payment will be paid by printing money for the bonds the feds has on their books.  YOU GET THAT.  That’s like me printing my bond and then printing money to pay principle and interest off on the bond I purchased. So again,

1st   I (the FED) print money to buy bonds on the open market QE2

2nd I (the FED) put the bonds in my bank (FED RESERVE BANK)

3rd I (the FED) print money to pay myself the interest and principle due on the those bonds I hold in my   bank (FED RESERVE BANK).

So I (the FED) bought the bonds TWICE with the money I (the fed) printed.

 

So, I do this again go out and by bonds on the open market again with the money I just paid myself, print more money to pay myself the principle and interest on the bonds I just bought.

Perpetual Quantitative Easing (QE in 2infinity) infinite monetization of debt

The fed also will be receiving principle and interest payment from the Mortgage Backed Securities (MBS). (This is here because I want you to know the makeup of assets on the feds balance sheet.)

A term you should look up is called stock and flow; it means the total amount of assets (stock) and the income stream from those assets (flow).  Stock and flow is fed jargon.  Of the 3 trillion they have on the books (stock) they figure they can get an income stream (flow) of 750 billion annually. That’s the essence of perpetual QE. A flow of 750 billion annually will be used to print till hell freezes over.

 

So this is how it will go down the FED will say oh we have stopped QE but now you and I know their full of shit. They will also say they are not expanding their balance sheet too, but you will also know why.

What do you think China will say when their 10 trillion dollar (whatever number it really is I don’t know) surplus today is reduced to 1 trillion dollars of purchasing power tomorrow?  I’d be one pissed off mother, so expect war at some point. You think the rest of the world is going to keep giving us shit for worthless dollars.  I personally think it’s going to blow up any day with us loosing the worlds reserve currency all china has to say is convert you currency into some commodity we like or no more products.

Look for our standard of living to drop real fast.

Remember those bumper stickers that say don’t laugh it’s paid for? Well you’re going to see a lot more of them. HYPERINFLATION COMIN THANKS BEN

Mon, 03/14/2011 - 14:13 | 1051173 Atomizer
Atomizer's picture

+1

Mon, 03/14/2011 - 14:37 | 1051288 tmosley
tmosley's picture

Excellent post.

I wouldn't be worried about China, though.  They will likely see the value of their gold reserves increase enough to offset their Forex losses, not to mention all the other "things" they have stockpiled.

Mon, 03/14/2011 - 15:08 | 1051437 cdude
cdude's picture

Yeah, I listened to Rickard's interview on King World too. It all sounds plausible in theory but HTF could the Fed pull 750 bln per year via interest and rollovers??

Maybe if all their holding were 2-yr or shorter but we all know they've been buying alot of 10 + to keep the spread in check. 

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/3/12_Jim_R...

Mon, 03/14/2011 - 14:01 | 1051100 Dr. Engali
Dr. Engali's picture

We must be getting close to the end if a congress fucktard finally gets it.

Mon, 03/14/2011 - 14:02 | 1051107 MrBoompi
MrBoompi's picture

Well, now that he realizes what's going on, he'll get a little anonymous note slipped under his office door telling him to shut his fucking mouth because they know where his family lives.

Mon, 03/14/2011 - 14:03 | 1051111 I Am The Unknow...
I Am The Unknown Comic's picture

You keep talking like that little Johnny and they'll put a dunce hat on you and make you sit in the corner next to Ron Paul.  

Mon, 03/14/2011 - 14:05 | 1051118 TumblingDice
TumblingDice's picture

Now, let's do some math: how many of the 535 can do math?

Take the two, carry the one, plus or minus...yea that turns out to be not enough. I propose that we do some research about our elected representatives. Imagine that Sarah Palin was once in charge of something and that this person is still in office:

http://www.youtube.com/watch?v=Kp1YjpNxn54

Mon, 03/14/2011 - 14:05 | 1051133 Convolved Man
Convolved Man's picture

I think he is ready for the full truth -- there is no money, just promises.

Mon, 03/14/2011 - 16:17 | 1051756 Al Gorerhythm
Al Gorerhythm's picture

When you put it that way, then: HOLY FUCKIN SHIT, BATMAN!

