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Here Comes Another $25 Billion In Excess Weekly Liquidity To Ramp Up Stocks

Tyler Durden's picture




 

Frequent readers may recall that 11 months ago, when the economy was falsely rumored to be doing better, and the Fed was expected to take baby steps in withdrawing liquidity (only to end up having to inject another $900 billion shortly... and probably much more soon), one of the key mechanisms used was the Treasury's Supplementary Financing Program, whereby the Treasury would issue 56-Day Cash Management Bills each week with a $200 billion ceiling. In addition to funding the Treasury with a $200 billion debt ceiling buffer, the program was supposed to extract a fifth of a trillion in liquidity which would be locked into the rolling of each 56 day bill (each one amounting to $25 billion) up to a total of $200 billion, as disclosed each day in the Treasury's DTS SFP Table 1 open cash balance. Well, not even 11 full months later, it is now time to unwind the program. The immediate catalyst for the unwind of the SFP is that the Treasury will most certainly breach the debt ceiling by the end of March unless it gets the benefit of the $200 billion buffer, which counts toward the total debt issued by the UST. However, what that also means is that the US stock market is about to become awash with another $25 billion in suddenly free cash every single week, until the entire $200 billion SFP buffer is depleted. In other words, take the liquidity impact of POMO, which is roughly $25-30 billion a week, and double it! We are confident the US Treasury will announce that beginning with the week of February 14, it will no longer roll maturing 56-Day Cash Management Bills, which means that for the ensuing 8 weeks, one on every single Thursday, there will be a total of $200 billion in incremental liquidity flooding the market, and probably sending stocks, commodities, and everything else that is not nailed down into the stratosphere all over again.

Below is a table laying out our estimated weekly liquidity boost. We believe the starting date for the SFP winddown will be the week of February 14, although we could be off by one week in either direction.

This makes sense, especially when considering of our expectation that the Fed will force the market to do a repeat performance of 2010, whereby it goes parabolic through mid-April and then it is smashed in another flash crash like event due to some exogenous variable, opening up the path for further Quantitative Easing. That said, it is likely that the PDs and the Fed's OMO will now orchestrate the perfect market boil up over the next 2 months as more than ample liquidity chases stocks at increasingly ridiculous multiples until the point where everything goes bidless just like on May 6.

 

 

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Mon, 01/24/2011 - 16:59 | 899970 Salinger
Salinger's picture

a bullish equity call from ZH

 

+1

Mon, 01/24/2011 - 17:09 | 899981 plocequ1
plocequ1's picture

Yes. Stay tuned. Bad news at 11

Mon, 01/24/2011 - 18:48 | 900410 mule65
mule65's picture

I need a DOW 12,000 hat.

Mon, 01/24/2011 - 17:01 | 899987 rumblefish
rumblefish's picture

go long in what?

Mon, 01/24/2011 - 17:17 | 900047 walküre
walküre's picture

unicorns

 

Mon, 01/24/2011 - 17:28 | 900091 Mongo
Mongo's picture

+100000 (that is binary if you were wondering)

Mon, 01/24/2011 - 17:34 | 900113 In Fed We Trust
In Fed We Trust's picture

How many $ is that per minute of the trading day?

Just wonder n if its worth my fucking time.

Mon, 01/24/2011 - 17:31 | 900098 goldmiddelfinger
goldmiddelfinger's picture

Charlie, the. His trip to candy mountain.

http://www.youtube.com/watch?v=Q5im0Ssyyus

Mon, 01/24/2011 - 17:18 | 900049 Dr. Doom
Dr. Doom's picture

Cue David Tepper..."Everything."

Mon, 01/24/2011 - 17:17 | 900050 topcallingtroll
topcallingtroll's picture

Paper, bitchez.

Mon, 01/24/2011 - 17:02 | 899988 Tyler Durden
Tyler Durden's picture

If you equate equity bullishness with a description of the consequences of broken monetary policy, then yes.

Mon, 01/24/2011 - 17:07 | 900007 JW n FL
JW n FL's picture

you are letting logic rule you Tyler... lets not be that one person who shits on the parade.. huh?

 

Mon, 01/24/2011 - 17:12 | 900031 goldmiddelfinger
goldmiddelfinger's picture

Sometime soon a shitstorm will end this parade.

Mon, 01/24/2011 - 17:14 | 900037 walküre
walküre's picture

Weimar style. Count on it!

Mon, 01/24/2011 - 17:17 | 900048 JW n FL
JW n FL's picture

not soon... but it is coming... to quote Tyler losely... given a long enough time line... or, if you sit by the river long enough you will see all of your enemies float by.. either or, its true in most cases. there are no absolutes in this world, when you sprinkle into the mix mass distortion.. well that just makes logic that much harder to follow...

for instance...

Dow up 1.31%... on news of terrorism.. on news of Ireland..

Gold down or the same.. on the same news, no flight to safety?

this is backwards... plainly.

Mon, 01/24/2011 - 18:14 | 900267 Highrev
Highrev's picture

Somebody's wrong.

Crude and gold?

Equities and the Euro?

What's behind door number 3?

Mon, 01/24/2011 - 18:19 | 900291 EscapeKey
EscapeKey's picture

Behind door no 3 is miners refusing to supply the Comex at the current prices, demanding a premium for physical.

Mon, 01/24/2011 - 18:58 | 900453 CU1981
CU1981's picture

++ Briliant !! :-)

 

We all knew it was coming.

Mon, 01/24/2011 - 17:18 | 900054 In Fed We Trust
In Fed We Trust's picture

And the next time(crash) the investing pubic wont have two weeks to play to the crash. You will be either locked into or out of the market.  The flash crash thingies are the biggest playerspractising who can run fastest to the exit. It won't be you.

