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The Great Unrotation In US GDP

Tyler Durden's picture




 

While most argue that the Fed has its foot on the throat of the bond market - and thus they do not reflect 'economic reality', it is hard to argue with the following chart of 30 years of Fed-intervened rates markets and the consequent GDP growth. Hope remains high for 2013 and beyond yet as very recent macro data shows, things are not going quite according to the economists' linear extrapolations. Maybe bonds do know something after all?

 

 

Chart: Citi

 

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Fri, 04/12/2013 - 21:27 | 3443700 FieldingMellish
FieldingMellish's picture

What about real growth?

Fri, 04/12/2013 - 21:41 | 3443731 ShrNfr
ShrNfr's picture

The US demographics are going to combine to give real shrink. In the general case, you do not increase the GDP when the number of people in the workforce declines. I do not care how you measure that, gold, fiat funny money, or anything else.

Sat, 04/13/2013 - 00:41 | 3444064 Richard Chesler
Richard Chesler's picture

Obozo's legacy;

Unprecedented growth in Gross Domestic Peonage.

Sat, 04/13/2013 - 11:55 | 3444521 Seer
Seer's picture

Another cheap Party Pussy remark.

The fucking chart clearly shows the top in 1980!  It's been a trend for 33 years!  Growth is D-E-A-D.  Deal with reality (or climb back on the Party Pussy wagon).

Sun, 04/14/2013 - 14:57 | 3447136 Jumbotron
Jumbotron's picture

Woah...I've been on this site for years.....learned a hell of a lot.  Started learning before ZeroHedge became part of my life years before that.

 

How in the world could anyone junk Seer?  He is spot DEAD on.  Growth is dead from NUMEROUS standpoints.  How many charts can be shown on this site....from multilple viewpoints....from multiple sources....from multiple datasets....with Tyler's and a host of personages' explanations to NOT know that this is true....that growth is DEAD?

 

Demographics, illegal aliens, the welfare state, encroaching and accelerating socialism, not to mention global peak cheap energy are just a FEW of the data sets that proves that growth is dead.

You five that junked Seer for whatever reason are complete morons.

Sat, 04/13/2013 - 03:27 | 3444157 dunce
dunce's picture

You are spot on. I do not see how we can ever measure anything economically from now on because of the years  lies and distortions in every govt. bit of data. After the crash we will have to start from a new zero reference point.

Sat, 04/13/2013 - 09:51 | 3444356 Save_America1st
Save_America1st's picture

how to get the real data?  John Williams:  http://www.shadowstats.com

 

Sat, 04/13/2013 - 12:02 | 3444541 Seer
Seer's picture

Economics is a fucking joke to begin with and you're want it to produce reality?  When the fuck has That ever been the case?

I sense that it's more about people wanting to have the insider info so that they can get the winning bets than it is about have factual data available for everyone.  Clue: nature is a master of deception; humans are OF nature.

Rather than kicking and screaming for something that never has existed or ever will exist how about getting on with life?  Do people really have to wait for the sound of the explosion before they act?  No one here (I'd wager) has ANY ability to influence the pending explosion; all we can do is prepare for it, and, frankly, I don't see how eliminating "economic distortions" is going to mean much of anything to us (unless you're gambling in the casino, in which case that would be like expecting the Fun House Mirrors to not distort images).

P.S. There's plenty of BS numbers produced by businesses (not govt) too.  Or did you miss what the financial sector has been doing for the past two decades or so?

Fri, 04/12/2013 - 21:55 | 3443771 Frastric
Frastric's picture

FieldingMellish; come again?

Fri, 04/12/2013 - 22:58 | 3443905 FieldingMellish
FieldingMellish's picture

Real growth = Nominal GDP - inflation (and real inflation, not that CPI garbage).

Sat, 04/13/2013 - 06:12 | 3444217 new game
new game's picture

simpler yet-value of money = growth/risk-return

zirp assumes you are of zero vlaue-nominaly (as in your labor that is).

very fucked up plan. deparado ben shalom; ivy league bozo...

is this really happening?

someone shout in my ear "this is not a nightmare-wake the fuck up".

arrest ben and charge him with conspiricy to fuck up millions of peoples lives!

Sat, 04/13/2013 - 12:04 | 3444546 Seer
Seer's picture

And then there's the issue of the GDP measuring shit like toxic site clean-up... and all the BS'd numbers from businesses (such as the financial sector).  Garbage in, garbage out... it's not just the govt that's fucked up...

Sat, 04/13/2013 - 00:11 | 3444028 ebworthen
ebworthen's picture

Real growth would involve enforcing the rule-of-law on Wall Street and in Washington, rewarding savers, not bailing out banks, and the FED not using taxpayer money to enrich banks and bankers and the Ponzi meisters; so it's a no go.

Sat, 04/13/2013 - 08:39 | 3444288 css1971
css1971's picture

Go ahead. What's "real growth" then?

Sat, 04/13/2013 - 12:10 | 3444557 Seer
Seer's picture

"Real growth" can really ONLY come from the extraction and consumption of physical resources.  Eventually, however, this is limited by the capacity of the Earth: it's a BAD idea to challenge this, as I believe that Mother Earth bats last...

I'd further have to state that "real growth" is the carrot-and-stick mechanism by which TPTB maintain their level of power and control (allowing them to escape doing actual work) over the masses (whom are trained to salivate over the sound of increasing GDP and stock market numbers).

Sat, 04/13/2013 - 16:09 | 3445055 css1971
css1971's picture

I agree but you didn't answer the question.

Real growth is the additional goods and services created by an expanding economy... more eggs for example. Problem is real growth isn't measurable in aggregate. Sure you can count eggs but it hardly makes for easy reporting for all the goods and services an economy provides.

So what they do to get their useless aggregate "growth" numbers is use the additional money created to purchase the new goods and services. i.e. growth in debt. Built a new house? Someone takes out a mortgage and buys the house. More debt/money. Growth.

Thing is, the market transaction only takes moments and the money is only needed to facillitate the transaction. Sure the house was built. Sure the builder should earn the money. But the money came from nowhere and will continue to exist for the lifetime of the mortgage. So even though the build took 6 months and the transaction took 1 week, the new money will exist for up to 30 years. The new house is now off the market, it is no longer contributing to real economic growth. It is no longer being chased by the new money created to buy it. It's already grown. The new money however is still circulating, chasing other goods and services.

So the cost of the current banking system is endemic inflation. "Growth" simply is inflation.

Sun, 04/14/2013 - 08:37 | 3446252 enloe creek
enloe creek's picture

I agree. 

Sat, 04/13/2013 - 09:27 | 3444324 Never One Roach
Never One Roach's picture

<What about real growth?>

 

There is no growth. In fact, it looks negative.

Fri, 04/12/2013 - 21:32 | 3443709 abducens
abducens's picture

I think that when Obamacare comes into play later this year it will be the straw that breaks the camels back.

