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QBAMCO On The Fed's Exit

Tyler Durden's picture


Authored by Lee Quaintance and Paul Brodsky of QBAMCO,

The Fed’s Exit

The markets have begun to wonder whether the Fed (and other central banks) will ever be able to exit from its Quantitative Easing policy. We believe there is only one reasonable exit the Fed can take. Rather than sell its portfolio of bonds or allow them to mature naturally, we believe the Fed’s only practical exit will be to increase the size of all other balance sheets in relation to its own.

This “exit” will be part of a larger three-part strategy for resetting the over-leveraged global economy, already underway. The first stage is policy-administered monetary inflation – QE in which the Fed is de-leveraging bank balance sheets by adding bank reserves. The second phase will be policy-induced price inflation – hyper-inflating the general price level enough to diminish the burden of debt repayment and gain public support for monetary system change. (Imagine today the Fed proclaims all one dollar bills are ten dollar bills. Goods and service prices would increase 10x, more or less, as would wages, asset prices, revenues, costs, etc. The only item on the balance sheet that would not increase 10x would be the notional amount of systemic debt owed.) We believe the third phase of the strategy will be a monetary reset that recaptures popular confidence following the hyper-inflation.

Below, we list a progression of facts and reason supporting these conclusions:

As the Fed monetizes Treasury debt (or, as it claims, temporarily adds Treasuries and MBS to its balance sheet prior to selling them or letting them mature sometime in the future, thereby draining reserves), the obligations of the US Treasury (i.e., obligations of US taxpayers) to the US banking system are increasing dollar for dollar.


The US banking system is: 1) the largest American creditor to the Treasury; 2) the largest warehouse of US taxpayer wealth (via deposits); 3) the largest (infinitely capitalized) intermediary for public US capital markets, and; 4) the monopoly issuer of US dollars and USD-denominated credit. In short, the US banking system is the issuer of the world’s reserve currency and supports conditions to maintain USD hegemony.


Thus, it seems reasonable to assume that the interests of maintaining a healthy US banking system rise above or are at least equal to the economic interests of Americans, and to a large extent their government.


Significantly higher US interest rates would implicitly harm the Fed’s balance sheet (which is not marked to market) and explicitly harm the loan books (assets) of private bank balance sheets (marked to market), potentially placing bank capital ratios in jeopardy and undermining confidence. (While significantly higher interest rates would ostensibly increase the value of adjustable rate bank loans not near their cap levels, they would also decrease the creditworthiness of borrowers’ loan collateral values, lowering lending activity.)


The Fed’s balance sheet is infinite and the Fed creates the currency with which its balance sheet may grow. The Fed will always have more money at its disposal with which to buy bonds and set benchmark interest rates than the quantity of bonds for sale, sine qua non.


Thus, it seems reasonable to assume that there will not be a sudden rise in US market interest rates unless the Fed wants such a rise. Nominal economic growth or even price inflation will not necessarily act as a trigger for higher Treasury yields (but it may be reasonable to fear higher yields within tertiary bond markets in which the Fed/banks do not have significant exposure).


The relevant issue for Treasury investors is not the risk of capital loss from bond price depreciation, but rather the risk of capital loss in real terms – negative real returns as coupon interest and principal repayment do not keep pace with price inflation (i.e., the loss of future purchasing power of Treasury P&I vis-à-vis consumer goods, services and equity assets).


The mix of economic growth (leading to higher tax receipts) and/or government austerity needed to reverse ongoing debt growth over time is mathematically impossible to achieve within the context of a stable social environment. The US public sector and US households are in a compounding debt trap in which there is no exit. Thus, debt is growing and being shifted presently, not being extinguished, and this portends the likeliest future path.


Real output growth from current debt/leverage levels cannot be generated from a coincident increase in more systemic credit/debt. So, the policy solution cannot be issuing new credit and transferring debt with the goal of generating increasing demand and nominal output growth. (And we further argue that wealth concentration that results directly from asset price inflation is a very relevant and direct constraint on real economic growth.)


The US economy (and all indebted advanced economies) is shrinking in real terms presently and fiscal measures are incapable of providing a sustainable remedy. This is precisely the catalyst forcing today’s aggressive monetary policy action.


The only solution is true systemic de-leveraging (banks, households and governments). Banks are already in the process of being de-levered through QE in the form of bank reserve creation.


There are only two ways to de-lever balance sheets: 1) letting debt deteriorate naturally, which would cause a 1930s style deflationary depression, and/or; 2) creating new base money in the form of bank reserves (first) and circulated currency (second). Both reduce leverage ratios (unreserved credit-to-money available with which to repay systemic debts).


The only two ways for the US government to de-lever without creating a deflationary depression would be: 1) Treasury sells assets (e.g. land, resources, shipping lanes etc.) and uses the proceeds for debt repayment, and/or 2) Treasury has the Fed devalue (inflate) the US dollar against a monetary asset on its balance sheet. The former would threaten US sovereignty and the latter would threaten the purchasing power of US dollars (i.e., the perceived current savings of US dollar holders).


To gain US public and geopolitical support for policy-administered deleveraging through
devaluation and a fundamental shift in the world’s monetary system, confidence in the current regime would have to be lost. The most effective tool for achieving this broadly would be price inflation.


Over the last forty years, the rate of price inflation has been about 2% per year (about a 125% compounded growth rate), which has diminished the purchasing power of the USD by about 55%. In other words, one dollar in 1972 is worth about forty-six cents today. Policy-administered US dollar devaluation would apply the same principle, but the inflation would occur suddenly and, discretely. Following a hyper-inflationary episode, the public would be conditioned for another resetting of the global monetary system (its fifth in one hundred years).


Central banks, led by the Fed, would have to re-price and monetize an equity asset rather than debt assets. The only monetize-able equity asset on official balance sheets is gold (which may explain why central banks of emerging economies are voracious buyers presently).


Re-monetizing gold would be popular within indebted advanced economies and therefore politically expedient. While net savers of US dollars would be harmed from the devaluation, net debtors would be helped. (The burden of repaying existing debts would be greatly diminished vis-à-vis inflated wages and asset prices.) Thus, those holding cash and bonds would suffer and those with mortgage, school, auto, and consumer debt would benefit. On balance, a policy-administered USD devaluation would be greatly welcomed within advanced economies. It would position politicians and central banks as economic saviors.


For the first time in memory all global currencies are baseless, including the lone reserve currency, and there is no other scarce currency that provides an alternative for global savers seeking a better store of future purchasing power. This implies that the Fed, with or without the encouragement of the BIS Global Economic Committee of thirty global central bankers, may unilaterally and effectively expedite a global currency devaluation. A policy-administered USD devaluation would force all other fiat currencies to respond in kind or to adopt the US dollar as its currency (maintaining USD hegemony).


The global system would revert to the gold/dollar exchange standard used between 1945 and 1971 (i.e., Bretton Woods). Currency devaluation against precious metals has long precedent (including the USD in 1933).


As we have discussed in the past, the mechanics for currency devaluation are straightforward and would be simple to exercise.


Global banks, having already been de-levered and finding the quality of their loan books to be pristine following the devaluation, would be eager to lend again. (The fractional reserve banking system would not be altered.) The devaluation would be economically stimulative.

In our view, public arguments by Fed members and observers of future balance sheet reduction using normal asset sales or amortization seem specious. The most visible, politically expedient and most likely path seems to be the path usually taken: inflation. In the case of the Fed and other central banks, we assert the magnitude of the systemic leverage problem will be met with equal inflationary force.


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Wed, 03/13/2013 - 19:34 | 3327935 machineh
machineh's picture

'Thus, it seems reasonable to assume that there will not be a sudden rise in US market interest rates unless the Fed wants such a rise.'

So the Fed rules the markets?

Dream on, dudes.

Wed, 03/13/2013 - 19:40 | 3327947 Crash Overide
Crash Overide's picture

The Fed’s Exit

It's a fucking DEBT based system, what do you think has to keep happening?


