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Merrill's Harley Bassman On Why This Is The "BIG ONE" And Its Implications

Tyler Durden's picture


Must read observations from Merrill's Harley Bassman, formerly head of the RateLab:

Maybe I am showing my age, but I can assure you that as World Political events go, what is happening in the Middle East is actually the BIG ONE.

Respectfully ignoring the moral aspects of what is occurring and only focusing upon the cold numbers of dollars and the economy, we have tossed some serious uncertainty into the mix.

Without stepping over the line and opining as to all the various outcomes that do not bode well, let's just say that the 20bps rally in the T10yr since the "pot started to boil" is microscopic relative to the scope of events.

The reason there is no "Flight to Quality" bid for USTreasuries is that USTs are no longer the "Quality" asset.  Since the FED has turned on the printing presses, the "value" of the dollar has steadily declined. This is why the "Flight to Quality" is happening in Gold, Oil, Copper, Cotton, etc

Attention all you non-inflationists (and you know who you are), what more evidence do you need that the Govt's Plan "A" (inflation) is well underway?

There is little we could add to this.

h/t David


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Wed, 03/02/2011 - 15:18 | 1012267 sheeple
sheeple's picture

what's plan B?

Wed, 03/02/2011 - 15:20 | 1012283 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Dr. Strangelove on plan B:

Wed, 03/02/2011 - 15:29 | 1012314 tickhound
Wed, 03/02/2011 - 16:12 | 1012485 Michael
Michael's picture

Why are humans incapable of admitting defeat? There is no way to fix what is wrong with the economy.

You must rebuild it from the ground up.

I just wish we did Ron Paul's plan 2 years ago. It wouldn't have been half as bad.

Well, at least we had 2 extra years to stock up on plenty of guns and ammo.

That scene from War Games

Wed, 03/02/2011 - 16:32 | 1012614 tickhound
tickhound's picture

In the case of our international corporations and supporting governments, its not so much about ever admitting defeat... The failures are planned, and "recovery" is implemented.

Thu, 03/03/2011 - 03:14 | 1014306 Sokhmate
Sokhmate's picture

a.k.a. "The mission has been a successful failure", or, "the right mistakes have been made"

Wed, 03/02/2011 - 16:26 | 1012536 RemiG2010
RemiG2010's picture

Plan B is in a making in Korean Peninsula! You are focusing on wrong event. In my humble opinion, the ‘architects’ of the ‘event’ are playing with fire! If things go wrong, no more trading at least for six to twelve months! But that would be the last thing on your minds!

Wed, 03/02/2011 - 15:21 | 1012285 Atomizer
Atomizer's picture

It’s an ancient Chinese secret grasshopper.


Thu, 03/03/2011 - 01:10 | 1014131 floydian slip
floydian slip's picture


Wed, 03/02/2011 - 15:22 | 1012287 SDRII
SDRII's picture

Q the naval update

Wed, 03/02/2011 - 17:00 | 1012730 TeamAmerica
TeamAmerica's picture

USS Kearsarge passed thru the Suez and is now steaming toward Libya.   USS Enterprise remains in the Red Sea.

Wed, 03/02/2011 - 23:50 | 1013947 snowball777
Wed, 03/02/2011 - 15:27 | 1012302 jus_lite_reading
jus_lite_reading's picture

Plan B in Fed speak:

;Global Nuclear War.




Wed, 03/02/2011 - 15:28 | 1012308 HoofHearted
HoofHearted's picture

Plan B? We don't need no stinkin' plan B. I am the BERNANK!!!

Wed, 03/02/2011 - 15:27 | 1012312 string
string's picture

To live and die in Libya.

Wed, 03/02/2011 - 15:29 | 1012320 Max Hunter
Max Hunter's picture

see plan "A"

Wed, 03/02/2011 - 16:03 | 1012484 Sudden Debt
Sudden Debt's picture

Nothing is as powerful as an idea whose time has come (Victor Hugo).


One of my favorite quotes :)

Wed, 03/02/2011 - 23:56 | 1013108 Guy Fawkes Mulder
Wed, 03/02/2011 - 22:45 | 1013771 MrSteve
MrSteve's picture

More accurately speaking:

more powerful than the tread of marching armies is an idea whose time has come

Wed, 03/02/2011 - 20:11 | 1013424's picture

what's plan B?


Plan B One-Step™: Home

About a progestin-only emergency contraceptive available in the U.S. ("If Plan A fails, go to Plan B...")
Wed, 03/02/2011 - 15:23 | 1012290 Eagle1
Eagle1's picture

As a former Merrill Lynch-er from years ago, Mr. Bassman better watch his six with stuff like this. Merrill has a long history of getting rid of talented people who dare to not be "bullshit, oops I meant bullish on Amerika."

Wed, 03/02/2011 - 15:39 | 1012367 dizzyfingers
dizzyfingers's picture

Maybe he's too disgusted to care?

Wed, 03/02/2011 - 15:58 | 1012461 alien-IQ
alien-IQ's picture

I think it's time some good people mustered up a healthy dose of disgust because this is getting alarmingly ugly.

