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Bernanke Shocker: "No Rate Normalization During My Lifetime"

Tyler Durden's picture




 

Forget all talk about "dots", "6 months", or any other prognostication from the Fed's new leadership about what will happen in the near and not so near future. For the real answer prepare to shelve out the usual fee of $250,000 for an hour with the Chairsatan, or read Reuters' account of what others who have done so, have learned. The answer is a stunner.

"At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "Shocking when he said this," the guest scribbled in his notes. "Is that really true?" he scribbled at another point, according to the notes reviewed by Reuters."

To think one could have read Zero Hedge for free for the past 5 years and gotten the same answer (time for a pop quiz: pumping liquidity into a closed system in perpetuity is i) inflationary or ii) deflationary?). But no, one would rather pay Bernanke's former annual salary in less than an hour to get the answer from the same person who infamously stated that "subprime was contained", that "there is no housing bubble", and that he doesn't buy the premise of house price declines as there has never been a "decline of house prices on a nationwide basis."

Still, one can't blame Bernanke for providing a service that the market (one market the former chairman didn't manage to break with his central planning spree, unlike all other markets) demands. Alan Greenspan waited only a week after his departure before addressing a private dinner hosted by Lehman Brothers, the investment bank whose collapse in 2008 sent the financial crisis into high gear.

Bernanke's private dinners, all of which cost around $250,000 began near the end of March, roughly two months after his retirement.

We say around because while Greenspan has already been rocked by 50% deflation in his "assets", Bernanke too is starting to realize that without constant liquidity injections, his "inflationary" days are also numbered:

The baseline fee for a private get together is $250,000, and more if Bernanke needs to travel from his home in Washington, though the price has dropped some as he has done more events, the sources said. The size of that decline could not be immediately learned.

Certainly expect the price of a Bernanke dinner to tumble now that virtually everyone who matters, and can afford the fee, has already listened to the Chairsatan in private, and the value of Bernanke's insight has been, shall we say, "diluted":

Hedge fund attendees have included Paul Tudor Jones of Tudor Investment Corp and David Einhorn of Greenlight Capital. Others have included Michael Novogratz of Fortress Investment Group, and Larry Robbins of Glenview Capital, as previously reported in other media. All declined to comment to Reuters.

 

David Tepper, the hedge fund manager who earned $3.5 billion in 2013 to rank as the industry's best paid investor, said at an industry conference this week that he attended the first private dinner and peppered Bernanke with questions. But Tepper said he didn't make the best use of the information, a lapse he now regrets. "I screwed up that trade," he said.

 

At the same conference, Novogratz from Fortress said many hedge funds that bet on big interest rate and currency movements missed a hint from Bernanke at the dinner and failed to buy long duration Treasuries.

Oh yeah, it was Bernanke hinting that Tsys are due for a surge - nothing to do with the fact that the global economy is stalling and that everyone and the kitchen sink was short rates, launching one of the biggest short squeezes in recent history.

Not surprisingly, not everyone is a happy customer:

Not every guest believes they came away from a Bernanke dinner with an exclusive insight.

 

"People can try all they want to feel that they got him to say something extra to them, but he never does," said one person who attended one of the dinners.

As for Bernanke's profound insight, it appears all he really did is admit that he failed at stimulating the economy.

In one dinner-table exchange with investors, Bernanke argued that fiscal tightening, constrained financial markets and lower U.S. productivity all point to lower real rates than would be considered normal for a long time to come.

 

Based on trading in the massive Eurodollar futures market, investors have in recent months tempered expectations of rate rises in the years ahead; as it stands, they don't expect the fed funds rate to return to 4 percent until 2022. As recently as last September, futures markets signaled they thought this would happen by the end of 2018.

 

At the dinners, Bernanke has also argued the Fed would want to delay raising rates if the tighter financial conditions created could threaten to harm the economy. He has also stressed that financial stability concerns would more formally be considered in policy-making, according to the sources.

In other words, blame Congress for slowing down the economy as it did not engage in reform, the same Congress which explicitly made it clear it would not engage in reform and told the Mr. Chairman "to get to work" to compensate for Congressional ineptitude. And now Bernanke has the gall to blame Congress, which is only able to do what it does thanks to, you guessed it, the Fed's ZIRP policy.

Of course, the slowing down of the economy, snow or no snow, is precisely the reason why bonds are bid. We explained as much recently:

"When the Fed begins lifting rates is almost not an issue any more,” Stan Jonas, former managing partner of Axiom Management Partners in New York, "The real question is how fast does the Fed increase rates and where do they stop. The market now sees diminished macroeconomic expectations and expects the Fed to ending the upcoming tightening cycle at around 3 percent."

 

 

In other words, the bond market believes in the Japanization of America and another lost decade as the new normal low/no growth world slugs along with no escape velocity dreams anytime soon.

 

Or even more clearly - it's about more than this cycle... the Fed's taper will run its course, the Fed will tighten rates and the economy will slump rapidly meaning the Fed will ease once again (and by then QE will have lost all credibility as anything but an asset inflation machine and along with it - the Fed's credibility)... the tumble in forward rates indicates the markets growing belief that the future growthiness looks very different from the dream priced into stocks...

Or, in other words, the Taper will lead to the Untaper, as we predicted exactly one year ago, leading to QE number... we don't even know the nuimber any more - 5,  6,  7? Rinse. Repeat.

As for the conclusion:

"He's being paid ... for sharing his wisdom and predictions, and presumably not to exert his influence on the Fed," he added. This will go on "until he's proven to not be all that clairvoyant."

The biggest shocker is not that Bernanke punked the market once again and after 5 years of QE the US economy is once again headed into a tailspin - most people with some common sense knew that in 2009.

The shocker is that people are willing to pay even $1, let alone $250,000, to listen to Bernanke speak.

 

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Sat, 05/17/2014 - 10:19 | 4769114 Flakmeister
Flakmeister's picture

Is this really a surprise?

Sat, 05/17/2014 - 10:20 | 4769119 Keyser
Keyser's picture

BULLISH!!!!!

 

Sat, 05/17/2014 - 10:29 | 4769134 Pinto Currency
Pinto Currency's picture

 

They are losing control of the bond market (eg. having to resort to Belgium for Treasury purchases) and the situation will get worse.

 

Sat, 05/17/2014 - 10:31 | 4769148 BrosephStiglitz
BrosephStiglitz's picture

We'll do a barter deal- treasury bonds to infinity for the European parliament.  

Sat, 05/17/2014 - 10:33 | 4769151 BKbroiler
BKbroiler's picture

forget "normalized", negative interest rates are coming

Sat, 05/17/2014 - 10:46 | 4769154 BrosephStiglitz
BrosephStiglitz's picture

That's the Rubicon Line.. once that happens the only limiting factor will be one of bargaining power of the banks.. minus infinity here we come.  

(Normalized rates is such a nonsense term anyway.. if rates were trading at market values they would probably be well north of 10%in the US and most of Europe.)

Edit: though seriously I do not know how they would ever manage negative nominal rates in practical terms.  That would be a giant incentive for the black-market economy and organized crime.  Much easier to inflate the hell out of the money supply and keep real rates negative.  In that case the limiting factor will be one of political opposition.  They'll try to keep the theatre going as long as possible and after that the tanks roll in.

Sat, 05/17/2014 - 10:47 | 4769169 THX 1178
THX 1178's picture

I think all the central bankers and private bankers and a great many intell-agency thugs know exactly whats coming. They know there will be an uprising and trials/executions, and they want to communicate in no uncertain terms to us that they sincerely dont understand and therefore cannot be held responsible for any of this. They will blame this on black-swan-ness (even though we all know this is not a black swan). They will call it an act of god that no one could have seen coming. This is bernanke saving his ass.

Sat, 05/17/2014 - 10:52 | 4769180 BrosephStiglitz
BrosephStiglitz's picture

It's very likely.  The message to the top-end bankers, CEOs, Wall-street insiders:  Cash in your chips at the teller before the clock hand strikes midnight, make sure you trade that paper money for real assets.  Then hunker down in your bunkers because shit is going to get real ugly real fast.

