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Putting It All In Perspective: Bernanke Does More For The Budget In 15 Minutes Than The Government Does In A Year

Tyler Durden's picture


From Peter Tchir, TF Market Advisors

Bernanke Does More For The Budget In 15 Minutes Than The Government Does In A Year

Now that we are being inundated by reports telling us how the government has saved us and reached an historic $38 billion of cuts, it's time to put the result in perspective.  This was 'Winning' only in a way that Charlie Sheen could understand.  The government would have shut down if a solution wasn't reached.  It's not like this was done randomly - the laws of the country forced them.  It took the threat of government shut down (which some people seem to think is a bad thing) to force them to come up with $38 billion of cuts.  Even with looming shutdown, they couldn't help themselves from throwing in some riders.  Although, even the riders were less odious than the President trying to convince us earlier in the week that not allowing planned budget increases actually counted as budget cuts!  They really did try and tell us that by not going implementing planned spending increases, they were actually saving money.  Say what?  Maybe that logic applies to Saks' shoe sales, but in the real world, that is not a cut, nor is it savings.

Anyways, it seems pretty clear that in spite of potential government shutdown, threat of public backlash, our government could barely get its act together to cut $38 billion.  Yet with $14.3 trillion of debt outstanding, an increase of 0.25% would add $36 billion to our deficit!  Mr. Bernanke, who claimed on 60 minutes, that he can squash inflation within 15 minutes has relatively few policy tools to do that.  Pretty much only raising rates or stopping QE2.  Raising rates is the simplest, but if a 0.25% rate increase (minimum the Fed has ever done) adds $36 billion to the deficit, will he, or anyone else have the stomach to deal with the consequences?

Just think how hard it was for the government to reach an agreement on $38 billion.  That agreement was only reached to avoid the imminent shutdown that both parties decided they would face negative consequences from the voters for. 

Should one man have this much power?  It wasn't as much of an issue in the past, but as our debt has grown out of control, it's a real issue now.  You can argue that with a steep curve maybe you wouldn't get a 0.25% cost increase across the board if the fed raised short term rates.  You can argue that at least a trillion is held by the Fed so it's a wash (but then why does it count in the debt limit in the first place).  On the other hand, you could argue that we should have the same rate as the ECB since allegedly our economy is in better shape than Europe.  That would be a 1% increase.  If you believe that QE2 has held down borrowing costs out the curve, than merely stopping that could add to our cost. 

We are at historically low rates, yet the bulk of our debt remains funded relatively short term.  So far I haven't seen a single budget proposal that shows a significant decrease in debt outstanding over the next 10 years. Shouldn't we borrow out to maturities that reasonably reflect when we can pay back the debt?  By funding so much 5 years and in, we save a meaningful amount of current interest expense, but expose ourselves to rate shocks in the future.  ARM's killed homeowners who weren't prepared.  Too much short term debt helped kill Greece and is killing Portugal.  Yes they have spending problems, but had they locked in low rates for a long time they wouldn't face the same degree of current pressure.  If we know we won't be repaying debt for 10 years, we should borrow more out to 10 years.  The cost would be shocking.  Maybe even prohibitive.  But that is what we need!  That cost is real.  Maybe if we funded all to 10 years, government would become horrified at the cost and really start to cut the budget.   At least Ben isn't responsible for this fiasco.  That is Treasury.  On $10 trillion of marketable treasuries, the average rate is 2.5%.  If we pushed that funding towards 10 years, it would jump 1%.  Even at 2.5% average cost, it is much less then the 4.6% average cost we had just 5 years ago.  That would be a 2% or $280 billion shock to the system!

So, at a time where the government has demonstrated a complete lack of will over $38 billion, we are left in the hands of Ben to determine short term rates, influence the curve, and Timmy to determine what maturity profile that 'best meets our needs'.  The actions of either of these two unelected individuals could dwarf the $38 billion as every 1% of increased borrowing costs would cost $143 billion.  Since the government could barely deal with $38 billion, how will they deal with increased borrowing costs?  Does even congress know just how trivial their cuts look relative to the potential increases in debt cost?


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Sat, 04/09/2011 - 14:27 | 1153545 Long-John-Silver
Long-John-Silver's picture

How I learned to stop worrying and love the debt bomb.

Sat, 04/09/2011 - 16:32 | 1153789 drbill
drbill's picture

Now all we need is to somehow figure out how to get a photo of Slim Pickens riding on debt bomb!

Sat, 04/09/2011 - 19:33 | 1154010 Urban Roman
Urban Roman's picture

WB7's gotcha covered. It's about the 8th picture down in this article:

Sat, 04/09/2011 - 17:00 | 1153841 traderjoe
traderjoe's picture

Why are 'we' discussing paying back our debt at all? Why does a sovereign country borrow its own money from private corporations? Fractional reserve banks create money out of thin air and lend it to the government, earning interest in the process. It's an infinite gross margin. The Fed is a fraud. End the Fed.

Sat, 04/09/2011 - 17:03 | 1153848 stewie
stewie's picture


Trade imbalance must be reduced.  If PBOC won't let the Yuan rise, then Fed will devalue USD, till food inflation forces them to let go.  Push hard & long enough and they WILL let go.  That's the main driver of what they are doing here, and why there's no political will to do anything else than spend, spend, spend!

When the trade balande is reduced, the economy recovers, tax receipt increases and interest rates can be slowly raised.  

I'm not saying it will work, just trying to understand the plan behind the actions.  And there's not much of that around here I find.  Just a lot of hand waiving, we're all doomed,  OMG let's all hide under our golden blankie till the thunder goes away.




Sat, 04/09/2011 - 17:29 | 1153872 Deep
Deep's picture

I believe china has us by the balls, not the other way around. they could slowly start dumping UST, and it would end us. Rates would skyrocket, and then what would we do. they could inflict a lot more pain on us then we could on them. Ya, lets keep devaluing the currency and see how high oil goes and everything else. by your logic, their is no pain on us by a lower ud dollar, more pain on us then them.

Sat, 04/09/2011 - 17:49 | 1153890 stewie
stewie's picture

Yes they could call the bluff and it's M.A.D.  

But to me, it seems that food inflation is putting a much more clear & present danger on them.  

