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Guest Post: Bernanke's QE^X Box

Tyler Durden's picture




 

Submitted by Gordon T. Long Of Tipping Points

Bernanke's QEX Box (pdf)

Chairman Bernanke has placed himself in a box. It is not a box of his choosing, but rather the result of his misguided economic beliefs, use of flawed statistical data, geo-political events occurring during his watch, poor decisions and a penchant for political pandering.  Some of these may be requirements for academia success but not for leading global financial markets during turbulent times.

It is time for Professor Bernanke to return to the collegial setting of Princeton University while the world still has time to correct the path he has mistakenly set us on.

I was angry during most of former Chairman Greenspan's tenure because of his persistent use of liquidity pumping to solve every problem from Y2K to the Peso crisis. Greenspan's inability to see a bubble two inches from his nose and yet still pontificate about irrational exuberance, rather than taking the punch bowl away from the party, incited me. Bernanke does not affect me that way. He simply disappoints and leaves a taste like eating dry shredded wheat, with the hope of a child, to eventually get the prize at the bottom of the box.

Character flaws show during times of stress. Honesty, integrity, value systems and beliefs are put to test and are highlighted under the public media microscope. I'm sure Chairman Bernanke is a nice guy, loved by his family but he is missing a backbone. On April 27th, 2011, that will become obvious to all.

SIGNAL MEETING

On April 27th, 2011 the Federal Open Market Committee (FOMC) issues its next decision and statement regarding the future of Quantitative Easing (QE) II. Though previously announced to officially end June 30th, 2011 there are serious questions if this is still a viable option.

This particular meeting is the 'signal' meeting that the financial community will be looking for to assess risk and strategy. Many (including myself) have already concluded what the outcome will be and are preparing accordingly.

On this date Bernanke will hold the first ever press briefing by the Federal Reserve, in addition to releasing forward forecasts which are usually held another 3 weeks. It is going to be an exciting event.

Unfortunately, Chairman Bernanke is going to disappoint!

THE BERNANKE BOX

Let's summarize the box Bernanke presently finds himself in.

REAL RATES

Interest rates have been artificially suppressed for such a long time that no matter what Bernanke does come June, interest rates will likely begin rising. Therein lies the problem for the Fed.  Any further debt monetization by the central bank is now becoming counterproductive. If Bernanke enacts another iteration of Quantitative Easing, the Fed may find itself the only player in the bond market. According to my analysis this is nearly the case already.

The truth is that only a central banker can afford to own bonds that are yielding rates well below inflation, and growing even more so.  The lower real interest rates become, the less participation there will be in the bond market from private sources. If you don’t believe me, ask PIMCO, the world's largest Bond fund who is not only out of US Treasuries but selling short. China  has been a net seller of US Treasuries since October. Besides the Fed, who is willing to buy the $1.65 Trillion in fresh new US debt paper?

So if Bernanke extends QEII we have a collapse in the US$ and a complete lockout of auction buyers. If they stop QE II, interest rates go through the roof immediately and the US government with short duration paper has an immediate and serious fiscal funding gap.

Bernanke is in a Box!

EVENT RISK & GEO-POLITCAL SHOCK

Event Shocks were unleashed on the global economy in a historic manner in Q1 2011. Whether Geo-Political issues throughout North Africa and the Middle East or Physical Natural Disasters like the earthquakes in Japan, a Tsunami, or a nuclear crisis at the Japanese Fukushima Nuclear reactors, they have impacted the global economic recovery.

These shocks are hitting an already unstable economic and financial situation. Whether Europe's worsening debt crisis as evident in Ireland, Portugal and Greece or China's aggressive policy to slow the world's largest economic engine to contain mounting inflationary pressures, we have tenets of instability.

If you couple this with corporate margin compressions due to cost push price pressures and increasing interest rates, it does not bode well for central bank monetary policy planners.  It is definitely not a good recipe for an already over-extended, over-valued and over-bought stock market.

Typically bad things happen when this occurs.

What we need to appreciate is that though Mr. Bernanke is Chairman of the Federal Reserve, his night job is as Board of Director member of the Bank of International Settlements (BIS) in Basel Switzerland. Along with the other major central bankers he meets bi-monthly with them to oversee policy direction for this mysterious institution which is considered the central bank to the central bankers.

They no doubt have been meeting to discuss 'coordinated' policy - coordinated policy efforts to address such global issues as  event shock risks.

They have been meeting to synchronize stopping the Yen

from rising and plunging the Yen Carry Trade into an unwinding spiral. They are highly likely to be meeting to consider policies that address global inflation which is now running rampant, thanks to US Quantitative Easing.

This is a busy group with some 'heady' problems - problems that Chairman Bernanke must additionally address and secede to.

The box Bernanke was in had little wiggle room prior to the crushing disaster in Japan and the historical geo-political events in North Africa and the Middle East. The pressures to increase the value of the US dollar by reducing the money printing operations of Quantitative Easing II is a decision being shoved in Chairman Bernanke's face by other central bankers.

I fully understand that the US dollar is considered the purview of the US Treasury, but there can be little disputing the fact that the US Dollar, as the world's Reserve Currency, has become a central policy lever for the US Federal Reserve's Monetary Policy. The direction of the US dollar is a major consideration for Chairman Bernanke.

  • The potential of forced unwinding of the Yen Carry Trade has trapped the G-7 into having to stop the YEN rising through repatriation pressures to finance reconstruction and recovery. To do this means pressures to increase the US-Yen cross.
  • North Africa and the Middle East geo-political event means the potential of an oil shock hitting America. This additionally puts pressure on the US dollar to be stronger to alleviate some of the pressures on the trepid US recovery or it will be quickly stalled and reversed.
  • The crisis in the EU as seen in Ireland and Portugal tells us the EU issues are unresolved. If Spain and potentially Italy are next, we have major global instability and fallout. Before this happens the Euro needs to be weakened to improve competitiveness. The rising Euro since QE II started must be reversed. This means the US dollar must be strengthened by slowing or stopping QEII.
  • China is clearly slowing in response to public policy. A strengthening US dollar would lighten China's inflation pressures.  Some would argue that QE II is at the root of China's inflation pressures and forced money printing to combat the US' premeditated Monetary Policy attack.

Bernanke is in a Box!

BANK CAPITAL RATIOS

A weakening US dollar has allowed US equity prices to rise and thereby assist in fixing the near terminally ill banking sector with their capital ratios and potential write-offs.  The correlation between the increase in the Fed's balance sheet, the rise in the market, the rise in profits and the weakness in the US dollar is unmistakable. The "R2" fit suggests as close a fit and proof as this writer needs.

US financial institutions still have close to $3 Trillion of Commercial Real Estate not yet reflecting current market valuations, which must be written down. Bank capital ratios are inadequate for this, since the US recovery has not brought back commercial and residential real estate values to anywhere near their still elevated book values.

Bernanke is in a Box!

Whether he continues QE II or stops it, the situation is dire. This is what happens to those who "Extend & Pretend" and "Kick the Can Down the Road".

GLOBAL INFLATION

Inflation in food, energy and consumer staples is now a major issue that Bernanke must be seen to be addressing. This week's headlines says it all:

WHAT IS TO BE DONE?

So what is Chairman Bernanke to do?

I believe he will resort to his old tools. Academic tools like Game Theory is likely being applied and is no doubt a good starting point for his decision making.

He needs to manage both perceptions and expectations. He needs to manage the reaction to the message he will deliver. Deciding on the reaction and degree of reaction is critical.

In the above game board, I have labeled the ordinate "Y" axis to reflect a decision and communications message that would foster increased interest rates. The abscissa "X" axis reflects the same but for a potential increasing value of the US dollar.

The problem for Bernanke is that an either or decision is not optimum to balance the many diverse needs of the decision.  Additionally either decision is prone to an exaggerated and dangerous reactionary move. He cannot allow the communiqué to be potentially destabilizing.

Gradualism dictates trying to move towards a midpoint on the decision game board.

