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Observations On The Latest Debt "Inflection Point", And Why Bernanke Has At Most 5 Months In Which To Announce QE3

Tyler Durden's picture


Yesterday on Tom Keene's always informative show, two of the world's most important economists, Goldman's Jan Hatzius and BofA's Ethan Harris presented their respective defenses for why GDP in 2011 would rise by nearly 4% as per their recent predictions. The straw man for the upside case: recently adopted fiscal stimuli which, however as David Rosenberg notes, are not really stimuli as much as lack of governmental disstimuli. Yet what is interesting is that both ceded that both employment and housing, the two key traditional drivers of economic growth and prosperity, would likely continue deteriorating, with employment ending the year over 9%. In other words, all growth in 2011 will be predicated upon very much more of the same: transfer payments and government stimulus (not to mention inventory accumulation) especially in the form of incremental debt to offset consumer deleveraging. No surprise there. After all the only reason why the economists of the world have expressed an unprecedented amount of bullishness in recent months is that the US is currently experiencing a rare confluence of both fiscal and monetary stimulus: an even that last occurred in March of 2009. The issue is that as we have noted previously, the benefit from the fiscal stimulus has already been negated by the jump in oil and other commodity prices, whereby the token weekly paycheck increase has been more than offset by gas price increases, while the monetary stimulus is already priced in, and absent rumors of another episode of QE in advance of the June end of QE2, the temporary stock market strength will quickly turn into weakness. Which leaves us with the hangover effect of federal deficit... and its funding. The chart below presents some interesting observations in this regard, and also makes us wonder just what will happen to risk assets if Bernanke does not leak the announcement of QE3 by May at the very latest.

Looking at deficit and debt issuance on an LTM basis, we may have reached another inflection point. While the trailing 12 month deficit jumped, and has stayed, over $1 trillion since March 2009, it had at least stayed relatively flat on an LTM basis. As of the November data, however, the LTM trendline has hit a support level and has bounced up. It is very likely that with the need to fund the payroll tax cut this trend will continue deteriorating. In fact, we expect that by the end of 2011 the LTM deficit to be right back at $1.5 trillion. And the other notable inflection: over the past quarter, the debt issuance over the deficit, which had averaged roughly $300 billion on TTM basis, jumped to approximately half a trillion. This is precisely the key part of the double whammy of the "negative convexity" of debt issuance used to fund deficit payments. As for the second one: once rates start picking up, and incremental debt issued by the US starts pricing with a higher cash coupon, increasingly more debt will have to be issued to fund merely the interest expense.

Nearly a year ago, we conducted a sensitivity analysis looking at what the annual interest expense would be as a function of treasury receipts. We concluded that should the average interest rate on US debt rise to 5%, the annual interest payment on the debt would jump from roughly $180 million to almost half a trillion, or roughly 25% of all revenues, at which point the Weimar scenario starts getting quite realistic. Needless to say we will update this analysis shortly, especially now that rates are not only rising, but projected to go up to 4.5% or higher, courtesy of the abovementioned "economic improvement."

But back to the chart: now that we have already managed to extract the benefits from the front-loaded benefits package, all that remains is the cost. And the cost in question is debt issuance risk. Which simply means that like last year, when well over $2 trillion in debt demand was unaccounted for, and subsequently satisfied by QE Lite and QE2, in 2011, when we predict net debt supply will hit another all time record, Ben Bernanke will have no choice but to enter the Treasury purchasing market once again. In other words, we expect that Jon Hilsenrath will circulate an article highlighting the ever greater likelihood of another round of quantitative easing some time in April... just a few weeks after the most recent debt ceiling vote passes, this time allowing the US Treasury to issue up to $15.5 trillion in debt, or $1.2 trillion more than the current token limit- just enough to kick the can one more year down the road.

On the other hand, if we are wrong, and if Ron Paul somehow succeeds in preventing this form occurring, then all those market "strategists" who expound the benefits of the economic "recovery" when all they expect are further rounds of QE, will promptly change their tune.

In other words, the entire fate of the market's 2011 closing print will depend on that critical window between April and May when QE3 may or may not be announced.

Below we present the Hatzius-Harris interview with Tom Keene.



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Sat, 01/01/2011 - 15:30 | 841684 winks
winks's picture

Notice how Bernanke says he may do "more or less" of QE2 "as needed". In other words, it is open ended. There will be no QE3 - he knows it won't fly. Much easier to use what is already in place and dial it up or down based on circumstances.

Sat, 01/01/2011 - 18:01 | 841783 Quixotic_Not
Quixotic_Not's picture

You really think that "There will be no QE3"?

IMHO that would require an aknowledgement from Bernank that *Keynesian Economics* has failed, as that *IS* his last play from that game book...

The only way to stop Bernank is to take away his ability to *pump* the failed system with QE drugs, when it approaches flatline...that is to *End the Fed* of remove the Bernank from his pseudo .GOV position.

Bankster Gangsters are doing their damnest to tread water using a *failed* model and MUST loot the Global Economy *until* Ponzi *debt* creation collapses and *stacked* gaming theory ceases to trick - Then, and only THEN, will the *sovereign* emperors be *finally* denounced as the craven and depraved inglorious basturds they *always* were.

Squeezing the last bit of ill-gotten profit has become a desperate addiction for the  perp skool bandits, and led by their King Ponzi Monkey, Ben the Bernank, they have *successfully* looted the U$ Treasury in broad daylight....