- Raising US rates -> monetization.

- Raising Chinese food price -> re-value the Yen.  

- Raising oil prices -> Bombs


See what I'm saying?  It's a big chess game being played, and to win it, you must remember the move played, as well as seeing a few moves ahead.


Sat, 04/09/2011 - 20:23 | 1154059 Vlad Tepid
Vlad Tepid's picture

- Raising Chinese food price -> re-value the Yen. 

Or China could revalue the Yuan.  Either way, Stewie.

Sat, 04/09/2011 - 20:42 | 1154099 stewie
stewie's picture

lol, absolutely. Thanks for that.

Sat, 04/09/2011 - 21:29 | 1154183 Mr Anderson
Mr Anderson's picture

Why would China sell UST right now. They would get their money sure. But it would just be printed dollars from the fed. 

First QE must end.

   Then China can then start dumping treasuries which will help to end us.

   No matter how you look at it, China has a great deal of leverage over the US. If this was considered a war, which it is. We would be suing for peace.

  When the system de-leverages and the stock market collapses China is perfectly set to come in and buy up our companies at pennies on the dollar.

  The Govt wont be there for another bailout, and likely the Govt will be going down with the ship.


Sat, 04/09/2011 - 18:01 | 1153903 Reese Bobby
Reese Bobby's picture

I can handle stupid or condescending but I have no use for both.


This country has been restructured over the past 30 years to ALWAYS run a trade deficit.


The only plan in for banks to earn interest on fiat currency created with keystrokes in return for allowing politicians to spend so far above our means it is satire.


The end game is the enslavement of workers worldwide.  "I'm not saying it will work, just trying to understand the plan behind the actions."

Sat, 04/09/2011 - 18:21 | 1153928 stewie
stewie's picture

Easy buddy, I wasn't being condescending at all.  You may disagree with my analysis, but no need to call me stupid.  We're all here to share idea and learn, no?  

Why do you think the US has been restructured to run a constant trade deficit?  Because it could.  It strategically positioned itself to become the reserve currency by re-cycling petro-dollars so"deficit didn't matter anymore".  This gave the US 30 years of riding the empire wave.  Pretty sweet deal if you ask me.  

The end game is not to enslave workers worldwide, that is the current situation.  Banks already have our collective ass! What they want is to keep it.  

Sat, 04/09/2011 - 18:35 | 1153954 NidStyles
NidStyles's picture

Wait, you said the end game is not to enslave workers, but then went on to qualify this said enslavement by stating they already had us. Which is it?

Sat, 04/09/2011 - 20:55 | 1154124 stewie
stewie's picture

Poor choice of words I guess.  You don't need an End Game when your goal has already been achieved.  You only need to preserve your power over others.

Sat, 04/09/2011 - 19:35 | 1154015 Reese Bobby
Reese Bobby's picture

I am not your "buddy" and I fear there is little I can "learn" from you, in contrast to so many others at ZH that you dismiss. 


"And there's not much of that around here I find.  Just a lot of hand waiving, we're all doomed,  OMG let's all hide under our golden blankie till the thunder goes away."  That is the definition of condescending, pal.


Now you can go ahead and think a stronger Yuan would be a positive if it makes you happy. But I don't believe it would help our 70% service based economy.  I think it would worsen another inflationary force that should pressure U.S. interest rates higher; China is our largest supplier of consumer goods. 


To blame our problems on the PBOC is popular because it is diversionary to the real problem: the willful destruction of this Country by the banks that control it.


Sat, 04/09/2011 - 20:40 | 1154091 stewie
stewie's picture

You know sometimes I wonder why I bother.  I don't know you, so no, you're not my "buddy".  This is how ppl write to appease a overly confronting person.  Too bad I had to explain this, but I suspect you're very young and still learning the basics of human communication.  BTW, NOW I'm being condescending.

The service economy of the US cannot survive indefinitely producing nohting but freshly printed FRNs.  That's why a stronger Yuan is required.  The US must produce stuff and sell it to somebody else.  You've been living the dream too long you must have forgotten this little rule.  Why do you think everybody is calling on China to re-value? Honestly, why?

If anything, please take the following away from this little verbal altercation:  Masters need healthy slaves to work fom them.  They don't want to destroy them, they want to control them.  Banks don't want to destroy the US, or any country, because without minions, they're nothing.  The healthier the economy, the more they profit from the free nectar or usury. 



Sat, 04/09/2011 - 21:15 | 1154165 Deep
Deep's picture

what i dont understand is how is a higher yuan going to help us. Yes i get you logic, trade imbalances will be on the righ track, then china will not have  a competitive advantage. But to say that is what will cure our ills is wrong imo. we have lived WAY behond our means. and would't a stronger yuan make the chinese even stronger? what am i missing stewie?

Sun, 04/10/2011 - 11:30 | 1154870 stewie
stewie's picture

The US and China are involved in a sort of economic symbiotic relation.  Oneof the reason China has avoided problems typically present in emerging markets is that it has financed it's booming development largely with it's own savings, as opposed to other emerging markets that relied on rich western nations' investments.  By doing this, it avoided the pitfall of investors pulling money out of the systems when they see fit, collapsing the economy.  With it's hight saving rate, it quickly become a creditor nation, specially to the US.  It did that for two reasons:  1- Vendor Financing and 2-Keep Yuan low.  It's easy to see this since they have been buying US debt hands over fists for decades.  This process has been discussed and documented to death.  Here's an example:

This huge amount of money comming back to the US felt pretty good, making everybody feel  rich, but debt is debt, and must be serviced.  It has proven difficult to stiffle this spending, by both private and public sector.  So the US has dug itself into a hole, too much debt that must be serviced, and interest on that debt at market price would have crushed the economy without the Fed's actions of late.  

So this is what I think happened:  The money masters came up with a plan.  Monetize a big chunk of US Debt, cutting the cost of servicing the debt, putting pressuse on the USD, causing commodity inflation, forcing the Chinese to revalue the Yuan, which would raise the price of imports to the US, which would cut the bleeding of wealth to the east.

So I think a stronger Yuan would help the US in the long by preventing China from killing it's symbiotic host.

