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"Regime Change": The Critical Message In Today's FOMC Announcement

Tyler Durden's picture


It will take the market some time to figure it out, but there were two main parts to the Fed's announcement: the actual breakdown of the $85 billion/month QE4EVA which were priced in as far back as the day QE3 was announced and were not a surprise at all; and the employment and inflation hard-targeting part, the so-called Evans Rule, which is, or at least should be, a shock to the market, only it hasn't quite realized it yet. Why shock? Because starting today, every incremental economic data point that is materially better, brings us closer to an explicit end of Fed intervention. Because at least before the Fed's calendar target was as soft as it gets; now the Fed will have no choice but to terminate its monetization once the unemployment rate plunges (be it entirely due to part-time jobs or 68 year old workers, as has been the case lately). It also means that as the economy continues along an "improving" glideslope, whether real, manufactured or doctored, the market will start pricing in its own "flow"-based demise. Because once the Fed's $85 billion/month in new Flows ends, it's game over.

Indicatively, using a simple forecast, based on LTM trends across all key employment metrics reveals something very troubling, for the Fed and stocks that is: the 6.5% unemployment rate will be breached in July 2013! Now granted that is simply idiotic, and there is no way that the US economy could possibly recover that fast, but that is precisely what is implied based on the ongoing collapse in the Labor Force Participation, and the concurrent plunge in the Labor Force Participation rate, which has been the biggest marginal driver for the unemployment rate, far more than the number of people who have jobs, or are unemployed (readers can recreate our calculation on their own in 10 minutes with excel).

The yellow arrow in the chart below shows at what point in the future the US Unemployment Rate is projected to dip below 6.5% assuming the current ongoing rate of contraction in the labor force participation rate.

Which then brings up the question: will the participation rate mysteriously start soaring beginning with the December data, as mysteriously all those people who had left the work force - supposedly all of the retirees if one listens to the "expert pundits" - start rushing back into the work force?

And if so, how will these same pundits reconcile their demographic based explanation that had justified the unemployment rate sliding so far, with the oposite trend which however has no demographic explanation?

After all, hitting the 6.5% unemployment threshold rapidly now is the wordst possible thing that can happen to stocks!

Perhaps, the best news of the day is that, finally, the narrative will be one where bad news are no longer both bad news and good news in the eyes of the market trading algos, but where good news, going forward, will be decidedly bad news for the stock market.

And after 4 years of benefits accruing only to stockholders even as the economy constantly suffered, this sounds like a very equitable trade off.


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Wed, 12/12/2012 - 14:44 | 3056679's picture

Next time I play Monopoly with my kids I'm gonna initiate some QE for myself and see how that goes over...

Wed, 12/12/2012 - 14:57 | 3056732 MillionDollarBonus_
MillionDollarBonus_'s picture

Interviews with average Americans

 What do average Americans want from their government?

 Sarah Ford, age 20, NY 

 “I'm a young and involved activist about to start my double major in environmental studies and politics, and I'm very, very angry about what is going on in this country. I blame this country's problems on the exploitations of corporations and a blind worship of the "free market" and "self-regulating capitalism" (Tell me, how does that work again? Oh yeah, it doesn’t morons). Following the deregulation of the banking sector and the repeal of Glass-Steagall (the financial regulation act that would have prevented the financial crisis), this country has gone down the drain. Meanwhile, scumbag corporations are continuing to hire non-American foreigners in other countries instead of Americans at home. Hire Americans, idiots – you’re American companies aren’t you? Fuck free trade. End capitalism. End this crap ... I’m sick of it!”

Wed, 12/12/2012 - 15:01 | 3056743 LawsofPhysics
LawsofPhysics's picture

Hhhmmmm, I wonder what sort of wage she is expecting.  Seems to me, her anger is a bit misguided, where did those corporations get the "free money" again?

Wed, 12/12/2012 - 15:22 | 3056851 CPL
CPL's picture

Dear Abby;

 My student loan is huge because my first degree in Women's studies with a masters in library technology didn't bare any fruit so I tried the trade schools.

I filled in the back of this match pack for cold drink preparation and a tooth cleaning secretary technologies yet I have not made my millions of dollars. 


OMG, totally.


Wed, 12/12/2012 - 16:28 | 3057106 Manthong
Manthong's picture

Dear Sarah.

News Flash..  There is no capitalism anymore. Capitalism presupposes capital accumulation as an objective.

Since 1913 the policy has been to promote credit accumulation (what do you think your credits cards, student loan and your share of the $16 Trillion national debt is).

Capitalism, a free market and free money system fixes everything.

Some smart guys knew that back in 1787, but we have collectively rejected their prescriptions.

Oh, BTW.. interest that compounds and grows for the use of the credit money you save is capitalism’s reward for the worker who accumulates credit money capital. How’s all that capitalism and savings interest working out for you nowadays?

Wed, 12/12/2012 - 16:34 | 3057147 trav777
trav777's picture

News flash for TD:  they'll just use a different number if/when UE hits 6.5% or they will change their policy statement.  There is no possibility in the Age of Contraction that a debt system predicated upon growth can ever have a Fed exit.

