This page has been archived and commenting is disabled.

Is The Fed Trying To Create A "Bond Run" Panic? Yes... In Its Own Words

Tyler Durden's picture


One of the most significant, if underrpeported stories of the week, was the announcement from Monday that in order to "prevent" bank runs, the Fed is preparing to impose "exit fee" gates on bond funds, in what, the official narrative goes, is an attempt to prevent a panicked rush for the exits. Of course, this is diametrically opposite of what the truth is.

This is what we  said: "it goes without saying that "discouraging investors" from withdrawing funds is the last thing on the Fed's mind, which knows very well that when it comes to investor behavior all that matters is how the Fed's future intentions are discounted. And with this unprecedented step, the Fed is sending a very clear message: it may be next year, or next month, or next week, but quite soon you, dear retail bond-fund investor, will be gated and will be unable to pull your money.... what is the obvious desired outcome, at least by the Fed? Why a wholesale panic withdrawal from bond funds now, while the gates are still open, and since those trillions in bond funds have to be allocated somewhere, where will they go but... stock funds."

But wait, this would mean that instead of attempting to prevent a rush for the exits, the Fed is in fact doing the opposite, and is seeking to force investors to sell those sticky bonds they are holding on to and destroying the propaganda of a recovery (remember: you can't pitch a stable inflation-driven recovery fable when the 10Y is trading at 2.50% in the process launching the very run for the exits it is supposedly trying to avoid.

Pure conspiracy theory right?

Well, maybe. But that doesn't explain why someone else who agrees with our assessment is none other than... the Fed?

That's right: here is what a recently released research paper by Cipriani et al of the New York Fed titled, "Gates, Fees, and Preemptive Run" found:

Our paper is the first to show that the possibility of suspending convertibility, including the imposition of gates or fees for redemptions, can create runs that  would not otherwise occur. This contrasts with the existing literature, which focuses on whether suspension of convertibility can prevent runs. In other words, we show that rather than being part of the solution, redemption fees and gates can be part of the problem.


... we show that there can be preemptive runs that occur only because an intermediary has the ability to impose "standby" (liquidity-contingent) gates or fees. Second, we show that for an intermediary that maximizes the expected utility of its own investors, imposing a gate or fee can be ex-post optimal. Hence, for an intermediary that can restrict redemptions in a crisis, a policy of not imposing such restrictions may be time-inconsistent. The financial intermediary might like to commit not to restrict redemptions, so that preemptive runs would not occur. Absent a means of ensuring commitment, however, the intermediary will find it optimal to suspend, con firming the beliefs of informed investors who withdrew preemptively.

Stated far more simply: the mere prospect of gating creates a self-fulfilling prophecy that results in the very bank run the gate was designed to prevent.

One can be sure that the same Fed, which is proposing "exit fee" gates is quite aware of this paper's conclusions. In fact, one can be certain that the Fed is imposing said gates precisely due to the findings of this paper.

In other words, the Federal Reserve, tasked with preserving financial stability, because not even the Fed pretends to be in the inflation and unemployment dual-mandate business any more - it is all about the "not a bubble" valuation of the S&P 500 - is actively seeking to create a bond run panic!

We wonder just which part of the Fed's "financial stability mandate" covers the Fed's attempts to spark a bond sell off.

Ironically, subversive intentions aside, as usually happens with the Fed when the intended theoretical outcome comes crashing down in the real world, an attempt to created a "controlled" panic, limited solely to bonds may very well backfire and result in a paniced withdrawal of other asset classes, including the most precious one of all to the Fed - equities.

Our results have broader policy signi cance. Rules that provide intermediaries, such as MMFs, the ability to restrict redemptions when liquidity falls short may threaten financial stability by setting up the possibility of preemptive runs. Much of the wider policy signi cance of that risk is beyond the scope of this paper, since our model does not incorporate the large negative externalities associated with runs on financial institutions, including MMFs. But one notable concern, given the similarity of MMF portfolios, is that a preemptive run on one fund might cause investors in other funds to reassess whether risks in their funds are indeed vanishingly small.

Example of the above: the S&P downgrade of the US which was supposed to drive investors out of bonds (and into stocks), had precisely the opposite effect.

But more importantly, now that the Fed has explicitly said in no uncertain terms that gating bonds funds will likely result in a loss of "financial stability", the next time there is a mandated market crash originating from either a bond run, or wholesale liquidity extraction panic, the world will know just who the guilty party is: the Fed.

Full paper below (link) 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 06/19/2014 - 10:33 | 4873540 gafgroocK
gafgroocK's picture



Proving the whole thing is a Show run by Clowns, i.e. a murderous Clown Show

Thu, 06/19/2014 - 10:38 | 4873569 Manthong
Manthong's picture

Heh heh..

This is what you get when you let .gov give control of the currency to a stinking banker.

We need another Andrew Jackson about now.

Thu, 06/19/2014 - 10:37 | 4873581 JRobby
JRobby's picture

Army of Jackson's and about a thousand shipping containers full of Jackson's to finance the "campaign"

Thu, 06/19/2014 - 10:40 | 4873588 Manthong
Manthong's picture



As when a conjurer takes a lease
From Satan for a term of years,
The tenant's in a dismal case,
Whene'er the bloody bond appears.

A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall.[4]

Thu, 06/19/2014 - 10:40 | 4873595 THX 1178
THX 1178's picture

The US is taking pointers from Russia.

Thu, 06/19/2014 - 10:45 | 4873612 linniepar
linniepar's picture

From the "No Duh" files! Again, all their actions signal intent to destroy our flawed system. One world order at a time.


Not for the benefit of We the people...

Thu, 06/19/2014 - 10:49 | 4873651 Manthong
Manthong's picture

“US is taking pointers from Russia”

..if only that was true.

..looks to me like we are taking pointers from North Korea.

