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Goldman: The Fed Needs To Print $4 Trillion In New Money

Tyler Durden's picture


With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...

Here is the math.

First, Goldman calculates that the gap to close to a Taylor implied funds rate is 7%.

Our starting point is Chairman Bernanke?s speech on October 15, which defined the dual mandate as an inflation rate of ?two percent or a bit below? and unemployment equal to the committee?s estimate of the long-term sustainable rate. The Fed?'s job is then to provide just enough stimulus or restraint to put the forecast for inflation and unemployment on a ?glide path? to the dual mandate over some reasonable period of time. Indeed, Fed officials have implicitly pursued just such a policy since at least the late 1980s.

To quantify the Fed?s approach, we have estimated a forward-looking Taylor-style rule that relates the target federal funds rate to the FOMC?s forecasts for core PCE inflation and the unemployment gap (difference between actual and structural unemployment). At present, this rule points to a desired federal funds rate of -6.8%, as shown in Exhibit 1.3 Since the actual federal funds rate is +0.2%, our rule implies on its face that the existence of the zero lower bound on nominal interest rates  has kept the federal funds rate 700 basis points (bp) ?too high.?

It is important to be clear about the meaning of this ?policy gap.? It does not mean?as is sometimes alleged?that policy is tight in an absolute sense, much less that it will necessarily push the economy back into recession. In fact, policy as measured by  the real federal funds rate of -1% is very easy. However, our policy rule implies that under current circumstances?with the Fed missing to the downside on both the inflation and employment part of the dual mandate (and by a large margin in the  latter case) ?a very easy policy is not good enough. Instead, policy should be massively easy to facilitate growth and job creation, fill in the output gap, and ultimately raise inflation to a mandate-consistent level.

Next, Goldman calculates how much existing monetary, and fiscal policy levers have narrowed the Taylor gap by:

The 700bp policy gap clearly overstates the extent of the policy miss because it ignores (1) the expansionary stance of fiscal policy, (2) the LSAPs that have already occurred and (3) the FOMC?s ?extended period? commitment to a low funds rate. We attempt to incorporate the implications of these for the policy gap in two steps.

First, we obtain an estimate of how much the existing unconventional Fed policies have eased financial conditions. In previous work we showed that the first round of easing pushed down short- and long-term interest rates, boosted equity prices and led to depreciation of the dollar. Although our estimates are subject to a considerable margin of error, they suggest that ?QE1? has boosted financial conditions?as measured by our GSFCI ?by around 80bp per $1 trillion (trn) of purchases. Moreover, our estimates suggest that the ?extended period? language has provided an additional 30bp boost to financial conditions. A number of studies undertaken at the Fed similarly point to sizable effects on financial conditions. A New York Fed study, for example, finds that QE1 has pushed down long-term yields by 38-82bp. A paper by the St. Louis Fed also finds a sizable boost to financial conditions more generally, including equity prices and the exchange rate.

Second, we translate this boost to financial conditions?as well as the expansionary fiscal stance?into funds rate units. To do so, we attempt to quantify the relative impact of changes in the federal funds rate, fiscal policy and the GSFCI on real GDP. As such estimates are subject to considerable uncertainty we take the average effect across a number of existing studies (see Exhibit 2). With regard to monetary policy, the studies we consider suggest that a 100bp easing in the funds rate, on  average, boosts the level of real GDP by 1.6% after two years. A fiscal expansion worth 1% of GDP, on average, raises the level of GDP by 1.1% two years later. Using existing studies to gauge the effects of an easing in our GSFCI on output is more difficult as other researchers construct their financial conditions indices in different ways. Taking the average across studies that report effects for the components of their indices?thus allowing us to re-weight the effects for our GSFCI? and our own estimate suggests that a 100bp easing in financial conditions increases the level of GDP by around 1.5% after two years.

What does this mean for the real impact on the implied fund rate from every incremental dollar of purchases?

Combining these two steps suggests that $1trn of asset purchases is equivalent to a 75bp cut in the funds rate (calculated as the effect of LSAPs on financial conditions (80bp), multiplied by the effect of financial conditions on GDP (1.5%), divided by the effect of the funds rate on GDP (1.6%)). This estimate reinforces the view that QE1 helped to substitute for conventional policy. Our estimate, however, is less optimistic than the 100-150bp range cited by New York Fed President Dudley, or the 130bp implied by Glenn Rudebusch of the San Francisco Fed.

In terms of the other policy levers, our analysis implies that the ?extended period? language is worth around 30bp cut in the funds rate and a fiscal stimulus of 1% of GDP is equivalent to around 70bp of fed funds rate easing.

So how much more work should the FOMC do? Exhibit 3 shows that consideration of policy levers other than the funds rate cuts the estimated policy gap by more than half, from 700bp to 300bp. Of this 400bp reduction, the easy stance of fiscal policy is worth 240bp; QE1 is worth 130bp; and the existing commitment language is worth another 30bp.

And the kicker, which shows just how naive we were:

We can then express the remaining policy gap in terms of the required additional LSAPs. Using our estimate that $1trn in LSAPs is worth an estimated 75bp cut in the federal funds rate and assuming that all other policy levers stay where they are at present, Fed officials would need to buy an additional $4trn to close the remaining policy gap of 300bp.

Now, for the amusing part: what does $4 trillion in purchases means for inflation. Or, a better question, when will $4 trillion be priced in...

In reality, the FOMC is unlikely to authorize additional LSAPs of as much as $4trn, unless the economy performs much worse than we are forecasting. The committee perceives LSAPs as considerably more costly than an equivalent amount of conventional monetary stimulus, and is therefore not likely to use the two interchangeably. Many Fed officials believe that there are significant ?tail risks? associated with LSAPs and the associated increase in the Fed?s aggregate balance sheet. These  risks include the possibility of substantial mark-to-market losses on the Fed?s investment, which might prove embarrassing in the Fed?s dealings with Congress and could, in theory, undermine its independence. They also include the possibility that the  associated sharp increase in the monetary base will lead households and firms to expect much higher inflation at some point in the future.

Unfortunately, it is extremely difficult to put a number on the perceived or actual cost of an extra $1trn in LSAPs in terms of these tail risks. However, we have some information on how the FOMC has behaved to date that might reveal Fed? officials? perception of these costs.

Oddly, nobody ever talks about the impact of "unconvential" printing of trillions on commodities such as oil and gold. They will soon.

Our analysis is therefore consistent with additional asset purchases of around $2trn if the FOMC?s forecasts converge to our own. It is unlikely, however, that the FOMC will announce asset purchases of this size in the very near term. Rather, our analysis suggests that the timing of the announcements should depend on whether, and how quickly, the FOMC?s forecasts converge to ours.

Hatzius pretty much says it all- suddenly the market will be "forced" to price in up to 4 times as much in additional monetary loosening from the "convention wisdom accepted" $1 trillion. We have just one thing do add. If Goldman has underestimated the impact of existing fiscal and monetary intervention, and instead of closing 4% of the Taylor gap, the actual impact has been far less negligible (and if Ferguson is right in assuming that all this excess money has in fact gone to chasing emerging market and commodity bubbles), it means that, assuming 75bps of impact per trillion, the Fed will not stop until it prints nearly ten trillion in incremental money beginning on November 3. That's almost more than M1 and M2 combined.

Is the case for $10,000 gold becoming clearer?


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Sun, 10/24/2010 - 13:10 | 673476 SWRichmond
SWRichmond's picture

7 December 2008

How much new money will Bernanke have to print in order to do this? Early estimates (April '08) of the amount of capital destruction ran in the $1.5 Trillion range. Roubini stopped estimating at $2 Trillion, so let's say that $2 Trillion of capital has disappeared. If that $2 Trillion blew a credit bubble at an average 30:1, you have an approximate estimate for the value of global economic activity, so the scale of this number is probably correct. Now, if $2 Trillion in capital has vanished, and if that $2 Trillion had been lent out to create "credit" at 30:1 ($60 Trillion worth of credit), how much new capital will Bernanke and the rest of the central bankers have to print in order to replace it at 10:1? Answer: $6 Trillion.


Sun, 10/24/2010 - 13:36 | 673535 Oh regional Indian
Oh regional Indian's picture

4 trill, 6 trill.... all the same eh? Trillion, used to be a big number.

I'd re-weight my portfolio towards Silver if I were you (mine is).

Gold is for the Annunaki eh? (Hat Tip Zach Sitchin!!!).