The dollar dies when our military is defeated or there is fundamental revolutionary regime change here a la the USSR. 

Wed, 12/12/2012 - 18:51 | 3057582 Harbanger
Harbanger's picture

 All it takes to kll the dollar is when it loses it's reserve staus or when inflation forces the Fed to raise rates.

Fri, 12/14/2012 - 11:00 | 3062561 MeelionDollerBogus
MeelionDollerBogus's picture

Or people get so sick of rising prices they start stealing canned food & tide and use that as money instead of dollars - aside from the rest of us who had the wisdom to stack silver coins & gold

Thu, 12/13/2012 - 10:25 | 3059043 Biggvs
Biggvs's picture

Exactly... they will play their current game in reverse, pumping up the participation rate as the number employed is increased, which will slow the rising percentage. And in the Q&A session Bernanke also left plenty of wiggle room for the Fed to ignore the 6.5% number if (their definition of) inflation is contained.

Wed, 12/12/2012 - 15:02 | 3056745 TruthInSunshine
TruthInSunshine's picture

Young Sarah Ford will get what she so richly deserves. The Bernanketh, Evans and fractional reserve fiat alchemists are unleashing hell upon her sorry, ignorant ass, and she is thanking them, while asking for more.

Thank you, Massas', may I have MOAR?


She reminds me of those Columbia University students whom The Bernank paid a visit during the Fed's propaganda/sheeple shearing tour, and who didn't have the fortitude or intelligence to bother to ask a single, probing, intelligent question of The Bernank.

Wed, 12/12/2012 - 15:05 | 3056761 Oldballplayer
Oldballplayer's picture

She is 20 and she is just starting her "double major." Like I give a shit that she cannot make up her mind.

But 20 is a little late starting school.

And she calls us morons.

Arrogant douche is what I call her.

Wed, 12/12/2012 - 15:17 | 3056822 _ConanTheLibert...
_ConanTheLibertarian_'s picture

She will get double penetration...

Wed, 12/12/2012 - 15:25 | 3056855 LawsofPhysics
LawsofPhysics's picture

...and then have the financial security she wanted so badly, maybe.  Judging by her comment, probably not.

Wed, 12/12/2012 - 15:39 | 3056910 e_goldstein
e_goldstein's picture

Youth. It tends to be wasted on the young.


Wed, 12/12/2012 - 15:15 | 3056805 Dan The Man
Dan The Man's picture

How does a double major come up with this stuff?  Good grief, I weep for the future, if our future is children.

Wed, 12/12/2012 - 15:30 | 3056828 TruthInSunshine
TruthInSunshine's picture

In Environmental studies & politics.

I'd expect as much.


p.s. - At least she's not studying Bernankefailurenomics.

Wed, 12/12/2012 - 16:36 | 3057153 trav777
trav777's picture

she's studying to agitate about things.  That's all anyone does anymore...I think deep down, they have read The Secret and believe that if we just agitate and wish strenuously enough, we can suspend the laws of physics.  Afterall, ANYTHING IS POSSIBLE, ain't it?

Wed, 12/12/2012 - 17:32 | 3057196 TruthInSunshine
TruthInSunshine's picture

She will get her Ph.D. in Midget Women Transgender Studies once she pays off her currently accruing student loans (whilst working as a Dunkin' Donuts Barista).

The only way her student loans get paid off in her lifetime is if she agrees to become the Chamber Maid for Charles Evans and let him have his sick, twisted perverted ways with her, daily and thusly.

Wed, 12/12/2012 - 15:34 | 3056893 lasvegaspersona
lasvegaspersona's picture


Did Ben just tell Obama that he (Bernacke) was not going to take the rap? That if he (Obama) wants nice unemployment numbers that Ben would stop funding the government? 

NICE PLAY!!!!! Bernacke excapes the noose.

Actually I suspect that the numbers will remain squishy and the Fed will 'have' to keep funding. But a nice forehand line shot just over the net....

Wed, 12/12/2012 - 15:35 | 3056898 clagr
clagr's picture


Wed, 12/12/2012 - 16:29 | 3057133 mkhs
mkhs's picture

Average. What is average?  Here, in WoeISus, everyone is above average.  Yeah, wisdom comes from youth.

Julia Chrysler is a third year ....

Thu, 12/13/2012 - 05:58 | 3058670 Professor Fate
Professor Fate's picture

The reason they don't hire Americans is because Americans spend $50,000 on a useless education in environmental studies and politics.  Americans know how to text and play video games.  Foreigners know how to make tooling at 20 cents on the dollar and weld.  Simple really.  Now, forget your double major and learn how to make a 427 Cobra fender from scratch on your English wheel and you'll have accomplished something. 

"Push the button, Max"

Fate the Magnificent

Wed, 12/12/2012 - 15:03 | 3056739 Kitler
Kitler's picture

Don't forget to make some deep budgetary cuts to the $200 in cash for passing "GO" which can reappropriated to help offset those pesky Community Chest taxes on the job-makers.

And while you are at it be sure to stuff a couple of "Get out of jail free" cards up your sleeve. That should help teach them the basics...