Wed, 03/13/2013 - 19:46 | 3327977 DJ Happy Ending
DJ Happy Ending's picture

Thank you.

The Japanese bond market is what our future looks like.

Wed, 03/13/2013 - 19:56 | 3328015 kaiserhoff
kaiserhoff's picture

These clowns think the Fed is god, but then, so does Ben.

Wed, 03/13/2013 - 20:00 | 3328028 negative rates
negative rates's picture

There is already a mkt created for this exact thing, it's called the derivatives mkt, coming to a town near you, soon.

Wed, 03/13/2013 - 20:18 | 3328077 NotApplicable
NotApplicable's picture


Wed, 03/13/2013 - 21:03 | 3328186 zaphod
zaphod's picture

The only problem with this is after you get back on the gold standard, all of a sudden there is no magical bailout fairy for the banks because the FED is now limited in its capital creation and the government has to live with a balanced budget because again the FED is limited in its capital creation. This would have negative effect probably greater than everyone clearing their past debts out.

Wed, 03/13/2013 - 21:24 | 3328229 jekyll island
jekyll island's picture

Going back to gold standard, the barbarous relic, will only be done to restore confidence in the Currency after hyperinflation. As for how long we would stay on a gold standard, well that's a totally different question. If the same politicians somehow hold on to power thru this, I would say about two years.

Wed, 03/13/2013 - 21:37 | 3328252 pods
pods's picture

The gold standard would do nothing to stop the cycle of collapse if fractional reserve banking survives.

The counterfitting would just be more out in the open due to the item being counterfitted being gold, not labor (debt=future labor).

There is no solution that benefits the common man if the current infrastructure stays in place.

Just a breather on the assfucking while they silently stalk your unborn progeny.


Wed, 03/13/2013 - 21:43 | 3328267 Payable on Death
Payable on Death's picture

The article is insane. The stated excuse for the Bernank's policies is to save / create jobs. There is no way that this "plan" is commensurate with that objective. If Ben's real purpose is to serve his masters, the banks(ters)--well, that doesn't make sense either. The biggest losers in a 10:1 exchange and hyperinflation are lenders.

Ben was trying to save a job--his. If the President is fired, so is he. The rest is all reaction.

Wed, 03/13/2013 - 22:40 | 3328425 SWCroaker
SWCroaker's picture

Stated excuses?  You listen?!?     Put the Fed on MUTE, just look at their actions, and it is plain as day that their actions are *entirely* aimed at supporting, saving and shepherding a cartel of global major banks.   Goal one, and only.

Serve the banks as long as possible, and then have them be key in any transition to a future form of control.       Jobs?  I don't think so.

Thu, 03/14/2013 - 00:27 | 3328699 philipat
philipat's picture

Assuming, of course, that the Western Central Banks actually HAVE any Gold???

Wed, 03/13/2013 - 22:11 | 3328344 French Frog
French Frog's picture

I don't think that even ZH's creator(s) would have thought in early 2010 that the Fed and other CBs around the world would manage to hold 'it' together so well (at least on the surface) for another 3 years.

The issues being discussed in this article are profound and I know a lot of it is way above my head and it certainly runs a lot deeper than a simplistic "buy gold and go to sleep for the next 10 years".

I don't know if they really can avoid a cataclysmic deflationary reset for ever but I am in no doubt that we will still be having this same debate for a lot longer than we deem it possible right now.

Thu, 03/14/2013 - 09:47 | 3329262 orez65
orez65's picture

"... and the government has to live with a balanced budget ..."

Isn't that the point?

The alternative is the FRAUD that we are living.

Wed, 03/13/2013 - 23:45 | 3328599 grid-b-gone
grid-b-gone's picture

Devaluation is pretty god-like, but it's hard to judge how the public would react. To keep the citizenry calm, it might have to happen in stages. In any case, depending on what instruments were affected, banks and businesses would get another huge gift at the expense of the middle class.

Along with the instant reduction of federal and state debt levels:  

Banks get mortgage and mark-to-market relief.

Insurance companies get annuity and structured payout relief.

Long-term environmental fines are greatly reduced.

Annuitized lottery payouts get eroded - and on and on

There is not likely to be a requirement for wages to adjust because the "free market" still needs to apply to someone...

The big recent move of hedge funds into real estate is pretty good anectdotal evidence that something more than just the renting trend may be at work. It would also mean stocks are not overpriced at current nominal highs.

Anything short of deflation that discovers a true market bottom is just another middle-class tax. 

The only action that partially protects the individual in any of these scenarios is to eliminate personal debt and have assets that will hold value during a reset (whether Fed or market-based) or that will continue to be productive after a reset.

Either own what the banks own, or avoid the assets they avoid. Expect a power move, not a sensible economic proposal.

Wed, 03/13/2013 - 20:15 | 3328071 slightlyskeptical
slightlyskeptical's picture

 Setting us off into hyperinflation doesn't seem very logical to me. These creeps would sell us all down the river in order to keep their monopoly over money intact.

Print the fiat, pay off the debt, refinance the housing market and let SS fund the mortgage market thereafter. Throw in a little protectionism and reduction of fractional reserve banking and life will be better for everyone. 


Wed, 03/13/2013 - 20:26 | 3328083 Spacemoose
Spacemoose's picture

and exactly how would this allow the U.S. to continue to consume more than it produces (which, notwithstanding debt issues, is the real problem which everyone in this country seems to be determined to ignore)?  let me say it loud:


Wed, 03/13/2013 - 20:33 | 3328115 negative rates
negative rates's picture

Debt as a hangover is the symptom, borrowing money (like drinking whiskey) is it's cause.

Wed, 03/13/2013 - 20:43 | 3328144 Spacemoose
Spacemoose's picture

countries that produce more than they consume are not net debtors.

Thu, 03/14/2013 - 07:12 | 3329041 Liberty2012
Liberty2012's picture

Spacemoose, if the dollar were based on a one to one value trade, that would be true. However, fractional reserve banking turns it into a game of stealing influence. It's a con.

That's the real meaning of the term "money changer". It's those who change the nature of money. Money should be work traded for work - a current real-time asset. Instead it's been turned into a scenario of who can exert the most control by issuing and manipulating debt [future labor - see above poster].

Money is based on freedom. Debt is based on slavery.

Fractional reserve banking perverts money into debt, and transforms freedom into slavery - slowly at first, then with accelerating speed.

Thu, 03/14/2013 - 08:01 | 3329087 Liberty2012
Liberty2012's picture

The bigger problem with fractional reserve banking is the government enforced monopoly of it. Single banks might be able to do it on a limited basis as long as they kept actual value in focus and could control issuance of their currency.

However, when everyone is forced to use currency that is issued by only a few - it becomes a control mechanism that destroys liberty.

Thu, 03/14/2013 - 15:47 | 3330419 Radical Marijuana
Radical Marijuana's picture

I liked this comment you made Liberty2012:

"That's the real meaning of the term "money changer".

It's those who change the nature of money."

However, I do not agree with your idealized definition of "Money is based on freedom."

In an imaginary world, without violence, where money is a permanent store of value, and the possession of that money is somehow guaranteed without any violence, (and therefore, no paradoxes with respect to the continuing possession of that money manifest), THEN that kind of idealized "money" could be based on freedom. However, there has never been such a world, and there can never be such a world. Imagining society without violence is like trying to imagine physics without force.

My sayings are:

There is no freedom without a force, therefore, money is backed by murder.

There is no enforcement of the any idealized "rule of law" which guarantees the possession of private property that does not generate the inherent paradoxes of enforcement, since nobody guards the guardians. The government is simply the biggest gang of organized criminals, which have nested groups of the better organized gangs of criminals within them, that operate covertly, in order to effectively control the public government, through the application of the methods of organized crime. That is, governments are the overt expression of the history of organized crime on the largest scale, which are covertly controlled by the best organized gangs of criminals operating within them.