Fri, 04/12/2013 - 23:39 | 3443967 Number 156
Number 156's picture

They will blame the republicans, and the republicans will pretend that they want to fix the problems.

Sat, 04/13/2013 - 00:05 | 3444021 Buckaroo Banzai
Buckaroo Banzai's picture

Straw??? It will be the fucking 4-ton boulder that breaks the camel's back.

Sat, 04/13/2013 - 02:27 | 3444131 BTFDemocracy
BTFDemocracy's picture

With a 4 ton boulder camel spit will be all over the place.

Sat, 04/13/2013 - 09:00 | 3444301 Mark Urbo
Mark Urbo's picture

They will never actually get it into play - its a clusterf*ck...

Sat, 04/13/2013 - 12:13 | 3444563 Seer
Seer's picture

Yeah, like if it weren't for this we could go on growing in perpetuity!

Fuck, more Party Pussy shit.

Sat, 04/13/2013 - 16:58 | 3445140 Abi Normal
Abi Normal's picture

Yeah, both sides have a hand in this, but I can tell you this much the Democrats have far and away spent/taxed moar than the Republicans.  what we can put on the GOP is that they are asleep at the wheel, for the most part!  The left/right thing today is a sham, because they both now all take away liberty, tax and spend, as there is really no difference, sans maybe gun control.  Demonizing the GOP is the mantra of the left, they stoop to any level to do it, and it is obvious.  There is no way to fix this via the vote, I don't think that the level of corruption can be overcome at this point.  The solution?  I really don't know any more, third party is not the way, revolution would just destroy the country, so what is it then?  Some grand awakening?  This croney capitalistic oligarchy is the problem, and certainly socialism/communism is not the answer, so what is it then my people?  Some new form of government?  The root of all evil is the LOVE of money...that is a basic problem we do have to overcome!  Jesus Christ does have a point, LOVE and FAITH, but with Satan ruling this world, how does that happen?  We would have to become something that I'm afraid we cannot be...HUMANS!!!  

Fri, 04/12/2013 - 21:34 | 3443713 lickspitler
lickspitler's picture

The upside is I'm sitting here with my stack of liberty morgan eagle keuger dollars. I have a cupboard full of C,k,h,j-rations. I have 100,000 rounds of 9mm 11mm  17mm ammo and the box set edition 2003-2009 of Jugs VIP. 

Bring it all on BITCHEZ !

Fri, 04/12/2013 - 21:43 | 3443739 HoneyPooh
HoneyPooh's picture

Don't forget the TP.

Fri, 04/12/2013 - 21:53 | 3443768 Alpo for Granny
Alpo for Granny's picture

Yes, as HoneyPooh said..make sure you have some Federal Reserve notes.

Sat, 04/13/2013 - 12:15 | 3444574 Seer
Seer's picture

I have land (w/home), animals, firewood and plenty of water.  Food, Shelter and Water.  You've got "C,k,h,j-rations?"  Better hope that you've got hunting rifles and that you're in an area that has game (which won't be decimated when all the others who have signed on to your "plan" are out doing the same).

Fri, 04/12/2013 - 22:36 | 3443766 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Press Release

=========

The central bank of DoChenRollingBearing announces that it bought some gold today to bolster its reserves.  In large part this was a response to the lower price of paper gold.

The Senior Analyst at the central bank was caught completely by surprise by today's gold price drop. And so did not predict the event.  The Senior Analyst has resigned his position as Price Forecaster, the bank is undecided about whether it is worthwhile to employ another forecaster.

Probably not...

Fri, 04/12/2013 - 22:36 | 3443865 DoChenRollingBearing
DoChenRollingBearing's picture

Here below is a view on today's price action in gold:

"Today's Massacre"

http://tinyurl.com/dxqvvfr

Sat, 04/13/2013 - 08:58 | 3444298 Beam Me Up Scotty
Beam Me Up Scotty's picture

Tulving website down?  Is Hans swamped or out of product or both?

Sat, 04/13/2013 - 12:07 | 3444470 DoChenRollingBearing
DoChenRollingBearing's picture

Last night his site was down as well.  My LCS was OUT of gold after I bought the last Eagle.  

They will not even quote price & delivery until Monday (when they can talk with their suppliers).

EDIT (further thoughts on the meaning of what happened yesterday)

"Fallout and Other Thoughts Post-Massacre"

http://tinyurl.com/9hlvzdx

Fri, 04/12/2013 - 22:02 | 3443793 CrashisOptimistic
CrashisOptimistic's picture

This subject begins and ends with oil scarcity.

It's forever, and there is no fix.

Fri, 04/12/2013 - 22:07 | 3443806 kito
kito's picture

Perhaps you have been missing the latest plunge into the abyss regarding oil and gasoline usage.....

Fri, 04/12/2013 - 23:20 | 3443950 CrashisOptimistic
CrashisOptimistic's picture

Nope, I've seen it.  If it's not there to burn, you can't burn it.

And I've also watched the commensurate decline in lifestyle.  As it continues, so will that lifestyle decline -- except for the low end.  For them, decline is death.

Fri, 04/12/2013 - 23:54 | 3444004 NotApplicable
NotApplicable's picture

Wow, you gotta work pretty hard to reverse causality that completely. Kudos! Meanwhile, in my world, every gas pump I drive past... well, they have gas

Sat, 04/13/2013 - 00:09 | 3444020 CrashisOptimistic
CrashisOptimistic's picture

No they don't.  They have 90% gasoline and now 10% ethanol.  You also don't really know what else you're putting in your tank.  Your gas mileage will fall as they add ethanol.  There is pretense, but there is no redefining joules.

There is an enormous amount of joules obfuscation going on.  The Eagleford shale, much celebrated, outputs mostly condensate.  Not crude.

There's a 40% joules differential.

Useful also to point out the outright shortages in California and the post Sandy northeast in 2012.  Twice in one year. 

Sat, 04/13/2013 - 07:12 | 3444236 SmallerGovNow2
SmallerGovNow2's picture

They only have ten percent ethanol because of government mandate and to subsidize the farming lobby...  Ethanol makes no logical sense what so ever...

Sat, 04/13/2013 - 12:20 | 3444586 Seer
Seer's picture

"They only have ten percent ethanol because of government mandate and to subsidize the farming lobby."

"They only have ten percent ethanol because that's as much as the farming lobby was able to force government to mandate."  FIXED! (so, where's the "SmallerCorporationsNow2" guy for promoting this angle?)

Anyways... I spent plenty of energy fighting ethanol.

Fri, 04/12/2013 - 22:35 | 3443858 FreedomGuy
FreedomGuy's picture

There is no scarcity except as imposed by governments.