Wed, 12/12/2012 - 15:15 | 3056812 eclectic syncretist
eclectic syncretist's picture

Things that make you go hmmmm. 

The Fed prints our debt then takes it from us and loans it to the big banksta's at 0.25% interest, who then (sometimes) loan us back our own money (contaminated 9-10-fold with some they counterfeited via fractional reserve accounting) at 10%+ interest, and people in this country put up with this immoral skimming operation that robs them every day of their life.

Wed, 12/12/2012 - 15:45 | 3056942 jayman21
jayman21's picture

Yes and these same people who re-elect congress with an approval rating of 10%.  They always say they are not good with money anyway.  Fool and money.


Do you think they will ever take the time to learn about economics and how they get screwed each day by the fractional reserve system?

Wed, 12/12/2012 - 18:26 | 3057548 Goner
Goner's picture

This sounds like an interesting idea. I wonder if it would help people understand the shit pile we are in if we could write it up as monopoly rules


* Gets permenant get out of jail card

* Takes 3% of all money handed at all times

* Gets 3% of property value each round

* Is free to levergage his money up to 40 to 1


Wed, 12/12/2012 - 15:03 | 3056753 Long-John-Silver
Long-John-Silver's picture

You can add a few "Bail Out" cards too. If you draw one you you can pick a competitor and take all his money thus kicking him out of the game. 

Wed, 12/12/2012 - 15:21 | 3056848 AmCockerSpaniel
AmCockerSpaniel's picture

Full employment, but at what average wage?

Wed, 12/12/2012 - 15:27 | 3056869 TruthInSunshine
TruthInSunshine's picture

At an hourly wage that a Subway 6" half-long will fetch.

Wed, 12/12/2012 - 16:03 | 3057027 Poundsand
Poundsand's picture

Bail Out Card Instructions:


You made friends with The Bernank and are now TBTF.  Insert ream of paper into your printer, put as many zeros behind a 1 that you can fit onto the sheet, hit ctrl P. and print until there is no more paper.  Better than the lottery!

Wed, 12/12/2012 - 15:05 | 3056765 insanelysane
insanelysane's picture

Buy Baltic and Mediteranean Ave, they come with government assistance.

Wed, 12/12/2012 - 15:24 | 3056856 JPM Hater001
JPM Hater001's picture

Why initiate QE.  Just own the bank.  Kids dont know any better.  Come to think of it most parents dont either.

Wed, 12/12/2012 - 18:57 | 3057654 hannah
hannah's picture

i always owned the bank and stole like a politician....

Wed, 12/12/2012 - 15:29 | 3056879 kalasend
kalasend's picture

First, shock and displease.

Second, QE from all players

Third, you run out of notes but you can always add 0's to the notes.

Wed, 12/12/2012 - 14:44 | 3056680 LawsofPhysics
LawsofPhysics's picture

What will the EBT/SNAP usage be then (assuming the commodity complex doesn't blow up first)?  FAIL.

Wed, 12/12/2012 - 14:50 | 3056686 TruthInSunshine
TruthInSunshine's picture

 "Why shock? Because starting today, every incremental economic data point that is materially better, brings us closer to an explicit end of Fed intervention."


The flip side is that the Fed just broke all markets further today, thus putting truly better economic data even further out, ensuring even more Federal Reserve "We Will Not Monetize The Debt" market breaking action and interference. Aggregate demand, employment & real GDP just got BBQ'd. All Hail the new, it's different this time, central planning committee.

As a bonus, the formulae used to tabulate both U3 and CPI are hopelessly flawed, and subject to massive manipulation. Good luck.

Wed, 12/12/2012 - 14:57 | 3056734 macholatte
macholatte's picture



The can shall be kicked!

"So let it be written. So let it be done."


All systems are GO and A-O-K.  Light this candle!

Wed, 12/12/2012 - 14:59 | 3056744 Seer
Seer's picture

"As a bonus, the formulae used to tabulate both U3 and CPI are hopelessly flawed, and subject to massive manipulation."

Beat me to it!

NOW we'll start seeing U3 manipulated the other way...

We'll be faking left and right until... the train hits us.

Wed, 12/12/2012 - 16:11 | 3057062 James-Morrison
James-Morrison's picture

This one is easy.

BLS data manipulated pre-election,

Now BLS data will be manipulated post election.

Nothing has changed.

Wed, 12/12/2012 - 14:46 | 3056688 Sutton
Sutton's picture

But the Fed's policies will do nothing but drive up input prices,killing the economy,making unemployment go up,in a huge way.  A rising price Depression.

Wed, 12/12/2012 - 14:47 | 3056693 not fat not stupid
not fat not stupid's picture

Any incremental improvement in the -real- employment environment will raise participation rate and raise it quickly.

Wed, 12/12/2012 - 14:52 | 3056715 Tyler Durden
Tyler Durden's picture

Wrong. Or at least wrong if one listens to the traditional "explanation" spoonfed by the BLS apoligists, namely that the rate has plunged to the retirement of aging baby boomers. Sadly, those retirees can't go back into the work force.

Of course, that this explanation is total BS is what we have been saying for years, but it will be fun to watch how the "intelligentsia" scrambles to backtrack on that one.