Sat, 04/09/2011 - 21:18 | 1154166 tennisdude
tennisdude's picture

A stronger Yuan could potentially help us farther into the future, after a painful recession where our economy shifts drastically.  But the recession would be huge, and in the USSA we print recessions away.  We don't allow market forces to correct misallocations, we fight it tooth and nail until the imbalances kill the status quo for good.

The call for a weaker Yuan is lip service, we depend on our ability to export inflation while we monetize a level of debt that we can never pay back. This just gives Joe Public somebody to blame. The US consumer would get smacked if this scam ended.  It takes time to build a manufacturing base when it has been neglected for so long, and when untrained workers must be overpaid to fill the gap.

Sat, 04/09/2011 - 23:19 | 1154350 Reese Bobby
Reese Bobby's picture

"Why do you think everybody is calling on China to re-value? Honestly, why?"

Try reading a post you respond to.  You sound like a fool when you skip that step...

Sun, 04/10/2011 - 11:46 | 1154904 stewie
stewie's picture

Mr. Reese Bobby: It's easy not to sound like a fool when you don't say anything.  Try to come up with something smart, then I'll shut up.  Your one-liner disparaging remarks are not impressing anybody either.

Sun, 04/10/2011 - 16:26 | 1155614 Reese Bobby
Reese Bobby's picture

I am now satisfied.  I have reduced you to a typical fact-vacant, finger-pointing, liberal nit-wit.  Not much of an accomplishment given your apparent dimness, but still nice.  Thanks.

Sat, 04/09/2011 - 20:11 | 1154049 Teamtc321
Teamtc321's picture

A must watch, China is going to extremes to keep there GNP as high as possible. They tell there population to buy silver and gold and yet there yearly income average is $6,000.00

WTF is going on in China?

Where are all the new's post on this bubble? Any help on more sound studies would be appreciated.  

Sat, 04/09/2011 - 21:32 | 1154188 blunderdog
blunderdog's picture

I think this approach has been noted before, but the problem is that the necessary element no one wants to talk about is general equalization of standard of living in order to achieve relative international balance.

If it costs $3/day to live in China, and $24/day to live in the USA, there's no way for US labor to be "competitive" in the international labor market. 

But good luck driving the cost of living in China UP to that of the USA/Western Europe.

So the necessary step is driving the US cost of living DOWN.

Deleveraging our overinflated asset "values" could be part of the process, but because that would collapse our financial empire, which owns our political system, it will not be permitted.  So the only other approach is literally to drive the majority of the population into 3rd world living standards.  Day to day subsistence at the mercy of government largesse will keep most Americans quiet and cowed.

And what's to fight for anyway?  Who is really motivated to work in the current economic system we've created? 

It doesn't take too long in any of the big-business environments to realize that most of what constitutes material success is political acumen.  The high-earners know what to kiss and when.  Some people aren't built to do whatever it takes to chase a dollar.  In my experience, it's MOST people who don't function that way.  An intrinsic sense of worth and interest in low-cost pursuits tend to lean against the monetary incentive to whore every iota of your existence for the next pay increase.

This is why it's over.  This is why, despite the potential approach to the problem you suggest, it just doesn't fucking matter anymore.  International economics are going to change over the next decade, and neither Ben nor Obama nor Chu can do a thing about it.

Sun, 04/10/2011 - 14:03 | 1155261 Chumly
Chumly's picture

De-leveraging IS a part of the process and will continue, regardless of whether it is "permitted." The wealth of the true patrician class is permanently baked into any future scenario - they don't sweat it. A million here or a billion there doesn't matter to them. It's always been "over."

The slow yin and yang of a long stagflation (deflationary inflation) will keep the powerless middle class mollified as they continue to fade into the class of peasants.

And, I agree: It doesn't matter anymore.

Sat, 04/09/2011 - 14:26 | 1153550 Alcoholic Nativ...
Alcoholic Native American's picture

Let's here it for anonymous billionaires.

Our true saviors.

Sat, 04/09/2011 - 20:26 | 1154062 Vlad Tepid
Vlad Tepid's picture

And all I ever did was impale people on spikes...

Sat, 04/09/2011 - 20:31 | 1154076 chunga
chunga's picture

Is that guy flipped out or what? I think it's great. "I think we should do like they do in France...if the Bossman fucks with you kidnap the son of a bitch".

Sat, 04/09/2011 - 14:26 | 1153551 cossack55
cossack55's picture

"Does even CONgress know just how....." LMFAO. Damn Tyler, you really need to take your comedy on the road. Well, maybe in a Prius.

Sat, 04/09/2011 - 14:58 | 1153614 TemporalFlashback
TemporalFlashback's picture

Guest post.

Sat, 04/09/2011 - 18:17 | 1153922 cossack55
cossack55's picture


Damn normalcy bias has me looking for the Guest Post tagline.

Sat, 04/09/2011 - 14:31 | 1153557 Oh regional Indian
Oh regional Indian's picture

Un-elected is right. Chosen is more like it.

How can the government be immune from vicious debt cycles? The hack Al. Einstien got one thing right, compound interest is more powerful than god.

The numbers clearly show this is silly season now. The dollar will dip below 70 before the next weeks is out at this rate (literally).

The dollar is now radioactive.



Sat, 04/09/2011 - 14:38 | 1153572 RealitiveMind
RealitiveMind's picture


Sat, 04/09/2011 - 14:50 | 1153595 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The holding point is dxy 66.  Up until then, make sure to catch every edpisode of Danzig with the Starz.

Sat, 04/09/2011 - 16:42 | 1153811 slewie the pi-rat
slewie the pi-rat's picture

way to dis einstein, braniac! 

how many weeks 'is' gonna be 'out' b4 the dollar breaks 70, there, brainiac?

ok, ORI, slewie will play!  now that we are boehner-hard for the next few months of gooberminting, i say the PPT will jack the living shit outa the dollar index, next week.  they just waited on their interventions, so all could "see" how horrible the index would go south without the goobermint in charge and the PPT helping keep it all "stable".

btw, who is this killjoy who wrote this drivel, Putting it all in Perspective?  the only reason interest rates crept up, there, is b/c the PPT decided to chill, for political reasons. 

slewie sez big $$$ rally ahead.  fade that ORI!  lol!  go ahead!  my record speaks for itself.  well, whispers?  ok, i'm usually totally wrong.  but not this time!  a little reverse reflation for a few days, and the nation may last another whole year!  who knows? 