Sat, 04/13/2013 - 09:13 | 3444315 Cloud9.5
Cloud9.5's picture

I wish that the decline in oil production was a political problem in the sense that we would no longer need to steam clean sand for oil substitutes if we could just vote out a few politicians,  Unfortunately the finite world is finite.  You might want to read this:  http://www.postpeakliving.com/files/shared/Hook-GOF_decline_Article.pdf

Sat, 04/13/2013 - 14:35 | 3444901 CrashisOptimistic
CrashisOptimistic's picture

The case for obfuscated scarcity is pretty simple.

We once shipped a horse drawn wagon of lumber to a site, nailed it together into a 30 foot tall derrick, drilled for oil, and then put a pipeline over the gusher that came out.

Now we have to build a 30 STORY tall structure, in pieces, ship it to a coast, assemble it in the water, put a 40,000 horsepower marine engine on it, helicopter out a crew, drive it 10,000 miles to a drill site and drill in 2 miles of water, and then down 4 miles under the seafloor.  Then you hope you have capture infrastructure.

Does anyone really believe all this shit would be done if they could head on out to Oklahoma, where the leases are in place and there are no environmental restraints, drill and capture?  Why don't they?  Because It's Almost Empty.  That's not where the oil is.

Look at that ratio of effort expended per barrel collected and which way that ratio is going. 

THAT is why growth is never coming back.

 

Sun, 04/14/2013 - 08:42 | 3446256 enloe creek
enloe creek's picture

totally accurate!!

  more on this here

 

http://richardheinberg.com/

Sat, 04/13/2013 - 12:28 | 3444605 Seer
Seer's picture

And the "government" is also hiding the unicorns!

It's about affordability.  I could readily argue that the US govt has made oil less scarce (more available) by its military operations around the globe.  But as is the case with BILLIONS of people on this planet, just because there may be a lot of something that that don't mean that you can get/afford it.

People will make a myriad of excuses to blame someone/something else for why they cannot have something.  It's a lot like spoiled children who cannot obtain something.

Fri, 04/12/2013 - 22:36 | 3443863 hannah
hannah's picture

"This subject begins and ends with FIAT scarcity."....we have plenty of oil...we dont have plenty of money to buy it.

Sat, 04/13/2013 - 12:30 | 3444612 Seer
Seer's picture

No, we DO Have plenty of money, it's just that it's not worth much!  And, really, the nerve of all those oil-producing countries to not have compassion for our absolute NEED to consume as much as we can, to not accept that our money is WORTH LOTS MORE than what they think it's worth!

Sun, 04/14/2013 - 15:03 | 3447160 Jumbotron
Jumbotron's picture

"This subject begins and ends with FIAT scarcity."....we have plenty of oil...we dont have plenty of money to buy it.

 

Bullshit Hannah....even the oil execs are on the record stating that the era of cheap oil is over.  YES, YES, there is plenty of oil left in the ground and under the sea.  But it costs WAY more to extract it out of the ground now than ever before.  Then the stuff they do pull out is so cooked or shitted up with sand like the tar sands of Canada that there is extra cost turning that stuff into light sweet crude that used to be pulled out of the ground simply by sticking a straw in the West Texas patch.

Certainly government regulations and fiat printing have a lot to do with it.  But you can't fight geology.

 

Sat, 04/13/2013 - 00:13 | 3444031 yrbmegr
yrbmegr's picture

The "fix", of course, is using different ways to generate energy.  They might be more expensive per BTU right now than hydrocarbon, but engineering can reduce the cost.  Enough?  Hard to know.  But clearly hydrocarbon will run out, and other ways will have to be used.

Sat, 04/13/2013 - 12:41 | 3444632 Seer
Seer's picture

"The "fix", of course, is using different ways to generate energy."

One does not "generate" energy- energy cannot be created or destroyed.

One can, however, create means of tapping it, of releasing it, such as "generating electricity" from some energy source (PE - Potential Energy).

"But clearly hydrocarbon will run out"

No, that is, not as long as the planet is still around.  It's an issue of EROEI; nature understands what this means (any life forms that consume more energy in order to get energy just don't make it- humans cannot defy this fundamental law).  If you have but a stick and there's a TON of oil down 100' from you you're NOT "out of hydrocarbons," you'll just die trying to get it (kind of like what's happening to military personnel in the ME).

"engineering can reduce the cost."

Engineering allows for increasing volume (extraction/production), helps creates the positive economies of scale, until, that is, Jevons Paradox slams the reality hammer down.

Sat, 04/13/2013 - 08:54 | 3444293 Mark Urbo
Mark Urbo's picture

Is that you Steve_from_Virgina ?

Fri, 04/12/2013 - 22:05 | 3443800 buzzsaw99
buzzsaw99's picture

I see a deflationary shit storm coming. People who have been trying to carry on a middle class existence with every last nickel they can scrape together are down to the bottom of the barrel. They are broke, desperate, and angry. The recovery they were told to expect will not be coming this time around. There is a raw nerve, just put your finger on it and expect a violent reaction. Seriously, I avoid people more and more. I pick where I go and what I do much more carefully than I did twenty years ago. Keep a low profile.

Fri, 04/12/2013 - 22:09 | 3443810 kito
kito's picture

Oh yeah buzz....absolutely...and today's gold sell off is the canary in the coal mine.....it's going to be a real deflationary doozy.....hold physical cash outside the system.......it will be needed......physical dollars are scarce......

Fri, 04/12/2013 - 23:04 | 3443923 The Shootist
The Shootist's picture

Opinions are like ass holes. No offense, just felt like saying it.

Fri, 04/12/2013 - 23:17 | 3443948 kito
kito's picture

I guess that is your opinion.....

Sat, 04/13/2013 - 05:33 | 3444200 zhandax
zhandax's picture

Seriously, I avoid people more and more.

From where I sit, it looks like the peeps are reacting in a rational fashion; they are plastered.  I went to an Elton John concert last Friday and there were a couple of girls in the men's room giggling incoherently when I stopped in on the way out.  One of them could barely stand up.  And we are not talking 50-year olds here; unlike Clapton a couple of weeks earlier, the house was loaded with babes.  These two may have been 30, tops.

As far as deflation, the price of something I buy other than gold/silver has to decline before I will consider there is even the possibility.  Show me the price of real food going down, and I will believe.

Sat, 04/13/2013 - 09:04 | 3444308 SofaPapa
SofaPapa's picture

I actually am still on the fence on the "flation" debate, because Ben has stated that he will never allow price deflation.  Hyperinflation would be preferable to him...

 

That said, I was very surprised a few weeks ago when I went into my local grocery store (western NC) and saw that the price of fresh fish (tuna and salmon in partucular were the ones I noticed...) had dropped by around 40%.  That's not an accidental 0.  Almost half.  I was stunned, and I asked the guy, who had no clue what I was talking about.  I've been watching since then, and the price has come back a little, but is still around 30% cheaper than it was a couple of months ago.

 

Like I said, I'm still not sure where this is heading, but that was one hell of a quick price collapse on those particular food products.  And note, these fish are not the bottom of the barrel they're aiming at.  This is a product for middle / upper middle / wealthy customers.

 

Staying tuned...