Mon, 03/14/2011 - 14:09 | 1051149 vas deferens
vas deferens's picture

Mon, 03/14/2011 - 14:10 | 1051151 John McCloy
John McCloy's picture

Ok it looks like were all baked into here. Is there a stored POMO cash push green coming?

Mon, 03/14/2011 - 14:25 | 1051219 Convolved Man
Convolved Man's picture

Slide on the Ray-Bans.

"Future's So Bright, I Gotta Wear Shades"

http://www.youtube.com/watch?v=8qrriKcwvlY

Mon, 03/14/2011 - 14:10 | 1051156 Greater Fool
Greater Fool's picture

Please. Spare me the Congressional crocodile tears. These guys march off to Washington--both parties--and proceed to cut taxes and increase spending at the same time so they'll be nice and popular back in their districts and then somehow are surprised to realize they can't afford it? Spare me. This is cover, pure and simple.

I'm sort of surprised that the most vehement form of hate here is reserved for Helicopter Ben. A lot of the reason he's doing what he's doing is to keep jokes like this guy, and Ron Paul, and all their esteemed colleagues living in the style to which they're accustomed: That is, getting reelected instead of doing their fucking jobs.

Mon, 03/14/2011 - 14:11 | 1051157 natew
natew's picture

Ah, but that $150 billion will equal $75 billion in profits to the Fed, which in turn must go to the Treasury.  So the end result may be only a $75 billion increase.  Brilliant and insane all at once.

 

So what happens when Fed's assets decrease in value? 

Mon, 03/14/2011 - 14:20 | 1051202 cossack55
cossack55's picture

They don't. FASB 157 has been toast for the last two years and the next 200 years.

Mon, 03/14/2011 - 14:17 | 1051187 Motorhead
Motorhead's picture

Wow, well that makes two Congressmen who get it.

Mon, 03/14/2011 - 14:19 | 1051200 LawsofPhysics
LawsofPhysics's picture

Bullshit, this corrupt fuckwad wants to pretend to suddenly be paying attention?  How about a solution, now that you have recognized the problem Mr Senator?

Mon, 03/14/2011 - 14:21 | 1051207 earnulf
earnulf's picture

He doesn't "get" it.    He talks a good game, but he's just another congressman, doing "congressmen" things and appearing concerned (another learned congressional trait) about the little people's welfare.

If he was really "concerned" he wouldn't be talking in "politics" on his website.     If you're gonna do something, say up front what you're gonna do and then do it.

Worried about the FED being a Ponzi Scheme?     Man Up and say QE2 ends in June, period.    The problem is that he may actually understand what that means when 70% of the debt is no longer being bought by ANYONE and he has no clue what to do and no time to figure it out!

Mon, 03/14/2011 - 14:24 | 1051225 rustymason
rustymason's picture

We are printing money ($600 billion) to buy our own debt so that the full effects of the deficit are not felt. We are buying long-term bonds to artificially hold down the rates on those bonds since home mortgages and many other things are based on those rates. We are selling the short-term bonds at cheaper rates to hold down costs now, but are leaving ourselves open to huge cost increases when interest rates go up.

 

What's all this "we" business?  These are private foreign banks and corrupt oligarchical governments creating and "buying" these notes.  The other 99.9% of us have no say so at all.  Time to give the wheel a big turn.

Mon, 03/14/2011 - 14:38 | 1051290 aheady
aheady's picture

+1913

Mon, 03/14/2011 - 16:04 | 1051705 traderjoe
traderjoe's picture

Yessss

Mon, 03/14/2011 - 14:28 | 1051245 djsmps
djsmps's picture

A blinding flash of the obvious?

Mon, 03/14/2011 - 14:31 | 1051246 Mister Meaner
Mister Meaner's picture

From John Campbell's web site (Bio)...

http://campbell.house.gov/index.php?option=com_content&view=article&id=1...


...Likewise, he was a natural choice for the bipartisan and bicameral Joint Economic Committee where he is tasked with monitoring economic conditions and recommending improvements in economic policy.