Also, ever wondered about the phrase "born with a silver spoon"? Why not a gold spoon?

Meaningless you say? Stupid? 

Hmmmmmmmm.......... egregores take a long time to be born. Eh? Worth paying them some attention.

November 3rd might well be the last big Fed meeting of any import. Ever!

Mark my words.



Sun, 10/24/2010 - 13:50 | 673567 Sudden Debt
Sudden Debt's picture

It's already getting more and more difficult to buy silver at spot. Mostly it already costs 20 to 30% above spot.

For those who still need to step in, it's getting 5 minutes before 12.

Sun, 10/24/2010 - 14:22 | 673622 EscapeKey
EscapeKey's picture

I haven't yet seen any issues here in the UK; is still (fairly) well stocked.

Sun, 10/24/2010 - 14:43 | 673656 Oh regional Indian
Oh regional Indian's picture

Escape, there is availability and then there is the illusion of availability.

Vested interests (who do you think supplies bullionbypost???), will keep the ilusion of availability going till the end.


Sun, 10/24/2010 - 14:47 | 673664 EscapeKey
EscapeKey's picture

I understand that, but I've essentially bought continuously for the past 9 months (get paycheque, buy PMs, wait for another month, etc.), and haven't yet had any issues with unfilled orders.

But having had a 2nd look today through their entire catalogue, it seems as if quite a few (especially) silver bars, and the lower demoninated gold coins are out of stock.

If they are starting to run out of stock, however, then this is very, very interesting. Inflection point?

Sun, 10/24/2010 - 15:14 | 673695 Oh regional Indian
Oh regional Indian's picture

Interesting. So we'll know soon enough won't we?

Week after next will be the prologue for what's really in store (!!!).


Mon, 10/25/2010 - 08:59 | 674718 bingaling
bingaling's picture

I have to agree with you . Either massive QE2 or none at all (which would surprise everybody except maybe a couple of insiders,but I think the insiders knew about qe2 b4 joe public and had their bets in ) . Geithner in China is also an indicator that something big is about to go down.

One question though . How is a 4 trillion dollar QE dump going to bypass congress ? Will there be a public debate or is the FED now also controlling the Federal budget ? It is the one thing I can't wrap my head around being if they can just create 4 trillion in debt ,what the hell do we need congress and a president for?

Sun, 10/24/2010 - 17:38 | 673875 Max UK
Max UK's picture

Hi escape key; some UK banter:

i use that firm too. Good supplier. BUT BACK AT THE RANCH, at the Royal Mint (who effectively set the price bar, even if it is the price ceiling) two interesting developments.
No.1: They have an alert on their site, that gold items are likely to increase in price on the 11th Nov (and they already sneaked up the prices of sovereign products recently, the basic sovereign being hiked from £245 to £255).
No.2: The only silver coin anywhere near spot, is the one ounce silver Britannia. It has been intermittently in stock, at £22.50, and recently went up to £25.00. I wouldn't be surprised if it goes up again on the 11th Nov, else 1st Jan is another likely time for a price hike when the VAT rate goes up to 20%.

Royal Mint is an interesting benchmark. At times, like in early 2009, their prices on some products were within 2% of spot; I think they are slow to respond to spot price movements, they must operate a FIFO product costing system or something, so always worth keeping them in mind for such anomalies.

Sun, 10/24/2010 - 15:39 | 673737 Sudden Debt
Sudden Debt's picture

They charge 28$  for a eagle + 17,9% tax!

Spot is 23,3$!

Sun, 10/24/2010 - 16:22 | 673791 Chappaquiddick
Chappaquiddick's picture

If you want to pay $37 an once use these guy's - fuck that!!  

Sun, 10/24/2010 - 16:41 | 673812 EscapeKey
EscapeKey's picture

Well, bullionbypost are ok for kg bars, which is essentially all I've bought off their site. Their charge for those: 521*1.6/32.15 = 25.93 USD/oz.

The VAT added on top, well it sucks, but it's the law here in the UK.

Sun, 10/24/2010 - 18:03 | 673917 merehuman
merehuman's picture

stellasecrets just did a vid (utube) on escaping the vat. hope i got the name right

Sun, 10/24/2010 - 23:20 | 674309 Careless Whisper
Careless Whisper's picture

why would anyone waste their time reading something published by an economist at goldman sachs?

Mon, 10/25/2010 - 01:36 | 674460 boiow
boiow's picture

this guy is good for uk buyers /sellers

when i sold some gold recently he paid spot price. money in bank account immediatly.  he has also started doing silver recently and offered me spot price on a 100oz bar. nice chap too.

 i also buy from to get around the uk vat robbery.

Mon, 10/25/2010 - 15:03 | 675831 Chappaquiddick
Chappaquiddick's picture

Follow the link to VAT free metal

Mon, 10/25/2010 - 13:38 | 675508 Ripped Chunk
Ripped Chunk's picture

Dirtbags. Doing business with them will only cause strife.

Sun, 10/24/2010 - 15:55 | 673763 oddjob
oddjob's picture

First Majestic sells $1 above spot.

Easy pay,easy delivery.They do limit to 300 ozs. per month.



Mon, 10/25/2010 - 00:06 | 674372 High Plains Drifter
High Plains Drifter's picture

anybody used Tulving?

Mon, 10/25/2010 - 09:12 | 674748 SheepDog-One
SheepDog-One's picture

Dont worry about this gold and silver, worthless to 'trade' in chaos...instead buy a bunch of cases of pint Jack Daniels bottles. Now youre talking real tradeable money.

Sun, 10/24/2010 - 19:20 | 674010 goldsaver
goldsaver's picture

Shit, I just checked. APMEX is almost out of 10oz bars and have almost nothing else below 100oz. And I was planning to buy more next paycheck. SHIT!!!

Mon, 10/25/2010 - 05:37 | 674574 barkingbill
barkingbill's picture

save up an buy a nice 100oz

Mon, 10/25/2010 - 08:54 | 674710 goldsaver
goldsaver's picture

At the rate is going up it would be a loosing battle.

Mon, 10/25/2010 - 08:47 | 674701 tmosley
tmosley's picture

Looks like they still have 1oz Buffaloes, as well as 1oz American flag bars.

Supply is much drier than it was when I last checked at the end of last week.  Last time it was this dry was in 2008, when the price had been cut in half.  This time, the price was down, what, 5%?  Not good news for those of us still in accumulation mode.

Sat, 07/02/2011 - 11:49 | 1421192 cole
cole's picture

When you are thinking of buying, indecision can be fatal. It is always best to take quick decisions but ultimately mistake

Fotos del mundo - Calcular hipoteca

Mon, 10/25/2010 - 03:27 | 674509 IQ 145
IQ 145's picture

A coin collection is not a retirement account. in London has all the Silver Bullion you need for your store of wealth. It's a very old and simple business model, they keep it in  the vault and you can sell it at any time to obtain current expenses currency. The website explains everything in detail. Only a fool would pay a premium over spot.

Mon, 10/25/2010 - 05:29 | 674571 EscapeKey
EscapeKey's picture

Bullionvault != physical.

Mon, 10/25/2010 - 08:57 | 674719 goldsaver
goldsaver's picture

SO I'm a fool for paying a premium for having my physical in my safe? Only a wise man would trust some centralized storage facility with physical not been over leveraged or subject to confiscation?


Mon, 10/25/2010 - 15:16 | 675879 Chappaquiddick
Chappaquiddick's picture

Well if you really want to get paranoid, they can track your purchases from all of these sources through the vendors sales ledger.  Unless you pay cash for bullion eg at a car boot sale or an auction, where your id is not linked to the purchase, then in theory they can track your ownership and come a calling if they so choose.

We know that the US has a history of gold confiscation and that could translate to gold and silver this time in Europe and the US - I put the chances of that at near zero.  But diversification is a means to mitigate that risk, so you need a hard metal basket that includes metals other than the above and coins, which bypassed the restrictions last time.

Personally, I'm not too worried.  I hold the majority of my investments in overseas vaults and collect coins, which is fun.

Mon, 10/25/2010 - 15:43 | 675941 Chappaquiddick
Chappaquiddick's picture


Mon, 10/25/2010 - 15:39 | 675942 Chappaquiddick
Chappaquiddick's picture


Sun, 10/24/2010 - 15:36 | 673730 tmosley
tmosley's picture

Rich children were fed with silver spoons to prevent common infections, thus the saying.  Gold spoons gave no such benefit (though it was certainly tried).