Sat, 04/13/2013 - 09:37 | 3444339 Melin
Melin's picture

Fukushima Friday Special?

Sat, 04/13/2013 - 12:56 | 3444663 Seer
Seer's picture

The younger people are pretty much sensing that their future is not going to be like the one that their elders had marketed to them.  As such it's really getting to the "whatever" level of existence for them.

"Show me the price of real food going down, and I will believe."

I "produce" (I manage the production) of "real food."  It ain't going down (despite the anectodal of the fish in a can post below).  It was late last Fall that I'd read that the beef industry was losing quite a bit per head; one has to ask how long do you think that This could last?  It's MARGINS.  And MARGINS are getting squeezed.  At some point people will have to pay more for food, and the likes of AAPL and FB (stock market BS) is going to feel the brunt of this.  Food in the US has been way under-priced for a LONG time, this has been the result of lots of disposable income (and a very efficient corporate factory food system)- That tide is clearly turning.

The value in things not directly anchored to Food,Shelter and Water will drop.

Got my truck fairly cheap thanks to a squeeze on disposable income (people could no longer justify holding on to it).  Have been waiting for prices to drop on a backhoe for my tractor- if I wait too long I'll end up with a good deal but won't be able to run it due to fuel costs!

Sat, 04/13/2013 - 09:17 | 3444318 Cloud9.5
Cloud9.5's picture

But all are not equal.

Sat, 04/13/2013 - 14:53 | 3444942 bonin006
bonin006's picture

(removed due to missplacement)

Sat, 04/13/2013 - 00:09 | 3444026 Professorlocknload
Professorlocknload's picture

I might have tended to disagree with you folks on the Fed allowing it's deflation nemesis to rear it's ugly head in public. Then I saw the 10 year yield today. Neatly in tandem with Au.

Dash for cash?

 

Sat, 04/13/2013 - 09:50 | 3444352 Winston Churchill
Winston Churchill's picture

Its interesting comparing the comments here to my grandfathers voluminous dairy's

of events post 1929.The cursive old German script and switching between that ,Italian,

and English are confusing but the gist is clear.

We are directly repeating history at this point from what I can see, not rhyming.

Defation. 50%cash and 50% pm's.

Hyperfation will follow next as there is no gold standard to stop it..

Sat, 04/13/2013 - 11:19 | 3444466 kito
kito's picture

No hyperinflation!!! There is no money velocity. Nobody has money to spend

Sat, 04/13/2013 - 13:00 | 3444669 Seer
Seer's picture

You don't believe that all that shit propping up the banks' balance sheets won't be let lose in the end?

Inflation/deflation, it's all mental masturbation shit.  Stuff that's necessary will become less afforadable.  Stuff that's just "stuff" will become more affordable (well, if one wasn't spending one's money on the less-affordable stuff).

Sat, 04/13/2013 - 15:13 | 3444976 css1971
css1971's picture

I don't think Bernanke will be able to fight deflation purely buying sovereign bonds. He's going to have to buy other shit too. They've started on MBS, what's next? At some point he's going to bypass the primary dealers and the money will get out.

He's following Japan whether it takes 20 years or not, who knows.

Sat, 04/13/2013 - 17:05 | 3445153 kito
kito's picture

Let loose how?? The GDP is nonexistent if not for federal debt spending. There is no other way enough dollars are able to find its way into the corpse of the American economy...

Sun, 04/14/2013 - 08:53 | 3446261 enloe creek
enloe creek's picture

fed does add some $$ benney bucks.  but a default is coming that will vaporize immense amounts of value on the books of every financial institution.  at which time all credit will be curtailed,  the system will freeze instantly as credit cards won't work. this means trucks stop when they need fuel 

  no more shit to buy at the stores after a few hours or a day maybe. 

 marshall law panic,  whay are all those preppers getting a woody

Sun, 04/14/2013 - 09:03 | 3446275 zhandax
zhandax's picture

I just tried to calculate what GDP would have dropped without .gov spending, and realized it has been included for a number of years.  That means the YOY rate with both adjusted down 40% is much lower than reported, but still positive, and still up over last year.  Now this is using the raw GDP numbers, and if you factor in the deflator and the slight adjustment in GDP percentage of .gov spending, you may get it negative, but not on the scale of percentage points.  Don't misunderstand, I think a chainsaw should be taken to .gov spending, so rant on.

Sat, 04/13/2013 - 00:23 | 3444043 Pareto
Pareto's picture

Yeah with gold going to $100, prices are going to hit the floor.  Do you realize how insane that is?  Fuck man, get off the deflationary kick.  The only thing that is scarce, is gold and silver.  Price deflation is a monetary phenomenon.  The only way prices are falling or capitulating is if money is withdrawn from exchange.  If price deflation were really true, then why isn't oil getting crushed....to the ground?  The demand for oil and gas at levels not seen since the 1970's.  Commensuarte with demand, oil should be around $30.  But its not because of monetary inflation (like, is there any other kind - troubling having to make this distinction all the time).  Prices will go to zero, when there is nothing left to buy.  Hold cash outside the system?  WTF does that mean?  And what cash, $USD?, $CDN, Yen?  The fucking last thing you should be stocking up on is $USD cash.  You should be buying stuff, right now.  You keep thinking that rates are going to rise (shoot up) - not going to happen.  THERE IS NO BOND MARKET.  There's just the FED, Abe, and Draghi

 

The $USD is under the process of becoming an isolated relic.  Interest rates up down, flat, don't much matter if it can't buy you anything of value, afterall, isn't that whats important?

 

Prices will normalize but not under a US currency regime.  Those days are gone.

Sat, 04/13/2013 - 03:47 | 3444171 dunce
dunce's picture

If oil drops very far, the mid east will be torn apart because the governments will not be able to buy peace. We will still have oil supplies but there will be blood. As much as i despise them i do not wish to see that. picture Syria only 10 times worse. The end will not be democracy, rainbows, and unicorns.

Sat, 04/13/2013 - 03:52 | 3444175 Dudeskis
Dudeskis's picture

Russia/China/India/Brazil will pick up our slack. We'll wane and they'll wax.

Sat, 04/13/2013 - 13:06 | 3444685 Seer
Seer's picture

"You should be buying stuff, right now."

Someone who gets it! (and all those who up-arrowed- nice to see!)

When you really think about this it's really no different than what the power players are trying to push (it's just that they don't come out and actually say why, because if they did then there would be utter panic at the gates).  The downside of the exponential growth curve is coming in to sight.  Shore up the liferafts (watch out for too much ballast, as that could potentially cause more problems that it could resolve) and concentrate on what direction to go to reach shore...

Sat, 04/13/2013 - 02:23 | 3444130 jimmyjames
jimmyjames's picture

......physical dollars are scarce......

***************

All money is scarce and gold money is even more scarce-

Sat, 04/13/2013 - 13:11 | 3444696 Seer
Seer's picture

Well played!

