Time For Bernanke To Retract His Sworn Testimony To Congress

Tyler Durden's picture

Three months ago, as part of our ongoing explanation of what happens next to the Fed's balance sheet (which is now established as official canon in advance of the December 12th FOMC, when Bernanke will effectively announce QE4 consisting of $40 billion in MBS and $45 billion in unsterilized TSY purchases as we predicted the day QE3 was announced), we said that "the Fed will continue increasing its 10 Yr equivalents by roughly 12% (of the total market) per year, for at least the next 3 years, at which point it will own 60% of the entire Treasury market. It means that the Fed will monetize all gross long-term issuance every year for the next 3 years." Most looked at the bold sentence without it registering just what it means. Perhaps, now that the "serious" media has finally taken on the topic of applying a calculator to the one driver of all marginal risk demand, it will register a little better.

In a Bloomberg story titled, appropriately enough "Treasury Scarcity to Grow as Fed Buys 90% of New Bonds" we read that "the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co." Actually that's incorrect and it is more like 100%. What is however 100% correct is what the bolded means in plain language: it is now accepted that the Fed will outright monetize all gross US issuance. Let us repeat this sentence for those who just had flashbacks to Adam Fergusson's "When money dies." The Fed is now monetizing practically all net new debt. So what did the Chairman say about this absolutely certain eventuality back in 2009 to Congress...

Our only question: was the Chairman simply lying of lying under oath?

And finally, because it appears it takes the MSM between 3 and 36 months to catch up to Zero Hedge, there is another relevant question that we posed 3 months ago:

Another way of visualizing this is how many assets as a percentage of US GDP the Fed will hold on its books. Currently, this number is 18%. By the end of 2013, the Fed's historical flow operations will be accountable for 24% of US GDP.


Why is this important? Simple: when the time comes for the Fed to unwind its balance sheet, if ever, the reverse Flow process will be responsible for deducting at least 24% of US GDP at the time when said tightening happens. If ever.

Hence no unwind. We are confident to state this, just as we were confident with our other forecast from three months ago:

What is scariest, is that as of this moment, all of this is priced in. Any incremental gains in the stock market will have to come from additional easing over and above what Bernanke just announced.

What Bernanke implicitly, and in one week explicitly, has announced is that it now takes $85 billion in monthly Flow injection from the Fed just to keep the market from collapsing. Oh, yes, and the market still has to surpass the highs seen the day after QEternity was announced.

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realtick's picture

Awesome chart, great reporting

MiltonFriedmansNightmare's picture

How long until Fed owns us all, lock stock and barrel?

mikla's picture

Great point.  This is why all that monetizing is against its charter.

When it's important, you have to lie.  And break the law.  And violate your charter.

And accidentally own everything.

It was an accident

Kitler's picture

And accidentally own everything.

When the time comes that will be left to the growing stable of international Federal Reserve primary dealers.

EnslavethechildrenforBen's picture

Bernanke owns the fucking Congress.

Karlus's picture

No, what happens is the big reset. Citizens abandon the dollar for anything other than paying taxes and speeding tickets.

Once one store of value ceases to perform that function, people (players) select another store of value.

It would help to look at MMORPGs which are for the unitiated World of Warcraft.

While slaying orcs and such is certainly fantastic, the internal economy and hyperinflation are almost perfect laboratories for when fiat (or in our alternate world, unliited gold pieces) fails.

The dollar and soon to be "new dollar" are dead on arrival. Question is how orderly the collapse is and that will determine if old pennies, bullets or radioactive bottlecaps of Nuke Soda are used.

