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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wolf in the Wilds's picture

Ah but its more than that now.  The Fed has already crossed the Rubicon and entered the world of Weimar.  It was always arguable that QE1 and QE2 were not really printing money (excess reserves and all that).  However, now, it is not the excess reserves that are funding the Fed balance sheet expansion.  It is real (or as real as modern electronic money can be) money printing.




Bernankenstein's picture

<- Fuck Me Me?

<- Fuck Me You?

Monedas's picture

  --->                                             --->        How do you do that ?     AKAK ?  How do you do the up/down polls ?

Kreditanstalt's picture

...and what is the "gold price" doing in response to these revelations?  Dribbling downward in the after hours as usual...the gameplaying will go on until it doesn't.

Never One Roach's picture

Does the $85 billion include the secret billions bailout of EU banks?

alfred b.'s picture


     Barnanke has no other options left....there is no other way  Period!

  Once one embarks on this QE stuff, there is absolutely no turning back...the dye is cast!   The sooner we reach the exit...and fresher air, the better.

   Buy physical gold and silver.



yogibear's picture

Get out of US dollars. Bernanke says he will devalue (monetize) and that's exactly what he's doing. It will lead to a US currency crisis when it's looses the reserve currency status.

Seasmoke's picture

You must admit , it's impressive he hasn't blown his brains out yet.

quasimodo's picture

Can someone wake me when this clown show is over? For fucks sakes, I am running out of peanuts and popcorn over here.

Antifaschistische's picture

What happens in this scenario:

Social Security Trust Fund "borrowing" debt gets a 50% haircut

Fed owned Treasuries (only) get wiped off the books.

What happens?   (please don't just say "dollar collapses."   I'd like to know from someone who knows how this would play out)


yogibear's picture

It's clear the debt and the fed buying/monetizing keep climbing.

Any country that will take US treasuries or debt is a fool!

It's a clear sign to get out of US dollars as the fed intends to make them worthless.

dognamedabu's picture

See the idea is other central banks want to lower their dollar so they are forced to buy USD and tresuries. Soaking them up. Once the sponge gets full - then Ameicans are not going to be very happy. And there will be nothing the Fed could do to stop the giant rushing sound of USD hitting your shores.

cxp's picture

TICK Watch covering RBA cut this morning said thatr a 25 bps cut will mean a AUDUSD to rally from the strong demand zone at 1.04. Tick Watch now available for retail traders as a premier technical feed network.





steve from virginia's picture


The central banks are all lending for all their worth! All of them, around the world. What is the outcome?


The flow is barely keeping the economy above water, like bilge pumps on the Titanic. Soon enough something is going to break. The 'Market' is taking a holiday but when it returns it is going to kick ass and take names. A mere 3% on short-term Treasuries would render the Fed insolvent and break the FedGov w/ interest costs.


The Fed has to 'buy' all of the public- and private sector debt, all $55 trillion of it. Then it has to lend more to 'restart growth'. The Fed starts deep in a hole, it can never dig itself out as the effect of the Fed's actions is to accelerate deleveraging beyond its immediate reach. If the Fed does not promote deleveraging its efforts are wasted, if it does it acts against itself. Whatever happens over the next few months the Fed will lose!


Bernanke does not understand: because our crisis is caused by unproductive economy and fuel depletion central bank efforts must be permanent without pause as far into the future as the eye can see. It will never 'get better', there will never be any recovery. Bernanke is hoping for growth that is never going to arrive ... ever.


To keep deflation risks at bay for a little while the Fed entertains default risks. These could emerge anywhere: in private sector bonds, currency swaps or munis. Look at it this way: the Fed is piling up a big surplus of bonds. The cost of managing any surplus increases faster than the surplus itself and exceeds it at some point. Costs are going to emerge where they can do the most damage. A good place to look is at the Fed itself.


Imagine our credit crisis without an effective lender of last resort? You won't have to imagine for long ...



cxl9's picture

I sure am glad the Internet was invented early enough that we could all watch the collapse play out in real-time.

knukles's picture

Dinner at the End of the Universe?

ebworthen's picture

Ben Bernanke confession: 

"The FED is a Ponzi.  We monetize debt, purchase the bonds of our own government, debase the currency, punish savers, reward bankers, float equities to reward hedge funds for gambling and punish pension funds and investors because the robots always leave the building before the humans.

We have made 'buy and hold' a sad joke, the markets a travesty, the nation a bankrupt shell; all while pretending to create employment and control inflation while doing the exact opposite. 

Please forgive me."

Not sure if God will have enough mercy for him, considering.