Thu, 06/19/2014 - 10:59 | 4873686 jbvtme
jbvtme's picture

come the days of atonement and the banker's bloated corpses are rotting in the streets, my greatest fear is that the jackals and vultures will refuse the feast...

Thu, 06/19/2014 - 11:00 | 4873705 Newsboy
Newsboy's picture

Stockman has a post on this; calls it "Fed-Gate".

Thu, 06/19/2014 - 11:24 | 4873810 Oh regional Indian
Oh regional Indian's picture

Someone needs to Burn the FIRE economy.....

Thu, 06/19/2014 - 11:40 | 4873883 nope-1004
nope-1004's picture

This "free market thingy" the Fed is doing is the envy of the world.  Amazing how free markets work so efficiently.  lmFao!


But, not so much.  This is onion politics and idiotic economists pulling strings hoping to make sumpin work.


Thu, 06/19/2014 - 11:51 | 4873927 Oh regional Indian
Oh regional Indian's picture

When Hopium runs out, they will count the Hoes and the Opium...line items...hah! 

Thu, 06/19/2014 - 12:33 | 4874088 economics9698
economics9698's picture

Interpretation “Fuck single digit inflation, time to get Venezuelan with the goyim.”

Thu, 06/19/2014 - 11:42 | 4873904 Manthong
Manthong's picture

I have a few yellow bottles of MAPP that could help.

Thu, 06/19/2014 - 11:48 | 4873923 Oh regional Indian
Oh regional Indian's picture

 MAPP: Magnificence's Academy of Packaging Professionals?

I kid you not!   :-)


Thu, 06/19/2014 - 12:21 | 4874035 Manthong
Manthong's picture

ha ha ... are they gilded in gold?

(maybe smuggled in some cavity)

Thu, 06/19/2014 - 12:28 | 4874071 Manthong
Manthong's picture

hey ORI.. if you are living out east there...

What are they getting for 28 grams of Ag nowadays?

Thu, 06/19/2014 - 11:47 | 4873915 kchrisc
kchrisc's picture

Those in bond funds should be scrambling for the exits, as this pronouncement by the FedRes just killed the unicorns. And why would anyone want to wait until they impose these new poisons?

Run for the exits marked gold and silver.


“Steel, lead and guillotines are also commensurate investments as well.”

Thu, 06/19/2014 - 11:04 | 4873720 Manthong
Manthong's picture

have hope.

the hyenas await..

Thu, 06/19/2014 - 11:25 | 4873819 maskone909
maskone909's picture

when it all falls down, i will be chillin eating mariscos, counting my stack while watching the retards on cnbc plead that nobody saW it comming!

Thu, 06/19/2014 - 10:59 | 4873693 eatthebanksters
eatthebanksters's picture

This would be similar to something like Florida State leading Alabama in a national Championship game and the refs changing the rules at their whim to give Bama a victory.  (I love Bama, so don't take this as a slam - just using two great teams as an expample). This is as bad as changing the definition of default last year when the Greeks defaulted and no one wanted to pay out on CDS and start the implosion.

You know the shit is fucked up when they do unnatural shit to prop something up and then change the rules to keep it going. Yay!  The goverment always speaks the truth, don't they?  And Central Planners always fix things, don't they?  I guess neither of them has heard about or understand the laws of nature...

Thu, 06/19/2014 - 11:31 | 4873837 Manthong
Manthong's picture


I had to hit myself heavily in the head..

I apologize for not recalling the poster who said something like this..

Paraphrase:  juxtaposed..  … like f me.. we are like soviet Russia in the ‘50’s and they are now like us in the ‘50’s…

Crap.. I do not want to die in the Soviet Union of the Un-United States of Vespucci.

Thu, 06/19/2014 - 11:58 | 4873946 WillyGroper
WillyGroper's picture

by all means don't watch this then.

Mao & Lenin fed the corpses to the people.

Thu, 06/19/2014 - 13:34 | 4874427 Manthong
Manthong's picture

crud.. you have to pay attention this..

sleep and dreams.. Hermes the thief...

I did not realize what a mythical schmuck he was. 

Thu, 06/19/2014 - 16:37 | 4875190 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

I think that came from the John Birch Society, pretty good prediction, no?

Thu, 06/19/2014 - 10:50 | 4873655 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

What? They don't like the ZIRP stagnation monster they have unleashed.

Thu, 06/19/2014 - 10:44 | 4873621 NoDebt
NoDebt's picture

When Cyprus imposed capital controls, the sheep didn't panic.  Just stood there and took it.  All the crony-connected money had, of course, already left the country weeks before.

This idea of a "panic" is ridiculous.  Nobody will panic because:

1.  They will never know it happened, because nobody will ever report it.  It'll be buried down deep in the fund prospectus, which nobody reads.

2.  The sheep don't know the sound of the slaughter blade coming down on their necks until it's already happened.  

3.  It applies to retail funds.  Nobody gives a flying shit what retail does.  They're bred for slaughter from day one.

Thu, 06/19/2014 - 11:09 | 4873746 MrPalladium
MrPalladium's picture

This fed proposal for lock ups and exit fees for bond funds has the sole purpose of making sure that the U.S. dual citizen oligarchs get out of bond funds now while they still can. The NY Fed's piece is just reinforcement of the message, namely that the Fed is ready to take bonds lower in price, higher in yield.

Thu, 06/19/2014 - 11:15 | 4873767 Oquities
Oquities's picture

1.  Establish exit fees

2.  Jack up intersest rates

3.  Cease exit fees after public outcry

4.  Watch public exit all bonds in panic

5.  Use Fed money creation ability to purchase desirable outstanding bonds for Fed balance sheet (mortgages?) at pennies on the dollar

6.  Reduce rates again

7.  Sell balance sheet inventory at huge profits

Thu, 06/19/2014 - 12:17 | 4874025 Buck Johnson
Buck Johnson's picture

Exactly, but thats if it goes accordin to plan.  I don't believe it will.