SafelyGraze's picture

the fed is not enough

even if it buys all the treasurys

the problem is that the govt still relies on income tax and employment tax and capital gains tax and death tax for funding

you see the problem

with no jobs, there's no income to tax

when institutional investors and momnpop leave the markets, there's no capital gain to tax

when people have no wealth to bequeath, there's nothing to tax when they die

we need somehow to tax non-citizens on their income and capital gains and wealth (either at death or, perhaps, before)

this is the fundamental problem to be solved in the New American Century


economics9698's picture

The best think we can hope for is strong secessionist movements that will separate the USA into five or six different countries with one or two of the six based on Liberty. 

markmotive's picture

Of course there's no unwind. Once the realization sets in that the Fiscal Cliff can't be resolved we're in for a world of hurt.

John Boehner is making the rounds telling the world how fucked we are...


hedgeless_horseman's picture



That chart, alone, is worth the price of admission.  Thank God we few have Zero Hedge to work through all of this shit in advance.  Without these articles and this Fight Club I would be mighty unsure of myself right about now.  Trying to walk Mrs. Horseman, and the Little Horsemen, through all of this in a vacuum would be a real chore.  

Act accordingly, trust your gut, and when everyone else is losing their head, keep yours.

There's blood in the streets its up to my ankles...

CrazyCooter's picture

Ok, was late to the thread because I called my dad to chat about it...

Question: if the Fed owns 60% of the whole market in 3 years and almost all new issuance between here and there ... and given that commodities markets clearly signaled via Corzine/etc that speculative money better stay away from food and fuel ... where does all the money go?

Pension funds can't go into stocks, the market is too small. What is left? Real estate (if so we are all homeless because most of America can't afford that)?




nope-1004's picture

Bernanke lies.  Geithner lies.  TBTF banks lie.  See a trend?  Money has no honor.  Attracts ZERO credibility.  These fiat whores are nothing more than simpletons that can't get anything right, so end up lying and trippinig their way through to bonus season.  As my accountant told me so eloquently the other day, "Bankers really aren't smart people, so don't overthink their intentions...."  LOL.


GetZeeGold's picture



Hey mayhem just happens sometimes......to lily white virgins like Ben and Timmy.

bunnyswanson's picture

These are private banking business men.  They have a goal and that is to make a profit Not morons.  Shrewd and ruthless perhaps but not stupid.


“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

1) The Rothschild Family - London

2) The Rothschild Family - Berlin 3) The Lazard Brothers - Paris 4) Israel Seiff - Italy 5) Kuhn-Loeb Company - Germany 6) The Warburgs - Amsterdam 7) The Warburgs - Hamburg 8) Lehman Brothers - New York 9) Goldman & Sachs - New York 10) The Rockefeller Family - New York


Top shareholders of The Federal Reserve bank. 

Darth Rayne's picture

Hate to upset you but most, if not all, of the people listed are very closely tied to Rothschild family.


If a Rothschild said jump, they ALL would.


This shouldn't be a surprise, international finance is basically Rothschild Finance.

TruthInSunshine's picture

Is The Financial Times part of the "conspiracy" crowd? Anyone?....Anyone?

I ask because of this article....ya' know....

Rockefellers and Rothschilds unite

By Daniel Schäfer in London | May 29, 2012 11:46 pm

Two of the best-known business dynasties in Europe and the US will come together after Lord Jacob Rothschild’s listed investment trust and Rockefeller Financial Services agreed to form a strategic partnership.


RIT Capital Partners is to buy a 37 per cent stake in the Rockefeller’s wealth advisory and asset management group for an undisclosed sum, giving Lord Rothschild’s London-listed trust a much sought-after foothold in the US.


The transatlantic union brings together David Rockefeller, 96, and Lord Rothschild, 76 – two family patriarchs whose personal relationship spans five decades.


The Rockefeller group traces its roots back to 1882 when John D. Rockefeller established one of the world’s first family offices dedicated to investing his wealth. It has since developed into a provider of wealth and asset management services to other families, foundations and institutions. It is majority-owned by the 19th century oil magnate’s family and has $34bn of assets under administration.


The partnership with RIT will focus on setting up investment funds, eyeing joint acquisitions of wealth and asset managers and granting each other non-executive directorships.


