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Why Is The Fed Actively Managing A $25 Billion Maiden Lane MBS Portfolio When Its $2.4 Trillion SOMA Holdings Have A $1 Billion DV01? (And Are Unhedged)

Tyler Durden's picture


An interesting thing happened when we were combing through the Fed's Maiden Lane 1 portfolio. After going through holding after holding of crap, that would make junk indignant if one were to call the Fed's adopted holdings of muni CDS, Subprime mezz bonds, and Agency CMO such, we ended up looking at the rate hedges section. As is disclosed by the Fed, the FRBNY holds 5000 TYM0 puts, 3825 TYH0 puts, short 4000 FVH0, short 7828 TYH0, short 2240 USH0, and is short a bunch of eurodollar positions. Also, the interest rate exposure is in thousands so the Fed has about 3 trillion in notional swap exposure. Now Maiden Lane is supposed to be an adopted, run off (or, as Geithner likes to boast, run on) portfolio, presumably without active management. Which is why we were surprised by the presence of the TYH0 and TYM0 positions: these did not exist at the time the Fed created Maiden Lane I! In fact TYM0 did not exist until March of 2009!

See below:


Fair enough - we now know that the Fed is paying Blackrock with our money to manage the interest rate exposure on its Maiden Lane I positions, just so JPM could get a steal on Bear Stearns (oh yeah, and Jamie Dimon is furious today that the Fed not only bailed him but gave him Bear on a silver platter). This means that the Fed paying Larry Fink several million a year to put on some interest rate hedges and some various futures. And for what - to avoid a blow up in a $25 billion portfolio?

What about the bigger picture?

As Jefferies points out today:

One has to ask why the SOMA is spending all this effort with Blackrock to hedge interest rate risks in a $25 billion MBS portfolio when it’s holding $1.25 trillion of MBS assets, plus a trillion of long dated Agency debentures and Treasuries. There is a billion dollars a basis point of interest rate risk in the SOMA.

You read that right, while the Fed is pretending to care about interest rate concerns in an increasing rate environment and is hedging ML1, it has one billion DV01 risk for its house bailout package. This is a stunning number: the second rates commence creeping higher, you can kiss all that profit on TARP and what not not only goodbye, but the losses on the SOMA books will likely destroy America. And yes Virginia, it is negatively convex: once rates start creeping wider, they will accelerate faster and faster until everything escapes the control of Ben Bernanke.

Ron Paul, Alan Grayson, and every other activist in the Congress and the Senate should immediately ask the Fed why is Ben Bernanke hedging its ML1 IR exposure, while leaving its SOMA exposure completely unprotected even when the DV01 is about 100 times greater!!! A 1% move in rates would lead to a $100 billion loss for taxpayers. Should we have a failed auction, or go back to Paul Volcker times and have the 10 year hit over 10%... well, you do the math.

Going back to Jefferies:

I think this whole move on transparency opens up way too many avenues for attack on our venerable Federal Reserve. It’s the most complicated time in monetary policy history and Congress is now on a warpath. This is not good for independence and it’s not good for credibility. Based on what I see the Fed will have tough questions to answer on its management of the SOMA account after this release. And if they are pushed into a corner on interest rate hedging because of this, it gets very interesting…..hedging 1bio/bp basically amounts to one thing - asset sales! Good luck trading.

One can now see why Tom Hoenig has been the voice of reason: unless the IR risk is promptly offloaded to private hands before rates begin creeping higher, and impact a portfolio of rate sensitive products, never before as concentrated as it is now in the clutches of the Federal Reserve, the mindblowing DV01 on America's assets will lead the country to a prompt, and very negatively convex bankruptcy, long before China realizes it should stop bidding on our auctions.

And to simply for those who may be a little confused by the jargon: the Fed's lapdog BlackRock is hedging that which is irrelevant: the smallest portion of the Fed's rate exposure. But because Tim Geithner has a penchant of appearing on TV and saying how well Maiden Lane is performing, the Fed has decided to protect against a major hike in rates. Yet that which is truly relevant, the Fed's nearly $2.4 trillion in holdings of MBS, Agency and Treasuries is completely unhedged. Good luck finding the counterparty that would be willing to put on a $200 trillion gross notional interest rate swap with the Fed. (or maybe one already exists, and since it is off balance sheet for the Fed nobody would ever have a clue. That counterparty would have America by the proverbial testicles). If rates do go up, and if the System Open Market Account holdings are unhedged, hyperinflation Catch 22 - here we come (oh yes, and the Federal Reserve is now a ticking time bomb, which can only be defused by forced asset sales which would be a prelude to wholsesale tightening and an S&P back to 666). Good luck trading indeed.


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Thu, 04/01/2010 - 14:00 | 283255 Selah
Selah's picture

This is a rhetorical question... right?


Thu, 04/01/2010 - 14:02 | 283260 Selah
Selah's picture

Oh, and Gold seems to have answered your rhetorical question.

Thu, 04/01/2010 - 14:29 | 283306 JW n FL
JW n FL's picture

Gold Bugs are IDIOTS!


Feel free to quote me... buy high to sell higher all based on fear...

Thu, 04/01/2010 - 14:37 | 283324 GoldSilverDoc
GoldSilverDoc's picture

And paper bugs are.... what is the word for somebody more stupid than an idiot? Cretin? 

Yeah.  Paper bugs are cretins.


Thu, 04/01/2010 - 14:39 | 283332 Ripped Chunk
Ripped Chunk's picture

Gun bugs will rule.

Stop arguing.

Thu, 04/01/2010 - 14:40 | 283334 GoldSilverDoc
GoldSilverDoc's picture

Damn right. 

Thu, 04/01/2010 - 15:27 | 283409 dark pools of soros
dark pools of soros's picture

ask the Hutaree how that went...

Thu, 04/01/2010 - 16:23 | 283459 Ripped Chunk
Ripped Chunk's picture

The ideology of defending your family, your home and your business has absolutely no connection whatsoever to individuals like the Hutaree militia and the things that they plan.

You clearly fear these types of people. I do not.

It is the everyday crazy no one ever notices, that never worn camo in their lives, never been on any training exercise that are much more dangerous than these Hutaree individuals. 


Thu, 04/01/2010 - 17:40 | 283580 WaterWings
WaterWings's picture


Considering the upside-down situation we are in, I wonder how valid the charges are. Isn't sedition a national pastime?

Sedition is the stirring up of rebellion against the government in power. Treason is the violation of allegiance to one's sovereign or state, giving aid to enemies [foreign and domestic], or levying war against one's state. Sedition is encouraging one's fellow citizens to rebel against their state, whereas treason is actually betraying one's country by aiding and abetting another state. Sedition laws somewhat equate to terrorism and public order laws.

And I would never condone initiation of force - ever! The shot heard round the world was defensive. If the plot to ambush and kill innocent police officers that lawfully protect fellow citizens is true, then the accused deserve their punishment. We can only hope now that a fully-informed jury of peers will decide their fate after viewing evidence.

If a government no longer respects the rule of law is it not ironic that it is illegal to attempt to subvert it? Should we allow TPTB to have a monopoly on force when every action it makes carries with it the implicit threat of lethal force?

Are we willing to so easily relinquish our proud heritage?

2nd Amendment


A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

How would the course of history been changed had the people been able to defend themselves?

"Common Sense" gun laws don't make sense:

Disarming law-abiding citizens does not make sense. It's called "victim disarmament":

Wouldn't Robo want to let these all these women protect themselves? (don't fuck with me)


How ironic that we view the highest levels of violence and gore on a daily basis through television and movies, yet recoil at the sight of a weapon? Programming? Get over it, or go the way of Darwin.

