The REAL Reason Ben Bernanke Leaves a Paperweight on the “Print” Button When His Finger Gets Tired

Phoenix Capital Research's picture

We’ve been
over the numerous BS excuses that US Dollar destroyer extraordinaire Ben
Bernanke has made for QE enough times that today I’d rather simply focus on the
REAL reason he continues to funnel TRILLIONS of Dollars into the Wall Street


I’ve written
this analysis before. But given the enormity of what it entails, it’s worth
repeating. The following paragraphs are the REAL reason Bernanke does what he
does no matter what any other media outlet, book, investment expert, or guru
tell you.


Bernanke is
printing money and funneling it into the Wall Street banks for one reason and
one reason only. That reason is: DERIVATIVES.


According to
the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the
Second Quarter 2010 (most recent), the notional value of derivatives held by
U.S. commercial banks is around $223.4 TRILLION.


Five banks
account for 95% of this. Can you guess which five?



Looks a lot
like a list of the banks that Ben Bernanke has focused on bailing out/
backstopping/ funneling cash since the Financial Crisis began doesn’t it? When
you consider the insane level of risk exposure here, you can see why the
TRILLIONS he’s funneled into these institutions has failed to bring them even
to pre-Lehman bankruptcy levels.



Ben Bernanke
is a stooge and a fraud, but he is at least partially honest in his
explanations of why he wants to keep printing money. The reason is to try to
keep interest rates low. Granted he’s failing miserably at this, but at least
he understands the goal.


Of course,
Bernanke tells the public and Congress that the reason we need low interest
rates is to support housing prices. He doesn’t mention that $188 TRILLION of
the $223 TRILLION in notional value of derivatives sitting on the Big Banks’
balance sheets is related to interest rates.


Yes, $188
TRILLION. That’s thirteen times the
US’s entire GDP and nearly four times WORLD GDP.


Now, of
course, not ALL of this money is “at risk,” since the same derivatives can be
traded/ spread out dozens of ways by different banks as a means of dispersing


However, given the amount of money at
stake, if even 4% of this money is “at risk” and 10% of that 4% goes wrong, you’ve
wiped out ALL of the equity at the top five banks.


Put another
way, Bank of America, JP Morgan,
Goldman, and Citibank would CEASE to exist.


If you think
that I’m making this up or that Bernanke doesn’t know about this, consider that
his predecessor, Alan Greenspan, knew as early as 1999 that the derivative
market, if forced into the open and through a public clearing house would
“implode” the market. This is DOCUMENTED. And you better believe Greenspan told
Bernanke this.


In this
light all of Bernanke’s monetary policies and efforts are focused on doing one
thing and one thing only: trying to shore up the overleveraged,
derivative-riddled balance sheets of the Too Big to Fails.


The fact
that the bank executives taking this money and using it to pay themselves and
their employees record bonuses only confirms that these folks have NO interest
in taking care of shareholders or their businesses. They’re just going to take
the money and run for as long as this scheme works.


I don’t know
when this will come unraveled. But it WILL. At some point the $600+ TRILLION
behemoth that is the derivatives market will implode again. When it does, no
amount of money printing will save the Too Bloated To Exist banks’ balance


At that
point, it’s game over for Wall Street and the Fed.






PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.


I call it The Financial Crisis “Round Two” Survival
. And its 17 pages contain a wealth of information about portfolio protection,
which investments to own and how to take out Catastrophe Insurance on the stock
market (this “insurance” paid out triple digit gains in the Autumn of 2008).


Again, this
is all 100% FREE. To pick up your copy today, got to
and click on FREE REPORTS.


publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.





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Diogenes's picture

Don't those credit default swaps and other derivatives have a time limit? Don't they expire after 1 year or 2 at the most? So shouldn't they all be expired by now?

Or did the big banks keep selling them after TSHTF in 2008?

tony bonn's picture

this article is a very timely reminder of the real reason satan is spending us into hell....

the irs are of tremendous moment as is the size of the debt....

qe now and qe forever....

geno-econ's picture


Superbowl-----more hollywood than sports

Economy-----more spending than savings

Wall St-----more greed than investing

Politicians-----more puppets than leaders

Voters-----more gullible than sensible

Seasmoke's picture

here to me (ticket fiasco story below) is a perfect example of what those who are in power are doing.....granted its not nearly as important as the world economy, but it tells you the mindset......the NFL knew midweek there could be an issue with the seats, but instead of informing the public, they held the information and caused the problem to become much much worse when they couldnt meet the deadline because they kicked the can until the very end, hoping that it would work out and they didnt have the consideration of the people who had tickets for those seats who would be compromised and could have made alternative plans if they had a heads up of the problem......this is the same that is happening now, they will not give any information to the public until its "kickoff" and then it will be too late for most


Grubman admitted that they realized there might be a problem with some of the seating in the "middle of the week" -- but didn't notify fans because it wasn't until gameday when it became clear there was a "distinct possibility" they wouldn't be able to accommodate fans.