Wed, 12/12/2012 - 14:58 | 3056737 LawsofPhysics
LawsofPhysics's picture

moreover, every "not counted" unemployed person still needs to eat and unless they are engaging in massive black market opportunities, they are an expense on someone's ledger.  The facade is crumbling, the Fed will be the bagholder and their owners will demand the underlying assets of the U.S. treasury.  All by design.

Wed, 12/12/2012 - 15:03 | 3056747 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Unemployed boomers are taking their SS benefits at 62 like hyenas enjoying a carcass.  The consequences of them coming back into the workforce are substancial, so they will likely stay at at pasture. 

We will get to 6.5% soon enough, but it will just be a greater drag on GDP a la a tax burden on the workforce.

Wed, 12/12/2012 - 15:05 | 3056760 LawsofPhysics
LawsofPhysics's picture

This is another problem that will be addressed when the parents move into the kid's basment after selling their remaining assets to an asian, my point was directed more at capital flows, which is a big deal.

Wed, 12/12/2012 - 15:08 | 3056770 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I hope that isn't the plan, because most kids are currently living in their parent's basement.

And as far as capital flows you should go on.  I thiought we were discussing the bottom line.

Wed, 12/12/2012 - 15:35 | 3056888 LawsofPhysics
LawsofPhysics's picture

The Fed has finally lost control of the capital flows in that there is a lot of business being transacted outside of the FRN.  Just like any other private business, when the velocity in your market slows (their market is the FRN) you aren't advancing your portfolio.  The circle jerk that they have going between themselves doesn't count as it doesn't add any real value to their holdings.  The Fed is a dead horse to the owners.  Time to shut it down, change the meme.  If I was a shareholder (and they do exist), I would have been voting for this in late 90's.  Anyone beholden to the Fed or their primary dealers will have any and all real assets confiscated to clear the outstanding debt.  Derivatives will be "negotiated away" by the CB that hold them, their debts will be gone, yours and the treasury, not so much. It's nothing personal, it's just business.

Wed, 12/12/2012 - 15:59 | 3057000 spinone
spinone's picture

That's why they made the Fed the bad bank in 2008

Wed, 12/12/2012 - 19:10 | 3057675 tip e. canoe
tip e. canoe's picture


question is how will the BIS fit into all of this.

Wed, 12/12/2012 - 20:29 | 3057870 spinone
spinone's picture

After the Fed goes down, they'll need a new central bank and new WRC to start the game over again

Thu, 12/13/2012 - 00:11 | 3058383 tip e. canoe
tip e. canoe's picture

ok then, but is there a curtain behind the curtain?

Wed, 12/12/2012 - 15:08 | 3056774 insanelysane
insanelysane's picture

My parents collect the check and then work 2 days a week for "walking around" money.

Wed, 12/12/2012 - 15:51 | 3056963 crusty curmudgeon
crusty curmudgeon's picture

If TPTB don't want the official unemployment rate below 6.5%, it won't be.

Wed, 12/12/2012 - 15:01 | 3056741 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Good calls so far on the macro side Tyler.  Let's see if UE does go to 6.5% by July....

....right in time for the Grove party.  Imagine that.

Wed, 12/12/2012 - 16:14 | 3057075 SmallerGovNow2
SmallerGovNow2's picture

Just exactly how does anyone see UE going to 6.5% ?  I see it getting a whole lot worse than that (14-15%).  There is no growth and when the free money stops flowing and governments start shrinking where the heck does everyone think jobs are going to come from?  What am I missing here Hendrix?

Wed, 12/12/2012 - 16:49 | 3057207 TruthInSunshine
TruthInSunshine's picture

They will further discredit...I mean "adjust"....yeah that's what I meant....U3. All is well.

Wed, 12/12/2012 - 15:02 | 3056754 Solon the Destroyer
Solon the Destroyer's picture

With the "AND" clause in place, at least now we know the main focus of the data fudging will switch from unemployment and labor participation to the inflation rate and CPI.

Unemployment will somehow drop while inflation remains "stubbornly low".

...Or so the fairy tale will go.

Wed, 12/12/2012 - 15:15 | 3056806 mewenz
mewenz's picture

Great stuff on this site overall, but can't agree that July 2013 will be time for 6.5% for at least a few reasons, which is why the Fed has plenty more time to print.

First, absolutely agree, it is BS about the publicly stated demographics driven labor force participation excuse, which is 1 of 2 reasons why 6.5% will not be hit so quick

The second reason is that the extrapolated trend in the chart above does not match the data, unless one were using just a few months to draw the trend, i.e. the slope appears far too aggressive.  If I was to simply extrapolate back the drawn trend, it would be far above the actual data points, once I get beyond a few months.

Not trying to nit pick, just saying that the Fed has not boxed itself in from it's real primary intent, to effectively inflate and monetize away the fundamental insolvency of the TBTF, giving itself at least another few years to do so.

Wed, 12/12/2012 - 17:44 | 3057390 cranky-old-geezer
cranky-old-geezer's picture



Eventually they'll get to the point if you don't have a job you're not in the labor force.

There, unemployment rate is 0%.