Further, if it's NOT infinite it IS scarce (has the attribute of scarceness).  It's the measure that determines how severe the scarcity, and as it is we can't seem to figure out what is and what is not currency money (greenbacks? electronic bits?), in which case proclaiming a level of scarceness without having any numbers is, well... scarce on logic.

Sat, 04/13/2013 - 14:00 | 3444813 jimmyjames
jimmyjames's picture

 in which case proclaiming a level of scarceness without having any numbers is, well... scarce on logic.

*****************

If you can't find on your own the "amounts" of  what is actually green backs and electronic bits/credit......try this-

http://research.stlouisfed.org/fred2/series/BASE

http://research.stlouisfed.org/fred2/series/WCURCIR

http://research.stlouisfed.org/fred2/series/TCMDO

http://tinyurl.com/c4ukgwt

http://tinyurl.com/ca7poh4

 

Fri, 04/12/2013 - 23:30 | 3443965 RopeADope
RopeADope's picture

On April 4th the bond market signaled deflation was coming. First time this year so will be interesting to see if the Fed will able to keep the ponzi going.

Fri, 04/12/2013 - 23:56 | 3444009 walküre
walküre's picture

The Fed pretty much suggested that QE might be ending in December 2013. That has to be fully priced in yet. Can they pull this off? JPM deposits higher than ever to fund government via UST purchases once rates start picking up? Is that their grand plan? Having their cake and eating it too? Long pitchforks.

Sat, 04/13/2013 - 02:21 | 3444127 jimmyjames
jimmyjames's picture

On April 4th the bond market signaled deflation was coming. First time this year so will be interesting to see if the Fed will able to keep the ponzi going.

**************

In 2001 the bond market signaled deflation was coming and so did gold-

http://research.stlouisfed.org/fred2/series/WTP30A28

http://www.acting-man.com/blog/media/2011/02/GoldMonthly.gif

Sat, 04/13/2013 - 14:16 | 3444859 akak
akak's picture

Give it up with your mythical flat-earth deflationism and your magically appreciating fiat currency already ---- what a hoot!

"Constant inflation-adjusted prices prove that there is no inflation".

LOL

Sat, 04/13/2013 - 14:48 | 3444933 jimmyjames
jimmyjames's picture

Give it up with your mythical flat-earth deflationism and your magically appreciating fiat currency already ---- what a hoot!

****************

Sure i will--as soon as you can give an explanation why bond rates have been tanking for 12 years and why gold has been going up for the exact amount of years and also while you're at it--explain once again- how you can sell more securities than there is buyers for?

Sat, 04/13/2013 - 06:36 | 3444226 css1971
css1971's picture

How can you possibly have any idea what the bond market signalled? It's got 85 billion a month coming in regardless of what's actually going on.

Sat, 04/13/2013 - 13:13 | 3444703 Seer
Seer's picture

It would be like trying to read smokes signals within a mushroom cloud!  Somehow the "message" just doesn't seem to be all that important when you look at the bigger picture...

Sat, 04/13/2013 - 15:04 | 3444967 css1971
css1971's picture

I used to use bonds all the time. Now... Totally useless.

Sat, 04/13/2013 - 00:00 | 3444014 Pareto
Pareto's picture

Whats a deflationary shiticane Julian?  

Fri, 04/12/2013 - 22:08 | 3443808 nmewn
nmewn's picture

Bond guys observe fundamentals, stock guys ignore them, snort coke & pop prozac.

Its like a soap opera for the clinically insane financial media.

Sat, 04/13/2013 - 05:25 | 3444204 hooligan2009
hooligan2009's picture

this is true...BUT...bond markets have predicted 38 out of the last 3 recessions..this one has turned into a depression because of qe

Sat, 04/13/2013 - 06:40 | 3444228 zhandax
zhandax's picture

nmewn, commission salesmen (and their traders, managers, and owners) snort coke and pop prozac.  The more stylish do it while chugging Maalox with their Rolex arm.  Go visit your local Boca bond house.

Sat, 04/13/2013 - 13:29 | 3444743 Seer
Seer's picture

"this one has turned into a depression because of qe"

QE is NOT the cause, it's just a bad remedy, a remedy that's not even a remedy at all.  The thing is is that this has been about rolling out the crash shoot, only we're not on the runway/tarmac.  We were ALWAYS heading for this (perpetual growth on a finite planet- who the fuck doesn't understand that there are limits to growth?), that it would happen was NEVER in question (unless you didn't bother to ask the question [ignorance; head in sand]); the ONLY think that was in question was WHEN.  Let's see a show of hand from the crowd of those who have benefited from this buying of time. (my hand is up; I have not, however, swindled, cheated, or otherwise screwed over anyone along my journey- it's been the benefit of living fairly frugally in a society of excess [which, I suppose, I could say has gained from swindling, cheating and screwing over people around the globe- may there be mercy upon my soul]).

Sitting at a crash site and examining the wreckage in the hopes of not crashing on an airplane while one is falling from the sky and is going to hit the very spot you're in- that's what all this finger-pointing w/o seeing the bigger picture stuff is going to get you.

There's something to be said about the (supposed) remark given by one of GW Bush's advisors(?) about all those who are prying into things trying to figure out what they were doing, that while this was going on the administration (or whatever entity/group he was referring to) would be ahead creating new realities.  FUCK ALL OF IT AND MAKE YOUR OWN REALITY (but do so only based on the real immutable laws, natures laws)!  Or, you can continue to try and play Their game, to identify what They are doing wrong, and continue to get fucked...

Fri, 04/12/2013 - 22:25 | 3443824 The Second Rule
The Second Rule's picture

Does anyone know of a single instance where a FED move preceded the 90 day T-Bill?

...didn't think so.

http://www.elliottwave.com/images/marketwatch/interestratesfed.GIF

Fri, 04/12/2013 - 22:24 | 3443830 WallowaMountainMan
WallowaMountainMan's picture

agreed. transformational shift; a view that bonds are right and right for a reason.

perhaps wisdom rests with the majority.

once there, the transformational shift provides a view consistent with the facts.

japan. just went all in w/ such a big number so as to guarantee that next to follow in the race to debase has to put up a magnitude greater to make the impression of its relative easing.

having set the threshold, japan now produces. japanese people take one for the gipper, all burning their paper and taking 50% pay cut as a society to become the lowest paid, best educated, dedicated work force on the planet. a great place to live (ex-nukes). they recover surprisingly quickly.

now, as for the rest of the world...

another time.

majority says gimme my money back when i give it to you.

the rest are dancing on a cloud of perfume. it may smell sweet while you're smellin' it, but look out for the landing.

no one seems to question if its gonna happen or not...talk about when, they do.

majority says...hmmmm. makes no sense to ask the question when. just wait. once is certain.

 

Fri, 04/12/2013 - 22:30 | 3443851 The Second Rule
The Second Rule's picture

"People are hardly ever incompetent. They just never try."