Mon, 01/24/2011 - 17:31 | 900103 walküre
walküre's picture

The coming currency and debt reform will not be announced 3 weeks before it happens.

It will be from one day to the next and the holders of Dollar denominated paper "assets" will not be made whole.

Simple as that.

Max pain unless you're holding physical.

Mon, 01/24/2011 - 17:34 | 900115 goldmiddelfinger
goldmiddelfinger's picture

You'll be without 2 kidneys when QE ends holding that position.

Mon, 01/24/2011 - 17:08 | 900012 SheepDog-One
SheepDog-One's picture

'Equity bullishness' is all that matters now, these fools will be dancing with glee as the DOW is at all time highs while $1 wont even buy you a single peanut.

Mon, 01/24/2011 - 17:10 | 900020 cougar_w
cougar_w's picture

Paper wealth FTW

Mon, 01/24/2011 - 17:09 | 900015 Spitzer
Spitzer's picture

So the inflationist/Austrians are right.

Deflationists wrong

And dumb asses are right for the wrong reasons, as far as equity is concerned. Not allot has changed in the last 10 years, when you price stocks in gold.

 

Mon, 01/24/2011 - 17:48 | 900144 goldmiddelfinger
goldmiddelfinger's picture

What happens to the gold play when QE is pulled?

Mon, 01/24/2011 - 18:04 | 900184 Spalding_Smailes
Spalding_Smailes's picture

Accounting tweak could save Fed from losses


(Reuters) - Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on January 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

 

"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

 

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

This enhances transparency by providing clearer, more frequent, snapshots of the central bank's finances, analysts say. The bonus: the number can now turn negative without affecting the central bank's underlying financial condition.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.

 

http://www.reuters.com/article/idUSTRE70K6OK20110121

 

Mon, 01/24/2011 - 18:42 | 900224 EscapeKey
EscapeKey's picture

That's so last week. There already was a rebuttal on this site about it.

Not that there's anything dubious about the supposed backstop of the entire financial system resorting to Enron-style accounting tricks in order to stay in business.

A representative of the entire system... a system of fraud, that is.

Mon, 01/24/2011 - 18:29 | 900334 Spitzer
Spitzer's picture

This kind of stuff is confirmation that the Fed is about to lose control.

reminds me of that Icelandic banker explaining to Max Kieser in 2007, how Iceland could never go broke

Mon, 01/24/2011 - 18:25 | 900318 Spitzer
Spitzer's picture

Eventually the economy crashes, less and less revenue comes in to service the US debt and the dollar sells off, just like the Euro did when it had problems.

Mon, 01/24/2011 - 17:16 | 900041 Salinger
Salinger's picture

(I was going to add 'with caveats" but figured most would understand)  having said that Rosie is likely reading and he clearly has failed to understand the consequences of a broken monetary policy vis a vis equities. 

Mon, 01/24/2011 - 21:34 | 901086 SamuelMaverick
SamuelMaverick's picture

Thank you Tyler Durden. Yet again ZH provides info not to be found anywhere in the MSM.  Yours, Maverick

Mon, 01/24/2011 - 17:05 | 899999 equity_momo
equity_momo's picture

Yet another sign of topping action! Complacency is rife. Realists are giving up one by one and hedging themselves with "expect a correction" type calls. Correction implies a pause in the trend however - i notice very few are actually calling an end to the bull market. Bull markets usually end in this way. Each correction the dumb dumbs will use to BTFD.  And before you know it , we are below 10k and all scratching our heads wondering how the bear returned.

Mon, 01/24/2011 - 18:05 | 900232 EscapeKey
EscapeKey's picture

More like growing expectation of severe/hyperinflation.

Mon, 01/24/2011 - 17:01 | 899977 Turd Ferguson
Turd Ferguson's picture

I wrote this a couple of weeks ago. It's appropriate here. Don't fight The Ben Bernank. You will lose.

http://tfmetalsreport.blogspot.com/2011/01/you-dont-tug-on-supermans-cap...

Mon, 01/24/2011 - 17:05 | 900001 walküre
walküre's picture

Turd, how did you like the shake down of longs with stops below $27 in silver today?

Can't have just anyone participate in the next leg up now can they?

It was a nice but short buying window. Most bullion dealers didn't even register the drop, just like they didn't register any drop since we're South of $29.

Recognized silver bullion is still over $33 / oz from a bullion dealer. Won't touch anything that's not recognized. The bid side.. well the bid side is going where the Comex says it should be but that doesn't get anything filled.

I'd like to see the Comex throw a hissy fit over their latest attempt at price surpression.

Houston, uhm Chicago ... we have a problem!

Mon, 01/24/2011 - 17:52 | 900173 goldmiddelfinger
goldmiddelfinger's picture

Turd says don't fight Bernake but he is a hypocrite. The turd will sing a different song when Ben brings down the curtain on QE. Soon.

Mon, 01/24/2011 - 18:02 | 900222 walküre
walküre's picture

The Bernank can't pull QE.

QE is his life blood. He and his shyster bank friends need QE because they don't have real jobs and never will work an honest job and get paid for their work.

The shysters live off us. They're parasites.

But we are flat ass broke and the Bernank and his shyster friends can't suck blood from a stone.

No more QE, followed by higher interest and higher taxes would get the revolution started.

The Bernank and his shyster friends now this. They're not that stupid.

You should spend some time outside the US and get an ear full of just how much hatred against the US is out there.

There's no love for the US or the US Dollar left anywhere in the world.

Unless the US eats crow and defaults on its debt that is a sign of sheer gluttony, there won't be any respect.

Default by the lenders will be forced upon the US if necessary.

 

Mon, 01/24/2011 - 18:07 | 900242 EscapeKey
EscapeKey's picture

Ignoramus.