...As a member of the House Committee on Financial Services, he has taken an active part in addressing the country's top economic issues, including mortgage lending, corporate governance, banking reform, and insurance regulation. Through the recent economic crisis, he was influential in the responses to the crisis that averted a collapse in our markets and economy. Currently, he serves on the Capital Markets and International Monetary Policy subcommittees.

...John also serves on the House Committee on the Budget, where he has had a hand in crafting portions of The Roadmap for America’s Future.

...Often called upon to offer his economic expertise, John appears regularly on CNBC, Fox News, Fox Business and Bloomberg TV.

==============

No need to worry people, John is on top of things.

Mon, 03/14/2011 - 14:29 | 1051249 RemiG2010
RemiG2010's picture

One Big Ponzi since 1972? Hmmm.... Carry on....

Mon, 03/14/2011 - 14:34 | 1051281 whatsinaname
whatsinaname's picture

1971 (gold standard)

1982 (401k programs go LIVE)

Mon, 03/14/2011 - 14:32 | 1051264 pyite
pyite's picture

If the government is serious about reducing the debt burden, they should be moving debt to 30 years while rates are still low.  Of course, part 2 of the plan is to run surpluses as far as the eye can see.  Or maybe that should even be part 1 to build some credibility like we did 10-15 years ago.

 

Mon, 03/14/2011 - 14:31 | 1051268 JR
JR's picture

Chris Martenson did a comparative fiscal outlook for the US with that of a troubled relative earning $50,000 a year yesterday in “How to Explain the Current Economic Situation to Friends and Family.” Here are the figures without the narrative) :

I have a relative in financial trouble. He makes $50,000 a year, but he spent $74,591 last year, and his prospects of making $50,000 this year look kind of bad. There's a good chance he will get a pay cut.

Unfortunately, he’s been overspending for quite a while and has charged $295,632 on credit cards…

So here’s the picture:

·         $50,000: Income

·         $74,591: Expenses

·         $24,591: Deficit

·         $295,632: Short-term revovling debt at artificially low rates

·         $2,372,632: Unfunded promises

·         $1,292: Republican friends budget cuts

·         $137: Democrat friends budget cuts

So, what does the future look like for my Uncle Sam? Do you think he can keep going like this much longer? What about his family that’s counting on the promises he made to them? Do you see any possible solution other than bankruptcy? 

Multiply the above numbers by 47,620,000 and you get the fiscal picture for the United States Government in 2010:

·         $2.381 Trillion: Revenue

·         $3.552 Trillion: Budget

·         $1.171 Trillion: Deficit

·         $14.078 Trillion: Debt

·         $113 Trillion: Unfunded Liabilities (Social Security, Medicare, Medicaid)

·         $61.5 Billion: Republican proposed budget cuts

·         $6.5 Billion: Democrat  proposed budget cuts

http://www.chrismartenson.com/blog/how-explain-current-economic-situatio...

Mon, 03/14/2011 - 14:35 | 1051283 the not so migh...
the not so mighty maximiza's picture

The chip in his brain must be malfunctioning

Mon, 03/14/2011 - 14:35 | 1051286 Muir
Muir's picture

 

http://www.pokernewsdaily.com/congressman-john-campbell-to-introduce-internet-gambling-legislation-18106/

We’re only two months into the 112th Congress and already talk of pro-internet gambling legislation being introduced has begun. This time, it’s from Congressman John Campbell (R-CA), who, according to Gambling Compliance, has teamed with Barney Frank (D-MA) to call for the licensing and regulation of internet gambling in the United States.

 

Barney and Fred

 

-

Mon, 03/14/2011 - 14:56 | 1051397 JR
JR's picture

Well, that should make him an expert on Ponzis.  And the U.S. taxpayer can pick up the poverty bill for a new crop of down-and-out gamblers. - maybe add them to the current Social Security tab for drug and alcohol addicts.

Meanwhile, the coffers for Carl Icahn swell with... MONEY!

Mon, 03/14/2011 - 14:39 | 1051300 Misean
Misean's picture

"I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less."

