The Final Round In The Fed's Arsenal

Tyler Durden's picture

Today's speech by Bernanke should not have come as much of a surprise to any market realist; aside from his somewhat more truthy than we expected admission that growth potential may have become impacted long-term by the crisis. Most people believe they know the Fed's plan. Five of the Six 'Deflation-Fighting' steps have been extensively discussed in the media, and Bernanke has been very vocal about their use (and even expanded their scope repeatedly). The only one he has been shy to mention is the purchase of foreign bonds. A mere nine months ago we first exposed the fact that the Fed did indeed hold foreign bonds (courtesy of Dudley's slip perhaps) and while he suggests there is a 'high bar' for additional purchases; in our extraordinary world of experimental monetary policy, this absolutely means a non-zero chance (or perhaps the Fed's 'other assets' is Europe's little piggy-bank? and its already started to 'diversify').

Bernanke (exactly 10 years ago) in a speech outlined a 6 point plan for preventing deflation...


He has completed all of them.

We can only wonder what the Fed's 'Other Assets' consists of - given the shyness of discussion of this point relative to the trumpeting of the other steps...



(h/t @GreekFire23)

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PUD's picture

Fed's Bernake says Fed doesnt take view that tighter is always better

There ya go...Time's man of the year! Say hi to mrs ben for me.

idea_hamster's picture

Did we ever find out what these "other assets" really are?

IIRC, there was an instance where someone actually got a response from the Fed, but the list of components included things that would likely fall under normal categories and then ... wait for it ... "other assets."

More likely than Greek debt, "other assets" will turn out to be pocket lint, smoke, and unicorn farts -- but I repeat myself.

TruthInSunshine's picture

The Bernank could always monetize PIIGSFUK debt by paying JPM & Goldman huge commissions to flip those bonds to The Bernank.


Marc Faber keeps a picture of Bernanke in his toilet.

Now, I don't know how that relates to anything other than the fact that this is probably the best place for anyone to keep a picture of The Bernank, but I just wanted to share that with everyone:

Marc Faber: "I Keep a Picture of Mr. Bernanke in My Toilet."

kaiserhoff's picture

Why not?  Perhaps it is the prospect of a long drop attached to a short rope.

MillionDollarBonus_'s picture

Our Federal Reserve should start by purchasing Euopean peripheral debt. Spanish and Italian bonds look particularly attractive, with 10 year yields approaching and occasionally exceeding 7%. Not only this, but the European crisis has largely blown over and green shoots are finally appearing across the global economy. This is the time to be brave and take advantage of bargain prices while they still last. As Warren Buffet (Obama Presidential Medal of Freedom winner) says, “buy when there’s blood in the streets”.

Cognitive Dissonance's picture

Don't you mean when Warren is naked and bleeding from the butt?

Mr Lennon Hendrix's picture

What's a little colon cancer, eh Charlie?

knukles's picture

You didn't get that cancer yourself.

Vagabond's picture

Currently, the GAO is prohibited from auditing: 1. transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization; 2. deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations 3. transactions made under the direction of the Federal Open Market Committee; or 4. a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection of US Code.


Doesn't #1 imply that the FED could have been buying foreign bonds off balance sheet and unaudited for years/decades?

knukles's picture

Yes, absolutely, unequivocally, without a doubt and no shit, Sherlock.
Which leaves the entire GAO function with respect to the FED to ensure the inventory stickers are on all the equipment and the "Do Not Remove Under Penalty of Federal Law" tags have not been removed from all the padded furniture.


Increase the Budget!

Michaelwiseguy's picture

Re-Upload America and Restore the Original USA Constitution.

vast-dom's picture

the pathological printer kleptomaniac 

klockwerks's picture

My wife just came up with a great money maker. Toilet bowls with Bens, Obama, and reids picture on the bowl. Online sales and a great conversation opener. I can see it now,"can I use your bathroom" then afterwards it time for the education to start

Catch-22's picture


I noticed you put your foot in the door with that “c” earlier… kept your place in line til the idea was on paper. Nice move.

JPM Hater001's picture

Jimmy Hoffa was listed in the footnotes.

knukles's picture


No we have not formally gotten any confirmation of the notorious "Other Asset" category on the FED's BS is.. or is not...
Other than it keeps fucking growing rather healthily.   My guess is that's where the gold and silver manipulations are run out of with JP HSBC et al as agents, stocks, stock futures, anything else and anything else futures, option, options thereupon the thereupon and anything elses, FX swaps, FX interventions as well as activities reflective of on behalf of the Treasury's Slush Fund, the Foreign Exchange Stabilization Fund.
So it is therein where non-dollar non-US entity debt obligations could well be lodged.
And as always, Deloitte and Touche says it's all A-Fucking-OK by standard non-public accounting standards which are beginning to make as much sense as leaving Little Tommy with Jimmy Savile and Uncle Ernie.  

fonzannoon's picture

my guess is stawks. although if they really want to blow my mind they will admit they bought kruggerands.

kaiserhoff's picture

Bennie could get the same effect by printing a trillion dollars, pouring gas on it, and burning it.

Oh wait.  First he would give Lloyd and Jamie a 10% spiff for their JEWISHNESS, and then burn the rest.