At some point *GAME OVER*, and The 'MeriKan Sheeple will become fully spooked upon realization that Pastures of Ignorant Bliss shall never 'gain be grazed upon, and they'll realize they missed da boat to self-actualization through duplicity, graft and brazent *taking*, having been upstaged by the Bankster Gangsters and their politikal lap-pets, the (D) & (R) Kleptocrats.

Until liquidity via amassing generational debt slavery stops working, the games will continue!

Sat, 01/01/2011 - 18:16 | 841839 jbc77
jbc77's picture

I think the previous post may be on to something. Thing about how the main stream media really picked up on QE2. Glenn Beck covered it, 60 minutes interview. The average person is starting to understand whats going on here. At some point something has to give. No one with half a brain expects this to end well. I think at some point people will push back, it may take $5 / $6 gas, but eventually the jig is up. The fed is in a field of landmines and the world only needs to step on one and they all go off.

Sat, 01/01/2011 - 20:45 | 842020 Perseid.Rocks
Perseid.Rocks's picture

*Keynesian Economics*

Malthusian Economics will be the new phrase for 2011.. the economics of violating ones neighbor while rushing for the door.

Sat, 01/01/2011 - 23:50 | 842192 Dave
Dave's picture

You ever been on the Gulf coast right before the hurrucane came in?

Sat, 01/01/2011 - 20:55 | 842033 Youri Carma
Youri Carma's picture

Indeedy "Open Ended" and

FED’s QEII is $1 trillion or more and NOT "only" the $600 billion

MarketWatch: "The U.S. central bank’s already buying intermediate-term Treasury bonds as it recycles cash from its maturing mortgage holdings. Those purchases could total nearly $490 billion in the next 12 months, according to the report prepared by a Nomura team led by George Goncalves, head of U.S. rates strategy."

So $600 + $490= 1.09 Trill

The Financial Times: "Aside from the $600bn of Treasuries slated for purchase under “QE2” until the end of next June, the Fed will also buy an estimated $300bn of additional Treasuries – from reinvesting the proceeds of expiring mortgages. That is expected to push total purchases to about $900bn."

So $600 + $300= 0.9 Trill

Fed may circle back to mortgage-backed securities, 1 November 2010, (MarketWatch)

NY Fed outlines plan for ‘QE2’ buying, 9 November 2010, by Michael Mackenzie in New York (The Financial times)

Sat, 01/01/2011 - 22:10 | 842103 MarketTruth
MarketTruth's picture

Maybe the Fed will lateral QE in mid-2011 into for a new program called ??? that outright purchases muni bonds? We all know muni bonds is a big fail and getting larger and far worse by the passing week.

Sat, 01/01/2011 - 15:36 | 841686 ??
??'s picture

not to mention that the administration will almost surely facilitate the repatriation of offshore profits (estimated to total almost $2t (coincidentally the same as their current cash hoard) at a tax rate in the  5% range.  This will almost certainly flow into stock buybacks and special dividends driving equities even higher and screwing the taxpayer that much more.

Sat, 01/01/2011 - 15:39 | 841693 KickIce
KickIce's picture

I seriously doubt there's any more announcements for QE, they will keep Ben off the idiot box and but he will continue to print money.  QE2 to infinity.


Sat, 01/01/2011 - 15:40 | 841695 buzzsaw99
buzzsaw99's picture

Ben Bernanke will have no choice but to enter the Treasury purchasing market once again...

I'm absolutely banking on it. This is a solid actionable fact. zirp 4evah, qe infinity.

Sat, 01/01/2011 - 15:45 | 841697 living on the edge
living on the edge's picture

I think you're right, Bernanke will never stop. By the way I like your pun "I'm absolutely banking on it".

Sat, 01/01/2011 - 16:06 | 841715 buzzsaw99
Sat, 01/01/2011 - 23:05 | 842157 Dr o love
Dr o love's picture

All Bernanke has to do is orchestrate a 3% drop in the S&P and warn of impending Armageddon to get our gutless Congress to look the other way while he initiates QE 3, QE 4, QE 5, etc...

Sat, 01/01/2011 - 16:55 | 841750 Eternal Student
Eternal Student's picture

I would agree. Though I think that the other observations about him not actually calling it QE3 are valid.

What exactly are his options here? To stop printing? I don't think he's got the guts for it. My impression is that he's boxed in, with no other way out (in his mind).


Sat, 01/01/2011 - 18:59 | 841897 living on the edge
living on the edge's picture

We will never know the real price tag of QE2. You can bet they will never stop because once they do it is game over. They can call it whatever they want but they won't be successful. 

Sat, 01/01/2011 - 15:51 | 841700 buzzsaw99
buzzsaw99's picture

I triple dog dare the bernank to let rates rise:

Sat, 01/01/2011 - 16:14 | 841726 KickIce
KickIce's picture

No doubt he's going to shoot his eye out.

Sun, 01/02/2011 - 01:13 | 842263 Cursive
Cursive's picture


I triple dog dare the bernank to let rates rise:

Bond vigilantes >>>>>>>>> The Ben Bernank

Sat, 01/01/2011 - 15:53 | 841704 Caviar Emptor
Caviar Emptor's picture

It will all boil down to a question of urgency and political expediency (as always). If jobs growth sputters and housing continues to double dip there'll be no hesitation about QE3 (though publicly they'll wring their hands about debt and it's the very last time we'll need to do it and we promise that we'll get austere some day). In a stressed economy, the Fed is more likely to respond to anxieties and unpredictables because the stakes keep getting higher and higher, the clock keeps ticking, and consequences of being 'wrong' keep increasing. 