Though I agree that silver will appreciate in purchasing power to a much greater extent than gold.

Sun, 10/24/2010 - 16:15 | 673784 Oh regional Indian
Oh regional Indian's picture

Thanks tmos. Not an appropriate enough metaphor then and I'm glad to know the source. See silver is good for you, better than the barbarious relic! ;-)

But equally, anecdotally speaking, here in India, for as far back as memory (it's said in old stories), when someone got really lucky in matters of wealth, they always said "Chandi Lag Gayi", which means, literally, I got silvered. You hear it in conversation all the time. Never Sona (gold).

Always Chandi. And there is some linguistic education for all of you.

In hindi

Sona = gold

Chandi (pr..Chaaandee) = silver


Mon, 10/25/2010 - 00:07 | 674375 High Plains Drifter
High Plains Drifter's picture

I know a full blooded Hopi.  He is into the legends, and walks on coals and says he can shape change. Yeh right, says I .

Mon, 10/25/2010 - 01:18 | 674443 goldsaver
goldsaver's picture

I think you've got yer injuns confused.

Mon, 10/25/2010 - 03:31 | 674514 IQ 145
IQ 145's picture

 Yes it's very significant that millions of people have these kinds of linguistic clues in their minds; It hasn't been that long since the Silver Tael was the unit of currency in China, also. This cultural "priming" potentiates the decision to put savings away in silver; and in not in the papers of politicians who will certainly cause it to diminish.

Sun, 10/24/2010 - 22:01 | 674196 Gully Foyle
Gully Foyle's picture

Oh regional Indian

Silver needles were used to test for poisons. At least in MA movies. Silver also seems to be an antibacterial, that's why you see Colloidal Silver used in some healing homebrews. It will turn you Blue if overdosed. Unlike those mountain folk who are genetically Blue, the Fugates of Kentucky.




Sun, 10/24/2010 - 22:56 | 674265 robobbob
robobbob's picture

use ionic silver. much more effective then colloidal, and won't turn you blue even at X100 normal dosages

Mon, 10/25/2010 - 05:58 | 674578 fiftybagger
fiftybagger's picture

Grrrrr, snap, slept in late.  24 comments later:



Mon, 10/25/2010 - 09:58 | 674845 Drachma
Drachma's picture

Hello Gully Foyle:

True silver colloids will NOT turn you blue. Ionic silver solutions on the other hand can (and I am not talking about silver hydrosols).  Colloidal silver is metallic silver (Ag) particles in the range of nanometers in size. Ionic silver is cationic and is reactive in the body. It will combine with chlorine to form silver-chloride and other silver halides and salts (e.g. AgI, AgNO3, etc.), as well as silver-protein complexes. Silver halides are very insoluble in water and your body tends to sequester silver halides and their metabolites in your skin. UV light from the sun will then 'fix' these substances, effectively turning your skin into a photographic plate. This is the cause of Argyria (the blue skin condition you refer to). It is not caused by pure colloids. Also keep in mind that metallic silver (not silver ions) will not react with the hydrochloric acid in your stomach as many other metals will. In other words, huge difference bewteen ionic silver and silver colloids. Problem is most colloidal suspensions contain varying amount of ionic silver, depending on how they were prepared.


Mon, 10/25/2010 - 05:34 | 674573 barkingbill
barkingbill's picture

not too many people have gold spoons. 

Mon, 10/25/2010 - 10:24 | 674916 SheepDog-One
SheepDog-One's picture

IMF- '$7 trillion Q/E2 needed' $4 isnt even close. Between a rock and a rockier place is the FED.

Mon, 10/25/2010 - 13:42 | 675520 Ripped Chunk
Ripped Chunk's picture

Black hole. The velocity of printing must accelerate in order to keep up with the moneterization suck.

Tue, 04/26/2011 - 13:26 | 1208266 william.smith61
william.smith61's picture

Hmmmmmmmm.......... egregores take a long time to be born. Eh? Worth paying them some attention.

November 3rd might well be the last big Fed meeting of any import. Ever! AC Evaporator

Sun, 10/24/2010 - 13:39 | 673539 Bluntly Put
Bluntly Put's picture

SWR, I followed your comments over at KD's site and found I usually agreed with you. That was a prescient article especially for it's time. 2 trillion stands on the Fed's balance sheet currently, add another $4 trillion and we do in fact arrive at $6 trillion. But that is most likely a low estimate, they will in fact be forced to further devalue the dollar, probably until it just snaps one day in a crisis of confidence. Again, you have stated this over and over in KD's site. Kudos.

Sun, 10/24/2010 - 20:41 | 674088 MeTarzanUjane
MeTarzanUjane's picture

Just curious. Why does Tyler now believe the Goldilox propaganda machine? Usually he says: Fade-ilox on all things published or rumored from this crew.

QE1 has still not been spent, not even close, neither has TARP. Goldilox is trying to get those hot money flows funneled in one direction so they can pounce.

ZH: part of the machine?

Sun, 10/24/2010 - 21:45 | 674164 Gen X Gen Y Hybrid
Gen X Gen Y Hybrid's picture

i've thought this myself from time to time because the crash aint coming.  at the same time, gold has continued up and we did get the big dip earlier in the summer?

u think TD is buying AAPL?

Mon, 10/25/2010 - 00:10 | 674380 High Plains Drifter
High Plains Drifter's picture

Tyler is buying gold and silver bullion , on the dips and stashing it in one of his many hidden wall safes , in his fashionable upper eastside pad.



Sun, 10/24/2010 - 22:12 | 674192 SWRichmond
SWRichmond's picture

QE1 has still not been spent, not even close, neither has TARP.

Can you provide some justification for this outlandish statement?  QE1 has been spent several times already.

  1. Bernanke printed it
  2. He spent it on MBS
  3. The banks turned it around and spent it on Treasuries
  4. Fed dot gov spent it on unemployment benefits and wars
  5. Unemployed people bought things they wouldn't have bought otherwise
  6. Defense contractors spent it on hookers and blow
Mon, 10/25/2010 - 00:17 | 674391 MeTarzanUjane
MeTarzanUjane's picture

THAT is outright conjecture! You are the one who should be required to prove your deliberately deceptive statements.

Pure conjecture. I don't often interact with you Sir so sorry if I'm out of line saying this but your statements are as mythical as a pink unicorn.

Except for #4, it's not a crime to invest in Treasuries. In fact it's a prudent action on their part based on prior actions. If they plowed it into something that turned out to have very low alpha you would be screaming foul.

Positive risk aware judgment.

But the real story here is how chummy Tyler is with Goldman. With that in mind, please discuss.

Mon, 10/25/2010 - 07:38 | 674628 SWRichmond
SWRichmond's picture

Are you fucking stupid?

We know from Fredgraph adjusted monetary base that Bernanke printed $1.5 Trillion.[1][id]=AMBNS

We know from the Fed's statements that they bought $1.5 Trillion in MBS, agencies and treasuries.

To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.

We have ample evidence that banks used it to buy Treasuries:

Banks Buying Treasuries Help Keep Borrowing Rates Low (Update3)

We know what the government is spending it on:     edit, add series, add series FGRECPT

#5 is an obvious fact

#6 is tongue-in-cheek (or is it?)


Mon, 10/25/2010 - 08:17 | 674673 MeTarzanUjane
MeTarzanUjane's picture

Argumentum ad hominem. Conjecture. I rest my case.

There is a difference between: the Fed printing and directly injecting without expectations of a full return(plus interest) and printing in order to secure assets that will, over time, unwind and provide an expected return. No?

Once the assets are sold the money comes back home to papa and he simply dissolves it back to where it came from.

Mon, 10/25/2010 - 08:56 | 674716 tmosley
tmosley's picture

That would be true, except the assets aren't worth anywhere close to what they paid for them (they paid par value--an insane price in the best of times).  They are looking at a huge loss.  If foreclosures should become illegal, it will border on a 100% loss.

This is all documented fact.  You just haven't been paying attention.

Mon, 10/25/2010 - 09:04 | 674726 MeTarzanUjane
MeTarzanUjane's picture

Until you realize that the Fed has a target for inflation.

Does the target make their assets increase in value? Your answer will reflect just how well you have been paying attention, to reality.

The real pain will be felt by those not able to keep up to the cost of living adjustments that are about 6 months away.

Mon, 10/25/2010 - 09:09 | 674739 SWRichmond
SWRichmond's picture

Until you realize that the Fed has a target for inflation.

More stupidity.  How will the fed achieve its targeted inflation?

