Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame

Recently the debate over when QE2 will occur has taken a back seat over the question of what the implications of the Fed's latest intervention in monetary policy will be, as it is now certain that Bernanke will attempt a fresh round of monetary stimulus to prevent the recent deceleration in the economy from transforming into outright deflation. Whether or not the Fed will decide to engage in QE2 on its November 3 meeting, or as others have suggested December 14, and maybe even as far out as January 25, the actual event is now a certainty. And while many have discussed this topic in big picture terms, most notably David Tepper, who on Friday stated that no matter what, stocks will benefit from QE2, few if any have actually considered what the impact of QE2 will be on the Fed's balance sheet, and how the change in composition in Fed assets will impact all marketable asset classes. We have conducted a rough analysis on how QE2 will reshape the Fed's balance sheet. We were stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.

A Question of Size

One of the main open questions on QE2, is how large the Fed's next monetization episode will be. This year's most prescient economist, Jan Hatzius, has predicted that the minimum floor of Bernanke's next intervention will be around $1 trillion, which of course means that he likely expects a materially greater final outcome from a Fed that is known for "forceful" action. Others, such as Bank of America's Priya Misra, have loftier expectations: "We expect the size of QE2 to be at least as much as QE1 in terms of duration demand." As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed's QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater.

A Question of Composition

Probably the most important fact that economists and investors are ignoring is that QE2 will be accompanied by the prerogatives of QE Lite, namely the constant rebalancing the Fed's balance sheet for ongoing and accelerating prepayments of the MBS/Agency portfolio. This is a critical fact, because once it becomes clear that the Fed is indeed commencing on another round of monetization, rates will collapse even more beyond recent all time records (and if we are correct, could plunge all the way to zero). What is very important to note, is that as Bank of America's Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: "Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%." (full report link)

The fact that declining rates creates a feedback loop on prepayments, which in turn results in more security purchases and even lower rates, is most certainly not lost on the Fed, and is the primary reason for the formulation of QE Lite as it currently exists. Indeed, those who follow the Fed's balance sheet, are aware that the MBS/Agency book has declined from a peak of $1.3 trillion on June 23, to $1.246 trillion most recently, a decline of $53 billion, which has been accompanied by $25 billion in Bond purchases, resulting in such direct FRBNY market involvements as $10 billion weekly POMOs. These, in turn, are nothing less than a daily pump of liquidity into the Primary Dealers (who exchange bonds boughts at auction for outright cash) by the Fed's Open Market Desk, which then liquidity is used to the PD community to bid up risk assets.

If we are correct in our assumption that on November 3, the Fed will announce a $1.5 trillion new asset purchase program, the implications of the previous observation will be dramatic. We additionally believe, that unlike QE1, the Fed will be far less specific as to the composition of purchases this time around, specifically for the aforementioned resion. As the Fed adds an additional $1.5 trillion in total assets, and as 10 Year rates, and thus 30 year cash mortgage rates, drop, the prepayment frequency of the Fed's existing MBS/agency book will surge, until it approaches and surpasses BofA's estimated 90% in a very short period of time. And courtesy of its QE Lite mandate, the Fed will purchase not only $1.5 trillion of US Treasurys as part of its new QE2 mandate, but will actively be rolling those MBS and Agencies put to it by the general public. As a result, it is our belief that over the six months beginning on November 3, the Fed will end up purchasing almost $3 trillion in US Treasurys in total. This can be summarized visually as follows:

As the chart shows, while the Fed's balance sheet grows from its current level of $2.3 trillion to $3.8 trillion, it is what happens to the Treasurys held outright by the Fed that is most disturbing: from $800 billion, we expect this number to surge to nearly $3.6 trillion in just over half a year, a massive increase of almost $3 trillion. The implications of this asset "transformation" on the Fed's balance sheet, not to mention those of US retail and foreign investors, and capital markets in general, will be dramatic.

Offerless Bonds?

One of the main problems facing the Fed in indirectly monetizing US Treasurys (keep in mind the proper definition of monetization is the Fed buying bonds directly from the Treasury, as opposed to using Primary Dealer middlemen, which is how it operates currently), is that there simply are not enough bonds in circulation to be bid, under its current regime of operation! Readers will recall that as part of existing SOMA guidelines, the Fed is limited to holding at most 35% of any specific marketable CUSIP. Furthermore, applying the SOMA limit to the $2 trillion in upcoming next twelve month issuance, means that in the interplay of the prepayment feedback loop coupled with collapsing rates, the Fed will need to either change the cap on the SOMA 35% limit, or the Treasury will need to issue far more debt to keep up with the sudden expansion in the Fed's outright, and not just marginal, capacity for incremental debt. Priya Misra summarizes this conundrum facing the Fed best:

We examine the Treasury market to analyze which part of the curve might benefit the most from Fed buying if it embarks on QE2. The constraints will come in term of the 35% SOMA limit as well as current outstandings and issuance profile. Table 5 provides the breakdown of average SOMA holdings and eligible dollar amount outstanding by sector. We estimate that in the nominal coupon universe, there is currently $1.3trillion in outstanding eligible issues for the Fed to buy. We compute eligible number of issues as the amount the Fed can buy without breaching its SOMA limit of owning 35% of the issue size. Considering that the Fed has not purchased 0-2 year securities in either QE1 or the reinvestment program so far, the eligible universe reduces to $935billion. Interestingly, $560bn of this is in the less than 7 year sector.

While the total eligible securities may seem like a low number in the context of QE2, we expect $2.1tn in gross issuance over the next year. Adding 35% of this gross issuance to the total, the Fed will have $1.67tn in eligible nominal outstanding to purchase without breaching the 35% limit. However, depending on the total size of QE2, much of the buying might have to be concentrated in the 2-7 year sector. To the extent that the Fed wants to keep long end rates low, it might have to increase the 35% SOMA limit, or the Treasury could change issuance.

We believe that the resolution to the limited supply question will be found promptly, as the last thing the US government and Treasury need is to be told that they need to issue more debt. We are confident they will obligly handily. From a purely structural perspective, suddenly the entire UST curve, and not just the "belly", will be offerless, as the Fed will now have a mandate of buying up virtually every single bond available in the open market, and then some! What this means is that rates will promptly plunge, and while many have noted the possibility that the 10 Year drops below 1% upon the formal announcement of QE2, we believe there is a very high probability that even the long-end can see rates drop substantially below 1%, while the 10 Year approaches 0%. Keep in mind that this move will not be predicated upon inflation expectations whatsoever (and in fact we believe this is merely the first step to an outright monetary collapse also known in some textbooks as hyperinflation), but merely as a means of frontrunning Ben Bernanke, as the entire bond market goes offerless, knowing full well that the Fed will buy any bond below its theoretical minimum price of 0% implied yield (we leave it to our readers to determine what this means price-wise on the curve). It also means that the Fed will finally cross the boundary into outright monetization, as Bernanke will be forced to directly bid for any new paper emitted by the US Treasury, to maintain the tempo of its purchases.

Asset Implications

As we have noted above, the immediate implication of the vicious (or virtuous if you are Ben Bernanke) feedback loop of collapsing rates, prepayments, and accelerating UST purchases, is that mid-and long-term rates will likely promptly approach zero, as every UST holder realizes they are now the marginal price setter in a market in which there is a bid for any price. The Fed will merely render the traditional supply/demand curve meaningless, and any bonds offered for sale at any price will be bid up by Brian Sack. The implication on stock prices is comparably obvious: to readers who have been confounded by the impact on stocks when there is $10 billion worth of POMOs in a week, we leave to their imagination what the impact on 4x beta stocks will be once the Fed floods the market with $90 billion worth of weekly liquidity, which is what we calculate to be the peak repurchase activity between the months of January and March, as QE2 ramps up to its full potential. In this vein, analysts such as Deutsche's Joe LaVorgna who this Friday came out with a note advising clients not to "Fight the Fed" (link) may take the message to heart. After all, if this last attempt by the Fed to spur asset price inflation, in which Bernanke is effectively telling the consumer that a house can be had for no money down, and for no interest ever, thereby eliminating the risk of price deprecitation, fails, it is game over.