Wed, 03/02/2011 - 16:43 | 1012662 Art Vandelay
Art Vandelay's picture

Exhibit A: David Rosenberg

Wed, 03/02/2011 - 17:08 | 1012746 flacon
flacon's picture

Greetings from another former ML employee. I used to work for Bob Doll at MLIM. I left after the buyout by BlackRock. I got to work at BlackRock for a few weeks - and hated their workplace in NYC. All the developers sardined on a looooooong bench with no dividing walls. Like a slave galley - all the young 20-somethings working their asses off and weekends. 

Wed, 03/02/2011 - 15:33 | 1012293 AccreditedEYE
AccreditedEYE's picture

Attention all you non-inflationists (and you know who you are), what more evidence do you need that the Govt's Plan "A" (inflation) is well underway?

If they inflate, yields explode and the U.S. treasury debt roll dies. It isn't as simple as inflating away the liabilities. At some point, they have to put the brakes on risk which will release pressure and allow yields to move down. (for how long that break lasts is another matter)

** agree 100% commodities are being used as store of value play**

Wed, 03/02/2011 - 15:24 | 1012294 Cognitive Dissonance
Cognitive Dissonance's picture

A long slow drawn out death is never pretty to witness.....particularly when it's your own.

Wed, 03/02/2011 - 15:26 | 1012305 jus_lite_reading
jus_lite_reading's picture

AMEN! Let's get the party started NOW!

Wed, 03/02/2011 - 15:33 | 1012338 DoChenRollingBearing
DoChenRollingBearing's picture

@ Cog Dis,

I completely agree.  Each day (that I remember...) I am trying to follow your advice to pay attention and wake up.  It's hard, as you have said.  I'm making very little progress.  I am preparing, but...

I commented on your opus yesterday, but I never congratulated you for such a great piece.  I sent the link to over 30 people, so consider my congratulations as DONE!

Wed, 03/02/2011 - 16:48 | 1012679 Cognitive Dissonance
Cognitive Dissonance's picture

I appreciate the high praise and the link sent to others. The essay appears to have gone somewhat viral as it has been picked up by several other blogs and even a few article consolidators. It seems I touched upon a subject many people were thinking about, but very few were talking about.

Another successful cognitive dissonance pinged. :>)

Wed, 03/02/2011 - 15:27 | 1012304 Azannoth
Azannoth's picture

No problem the government will indoctrinate the sheeple to the contrary through artificial 'Facebook Friends'

(this site has recently been hacked and shows up as malware but it's not)

Wed, 03/02/2011 - 15:27 | 1012309 jus_lite_reading
jus_lite_reading's picture

Which you can now get on your gov't approved Apple iPad 2.

Wed, 03/02/2011 - 15:55 | 1012443 LawsofPhysics
LawsofPhysics's picture

don't forget the blog trolls like harry!

Wed, 03/02/2011 - 16:14 | 1012528 downrodeo
downrodeo's picture

his conspicuous absence over the past few days is really starting to hurt his perma-bull reputation


harry, you out there? We're starting to get depressed...

Wed, 03/02/2011 - 15:44 | 1012319 Tense INDIAN
Tense INDIAN's picture

dont see much of an upmove here in the S & P:::

Wed, 03/02/2011 - 15:30 | 1012321 unionbroker
unionbroker's picture

an acre of land or an i pad hmmm whatever will i choose

Wed, 03/02/2011 - 15:39 | 1012363 nedwardkelly
nedwardkelly's picture

An acre of land for the price of an ipad? Where are you buying land, the desert?

Land that's actually useable for much of anything runs at least $1k an acre around here.

Wed, 03/02/2011 - 15:45 | 1012396 unionbroker
unionbroker's picture

ok one and a half ipads

Wed, 03/02/2011 - 16:22 | 1012567 dow2000
dow2000's picture

And where are you? You should move to Long Island where you can get a 1/4 acre for about 200k plus 9k per year in property taxes.  The land where cops make about 150k per year and teachers make about 120k.

Wed, 03/02/2011 - 16:47 | 1012676 unionbroker
unionbroker's picture

 cheap 1! come to Vancouver and buy 1/4 acre for 1.5 CDN

Wed, 03/02/2011 - 21:49 | 1013614 Treeplanter
Treeplanter's picture

Most of BC is government land.  It's insane.

Thu, 03/03/2011 - 00:00 | 1013964 Sunshine n Lollipops
Sunshine n Lollipops's picture

Awesome! So it belongs to the Canadian people, right? Oh wait . . .

Wed, 03/02/2011 - 17:00 | 1012735 Bob
Bob's picture

Sounds like an expensive place all the way around.  Are the cops and teachers doing that? 

Wed, 03/02/2011 - 20:22 | 1013455's picture

The system which socializes educational, security and other services in order to allow the politicians and bankers to syphon wealth out of the pockets of productive individuals (all for our own benefit and the good of the children) is responsible for that.

In other words, things cost more when people believe that services they receive will be paid for by someone else. But if you read the fine print you'll discover that the someone else is you.

Wed, 03/02/2011 - 17:48 | 1012913 ColonelCooper
ColonelCooper's picture

I don't know why anyone would live there, but I'm glad they're there and not here.

Wed, 03/02/2011 - 15:32 | 1012329 Tense INDIAN
Tense INDIAN's picture

dont see much of an upmove here in the S&P:::

Targets around the 1250 area......

Wed, 03/02/2011 - 15:33 | 1012337 cougar_w
cougar_w's picture

the 20bps rally in the T10yr ... is microscopic relative to the scope of events.