I also learned that the sun rises IN THE EAST! The EAST!!!! Also, the Pope lives in Italy and is Catholic, and Barney Fudd is gay...I tell ya, you need a cheat sheet for all this stuff...

Mon, 03/14/2011 - 15:06 | 1051434 sdmjake
sdmjake's picture

"You guys playin' cards?"

Mon, 03/14/2011 - 19:45 | 1052651 Blano
Blano's picture

+10 for the Flounder reference.

Mon, 03/14/2011 - 14:39 | 1051301 Alex Kintner
Alex Kintner's picture

" I'm shocked, shocked to find that gambling is going on in here!"

Mon, 03/14/2011 - 15:57 | 1051681 Muir
Muir's picture

-

 

Frank McCloud: "One Rocco more or less isn't worth dying for! "

 

-

Mon, 03/14/2011 - 14:42 | 1051306 Unlawful Justice
Unlawful Justice's picture

When you work and produce income you feed the ponzi

When you buy any thing you feed the ponzi

When you pay any tax you feed the ponzi

When you listen to a congressmen who "just got it".

You feed the ponzi

Time for a money system that A99.9 control.

Mon, 03/14/2011 - 14:44 | 1051327 PulauHantu29
PulauHantu29's picture

If I remember correctly, Campbell played Homer Simpson in his high school play.

Mon, 03/14/2011 - 14:53 | 1051378 ThirdCoastSurfer
ThirdCoastSurfer's picture

"buying 10 year maturities and longer in order to hold those rates down"

should be: buying mostly 5's and 7's. Buying the middle and probably 70% of those issues.

This forces (or tried to force in the case of PIMCO), those who only invest in notes to chase the yield on the long end (think of the expenses that a firm like PIMCO needs to cover) thus the Fed takes care of the long end without having to invest directly. 

maybe next he'll notice what's going on with the middle and the PD's. 

Mon, 03/14/2011 - 14:55 | 1051386 BennyBoy
BennyBoy's picture

It's not a Ponzi scheme.

It's a Goldmanzi scheme.

Mon, 03/14/2011 - 14:57 | 1051390 Paul Bogdanich
Paul Bogdanich's picture

This is the same idiot that when originally presented with the evidence said it was "ranting" by "wild eyed progressives."  The guy is a freaking idiot.   

Mon, 03/14/2011 - 15:18 | 1051503 aerial view
aerial view's picture

next time our illustrious leaders make a stink about improving the education system let's make it mandatory that our kids starting in grammar school are taught about ponzi schemes, leverage, correct accounting principles, how the fed and treasury work are suppose to work and budget deficits.

Mon, 03/14/2011 - 15:21 | 1051513 aaronb17
aaronb17's picture

Anyone remember when the government was borrowing money at 15 percent interest in the 80s?  Anyone buy 30-year treasury bonds at 15 percent interest back then?  That's what a 30-year treasury bond was paying back then -- 15 percent interest. 

Borrowers who bought $1 million in 30-year bonds back in 1982 have been living the high life all the way up to today -- they've been collecting $150k in interest income every year.  

Unfortunately, that gravy train is about to start winding down for good.  The 1982 30-year bonds, purchased at the peak of the interest rates, are finally going to expire in 2012.  I wonder how many people are going to have to give up their high-on-the-hog lifestyle next year as a result of this? 

Mon, 03/14/2011 - 15:51 | 1051647 10kby2k
10kby2k's picture

They could re-invest those proceeds in 5 year TIPS and receive (-0.60%) !!!!

Mon, 03/14/2011 - 15:48 | 1051631 10kby2k
10kby2k's picture

Randomly choose non-felons from the general population and make them congress. Did you BTFD of 30 minutes ago?

Mon, 03/14/2011 - 15:55 | 1051671 Downtoolong
Downtoolong's picture

The biggest financial disasters have often involved use of short term financing for long term commitments. The excessive use of adjustable rate teaser mortgages in the housing market was another sad example. I do give Congressman Campbell credit for recognizing the risk imbedded in the current government / Fed funding strategy; risk that has increased substantially in the last few years. I’m sure other Congressmen will eventually come around to recognizing this too, about three days after the entire system collapses.