Thu, 04/01/2010 - 21:11 | 283846 SWRichmond
SWRichmond's picture

Thursday, 5 June, 1788; Patrick Henry is at the Virginia Convention considering ratification of the Constitution.  The Bill of Rights does not exist.  Henry is adamantly opposed:

I shall, with the aid of my judgment and information, which, I confess, are not extensive, go into the discussion of this system more minutely. Is it necessary for your liberty that you should abandon those great rights by the adoption of this system? Is the relinquishment of the trial by jury and the liberty of the press necessary for your liberty? Will the abandonment of your most sacred rights tend to the security of your liberty? Liberty, the greatest of all earthly blessing — give us that precious jewel, and you may take every thing else! But I am fearful I have lived long enough to become an old-fashioned fellow. Perhaps an invincible attachment to the dearest rights of man may, in these refined, enlightened days, be deemed old-fashioned; if so, I am contented to be so. I say, the time has been when every pulse of my heart beat for American liberty, and which, I believe, had a counterpart in the breast of every true American; but suspicions have gone forth — suspicions of my integrity — publicly reported that my professions are not real. Twenty-three years ago was I supposed a traitor to my country? I was then said to be the bane of sedition, because I supported the rights of my country. I may be thought suspicious when I say our privileges and rights are in danger. But, sir, a number of the people of this country are weak enough to think these things are too true. I am happy to find that the gentleman on the other side declares they are groundless. But, sir, suspicion is a virtue as long as its object is the preservation of the public good, and as long as it stays within proper bounds: should it fall on me, I am contented: conscious rectitude is a powerful consolation. I trust there are many who think my professions for the public good to be real. Let your suspicion look to both sides. There are many on the other side, who possibly may have been persuaded to the necessity of these measures, which I conceive to be dangerous to your liberty. Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. Whenever you give up that force, you are inevitably ruined. I am answered by gentlemen, that, though I might speak of terrors, yet the fact was, that we were surrounded by none of the dangers I apprehended. I conceive this new government to be one of those dangers: it has produced those horrors which distress many of our best citizens. We are come hither to preserve the poor commonwealth of Virginia, if it can be possibly done: something must be done to preserve your liberty and mine.

Thu, 04/01/2010 - 21:35 | 283865 Rick64
Rick64's picture

Thats when the real power grab was going on. Henry was right.

Fri, 04/02/2010 - 10:31 | 284231 WaterWings
WaterWings's picture

And now, thanks to surveillance technology, you can bound, gagged, and labeled a terrorist without even leaving the safety of your own home. They come to you!

Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. Whenever you give up that force, you are inevitably ruined.

Most excellent.

Thu, 04/01/2010 - 16:07 | 283465 gmrpeabody
gmrpeabody's picture


Thu, 04/01/2010 - 19:24 | 283723 Hulk
Hulk's picture

Hutaree are idiot wack jobs.....

Thu, 04/01/2010 - 16:09 | 283467 JW n FL
JW n FL's picture

^^^^ yes sir... if the fear plays out and goes wide spread... the only metals that will matter will be the jacketed verity...


G36... Herstal 57... AR-15 converstion to a 146 kits?

Thu, 04/01/2010 - 21:56 | 283576 Rusty Shorts
Rusty Shorts's picture

 How in the hell does oil fit in this picture ??

Thu, 04/01/2010 - 17:44 | 283585 WaterWings
WaterWings's picture

Huh? Clear it up a little and make it relevant, like this:

Thu, 04/01/2010 - 21:59 | 283889 Rusty Shorts
Rusty Shorts's picture

 - yeah, but, let me clarify:

Fri, 04/02/2010 - 10:31 | 284233 WaterWings
WaterWings's picture


Fri, 04/02/2010 - 14:17 | 284488 JW n FL
JW n FL's picture

BullPup for close quarters...

down range weapons... AR-15 converstion to a 416... G-36... .223 being a round easily sourced, I am big on...

Here is one reason why...

I am not a fan of the ACR fire rate... but its not a terrible gun..

G-36... is H & K... what else can I say?

Common round 9mm... mp5/s maybe... for the $12,000 dollars? maybe there are other options that would make someone happier...

The conversion kit to a .45 ( ) ... or .223 ( )makes me like the gun a little better.. preban stuff everywhere..

Shotgun? if its good enough for my Marines... its good enough for me.

Tri rail when every possible... I would as well recomend.

Thu, 04/01/2010 - 19:05 | 283699 Cursive
Cursive's picture

When TEOTWAWKI comes, the agro and ammo and camo crowd will rule.  Gold and silver will just weigh you down.

Thu, 04/01/2010 - 21:15 | 283850 SWRichmond
SWRichmond's picture

Gold is capital; anyone holding any significant amount of it will be able to hire all the mindless shooters he/she wants if your TEOTWAWKI ever actually happens.  Look around you; they're plentiful and easy to hire right now.  dot gov employs hundreds of thousands of them.

Fri, 04/02/2010 - 01:31 | 284013 Cursive
Cursive's picture

We need to stop talking about gold and silver in generic terms.  What kind of gold and silver are you talking about?  Krugerrands?  American Eagles?  Canadian Maple Leafs?  Gold or silver jewelry?  Because from what I've read about the Argentinian collapse, you don't want bullion.  You want jewelery that can be exchanged at street level.

Fri, 04/02/2010 - 04:40 | 284033 jeff montanye
jeff montanye's picture

lots and lots of simple gold (10k or 14k i would think) rings, we are told.  gold coins would be good if banks still function, one can get to/from a bank and gold isn't seized by the government.  remember it is the exit and entrance to one's domicile that is most dangerous and the many-shot semi-automatic hand gun that is most useful.  this would seem to make on-line (or at least telephone or mail order) transactions more attractive, imo.  

however if the future experience is only as negative as "the great depression" or previous 19th century depressions (see "my man godfrey", "the grapes of wrath" et. al.) and we want to be closer to the penthouse and carole lombard than to the dump or the relief camps, we are really talking portfolio management rather than hand-to-hand combat.  

in these prior times (of, admittedly, semi-fixed gold prices) gold miner stock ownership outperformed bullion, was easier to transact and was less likely to be stolen.  this might even be true in an argentina-type situation where keeping gold rings, coins etc. for trading is only as good as one's own variable ability (mine is weak) to defend such "attractive nuisances".  it's so hard to get good help these days. 

also in the '30's the government did require the "turning in" of privately held gold bullion, coins, etc. before the government allowed the price to rise, hence the 90% fineness (coin quality) of some u.s. central bank stock, rather than the 99% supposedly required for "good london delivery".  from what i can glean, this shadowy world is still quite mysterious but being pricked, increasingly, by tiny shafts of sunlight, some radiating from these pages.     

Fri, 04/02/2010 - 08:50 | 284084 SWRichmond
SWRichmond's picture

the many-shot semi-automatic hand gun that is most useful.

It's not a magic wand.  I probably shouldn't start this here, but all the shots in the world won't do you any good if you can't hit anything and your opponent can.  These guys, for example, call themselves firearm experts, but they suck, really bad.  They fact that they're not embarrassed by their lack of ability speaks volumes:


Fri, 04/02/2010 - 10:42 | 284249 WaterWings
WaterWings's picture

Ha! Yeah, @ 18:00 is when the roll in the targets - LOL. It is probably 30-35 feet, no? But for guys who do it as a profession... Plus, shooting at the range is a minimum - drilling with movement and moving targets is the only way to be sure - no one will stand there while you try to empty your mag in their general direction.

In self-defense, of course.

Nutnfancy project is pretty awesome if you want to hear extensive reviews on gear - informed me on a few of my purchases that I wouldn't have considered otherwise.

Fri, 04/02/2010 - 08:00 | 284062 SWRichmond
SWRichmond's picture

Jewelry that can be chopped into tiny pieces and exchanged at the street level is not capital.  That's not what I'm talking about.  You're thinking too small.  I'm talking about wealth that can be used to buy other capital assets that can in turn be used to produce more wealth.  You know, farmland.

Fri, 04/02/2010 - 14:13 | 284490 bc0203
bc0203's picture

That works until the powers that be believe in "redistributive change."

Fri, 04/02/2010 - 14:52 | 284537 SWRichmond
SWRichmond's picture

Well, at some point we all must decide how we want to live.