And there you have it. His personal opinion doesn't even matter; the rest of the world has voted with it's risk.

Wed, 03/02/2011 - 16:09 | 1012513 Commander Cody
Commander Cody's picture

And the salute to technology that was the Death Star is insignificant relative to the power of the Force!

Wed, 03/02/2011 - 22:01 | 1013654 I only kill chi...
I only kill chickens and wheat's picture

We will need the force if we are to survive.

Wed, 03/02/2011 - 15:33 | 1012341 LostWages
LostWages's picture

Thought that maybe this was a McBags headline....

History shows that the best way to deflect anger away from govt is to start a war and redirect that anger towards a common enemy.  This one could be tricky, but I'm sure the govt thinktanks will come up with something juicy in an attempt to rally the sheeple to send their sons off to die for something worthy.

Wed, 03/02/2011 - 15:51 | 1012423 RobD
RobD's picture

Don't forget your daughter could be sent off also. Equal opportunity death and such.

Wed, 03/02/2011 - 16:41 | 1012656 kridkrid
kridkrid's picture

the false flag to support it will be epic... has to be bigger than the last and that one was fairly epic.

Wed, 03/02/2011 - 17:35 | 1012865 RobD
RobD's picture

Don't think a dirty nuke will do the trick, not enough damage and not very spectacular. Same with a chem attack so what is left? I'm guessing a nuke in a freighter in one of the major ports. That would be pretty epic...

Wed, 03/02/2011 - 18:55 | 1013160 MarkD
MarkD's picture

Or a train wreck. TSA will get to more wack off machines and pat down more kids.

Wed, 03/02/2011 - 23:53 | 1013955 Ima anal sphincter
Ima anal sphincter's picture

My sons will most likely die along side their father trying to "take care of business" right here in the good-ol USA. Most likely deployment in the northeast area.

Wed, 03/02/2011 - 15:36 | 1012346 Jasper M
Jasper M's picture

Wile I don't necessarily doubt the "plan", I do still doubt capacity to execute. market re-/devaluations can wipe out as much money supply as the Fed can print, and just as fast. And Mark-to-Unicorn won't save them, as before an asset can be offered up as paymet for anything (and thus have any hope of diving up the prices), it must be presented to the market, if only briefly – at which point the market will devalue it to its real value. Already happening in FDIC closures. 

Wed, 03/02/2011 - 15:37 | 1012350 grl
grl's picture

Can someone please direct me to the link to the rest of Bassman's statement or just a link to the source? I am unable to find it anywhere despite my best search efforts. 

Wed, 03/02/2011 - 16:30 | 1012600 CIABS
CIABS's picture

yes, that would be good.

Wed, 03/02/2011 - 15:39 | 1012354 Robslob
Robslob's picture

Win win Thanks Ben!

Thanks for my cheap silver and Thanks (sort of) for my refinance opportunity at low rates...even though I realize my house will drop in value it will be paid for and , in theory, my property taxes should decline along with that value...time will tell.

Good luck getting a cheap 15 yr mortgage when they remove the interest rate deduction from your taxes next year...

Wed, 03/02/2011 - 15:39 | 1012368 JW n FL
JW n FL's picture

Got Physical?


Then You've been Fucked!!!

Wed, 03/02/2011 - 15:41 | 1012369 Muir
Muir's picture

"Attention all you non-inflationists (and you know who you are), what more evidence do you need that the Govt's Plan "A" (inflation) is well underway?"



This is beyond silly.

1. Inflation as a plan has been well underway for quite a few decades.

2. Pray tell, if this is the "BIG" one, what, may I ask, do you think would happen to all prices of all asset classes? (equities, commodities, gold, silver, oil... the day after everyone realizes that the 1929 depression was the "little" depression.)







Wed, 03/02/2011 - 15:51 | 1012425 LawsofPhysics
LawsofPhysics's picture

Sorry, can't get past the your moniker image.  fucking near perfect if you ask me.

Wed, 03/02/2011 - 15:57 | 1012451 Muir
Muir's picture


Wed, 03/02/2011 - 17:57 | 1012938 mynhair
mynhair's picture

Release the Hounds!

Wed, 03/02/2011 - 18:21 | 1013037 Ned Zeppelin
Ned Zeppelin's picture

quantum fluctuations made flesh

Wed, 03/02/2011 - 15:59 | 1012452 cougar_w
cougar_w's picture

I see that avatar as a market indicator. Jiggling up and down all day long, not going anywhere.

Where it breaks as a metaphor however is the volume; those need to be A-cups at best for this anemic trade volume.

People think that because I'm a cougar I'm a girl. Well I'm not a girl I'm a cat. Get it straight people.

Wed, 03/02/2011 - 16:03 | 1012487 JW n FL
JW n FL's picture

sorry cougar... my bad, I tell people I am wrong all the time... here's proof positive.


But I am still long tangibles... Silver!!!!! Food!!!!! Solar / Wind / Hydro Power (physical)!!!!


Get on board people before the train leaves without you!

Wed, 03/02/2011 - 16:19 | 1012549 cougar_w
cougar_w's picture

heh heh. It's fine. My name really is Cat, I go by Cougar sometimes, and unless I go so far as to point out that I'm Mr. Cat people think it's short for Catherine. They finally meet me and their face is all oh hell I hope I didn't say anything stupid before. All the more so because I'm over 6 feet tall with a mane like a lion.