DECISION

DECSION: DON'T GIVE ANY DIRECTION!

  • The optimum message is one that does not confirm the ending of QE II, nor a message saying QE II it is being extended.
  • The communiqué should leave the existing June termination date stand without annotation.

RESULT: LEAVE OPTIONS OPEN

  • By sending no message the market will migrate towards an 'ending decision' but will be constrained because of the lack of finality.
  • By not being specific the options are left open in case the expected result is unsatisfactory. May and June can be used for further adjustments.

STRATEGY: BUY TIME BEFORE QEX

  • It is my opinion that the Fed has no choice but to continue the dramatic expansion of its balance sheet to offset the collapse of the Shadow Banking System.
  • Money supply as measured by M3 is still dramatically shrinking.
  • The Fed needs to take some pressures off financial markets by allowing a corrective/ consolidation to occur via a period of 'risk-off' adjustment.
  • The negative impact of a 'risk-off' event will give the Fed the political cover to resume its QEX policy, in due course.

AN INSOLVENCY PROBLEM, NOT A LIQUIDITY PROBLEM!

The reason Central Banks are called upon to 'pump' money into an economy with policies like Quantitative Easing is because an ongoing crisis is draining liquidity in the markets and the Central Bank is the 'lender of last resort'.

We seem to have forgotten this over the last few years. There can be little doubt that the issues we are facing today are not liquidity problems despite the central banks issuing accelerating amounts of money.

What we have is a solvency problem that is presently being hidden by inflating assets or collateral values. Without this occurring, many major financial institutions are legally insolvent from mal-investment and speculative investments gone bad.

The Federal Reserve is now the 'Buyer of First Resort'. This is a completely new dynamic and shift in the structure of the country.

The game that is being played is beyond "Extend & Pretend" and "Kick the Can Down the Road". It is a game that does not allow the capitalist game to work its magic powers. It is a game that protects crony capitalism at the expense of the capitalist system.

Consider the central issue of "too big to fail'. We have laws that specifically address 'too big'. They are called anti-trust or monopoly laws. They are in place to stop unfair competitive advantage of companies using their size, to stop predatory practices from those too big to be effectively legislated and to protect the consumer from being taken advantage of. If we had used the antitrust laws that were outlined in the Sherman Act we would never have got into the predicament in the first place. We have additionally completely ignored the tenets of Control Fraud prosecution.

The second part is ".... to fail". We have bankruptcy laws specifically for the problem of corporate failure. By using government sponsored DIP (Debtor-in-Possession), break-ups, sell-offs, restructured, debt holder haircuts and debt for equity we could have addressed much of our current issues without having plunged the country into near bankruptcy so that less than two years later the banks are making historic profits and the bank owners and debt holders are completely whole and richer off. This is the epitome of crony capitalism.

The government, as represented by the US Treasury if held to the same standards as the private sector, would be criminal on many fronts. The renowned Kenneth Rogoff in a Financial Times Op-Ed referred to the US government as effectively operating a full blown Ponzi Scheme. Bernie Madoff went to prison for 150 years for this. The government calls it PAYGO. Pay as you go and go free.

We do not have a liquidity crisis. We have an Insolvency Crisis as a result of debt saturation built upon mal-investment. The government and Federal Reserve are doing everything in their powers both ethical and other to keep the whole house of cards from coming down on our heads.

Bernanke is in a box. Unfortunately it is a box of cards, cards that when played out will show it was a bad hand even though t was dealt from the bottom!

Do you really believe the Fed will end QE II in the spring? 

NO it won't  - BUT

The market will react differently this time no matter what the Fed does

 

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Thu, 04/21/2011 - 14:29 | 1193246 baby_BLYTHE
baby_BLYTHE's picture

From Ron Paul's latest book, Liberty Defined

We cannot know exactly what tomorrow will bring, nor in  what time the consequences of bad policy  will evolve, so we must strive for truth and the preservation of those values that we are convinced have benefited mankind. We could be successful and preserve the American Republic as it was intended, giving up on the militarism of the American Empire. the odds are slim that that will occur without a bloody reaction from those who wield the power over the military-industrial complex, our political process, the media, our economy, our monetary system and out personal lives. But regardless, since the principles of liberty are based on morally correct ideas, anything we do to preserve them will benefit mankind.

Thu, 04/21/2011 - 14:34 | 1193263 TheGoodDoctor
TheGoodDoctor's picture

Martyrs bitchez?

Thu, 04/21/2011 - 14:41 | 1193288 baby_BLYTHE
baby_BLYTHE's picture

John Kennedy was a young man yet when he was chosen as the sacrifical lamb by the Global banking cartel and Military Security Complex.

Thu, 04/21/2011 - 15:32 | 1193589 High Plains Drifter
High Plains Drifter's picture

he , and his father and his brother knew the real score. but they played along biding their time.  they miscalculated.  a expensive mistake for all involved. yet to this day, they talk of a conspiracy about his death, like when he died, conspiracies stopped. they did not. they never will until we know our true enemies, as good as the kennedys knew them. after all, they swam in the same water as these pigs. they knew them all too well. but now, our presidents come into office and they already know who they bow the knee too and they do bow the knee. we suffer because of these traitors and the republic dies one day at a time. the old rothschild patriarch in the late 1700's said, i care not who is king, as long as i control the money. he was not talking out his ass, ladies and gentlemen. when are people going to realize they cannot control their government unless they control their money? when????    so we americans think we have freedom?  please, spare me.

Thu, 04/21/2011 - 15:30 | 1193592 dogismyth
dogismyth's picture

dimona

Thu, 04/21/2011 - 17:38 | 1194230 I Am Ben
I Am Ben's picture

exactly.

But alot of other things aswell

Thu, 04/21/2011 - 14:40 | 1193284 JFK.4PREZ
JFK.4PREZ's picture

i'll die for that cause. 

Thu, 04/21/2011 - 15:34 | 1193603 traderjoe
traderjoe's picture

Sorry to jump right in here, but it's ironic, comic, and sad all at the same time to see an author trying to analyze the actions of the Fed from the lens of what they should or shouldn't do, and what a 'correct' policy would or should be for the benefit of the masses/country. 

THE FED WAS CREATED BY THE BANKERS TO SKIM THE WEALTH OF THE COUNTRY. Full.stop. [Sorry for the all caps.] 

The Fed is a privately-held banking cartel designed and created to propagate inflation, lower interest rates (to eliminate competition), and to support the fractional reserve banking system - so money could be created out of thin air and lent at interest (in part to the sovereign). 

The Fed is performing perfectly to plan, robbing and stealing from the American people in plain sight since 1913. 

Any attempt to analyze this fundamentally fraudulent institution is erroneous on its face. We must simply End the Fed. 

Thu, 04/21/2011 - 15:40 | 1193640 CH1
CH1's picture

Well said, Joe. And caps warranted, IMO.

Thu, 04/21/2011 - 15:41 | 1193649 SheepDog-One
SheepDog-One's picture

Furthermore, THIS FED was designed not to improve the economy and rescue toxic assets, Bernanke was chosen to ENSURE that the destruction of this country was complete this time!

Mon, 04/25/2011 - 19:50 | 1205868 thames222
thames222's picture

I doubt this was purposeful; i think they all really are just too stupid to understand how fiscal policy works.  That, and they clearly don't give a fuck about any consumer's well-being.  as long as prices keep rising we're doomed.

 

www.forecastfortomorrow.com

Fri, 04/22/2011 - 00:16 | 1195285 Hot Piece of Bass
Hot Piece of Bass's picture

"Any attempt to analyze this fundamentally fraudulent institution is erroneous on its face. We must simply End the Fed. "

Word. 

Fri, 04/22/2011 - 13:10 | 1196582 Milestones
Milestones's picture

by Milestones 
on Sun, 11/21/2010 - 14:22
#

 

Mr. T., I addressed this issue a couple of times "The Trials and Tribulations of the Federal Reserve Act of 1913" on 6-15-10 and a couple of times later. In fine, let me answer you in brief.