"We made a judgment that we had a very good shot to be able to complete it," he said. "We made a judgment that it was the right course of action to bring the fans in, rather than to discourage them or to create a sense that they wouldn’t have the information necessary."

The affected fans waited in the Party Plaza area as organizers figured out what to do. Goodell said they weren't certain exactly which seats and which fans were going to be affected, which is why they handled it this way. He also said he spoke with some of the fans but would reach out to the remainder in the coming days.

The NFL characterized the main issue as "running out of time." That's a tough one to explain, because it had control of the stadium for several weeks and knew the work that had to be completed. Grubman said the affected seats were not last-minute adds, and that the problem was installation and not design.

TeMpTeK's picture

The only way for the Globalists to win is to destroy America from within.. first by diluting our sovereignty with open borders and laxed immigration policies. then destroying our American pride through political correctness...... Our currency destruction is next and will be the catalyst that seals our demise ...When so many Americans become dependant on govt for food and water they will be broken..Schools stopped teaching our kids the constitution years ago..... this is when they will take our gun rights from us and then folks its over... There is no other explaination as to why our govt officials and the fed could not have foreseen the events taking place today..This is an Inside Job if I ever saw one for sure.... I dont care if I get junked either!!!

geno-econ's picture

Most derivatives by far cover interest rate and currency transactions. Volitility therefore depends on soveriegn debt defaults , fiscal and monitary policies, but more importantly on Swans of various colors and shades. According to Greenspan , derivatives lower  risk for counterparties and as we all know greenspan is always right except when the market is wrong

disabledvet's picture

Egypt on line three Mr. Chairman.

Egypt?  I don't know that guy.  Put him on hold...tell him it'll just be a minute.

edwardo1's picture

The Fed, from its inception, has always been about one thing- despite its, so called, mandate, or its charter-providing "liquidity" and acting as the lender of last resort to the commercial banking system. That's it. And The Fed, unless it has access to massive amounts of physical gold, is going to go down with the commercial banking scum it seeks to save at the expense of pretty much anything else.  It's a rigged game, and has been from the beginning, given that the 16th Amendment-remember, we must pay our taxes in FRNs-was passed the same year that the demon seed Fed was born.

flattrader's picture

It's not just the total notational that each bank has...

It's the ratio--

One of my personal favorite measures is the ratio of the OBS notional balance versus the balance sheet assets of just the operating bank portion of the BHC. This figure gives you an idea of how much leverage derivative activity within the bank contributes to ongoing business operations.

This article is a year old, but he gets it right.

...and it's even scarier.

flattrader's picture

I believe the OTC derivatives nos. from 2010 will be reported sometime in Feb or March.

Another good article written about the same time last year.

aerial view's picture

Thanks for restating what most at ZH already know but seem to put more energy into shooting the messenger, trying to be one line comics or just fighting among themselves while ignoring the most effective and maybe the only method for reform and justice:repeatedly disperse this vital info to the masses i.e. talk to family, friends, aquaintances and whoever will listen before it's too late.

instinctiveDrift's picture

Only look I get from family or friends is the glazed over eyes look.  


I feel like I'm waving donuts in front of Homer Simpson some times.

topcallingtroll's picture

Of course. And this buys some time for the banks to continue to hedge off that interest rate risk to the masses with double inverse floater repo agreements and cubed swaptions, or whatever is the latest derivative craze.

cougar_w's picture

blah blah blah blah blah blah blah blah TRILLIONS! blah de blah blah blah blah TRILLIONS!! blah blah blah blah TRILLIONS!1! blah blah blah blah blah blah.

Ok Tyler, my guest post is ready.

No I'm not making fun, that's just how the world is now. It's gone from a problem to a disaster to a farce.






patience...'s picture

"these folks have NO interest in taking care of shareholders or their businesses"

And why would they. If/when it implodes I'm sure they have contingency plans.

patience...'s picture

Oh and if you haven't made plans yourself, you'll have no-one to blame.