Tue, 01/25/2011 - 11:14 | 902513 cramers_tears
cramers_tears's picture

I'm w/ Turd.  The Bernank is the Star Wars Force that permeates our earth.  If he drives DJIA to 15,000 by June, TPTB will be giving him a 20 year extension on his chaircreature gig!  Join the team and come in for the big score!  Even if you get out on the slide, you could still chap up a decent little return these next months, courtesy of The Bernank and broken monetary policy!  Keep your eyes on the BRIC, some accelerated decoupling or adverse moves on their part to the $USD sends me packing...  but the USD/EUO/GB are calling the shots right now with no end in sight.  China, who could really tube the west seems content to play along.  Who cares if the $USD falls like a rock?!  The Bernank is lovin' it.  Send the Hot Money to the BRIC, the carry trade will be creamin' all over themselves.  The Western Banks have The Bernank Put behind them and the pussy GOV INC behind that.  Watch BRIC/Developing Inflation soar (Food Prices off the charts).  Offsets the stone-like fall of the USD/EUO/GB as the BRIC/Developing try to keep up.  TPTB milk every last drop out of the populations for debt service!  And then when the inflation/flash-crash/rate-raise/military event finally occurs - everybody gets shiny new SDR's and The Rothschilds & Company plan their next move!  Oh the horror...  Don't ever understimate these fuckers.  They've got all the marbles and they can take yours in a heartbeat.  Of course we could all get some organized resistance and send them all packing!?!?!  Nah... WTF am I thinkin' about.  We've got TV Tonite! - The Biggest Loser @ 8 and then off to Beverly Hills Housewives while OBOT spiels his bullshit.  Synopsis: "Unforgivable"
Celebrating Taylor's birthday; Kim and Kyle go to blows; Camille learns that Kelsey wants to end the marriage.

Mon, 01/24/2011 - 16:59 | 899978 digalert
digalert's picture

Hey CNBS, here comes DOW36,000$$$

Mon, 01/24/2011 - 17:13 | 900035 In Fed We Trust
In Fed We Trust's picture

Do a 3 for 1 split on every stock in the DOW, and poof.......

Dow = 36,000

Paging Chris Cox

Mon, 01/24/2011 - 17:13 | 900036 In Fed We Trust
In Fed We Trust's picture

Do a 3 for 1 split on every stock in the DOW, and poof.......

Dow = 36,000

Paging Chris Cox

Mon, 01/24/2011 - 17:11 | 899979 plocequ1
plocequ1's picture

The new and long Mr Spock says , "Go long and prosper. Dont let Logic and math be a cork in the Asshole of prosperity."

Mon, 01/24/2011 - 17:02 | 899989 Racer
Racer's picture

And the agonising death of many more innocents who suffer at the hand of the Fed

Mon, 01/24/2011 - 17:02 | 899990 Spitzer
Spitzer's picture

Not allot is going into the gold mining sector. This is a tricky one, DOW up, gold miners down. What will the miners do when the DOW slides ?

Unlike bullion, the gold mining stock bear market ended in 2008, not 2001. Pullbacks are to be expected but Im not exited about having a double whammy if gold stocks fall further because the broader market falls.

Im going to stick with juniors here because they don't follow the broader market as much as the majors.

 

Mon, 01/24/2011 - 17:09 | 900018 walküre
walküre's picture

If you have cash to spare, experiment with mining stocks.

DOW going up and commodities down cannot end well.

Producers will idle their mines if need be to force Comex out of business.

Mon, 01/24/2011 - 18:33 | 900348 Spitzer
Spitzer's picture

If you have cash to spare, experiment with mining stocks.

This is the kind of talk you hear at the start of a bull market. For the record, I am more then 100% invested in mining stocks.

Mon, 01/24/2011 - 17:10 | 900019 tmosley
tmosley's picture

Paper will be manipulated.  This is why I prefer the real thing in my hand.

Mon, 01/24/2011 - 17:20 | 900060 goldmiddelfinger
goldmiddelfinger's picture

You pumping something more personal now?

Mon, 01/24/2011 - 17:06 | 899998 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

A handful of people creating the madness, millions suffering because of their actions, not to mention the millions of unborn who are yet to be exposed to this corrupt to the core system. There is no end to it, because the people have no will to end it.

Mon, 01/24/2011 - 17:07 | 900008 bob_dabolina
bob_dabolina's picture

This is an amazing idea! It will surely work! We will all become rich, and prosperous!

Mon, 01/24/2011 - 17:07 | 900009 Johnny Lawrence
Johnny Lawrence's picture

How does not rolling these 56-day commitments create excess liquidity for the market?  Because the PDs who hold these 56-day jobbers get their principal back?

Mon, 01/24/2011 - 17:19 | 900040 bob_dabolina
bob_dabolina's picture

Seeing as there is very little (if any) organic demand for UST's, the PD's buy them, and flip em back to the FED (whom printed the money out of thin air) The PD's use the proceeds to buy overvalued stocks. However, people who see that stocks are overvalued, sell the stocks and buy things like commodities because afterall money chases its best rate of return.

The net result is that we can keep everyone on food stamps/unemployment (and continue to bail out banks, and make sure the bankers who created this problem get their bonuses) and the price of everything to include SnP, commodity prices go through the roof. Which is why right now we are in a period of stagflation that will eventually lead to hyperinflation unless these PhD's stop this nonsense (but they wont) because like Tyler says they want a DOW 36,000 because it creates somekind of imaginary "wealth effect"

Mon, 01/24/2011 - 17:07 | 900010 DavidC
DavidC's picture

More scary stuff, after the Fed's accounting tricks over the weekend. That this cannot end well...

DavidC

Mon, 01/24/2011 - 17:08 | 900014 cougar_w
cougar_w's picture

Pushing Mr Market up another 5% might work out OK, but it might not. Stock investors will buy the (current) dip expecting a run up for 6 months. But each will have the exact same strategy; run with the bulls, at the first sign jump out. They'll all run at once, they'll all jump out at once.