Anyway, Liberty2012, while I totally agree with your ideas that "Debt is based on slavery." And that "Fractional reserve banking perverts money into debt, and transforms freedom into slavery - slowly at first, then with accelerating speed." I do NOT agree with any idealized views that somehow there can actually exist any ideal "money based on freedom."

There can be no private property that exists outside of the context of public violence. Violence is self-organizing and self-justifying. Nothing but other violence changes it. The basic laws of physics continue to operate through the energy systems that we call human civilizations.

Overall, I thought that this article above was great, and intellectually stimulating. Unfortunately, I think that its world view grossly underestimates how criminally insane the ruling classes have become. Their systems ARE based on the history of having been the best at deceits, backed up by destruction. Therefore, their social and psychological habits were selected to become more and more criminally insane. Too much triumphant force backed fraud drives that to become more and more completely corrupted and crazy. The same processes that were the selection pressures which enabled those people who were the best at being dishonest, and backing that up with violence, continue to work to drive them mad, and hence become self-destructive, and thus, to eventually destroy the entire civilization that they controlled.

This article above, like your comments, Liberty2012, I regard as based on too much optimism, and on beliefs in impossible ideals, which reflect beliefs in false fundamental dichotomies. The real world is ALWAYS organized lies, operating organized robbery, and the same factors that make and maintain the ruling classes in the first place then drive them mad, until they become self-destructive. Along the way, the same factors that achieve the goals of turning the vast majority of people into debt slaves, or Zombie Sheeple, (dominated by the ruling classes, who are Vicious Wolves), continue to work to keep those Sheeple under control, despite their rulers becoming more and more criminally insane.

The deeper realities that money is backed by murder never go away. Those deeper realities are never replaced by some idealized "money based on freedom," nor ever replaced by any other kind of sound money, nor honest money, because none of that ever escapes from the paradoxical problem of the enforcement of the "rule of law," where nobody guards the guardians.

The theory that a democratic republic has the People as the guardians of the guardians has obviously broken down, since the runaway vicious spiral of the feedback between the funding of the political processes, and the monetary system controlled by those political processes, drives that whole system to become terminally corrupted and crazy. Therefore, all the theoretical checks and balances that should work to enable the People to guard the guardians have been undermined and effectively neutralized by the feedback of the funding of politics taking over the monetary system, in ways which result in the effective destruction of the democratic republic itself. Clearly, the Vicious Wolves DO succeed in turning the vast majority of the People into Zombie Sheeple, policed by the domesticated Dogs, while the few Black Sheep can not do anything effective to resist that.

The only things that ever happen are continual processes of the evolution of different systems of organized lies, operating organized robberies. That evolution has all the traits that evolution tends to typically display, such as relatively long periods of stability, punctuated by rare, radical changes, i.e., the basic theory of evolution through punctuated equilibrium. There are also the even rarer real, revolutionary events in evolution, where the ordinary processes of adaptive radiation may result in a creative convergence of some of those adaptive radiants, to provide a new creative beginning for a renew process of the series of adaptive radiants, then later pruned by more extinctions.

The interesting questions with regard to the evolution of human civilization at the present time are how close we are to some drastic punctuations, and even more importantly, how close we might be to some real, radical revolutions, which could provide the basis for another kind of creative system to begin to evolve ??? The possible "exit for the Fed" should be seen in those contexts. I feel that one should not underestimate how criminally insane the people supervising those processes may have actually become!

Thu, 03/14/2013 - 23:36 | 3331573 Liberty2012
Liberty2012's picture

Wow Radical Marijuana - Thank you for the thorough review and response. I'm glad my turns of phrase connected with you. ;)

Money only exists to the extent freedom exists. If work is not traded freely, then it is, by definition slavery.

The stealth nature of a con causes problems with accurate definitions and descriptions. For example, can someone be a slave if they are not aware they are?

Lately, I see more and more that truth is astonishingly simple. Paradoxes and all.

That evil exists does not mean good doesn't exist. A man in chains who defines his own beliefs is more free than the one who walks "free" yet is afraid to have a voice.

As someone once said - the true ideal lies within the real.

The true ideal is not opposed to the real but lies in it; and blessed are the eyes that find it.   - James Russell Lowell

The good guys are out there! We may not be able to see them, but their effects are visible all around the edges. I see glimpses here and there.

As for government, people always consent to be governed, so (in that sense) always guard the guardians. Sometimes they do a good job, sometimes not. They are awakening and remembering that they need to do a better job.

Good does triumph over evil in the end. Evil leads to death and destruction. The void of nothingness. Good creates life.

We are here. We are alive. We have free will.

Truth does exists. It cannot be destroyed. It can be ignored, twisted, and perverted, but it cannot not be.

Nothing can change that. :)

Sat, 03/16/2013 - 23:43 | 3337198 Radical Marijuana
Radical Marijuana's picture

Old comments on Zero Hedge tend to be quickly buried by time ... but, if you ever see this, Liberty2012, thanks for your reply.

Your turns of phrase connected with me, because I think that the language that we use to think so deeply effects the ways that we think that we are barely aware of that. Therefore, I believe that it is extremely important that the "money changers" HAVE CHANGED THE MEANING OF THE WORD "MONEY!" And, I thought your comment pointed that out well.

I tend to agree that there is some truth, but I do not believe than any finite human being is able to ever state that truth in any finite way that is fully satisfactory. But nevertheless, I agreed with all of the ways that you attempted to explain your views regarding the ideal of truth.

Thu, 03/14/2013 - 23:30 | 3331594 Liberty2012
Liberty2012's picture

I also agree there is plenty of criminally insane behavior going on. And those are the guys who might otherwise be nice to know if they weren't caught up in a system that generates worse and worse choices to make.

The really bad guys are evil. They fully understand the nature of what they are doing and enjoy it.

Most people don't understand what they are doing, or don't know what to do about it, if they do understand. As the destruction escalates, both of those situations will start changing.

Wed, 03/13/2013 - 20:23 | 3328094 Professorlocknload
Professorlocknload's picture

Guess the evil Bond Market has been converted. It can never again strike fear into the hearts of politicians and bankers. The only lender left can set rates where ever it pleases, all the way down to the bottom. Then?

Wed, 03/13/2013 - 20:51 | 3328162 disabledvet
disabledvet's picture

the bond market need to VERY little to strike a full fledged panic out of sovereigns and into Sovereigns. the only reason it hasn't happened to the United States (unlike it seems the whole world actually) is i think probably the best run war effort...certainly in American history...probably in all of Western History actually. unlike the seventies "this is REAL faith and credit" and not the mystical kind. as resource "wealth" starts deflating (massively actually) the value of these political/military assets (and that includes alliance systems, trade regimes, "laws of the sea", treaty rights, a "united nations", the list goes on and on and on and on) simple can't have a price put on them they are so priceless. as Microsoft discovered when it tried to rid its internal computing systems of Oracle Database software (took a decade) so the world is discovering with the dollar: "you can't replace it." and no this does NOT give the Fed "some great power." i'm coming around to the view that the Fed can't create inflation here even if they wanted to. the dollar has been weak to worthless for so long it was long overdue for a dead cat bounce...but there appears to me to be a VERY strong case for a secular bottom in "the Bucky" that hasn't been seen since the end of World War II. simply put there is a sudden and very real shortage of dollars in the world (just ask Venezuelans) and no matter how "market competitive" you make the products to get those "depreciating dollars" the value of that same dollar just keeps rising. an ALMIGHTY dollar indeed. all with interest rates "at or near zero...forever." hmmm. go figure. with growth wilting on the vine i fail to see how an outright default by a large State or municipal authority can be ruled out. clearly the case isn't even made here even though we've a record number of defaults to date...with more on the way. we shall see but i have made a bet that an outright deflation is in the offing here. obviously equities haven't agreed with this thesis at it remains an outlier call fer sure. can't say why i'm will to stick with this for a while...but something just doesn't "feel right" in the numbers. anytime a dwindling number of "rich" are suddenly made to "pay for all that inequality" just says to me "there really wasn't that much money to begin with actually." certainly not in the economic sense as we all can see given the exceptionally low growth numbers going on 5 years now.