... but Bennie will keep printing.   Nobody else will buy $150 billion govt debt and $50 billion (collapsing) MBS every month ...or is it $100 billion now?

Wed, 12/12/2012 - 17:44 | 3057410 crusty curmudgeon
crusty curmudgeon's picture

Wouldn't it be better to institute a negative unemployment rate?  You need to account for all those people who have 2 or more jobs.

Wed, 12/12/2012 - 14:58 | 3056736 insanelysane
insanelysane's picture

The Fed knows that if the unemployment rate hits 6.5% based on the participation rate falling then the game is over so QE will be stopped because we will have arrived at a real cliff.

Wed, 12/12/2012 - 14:48 | 3056694 Cursive
Cursive's picture

This good-is-bad, bad-is-good outlook only confirms that the Fed's primary mission is financial repression of the masses.

Wed, 12/12/2012 - 14:49 | 3056699 nobusiness
nobusiness's picture

If only it was that easy.  The fed continues to amaze me in the amout of intervention and risk it will incur.  I don't think employment nor inflation will stop them.  Only an all out attack by the bond vigilante's (if they are still alive) will stop this insanity.

Wed, 12/12/2012 - 14:49 | 3056700 Tsunami Wave
Tsunami Wave's picture

I knew we were done as a nation after QEII... but man, we are just done now.  We are just completely fucked.


Reason for buying treasuries... none.


Real reason for buying treasuries.. To simulate normal market operations of bond puchases, and protect the people that are trying to gut the country inside out - the biggest banks.

Wed, 12/12/2012 - 14:50 | 3056702 youngman
youngman's picture

They have the BLS in their back pocket.......the 6.5 can be fudged anyway they want it to be...if they want to get out...just drop the participation they want to stay in...just increase it....30 years ago you could invest with these they are faked....

Wed, 12/12/2012 - 15:42 | 3056928 Snidley Whipsnae
Snidley Whipsnae's picture

Youngman... My first quick take on this (announcement?) is that the Fed is going to back off their constant printing regimen when the (fudged or not) unemployment figure reaches ~ 6.5%. Is this how you read it?

If the Fed does stop or slow significantly their constant printing I see interest rates rising rapidly and significantly... Otherwise, no one will purchase Ts/notes at the rediculous rates that prevail.

Stand by for major fireworks in July or whenever the Fed cuts back on printing if an accompanying interest rate rise is in the cards.

Wed, 12/12/2012 - 14:50 | 3056704 WhiteNight123129
WhiteNight123129's picture

Throw a recession on the economy now, what happens?

Wed, 12/12/2012 - 14:51 | 3056705 DeficitAlchemist
DeficitAlchemist's picture

All well and good 'It ends' who is gonna buy all the deficit debt generated and all the short term Treasuries that need rolling now that debt is bunching up on the short end?

China stopped at a Trillion Ponzi - Fed is the only buyer of Treasury soon to be 'junk debt'?

There is no Fed based extraction, maybe this is just a calendar to reset day or just likely to be amended for the umpteenth time as we move down the curve..

Wed, 12/12/2012 - 14:51 | 3056706 NoDebt
NoDebt's picture

Wrong!  Read closer: 6.5% unemployment AND 2.5% or higher inflation.  AND, not OR.

Wed, 12/12/2012 - 14:53 | 3056717's picture

yes..the miracles are in the details

Wed, 12/12/2012 - 15:10 | 3056787 Schmuck Raker
Schmuck Raker's picture

Sorry Nodebt, close but not quite...

" long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal..."


Read more:


Wed, 12/12/2012 - 15:43 | 3056837 NoDebt
NoDebt's picture

Sounds like "AND" to me!

AND the man himself just said that hitting those targets does not mean that rates will immediately start to rise.

ZIRP will be taught in high school history books while while the program is still running years from now, I'm sure.

Wed, 12/12/2012 - 15:58 | 3056994 Schmuck Raker
Schmuck Raker's picture

Well, I agree with your last thought.

Wed, 12/12/2012 - 14:52 | 3056707 Iam Yue2
Iam Yue2's picture

Of broader interest, is that whilst Draghi and the sell-side analysts have told everybody who would listen that things are starting to stabilise, the Fed has very explicity said;


" Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook."


    Wed, 12/12/2012 - 14:52 | 3056709 sbenard
    sbenard's picture

    "...based on LTM trends across all key employment metrics reveals something very troubling, for the Fed and stocks that is: the 6.5% unemployment rate will be breached in July 2013!"
    But ironically, it will likely happen without any real nominal INCREASE in jobs!

    And what happens if we hit 2.5% inflation first? Then interest rates rise and the Fed begins to unwind its monetary mayhem? I have my doubts that they will!
    One thing for certain: MORE UNINTENDED CONSEQUENCES -- and they WON'T be PRETTY!

    Wed, 12/12/2012 - 14:52 | 3056713 Silver Garbage Man
    Silver Garbage Man's picture

    Maybe it's just me, but my shiny stuff looks a little bit shinier today. All according to plan.

    Wed, 12/12/2012 - 15:36 | 3056900 NeedtoSecede
    NeedtoSecede's picture

    I wish I could see my shiny stuff. That lake it all fell into is very dark and very deep...