Sat, 04/09/2011 - 17:50 | 1153892 Note to self
Note to self's picture

Talk right, ya mo-ron.

Sat, 04/09/2011 - 14:29 | 1153558 godgunsandgold
godgunsandgold's picture

It's all a giant ponzi scheme, just for show, "See, we're actually getting things done on you're behalf."

How can you tell if a congressman is lying?...(wait for it)...the lips are moving.

Sat, 04/09/2011 - 14:29 | 1153559 covert
covert's picture

it's simpler than it looks. most people always overspend. they order more service than they can pay for.


Sat, 04/09/2011 - 16:35 | 1153795 stewie
stewie's picture

Go Away!

Sat, 04/09/2011 - 14:40 | 1153573 Jack Sheet
Jack Sheet's picture

some great comments from Jim Rickards (Twitter):

  • we're talking about fiscal 2011 which has a higher deficit than 2010 so in reality THERE ARE NO CUTS
  • 2010 deficit at $1.3T, & 2011(est) at $1.6T
  •  2010 outlays at $3.5 T, & 2011 (est) outlays at $3.8 T
  • These "cuts" are from auto-increases
  •  "We're spending more but not AS MUCH MORE as we threatened" moment? Only inside beltway is that a cut
Sat, 04/09/2011 - 16:11 | 1153747 Rainman
Rainman's picture

Not that I needed more convincing, but this budgeting debacle brought it all home. The government has built an ark for its employees and its thousands of sacred cows. They don't care if the mothership sinks with all the elders, women and children aboard. A catastrophic event will be required to swamp the ark and drown those on board.

Sat, 04/09/2011 - 18:21 | 1153932 cossack55
cossack55's picture

That event may be closer than anyone thinks.  Have you noticed milk prices lately? Been following the stories of radioactive milk above EPA rules in WA, AZ, VT, CA?  Soon you will be able to mow the lawn at night.

Sat, 04/09/2011 - 23:04 | 1154330 Oh regional Indian
Oh regional Indian's picture

Yer gonna moe that curly grass larry? Seriously, isn't this farce going in the direction of the 3 s's? 

Somewhere between radioactive milk and radiant spinach, there is both a truth and a lie. All of these readings are by givernment agencies right? Control money, control government, control food, control the people...not sure who said that, but someone wise in the ways of the world.

I'm sure geiger conters are also government approved, right? 

Such a time that at every turn we have to ask of ourselves... Cui Bono?

Who to trust? 


Sat, 04/09/2011 - 14:44 | 1153576 Misean
Misean's picture

If they financed all $14T in like 3-day paper, that would save a bunch o' cash until Tuesday...

Sat, 04/09/2011 - 16:39 | 1153808 stewie
stewie's picture

Sure let's go there...

Bring HFT to bond market and finance everything in sub-second debt @ .000000000000001%. 



Sat, 04/09/2011 - 14:51 | 1153577 Bastiat
Bastiat's picture

This is exactly why Ben cannot raise rates: it will slow "growth" and fed revenue and raise interest expense both increasing the deficit and the need for more borrowing --  death spiral to economic and currency collapse.  Got gold?  Alternative is continue to print and directly suppress rates -- inflation, currency collapse.  Got gold?

Sat, 04/09/2011 - 14:46 | 1153589 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Thought experiment:  POMO monetizes $36 billion in 15 minutes.  If the government needed to save $36 billion would not running a POMO auction do the work?  Or is POMO actually "creating" or rather freeing up $36 billion for the government?  Or, is it doing both, spending one side of the ledger, and freeing up the other.  Is Bernanke a genius majician, or a belligerent alchemist?

The gun isn't in your hand...the gun is in my hand.

Sat, 04/09/2011 - 14:55 | 1153602 tony bonn
tony bonn's picture

congress doesn't know or care how trivial their 38b is.... 38/3820 is how much? or for you congressmen, 38/1650...

the deficits are to take from the poor and give to the rich plutocrats and kleptocrats....we have to fight 3 wars dontcha know...

1.7 trillion usd in deficits is going where?? and 3820b in spending doesn't even begin to tell the trouble with the fisc....any business which kept books like the government would be locked up in a cell next to those mint silver coins....


Sat, 04/09/2011 - 15:06 | 1153612 A Man without Q...
A Man without Qualities's picture

"Our duty is most distinctly not to monetize - or even be perceived as monetizing - the debt of fiscally imprudent government. Throughout the history of nations, monetizing the budgetary excesses of governments has proven to be a direct path to economic perdition. Having already peeked inside that door, I feel strongly that we must now shut it, lock it and throw away the key. "

This is certainly not part of the baffle with bullshit plan.  The strength of these words is astonishing....

Sat, 04/09/2011 - 21:44 | 1154207 Mr Anderson
Mr Anderson's picture

YA, you peeked inside the Door!

   Why even open Pandora's box!

Once its open how do you close the door. A congress is elected by the people. 80% of the people have 7% of the wealth. Now that they know they can monetize their problems away, why work, why reign in spending.

There is no good end. There is no positive end. The Govt and the Fed are out of options. We need to quit talking about growth and hoping for growth. You cannot spend yourself out of a recession, you cannot leverage yourself out of a recession.

Sat, 04/09/2011 - 15:01 | 1153617 PulauHantu29
PulauHantu29's picture


It's laughable....seriously laughable. I carry $30 Bill in my back pocket now the dollar is so worthless.

Sat, 04/09/2011 - 15:03 | 1153623 10kby2k
10kby2k's picture


15 trillion in the hole and growing.   No more needs to be said. This country is fucked.

Crisis is not avertable.