EARLPEARL's picture

lets see who loses based on article and all these comments...everyone with cash or bonds lose...that would be the top 2%...who wins? that would be the 98% who have no bonds or cash.....where have i read similiar plan.....and all those gold bugs get their gold seized by the government....

newengland's picture

Chairsatan will do as he is told by the Trilateral Commission, led by Rockefeller in the U.S., and founded by the rootless cosmopolitian monarchist freaks Rothschild, Oppenheimer et al who funded Marx, Hitler, Lenin...anything raving loony party that would bow down to their insane idea of a new world order, ruled by technocrats, bureaucrats, academics and inbred Zionists.

Newcomer Obama and Romney are equally captured ambitious servants.

Buy physical gold, silver, land...and any other metal or food. Don't be a victim of the old world Brit/European order of  inbred freaks; the money masters who plot a new world order run by their scared technocrats, bureaucrats, academics - the plot of the Trilateral Commission.

Their plot is failing. Leave them to it. 

Lord Of Finance's picture

This calls for a bond market rebellion!  

   Oh wait. The fed is the bond market.

newengland's picture

:-),, Lord of Finance.

We don't need experts like the Fed or big government. We are perfectly capable of losing money or messing up nations on our own - without the added expense of TBTF banks, central banks, big government and their bureaucratic minions.

And that way would cost us less, and more people would live.

Sack 'em. They fckd up  - and bill us for endless wars.

The Fed is the war machine along with its bribed politicos and bureaucrats. That's why they back each other, and bail out each other with other people's money or digital counterfeiting.

Never in the history of the USA have servicemen been placed so long in continuous war abroad. Never in the history of the USA have so few politicians seen active service.

They are precious freaks, stealing from taxpayers on behalf of their big bank masters who pay NO tax but screw the USA by shipping jobs abroad to slave labor nations, and import ignorant slave labor from dirt poor nations.


knukles's picture

Nothing is right, nothing works, there is no honor, there are no ethics, no morality, no laws, no conscience, no caring, no helping, no empathy...... nothing.

All's left is the Null Set.

For those of you who don't fully grasp the implications, the strength of the statement;
No vacuum, no solutions, no absence of solutions, no emptiness, no space, no residual, no matter, no being, no thought, no time, not even nothing.

Way the fuck past the New Normal....

Welcome to the Null Set, your New Future of Less than Naught

newengland's picture

Fear not. There is honor, loyalty and commitment in genuine communities. 

The freak inbred central bankers and their political/media/academic/bureaucratic minions want you to despair. Don't give them that advantage.

Better to die on your feet than your knees, in my opinion. Fear not. Never give your enemy an advantage.

Bastiat009's picture

This seems to be very bearish for gold which is about to get to the level it was before QE3 while the US$ has yet to crash.

I am not saying it makes sense, but facts are stubborn. 

newengland's picture


It's a shake down. Criminals do that.

Look at the fundamentals: the Fed prints like an insane inbred counterfeiter, so therefore, gold will rise in real terms.

Lord Of Finance's picture

There will be a true inflation adjusted adjustment. Then a little later on, a whole lot more.

newengland's picture

I own gold, silver, land and live in a genuine community which looks after each other.

Central banksters and their followers can  die, for all the misery they have caused. The sooner, the better. We are prepared, and waiting. Bring it on, the sooner, the better.

The sovereignty of states is true and will prevail.

And in true ZH style, I'll say this:


Bastiat009's picture

It's not because it's "criminal" that it's not happening, like everything that governments do. Taxes can considered "criminal" but I still have to pay them.

epwpixieq-1's picture

NO worries. As long as the Oil IS priced in $$$ everything is under (ever loosing) control.

As long as the OPEC baron-morons, go along with this game, and their countrymen do not rebel, there will be a nice sliding downwards, witch at some point, of course, will blow up one way or another.

Milton Waddams's picture

Why would BB ever retract anything when his predecessor, when given the opportunity to offer a mea culpa, pleaded quasi-insanity?



wisefool's picture

The way the story was told to me is that Ben got 1600 on his SATs. Anybody with the internet knows that turbo timmay is a clinical retard.

I will miss you all after december 15th. That is when timmays IRS says I am no longer allowed to have internets. Also write your senators to get a 43 nm press.

resurger's picture

Here is my bank account , iwant some of that free QE

+5 Tylers

devo's picture

Fire up a bag of popcorn.

unirealist's picture

When will it all blow up?  Oh, hell, I've known for years.  The global financial system will collapse by 3/27/2013.

Because that's when I'm supposed to receive my first Social Security check.

Mark it on your calendar and plan accordingly. 

bobthehorse's picture

Ben Bernanke is a sexy beast.

His man tits are beautiful.

Bunch of haters.

Peace on Earth, and good will to man.