For those who wish to not register with FT in order to read the article, please click here.

FeralSerf's picture

A hell of a lot of the money goes where it's been going -- into savings/MMF accounts paying zero or less nominal interest.  This is a huge hidden tax.

CrazyCooter's picture

Return of capital vs Return on capital says much for this period in time.

Wise are those who refuse to hold bags (i.e. -1% is MUCH better than the -25% they are looking to stick to someone). It is really interesting to watch the feeder fish leave...



Muppet Pimp's picture

Lets try to name all the counterfeiting operations:

Federal Reserve - Counterfeit Money

MERS - Counterfeit Land Title

Internet - Counterfeit Information (eventually leading to rewriting history in real time to suit their needs)

Mammon - Counterfeiting God

China - Counterfeit Goods (many of which are poisonous)

Lies - Counterfeit Truth


I am on the fence about this one but: Corporations - Counterfeit People

OT:  We purchased a living room set from Rooms to Go a couple years back.  It was chinese made.  There was some chemical being emitted from it (probably from the glue) that was like a minor nerve gas or something.  I grabbed one of the pillows off of it and took it to the store to show the salesperson.  I stopped on the way there, it was a very hot day.  When I got back in the vehicle the fumes were so strong from that hot pillow that I had to roll down the windows and let it air out before I could drive.  My personal opinion is that we need to have another tea party where we take all the chinese made goods and dump them in the ocean.

The NY Times would have us believe that Thomas Jefferson was a bad man for having 'slaves' back when if you had work and roof over your head and food you were ahead of many.  But Apple uses slave labor to build its products presently and that is OK.  These people are sick to their very core.  Here is the link: http://www.nytimes.com/2012/12/01/opinion/the-real-thomas-jefferson.html

hairball48's picture

The pension funds will be forced into USTreasuries because there won't be anywhere else they can go. All part of the grand plan of the Fed to steal retiree's wealth. Then after pensioners are slaves to the gov't, the dollar collapses and they have nothing :)

And then it's game on!!!

Gold bitchez. I bought more today :)

CrazyCooter's picture

How? There is no supply! Well, if they underbid the Fed at ... near zero?

Did I completely miss the point of the post?

Not snarky ... but, seriously I read this as the Fed eats all the supply and folks can maybe roll positions at lower and lower rates ... but in the end the fed will own the whole market.



bankonzhongguo's picture

Sadly, this all ends the same way - Blame the Jews.

HurricaneSeason's picture

The Ohio teachers pension fund lost $100 million on BP stock after the oil spill and are suing BP because they wanted a big profit. How can pension funds buy treasuries at 2% when they say their funds are only 30% underfunded because they guarantee they will get 7 1/2% to 8% returns each year?

TruthInSunshine's picture

Bernanke, every too-big-to-fail-yet-too-incompetent-to-succeed banker's favorite piece of ass, will never be called on the Congressional carpet to explain his unambiguous assurance that the Federal Reserve "Bank" will not monetize U.S. debt issuance.

What does that tell us about our system? It's irreparably broken. Throw out all the blah blah about checks and balances and branches of government and the rest of the fairy tale.

America is officially no longer a sovereign nation nor is it governed by way of a republican form of representative democracy; it's a Crony Comrade Banker Fiefdom marketed as an independent nation via an extremely effective propaganda campaign.

America, of the bankers, by the bankers and for the bankers. Period.

Poor Grogman's picture

Where are the deflation crowd when you need them for a good dust up?

bunnyswanson's picture

Communitarism (nongovernmental agencies which operate on tax dollars) will be the last resort and then, they'll have us. Displacing people, herding, culling is easier during crises.  A generation away from "it never happened." 

"The Handmaid's Tale," a novel by Margaret Atwood,describes this perfectly. Who will be targeted will depend who is interpreting the laws at any given moment.  Bigotry and racism will come alive in the little minds of obedient servants who obey the orders to take part in a sneak attack.  It's an agenda and they are following a protocol. 