Mon, 03/14/2011 - 15:57 | 1051686 sbenard
sbenard's picture

Apparently, Congressman Campbell is just now seeing what the readers of ZH have seen coming for some time! At least ONE person in Congress is waking up! Let's hope he can pull the blinders from the eyes of a few more! Unfortunately, I have my doubts!

Mon, 03/14/2011 - 16:15 | 1051758 Mossy
Mossy's picture

Democracies have always destroyed themselves, either through bankruptcy or by voting some ass greater power (see Chavez). That's why to founders set up a Democratic Republic.

Mon, 03/14/2011 - 16:15 | 1051759 newbee
newbee's picture

I've heard as an aside that the interest payments made to the Fed when they purchase securities are then counted as positive inflows to our GDP by the Treasury, which then pays these interest payments using tax dollars.  (These payments go into the Fed's reserves, then counted to GDP somehow?  I can't see how our tax dollars are making these payments while there are POMO / banks setting between the Treasury and the Fed.)  Any advice how this works?

 

Mon, 03/14/2011 - 16:30 | 1051845 Can2001
Can2001's picture

Had he? ( John Campbell ) a vacation from 11/2010 to 3/2011 ???...ok better

than an lifetime vacation like his sisters and brothers...ot: obsama have no vacation, he only plays golf for sportsmanship.

Mon, 03/14/2011 - 16:36 | 1051885 Mark Beck
Mark Beck's picture

A few points:

IMHO the congressman is under the impression that the Treasury controls demand. How exactly? To me the short end is easier to churn for the market at large, given the current environment.

----------

As I recall the QE1 buy (originally described as a long term purchase program) upon completion had a broad distribution across maturity. Mainly to provide needed flexibility in the churn to influence buy dynamics. I expect QE2 to be much of the same. Although I am looking to see an overall QE1 +QE2 + QE light (Treasuries) to form a distribution which allow effective control over the buy for the anticipated Treasury churn needs.

----------

Mon, 03/14/2011 - 17:42 | 1052188 zebra
zebra's picture

Ben, we have a friend Mr. Campbell ran out of kool-aid. Please FedEx some to his office ASAP.

Sincerely

O-man

Mon, 03/14/2011 - 17:43 | 1052199 Mark Beck
Mark Beck's picture

So lets read between the lines shall we.

He is disingenuous in his remarks. The CBO and CRS has warned about this pending crisis for over two years now, and the congressman knows it, and is writing to act surprised at our true fiscal situation, as to not be held accountable.

Don't be fooled by this career politician, he knows nothing will change in Washington without crisis, and is trying to remove himself from blame.

The first step is to single out the FED as the whipping boy, without discussing the congressman's own fiscal responsibility in creation of  the deficit.

It is this misdirection, and unaccountability which describes most of our congressmen.

What I call political scum.

Sorry, but he is just full of shit. He knows the truth, but will not speak it. He will say just enough to remove himself from blame. Expect more of this kind of political scurrying about as more constituents ask why.

-----------

"And, once the Fed ends QE2, even if it doesn't reverse it, the markets will then have to absorb a new influx of long-term bonds at a time when our ability to pay them is in question. The Fed can cure a bunch of this simply by printing a lot more money. That, however, will result in an inflationary period with major wealth destruction and economic malaise."

Monetization of debt is not a cure, and wealth destruction, as he calls it, will inhibit our ability to provide services, specifically, entitlements.

Mark Beck

 

Mon, 03/14/2011 - 18:11 | 1052317 innertrader
innertrader's picture

He still doesn't get that the FEDs also caused the "private debt" by pressuring banks to make loans to buy homes that people should NOT have been buying, period!  Where is Barney Frank these days???  What an ass hole!  He was "the" spokes person promoting the FEDs guarantee (Fannie and Freddie) of loans that banks should NOT have been making to people who should NOT have been buying, period!  Also, where is the Black Caucas that totally promoted the destruction of the U.S. housing market and maybe the U.S. too!