My prediction: in 2011, price and capital controls will come to the foreground, slowly at first through policy shifts like position limits and disclosures and margin requirements, then through tax incentives.

Sat, 01/01/2011 - 16:23 | 841731 Id fight Gandhi
Id fight Gandhi's picture

No, they're bound to freak out about commodity prices especially oil when it hits 100.

The country jst cant run on that. QE will have to end.

Sat, 01/01/2011 - 17:14 | 841771 Caviar Emptor
Caviar Emptor's picture

They can"t end QE. GDP would go negative. But they can impose price controls. And will.

Sat, 01/01/2011 - 17:46 | 841802 Rogerwilco
Rogerwilco's picture

If they're dumb enough to try price controls, then they had better institute wage controls as well. Unless wages are forced higher, Obama will face outbreaks of violence and things will start to blow up, literally. They really should consider hiring some experts from the PRC at this point. The Chinese government has far more experience in keeping the lid on when things get rough.

Sat, 01/01/2011 - 18:10 | 841832 Caviar Emptor
Caviar Emptor's picture

We had price (and wage) controls here in the US in the early 70s for 4 years. THis time you won't need wage controls with 9% unemployment and outsourcing

Sat, 01/01/2011 - 18:31 | 841849 Rogerwilco
Rogerwilco's picture

I remember Nixon's attempts vey well. My point is that price controls alone will not quell the anger, especially when the shortages start and people are faced with long lines and empty store shelves. Obama will have to force wages higher and/or increase handouts so there is some appearance of progress. If we are going to model our economy after the Chinese, then we had better learn to govern like them.

Sat, 01/01/2011 - 18:43 | 841870 KickIce
KickIce's picture

That would be the end goal.  Valerie Jarrett has stated publicly that she admires Mao.  You don't put admitted communists like Van Jones in position of power without an end game that will transform government.

Sat, 01/01/2011 - 19:55 | 841958 Terminus C
Terminus C's picture

Mao made Stalin look like a cabbage patch doll when it came to killing his own people.  For one to say that they "admired" someone like that... wow.


Sat, 01/01/2011 - 20:00 | 841961 TruthInSunshine
TruthInSunshine's picture

I don't know how many people Mao killed, but Stalin is reported to have killed a minimum of 50 million Russians during his time in power.

Sat, 01/01/2011 - 20:41 | 842017 Sean7k
Sean7k's picture

Your better geography studies place the numbers between 18 and 35 million. Horrific by any standards, if Mao was worse, then he might start getting into numbers killed by US governments in their attempts to spread democracy via poisoned foodstuffs, military takeovers for raw materials and of course, oil. 

Incredibly, people continue to classify America as a great model- you might notice, very few are from countries outside of the US and Britain- another mass killer in it's days as a world power.

I find it interesting how throughout history, one person has been capable of killing so many people and the population rarely objects. Even when the people are themselves. I find it even more interesting that we continue to use any form of government based on the rule of a small elite buttressed by a police power and legitimized by an in house judicial system.

Sat, 01/01/2011 - 23:19 | 842169 New_Meat
New_Meat's picture

Sean-happy new year. 

" numbers killed by US governments..."

references please?


Sun, 01/02/2011 - 00:35 | 842212 Sean7k
Sean7k's picture

Happy New Year Ned,

Spanish- American War, The Depression, Vietnam, Both Gulf Wars, Grenada, Nicaragua, Panama. Use of the IMF to transfer the wealth of nations through projects creating poverty and death through the accumulation of debt. Baby formulas and other tainted food items that cannot be sold here, being sent to foreign countries. The use of revolutionaries to access products in Africa and South America. 

The use of corn based foods to cause obesity, diabetes and cancer. The pollution of water, air and soils creating cancers and other diseases- ending lives prematurely. The US government not only allowed these things to happen, they wrote the laws that allowed it.

Economic Hitmen, Us History, History of Money and Banking Murray Rothbard, Acres Magazine- hundreds of articles, Organic Chemistry, The Robber Barons, The Morgans, that will have to do for a start. 


Sun, 01/02/2011 - 13:10 | 842580 hrrreardon
hrrreardon's picture

The people who did these things are the same people regardless of their nationality. It's got nothing to do with America vs. China vs. Russia vs. Great Brittain. Countries are merely ideas brought to reality by the people's vision which waxes and wanes like the phases of the moon. This is a human problem. Go easy on America. She was (and still is) a good idea in need of a people worthy of her. She needs your actions,, not your reactions.

Sat, 01/01/2011 - 21:00 | 842018 Sean7k
Sean7k's picture


Sun, 01/02/2011 - 00:02 | 842198 Dave
Dave's picture

Anyone who admires Mao Tse Tung either doesn't know shit about

him or is a sick puppy. Mao is high up in a very elite group of psycos.

Sat, 01/01/2011 - 20:51 | 842025 TruthInSunshine
TruthInSunshine's picture

9% unemployment?

Brother, I've seen your posts, and you're far too intelligent for that trash.

Is there a legitimate thinker on ZH or anywhere who has no doubt the real unemployment rate under a U6 type measure would easily exceed 13%, and that the true unemployment rate not using any current or former governmentally crafted smoke&mirrors statistics scheme is closer to 20% (and possibly higher)?