I just don't see how that is going to save us in 6 months.

However, I will probably get in the market again for 3 months just for laughs if this new liquidity slug materializes

See you guys on the other side.

Mon, 01/24/2011 - 17:11 | 900025 walküre
walküre's picture

sell into strength

convert paper into real assets right now

no more monkey business with funny money

Weimar Germans would have loved to been able to see their shit storm coming.

Mon, 01/24/2011 - 18:43 | 900386 cougar_w
cougar_w's picture

No argument from this corner. What we are seeing is monetary insanity. I feel dirty.

Mon, 01/24/2011 - 17:09 | 900016 InconvenientCou...
InconvenientCounterParty's picture

By chance any of the central planning resources going into COMEX paper shorts? If not, why not?

Mon, 01/24/2011 - 17:16 | 900044 InconvenientCou...
InconvenientCounterParty's picture

Strong positive corelation between POMO liquidity and spot gold was pretty damn high, then starting in 2011, they are decoupling. Something changed.

 

Mon, 01/24/2011 - 17:23 | 900075 walküre
walküre's picture

Clearly Lululemon and Carnival Cruise Lines are going to be the real winners because that's what everyone needs when their money is diluted into nothingness.

300 million stupid Americans vs. several billion non-Americans who understand that when a massive debt and currency reform is at hand, you want to hold proper things to barter.

 

Mon, 01/24/2011 - 17:09 | 900017 frippy
Mon, 01/24/2011 - 17:11 | 900021 I Am The Unknow...
I Am The Unknown Comic's picture

Bad News!  We're ALL going to be millionaires!!!

Mon, 01/24/2011 - 17:12 | 900030 Goldbugger
Goldbugger's picture

Time to cover my shorts...

Mon, 01/24/2011 - 17:13 | 900033 onlymyopinion
onlymyopinion's picture

Tsk tsk, you guys need a personal invite from The Bernank to tell you stocks are going higher?  Just get long and enjoy the ride!  Doesn't look as though we'll have to wait till Q4 before we hit 13K now. 

 

Sticking with my call that the market bottomed on January 3rd (1257)

Mon, 01/24/2011 - 17:25 | 900081 Johnny Lawrence
Johnny Lawrence's picture

This time is different!

Mon, 01/24/2011 - 17:36 | 900122 onlymyopinion
onlymyopinion's picture

It really is--take a recovering economy that's gaining strength and sprinkle in a little POMO here and there and YES, it is different.

 

Did you happen see the way the market was sniffing 12k like a dog in heat today?  Based on the strength when we do get the 12k mount, this puppy may run for a while.  At least, IMO, till we get through earnings.  Look for a pullback between 1325 & 1340.

Mon, 01/24/2011 - 17:16 | 900043 JG Krielsen
JG Krielsen's picture

Hello Dow Jones 13,000. See you next month.

Mon, 01/24/2011 - 17:17 | 900045 Common_Cents22
Common_Cents22's picture

14,000 and all time highs here we come!

 

Wealth effect baby!  Except whats the balance of the average American's stock holdings?  3-4000?  So a big move to $6,000 will really hammer it home!

Mon, 01/24/2011 - 17:18 | 900052 JW n FL
JW n FL's picture

Trickle down here we come!

Mon, 01/24/2011 - 17:39 | 900129 onlymyopinion
onlymyopinion's picture

Originally I wasn't expecting new ATH's till 12/31/12 but given the strength of the recovery, the return of the consumer, a little POMO here & there and now this program, I'd say ATH's are within 12-18 months away.

 

Mon, 01/24/2011 - 19:19 | 900554 Fred Hayek
Fred Hayek's picture

The strength of the recovery and the return of the consumer, huh?

I'd prefer Salvador Dali.  Surrealism just doesn't work as a verbal art.

 

Mon, 01/24/2011 - 17:17 | 900046 Convolved Man
Convolved Man's picture

Might as well sit down, strap in and shut up, because we're going on a ride.

Do not bother looking for clearly marked exits -- THERE ARE NONE.

Have a nice day.

 

Mon, 01/24/2011 - 17:23 | 900051 bingaling
bingaling's picture

What a Valentines Day present for those who make commissions on those purchases .

On a side note sell 8 weeks after when 25 billion stops going in the market every week,buy some puts and you good .

Mon, 01/24/2011 - 17:19 | 900057 Sudden Debt
Sudden Debt's picture

R A I S E   T H E    D E B T    C E I L I N G

 

Untill then, the clock is counting down. How far are they with the vote? Did everybody already got their brown enveloppes?

Mon, 01/24/2011 - 17:26 | 900083 Slow learner
Slow learner's picture

Hay, come over hear!!

Mon, 01/24/2011 - 17:26 | 900084 bingaling
bingaling's picture

Yeah  they got em . But it seems the slush funds weren't big enough with this much money floating around . They want one of those super sized 7-11 slushies that make your brain freeze .

Mon, 01/24/2011 - 17:20 | 900058 davepowers
davepowers's picture

And what did the Treasury do with the $200 billion raised under the SFP?

Answer - they loaned it to the FED. 

In fact, the $200 billion covered the entirety of the expansion of the FED's balance sheet in 2010.

And the expansion of the FED's balance sheet resulted from the FED's purchase of US Treasury notes and bonds.

IF there is an unwind of the 56 day rollovers, the liquidity impact will depend on what happens with the FED's resultant debt to the Treasury.

For those that were concerned that the Treasury would have to bail out the FED, the SFP shows that it already has bailed it out - to the tune of the entire FED balance sheet expansion for all of 2010.