However, a deflationary recession may differ in one respect from "normal" recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero.2 Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash. At this point, the nominal interest rate is said to have hit the "zero bound."

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Mon, 10/25/2010 - 09:13 | 674749 MeTarzanUjane
MeTarzanUjane's picture

How will they hit the target? Easy. OPM (using other peoples money to fuel the machine)

"Foreign buying of U.S. government debt has been in an uptrend since early 2009. Apparently the death of the dollar isn't so convincing abroad."$117-Billion-in-Treasuries-During-August.html

Mon, 10/25/2010 - 10:00 | 674804 SWRichmond
SWRichmond's picture

I can't post charts here or I would.  You are asserting that this is sustainable:

edit, add series, add series FGRECPT

Is that what you mean to assert?

Mon, 10/25/2010 - 09:15 | 674758 SheepDog-One
SheepDog-One's picture

'Target for inflation' lol mad hattery at best, and youre applying some kind of logic to it?
BTW Bernanke will never deliver on Q/E2, who cares what Goldman says.

Mon, 10/25/2010 - 09:19 | 674769 MeTarzanUjane
MeTarzanUjane's picture

Thank you. That was my initial point. QE2 will not set sail but her ticket price is already baked in.

Now, let's discuss Tylers relationship with Goldman. With so much research that is published why do we only see reports from Goldman?

Mon, 10/25/2010 - 09:05 | 674733 SWRichmond
SWRichmond's picture

oh my goodness.  The exit strategy?

Once the assets are sold the money comes back home to papa and he simply dissolves it back to where it came from.

Everything I stated is fact (except for #6).  Can you refute any of these facts?  I didn't think so.  The "exit strategy" hasn't been implemented, so the facts remain.  But the fact of your own stupidity is on display, as you are apparently the only one who still believes the exit strategy has a chance of happening, so my additional statement about your stupidity is also at least arguably factual.  The obfuscation of monetization through third-parties (the PDs) is thin indeed, even transparent.  Faith-based monetary system coupled with faith-based accounting, and you are here to help us keep the faith.  You can keep it to yourself.

Mon, 10/25/2010 - 09:17 | 674762 MeTarzanUjane
MeTarzanUjane's picture

I hope you only manage your own money or have extensive malpractice coverage.

Mon, 10/25/2010 - 09:25 | 674783 SWRichmond
SWRichmond's picture

I suppose you owed me an ad hominem.

So, you can't refute my facts, is that correct?  That's what I thought.  Maybe you'd like to treat us all with your long term layout of how this crisis plays out?  Let's start with something simple: What will be the source of domestic growth that enables Bernanke to employ the exit strategy?

Mon, 10/25/2010 - 09:52 | 674834 MeTarzanUjane
MeTarzanUjane's picture

That will cost you but my membership rates are affordable for the institutional hedge fund industry.

Mon, 10/25/2010 - 09:59 | 674849 SWRichmond
SWRichmond's picture

So I'm wrong and your refutation is private?


Sun, 10/24/2010 - 14:10 | 673597 decon
decon's picture

Ain't going to happen all at once.  Won't even be announced all at once.  Our gov. is like water, it will always take the path of least resistance.  They aren't looking far down the road like a chess master, they're just thinking a few moves ahead.


The 11-3 announcement will be underwhelming and with no long-term strategy spelled out.  This will placate our creditors somewhat and won't hurt the elite since they've been bailing for a while.  Late in the lame duck and into the new balance government they'll begin piece mealing qe in sizeable chunks based on the "crisis".  It will be a grinding trip to hell.  O has no illusions to a second term.  The grind can be blamed on both camps since nobody will have decisive sway.


From a global perspective, wealth is also like water, in an open system it seeks equalibrium.


SW, I've always liked your thinking!

Sun, 10/24/2010 - 15:16 | 673697 SWRichmond
SWRichmond's picture

Thanks all for the kind words.  After doing that piece of simple math, coupled with an overarching cynicism about (belief in) central bankers' commitment to maintaining the illusion of their own and governments' economic managerial omnipotence, I (correctly) began buying precious metals, and have been extemely glad I did. 

The game goes on if they print.  The game stops if they stop printing.  Simple.

Sun, 10/24/2010 - 23:26 | 674323 hamurobby
hamurobby's picture

The game goes on if they print.  The game stops if they stop printing.  Simple.

YES, this is why now I have straddled slv, thousands of calls and puts just out of the money, their move.

Sun, 10/24/2010 - 15:17 | 673702 Rasna
Rasna's picture

Do you remember Hank Paulson running around with his 1 page, $700B TARP plan, scaring the bejeezus out of Congress, telling them that if they didn't pass his plan there would be martial law imposed?  Despite the hue and cry from the electorate, they passed the damn thing anyway.  All at once.

I'm mixed on this.  On the one hand they could do nothing, create a market crisis ala '08 and the go all in, or they could do as you say, go incrementally.  The problem with the latter is that depending on the scale, the markets could be disappointed due to unmet expectations and go to the default crisis scenario thereby creating the "all in" scanario.

I do believe that this has been gamed out by the Fed and Treasury, and that the outcome has been predicted.  Given the level of intelligence in both agencies, it's not clear to me that they have thought through any unintended consequences or exogenous events.

Sun, 10/24/2010 - 18:14 | 673937 Spitzer
Spitzer's picture

I liked the one page plan, Hank is a simple guy. 

I think the plan was to temporarily postpone hyperinflation. Hank knew that the dollar would have imploded then if there was no bailout, now it will just implode a few years down the road.

You get anarchy in hyperinflation, not deflation. Hank knew this. He certainly saved my ass, I didnt own enough gold in 08 but I do now. We should all be thanking Hank

Sun, 10/24/2010 - 21:57 | 674186 Rasna
Rasna's picture

Good points, however, to me it smacks of hubris to think that one could come up with a $700B bailout plan and put on on one piece of paper and then push it as my way of the highway (no changes by congress).  And I don't think that hyperinflation was the thing that everyone was worried about... It was, and still is, deflation... The problem that arose was that banks that should have died and their toxic assets with them were kept alive... Zombie banks.

Rather than systematically dealing with the problem then and taking the pain, the can got kicked down the road because of political expediency, and the problems magnified...

I agree that Hank was a simple guy, but he was smart enough to make sure that GS got taken care of, which allowed them to speculate with your money and mine, to the tune of $100M/day profit for a quarter without a loss (Man, I tried trading the ES against their algos and the 2-3 point rang for hours on end was a killer).  That's not what I expected from the bailout plan.  The problem also is that we still have a lot of simple minds applying simple solutions to a fiscal,economic and monetary problem that is complex in the extreme...

See, I don't want Larry, Moe and Curly working this problem, but that's what we're getting... It would be nice to have principled leaders with vision and the tempered steel backbone to do the right thing NOW for our country... Where are they? Who are they?

But I'm glad that Hanks actions allowed you to get more Gold in your stash?  If indeed, his actions created the opportunity for you to do that then I'll tip my hat to him...

Sun, 10/24/2010 - 23:02 | 674276 spdrdr
spdrdr's picture

It is actually fairly easy to come up with a one-page, back of the napkin legislative plan:

1.   The Chinese Walls between the Investment and Depository banks have imploded after the repeal of Glass-Steagall by Bill Clinton, signed off on 12 November, 1999.

2.   Since then, the fractional reserve lending by the depository banks has been focussed upon the lowest common denominator of real estate malinvestment, by financial speculators, mortgage originators, common-herd property speculators, and FIRE economy retards.

3.   Mid-2008, and the GFC arrived.  In a matter of days, it closed the clenched sphincters of most lending institutions, world-wide.

4.   The issue, which circumnavigated the Western World's governments almost instantaneously, was simply that Main Street business commercial bill roll-overs (90, 180, 360 days) could not be guaranteed to continue, because the banks who owned these bills may not be able to refinance them with other banks (because no bank trusted any other as to their exposure to the GFC), and as a result, millions of Main Street businesses were going to be rejected on their roll-over bonds.  {Think utter systemic fuckup, everyone immediately unemployed}

5.  This was unacceptable to the Government.

6.   Accordingly, it became in the best interests of the United States to allow for massive cash injections to the Banks, so that they WOULD roll over the Main Street business credit lines. This was coupled with massive financial injections into all sorts of crazy schemes.

7.   Unfortunately, the Banks did not immediately (or ever) issue their newly acquired funds to Main Street, preferring to purchase Treasury bonds at a 2% contango arbitage over cost.