Thu, 06/19/2014 - 14:31 | 4874663 saveandsound
saveandsound's picture

"at pennies at the dollar"

That won't happen. In that case the world would burn. No need to buy back paper.

Thu, 06/19/2014 - 12:04 | 4873973 Banker Buster
Banker Buster's picture

I agree, they are preparing for the eventual interest rate increase.  Once rates go up which they have to eventually to normalize the system, bonds are going to get annihilated.  Being an optimist (gets harder every day), I think they want to avoid everyone from getting destroyed in bonds when they do increase rates.  However, they can't get people out of the way of the cement roller, austin powers style, people just wont move.  So they want bond investors to move out of the way or be more likely to wait out a crash in bonds.  All the while, stocks will go down when interest rates are raised, but they go down less because some bond money is now in the stock market to cushion the blow by adding liquidity.  I think that's the attempt at least by the fed and if that were their intention, then it does at least try to meet their financial stability job.


They are just trying to undo what fuk face bernanke did when he doubled quantitative easing to 85 billion.  He went rogue and his ego got in the way of rational thinking, because QE wasn't working and he wanted to go all in, it works or he dies trying mentality.  Deep down that asshole knows you stimulate hard at the beginning of a crisis then let off the gas, you don't do it 4 years out.

Thu, 06/19/2014 - 11:32 | 4873847 asteroids
asteroids's picture

Should bonds crater and peoples pensions be wiped out, I suspect the hunting of bankers might turn into a national sport.

Thu, 06/19/2014 - 11:58 | 4873948 El Vaquero
El Vaquero's picture

Perhaps, perhaps not, but if it does, the sheep will likely turn on the closest representatives of the bankers first.  While I wouldn't lose any sleep over the nearest BofA, WF, big megabank branch being burned down, I suspect that angry sheep might try to make sure that the tellers and branch managers are inside when it burns.  These are people who, while part of a corrupt system, likely don't even comprehend that they are part of a corrupt system. 

Thu, 06/19/2014 - 12:02 | 4873961 WillyGroper
WillyGroper's picture

Hunger games for real, indeed.

Thu, 06/19/2014 - 12:25 | 4874061 Kirk2NCC1701
Kirk2NCC1701's picture

If only, but I doubt it.  People are sheeple.  And you know what sheep are good for:

Herding, milking, shagging, shearing, fleecing, butchering and consuming.

Predators (smart, strong, fast, dilligent, cunning and organized) beat and eat the prey (dumb, weak, slow, lazy, naive and disorganized).  Even if outnumbered.  I feel sorry for you (but not too much), if the Bible or mamby-pamby Sunday School didn't teach you the real facts of life, or Mother Nature's laws.  Which have been true for the last Billion years.

Thu, 06/19/2014 - 13:03 | 4874264 Kirk2NCC1701
Kirk2NCC1701's picture

I think the real takeaway here is whether ZHers have learned anything to front-run the Fed.  And I don't mean the way many got burned by buying PM on the way up, during QE front-running (Summer-Fall 2012).

The question is:  (a) is ZH right about the Feds' motives and intent, and (b) if we do try to front-run the Fed again, will we be safer this time?

This is not the time to bitch & moan like an under-tipped whore.  It's time to stand up and be counted, I'd say.

Thu, 06/19/2014 - 10:42 | 4873615 post turtle saver
post turtle saver's picture

Fed policy is "opposite day"... forever

Thu, 06/19/2014 - 10:43 | 4873616 PartysOver
PartysOver's picture

Oh the Humanity...  The death, the desctruction of a horrible accident on the Fed Highway.   Only one car was involved.

Upon further review the goring scene was just the makeup of the 12 clowns riding in one car.

My bad.

Thu, 06/19/2014 - 10:49 | 4873649 Gamma735
Gamma735's picture

The Fed Reserve, nothing but a bunch of Juggalos

Thu, 06/19/2014 - 11:30 | 4873836 ThaBigPerm
ThaBigPerm's picture

Easy-cheesy litmus test to determine whether they're trying to prevent a run, or cause one.

If they're trying cause one, they will announce with a bullhorn that they're considering closing and locking the gates, just not yet.  But "oooh!" are they seriously considering it.  MSM yackity-yack heads will debate the possible effects of shutting the gates ... papers are issued debating this or that aspect of closing the gates.  They may even actually, at some point, lock the gates after the horses are gone.

If they're trying to prevent a run, you wake up one morning to find the gates locked.  No warning, no MSM yackity-yack.

Thu, 06/19/2014 - 14:19 | 4874581 cowdiddly
cowdiddly's picture

You always know beforehand if the guy trying to get in your front door is a criminal or the cops. If it is the cops they will be hollering at the top of their lungs. A thief you wont hear crap.

Thu, 06/19/2014 - 11:39 | 4873893 Lionhearted
Lionhearted's picture

If a run is what happens then a run is what they wanted to happen.

Thu, 06/19/2014 - 12:06 | 4873983 WillyGroper
WillyGroper's picture

Kyle Bass said they're going to kill the dollar.

What better time to do it then after said run?

Thu, 06/19/2014 - 12:33 | 4874086 Kirk2NCC1701
Kirk2NCC1701's picture

Financial Iceberg Slalom.  It's a kinda magic.

Don't try this at home, kids.  We are trained professionals. /s

Thu, 06/19/2014 - 13:50 | 4874506 JLee2027
JLee2027's picture

To create a bond run, stop buying them, simple as that since the FED is the major and only buyer of bonds mostly.

So, no, they aren't trying anything.

Thu, 06/19/2014 - 10:31 | 4873541 madbraz
madbraz's picture

These criminals at the federal reserve don't even care anymore if the BS they spew even makes any sense, as long as it serves their masters.


let's invest in a money market fund that has ZERO returns, invests in european junk commercial paper and may not allow you to redeem your money when you want it.  


it's like trying to sell used toilet paper.