Sat, 04/09/2011 - 22:13 | 1154262 Narcolepzzzzzz
Narcolepzzzzzz's picture

Short and succinct. +1

Sat, 04/09/2011 - 15:25 | 1153646 Quinvarius
Quinvarius's picture

It is interesting that the Fed really has no tools to fight inflation.  All the tools they have merely starve the economy of money by hoarding it in banks, who are speculating with it.  They have no tools to destroy money, and could not use them anyway.  All of their tools are designed to put the breaks on a hot economy.  The banks are not loaning now.  Good luck trying that garbage in this economy.  If the Fed raises rates here, it will show a spectacular misunderstanding of the monetary system.  We will all pay a huge price.  The dollar might have a bounce for a week, but it would end up falling even faster.  Debt based fiat monetary systems are tied to the economy in a way that gold backed hard money never was.  They require a constantly growing economy/tax base.

QE will continue in stealth forever.  I expect large US corporations to secretly get many more rounds of free zero percent money as well.  This is what no capitalism and no free markets looks like.

Sat, 04/09/2011 - 15:25 | 1153658 max2205
max2205's picture

laws of the country forced them..... Really???????!!!!

Sat, 04/09/2011 - 15:30 | 1153680 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

The Fed is totally unconcerned with the impact of rising rates since they will be monetizing the debt,the government can then spend as much as they like(much as they are now).They are monetizing around 70% of the defecit now,it's not that great a leap to 100% is it?They have no intention of issuing new debt at the higher rates the market would demand due to continual debasement, since they know the government could not possibly pay the interest on it let alone repay the debt itself

This can go on for a very long time,until the dollar is so debased that Americans can no longer afford basics like food,but by the time the people rise up and protest it will be too late.

Sat, 04/09/2011 - 21:47 | 1154216 Mr Anderson
Mr Anderson's picture

Why do you say it can go on a long time?

  It will not take much higher increases in food prices before the SNAP participants cannot feed their families adequately.

  It will not take much higher gas prices before fuel surcharges for everything you buy go up.

  You can only squeeze a balloon so for before it pops.

Sat, 04/09/2011 - 15:56 | 1153715 apberusdisvet
apberusdisvet's picture

I wonder if they can find a few cells at Gitmo for our corruptocrats.  If this was any other country, there would already be marches on Washington; but then any other country has an educated populace; apparently we do not.

Sat, 04/09/2011 - 20:31 | 1154078 Dugald
Dugald's picture

  'but then any other country has an educated populace; apparently we do not'

Think you hit the nail on the head. 

Reading ZH I am constantly surprised by the poor spelling.

Sat, 04/09/2011 - 15:57 | 1153722 Waterfallsparkles
Waterfallsparkles's picture

All I need is one of those liar loans and I will be fine.

Sat, 04/09/2011 - 16:14 | 1153751 jmc8888
jmc8888's picture

Why don't the big idiots figure out that you can cut trillions without affecting one service? Cancel the frauds, cancel the bailouts, with Glass-Steagall.

Glass-Steagall will 'cut' most of what you need, then you need the political will to get rid of say the corporate bankster imperialist wars. 

People need to focus on what's real....our debt, is FRAUD.  Other's debt is FRAUD.  The prices we pay, since it has so much FRAUD debt built in, is FRAUD.

Cancel the frauds, and THEN see what 'services' you 'need' to cut. I'm quite sure you'll find out that not only do you not need to cut, you have ample room to increase the programs that HAVE been cut, or whose funding has been increased under inflation the past 40 years.  Oh yes, the gov't providing services to the people was NEVER what got us into trouble, it was the fraud inherent in our imperial monetary system that SOLELY did it.  (and still is)

Why debate HOW to pay off fraud...printing or cutting? Just call it fraud, and refuse to pay it.  But even better, do it legally with a Glass-Steagall wipe-out of the fraud.

So many idiots, paid alot of money, to get things completely wrong.

Oh 'we're in trouble if we can only cut 38 billion'.  Why? Since the answer is trillions upon trillions of debt are fraudulent.  The only way these idiots answer makes sense, is if we somehow are stupid enough not to call a fraud a fraud, and deal with it, because we're vaginas, and stupid, and want to make 'people pay' through printing or services cuts to pay off that fraud.

If a restaurant gave you a bill, for food you didn't order, receive, nor eat, why would you pay it?  Because you're a damn fool? Because you're a pussy? 

Because that in essence (one of the two, if not a third being 'captured') is what we're dealing with.  Dem, Repub, tea, Ron Paul...ALL OF THEM...want us to keep the fraud legitimate.  So fuck them for being foolish vaginas.




Sat, 04/09/2011 - 16:21 | 1153760 Waterfallsparkles
Waterfallsparkles's picture

Check out this video from Market Ticker chart overlaying prior collapse to todays chart.

Love it:

Sat, 04/09/2011 - 16:52 | 1153829 slewie the pi-rat
slewie the pi-rat's picture

hey, toots!  thx for the year-old karl denninger "update"!  not to mention the liar loan "gag" and the swell, innocent emotions of a "loving" asswipe troll.

Sat, 04/09/2011 - 18:00 | 1153902 Note to self
Note to self's picture

What?  Are you home-schooled or something.  Use capitals.  Use complete sentances - you knwo - verbs AND nouns!  You write like an imbecile.

Sat, 04/09/2011 - 19:54 | 1154035 Waterfallsparkles
Waterfallsparkles's picture

Yep, we give the Government our Money and they use it on unmentionable parts of their body and we get the flush tax.

Sat, 04/09/2011 - 16:54 | 1153830 equity_momo
equity_momo's picture

Thats a year old. And in hindsight very wrong.  

Sat, 04/09/2011 - 16:26 | 1153779 UP4Liberty
UP4Liberty's picture

I'm not worried about the 12 - 15 trillion...I'm curious to what the Fed and the central banking cartel has in derivatives - possibly "QUADRILLIONS"?

Sat, 04/09/2011 - 16:35 | 1153797 Pepe
Pepe's picture

Fisher:"Indeed it may well be that we should consider curtailing what remains

of QE2.After all it is our duty to hold inflation at bay"

Bernanke: "Get the fuck out of here"


Sat, 04/09/2011 - 16:38 | 1153801 eureka
eureka's picture

ZH et al repeatedly state that the Fed buys 70% of U.S. Treassuries. How then does one explain todays Bloomberg claim that:

"The class of investors that includes foreign central banks bought 60 percent of the $66 billion in benchmark 10-year U.S. notes sold this year, up from 42 percent in 2010, according to the Treasury Department. As of January, foreign investors increased their ownership of Treasuries to $4.45 trillion from $3.7 trillion a year earlier, according to the latest government data."