My argument lies in Article 1, Section 8 (5)-Powers of Congress. The Congress SHALL have power: to coin money, REGULATE THE VALUE THEREOF,--". That power was apparently DELEGATED to the Federal Reserve Bank. That DELEGATION of authority to the Federal Reserve is my question. Did Congress have the authority to delegate that authority to "regulate the value thereof"?

Panama Refining Co. v Ryan 293 U.S. 388 1935

"The Constitution provides 'that all legislative powers herein GRANTED SHALL be vested in the Congress of the United States, which shall consist Senate and House of Representatives.'--The Congress MANIFESTLY IS NOT PERMITTED to abdicate or to TRANSFER TO OTHERS the essential legislative functions with which it is vested.---Cannot be allowed  to obscure the limitations of the authority to delegate, if our constitutional system is to be maintained."

Field v Clark 143 U.S. 649 1892

--"The legislative power must REMAIN in the organ where it is lodged by that instrument."

Sovereignty is granted to "We the People" in the first 3 words of the Preamble. As such, under the Constitution, we the people delegate our Sovereign authority to persons to REPRESENT us in day to day dealings. But it is the reserve of the Soverigns to delegate authority not our reperesentatives. John Locke came to the same conclusion.

I would contend that the Federal Reserve Act of 1913 is illegal under the Constitution. Further, if we consider Marbury v Madison of 1803, a decision has stood for over 200 years, the case can be stated in far starker terms:

Marbury v Madison 17 Wall 205 Cranch 2 1803

"Thus the particular phraseology of the Constitution of the United States confirms and strengthens the principal, supposedly to be essential to all written constitutions, that a law repugnant to the constitution is VOID; and the courts AS WELL AS ALL OTHER DEPARTMENTS ARE BOUND BY THAT INSTRUMENT."

Not only did Congress not have the authority to submit such a document as the Federal Reserve Act of 1913; likewise President Wilson had no authority to sign it. See the last sentence of the above.

Yes, I know, the Constitution has been turned into a roll of toilet paper to the 1%ers but that is still the document I still march to as do most others . If that not be the case then we would be far better served now to be comparing an AR-15 to an AK-47.

If those unhappy with the way things are want a change, we must state our concerns and grievances in a fashion that those who are totally uninformed can have a place, a handle so that a nightmare of a 2nd revolution can be avoided. 

To add to that, I would now contend that a peaceful solution is now all but impossible, and with a certain collapse staring us in the face, if we do not take up arms, we had better be acceptable to chains. Drifter wrote an item concerning Japan's "little" atomic problem vis a via a certain semitic nation today in another post which had some extrodinary implications if true.

The finiancial problems are now possibly very directly linked to some overriding political ones and we are truly in a nightmare box. The removal of the Fed would be simple if we had a president who had both balls and brains-but has neither and impeachment is not even a consideration so we are left with only the alternative mentioned earlier which our spineless public would run from in stark terror. We then only have a total collapse of the government as a possibility. Our military is too over extended to be able to be a factor even if it was their desire, which I question. 

I guess our only hope to to ride out the storm and be prepared to pounce once it happens. What a friggin mess you have got us into this time Ollie.     Milestones

Thu, 04/21/2011 - 16:11 | 1193819 medicalstudent
medicalstudent's picture

their shitll never work.

 

n always stink.

Thu, 04/21/2011 - 15:07 | 1193452 LMAOLORI
Thu, 04/21/2011 - 15:18 | 1193516 baby_BLYTHE
baby_BLYTHE's picture

cool, thanks for that :)

Thu, 04/21/2011 - 15:33 | 1193610 High Plains Drifter
High Plains Drifter's picture

ron paul is controlled opposition.  the calvary is not coming to the rescue.

http://www.henrymakow.com/is_the_truth_movement_false_op.html

Thu, 04/21/2011 - 15:46 | 1193677 LeBalance
LeBalance's picture

Thank you.

Thu, 04/21/2011 - 16:04 | 1193774 High Plains Drifter
High Plains Drifter's picture

hey i want to make sure everyone understands. i too have been hoodwinked a few times myself. don't get me wrong. but what pisses me off is this constant never ending supply of chumps that come forward saying they can help me. i figured out a long time ago, the calvary is not coming this time. perhaps the calvary never has come at any time in world history.  perhaps the calvary coming to the rescue was always just one big lie based upon a fairytale told in some hollywood movie. we are the calvary. 

by the way, did you read the part about the donald.  i never liked that guy. there is something very flakey about him. there he is sitting there, making his little secret masonic hand signs like he is cool or something.  always was. yet he says the things the tea party wants to hear and suddenly he is their guy. the stupidity of the american people knows no bounds... there are many of these traitors i would like to hear screaming for their lives, as they are being reading for hanging. some of you may say, what a terrible thing to say. i say to you.......is it really that terrible for me to think this way? 

Thu, 04/21/2011 - 16:14 | 1193833 traderjoe
traderjoe's picture

+1

Thu, 04/21/2011 - 16:17 | 1193848 Yardfarmer
Yardfarmer's picture

terrible perhaps, but also the truth.

Thu, 04/21/2011 - 15:54 | 1193733 NotApplicable
NotApplicable's picture

Umm... Dr. Paul is not the truth movement (though I agree that it is an astroturf movement), nor did that article provide anything credible to discredit him.

Why do you attempt to slander him so?

Thu, 04/21/2011 - 16:07 | 1193790 High Plains Drifter
High Plains Drifter's picture

NA, you got to get out of the box and look around man.........you simply have to.

Thu, 04/21/2011 - 17:54 | 1194328 hardcleareye
hardcleareye's picture

+++++

Mon, 04/25/2011 - 19:55 | 1205880 thames222
thames222's picture

Wow, loving the Ron Paul Esquire swagger.  To think, just four years ago I was laughing at all of my friends' neighbors and people in his wealthy, hippy, San Francisco area with all of their Ron Paul stickers on the car.  I'm actually starting to think I might vote for him.  Paul vs. Trump?  this could get interesting.

 

www.forecastfortomorrow.com

Thu, 04/21/2011 - 17:52 | 1194311 hardcleareye
hardcleareye's picture

"..preserve the American Republic as it was intended,"

"...since the principles of liberty are based on morally correct ideas..."

MY BULLSHIT DETECTOR HAS JUST GONE OFF!!!

Lets see, the founding father's believed that slavery was a "morally correct idea" and acceptable per their definition of "liberty".  

Ever read John Lind's, 1776, "Answer to the Declaration of the American Congress"?   The arguments can be made that the motivation to separate from Britain was not "based" on "morals" but on personnel profit for the founding fathers!!  (Perhaps "liberty" for a certain few to make more profit.....) 

Every study Shay's Rebellion?  When the common man realized that the "founding fathers" had "mislead" them with the "Independence/Liberty" propaganda...

"I have been greatly abused, have been obliged to do more than my part in the war, been loaded with class rates, town rates, province rates, Continental rates and all rates...been pulled and hauled by sheriffs, constables and collectors, and had my cattle sold for less than they were worth...The great men are going to get all we have and I think it is time for us to rise and put a stop to it, and have no more courts, nor sheriffs, nor collectors nor lawyers." a farmer, Plough Jogger

The financial situation leading up to this, repayment of the war debt, were the investors demanded repayment (payment of taxes) in gold and silver from a population that had no gold or silver....   

The more things change, the more they stay the same.......

 

Fri, 04/22/2011 - 00:58 | 1195359 been there done that
been there done that's picture

Pardon my reply near the top. I just wanted to point out that Gordon has a podcast chat show with Ty Andross that I think is pretty good at traderview.com then click the Audio tab. If you want to hear 2 smart guys talking about how totally Phucked we are, then you'll like the show.

traderview.com

 

Thu, 04/21/2011 - 14:33 | 1193253 TruthInSunshine
TruthInSunshine's picture

I call dibs on The Bernank's liver and backstrap.