Thu, 06/19/2014 - 10:31 | 4873542 Stoploss
Stoploss's picture

========================FUCK THE FED=========================

Thu, 06/19/2014 - 12:17 | 4874031 lakecity55
lakecity55's picture

I am not suggesting this, it's only an observation, but if a certain Tribe suddenly disappeared from the Earth, things would be quite different.

Thu, 06/19/2014 - 13:39 | 4874445 Lmo Mutton
Lmo Mutton's picture

If a certain Tribe suddenly disappeared from the Earth, things will have been as they were prophesized.

My research says it goes down hill fast from there.  Like LC62 won't even help.

Thu, 06/19/2014 - 10:32 | 4873543 onewayticket2
onewayticket2's picture

Free market 1
Central planning. 0

Thu, 06/19/2014 - 10:34 | 4873545 LawsofPhysics
LawsofPhysics's picture

So, intentionally crush the price of american bonds/treasuries?  Well, that certainly would make it easy for the Fed (and primary dealers) to buy the remaining debt "market" with regard to american paper.  The U.S.S.A. would then trully be 100% owned by a group of individuals the taxpayer has paid to coin their on money by printing that money out of thin air.  Fucking genius (and still not one head has been taken, fucking amazing).

The Fed is and has always been about maintaining power and control  over real resources (including the human resources).  It's about ownership, period.

Thu, 06/19/2014 - 10:38 | 4873587 madbraz
madbraz's picture

back in the day when this was country didn't cater to banksters (some 120+ years ago), the actions of the federal reserve would be seen as treason - they provide treasury collateral for large banks to short the bonds of our own country.


think about this for a second.  they provide treasuries to banks who are allowed to go ahead and short the bonds of the country that always bails them out.


this NY FED study bought to you by the nice people from the NY FED Macro Research department, located between the "destroy the middle class department" and the Goldman Sachs adoration shrine.



Thu, 06/19/2014 - 11:12 | 4873758 Colonel Klink
Colonel Klink's picture

And the NY Fed is run by WHO?

Thu, 06/19/2014 - 11:25 | 4873815 CH1
CH1's picture

Rockefellers, Morgans, Peirponts and a few others.

Thu, 06/19/2014 - 11:37 | 4873875 CoolClo
CoolClo's picture

Crown, Inc.... London, England..

Thu, 06/19/2014 - 12:15 | 4874011 lakecity55
lakecity55's picture

A certain, mysterious Tribe, COL.

Thu, 06/19/2014 - 12:39 | 4874119 Colonel Klink
Colonel Klink's picture

And their accomplices, who some call our representatives.

Thu, 06/19/2014 - 13:04 | 4874268 lakecity55
lakecity55's picture

Always admire your Stand, COL!

Thu, 06/19/2014 - 14:09 | 4874557 Manthong
Manthong's picture

City of London, Corporation.

Understand that and the rest of the dots will connect.

adios.. I am breaking out the "V" dvd again.

Thu, 06/19/2014 - 12:45 | 4874142 Kirk2NCC1701
Kirk2NCC1701's picture

The Fed is run by... "Them, who must not be named"

Even then they can be named only with respect, and in a soft and reverent tone.  That's where we've progressed to these days. 

And yet, ironically enough, strong men, trained and armed men fear to do something about it.  "Land of the what?  And home of the who?"  Speaking of "brave"...

Thu, 06/19/2014 - 13:22 | 4874360 Raging Debate
Raging Debate's picture

Madbraz - Excellent point, a private entity being allowed to continue this way is treason but the treason comes from Congress that is not revoking it's charter.

That is the evil genius of the private Central Bank system. It's government is subjected to state capture until your profits are milked dry and you become the new commie police state like America has morphed into and like the Soviets.

Meanwhile, they choose a new host, a former commie police state like China. See all the press about China cleaning up corruption and jailing bankers there?

Revolutions against these modern conquistadors are financed and manipulated by other governments also owned by Central Banks and tge head of all of them is BIS in Switzerland. Note how well Switzerland has been run for centuries? The eternal tax haven so it never gets attacked.

The world has been infected by termites. The conquest is complete. What is the only option to a termite infested house? It will burn, it is inevtiable that one nation with even a few nukes will get sick of this shit and use them which even one going off will collapse all markets overnight. That is why I hedge for three month basics and some tradeables and what I think will happen.

"The issue which has swept down the centuries
and which will have to be fought sooner or later
is the people versus the banks." - Lord Acton (google him, was a major banker himself).

I dont think we'll be full Soviet though. The model's profitability is low compared to collapse and restructure. Of course that can take a decade or more to play out after initial events like 2008. Britain and America were fascists in the 1930's but it doesnt seem they were hollowed out (especially America) at this scale.

Thu, 06/19/2014 - 11:06 | 4873731 Yen Cross
Yen Cross's picture

  Right out of the old Japanese playbook. That's why I'm watching Japan so closely.

Thu, 06/19/2014 - 11:45 | 4873909 madbraz
madbraz's picture

difference is that the japanese don't have close to 50% of their assets in the stock market and the japanese don't encourage banks to short the bonds of their own country.


what we have here is truly criminal.

Thu, 06/19/2014 - 12:00 | 4873953 LawsofPhysics
LawsofPhysics's picture

Correct,  more to the point D.C. and New York are the primary centers if you will of the earth's criminal enterprise.

hedge accordingly.

Thu, 06/19/2014 - 12:58 | 4874232 RafterManFMJ
RafterManFMJ's picture

intentionally crush the price of american bonds/treasuries? Well, that certainly would make it easy for the Fed (and primary dealers) to buy the remaining debt "market" with regard to american paper. The U.S.S.A. would then trully be 100% owned by a group of individuals...


This reminds me of this fable I heard!

One time long ago there was this banker who had a spy and a magic horse and there was this big war that was decided by one big battle - WaterLoo or Watership Down it was called.