Sat, 01/01/2011 - 23:21 | 842170 New_Meat
New_Meat's picture

conveyor belt no. U-6 is engaged, and voila! the answer is whatever they dial it to be.

Sun, 01/02/2011 - 13:35 | 842612 Confuchius
Confuchius's picture

You've probably figured out that oil has not changed price. In Gold.

Had the bernank not run the printing presses 24/7 oil would still be $60 or so.

If the printing continues (he's trapped) oil will get to $200/$500/$1000.


Happy New Year!

Sat, 01/01/2011 - 15:53 | 841705 CrashisOptimistic
CrashisOptimistic's picture

Here is the debt outstanding:

Here is the interest on it:


It says $414 billion on $13.8 trillion.

That's an average rate of 3%.


We concluded that should the average interest rate on US debt rise to 5%, the annual interest payment on the debt would jump from roughly $180 million to almost half a trillion, or roughly 25% of all revenues, at which point the Weimar scenario starts getting quite realistic. 


I do not understand these numbers.  The annual interest payment is ALREADY almost half a trillion -- at 3%.

An increase to 5% would be a 60% increase to 414B X 1.6 = 662B.

Sat, 01/01/2011 - 15:52 | 841707 makeyoumiss
makeyoumiss's picture

QE3, 4, 5 with no end. QE is the new normal.

Sat, 01/01/2011 - 16:01 | 841713 topcallingtroll
topcallingtroll's picture

I sure hope that socialist, Kenyan, anti-colonialist-business-hater allows all that foreign held money to come back to the USA tax free.  He has dug in his heels on that one.  It really sticks in his craw to consider allowing money to come back to the USA tax free because he knows that that money will be distributed to capital owners rather than his base of tax sucking parasites.  It's so "unfair" according to  the great redistributor in chief.

Sat, 01/01/2011 - 16:25 | 841735 Id fight Gandhi
Id fight Gandhi's picture

You're wrong about the business hater. If big business is so wonderful why do you need bailouts and government takeovers? Whatever happened to the best company will prevail?

We lost our soul and went to fascism, big business style in 2008.

Sat, 01/01/2011 - 16:57 | 841754 KickIce
KickIce's picture

We have been fighting an uphill battle since LBJs "Great Society" act and our politicians have been gaming the system ever since.  Obama just stands ready to complete the transition to a new type of government, a position he has been groomed for.

Sat, 01/01/2011 - 17:35 | 841792 Pants McPants
Pants McPants's picture

I'd argue we sold our soul in the 1913, then sealed our fate in the 1930's when fascism became the rage the world over.  Mussolini, Uncle Joe, Hitler, and Roosevelt all had the same idea (controllers?).

Sat, 01/01/2011 - 18:01 | 841816 KickIce
KickIce's picture

Hard to argue with that.  My point was more from a financial standpoint.  Unconstitutional as it was, SS was financially solvent at the onset.  In the spirit of vote buying, future politicians couldn't just leave it alone.

Sun, 01/02/2011 - 00:21 | 842208 Dave
Dave's picture

Groomed by whom? His election was pure luck and stupidity by the

opposition. TPTB see an opportunity and are making the most of it.

That's politics American style. Now the economic situation is a whole

nuther deal. I believe Alan Greenspan set it up on purpose

to crash the fiat system but there's no way he can admit that.

Sun, 01/02/2011 - 00:48 | 842234 KickIce
KickIce's picture

Study his life, the guy has been surrounded with more communists than Stalin.  He studies the Constitution not to follow it but to destroy it.

Sat, 01/01/2011 - 16:23 | 841732 reload
reload's picture

By April/May Europe will be providing a useful distraction. Ben can spool his printer up to max ink consumption again, the dollar may be looking like a better bet than the Euro (for the time being) and some flight to `quality` money may be lured into the TBond market. I think he will largely get away with it again. But the price of goods in fiat money.......Up Up Up and ................awaaaaaay

Sat, 01/01/2011 - 16:59 | 841756 Phat Stax
Phat Stax's picture

What about the 3 new Fed committee members rotating on this month?  They are supposed to be QE hawks... I would think they could influence more than just their 3 votes.

Sat, 01/01/2011 - 17:29 | 841760 TruthInSunshine
TruthInSunshine's picture

I'll go odd man out and say that Bernanke is doomed if/when (take your pick) we get another significant increase, YoY (maybe shorter term than that?) in the price of gasoline, heating oil, produce, etc.

I already see people who wouldn't have been able to tell me who Ben Bernanke was a year ago refer to him in casual conversation (this is the reason he and his handlers in this administration have felt compelled to have Bernanke go on '60 Minutes' so often - why else would he do this?), and with Republicans set to take over the HofR, there will be more fanning of the flames and blame game politics to incite the American Middle Class on who is to blame for such inflation, even if the Republicans don't really care about the matter - or worse yet, would have done/supported the same things Bernanke is doing now but if under a GOP Executive Branch.

In other words, all is fair in Love, War & Politics, and I expect to see fireworks this year with Bernanke cast as a central villain if things continue to evolve (devolve?) as they have been.

Now, let me put on my tin hat, and also say that the very sophisticated people running the Federal Reserve see the problems they face on the horizon, and know that they can't please the kleptocracy while fooling the middle class on a longer horizon, and they already have their backup or contigency plan in place. What that contingency plan is, whether a theatric Bernanke-as-sacrificial-lamb before Ron Paul, or some other measure, is anyone's guess, but the succession plan is already in place.