And speaking of game over, we dread to look at a chart of the DXY in early 2011. The dollar will plunge, pure and simple, as the Fed makes it clear that it will not tolerate currency appreciation. Also, don't forget that as a side effect of QE2, another component that will surge in addition to Fed Treasury holdings, will be excess reserves held by the banks. If we are correct in estimating that the Fed's assets will explode to $3.8 trillion, then bank excess reserves will skyrocket by a factor of 150% from the current $1 trillion to well over $2.5 trillion. The immediate casualty of this will be the US Dollar: one needs to look no further than 2009 to see what happened to the DXY when excess reserves increased by $1 trillion, in order to extrapolate what happens when it becomes clear that Bernanke is prepared to put any amount of liabilities on the Fed's balance sheet in its latest reflation attempt. And if anyone had doubts about the Fed being able to successfully absorb $1 trillion in excess reserves accumulated through QE1, all those concerns will be put to rest once the number hits $2.5 trillion, or more.

Which brings us to gold. Needless to say, once the full "all in" realization of just what QE2 means for risk assets and capital markets sets in, gold (and other physical commodities) will promptly go from its current price of $1,300 to a number well in the five-digit range. We leave it up to our readers to provide the actual digits.

In summary, David Tepper may well be right that stocks will benefit from QE2, as will Bonds and as will commodities. In fact, every asset class will explode in a supernova of endless liquidity. To be sure, all of this will be very short lived. Very soon, all those assets denominated in fiat paper, will promptly collapse in the great black hole of reserve currency devaluation, as it becomes clear that the Fed will stop at nothing to win the race of global currency debasemenet. And of course, none of this is to be confused for an actual improvement in the economy, as QE2 will result in a dramatic and irreversible deterioration in the US, and thus global, economy, which, once the initial euphoria from QE2 recedes, will promptly progress to isolationism, protectionism, currency wars and exponentially accelerating monetization of each and every asset class, thereby rendering price discovery irrelevant, as central banks around the world stampede into irrelevant capital market, each buying up as much of everything as their printing presses will allow them, until the ink runs dry.

At this point we refuse to pass ethical judgment on the Fed's actions. The Fed will do this action regardless of what happens on that other fateful event scheduled to take place on November 3. If it does not, asset prices will collapse leading America into a deflationary vortex of deleveraging, and Bernanke is fully aware of this. The only reason the market has found some validation to the September risk asset surge, is the "certainty" of QE2. Were this to be taken away, stocks would plunge, as would all other assets. And since the Fed is uncontrollable, and unaccountable to anyone, it is now impossible to prevent this line of action, whose outcome is what some may be tempted to call, appropriately so, hyperinflation. The direct outcome will be an explosion in all asset prices, although we continue to believe that of all assets, gold will continue to outperform both stocks and bonds, as recently demonstrated. Those who are wishing to front-run the Fed in its latest and probably last action, may be wise to establish a portfolio which has a 2:1:1 (or 3:1:1) distribution between gold, stocks and bonds, as all are now very likely to surge. We would emphasize an overweight position in gold, because if hyperinflation does take hold, and the existing currency system is, to put it mildly, put into question, gold will promptly revert to currency status, and assets denominated in fiat, such as stocks and bonds, will become meaningless.

And while Zero Hedge refuses to condemn what is now openly an act of war against the US middle class and the country's holders of dollar-denominated assets, by Ben Bernanke, who is fully aware what the implications of QE2 will be, we were delighted to read a brief note by none other than Bank of America's Jeffrey Rosenberg, who analyzes the costs of QE2, and comes to a politically correct conclusion which recapitulates everything said previously.

The costs of QE 2 in our view however go beyond the cost benefit analysis Chairman Bernanke highlighted in his Jackson Hole speech. There, the Chairman highlighted two key risks to additional purchases of longer-term securities. First, that they do not know with precision the effect of changes in Fed holdings of securities on financial conditions. On this point we have emphasized on numerous occasions that the main consequences of QE1 to date have been financial asset inflation. Further purchases under QE2 hence in our view would likely be limited in impact to furthering this process of asset inflation. However, the costs of even further asset inflation would likely accelerate the risks associated with what we characterize as conditions conducive to the growth of a credit bubble: low global yield levels, tight credit spreads, and an excess of demand for credit relative to supply. While those characteristics create asset inflation and form the backdrop of our near term bullish outlook on risky asset class performance, the risks of sparking future credit bubbles with their attendant systemic risk consequences grows under a scenario of QE2, in our view.

It’s the (lack of) confidence, stupid

The second risk highlighted in Jackson Hole by the Chairman concerns the confidence effects of Fed’s ability to exit accommodative policy and shrink the size of its balance sheet. While we agree with the notion that the key risk is one of confidence, the confidence impact of greater near term importance may lie less with concern over the Fed’s eventual ability to exit and more with what expanding QE2 says about the Fed’s confidence in its ability to utilize monetary policy to address deflationary risks.

Bernanke acknowledged that fiscal policy needs to be part of the policy response and that “Central bankers alone cannot solve the world’s economic problems.” In our assessment, further liquidity injection beyond some additional marginal transmission mechanism into mortgage refinancing or housing affordability would achieve little impact on the real economy. Much of the liquidity benefit of QE1 for the commercial side of the economy already remains on display in the form of very high rates of corporate refinancing activity. Additional rate declines from QE2 would add only marginally to those trends well underway. For smaller corporates or small business, QE1 did little to expand lending, though QE1 likely did prevent even further declines in lending. However, QE alone appears incapable of leading to expanding lending as the problems today shift from one of supply to one of demand. Chart 5 illustrates the stabilization of lending and how most of the Fed’s expanded balance sheet remains in the form of cash, not loans. Chart 6 shows that even as banks have eased underwriting standards, the demand for loans remains low.

Rather than liquidity – and its potential augmentation from expanding QE - the key issue behind the inability to see credit expansion and the weakness of monetary policy more broadly to affect a more positive economic outlook is confidence. And this leads to our final cost analysis on QE2. Where confidence stands as the key issue for the economy, expanding QE2 may end up doing more damage than good as the confidence loss from a Fed indicating its fears of deflation through expansion of QE2 as well as the follow on loss of confidence from the diminishing impact of further QE leads to a loss in confidence whose costs outweigh those of the benefits of further reductions in long term rates.

Perhaps at this point it is prudent to recall what the first definition of credit is:

1. Belief or confidence in the truth of something.

By that defintion, America's "credit" has ran out.

Comments

[Victorio]

Stefan Molyneux!?! Is that you?!?  ;)

[Bob]

That's why I see a "warm reset" already planned and waiting.  Disaster cannot be guaranteed, but I really don't think they have failed to lay up some contingency plans.  Hell, new currency may already be printed . . . if they haven't just decided to go with debit cards (making everything more elegantly simple and flexible for future moves, among other advantages.)

Don't worry, TPTB know perfectly well what an American public without its cable TV and internet service--much less starvation--would bring them.  I don't think they'll let it get that far, fwiw. 

[merehuman]

Red dollars to replace green dollars early 2011. Red dollars been sitting around a while now. ATM and money count machines were notified months ago.

I no longer recall the sites i got this from. In any case they may be used or not, too many plates in the air now to say for sure. If bernanke HAD a plan it likely went the same route as any war. The minute you begin your plan, things change. I think Bernanke s plan has gone astray. He is plugging holes in a dam that is developing cracks. Good luck with that.

[Bob]

Hey, mh, you awight? 

What state are you in?  Here in Michigan, the toilet paper is going to recycled single ply--people in Muskegon, a predominantly working class town, have been selling their boats, engines, bikes, cars, and perfectly working tools of all kinds, for scrap metal! 

[Kayman]

The only people blissfully unaware of the Depression we are in are people who work in the Banking Cartel and those whose names appear on Government pay checks.