Wed, 03/13/2013 - 21:13 | 3328207 donsluck
donsluck's picture

+1 I am with you, although a bit long winded. The article has a big blind spot re the power of the Fed. The author seems to think the Fed, leading the other CBs, can even control the weather. Aint so.

Thu, 03/14/2013 - 05:07 | 3328957 chubbyjjfong
chubbyjjfong's picture

"simply put there is a sudden and very real shortage of dollars in the world (just ask Venezuelans) and no matter how "market competitive" you make the products to get those "depreciating dollars" the value of that same dollar just keeps rising. an ALMIGHTY dollar indeed."

I sort of get what you are trying to say in your post and I agree with most of it, but I can't agree with your above statement. There is certainly NOT a shortage of dollars in the world at present. The problem is that the majority of the vast amount of dollars belong to the wealthy minority. It is true to say that the working class is depleted of dollars, and there-in lies the major problem. The FED and CBs can print dollars until they are blue in the face, however that money isn't gonna do squat for increasing jobs and/or growth if it doesn't flow to the people. The gap between the wealthy few and the poor majority will now increase rapidly and in the process the elite will wrench the last vestiges of wealth out of the middle class. Plain and simple wealth transfer.

Agreed, there will be deflation as the working class are forced to down scale all product selection to make ends meet causing the competition you highlighted. There comes a point though where the common decent people, whose collective jobs are dwindling at an ever alarming rate, face the decision of whether to accept total control by the wealthy corrupt few in exchange for support and handouts, or revolt. That decision point of the masses seems to be getting ever closer... fast. That will be crunch time.

When that day comes I will look forward to saying "Fuck you" to those toilet licking elitist banking maggot fucks as I would rather eat my own shit than take any handout from them. I got seeds, fishing rods, guns ammo, all up in my shit, so come find me in the hills if you want a piece.. banking bitchez!

Thu, 03/14/2013 - 12:05 | 3329683 kalasend
kalasend's picture

Where have you been the last few years?

Wed, 03/13/2013 - 19:41 | 3327954 rlouis
rlouis's picture

"The only item on the balance sheet that would not increase 10x would be the notional amount of systemic debt owed.)"


entitlements not 10x?


Thu, 03/14/2013 - 10:21 | 3329360 Spigot
Spigot's picture

These people are advocating hyperinflation. I have been writing here and elsewwhere for the past 5 years that hyperinflation is their only real end game. And grandma IS going to be eating catfood and paying for her cigarettes with $1,000,000 bills. In that context "entitlement" payments will continually and significantly drop in purchasing power even if nominal numbers increase. At least the elderly have some gold in their mouths.

Wed, 03/13/2013 - 19:42 | 3327956 Yen Cross
Yen Cross's picture

 Tomorow and Friday are the 2 biggest POMO days of the week. Just a friendly reminder ;-)

Wed, 03/13/2013 - 20:01 | 3328031 breakyoself
breakyoself's picture

S&P 500 - 1580. Why not, Ben? Give the crashing n burning channel something to talk about all next week while wondering why isn't the retail investor participating a whole lot more in this wonderful and oh so legit market.

Wed, 03/13/2013 - 20:14 | 3328068 Yen Cross
Yen Cross's picture

   Remember this chart?  When any of the MSM (financial illiterates) tell you that retail investors are participating in the markets, just spam them with this link/chart.

Wed, 03/13/2013 - 20:24 | 3328096 A82EBA
A82EBA's picture

?page not found

Wed, 03/13/2013 - 20:32 | 3328111 Yen Cross
Yen Cross's picture

  Try this link. If it doesn't work google [bloomberg mvoluse]. BBG might have the link I sent gated, but I checked the search link and it worked. Sorry about that.

Wed, 03/13/2013 - 20:58 | 3328174 HD
HD's picture

 Link works Yen. Thanks.

Wed, 03/13/2013 - 21:03 | 3328185 Yen Cross
Yen Cross's picture

   Anytime. sorry for the confusion.

Wed, 03/13/2013 - 19:41 | 3327958 xtop23
xtop23's picture

Got Gold?

Wed, 03/13/2013 - 19:54 | 3328005 Golden_Rule
Golden_Rule's picture

I can't make sense of the logic of the article (does it have any?), but if $1 becomes $10 as the article hypothesizes that would presumably be deflationary, or at least would be a sign of dollar strength, so the gold bugs would get killed if this scenario played out.  The article doesn't make one bit of sense to me though...

Wed, 03/13/2013 - 20:02 | 3328036 Yen Cross
Yen Cross's picture

 It would be inflationary, as a loaf of bread would increase in price X10. Just because you put an extra zero on the dollar bill, doesn't mean said commodity decreases in value by a factor of 10.

Wed, 03/13/2013 - 20:34 | 3328121 Professorlocknload
Professorlocknload's picture

I'm still trying to figure out what $100 oz (1972 cash price to a gypo miner) gold should be worth today, at 2% inflation over the last 40 years.

Wed, 03/13/2013 - 21:17 | 3328214 donsluck
donsluck's picture

$220. This means gold may very well be over valued today. However, there is the risk premium etc. My thinking for quite a while has been gold/cash and that's it, long term.

Wed, 03/13/2013 - 20:04 | 3328042 eigenvalue
eigenvalue's picture

Gold? NO! The preciious metals bubble has burst. Gold can't even break $1600 and silver $30. Gold and silver will continue the slide until they become arsewipe. The only way to make money is to buy stocks. Nuff said.

Wed, 03/13/2013 - 21:01 | 3328181 NoWayJose
NoWayJose's picture

Gold and silver will maintain their purchasing power against whichever currency 'best survives' the currency devaluation wars. It will gain against everything else. Someone holding hold in Venezuela can exchange it for the same number of dollars or Euros as last year-- but they can now exchange it for twice as much Venezuelan fiat. That is the pattern for the future.

Thu, 03/14/2013 - 01:58 | 3328821 xtop23
xtop23's picture

+1 well said

Wed, 03/13/2013 - 19:41 | 3327961 Pareto
Pareto's picture

Fuck.  Aint life grand?  donchya love it when a fucked up plan comes to-fucking-gether?

Total.  Fucking.  Insanity.

Fuck you Ben Bernanke

Biggest Fucktard EVER.

Wed, 03/13/2013 - 19:45 | 3327974 de3de8
de3de8's picture

I need more gold.

Wed, 03/13/2013 - 19:50 | 3327995 toros
toros's picture

I think he ment $10 would be worth $1

Wed, 03/13/2013 - 22:39 | 3328422 aerojet
aerojet's picture

I figured more like the $100 would be the new $1 and we might be getting there.  They would do it over a long weekend.  And if the American public has any balls left at all, it would trigger an immediate civil war.  And they know all of this and that is what they are preparing for.  The wheels just can't stay on this crazy hotrod forever.

Wed, 03/13/2013 - 19:53 | 3328002 max2205
max2205's picture

Thats a mouthful. ..can we get a recap

Wed, 03/13/2013 - 22:58 | 3328481 SWCroaker
SWCroaker's picture

1) Peeps in charge are getting close to losing it.

2) Peeps in charge are bastards, but aren't idiots.

3) Get ready for the Peeps in charge to a) create a crisis, b) trash all paper currencies as a consequence of the crisis, and c) put forth gold (and a collective new world order) as a solution to the problems they've created.  The gold will be backing for a "Standard", which means open to abuse but only by those in power, and as long as enough major world players get their cut of power, they'll all push their citizens to accept it.  Like the EU trying to force Federalism down member countries throats, only on a global scale.