Sat, 05/17/2014 - 11:03 | 4769201 Pool Shark
Pool Shark's picture

 

 

 

"In other news, former Federal Reserve Chairman Benjamin Bernanke was killed today in a tragic incident involving a nailgun. Reports indicate there were fatal wounds sustained from at least seven nails fired from the pneumatic device. A law enforcement spokesman is quoted as saying they believe it to be an act of suicide..."

 

Sat, 05/17/2014 - 11:15 | 4769219 jaap
jaap's picture

off topic, but hear condoliza r. explaining the ukraine war to us europeans:

https://www.youtube.com/watch?v=OU1t3t4Bq-Q

Sat, 05/17/2014 - 11:25 | 4769240 BrosephStiglitz
BrosephStiglitz's picture

x

Sat, 05/17/2014 - 11:32 | 4769255 CrazyCooter
CrazyCooter's picture

Bernanke's opinion makes total sense. Why? Interest rate swaps.

If I am not mistaken, interest rate swaps and credit default swaps are the two biggest slices in the derivative market pie that gets touted so much. You know, the JPM has 100T (big T!) in gross (not net) derivatives.

What is an interest rate swap? Simple in concept. Let's say you get a credit card offer in the mail for 9% and you want to use the whole line for your small business. But you are worried the rate will go up in the future, right? So what you do is buy an interest rate swap and transfer the rate risk (i.e. the chance the rate will go up or down) to someone else. So, you get 9% forever and someone else gets the plus or minus. Rates go to 15%? That poor bastard on the other end of the swap eats it. Rates go to 0% the bastard is laughing all the way to the bank (because he doesn't have to walk anywhere - its JPM).

When rates started dropping years ago, everyone wanted to lock in the low rate and avoid rate risk to the upside. So they did. JPM has such a huge book because they made the market and took the other side of the trade. Rates kept on dropping and JPM kept making the market.

The simple fact is that if rates do go up, some banks are going down which will set fire to the CDS market. And its too big to bail this time. Welcome to ZIRP forever. Which will, by the way, slowly destroy the entire market/system. Keep your power dry for the reset!

Regards,

Cooter

Sat, 05/17/2014 - 11:34 | 4769264 markmotive
markmotive's picture

Stop reading this and keep buying your sh!t. Do your duty!

http://www.planbeconomics.com/2013/06/the-unconscious-consumer.html

Sat, 05/17/2014 - 11:44 | 4769288 old naughty
old naughty's picture

how long is his lifetime, I wonder.

Sat, 05/17/2014 - 11:50 | 4769299 CrazyCooter
CrazyCooter's picture

That was my first thought. My guess is ten years, maybe 15. So, think "lost decade or two".

But, ZIRP is eating the economy like a cancer, so shit will come unhinged way before that.

Regards,

Cooter

Sat, 05/17/2014 - 12:24 | 4769356 Chief Wonder Bread
Chief Wonder Bread's picture

Apologies if someone has already made this observation.

From the article:

Certainly expect the price of a Bernanke dinner to tumble now that virtually everyone who matters, and can afford the fee, has already listened to the Chairsatan in private, and the value of Bernanke's insight has been, shall we say, "diluted":

No. His fees will remain the same and he will 'earn' them. Why? Because this is merely the payoff period for his 'work' during his tenure as Chairsatan. If he didn't continue to earn fees at these levels, then Yellen and those who come after her wouldn't know who to serve. There's no honor among thieves.

Sat, 05/17/2014 - 12:30 | 4769370 Boris Alatovkrap
Boris Alatovkrap's picture

Boris, in humble apartment share with mother-in-law and lazy nephews is say again and again, Fed Rate is forever to be stuck. Duration Mismatch is, how you say, reed for breaking of posterior of dromedary. In 2008 Fed is lower rate and is hold for too long, and new ZIRP regime is building on lend long borrow short in perpetuity. All other world central bank is follow.

Sat, 05/17/2014 - 12:46 | 4769403 Stackers
Stackers's picture

What idiot would be shocked by this ? Anyone with half a brain, a calculator and access to www.usdebtclock.org knows that interest rates can never rise, ever, never, never ever again or the whole world turns into Cyprus and Greece. Should be interesting when interest rates do rise.......

Sat, 05/17/2014 - 17:09 | 4769475 Pinto Currency
Pinto Currency's picture

 

Expect proclamations by Bernanke and other central planners to become more and more fantastic as they become more desperate.

My sense is that we are about to be swamped by consumer goods price inflation after Bernanke et al's wild QE monetary inflation.

Solution: conflict with Russia and blame energy and metals price spike on Euro energy disruption and fear trade.

re. the video of Bernanke - the US did have dropping house prices on the national level - during the Great Depression.  Bernanke would have known that.

Sat, 05/17/2014 - 12:31 | 4769374 rubiconsolutions
rubiconsolutions's picture

It's an interesting "coincidence" that this article is just a couple away from another about homelessness. In the coming years the elderly who depend on savings are going to be homeless as their savings is eroded by ZIRP and QE enabled inflation. But of course it will be illegal to help the elderly homeless because, well, the government can do a far better job.

/sarc

Sat, 05/17/2014 - 16:18 | 4769418 derek_vineyard
derek_vineyard's picture

investing options:

2% yielding s and p stocks ---- dividends taxed as cap gains

5 year brokered cd's yielding 2% taxed as ordinary income  (10 year cds yield 3.35%)

rental real estate (which requires active participation)

gold bullion. silver bullion and guns in excess (some to trade)--which government is hell bent on crashing the market

cash and just eat all the worlds inflation

PE's at 1,000,000 will yield more than a money market.  LOL at our world.  Humans are stoopid.

Sat, 05/17/2014 - 12:26 | 4769363 eatthebanksters
eatthebanksters's picture

Why would anyone pay this douchebag $250k to blow smoke up their ass when a nasty hooker would do it for $25.  Unbelievable...what insights will this guy give that are different now from when he was Chairsatan?  He's still going to lie to keep the game going as long as he can.

 

Sat, 05/17/2014 - 19:42 | 4770226 LetThemEatRand
LetThemEatRand's picture

Hookers with beards and fore-knowledge of what the Fed is going to do are more expensive.  Niche market.

Sat, 05/17/2014 - 16:01 | 4769770 StychoKiller
StychoKiller's picture

Reminds me of that scene in "Jurassic Park II" where the T.Rex saunters off the cargo ship:

Malcom:  "Now you're John Hammond." (to the jerk CEO that 'thought' he had things under control)

Sat, 05/17/2014 - 18:26 | 4770068 Kirk2NCC1701
Kirk2NCC1701's picture

When will people clue in that ZIRP = libertarianism of sorts?  Think about it...

If you're against Usury and dont' believe/think that "money should beget money" (compound interest), but that we save by saving what we earn ("By the sweat of thy brow thou shall..." Genesis 1), then it only makes sense that FRB gets reeled in with ZIRP.

Funny how people hate the Truth when it adversely affects them (i.e. No interest on savings).  Boo-hoo kitty!

Sat, 05/17/2014 - 15:12 | 4769671 DeadFred
DeadFred's picture

I am hoping he is correct and that rates mormalize by the end of the year ;)

Sat, 05/17/2014 - 12:13 | 4769340 JoeSoMD
JoeSoMD's picture

It is posts like yours Sir that keep me coming back to ZH.

Sat, 05/17/2014 - 12:18 | 4769348 JoeSoMD
JoeSoMD's picture

Sorry, a couple of questions from a novice... why will ZIRP forever slowly destroy the entire market / system?  What "system" are you referring to.  Not trying to be sarcastic here ... just trying to learn.

Sat, 05/17/2014 - 12:27 | 4769367 eatthebanksters
eatthebanksters's picture

Read up on 'liquidity trap'.  All you need to know.