So that means 40 to 50% think we live in "normal" times.

The Parasites are sucking on an ever diminishing supply of blood.

[nmewn]

"Red dollars to replace green dollars...I no longer recall the sites i got this from."

Bruce did a piece on this a few months back.

Regards

[fiftybagger]

The Hidden Meanings in the New $100 Bill!

http://www.roadtoroota.com/public/261.cfm

[apberusdisvet]

I'm waiting to see what the posted bounties will be on the various corruptocrats at the national and state levels, and of course the Marxist union bosses.  I can't mention names, because then Tyler would be waterboarded to get my home address and my neighbors might not like the thump, thump, thump of the black helicopters.

[B9K9]

The names are already known by opposing forces. What is the sure fire, instantaneous means of gaining legitimacy via public approval upon takeover by a new regime? String up the prior cabal of criminals. Which is why their passports are always in their back pockets, along with some gold 'pocket change', and tickets in hand to the land of return.

[Everyman]

Extradition, Bitchez!

(I finally got to do one!)

[Everyman]

This is the post I was hoping to read!

Since this Ponzi/RICO/Mafia that is the SEC/UST/FEDRES is a criminal organizations with accomplices such as GS, AIG, BoA, etc.; there have always been "bounties" on criminals.

THAT is precisely what is going to happen.  Why use the courts?  They will call this a "victimless white collar crime", "nothing to see here" despite the damage wrought on the entire country!

The mafia has hit squads, and I can see that happen if some rich guy loses his fortune, and if enough of them lose their fortunes somebody will wake up with a "horse head".

BTW, did anyone see the posts of the London Bullion Merc, Assn. that a buch of billionaires starting withdrawing their gold??  Seems as if the LBMA has sold paper gold 100 to one and does not have the money to cover the difference and 12-13 of the billionaires got together and started withdrawing their physical gold.  IT shut down the exchange and the data went blank.

The revolution has already started, and the filthy rich are scared, Why TF would Main street not be upset??

As for the "Ghandi Moment" we ar long past that, these idiots were warned NOT to do this LOUD and CLEARLY, NOT to debase and NOT TO BAILOUT and to STOP THE MARKET MANIPULATION.

If they ignored, then their head deserved to be 'on a pike" either literally or by metaphors.

Either way they are criminals, that inludes Geitner, Summers, Romer, Paulsen and the rest of the rouges gallery.

They are the enemies and terrorists of the American Citizens.

[laughing_swordfish]

+ 1000

[Kina]

What effect does a melt down of the USD have on other ecnomies and currencies?

It is not as though Europe is not in the same boat. And countries like Australia and Asia relying on China wont fair well as China shuts up shop and turns inward to deal with a broken export sector.

In the first instance maybe some currencies will seem attractive, but the writing would have to be on the wall for them all as being in a series of dominos. Commodities are it then, own things of value.

Wish I knew what else to do to prepare for the eventuality.

[Arkadaba]

I also wonder what the effect will be on other currencies and economies . Recently, UBS predicted that the Canadian dollar will be at par within 3 months:

The Canadian dollar will hit parity with the U.S. dollar in the next three months, according to a new forecast from UBS, the Swiss bank.

UBS Wealth Management Research projects the loonie will continue to make gains during the nine months after that.

http://www.financialpost.com/news/Loonie+reach+with+dollar+months/3567716/story.html

I believe this has everything to do with weakness in the USD rather than strength in the CDN dollar. However, once the SHTF, what would happen to the CDN and economy? Given Canada's close economic ties to the US, there would obviously be economic damage. But might not some countries like Canada be in a somewhat more secure situation at least wrt the degree of social unrest?

And if the worst case scenario comes to pass in the US (massive social unrest), I wonder if Canada would have to close her borders because of economic refugees (I know that seems a little far out there but I'm speculating here)?

[Kayman]

If the U.S. collapses (in turn killing China's most important export market) the CDN$ is screwed.  And don't worry about closing the border.  It will be as successful as keeping Mexicans out of the U.S.

Socialist Pinko Canada only has the better federal debt position because Pierre Trudeau/Castro ruined Canada's credit rating a generation ago.  

Canada (supposedly) became fiscally prudent. Not because she wanted to, but because she had to.

[Arkadaba]

Ok I won't comment on "Socialist Pinko Canada" because I don't think it would useful given that we are probably miles apart on that subject. But I would like to know how "Trudeau/Castro ruined Canada's credit rating"? I'm not sure what you are referring to there.

[Thunder Dome]

It's well into the 4th quarter and the FED is losing by three touchdowns.  Time to spread out the offense and go into shotgun formation every play.

[steve from virginia]

Long article - not ONE WORD about energy.

The Fed stuffs finance with more cash as if they don't already have enough. This is a nice theory but ignores real world examples of QE, such as 'The Japan Effect'.

Cash flowing into oil raises the price higher than the real economy can afford. You know, the economy that makes stuff - supposedly at a profit.

$75 oil is too expensive for much of the developed world. A price above $35 kills the economy. $80 oil kills it that much faster.

Look for oil to 'touch' $80 and for the short- dollar trade to unwind again.

BTW, Bennie & Co can create another bubble - this time in gold - but the real economy's failures determine outcomes from now on.

Not finance, and not the Fed.

[yabyum]

80.00$ is bad? 150.00$ oil will be a boot on the throat of free people world wide...tought times ahead.

[tom a taxpayer]

Steve - As you have said many times before, oil is central. I think if oil prices ever move up significantly, that will be the final confirmation that all hell is going to break loose. With oil still in the $70-$80 range, the lid is still on the steam kettle. Oil is the king of commodities. Until the king sings, the commodities upswing is not in full swing.

Conversely, if oil prices do not rise significantly, then deflation or disinflation are still on the table.

[steve from virginia]

Gold has all the appearances of a classic asset price bubble: lots of public participation, lots of available credit, lack of asset alternatives, limited supply (but not that limited) along with a large and increasing horde of gold derivatives w/ much leverage. I can see $5,000 gold the same way as anyone could see $1m Miami airport condos and for the same reasons.

Gold, it is said, will never go 'down' in price.

As for oil, it indeed the king of commodities, without it there is no modernity, no industry and none of the derivative finance that depends on it.

Oil is a great 'wealth' barometer. Expensive oil ($147/bbl) indicates a society with great wealth. $80 oil suggests a society that has lost about 40% of its wealth with more lost every day. This is a simple exercise in curve- fitting. What diminishes faster: the dollar value or oil or the dollar value of the business that requires the same oil to run profitably? The answer that the past five or so years has been telling us is that business is going broke fast!

If oil drops below bout $70 look for shortages as 'cheap oil' producers cut back production (to hoard their crude) while expensive to produce crude is shut in. Shortages will cause a shock that leads to lower prices and a vicious, self- reinforcing cycle.

QE is irrelevant, as the Fed cannot print crude oil or add any real value to anything.

[Implicit simplicit]

SFV- I believe that you will be right in the long run, but the markets have a way of dragging the inevitable out over a long period of time,

[fiftybagger]

"lots of public participation"

Are you stupid?  In 1979 15% of the public was involved in PMs.  Today it is 1.5%

"lots of available credit"

Huh?

John Nadler, is that you?

What a doosh

[puckles]

The "Japan effect" cannot happen here, for reasons that have been widely explored on ZH.  To sum, they then had, and still, have enormous trade surpluses, and virtually all of the buyers of their State bonds were the hyper-saving Japanese themselves.  For many reasons, both demographic and fiscal, the latter will not hold much longer.  The USA is in a completely opposite situation, with severe trade deficits and a population that has only just begun to save again, but typically not in .gov bonds.  Regarding energy:

There has been relatively little speculation in oil lately. And in what currency worldwide do you think oil is traded?  Should the dollar tank, what seriously can you imagine the price of oil to go to?  Your observations about what happened in the past regarding oil at certain levels certainly hold.  That is the exact point of other posters here--what happens if the dollar becomes close to untradable?  Oil at $500/bbl? Or more?  We don't know, and that is what is scaring us.