It's all good. Cat's really do have more fun.

Wed, 03/02/2011 - 17:57 | 1012943 mynhair
mynhair's picture

Yep, I can attest to that!

Wed, 03/02/2011 - 20:25 | 1013461 doggings
doggings's picture

I have to disagree, i might look like a rottie but daddy was a Dogo Argentino, bred for hunting wild boar, and significantly, puma.

me n daddy dawg definitely had more fun bagging those dumb blonde pussies than they did.

Wed, 03/02/2011 - 16:12 | 1012524 ThreeTrees
ThreeTrees's picture

Just to be doubly sure, do you wear leopard print?  The wearing of leopard print is the only surefire way to tell you're a cougar.

Wed, 03/02/2011 - 16:22 | 1012560 cougar_w
cougar_w's picture

I do have a very nice leopard-print tie I wear to meetings. Bought it at the zoo gift shop. Can't be too serious about things.

Wed, 03/02/2011 - 16:20 | 1012552 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

I knew you weren't a girl ever since this moment:

Wed, 03/02/2011 - 16:28 | 1012587 cougar_w
cougar_w's picture

Damn, I better be careful what I post. You bastards have long memories.

Um ... if I've ever posted anything about small mammals, beer and duct tape I was seriously drunk and you can't hold me to it.

Wed, 03/02/2011 - 17:12 | 1012776 Amish Hacker
Amish Hacker's picture

Hey, everyone makes mistakes. That's why every pencil comes with an eraser. All is forgiven, Cougar. The important thing is you're safe, and the nuns aren't going to sue..

Wed, 03/02/2011 - 17:31 | 1012843 Cognitive Dissonance
Cognitive Dissonance's picture

Maybe.....but they have Cougar on a short leash.

Wed, 03/02/2011 - 19:13 | 1013218 cougar_w
cougar_w's picture

I would survive being sued. Hell I'm broke as it is.

It's the noose has me worried. They being nuns and all aren't they supposed to be forgiving and everything?

I'm blaiming The Bernank for my troubles: Nine lives don't stretch as far as they used to.

Wed, 03/02/2011 - 23:25 | 1013880 JW n FL
JW n FL's picture

God Willing the Cream will rise to the top and the Bankers Death Grip on America's Throat will be RELEASED!!!

Wed, 03/02/2011 - 17:27 | 1012828 naughtius maximus
naughtius maximus's picture

Boobie breakout, bitchez!

Wed, 03/02/2011 - 15:57 | 1012448 AccreditedEYE
AccreditedEYE's picture

Pray tell, if this is the "BIG" one, what, may I ask, do you think would happen to all prices of all asset classes? (equities, commodities, gold, silver, oil... the day after everyone realizes that the 1929 depression was the "little" depression.)

+100 Now THAT'S solid gold.  

Wed, 03/02/2011 - 16:03 | 1012481 SWRichmond
SWRichmond's picture

What will happen to USD when your depression hits and we can't pay interest on the debt?  Hmmm?

  1. We ARE in a deflation
  2. Gold and silver are money
  3. All things are deflating wrt gold and silver
  4. Fiat currency-thingies are deflating wrt gold and silver, which clearly indicates that they are NOT money
  5. Gold and silver are executing the store-of-value function, while fiat currency-thingies are not.
  6. The buying power of gold and silver continues to rise, just as would be expected of money in a deflation.

The only problem most people have is defining inflation/deflation with respect to what?  If you understand that fiat is NOT money, and gold and silver ARE money, then everything makes perfect sense.  Then, also, you know what to do.

Wed, 03/02/2011 - 16:16 | 1012540 Guy Fawkes Mulder
Guy Fawkes Mulder's picture


Prepare for short hyper-inflation and long hyper-deflation.

Wed, 03/02/2011 - 16:17 | 1012545 Implicit simplicit
Implicit simplicit's picture

What about if things got so bad that people were just bartering for food, gas, guns and amo?

Wed, 03/02/2011 - 16:30 | 1012596 Dr. Porkchop
Dr. Porkchop's picture

Dollars are derivatives of real money.

Wed, 03/02/2011 - 19:00 | 1013167 John Wilmot
John Wilmot's picture

That's a good way to think about it. Most cannot fathom the distinction between money and currency, however. Or, on a related note, between credit and capital.

Wed, 03/02/2011 - 16:07 | 1012498 Slim
Slim's picture

Agree - you have to be pretty bullish to be using commodities as a store of value at current pricing when true end user demand (i.e. not the demand of people buying futures) is down and about to become much more suppressed should the commodity up move continue.  I'm not saying it won't work this time but I'd point to 2008 and say that it absolutely didn't then for the same fundamental reasons - eventually supply/demand balances and fundamental pricing happens.


In any truly significant negative scenario that destabalizes the world, the USD remains the standard (i.e. this is nothing but small potatoe noise thusfar and people trying to make a case to talk their books).  Reason being...US will be last man standing.  The Bernanke and full faith/credit are not the ultimate backers of the Dollar.  The combined armed forces are.  If the world's reserve currency goes to nil, the "world" in which we exist and make these investment decisions unravels at near instant pace and by default we move toward last man standing and USD.  Unless you believe 100% in new world order happening right now this minute and own all physical (and have real ability to protect it) - I'd rethink that thesis and put some price boundaries on positions, something which many people seem to have discarded in favor of their favorite theme.