Sat, 04/09/2011 - 20:33 | 1154081 Vlad Tepid
Vlad Tepid's picture

I think thay's sort of the point of this post.  $66 billion in 10 year notes since Jan? That's NOTHING. It's like saying 60% of 3%.   Most of the debt is being issued SHORT TERM, not long term.  The TOTAL amount of debt (short and long) being bought by the Fed may equal 70%.  

Sat, 04/09/2011 - 16:38 | 1153806 ivars
ivars's picture

USA debt growth has characteristic pre-crash signs in it-log-periodic growth pattern turning into super-exponential peak , meaning a correction (REDUCTION) by e.g. 3-5 trillion in 2013-2014. The buildup for this crash started at least at 1945, if not earlier. ( look Sornette/Johanson for how such crash buildup can be seen in growth patterns).

But by what mechanism? Here are few thoughts on that..

Coincidentaly, 2013 timetable for debt correction  ( crash reduction) coincides with independently derived graph for silver prices 2011-2012 which show a definite upwards trend (at level 100 usd).

So its actual devaluation of world reserve currency, by tying it to PM at some rate ( higher than 100 usd for silver, higher than 3600 Usd for gold). Interesting approach with huge geopolitical consequences. I will check the continuation of that graph to see at what levels USD may be tied to PMs if it happens in 2013 or 2014.

I checked. If it happens in 2013, its basically the same 100 USD/ ounce ( 3600 USD for gold). If it happens in 2014, it will be 150 USD/ounce ( 5400 USD /ounce for gold).

Does that level is what some people have been mentioning for USD gold standard based on some other assumptions?

Sat, 04/09/2011 - 16:42 | 1153813 Timmay
Timmay's picture

Raising rates = stronger dollar= lower commodities= boost to the economy.

Gradually Raise rates, Gradually Raise taxes, Gradually Cut spending and telegraph your intentions to target the interest rate in 10 years and target the tax rate in 10 years, with a "plan" to return to current levels in 20 total years. Target and telegraph Spending cuts over next 10 years. 

Rising Rates will Curtail Gov. borrowing, Rising Taxes will narrow Budget Deficits, Spending Cuts will close the Gap.

If you knew what rates would be for next ten years and tax rates (all higher) you would get the lead out TODAY and have some level of certainty what was coming next. Stronger dollar would lower commodities, most importantly energy and give us all an immediate boost in income. 

Start domestic energy production to keep all the oil revenues in house and now we have something....


Sat, 04/09/2011 - 20:06 | 1154046 dracos_ghost
dracos_ghost's picture

Raising rates gradually won't slow commodities prices IMO. It would have to be abrupt and substantial to stem the tide of the commodities juggernaut at this point.

I'm not sure what the crossover point would be between rate->commodities but didly little 25 bps moves ain't gonna cut it.

The WS boyz will bitch slap the Bernank if he tries a gradual strategy. He screwed up announcing the 15 minute ejaculation technique of central banking inflation control. Who else sees no bids on treasuries until some acceptable rate when he pulls the trigger.

He better do it while he has POMOs in the hopper as a buffer.

Sat, 04/09/2011 - 16:46 | 1153817 Waterfallsparkles
Waterfallsparkles's picture

Very simple explanation of Economic Planned Collapse in a video.

Sat, 04/09/2011 - 17:05 | 1153849 slewie the pi-rat
slewie the pi-rat's picture

"what he said" again, eh?  thx for telling us it's all very simple, too!  wowser!  lucky us!

Sat, 04/09/2011 - 17:03 | 1153845 Kyle Reese
Kyle Reese's picture

I read that in the 8 days prior to the budget cuts we had accumulated 54.1 billion in debt.



Sat, 04/09/2011 - 20:33 | 1154080 tomster0126
tomster0126's picture

That's right.  what a circus, huh?  The inmates are running the asylum!

Sat, 04/09/2011 - 17:22 | 1153865 Highrev
Highrev's picture

Does even congress know just how trivial their cuts look relative to the potential increases in debt cost?

Clowns are clowns.

Sat, 04/09/2011 - 17:43 | 1153884 ZeroAffect
ZeroAffect's picture

Bought 'n paid for with your $$$....

Sat, 04/09/2011 - 17:35 | 1153877 HankPaulson
HankPaulson's picture

We seem to be fretting that this situation might not turn out well for America, but surely by now we know the formula. The USA will be taken deeper into debt, providing very profitable opportunities for increased bank/financier ownership of the country and its inhabitants.

It was kind of cool to see Obama himself engaging in some financial terrorism, completing the circle. Now we've seen:

* "Give the banks billions, or we'll blow up the economy.", and

* "Take these billions in cuts, or we'll blow up the country."


Like yin and yang :)

Sat, 04/09/2011 - 17:49 | 1153889 howardstark
howardstark's picture

This is exactly why stagflation will ultimately lead to hyperinflation.

We can't afford the debt service payments if interest rates were to rise.

We are within a couple of years of just the interest payments exceeding $1 trillion annually:


Sat, 04/09/2011 - 18:21 | 1153927 ivars
ivars's picture

I did some more predictions on USA crashing its debt by returning to gold standard. The value of gold, if this is done in 2014, came out around 5400-6000 USD/ounce.

I was wondering who will get the haircut. It seems it will be those mony instruments that form M2 and M3 above M1 and M0. Is that feasible? That would be a major upset as it involves domestic deposits as well as foreign and domestic short term debt.

But it will happen in some form, the correction ( reduction) of USA debt no later than in 2014.






Sat, 04/09/2011 - 18:22 | 1153929 Urban Redneck
Urban Redneck's picture

Clinton & Gingrich never created a budget surplus, they had GS Rubin & Greenspan trade the 30 year fixed for a 30 month ARM.

Obama & Boehner will never create create a budget surplus, we have Turbo Tax Timmy & Chairsatan trading the 30 month ARM for CDS.

Rinse, Repeat

Sat, 04/09/2011 - 18:56 | 1153974 JR
JR's picture

Tchir asks, "Should one man have this much power?" The answer is No. 