BTW, in case the foregoing is not enough proof, Bernanke & Co. have no interest in creating a bubble in gold, if they even could, which is doubtful; the obverse is the real truth.  The rest of the world has begun to catch on to the fact that the emperor, i.e., the almighty $, has no clothes.  Indeed, there has been plenty of evidence over the past decade that central banks and their cohorts worldwide have been actively attempting to lower the price of gold in a syndicated fashion.  For further information, see www.gata.com.

I think you may have been misreading some primers of Elliott Wave Theory.  Hyperinflation is never ruled out, but it is typically predicted to occur after the primary deflation.  We have to date experienced some very major deflation in certain sectors, but due to the Fed, it has not been allowed to run its expected Austrian course.  Prechter, in particular, has been both mystified and angered by the action of gold, because his model did not anticipate that the Fed would continue to act utterly unrestrainedly.  His model also predicted that notwithstanding the actions of the Fed or other central banks, the aggregate outstanding debt worldwide was so massive, and the eventual repudiation so vehement-and equivalent-that whatever the Fed did would be piddly by comparison.  I doubt that his model considers the effect of a butterfly wing.

[Dadburnitpa]

http://en.wikipedia.org/wiki/Rudolf_Höss

[aka_ces]

I read Prechter’s free pdf, “The Guide to Understanding Deflation” this weekend.  

His key point is that the Fed creates credit; the Fed does not print money, as that would inhibit the Fed’s ability to continue creating credit: Bernanke “would be exhausted from turning the crank on the printing press fast enough to try to outrun the selling of panicked bond investors. A falling bond market would mean rising interest rates, the opposite of what the Fed would be trying to achieve. If rates were held down by fiat in such an environment, it would mean the immediate end to the market for new Treasuries, creating instant deflation … the net result of an attempt at inflating would be a system-wide reduction in the purchasing power of dollar-denominated debt, in other words, a drop in the dollar value of total credit extended, which is deflation”.  

Throughout this document Prechter reminds that “analysts constantly confuse credit creation with money creation.”  I (now) sense this confusion in a lot of ZH entries.  The credit/money distinction means that “If investors worldwide were to become informed, or even suspicious, that the Fed would follow the ’copter course, it would divest itself of dollar-denominated debt assets, causing a collapse in the value of dollar-denominated bonds, notes and bills. This collapse would be deflation. It would be a collapse in the dollar value of the outstanding credit supply.”

Again re the credit/currency distinction: “The inflation of the past 73 years is not primarily currency inflation but credit inflation. Credit can implode in a deflationary depression; currency cannot. Once currency is printed, it’s out there for good”

I think it's a reasonable expectation that the Fed would want to act in its self-interest.  At the same time,  considering how extremely complex and fragile the world financial system is, it seems that, yes, a butterfly wing could trigger a wide range of unpredictable outcomes.  Prechter chastises central banker economists for conceptualizing human behavior as machine-like, oblivious to social mood, yet his expectation of rational Central Banker behavior tends towards the mechanistic.  This approach is also in line w/ Elliot Wave Theory, which applies not particularly rigorous methods to arrive at relatively simple characterizations of social mood,  which then deterministically drives the particular behavior of central bankers.  He also argues that the Fed really has no idea what it is doing, which implies that it might very well start printing money, come what may.

Yes, Prechter in 2003 does anticipate the possibility of eventual hyperinflation.  From same section quoted above: “Were Bernanke’s policies begun today, they would in fact initially accompany a crushing credit deflation and then cause a currency hyperinflation. If they were begun years from now at the bottom of the deflation, then only hyperinflation would result.” 

And:  “Congress will not let the Fed inflate the currency until deflation has run its course. Then we will probably get hyperinflation. But it’s one thing at a time!”

Hyperinflation could also be a consequence of war: 

“The U.S. could decide to inflate its currency as opposed to the credit supply. As explained in Conquer the Crash, doing so would be seen today as a highly imprudent course, so it is unlikely, to say the least. If it were to occur anyway, the collapse of bond prices in response would neutralize the currency inflation until the credit markets were wiped out. Despite these arguments, I concede that war can be so disruptive, involving the destruction of goods and the curtailment of commercial services, that the environment from the standpoint of prices could end up appearing inflationary. To summarize my view, the monetary result may not be certain, but an inflationary result is hardly inevitable.”

[lizzy36]

"Man looks into the abyss and there is nothing is staring back at him. That's when man finds his character. And that's what keeps him out of the abyss."

[tip e. canoe]

great line...just watched that again for the 1st time in a long time last week...well worth it.

[mark mchugh]

I just want to clarify one thing: I was not trying to insinuate that TD had gone propagandist on us in my earlier post.  His integrity is unmatched and that's why this site has become "reality central" IMO.

That said, If I were TPTB, I'd be desperately seeking a way to throw TD and his ilk a head fake.

Sadly, I still read things and part of me thinks, "hmmm....how do I trade this?", knowing full well that the casino has been thoroughly rigged against me.  That lens (combined with it being the middle of the night) made me misinterpret the post.

[RockyRacoon]

"hmmm....how do I trade this?", knowing full well that the casino has been thoroughly rigged against me.

There's an app for that:  Doing the same thing over and over expecting the same result.

[Arkadaba]

Insanityville ?

[Arkadaba]

Actually that might be a fun app to develop ....

[aka_ces]

MSFT has been selling that for years.

[aka_ces]

(dup)

[macholatte]

Sadly, I still read things and part of me thinks, "hmmm....how do I trade this?", knowing full well that the casino has been thoroughly rigged against me.

Well, of course! Nothing sad about it. Somebody, somewhere is making money on this and a lot of it. Who? How? Why not me? Why not?

[digalert]

We have Barama talking of NWO, open borders, global governance. Bubble Ben with his 'to the moon Alice' policy. This will result in an unsustainable, insurmountable position where the only option is default. Come to the rescue...oh I don't know...the IMF.

http://notalemming.wordpress.com/2010/09/23/the-new-world-order-of-globa...

Continue living in lala land, believing we'll all be sitting around singing kumbaya if you wish. Open your eyes and see where this USS tanker is heading. Imagine how grand, when the policy of the "Americas" is determined by a single vote from Uganda or Chile.

[apberusdisvet]

The IMF is an integral part of the cabal; don't be naive.

[jmc8888]

Glass/Steagall is the way out

NAWAPA, Nuclear and later Fusion power get's us going.

The platforms we must construct with synergistic qualities between them, is Glass/Steagall>>>>>>>>NAWAPA >>>>>>> Space Program >>>>> FUSION

Credit System, not Monetary system

It's not hard.

You want to stop this deflationary/hyperinflationary crash? Glass/Steagall.

But you'll have to throw NerObama out...and no way will a repub do it either.  Meaning, impeach/resign Obama, and Pass Glass/Steagall or Die.

It's really that simple.  Wipe all the fraudulent stuff from the system with LAW.  Glass/Steagall is that law.  Those that say it can't, DON'T know HISTORY, DON"T KNOW THE SPIRIT OF GLASS/STEAGALL, and are utterly idiots.  Glass/Steagall will say bye-bye to the fraudulent derivaitves, cancel the bailouts, and wipe every non-functioning commercial asset off the books. 

Then we can utter the credit for what we need to right the ship.  NAWAPA will employ 3-6 million people right at the beginning.  We'll also solve our water (future) shortages, gain power, transform the biosphere from desert to green, AND we'll learn a thing or two about terraforming.

So many ideas, to right the ship and get us moving.  But Helicopter Ben, Nerobama, and all the republican whores or know nothings will only throw us under the rug.  You need REAL change, and no republican will EVER give you that.  Neither with Nero. Nero is so against Glass/Stegall because in reality, when you work for banks and create CCX like Obama does, you are nothing more than a bankster whore yourself.  He beleives in banking monetarism.  After all toots was one.  So is he.  We will get no change out of NerObama. 