Thanks.

 

The Bernank's greatest quotes (thus far). Be afraid. Be very afraid:

 

  • (November 15, 2005) "With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."
  • (July, 2005) "We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though."
  • (October 31, 2007) "It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions."
  • (November 21, 2002) "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 no cost."
  • "The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities."
  • "One myth that’s out there is that what we’re doing is printing money. We’re not printing money."
  • (When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) "The Federal Reserve will not monetize the debt."
Thu, 04/21/2011 - 14:36 | 1193267 Clueless Economist
Clueless Economist's picture

In times of crisis we must consult Keynes.  What would Keynes do?  I propose a $4 trillion stimulus to create or save ten million shovel ready jobs.  We need to be brave and raise the debt limit to 20$ Trillion and spend the $ on Government works programs.

Thu, 04/21/2011 - 14:38 | 1193285 TruthInSunshine
TruthInSunshine's picture

Paul Krugman,

I have read your op-ed suggesting printing the equivalent number of dollars that matches the U.S. debt, and attempting to pay said debt off with that batch of dollars, and I reject this suggestion's logic for a variety of reasons.

Thu, 04/21/2011 - 15:28 | 1193556 Dr. No
Dr. No's picture

Isnt it funny how even children know printing green pieces of paper to pay of a debt is wrong, but the same children believe printing pieces of paper (of different size, color, and shape) is okay (printing and selling treasury bonds to pay of debt).  The power of a promise!!

Thu, 04/21/2011 - 15:30 | 1193573 NotApplicable
NotApplicable's picture

First we're gonna have to build 10M shovels.

Thu, 04/21/2011 - 15:31 | 1193584 Dr. No
Dr. No's picture

make that 20M.  The guys who are going to fill the hole back in need a shovel too.

Thu, 04/21/2011 - 16:20 | 1193852 ihedgemyhedges
ihedgemyhedges's picture

You need 20,000,000 shovels?  I'm on it.  The stimulus money must arrive BEFORE I start production.  And by money, I mean the shiny yellow kind.

Sincerely,

CEO of a major multi-national corporation

Thu, 04/21/2011 - 15:11 | 1193458 Kitler
Kitler's picture

Nice but very incomplete compilation.

As for:

(November 15, 2005) "With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."

Bernanke merely failed to add these last words to his thoughts...

 ... "to maximize their own wealth at the expense of all other inhabitants of the planet and their future generations."

Unfortunately Ben can't defend himself against his own comments right now... he's too busy fighting the good fight against deflation.

Thu, 04/21/2011 - 15:28 | 1193567 wandstrasse
wandstrasse's picture

the bad Bernank, the evil satan... cannot hear it anymore! I find he has nice eyes, like a child. I call him 'Chairboy'.

Mon, 04/25/2011 - 19:54 | 1205890 thames222
thames222's picture

He does look quaintly helpless, with kind eyes that beg for some kind of contact or help.  Poor Ben...lol. poor, "chairboy."

 

 

www.forecastfortomorrow.com

Thu, 04/21/2011 - 15:34 | 1193615 Lets_Eat_Ben
Lets_Eat_Ben's picture

ill take the hindquarters

Thu, 04/21/2011 - 14:33 | 1193265 TheGoodDoctor
TheGoodDoctor's picture

Do they have summer school classes at Princeton? Maybe that is why he is taking the 3 to 6 months off from QE to infinity?

Thu, 04/21/2011 - 14:33 | 1193266 ziggy59
ziggy59's picture

Captain Crunch now has specially marked FRNs in every box.

Thu, 04/21/2011 - 14:33 | 1193268 steveo
steveo's picture

With the Market hitting 845 on Russell, that wipes out 90% of all of the traders who went short on Monday.   In other words all of the non- HBB traders that started the sell-off.  

How many had the dakine to hold their puts from last week?   at least one stupid one....that be me.  Long weekend.    

They ramped and boiled, for all we know there is a full on nuclear meltdown in the 2  or 3 largest economy in the world this weekend.  No news is not good news.   Good news would be promoted with zeal, there isn't any.

Easter weekend,  very odd.

http://oahutrading.blogspot.com/2011/04/russell-stop-run-egg-thon-cable-...

Thu, 04/21/2011 - 14:34 | 1193269 hugovanderbubble
hugovanderbubble's picture

Watch out loading Long VIX for May/June Spike

Thu, 04/21/2011 - 14:36 | 1193276 slewie the pi-rat
slewie the pi-rat's picture

gotta run!  silver ready for push to $47!  l8r!!

Thu, 04/21/2011 - 14:39 | 1193281 buzzsaw99
buzzsaw99's picture

the bernank is a pawn, a peon, a pee-on. bernank be a good little corporate n$$$$r.

Thu, 04/21/2011 - 14:41 | 1193291 Escrava Isaura
Escrava Isaura's picture

"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve regarding the Great Deppression. You're right, we did. We're very sorry. But we won't do it again" - Ben Bernanke, November 8, 2002.

Thu, 04/21/2011 - 15:06 | 1193456 EvlTheCat
EvlTheCat's picture

Yea, that has been playing over, and over in my head for the last few months.  As the old saying goes its better to beg for forgiveness then to ask for permission.

Thu, 04/21/2011 - 14:42 | 1193294 cossack55
cossack55's picture

But The Bernank has a nicely trimmed beard.

Thu, 04/21/2011 - 14:46 | 1193318 JuicyTheAnimal
JuicyTheAnimal's picture

Or in Laymen's terms.  "We are totally fucked".   

Thu, 04/21/2011 - 14:46 | 1193322 Sudden Debt
Sudden Debt's picture

If interest rates go up 1 point : KABOOM!!!

If QE 3 is larger than 200 billion : KABOOM!!!

If no QE : KABOOM!!!

 

Options are so cool :)

 

Thu, 04/21/2011 - 15:33 | 1193607 carbonmutant
carbonmutant's picture

Sounds like you're celebrating the 4th a little early...

Thu, 04/21/2011 - 15:43 | 1193657 SheepDog-One
SheepDog-One's picture

Right, theres no way out of this box, ANY action means implosion.

Thu, 04/21/2011 - 16:06 | 1193795 DoChenRollingBearing
DoChenRollingBearing's picture

Correct, no way out.

Quoting mick_richfield from yesterday:  In Pace Requiescat

Thu, 04/21/2011 - 14:48 | 1193323 Howard_Beale
Howard_Beale's picture

Volcker should go and sit on Bernanke and get to Banzai7's Bernanke keyboard and punch the abort key. Then he should wrap Ben's head in a plastic bag, suffocate the asshole, and raise short term rates to 10% to start. 

Fucking liquidity spigot needs to be turned off. All it does is kick the can to the day of reckoning.

Volcker should then get the Nobel peace and economics prizes.

Thu, 04/21/2011 - 14:54 | 1193375 TruthInSunshine
TruthInSunshine's picture

Moe Green Specials all around for central banksters!

Thu, 04/21/2011 - 15:44 | 1193660 PD Quig
PD Quig's picture

I wish I had 10,000 shares of AIG for every time somebody told me back in 2009 that “if we hadn’t bailed out the banks the economy would have collapsed

All the USG would have had to do was to declare:

1.      100% of every depositor’s cash in the bank was guaranteed by the federal government—no limit

2.      All the banks will remain open until all depositors have moved their money to a solvent bank

3.      All bank bond- and shareholders will be dealt with in bankruptcy proceedings

Would things have been chaotic for a year or two? Yes. Would we have cleansed ourselves of all the bad debt and malinvestment? Yes. Would the motherfuckers that caused the problem be the ones who paid the price? Yes.

We’d be decades ahead of Europe again and catching up to the BRICs as we speak. Of course, that would have required jailing (killing?) some bankers to show that we were serious about ending corruption.

Pity. “T’would have been glorious.”