    Wed, 12/12/2012 - 15:51 | 3056957 mick_richfield
    mick_richfield's picture

    "It fell into an abyss."

    "What abyss is that, comrade?"

    "The abyss between what is said, and what is done."


    Wed, 12/12/2012 - 14:53 | 3056723 WhiteNight123129
    WhiteNight123129's picture

    If the Fed stops buying treasuries, who will? What would be the impact on higher rates on mortages, housing, etc... I am curious to see how the treasuries will look like once the Fed stops printing hehe....


    Wed, 12/12/2012 - 15:33 | 3056887 DeficitAlchemist
    DeficitAlchemist's picture

    My point from early... buyer of last resort cant leave the room...

    Else this is a calendar for 'Reset day' or just another fake out deadline that will see new interventions subsequently anyway...

    in which case reset day will be inflicted at its logical break point rather than controlled and determined..

    Wed, 12/12/2012 - 15:49 | 3056952 Snidley Whipsnae
    Snidley Whipsnae's picture

    DeficitAlchemist... I see it the same way... If we are getting the correct info regarding the announcement.

    And, these would not be UNintended consequences. The Fed knows all too well what a cessation of printing will do.

    Stand by for 666, disruption in US Ts/bonds for lack of buyers (or interest rates will skyrocket overnight), disaster for what is left of Main St, much stronger dollar causing collapse in what is left of exports, an nauseum...


    Wed, 12/12/2012 - 14:55 | 3056727 Caviar Emptor
    Caviar Emptor's picture

    This also confirms that the long-term unemployed don't count and those jobs are never coming back. Unemployment rate does not take them into account. Say hello to the two Americas: one employed, one on welfare.

    Wed, 12/12/2012 - 15:53 | 3056971 Snidley Whipsnae
    Snidley Whipsnae's picture

    Three Americas...

    1) employed

    2) jailed in the worlds largest penal system and working for pennies per day

    3) those receiving SNAP cards go directly to FEMA camp for access to mess hall

    Wed, 12/12/2012 - 14:54 | 3056728 realtick
    realtick's picture

    Watch AAPL and the 500 level

    Wed, 12/12/2012 - 14:55 | 3056730 WhiteNight123129
    WhiteNight123129's picture

    How about hte end of FDIC insurance and PIMCO buying the short end of the bond market? I am siding with PIMCO, Fed sees recession coming and is full of BS as usual.


    Wed, 12/12/2012 - 14:58 | 3056740 dmger14
    dmger14's picture

    Who's to keep the fed from backing away from its employment and inflation targeting when those metrics are reached and continue with QE?  I don't trust that bald headed bastard!

    Wed, 12/12/2012 - 15:02 | 3056748 khakuda
    khakuda's picture

    Interesting point.  On the other hand, I have to believe they will make sure the numbers never show 6.5% or 2.5% and, if they do, they will say that it's only transitory.  The genie is out of the bottle globally and no one can stop printing now until it ends badly.  There is no other way to fund budget deficits other than printing, as significant tax increases and spending cuts are politically difficult.

    Wed, 12/12/2012 - 15:01 | 3056751 ekm
    ekm's picture

    So, are you guys going to believe me now that there is no such a thing as an independent central bank?


    Timmy G told Benny B to peg the decision to a number that Timmy G controls and invents:

    Unemployment rate


    Do you want more proof?

    Wed, 12/12/2012 - 15:06 | 3056763 Mr Lennon Hendrix
    Mr Lennon Hendrix's picture

    And they control the inflation rate because the price of oil is transitory and gold is tradition.

    The fire breathing inflation dragon has been woken by the Knights of the King and sleepy from its long slumber it has found the people's village first. 

    Good luck to the people who stayed in the village, but it's best to run now.

    Wed, 12/12/2012 - 15:12 | 3056797 fonzannoon
    fonzannoon's picture

    Am I missing the answer to this riddle? How, when the UE is hitting the high 6's next year...does the fed get out of ending QE?

    Wed, 12/12/2012 - 15:16 | 3056818 ekm
    ekm's picture

    The Fed cannot possibly get out. That's the order from the White House.

    The shit that they've bought already cannot be sold into the casino any longer.

    Wed, 12/12/2012 - 15:34 | 3056892 CPL
    CPL's picture

    They are already spending 101% of GDP.


    There is no options now.  All the QE does is buy an inch of time...if that.  They might roll it back by mid January.


    They are going to have to take their licks or the dollar goes away and then they won't have a pot to piss in.   

    Wed, 12/12/2012 - 15:34 | 3056885 Dr. Engali
    Dr. Engali's picture

    There is no way the fed ever unwinds this mess. Just think what will happen to their balance sheet if interest rates just goes up .50 bips. Everything they sell(which most if the crap they can't anyway) into the market would be at a loss, especially when you consider they are extending duration.

    Wed, 12/12/2012 - 15:37 | 3056902 drivenZ
    drivenZ's picture

    they wont sell it...or atleast not most of it. They will let it runoff. 

    Wed, 12/12/2012 - 15:45 | 3056940 Dr. Engali
    Dr. Engali's picture

    I realize that, but they are telling people they will.