Fri, 04/02/2010 - 11:05 | 284273 WaterWings
WaterWings's picture

Okay, here's my $0.02:

The only advantage of Maples, Krugs, Eagles, etc. is that they have an established weight and purity - much easier to detect attempted forgeries. When a buyer is evaluating your coins they are more liquid than generic rounds because of recognition. This is one of the main problems with bartering - what value does the buyer place on it anyway? What if they buyer isn't willing to match what you think the value of your coin is? If all paper fails, and it eventually will (all, as in, even mining stocks (but toilet paper has inherent value ;-) )) if we take into account the long view of history and compare it to our current mutual predicament, then only unreproducible tangibles will hold value. Only. This can be food, ammunition, batteries...but the all of that can rot, expire, faked. Not precious metals.

Okay, that's all I'll say about that.

If you are small potatoes (< $5,000) I wouldn't really consider gold. I would go full silver. If you are walking around with 5 Maples you will have a hard time getting the value out of them. Gold is your long-term savings, silver is your checking account. If you don't have enough for long-term savings, then you only need your checking account anyway. Looking at the historic ratio of gold/silver, silver has some serious catching up to do in terms of comparable value to gold. You just can't go wrong with s.i.l.v.e.r. (no, I'm not a silver dealer).

If the system has not failed yet, you will be able to redeem your silver at any coin shop. If the system crashes over night, all your electronic dollars are forever irretrievable, and you'll wish you had food, ammunition, and transportable shelter if certain threats necessitate a move from your residence - having farmland to run to is not a bad idea. Living there in advance, with all your savings, is a better idea - but that's tricky since you still would like to make an income whilst shoveling goat and chicken guano. 

Get necessities to preserve your life, then get precious metals. Keep a minimum amount of cash (~$1,000) - it will be good for a little while after a major system shock - imagine waving what you know to soon be a worthless $100 bill in front of a gas station attendant for that last tank of gas...

Oh, and the whole gold confiscation thingy? They just made it illegal to exchange in public - anyone with a brain put it in a secret place instead of selling it to the gov't, which turned around and revalued it anyway. Bastards then...and bastards now. Well, they're just thieves with guns and official titles. Little did they know what was around the corner.

Thu, 04/01/2010 - 14:58 | 283359 Burnbright
Burnbright's picture


You don't understand value, no gold bugs are not "buying higher to sell higher". You seem to think paper money is absolute pricing of things. Read or book or two please.

Thu, 04/01/2010 - 16:11 | 283470 JW n FL
JW n FL's picture

You can use the Feds printing... as a way to value gold higher... you can use consuption... real consuption making or things and / or stuff... You can use inflation as the base to make your case...


But if the World melts down... Gold will not out value Bullets, EVER!

Thu, 04/01/2010 - 20:39 | 283815 merehuman
merehuman's picture

the world melted down repeatedly amongst european nations. Gold allowed passage and bought lives. Read history.

Fri, 04/02/2010 - 04:53 | 284037 jeff montanye
jeff montanye's picture

one would think there is a positive synergy between a skillfully used sidearm and, say, gold coins in extremely extreme conditions.  however one would hope one could anticipate such conditions and avoid them (e.g. emigrate before hitler is elected rather than after kristallnacht).  that, and the recent market trends, would seem to argue against home ownership.  

Thu, 04/01/2010 - 21:42 | 283872 Cookie
Cookie's picture

Wipe your ass with your greenbacks, it will be cheaper than tissue soon

Thu, 04/01/2010 - 14:19 | 283278 hedgeless_horseman
hedgeless_horseman's picture

4-1-10, 14:12, Ben Bernanke: I hate the Internet; damn Al Gore

4-1-10, 14:14, Ben Bernanke: Wishing those dolts in the Dep't of Education would do a better job dumbing down our citizens' math skills

4-1-10, 14:15, Ben Bernanke: Mind your own business, Durden


Thu, 04/01/2010 - 14:27 | 283300 faustian bargain
faustian bargain's picture

4-1-10, 14:18, Ben Bernanke: WTF this math captcha...where's my damn calculator

Thu, 04/01/2010 - 16:06 | 283462 tip e. canoe
tip e. canoe's picture

4-1-10, 16:20, Ben Bernanke:  Enjoy your easter holiday at the Extended Stay Hotels!  Only $99.99 per night!  Free CNBC!

Thu, 04/01/2010 - 14:44 | 283343 john_connor
john_connor's picture

It's Supreme Leader Bernanke, with the 3 branches of government and all citizens reporting to him.

Thu, 04/01/2010 - 16:46 | 283517 ZackAttack
ZackAttack's picture

The three branches of government: money, television and bullshit.

Thu, 04/01/2010 - 16:38 | 283507 JW n FL
JW n FL's picture

God Love Ya!


by hedgeless_horseman
on Thu, 04/01/2010 - 13:19


4-1-10, 14:12, Ben Bernanke: I hate the Internet; damn Al Gore

4-1-10, 14:14, Ben Bernanke: Wishing those dolts in the Dep't of Education would do a better job dumbing down our citizens' math skills

4-1-10, 14:15, Ben Bernanke: Mind your own business, Durden

Thu, 04/01/2010 - 16:19 | 283486 Carl Spackler
Carl Spackler's picture

Maybe, it is Little Timmy's science project as he tries to outdo the rest of the class?!?

Fri, 04/02/2010 - 04:52 | 284036 bc0203
bc0203's picture

QE1 was a standard central banker's response to a banking crisis caused by an asset bubble in real estate.  As Carmen and Rogoff point out in their book "This Time It's Different," central banks almost never effectively recover from this type of intervention; another crisis such as currency/default results within, on average, three years.  This is what seems to be playing out today.

The really sad twist on QE1 was letting the primary dealers get rich off the proceeds of the discount window without putting them under MUCH tighter regulation, regardless of how much of a mess the financial system was in.  This, combined with the fact that other central banks around the world (with better credit ratings) will be competing for in the same market for sovereign debt going forward, make it difficult for me to believe that the US will be able to afford to finance QE2 at sustainable rates.

Because of the nature of US Federal Reserve debt, hyperinflation is not really an effective option; I'm going to bet they try to restructure the debt at some point in the not-too-distant future, which is, in effect, a form of default.  The alternative will be rioting in the streets, which will not be acceptable to those trying to stay in power.

Fri, 04/02/2010 - 05:04 | 284040 jeff montanye
jeff montanye's picture

generally on target, imo, but i remember a good bit of rioting a while back and they elected and then re-elected richard nixon (didn't vote for him but imo a far better president than george w. bush and probably ronald reagan; i'm still waiting to see on obama but first indications are not good at all).

Thu, 04/01/2010 - 14:05 | 283264 AnonymousMonetarist
AnonymousMonetarist's picture

Looks like the PPT will have to invert that V.

Strong dollar policy indeed!

Thu, 04/01/2010 - 14:08 | 283268 sweet ebony diamond
sweet ebony diamond's picture

the $1 trillion MBS principal has to be paid back somehow.

people need incomes to pay back principal.

cleaning old peoples genitals doesn't provide a great income.

any other ideas banksters?

Thu, 04/01/2010 - 14:24 | 283294 SmittyinLA
SmittyinLA's picture

you mean of course "indigent old people's genitals", remember there is no "lock box", those old people HAVE NO ASSETS to even pay minimum wage, not that minimum wage is sufficient to live on or pay taxes anyway.

Fri, 04/02/2010 - 05:08 | 284041 jeff montanye
jeff montanye's picture

that is a crucial distinction because, if not exactly cleaning, providing assistance in that general area for the very well-off old person can be extremely lucrative (or so i have heard).

Thu, 04/01/2010 - 14:10 | 283270 Hansel
Hansel's picture

We're gonna be rich!!!

Thu, 04/01/2010 - 14:12 | 283271 buzzsaw99
buzzsaw99's picture

Despite the decline in the current fair value of the collateral, the Board does not anticipate the Maiden Lane loan will result in any net loss to the Federal Reserve or taxpayers. The Maiden Lane loan was extended with the expectation that the value of its portfolio would be realized either by holding the assets to maturity or by selling the assets over an extended period of time during which the full value of the assets could be realized.