LawsofPhysics's picture

This "wealth" or capital is only real in a "mark to unicorn" accounting world.  Hedge accordingly.

jpintx's picture

How did you arrive at the total?  In simplistic terms, is it the long side, or the short side or both.  Would it not be necessary to analyze the positions to determine what the risk actually is prior to declaring the end of the world?  I'm not saying that any of these folks are geniuses, just that folks like Goldman tend to be the bookie in the deal, making money on the vig, not caring who wins.  I don't know the reporting rules these days, but some years ago, the auditors insisted that my calendar spreads, long the front short the back (or vice versa, can't remember) be reported by adding the two sides together, might that, or similar, be the case here?

topcallingtroll's picture

It wouldnt make quite the headline to report something similar to VaR.

km4's picture

Obama thinks he's Kennedy 2.0

Obama To Business Execs: 'Ask Yourselves What You Can Do For America' : The Two-Way : NPR

"He couldn't pour piss out of a boot if the instructions were written on the heel."


blindman's picture

the world really needs a pre total collapse claw back

committee to be set up immediately.  check


Peter Tosh 'Equal Rights" & 'DownPressor Man'

shortus cynicus's picture

Game may be over only if there are rules to follow and someone to oversee the play.

If derivatives are not public and nobody knows nothing, so who cares?

POMO operations transfer some money in visible way so we have something to talk about, but who knows how much money is simply created by FED/TBTF just under cover ?

It is just serious question: if some bank creates electronic money just for own use, how anyone can see and detect this fraud ?

CPL's picture

Ever fart silently in a group of people and let it linger without taking responsibility?


It's like that except everyone is dropping "roses" and nobody is bothering to notice that the room stinks of ass gas.  The finger will only be pointed as soon as someone outside of the room enters and proclaims "fuck what stinks?!?".

Then the rule of "they who smelt it, dealt it" applies.

Since that person outside coming in is the general public, it will obviously be our fault.  Not the people stinking up the room.

instinctiveDrift's picture

Now this is a post the "common man" can understand the implications of... 


Whats that smell's picture

I hear ya,

Bernak's fertilizer will make a tree grow to the sky if it is applied properly.

dick cheneys ghost's picture

thanks for sharing. more info about this subject is needed.



Rainman's picture

I think it is safe to say the entire globe is not worth 600 trillion fiatscos.

GottaBKiddn's picture

Only inflation can kill debt. Only if the sheeple still believe that all debt should be paid back in full, will they remain loyal slaves. Groaning, but loyal.

Today the Capitalist giants have been used to absorb horrendous debt, that is to be paid back by taxpaying sheep. Nothing to see here.

Opposition to the system will bring crushing punishment, and only those who are willing to go back to work will be spared. Just the facts, mam.

eatthebanksters's picture

You Gotta be kidding me...only inflation kills debt?  Bankruptcy discharges debt as well.  The issue is simple, let the TBTF banks fail and watch the system fail, or, babysit the banks and the kleptocrats that run them and let 99% of the poplulation suffer an immense reversal in living standards.  Personally, I think having the system collapse might be preferable to years of depression and a society which emulates those that are successful,  while integrity and character disappear and are replaced by a free for all system where laws mean nothing.  Just look at the situational ethics of Obummer, Geetner and the Bernank.  Doesn't it tell you something when your leaders lie and break the law?

Tic tock's picture

Indeed, this is the beauty of the situation..the financial architecture is so unbelievably bollocksed..that there is nothing that can be done to reinvigorate Agg. Demand...there will be no Consumer at anywhere near sufficient levels to handle built capacity, no matter how much is whittled from company profits towards investment. Even the rapid inflation in prices can only mask a substantial drop in demand for so long - believe it or not. The simple reason for this is the difference between wage inflation and price inflation: ultimately Doods and services have to be used by the bankers human pets. And there is no way on Bernanke's Earth that industrial policy will be changed to the degree required to bring wage inflation in line with price inflation. Governments, the other source of major consumption require their bonds to be reflective of economic growth, see wage inflation or lack thereof. 

This is the beautiful thing - for the major banks to be propped up, the real economy must be disembowelled. The level of capacity will be severly diminished, and then, once the dust finally settles...we will either have complete totalitarianism, or a far more relaxed and equitable industrial relations policy, where there will be a necessity for the employed to be far better paid in real terms; which strongly implies a far less dominant banking sector. 

VaJim's picture

It’s sad most people take Bernanke’s reason for pumping the Fed balance sheet as being to stimulate employment or support housing.  If true, he could be excused as sacrificing the Fed and taxpayer for the collective (to use Obama’s word) good.  It’s just not true IMO.  He’s trying to save the banks, the vast majority of which, are asset insolvent.  Liabilities exceed assets at fair value to use the US Bankruptcy Act definition.  The only way to save the banks is to ‘give’ them plenty of liquidity and a riskless net interest margin with which, in about 10 years, they can internally re capitalize themselves.

Sacrifice the taxpayer who will have to pick up the tab for bad Fed assets, sacrifice the retired person who can’t get a fair rate of interest on his life’s savings, sacrifice the wage earner who must pay higher gas, food and other costs……..  just so we can save Bernanke’s banks.  


sgt_doom's picture

"It’s sad most people take Bernanke’s reason for pumping the Fed balance sheet as being to stimulate employment or support housing."