Thu, 04/21/2011 - 17:00 | 1194058 radarthreat
radarthreat's picture

+10,000

Thu, 04/21/2011 - 14:48 | 1193332 A Man without Q...
A Man without Qualities's picture

I guess there is always a point following massive amounts of stimulus whether what you are seeing is nascent growth or nascent inflation.  Calling this right is key to what to do next. My view is focusing on core inflation is going to be their downfall, because it misses the changes in the global economy and the resultant constraints on resources.

 

Thu, 04/21/2011 - 14:52 | 1193358 Howard_Beale
Howard_Beale's picture

Basically it's because core inflation doesn't have a rats ass to do with reality if you look at the components.

Thu, 04/21/2011 - 14:53 | 1193335 Kitler
Kitler's picture

Excellent analysis.

I had a dream that Bernanke was Sanda Bullock in Speed. If he takes his foot off the inflationater the bus (economy) falls below 50MPH and implodes.

Too heavy a foot and the shitmobile misses a turn and rockets off the road into a sea of hyperinflation.

Did I mention that there is a hole in the gas tank?

Tic tic tic...

Thu, 04/21/2011 - 15:37 | 1193618 NotApplicable
NotApplicable's picture

Funny, I was just thinking earlier today how that movie is a good way to explain our financial predicament. The hole in the gas tank is the perfect addition.

Then there's still the upcoming scene where we get to try and turn the corner without flipping. We'll see if the banksters can shift their weight well enough to have a positive effect. If not, shows over!

Thu, 04/21/2011 - 16:05 | 1193778 Kitler
Kitler's picture

That would have been the Bridge Jump Scene!

Thu, 04/21/2011 - 14:56 | 1193371 Chuck Walla
Chuck Walla's picture

OK, Bernanke is in a Box!  Why do I feel like I'm in a barrel? And who will get hurt the worse?  as John Connally once said: It maybe our currency but its your problem".

 

Thu, 04/21/2011 - 14:57 | 1193390 treemagnet
treemagnet's picture

That was a really, really well written piece.  And who knew Ben was moonlighting?  I guess when you can make decisions in a vacuum that certainly frees up some time.

Thu, 04/21/2011 - 14:59 | 1193404 hidingfromhelis
hidingfromhelis's picture

The target at the center of the, "WHAT IS TO BE DONE" graph should be a circle, as in a black hole, as in everything is going to be sucked into it regardless of what whitewash is attempted to hide the fundamentals of ponzinomics run amok.  We seem to be at the terminal looting stage where all resources are being diverted to the TBTF's and the connected.  As with our politics and figurehead puppet leaders, is Bernanke really relevant, or is he just the public face of the Federal Reserve?  Just another puppet if you ask me. 

Thu, 04/21/2011 - 15:36 | 1193630 NotApplicable
NotApplicable's picture

Hell, he makes Pinnochio jealous, as his nose remains the same size.

Thu, 04/21/2011 - 15:00 | 1193408 tawdzilla
tawdzilla's picture

Pandora's box is an artifact in Greek mythology, taken from the myth of Pandora's creation around line 60 of Hesiod's Works and Days. The "box" was actually a large jar (πιθος pithos) given to Pandora (Πανδ?ρα) ("all-gifted"), which contained all the evils of the world. When Pandora opened the jar, the entire contents of the jar were released, but for one – hope.[1] Today, opening Pandora's box means to create evil that cannot be undone.

Thu, 04/21/2011 - 15:01 | 1193410 Twice a Day
Twice a Day's picture

No POMO on April 27th. Two high end POMO's

28th & 29th. Two large POMO's May 2&3.

Watch the market, another stick save making

the FED's press conference a ripe peach.

Thu, 04/21/2011 - 15:01 | 1193411 medicalstudent
medicalstudent's picture

dry shredded wheats the shiz.

Thu, 04/21/2011 - 14:58 | 1193412 GOSPLAN HERO
GOSPLAN HERO's picture

Coin Act of 1792 --DOLLARS OR UNITS -- each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.

Thu, 04/21/2011 - 14:59 | 1193418 FunkyOldGeezer
Thu, 04/21/2011 - 16:06 | 1193794 EvlTheCat
EvlTheCat's picture

Thanks for the link Geezer.  Lots of known information, but a good read.

Thu, 04/21/2011 - 15:03 | 1193439 LMAOLORI
LMAOLORI's picture

 

Don't Like a Weak Dollar? Might as Well Get Used to It

http://www.cnbc.com/id/42703813

 

Thu, 04/21/2011 - 15:03 | 1193443 Jovil
Jovil's picture

How do we know that it was planned this way all along by the puppet masters. They will make another bundle on the demise of the dollar and another bunch with the new established currency. For them everything will be falling into place. They will take the money from the middle and upper middle class. Us.

Thu, 04/21/2011 - 15:55 | 1193726 SheepDog-One
SheepDog-One's picture

Bernanke, Geithner, all the rest of them know exactly what theyre doing, its to destroy the dollar for a 1 world govt, 1 world currency. This nonsense that theyre simply 'misguided nutty well-meaning professors' is a total sack of BS.

Thu, 04/21/2011 - 18:18 | 1194404 Zero Govt
Zero Govt's picture

yes i think Benny knows precisely what he's doing. Where did the money go? Why to buy honking MBS's and US Treasuries??

Only one motive, to bailout your busom bum chums in Wall Street and Washington

..everything else - stimulate the economy, rate of inflation, unemployment blah blah - is white noise and a complete whitewash

Thu, 04/21/2011 - 15:40 | 1193446 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Whole Foods is about to blow its load like it does with a 13% in one day move thanks to 1) surging oil prices thanks to 1a) peak oil and  1b) the devaluing dollar.  I will not be surprised if WFMI opens level up Monday, but by mid week next, it will be trading in the $70s.

Thu, 04/21/2011 - 15:06 | 1193450 GOSPLAN HERO
GOSPLAN HERO's picture

Silver, comrades!

Thu, 04/21/2011 - 15:36 | 1193612 tallen
tallen's picture

$47 before the end of the day. FULL STEAM AHEAD!

Thu, 04/21/2011 - 15:06 | 1193454 duncecap rack
duncecap rack's picture

I think there will be a policy shift. It won't be permanent because as pointed out in the article it can't be but I expect them to say QE2 will end as planned. They will have to come back to it but they must wait until there is a desire for it in other corners of the world. I think the greatest danger is the decline in the dollar. If it comes to the point where all holders of US currency start to race to chase tangible assets with those dollars the mess that would result would be too harsh. None would suffer more than the US. So I expect zirp and QE to take an indefinite pause. I don't think it is what Ben wants but I believe it is what he must do. He is not stupid and I do not think he wants to be the one at the wheel when the US dollar sinks.

Thu, 04/21/2011 - 15:10 | 1193466 jal
jal's picture

 

"Gradualism dictates trying to move towards a midpoint on the decision game board."

"It is a game that protects crony capitalism at the expense of the capitalist system."

"The government and Federal Reserve are doing everything in their powers both ethical and other to keep the whole house of cards from coming down on (THEIR) our heads." 

 

“ ... his night job is as Board of Director member of the Bank of International Settlements (BIS) in Basel Switzerland. Along with the other major central bankers he meets bi-monthly with them to oversee policy direction for this mysterious institution which is considered the central bank to the central bankers.

They no doubt have been meeting to discuss 'coordinated' policy - coordinated policy efforts to address such global issues as  event shock risks."

 

I would summarize ...

Do whatever is necessary to avoid “a catastrophic failure ”.


 

Thu, 04/21/2011 - 15:12 | 1193485 THE DORK OF CORK
THE DORK OF CORK's picture

Simple choice - Gold reset at something like  $10,000 or continue with QE.

Thats it in a debt based system.

Unless he wants to give all money creation back to the treasury and have full deposit banks ( I doubt it )

Thu, 04/21/2011 - 15:23 | 1193540 jtz5
jtz5's picture

Reposting this on this thread...