Thu, 04/01/2010 - 14:12 | 283273 TheDreadPirateR...
TheDreadPirateRoberts's picture

Uhh, good luck finding a counterparty to hedge that with. nobody's got enough capital left to legitimately hedge anything close to that. that's why that crap is there, in point of fact. The Fed continues to release data that demonstrates the lunacy of their monetary policy (print, print, print, and print some more) and clearly does not expect anyone to figure it out. Or, maybe they don't understand that what they are doing is stupid.


Thu, 04/01/2010 - 14:45 | 283345 hungrydweller
hungrydweller's picture

Wow - pour yourself some scotch and chill out dude.  Sheesh.

Thu, 04/01/2010 - 16:28 | 283493 JW n FL
JW n FL's picture

I have to Plus (+) 1,000,000,000,000,000,000,000 you for the single malt option... sorry to come across as a prick.. I really should tone it down so people will read and learn, instead of get hung up on my passion about it... sorry to over shadow the information with my tone.. it is duly noted and I will do my best to not ruin perfectly good information.

Thu, 04/01/2010 - 16:53 | 283521 faustian bargain
faustian bargain's picture

+1, need a 'not junk' button for this. very admirable.

Thu, 04/01/2010 - 14:49 | 283347 mikla
mikla's picture

You bitch and whine... but what is the answer? let it all default and the markets self correct?

We've hit the surreal.  It's not bitching and whining -- we all know where this is going.

No, there is no answer.  The current system was designed to fail, and you're merely seeing it conclude as designed.

Are you asking for an "answer" that enables the system to continue?  Or which permits the system to not conclude?  Sorry, that Rubicon was long ago.

You're going to have to be more "specific" regarding the term "answer" for what you want to hear.  Beyond this theatre, the only legitimate discussion is regarding how the system falls (to help avoid getting hit by debris), and what will be the structure of the next system.

Thu, 04/01/2010 - 16:14 | 283475 JW n FL
JW n FL's picture

are you in Washington DC?

cause you said alot of nothing..

I will say it again... SLOWLY!

What.... Makes.... The.... Difference.....?

What..... Is...... The...... Fix...... To...... The...... Problem(s).

any or all... anything that is beneficial to your fellow Country men and women? a lil is better than nothing with regard to an answer we all can get behind... I am no leader, I am the bullshit police though.

Thu, 04/01/2010 - 17:25 | 283557 trav7777
trav7777's picture



The mathematics of debt-based monetary systems make implosion of them INEVITABLE in a finite system.

Thu, 04/01/2010 - 20:55 | 283831 umop episdn
umop episdn's picture

Exactly. Here is a very good video (imho) that explains why:


Thu, 04/01/2010 - 18:11 | 283619 mikla
mikla's picture

are you in Washington DC? cause you said alot of nothing..

I echo trav7777 above:  There is no solution.  Quoting me:

No, there is no answer.  The current system was designed to fail, and you're merely seeing it conclude as designed.

The grammar was entirely readable.  You appear to be in some stage of "denial" or "bargaining".  Let me know when you move past that.

If you want a nugget of something, though:  (1) Wait until the central banks fall.  (2) Wait until the sovereign nations default, worldwide.  (3) After all this worldwide debt clears, help establish a new economic system that includes NO central banks (or no fractional reserve lending, or whatever other economic theory floats your boat.)

You will have plenty of opportunities in the coming months to get to know your neighbors, join a church or other local community groups, have a garden, host and participate in "potluck" dinners, and otherwise take your turn volunteering for the nightly neighborhood watch.  We'll all be bartering as we figure out (3).

There will be much good that comes from this, though:  Your kids currently owe more than $500K, and it will be nice when that is gone.


Thu, 04/01/2010 - 20:08 | 283776 B9K9
B9K9's picture

Travis & Mikla, it's good so see more & more people focus on addressing the core issue of this crisis. Mako has also been consistent in identifying the root of the problem.

Quick primer: the exponential function dictates that compounding principal+interest will always exceed the income producing capacity of the underlying asset, eventually resulting in default. [Run any equation and the average doubling length is around 50 years - (not) coincidentally, the same period as jubilee.] As loans/mortgages are typically secured by the underlying collateral, bankers end up taking possession of all real property. This has occurred countless times over thousands of years.

Yesterday, Chumly referenced a book which I hadn't been previously aware, but voraciously read this morning:

USURY - A Scriptural, Ethical and Economic View



Copyright 1902

People who read my posts know I'm very fond of quoting various biblical pronouncements. As a devout atheist, it has nothing to do with ecclesiastical matters, but rather a recognition that human nature hasn't changed one iota over the past millennia.

The bible speaks to us across the ages of peoples, cultures & nations who have experienced the EXACT SAME things we are experiencing today as a result of interest bearing lending practices. This book includes enough scriptural references regarding prohibitions (and reasons) against usury as to make a bishop smile.

Here are two brief passages:

These laws of God, given by Moses, positively forbade usury or interest, and this prohibition was so repeated that there was no mistaking the meaning. Ex. 22:25: "If thou lend money to any of my people that is poor by thee, thou shalt not be to him as a usurer, neither shalt thou lay upon him usury." This law is more fully presented in Lev. 25:35, 36, 37: "And if thy brother be waxen poor, and fallen into decay with thee, then thou shalt relieve him; yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or [14]increase; but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, or lend him thy victuals for increase."

Prof. George Bush makes the following note upon this passage: "The original term 'Neshek' comes from the verb 'Nashak' (to bite), mostly applied to the bite of a serpent; and probably signifies biting usury, so called perhaps because it resembled the bite of a serpent; for as this is often so small as to be scarcely perceptible at first, yet the venom soon spreads and diffuses itself till it reaches the vitals, so the increase of usury, which at first is not perceived, at length grows so much as to devour a man's substance."


But there was a strange interruption in this patriotic work. A sordid covetousness possessed their nobles and rulers. While the people were absorbed in their patriotic service, these persons were planning successfully to despoil them.

A cry of distress came to the ears of Nehemiah. The people found, now that they had made the sacrifice and suffered deprivations and cheerfully given their labors for the common good, they were deprived of their blessings and enslaved.

This enslavement was not to foreign rulers, but to those of their own blood. A division had grown up among their own kindred. Some had grown rich and become their masters. Others were in hopeless poverty. The distinctions came gradually or grew up among them, possibly unobserved: the rich becoming richer and the poor poorer, until the nobles held their lands and were selling their sons and daughters as chattels.

This condition was hopeless, after all their struggles for nearly a hundred years to re-establish their institutions. Neither they nor their children could, under those conditions, enjoy the fruit of all their efforts. This was no fault of theirs. There had been times of dearth and harvest failure, when some with large families were in need. The king's tribute, too, was heavy upon them and some were not able to pay and they were compelled to borrow, but had to give mortgages upon their land as security. Now lands, homes [39]and all, had passed to the creditors and they were despondent and helpless.


Pretty trippy, huh? We haven't learned a fucking thing in 5,000 years. Anyway, the system is coming down, so the real game is to figure out what can be crafted as a replacement. When new laws are proposed, debated & enacted, it is up to us, the knowledgeable ones, to teach others the reasons for the crash.

We can't do anything today abut saving the current system or even helping people get out of the way, but we can be a key part in transforming society to a more equitable economic state once the dust settles.

Thu, 04/01/2010 - 20:25 | 283802 B9K9
B9K9's picture

There are so many great passages (again, thanx for the tip Chumly), I just have to post another one:

Basil describes a scene so real that we can scarcely realize that he wrote over fifteen hundred years ago. After stating the usurer's protestations of having no money, to the victim, who seeks a loan without interest, he says:

"Then the suppliant mentions interest and utters the word security. All is changed. The frown is relaxed; with a genial smile he recounts old family connections. Now it is 'My friend, I will see if I have any money by me. Yes, there is that very sum which a man, I know, has left in my hands in deposit for profit. He named a very heavy interest. However, I will certainly take something off and give it to you on better terms.' With pretenses like this he fawns on the wretched victim and induces him to swallow the barb."

