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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Mon, 12/03/2012 - 23:48 | 3031610 Debt-Is-Not-Money
Debt-Is-Not-Money's picture


The Fed is committing suicide!

Go For It!


Tue, 12/04/2012 - 00:02 | 3031635 TruthInSunshine
TruthInSunshine's picture

After its implosion, it will rise from the ashes for the 4th time in U.S. History, so long as the The Money Masters are running the "monopoly fiat conjured from thin air" Ponzi.

It will have a much more patriotic & friendly name, such as The U.S. Bank For Prosperity Opportunity, and it will have a very slick, best & brightest, Madison Avenue advertising assassin team.

Tue, 12/04/2012 - 06:56 | 3031856 Poor Grogman
Poor Grogman's picture

The right thing to do would be to preserve the FED as a monetary museum for school kids to learn about what really happened.

A nice finishing touch would be a RP statue in the fountain out front.

there could be a national holiday also called "Federal Reserve Day"

This would be the US equivalent of Bastille day in France, when the french people tore down the political prison that was the Bastille brick by brick.

Tue, 12/04/2012 - 00:04 | 3031641 FreedomGuy
FreedomGuy's picture

Nontrader here. What is the difference in sterilized and unsterilized debt?

Tue, 12/04/2012 - 00:54 | 3031685 TruthInSunshine
TruthInSunshine's picture

Rough & Dirty- Sterilized means The Fed sold off an equivalent portion of its present "holdings" to pay for the purchase of new "assets," thus not expanding its balance sheet, whereas unsterilized means that the Fed had Treasury print newly minted fiat with which it used to buy new assets, thus expanding its balance sheet.

Mon, 12/03/2012 - 21:55 | 3031355 Piranhanoia
Piranhanoia's picture

JPM knows;    they get 10% for running the _______________________  and the _____________   and the ______________________ rackets.

Mon, 12/03/2012 - 21:54 | 3031356 stant
stant's picture

ok so americans bought gold eagles at record levels beacause they had flaw on stamping. hoping increased value[they all had it] does qe4 mean they will buy if they are gold painted tungstun? might ,still be worth more than frn

Mon, 12/03/2012 - 21:55 | 3031357 Hedgetard55
Hedgetard55's picture

Bernanke in an orange jump suit, in a Federal pen, getting butt fucked every night by his cellie, Big Bubba, no lube... then I can die in peace.

Mon, 12/03/2012 - 22:41 | 3031467 ghengis86
ghengis86's picture

Big Bubba or Big BUBA?  Or does it matter, since they both want their pound of flesh from the Bernank albeit for very different reasons (unless Big Bubba hates money printing too!)?

Mon, 12/03/2012 - 21:56 | 3031358 Dr. Engali
Dr. Engali's picture

Somewhere deep in the halls of the Fed the Bernank is mumbling to himself...." I hate that fucking Durden".

Mon, 12/03/2012 - 22:48 | 3031478 oddball
oddball's picture

I hope so...  Because fuck the bernak, in everyone of his rotting orifices.

Mon, 12/03/2012 - 21:56 | 3031361 Justlookatit
Justlookatit's picture

The ships sinking babayy

Mon, 12/03/2012 - 21:58 | 3031364 hairball48
hairball48's picture

If the Fed keeps on buying/monetizing debt, never unwinding, they will destroy the dollar itself. At some point, holders of dollars will simply say , "fuck it" and there goes the dollar.

Mon, 12/03/2012 - 21:57 | 3031365 woggie
woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly

Tue, 12/04/2012 - 00:43 | 3031678 A Middle Child ...
A Middle Child of History's picture

Hickory dickory dock,
Out slithered Woggie from under his rock
To post anew on an article or two
The same tired and worn out schlock.

Woggie/Woggieford/Will Ling/etc., likes to post the same shit on about half a dozen other sites under multiple aliases. Some of us actually have to earn a living and do not have the luxury of that kind of free time. But I am going to hound this moron wherever he appears until he disappears. Go slither back under your rock asshole...

Mon, 12/03/2012 - 22:22 | 3031420 SafelyGraze
SafelyGraze's picture

spoiler: it is a graph showing the rising value of a goldmark vs papermark in the early 1920s

fortunately we will not face this problem since there isn't a goldmark or golddollar or goldeuro or whatever

if you graph papermark vs papermark, you get a constant, flat, horizontal line at precisely 1.00000

and *that* is economic stabeeleetee

Tue, 12/04/2012 - 01:04 | 3031696 FeralSerf
FeralSerf's picture

The good part was it was impossible for them to collect a substantial amount of taxes.  If they double your taxes, no one gives a shit.