--Yosida-Shoin

Sat, 04/13/2013 - 05:21 | 3444196 hooligan2009
hooligan2009's picture

behind success lies ambition, behind ambition lies effort, behind effort lies someone willing to try

removing ambition from the majorityof the population with qe causes an economy to fail

Sat, 04/13/2013 - 08:47 | 3444292 DarthVaderMentor
DarthVaderMentor's picture

Wise words. Like in most of the communist feudal dictatorships of the 20th century, the populace will morph to be either the corrupt sheeple Nomenklatura or Hooligans that gave up and resist any economic advancement. 

Sat, 04/13/2013 - 17:12 | 3445137 hooligan2009
hooligan2009's picture

hey! entropy is economic advancement if i want it to be!

Sat, 04/13/2013 - 13:32 | 3444748 Seer
Seer's picture

"Ambition" is also about cunning, trickery, deceit.

If you don't have physical resources you're going to have to stoop to the above attributes/other side of "ambition."

Japan is fucked.  Demographics.  Lost wealth.  Innovation and production picked up by other SE Asian countries.  And no energy.  Care to guess what form of "ambition" is left for them?

Sat, 04/13/2013 - 15:08 | 3444971 hooligan2009
hooligan2009's picture

a new Japan that defaults on existing debt and replaces it with the "penchant" instead of the "yen"

Sat, 04/13/2013 - 18:51 | 3445336 WallowaMountainMan
WallowaMountainMan's picture

penchant.

gotta love it.

one of alltime zh original lines.

:)

 

Sun, 04/14/2013 - 06:46 | 3446181 hooligan2009
hooligan2009's picture

heh..thanks..and i dont drive a fiat 500 either!

http://www.fiat500.com/

Sat, 04/13/2013 - 19:37 | 3445399 WallowaMountainMan
WallowaMountainMan's picture

gotta agree that the road looks bleak, and my suggested 50% paycut for them optimistic and unlikely...but heck...

japan's a beautiful place to headquarter world wide toyota etc  production....even if they're made in ...DETROIT !!!!

ok, not detroit... but somewhere.

no reason not to be the next london of finance, etc...

just saying, bottom of the ninth, what else to do?

their all in buying of bonds is a great stategy for where they are.

honorable too.

after all, don't or won't they mostly owe only themselves in the end ?

unlike, well, most everybody else?

relative easing. relative collapse.

:)

Fri, 04/12/2013 - 22:29 | 3443832 lolmao500
lolmao500's picture

Lulz. If you thought the 2008-2009 recession was bad... just you wait. When the bond market meets reality, GDP will go down by at least 10-15% the first year...

Sat, 04/13/2013 - 13:43 | 3444775 Seer
Seer's picture

"GDP will go down by at least 10-15% the first year..."

Would this be actual GDP (which we really can never truly know/see- the reality) or the "numbers" fed us?

I think that real growth has been down for some time and that this is the new trend (slinky-down-the-stair-case).  If we're so lucky to survive the crash landing I'm NOT thinking that there's going to be any future ability to ever again hoist up an airplane into the sky.

The ENTIRE synchronized MEGA life chain is going to blow.  Economies of scale in reverse is going to result in total blow-out.  The System will be like a bunch of younger folks running around banging into walls because they're trying to get their iCrap to work and it won't- they have no idea on how to go about doing anything w/o having their iCrap.  The System HAS to have the big machines of the market to link everything together; as the pressure starts dropping there won't be enough pressure to keep things running.

This is going to be The Big One!

http://stream1.gifsoup.com/view/111989/fred-sanford-heart-attack-o.gif

Fri, 04/12/2013 - 23:13 | 3443938 bonin006
bonin006's picture

Looking at the chart, from 1960 to 1995-2000 the GDP change preceded (caused?) the change in bond yield. After that, bond yield change appears to possibly precede GDP change. Looks like a case of unintended deceleration. Mr.B thinks he is pressing on the gas, but is actually stomping on the brake?

Sat, 04/13/2013 - 05:07 | 3444194 hooligan2009
hooligan2009's picture

yes he is..the ten year bond yield would be around 4-5% now were it not for q/e..this chart perfectly illustrates that q/e actually decelerates growth in the economy by misallocating capital (in this case into bonds, rather than into the economy).

Sat, 04/13/2013 - 15:42 | 3445021 RopeADope
RopeADope's picture

It prevents good capitalism from coming up with solutions to the problem QE hides, wasting the limited time remaining to fix said problem. The opportunity cost of this time is astronomical...

Sat, 04/13/2013 - 16:42 | 3445116 hooligan2009
hooligan2009's picture

yep..now if we can just get "good" capitalism going..without the usual criminal element that is a permanent presence in any and each sector of society..yanno that 10% who need to be satisfied..from police, through banksters, through benefit frauds, through accountants, lawyers, bloggers, senators, bus drivers etc etc..could be that all that is needed is for good people to NOT remain silent

Fri, 04/12/2013 - 23:43 | 3443996 newengland
newengland's picture

I bet my bad guy against your bad guy, Tylers. 

USD, gold, silver, land: the last men standing.

Carry on...

Fri, 04/12/2013 - 23:58 | 3444007 W74
W74's picture

FUCK.  Anyone know where I can get silver for not too much over spot?  Scottsdale is 17% over.  I want to get my last purchase in, but I guess I'll be checking my usual dealers tomorrow.  They probably don't want to take fiats either though.

Sat, 04/13/2013 - 05:08 | 3444193 The Abstraction...
The Abstraction of Justice's picture

Depends what you mean by spot. Physical or electronic. Physical spot price is 17% over the electronic spot. Maybe 'Discount Gold and Silver' will give you a good price. 

 

http://libertyarchives.com/ 

The Financial Survival show is worth listening to, now and again.

Sat, 04/13/2013 - 12:10 | 3444561 Kprime
Kprime's picture

Are you serious??  My dealer sells at spot plus 10%. Take home price.  No sales tax if you buy more than $1000 per purchase (TX state law).

I thought the %10 was high.

Sat, 04/13/2013 - 07:59 | 3444263 hooligan2009
hooligan2009's picture

try some of the UK sites and claim back the VAT?

for example..i clicked this one in the auto ad column

http://www.bullionbypost.co.uk/silver-bars/1kg-silver-bar/metalor-1-kg-silver-bar/?gclid=CJayiuXKx7YCFU3KtAod7DoAaA

or this one

http://www.bullion-dealer.co.uk/silver/silver-bars/

ponders whether it is illegal to melt these bars down and convert to coins...

Sat, 04/13/2013 - 08:32 | 3444283 css1971
css1971's picture

Silver isn't as popular in Europe due to the VAT. Shipping will suck for anyone but UK residents.

Sat, 04/13/2013 - 09:43 | 3444347 Prisoners_dilemna
Prisoners_dilemna's picture

Legacy coins, lutz Florida.

Ask for Mark or Art.