Sat, 05/17/2014 - 18:08 | 4769390 Chief Wonder Bread
Chief Wonder Bread's picture

It distorts the price of money - the money market rate of interest. All sorts of nonproductive investments get funded because it becomes difficult to identify truly productive from nonproductive assets when the price of money is distorted/suppressed. These nonproductive investments will never pay for themselves. In that way, capital (productive assets) is destroyed or never replenished. Society cumulatively gets poorer and poorer although few can identify the cause.

Sat, 05/17/2014 - 18:25 | 4770065 daveO
daveO's picture

And it funnels more money to the gov., allowing it to takeover the markets.  

Sat, 05/17/2014 - 21:20 | 4770422 CrazyCooter
CrazyCooter's picture

JoeSoMD, I have a few words of advice.

First, I didn't know shit until '07 when I knew housing was jacked and I (1) let an investment professional make bad decisions on behalf of my household and (2) I let my ex-wife talk me into buying a house. This was the second time I got screwed in investing and I realized that if I didn't learn how the system worked, I was under the bus in old age.

Here is the reality; if *YOU* do not learn how money, banking, and the financial system in general works you are *FUCKED* in old age.

Check? Roger!

Second, I have been on ZH for quite a while and so far this is the best place to cut your teeth. Read the shit you don't understand, it is why you are here. The faces and the voices have changed and it is unfortunate that much of the back-and-forth of the old threads is so out of reach, it is there if you want to dig.

<Aside>Tylers, I have ideas about how to re-purpose old content if y'all care. The real thread contributors tend to fade over time, so a tool set that lets folks pick a name and read would be highly useful. Ping me and I can pitch for you. I assumed you didn't have it because you consciously decided not to do it. I thought about this as a third party site, just going off archives, but I got better shit to do (like fish!).</Aside>

Thired, everything you ever needed to know can be learned in two books and one PDF (learn how to search Google):

None if this is new. It is the SAME shit for hundreds of years. Computers are the only new dynamic. If you don't have time to read that stuff on the shitter, then you aren't serious about learning a damn thing. It pretty much sums up, in narrative no less, much of what you need to know.

Lastly, to highlight, that Shadow Banking PDF summarizes the interest rate swap stuff I talked about up thread. And a lot of REALLY good info if you are cutting teeth.

Regards,

Cooterf

 

Sun, 05/18/2014 - 00:22 | 4770748 CrazyCooter
CrazyCooter's picture

Doh!

My apologies.

I meant to cite this paper. Hope you check back for the update.

Dallas Fed: Understanding the Risks Inherent in Shadow Banking: A Primer and Practical Lessons Learned

Best of luck.

Regards,

Cooter

Sun, 05/18/2014 - 06:20 | 4770972 JoeSoMD
JoeSoMD's picture

Got it.  Thanks!

Sun, 05/18/2014 - 08:21 | 4771033 CoonT
CoonT's picture

+10 most informative comment ever

Sat, 05/17/2014 - 11:27 | 4769241 BrosephStiglitz
BrosephStiglitz's picture

What a cocksucker.  Translation:  Hey Europe.  You NEED to damage relations with a regional neighbor because it suits our interests.  Maybe send your economy back to the Stone Age.  Another world war perhaps?

Europe is in a tough spot right now.  No question.

Sat, 05/17/2014 - 11:35 | 4769267 Winston Churchill
Winston Churchill's picture

No tougher than 1939.
Oh wait.....

Sat, 05/17/2014 - 11:56 | 4769305 BrosephStiglitz
BrosephStiglitz's picture

x

Sat, 05/17/2014 - 11:57 | 4769306 BrosephStiglitz
BrosephStiglitz's picture

You're right.  It's more like 1913.  Only this time with a small industrial base, nuclear capabilities, and massive energy dependence.

Sat, 05/17/2014 - 11:53 | 4769308 CrazyCooter
CrazyCooter's picture

The US benefited in many ways from both World Wars ... because they largely were not fought here. We didn't have much to rebuild. With all the industrial capacity, when Europe was a burned out honkey tonk, it was kind of hard not to have a few good years in sales.

The trick is to net it out and realize the world could have been better off with the resources deployed building on what existed instead of rebuilding what already existed.

At interest.

Regards,

Cooter

Sat, 05/17/2014 - 12:06 | 4769324 BrosephStiglitz
BrosephStiglitz's picture

Loving these posts Cooter.  Rice and other bureaucrats are just kicking the hornet's nest are are hoping to turn Europe into ground zero for a global war. At that point they can turn around and tell the Europeans: "See- we told you that Putin couldn't be trusted!"  So who does Europe pick?  Their historic NATO ally who at this point seems to want to maintain its slipping grip on global power at any cost?  Or do they go willingly into the arms of a despot who almost certainly won't have their best interests at heart.

What you mention is called the "Broken Window Fallacy" in academic terms by the way..  The process of rebuilding after destruction, ie:, wars are good for the economy.  If I bomb a hospital, yes I am forced to clear up the wreckage build another hospital after peace is restored.  But with those resources I could have built a second hospital and had resources left over after.

The only good thing that war does do is cause a large investment in risky R&D projects that otherwise would never have of been considered.

 

Sat, 05/17/2014 - 12:31 | 4769377 CrazyCooter
CrazyCooter's picture

While most of the population of the world is either ignorant (i.e. not educated and won't understand) or not paying attention (i.e. educated/educable and doesn't care) they will start asking really hard questions when shit hits the fan. Absent a war, that will be a domestic "come to Jesus" meeting between the population and its leaders.

War is how the current crop of broke dick leaders avoids culpability for the disaster they are presiding over.

Oddly, Putin has thwarted them at every turn and comes out on top to boot (i.e. Iran, Syria, and so far Ukraine). While Putin is sharp, these outcomes point to the genuine incompetence of US leadership. If he is able to achieve a peaceful outcome with all this pot stirring going on, it might prove to be the best opportunity the Soviets/Russians ever had to topple the US.

 

What is Putin's strategy? Simple to avoid a hot war and watch the US economy implode. When the dollar loses reserve status, the US loses its military machine (i.e. we won't be able to afford it anymore).

I think that is Russia's game, but time will tell. And, as always, I could be (and often am) totally wrong.

Regards,

Cooter

Sat, 05/17/2014 - 13:28 | 4769453 BrosephStiglitz
BrosephStiglitz's picture

Agreed.  I was also aware of fed rates remaining low due to overleveraged banks, but I hadn't studied interest rate swaps.

PS: Coming back to my point of R&D and warfare.. it is likely that renewable energy (or non-conventional energy) technologies would absolutely explode out of another world war, provided that nukes aren't employed.   I don't think there has ever been such an enormous necessity for a particular technology.  Japan, Europe and China are all desperate for this right now and the demand for increased levels of industrial production, and the operation of mechanized armies would really tip the balance away from the oil/gas cartels.

Sat, 05/17/2014 - 16:12 | 4769787 StychoKiller
StychoKiller's picture

Time is on Putin's side in these events.

Sat, 05/17/2014 - 11:55 | 4769310 free_lunch
free_lunch's picture

Off topic, but certainly related in more than one way: now the previous link seems to have become invalid after +10.000 views I will post this new link to the account of the producer of this crowd funded documentary EUROMANIA.

A FILMMAKER ON A SEARCH TO UNCOVER THE EUROPEAN UNION:
IMDB: http://www.imdb.com/title/tt3037906/

Does Europe provide jobs and democracy, or is it a big business project? A deeply personal and revealing documentary from the creators of the 2012 hit Panopticon. EUROMANIA shows what is happening to people and countries all over Europe.

https://www.youtube.com/watch?v=cO4Ayo4mYZg

Sat, 05/17/2014 - 21:01 | 4770388 thestarl
thestarl's picture

A real global issue youth unemployment and prospects getting dimmer.

Sat, 05/17/2014 - 18:17 | 4770040 groundedkiwi
groundedkiwi's picture

I wonder if Ukraine is aware the lovely Condaleeza thinks Russian gas should not go through Ukraine. Its a money earner.