Some obvious components of the system will fall on their swords, there must be some to blame.   But the end result will be tragedy for the masses, and transition to a new power structure (no doubt a camouflaged fiat fractional reserve system) that should provide them with control for at least another 30 years.

Thu, 03/14/2013 - 02:25 | 3328841 Meat Hammer
Meat Hammer's picture

d.) Local, tiny, mini, micro-economies, based on trading and bartering, maybe with gold and silver as the only money, will abound as communities begin to realize that they can and must rely on their collective strength.  It's how this thing called America began.

Wed, 03/13/2013 - 19:54 | 3328003 max2205
max2205's picture

Did barry write this?

Wed, 03/13/2013 - 19:55 | 3328007 venturen
venturen's picture

Gee didn't have to think hard about that....get your wheel barrows ready!

Wed, 03/13/2013 - 19:56 | 3328009 chasman
chasman's picture

Great read as always. So what did we learn here boys and girls? Do not fight the fed!
Wealth destruction is inevitable, resistance is futile, you will be assimilated.

Wed, 03/13/2013 - 19:59 | 3328017 JustObserving
JustObserving's picture

 one dollar in 1972 is worth about forty-six cents today.

Sorry, that does not compute:

$1.00 in 1972 had the same buying power as $5.59 in 2013.

Annual inflation over this period was 4.29% (official US stats), not 2% as claimed by the authors.

If you held cash from 1972 in your mattress, it is worth 18 cents today.


Wed, 03/13/2013 - 20:02 | 3328033 Critical Path
Critical Path's picture

Everyone has their source for inflation data, and each uses it to make their point.  Either way, based on your assessment and theirs your dollar buys about .18 to .46 worth of goods in 40 years, a wide range and pathetic at both ends and everything inbetween.

Wed, 03/13/2013 - 20:38 | 3328133 Professorlocknload
Professorlocknload's picture

Thanks for that. I thought my cow-culator got stepped on!

Wed, 03/13/2013 - 19:59 | 3328025 SIOP
SIOP's picture

I've been saying this for a long time.



1. Stagflation

2. Bank Holiday

3. New currency issued with a couple of zero's chopped off.

4. Life goes on.

Wed, 03/13/2013 - 20:13 | 3328061 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

It's just a different kind of Jubilee.

Wed, 03/13/2013 - 20:55 | 3328169 max2205
max2205's picture

Now you know why they are buying all that ammo

Thu, 03/14/2013 - 02:01 | 3328825 xtop23
xtop23's picture

Somewhere between 2 and 3 you're missing quite a bit of shooting.

Thu, 03/14/2013 - 07:42 | 3329060 BeerBrewer09
BeerBrewer09's picture

all those nickels are going to be worth a lot

Thu, 03/14/2013 - 15:56 | 3330503 Papasmurf
Papasmurf's picture

That's what the wheelbarrows are for.

Wed, 03/13/2013 - 20:12 | 3328029 khakuda
khakuda's picture

Thanks for posting. These guys are thoughtful. It would make sense. They are just extrapolating the fucking of savers to the next level. 10 years of zero interest won't be enough of a screwing. May as well bankrupt them entirely and destroy people's lives. All those years of work represented by a person's savings vaporized overnight.

I would eventually imagine bullets finding their way into the heads of the government officials who implemented those types of ideas. It is also hard to see politically how they could do this as it would destroy senior citizens with cash and bonds. They would be eating cat food. AARP is too big and powerful a lobby.

Thu, 03/14/2013 - 03:19 | 3328870 Sunshine n Lollipops
Sunshine n Lollipops's picture

Old people cause an enormous amount of overhead. The gov't may see a benefit to 'downsizing' them.

Thu, 03/14/2013 - 15:58 | 3330510 Papasmurf
Papasmurf's picture

I guess you never received an AARP flier.  They represent the insurance industry.

Wed, 03/13/2013 - 20:04 | 3328041 Abraxas
Abraxas's picture

On another note: a bunch of comments from the post about white smoke + pope, have been moderated. Here we are complaining about the big G censoring and controlling us, we run over here for a little that's left of the free speach, and our comments get removed. How about that?

Wed, 03/13/2013 - 20:32 | 3328112 Tsar Pointless
Tsar Pointless's picture

Mine was one of them.

I guess you can't call a child molester a child molester, even on ZH.

Wed, 03/13/2013 - 20:46 | 3328154 Abraxas
Abraxas's picture

Should we call him boy-fondler, instead?

Wed, 03/13/2013 - 21:06 | 3328194 Key-Rick
Key-Rick's picture

Those comments are still up in the article about Farage.  child molester and all.  

Wed, 03/13/2013 - 20:34 | 3328043 JustObserving
JustObserving's picture

 one dollar in 1972 is worth about forty-six cents today.

Average gold price in 1972  $58.42 an ounce.

Average silver price was about $1.50 per ounce.

Priced in gold and silver, US dollars have lost 96% of their value since 1972.

Thu, 03/14/2013 - 16:09 | 3330552 Papasmurf
Papasmurf's picture

In 1972 two oz silver would fill your auto with gas.  Today it still will.

Wed, 03/13/2013 - 20:11 | 3328053 Critical Path
Critical Path's picture

All Bernanke and Co. really needs is for this thinking to go mainstream.  People start dumping their savings into something tangible, especially if its going to catch a 90% haircut.  Of course, why not leverage your savings into a loan and buy some land, and lots of it.  (Then again, your average "consumer" would probably go buy something completely inappropriate for the circumstance that will depreciate 20 to 50 percent by the time they leave the store with it...) Or, if you don't have any savings, go out and buy some stuff with that credit card.  There's no time like the present when a currency devaluation is on the horizon. 

Wed, 03/13/2013 - 20:12 | 3328058 shayneals shayneals
shayneals shayneals's picture

This article is surprisingly sophisticated and talks about the BIS Global Economic Committee as the governing body to our monetary future which is not normally discussed. In this base case scenario, its not hard to see why the paper gold market is being manipulated everyday, if the fed planned to do this - would they not short the hell out of the gold market whilst buying physcial. Or whilst starting wars and stealing gold. Maybe China and the Fed are accumulating like a bat out of hell.

My thoughts are, will the usa government and other governments try to confiscate everyones gold before this re-set. Surely if the people have gold themselves, this re-set allows those with gold to be independent of the governments control plans. You can not tell a nation what to do if they hold more gold than you. 

And if this is their plan, how does the paper gold market work. When there is a revaluation - surely this in itself means that the gold paper market will become so big as gold is revalued - that paper gold will itself become a fiat currency.

I do not to seem like an alarmist, but if qe does not work to create a hyper inflation scenario - i think we are going to be in deep shit and someone is going to seize power and do something thats pretty uncomfortable. Maybe those that claim guns and ammo are what you need are right.

Wed, 03/13/2013 - 20:15 | 3328072 khakuda
khakuda's picture

Gun equities and gold have been telling the story for years.

The guys who write this are brilliant, whether they prove right or wrong.

Wed, 03/13/2013 - 20:53 | 3328165 Abraxas
Abraxas's picture

Agreed. Very good article. It filled a few gaps in my pondering about the current economic situation. (there are still a few huge black holes left to be filled in order to make a complete picture)

Thu, 03/14/2013 - 15:54 | 3330492 Radical Marijuana
Radical Marijuana's picture

Yeah, the central banks are the Fraud Kings, and the King of Kings of Frauds is the BIS.

Wed, 03/13/2013 - 20:15 | 3328070 kito
kito's picture

what is the fed exiting??? what does that mean???? exiting would mean they are leaving some anomalous state.....................the concept of exiting no longer exists..................they have already EXITED the norm and now are firmly entrenched in a place with no means of darkness....................a black hole that sucks in everything beneficial................and only when that black hole collapses on itself............then society can begin anew.....................

Wed, 03/13/2013 - 20:26 | 3328099 Sean7k
Sean7k's picture

It's balance sheet.