I've never seen a republican produce change, and the tea party is a joke.

If you think

a) Obama

b) Republicans

c) Tea Party

If you think....any of those will change this and do what's easily right in front of you.  I've got beachfront property in Arizona and dry swamp land in Florida, and earthquake free land in California, and volcano free land around Mt. St Helens. 

Good luck everybody.  Because the world need not go down this road.  We can end it with a stroke of a pen or two.  Or we can play this retarded game and lose it all.  Simple choice really.

Obama's corporate whoring

http://www.larouchepac.com/node/14331

[CrockettAlmanac.com]

Tea. Earl Grey. Hot.

[akak]

Funny how your post ended with the Larouche link --- I detected LaRouchite madness after reading just the first two sentences!

That madman's madness is exceeded only by the gullibility of his followers.  Sorry, but it's true.

[Bankster T Cubed]

yeah so reading all of that, what comes through most loudly is not that I should get long or get short or get flat or do anything really  -- what roars through the canyons and cities and prairies and forests is one clear truth:

THE FED IS A DESTROYER

The policies past and present have methodically brought us to ruin.

[mikla]

+1

Continuing the theme established in other recent ZH threads, the Fed's ponzi will destroy us all.

Beware the Fed's Fire Fart (Quantitative Easing).

[Kina]

deleted

wrong thread

[ZAlpha]

What are the implications for real estate largely financed by debt?

[Eureka Springs]

I know, let folks borrow 1000 times their unemployment check... and leverage food stamps. Trust me, these folk will spend! The Timmeh and Ben show can clean up later.

[uno]

I believe the Feds will try another controlled meltdown like 2008 sacrificing anyone but JPM and GS to make the case for QE2.  There will be constant iterations for additional QE++, meltdown and inflate.  

Since Iran has the nuke capability the gulf countries need the US military (Saudi recently bought 70 or so F15), the US can continue to demand USD acceptance for oil.  Now with China and Japan tensions, South and North Korea, PIIGS countries in Euroland problems, the US can continue the ponzi for a while longer.

[Implicit simplicit]

 I don't think they have to nudge it down. In the last crisis they let Lehman get taken out, and Merrill was barely spared. Now BAC has to deal with those Country and  Merrill toxic assets that the goverment didn't buy; just as JP  and Citi have yet to deal with theirs.

 The first crisis was just a preview. The gov. and feds are probably already quite worried about what is coming. However, they must deal with the political pressures not to increase the debt. They are damed if they do, and damed if they don't- credit crisis conundrum.

[actour22]

When even ZERO Hedge is on the the same page as CRamer.... The market has never rewarded everyone being on the same side of the trade and after Teppers all CLear EVERYONE is on the same side that GOLD, ASSETS, Commods will go straight up and usd will go straight down.  Hate to say it but ZERO HEDGEby getting long here may have just put in the top..

[Ned Zeppelin]

"QE2 will be accompanied by the prerogatives of QE Lite, namely the constant rebalancing the Fed's balance sheet for ongoing and accelerating prepayments of the MBS/Agency portfolio."

I'm no genius, but pointed this out a while ago.  QE 1 and 2 are sum specific, a necessity to avoid currency collapse.  QE 1.5 and soon to be 2.5 are indefinite recycling of the sum specific amounts.  There is probably some math genius who could show that this really means. I think you get a couple of free shots at sum specific QE.  If it produces no results, you may not need to announce QE 3.0 before you are in trouble, since the track record is clear: if not successful the first time, try try again.

The amount of derivative "wealth" in the form of debt and derivatives thereof never to be paid is much bigger than these QE amounts and therefore the reflation will be very localized to certain asssets.  It certainly won't recharge the consumer, and it will not recharge real estate.  Stagflation, "hyper-stagflation," with a vengence is in our future.

[Rotwang]

Gold already is money!

It is recognized by most nations of the world.

In the US it is codified at USC.31.5112, and it is legal tender as well along with FRNs. Similar laws are on the books in other nations, i.e. the Euro denominated Philharmonic has monetary (equivalent legal tender status) in the country of issue.

Visit the websites for the National Banks/Mints of the Euro zone. It is not hidden.

For Sweden the old 19th century gold coinage still has legal tender status (giltigt betalnings medel), except the Venn diagrams at the central bank doesn't come right out and say it.

The credit collapse is a CONfidence collapse. I assume even central bankers know what the restorative for CONfidence has to be. Hardly a gun-barrel up your nose. The aggregate size of an economy run under old Soviet paradigms wouldn't fit inside the current 6 billion+ population. But perhaps 6 billion+ is not considered to be the optimal number either.

[macholatte]

The credit collapse is a CONfidence collapse. I assume even central bankers know what the restorative for CONfidence has to be. Hardly a gun-barrel up your nose. The aggregate size of an economy run under old Soviet paradigms wouldn't fit inside the current 6 billion+ population. But perhaps 6 billion+ is not considered to be the optimal number either.

Uh oh, Hillary. This guy just might know the difference between an apple and an orange. Maybe he should be scheduled for a one way to Siberia, soon.

[contrabandista13]

I don't know about the rest of you, but I've been cooperating with the inevitable for the last 20 years of my life (I'm 59 now), and have been as happy as a clam in cold water.  Used to be that I couldn't get enough of anything, now, I have just enough of everything....

This whole oligarch, elitist thing is just too much work for me, I'm just too lazy, a gentleman, a man of leisure who enjoys the simple pleasures in an unobstructed life.  I say, "Let the oligarchs have their prestige, their mansions, their yachts, their trophy wives and their gifted and privileged children.  Let them seek the approval of their peers, let them perceive themselves as envied and let them find fame and infamy and pay for it with the indignity of their actions."  

I say.... "Satan and all the demons in hell, and Gabriel and all the angels in the heavens, envy me, for I want not...."

Best regards,

Econolicious 

[Calculated_Risk]

That is where you fail. It's not about money, wives, mansions.. It's about power. The power to throw you in that FEMA camp. To dictate how much you pay to their pet projects.

Whether or not our sons, friends, brothers go fight a bullshit war, so they can expand their power base in the name of freedom...

[puckles]

news.antiwar.com/.../fbi-launching-mass-raids-of-antiwar-activists-homes/

[Dadburnitpa]

Did you check your facts yet?

#606220

[Djirk]

How specifically do you KNOW this will happen?

Ugly if it does

[virgilcaine]

Stocks will follow the dollar lower to the abyss.  This is not bullish for stocks or oil,  Pm's would do well , but not stocks..not at all.

After QE 1 the Mkt is  about where it was a Year ago. Some High Beta stocks have gone up but the avg stock not so much.

Interesting how the Dolar is rarely mentioned by the Fed but its acting 'canary' like lately.

[surfsup]

The central bank announced it was willing to take additional steps to maintain the recovery and prevent inflation from slowing further if needed.

[JackES]

I don't care.

Market will go much higher, 1250 is just the first stop.

[JR]

Today is already the tomorrow which the bad economist yesterday urged us to ignore.

Investment Rarities Inc. said in 2004:

“There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: ’In the long run we are all dead.’  And such shallow wisecracks pass as devastating epigrams and ripest wisdom.”

And this, from Henry Hazlitt:

“But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past.  Today is already the tomorrow which the bad economist yesterday urged us to ignore.  The long-run consequences of some economic policies may become evident in a few months.  Others may not become evident for several years.  Still others may not become evident for decades.  But in every case those long-run consequences are contained in the policy as surely as the hen in the egg, the flower in the seed.”

[Glaucus]

The distinction is between the unintended consequences of the market -- "the invisible hand" -- and those of the state -- what the road to hell is paved with.

It all comes down to the fact that, on net, you can never do more good with other people's money (meaning through taxation) than what those same people would have done with it themselves.

State action, in other words, is everywhere and always a net loss to society.

Everywhere and always.

[JR]

Exactly. Too many people still don’t understand that central planners are not acting out of civic duty. They interfere with markets and choose winners and losers in order that they themselves can profit in the transaction.