8.   It is legislatively impossible to direct precisely where bank funds should be directed.  This is as a result of the constitutional separation of Church and State. 

9.   It has now become necessary to provide further emergency funding to the Banks, in the hope that they will direct those funds to those most in need (Main Street business).  I believe that such a hope is forlorn.

10.   No funds will be allowed to reach Main Street.

11.   Pray hard.  


Sun, 10/24/2010 - 23:25 | 674321 Oh regional Indian
Oh regional Indian's picture

Your statement...

"Given the level of intelligence in both agencies"

Classic error, underestimating the opponent. These guys are some of the sharpest knives in the bag (in their own vertical specialty). 

There are mostly known AND intended consequences. The difference between us and them is their pathological minds see them as unavoidable fall-out of progressing model-space (so to speak). 



Sun, 10/24/2010 - 14:15 | 673608 Charley
Charley's picture

And, what happens to Mozambique?

These guys care nothing about the rest of the planet; they will devalue the dollar into a generalized famine

Sun, 10/24/2010 - 17:11 | 673843 Oracle of Kypseli
Oracle of Kypseli's picture


All the 50lb bags of rice have disappeared from Sam's club. We were there Friday, Saturday and Sunday and we were told each day that they are getting deliveries overnight. We did not think anything of it, until today that we were told that they will not get more deliveries until sometime next week.

Small bags were also gone. The only ones left were specialty Basmati, par boiled and Thai jasmine.

As I had posted before, a good barometer of things to come is to watch the American Asian community. Somehow they have the uncanny ability to sniff trouble. They are always the first to withdraw cash from the banks and the first to hoard staples like rice, flour and noodles.

There is nothing curent on google on rice hoarding but the posting is usually after the fact. Consider yourselves warned.

Sun, 10/24/2010 - 21:05 | 674106 Betty Swallsack
Betty Swallsack's picture

Funny you mention the Asian community...

Over at this nutter's site, that will remain nameless as I don't want to promote it, is this posting:

In speaking to  my Asian  source last night it became clear that the FED is buying time for the Day of The event--"you are hearing a pre-amble of panic attacks (again) to securitize one's investment. The FED is vetting out all possible scenarios. They will stupidly print out more money against their debt and that is just to keep the lights on around the world. A Weimar replay". He went on to say that even the Billionaire Clients of his are preparing for the inevitable Shutdown and Meltdown of the Worlds Financial System by Thanksgiving at the latest.Nothing like this has ever happened before in History.All day trading will stop--all ability to take Delivery of anything through the mail will end. Day trading and the Stock Market  will not be able to function as the Net  goes down by DESIGN! There is a Reason why all the Articles in the "Lame stream Media", are writing  about the Military being involved so heavily in preparing for the KNOWN CYBER ATTACK that is planned!  MARTIAL LAW ,the Military control over of the Country will be implemented as Law and order breaks down and all services from power,water, sewer and STORES CLOSE--ALL TRANSPORTATION(PUBLICS ABILITY TO TRAVEL) is controlled or forbidden and the EARTHS FINANCIAL SYSTEMS COME UNHINGED! THIS IS  MAY BE THE THE LAST TIME I HAVE TO WARN YOU ABOUT THE PRECIOUS METALS--In speaking with one of The Largest wholesalers of Gold and Silver yesterday, that I have been doing business with for over 28 Years ,I was informed that Silver Rounds and silver bars are 4-8 weeks out ,meaning the Primary Market Sources that Precious Metals Dealers buy from for resale to the public are running on out of stock--SILVER EAGLES ARE STILL SOMEWHAT AVAILABLE AT INCREASING PREMIUMS- Gold is still available but silver is problematic--PLease call us Today at....

Remaining deleted as not to promote the website or the person trying to drum up sales through blatant fear tactics.

Mon, 10/25/2010 - 13:51 | 675535 Ripped Chunk
Ripped Chunk's picture

So yes, go ahead and get the 25lb. turkey for Tgivin' ???

Why not show the source of this dire rant ???? Would it ruin the "theater" impact ????

Sun, 10/24/2010 - 21:21 | 674134 1984
1984's picture

No need to panic, yet.

I was just down at 99Ranch and they're having a huge sale on large (20lbs?) bags of Japanese rice.

Flying Horse jasmine 20lbs@ $9.99

House brand jasmine 50lbs@ $29.99

Mogami japanese 20lbs@ $10.50

Sales flyer here (pg 6) :


I don't agree that the asian community is a good barometer of anything.  If I have to say something, it would be they are very sheep-like and very skittish.  So negative rumors would lead to mass panic in a hurry.  Same applies to "positive" rumors where they'd throw money into some spec scheme in the most sheep-like manner, sometimes leading to spectacular fraud cases.   Of course, if the rumors turn out to be true, they'd be ahead of the game.  Beware of selectional bias.

Sun, 10/24/2010 - 21:46 | 674165 Gen X Gen Y Hybrid
Gen X Gen Y Hybrid's picture

then go to Costco.

Sun, 10/24/2010 - 22:05 | 674200 Gully Foyle
Gully Foyle's picture

Oracle of Kypseli

100 Items to Disappear First

1. Generators (Good ones cost dearly. Gas storage, risky. of thieves; maintenance etc.)
2. Water Filters/Purifiers
3. Portable Toilets
4. Seasoned Firewood. Wood takes about 6 - 12 months to become dried, for home uses.
5. Lamp Oil, Wicks, Lamps (First Choice: Buy CLEAR oil. If scarce, stockpile ANY!)
6. Coleman Fuel. Impossible to stockpile too much.
7. Guns, Ammunition, Pepper Spray, Knives, Clubs, Bats & Slingshots.
8. Hand-can openers, & hand egg beaters, whisks.
9. Honey/Syrups/white, brown sugar
10. Rice - Beans - Wheat
11. Vegetable Oil (for cooking) Without it food burns/must be boiled etc.,)
12. Charcoal, Lighter Fluid (Will become scarce suddenly)
13. Water Containers (Urgent Item to obtain.) Any size. Small: HARD CLEAR PLASTIC ONLY - note - food grade if for drinking.
14. Mini Heater head (Propane) (Without this item, propane won't heat a room.)
15. Grain Grinder (Non-electric)
16. Propane Cylinders (Urgent: Definite shortages will occur.
17. Survival Guide Book.
18. Mantles: Aladdin, Coleman, etc. (Without this item, longer-term lighting is difficult.)
19. Baby Supplies: Diapers/formula. ointments/aspirin, etc.
20. Washboards, Mop Bucket w/wringer (for Laundry)
21. Cookstoves (Propane, Coleman & Kerosene)
22. Vitamins
23. Propane Cylinder Handle-Holder (Urgent: Small canister use is dangerous without this item)
24. Feminine Hygiene/Haircare/Skin products.
25. Thermal underwear (Tops & Bottoms)
26. Bow saws, axes and hatchets, Wedges (also, honing oil)
27. Aluminum Foil Reg. & Heavy Duty (Great Cooking and Barter Item)
28. Gasoline Containers (Plastic & Metal)
29. Garbage Bags (Impossible To Have Too Many).
30. Toilet Paper, Kleenex, Paper Towels
31. Milk - Powdered & Condensed (Shake Liquid every 3 to 4 months)
32. Garden Seeds (Non-Hybrid) (A MUST)
33. Clothes pins/line/hangers (A MUST)
34. Coleman's Pump Repair Kit
35. Tuna Fish (in oil)
36. Fire Extinguishers (or..large box of Baking Soda in every room)
37. First aid kits
38. Batteries (all furthest-out for Expiration Dates)
39. Garlic, spices & vinegar, baking supplies
40. Big Dogs (and plenty of dog food)
41. Flour, yeast & salt
42. Matches. {"Strike Anywhere" preferred.) Boxed, wooden matches will go first
43. Writing paper/pads/pencils, solar calculators
44. Insulated ice chests (good for keeping items from freezing in Wintertime.)
45. Workboots, belts, Levis & durable shirts
46. Flashlights/LIGHTSTICKS & torches, "No. 76 Dietz" Lanterns
47. Journals, Diaries & Scrapbooks (jot down ideas, feelings, experience; Historic Times)
48. Garbage cans Plastic (great for storage, water, transporting - if with wheels)
49. Men's Hygiene: Shampoo, Toothbrush/paste, Mouthwash/floss, nail clippers, etc
50. Cast iron cookware (sturdy, efficient)
51. Fishing supplies/tools
52. Mosquito coils/repellent, sprays/creams
53. Duct Tape
54. Tarps/stakes/twine/nails/rope/spikes
55. Candles
56. Laundry Detergent (liquid)
57. Backpacks, Duffel Bags
58. Garden tools & supplies
59. Scissors, fabrics & sewing supplies
60. Canned Fruits, Veggies, Soups, stews, etc.
61. Bleach (plain, NOT scented: 4 to 6% sodium hypochlorite)
62. Canning supplies, (Jars/lids/wax)
63. Knives & Sharpening tools: files, stones, steel
64. Bicycles...Tires/tubes/pumps/chains, etc
65. Sleeping Bags & blankets/pillows/mats
66. Carbon Monoxide Alarm (battery powered)
67. Board Games, Cards, Dice
68. d-con Rat poison, MOUSE PRUFE II, Roach Killer
69. Mousetraps, Ant traps & cockroach magnets
70. Paper plates/cups/utensils (stock up, folks)
71. Baby wipes, oils, waterless & Antibacterial soap (saves a lot of water)
72. Rain gear, rubberized boots, etc.
73. Shaving supplies (razors & creams, talc, after shave)
74. Hand pumps & siphons (for water and for fuels)
75. Soysauce, vinegar, bullions/gravy/soupbase
76. Reading glasses
77. Chocolate/Cocoa/Tang/Punch (water enhancers)
78. "Survival-in-a-Can"
79. Woolen clothing, scarves/ear-muffs/mittens
80. Boy Scout Handbook, / also Leaders Catalog
81. Roll-on Window Insulation Kit (MANCO)
82. Graham crackers, saltines, pretzels, Trail mix/Jerky
83. Popcorn, Peanut Butter, Nuts
84. Socks, Underwear, T-shirts, etc. (extras)
85. Lumber (all types)
86. Wagons & carts (for transport to and from)
87. Cots & Inflatable mattress's
88. Gloves: Work/warming/gardening, etc.
89. Lantern Hangers
90. Screen Patches, glue, nails, screws,, nuts & bolts
91. Teas
92. Coffee
93. Cigarettes
94. Wine/Liquors (for bribes, medicinal, etc,)
95. Paraffin wax
96. Glue, nails, nuts, bolts, screws, etc.
97. Chewing gum/candies
98. Atomizers (for cooling/bathing)
99. Hats & cotton neckerchiefs
100. Goats/chickens