Wed, 03/13/2013 - 20:27 | 3328102 Bear
Bear's picture

Whatever you call it ... it's still BS

Thu, 03/14/2013 - 16:22 | 3330596 Papasmurf
Papasmurf's picture

Balance sheet?  The ponzi has no need to keep records.

Wed, 03/13/2013 - 20:41 | 3328139 SillySalesmanQu...
SillySalesmanQuestion's picture

+ 1000 Kito

Wed, 03/13/2013 - 20:57 | 3328171 fonzannoon
fonzannoon's picture

kito the fed exiting means they first slow down and then cease QE. Eventually they will begin to slowly raise the short end of the curve. This will help tap the brakes and keep the economy from overheating as well as making sure inflation stays in check. Once we have a budget surplus and are seriously reducing the overall debt burden the fed can normalize rates into the much higher historical range.

Honestly I figured you knew this was how it works. I am not sure why you are so perplexed. What exactly is your issue?

Wed, 03/13/2013 - 21:02 | 3328183 kito
kito's picture

sorry fonz....clearly my boycott of cnbc is dumbing me down............................

Wed, 03/13/2013 - 21:09 | 3328200 fonzannoon
fonzannoon's picture

By the way the guy who was working on my bathroom today completely laid out the end game scenario for the dollar to me today. I played dumb (it was not hard) and he, unlike me, is busy and does not focus on economics. He just calls it like he sees it. People are waking up.

Wed, 03/13/2013 - 21:10 | 3328201 kito
kito's picture

do tell....what is his endgame scenario??? how did this conversation come up???? this makes for good evening fodder............

Wed, 03/13/2013 - 21:22 | 3328223 fonzannoon
fonzannoon's picture

The conversation came up because we went from talking about my house, to home the economy...Long story short, he went with the "China is not going to put up with our shit" argument.  I asked him what he planned to do about it. He said he bought gold in 2004 and thought it was a great investment. Then he bought more in 2011 and he is down and so now he is not so sure what to make of it. He understands that he may have to get out of dodge with his family (he also lives on LI).

To ultimately call a spade a spade though....he is going to stay here. Put his head down and get paid in the same dollars he so eloquently explained to be were losing value everyday. He will just do his best to hang on as long as he can.

I told him that he has real skills that one day will serve him well. I think he understood me but did not totally believe me. Then Bob Pisani came on and I told him to stop talking because I just had to hear what Bob had to say.

By the way you are completely right about Bass.

Wed, 03/13/2013 - 21:59 | 3328311 kito
kito's picture

im sure bob pisani made you all feel better....whenever you are in that dark place........fretting over the future of america..............there is always that soothing financial news network to ease your concerns.........................

interesting that he is having second thoughts on gold....................the pull of the almighty dow is so strong................those big green positive numbers day after niiiiiice......................


ben is nefarious but brilliant...........that is for certain.................bill belichick has never executed such a brilliant game plan............

Wed, 03/13/2013 - 22:24 | 3328373 fonzannoon
fonzannoon's picture

The last thing this guy was buying was a stock.

Wed, 03/13/2013 - 22:46 | 3328445 kito
kito's picture

you never know...........the fed has done a great job in removing the doubt of countless americans..................

Thu, 03/14/2013 - 05:21 | 3328965 SunRise
SunRise's picture

"Honestly I figured you knew this was how their higher-education-fantasy robs the producers!"  -- Fixed

Wed, 03/13/2013 - 21:25 | 3328231 donsluck
donsluck's picture

kito, black holes do not collapse. All matter enters and, theoreticaly, enter a different universe, after being stripped of all cohesive organization. Very scary if the Fed is indeed in a black holel

Wed, 03/13/2013 - 22:45 | 3328442 kito
kito's picture

i sucessfully avoided physics in high school and college, but my understanding was that they could collapse....

Thu, 03/14/2013 - 05:25 | 3328969 SunRise
SunRise's picture

Makes sense -> The Fed's "brains" are already in a different universe.

Wed, 03/13/2013 - 20:28 | 3328104 Rayfp65
Rayfp65's picture

OK, so if you someone is paying 1500$ for an apartment per month, it would jump to 15000$. Among infinite other things, highly plausible, sounds good on paper(or maybe not), but would cause much more harm than good. I know our govt is crazy, but that scenario, while lowering debt would throw the country into a depression overnight. The easiest solution is to just DEFAULT, why not, everyone else does it, they'll all forget in 2 years time anyway.

Wed, 03/13/2013 - 20:34 | 3328116 Critical Path
Critical Path's picture

Your apartment monthly rate would jump after your contract was up for renewal, ie. the longer rental term you secured with remaining duration after the devaluation you're laughing all the way to the bank... although not really.  Because the poor bastard next door who was under water probably pays his place off and fully owns it by the time you're up for a lease renewal.


I get what you're saying though.  Wages will not go up over night, however, commodities will, and therefore food and energy will.  Its the sort of gray area of adjusting to the newly devalued currency, wages will lag, and there is going to be a lot of pissed off people during the lag time.

Wed, 03/13/2013 - 23:37 | 3328580 SWCroaker
SWCroaker's picture

I'm sure some concerned government will see the need to step up, deploy the military, and nationalize *everything*.   They're there to help you...., sorry if doing required them to also reset the debt/savings of every individual *not* part of the ruling elite.

The grasping "majority" would applaud this, at first.

Wed, 03/13/2013 - 21:07 | 3328196 Professorlocknload
Professorlocknload's picture

Cornered governments always print. They just do it at first ever so gradually, exercising what they believe to be meticulous control, to prevent it getting out of hand. Then, when it is realized it takes more than a fresh C-note to get a $100 bang in GDP (diminishing returns), they accelerate the process. (WTF?) Then, when pitchforks and bic lighters are flying off the shelves, they accelerate...Exponentially! Wheeeee! Then they run off to Peru or some such, before they get any on them.

This bunch of civil service welfare recipients is no different that the rest of histories nit wits.

OK, I'm over it.

Wed, 03/13/2013 - 20:33 | 3328114 Tsar Pointless
Wed, 03/13/2013 - 20:33 | 3328118 realtick
Wed, 03/13/2013 - 21:32 | 3328241 slimething
slimething's picture

I didn't see any charts on that page.

Wed, 03/13/2013 - 20:45 | 3328126 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I believe they've sensed a disturbance in the farce and that disturbance is going to happen in 2015.

Here are the signs.

We shall start here




Now here

The board that sets American accounting rules moved on Wednesday to substantially reduce the use of market values in financial statements. The move, if adopted, would give banks more freedom to value financial assets as they deem appropriate.

The proposal by the Financial Accounting Standards Board, contained in what is called an exposure draft, would also end the counterintuitive practice of a bank’s profits rising simply because its credit has worsened, and then falling when the credit recovers.

Under Robert H. Herz, the former chairman of the FASB, the board moved to increase the use of “fair values” of financial assets, on the ground that such values were all that really mattered.....

After a comment period, the board will take a final vote on the rule. The board said that if it adopted the rule, possibly late this year or early next year, banks could immediately adopt the part on how they valued their debt. The rest would be unlikely to take effect until at least 2015.

I'm not sure how this ties in just yet but I suspect it has some importance in all this.

Finally here the actual disturbance

"Today, we’re enjoying historically low interest rates because the Federal Reserve is buying large amounts of our debt, and investors have retreated to U.S. securities amid global turmoil. But our growing obligations may shake their confidence. In return, they might demand compensation for that higher risk. Foreigners own almost half of our publicly held debt. So we’re particularly vulnerable to a sudden shift in foreign-investor sentiment. In addition, over one-third of our total marketable debt will mature over the next 24 months. So we will have to roll over much of our debt in the next two years—when interest rates might be higher." (Pg. 14)

My theory is the FED along with the Treasury and whoever else is involved aka market manipulators like GS and JPM are going to syphon the liquidity out of the stock market to pay that debt down so it doesn't show up on the Federal's books or in the deficits for the Federal Budgets. They have to keep the market goosed enough to ensure proper liquidity and to for the manipulators to get their skim off the top for doing their part. Once that is syphoned out make it look like a controlled market devaluation my guess is by about the drop they printed in that stress test, then interest rates blow up on the Treasurys, hyperinflation (50% stock market drop + 50% inflation = 50% Federal Deficit reduction). Bascially this is the last amount of goosing to keep the stock market slush fund from crashing and then getting fucked by being forced into default or civil war when they try to force to bill onto the taxpayers back after they get caught red handed with the White House playing along.