Ultimately I think a number of people understimate the power of deflation.  Time will tell.

Wed, 03/02/2011 - 16:11 | 1012514 SWRichmond
SWRichmond's picture

See my above.  The only problem most people have is defining inflation/deflation with respect to what?  If you understand that fiat is NOT money, and gold and silver ARE money, then everything makes perfect sense.  Your statement starts from the propostion that fiat is money; you appear to be defining inflation/deflation in terms of fiat.  Thus, your statement is destined to be proven wrong.

Wed, 03/02/2011 - 16:35 | 1012628 Muir
Muir's picture

"Money" is whatever the PTB decide it is.

Shells, paper, silver. Whatever.

(I assume you are old enough to have seen James Bonds' "Goldfinger")

Yes, it is a mistake to be "paper centrist" and view all throught the prism of (paper) "money."

But you make the same mistake by being "gold centrist."


It is, (as you, yourself, implied) whatever basket of goods you can exchange for whatever store of value you possess.

Gold has sometimes won, and sometimes lost.



It's not rocket science.




(As to what is "inflation" and "deflation," let's leave that to another discussion.)

Thu, 03/03/2011 - 09:17 | 1014526 SWRichmond
SWRichmond's picture

But you make the same mistake by being "gold centrist."

No, I don't.  Which is more irrational: accepting as valuable something that humans have accepted as valuable for thousands of years, or accepting as valuable something that humans only accept as valuable because men with guns demand it?

(As to what is "inflation" and "deflation," let's leave that to another discussion.)

Why?  I made my case above.  Gold is behaving exactly as would be expected of "money" during a persistent deflation.  Do you disagree?

"Money" is whatever the PTB decide it is.

See my post below.

Wed, 03/02/2011 - 16:40 | 1012649 Slim
Slim's picture

I understand your point but mine was that unless it is 100% game over right now, it is ultimately the power conveyed through armies which tell you what is money and what is not (value of gold is built on consensus too, it is a non-consumed rock at the end of the day).  Unless you have your own army and rise up to challenge that, you live and function by their rules.  I'm not saying don't hold a stash or use it in your portfolio, I'm saying that the medium for transaction ultimately is defined by power.  1934 actions against gold ownership to keep gold holders from undermining currency during the reset are an example.  I have a feeling they are prepared to go far beyond that and will ultimtely hold it together longer than many doomsdayers think.  Mainly the USD has not been truly supplanted by gold yet and any serious threat to global stability will instantly reveal it. 


Notice that this is all time hedged as primarily the author was claiming "this is the big one" where I'm saying he wouldn't know a big one if it bit him.  Whether it's 5 years or 5000 years change will come, but this isn't it.



Wed, 03/02/2011 - 17:40 | 1012876 Bob
Bob's picture

This full-blown banana republic thing is new to us.  And those people don't often own the reserve currency.

Thu, 03/03/2011 - 09:10 | 1014516 SWRichmond
SWRichmond's picture

it is ultimately the power conveyed through armies which tell you what is money and what is not

I couldn't disagree more.  The power conveyed through armies is in the process of being negated by economic factors, namely, the destruction of the currency, courtesy of the banksters who brought us central banking and the crackup boom.  While armies still are suitable for controlling individual nations, as we are seeing there are no armies large enough to control the entire planet when it decides all at once it doesn't want to be controlled.  Hell, the U.S. can't even subdue Afghanistan.  It's just too big, and even the banksters understand that destroying it to subdue it isn't a viable option.  There isn't enough real money to have a big enough army to do that to the whole planet, or even to a small area of it.  Not any more.  Used to be, information flow was slow and spotty enough that coordinated (and thus successful) unrest was impossible.  Even the U.S. military can't whack-a-mole the whole planet.  They're going to try anyway, because they must, but they're going to fail.  Wait and see.

When they fail, if we are prepared, economic freedom breaks out all over the place.  Because while the banksters understand that destroying a place to subdue it destroys their ability to plunder it, we understand that we really don't need the banksters and can separate them from their power without economic loss to ourselves.  It is they who are most at risk, because we really don't need them.   In fact, we'd all be better off without them, wouldn't we?

Wed, 03/02/2011 - 15:59 | 1012385 hambone
hambone's picture

The US T market needs to roll $5T in T's in the next 12 months...Fed is officially buying up $2T on an annual rate(SOMA/POMO) plus has been using $200B+ annual SS surplus plus whatever backdoor games are going on.  Stop this, fail to announce QE3 and we are slammed (not to mention debt interest shock + mortgage interest rate 2nd leg big leg down for housing market).  Yeah, BB knows US needs "someone" to buy $5T in T's in next 12months ($3T rollover and $2T new issuance).  That is a black hole of debt (=8% global GDP) and absent QE3 we are bout to see interest rates spike and deathly debt spiral go into hyperinflationary overdrive while even at higher rates US still can't find T buyers enough.  Particularly consider the Fed doesn't care to make a profit and in fact are happy to take a loss to pass along the difference to their, counterparties.  Imagine what happens when buyers who actually don't own a US dollar printing press have to's not a small correction, it's black and white different.