    Wed, 12/12/2012 - 16:16 | 3057084 ekm
    ekm's picture

    That will in effect merge the Treasury and the Fed because the Treasury will have to pay the principal to the Fed, hence practical Fed shutdown.

    Wed, 12/12/2012 - 15:08 | 3056772 drivenZ
    drivenZ's picture

    FYI, the fed's holdings of MBS have only increased $40B since September.  Not $80-120B as ZH suggested originally and is still suggesting.

    This leads me to believe that the $40B is a gross number and doesnt take into account the maturties in the portfolio or that they aren't buying 40B/month because the language was enough to accomplish what they intended. Either way it seems like ZH is overstating the increase in the balance sheet.  

    Wed, 12/12/2012 - 15:10 | 3056783 Mr Lennon Hendrix
    Mr Lennon Hendrix's picture

    The Fed doesn't have to report their actual holdings so I am not sure where you are getting your numbers.

    Wed, 12/12/2012 - 15:09 | 3056776 snowlywhite
    snowlywhite's picture

    they'll just change the target, duh; wtf...

    Wed, 12/12/2012 - 15:09 | 3056782 Catullus
    Catullus's picture

    I'm really surprised they didn't give a range of inflation and unemployment. The key being that they could always just say one or the other is not quite there yet. In fact, Bernanke specifically wrote about this while at Princeton. Strange that he didn't follow his own advice.

    I doubt that unemployment number will pick back up. The number is more political than anything else.

    The thing to watch is how DoL starts changing the inflation numbers. The hedonic Substitutive CPI. When things get expensive, you just buy the cheaper alternative. Zap. No inflation.

    Wed, 12/12/2012 - 15:10 | 3056786 azengrcat
    azengrcat's picture

    Fed Academy QE4: Get Citizens on a Payroll

    Wed, 12/12/2012 - 15:11 | 3056789 Piranhanoia
    Piranhanoia's picture

    So many people demanding the destruction of civilisation can't be wrong.

    Wed, 12/12/2012 - 15:16 | 3056816 Dan The Man
    Dan The Man's picture

    They're taking some liberties with that graph.  Might very well flatline as newer unemployed fill in where the frustrated ones fall off the list.   Or they may just tell you that to keep up the QE.


    Wed, 12/12/2012 - 15:17 | 3056820 Body of Lies
    Body of Lies's picture

    The unemployment rate will never get to 6.5%:

    1) The Administrations controls this number and it will never let it get to 6.5% before mid-term election run up. 'deteriorating conditions' will be blamed on Congress until voting time.

    2) If conditions do really improve, more people will start looking for work again, increasing unemployment

    3) If conditions get really bad, more people will have to start looking for work again, increasing unemployment

    4) Some enterprising young journalist may just want to get that Pulitzer Price that will come from exposing all the crap flowing from the DC sewers, and then the unemployment rate is exposed as 20%


    Wed, 12/12/2012 - 15:48 | 3056949 NeedtoSecede
    NeedtoSecede's picture

    There is no such thing as an "enterprising young journalist" anymore. Might as well hope for more North Korean Unicorns that crap gold and silver bars.

    I am not even half as smart as most here on ZH, but I can see this cannot end well.

    Wed, 12/12/2012 - 15:22 | 3056850 sbenard
    sbenard's picture

    Economic ennui, the Obamalaise economy!

    Wed, 12/12/2012 - 15:30 | 3056874 TrustWho
    TrustWho's picture

    Daddy Bernanke told you. Once we reach 6.5% unemployment he MAY reduce his accomadative stance.  Daddy Bernanke "PETAL TO THE METAL...BUNGA, BUNGA"

    FU Bernanke!

    Wed, 12/12/2012 - 15:32 | 3056882 Quinvarius
    Quinvarius's picture

    I am pretty sure QE will be needed in the Treasury market long after 6.5% is achieved.  This is a fine exercise in rhetoric.  But they have not even begun to print yet. 

    Wed, 12/12/2012 - 15:35 | 3056897 zrussell
    zrussell's picture

    We will all have something to "do" in the FEMA itinerant/detention camps. That will constitute having a "job" and will be reported in the employment numbers.

    Preparations are already being made to open some of these with the secessionists who bothered the White House with emails.

    Wed, 12/12/2012 - 16:00 | 3057003 Snidley Whipsnae
    Snidley Whipsnae's picture

    zrussell... I don't think so. If they wanted to increase head count of the 'employed' they could use those imprisoned and receiving pennies per day for their 'employment'.

    The prisons are owned by giant corporations.

    Wed, 12/12/2012 - 15:45 | 3056941 LucasATX
    LucasATX's picture

    Sure. Yeah. ok.

    "now the Fed will have no choice but to terminate its monetization once the unemployment rate plunges"

    Just because they say they will does not mean that they actually will.

    If they decide not to, what are you going to do; call them "liars"?

    This is just posturing for confidence.
    They don't even need to monkey with the stats.
    They just need to adjust their policy.
    Kind of like when programs will end in 2012. No wait 2013. Oops I meant 2014. No really 2015.