Sat, 05/17/2014 - 11:28 | 4769249 realWhiteNight123129
realWhiteNight123129's picture

Bernanke IS RIGHT. The Fed is going to fail before. So no Fed no Fed Funds rate at 4%. Simple.

Sat, 05/17/2014 - 12:05 | 4769326 Lost My Shorts
Lost My Shorts's picture

Either that, or some nervous morning it's going straight from 0% to 25% with no stop at 4%.

Sat, 05/17/2014 - 12:07 | 4769330 new game
new game's picture

notice of death went on to say the family askd for forgiveness for the millions of families his policies put in turmoil.

"We dispair the consternation he was under to answer to his superiors. forgive them too"...

Sat, 05/17/2014 - 16:13 | 4769790 StychoKiller
StychoKiller's picture

Madame Guillotine has only one reply...

Sat, 05/17/2014 - 10:52 | 4769182 outofideas
outofideas's picture

Well are we talking his natural life time, or ... ?

Sat, 05/17/2014 - 11:05 | 4769204 0b1knob
0b1knob's picture

Whenever a politician promises ANYTHING for his or "our" time you know a reset is at hand.

https://www.youtube.com/watch?v=FO725Hbzfls

 

Sat, 05/17/2014 - 11:24 | 4769238 NihilistZero
NihilistZero's picture

That was my first thought.  Why in the fuck would wee trust the word of Mr "Subprime is contained" on anything???

Something is going to happen, but I think it will be much more subtle than a dollar destruction.  Some basket of currencies coupled with low rates AND deflation because all the borrowed money is going to the .01%.  Luxury items and real estate will mop up all kinds of excess liquidity while everything else slogs downward reflecting the 99.9%s decreasing purchasing power.

 

Sat, 05/17/2014 - 18:16 | 4770027 BrosephStiglitz
BrosephStiglitz's picture

It's anyone's guess what happens next.  SDRs are probably going to be the next port of call, so that would be the basket.  Definitely don't see a gold standard coming into play.

Deflation does seem plausible also as credit thins, capital controls might also go into effect.  Unless .gov hijacks the printing press overtly and runs it on a permanent basis, or there is a sudden repatriation of foreign dollar reserves.

I wonder what will happen to student loan holders, because damn is deflation going to be painful for them and there is no possibility of debt forgiveness in post crisis loans.  If I wasn't able to clear my loan within a set time-frame I would be seriously looking to sell some organs on the black-market.

Sat, 05/17/2014 - 11:31 | 4769259 max2205
max2205's picture

Fuck you Ben!

Sat, 05/17/2014 - 10:57 | 4769189 flacon
flacon's picture

THX hits the nail on the head. That is exactly what I believe is happening and will happen. I hope it doesn't happen when my two sons are of military age (6yo / 8yo presently).

Sat, 05/17/2014 - 11:07 | 4769203 BrosephStiglitz
BrosephStiglitz's picture

Ever wonder why banker bonuses are no longer representative of performance?  THX nailed it.  

But honestly I'd be massively surprised if this thing played out for another decade.  The metaphorical barbarians (Russia/China) are already at the gates.  Couple that with an undercurrent of anger and frustration at food prices.  I give it less than 5 years.

Edit: Ultimately these things are hard to pin down and with the EU and Japan limping along and hemmorrhaging on a day to day, it might be longer.  At this stage it isn't a question of if the dominoes fall, it is just a case of which one falls first and when it happens.

Sat, 05/17/2014 - 11:23 | 4769237 BlindMonkey
BlindMonkey's picture

I said the hangover from Keynes' big party is going to be a bitch. Lots of economies have tried to paper over problems before. I am thinking that doing this on a global scale concurrently is going to prove unique. A reset is going to happen. The big question is will the reset be global thermonuclear war or not.

Sat, 05/17/2014 - 11:01 | 4769195 Dr. Engali
Dr. Engali's picture

The USDA isn't buying sub-machine guns and body armor to hunt rabbits.

Sat, 05/17/2014 - 11:27 | 4769246 BlindMonkey
BlindMonkey's picture

It actually makes sense to me. They have seen too much if this and are expecting the rabbits to shoot back.

http://youtu.be/MGH03m2pGEM

(PS. My autocorrect changed 'rabbits' to rappers. Now that is an interesting edit in context if you ask me.)

Sat, 05/17/2014 - 15:56 | 4769761 StychoKiller
StychoKiller's picture

"I knew the gun was loaded, but I didn't think it'd kill!" is NOT a valid excuse...Madame Guillotine is getting thirsty!

Sun, 05/18/2014 - 00:15 | 4770736 kchrisc
kchrisc's picture

Too late!

Constitutional oath and Article 3, Section 3 and Article 1, Section 8 violations and aggressions against people and their property are all that need be presented as evidence against all pols, crats, thugs and banksters.

 

"My guillotine is going to party like it's 1775."

Sat, 05/17/2014 - 10:38 | 4769155 Oh regional Indian
Oh regional Indian's picture

My left field take:

He said this more as a reflection on his remaining life time, perhaps?

He's got a spot reserved on Pleasure Island, to join the Enron Gang and all the other sundries :-)

Sat, 05/17/2014 - 10:48 | 4769171 Spastica Rex
Spastica Rex's picture

Not long ago, I asked you for your off-handed thoughts on solipsism. Today I'll ask you for your off-handed thoughts on (philosophical) materialism.

P.S.

Have you posted a response to India's election?

Sat, 05/17/2014 - 11:56 | 4769312 Oh regional Indian
Oh regional Indian's picture

Ma-terial ism.

Mater Realism.

Matter. Realism.

Magnetic

Pa

Pater

Pattern-maker.

Electric

Cause and effect. 

In effect.

 

And I did... ;-)

Of course...

http://aadivaahan.wordpress.com/2014/05/15/mera-bharat-mahaan-ahhhaaaaha...

 

 

Sat, 05/17/2014 - 11:00 | 4769194 Boston
Boston's picture

Huh?

Treasury yields have been FALLING on average for the past 5 months. Seems to me they are fully in "control" of the bond market.......assuming of course we agree that "in control" means containing or depressing the price that the US government pays on its debt.

Sat, 05/17/2014 - 11:28 | 4769247 indygo55
indygo55's picture

Over 5 years passes after the crisis and he still would sit there and calmly answered the softball questions from a captured congress and no one did a thing to call him out. The whole thing is a dismal cluster fuck. They all must be:

1.stupid,

2. bribed or

3. threatened. 

Sat, 05/17/2014 - 11:39 | 4769275 Winston Churchill
Winston Churchill's picture

All of the above.

Sat, 05/17/2014 - 12:14 | 4769342 new game
new game's picture

pinto, don't think they have lost any control! they are doing what they do - control this shitshow.

think you got it backass. they're in complete control. think that is the mindset missing here at zh(by majority). call it wish/think/delusion to hopium for a failed policy. remember that boss you wish would nailgun himself, ha, never happens, but alas, you hear he is PROMOTED! all the time you wish he was dead. just don't happen. trust me, i'm of you thoughts, only not seeing HOW it will happen, short of a truly dark black swan, like say an asteroid hitting dc and ny area...

Sun, 05/18/2014 - 08:48 | 4771048 Raging Debate
Raging Debate's picture

New Game - You are a very bright student. My forecast continues to be stagflation until 2021. To make money one does what others don't want to do for job security. Since there are millions of coders now all comepting for a dwindling slice I learned databases and how to leverage them. Data manipulation and gatekeeping is growing in demand. Just citing an example.

It's going to remain a barbell economy for at least another several years. We are becoming France so attempt to escape gravity (tougher now if your middle class) to have enough money to do lots of diligence to multiply money slowly or work less and downsize to have free time.

Geopolitics are a real wild card. I also am not so sure we in America will make it five years without revolt but misdirecting a population into war seems the most common solution for governments. I advise not picking sides and hedging accordingly. But do try and have some fun and not devote your entire existence to fear life is short.

Sat, 05/17/2014 - 13:37 | 4769512 RafterManFMJ
RafterManFMJ's picture

I'd gladly pay 1 dollar to hear him speak, assuming I got a table within my shoe-hurling envelope.