Sat, 04/13/2013 - 00:22 | 3444040 yrbmegr
yrbmegr's picture

It's actually kind of interesting.  It seems the Fed can't create enough money to make the economy grow.

Sat, 04/13/2013 - 01:41 | 3444094 Mentaliusanything
Mentaliusanything's picture

And since when did the digital printing of money produce an extra ear of corn, an additional grain of rice, a drop of pure rain water or a square meter of fertile land?

I rest my case!

( Oh and fuck you twice Ben Bernanke! you have the brains of a SMASHED CRAB!)

Sat, 04/13/2013 - 13:46 | 3444782 Seer
Seer's picture

"And since when did the digital printing of money produce an extra ear of corn, an additional grain of rice, a drop of pure rain water or a square meter of fertile land?"

Clap, clap! (for mentioning stuff that really matters)

Sat, 04/13/2013 - 01:42 | 3444096 Professorlocknload
Professorlocknload's picture

Guess they're finding out a $Quadrillion is a pretty big hole to fill, maybe?

Meanwhile...

From Mish...http://finance.yahoo.com/blogs/daily-ticker/don-t-depend-bank-deposit-in...

 

Sat, 04/13/2013 - 09:31 | 3444331 Cloud9.5
Cloud9.5's picture

I like Mish.  He is wrong about guns but he is right about the banks.

Sat, 04/13/2013 - 14:12 | 3444849 akak
akak's picture

Not that it matters all that much to me, but just out of curiousity, what does Mish say about guns?

Sat, 04/13/2013 - 13:48 | 3444785 Seer
Seer's picture

I'd read that the other day.  WARNING: don't read the comments! (way too many people are clueless!)

Sat, 04/13/2013 - 01:27 | 3444084 CosmicDebris
CosmicDebris's picture

Tyler.

Agreed.

Sat, 04/13/2013 - 06:31 | 3444221 css1971
css1971's picture

Can we all agree to simply replace the words "gdp growth" with the word "inflation". It clarifies for all, the reality of what's actually going on.

Sat, 04/13/2013 - 07:50 | 3444259 hooligan2009
hooligan2009's picture

sounds good to me..

deflation in home owners equivalent rent, electronic goods and clothes over several years negating inflation again over several years in stuff like natural gas, gasoline and food means that the urban CPI is a false measure.

inflation = change in profits / gdp

gdp = sales less government spending and fed injections

Sat, 04/13/2013 - 13:49 | 3444793 Seer
Seer's picture

"End of growth."

Accepting this reality is where we need to start from.  That and write on the chalkboard:

We will never again be fooled into thinking that perpetual growth on a finite planet is possible.

We will never again be fooled into thinking that perpetual growth on a finite planet is possible.

We will never again be fooled into thinking that perpetual growth on a finite planet is possible.

We will never again be fooled into thinking that perpetual growth on a finite planet is possible.

We will never again be fooled into thinking that perpetual growth on a finite planet is possible.

1,000 times!

Sat, 04/13/2013 - 10:55 | 3444435 yogibear
yogibear's picture

The fed will keep on buying trillions of government debt and make it diappear just like:

9 TRILLION Dollars Missing from Federal Reserve

http://www.youtube.com/watch?v=GYNVNhB-m0o

Easily created by printing and it disappears just as easy.

Sat, 04/13/2013 - 11:03 | 3444445 ableman28
ableman28's picture

There are a lot of smart and serious people on ZH aiming a lot of well thought criticism at the Fed's rapid expansion of its balance sheet to buy Treasury paper and to a lesser extend mortgage backed securities.  Fair enough.....but assume for the moment that the Fed community is not intentionally self destructive and eventually wants to normalize things.  My question to all the smart folks here is what is their end game.  How do they walk back from the narrow end of the plank they've gotten themselves out to by buying a collosal amount of US debt.  Cause, they are gonna try something, they aren't going to decide to close up shop and go home.

My best guess is they will reduce purchases at the far end of the curve first and continue to roll over the short end of the curve. The US Treasury will respond by trying to push all their financing needs to the shorter end of the curve still under control of the Fed.  The Fed then will have a problem.  Paper they bought at the longer end of the curve, at lower interest rates, will suddenly be devalued below par as new paper issued will carry a much higher interest rate.  And, if the Treasury can focus refinance needs to the short end of the curve they won't have to issue much long term debt which at higher interests rates make the national debt worse, quick.

The Fed could, actually decide to eat the loss against par.  It was all funny money they created electronically in the first place and the easiest way to get this money out of circulation is to accept valuation destruction so that the Fed balance sheet shrinks due to a repricing of assets.  Money created out of thin air in the first place goes right back where it came from.  And the Fed just tolerates the reduced asset value of paper put to them by the primary dealer banks.  Its all among friends after all.

Then the question is what to do on the short end of the scale.  One option is for the Fed to hold to maturity.  Slowly rolling over a declining percentage of new Treasury issues they do buy allowing upward pressure on interest rates to filter into the system slowly over however long a period is needed.  The surplus to rolled over paper would be reabsorbed on the balance sheet and literally disapppear as the funds created out of thin air to buy the paper in the first place goes back into the thin air it came from.

This may not be the best strategy but its a strategy.  And people at the Fed, believe me, are up long hours trying to figure out their options.  I'm curious what serious thinkers here, not the tin hat blog trolls, but serious people think the Feds strategy options are.  What say you?

Sat, 04/13/2013 - 14:07 | 3444835 Seer
Seer's picture

A LONG time ago I hypothesized that the Fed was the black-hole that would swallow up all the debt and then implode.  With every passing day this notion seems not all that far-fetched.

Ultimately it's the environment held by the govt and the people (yes, I know folks can giggle a bit about this, but I do believe that there's an enormous amount of pressure at the gates and that, as history shows, it'll be the govt that is called upon to "take care of things").  More and more actions by the central banks have been dictated by political policy rather than market policy (I believe there was a nice article here on ZH the other day that showed this).

What do businesses do when they become insolvent?  Bankruptcy.  The bits are dispersed, the heads go elsewhere and start up another "game."

The Fed, as well as the rest of the world's CBs, has been getting a sufficient amount of negative painting to support the final picture of them being set up as the "fall guys."  Because this is happening all over the globe I can only think that one big cancellation is possible- all CBs effectively collapse.  The "collapse" may be some major G20(?) decision.  The options?  WAR.  Killing the CBs, though they aren't necessarily the culprits (they just helped facilitate it all), will be the gentleman's' agreement, it'll be seen as much more acceptable than the obvious "other solution."

So, financial control will be handed over directly to politicians.  Rack it all up for another round of epic failure... (I suspect, however, that things will be so toasted at this point that their ability to control things will be significantly castrated- those that are wanna-be players, however, will have to carry the flag of the Blue or Red team in order to have any benefit of the "new system").

Sat, 04/13/2013 - 15:00 | 3444949 css1971
css1971's picture

A LONG time ago I hypothesized that the Fed was the black-hole that would swallow up all the debt and then implode.