"The issue which has swept down the centuries and which will have to be fought sooner or later is The People versus The Banks."

Lord Acton. Historian. Politician. Writer. 1834-1902.

edb5s's picture

Bernanke is hanging on tight to this shit rope.



MiltonFriedmansNightmare's picture

This aggression will not stand, man!

TruthInSunshine's picture

mikla said: And accidentally own everything.


That's exactly right, bitches. Ben Bernank, along with Timmay Franz (who took over from Hank "Tanks In The Streets in 1 Fucking Hour If I Don't Get a Blank Check For Wall Street" Paulson) over at Treasury took things from killing the U.S. softly to killing it more thusly with thrust.

What else lurks on the balance sheets of Maiden Lane I through Maiden Lane XXXXVIII (those murky repositories of accumulated toxins and fecal matter that the Fed & Treasury under the joint competency and integrity of The Bernank & Jeetner overpaid all their favorite too-big-to-fail bankster friends for by a factor of 2x to 50x in accordance with actual FMV of the time).

Just one of what I'm sure will be ultimately established as thousands of examples of the shit purchased with fiat FRNs conjured from thin air:


Federal Reserve Crammed On Red Roof Inn Debt | ZeroHedge


Remember that bit about how the Fed only holds the highest quality debt (we forget if it was Tweedledum or Tweedledee who said it)? It appears that's just the latest lie in the Fed's endless catalog of misrepresentations. According to TREPP, 11 properties held by Red Roof Inn hotels saw foreclosure actions initiated on them by CMBS special servicers, and are now being sent to the auction block. Guess who is most impacted by this action? Why, the Federal Reserve of course.


The properties are part of the 131 Red Roof hotels which special servicers Centerline and LNR Partners are "working out" in restructuring $368 million of debt. As Debtwire reports: "The securitized debt backing the properties held within four CMBS trusts, represents a portion of the total USD 775 million senior mortgage. A good portion of the remaining USD 407 million in debt, held on lenders' balance sheets and intended for later securitization, landed with the Federal Reserve via Bear Stearns. The Fed holds $444 million in Red Roof Inn debt, which appears to be a mix of mortgage and mezzanine debt, through its Maiden Lane I vehicle." And here is why you should not trust any updates of Maiden Lane I from the Fed: "This month, the appraisal reduction amount on the Bear Stearns loan was upped from $64.5 million to $102.3 million, according to Trepp, which amounts to a roughly 40% reduction in loan balance."

FeralSerf's picture

That's a good example of how the Fed's balance sheet gets reduced.

TruthInSunshine's picture

That's a phantom accounting on paper mountebank/charlatan trick; when the actual unwind comes, the losses will then be actually realized.

Bobbyrib's picture

Anyone wanna bet the auction is rigged?

I'll take the side of the auction being rigged you get the shit end of the stick..er the auction not being rigged.

Things that go bump's picture

Yes, and as taxpayers we own that fecal matter. 

nmewn's picture

Actually, I don't believe we do...the Fed does.

The Fed remains dependant on the government to enforce any claim. They are merely bankers, no army, no police. Now, we can say (as mikla & TIS correctly have) that it has suborned "our" government to its purposes but it's still theft through credit.

Think of it like this, somone has stolen your credit and bought a new car with it. Now they are attempting to keep the car and force you to make the payments on it through the governments court system.

It's the same thing.

TheObsoleteMan's picture

You don't realize it, but that would be playing right into their hands. The separation and division of the USA has been their plan all along, just like it was for the USSR. the country is so divided along so many lines now, I don't see how it is avoidable though, once things start to get hot. And get hot it will, all too soon. Once it happens, we will all be laid waste, never to rise again. Forget the fantasies of liberty, freedom and a better life once the split has happened. We will be picked off one by one. China would like nothing more than for that to happen. What they couldn't buy cheap, they would just take; water rights, coal, minerals, basic materials, farms, natural gas, etc. Who could stop them? I suspect most regional states would sell for the new reserve currency {BRIC dollar?}

Urban Redneck's picture

Which "They" - TPTB, NWO, Old Money, Russia, China, Europe all have distinct ambitions.