Wed, 03/13/2013 - 21:10 | 3328199 Bingfa
Bingfa's picture

+1    Their desperation is getting more transparent by the day......

Wed, 03/13/2013 - 21:49 | 3328279 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Assuming I am correct and they can pull it off without being caught, it is like purposely setting the movie theater on fire making sure only one exit door is acessible, as everyone is running to get out of the theater they have no choice but to use that one door. That door is treasurys, voila all the remaining savings tied up in equities running for its lives will flow directly into the treasuries and now higher interest rates. Allows the FED to take the foot of the QE accelerator, cut the deficit in half, ruin the economy and wreck what is left of the middle class. Just think of all the damage Obama and his allies in Congress then can do fowarding their fabian socialist agenda in that chaos.

Thu, 03/14/2013 - 15:55 | 3330498 Radical Marijuana
Radical Marijuana's picture

Yeah, I feel that it is impossible to underestimate the degree to which the ruling classes have become criminally insane!

Wed, 03/13/2013 - 20:38 | 3328132 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

Bernake's exit strategy is the same as greenspans:  retire before the shit storm then write a book.

Wed, 03/13/2013 - 20:42 | 3328143 machineh
machineh's picture

Ben's retirement date is already fixed: 31 Jan 2014.

Savers' Freedom Day, if you will.

Wed, 03/13/2013 - 20:50 | 3328160 rubearish10
rubearish10's picture

UMM, Aussy employment numbers blowout to the upside best in 12 years! Export jobs/inflation Ben, go right ahead!

Wed, 03/13/2013 - 20:51 | 3328164 Bingfa
Bingfa's picture

"Fed's exit"   hilarious

Who would buy our debt?

              Never gonna happen

              The Fed balance sheet is gonna be 40 Quadrillion before long.

Wed, 03/13/2013 - 23:13 | 3328534 yogibear
yogibear's picture

That's correct.  The Fed cannot exit until the US dollar crashes.

Wed, 03/13/2013 - 21:00 | 3328179 swabeyjw
swabeyjw's picture

Wow $0.18. Lets see $420 * 0.18 = $75. Why was it that ipad sales were not higher in 1972. What did we spend our money on back then?

Wed, 03/13/2013 - 21:06 | 3328192 jeebus
jeebus's picture

Or, some hacker(s) could invent a fixed currency, and people could just start using that.


Oh wait...


Wed, 03/13/2013 - 21:10 | 3328203 hairball48
hairball48's picture

who are these guys? They're out of their fucking minds.

Wed, 03/13/2013 - 21:36 | 3328247 Herdee
Herdee's picture

Maybe we are not seeing another form of so-called "money" evolving.It's possible that the type of banking system that exists now will no longer survive. The fractional element will disappear. It might even revolve around the SDR's or Special Drawing Rights at the IMF as China has already suggested. Gold would then be repriced very high and all Bank debts written off.There would be no more interest rates.Only fees would be paid for paper work on a loan.It would be like the U.S. Treasury and all other countries combined together telling Banks to go piss-off,you're no longer getting anything,we've created a new system and if you don't like it we'll either imprison the Bansters for life or shoot them all as being threats to National Security.

Thu, 03/14/2013 - 06:17 | 3328995 auric1234
auric1234's picture

No interest rates? So who will be lending all gold demanded by borrowers at zero interest rate?


Wed, 03/13/2013 - 21:47 | 3328277 Sutton
Sutton's picture

Funny how the report looks like it was issued by Obamco.

Wed, 03/13/2013 - 21:56 | 3328283 fockewulf190
fockewulf190's picture

Plans, schmans. Think the Chinese are just going to sit there, allow their reserves to be vaporized, and still accept the dollar as the world's reserve currency? Not before every US company within China goes up in flames. The US will be publicly labeled as the biggest thief in history, and the whole globalized world goes to hell in a handbasket as one nation after the next demands their gold back from the US at once.

There is no escape from the Great Reset, and it is fantasy to think that it can be managed in a way that can allow for some type of control. How can a $600+ trillion (some say closer to $1 quadrillion) dollar derivatives timebomb be deactivated when there are multiple triggers scattered throughout the world? All the Fed is doing with it's massive money printing is adding some length to the fuse....but make no mistake about it, the fuse is burning.

All the individual can do is to continue to trade your increasingly worthless fiat for phyzz, and stack it as high as possible while it's still available to purchase. Get your hands on supplies for living, because they will become shockingly expensive and rare as the Great Reset unfolds. It is a tragic situation that humanity is going to be facing this century, and for the billions of people living on a dollar a day or less, the suffering is going to be terrible.

Wed, 03/13/2013 - 21:52 | 3328292 ISEEIT
ISEEIT's picture

A fairly well put together speculation I suppose. The missing link/fatal flaw though is that some benign and ultimately benificial to the average human being 'solution' might be sought. Based on what I see and understand what is actually taking place is more of a harvest intended to occur and we are living in the time of a devious trap being set. I trully don't buy into the wishful thinking of a bunch of sociopath lunatic politicians sincerely scrambling to somehow make the 'world' a better place. The goal in my mind is far more dark and nefarious. My opinion is that yes, 'they' are certaintly faced with choices...They are persuing a goal though. The goal is NOT in the best interest of the human race and the proof of that is in the deception. Goodness has no need, in fact will NOT lie.

We are being herded toward an outcome that has been designed.


Wed, 03/13/2013 - 22:55 | 3328480 kentmills
kentmills's picture

+1 "Harvest" sounds just about right. The last few years (MF Global, etc.) has just been practice.

Wed, 03/13/2013 - 23:07 | 3328521 Bingfa
Bingfa's picture

This planet simply cannot support it's population

Energy and food are not sustainable.....

                They got plans

Wed, 03/13/2013 - 21:54 | 3328295 The Invisible Foot
The Invisible Foot's picture

But CNBC says the FED's exit will help stocks!

Wed, 03/13/2013 - 21:56 | 3328300 slimething
slimething's picture

I enjoy reading ZH, but must admit get entangled in the technical financial jargon and somewhat vague predictive rhetoric of various pundits.

It is difficult to know who to believe anymore, not due to lack of integrity or creditibility per se but the timing and magnitude of the Big One. Some say 2013 will be a banner year for the stock market and economy (well, compared to the previous 4 years), while others say by the end of April-October it will all unravel. Others say it will be a gradual decline with no real growth forever and eventually leave the U.S. a hollowed out shell. Still others say the end of 2014 or even years later before there is a debt crisis, let alone a currency crisis. Then there are the "corrections" crowd; they say that will be substantial (5-20%) but also normal. Last but not least are the optimists. They say the economy will continue its "recovery" with unemployment improving with 3%+ GDP per year leading a slow but continuous uptick in economic conditions, the only main issue being the Fed's exit strategy, the topic of this post. 

I could go on, but that's my basic perception, along with one overlooked; "watch what happens in Europe, then we'll know". Well, I've been watching but apparently don't know what to look for.

There's a different prediction for every day of the decade, but somebody is right. Who?







Thu, 03/14/2013 - 16:41 | 3330659 Papasmurf
Papasmurf's picture

Sometimes in life you have to do your own critical thinking.

Wed, 03/13/2013 - 22:03 | 3328321 Downtoolong
Downtoolong's picture

I still say they're just going to blame it all on a rogue trader one day and start over.