Tyler,

With the Fed taking open questions from the media following the next FOMC meeting, how about writing an article "Questions I would ask Bernanke" in case some MSM reads ZH and needs some good ideas.  I would love to see how different your questions would be vs. what we get on 4/27.

Thu, 04/21/2011 - 15:27 | 1193548 TruthInSunshine
TruthInSunshine's picture

Suggested question for The Bernank @ his April 27 press conference:

Mr. ChairSatan, what do you do in your spare time, when you're not debasing our currency?

Thu, 04/21/2011 - 16:14 | 1193825 EvlTheCat
EvlTheCat's picture

Anyone ever seen the movie Danger: Diabolik?  I bet he opens his personal vault and rolls around in the dough with one of his concubines.

http://youtu.be/QTcGTEK0Q2g

Thu, 04/21/2011 - 16:23 | 1193878 Alienated Serf
Alienated Serf's picture

Bernank:  "Oh you know, just raping small children and lighting kittens on fire.  Maybe strangle an old lady if the weather is nice."

Thu, 04/21/2011 - 15:46 | 1193687 Tyler Durden
Tyler Durden's picture

Absolutely.

Thu, 04/21/2011 - 16:18 | 1193843 EvlTheCat
EvlTheCat's picture

Great suggestion.  And am glad you got a positive reply.

Thu, 04/21/2011 - 15:27 | 1193555 redarrow
redarrow's picture

Feel digusted with myself. People here are not going to like it but I guess I am under no obligation to say something nice. Here we are 5 years after the collapse of the housing bubble and there has not been much in it for me. All I am looking at now is that I have spent years going through all kinds of material, numbers and scenarios but the fact is that none of the doomsday scenarios have come. The bankers got their bailouts, the reckless kept their homes and some like me watched it and did not make much out of it.

Tons of  doomsayers came like Rou and KD and TD although they make sensible points and are right. Being right has not paid so far. I am just fed up. Nothings going to change, if the bond market did not collapse back then it will likely not collapse in the future.

I have a sick feeling that the shows over, regardless of the economy (I know its F'up but...)

It would have been far more useful for me to take advantage of this and I wish I had gone long. Instead I just kept shorting and lost money. It sucks. Whatever...perhaps I should just get back to work and make money the way I know it than trying to take advantage of the machinations of the wall st theives. I just cannot win against them.

I now think that I have wasted many years that could have been spent being more productive. Maybe its just me with my limited intellect others here perhaps made a lot of money. I wish them well. Gawd....I have spent a lot of time chasing a dream that being knowledgeable saves the day...crap.

 

 

Thu, 04/21/2011 - 16:02 | 1193777 stormsailor
stormsailor's picture

+100000

Thu, 04/21/2011 - 18:15 | 1194398 baby_BLYTHE
baby_BLYTHE's picture

The worst is yet to come.

I promise

Thu, 04/21/2011 - 20:46 | 1194833 nodoctor
nodoctor's picture


Chin up friend.

It is always better to be informed. But just because you have read the tea leaves doesn't mean you won't make a bad bet.

As was said previously, don't worry - things will get worse. In fact, much worse, and sooner than you realize.

Thu, 04/21/2011 - 15:25 | 1193557 Lotionboy
Lotionboy's picture

http://theslipperyslopeinvestor.blogspot.com/2011/04/qe-5-bitchez.html

enjoy...don't think this is far off from what will happen

Thu, 04/21/2011 - 15:26 | 1193565 Elooie
Elooie's picture

So the play should be to Short treasuries and buy gold? Seems a fairly logical hedge to set up prior to the announcements. 

As to implimenting the treasury short. Whats the easiesy way for a retail investor to set that up? ETF or literally try and sell treasursies through the bond trading desk with my online broker?

Thu, 04/21/2011 - 15:35 | 1193606 dalkrin
dalkrin's picture

Yo Bernank:

Cut a hole in a box.

Put your junk in that box.

Throw some ants and starving gerbils into that box.

Set fire to said box.

Don't singe your precious beard, it keeps you elite.

Thu, 04/21/2011 - 15:39 | 1193650 the grateful un...
the grateful unemployed's picture

you need some kool aid to wash it down, orange juice is too speculative

Thu, 04/21/2011 - 15:45 | 1193673 dogismyth
dogismyth's picture

all we have to do is hire a James Caan type to break into Bernanks office and steal the playbook.  IMO this was designed well before 2008...everything down to the tit and tat.  Down to where the market would be on a certain day.  Down to where silver would be in 2012.  You call them idiots or incompetent, but I think financial engineering is an art and science, and GS is ample proof of causing a disaster and profiting on it.

So get the playbook and we'll know their game plan.  Otherwise, forget it.  With all the brainiacs out there, no one has a clue to WTF is going on and what will happen next.  And those that ventured to make a guess, got their balls handed to them.  All news is propaganda.  Very little investigative reporting nowadays but we love to substitute inflammatory non-factual stories to our Top 100 list each week.

BTW...why in F are the markets closed on Good Friday??  aren't we are a bunch of war-loving, sex lusting, crap food indulgent, TV idol worshippers, gamblers, fraudsters with an insatiable desire for power, wealth and control.  I guess that explains it....we're closed to celebrate the death of the only righteous man to walk the earth...or so they say anyways. 

I'm sure the weekend will be full of changes and happenings...according to the playbook of course.

Thu, 04/21/2011 - 18:17 | 1194408 baby_BLYTHE
baby_BLYTHE's picture

The Bernank has admitted in congressional testimony that central banking is an "art"

Fri, 04/22/2011 - 01:57 | 1195410 Yen Cross
Yen Cross's picture

Central Banking is the result of poor fiscal policy. Nothing more and nothing less! PUN intended.

Thu, 04/21/2011 - 15:50 | 1193703 SheepDog-One
SheepDog-One's picture

'Result of misguided economic beliefs'...AW BULLSHIT these people know EXACTLY what theyre doing!

Thu, 04/21/2011 - 16:38 | 1193942 ivana
ivana's picture

Oooo yes. They were trying to exhaust china and weaken emerging markets. Now interest rates are creeping up and protectionism rising but watch out - rates always must stay higher on periphery than in the core of evil. Emerging markets should fall one by one ... major oil shock still waiting behind a curtain - in case its neccessary.

So now there's an ARMY of privilidged "investors" and insiders packed with tons of cash waiting to jump in as extended arm of bankster utilities.
Waiting for blood on streets. Waiting for good deals worldwide.

PS goal of dirty game is not in US at all. You are just a collateral victims

Thu, 04/21/2011 - 15:56 | 1193740 sbenard
sbenard's picture

Unfortunately, we are all going to pay a very dear price for "Bubbles" Bernankes' QE catastrophe and monetary mayhem! The worst, I fear, is yet to come!

Hold on tight! It's going to be a horrific ride!

Thu, 04/21/2011 - 15:58 | 1193747 assumptionblindness
assumptionblindness's picture

The Fed has kept everyone guessing between inflation and deflation since the beginning of the crisis.  Due to geopolitical chaos and the dollar nearing the edge of the abyss I see the Fed having two choices: 

1.  Continue QE (to infinity and beyond) and/or easy money (ZIRP) in order to support asset prices and lead the US into a new currency regime.

2.  Sacrifice the stock markets (currently in ICU) and housing markets (already dead) in order to save the dollar and force a long overdue conversion of some (better than nothing) debt to equity.  Hello, Dodd-Frank resolution authority...C.

Although this may be a contrary opinion, I am looking for the Fed to go with option #2.  Goldman Sachs may know something (like that's a surprise) is up.  I think their VaR is so low because they are expecting a indiscriminate across-the-board drop in a variety of assets.  The bond markets are not selling-off like they would when a ratings downgrade is in the cards.  Therefore, the insider money (Goldman) and the smart money (bond markets) seem to indicate that we have a potentially deflationary, rather than inflationary event in the making.   