Mon, 01/24/2011 - 17:20 | 900062 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

Over the last 5 years, I think I've read that the Fed "is out of bullets" at least 200 times.

 

I have argued before that since there is a well established system for moving losses from bankers onto productive people both within nations and across international boundaries, the system need not collapse until the savings and debt servicing capacity of all citizens across the globe is exhausted.  Unless someone can prove we are at that point now, there is no reason we cannot have at least one more major "economic recovery" and crash before this all falls apart.

 

Once this bubble pops, I will once again be reading about how the end is near, but I won't believe it until I see some Roubini-esqe proof that on a global scale there is simply no one left to borrow or steal from.

 

I expect that report will appear on zero-hedge before it appears anywhere else.  Until then, I wait.

Mon, 01/24/2011 - 17:34 | 900112 walküre
walküre's picture

You and so many elites are hoping for just that.

The issue is the US currency itself.

Mon, 01/24/2011 - 17:58 | 900191 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I'm losing paper money in gold on a daily basis while the markets rise on the evidence of the Fed's continued folly.

When the markets eventually start heading down, some very rich people are going to once again find themselves in trouble.  Bailouts will be demanded in order to keep those awful doomers from celebrating our collective destruction.  The political will to take care of the elites will be overwhelming, just like last time.

 

So the question is, can we afford to bail them out again?  Has anyone estimated the total debt carrying capacity of everyone on earth?  Governments will move the losses of the elites onto local taxpayers.  If local taxpayers are tapped out, the IMF will move the debts around the globe onto whomever can act as a bagholder.

To say, "the people won't stand for it" is to make the same mistake that will keep me in gold and out of stocks while I wait out this latest insanity.  Zerohedge readers are expecting the masses to learn something from events, but human nature doesn't work that way.  People *will* stand for it, until it becomes physically impossible for them to do so (no more food in stores).

Then they will get very angry and look for someone to blame. How hard will the elites have to work to redirect a frightened ignorant mob away from the complicated cause of their misery?

 

Mon, 01/24/2011 - 18:08 | 900244 walküre
walküre's picture

You're right about human nature which is a reflection of nature in general.

Nature is defined by laws of physics, math and chemistry.

Unless all mankind accepts the US and the US Dollar as too big to fail (which it doesn't), there will be an end to the imbalance of fake paper and real assets.

Commodities are not infintely available.

 

Mon, 01/24/2011 - 17:37 | 900126 AnAnonymous
AnAnonymous's picture

a well established system for moving losses from bankers onto productive people both within nations and across international boundaries, the system need not collapse until the savings and debt servicing capacity of all citizens across the globe is exhausted. 

 

Very good.

Mon, 01/24/2011 - 17:21 | 900066 T Rex
T Rex's picture

Enjoyed the fundys, see you next year.

Mon, 01/24/2011 - 17:21 | 900068 topcallingtroll
topcallingtroll's picture

Thanks for the data. If bernank is doubling.down then maybe we should too. This might be a good time to lighten up on commodity plays.temporarily

Mon, 01/24/2011 - 17:26 | 900082 goldmiddelfinger
goldmiddelfinger's picture

Such thinking is a heresy at ZH but that probably makes it the correct call.

Mon, 01/24/2011 - 17:22 | 900070 topcallingtroll
topcallingtroll's picture

Thanks for the data. If bernank is doubling.down then maybe we should too. This might be a good time to lighten up on commodity plays.temporarily

Mon, 01/24/2011 - 17:27 | 900085 unky
unky's picture

So in the very short term, is there still room for silver to fall a little further? I mean, when exactly will they put the additional 200 billion dollars in? About the same time like in the beginning of february 2010 when gold reached a local minimum? If so, I would maybe wait another week, then buy some silver coins ;-)

Mon, 01/24/2011 - 17:29 | 900094 onlymyopinion
onlymyopinion's picture

Tsk tsk, you guys need a personal invite from The Bernank to tell you stocks are going higher?  Just get long and enjoy the ride!  Doesn't look as though we'll have to wait till Q4 before we hit 13K now. 

 

Sticking with my call that the market bottomed on January 3rd (1257)

Mon, 01/24/2011 - 17:30 | 900099 Scottj88
Scottj88's picture

What this does not take into account is the Dollar Index.  The Dollar Index (DXY) is getting dangerously low.  As I post it sits exactly at 78 and overnight will probably continue its movement.  If the past 5 days have anything to say about the immediate future of the DXY, then I don't know what would.

 

The Dollar is dumping faster than a man who just ate a lot of refried beans...

Read more about the dollar index long term since 1971 and how it has really told the story of our economy (in long run terms) and how devalued it is about to become in the near future.

http://thehardrightedge.com/2011/01/21/the-dollar-index/

-

Scott J

Mon, 01/24/2011 - 18:11 | 900257 EscapeKey
EscapeKey's picture

The one thing saving the Dollar is that the Yen, Euro, Pound Sterling and just about every other fiat currency is just as bad.

Mon, 01/24/2011 - 17:31 | 900101 davepowers
davepowers's picture

This whole SFP thing can tie into the Jan 6th accounting change in many ways.

SFP was set up to allow the Treasury to sell paper over and above its financing needs. They then loaned it to the FED for balance sheet expansion. In 2010 that was used to buy Treasury paper.

If Tyler is correct then the Treasury is above to run out of the ability to continue selling paper over and above its needs - the looming debt limit will take care of that. So, in effect, the Treasury needs the $200 billion back.

The FED could, of course, pay back the $200 billion it has borrowed. But which Peter will be robbed to pay Paul? If the FED is already reduced to borrowing from the Treasury to finance QE2, then where would it get the money?

One possibility is to sell other assets, MBS or something from the host of other programs. But what if they could only do so at a loss. In that case, the new accounting policy, which allows a daily shifting of losses to the Treasury vs. the old policy of annual loss shifting, would provide cover to do so.