Sun, 10/24/2010 - 23:54 | 674359 hamurobby
hamurobby's picture

I have 10 cases (48 cans each) of walmart tuna in water, I cant stand making tuna sandwiches in oil, should I bring them back and exchange them? They are good till (average) 7/2015.

Mon, 10/25/2010 - 07:17 | 674615 Waterfallsparkles
Waterfallsparkles's picture

With such an extensive list it is hard to believe you for got a Gasoline powered Chain Saw.  Chain sharpner, extra chain and 2and1 oil.

Also, a hand well pump.

Mon, 10/25/2010 - 07:50 | 674637 SWRichmond
SWRichmond's picture

The asians certainly are buying gold and silver today, aren't they?

Sun, 10/24/2010 - 21:40 | 674157 espirit
espirit's picture

Unbelieveable that this sum is beyond the comprehension level of the normal person on the ground floor of our society, so why not divy it up to those that would spend it and stimulate the economy?

Otherwise, just make it a Gazillion and get it over with. 

Mon, 10/25/2010 - 09:22 | 674776 SheepDog-One
SheepDog-One's picture

Remember too about a month ago the IMF said $7 trillion Q/E2. They simply cant do any of this, and everyone knows it, so whats the game here?
I think something happens on Nov 3 that makes stock prices, politics, all of it irrelevant.
BTW has anyone been reading the story all over the place now about removing Obama?
I dont believe they will, but its cover for some big event.
I think on Nov 3 stock markets will be irrelevant, and we'll be dealing with some massive fear and panic theyve sprung on us.

Mon, 10/25/2010 - 15:03 | 675827 Squid Pro Row
Squid Pro Row's picture

Fantastically prescient SWRichmond.  Thank you for your article.  It is neat that you spotted this problem nearly two years ago. 


What are your thoughts going forward?

Sun, 10/24/2010 - 13:11 | 673478 Cistercian
Cistercian's picture

 I need to buy a truck to carry the money for grocery shopping in the near future it seems.


  Great.....and the gas for it will be 12.50 a gallon+

Sun, 10/24/2010 - 13:34 | 673532 UGrev
UGrev's picture

Better leave someone on watch at the truck because it will be worth more than the money it carries.. :)

Sun, 10/24/2010 - 14:04 | 673591 ZackAttack
ZackAttack's picture

Should create lots of new jobs - tailgunner on a Budweiser truck, for instance.  

Sun, 10/24/2010 - 22:46 | 674252 1100-TACTICAL-12
1100-TACTICAL-12's picture

+4 Trillion.... I prefer the high life....

Sun, 10/24/2010 - 23:46 | 674349 hamurobby
hamurobby's picture

Stock up now, we bought grain alcohol by the cases in plastic bottles, hell im trying to empty one now....

Sun, 10/24/2010 - 18:07 | 673929 merehuman
merehuman's picture

I just sold my truck, recognizing it as a useless appendage once there is no fuel. And thats what i expect.

Sun, 10/24/2010 - 21:35 | 674153 Betty Swallsack
Betty Swallsack's picture

Bicycles, bitchez.  And everyone else is buying gold and silver.  Pshaw!  When transportation becomes an issue, two wheels will look simply awesome.

Sun, 10/24/2010 - 22:21 | 674225 Rusty Shorts
Rusty Shorts's picture

Trail Horse, bitchez.

Sun, 10/24/2010 - 23:52 | 674357 hamurobby
hamurobby's picture

I dont have to feed my K2 lithium nor my walmart mongooses, mountain bikes rule. I just bought a 50cc scooter today as well. We are going to get some 55 gal fuel drums and fill them in the garage, we will use the fuel regardless, just like my dad did in the early 70s. My dodge minivan is the mule, the car is having a cardiac arrest right now...

Sun, 10/24/2010 - 13:11 | 673479 SayTabserb
SayTabserb's picture

This is absolute certifiable lunacy. And does no one see a slight conflict of interest of Goldman, as a PD, banging the drum for more free play dough?

Sun, 10/24/2010 - 13:12 | 673483 3ringmike
3ringmike's picture

How much ink does it take to print four trillion dollars?

Sun, 10/24/2010 - 13:16 | 673491 SWRichmond
SWRichmond's picture

Not enough to dissuade them.

Sun, 10/24/2010 - 14:25 | 673633 Sudden Debt
Sudden Debt's picture

15 olympic swimming pools. And that's just for the colour green!

Sun, 10/24/2010 - 15:40 | 673741 tmosley
tmosley's picture

Eh, not much.  They just need to print four bills.

It'll be tough making change, though.

Sun, 10/24/2010 - 16:36 | 673804 Djirk
Djirk's picture

If they really printed it, there would be some value creation, but it is really an accounting entry on a computer, so no tangible value creation.


Solving a debt problem with more debt, that should work out well.

Sun, 10/24/2010 - 19:02 | 673996 optimator
optimator's picture

Half of what you'd estimate.  Weimar Germany ended up printing bills on one side only to save ink.  That'll be John Q. Public's wake up call I should think, but by then too late.

Mon, 10/25/2010 - 09:24 | 674780 SheepDog-One
SheepDog-One's picture

They couldnt 'print' $4 trillion its impossible.
And remember just 2 years ago, the TOTAL amount of US FRN's in circulation was $800 billion to $1.2 trillion...puts it all in perspective huh?

Sun, 10/24/2010 - 13:15 | 673487 No One
No One's picture

Why doesn't the Fed just ask for all debtors to send in their bill to the Eccles building, and that the Fed will pay 100% of the balance for the rest of the calendar year?


I mean, what could go wrong? 


Sun, 10/24/2010 - 13:15 | 673490 bugs_
bugs_'s picture

He must have gotten really high to do a top down look at 4 trillion!

Sun, 10/24/2010 - 13:20 | 673501 cossack55
cossack55's picture

Nah. Four Trillion isn't what it used to be. You must really start thinking in quadrillions.

Sun, 10/24/2010 - 13:24 | 673504 snowball777
snowball777's picture

Dear Lloyd,

Fuck you; take the haircut, bald prick.