BlackholeDivestment's picture

...if you want me to arrest them, don't dial 666-ADD-Debt or call 911 for help, I am not an AmbASSador for the Antichrist. I am alive and waiting with the Saints. We will be marching in shortly, but there's a delay on the line right now. The number is not in the Yellow pages, the other Book. Look Up, it's about to get off the hook. That ain't no Lame Duck Dance, it's the end of perfectly bad charecter time ...bitchez. Zero the Heroshima.  http://www.youtube.com/watch?v=fgYIfBvRcsQ


q99x2's picture

That's great. I enjoy all the Rothschild's money I can get. YeeeeeHaaaaa. Who's got the acid.

TheObsoleteMan's picture

Who didn't see this coming? I saw it {as did some of my inner circle of friends} four years ago! As the rest of the world diversifys out of US debt, who else was left to pick up the tab? This was the bargain struck between the US Gubmint and the Federal Reserve many years ago. Make no mistake, this is a very lucrative business for the Fed, and in return, the Gubmint is enabled to kick the can a while longer. This is what the end of the road looks like. The MSM and the pundits will claim this is a good thing, much like Japan owns much of it's own debt. However a closer look will reveal the truth: "Bad money drives away the good". This is not investment purchases. it is desperation purchases, as no one else will want to buy them, especially when there is no yield for the risk. And there is a risk, you can bet the farm on that. Wait until real yields turn negative, that is when things get "interesting". The creditworthiness of the US Gubmint days are numbered, and are few.

Super Broccoli's picture

how can we monetise such huge amounts of debts without creating zimbabwean-style hyperinflation ????

smacker's picture

Somebody may correct me...but I believe the reason it has not caused inflation/hyperinflation "yet" is that Banana Ben's funny munny is going into assets, not into consumer demand/spending.

slvrizgold's picture

Don't forget, not only will the Fed end up owning all the Treasury debt, they'll also own a lot of houses too!     lol

smacker's picture

Banana Republic.

Radical Marijuana's picture

Another excellent article, demonstrating why I read Zero Hedge.

And, after skimming the comments, I liked these remarks best,

by TruthInSunshine:

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

The monetary system is the American state religion. Bernanke is the "infallible" pope of that religion. Therefore, it was symbolically appropriate which image and caption this article started off featuring, of Bernanke praying. However, by and large, virtually ALL of the other comments were based on reversions to various alternative old-fashioned religions or ideologies. This is the tremendous irony of the breakdown of the globalized Neolithic civilization: awesome scientific progress in every area, except for basic human ecology, because we generally refuse to think about ourselves more scientifically. Almost nobody wants to do that, and especially the ruling classes do not want other people to do that! That paradox is now an insane runaway situation, since we are building a scientific dictatorship, based on applying science in the most anti-intellectual and unscientific ways possible, i.e., science is primarily employed to be better at being dishonest. Our paradoxical situation is that everything was based on historical triumphs in war, through deceits, developing to make FRAUD KING.

Thus, we are rushing forward at exponential rates, with the development of more knowledge in every human endeavour, while, at the same time, everything is controlled by an insane state religion, which is totally entrenched in the system, until it practically IS the system. Money controls almost everything, however, that money itself is nothing but legalized lies, backed by legalized violence. The established systems deny those facts, and almost all the "alternatives" want to continue to deny WHY those are the facts. The ruling elites benefit from the lies, and they work hard to force everyone else to agree with or accept FRAUD as the basis for their society. The more that the ruling classes benefit from their frauds, the more powerful and wealthy they become. Everything becomes more and more controlled by the monetary system, while that system automatically becomes more and more insane ...

The most important thing for a technological society is the philosophy of science. I recommend two books about the philosophy of science, which I think are relevant to understanding how the American monetary system is a state religion.

The Structure of Scientific Revolutions


Darwin's Blind Spot: Evolutions Beyond Natural Selection


tok1's picture

what matruities are they likely to buy .. didnt they just sell all their 2-4ys as part of operation twist so might it not be same are where they can then roll them down (ie future twist)... ie if they long end.. then their really going to have large high duration risk out there..

EscapingProgress's picture

Jamie Dimon told me that this is how a free market works...

GreatUncle's picture

A point of observation for all commentators.

If you own any gold, silver or the like and if I was you I would not state it. Ordinary people are not what you have to worry about but those able to figure out who you are one day knocking on the door to confiscate it.

Now these people will be fully armed, bit like Rambo on steroids so your puny little peashooter to defend what you claim is yours is not really going to be much use is it?

Radical Marijuana's picture

YES, GreatUncle! And even worse, the thing that shows up at your door to demand your guns and gold is probably going to be a literally remote controlled robot, with automated defence capabilities. The nightmare science fiction situation that is emerging at an exponential rate far, far outruns the old guns and gold stuff!