Of the man who has borrowed on interest, he says: "At first he is bright and joyous and shines with [70] another's splendor * * * now night brings no rest, no sun is bright. He hates the days that are hurrying on, for time as it runs adds the interest to its tale."

Fri, 04/02/2010 - 01:00 | 283999 faustian bargain
faustian bargain's picture

Sounds like that guy'd better hurry up and pay off the loan, if it's giving him that much stress.

Or, maybe he didn't really need that loan to begin with, since it seems to have done him no good.

Fri, 04/02/2010 - 11:16 | 284300 WaterWings
WaterWings's picture

Always very interesting posts.

Thu, 04/01/2010 - 16:13 | 283473 TheDreadPirateR...
TheDreadPirateRoberts's picture

you seem angry about something.

Thu, 04/01/2010 - 16:19 | 283487 TheDreadPirateR...
TheDreadPirateRoberts's picture

You seem angry about something. Hope tomorrow is a better day for you.

The first rule of holes: If you are in a hole, stop digging. 

Please enlighten us with a 'real answer'. 


Thu, 04/01/2010 - 16:32 | 283499 JW n FL
JW n FL's picture

We are not in a hole... we are sitting on top of a mountain... a house of cards... the size of a mountain... printed by the Fed... and we all see that one good wind... could take us all down. At least in a hole the fall would not kill us, I feat that we dont even have that luxury.


Sorry to come across as a prick, and as I noted for someone else... I will do my best not to let my shitty, pissed off tone ruin perfectly good information... as much as possible, going forward.

Thu, 04/01/2010 - 17:18 | 283550 TheDreadPirateR...
TheDreadPirateRoberts's picture

well, i guess it's a matter of perspective or analogy. it sounds like we agree on the big picture, despite the difference in analogy.

Below is my opinion.

First let's assume the 'answer' means that set of actions which will produce the fairest economic outcome in a capitalist system which rewards productive investments and punishes losing investments without any form of theft (legalized or otherwise) from one class of participants by another. I know this isn't very precise, but like a good economist, I am going to assume that captures the spirit of what I am trying to get at.

The answer then, in my opinion is equity. Not more debt, but equity. The problem is that the government and monetary authorities are colluding to favor the debtor classes, and seeking to do this by issuing more debt (rolling some debts over, and creating even bigger new ones). In the long run, taxes and inflation of the money supply are equal. And inflation of the money supply, in the US, means creation of more net debt, because the paper (or electronic book entries) we use for money is backed by debt. Unfortunately, our government is committed to continuous creation of new money (and associated debt) as a stealth tax on its citizens, in order to to keep itself in existence and fund its expansion. The banking system went bust because the government's collaborator, which gets its funding done, the Primary Dealers, got too greedy, overexposed themselves to risks which they knew they would not personally be held accountable for. Outcomes like this are actually a predictable consequence of expanding a fiat money supply. Because the government cannot exist very long without them, it naturally volunteered the taxes and savings of its private citizens in order to keep these dealers in operation, and also, just as importantly, to bail out the lenders who finance the banks, which naturally include each other.

This generally rewards the class of debtors including the very wealthy and some among them who are speculators. At the other end of the spectrum more debtors are rewarded with mortgage bailouts. Deadbeats live in homes with better lifestyles than honest working people. Instead of paying their mortgages, they go shopping. This keeps them from rioting and also gives the government an ever larger constituency to cement its powerbase. In the system we actually have had since 1971, which is not 'fair' in the sense described above, it is increasingly speculators who are rewarded and who comprise the wealthy. I tip my hat to them. they are very smart people who are merely taking advantage of the monetary system our government relies on.

Instead of equitizing the debt of insolvent banks to the point necessary to stabilize the financial system in a responsible manner that would provide a solid base for the economy to begin to recover, the government bailed out the speculators and debt holders of the banks. Politically, this was the path of least resistance. Because most depositors don't understand what's going on - that their deposits are merely loans to the banks, and that the more money the Fed prints, the less purchasing power those dollars will have in the future. As more people begin to understand, then the wheels will start coming off the bus, if something else hasn't gone wrong already.

Unfortunately, all the history that I can read suggests that there has never been a government that has gone down this path that ever got out of it without zeroing out the currency (well, Zimbabwe is still going, but they are still headed for zero - but they have a functioning black market that helps them cope) in a final massive repudiation. Usually it is the much expanded lowest classes who are left holding this worthless paper, at the end. If we get out of this without destroying the USD, I'll be very happy and impressed. Based on the present situation, I don't see that outcome developing yet.

So the 'answer' is we have to change the government so that the people in power are not people who want to perpetuate this scheme. Not impossible, but unlikely.

The government must shrink. Unless I see government shrinking, I continue to view gold as a good way to store some value, in case we can't get off the current path we are on.




Thu, 04/01/2010 - 17:30 | 283566 trav7777
trav7777's picture

There's no solution.

Just accept that and try to maintain your own sanity.

Think about this: without the discovery of oil, let's say oil never existed.  We wouldn't be here having this conversation right now.

Look around you...everything we've built...oil.  I went out for a MC ride and saw all the cars whizzing by, all burning gasoline we dug out of the ground.  And it's amazing.  And the more we've pumped, the more cars we can drive more miles.

Well, in 2005, we crossed an absolute threshold where we hit the maximum net rate at which we can extract this magic substance.

Look at the oil age, what, 200 years?  Less?  100 if you include the airplane or a real notion of an automobile.  That's 100/2,000,000 of human existence, 100/10000 of civilization, which isn't even recorded history.  All this built on the last 100 years of growing the rate at which we pump free energy out of the ground.  And that rate peaked a few years ago.

We can all either get caught up in trying to make 1-1<>0 or else we can focus on making changes.

There is no "solution."  Things cannot go back to the way they were absent a technical discovery on par with the discovery of oil itself.

Government and the people and finance and this claptrap is all so much bullshit.  Maybe the future will be a good one.

Thu, 04/01/2010 - 19:30 | 283731 Hulk
Hulk's picture

Electric cars with flux capacitors going to save us dude!

Thu, 04/01/2010 - 21:49 | 283878 TheDreadPirateR...
Fri, 04/02/2010 - 01:08 | 284001 faustian bargain
faustian bargain's picture

"...a technical discovery on par with the discovery of oil itself."

Unfortunately, entrepreneurship is not in vogue right now, what with all the government force being applied to the economy in various and sundry ways. We're getting screwed from all angles: monetarily, fiscally, regulatorily. You can be sure capitalism will be blamed for the mess.

Fri, 04/02/2010 - 05:50 | 284045 jeff montanye
jeff montanye's picture

there is a lot to what you say, but also to what the pirate had to say farther above.  the government's response didn't have to be as impractical and evil as it was.  another response is conceivable (see pirate, john hussman and much of what the fdic does on a smaller scale routinely).  emergency laws to include shadow banking in such a system could have been passed but were not, largely for (corrupt) political reasons.  

regarding predicting the future from, perhaps, the invention of the steam engine (run on, say, charcoal):  such judgments are difficult, so many variables and, even though tiny by geology, the time involved is considerable.  science would have progressed without fossil fuel (faraday, maxwell, edison, tesla, einstein, et. al.)  if nothing else we would have extremely sophisticated and efficient batteries; wind and water turbines; photovoltaics; nuclear (possibly fusion) power; less pollution; and, possibly, less war.  

Fri, 04/02/2010 - 06:53 | 284052 tip e. canoe
tip e. canoe's picture

and cars running peanut oil (see diesel).

Fri, 04/02/2010 - 09:19 | 284127 Rollerball
Thu, 04/01/2010 - 14:20 | 283280 Miyagi_san
Miyagi_san's picture

They could sell the National Parks to Exxon or start a Disaster Relief Fund where we all sing , "We Are The World"  


Thu, 04/01/2010 - 14:19 | 283283 barthezz
barthezz's picture

What is the Bloomberg function for the above screen?