Well the short guy lost and the magic horse and rider FLEW back to London with this intel and the banker faked out everybody by selling the bonds of the winning army!

Everybody panicked and dumped their bonds as well - then the banker had his agents buy all those bonds for PENNIES on the pound!

At this point he and his family, or House, became supreme as they owned all the bonds and thus owned the government!

It was a scary tale; don't know why I suddenly remembered it...

Thu, 06/19/2014 - 10:32 | 4873547 Shizzmoney
Shizzmoney's picture

I think alot of this is propaganda to make investors "stand pat".  I know the BOE has "threatened" to raise rates in order to stave off their bond holders selling off in this new Age of Deflation.


Thu, 06/19/2014 - 10:34 | 4873566 LawsofPhysics
LawsofPhysics's picture

Jawboning to maintain power and control?  Yes, I think you nail it.

Thu, 06/19/2014 - 10:33 | 4873549 alien-IQ
alien-IQ's picture

I feel like my head is going to explode.

Thu, 06/19/2014 - 10:33 | 4873559 Thought Processor
Thought Processor's picture




As if we needed more evidence that the central banks have planned all of this.

Thu, 06/19/2014 - 13:39 | 4874448 seek
seek's picture

Anything the central banks do is planned, by definition. Even knee-jerk reactions are by committee.

Thu, 06/19/2014 - 10:35 | 4873561 Sudden Debt
Sudden Debt's picture

Crack doesn't cause addiction, it only makes you want to get addicted

Thu, 06/19/2014 - 10:35 | 4873564 Pumpkin
Pumpkin's picture

Well fucking duh! 

Thu, 06/19/2014 - 10:35 | 4873567 JRobby
JRobby's picture

If they say RUN, It must be time for a RUN.

Thu, 06/19/2014 - 10:35 | 4873570 Too Big 2
Too Big 2's picture


* Impose fees on bond redemptions to spark selling in bonds and flight to stocks

* "Influence" stock sell off and flight to bonds

* Check-mate

* Always sound credible (despite the fact that we are making this shit up as we go...)

Thu, 06/19/2014 - 11:06 | 4873718 cowdiddly
cowdiddly's picture

The central banks have used 29 TRILLION dollars printed out of thin air to buy up the stock markets all unaccountable and off balance sheet of course. The central banks  effectively now own half of EVERYTHING and it cost absolutely nothing. And, you must now ask yourself if this is true then what is the money now worth? NOTHING.

The smart sheep did not fall for it and buy into this constant market levitation leaving them stuck without enough non central bank buyers to unload. So now they are blocking all the exits. Money market check. Gold, check. Now the bond markets. They are going to try to force you to buy into this overpriced criminal stock market.

This has to be the biggest fraud of the entire history of the world. FUCK YOUR STOCKS SHOVE THEM UP YOUR ASS.

Sorry but this pisses me off to no end.

Thu, 06/19/2014 - 11:15 | 4873768 centerline
centerline's picture

Governments are going to default.  The US will too.  Just a matter of time.  This rotation is just front-running the capital flows that will occur as the EU and Japan goes tits up first.

Thu, 06/19/2014 - 13:48 | 4874429 Raging Debate
Raging Debate's picture

Centerline - The rotation has been into China and soon Russia. Back to the gold standard as Western nations and Japan default.

CB's returning to a gold standard is a feature not a bug, lasts 40 years of a model. Second half of 40 years liquidity standard. I don't own bonds but if I am taking the really long view, I would buy Chinese bonds because that is what CB's are doing compelling you to invest East (and yes US stock market to a lesser degree).

The risk to bond investing in China is a nation goes full retard and ignores MAD thinking (true or not) that they become the next Saddam causing domino effect.

Thu, 06/19/2014 - 11:43 | 4873906 Cthonic
Cthonic's picture

Regarding that "29 TRILLION" figure, have you actually seen the report? That figure looks like it was taken grossly out of context, seeing that the report includes sovereign wealth fund and public pension fund investments. I'd be keen to hear from someone who actually has a copy, and could tell us what portion of that figure is actually held, directly or indirectly, by central banks, and was purchased via pure fiat issuance.

Thu, 06/19/2014 - 11:53 | 4873930 cowdiddly
cowdiddly's picture


Thu, 06/19/2014 - 12:00 | 4873955 Urban Redneck
Urban Redneck's picture

It's that sort of reaction to reason that facilitates the bankers discrediting of their critics en masse (taken straight from the AIPAC/BICOM handbook).

Thu, 06/19/2014 - 12:21 | 4873978 cowdiddly
cowdiddly's picture

I am not going to do his research for him because he is to damned lazy. the information is out there all over. IT was reported in FT and right here in fact. He does not want to believe it anyway. It does not matter at this point anyway. IT's OVER. The only thing left now is to try to survive this mess.

Thu, 06/19/2014 - 12:41 | 4874128 Urban Redneck
Urban Redneck's picture

I could just as logically ask you to do your homework, since what the FT actually says is,

"says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif)... The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries."

1) There aren't 400 central banks in the world.
2) Gold

Start at page 36

This one is only 2 pages
(As to the $5T SWF total - they're also using a more restrictive definition of SWF)

In regards to the CB balance sheets, there is also a distinction that needs to be made between investing the product of a trade surplus versus investing the product of a printing press, which is more difficult when the CBs in more productive economies are pulling the same shit as the ESF assclowns of the Eccles buildings (or whatever they morphed into in the digital age when the ESF was no longer big enough). To wit (from the same FT article) "China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials quoted by Omfif. Safe, which manages $3.9tn, is part of the People’s Bank of China"

Or to pull quotes straight from OMFIF

The report, focusing on investments by 157 central banks, 156 public pension funds and 87 sovereign funds, underlines growing similarities among different categories of public entities owning assets equivalent to 40% of world output... The assets of the overall survey of 400 Global Public Investors comprise $13.2tn (including gold) at central banks, $9.4tn at public pension funds and $6.5tn at sovereign wealth funds.