Many will argue that the FED will just print it. 

But if the FED's were really all powerful and could print with nary a concern, why was it forced to resort to the financial 'circle jerk' of borrowing from the Treasury to buy paper using money the Treasury raised by selling paper?

Or maybe they're just engaging in all these SFP gymnastics to provide more fees to the PDs. It's likely that the PDs take a cut on every slightest movement of 'money' these days.

Mon, 01/24/2011 - 17:36 | 900105 squexx
squexx's picture

Instead of flying the plane into the IRS, it's a shame he didn't point the plane at one of the  windows of the Federal Reserve!

Mon, 01/24/2011 - 17:50 | 900167 lunaticfringe
lunaticfringe's picture

Be careful dude. They'll track you down and steal your guns.

Mon, 01/24/2011 - 17:45 | 900138 DavidC
DavidC's picture

This does beg the question, at what point is the Fed going to be happy that we're back to 'normal' as far as the stock market is concerned?

DavidC

Mon, 01/24/2011 - 17:55 | 900185 uno
uno's picture

when the middle class buys the stocks from the EE (ala 2000, 2007), can't have a top until then

Mon, 01/24/2011 - 19:29 | 900602 DavidC
DavidC's picture

uno, had to think for a moment there what EE is - should have twigged faster! Evil Empire...yes...!

Mon, 01/24/2011 - 18:06 | 900187 uno
uno's picture

multiple post, server must be slow

Mon, 01/24/2011 - 18:05 | 900229 uno
uno's picture

multiple post

Mon, 01/24/2011 - 17:53 | 900177 lunaticfringe
lunaticfringe's picture

So on top of this, on top of scheduled POMO, and the liberation of one trillion off shore dollars...anyone wanna try to call the top? I am in awe. Total, unflinching awe. The gold and silver squish is on until mid Feb. I believe that. When gold touches 1100, silver sub 25, I am backing the truck up.

Mon, 01/24/2011 - 17:53 | 900178 gloomboomdoom
gloomboomdoom's picture

Wish I could help you doomers out. Buy the DIP! Make money

The Recession is over. The State of the Union is tomorrow. Obama will be reelected... The economy is recovering... Gold is falling.

No Hyper-Inflation. No Deflationary Depression.

Ben Bernanke, the man you love to hate, literally re-wrote the laws of Macro economics to the benefit of millions of people upon this earth. We are greatful!

Mon, 01/24/2011 - 17:58 | 900205 plocequ1
plocequ1's picture

Exactly. Im done fighting. My fiance and i love Bernanke. Between F and AAPL alone, We's happy.

Mon, 01/24/2011 - 18:14 | 900271 taraxias
taraxias's picture

You forgot <sarcasm off> at the end of your post.

Mon, 01/24/2011 - 18:25 | 900315 EscapeKey
EscapeKey's picture

THIS TIME IS DIFFERENT!

Mon, 01/24/2011 - 17:54 | 900180 overmedicatedun...
overmedicatedundersexed's picture

The Mulatto Swan that will roil the markets

an update see ..Gov of Hawii quoted as saying no record of birth exists see second URL out today!!

The Obuma BC has snared the new gov of hawaii..in the coming months this could be a

"mulatto Swan" that roils the markets??

just reporting what the MSM seems so eager to avoid,but that may change..

who ever has a copy of the long form Birth cert

has tremendous leverage over the most powerful man in the world...

 

http://hillbuzz.org/2011/01/23/hawaii-ground-report-could-hawaiian-governor-neil-abercrombie-not-be-as-incompetent-and-foolish-as-he-appears-but-orchestrating-a-deliberate-birth-certificate-recovery-dead-end-to-cover-his-own-pap/

http://www.youtube.com/watch?v=nb--1AxmgZ8
Mon, 01/24/2011 - 18:03 | 900223 goldmiddelfinger
goldmiddelfinger's picture

Somewhere in Africa, a village is missing its midwife.

Mon, 01/24/2011 - 18:09 | 900253 6 String
6 String's picture

I think I'll just bet in all on red. Fuck it. If I go broke, I''ll just stand in the digital soup lines and my life won't change anyway. Silver will just be recalled and with a VAT to boot, Gold will declince in the next couple months as this is all mistaken as an uptick in economic activity, jobless claims will suddenly seem bettter, the quarter will be so-so for corporate profits which is all it takes, and we'll see S + P 1500 before April as Tepper, of course, will be right again.

After that, we'll see a 10% correction in equities, then at least another 500 billion monetization past June, and the markets will end at least 30% higher on the year as Silver gets nationalized and Gold gets dusted.

Or not.

Mon, 01/24/2011 - 18:14 | 900270 sabra1
sabra1's picture

pomo presently is having less and less effect on the markets, except for the upcoming massive increases in food riots! rioters will turn on the USA for revenge! being canadian, i'll have to watch it unfold on CNN!

Mon, 01/24/2011 - 18:15 | 900274 buzzsaw99
buzzsaw99's picture

S&P 500 > 9000 with a divi yield of 0.00001% bitchez!

Mon, 01/24/2011 - 18:18 | 900287 OptionsHedge
OptionsHedge's picture

swim in the wake, crest and trough

Mon, 01/24/2011 - 18:22 | 900309 working class dog
working class dog's picture

Is there hope to sidestep the banksters credit smack down on the public. Check out the article below from the Huffington Post from:
Ellen Brown.Civil litigation attorney; author of "Web of Debt"
Posted: January 24, 2011 02:20 PM .

Washington State Joins Movement for Public Banking
Bills were introduced on January 18 in both the House and Senate of the Washington State Legislature that add Washington to the growing number of states now actively moving to create public banking facilities.