Thu, 04/01/2010 - 15:04 | 283291 hedgeless_horseman
hedgeless_horseman's picture

4-1-10, 14:21, Ben Bernanke: Commanding NYC Mayor to disable function for above screen

4-1-10, 14:23, Ben Bernanke: Amazed at GoToMeeting app.  Talk w/Hugo and Barry re Venezualian Solution to ZeroHedge

4-1-10, 14:27, Ben Bernanke: These out-of-the-money FLUBBER calls seem harmless enough, and look what a bounce!

Thu, 04/01/2010 - 17:05 | 283537 JW n FL
JW n FL's picture

God Love Ya!

by hedgeless_horseman
on Thu, 04/01/2010 - 14:04


4-1-10, 14:21, Ben Bernanke: Commanding NYC Mayor to disable function for above screen

4-1-10, 14:23, Ben Bernanke: Amazed at GoToMeeting app.  Talk w/Hugo and Barry re Venezualian Solution to ZeroHedge

4-1-10, 14:27, Ben Bernanke: These out-of-the-money FLUBBER calls seem harmless enough, and look what a bounce!


Thu, 04/01/2010 - 14:29 | 283307 gmak
gmak's picture

TYM0 Comdty Des

Thu, 04/01/2010 - 15:29 | 283413 barthezz
barthezz's picture


Thu, 04/01/2010 - 14:21 | 283288 mikla
mikla's picture

Holy shit ...

I thought a Fed audit would merely expose fraudulent accounting, front-running, and illegal bailouts/subsidies to wall street masters.

I never dreamed they would be so stupid as to roll the dice on unhedged interest rate hedges.  That was a BIG mistake.

Thu, 04/01/2010 - 15:39 | 283427 Rick64
Rick64's picture

This isn't even an audit. I would like to see what else they are hiding.

Thu, 04/01/2010 - 17:28 | 283564 Rainman
Rainman's picture

Not much of a dice roll if BB had every intent of, manipulating.... the lid on rates forever. As this scheme was manufactured, I'm willing to bet the boyz were projecting holds of only moderate duration as they gradually reflate RTC or LTCM affair.

Like an airliner in big mechanical trouble at 30,000 feet. The crew goes directly to the book.

I continue to believe the strategic plan of the Fed has been bushwhacked by a gross underestimation of asset deflationary depth and duration. And they have no doubt been lied to viciously by the cartel of gangsters who have kept much of the depth buried away from view. Once committed, there was no turning back from the plan, even though it has evolved as a Kamikaze mission for the US economy. Now the Invisible Hand must continue the shadow manipulations in equity and bond demand until Gabriel blows his horn on the world economy. Death by one stroke beats that of a thousand cuts.

This time is we often repeat here at ZH.

What started out as a containable nest of termites ( Lehman, Bear, ML, Countrywide, etc. ) has now eaten most of the building.

Never give any of the boyz credit for being smarter than they really are. Lots of evidence to the contrary.



Thu, 04/01/2010 - 18:01 | 283607 trav7777
trav7777's picture's not containable.

They keep going to the is a SYSTEMIC problem.

The problem is that the very money they think is "capital" is actually DEBT.  Debtmoney ONLY WORKS in an expansionary economic climate.  In EVERY finally saturated economy, you see deflation as credit contracts and there starts to be systemic competition for the access to money to pay the interest claims on today's debt.

At its core, all comes from the Oil Peak.  Period.  The aggregate expansion phase of the globe is over.  Paper promises of a future of more must be discounted now that the future holds less.

These idiot economists keep looking at their stupid equations and metrics on MONEY on PAPER for an answer; the answer is in the real world.  We hit energy supply maximum.

Thu, 04/01/2010 - 19:33 | 283736 Hulk
Hulk's picture

Wait till they find out they can't QE peak Oil....

Thu, 04/01/2010 - 19:50 | 283764 Rainman
Rainman's picture

But they do have strategic reserves.....a threat of release would blow up a boatload of longs in the non user spec market. Slow em down. The drilling bullshit was just that with zero effect.

GWB had no stomach for the reserves plan in Spring / Summer 08. He's an oil bred guy with a Cheney kicker to keep him on the reservation.

But this particular Team Ponzi won't survive without an oil spike threat contained. That's for sure. 


Thu, 04/01/2010 - 21:35 | 283866 Hulk
Hulk's picture

Everyone now realizes just how impotent we are. The problems we face, considered in totality, are truly staggering ....

Everytime our politicians speak of green energy and jobs, the world laughs....

Fri, 04/02/2010 - 08:40 | 284075 mikla
mikla's picture

The world is indeed disturbed when The Hulk feels impotent.

Fri, 04/02/2010 - 00:24 | 283982 Dicite justitiam
Dicite justitiam's picture

Energy amplifies economy amplifies credit (resonance)

trav, you have resources you can share that are peak oil/credit connection commentaries/research?

But I'm not such a Malthusian to say peak oil, QED.  As a scholar of the atomic golden age, I have a certain well founded faith in the human mind, properly channeled (not that developing atomic weapons is proper, but the investigation of the fundamental nature of things is--plus as a practical man, you sometimes need to hold people's feet to the fire to get amazing results)

There seems a clear peak oil 2nd derivative => deflation/implosion connection, as the acceleration (or maybe it's easier to say it's when the 3rd derivative of the rate of production is zero (plus the information lag as the news sinks in to a critical mass of consumers), when the acceration is at a maximum negative change in acceleration) is what causes the pandemonium and panic, which causes the chaotic and devastating disorderly unwinding of leverage.

Thu, 04/01/2010 - 14:24 | 283293 John McCloy
John McCloy's picture

  This was a horrendous mistake from the very beginning. I cannot believe Bernanke was talked into the actions of the past year. If they were going to resort to such desperate measures in an attempt to stabilize they simply should have allowed every bank to fail, home prices fall and directly lend to Americans as a TRUE lender of last resort. 

Thu, 04/01/2010 - 14:30 | 283308 Racer
Racer's picture

For the good of many instead of the few?

Sorry I am not falling for that April Fool's joke, it's too unreal to be even vaguely be true

Thu, 04/01/2010 - 14:40 | 283333 John McCloy
John McCloy's picture

And at this point they are not even discreet about it any longer. Never has not just the American public but the entire world been able to unmask such a crooked system and their unrelenting strange hold on politicians to such as extent. We were able to discover how unnecessary Wall Street's existence is, how either incompetent or corrupted our political structure is and how swiftly the elite can come together using every tool of deceit at their disposal such as the media to ensure the middle class always foots the bill in more ways the one. We get to backstop the system which has looted us in past years while it was going up and then on the way down in order to reflate it for the looting back up.
It reminds me of that scene in Amistad where the slaves kill the crew and free themselves. Then they ask the last remaining crew member, "Which way is Africa?" and he steers them to New York instead. Well it looks like are almost to port in the Hudson. They are completely convinced most Americans are as dumb as toast and if they weren't before they are convinced now.

Thu, 04/01/2010 - 16:20 | 283488 gmrpeabody
gmrpeabody's picture

"They are completely convinced most Americans are as dumb as toast "


Sadly..., they are probably right on that one.

Thu, 04/01/2010 - 15:03 | 283371 Missing_Link
Missing_Link's picture

...  in an attempt to stabilize ...


But what if your assumption is incorrect?

Perhaps I'm being paranoid here (wouldn't be the first time), but what if Bernanke et al not only see clearly that it cannot be stabilized, but are attempting to ensure that the destabilization occurs at the time and in the manner of their choosing, and after the necessary preparations have been made?

In other words, what if, throughout 2007-08, the truth was not "we didn't see it coming, and we're trying to control it," as they've been saying, but "we did see it coming -- in fact, we manufactured it, and now that it's happening, we want to postpone it for a while longer to ensure that we're well-prepared for the inevitable outcome."