Thu, 06/19/2014 - 13:04 | 4874248 cowdiddly
cowdiddly's picture

Good, you believe what you want. Buy every stock you can get your hands on. Im not going to argue with you. I have thought about what this actually means for two days.  Believe it baby, go all in..

Thu, 06/19/2014 - 13:22 | 4874357 Urban Redneck
Urban Redneck's picture

That's a half-assed and intellectually bankrupt straw man.

The $29T figure was taken grossly out of context. Excluding gold it's less than $12T. Moreover without getting into specific line items (such as SAFE) there are huge (undiscussed) implications for the continuation USD hegemony..

Central Banks (who have access to printing presses) getting into equities is problematic, but there is a significant difference between public and private Central Banks owning 1/2 vs 1/6 of global equities (once they get to 1/2 it would be too late).

Thu, 06/19/2014 - 13:34 | 4874426 cowdiddly
cowdiddly's picture

Like I said. Load your boat. Im not here playing intellectual games with you.

Thu, 06/19/2014 - 14:56 | 4874783 Urban Redneck
Urban Redneck's picture

Again with the strawmen, where did I ever suggest anything like buying equities??? It's like you really don't understand what's going on, much less the implications.

An intellectual game would be debating the ethics of central banks as activist investors (a continuation of a long running debate in the SWF community), because CBs already are political and warfare tools of the State.

BTW since research to identify facts doesn't appear to be your strong point- the 29.1 trillion is in "market investments", not just equities (and gold).

Just looking at the 13T of "market investments" that central banks hold - this includes both commercial debt and derivatives.

Debt and assets (equity and gold) are relatively straightforward, but a derivative "market investments" is simply a wager between two parties, and with the vast majority of outstanding derivatives being interest rate derivatives (and thus potentially under the direct control of one of the parties) there are very serious policy implications to the move by central banks away from a traditional portfolio composition of sovereign debt and gold, as well as for the banks that act as counter parties or proxies (who then have inside information).

Thu, 06/19/2014 - 13:48 | 4874498 centerline
centerline's picture

Public assets are going to go out with a bang.  Private assets is the only game left.  When I said that the student loan bubble was the last bubble, I should have clarified that in terms of debt (perhaps I did... don't recall).  The equities bubble is going to one to behold when the sovereign debt chain of counterparty exposure begins to collapse.

In the interim, this is a game of musical chairs and the Fed has the advantage.

Thu, 06/19/2014 - 14:28 | 4874623 Cthonic
Cthonic's picture

Why are you so pretentiously offended by a simple information request?  Truth be told, it would be scandalous if but 1/100 of the stated amount has been 'printed out of thin air' by the Fed and invested in equities in an undisclosed manner.  However, without the report, we don't know which central banks, in which countries, have done this, or what enterprises (possibly state-owned to begin with) the funds were transferred to, if any.  And sorry I don't have access to a Bloomberg terminal, or 350 pounds to blow on a report that may or may not break out those figures.  Cracks me up when people cite sources they've never even seen.  The story would be bigger than Snowden if it's going down the way you agitprop it.

Thu, 06/19/2014 - 12:09 | 4873986 lakecity55
lakecity55's picture

(Tribal conference, unknown location)

"The goys must be forced into the Market, by any means possible. Then we will Short and Crash it. What difference does it make, at this point? They are animals bred to our subservience! We will degrade their women, force upon them Miscegenation, control their information and grind them into the dirt they came from.

Long Live Zionism!

Thu, 06/19/2014 - 12:55 | 4874200 Kirk2NCC1701
Kirk2NCC1701's picture

That's similar to how a bunch of shepherds might view their sheep, because they hate their sheep, or have no principles or values.

Long live Financial Shepherding!

People are sheeple.  And you know what sheep are good for:  Herding, milking, shagging, shearing, fleecing, butchering and consuming. 


Thu, 06/19/2014 - 10:36 | 4873575 ejmoosa
ejmoosa's picture

Wasn't Yellen asked a question on this specific topic yesterday?  Pretty sure she said she knew nothing about it.

Thu, 06/19/2014 - 10:41 | 4873603 Thought Processor
Thought Processor's picture




Alas, one can only really pre-empt something if one knows for a fact what is going to occur in the future.



Thu, 06/19/2014 - 14:51 | 4874761 Ckierst1
Ckierst1's picture

Use your opponent's track record of behavior as a guideline for future behavior, buying the rumor and selling the fact accordingly.  If they have been ruthless then expect more ruthlessness.

Thu, 06/19/2014 - 10:38 | 4873584 MATA HAIRY
MATA HAIRY's picture

so how can I take advantage of this run if it does happen????

Thu, 06/19/2014 - 10:42 | 4873610 madbraz
madbraz's picture

ever wonder why the "cash" option on a 401k is a money market mutual fund?  it's insane.

Thu, 06/19/2014 - 10:43 | 4873617 alien-IQ
alien-IQ's picture

the would be entirely dependent on your comedy writing skills.

Thu, 06/19/2014 - 11:16 | 4873777 headhunt
headhunt's picture

or horror stories

Thu, 06/19/2014 - 10:39 | 4873586 asking4it2k
asking4it2k's picture

The FEDs QE and ZIRP are forcing investors out of CDs and savings and into the stock market. Thats the FEDs grand plan.

The FED wont ever let the stock market bubble pop. It will continue to go higher !!

Thu, 06/19/2014 - 10:41 | 4873606 Winston Churchill
Winston Churchill's picture

It worked in Zimbabwe didn't it.

Oh wait....