I'd love to bounce a steel toe off his perfectly styled head and hear it ring like a gong in Chinatown.

Sat, 05/17/2014 - 10:54 | 4769138 BrosephStiglitz
BrosephStiglitz's picture

Ultra-bullish.  Adding Facebook,Twitter, Linkedin, Alibaba, Amazon and a mix of the Dubai stock market's choice picks to my portfolio as I type this.  Gonna make it rain Greenbacks up in this bitch. /sarc

Sat, 05/17/2014 - 10:31 | 4769147 Salah
Salah's picture

IF TRUE, IT'S THE 'MOTHER OF ALL CONTRARY INDICATORS'

Sat, 05/17/2014 - 11:06 | 4769207 intric8
intric8's picture

Why are these bastards so honest and forthcoming only AFTER they leave the fed res?

Sat, 05/17/2014 - 10:31 | 4769145 Gamma735
Gamma735's picture

From the Bernanke perspective, goverment debt load means they will have to keep rates at near zero(i.e., Japan) or the interest on the debt load will implode the economy.  But once the US$ loses its reserve status, there will be no conroling the rate as no one but the Fed will want or buy bonds.  

Sat, 05/17/2014 - 11:29 | 4769253 Snidley Whipsnae
Snidley Whipsnae's picture

Rates won't be 'normalized' because of weather.

If the weather doesn't improve rates will be driven negative.

Sat, 05/17/2014 - 11:32 | 4769262 holmes
holmes's picture

I hope he drops dead by mon AM. I'd like to see the mkts get back to normal ASAP.

Sat, 05/17/2014 - 11:59 | 4769317 BadKiTTy
BadKiTTy's picture

Of course...... it does depend on how long he lives! 

 

Sat, 05/17/2014 - 12:37 | 4769385 stant
stant's picture

Thanks to him and the gov the price of my own dinners are outa sight too

Sat, 05/17/2014 - 13:56 | 4769545 TheReplacement
TheReplacement's picture

Think about it for a moment.  Either the central party is successful and takes control of the world, in which case rates just don't matter, or there is a global upheaval and the central party is used as unseasonal lightpost decorations, in which case rates will skyrocket. 

If the central party takes over rates will be manipulated forever and he lives a long time.  If they fail to take over rates will no longer manipulated and he will die early.  Either way, not in his lifetime.

Sat, 05/17/2014 - 18:08 | 4770013 caShOnlY
caShOnlY's picture

Is this really a surprise?

No real surprise to me.  This is nothing more than a disguise to pay Bernanke back, in large sums, for pumping the market back from the dead and saving those most attached to it.   No surprise it is the hedge funds, investment houses and the like attending.  Slick Willie is worth ungodly amounts for constantly going to China to give multi million dollars speeches.  Too bad most of his audiences couldn't even speak english.  Didn't matter as the Corps, Big business and W.st. payed slick william handsomly for his assitance in turning the USA into the largest fascist nation in just a few short years.

Sat, 05/17/2014 - 20:27 | 4770318 icanhasbailout
icanhasbailout's picture

Not a surprise at all.

 

The events leading to rate normalization are also likely to lead to Bernanke being hung in the public square.

Sun, 05/18/2014 - 10:18 | 4771124 ZH Snob
ZH Snob's picture

being a retiree and all, you'd think Ben would be more concerned with low interest rates.  he can't count on this 250K fee forever.

 

Sun, 05/18/2014 - 12:16 | 4771347 Jumbotron
Jumbotron's picture

2020.....give or take 2 years......the wheels really start to come off.  Too many demographic, financial, macroeconomic and cheap energy related tsunmais for the system to handle.

The Long Emergency......

https://1.bp.blogspot.com/--W8mdCVwsM0/TdvLq26vSpI/AAAAAAAAATg/whcFEClwj...

Sat, 05/17/2014 - 10:20 | 4769118 km4
km4's picture

The biggest shocker is not that Bernanke punked the market once again and after 5 years of QE the US economy is once again headed into a tailspin - most people with some common sense knew that in 2009.

The shocker is that people are still willing to pay even $1, let alone $250,000, to listen to Bernanke speak.

+100

Sat, 05/17/2014 - 11:16 | 4769222 Ignatius
Ignatius's picture

It's not pay, it's the payoff for services rendered.

Sat, 05/17/2014 - 11:55 | 4769311 CrazyCooter
CrazyCooter's picture

Three letters for you sir.

Oh.

Pee.

Em.

Regards,

Cooter

Sat, 05/17/2014 - 13:05 | 4769449 KickIce
KickIce's picture

No kidding the solution to every problem is to push CNTL-P.  Mr. Bernanke, would you please summarize your job responsibilities?  Well, every week I get a call from the Rothschilds and they tell me how much money to print and I run to the computer to hit CNTL-P; then occasionally I have to answer softball questions from a Congress that has been bought and paid for by the Rothschilds (you know, the people that really appointed me) so I there's absolutely no fear of ever being challenged.  People pay 250K for this?

Sat, 05/17/2014 - 10:20 | 4769120 kliguy38
kliguy38's picture

Wanna bet Biatch........you can cheat mother nature only so long.........

Sat, 05/17/2014 - 10:24 | 4769126 apberusdisvet
apberusdisvet's picture

 

 

iN HIS LIFETIME?

 

Does the asshole see a guillotine in his near future?  I certainly hope so, because the revolution will begin after just 2 more years of this purposeful destruction of the global debt slaves.

 

Sat, 05/17/2014 - 10:27 | 4769132 BrosephStiglitz
BrosephStiglitz's picture

He was the number one target on that "Assassinations for Bitcoin" website.  There was a decent sum of money (bitcoin equivalent) on his head.  Bernanke is probably going to end up fleeing to New Zealand to live out his days in Lord of the Rings, Shire-like  solitude.

Sat, 05/17/2014 - 11:18 | 4769224 SanfordandSon
SanfordandSon's picture

Strongly disagree with your statement, especially for those of use who have served this country for years who could have and at times wish they had gotten their brains blown out. And now see what it has turned into and frankly have a sense of what it will take to turn things around...

Have been and love the silence and solitude of New Zealand, especially the south-southern island.  Picked the U.S. western mountains to live, but often think of my time in New Zealand. 

Sat, 05/17/2014 - 18:11 | 4770022 groundedkiwi
Sat, 05/17/2014 - 22:25 | 4770520 BrosephStiglitz
BrosephStiglitz's picture

Huh.  Looks like I wasn't the only one who considered NZ about the best place in the world to be if the nukes start flying.  Too bad I don't have 5 mill.

Sat, 05/17/2014 - 10:25 | 4769129 RaceToTheBottom
RaceToTheBottom's picture

I find it mildly amusing that the most anti-capitalistic, central planned actions were caused by the group that views themselves as the bastion of capitalism, Wall Street.

Wall Street should be broken and started over. You cannot do worse than what we have now.

Sat, 05/17/2014 - 10:26 | 4769131 Smegley Wanxalot
Smegley Wanxalot's picture

Solution:  end his (waste of a) lifetime and raise the rates.

Win-win!

Sat, 05/17/2014 - 10:39 | 4769158 FieldingMellish
FieldingMellish's picture

I'll get the piano wire and meat hook, you bring a lamppost.

Sat, 05/17/2014 - 10:28 | 4769133 csmith
csmith's picture

Millions of empty homes, unsold cars, ghost Chinese cities, etc., with more produced every day and ANYBODY thinks rates will "normalize" within the next 20 years?!?!?

The "solution" is staring us in the face, and the Bernank couldn't admit it when he was chairing the Fed, but now he can. It destroys banks and governments, but it would bring material prosperity (as all this crap sells at real instead of fake prices) to many people. Its called deflation, aka progress.

Sat, 05/17/2014 - 10:42 | 4769163 Oh regional Indian
Oh regional Indian's picture

The only sure-fire way to combat deflation is Viagra....

http://www.google.com/trends/explore#q=Deflation%2C%20viagra&cmpt=q

 

Sat, 05/17/2014 - 10:53 | 4769183 CrashisOptimistic
CrashisOptimistic's picture

$102.