Thu, 04/01/2010 - 15:35 | 283421 crosey
crosey's picture

+1 ML....the mother of all conspiracies.  It's entirely possible.  I seem to recall a couple of university professors who theorized that, if you stressed/burdened a capitalist system with enough entitlement and malfeasance, you could bring it down.  Sure smells like it.

I wonder what the world will look like, thereafter?

Thu, 04/01/2010 - 15:37 | 283424 cougar_w
cougar_w's picture

Paranoid? My friend, the scenario you describe has been my operating assumption for a year.

It's called an unpowered controlled descent.

They're hoping to land this bitch on the Hudson River.

Thu, 04/01/2010 - 16:11 | 283471 tip e. canoe
tip e. canoe's picture

and blame it on the black swans.

Thu, 04/01/2010 - 15:41 | 283433 Rick64
Rick64's picture

This would be a more likely scenario. Introduction of a NWO and money system.

Thu, 04/01/2010 - 16:06 | 283463 Ripped Chunk
Ripped Chunk's picture

Where all the bad debt is shoveled on to the IMF's balance sheet?

Stupid but the most likely scenario.


Fri, 04/02/2010 - 08:49 | 284083 mikla
mikla's picture

Shoving all the debt onto the IMF balance sheet is probably where this is headed.  That provides an "out" for every central bank (indirection, laundering, plausible deniability) since ever central bank can behave as they always have, but have someone else to blame.

However, there's the political stochastic component -- Iceland won't play ball (good for them), I doubt Greece will either, and when Ireland figures out how they got screwed (indentured servitude for all eternity), my hope is they bail also.

Personally, I would not accept such currency (IMF-backed), but when governments mandate it, that will be quite hard to resist.

Of course, in the US, that would be Unconstitutional (currency weights and measures established by Congress, not a foreign entity), and IMHO that's been the only thing holding us back this long.

However, we mostly don't follow the Constitution, and Fed exercising of swaplines with foreign central banks (and SDRs) is almost (but not quite) the same thing as IMF-backed currency, and that's exactly where the IMF and central banks have been explicitly stating they want to go.

Thu, 04/01/2010 - 18:16 | 283526 wyosteven
wyosteven's picture

Good comment, but unfortunately the average US citizen doesn't come with the money multiplier like banks do.  This should tell you the gravity of the problem they are trying to face.

To me, the most obvious solution to this was Main Street all along, but not through givaways and welfare, but simply let people keep their earned money. Abolish the income tax in lieu of a consumption tax (VAT).  

The fed is forcing people into the risk pool by destroying the beach.  This is crucifying prudent savers, risk averse, and future citizens that had nothing to do with the issues at hand while everyone else at the present can't swim.

Thu, 04/01/2010 - 14:25 | 283296 faustian bargain
faustian bargain's picture

I wish I could understand this better than I do. I know this is smoking gun type material, but I'm struggling to keep up. I was (not so) blissfully ignorant until fall '08. Now, every morning I check ZH and I'm like, "WTF?"

Thu, 04/01/2010 - 14:32 | 283316 Modus
Modus's picture

same here, crazy stuff goin on out there....

although, is there a necessity to hedge if they intend to hold all mbs until maturity? of course, then there is no exit strategy at all

Thu, 04/01/2010 - 15:03 | 283372 Burnbright
Burnbright's picture

That's kind of what I am thinking. They are not hedging on raising interest rates because they will keep them low at all costs. But as Tyler pointed out that means hyperinflation.

Thu, 04/01/2010 - 16:25 | 283490 gmrpeabody
gmrpeabody's picture


+1.5 trillion

Thu, 04/01/2010 - 14:25 | 283298 BlackBeard
BlackBeard's picture

That's great.  There would be no better ending to this story, than if the Fed were to blow itself up.

Thu, 04/01/2010 - 14:29 | 283304 faustian bargain
faustian bargain's picture

But first I want to see Bernanke go all Tom-Cruise-on-Oprah's-couch on national TV.

Thu, 04/01/2010 - 15:39 | 283426 cougar_w
cougar_w's picture

Fine. But would it really be worth the inevitable emotional scarring?

Thu, 04/01/2010 - 15:47 | 283438 faustian bargain
faustian bargain's picture

Couldn't be any worse than watching C.Romer try to spin some bad news on any given interview. Or could it. I'm afraid the past couple of years I have built up a tolerance for masochism.

Thu, 04/01/2010 - 17:47 | 283588 TheGoodDoctor
TheGoodDoctor's picture

I get the feeling that C. Romer hardly believes her own bullshit that she is spewing in any given interview.

Thu, 04/01/2010 - 18:31 | 283653 non-anon
non-anon's picture

Every time the WH trots her out, it is freaking scary the way she looks and talks. Totally unrealistic!

Thu, 04/01/2010 - 14:30 | 283311 faustian bargain
faustian bargain's picture

now at

The website is currently down due to technical difficulties.
We apologize for any inconvenience and we invite you to check back shortly. For any information or Online orders please contact us at 1-877-775-4826. Thank you for your understanding.

Thu, 04/01/2010 - 14:30 | 283313 Pegasus Muse
Pegasus Muse's picture

This stuff just makes my head spin.  Ditto what Faustian asked. 

How do I protect myself?  Buy gold & silver?  Anything else? 

Thu, 04/01/2010 - 14:52 | 283351 faustian bargain
faustian bargain's picture

Your schtick is tired.

Thu, 04/01/2010 - 16:16 | 283482 JW n FL
JW n FL's picture

One sentence... no numbers.... no sources.... you are a fucking blessing to your Country, idiot.

Thu, 04/01/2010 - 16:29 | 283494 gmrpeabody
gmrpeabody's picture

Me thinks you may not be around much longer.  Arrrgg!

Thu, 04/01/2010 - 16:34 | 283501 JW n FL
JW n FL's picture

Why? becuase I provide 3rd party information?


because I offer more than 1 line of whinning?


becuase there is substance to what I offer?


Becuase the Gold bugs out number me?

Thu, 04/01/2010 - 16:54 | 283524 gmrpeabody
gmrpeabody's picture


Because, I believe, you just set the record for being junked.

Thu, 04/01/2010 - 17:03 | 283534 tmosley
tmosley's picture

More likely because you run around screaming and calling people idiots.

There are plenty of ill informed people on these forums, but none are so persistent as you.  Cut it out, and stop pretending like you know everything.

Thu, 04/01/2010 - 17:21 | 283552 JW n FL
JW n FL's picture

What exactly did I say I know everything about?


What am ill informed about?


You are an idiot.


Your 3 sentences of nothing... your actions, more than my pointing it.... out make the statement true.


I share information... sourced and sited... 3rd party... stuff anyone can read and debate the facts on...


You... say I am a Meany! and that I am ill informed... but instead of trying to help me... by sourcing and siting facts you call me names... you are the Sheepeople... offer nothing and do nothing but take up space.


So, idiot... where am I wrong? lets have a discussion about the facts... unlike you... I am happy to be wrong and learn something. I am greatful to learn... from anyone on any subject... and that will not likely soon change...


i could make the logical leap you are on of the true believers of "Fox News" or a gold bug... becuase i dont see how.. since you have not said anything worth responding to... why you would single me out and call me a meany, know it all... so share for the benefit of all...


Or complain, whinne, piss, bitch and / or moan... in 3 sentences and offer nothing of substance...


Consider this a challenge... help me learn.. help everyone learn... Please?!


I once again am all for learning and being wrong, I dont have an ego the way you have described.. if someone teaches me and helps me... I am forever greatful!

Thu, 04/01/2010 - 21:05 | 283838 merehuman
merehuman's picture

yes we all have an ego. We have noticed yours right from the start. Your attempts to be helpful are appreciated. But perhaps, you like myself , need to be better informed. This is a very deep rabbit hole. From 1913 to 911 and the lies we all believed. Bildeburg to Kramer, goldmans minions all in CBs worlwide, A coincidental huge profit by few while their countries die. Its huge. And we the unwilling aware few victims can do little but warn the innocent.

And we all should be warning our fellow countrymen who do not see what we see and have no computers.