A collapse of the stock markets will actually HELP the long term debt burden of the United States because nobody will be able to afford to retire for quite a long time.  Think of the impact that such a 'crisis' (think Rahm) will have on the future budget negotiations for the SS and Medicare entitlement programs.  Also, the Fed can help to save JPM's silver-shorted ass if they trigger a PM liquidation (paper, not physical).  My bet is that Jamie is on his knees in front of Ben (use your imaginations) as I write this.

I am holding onto my physical silver even though I believe that it will get hit.  Heck, my cost basis is only $17/oz..  Otherwise, I have gone to cash in the last few days.  Cash will be king and those who have it will be able to go shopping when TSHTF. 

Thanks in advance for the junks...   

Thu, 04/21/2011 - 16:31 | 1193927 dogismyth
dogismyth's picture

I like your idea.  People like Bernanke are well connected are not really "in this" for the money per se.  They are certainly following orders but they are also very arrogant and egotistical...much like Obama.  It will be  important to see how Bernank defends himself and on what issues he chooses to discuss from his soapbox.  What is more important to the Obama and Bernank types is that they are "right" and it is acknowledged by a majority.  So unless they have some evil plan to destroy the world, I think they are at the point to make heroes of themselves by choosing differently this time around.  I'm not sure what endgame they have in mind.  There are global initiatives and interworkings that are the true drivers of what happens in this world.  But confidence is at all time lows, and confidence needs to be restored, albeit, temporarily so they can continue the charade for a few more years.  What they need most is the public support.  They are not getting it with increased commodity prices, and most average Joes are not market players so they are not benefiting from the market rally.

BTW...Dimon is not down on his knees begging Ben to do something.  Ben is a schmuck compared to Dimon.  If anything, JPM is calling the shots along with a few other global entities who are backed by the elite trillionaires.

They'll have to do something different and soon.  A lot of talk of people going crazy on these guys.  A small minority is pissed about how things have fallen out.  It doesn't take many to screw up a good party.

 

Thu, 04/21/2011 - 16:17 | 1193834 Caviar Emptor
Caviar Emptor's picture

You've all had your turn trashing the Bernank. I'd like to be the first here on ZH to enumerate his qualities: 

-Loved by groupies in the canyons of Wall Street and by those wearing tasseled loafers and A. Testoni in rosewood-paneled conference rooms 

-Should have run the slogan: "Quantitative easing without Qualitative easing" 

-Humble

-Equal opportunity unemployer and social reverse-engineer

-Clever and at times brilliant financial linguist (finilingus?)

-Abolished the free world and made it the pay world

-Helicopter pilot extraordinaire! 

 

 

 

Thu, 04/21/2011 - 16:17 | 1193836 Bubbles the cat (not verified)
Bubbles the cat's picture

Enjoyed readin that. But it's the unexpected 'bad things' that kick the shit outta so-called 'plans'. Always seems to happen when you ain't got room to move. Expect more.

Thu, 04/21/2011 - 16:21 | 1193857 karthikraoa
karthikraoa's picture

nice article..

Thu, 04/21/2011 - 16:21 | 1193863 FLIP THAT BOND
FLIP THAT BOND's picture

I'm preparing for a dip in silver starting now until after bernanke's speech is digested.  Who knows, maybe it still goes up.  But after this, I see three clear weeks of silver bliss.

Thu, 04/21/2011 - 16:21 | 1193874 Breaker
Breaker's picture

Of course he is in a box, partly of his own making. But the main culprits are the authors of the 1.6 trillion dollar deficit. If we had a balanced budget, the Fed's options would be far more palatable and far less damaging to the economy.

But as soon as you add the bubble economy of the 90's and oughts to a huge federal deficit, you really only have two choices, let loose the dogs of deflation and have two really bad years while things reset (a hard version of the Reagan/Volker solution) or you keep blowing the bubble.

IMO, Americans would be better off with the reset. But, as the article points out, a reset would deal a serious, if only temporary, blow to crony capitalism and its enablers in congress and the white house.

Thu, 04/21/2011 - 16:27 | 1193910 Smokey1
Smokey1's picture

What is a "trepid" US recovery?

Thu, 04/21/2011 - 16:34 | 1193934 monopoly
monopoly's picture

Luv it all. You heard it here first. It all goes "Kaboom", from Sudden Debt.

 

Thu, 04/21/2011 - 16:41 | 1193963 Charles Wilson
Charles Wilson's picture

1. "Capital is international."

    - Marx

I stated in an earlier post that this appears to be Economic World War. The Firing on Fort Sumter or Pearl Harbor event was reported by Rep. Kanjorski from the meeting led by Hank Kimball Paulson: "There's been an electronic run on the bank."

After whining and wheedling for years, the U.S. in the form of the Bernank answered: "You Devalue or we will - to devastating consequences."  Therefore, the enemy power is China. Rush Limbaugh has stated that the purpose of an army is to kill people and destroy things.  Each extra dollar is a soldier and Bernanke has given a blood oath that he will continue the War until China breaks.  It is not the Great Depression Bernanke is studying. It is Mao and the encirclement strategy of the early 1930s.

2. "The Red Army and the entire population must be called on to fight the campaign of "encirclement and annihilation" and for the defence of the base area...Finance and food supply are, needless to say, of greatest importance for a counter campaign. That the enemy may prolong his campaign should be taken into consideration.  There must be an estimation of the minimum material requirements, chiefly of the Red Army and also the people in the revolutionary base area..."

     - Mao

3. China needs water.  They can do nothing without it.  It is one thing to run a campaign for years in a semi static world  where there is food supply and water.  Hannibal almost succeeded and he was in Italy for 15 years. 

John 4:

"A woman of Samaria came to draw water. Jesus said to her, "Give me a drink." ...The Samaritan woman said to him, "How can you, a Jew, ask me, a Samaritan woman, for a drink?" (For Jews use nothing in common with Samaritans.) ...Jesus answered and said to her, "If you knew the gift of God and who is saying to you, 'Give me a drink,' you would have asked him and he would have given you living water." ...(The woman) said to him, "Sir, you do not even have a bucket and the cistern is deep; where then can you get this living water?   Are you greater than our father Jacob, who gave us this cistern and drank from it himself with his children and his flocks?"  "

The very key phrase is, as usual, spoken by the woman.  It is not about the glorious world to come or "living water".  "Are you greater than our father Jacob, who gave us this cistern and drank from it himself with his children and his flocks?"

It takes a LOT of water to feed families and especially flocks of sheep.  "Sir, you do not even have a bucket and the cistern is deep..."

This is a marker for the period known as the "Roman Warming". The identity of the players here are known but not important except for the military aspect. China isn't in the throes of a guerilla war but they still have a model going back almost 90 years. It is one thing for Mao to march through marshes. It is another to have half a country turn to ashes from no water.

4. So: Does China devalue Next week? Probably though there will be some reactionaries in the Central Commitee who would prefer military action.  The devaluation may be delayed. Will Bernanke stop the debasement of the U.S. currency?  Probably.  He will grouse that China hasn't devalued enough but the currencies will reset and there will of course be the Bribery/Trade Pact agreements with smiling tourist pictures for the Newsies.

5. "After we deal with you, then on to Trantor"

     - Asimov

"A true World War has been averted", Bernanke should think. The new Spheres of Influence have been set (Whither India?).  There are always reactionaries to hang after the war and there will be plenty here in the U.S.  The problem is twofold: One, the sustainable bureaucracy in the U.S. should be < 10%, as in, "bye-bye Welfare State".  Some Hegelian needs to step in here and work out the final mixture.  Finally, the smart set sees all the Caesar worshippers out there in the deserts and grasslands and dismisses them as they always have.

Maybe they haven't read enough Josephus.

6. Finally - and this comes over the 'Net as I finish this. Just as I finish stating that there will always be enough good people to hang, O-Dumbo is about to appoint a commission to seek out "evil oil speculators" and such.  Good God Almighty!!!  If this is choreographed, we need a new writer.  This witchhunt makes Nixon look like a Saint.  No good can come of this and everyone knows it.  China may yet win if this is the best we can offer...