How could anything get better?

Sat, 05/17/2014 - 10:35 | 4769135 Sudden Debt
Sudden Debt's picture

nailgun accidents... how they actually happen...
http://www.youtube.com/watch?v=ClL86IwN6o8&sns=em

Sat, 05/17/2014 - 10:56 | 4769188 BrosephStiglitz
BrosephStiglitz's picture

They really need to ban bankers from playing with nailguns during lunch break.  Those darned things sometimes just go off.

Sat, 05/17/2014 - 11:17 | 4769228 intric8
intric8's picture

Its called the bankers acupuncture. Those small needles just dont work well enough on relieving stress associated with an sec inquiry designed to hang the rank and file bankers so the real big assholes can get off scott free.

Sat, 05/17/2014 - 10:30 | 4769140 bam
bam's picture

Ben is always wrong, everyone short bonds NOW!!!

Sat, 05/17/2014 - 10:32 | 4769149 remain calm
remain calm's picture

"During my lifetime"

Well lets consider this for a moment. When the world economoies defalt, and they will default who do you think we are going to hang by theor balls? How long can you survive hanging by your balls? Then how high will interest go? That right you won't know because you will be dead from hanging from your balls. So you are correct when you say your lifetime. The real question is. How can your fellow central banker keep you from hanging from your balls? That my friend is the 64 Quadrillion dollar question.

Sat, 05/17/2014 - 10:38 | 4769156 stonecoldbrokei...
stonecoldbrokeinthemiddleofthewinter's picture

Does Yellen have balls?

Sat, 05/17/2014 - 12:21 | 4769350 old naughty
Sat, 05/17/2014 - 10:34 | 4769150 ptoemmes
ptoemmes's picture

So, it sounds like his fee per session is $250,000 plus or minus.

OK - how many residents of ZerHedgeVille (you know the FEMA camp) are there?  I'd chip in $5.00 (cash advance on my SNAP card) with my fellow residents to attend a Bernank Meet-n-Greet.  Perhaps he'd come to the ZeroHedgeVille open air amphitheater.  We could all sit in those brand spankin' new unsold GM vehicles parked at the 'Ville.

Sat, 05/17/2014 - 11:08 | 4769159 JustObserving
JustObserving's picture
"No Rate Normalization During My Lifetime"


US debt and unfunded debts are $147 trillion today and rising at $8 trillion a year.  There is no chance that US rates can normalize.  I could have saved you that $250,000.

Or put it another way - US debt and unfunded liabilities are $1,265,000 per taxpayer and rising at $69,000 per taxpayer per year.

Kotlikoff claims that US debt and unfunded liabilities exceed $230 trillion and growing at $11 trillion a year.

http://www.usdebtclock.org/

http://www.bloomberg.com/news/2012-08-08/blink-u-s-debt-just-grew-by-11-...

Sat, 05/17/2014 - 10:42 | 4769162 deepsouthdoug
deepsouthdoug's picture

Fuck the savers.

Sat, 05/17/2014 - 11:06 | 4769206 free_lunch
free_lunch's picture

Now that's not very nice..

Off topic, but certainly related in more than one way: now the previous link seems to have become invalid after +10.000 views I will post this new link to the account of the producer of this crowd funded documentary EUROMANIA.

A FILMMAKER ON A SEARCH TO UNCOVER THE EUROPEAN UNION:
IMDB: http://www.imdb.com/title/tt3037906/

Does Europe provide jobs and democracy, or is it a big business project? A deeply personal and revealing documentary from the creators of the 2012 hit Panopticon. EUROMANIA shows what is happening to people and countries all over Europe.

https://www.youtube.com/watch?v=cO4Ayo4mYZg

Sat, 05/17/2014 - 10:44 | 4769166 Herdee
Herdee's picture

Tapering to the very end will be interesting and what will happen to the stock market,interest rates and gold upon completion of the tapering?Don't forget to add on increases in debt payments by government.Where's the tax money coming from?IF the market corrects,pension funds are going to take a big hit and I just don't see any substantial economic recovery in the cards but I do see lots of propoganda saying there's there's the start of a big recovery in a depression.

Sat, 05/17/2014 - 10:49 | 4769174 BrosephStiglitz
BrosephStiglitz's picture

Tapering won't stop.  I am sure it will as far as the media is concerned but clandestine QE will go on until the very end.  Which will be the death of the dollar.

Sat, 05/17/2014 - 11:01 | 4769197 codytho
codytho's picture

What will really happen to gold

Sat, 05/17/2014 - 11:18 | 4769230 BrosephStiglitz
BrosephStiglitz's picture

There will likely be a flight of dollars into gold & silver and other liquid real assets, which means they probably will trade at a premium (in the black market, only by the way).  Once the situation stabilizes and a new currency is maintained, they will trade at discount.

Sat, 05/17/2014 - 10:50 | 4769172 Son of Captain Nemo
Son of Captain Nemo's picture

I actually appreciate the fact that you posted this read with this SOB's "shit eating grin" of a picture.

When he said "not in his lifetime" does he know and understand that 'his' will be considerably shortened due to his very poor choices as a Fed Chairman?...

He'll be singing a very different tune and regrettably so will all the rest of us when a World War is the variable that will be used to compensate for that perpetual "rate cut" which always results in a generous reduction of the surface population which always winds up including the people at the top with that emergency capsule (just in case) buried in the breast pocket of the suit jacket!

Sieg Heil Benny "Shalom"! 

Sat, 05/17/2014 - 10:47 | 4769173 Fix It Again Timmy
Fix It Again Timmy's picture

Gold pays no interest; your fiat-savings account also pays no effective interest.  To say that relationship is unnatural is an understatement....

Sat, 05/17/2014 - 10:48 | 4769176 aqualech
aqualech's picture

Obviosly there is something horribly wrong and this will end badly for the US and its USD.  Is it even POSSIBLE to "end the FED" now or would that just mean a huge debt service crisis sooner rather than later?

Sat, 05/17/2014 - 10:49 | 4769177 Dr. Engali
Dr. Engali's picture

This should come as a shock to nobody. We've known a along that no matter what they say rates will never ever go up. There are far too many unfunded liabilities. Rates will eventually continue their downward trajectory until we see 1% or lower on the ten year. Fuck the savers, elderly, and poor. The only issue of importance is preserving the status quo.

Sat, 05/17/2014 - 11:13 | 4769179 OC Sure
OC Sure's picture

The best thing to happen to a nation governed by modern banking is deflation.

Deflation replenishes the citizens power to purchase.

Deflation reverses the ability for the thief to steal from citizens by their primary method of theft; counterfeiting.

Counterfeiting, the expansion of the "monetary base" (that is to say the counterfeit and not money), causes citizen's purchasing power to decrease and thus what they would have done or purchased with the formerly higher power to purchase has been stolen from them by the thief; the thief, the initial recipient of the counterfeit exchanged "nothing," the counterfeit, for something in the process of passing along the devalued "money."

That there will be more "liquidity injections," counterfeiting,  is symptom of the following cause:

The thieves can no longer tolerate the justice of deflation and will return to feast in a frenzy; this is their nature.

____

Bonds do not appear to be in a short squeeze. The trend up since December 28th has been on expanding open interest in the nearby futures. This is genuine long interest. Short squeezes are measured by up trends with contracting open interest. Do you remember at about 2:30 am on December 23rd the SIX POINT 15 minute surge in the Bond?

http://www.zerohedge.com/news/2013-12-23/todays-11-sigma-bond-market-fat-finger-3-d-animation

 Were those trades ever busted? They took that spike of the charts. Now, THAT was the short squeeze.

Sat, 05/17/2014 - 22:29 | 4770526 BrosephStiglitz
BrosephStiglitz's picture

Unless your debts > cash, and your debt is inextinguishable.. see: recent US students.