Yes we need to act , and that first action should be to inform our citizens

Thu, 04/01/2010 - 16:53 | 283523 hack3434
hack3434's picture

Click on the 5 & 10 year chart to see the "bigger"'re truly are a fucking shill and an idiot...

Thu, 04/01/2010 - 17:22 | 283554 JW n FL
JW n FL's picture



Yeah buy Gold! Moron!


The Spot Price of Gold is $ 1126.50Current as of Apr 01, 2010 01:32PM . Not For trading purposes verse reward... and when the Fed does print thier way out... which they will, the middle market will hedge thier savings into Gold and you will make a Fortune! Go Gettum Tiger!

Thu, 04/01/2010 - 15:33 | 283417 merehuman
merehuman's picture

King World news had a great interview on gold and silver manipulation whistle blower. Yesterday the site was attacked and someone ran over the whistle blower. MSM is keeping mum on this. CTFC meet was a boost for all gold and silver owners (actual only, paper holders are  screwed).

Thu, 04/01/2010 - 18:59 | 283686 boiow
boiow's picture

that was the story of the decade. when it takes off and it will, the world will be a very exciting place.

being a witness to all this is a bit like filming the titanic as it hits the iceburg.

Thu, 04/01/2010 - 21:06 | 283841 merehuman
merehuman's picture

I am watching it via various websites, primarily Zerohedge.

Thu, 04/01/2010 - 16:10 | 283468 Ripped Chunk
Ripped Chunk's picture

Ammo and something to fire it from.

Remember the vast majority do not have a clue how bad it can and probably will get.  Are you going to throw your gold and silver at them when they figure out how much of it you have and come for it?

Thu, 04/01/2010 - 16:35 | 283502 JW n FL
JW n FL's picture

Careful Brother... the Gold Bugs dont like reality... they like pump and dump.

Thu, 04/01/2010 - 17:47 | 283587 WaterWings
WaterWings's picture

Hey, you seen Master Baits around? Wait a minute!

Thu, 04/01/2010 - 19:09 | 283707 Rusty Shorts
Rusty Shorts's picture

Hey, that's exactly what I was thinking...MB.

Thu, 04/01/2010 - 21:08 | 283843 merehuman
merehuman's picture

WW and Rusty, i agree, had same thought repeatedly.

Thu, 04/01/2010 - 19:07 | 283703 trav7777
trav7777's picture

They won't figure out how much your guns and ammo are worth and come for them???

Thu, 04/01/2010 - 14:39 | 283320 Mako
Mako's picture

And who do you think is big enough to sustain those losses?  You are asking them to hedge a position nobody on this planet can cover. 

All you guys are getting closer and closer to end game.

And no it won't be hyperinflating, the only thing that would be hyperinflating is graves as the credit system implodes.



Thu, 04/01/2010 - 15:02 | 283370 carbonmutant
carbonmutant's picture

In a "Kick the Can" administration nobody cares. All they need to do is keep it going long enough to drop it in the next guys lap.

Thu, 04/01/2010 - 15:06 | 283381 Mako
Mako's picture

It last about 60-80 years or a generation.   There is nothing anyone can do, it was over before you were even born, the only question has been "when". 

"There is no out, there is only in"

Thu, 04/01/2010 - 16:15 | 283478 tip e. canoe
tip e. canoe's picture

"The thing's hollow—it goes on forever—and—oh my God—it's full of stars!"

Thu, 04/01/2010 - 20:56 | 283833 kevinearick
kevinearick's picture


We have found a strange footprint on the shores of the unknown. We have devised profound theories, one after another, to account for its origins. At last, we have succeeded in reconstructing the creature that made the footprint. And lo! It is our own.


Thu, 04/01/2010 - 16:48 | 283518 JW n FL
JW n FL's picture

When is the last time we had a Government that was not just "kicking the can"?


I would love to see anyone in this room... "almost everyone" 99.99999999999999% be the President of America over what we as a nation have suffered... But how long before anyone with a real agenda to try to straighten out America would be shot down in the street by some guy with a sling shot?


The Status Quo does not want change... and will kill to keep and real change from happening. That is the fate we all suffer... hoping that the lie does not crush our Country. Most of us here would survive and do well and would even live well... in the event of a crash... but I have a real concern for most.. not just us with brains. I dont wish hardship on any of my fellow Country men or women, but I dont know if that the lie will be able to out run the truth this time around. I really hope that all of us do well and I really hope the Country does well... but we are all sitting on top of a house of cards printed by the Fed... that is 30,000 feet high... and the fall could kill us all.


Thu, 04/01/2010 - 17:18 | 283545 wyosteven
wyosteven's picture

There are simple solutions that are already in place and just haven't been enforced -- transparancy and accountability.

With those two pieces justice becomes the free market.  Obviously, we have none of that at the present and money is the red herring.

Thu, 04/01/2010 - 17:24 | 283556 Mako
Mako's picture

The solution is coming whether there is transparency or not... the equation could give a rat's ass about transparency.


You either supply the equation exponential growth or the system dies... humans have no ability to supply long-term exponential growth.

Thu, 04/01/2010 - 19:00 | 283689 Pinkfleud
Pinkfleud's picture

 "not just us with brains"

Very arrogant of you to think you have a brain ! From everything I've read you sound like just a whiner and an inflamatory asshole. Please don't insult those of us that actually have some gray matter to exercise. If you have a solution cough it up, otherwise relagate your bitching and your attacks to the Alex Jones blog.

Thu, 04/01/2010 - 15:25 | 283405 deadparrot
deadparrot's picture

I agree. Goldbugs see any and all regulatory shenanigans as bullish for gold. A blowup at the Fed would mean an international financial reset in which all assets plunge. The only things that would have any value are goods you can barter. In such a situation, i think the govt would bite the bullet and allow deflation to preserve the dollar. Going the hyperinflation route would just kill the dollar and economy. Deflation is the lesser of two evils.

Thu, 04/01/2010 - 15:38 | 283425 faustian bargain
faustian bargain's picture

I think the jury's still out on whether the government (or the Fed, or whoever is really in charge) cares about the economy per se. I think "their" priority is maintaining power, and if the economy/society/civilization has to be killed to do that, well that's a price they're willing to (make us) pay.

Maybe "they" have some new strategy brewing in the wings, for transferring to a non-economical means of maintaining power.

Thu, 04/01/2010 - 17:22 | 283553 wyosteven
wyosteven's picture

There are only two other means - fear and force.

Thu, 04/01/2010 - 15:40 | 283431 Mako
Mako's picture

The system is credit, not gold.  The system ran out of gold to run the system. 

Going back to a barter system will mean almost no credit, which is deflationary.   You can't feed 7 billion with or without gold when the system collapses.  Didn't seem to help the Jews in Europe the last time.


Thu, 04/01/2010 - 15:52 | 283449 faustian bargain
faustian bargain's picture

Well, in that case I guess the population problem will solve itself eventually. And/or the nonproductive set will learn some new skills in highway robbery.

Thu, 04/01/2010 - 16:17 | 283483 tip e. canoe
tip e. canoe's picture

Mako, you can run a barter economy on credit.  just have to put buffers in to limit everyone's exposure to hustlers gaming the system.

Thu, 04/01/2010 - 17:29 | 283565 Mako
Mako's picture

Even in the Road Warrior there was credit... Mad Max got out lockup with 5 gallons to bring a truck back, in return he got his car back with a fuel tank of gas.... credit was given in the form of his freedom with 5 gallons of gas.  

You are not going to feed 7 billion in a barter system... the liquidation process this time will be one of legends.

Thu, 04/01/2010 - 21:51 | 283645 tip e. canoe
tip e. canoe's picture

"You are not going to feed 7 billion in a barter system..."

depends how limited you define barter system? 

Thu, 04/01/2010 - 15:50 | 283446 RonnieHonduras
RonnieHonduras's picture

The market would accept a medium of exchange.  It would be especially demanded by the haves. Someone's gold watch, or gold (or silver) coin, what's the difference.

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