Sun, 01/02/2011 - 00:23 | 842210 serotonindumptruck
serotonindumptruck's picture

 "...they already have their backup or contingency plan in place."

Yes, they do. It's known as "Continuity of Government", and it likely involves the elite and their families being rapidly relocated to vast underground complexes such as Cheyenne Mountain in Colorado.

Perhaps this might be why Caterpillar has enjoyed such a successful business model during the "recession". The heavy mining and earth-moving equipment may be very much applicable to the construction of large subterrainian evacuation/living facilities.


Sat, 01/01/2011 - 17:07 | 841761 Chappaquiddick
Chappaquiddick's picture

The debt that the Fed now holds - is there a rebate back to Government on this $1Tr+ debt mountain, so that the effective rate for this debt is zero? 

Sat, 01/01/2011 - 23:26 | 842172 New_Meat
New_Meat's picture

Dick: You have hit The Bernank's viewpoint, imho.  He knows that debt is vanishing and is using e-press to make magic ONES with many magic ZEROS to fill the void.  As a kid he must have been fascinated by magic, because the exact time he needs to, he thinks he can make them all vanish.

- Ned

and OT but fits your handle:

Sat, 01/01/2011 - 17:17 | 841775 Caviar Emptor
Caviar Emptor's picture

The Fed's only option to respond to Biflation (according to their playbook): QE3 with price controls. 

Sat, 01/01/2011 - 17:18 | 841776 Bubbles...bubbl...
Bubbles...bubbles everywhere's picture

"so...we expect oil to hit triple digits and it's going to be a drag on growth". Really, just a "drag", eh? What exactly would be the efect of a $10 rise of oil in GDP and disposable income again? Add to the 5% drop in housing values, the rising unemployment due to municipal government cuts and there is no way to avoid a continuation of QE2 or a derivative by any other name.

Sat, 01/01/2011 - 17:31 | 841788 CrashisOptimistic
CrashisOptimistic's picture

Pasting my comments from the other thread:

They threw in a crude price number because it can no longer be ignored, but I am curious about the sophisitication of the model of its effect on all the other parameters.

The US imported about 12 million barrels of oil per day in 2010.  US oil production peaked several decades ago so domestic production won't reduce that.

The point is this.  If GS calls for a $10/barrel increase, a decrease in unemployment (more commuters) and overall GDP growth (even more oil consumption) then with just a 1% consumption increase we have 12.1 mbpd consumption in 2011 X $10 =

121 million dollars/day MORE sent elsewhere or $3.6 billion MORE (than 2010) per month drained from the US economy.  

This is not a huge number, but it is a substantial number.  One wonders if it's in their model.  For six months it is $21.8 billion.  They call for an additional $10/barrel increase by EOY so that will be an additional $21.8 billion for a year's total of 

$21.8B + $43.6B or $65 billion dollars additional vs 2010 drained from the US in 2011 if the price hits those 6 month targets early in the 6 month segments.

The overall drain, of course, is $100 X 12.1 mbpd.  $442 billion/yr.


And then:


Replying to myself in a curiosity tidbit.

To what extent will a $20 increase in crude prices wipe out the 2% decrease in Social Security taxes?

Avg American income $34,000ish/yr.  Times 2% = $680.  US total of employed workers: 

239 million

So 239million people X $680/person = $162 billion.

So an oil price increase of $20 will wipe out 40% of the 2% SS stimulus.

Note that the 34K number is influenced by a big chunk of workforce earning beyond the $SS contrib cap.  Note also that a significant chunk of the workforce (state govt teacher types etc) do not pay into Soc Sec.  So the 40% number is likely quite a bit low.

IOW, a $20 crude jack could negate most or all of the 2% stimulus.  I wonder if these models have that in them.

Sat, 01/01/2011 - 17:42 | 841798 Bubbles...bubbl...
Bubbles...bubbles everywhere's picture

Thank you for crushing the numbers. I think they are benign, since rising oil per gallon would also translate into higher transportation and food prices, on top of already surging commodities.

Sat, 01/01/2011 - 18:05 | 841827 cxl9
cxl9's picture

US total of employed workers: 

239 million

So 239million people X $680/person = $162 billion.

Some good number crunching overall, but your 239MM workers is off. Labor participation rate is 64.5% which is 154MM (Nov. 2010). See BLS A-1.

Sat, 01/01/2011 - 19:47 | 841935 CrashisOptimistic
CrashisOptimistic's picture

You are correct.  I extracted from that spreadsheet the incorrect number.  239 M is the overall civilian pop, not the employed pop, which is apparently, from that same spreadsheet, 139 M.

This is a crushing mistake on my part and it changes the conclusion.

The 2% SS cut on just that many people is $680 X 139M = $94.5 billion for the year.

Oil's $20 jack will destroy 2/3 of this cut (stimulus).

It seems very unlikely GS has this in their model, unless they are pretending the portion of outflow going to Canada and Mexico for their oil will buy US goods exported to those countries.

Sat, 01/01/2011 - 20:59 | 842041 IslandMan
IslandMan's picture


239 is not the "overall civilian population", whatever that means (?).  The US pop is about 300 million ; 239 may be the number of people over 18 years old, or 18-64, or some other such category. 

Sat, 01/01/2011 - 22:29 | 842123 CrashisOptimistic
CrashisOptimistic's picture

Yes, it is listed a non institutional civilian pop, and probably that age group.  I didn't type it all out because all that is relevant to the calculation was the number employed.