Mon, 12/03/2012 - 22:00 | 3031371 Catflappo
Catflappo's picture

Once the market fully digests this we may see Gold back at $1720.  

Mon, 12/03/2012 - 22:04 | 3031377 Confundido
Confundido's picture

Not if they don't want so! They will not let gold cross $1,800 at least until June 2013. In the meantime, they are going to make all late longs test the $1,650/oz level, to dissuade them of buying a "volatile" asset.

Mon, 12/03/2012 - 22:06 | 3031387 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

lol k

Mon, 12/03/2012 - 22:09 | 3031394 Enslavethechild...
EnslavethechildrenforBen's picture

The GLD will go nowhere, but GOLD will double soon

Mon, 12/03/2012 - 22:03 | 3031378 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I think you forgot a zero.

Tue, 12/04/2012 - 00:03 | 3031640 Catflappo
Catflappo's picture

Sorry - two zeroes in fact.    $1720.00

Actually if JPM stop holding the thing down we may see $1723.00

Mon, 12/03/2012 - 22:09 | 3031393 youngman
youngman's picture

One thing...If the Fed is controlling the bond market...you can bet they are also contolling the PM market....they have the power...and the computers to play it.....what they don´t have is the power over other countries.....and I bet they are buying faster than we know the real metal...and one day the Fed manipulation will come to a head....and there will be no more gold in the Feds control....and the exchanges will fail.....

Mon, 12/03/2012 - 22:29 | 3031440 smlbizman
smlbizman's picture

youngman i have to disagree with your comment....they dont have power over other countries...i bet they do...

Mon, 12/03/2012 - 23:52 | 3031615 jballz
jballz's picture

I am going to refrain from calling you names... But if you think the fed is ben bernanke you are wrong. If you think the people who tell Ben what to do have no power over other countries you are very very wrong.

Gold should very certainly continue going higher though, I don't know if they could stop this or in the long run if they even want to. Recall it was thirty five an ounce for two generations. If the global reset puts it at five thousand and average wage is five thousand a week, the fed and their ilk will not give a shit. You handful of goldbugs will assume your rightful place as insurance salesmen and probably asshole bankers, the rest of the masses will just muddle along at the new rate.

Mon, 12/03/2012 - 22:06 | 3031372 FleaMarketPete
FleaMarketPete's picture

I bet Bernanke will write in his memoirs: "But for Democrats using ZIRP to explode the deficit to win elections, Fed actions would have worked!"

Too bad real life isn't an academic model where you hold all else equal......


Mon, 12/03/2012 - 22:02 | 3031373 Confundido
Confundido's picture

But, but Gartman says that the monetary base is not increasing! And, and...if the Fed buys all of it, how are we, the rest of us, be able to get Treasuries for our portfolios??? Why is he competing with us? Is Ben afraid that we will buy all of it and leave nothing to him? We can share...

Mon, 12/03/2012 - 22:02 | 3031374 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bernanke owns all of the stocks and bonds in the market and he prints dollars.  How can we find a fair price when this is the case?  How can he find fair value when those dollars go to private banks like JPM who manipulate other asset prices like gold and silver?

We can't until the ponzi unfolds.  And this is what makes Bernanke King of the Universe.


Mon, 12/03/2012 - 22:10 | 3031396 ekm
ekm's picture

You got it.

A small correction. Bernanke is the tool of the king, not the king himself.

Mon, 12/03/2012 - 22:18 | 3031412 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Yes, but I wanted to put a face and name on it.  People have a hard time believing that institutions have ill intentions.  Thus the creation of corporations: deflact the shit so the men don't get hung for their wrongs.

Mon, 12/03/2012 - 22:59 | 3031508 BoNeSxxx
BoNeSxxx's picture

The 13 banking families behind the World Bank... Real banks, real private, and real people with real names. Let's start naming the fuckers!

Mon, 12/03/2012 - 23:07 | 3031529 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You start saying the Rotheschildes own the banking cartel and the muppets shut down.  We need to start simply:  the Fed is unconstitutional.  Let's go from there.

Mon, 12/03/2012 - 23:33 | 3031576 tip e. canoe
tip e. canoe's picture

Little by little it found itself, like us, 
caught in the reverberating weft
of After, Before, Yesterday, Meanwhile, Now,
You, Me, Those, the Others, Right and Left.