Watch the BOJ as the model for this very thing.

You just need to think of a word other than "implode".

"debt restructuring", "balance sheet alteration", "voluntary asset reduction". Something like that, I like the last one, it sounds the best; "hey they have assets and they're voluntarily reducing them".

Sat, 04/13/2013 - 15:36 | 3445008 Seer
Seer's picture

"liquidating debt?"  That sounds pretty good, no? ("asset" and "reduction" in the same sentence might not be good marketing because people will ask whether this is happening to what they have- and then it becomes clear that the value of their assets, mostly homes, is being turned to near-zero)

Anyway, I think that you're on the right path.  Any "unwind" is going to result in a TOTALLY different landscape, rather than some "adjustment" to the existing (in which we start up again with the same basic playing pieces).

Sat, 04/13/2013 - 15:04 | 3444963 hooligan2009
hooligan2009's picture

the feds treasury assets are a book keeping entry and will be cancelled from the regiter of public debt.

this is because the fed is a government agency holding government paper. the same is true of the social security funds that hold 5 trillion of "non-marketable" treasuries. ALL treasuries are marketable, so this is an outright lie.

have you heard anyone tell you what would happen if the feds holdings were cancelled? 

what happens if the Fed holds the bonds to maturity and what happens when the Fed's holdngs of treasury's pay income? the government pays cash? really? where does it get the cash from? 

the fed's qe changes the debt issuance profile from bonds with maturity dates paying coupons to us dollar currency notes that do not mature and bear no coupons (e.g. treasuries held at banks are swapped for fed reserves at banks)

a perpetual zero coupon bond is worth ZERO unless it enjoys fiat status and can be exchanged for assets.  

the Fed is indemnified against any and all losses by the Treasury today, so you can put your mind at ease about that. the Fed (and the Bank of England) simply pay coupons back to the Government (with the appropriate book entries of course). 

what difference does it make if the Fed allows the bonds to mature and receives its own currency back via its own printing press? 

you are quite right to point this out, but why are you more worried about a four year policy by the Fed to hold 1.2 trillion of Government debt and you are not worried about the thirty year program of issuing 5 tn dollars of debt into the Social Security funds; they are both government agencies and they both have no liability for losses. as i hope your realize, these losses are also "book entries".

if the Government allows its agent, the Fed, to roll off these treasuries, when 1 million of bonds matures, the government will simply roll over this debt (the US has not paid back any government debt, EVER) and will seek 1 million dollars from the "market" to do this.

you should note that this is not a discretioanry item for the Fed, neither was the pruchase of the treasuries by the Fed discretionary. it did as it was told by the Government/Treasury. the maturity proceeds will be funded the governments general budget (or lack of one, since no-one has passed a budget for years, only a final tally on a histroic basis). 

where the roll off of treasuries in the social security funds matches payments by these funds, the treasury will pay cash (fund from its non-existent budget or get the Fed to print it) for the maturing proceeds which then go to beneficiaries. where these funds dont have treasury holdings (i.e they are broke) the government will fund the expenditures from general revenue (from its non-existent budget) or get the fed to print it. 

i prefer to think of it this way; the fed holdings of treasuries are an illusion, as are the trust funds. they all could be cancelled today and not affect anyone in any way. this would also bring government debt down from 100% of gdp (16 trillion) to 63% of gdp (10 trillion).

of course, the deficit of c. 1.2 trillion per annum and the likely c. 800 bn to 1.2 trillion per annum forever will soon return debt to gdp back to 100% (just 6 years by my reckoning), but by then, if the Fed can get hold of and cancel more treauries in exchange for valueless fiat, who is even going to notice!

Sat, 04/13/2013 - 15:37 | 3445010 Seer
Seer's picture

"this is because the fed is a government agency"

Is it?

Sat, 04/13/2013 - 15:48 | 3445031 Seer
Seer's picture

OK... I thought a bit more about this...

"Agent" as in agent for selling USTs.  Just want to make sure that people understand that the Fed's "independence" from the govt does provide a handy relief valve for allowing them to be the ones falling on the sword (w/o implicating the govt).

Sat, 04/13/2013 - 15:45 | 3445024 Seer
Seer's picture

I think that you (somewhat) shore-up my point about the Fed being the bag-holder.

Somewhere along the line I'd figure that interest rates would be affected, and I don't think that this would be inconsequential (like just writing off a book entry).

Also, there is the trade deficit, those (obviously ever-increasingly worthless) USDs are going to buy less and less.

It is these two points that tend to lead me to believe that this can't really go on for much longer.  The reality of negative growth is going to hit pretty hard (people need to fully appreciate the impact of "economies of scale in reverse").

Sat, 04/13/2013 - 18:40 | 3445315 Abi Normal
Abi Normal's picture

It's called QE Infinity!  There is no way they can manage their way out of this by shorting the short end of the scale!  The problem lies in the fundamental factor that money created out of thin air is not money in the first place.  Digitized fiat is AIR, yet it buys our own debt, MBS's and the like.  It is like the Fannie/Freddie conundrum of mixing good and bad debt and selling the securities to the unwitting buyer, and we all know how that turned out, you know the whole sub-prime deal.

It would have to be a rolloever of thin air debt into infinity, there is no other way around it.  Your cash ain't nuthin' but trash!  All one has to do is look at Wiemar, and the result was Fascism, and World War.  The only way to destroy the fake TB and money is to create war, problem today is there is a thermal nuclear factor in it.

This whole deal we are in is a ponzi scheme, and we all know how they end, when there are no more suckers to buy into it, then the house of cards falls.  The grand experiment went wrong in 1913, when we signed our soverienty and our very lives away!  Instead of living within our means, we wanted instant gratification, and THAT is the root of it right there.

The variables are too many, and the calculus too complex for mere mortals at the illegal Fed to really figure this thing they created out, as they are running on the seat of their pants.  Remember Ben said there is no housing bubble in 2007...and there it was staring him right in the face.  He was wrong then, and digitizing/monetizing our debt is now creating another monster bubble, along with all the others (student loans, new housing) bubbles, etc.  It's bubblelicious don't ya know.

No, there is no wiggling the Treasuries to fix this problem, it is way to big, without total destruction, and it seems to be well planned, as old George Sorazz said..."The last impediment to world peace is America".  No, it is a planned takedown, with no solutions, so as to usher in a new age...NWO or whatever you want to call it.  Global hedgemony, one world commumism, with the 1% in charge and rest of us eat dirt, or slave it out under the thumb.  That's the way I see it at least.

Sat, 04/13/2013 - 15:13 | 3444980 hooligan2009
hooligan2009's picture

ponders what that chart would look like without the government component of the US military industrial complex. 

prays that there isn't another world war that attempts to realize the "value" created by WMD, drones, all the other hardware and keeping 10 million people employed (directly or indirrectly) on what is otherwise enhanced unemployment benefit

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