Sat, 01/01/2011 - 17:25 | 841782 max2205
max2205's picture

Great so now I have to borrow more money to invest When Ben announces QE 2. Ok

Sat, 01/01/2011 - 17:42 | 841797 Sean7k
Sean7k's picture

There are so many ways for this to blow up. The only option is QE and lots of it. The debt swap facility will be used and abused- covering problems in Japan and Europe. The attempt at a global soft landing using the Asian economies will fail.

Why? People get angry when their money continues to lose value. While the smart investors will shield their wealth, the costs to the poor and middle class will continue to impoverish. When entitlements fail to cover the basics and the seizures of capital begin along with new fees and local taxation schemes- people will get angry. 

There is not an election to burn off the heat. 

As consumption declines, businesses will fail. Unemployment will rise. They will have to accelerate the printing of money to maintain any liquidity. Unfortunately, the liquidity is being directed by the banksters and they will direct it into their pockets through off shore accounts and other protections. 

At some point, the FED will present the bill for all the trillions in off sheet garbage and attempt to dump it on the taxpayer. I don't see a riot or a revolution. I see people saying no mas and refusing to pay. Then, it gets interesting...

Sat, 01/01/2011 - 17:47 | 841804 TruthInSunshine
TruthInSunshine's picture

That literally harkens back to Gonzo Lira's outstanding article he wrote some time ago, where he identified two fictional upper-middle class retirees (or near retirees), who opt out of compliance with the system, tax wise and otherwise, emphasizing that the real problems begin with a quiet revolution when upstanding members of the middle class and upper middle class start engaging in acts of non-compliance.

At that point, the whole system has to inevitably collapse.

It was one of my favorite articles posted on Zero Hedge or anywhere else in 2010.

Sat, 01/01/2011 - 17:59 | 841814 lunaticfringe
lunaticfringe's picture

No shit. That was my very aha moment when Craig T Nelson said he wasn't going to pay taxes on Beck's show. The clip is still on you tube but I'm too lazy to find it.

The SHTF when gas hits 5 bucks and the southern boys don't have enough money to buy beer. Thats when the trailer house blows apart.


Sat, 01/01/2011 - 21:38 | 842080 KickIce
KickIce's picture

Yeah, I'd say that beer qualifies as a commodity in the south.

Sat, 01/01/2011 - 18:08 | 841830 Sean7k
Sean7k's picture

One of Gonzo's better pieces. When the leadership continues to rape the law, the common people line up for the train.

They think they have enough police power to control it. They couldn't control three cities in Iraq. The Afgani's are kicking their butts. Many of those unemployed are ex-soldiers.

Nothing here to feel smug about. 

Sat, 01/01/2011 - 17:45 | 841803 blindman
blindman's picture

so, i drink some wine after purchasing rat poison on the first day

of the new year, after hearing report from my visiting daughter that

something in the garage was no doubt a rat! and so the laundry room

is uninhabitable and then i watch this clip of jan and keene and harris

and i'm thinking what is it about public financial rape and financial execution

that turns these guys on?  then i remember it is a way of life.  a means

to an end that is globalisation so all acts of forced copulation are justified.

or / and what are the moral markers that are set when a mathematic rapist

assaults a consumption nymphomaniac while being digitally recorded and

broadcast globally. ?  there, my prediction for 2011. 

but what are the ramifications of a system that defiles itself while

feeding on its neighbor?  or itself?  we will see in 2011.

Sat, 01/01/2011 - 17:48 | 841805 DaBernank
DaBernank's picture

QE3 will have some Orwellian name... "Deflation Stability", "Asset Value Protection" ... any good ideas?

But whatever it's called, TD is right that it will include the purchase of Muni Debt.

Sat, 01/01/2011 - 18:15 | 841838 MobBarley
MobBarley's picture

How about 'Debt Mitigation'


It's in your face enough to work in NY State.


Sat, 01/01/2011 - 17:55 | 841812 lunaticfringe
lunaticfringe's picture

QE2 will simply continue. The Bernank has already foreshadowed that event. If the hairsplitters wanna say that QE2 ended at 600 nillion and QE3 starts at 601...I'm cool with that.

They have a status quo mess on their hands. And if I was the generation born after '64...I'd be sharpening the guillotines.

Sat, 01/01/2011 - 18:03 | 841819 High Plains Drifter
High Plains Drifter's picture

As a metal head, I can say without a doubt that the Bernank is going to muck it up more than he already has and for this I thank him and my PM holdings thank him , very much.

Sat, 01/01/2011 - 18:05 | 841826 KickIce
KickIce's picture

I think the next ZH poll should be who's mug shot will grace the $1,000.00 dollar bill.  (Yes, I realize this could not happen as it would be the ultimate concession that we are printing money)

Sat, 01/01/2011 - 18:09 | 841828 mhjhnsn
mhjhnsn's picture

imho, the external, "real" economy will just be the excuse for continuing QE... however well or poorly it is doing, the Fed will claim it's not good enough and could be improved with more QE... because that's the only chance to keep financing the exploding federal gov deficit at any kind of affordable rates.  The world probably lost its appetite for USG debt in the amounts being sold, sometime in the last 12 months, and QE is what is keeping interest rates from spiking.  So much for Fed independence, btb...