The Internet

Sun, 10/24/2010 - 16:37 | 673806 Djirk
Djirk's picture

Yeah and your bitch Bernanke looks like Krusty the Klown

Mon, 10/25/2010 - 03:38 | 674516 fallst
fallst's picture

This is why they are all bald?


They are unhaircutable.

Sun, 10/24/2010 - 13:26 | 673507 doggis
doggis's picture

i ain't buyin it, so i hope you aint sellin it.....this ridiculous conversation of 'over - printing mania' implies that the  bondholding chinese, japanese, oil middle east will quietly sit back and take it up the back side - alongside the saving public, the pensioners and the consuming public.

nope. this 'over - printing mania' conversation is just dumb. i think graham summers may have a point, that a backroom deal has been struck with china and the usa. this would mean a conversation in 'under-printing mania'. lets talk about this. discuss.....

Sun, 10/24/2010 - 13:58 | 673583 Dadoomsayer
Dadoomsayer's picture

they have taken it so far with not even a squeek.  The chinese just don't care about the trillion anymore, they just want to continue to grow.  Japanese, they are fucked any which way you look at them.  Savers here in the US?  I think I am the last of those.  I am the only one out of all my friends that has any savings.  Everyone I  know is up to their ears in debt. 

Mon, 10/25/2010 - 00:23 | 674397 Al Gorerhythm
Al Gorerhythm's picture

Why? Do you collect depreciating assets as a hobby?

Mon, 10/25/2010 - 09:26 | 674785 SheepDog-One
SheepDog-One's picture

Yep doggis this is all pure BS...Q/E wont happen this is all last gasp desperation push for election 'all is well' and theyll never deliver on it.

Sun, 10/24/2010 - 13:33 | 673517 Charles Mackay
Charles Mackay's picture

If I am not mis-understanding this, Bernanke and Dudley applying the Taylor rule would have to raise the rate of inflation by 3% more.  So we are not just maybe 1% below the 'core' rate, but 3% below the 'target' rate. 

Would would the price of oil have to be to get 3% more inflation?  I would guess at least $100.  So we could see 45c a gallon added to the price of gasoline and diesel.

That may actually be acceptable to Ben.

Sun, 10/24/2010 - 13:39 | 673540 ratava
ratava's picture

You are not mis-understanding it enough to even get close to Ben's level. The almighty scholars think that inflating inputs will make us all somehow better off. I am not buying it. They inflate my living costs and the worth of my labor stalls or deflates. I am screwed like the rest of the middle class while the inefficient Goverbank moloch swells. Fire the half of bureaucrats who sit in their office not doing any field work, give them lifetime rent to shut them up. Then replace them with computers and start writing laws in source code.

Sun, 10/24/2010 - 14:00 | 673585 Dadoomsayer
Dadoomsayer's picture

they are just trying to reflate real estate.  their banking masters need to crawl out of the hole of bad debt they own.  they will print as many dollars as is needed to get housing prices back to where they were before the explosion.

Sun, 10/24/2010 - 16:34 | 673799 Bob
Bob's picture

Largely true--they must not eat their own losses.  That would be profoundly unfair in psychopath terms.  It would also undermine continued multi-billion dollar bonuses. 

Never let a crisis go to waste. 

Sun, 10/24/2010 - 16:40 | 673810 Djirk
Djirk's picture

Housing price won't come back until wages or expectations of further equity appreciation happen. Inflating wages will take some time and some serious pain.

deflating and liquidating would get the housing market back on solid ground for some sustainable long term growth.

It was in a bubble it should deflate.


Sun, 10/24/2010 - 19:19 | 674009 ClassicalLib17
ClassicalLib17's picture

Armed with only a high school education, living in a community of 90,000-- 60% hispanic, 20% black-- I can tell you that your gambling ways will eventually lead you down the same path of destruction that you have wrought upon those of us who have lived well within our means, all the while believing that this was what we, as Americans do to safely guard our meager nest egg. I read a lot and I appreciate the information that is provided on this forum, however, I would warn all that there is a growing movement building in our great land that is dedicated to restoring the rule of law as provided by our founding fathers. You may want to consider this fact in your investment decisions. To paraphrase a quote from neithercorp press  "There is nowhere for them to hide" I think they were referring to all that get their money through, yes I'm going to say it, nefarious ways. Save yourselves, before it is too late.

Sun, 10/24/2010 - 22:09 | 674205 Gully Foyle
Gully Foyle's picture


"I would warn all that there is a growing movement building in our great land that is dedicated to restoring the rule of law as provided by our founding fathers."

Hell YAH! Now I can buy me some Negro's and steal up some Indian Casino land! I can start beating my bitches. Happy fucking days are here again!

Thank you founding fathers and your RICH WHITE MALE favoritism.


Mon, 10/25/2010 - 05:49 | 674577 barkingbill
barkingbill's picture

that pretty much off topic since we are doing these things today anyway and the founding fathers were not quite the beasts you try to portray them as from all that i have learned. these things would have happened if we hadnt had a constitution and a bill of pretty poor argument. 

Mon, 10/25/2010 - 06:54 | 674601 AnAnonymous
AnAnonymous's picture

But the fact is (not the hypothecal posture you try to oppose this to) it happened with a constitution and a bill of rights.

Stick to the facts. Dont draw inferences from things that dont happen. Or at least dont put them level-plain as the things that happened.

The Founding Fathers were the guys who declared freedom while maintaining slavery, that declared property rights when engaging in massive theft. That is the way it is, not any other way. It is what happened and not something that could happen.

They are at the roots of contemporary duplicity. Whether you like it or not.

Mon, 10/25/2010 - 06:30 | 674592 fiftybagger
fiftybagger's picture

"living in a community of 90,000-- 60% hispanic, 20% black"


Good luck with that ;-)

Sun, 10/24/2010 - 21:30 | 674145 1984
1984's picture

It's funny you still think Bernanke or the US gov't works for us, as in you and me.

Sun, 10/24/2010 - 22:23 | 674228 Careless Whisper
Careless Whisper's picture

they work for the globalist bankers. this is not a secret, it's just that most people don't take the time to learn about it. plus, some have a hard time believing it because they are in denial. people are in the matrix and they don't even know it.


Sun, 10/24/2010 - 23:25 | 674322 1984
1984's picture

Sigh.  Even at a place like ZH, people are still stuck in the matrix.

Mon, 10/25/2010 - 09:40 | 674805 SheepDog-One
SheepDog-One's picture

'Us all' is not a factor in the elites actions.

Sun, 10/24/2010 - 13:32 | 673521 centerline
centerline's picture

Got to have the cash ready to avoid the clusterf**k in 2011 that would otherwise result.  State's set to collapse one-by-one as early as next year.


The kicker is that we are simply going to be successful is using our reserve currency status, MIC strength, etc. to reach an otherwise unobtainable point on our parabolic journey that when the loss of confidence occurs, it will most likely vaporize the economy in a blinding flash rather than as an "event" or "process."

Sun, 10/24/2010 - 13:31 | 673526 ratava
ratava's picture

look Tyler they named a gap after you

Sun, 10/24/2010 - 13:37 | 673537 doolittlegeorge
doolittlegeorge's picture

"The Taylor Rule."  Otherwise known as "the other God."  Glad to see you're bringing it up!  Did Goldman underwrite those Star Trek movies?  It feels like "Scotty, I need warp 9 in three minutes or we're all dead."  Insofar as "other theories are no longer relevant" that is as of now "to be continued."  Real Estate.  REAL....Estate.   REAL....ESTATE.  Mortgage.  Mort...gage.  MORT...gage.  MORT...GAGE.  Hmmm.  Wordsmith.  Word...smith.  WORD...SMITH.

Sun, 10/24/2010 - 13:45 | 673551 spanish inquisition
spanish inquisition's picture

If QE2 is priced into the market and everyone is waiting to sell on the news, what do you do? Be vague about the amount, start at $2T with $2-4T in reserve or have a big list on what you are buying, that should limit the selling on the news. Continue ramp as usual........

Sun, 10/24/2010 - 13:46 | 673552 Sqworl
Sqworl's picture

After a Trillion...Werefuckedadillion!!!  As usual Nourie was being conservative in his doomness...

Sun, 10/24/2010 - 13:49 | 673560 Endstrategy
Endstrategy's picture

So was the G-20 meeting, aside from being the farce we know it to be, also a way to gauge other members' reactions to QE, or to in a roundabout way prepare them for what is to come?