The Daily Bell Staff Report, “Truth About Bigger Wall Street Bonuses,” sums up America’s plight:

”Central banking was the last piece of the puzzle when it came to the centralization of stock-trading that the power elite had created in America. The Federal Reserve was set up in 1913 along with the graduated income tax. Today, in hindsight, we can see how all three of these entities meshed together in a way that allowed the elite to drain a maximum amount of money out of the American economy, while gradually bankrupting the middle class.”

Or, as Tyler Durden put it in “I Print Therefore I Am”: [I]n the interim 101 years (from 1910 to 2011) the Fed's overlords from Wall Street, managed to steal over 98% of the wealth of Americans in the form of shadow currency devaluation better known as inflation.”

All the checks and balances created by the Founding Fathers to keep their newly formed Republic “by and for the people” – the Legislative, Executive and Judicial branches – are now centrally concentrated in the hands of the current system-as-it-is – i.e., the oligarchic Federal Reserve System of central bankers with their current point man Benjamin Shalom Bernanke.

Here are a few of the ramifications of how that power destroys wealth and substitutes indentured servants and wealthy overlords:

Average hourly wage earned by workers in March (BLS) in an average 39 hour work week -- $22.87.

In 2010, 25 hedge fund managers earned a combined $22.07 billion.

Median CEO pay jumped 27% in 2010 (USA Today) while workers in private industry saw their compensation grow 2.1% in the 12 months ended December 2010 (BLS).

52 million Americans are without healthcare.

The average American spends 23% on food and gas; he will spend $700 more on gas in 2011 than in 2010.

25% of households have zero or negative net worth as compared to 18.6% in 2007.

China produced 19.8% of all the goods in the world last year; the U.S. 19.4%.  The U.S has lost 46,000 manufacturers due to off-shoring by multinational corporations.

The U.S. has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

New home sales hit a new all-time low in February, down 80 percent from their 2005 peak.

Six million Americans have given up looking for work; the BLS average length of unemployment is at an all-time high. (Thanks to Economic Collapse Blog on April 7 for selective statistics from Feeling Depressed? 27 Depressing Statistics About the U.S. Economy... Charles Hugh Smith in the Devolution of the Consumer Economy posted April 6 on ZH gives many more statistics.)

With a 2,313% increase in CPI since 1907 when Citibank apparently was as insolvent then as it was in 2008 and the bankers push for central control began in earnest, here are today’s typical Certificate of Deposit rates paid by Keypoint, a California credit union, to IRA and regular savers. Obviously, Bernanke, who swears there is little or no inflation, has wiped out the last “safe haven” for American families to store their earnings and wealth along with the safety of equity and hours of personal labor in their homes.

Minimum Balance $100,000 and Yield (APY):

1-2 Months  0.10%

9-11 Months  0.30%

12 to 17 Months  0.65%

18 to 23 Months  0.80%

24 to 35 Months  0.90%

36 to 47 Months  1.50%

48 to 59 Months  1.75%

60 to 84 Months  2.00%.

Sat, 04/09/2011 - 20:42 | 1154098 Vlad Tepid
Vlad Tepid's picture

He hasn't taken the PMs out of our hands (yet). Last I checked, the dollar/PM ratio was a little better than those rates up there.

On a side note, I was in a bank that caters to Pacific Islanders yesterday and saw a prominent ad for $5000 min 60 month CD paying 1%. And if you took the deal they gave you a commemorative "Year of the Rabbit" thingy. Gold?  Silver?  No, a crisp greenback encased plastic laminate.  And they wouldn't be dangling it if people weren't biting.  What was it that P.T. Barnum said...?

Sat, 04/09/2011 - 19:03 | 1153982 honestann
honestann's picture

End the federal reserve.

End the federal government.

The experiment with "central bank" is an absolute, complete, utter disaster.  Shut it down, permanently.

The experiment with "central government" is an absolute, complete, utter disaster.  Shut it down, permanently.

All this elitism and authoritarianism must end.  Individuals can and should make their own decisions, and enjoy/bare/suffer the consequences of their own actions... and nobody elses'.

Sat, 04/09/2011 - 19:17 | 1153994 Bansters-in-my-...
Bansters-in-my- feces's picture

So when are you's all going to rally and throw the Goverment out.

They are OBVIOUSLY,NOT for the people.

And the ones that did vote them in are brain dead.

Sat, 04/09/2011 - 20:08 | 1154047 thames222
thames222's picture

Always a short-term fix and a Band-Aid instead of a real solution for the future...thanks again Bernanke, everyone thinks you saved the day this time but we will throw you down.

Sat, 04/09/2011 - 21:05 | 1154146 RobotTrader
RobotTrader's picture

By the way gold and silver are acting...

It is quite obvious that the printing is simply going to accelerate.

Why worry about rate increases, when you can simply speed up the printing presses to run even faster?

Sat, 04/09/2011 - 21:24 | 1154180 khakuda
khakuda's picture

Ben must just throw a fit when he goes into Taco Bell and sees that he can still buy a Taco for only $.69.  I'll bet he can't wait to get it down, hit the can and get back into the chopper.

Sat, 04/09/2011 - 22:35 | 1154299 web bot
web bot's picture

If we connect the dots, we see that Bernanke is going to hold news conferences on a regular basis going forward.

Make no mistake, this is his efforts at signalling to calm markets. As QE2 is wound down, he's looking at a massive sell off so this is an attempt at signalling on  regular basis. We'll see how it works.

Sun, 04/10/2011 - 07:16 | 1154641 Zero Govt
Zero Govt's picture

Peter Tchir, TF Market Advisors

"Too much short term debt helped kill Greece and is killing Portugal... If we know we won't be repaying debt for 10 years, we should borrow more out to 10 years."

Point of Order: what killed Greece and Portugal was the usual suicide socialism of out of contro, spending. The debt is a pure by-product of political indicipline amongst the political parasites that they can run their country into the ground.
But your 'advise' is wanting administrations to kick the debt can for running budget deficits further down the road, from say 3 years to 10 years? ..namely for other administrations to repay the debt buck because the current is incapable of repaying the debt they ran up? Things that make you go Mmmm!