If BB announces QE3, dollar is dead and inflation, oil, PM's are off to the moon.  If he doesn't announce it, we are looking at sovereign collapse as the debt interest payments soon eat up all tax revenue.  Fucking insane but I don't see a sane path out of here???  Fucked if we do and fucked if we don't.  And soon.

Wed, 03/02/2011 - 16:01 | 1012469 citizen2084
citizen2084's picture

sure your right, once you sell your soul no turning back...

pain & sufferingdead ahead.



Wed, 03/02/2011 - 16:12 | 1012492 hambone
hambone's picture

Then again, absent QE3...could we not be in terrible illiquidity trap?  Not nearly enough dollars to pay the massive global debts...default and deflation?  Interest rates back down to all time lows?  PM's, ags, everything collapsing in value?  I pray for the deflationary outcome as it's a reset vs. the inflationary destruction controlled by those who create the money.

Are we riding the razors edge and will we alternately visit both sides???

Wed, 03/02/2011 - 17:17 | 1012793 schrock
schrock's picture

Good post. I ponder these same exact questions, I sure wish I knew the answer. The one sure thing in my mind is Bernanke has already chosen the path of inflation. I don't see how he can turn back now. I think QE3 is inevitable unless the rest of the world tells us enough. I think with inflation, deflation or biflation gold is a good bet. The stocks you own could always go to 0 but gold will always be worth something even if you are wrong in your predictions and it is worth less than what you bought it for. There are a lot of people who buy gold because they have lost complete faith in the US Government and financial system not because they are expecting inflation per se.

Wed, 03/02/2011 - 22:30 | 1013737 ConfusedIdiot
ConfusedIdiot's picture

Nice call HB. No QEIII is instant illiquidity trap. Monthly USD expenses in "cash" exceed revenues over $50billion. Debt destruction resulting from no QE or other UST purchase source would vaporize trillions in current dollars - instant deflation and the very reason why Fed cannot permit this as the value spike in the dollar might litterally destroy the trading world's balance sheets. Regards CI.

Wed, 03/02/2011 - 23:27 | 1013888 JW n FL
JW n FL's picture

Cute Pooch!!

Wed, 03/02/2011 - 16:12 | 1012521 Implicit simplicit
Implicit simplicit's picture

We're stuck between a diamond headed rock cutter, and a bucky ball shaped titanium slab.

Wed, 03/02/2011 - 22:40 | 1013758 Captain Kink
Captain Kink's picture

We are stuck between Keynesian and Austrian economics.  One's view on how things play out is not limited to the script either of these two would indicate...and which would be the slab?  I guess Austrian?

Wed, 03/02/2011 - 22:43 | 1013767 I only kill chi...
I only kill chickens and wheat's picture


Gold and Silver are essentially useless in a true crisis scenario for the short term. Hard Assets like food, fuel, medical supplies, hell TP was a highly valued trade commodity during the Bos-Yugo whatever conflict. Excess wealth to PM's all the rest to hard productive assets. Like get a grain grinder, stock up on shit people will want and you will use day to day anyway.

Wed, 03/02/2011 - 15:47 | 1012402 rookie
rookie's picture

Look how fast this article from earlier  about Tom Hoenig's speech . . . .


got edited down to this. . .


Wed, 03/02/2011 - 18:17 | 1012946 Bob
Bob's picture

Seems the revision mainly missed this:

The Kansas City Fed leader also urged breaking up the largest banks, which he said have a lower cost of funds because of an implied government safety net. He would restore the barrier between commercial and investment banking.

“I think this is a good idea as they are so large they cannot be allowed to fail,” Hoenig said.

Hoenig also said standards for bank capital need to be raised further, and the Basel Committee on Banking Supervision’s overhaul of standards may not go far enough in reducing leverage.

That's odd--why would they edit that part out?

I was just kidding, but looking more closely at the time stamps, it looks like the reverse is true: They edited it in. 

Perhaps journalists are making a move to assert some self-respect.

Wed, 03/02/2011 - 15:49 | 1012409 AldoHux_IV
AldoHux_IV's picture

Plan B: we nuke the central banking system. And in the revolutionary spirit chop their heads off.

Wed, 03/02/2011 - 15:49 | 1012413 LawsofPhysics
LawsofPhysics's picture

People talking about inflation or deflation are retarded.  All that is important is buying power, period.  The only sane way out as I see it is to tell the truth and declare the vast majority of the debt a fraud and all those holding assets purchased with the fraudulent debt take the haircut.  The "mark to unicorn" paper chase bullshit will end one way or another and real compensation will once again find its way to those that are actually worth a shit.

Wed, 03/02/2011 - 15:51 | 1012424 citizen2084
citizen2084's picture

plan B is the mobarik plan.

Wed, 03/02/2011 - 15:55 | 1012426 redpill
redpill's picture

Enough of all this, the only important thing going on is a ton of financial journalists suddenly attempting to biometrically analyze the health of Steve Jobs based upon the pace of his footsteeps and observed estimated bodyfat content as he walks on stage to introduce the iPad 2.  According to every major financial "news" site, that is all that matters today.  Dying Libyans and skyrocketing commodities are meaningless in the face of whether a wrinkle in Mr. Job's "signature black mock turtle" is indicative of declining health or recovery.  And remember, BTAMU (buy the Apple melt up).