    They are just exchanging end dates with stats.

    Wed, 12/12/2012 - 15:47 | 3056946 buzzsaw99
    buzzsaw99's picture

    It will be 6.6% for decades.

    Wed, 12/12/2012 - 15:59 | 3057001 dolph9
    dolph9's picture

    It doesn't matter how rich or successful or shiny or powerful you are.

    There are consequences to lies.  If you lie enough, nature will hand you a severe beating.  Americans will learn this.

    We are getting closer now.  But I still think the fireworks start around 2015 and the big bang is around 2020.

    Wed, 12/12/2012 - 16:10 | 3057058 lakecity55
    lakecity55's picture

    We'll keep printing fiat and buying our own phony products until we decide not to thru our phony statistics.

    Then the Dark Overlords from Mordor will Rule The World.

    Peasants will all live and slave for us in compact, gray, concrete buildings, except for those who work in the camps in the country.

    Forward, Soviet!

    Wed, 12/12/2012 - 18:15 | 3057504 1000924014093
    1000924014093's picture



    ««?????, ?????!» »

    Wed, 12/12/2012 - 16:14 | 3057073 geno-econ
    geno-econ's picture

    It was a huge mistake making employment a mandate for the Federal Reserve more than a decade ago and opened Pandoras Box for the Fed to make economic policy and be involved in fiscal policy as well.  Combined with multinationals outsourcing for profits, shadow banking  and weak political backbone , the Fed will hock the US into a credit  and/or currency collapse or inflation spiral.  Fed just gave more reason not to face up to our problems now. Stock market will react only when the Ponzi scheme begins to unravel and Fed has no ammunition left.  

    Wed, 12/12/2012 - 16:15 | 3057081 Swarmee
    Swarmee's picture

    Gents, ladies, why all this handwringing over the Fed drawing a line in the sand at some arbitrary employment rate that is, and forever will be, manipulated?

    The Bernanke already testified to Congress - under oath, no? - that he would not monetize the debt, and yet here we are today doing exactly that.

    So then why does anyone expect that when/if 6.5% unemployment is reached they will not simply backtrack on that just as quickly?

    It's all a farce, they will say whatever they think needs to be said to keep the game running as the debt treadmill speeds up ever-faster until the economy finally flies off the back of it and we collapse in some, likely hyperinflationary IMO, fashion. TPTB KNOW it's unsustainable, but if they hold the big guns (illegal for YOU, citizen) and the pieces of paper that say they own all the tangible collateral tied to the mountains of fiat debt then what do they care if it all goes to Hell, as has every other paper experiment in human history? There's only one reason for non-military government institutions to order hundreds of millions of hollow points. Hint, it's not target practice.

    Print to hold order until collapse is assured, then take everything of real value by force, start over again with pretty new slogans and maybe some new colors splashed on the red vs blue sides of the same coin. Every time the system gets close to breaking under the rules, they simply CHANGE THE RULES. For them anyway, same rules as ever for us, with lovely oppressive additions annually. Ought to be interesting to see what new freedom-limiting provisions are tucked into any last-minute fiscal cliff bill passed hurriedly at 11:59 on 12/24 or 12/31.

    Wed, 12/12/2012 - 16:17 | 3057085 SmoothCoolSmoke
    SmoothCoolSmoke's picture

    I wonder what Bernake would have said today if Romney had won?

    Wed, 12/12/2012 - 16:54 | 3057226 cosmyccowboy
    cosmyccowboy's picture

    i have devested myself of all my wordly goods just to make sure the feds were sadly disappointed when they came to take all i own!!! i used the proceeds to purchase silver and gold but sadly lost it when canoeing to the island to bury it... the darn canoe overturned!!!

    Wed, 12/12/2012 - 17:01 | 3057252 cranky-old-geezer
    cranky-old-geezer's picture



    Because starting today, every incremental economic data point that is materially better, brings us closer to an explicit end of Fed intervention.

    Are you insane? 

    Fed will never stop printing and funding a $2 trillion govt deficit, nor will they ever stop monetizing a tsunami of collapsing bonds.

    Fed will NEVER stop printing.  They'll destroy the damn currency first.

    Wed, 12/12/2012 - 17:50 | 3057429 crusty curmudgeon
    crusty curmudgeon's picture

    I'm skeptical.  Examine the premises...

    1.  The Fed is in charge of the printing press

    2.  The Fed exists to protect large banks

    3.  Hyperinflation would destroy large banks

    4.  The debt is too large to be paid down

    Therefore, there will be default.  The details of the selective defaults will always be leaked to the banks ahead of time.

    By the way, I like the cut of your jib.  You look mighty good for an old geezer.

    Wed, 12/12/2012 - 18:03 | 3057470 hannah
    hannah's picture

    the way that the unemployment numbers are calculated means that the number will go to zero as people fall off the backend and are not counted. there is a ticking clock now to the end of the fed.....or the backtracking of the fed.

    Wed, 12/12/2012 - 18:35 | 3057576 barroter
    barroter's picture

    No more QE for the private market? Oh, you'll hear them screaming "Unfair!" from Mars should this happen.

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    nastaking's picture

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