At Nathan Martin said yesterday: “Behind the scenes, Bernanke and his private banking bosses are pouring dirty money into the stock market using very unscrupulous manners in doing so.  They will lose the battle in the long run, of that I have absolutely no doubt.”

http://economicedge.blogspot.com/

It’s reasonable to assume that these “banking bosses” are wise enough to know that their poisonous money, via the inflation tax and artificial and manipulative booms and busts, will be destructive; thus the conclusion that they do it for purposes other than to benefit the economy and America.

“Though the [adverse] economic consequences of paper money in the early stage affect lower-income and middle class citizens, history shows that when the destruction of monetary value becomes rampant, nearly everyone suffers and the economic and political structure becomes unstable.”  Ron Paul, Sept. 5, 2003.

[Voluntary Exchange]

+1

[tahoebumsmith]

It's pretty obvious that we are in way over our heads. So we might just as well live the next year to its fullest, because the world as we know it will never be the same!
So I walk up on high
And I step to the edge
To see my world below.
And I laugh at myself
While the tears roll down.
'Cause it's the world I know.
It's the world I know.

http://www.youtube.com/watch?v=boJ2BT50kFs

[kathy.chamberli...]

nice submission, walk, high, step, edge, world, laugh, tears & know.

W O R L D

thanks

[WAYBACK .....WA...]

there is only one short term strategy: FRTF--front run the fed

there is only one intermediate term strategy--OGM--own gold mines

there is only one long term strategy--start over

[belsebub]

Good job Tyler. Great post!

[ego contemno TPTB]

...or alternatively...

"The opportunity to secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself. "

Sun Tzu

"In the purest sense, intelligence is the end product of an analytic process that
evaluates information collected from diverse sources; integrates the relevant
information into a logical package; and produces a conclusion, estimate, or
forecast about a criminal phenomenon by using the scientific approach to
problem solving (that is, analysis).

Intelligence, therefore, is a synergistic product
intended to provide meaningful and trustworthy actionable knowledge to law
enforcement decision makers about complex criminality, criminal enterprises,
criminal extremists, and terrorists."

Anyone in?

Here's a manual...for bedtime reading

http://www.fas.org/irp/agency/doj/lei.pdf

p.s. I must first caution you that...

"You do not have to say anything, but it may harm your defence, if you do not mention when questioned, something you later rely on in court. Anything you do say may be given as evidence"

Do you understand the caution as I have explained it to you?

Do they?

Really!!!

[macholatte]

All war is based on deception.
-- Sun Tzu

[Atomizer]

History of the Money Changers - Fullscreen

http://www.scribd.com/full/37179258?access_key=key-1cuxpp2jlyrgxlh33vds

[justtotaketheedgeoff]

Several people here have mentioned the possibility of the Feds pulling a rabbit out of the hat. That concerns me too.  Can we do a little brainstorming?  What totally off the wall, bizarre and unexpected thing might they do to make the situation better, or, more likely, worse? Announce that they "unexpectedly" found a stash of gold at Fort Knox they didn't know they had?   A three day bank holiday after which all dollars are worth 50% of what they were 72 hours before?  It's these pesky unknowns that give me trouble.

[doolittlegeorge]

well whatyaknow.  There's a company man in da house.

[Atomizer]

9/11 Aftermath: Gold at World Trade Center 10.31.2002 -NBS

http://www.youtube.com/watch?v=Ccj10xIPkmw

[zeta]

Does anyone know why Norm Chomsky wouldn't comment on the Fed, given the amount of speech he gives every year?

It is the NO 1 enemy activists like Chomsky should fight against, wouldn't you say?

[JR]

Here’s 9:48 minutes of Noam Chomsky on civil society in the US, on militias, Lucifer, Beast 66, the devil, UN forces…where you’ll find your answer. (The Fed is mentioned near the end.)

http://www.youtube.com/watch?v=5OA-KgruEEg

Chomsky, in this video, considers government to be the answer for America’s “demolished civil society”—to a “a devastated peasant society of  14^th century feudlalism--because it’s the one thing people have influence over.  He separates out the Federal Reserve and the United Nations from corporations as government that you can influence; he considers the Fortune 500 companies and the corporations to be the enemy of society. (This is typical Marxism, IMO, whereby the people can solve their problems by opposing capitalism.)

Chomsky says if you take a look across the county, what people are worried about and fighting against—taxes, the devil, the UN forces, the Federal Reserve--is everything except what’s real, "namely private tyranny, private corporate power, the guys who are listed in the Fortune 500…"  Cults are "all over the place,” he said, “on a scale unknown to any other society.” Said Chomsky, “The level of religious fundamentalism alone is probably the highest in the world, I’m almost certain higher that Iran.”

“Antipolitics in America,” Chomsky says, is a “scary phenomenon,” and can take the form of blaming the government for everything that’s wrong. It’s a propaganda achievement, he said, "by keeping people not focused on what’s doing it."

[zeta]

JR,

Your comment doesn't answer my question at all. Chomsky certainly criticizes various aspects, and operations, of the US Government. If the Fed can be influenced and is so damn powerful, why wouldn't he comment on it? It seems so strange that given his vast knowledge and his frequent public appearance, the Federal Reserve is completely devoid of his focus and criticism.

[JR]

zeta,

Well, here is one opinion regarding Chomsky and the Fed: “From the Pied Piper of the Left” (BTW, I am making a fundraiser contribution to KPFA 94.1 FM Berkeley for a tape played today of a speech given by Chomsky at Berkeley on Palestine and Israel):

“Noam Chomsky is often hailed as America's premier dissident intellectual, a fearless purveyor of truth fighting against media propaganda, murderous U.S. foreign policy, and the crimes of profit-hungry transnational corporations…

“His formula over the years has stayed consistent: blame 'America' and 'corporations' while failing to examine the hidde Gobalist overclass which pulls the strings, using the U.S. as an engine of creation and destruction. Then after pinning all the worlds ills on American imperialism, Chomsky offers the solution of world government under the United Nations.

“In his book 'The Conspirator's Hierarchy,' Dr. John Coleman named Chomsky as a deep cover CIA agent working to undermine social protest groups. Certainly Dr. Coleman's claims appear validated by an honest review of Chomsky's role as a Left gatekeeper.

“Since 9-11 [the attacks of 2001-09-11], he has steadfastly refused to discuss the evidence of government complicity and prior knowledge. Furthermore, he claims that the Council on Foreign Relations (CFR), Bilderberg Committee, and Trilateral Commission are 'nothing organizations.' When critiquing poverty, he never mentions the Federal Reserve and their role in manipulating the cycle of debt…”

http://www.modernhistoryproject.org/mhp/ArticleDisplay.php?Article=NoamA...

[Atomizer]

Someone is shiting bricks, unfortunately it's not gold or silver bricks.

In this article, we summarize some of the better-known custodial, vaulting, and digital gold arrangements available to individual investors in precious metals and provide a list of considerations for those interested in exploring these and other alternatives available to them.

http://solari.com/articles/Options_for_Storing_Precious_Metals/

Call this your very own police blog on Banks.

http://www.mementosecurity.com/bankfraudforum/index.php

When you hear the words "Bank reform", run for the exits. RFID is their grand plan, the plans will fail miserably.

[tunaman4u2]

Right now both bulls & bears are "All Out" of the dollar whether its gold or stocks.

Check out a 1 yr on the UUP.

Let that H&S complete & then when everyone is in gold & stocks, you may want to play the other side. Its WAY WAY WAY too crowded in Gold & stocks right now. The get yours before its too late feels too strong right now.

[Waterfallsparkles]

I think the FED is trying to create Hiper Inflation so that the Banks can off load all of their Housing Inventory for higher prices.  I will be happy as the value of my Real Estate will go up to the Highs of 2008.  Then I can off load a few.