Mon, 03/14/2011 - 18:14 | 1052332 falak pema
falak pema's picture

You only look in the mirror to see your real self once the vision of your ideal self has finally vanished into oblivion. Its painful to see it fly away. But one day you have to admit it's gone....like MM in "Some like it hot' ...never to return, for a long time coming.

Mon, 03/14/2011 - 18:35 | 1052378 steelhead23
steelhead23's picture

Dear Rep. Campbell,  Now that you understand the nature of the problem, what sir, do you offer as a solution?  Many are focused on the expenditure side of the federal ledger: if we could only sufficiently reduce spending, the deficit would be reduced, interest rates could be allowed to rise, and the Fed could reduce its assets and end its intervention in the credit markets.  However, with unemployment officially around 9 percent and is actually probably close to twice that if those who have given up or are woefully underemployed were counted, substantially reducing federal spending would have a human cost.  The recession would deepen, at least initially as folks benefitting from federal largesse were forced to reduce expenditures.  Indeed, Keynesians would suggest that substantially reducing federal spending would force further GDP contraction.  Why not man-up and propose to close the deficit by increasing revenues as well as cutting expenditures.  Oh, I see, you're just another whiny girlie man.

Until revenues are on the table, this is all just talk and it will never solve the problem.

Mon, 03/14/2011 - 19:12 | 1052521 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Re QE Perpetual as proposed by Jim Rickards :  if the Fed has 750bio receipts/year from its holdings of Treasuries and MBS', how does this monetise the deficit? It is simply rolling over in perpetuity maturing (existing debt). The annual deficit needs a fresh infusion of 1.5trillion...which needs fresh money printing. What am I missing?

Mon, 03/14/2011 - 19:36 | 1052605 trendybull459
trendybull459's picture

People get together,anyone who cares about basic problem of our existance FED invited to vote in our poll and read out latest comments on yahoo FED article about QE3:

http://trendybull777.blog.com/2011/02/21/hello-world/

Voting poll is waiting for you click,take 5sec to make your choice,we must to reach critical level to be recognised by others to tove too!Thank you and keep all us together regardless government effords,we appreciate if you link us to other polls,blogs,sites to let people or your friiends to vote FED existence

Mon, 03/14/2011 - 19:36 | 1052610 wilburpup
wilburpup's picture

The eminent economist E.J. Dionne respectfully disagrees and asks the burning question:

"What if We're Not Broke?"

http://www.washingtonpost.com/opinions/what-if-were-not-broke/2011/03/11/ABhFE6T_story.html

 

 

Mon, 03/14/2011 - 19:43 | 1052636 Mediocritas
Mediocritas's picture

All of this is a problem how exactly?

If the government does not expand the deficit to fund economic activity that is being abandoned by a deleveraging private sector then we'll have a major problem.

Is that expansion a problem? No it is not because it's the Fed that is now the primary buyer of US debt. This is like taking a loan from yourself. As I've said several times before, debt owed to the Fed is irrelevant because it can, and will, be rolled indefinitely and the interest service is effectively zero (the Fed returns interest paid to the Treasury).

"Deficit terrorists" would have you all believe that a growing deficit during a balance sheet recession is a terrible thing. They're wrong. Any attempt to balance the budget or worse, go to surplus, at this time would be a disaster. History demonstrates this.

As for focusing on the short end. This is a GOOD thing and I commend the Fed/Treasury for doing so. Too much activity on the longer end drives pension funds out of fixed income and into the Ponzi stock market, which is not a good thing.

As for inflation. None of this (QE1, lite or 2) is inflationary until such time as the money multiplier recovers (deleveraging in the private sector stops). The inflation you are seeing in commodity prices right now is a consequence of Chinese monetary policy much moreso than US.

People are getting far too worked up about all this. All that's actually happening is that the US public sector is replacing the US private sector as the latter erodes in order to try to maintain economic buoyancy. The public sector expansion is being funded by deficit spending which is, by nature, reversible.

Once the private sector shows signs of life again, the deficit (and the size of the bond roll) can, and will, be reduced via austerity measures (taxation). The only real threat to us here is that, when the time comes, the government proves fond of its newfound role and refuses to shrink as the private sector grows. That, I'll admit, is a potential problem.