The bills, House Bill 1320 and Senate Bill 5238, propose creation of a Washington Investment Trust (WIT) to "promote agriculture, education, community development, economic development, housing, and industry" by using "the resources of the people of Washington State within the state."

Currently, all the state's funds are deposited with Bank of America. HB 1320 proposes that in the future, "all state funds be deposited in the Washington Investment Trust and be guaranteed by the state and used to promote the common good and public benefit of all the people and their businesses within [the] state."

The legislation is similar to that now being studied or proposed in states including Illinois, Virginia, Hawaii, Massachusetts, Maryland, Florida, Michigan, Oregon, California and others.

The "once unthinkable" includes not only draconian cuts in services, increases in taxes, and sale of public assets, but now filing for bankruptcy. States are not currently allowed to go bankrupt, but a move is afoot in Congress to change all that. Bankruptcy proceedings would allow states to escape pension and other contractual obligations, following the dubious lead of such megacorporations as General Motors and Continental Airlines.

Meanwhile, fears of state bankruptcy have caused state and municipal bond values to plummet and borrowing costs to soar. As with Greece and Ireland, rumors of bankruptcy become a self-fulfilling prophecy, bringing out the hedge funds and short sellers that turn prophecy into reality.

Addressing the Problem at Its Source: The North Dakota Model

While drastic spending cuts are being proposed and implemented, the states' woes are not the result of over-spending. Rather, they were caused by loss of revenues and increased borrowing costs resulting from the Wall Street banking crisis. Jammed with toxic assets, derivatives, and the subprime mortgage debacle, the Wall Street credit machine ground to a halt in the fall of 2008 and has still not recovered.

And it is here, in generating credit for the state, that the Bank of North Dakota has been spectacularly successful. By providing affordable, low interest credit for business expansion, new businesses and students, the BND has helped North Dakota sidestep the credit crisis altogether.

The BND partners with private banks, providing a secondary market for mortgages; offers "wholesale" banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support economic development. In the last ten years, the BND has returned more than a third of a billion dollars to the state's general fund. North Dakota is one of the few states to consistently post a budget surplus.

Unlike private banks, public banks don't speculate or gamble on high risk "financial products." They don't pay outrageous salaries and bonuses to their management, who are salaried civil servants. The profits of the bank are all returned to the only shareholder - the people.

January 24, 2011 2:08 PM

Mon, 01/24/2011 - 18:33 | 900351 Gimp
Gimp's picture

Confirmation we have the smartest idiots running the country...

Buy AAPL - Its is already 20% of the Nasdaq soon to be 50%

Mon, 01/24/2011 - 18:37 | 900365 Hephasteus
Hephasteus's picture

Has anybody read Bernank's book. Fuck Plato The New Republic. It has pictures.

http://viralviralpictures.com/2011/01/07/theres-something-wrong-with-thi...

Mon, 01/24/2011 - 18:37 | 900367 tahoebumsmith
tahoebumsmith's picture

The true sucker's ralley put forth to bring all you suckers back in. They found the formula to bring you back to the Casino tables even though they wiped you out only a few short years ago. How else can they crash the market again for a 6 trillion dollar payout and leave all you bootlippin fools stuck holding the bag if they didn't get you back on the ether? The cost of all this nonsense? America's future... Nobody will buy our treasuries again and if you think the FED can continue to monetize the debt ceiling forever, think again. This is the most desperate attempt to create an economy that doesn't exist that has ever been orchestrated. Meanwhile as the Banks and the CRONIES on Wall St. continue the greatest heist in American history, Main St. and the middle class continue to deteriorate. When this whole PONZI SCHEME falls apart the money you make in the market ain't gonna be worth shit anyway so your better off just squandering what money you have left on a good time because good times will be something we read about in history books.

Mon, 01/24/2011 - 18:47 | 900406 6 String
6 String's picture

When this whole PONZI SCHEME falls apart the money you make in the market ain't gonna be worth shit anyway so your better off just squandering what money you have left on a good time because good times will be something we read about in history books.

This idea has great merit to me. Cash out of every rigged investment--which means everything--and have enough food stored to last roughly 1 year, some gold.....and spend the rest on shit like the rest of America. Afterall, I am still in much need for an Ipad, Ipod, Imac, some work-out clothes from Lulu, Netflix, DirecTv, four phone bills, a leased mercedes, some new expensive suits plus a rolex, some good italian shoes.....

Oh, I also should stop paying the mortgage. That money can be used to buy free-float groceries and subsidized shit for a year or two....

Once that easy lifestyle comes to an end, I will get unemployed for excessive drug use....and live easy on Food stamps, unemployment, and sect. 8 housing.

Once that runs its due course, I'll just run for politics.

Mon, 01/24/2011 - 18:43 | 900387 Racer
Racer's picture

I saw the film "V for Vendetta" today .. it is set in the future but it could be now/the near future for other countries, but the difference is that the people rise up against those in power!

Mon, 01/24/2011 - 18:46 | 900401 call me ahab
call me ahab's picture

it's a no brainer-

just like- buy the dip (and I ask- what dip? As if there is a dip to ever buy)

so instead it should just be- BUY! Because it's going up . .

I love new economics . . .kind of like new math- but better

Mon, 01/24/2011 - 18:50 | 900416 Racer
Racer's picture

the new dotcom? the new tulipmania? No, it is the new Hopium poppy FED on  liquidity growth hormones.

Smoke it, and get a higher market

Mon, 01/24/2011 - 18:58 | 900450 call me ahab
call me ahab's picture

with tulipmania- at least you got a tulip out of the deal . . .

 

Mon, 01/24/2011 - 19:08 | 900472 walküre
walküre's picture

I just upped my imaginary nett worth to a billion dollars.

Looks great on paper and maybe I can get a bank to float me based on the fantasy.