If you believe the current deficits are what is keeping us out of depression, there is no obvious alternative course of action that is politically feasible.  Myself, I have my doubts whether the deficits are nearly as stimulative as the Washington crowd seems to think, and the whole thing is unsustainable beyond another year or two, three at the outside, in any case.  And the deficits are mostly funding payoffs to interest groups of various kinds, not legit "stimulus" by any rational standard.

So, we can either start to reel in the deficits and the associated QE in 2011, or just keep spending $1.5T more than we have every year while monetizing all that debt with QE, and wait for the crash.

Sat, 01/01/2011 - 18:14 | 841835 bankonzhongguo
bankonzhongguo's picture

The first red flag for 2011 is the congressional debt ceiling vote with the "new" congress.  Will this be conservative - meaning single year increase or will it be enough to carry the country through the 2012 election - debt ceiling raised to $25 trillion?  Will it be a single issue vote, or the newer era's critical legislation gang bang where everyone gets their earmarks passed with the ceiling. 

I think it will be a massive debt ceiling so that nobody has to vote on it again until the next election. 

The end game is just a merry go round of corporate feeding upon the carcass that once was America.  Every sector will get their quarterly turn at the victim.  One quarter its energy, then food, then interest rates.  The UST must go to over 5% for the banks to own America and Americans.  When the water runs with this much blood, you can only have a vampire orgy feeding frenzy. 

Protect your children.

Sat, 01/01/2011 - 18:15 | 841837 lunaticfringe
lunaticfringe's picture

Ya wanna know what has staved off the pain short term? The government. Three years worth of unemployment checks and they still haven't figured out we have lost 20 million jobs yet? When is that fucking insanity going to end. If the government admitted we have a structural problem that there is no solution for- they'd have to end eternal largesses payments. When that shit happens. Hold on. That cannot go on forever either.

Sat, 01/01/2011 - 18:16 | 841840 MobBarley
MobBarley's picture

Two choices:

Eternal unemployment payments ('the dole') 


FEMA camps.

I'm sorry, did I say FEMA camps? Why would those exist. That makes no sense.

Surely it's a conspiracy. 


Sat, 01/01/2011 - 18:52 | 841850 Quixotic_Not
Quixotic_Not's picture

They're no longer called "FEMA camps".

They will be called Homeland Security Worker Relocation Camps...I remember reading the Congressional Order to the Army back in 1994.

For the uninformed, some of us have seen the *eventual* END-GAMES a *long* time ago:

Sun, 01/02/2011 - 15:05 | 842724 merehuman
merehuman's picture

3rd choice...war, to get rid of us useless  eaters .

Sat, 01/01/2011 - 20:05 | 841973 TruthInSunshine
TruthInSunshine's picture

You wanna know what has staved off the pain short term?


1) Credit cards (take them away and see what happens).

2) Unemployment insurance, electronic welfare debit cards (for food), government subsidies to the poor and working for for heating/electricity assistance, Medicare/Medicaid, Social Security, etc.

3) Millions not making their mortgage payments (I'm not passing a moral judgment one way or the other, but just pointing to fact).

4) Extend and pretend valuation methods extended to banks and, now, government on asset valuations.

Take especially 1 or 2 away, and we'll have a 2nd Revolution and possibly civil war in the U.S.


Sat, 01/01/2011 - 18:34 | 841853 blindman
blindman's picture

qe = stealing.

tarp = stealing.

taldigital representation so f + stealing.

fed + stealing.

voting = stealing ......

life + + = stealing.

random shit _+=+ stealing .....

random digital + symbol 

ism + your attention +  time

and energy + =   

stealing.  and money is + =

just a thought.  and always doomed.

=  attention.  hehe...

so , freedom is your enemy. 

insanity your home.  remember,,,,,,

you are sane,  no matter how odd.  or normal.

happy new


my po

em fo





Sat, 01/01/2011 - 18:39 | 841862 razorthin
razorthin's picture

Wouldn't mind a spit and sputter of uncertainty about more QE first though, so we can get a better price on silver.  Would be sweet to get a bit of a deflationary spiral before the big HI.

Sat, 01/01/2011 - 18:46 | 841875 blindman
blindman's picture


SP 500 and NDX March Futures Daily Charts Final for 2010 Jammed the futures higher into the closing fifteen minutes to finish near unchanged.

I would not be surprised to see a correction in January. Last year it occurred about week two.

Wait for it.

Sat, 01/01/2011 - 18:50 | 841885 razorthin
razorthin's picture

The price of oil holds sway above all forces.  It breaks out well above $100 without a reduction of the real unemployment rate to below 8%, it's over. NO, the world CAN'T handle $100 oil.

Sat, 01/01/2011 - 21:25 | 841962 blindman
blindman's picture

qe = inflation of speculative commodities.  unemployment is a function,

result, of technologic improvement, advancement, and a source of raping

value and life from labor and capacity and potential from those so

encumbered,  capable,  by those so inclined and unable to satisfy but endowed,

"legally",  to spoil said spoils.

"price" is manufactured, synthetic,  via fraud and sway is derivative extremis,

a force of man, to milk and steal future obligation, promise and commitment,

and deliver said to the headless elite.  ongoing..  seee

the future,  many headless....

Sat, 01/01/2011 - 21:05 | 842047 IslandMan
IslandMan's picture


The world can handle $100 / barrel oil.

The US cannot.

The US is not the world.