Thu, 06/19/2014 - 12:27 | 4874068 Zwelgje
Zwelgje's picture

Well, Mugabe is still in power. His buddies still have their I guess it did. ;-p

Thu, 06/19/2014 - 10:41 | 4873589 Dr. Engali
Dr. Engali's picture

Free markets are becoming less free every passing day. It doesn't matter where the funds are allocated, they will all be locked down at the appropriate time. The central planners better be careful with what they wish for, if they get too clever money may end up moving some place detrimental to the system.

Thu, 06/19/2014 - 10:42 | 4873609 alien-IQ
alien-IQ's picture

"Free markets are becoming less free every passing day"


So what you are saying is that the market is becoming a more accurate reflection of life in Amerika? Less free every day.

Thu, 06/19/2014 - 10:48 | 4873642 Dr. Engali
Dr. Engali's picture


Thu, 06/19/2014 - 10:48 | 4873645 Chupacabra-322
Chupacabra-322's picture

Free Markets? Wasn't that referred to as Capitalism once? What we have now are a bunch of Money Changing / Laudering Fascsits.

Thu, 06/19/2014 - 10:56 | 4873681 ParkAveFlasher
ParkAveFlasher's picture

If what denominates all prices is out of the hands of real market participants, if the value of the denominator is arbitrary, then you can't ever have a free market.  I don't know why everyone succumbs to nostalgia for what has ever been a faerie tale, that markets were free at one time.  They never have been. 

Thu, 06/19/2014 - 14:43 | 4874723 Ckierst1
Ckierst1's picture

We've never had free markets.  Whether or not it is capitalism depends on your definition of capitalism.  I notice quite a few people using the term "crony capitalism".  If we are  splitters in that fashion then it can be a genre of perverted capitalism.  Personally, I prefer mercantilism rather than crony capitalism.  Real, free market, free enterprise capitalism is laissez faire, a level playing field for competition and no government interventionist, elitism, granting monopolies and regulatory or otherwise picking favorites.

Thu, 06/19/2014 - 10:44 | 4873622 Winston Churchill
Winston Churchill's picture

One Friday evening all markets will close for good in the US.

They are just letting you play with THEIR money, they have no intention of letting us

keep it.

Thu, 06/19/2014 - 10:55 | 4873672 Thought Processor
Thought Processor's picture



Perhaps the only way to win is to not play their game.


This is what makes the case for gold compelling.  Real physical Gold has no liabilities or secondary debt instraments attached to it.  That is the real value of gold.  If one chooses to not play their game then Gold is one of the few assets that provides a safe haven away from the coming turmoil.


Thu, 06/19/2014 - 11:29 | 4873820 Sorry_about_Dresden
Sorry_about_Dresden's picture

Tell that to my friend who had his pool cleaned and inadvertantly exposed his gold coin collection while cutting a check for the pool service.

Pool guy came back and murdered friend to steal the gold.

Be careful. You might have pm, but, when the neighbors find out....when you try to exchange Au for services they will hunt you down and kill you for your gold.
The pool guy murdering gold the if wsst apprehended and rode ol' sparky in the State Pen in Richmond, VA.

That gold didn't help my friend. One chance moment cost him his life and this was in the 1970s when gold was under $100/oz.

They will stop at nothing to steal your gold. Catch 22. You have gold, but, you dare not try and spend it cause the mob will be on you and you will perish and the cycle will continue. Ask the German Jews if it helped them.

Thu, 06/19/2014 - 11:34 | 4873856 Thought Processor
Thought Processor's picture



That is unfortunate.  I have heard other stories as well, quite a few about losing gold in boating accidents.


It happens.  Be smart, be safe.

Thu, 06/19/2014 - 11:36 | 4873874 Harry Dong
Harry Dong's picture

Oh, but it did indeed!

And further, silver is your spending money, gold is saved, not spent.

Thu, 06/19/2014 - 11:52 | 4873933 lakecity55
lakecity55's picture

I keep a .45 Army Colt within reach At All Times. That's only to get to my shotgun and/or AK-47. I keep 10 weapons stashed all around the house. I fought in Indochina in a special group; old habits die hard. I am an old man, now, but I love America and I will defend her People.

There are thermal cameras mounted on the house.

Proceed at your own risk.

Molon Labe, Motherfuckers.

Thu, 06/19/2014 - 12:11 | 4873996 Sorry_about_Dresden
Sorry_about_Dresden's picture

Don't want to be a downer. Just thought I would share to save others who might not be as equipt as you.

Thu, 06/19/2014 - 13:08 | 4874288 lakecity55
lakecity55's picture

Just Arm Up, Bitches.

They Are coming.

Whatever you got.

Thu, 06/19/2014 - 22:03 | 4876448 UselessEater
UselessEater's picture

Be sure your cameras cannot be hacked.

Thu, 06/19/2014 - 10:45 | 4873626 Thought Processor
Thought Processor's picture



I've become convinced that they never really were free, they were simply allowed to work a certain way for a period of time until that way was deemed unprofitable to a certain group.  Thus the way must change when it is no longer of use.



Thu, 06/19/2014 - 10:54 | 4873670 Dr. Engali
Dr. Engali's picture

The markets were always manipulated to some extent, for example Reagan's working group on financial markets introduced the PPT, but they have never been manipulated to this extent. The fed is practically guaranteeing positive returns.

Thu, 06/19/2014 - 11:39 | 4873890 Oldwood
Oldwood's picture

Freedom is like pornography in that its hard to define but you know it when you see it. Or in our case, when you lose it. Freedom carries consequence which is what more and more people are seeking to escape. This is not the freedom they are looking for.

Thu, 06/19/2014 - 10:40 | 4873594 buzzsaw99
buzzsaw99's picture

nice try bozos

Thu, 06/19/2014 - 10:40 | 4873596 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

I think they overestimate their abilities just a little...

Thu, 06/19/2014 - 10:48 | 4873639 Flakmeister
Flakmeister's picture

Tyler, I think that your conclusion may be a little overstated...