"At least Ben isn't responsible for this fiasco. That is Treasury."

Yes but one wonders how much Treasury has continued on its suicide socialist path of Big Govt, Big Spending, Big Debt precisely because they know Ben is such a big softy. I wonder if Timmay and Obumma continue to spend like credit card crazed banshees because Benny the Bean is running an 'accomodative policy'. Is Benny so innocent in all this?  Things that make you go Mmmm! 

Here's a suggestion, novel and way out from left-field i know, but how about Govt stops spending, balances its fuking budget, has no debt whatsoever it cannot repay in its own term and has to live within its means (cuts its economic clothes to the size of the economy)? 

I believe only one US State (is it Idaho!!) has a truly elightened policy of zero debt. What do you think about that rather than another article on re-arranging the deckchairs on the Titanic? Should we be aiming for the best like Idaho or should we continue to aim at the lowest common denominator of being shifty, buck passing and unbalanced budgets because spending is out of control?  Things that make you go Mmmm!

Do you think Obummas new 'Committee of Fiscal Responsibility' will be coming up with that recommendation soon? ...they seem to be taking an awful long time to do a whole lot of nothing. The public sector eh, things that make you go Mmmm!

Sun, 04/10/2011 - 08:58 | 1154718 css1971
css1971's picture

WTF?  Don't you know what money is?

No debt, no money.

It is really that simple.

Under the exising monetary system, EVERYONE is up to the eyeballs in mountains of debt. If you personally are not, then good luck... Your friends, neighbours, relatives, employers, employees and governments are.

You can try to blame people, governments, but the reality is that 95%+ of all the money which exists is based on debt. Each pound/euro/dollar of it is backed by an exponentially growing pound/euro/dollar of debt. No debt means no money. Escaping the debt trap is almost impossible, if... no, when...  the debt implodes, you are going to get sucked into the situation, whether you like it,  whether you personally have prepared, or not. Everyone round you is going to get sucked in and they'll take you with them.

Oh and anyone who thinks PMs will save the day... Fiat vs gold is a simple minded, bullshit argument. The credit creation process works perfectly well with gold and silver as with paper. Fractional reserve banking was created under a precious metal backed monetary system and is probably already in process with SLV and GLD.

The problem is, and always has been,  The Fucking Bankers, so please stay fucking focused on the problem.

Sun, 04/10/2011 - 13:25 | 1155106 stewie
stewie's picture


Good post.

You raise an interesting question:  What is the percentage of all the money in the system that is backed by a loan?

From what I understand, today, 100% of newly created Money is backed by debt.  When debt is defaulted on, the debt goes away, but sometimes, not all the money is repaid, because the assets of the debtor may not be enough to cover the balance of the loan.  So there is some money that remains in the system that is not backed by debt anymore.  I'd be curious to know how much that is, but I suspect nobody knows. It would require going through the financial statements of all banks since... when?  Initially some Gold was exchanged for Fiat, and that wasn't backed by a loan.  So the answer is not trivial.  Maybe your 95% estimate is not too far from the truth. 

Also, although the current situation of Bankers profiting from interests on loans (of money they don't have) is somewhat disconcerting, Banking, when properly regulated, is not bad. Even Fractional Reserve Banking of Fiat has merits.  Banks take risks and sometimes go bancrupt when they make bad loans.  So the vilification of all Bankers is inapropriate.

The real problem comes from the synergetic fuckfest of Central Banking Cartels and Governments.  They are not accountable for their actions, and corrupt everybody with their god-like money creation powers.  Governments create Money too via the Fed you know.  By Law, when the Treasury issue a bond, the Fed has to take it, sell it and give the proceed to the governments.  Money must be treated like itis precious, but it is not,  because everybody likes free money.  Apart from Ron Paul and a few others, I don't see anybody making a stand against the corrupting powers of TBTF and Governments.  

Sun, 04/10/2011 - 15:02 | 1155422 css1971
css1971's picture

What is the percentage of all the money in the system that is backed by a loan?


Total US public debt: 14 trillion

Total US debt including public: 50 trillion.

The number you are looking for total credit, is the M3 money supply figure.  They don't publish that any more, but M2 which I suppose is the next best number is 9 Trillion. The only "real" money (coins and notes) which exists, M0 is about 940 billion US dollars.

See the problem? When credit pays debt, credit vanishes. The 14 trillion public debt can't be paid off never mind the 50 trillion total debt. The only option is to "grow" the economy and take out bigger loans to pay off the current round of loans. Or default of course.

Your answer, how much of US money is backed by debt? 550%

Or, 5300% of physical money.

The public debt is a sideshow. Amusing to watch the monkeys cavorting and throwing shit, but not the main attraction.


Sun, 04/10/2011 - 18:43 | 1155850 stewie
stewie's picture

Thank you for your insights.


Sun, 04/10/2011 - 18:32 | 1155810 Zero Govt
Zero Govt's picture


You say "no debt equals no money" but I have $0.00 personal debt AND i have money (electronic digits in my bank account and cash in my pocket). That money is value, which is what money is: a means for exchanging or storing value.

If your point is our money is central banking created credit then yes it is a form of (worthless) debt. Benny will give you fuk all for the notes he issues because he's a worthless piece of crap with a tenuous grip, a State sanctioned and enforced (private) monopoly on money.

But only at the end point of currency collapse, when society no longer accepts money as a means of exchanging value is money worthless and so too its numerical debt (cue barter or Gold and Silver coins)

Sun, 04/10/2011 - 10:14 | 1154777 ageofreason
ageofreason's picture

What is worrisome the most is that we really on a treasury that is run by 'tax-cheat' Timmy and was previously run by a sleestak......

Sun, 04/10/2011 - 22:13 | 1156472 Ted K
Ted K's picture

The old Wall Street stand-by:  When you don't have the testicles to make a real forecast, bitch whine, bitch whine, bitch whine about government policy until each paragraph looks like the proceeding one. Then sum up "Which is my market analysis for today".

Hey Biffy, if I need bitching about the Gov labeled as "market analysis", I'll go knock on my fucking neighbor's door, and he is as much of a damned idiot as you are.

Do NOT follow this link or you will be banned from the site!