Sun, 10/24/2010 - 13:51 | 673569 Sudden Debt
Sudden Debt's picture

Time to go long banks!

Sun, 10/24/2010 - 14:00 | 673586 Mr.Kowalski
Mr.Kowalski's picture

What these geniuses fail to realize is that if anything like this is announced, every investor on the planet will pile into commodities; oil will be $100 within a month, gold $1,500/oz. As the price of gas and food begin to rise, the serfdom will begin to default on unsecured debt (credit cards, etc) and stop shopping at local malls (commercial r/e bust). I wonder how the Chinese will take their $2T in assets being devalued. Oh well.. one day this will all end: very quickly and very badly. 

Sun, 10/24/2010 - 14:28 | 673637 Sudden Debt
Sudden Debt's picture

Begin to rise?

This weekend I went shopping for food for the whole week. 380$!!

I thought the cashier made a mistake! And that was just 1 full cart!

I still remember the days 10 years ago, a full cart used to cost you about 100$

Sun, 10/24/2010 - 15:09 | 673690 cossack55
cossack55's picture

A cart full of coffee doesn't count.

Sun, 10/24/2010 - 15:41 | 673743 Sudden Debt
Sudden Debt's picture

It was only 1/3 coffee, 1/3 red bull and the empty spaces where filled with sigarettes :)

Mon, 10/25/2010 - 09:00 | 674727 ZeroPower
ZeroPower's picture

What? I highly doubt 1 cart is $380. Even if youre packing some prime steak in there.

Especially since food is so cheap in the US compared to Canada or EU.

And if youre in Canada, its still not that much unless you truthfully did pack it up with cartons of tobacco...

Sun, 10/24/2010 - 17:06 | 673839 Waterfallsparkles
Waterfallsparkles's picture

Anyone notice that the grocery stores are not offering that many specials anymore?  Most of us go in and fill up on the specials and do not buy anything else except a few essentials.  Of course maybe you have some left over from the last sale.  Toilet Paper on sale, load up, tuna on sale, load up, canned veggies on sale, load up, spagetti sauce on sale, load up, rice on sale, load up, etc.

Poor Mans Gold.  Their stock pile of food will out appreciate even Gold at this pace.

Sun, 10/24/2010 - 17:12 | 673848 EscapeKey
EscapeKey's picture

Spot on. Margins are getting squeezed. Two-for-one's are the first to go. Smaller portions follow.

In my local Sainsbury's, the only things you can get great deals on these days is chemical kitchen or bathroom cleaners, and high-end French/Spanish wine. Not that I object to '02 Gran Reserva Rioja for 7 quid...

Anyway, today they had a "special" on 1kg of onions for one Pound. They've always sold for a Pound, but now it's suddenly a "special offer".


Sun, 10/24/2010 - 21:29 | 674143 Kali
Kali's picture

I don't eat much commercially canned fruits and veggies,  mostly do my own.  But, I stock up on them during harvest season for my "Mormon Room".  I usually end up giving it to the local food bank after a year or two.

Not even two years ago, canned corn 4/$1, year before that 10/$1!

Green beans, spinach, beets same thing.  I used to be able to fill up the pantry cheap.  Now it's more like 2/$1.  With fewer ounces, more water.

Mon, 10/25/2010 - 04:45 | 674549 equity_momo
equity_momo's picture

Sainsbury's chicken breasts /fillets/dices have been priced up 20% in the past few weeks. Previously  "BUY 2 FOR £5" and now it is "BUY 2 FOR £6".  Its probably more than 20% if you just buy one.

Sun, 10/24/2010 - 21:37 | 674154 1984
1984's picture

I didn't notice that.  What I did notice is all the packaging is 1/3 less for the same price.

Sun, 10/24/2010 - 23:00 | 674270 Bananamerican
Bananamerican's picture

a new one..

Fruity Pebbles box is same size from the front but only VHS deep.

I laughed when i plucked it from the shelf....before putting it back.....

Item # 101

FP bitches!

Sun, 10/24/2010 - 22:13 | 674212 Gully Foyle
Gully Foyle's picture

Sudden Debt

When the government blocked the use of food stamps and other nutritional aid for cigarettes and alcohol, most people gave it at least tacit support.  The idea behind food stamps and welfare wasn’t to feed addictions, but to feed people.  Now, however, the government has decided to dictate choices on food, too — beginning with the potato.  Potato farmers have begun protesting a decision by the USDA’s Food and Nutrition Service to bar participants in its food-aid programs from buying spuds at the grocery store:

With that in mind, the Institute of Medicine, the health arm of the National Academy of Sciences, recommended that the U.S. Department of Agriculture stop participants of the federal Women, Infants and Children program, known as WIC, from buying potatoes with federal dollars. The institute also called for the USDA-backed school lunch program to limit use of potatoes.

Under an interim rule, the USDA agreed to bar WIC participants from buying potatoes with their federal dollars. Potatoes are the only vegetable not allowed. Next year, the agency will roll out a final rule on the WIC program, which last year served 9.3 million children and pregnant and breast-feeding women considered at risk for malnutrition.

The WIC program is a supplemental food program, and the determination was made that consumption of white potatoes was already adequate, said Christine Stencel, spokeswoman for the Institute of Medicine.

“The recommendation was made to encourage consumption of other fruits and vegetables,” she said.

At the same time, the USDA will act to reduce potatoes in school lunches subsidized through its programs.  Given that the government actually does the preparation of the lunches themselves (in the form of public school cafeterias and district kitchens), that’s less of an intrusion on choice than a strategic decision on menu offerings.  But given that schools or their contractors control the preparation, perhaps it might make more sense to focus on a healthier preparation than omitting a perfectly acceptable source of nutrition altogether.

Potato farmers point out that their crop does have significant nutritional value.  Potatoes, while starchy (as are carrots and other root vegetables), contain high levels of potassium and Vitamin C, both essential elements in a healthy diet.  The problems associated with potatoes are more accurately assigned to the manner in which they are cooked — deep friend or covered in cheese and sour cream. In fact, buying potatoes at the store usually means better preparation than one finds in chain-store restaurants.

Most offensively, the program treats subsidy recipients as if they cannot make their own food choices for themselves.  People may tend to write this off by saying that aid recipients aren’t entitled to the money and that the USDA can set whatever condition it likes on the service, and that’s true.  WIC and food-stamp recipients can buy potatoes with their own cash, too.  But when a large number of Americans start receiving federal subsidies on health insurance — subsidies that will apply to anyone in the health exchanges with an annual salary of $88,000 or less, which is the 62nd percentile for annual household income in the US — what dictates will then be permissible?  Smoking, alcohol, food?  All of these impact health, and health-care costs.

Sun, 10/24/2010 - 14:29 | 673638 EscapeKey
EscapeKey's picture

Hyperinflation will happen overnight this time around.

Sun, 10/24/2010 - 23:43 | 674340 1984
1984's picture

Hyperinflation always happens overnight.

But judging from the mere fact that people are still debating whether BB will print enough or not enough, or that we'll have deflation or inflation, means the moment is still far away.

When people stop giving a rat's ass about what kind of BS is spewing from BB mouth, what he's gonna do next and by how much, then you know the moment is near.

You can be sure that the ruling elites the world over don't want hyperinflation.  Hyperinflation is destablizing.  It could mean revolution - the end of their rule.  They will try everything to not let it happen.

So be prepare for the possibility.  But don't try to live your life by it.


Sun, 10/24/2010 - 14:12 | 673604 MelvilleSaysNo
MelvilleSaysNo's picture

Has the recent sharp rise in PMs the past couple monthes already priced in this anticipated $$ printing?  Or should there be yet another leg up?

If the Fed pulls a switcheroo and does NOT come out w/ QE2, then PMs could crash, right?

Sun, 10/24/2010 - 14:23 | 673626 Charles Mackay
Charles Mackay's picture

To some extent, the market has front run some of the expected Fed moves.  Basically frontrunning the Fed is free money for the primary dealers (large banks and brokers).  Some of that extra money leaks into precious metals.

In October, the Fed is replacing $32 billion of mortgage related assets (probably mortgage payments and pre-payments due to property transfers) with US government bonds.  Government bonds, being more liquid, have a more direct relationshiop to the financial markets.

In other words, the Fed is already easing and already have some effect, which helps gold, but part of the gain in gold is due to some front-running too.

Sun, 10/24/2010 - 14:20 | 673618 bobboberson
bobboberson's picture

What is LSAP?

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