The THEORY of a democratic republic is the best thing we have. The PROBLEM is that enough people are already Brain Dead Zombie Sheeple, that enable the elites to turn that theoretical system into a cruel joke! The problem is that the theoretical system makes lots of sense, and is the best possible which can be imagined, as far as I can tell. However, the reality of that has been a runaway take over by the covert best organized criminals, enabled to do that because enough people are mainstream morons, brainwashed to believe in bullshit.

There is no better theory than to make a democratic republic actually work. However, I can not imagine any practical solutions to the already runaway triumph of the ruling classes having dumbed down the masses to the point which has already been achieved. Given that fixing those problems appears realistically impossible, I understand why people pick personal alternatives as their own solutions, which involve attempting to opt out of the established systems, as much as possible, and try to forget the old, while building the new! Given how bad the realities ARE, I sympathize with those who no longer bother to vote. However, I still cannot think of any better theoretical solutions, overall, than to make a democratic republic actually do what it was supposed to do!


Attempts at any armed resistance of the runaway system of computerized/machine police and army forces are being left in the dust, way too fast! Unfortunately, as far as I can tell, nothing will actually work. We will have to go through some kind of insane collapse to chaos, and that will be so insane that being prepared will only have made one a target of the systems that will already know who you are, and where you are, and that you prepared. Some god damn computer will send some god damned robot, to tell you what to do. If you resist, a whole bunch of other god damned robots will soon show up! What is worse, as we all gradually let that system get bigger, and more out of control, it will finally turn against those who made it too. Even the ruling classes will find that they too become the targets of the monsters that they made. When the rule of law gets utterly destroyed, and replaced by computerized robot police, we are all doomed! All the evils that some men did to other men shall be replaced or superseded by the machines that some men made turning against all men!

The only theoretical solutions are to make human beings competent citizens ... which has been deliberately subverted by the ruling elites, for their own short-term interests.  However, tragically, what they did to others will later come back against them, and they shall find that the monsters that they created, by destroying the constitutional rule of law, will become monsters that later destroy them too!

toomanyfakeconservatives's picture

RM, despite all your great posts, this latest one of yours is a real clunker.


"Attempts at any armed resistance of the runaway system of computerized/machine police and army forces are being left in the dust, way too fast! Unfortunately, as far as I can tell, nothing will actually work."


Guerilla and asymmetric warfare isn't on the wane, it's still on the rise and far from it's potential peak. On the other had, you've already seen the heyday of smart weapons. From the Warsaw ghettos, to the jungles of Vietnam, to the mountains of Afghanistan, determined boots on the ground will always grind the mechanized, smart weapons-equipped oppressor into dust. Pushed to the brink, millions of armed Americans would make Red Dawn (the original) look like a walk in the park for any invading army, foreign or domestic.


The idea of door-to-door confiscation in America of guns, gold, or food is so laughable I don't know where to begin. I hate to sound like a broken record, but just watch Red State to get an idea of the heavy, unsustainable losses the bad guys would take against armed Americans.


Snipes: We're safe around here.

Connery: You call this safe?

Snipes: Rough neighborhoods may be America's last advantage.

Connery: May I suggest a strategy?

Snipes: Don't stare at these guys. Keep your hands down. These guys don't like big arm movements. They might shoot you. Keep your voice calm. Better still, don't say shit.

Radical Marijuana's picture

I hope you are right, toomanyfakecons!

One of the real possibilities, which I find the most difficult to estimate, is the potential fragmentation of the chain of command, after sufficiently insane orders are given to people who finally refuse to obey them. That could become one of the real triggers of some revolution, and that could happen before what I was speculating about happens.

What I was saying is obviously not real, yet! However, I believe that it is becoming more and more really possible at an exponentially accelerating rate. But neverthless, like everything else in the grab bag of trick or treat futurological speculations, it is impossible to predict which other events might happen first, in order to make whatever else one was worried about happening occurs before that.

It is an astonishing fact that there are more privately owned weapons in the hands of Americans than in most of the other combined public armies in the rest of the world.  America makes up more than half of the world's military expenditures, and private purchases are equally awesome in magnitude. Furthermore, there is an abundance of weapons of mass destruction distributed throughout America, and any kind of real revolution could see the break down of the chain of command over some of those, which is another wild card beyond comprehension.

What I was saying in my comment above would require that nothing else change, while the exponential fascist police state kept on growing and growing, long enough to have developed advanced computer/robot entities, which became the primary front line of the police and military. That may well be a silly science fiction, that will not have time to develop as far as I imagine, before other events preempt that, with their own imperatives, which change everything beyond our imagination.

However, so far, I see nothing from the outside but enough Americans continuing to do nothing, until it is too late. I hope I am wrong, and you are right!

Monedas's picture

McAfee wanted for questioning in the murder of a neighbor over a dog dispute ?  You don't need to move to a tropical Cay in Belize to do that !  White people can be so complicated !