CW

 

Thu, 04/21/2011 - 16:44 | 1193987 Eos
Eos's picture

Noone cares now. Debt ceiling breached, claims above 400k 2 weeks in a row, massive philly fed miss and USA rating downgrade warning. So what? Dollar trashed 6% and SPX flies 6%, shit pig stocks fly... Now it's a fight between Ben and shorts, guess who will win?

Thu, 04/21/2011 - 16:50 | 1194012 Problem Is
Problem Is's picture

"...the result of his misguided economic beliefs, use of flawed statistical data, geo-political events occurring during his watch, poor decisions and a penchant for political pandering."

The Bernank: Yes Man
But most of all it is because Bennie is a "Yes Man Extraordinaire"... He knows who his TBTF owners are and says "Yas sir!" accordingly...

Like a nice little bald bearded fellow...

BTW: Tyler, you have to sell boxes of "Credit Crunch" at the ZH store... I want one...

Thu, 04/21/2011 - 16:52 | 1194014 Stuck on Zero
Stuck on Zero's picture

It's not so much that Bernanke prints so much money.  The globe probably needs it.  The problems is that he hands it to the most profligate, irresponsible group of illuminati pandering morons on the planet: Congress, POTUS, and Banksters.

Thu, 04/21/2011 - 17:19 | 1194140 css1971
css1971's picture

His boss says turn the crank. He turns the crank.

Thu, 04/21/2011 - 17:14 | 1194119 AldoHux_IV
AldoHux_IV's picture

The slavery of debt is coming to an end-- it won't be pretty for the elitards as it will be merciless and far reaching.

Thu, 04/21/2011 - 17:31 | 1194202 Verstehen
Verstehen's picture

The US seems to be terminally ill. The scheme JP Morgan forced on Europe will guarantee the same outcome. Do you think bankers understand complex systems? Cause and effect? They are triggering massive socio-economic changes. This can not be healthy.

Thu, 04/21/2011 - 18:27 | 1194444 Paul67
Paul67's picture

Prediction QE2 will end on schedule but existing debt roll over will continue (i.e. echo of QE2) for a time.  Maybe little QE3 like pokes from time to time, “Just to stabilize the market, don’t you know.” In order to have a controlled rise in interest rates.

 

Interest rates will rise in order to attract private cash putting significant downward pressure on real estate prices.  This in turn will cause more mortgage defaults and walkways due to yet more underwater loans and variable rate mortgages resetting to the higher rates.  Construction related jobs and suppliers will take another hit increasing unemployment.  

 

Some of the cash will come from equities eventually crashing the overleveraged PE resulting in increase problems an already oversubscribed/under funded pension plans.   401K/IRA in general will take a significant nose dive for the same reason.  Meanwhile the inflation already baked into the cake will cause commodities too climb still higher though at a lower rate than if QE3 immediately followed QE2.

 

Congress and the President will make a bunch of noise and point fingers at this or that cause trying to demagogue voters their direction for 2012 and MSM will be completely clueless and/or complicit with regards the myriad of stupid policies (many of which are 100% unsupported by the Constitution) accumulated over decades.  The real reason we find ourselves in such a dire situation at this point in time.

 

The Fed will then ride to the rescue with QE3 (say Fall of 2011) but will require that in order to close the deal and provide a firm foundation for these now seriously distressed pension plans they will need to be move out of 'risky' equities and onto the rock solid security of UST.  Also for all you rich guys in tax differed 401K/IRA, in order to keep your tax deferred status you’ll need to transfer your money to UST as well.  Or you could elect to have the 401K/IRA declared as income and take a serious tax hit plus early withdrawal penalty for those under 60, it’s your choice.   All good for the Banks trying to unload the job of supporting UST demand and a government disparately trying to generating more tax revenue from "the rich".

 

So what do the Banks do with all this new QE3 + UST transfer money?  Why they go on spending spree buying up fire sale foreclosed real estate (and then rent), PM and ownership in companies the actually make stuff now at discounted post equity crash prices.  Everything of real value, which by definition will still have value in terms of whatever the replacement to the current currency ends up being.

 

Meanwhile, Joe citizen is forced to now rent a house he used to own and whose net worth consists of  UST backed by only by future taxes on his income.  Looks like Feudalism is make a strong come back to me.

 

If I remember correctly, we work the land they owned, they get everything above the subsistence we need to work the land some more until we die, and occasionally we are forced to fight and die in the wars (in order to enjoy the privilege of working their land for their benefit); wars they start in order to take the land from some other Feudal Lord.  So there we are on the battlefield hacking up some other poor SOB who happens to be a slave of the wrong Feudal Lord.

 

Did I miss anything?

Thu, 04/21/2011 - 21:27 | 1194941 Charles Wilson
Charles Wilson's picture

"...wars they start in order to take the land from some other Feudal Lord.  So there we are on the battlefield hacking up some other poor SOB who happens to be a slave of the wrong Feudal Lord.

Did I miss anything?"

 

"As often as the moon shone out (it was constantly being concealed by numerous clouds of all shapes that kept passing in front of it), one might have seen them sometimes fighting, sometimes standing and leaning on their spears or even sitting down.  Now they would all shout together on one side the name of Vespasian and on the other side that of Vitellius, and they would challenge each other in turn, indulging in abuse or in praise of the one leader or the other. Again one soldier would have a private conversation with an opponent: "Comrade, fellow-citizen, what are we doing? Why are we fighting? Come over to my side." "No, indeed! You come to my side."  But what is there surprising about this, considering that when the women of the city in the course of the night brought food and drink to give to the soldiers of Vitellius, the latter, after eating and drinking themselves, passed the supplies on to their antagonists? One of them would call out the name of his adversary (for they practically all knew one another and were well acquainted) and would say:  "Comrade, take and eat this; I give you, not a sword, but bread. Take and drink this; I hold out to you, not a shield, but a cup. Thus, whether you kill me or I you, we shall quit life more comfortably, and the hand that slays will not be feeble and nerveless, whether it be yours that smites me or mine that smites you.  For these are the meats of consecration that Vitellius and Vespasian give us while we are yet alive, in order that they may offer us as a sacrifice to the dead slain long since." "

- Dio, Epitome 64

 

Nope. Didn't miss a thing.

 

CW

Thu, 04/21/2011 - 22:54 | 1195141 Logman
Logman's picture

He's only in a box due to US Government spending.  If the US could balance their budget the Dollar could be allowed to rise fixing many of the global economic issues (Yen, Euro, China).

Thu, 04/21/2011 - 23:46 | 1195226 CitizenPete
CitizenPete's picture

Great post.  I need to eat some cereal now from my stash in the basement. 

Mon, 04/25/2011 - 19:51 | 1205872 tomster0126
tomster0126's picture

Thoughts on Rice Krispies Treats cereal and its discontinuation years ago?  I'd give my left nut for a box of that cereal, It'd be funny to put a mock price on it and see how it compares to silver.

 

www.forecastfortomorrow.com

Fri, 04/22/2011 - 00:49 | 1195351 Federal Reserf
Federal Reserf's picture

How many QE's will it take for the box to implode into a black hole?

Fri, 04/22/2011 - 01:06 | 1195367 Bansters-in-my-...
Bansters-in-my- feces's picture

"Greenspan's inability to see a bubble two inches from his nose and Truly you do not believe that Greenspa yet still pontificate about irrational exuberance,"

Truly you do not believe that Greenspan did not know he was blowing bubbles.

That is a Banksters key purpose.

Then to pop it.

Fri, 04/22/2011 - 01:58 | 1195414 Yen Cross
Yen Cross's picture

Greenspan was raised on (Pangaea) The ancient continents come to thought!

Mon, 04/25/2011 - 19:49 | 1205860 tomster0126
tomster0126's picture

Great post, really awesome visual of the box Bernutty's been put in.  will there be QE3?  methinks so...let's help Ben out of this one, I feel bad for him now.

 

www.forecastfortomorrow.com

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