Mon, 03/14/2011 - 20:16 | 1052761 Orly
Orly's picture

Greetings to you, Mediocritas.  It is a pleasure to see and hear you again, as your posts are most enlightening.  I appreciate your input greatly.

"People are getting far too worked up about all this. All that's actually happening is that the US public sector is replacing the US private sector as the latter erodes in order to try to maintain economic buoyancy."

A few of questions, if you don't mind:

  • Is there truth, then, to the idea that the erosion of private capital by way of deflation is occurring at a magnitude far greater than the Fed and other central banks have been creating money or credit?
  • Should the Fed be actually creating more credit as the pace of monetary destruction accelerates?
  • Is there a point of equilibrium whereby the monetary destruction due to deflation reaches a tipping point and the Fed will not be able to keep up with it and the entire scheme collapses?
  • How will we know when this has occurred or is occurring?
  • Isn't deflation the necessary end-game and the actions by the Fed are only softening the hard landing, or do you believe the Fed can actually re-inflate the economy as it once stood?

Many thanks.

Orly

Mon, 03/14/2011 - 23:20 | 1053626 JR
JR's picture

This problem is exactly because Keynes’ twin answers to unemployment and economic downturns, ie,  massive government spending and “cheap money” – the artificial driving down of interest rates to “free up credit” -  not only do not work, but they have the OPPOSITE effect of that intended.

And your conclusion that “Once the private sector shows signs of life again, the deficit (and the size of the bond roll) can, and will, be reduced via austerity measures (taxation),”  I fear, is now beyond the scope and acceptance of maxed out American taxpayers.

Keynes pronounced his theories ex cathedra, without substantial statistics to back them up. Then, if actual statistics were produced that seemed to show results opposite to what his theories had predicted, he simply challenged the statistics.

Ludwig von Mises said in 1959 that Henry Hazlitt in his book The Failure of the New Economics had “entirely demolished the Keynesian misconceptions…”  

To remedy unemployment, Hazlitt said:  “Keynes recommends two main remedies. One is deficit spending (sometimes euphemistically called government ‘investment’). How good is this remedy? It was tried in the United States (partly because of Keynes’ recommendations during the Great Depression) for a full decade. What were the results”


Official figures cited by Hazlitt in his book regarding “the deficit in the Federal budget, the numbers of unemployed, and the percentage of unemployed to the total labor force, year by year in that decade” show that: “The central and decisive fact is that heavy deficits were accompanied by mass unemployment…”

Hazlitt continues: “The other main Keynesian remedy for unemployment is low interest rates, artificially produced by ‘the Monetary Authority.’ Keynes incidentally admits … that such artificially low interest rates can only be produced by printing more money, i.e. by deliberate inflation… The question immediately before us is: Did low interest rates prevent mass unemployment? …”


The answer is No! 

Hazlitt’s chart measuring the commercial paper rate against the unemployment rate for the years 1920 through 1940 shows that: 

“In sum, over this period of a dozen years low interest rates did NOT eliminate unemployment. On the contrary, unemployment actually INCREASED as interest rates went down. In the seven-year period from 1934 to 1940, when the cheap money policy was pushed to an average infra-low rate below 1 percent (.77 of 1 per cent) an average of more than 17 in every 100 persons in the labor force were unemployed.”


 

Hazlitt proceeds to demonstrate that from 1949 to 1958, when the same policy of artificially pushing down interest rates was tried, “the relationship of unemployment to interest rates is almost the exact opposite of that suggested by Keynesian theory.”

Mon, 03/14/2011 - 23:51 | 1053849 AldoHux_IV
AldoHux_IV's picture

2 Solutions:

1. End the fed

2. All home mortgages should be written down from the perspective of the borrower thus also solving the TBTF problem as these banks will have to get smaller in size in order to adjust to their holdings.

Tue, 03/15/2011 - 05:34 | 1054664 Mr Rogers
Mr Rogers's picture

Just checked how this guy voted on TARP....he voted YES.  What a two faced loser.  I've also heard him say he supported the auto bailouts.  I mean afterall he was a car salesman.  He'll believe anything Bernanke tells him if we go by his past track record.

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