Sun, 05/18/2014 - 08:03 | 4771021 OC Sure
OC Sure's picture

 

 

 

Bro, I see what you mean but considering the full context that still does not change that deflation is always good and inflation always bad.

Let the system deflate completely once and for all. This will expose and separate the thieves from the victims.

The source of the debt is the counterfeit and the culpable are those who knowingly pass off counterfeit as money.

If you cannot afford to take on debt and instead expect to pay it back in worth-less dollars, then it was a poor decision to go into debt and the corruption has corrupted you.  

However, since the massive build up in loans is not a money for money, a something for something transaction, and instead they are a counterfeit for money, a nothing for something transaction, then the thieves should be held accountable and perhaps those devestated by deflation can obtain restitution in some way from the prosecution of the thieves.

 

Sat, 05/17/2014 - 10:53 | 4769185 planet psyop
planet psyop's picture

their agenda is beyond the latest and greatest million crimes we're familiar with - belch

Sat, 05/17/2014 - 10:59 | 4769192 yogibear
yogibear's picture

Japan #2. How did tthat work out?

More and more debt. More and more taxes and government expansion. Soon $20 trillion, much more when you look at the other long term debt.

The Federal Reserve is already buying US debt through Belgium and other country accounts.

The Fed will just keep devaluing the dollar while denying inflation that appears. Just keep calm everyone until the EBT card can't sustain people anymore, then it's riot time.

Sat, 05/17/2014 - 11:00 | 4769196 novictim
novictim's picture

Oh, it's true, alright.
There will be no rate increase in his *lifetime*.
Those in the know, such as the man in the background with the crazy eyes (just to the left of Mr. B on most panoramic interview pictures), suggest that Bernanke was making a desperate cry for help.

Mmmmm. It must have been very frustrating for the former Fed Chairman to find that the post-interview focus was on the rate question. Bummer.

Sorry, Ben, we believe you...it won't happen in your lifetime. Much like the 4th of July and many other imminent calender events...

Oh, look! Crazy eyes has moved even closer! Everybody back up!

Sat, 05/17/2014 - 11:02 | 4769202 mrdenis
mrdenis's picture

So the rates are to low or his lifetime is to long . .

Sat, 05/17/2014 - 11:05 | 4769205 q99x2
q99x2's picture

Arrest Bernanke. Lock the pedophile up. Don't let him get away. Arrest him for Treason.

Sat, 05/17/2014 - 13:56 | 4769546 RafterManFMJ
RafterManFMJ's picture

Treason?

He performed his job masterfully for the banks...oh, I see - you think the FED and .gov exists to serve you and your family?

U silly!

Sat, 05/17/2014 - 11:08 | 4769209 Amish Hacker
Amish Hacker's picture

Fake rates forever? On the north face of the Eiger is a very difficult traverse, now called the Hinterstoisser Traverse, in honor of one of the four climbers who died there on an early attempt in the 1930s. The group had ascended past the traverse, when bad weather closed in and they decided to retreat. Then they discovered to their horror that it was impossible to downclimb the traverse unless a fixed rope was left in place, and they hadn't done so. They perished.

Forgive the extended metaphor, but my point is this: there are some mistakes that, once made, are irreversible. When the Fed set interest rates to zero to save their banker friends, they had made it across the no-reverse traverse, but they left no fixed rope. For a quarter-million dollars Bernanke will tell you, smugly, that the Fed has no intention of retreating to normalized rates, but the simple fact of the matter is, it's impossible. 

Sat, 05/17/2014 - 11:12 | 4769217 aqualech
aqualech's picture

The value of their asset book would be crushed.  I've always wondered though to what extent they are backstopped from losses on gov debt holdings by the taxpayer.  Have'nt been able to find out anything.

Sat, 05/17/2014 - 11:26 | 4769244 WAMO556
WAMO556's picture

Bernanke is a dual-passport holder. He can't be arrested. Guess which country his OTHER passport is from???

Sat, 05/17/2014 - 11:41 | 4769279 I Write Code
I Write Code's picture

They are backstopped by an infinite supply of printer's ink.

But "backstop" is even the wrong concept - they *acquired* all these assets on nothing but printer's ink, so there's no backstopping involved.

Sat, 05/17/2014 - 12:23 | 4769352 JR
JR's picture

We are on the road to bankruptcy… i.e., ”Very Bad Economic Times Dead Ahead.”

At least that's the view from Dr. Adrian H. Krieg’s article:

“The dollar has been inflated by many hundreds of percent; it today is backed by nothing. Quantitative easing is the process of the government purchasing its own debt through producing more fiat paper whose value does not exceed the price of the paper on which it is printed; about one cent per banknote.

“They have been playing that game in Washington for about 30 years but beginning with Fed chairman Greenspan and continuing with Bernanke, the process has been greatly accelerated. Beginning in March 2011 the central bankers began purchasing their own debt by simply electronically issuing increases in the balance sheets of the 12 Federal Reserve branch banks to offset the losses. Any businessman who did this would be in jail in a heartbeat.

“So, the question is, what will happen to us? Well, it’s really easy to find out because before the dollar, the English pound sterling was the world’s reserve currency. It is a reasonable assumption that whatever happened to England when they lost that status will happen to the U.S. also.”

“What’s coming? A run on the dollar. A dollar devaluation. A rise in interest rates. The end of the dollar as the world’s reserve currency. Massive price increases across the board. The loss of much accumulated wealth in 401Ks, IRAs and savings accounts…. Huge tax increases, which already began in 2010. A reduction in Social Security payments through inflation and more reductions in COLAs.  An average inflation rate of about 30% per annum.

“Then within five years the elimination of the middle class.”

As former Federal Reserve Chairman Paul Volcker (CFR and TC) said in 1979:

"The standard of living of the average American has to decline... I don't think you can escape that." -- Testimony before the Joint Economic Committe of the U.S. Congress, October 17, 1979

Sat, 05/17/2014 - 11:53 | 4769296 One And Only
One And Only's picture

When the FED set interest rates at 0% it did bailout the bankers, this much is true - but that was more of a symptom. The number 1 beneficiary of the Fed printing money and keeping rates low isn't banks (in fact low rates aren't good for a banks traditional business model). The number one chief beneficiary of this all is the US government.

The FED is a lender and the US government is the borrower. By "law" the FED can't lend directly to the US government so they use banks as an intermediary (banks buy UST's and flip them to the FED). I believe most people reading zerohedge know that much hopefully. This would normally be horrific economically if a country wasn't exporting real goods. So how does the US government get away with borrowing free money at low rates without exporting any real goods? Because the US is the number 1 exporter of the World's Reserve Currency. That is the only reason the inflation rate in the US is low (comparatively) and that's because we export inflation to the rest of the world.

Most Americans take this for granted (mostly Obama) as he is ensconced in this race thing where all black people need to be equal regardless of whether or not they actually work. However, as zerohedge has been reporting the world is getting tired of importing our inflation and some of the largest countries are entering into contracts bypassing the dollar completely. I don't want to patronize the more astute readers but if and when the dollar loses it's reserve status (which is occurring before our very eyes if ones looks at the actions of Russia/China/India/Iran) than our inflation will get real bad. But America is a fat and lazy society that doesn't care about it's borders, language, or culture and soon enough all of the self entitled Americans who take for granted the privilege of having the reserve currency are going to learn that they've been living in a very comfortable dream for a very long time and when they wake up from that dream they are going to be very uncomfortable and very angry with very few choices.

When exactly this moment occurs is unfortunately beyond my pay grade but while the music is playing, enjoy your dance.

Sat, 05/17/2014 - 12:11 | 4769336 blindman
blindman's picture

http://ellenbrown.com/2014/04/13/the-global-banking-game-is-rigged-and-t...
The Global Banking Game Is Rigged, and the FDIC Is Suing
Posted on April 13, 2014 by Ellen Brown
.
..." Why would keeping interest rates low enrich the rate-setting banks? Don’t they make more money if interest rates are high?
The answer is no. Unlike most banks, they make most of their money not from ordinary commercial loans but from interest rate swaps. The FDIC suit seeks to recover losses caused to 38 US banking institutions that did make their profits from ordinary business and consumer loans – banks that failed during the financial crisis and were taken over by the FDIC." ...e.b.
.
With Greg Hunter on USAWatchDog: Banks Will Take Deposits in the Coming Financial Meltdown, LIBOR Rate Rigging and More
Posted on April 23, 2014 by Ellen Brown
http://ellenbrown.com/2014/04/23/with-greg-hunter-on-usawatchdog-banks-w...