Hey, if it's all the same. Why the hell not? If the Fed and UST can do it, so can you!

Money is no longer real unless you accept it as real. Values are clearly being messed with and there shouldn't be any children left behind.

edit: looking at a good printer to invest

edit edit: my accounting software is not working properly, it says 1+1=2 but I need 1+1=4 billion

edit edit edit: are Enron's cheat cheats finally declassified?

really struggling here!

Mon, 01/24/2011 - 19:24 | 900563 hambone
hambone's picture

Real Question - How high is high enough for the FED and who are we Americans?

Has anyone read some thougths on where the Fed is taking us?  Full employment (6.5%?) and 2%+ inflation (measured Fed style...housing ripping upward, wages slightly up but we've always got outsourcing or that permeable border to bring wages back into control, CPI ripping as manufacturers can pass along their higher inputs and maintain margins). 

How long will it take for full employment and resultant rising wages / credit expansion and resultant housing apprection?  This seems at least another 12 to 18months even when created by completely unsustainable deficit spending / accounting gimmickry / out and out lies and lawlessness. 

This 12 to 18mo period could cause some trouble for the sheeple in America but imagine the impact in Africa, Asia, C. America where food / energy take 50%+ of income.  This policy is going to set many countries on fire and kill millions in starvation and chaos. 

In time, history always looks back on a people and makes its judgement...I think we Americans will be judged no better than our Nazi friends who we revile.  But look at what we are doing...we are no different.  We can pretend we don't know or don't see the impacts but that is a lie.  What we are doing is out and out warfare on the least among us so the greatest may have more.

Mon, 01/24/2011 - 19:27 | 900594 TruthInSunshine
TruthInSunshine's picture

I'm no accomplice of Bernanke. I will never accept any such slur.

Mon, 01/24/2011 - 19:47 | 900617 hambone
hambone's picture

If you are an American - you (we) are accomplices of these policies and these represenatives so long as they continue.  Germans could say the same, I didn't support it.  I only followed orders.  Now look at us, I didn't vote for him or don't agree.  But we know what will happen...just like the Germans knew.

But did the Germans stop it?  Will we? 

Doing nothing in both cases is de facto support of the policies.  Ramping the money supply is economic warfare and the casualties will be very real...especially among the children, the elderly, the weakest, the poorest.  Where are the fucking churches, the pious, the religious, the moral, the ethical, the people mythically known as "Americans" to call a stop to this???  I'm ashamed for what we've become.

Mon, 01/24/2011 - 19:25 | 900585 David99
David99's picture

$ 1 trillion is being pumped by FED for every 500 points gain on Dow

Mon, 01/24/2011 - 19:48 | 900676 PulauHantu29
PulauHantu29's picture

Why Steal Less, when you can Steal More."

Wall Street's (aka fed's) mantra

Mon, 01/24/2011 - 19:58 | 900695 hambone
hambone's picture

+1

I don't think there will ever be "enough" money for these bastards.  More, more, more.  I'm not a religious person but I hope there is a hell and that these fuckers spend eternity there after their run here is done...and I'm afraid many of us ZH'ers will be joining them for not having the guts to do anything but try to profit on the run-up and eventual collapse.

Mon, 01/24/2011 - 20:00 | 900712 chump666
chump666's picture

the market is working on a short timeframe now stuck on "repeat"...till the final collpase.

'flash crash' due,  say maybe May again, huh? But I'd say ealier (March/April 2011), QE3 will then send the US into it's debt crisis in 2011 - once China does the big UST dump.

meantime a huge correction is due.

Mon, 01/24/2011 - 21:33 | 901078 Gimp
Gimp's picture

Correction is due but "they" won't let it happen, just keep pumpin' the old fool with viagara and not calling the doctor after four hours!

Have you seen the SPY...just keeps on going up heading to 150..on hopium..

Mon, 01/24/2011 - 21:56 | 901170 G Mann
G Mann's picture

But I'm afraid to long C, even at 4.86!  Do I have to?

Mon, 01/24/2011 - 22:08 | 901196 JimS
JimS's picture

"The coming currency and debt reform will not be announced 3 weeks before it happens", great observation. This has happened once before in my lifetime. While I was in Vietnam in 1968, we used Military Payment Script- MPC. One morning, at 6am formation, the CO told us to go get all of our MPC, immediately. We were told not to hold any of it back because it would be worthless. We were given 5 minutes to come back to the formation. We were then issued a new MPC. Later that day the Vietnam civilians were in total chaos, as MPC was their "reserve currency". Their "reserve currency" was now worthless. It was the most secret operation of the entire war. I think these clowns could maybe pull off the same event. May we live in interesting times.

Mon, 01/24/2011 - 22:11 | 901215 JimS
JimS's picture

A post-script: of course TPTB will have enough warning to prevent any loss in capital, not like the rest of us serfs.

Mon, 01/24/2011 - 22:42 | 901325 David99
David99's picture

The way FED's POMO's are working up the Casino, I am cleaning my hats

12,000 hat this week
13,000 hat by end of April
14,000 hat by end of September
15,000 hat by end of December

Thank you Helicopter fraud Ponzi Ben

Tue, 01/25/2011 - 00:33 | 901635 bullet357
bullet357's picture

Pump & Dump ....same ol same ol ...this will never stop till the common man stands up to this mockery.

Tue, 01/25/2011 - 09:25 | 902158 HakAllah
HakAllah's picture

You are not even talking an amount 1.5% of the US equities market.

And that is assuming the entirety of this influx goes into equities. Granted, it would be focused more towards the stocks in the indexes and not the whole, so you *might* see as much as 10x that - again, assuming it focuses only on equities... which seems hugely unlikely.

I'm not convinced it will the boom this alludes to, but do agree that it is at best just making things worse in the long run.

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