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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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.


hungrydweller's picture

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

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.

faustian bargain's picture

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

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.

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.

trav7777's picture



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

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.


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.

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."

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.

WaterWings's picture

Always very interesting posts.

TheDreadPirateRoberts's picture

you seem angry about something.

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'. 


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.

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.




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.

Hulk's picture

Electric cars with flux capacitors going to save us dude!

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.

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.  

tip e. canoe's picture

and cars running peanut oil (see diesel).

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"  


barthezz's picture

What is the Bloomberg function for the above screen?

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!

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!


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.

Rick64's picture

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

Rainman's picture

Not much of a dice roll if BB had every intent of keeping...er, 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 assets......an 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 different.....as 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.



trav7777's picture

No...it's not containable.

They keep going to the book...it 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.

Hulk's picture

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

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. 


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....

mikla's picture

The world is indeed disturbed when The Hulk feels impotent.

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.

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. 

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

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.

gmrpeabody's picture

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


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

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."

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?

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.

tip e. canoe's picture

and blame it on the black swans.

Rick64's picture

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

Ripped Chunk's picture

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

Stupid but the most likely scenario.


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.