Wed, 03/02/2011 - 15:54 | 1012436 tahoebumsmith
tahoebumsmith's picture

Actually the BIG ONE will be war that the US dollar collapse is going to cause when those who caused the crisis try to cover their tracks. And unlike the past, the war will not boost our economy it will put the nail in our coffin as oil prices hit record highs and we get our butts handed to us.

Wed, 03/02/2011 - 21:53 | 1013630 Treeplanter
Treeplanter's picture

War boosts debt, not the economy.

Thu, 03/03/2011 - 05:31 | 1014359 huggy_in_london
huggy_in_london's picture

well... that depends on who is fighting it and who is producing the tanks, guns, bombs, etc....  WWII turned out pretty good for america (w.r.t the economics obviously, not the ridiculous loss of life)

Wed, 03/02/2011 - 16:00 | 1012465 Judge Judy Scheinlok
Judge Judy Scheinlok's picture

Each and every tidbit is presented as if the slime balls would never talk their book.


Wed, 03/02/2011 - 16:00 | 1012466 Godot
Godot's picture

Jim Rickards says Plan B is going back to the Gold Standard and pricing gold at $5000

Wed, 03/02/2011 - 16:07 | 1012507 SWRichmond
SWRichmond's picture

Pricing gold at $5k would be deflationary, as we're about to find out.

Wed, 03/02/2011 - 20:35 | 1013481 doggings
doggings's picture

between $4 and $11k first time I saw him say it

Wed, 03/02/2011 - 16:07 | 1012505 I am a Man I am...
I am a Man I am Forty's picture

fed stops printing, interest rates float up 200 bps, a few financial institutions go by the wayside, market goes back between 10 and 11000,  a couple hundred people finally go to jail, problem solved

Wed, 03/02/2011 - 16:09 | 1012515 proLiberty
proLiberty's picture

Or maybe this is the "dog that didn't bark", and the Big One is yet in the future.  That said, if we see big riots in Saudi, that is a pig of a different color.



Thu, 03/03/2011 - 00:15 | 1014000 JW n FL
JW n FL's picture

Hay!!! Hayyyy!!!! Now! lets settle down... the American Goobermint is all for Democracy or Freedom as long as it doesnt effect the sheepeople's ability to stay calm at the pump... the Goobermint cant have Good Ole' Regular Americans getting all nervous becuase gas at the pump is $10 bucks a gallon, they might rise up and demand some change we all could really believe in. As long as it is just us fringe weirdo's bitching about truth, transparency and honesty the Goobermint doesnt care... it is when the Sheepeople get involved and demand honesty in banking and stuff that it can get all weird and effect the lobby dollars those whores love to spend.


Stay away from the Lobby Dollars and no one gets hurt!

Wed, 03/02/2011 - 16:17 | 1012529 rapier
rapier's picture

I believe it is doubtfull that enough can be printed to inflate, increase prices, of  everything or a majority of things. Certainly real things at any rate. A hundred billion a month isn't going to cut it.  Prices of assets made in derivatives market can be bid up and maybe held up but the money isn't there in the cash markets to support them.

If the original plan in the US was, say for the sake or arguement that such things are planned by the faceless them, to let half the households drop right out of the economy then the plan is failing because over half are already sinking.

Wed, 03/02/2011 - 16:17 | 1012539 LongShortSally
LongShortSally's picture

Is it me or did I somehow miss a cogent, detailed, fact-based rationale for why this is The "BIG ONE?"

Wed, 03/02/2011 - 16:28 | 1012591 Bam_Man
Bam_Man's picture

"Cogent, fact-based rationale" is so old economy.

Wed, 03/02/2011 - 16:34 | 1012622 chistletoe
chistletoe's picture

I understand that the USA DOD has some excellent hardware,

in quantity, and widely distributed.

One issue to consider is that all of the people involved in its acquisition, maintenance, and application, are dependent upon US $ for their well-being.

And what, then, do you think might happen when the US $ will no longer provide them with sufficient sustenance to eat, sleep, and support the local liquid dispensary?

Wed, 03/02/2011 - 16:37 | 1012635 Dr. Porkchop
Dr. Porkchop's picture

All empires have expiry dates, and this one is getting long in the tooth. The barbarians aren't at the gates, but they're rebelling in the outposts.

Wed, 03/02/2011 - 16:43 | 1012658 falak pema
falak pema's picture

The only plan B is to move away from the current paradigm where all wealth is measured in terms  of material economic growth. This is what creates the capitalistic spiral that believes in constant geometric growth. This is untenable. The world must recognise it. Geometric growth only leads to poverty after initial temporary wealth.

We have to find a new wealth creation paradigm. Where material growth is not the only criteria. Society has other goals. It should recenter the debate on those as well : Man and the planet. 

Wed, 03/02/2011 - 16:44 | 1012671 Hannibal
Hannibal's picture

"the BIg One",....ww3?

Wed, 03/02/2011 - 17:03 | 1012744 Fix It Again Timmy
Fix It Again Timmy's picture

We're headed for a cosmic joke started by a fruit vendor in Tunisia - who says that the universe doesn't have a sense of humor?

Wed, 03/02/2011 - 17:12 | 1012773 Dr. Porkchop
Dr. Porkchop's picture

We're headed for a cosmic joke started by a fruit vendor in Tunisia - who says that the universe doesn't have a sense of humor?