True, but like Capt Willard's comment below, it's because they, and he or she, simply mindlessly repeat something they heard on the corporate non-media over and over and over again.

The Ameritard is hardly capable of thinking for themselves or thinking independently nor analytically.

If only they could find their vaginas?

Captain Willard's picture

VaJim has it right.

But the article above is just too simplistic. Derivatives are "zero sum": there's a winner for every "loser". Also, they get "trued up" as the underlying values change, at least in theory. Of course, we know from AIG that it doesn't always work according to plan or to the rules.

That said, you do have to wonder what would happen if interest rates, or even interest-rate volatility. were to spike.

I hope Reggie Middleton will study this issue.

sgt_doom's picture

" Derivatives are "zero sum": there's a winner for every "loser"."

You, of course, are completely WRONG, but are simply repeating the popular mantra and talking points of the Wall Streeters, thus displaying a lack of comprehension on the structuring of credit default swaps and any knowledge of the existing thousands of categories of credit derivatives.

Sorry, I'm plain tired of explaining it over and over and over again.

You'll have to learn something on your own for once.

Racer's picture

sacrifice the poor who can't afford to feed themselves or their children and who will die

sacrifice the children that are not yet born who will have to be debt slaves for their whole lives and will die in poverty

sacrifice the unborn that won't be born because the parents can't afford to look after them

sacrifice the sick who cannot afford the bills and will die.

to pay for banksters fat bonuses



LiquidBrick's picture

Everything is as it should be.

Bouy with the universe.  All will be well.

Max Hunter's picture

I can see that unraveling fast..

TradingJoe's picture

Please tell us something we don't know...yet!

covert's picture

how big will the crash be and when will it happen? where exactly will the momentum be? any recommendations?


sgt_doom's picture

True, but it bears repeating, and repeating, and repeating, because most people, and definitely most Ameritards, are incapable of finding their own vaginas today.  Period.

Not to quibble, good sir, but that's JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citi and BofA.

Regardless, everything holds true, and with 74% of the American GDP made up of the Fantasy Finance Sector, which only (curious play on numbers here??) employs approximately 7.4% of the workforce (and I'm uncertain how much of that is American???), there is NO economy.

And until the typical Ameritard begins to comprehend this, they will still be clueless as to who The Enemy is.

Thank you.

instinctiveDrift's picture

Typical "Ameritard" comprehending this?  Surely you jest...

Think about the number of people you know.  How many of them do you think know about this already or could even understand it if it were presented to them?  I don't run in financial circles and I can safely state with certainty that the number is 0.  Even of the finance savvy types I know (CFO, Finance directors, Business owners, etc) the number is still 0.  

People have been trained to not care.  They've been trained to not understand.  They've been trained to not think.  

Now, if anyone has suggestions on how to explain this stuff to the masses to hijack their programming I'm sure we'd all love to hear them.  

The Fonz's picture

Simple, you say "A loaf of bread is 25 dollars today sir!".

sgt_doom's picture

Sure, I agree with your comments, but here's the reason for my endless rage and anger:

I have worked thousands of hours over the past thirty-five plus years, as a volunteer activist, on my own time and own dime, fighting both the super-imperialism of America and the dismantling of the American economy (as in the plutocrats' laughing and saying - and several have told me this outright -- that it's our turn).

There's been plenty of explanation as to what's going on over the previous 40 years or so, but I continue to meet clueless Ameritards over the age of 40 who have NO FRIGGING EXCUSE!

During the Great Depression, the bulk of Americans knew who the enemy was and what was actually taking place.

Today we simply have too many lazy 'tards here.

Akrunner907's picture

Bingo!  You just rolled doubles and get to advance passed GO and collect $200.  I am suprised it has taken this long to begin hammering on the real catastrophe that is coming. 

Bluntly Put's picture

I don't know I thought it was enlightening. For instance I thought that they just needed liquidity to meet payouts related to derivatives not related to interest rates.

Some of us are here to learn not profit from trading in rigged markets.

CPL's picture

Here something I learned this morning on NPR.  There is a detrivatives chain built exclusively on snow for companies to hedge their bets on how snow fall during a year impacts business.

People will bet on anything.

I think I'll build a hobo derivative.  I'll track how much nail polish and hand sanitizer can be drank by a single human being and place calls/puts on vomit content of both of the aforementioned substances.  Wrap it all up in a under written security and hire a group to track and analyse the hobo selected for the derivative outcome.

Here at Hobo Derivatives Inc we hope to be successful in our "Dave" portfolio of canned beans, thunderbird cooking sherry and hand sanitizer.  There are others though that may favor the conservative "Mike" prospectus which is strong in the crack, cheap whiskey and dumpster diving offerings.