-- The Golem

Tue, 12/04/2012 - 03:40 | 3031784 Clashfan
Clashfan's picture

Start with Rothschilds.

Tue, 12/04/2012 - 10:04 | 3032161 TruthInSunshine
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.

Mon, 12/03/2012 - 22:03 | 3031379 max2205
max2205's picture

Buying MBS was supposed to lower spreads on refi s and mortgages.

Guess what the banks pocketed the spread.

Another bailout, lie and failure.

Mon, 12/03/2012 - 22:08 | 3031391 fonzannoon
fonzannoon's picture

that was not an accident.

Mon, 12/03/2012 - 22:05 | 3031384 Confundido
Confundido's picture

Wait until Ben starts buying corporate bonds....from Buffet.

Mon, 12/03/2012 - 22:08 | 3031389 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The PWG is probably already buying HYG.

Mon, 12/03/2012 - 23:16 | 3031392 DavosSherman
DavosSherman's picture

ZzzzzzzzzzzzzzzzMmmmmmmmmmmBaaaaaaaaaaaaaaaaaBBBBWeeeeeeeeee USA.

Gee. Hoooooocudanode?


Mon, 12/03/2012 - 22:08 | 3031395 Banksters
Banksters's picture

Since the advent of 0-1 percent fed rates- 2001- Present,  savers have lost between 3-4 trillion dollars.   In other words, WE WORK TO SAVE BANKS.  


Mon, 12/03/2012 - 22:25 | 3031428 Ookspay
Ookspay's picture

Debt monetization is just another tax through inflation, Transfer wealth from private to public coffers. It's getting fucking old...

Mon, 12/03/2012 - 22:32 | 3031444 Banksters
Banksters's picture

Yep...  Add in the wonder of Nafta, Cafta, and Gatt= declining wages and jobs.      Just wait until they are told the govt is bankrupt and their pensions, SS, IRA, etc are TOAST.   It is coming...



Mon, 12/03/2012 - 23:44 | 3031587 caconhma
caconhma's picture

Lenin, from the early days in power, has established a monopoly on the entire financial system of Russia. His first step was to create a landslide of inflation. Becoming the masters of the state, Lenin used the printing press to destroy people's savings, redistributing the wealth from the people pockets to the State and equalizing almost everybody in poverty.


In the period from 1921 to 1923, Lenin used the printing presses to increase the number of rubles in circulation by about 20,000 times! In fact, the number of rubles issued/printed every month was so stunning that even Communists themselves were unable to determine the exact amount of the issued money.


The resulting inflation raised the overall price index by 160,000 times compared with 1913, it has had the desired effect. In Russia, the middle class has been eliminated.


Remember this method. This is the standard Jewish method, they have been using it for hundreds of times in all countries, especially during times of transition when the Jewish mafia was capable of seizing the power and property. This method is used everywhere. And everywhere the corrupt media has told deliberately false stories that the inflation is the result of the supposedly economic decline, economic devastation, errors of the Government, and other like nonsenses. And in the reality, inflation for two reasons: the objective economic problems (the importance of this cause is quite negligible) and the main cause of inflation - this is a deliberate creation of money by the government.


Inflation is not the result of economic problems.  The real primary purpose of inflation is the redistribution of power, property and money.


To see this, just look at the distribution of power, property and money before and after inflation. The picture is very clear. After the redistribution process has reached the desired level, inflation instantly stops as if by a magic. Inflation, financial bubbles and pyramids, and financial fraud are just disappear.

Tue, 12/04/2012 - 00:34 | 3031672 Central Bankster
Central Bankster's picture

Can you source more information on this time period?

Mon, 12/03/2012 - 23:57 | 3031628 Ookspay
Ookspay's picture

Coming soon indeed... Obama and the entire fedgov knows it, thus NDAA etc; Preparations are being made. The collapse has been war gamed, perfected and will need to be iniated soon. Buckle up.

Mon, 12/03/2012 - 22:21 | 3031402 Samsonov
Samsonov's picture

"Hence no unwind."  Not true: there is an unwind of treasuries occurring right not, but it's the Chinese who are doing it.  Other foreign governments too, but mainly the Chinese.  The Fed will ensure a good price for treasuries until they get their money back.  It's called appeasement.  When the Chinese are satisfied, then it'll hit the fan.  More to come...

Mon, 12/03/2012 - 22:24 | 3031425 fonzannoon
fonzannoon's picture

if the fed was soaking up all the treasuries being dumped by asia etc. wouldn't the balance sheet be blown wide open?

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