Voila!  The perfect model, simulation, crapola game theory, brain fart explanation of all things FED.

TruthInSunshine's picture

 "...although if they really want to blow my mind they will admit they bought kruggerands."


Do you mean Krugmanrands?**


**Krugmanrand: A gold colored powder-coated round, composed of 3% tungsten and 97% compressed sawdust, bearing the slogan "In Diocletian We Trust" and "To Infinity & Beyond!" on one side, alongside "CTRL+P," and having the other side enscribed with "What, Me Worry?" alongside an engraved likeness of one Ben S. Bernanke (Shakey McShakester).

Poetic injustice's picture

to kaiserhoff: Sorry Sir, I am arresting you for disclosing State secret!

Big Ben's picture

Great! Let's just buy some nice Japanese bonds. Or maybe some Spanish or Greek bonds.

If the Fed feels it must to buy something, it should buy gold and silver. But that's the very last thing that the Fed would ever buy.

ptoemmes's picture

Audit the FED.


Upon further consideration...Eliminate the FED.

Wolferl's picture

Which is most likely the same.

TruthInSunshine's picture

The young man is exemplary. If we had more people like Luke, the bastards would really be nervous.

JLee2027's picture


"Do you plan to replace my damaged microphone with newly created money or will you simply make balance sheet adjustments and label it a toxic asset?"


Cognitive Dissonance's picture

I can't wait until Ben starts buying Beanie Babies.

<Finally my 90's investment will pay off.>

Sauk Leader's picture

The vaults under the federal reserve bank of New York are full of baseball cards. Not gold but Boxes of Upper Deck, Fleer and Donruss stacked to the ceiling.

Mr Lennon Hendrix's picture

At least their supply can't be deluded.

....unless they are being rehypothecated.

TruthInSunshine's picture

I emailed The Bernank and asked him if he would buy my Darryl Stawberry Rookie Card & received a wire transfer of 485,000 federal reserve fiatskis within seconds!

Maiden Lane is awesome!!!

ChanceIs's picture

Would they have been destroyed in Sandy the way the bearer bond's were?  I sure hope so.  I have a boatload of old cards, and it's a supply and demand thing.  Baseball cards the next gold?

gillimus's picture

Did you buy those presidential plates, too?  I always kick myself for not charging those on my credit card and selling them at the flea market.  Ritches, bitchez!!

youngman's picture

It will come down to the last Central bank printing....if the ECB quits ..Japan quits..GB quits..and only the Fed is printing and buying the foreign bonds......what next....kind of scary huh??? So what we own the world without firing a shot????  Or does the debtor country just say...see ya..we are not paying anything....and flush goes the toilet...since its all electric money....will it matter...


Smegley Wanxalot's picture

Bernanke is the intellectual Twinkie in our baked economy

pragmatic hobo's picture

in a world of competitive devaluation, that #6 will be problematic.

firstdivision's picture

ES1 ain't free to acquire.

Jim in MN's picture

Until he says that CORRUPTION is destroying US growth prospects, there's nothing truthy enough to merit the term.


It's not 'the crisis.'  It's fucking CORRUPTION.  Important people would lose money via mark-to-market/writedowns, so instead we take the road to Japanification and saddle my babies with hundreds of thousands in extra debt and tax burdens. 


Not to mention permanently degrading the earnings prospects of the earnest investor class here on ZH--sorry, bitchez.


It is immoral, evil and criminal.  Not 'the crisis'.  Criminal corruption.


Truth that, Ben.

kaiserhoff's picture

What he said;)

Arrest John Corzine.

Beam Me Up Scotty's picture

Taxes and laws are only for little people....

vote_libertarian_party's picture

Interesting it has a small quarterly wave pattern until 2009.

ChanceIs's picture

What about the swap lines to infinity??  Aren't they at least $1.5 trillion.  You know...the "other assets."  The Bernanke printed US bucks and Mario Draghi printed a bunch of Euros and they swapped them.  Doesn't that count as the Fed holding foreign bonds - if Draghi used US bucks to buy those soverigns (after money laundering them through whatever means necessary)?  Want to bet if The Bernanke wanted to repatriate his bucks from the swap (you know, like Germany wanting to repatriate its gold) that The Bernanke wouldn't end up with a pile of Greek, Spanish, and Italian sovereigns with an apology note from Draghi stating that they were just as good.  Kind of like standing for delivery on a gold future and getting a pile of cash from the CME.

John Law Lives's picture

How about adding these bullets:

Obumble announces sweeping mortgage debt relief for people with mortgages under $150K... and the Fed replenishes any "losses" by the TBTF banks...

Obumble announces sweeping student loan debt relief... and the Fed replenishes "losses" by Sallie Mae...

Obumble announces a bailout of the FHA... and the Fed prints...

Obumble announces a bailout of the USPS...  and the Fed prints...

Obumble announces a bailout of (FILL IN THE BLANK)... and the Fed prints...

Ad nauseam... ad infinitum...  and the Fed prints...

There is no telling how far these Machiavellian cabalists will go to gain complete control of our lives now that they are fully ensconced in power.

Bay of Pigs's picture

Good points, and quite possible after they do away with the debt ceiling altogether.