Sat, 05/17/2014 - 12:26 | 4769362 blindman
blindman's picture

http://www.silverdoctors.com/pm-fund-manager-smoking-gun-on-the-feds-mon...
PM FUND MANAGER: SMOKING GUN ON THE FED’S MONEY LAUNDERING T-BOND PURCHASES
MAY 17, 2014 BY THE DOC

Sat, 05/17/2014 - 21:31 | 4770435 OC Sure
OC Sure's picture

 

 

"The number one chief beneficiary of this [counterfeitng] is the US government."

Then we live in tyranny and the thieves should be exposed as criminals, not saints.

...Good point, One and Only, about the trade deficit. For decades it has been an endless gushing firehose. It is the indicator to watch but I suspect the dxy and bonds will tip their hand long before the deficit-to-surplus news prints; or even a default which would intercept a deficit-to-surplus trend change.

Sun, 05/18/2014 - 01:35 | 4770674 bunnyswanson
bunnyswanson's picture

Great analogy.

The Beckoning Silence - the Eigen descent documentary

https://www.youtube.com/watch?v=zVkJBsUSdGs&noredirect=1

I have watched this...a number of errors were made.  The men thought they could descend from another route but weather (correction) injured man could no longer continue the ascent.  However, they pulled the rope from the hooks making it impossible to traverse the wall, as you mentioned.  They tried to go straight down.  The 3 men who came to rescue them also are said to have dropped a rope and by this time, the one man left alive had found himself hanging off the cliff with a clip stopping the knot, rendering the ability to reach the several feet to put him within distance of the men.  His hand had frozen and he was unable to untye the knot. 

https://www.youtube.com/watch?v=eCCDlK-WW0A

Wall of Death 

 

Sat, 05/17/2014 - 11:09 | 4769210 NoWayJose
NoWayJose's picture

We will see a 4% rate again in Bernanke's lifetime - even if it is only briefly during the economic collapse and plunge in the dollar. When the collapse of the dollar comes, higher rates will be offered as an easy solution to try to strengthen (save) the dollar because the effect is immediate, whereas the pain is only from refinancing debt that is rolling over each month. Of course the effect is only temporary as the fate of the dollar will be sealed at 4% rates. The rate will continue higher until the dollar dies.

Sat, 05/17/2014 - 11:10 | 4769213 sondernauch
sondernauch's picture

Did he say over his dead body? Be careful. I think killiing a bankster is still a misdemeanor.

Sat, 05/17/2014 - 11:15 | 4769225 chapaev's ghost
chapaev&#039;s ghost's picture

The most important articles on ZH are the most undercommented. The economy is like a tire with a giant hole in it- QE is like pumping air into that tire- as soon as the air goes in, it goes back out again.

If the fed stops printing money, the tire (economy) goes flat. Right now, with  QE-infinity, it is simply severely underinflated, but at least the rim isn't grinding against the pavement.

If the Fed raised effective rates even to 1%, the entire economy would implode.

To shift metaphors, QE is life support. We can argue aout the causes of death (peak oil), but the fact is, the economy is dead. There are two alternatives if anyone wants the status quo to continue. The first is what we are currently doing- printing money into an ENERGY SHORTFALL. The second is to start a giant war.

Currently, there is no real sustitute for cheap (plentiful) liquid fuel. It is portable, scaleable, and, (at least in terms of human effort), relatively efficient. Those days are gone. We can either, 1) Accept reality and transition our economy, population, political systems, and society BACK to a more decentralized, agrarian, Jeffersonian plan, based on muscle energy and economically sound renewables (falling water), 2) Keep QE until our scientists are able to perfect portable hydrogen, micro-fusion, or zero-point orgone energy systems, (I'm not holding my breath), or 3) Start a giant war, with the hopes of sequestering all available petroleum energy into the hands of the Western elite, in a vain attempt to prolong, not only an energy intensive consumer society, but the parasitic elite that controls it.

A final analogy- our economic system is like a heroin addict that burned through his family fortune. Now, unable to buy heroin, the addict must have a continual intravenous morphine drip (QE). Did his dependence on heroin (borrowed money lent at usury in a fiat system) kill him, or was it his dependence on, and the eventual failure of, his inheritance (cheap fossil fuel)?

So, I say, don't bitch about the life support. If I were you, I'd hope it lasts long enough to buy arable land with water rights, learn how to grow your own food and use draft animals, strengthen your family and kinship ties, build up a herd of cattle, and stock up on guns and ammunition. These things are the only true wealth.

I am Chapaev's Ghost

Sat, 05/17/2014 - 11:29 | 4769243 OC Sure
OC Sure's picture

 

 

 

 

Allow the system to deflate completely once and for all.

This will expose and separate the thieves from the producers.

Sat, 05/17/2014 - 11:18 | 4769227 chapaev's ghost
chapaev&#039;s ghost's picture

Double post, sorry

Sat, 05/17/2014 - 11:17 | 4769229 Racer
Racer's picture

Has he been told he has a terminal disease with 6 months to live?

Sat, 05/17/2014 - 11:39 | 4769276 RealityCheque
RealityCheque's picture

I believe he has no heart and has had brain cancer for about 3 decades but somehow continues to live.

Sat, 05/17/2014 - 11:18 | 4769231 JR
JR's picture

The only reason Bernanke said he does not expect interest rates to normalize in his lifetime (he’s 60 years old) was to hold the equity indices high in this oversold market with the hope that the bankers can somehow escape the erosion that’s coming for the banking sector. The bankers are in trouble.

This just proves again that the central bankers are unable to run the world. Markets, property and assets, and the contract society are essential for the progress of civilization.

Men such as Bernanke are tied to a European system that began with the Bank of England, a system that has corrupted the politics of the West in a spectacular way. And, now, honest men can no longer afford the Bernankes and the Montagu Normans who would manipulate currencies and politicians – “based on exploitation of the work of others without any productive activity of their own… characterized by gambling and speculation on the differential in values as the way to achieve riches” -- for their sole benefit.

In short, the world can no longer be run from a central location by a single central banker.

America’s Founders promoted Christian principles in commerce, based on decency, honest toil and a common good that restricted the use of excessive economic power.  This miraculous use of freedom and free enterprise is what built the world’s rising standard of living; it was not exploitation by the Fed for the profits of a the few.

And, btw, Bernanke is wrong about holding interests rates below normal for his lifetime; he’s already proven that his understanding of economics is only propaganda to hold stock indices up until the western economies finally take charge.

Sat, 05/17/2014 - 11:28 | 4769248 realWhiteNight123129
realWhiteNight123129's picture

Bernanke IS RIGHT. The Fed is going to fail before. So no Fed no Fed Funds rate at 4%. Simple.

 

Sat, 05/17/2014 - 11:37 | 4769271 blindman
blindman's picture

so what is the correct answer to the pop quiz?
.
inflation of mz's.., deflation of m0 resulting
in collapse of capital and markets, price
gone under the waves forever, no return. not enough
moth balls for storing unsold products. mountains of
dwellings and products produced and people have none.
throw away food and people starve. all the money
in the thin air and people are broken. weapons enough
to kill everyone and no need for war, if only war could
be waged against itself.
information exploding and access but no m0-ney for
education.
.
Stan Rogers - The Jeannie C.
https://www.youtube.com/watch?v=uXDSGJky4qk

Sat, 05/17/2014 - 11:38 | 4769272 RealityCheque
RealityCheque's picture

Hope they all got food poisoning and spent 48 hrs passing pint after pint of boiling hot shit.

Fucking retards.

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