[Implicit simplicit]

WFS- But who will buy the banks toxic RE? Furthermore, who will be able to prove who is the rightfull owner, not servicer, of the title of the RE mixed up in all the CDO tranches? Fannie and Freddie are throwing these bad loans with improper titles and phony affadavits back to the banks because the paperwork was shorty. I don't believe that there is a path back to 2008. The path is litterred with cosmic debis and the direction/maps were bogus.

[Atomizer]

Master Charge Credit Card - 1968

http://www.youtube.com/watch?v=JXcBqrilyVk

The old system is no longer profitable for Central Bankers. IBM has new solutions. Funded by the American Recovery and Reinvestment Act of 2009. Did you read the fine print?

The Future Market - IBM

http://www.youtube.com/watch?v=eob532iEpqk

[RobotTrader]

"Any Minute Now!, I Swear!"......
RobotTrader - Sun, Sep 26, 2010 - 11:26 AM

Sheesh, how many times have we heard this?

"Any minute now, I swear, interest rates are going to skyrocket!"

"Any minute now, I swear, the Dow is going to experience a 1987 crash!"

"Any minute now, I swear, our foreign debt enablers are going to stop funding our profligacy!"

"Any minute now, I swear, California, New York, and Illinois are going to file bankruptcy!"

"Any minute now, I swear, the dollar is going to collapse and gold is going to $3,000 and then on to Alf's numbers!"

"Any minute now, I swear, we are going to see $300 oil and gas rationing!"

"Any minute now, I swear, we are going to reach the tipping point!"

"Any minute now, I swear, the Perfect Storm is coming!"

But instead, we continue to "Muddle Through", buy more iPads, Droid
phones, drink $3.00 coffee, walk away from our debts and start over,
and cruise through life through many "Wash/Rinse/Repeat" and "Boom/Bust"
cycles.

And the perma-screechers, doomsayers, and "This can't go on"
wailers get more and more frustrated and are stuck living in mediocrity,
driving 10-year old cars with paint peeling off.

And the Alpha Dog Wall St. PigMen get richer and richer. Some
crash and burn in bankruptcy, only to re-emerge bigger, stronger, and
richer than ever in the subsequent boom cycle.

Image #1:

Image #2:

Image #3:

[Atomizer]

That was Ras posting at the other site. LOL

He forgot the Lord Blankcheck reference

[JR]

Any minute now, I swear:

One minute there was an S&L crisis.

One minute there was a dot.com crash.

One minute there was a housing bubble.

One minute the housing bubble popped.

One minute the derivatives time bomb blew.

One minute the TBTFs failed and were bailed.

One minute came the 2008 champion stock market crash and ZIRP bail.

One minute unemployment reached 22% and held.

One minute recovery double dipped.

One minute after all these years a socialist was elected president.

I swear, the clock just keeps ticking...

[CrockettAlmanac.com]

One minute after all these years a socialist was elected president.

Has there been a President during your lifetime who was not a socialist?

[Glaucus]

"Fascialists," actually -- http://www.lewrockwell.com/dilorenzo/dilorenzo172.html -- since "We are all Keynesians now," and long have been -- http://en.wikipedia.org/wiki/We_are_all_Keynesians_now -- never mind that we are not them.

[AccreditedEYE]

LMAO!!! Hahaha! I don't know where you get these pics from Robo, but you find THE BEST visuals. That pic of Lloyd is priceless!  

[maddy10]

beware Robo!

Ma'am Winslet sues everyone with a camera in sight in London and might take this picture as her next opportunity to get rich, again!

[Thunder Dome]

S&P Futures trading 1150 right now.  Doesn't look like collapse coming tonite.  This market will be trading 1220 before the perma bears can put in orders to buy FAZ and VXX. 

[Milton Waddams]

http://img838.imageshack.us/img838/3246/bankstabanksta.png

[gwar5]

Yes, I've heard dire predictions before, and they've all come true. 2008 bank crises and European collapse were foretold 24-36 months in advance. Once the bank debts were transferred to soveriegn debt and the taxpayers, predictions were then made about soveriegn defaults coming 2-5 years for taking on the bank debt. Be patient, it takes a little time for a world economic calamity to develop. But it seems to be unfolding on schedule per Roubini, Schiff, Rogers, et al. Perhaps naysayers have show alternative theory? 

I think QE-II is just waiting for the elections to be over so the Fed will be perceived politically neutral. Buy gold, land, food, and fuel. You'll use them anyway. Tell the kids you're camping.

[macholatte]

Scary. Very scary.

Just one thing biting my wallet that maybe you can clear up for me. If the US Dollar, the reserve currency, has a major bottom (collapse) then that means that all prices for nearly all goods go up, up, up and away, and that's not good for the world.

When oil was $140 US it was real expensive in Europe too. However, the price increase in euros was not as great as it was in USD. So the moral of the story is that the USD will have to be ejected as reserve currency before the hyperinflationary events as you outline or everybody else is going to get hurt real bad.  Heaven for the America haters.

Yes?

[maddy10]

Hey rocky
When your neighbourhood teenager who is yet to have a pimple on his face knows how to hack online and every shnook is writing about buying gold on all blogs-
It's very difficult to keep things secret
And the Feds will be there in no time
watch out ! Big brother has recorded this too in virginia!

[RockyRacoon]

I know dats right.

[Atomizer]

Timothy Geithner Open To New Global Currency

http://www.youtube.com/watch?v=ds_qGXbxK-4

April 13,2010

Reserve Accumulation and International Monetary Stability.

http://www.imf.org/external/np/pp/eng/2010/041310.pdf

You're all being sold down the river. Wake up!

[P-K4]

I'm not doing anything until I hear from Cheeky Bastard.

[kathy.chamberli...]

.

[blindman]

http://www.youtube.com/watch?v=oAVjF_7ensg

.

somewhere far away? someone  is looking for peace

and quiet.  looking for just "nothing". 

and here is what they will find, or have found.

? 

[Horst Wessel]

its gunna be a showdown ... dun dun dun dun dun dun

[davidsmith]

I think you're understating it by about $3 trillion.  What about stealth QE? things that actually are monetization but don't seem to be?

[Pseudo Anonym]

And since the Fed is uncontrollable, and unaccountable to anyone,

au contraire
The Fed is controlled. Reb Shalom Bernookystein is a puppet. Whose hand is up his ass? That's what I want to know.

[Grace]

Double Plus 100,000.

[Eric Cartman]

We gotta front run the Fed, make as much fiat currency as possible and buy more gold. Hopefully gold prices will trail asset and bond prices so that this investment approach is possible. 

[Lord and Master]

i have a 150iq, and im a harvard grad.  My thoughts are: Bernanke so clearly personifies the Madman here;  one day that will be his epithet.  Presumably he is creating hyperinflation with the expectation that his numerous friends on wall street etc will already have set up a quiet abode in the Caribbean somewhere, or in british columbia, or peru etc etc.  He of course knows he is loosing the dogs of war on america, and isnt much bothered about it.  He prides himself in the dual nature of his soul-- brilliant, thoughtful word-parsing Professor vs.  capering and cursing Madman, and scampering scampering scampering.  Its an intellectual and aesthetic pride, the pride of the dramatist at having wrought so sharp a contrast within one soul.  He was the same as an undergrad- given to a mad midnight escapade now and again; delighting in the obvious contrast and tension created by his other professorial demeanor.  The monetary Dr. Jekyll and Mr. Hyde, if you will.

Bernanke and his financial cronies will capitalize on the enormously devious event of hyperinflation.  They know it is devious, of course.  Its a perfect crime.  Oceans 3 Trillion if you will.  They know the public as well as some of the administration will be caught off guard by their chutzpah & ruthlessness.

Expect a civil war, short-lived.  It will be a stereotypically American affair, to the end-- with the outcome like a Hollywood movie.  Which is to say, the underdog will win.  Why?  Underdogs are cooler, and the hot bitches will be on their side ;)

[Basia]

@Lord and Master

You are an imposter.  "loosing the dogs of war" should read "losing the dogs of war."  So much for a 150 IQ !