The answer is 42.

Wed, 03/02/2011 - 18:34 | 1013084 andybev01
andybev01's picture

So long, and thanks for all the fish.

Wed, 03/02/2011 - 20:30 | 1013468 Guy Fawkes Mulder
Wed, 03/02/2011 - 17:25 | 1012806 ThirdCoastSurfer
ThirdCoastSurfer's picture

$14 trillion is a lot of demand to keep afloat, especially when you look out over 5 years and the number becomes $70 trillion. Since practically every American already owns at least 1 of everything else, how many iterations of Apple products will it take to make up the difference?  

Inflation is too much money chasing too few goods, but the key word is "chasing" and Americans, on whole, are too obese (for lack of a better term) to chase anything.

Sure they'll have lots of fiat dollars and will pay a lot more for the things they need but the traditional meaning of chasing refers to something uniquely aspirational (worth abandoning your family to work a 70 hour week to afford), something the Jone's don't already own that you can lord over them as proof of your superiority and  it appears that this game is largely plaid out in America unless the mood ring, the pet rock or the Snuggie make a comeback. 

Wed, 03/02/2011 - 17:32 | 1012850 tradewithdave
tradewithdave's picture

"By Jove!  I think she's got it"  Prof. Higgins in George Bernard Shaw's Pygamalion

The "it" the professor was referring to is indeed Plan C.  No, it's not extend and pretend using inflation.  No, it's not the nuclear option.  Plan "C" is the reset button also known as the observer effect, or the Rosenthal effect, or the placebo effect, or the quantum effect, or the uncertainty principle, or chaos theory, or reflexivity, or Jim Rickards, or even existentialism.  They're all the same.  You've bought in the minute you're convince that the focus is indeed form over substance and you're almost there.  You're almost ready to believe in the reset switch.  

Eliza Dolittle may be speaking in terms of $5,000 gold, Special Drawing Rights and sovereignity-diluting currency baskets, but is she NOT the same Eliza Dolittle.  Indeed she is although refined in her appearance and language.  The bigger question than who is Eliza Dolittle is who exactly is Jove and how did she come to have "it" by him and what exactly does she have that can't be taken away from her.  

The next phase to watch for is the presentation of choice.  As Lynn Tilton is quoted in her new reality TV series... as "The woman who will lead you to salvation."  Then again, if you don't like Lynn as your patriarch, there's always gold.  How could gold ever let you down?  Just look at it.  It's shiny, by Jove.    


You can sell assets like Niall, cause unions did rile

You can buy gold, cause the dollar will fold

You can buy guns, or silver by tons


Whatever you do, they're coming for you

It may be your neighbor, it may be your friend

It may be the sheriff, that has you turned in    


For fear is their only weapon of choice

Fear for your life, fear in your voice

Fear's a solution, dichotomy's choice


It's fear that they deal in that gets you to buy

It's fear in your heart, the one reason why

Your reflexes work, you give them a try


You lose track of the content and focus on shapes

You're convinced that there's substance behind their cape

What you thought was true love was actually rape


Once you believe, the rest is mundane

Their battle is won, they tell you you're sane

Security bought, security paid


If only security was willing to stay


Dave Harrison


Wed, 03/02/2011 - 18:01 | 1012951 mynhair
mynhair's picture

What part of PCE is due to stockpiling, ie. hoarding?

One wonders.....

Wed, 03/02/2011 - 20:09 | 1013420 Wakanda
Wakanda's picture

This is the BiG oNe.

Ben can't paper over peak oil.

Bassman's got the backbeat rock solid.


Wed, 03/02/2011 - 22:04 | 1013662 abguy
abguy's picture

EE needs to upset the apple cart with a big, 'geo-political-event' to keep the 'end of the world as we know it' from happening to the dollar.
I wonder....
will Israel do the deed for the US? Or will we have to make-up our own 'event' to scare all the traders back to the almighty greenback? Gotta keep the sheep from straying too far.
Will our jumping into the Libya thing be big enough to tip the cart? I doubt it. Who gives a shit about Libya? Not even other Arabs.
But, everybody over there cares about Iran.
So far Israel kept her stinkin filthy paws off that Iranian ship in the Suez. That was their opportunity - and they passed.
I dunno. I dunno. I dunno.

Thu, 03/03/2011 - 00:10 | 1013990 sellstop
sellstop's picture

You know if they don't give a shit for the economy and the markets with their monetary policy, what make you think they will cook something up just to save us for awhile.

Shit just happens. And when the markets are strung tight they do a kneejerk reaction and positions get unwound. "Cause the markets don't like uncertainty", as some moron said on Bubblevision today.

There are no "grand" conspiracies. It just seems that way sometimes.


Wed, 03/02/2011 - 22:32 | 1013741 savagegoose
savagegoose's picture

plan B is to print more

Wed, 03/02/2011 - 22:51 | 1013789 Captain Kink
Captain Kink's picture

Sanford & Son!  


back to the junk yard

Thu, 03/03/2011 - 00:31 | 1014046 WhatCouldGoWrong
WhatCouldGoWrong's picture

How do you explain to your friends that a 20bp reaction is a big deal in their lives? I'm tired of being fitted for a tin-foil hat.

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