Sat, 01/01/2011 - 22:11 | 842102 ZeroPower
ZeroPower's picture

Considering China and India are responsible for 35,000 new cars on the road, DAILY, i propose to you the world indeed cannot handle $100/oil. 

Although, it will have to learn how.

Sat, 01/01/2011 - 18:50 | 841887 lynnybee
lynnybee's picture

I just read JIM SINCLAIR, JSMINESET, & you know what he says :   QE to INFINITY .    Now, how can anyone refute the great one, Jim Sinclair ! 

Sat, 01/01/2011 - 18:52 | 841888 6 String
6 String's picture

I'm just going to have to print this f'ing beautifully said piece of logic from my printer...and stick it in front of my computer, stick it on every available surface I know of--for alpha and perhaps even survival, this is almost all that will matter in 2011:

In other words, we expect that Jon Hilsenrath will circulate an article highlighting the ever greater likelihood of another round of quantitative easing some time in April... just a few weeks after the most recent debt ceiling vote passes, this time allowing the US Treasury to issue up to $15.5 trillion in debt, or $1.2 trillion more than the current token limit- just enough to kick the can one more year down the road.

On the other hand, if we are wrong, and if Ron Paul somehow succeeds in preventing this form occurring, then all those market "strategists" who expound the benefits of the economic "recovery" when all they expect are further rounds of QE, will promptly change their tune.  

I simply couldn't not have articulated it better myself. Kudos, ZH. Some serious nail down.

Sat, 01/01/2011 - 19:24 | 841919 Sudden Debt
Sudden Debt's picture

4.5 on the bonds would be the killer. Actually, once over 3,48% it's already over and out for the dollar.

Sat, 01/01/2011 - 20:03 | 841951 Everybodys All ...
Everybodys All American's picture

Without a further round of QE municipals all over the place fail and banks would have alot less "free money" via POMO to boost their false earnings. There is no way we will not see some form of QE 3.

Sat, 01/01/2011 - 20:13 | 841966 gwar5
gwar5's picture

I think they'll roll out the QE III plans when they roll out the State and Muni crises this Spring. On Schedule.

Then the EU crises will be rolled out again, ala Spain, to elevate the panic there and make Americans feel a little better.

At that point, they'll start floating the idea of the IMF Bancor WRC, and see if the Chinese and the sheeple are ready for their brew

With compliant media and regulatory agencies, it really just boils down to stage craft on their part, and where they're going

They don't lack hubris so they'll swing for the fences. Our FED is on a one way suicide mission, any higher rates and they're bankrupt

That's why the globalist missionaries from the UN have taken over our government and we should move our gold away from the FRBNY before they hand it to the IMF


Sat, 01/01/2011 - 20:30 | 842004 Phat Stax
Phat Stax's picture

What about the Fed's credibility - what's left of it...?  At some point their self-preservation gene will kick in and that will curtail more QE.  There is a tipping point somewhere - and a threat to the dollar's status as the world's currency could also be it.

Sat, 01/01/2011 - 22:24 | 842115 Atomizer
Atomizer's picture

Bernanke compilation.

Bernanke in Denial 2005-2007

Sat, 01/01/2011 - 22:25 | 842119 tom
tom's picture

Oil needs to pass $120 for non-interventionists (wrongly named "hawks") to gain the upper hand on the FOMC. With China tightening and Europe crumbling, I just can't see that happening this year. You can call it QE3 or you can call it an extension of QE2, you're getting it all the same.

Sat, 01/01/2011 - 22:44 | 842140 Atomizer
Atomizer's picture

Bernanke goes undercover to invigorate Quantitative Sleazing v.3.0

Sat, 01/01/2011 - 22:45 | 842141 Clapham Junction
Clapham Junction's picture


Draft for men aged 18-25, to begin mandatory military service.

Stock market goes away completely.

Mission accomplished.

Sun, 01/02/2011 - 03:12 | 842346 Quixotic_Not
Quixotic_Not's picture

'MeRiKan dumbed-down-to-sucumb they cheer the destruction of their own prosperity, and that of their progeny.

Sat, 01/01/2011 - 23:08 | 842159 ??
??'s picture


excellent paper on CO2 and Warming

New paper – “absence of correlation between temperature changes … and CO2″

Sat, 01/01/2011 - 23:43 | 842184 New_Meat
New_Meat's picture

OT-OT Dude, new concept for all y'all: separation of effects.  Below are conservative (high) data on GHG effects of invisible gas including plant food.  It's on wikipedia, so we know that it is right ;-)

Of course, some like my brothers out west, think that warmer would be better.  And then, there is this crowd: them dudes know something about the need for warming.

(%) Water Vapor H2O 36 – 72 %   Carbon Dioxide CO2 9 – 26 % Methane CH4 4 – 9 %   Ozone O3

3 – 7 %

Sat, 01/01/2011 - 23:08 | 842160 ??
??'s picture


Sat, 01/01/2011 - 23:16 | 842165 TexDenim
TexDenim's picture

I believe there will be no QE3. We now have a GOP lower house which will be looking for any issue with which to confront the BO administration and the Fed. Given the debt levels already extant in this economy, I can't imagine that it will be political feasible to launch a third round.

Sat, 01/01/2011 - 23:42 | 842187 New_Meat
New_Meat's picture


Sun, 01/02/2011 - 03:18 | 842347 Quixotic_Not
Quixotic_Not's picture

"I believe" that anyone that resorts to carnal impulses is either an agent provocateuror a moron!

Go drown in titty JPEGs you idiot...

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