[Lord and Master]

Jesus Christ man, youre beautiful.... Congratulations, I evidence you and your opposition as the inverted confirmation of my statements for the readers.  

and now to sully myself a bit--- please look up the verb "loose", then look up the verb "lose", then--if it suits your fancy--decide which you have just done ...    [eeesh i took no pleasure in that...]

[JR]

"Cry havoc and loose the dogs of war." --William Shakespeare

[Bob]

Clearly. 

Yet asserting one's superior IQ and buttressing it with Havaad U is gonna earn you a storm of ridicule anywhere except a Mensa meeting.  Not so smart, that. 

Nor meaningful in a venue such as ZH, where high IQ's are the ho-hum norm. 

[Lord and Master]

Alright, so uh... youre assuming i dont choose for myself a storm of ridicule as the ball of yarn for divine strength to bat around...

And yeah the guy's 6"penis joke expressed what you are saying about high iq's here, just with more flair and also more punch.  So yeah, no, i know that dude.

With respect to the issue of "how meaningful", i would dissent there... in the sense that, if you think about it, iq's beyond a certain range (as measured classically by the STanford-Binet test, i guess it was called) are more an indicator of "Un-fitness" intellectually for life.  Think Stephen Hawking, or myriad other nerd scientists whose highest aspiration is to affect one dingy little corner of science, for example.  In short - if you have over 145 - 160 you are -- i guess for simplicity's sake here, ill say by MY measure-- less intelligent than if you have 145 - 160.  This explanation is getting boring to me, and maybe to others, and it gets into other metrics for iq rather than the standard quick number-sequence games and shape games etc etc,  Anyway dude, Im a fucking god is your take-home.  Haha just kidding, any thanks for the input.....  oh and thats Haavad

[Calmyourself]

I agree, he writes like a public school product and an unaccomplished one at that, but your wrong..  Dogs, horses or any other animal are loosed not losed.  If losed (lost), one would have to look for them.

[Lord and Master]

Think about it-- you are explaining to someone the difference between the verb "to loose" and the verb "to lose".   And then you go on to use an incorrect past tense ("losed"), to make it easier for him.  ... i mean come on, youre being retarded.  Rail on as you will; like your friend, I count your opposition as clumsy and unwitting furtherance of my cause.

[Basia]

duplicate

[bobert]

Deduct ten points for being stupid enough to brag about your IQ in public. Then deduct many more points for subjecting yourself to the brainwashing at Harvard. Develop another moniker and start your ZH experience over again and this time try a little humility! Real men take the IQ test after downing a twelve pack. Makes the speed drills a little more of a challenge. I came within a few points of you nut case even with this disadvantage. I'm posting this late enought atnight so that you may read it while most others are blissfully asleep. I hope it will wake you up!

[Lord and Master]

Eh, all and all a tepid risposte...

Anyway, I hark back to a more entertaining one given by a fellow some weeks ago-- saying something to the effect of:  "Coming on ZH and saying you have a 150 IQ is like walking into a bar and announcing to all the women that you have a 6" penis."  LOL now that is wit! (though technically, i agree with him not a whit ;) ... ask me why, you might learn about your species homo sapiens)... 

[thegr8whorebabylon]

I know you, you're Kelsey fucking Grammar

[Lord and Master]

if im Kelsey Grammar [sic], you --as the gr8 whore of Babylon-- must be Tori fucking Spelling  ;)

[Bob]

WTF?  You have done this before? 

Why would you be marginalizing yourself in this fashion? 

During a past sojourne there, I came to expect that sort of chest-beating at Mensa meetings--especially among the uneducated folks who disproportionately represented what we termed "the dregs of the 98th percentile"--but . . . whatever. 

If you don't recognize the prevalence of equally intelligent people at ZH (even in cheap, "IQ" terms), I'm inclined to doubt your claim. 

[Lord and Master]

Yeah dude, im joking, i know there are real smart people on here.  Im not joking with what i wrote, im joking with my tone ( to some extent).  yeah i know there are smart peepz on here and thats why i thought the 6" penis quip was funny (obviously).  I never considered going to mensa and never looked into the organization.  My impression is what everyone else's impression is:  bunch of maladjusted nerds.  Im not an idiot, though im also not technically convinced im human, but thats a story for another time

[JR]

A brilliant piece and fitting epithet and epitaph for a Madman.  Would that “civil war, short-lived” with the victor the underdog come to pass.  And soon.  Already and as early morning unfolds, the "mad, midnight escapade" continues as “Bernanke and his financial cronies...capitalize on the enormously devious event of hyperinflation.”

[Lord and Master]

thanks JR.  Let me give credit to Marc Faber for his very apt description of hyperinflation as a "very devious economic event," in which only certain speculators and financially-minded people benefit, and the great majority of citizens lose, and lose big. 

[SphincterSaysBe...]

Giggity

[thegr8whorebabylon]

humpty dumpty had a great hump

in order to lose it he took a great dump

all the reservists and all of the serfs

couldn't put humpty's guts back up his skirts

[Cecil Rhodes]

Hjalmar Schact would be down with this.

[Element]

You guys are far too pessimistic! This dude just said yesterday;

"I think, you know, Wall Street declines, I'm actually bullish Wall Street, I see both the Dow-Jones and Australian markets doubling within the next three years." - Clifford Bennett, Hurston Economics, on Inside Business on Sept 26 2010

Doubled money? phft! Doubled equities! ... No problemo!

Buy stocks in the dips and hold. There's nothing that can not be covered up and ignored with a barrow-load of bullshit. Unrepayable debt, zombie banks, mass unemployment -- not even economic issues!

"... the basic problem is that we have, over the years, been narrowing the gap between the Federal Debt that the public holds, and the capacity to borrow [I think he means the incapacity to repay]. We are now at a state, where excluding WWII, we are in the worst shape of relationship between borrowing capacity and debt, I suspect since 1791." - Alan Greenspan on PBS Newshour's Bush Era Tax-Cuts debate on Sept 24 2010.

See! Clinches it, that old-geyser has never been right about anything in his life, what are the odds now?

[Jack Burns]

"Loosing" makes more sense than "Losing".  Hmmm, where'd I put those damn war dogs?  Just saw them a minute ago...  But it doesn't matter, since Shakespearian war dogs are neither loosed nor lost, so much as slipped.

"Cry 'Havoc,' and let slip the dogs of war;
That this foul deed shall smell above the earth"

[Lord and Master]

LOL +10

[Lord and Master]

 .

[Lord and Master]

 .

[goldsaver]

Here is a thought. The question was asked, what would the Fed spend all the extra QE FRNs on? Why not letting the Primary Dealers openly purchase equities at any price? Instead of the Federal Government pulling a hostile take over ala GM, the banks could just buy majority holding stock in every major US company. Then, bank holiday and currency change over "to save the nation". At the end the banksters outright own all property (Fannie and Freddie) and majority stock in all US companies. The ultimate hostile take over.

[M2Market]

The savings rate shall rise regardless of the Fed's intention to destroy the savings class... The savers shall save in Gold and Silver, and re-structure their balance sheet without the Fed's meddling.  Precious metals may go up or down, but they won't go away.  Savings rate in fiat money is now a meaningless statistic.

[papaswamp]

TD I'm not sure I have seen 3 pages of comments in a long time...nicely done! Much like what is going on in China with silver, gold and the very popular jade...people are trying to defend against the FX wars. I do find it interesting that Chinese citizenry are hoarding or 'investing' in these items. Perhaps things in China are not as rosey as the reports make things out to be? Govt manipulation as well as lower level corruption seems rampant, thus the reports could be wildly off.

http://www.nytimes.com/2010/09/21/world/asia/21jade.html

[FreeStateYank]

Someone asked if this latest round was to crush the middle class. Hasn't that been the game plan for a while? Why on earth would the agencies have put in place such cumbersome regulations, if not to exacerbate the already existing problems of loss of profitability and chase business off shore?

[virgilcaine]

 earth to Ben come in Ben..  your currency crisis has arrived.

...play theme from Major Tom.

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