The Federal Reserve Bank is seeking a unique individual for a new middle management position in economic analysis, reporting, and open market operations. Job duties are essentially nothing except taking the fall for about $4Trillion of failed stimulus policies, inflationary counterfeiting of money, excessive monetization of the Federal Deficit, and leaking inside information to Wall Street banks and financial firms.  Less than stellar credentials preferred. Prior experience as a Congressional Staff Advisor, Lobbyist, Chicago BLS employee, or Rogue Trader a plus. In this position you will be required to attend hearings and participate in criminal investigations. However, you will not do any jail time, GUARANTEED. Send resume or CV to Mr. Jones, Marriner Eccles Building, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551


Wed, 03/13/2013 - 22:05 | 3328327 ozzz169
ozzz169's picture

Inflation is only way out, If my memory serves me correctly I think bernanke said he would buy the entire stock market to stop deflation, which should have happened when the housing bubble popped, the economy is way to levered due to reckless Greenspan and politicians of the last few decades.    Greenspan will go down as the doom bringer at some point for blowing up the bubble to begin with.

Wed, 03/13/2013 - 23:27 | 3328563 enloe creek
enloe creek's picture

what about the price of rice in china? you think the world can afford to increase food prices 1000%

Wed, 03/13/2013 - 23:28 | 3328564 enloe creek
enloe creek's picture

what about the price of rice in china? you think the world can afford to increase food prices 1000%

Wed, 03/13/2013 - 23:29 | 3328568 enloe creek
enloe creek's picture

what about the price of rice in china? you think the world can afford to increase food prices 1000%

Wed, 03/13/2013 - 23:28 | 3328569 enloe creek
enloe creek's picture

what about the price of rice in china? you think the world can afford to increase food prices 1000%

Wed, 03/13/2013 - 23:29 | 3328570 Nid
Nid's picture

It seems to me that there's another likely resolution which involves tanks rolling in and soldiers taking things and occupying places.....funny, that wasn't mentioned.

Wed, 03/13/2013 - 23:40 | 3328578 malek
malek's picture

Yes, a hyperinflationary depression is for sure much better than a deflationary one! /s

Oh, and one Dollar today is worth about 6 cents in 1972, as its value has halved every ten years.

Thu, 03/14/2013 - 06:13 | 3328993 auric1234
auric1234's picture

Yes it is. Hyperinflation is a way out. It implies the death of FIAT, and it's replacement with real money.

Argueably it's not the best way out, but at least it's an exit.


Wed, 03/13/2013 - 23:46 | 3328606 moneybots
moneybots's picture

The interesting thing is that nothing occurs in a vacuum.  What the FED expects and what will happen are not mutually inclusive.

Thu, 03/14/2013 - 01:44 | 3328810 kchrisc
kchrisc's picture

I love this talk about an "exit" for the FedRes. If they are THE only buyer now, who the hell will they be able to sell to in the future and who will be buying future new US debt?!?

Just plain funny to think about except they are painting us, the American people into the corner, not themselves.

But, the guillotines are on order.                     hujel

Thu, 03/14/2013 - 02:11 | 3328835 Fishhawk
Fishhawk's picture

All this was planned (or baked into the cake) when the Federal Reserve was created.  Debt is not money, and an economy based on debt is fraud.  But the direct benefit of the fraud has been for the US, with 6% of the world population, to consume 25% of the world's resources.  The ROW has sort of figured this out, and the bigger players now want to evolve this system so that they can also participate in the fraud.  Inflation helps debtors, such as those who use debt as money, which is now at least the Fed, BofE, ECB, China, BofJ, probably a few more.  Inflation allows the reset while maintaining the current players in power.  Deflation would be bankruptcy, in which debt is forgiven.  The Greek situation should be an obvious example that the banksters will do anything else before they forgive the first euro of debt.  So hyperinflation is the intended outcome, as has always been the plan.  Revaluing gold at $50,000 per ounce would be a good start to sorting out the new currency regime, which is why the current power structure is grasping to get the gold now.  Dragi said a year ago that the central banks would have to print $100trillion to cover the bad debts they hold.  They are well on their way to $100 trillion now, and have programs in place to get there within a few years.  Based on supply and demand, a 10X supply of 'money' chasing the same or smaller supply of real goods means the prices of goods increase 10X.  Economics is not rocket science. 

Thu, 03/14/2013 - 13:50 | 3330042 mac_daddy
mac_daddy's picture

And what happens to silver?

Thu, 03/14/2013 - 16:02 | 3330527 Radical Marijuana
Radical Marijuana's picture

I agree with your overview, Fishhawk, EXCEPT I do not believe that the ruling classes actually understand what happens after they get their treadmill going at the speed of an electronic fraud, backed by atomic bombs.

I agree that they appear to be carrying through their plans. However, I do NOT believe they can possibly understand what happens to their systems AFTER they become amplified to astronomical sizes by progress in science and technology. Therefore, I think that the ruling classes have become criminally insane.

They have transformed their Neolithic civilization with things like electronics, and atomic energy, which are trillions of times more powerful than anything that existed before in human history. I do not believe their psychological attitudes and social habits are adapted to those emerging realities. Instead, I believe that those ruling classes have become so out of touch with those emerging realities that those ruling classes have become quite criminally insane.

Fri, 03/15/2013 - 16:49 | 3332438 Carl
Carl's picture

I'm reminded of a little notation I read on a Federal Reserve website that stated (paraphrased): Credit is not money but all debts incurred through its use as such, are legally binding.

Your notions are flawed.  First, they haven't "printed" anything of substance, other than digits on a balance sheet.  Secondly, they will not "print" receipts (paper cash) to cover the digits they've already issued.  Third, Hyper-deflation (the collapse of digital currency) will default almost all debts, rendering all real assets associated with those debts the property of the banks, drive gold prices down, inflate the value of scarce paper currencies and the value of the banks that issued them.

I mean, its not as if the Fed hasn't done it this way before...

Thu, 03/14/2013 - 02:30 | 3328842 dunce
dunce's picture

The line "sell it's bond portfolio" gave me pause. Sell it to who???? If some buyer bought it with hyper inflated currency, how much would it have to be discounted?

Thu, 03/14/2013 - 06:11 | 3328992 auric1234
auric1234's picture

But it will be bought with real money.

I'll offer one ounce of gold for the entire bond portfolio. It's more than they have at Fort Knox, so I think it's a fair offer.

And it's a win for me, too. They'll give me so much paper I won't have to buy firewood or toilet paper ever again in my whole life!!


Thu, 03/14/2013 - 06:07 | 3328991 auric1234
auric1234's picture

Thus, it seems reasonable to assume that the interests of maintaining a healthy US banking system rise above or are at least equal to the economic interests of Americans, and to a large extent their government.

Maintaining a healthy US banking system? You mean as if we had one?


Thu, 03/14/2013 - 09:35 | 3329248 Getting Old Sucks
Getting Old Sucks's picture

What percentage of the U.S. population depends on Government, Federal, State, and Local?  I'd say well over half, including government employees, employees of corporations contracted by the government, welfare, social security, medicaid, medicare recipients, government retirees, military, etc. 

Hyper-inflation may wipe out the current U.S. debt but seeing as outlays over revenues are 3:2, even if they made cuts to balance the budget thus throwing half the population into third world poverty, how would they bring in ten times revenue from the other half? 

Jobs are not coming back to the U.S and all those affected by the cuts will have to work to eat like other third world citizens who currently are enslaved by TPTB.  That alone will bring down the wages of those currently employed who the government depends upon for revenue.  It would also greatly increase the labor pool for fewer jobs.  The article states what can happen but doesn't give a rational way it would work other than bringing down national debt.



Thu, 03/14/2013 - 17:52 | 3330024 mac_daddy
mac_daddy's picture


Now I understand why the gov'ment is buying 2 billion rounds of ammo and deploying mini-tanks.


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