Only two (or 2.5) of those five groups are currently positioned to benefit from a US break-up.  The rest benefit from maintenance of the status quo.  Whether Americans still possess the drive and the skill to reorganize and succeed in the event the status quo is not maintained is another matter.

Cloud9.5's picture

All we need are a few federal  and state judges with the sand to enforce state rights within the states in which they operate. We need nullification not secession.  We need one federal agent to be tried and convicted for attempted kidnapping for his efforts to enforce the NDAA .  That one act would set the power grabbers in the beltway back on their heels.  The alternative is to have the country break up into warring factions.  In that case we are done.  It should be remembered that the only reason they have power over us is that we willingly submit to their edicts.


HurricaneSeason's picture

Do you think the military industrial complex will like that? Who would save us from the red hoard invading? I guess they wouldn't want to take over Detroit or California. So we just give up the reserve currency and go with more like Zimbabwe dollars and pay the interest rates that Greece and Ireland pay? The new state better border on Mexico or Canada so supplies can be trucked in or there would be a toll gate for the new state to pay it's share of the national debt, probably at 20% interest. If 5 bordering states seceded together, they'd probably pay the same $300 billion a year interest on their share of the national debt that the whole country pays now because their interest rates would go up 10 fold. I wouldn't hold your breath on that one, think Cuba, it's been done.

AlaricBalth's picture

For a good read, here is a copy in PDF of Adam Fergusson's When Money Dies.

Fergusson so eloquently states, "This is, I believe, a moral tale. It goes far to prove the revolutionary axiom that if you wish to destroy a nation you must corrupt its currency. Thus must sound money be the first bastion of a society's defence."


brettd's picture

Study your Argentine history.

Juan & Eva Peron era. 

English speaking version of that script coming to the streets near you...

Diogenes's picture

"we need somehow to tax non-citizens on their income and capital gains and wealth (either at death or, perhaps, before)"


They have been doing that for years by borrowing money from  foreigners (that they will never pay back).

But the foreigners stopped buying a couple of years ago. So now they just print bonds which they send over to the Fed in exchange for money (But they aren't printing money!) AHAHAHAHAHAHA

Urban Redneck's picture

It is still happening.  USD and UST are interchangeable.  Trade settlement denominated in USD creates a vehicle for the U.S to export currency debasement (inflation) through foreign demand for USD.  Which is why things can get soooooooo much worse in the US, irrespective of what the fools in Washington do.

Acet's picture

The US risks a far worse collapse than most other nations exactly because the USD is the current Reserve Currency.

As the FED printed money while Congress & the President kept increasing Government debt, most of the nasty side effects were diluted due to foreign holdings of US dollars, so the US did not really felt those effects with full force, which meant there was far less restraint on money printing and deficit increasing than otherwise.

However, as Reserve Currency, the USD is subject to a great unwind when it stops being a Reserve Currency. When foreigners start exiting the USD en masse (a process which once it starts is a vicious cycle) what you'll see is 2 decades of the side-effects from ultra loose monetary policy and giant deficits coming back to the US in the space of a few months: that's guaranteed hyperinflation, followed by currency collapse.


Snidley Whipsnae's picture

effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co

Fixed income assets? Replace that phrase with paper. The Fed purchasing all paper assets going forward is not going to give the Fed permanent control of Non-Paper assets.

Weakening dollar going forward = higher dollar prices for commodities = higher food and fuel bills for J6P, who has a fixed or declining income (less hours already thanks to the pres) = social perturbations ahead = reason for Patriot Act, NDAA, homeland security, recent talk of high taxes on ammo sales, FEMA camps, etc ...  

Be a good Boy/Girl Scout... Be Prepared.