Thu, 06/19/2014 - 10:52 | 4873660 Seasmoke
Seasmoke's picture

So what was that genius idea I read at ZH, last year about declaring a hardship and getting your money out of there ASAP. It's time for me to have a hardship. 

Thu, 06/19/2014 - 10:55 | 4873674 oklaboy
oklaboy's picture

Ranks up there with lost the e mails, and the hard drive.......

Thu, 06/19/2014 - 11:12 | 4873761 headhunt
headhunt's picture

That shit is Nixon's dream

Thu, 06/19/2014 - 11:44 | 4873902 lakecity55
lakecity55's picture

"I am the Tyrant; I have blatantly destroyed criminal evidence in the open, for everyone to see. The eroticism of watching a  State Department Ambassador Raped and murdered in real time was like sweet Nectar from the hash factories of Lebanon!

You saps will do Nothing. You watch me Destroy you in Plain Sight and do not resist! Your vaunted Military Oath Keepers are nothing but feeble women. I will destroy you and you will beg for Death! Your Military Leaders are cum dumpsters for my Mujaheddin!

When I order you put up against the wall and shot, you will exclaim, "Long Live Bath House."

Thu, 06/19/2014 - 12:28 | 4874070 Jethro
Jethro's picture

Since the NSA can't retrieve the e-mails, I wonder if the FSB can....assuming Russia has a Freedom of Information Act? I bet they just might release any info they had just to further discredit our current regime....

Thu, 06/19/2014 - 10:58 | 4873691 Rathmullan
Rathmullan's picture

Why not? The "concensus" of investors (aided by the market manipulating primary stealers) have been taught that it is best to never cross the fed. It pays to be a lemming. No room for logic in this market where there is only a once per decade john paulson type payoff.

Thu, 06/19/2014 - 11:01 | 4873708 theminister
theminister's picture

I saw this coming 2 years ago (thanks ZH) so I started buying up the golden shiney with fiat paper to store on my house boat...which subsequently capsized out on the lake. Total loss.

Thu, 06/19/2014 - 11:06 | 4873730 headhunt
headhunt's picture


Thu, 06/19/2014 - 12:22 | 4874047 Rathmullan
Rathmullan's picture

Which Lake?

Thu, 06/19/2014 - 11:02 | 4873709 Conax
Conax's picture

Good story, bros.

I think they are trying to herd some sheep over into the equities pen.  I'd like to see them flee into the traditional safe haven of

Gold (and Silver), Bitchezz!


Thu, 06/19/2014 - 11:41 | 4873901 Oldwood
Oldwood's picture

Fear and greed are the two most often used fulcrums for leverage. We fall for it every time. AS you say, we are herded like sheep with the crack of a whip and the rustle of the feed bag.

Thu, 06/19/2014 - 11:04 | 4873722 headhunt
headhunt's picture

Short of printing more money to purchase from themselves, they have no way out of their 'Belgium' stock purchases. They need new 'customers' to prop up their ongoing Ponzi scheme. I suspect they have called in Madoff and Corzine as consultants.

Nothing to worry about ... really.

Thu, 06/19/2014 - 11:04 | 4873724 Porous Horace
Porous Horace's picture

"In other words, we show that rather than being part of the solution, redemption fees and gates can be part of the problem."


The Fed: part of the problem since 1913.

Thu, 06/19/2014 - 11:07 | 4873737 Quinvarius
Quinvarius's picture

When a historical arsonist is barring the door to the barn, by all means rush in to hang out with the sheep.

Thu, 06/19/2014 - 11:13 | 4873762 taketheredpill
taketheredpill's picture


"since those trillions in bond funds have to be allocated somewhere, where will they go but... stock funds."


Also Govie Bond funds...


It's not obvious that the money would pile into Equities.  And since the circular HY / Buyback / Dividend shift has been one of the drivers in Equity valuations, wouldn't crushing the Corporate market and driving spreads wider hammer Equities too?


Maybe this is Part 2 of the Taper, repairing some of the damage created by the QE monster.

Thu, 06/19/2014 - 11:37 | 4873865 buzzsaw99
buzzsaw99's picture

Also Govie Bond funds...


Absolutely. The rent (corp-gov spread) is too damn low! Mostly, though, they don't want money just sitting in bonds for the next decade. They want trading volume, spending, velocity, and all the rest. They know damn well the eCONoME is in the toilet.

Thu, 06/19/2014 - 11:16 | 4873773 moneybots
moneybots's picture

People should just get out of all markets, including the stock market.

Thu, 06/19/2014 - 11:18 | 4873787 JenkinsLane
JenkinsLane's picture

What will they think of next?



Thu, 06/19/2014 - 11:19 | 4873792 moneybots
moneybots's picture

"But more importantly, now that the Fed has explicitly said in no uncertain terms that gating bonds funds will likely result in a loss of "financial stability""


With a 100 trillion dollar global debt bubble, we have financial stability?

Thu, 06/19/2014 - 11:30 | 4873830 lakecity55
lakecity55's picture

I diverted most available funds to PMs, unfortunately lost during a storm.

I did however invest some funds in Helium Futures, aka "the stock market."

I am about ready to deflate the helium balloon and sit on cash, convertible to Land.

Thu, 06/19/2014 - 11:34 | 4873853 canonball
canonball's picture

Can't belgium just buy the bond funds

Thu, 06/19/2014 - 11:34 | 4873858 bwh1214
bwh1214's picture

The first story on zero hedge about these gate fees was way off the mark.  This story is much closer to the reality.

Thu, 06/19/2014 - 11:36 | 4873870 kchrisc
kchrisc's picture

So basically once the new currency, SDRs, are in place, they can pull the rug out from under what remains of the TP$ with "fees and gates" and make money on the whole thing with the fees as well.


"And people wonder why my guillotine has such a special affinity for banksteers."

Thu, 06/19/2014 - 11:36 | 4873872 gcjohns1971
gcjohns1971's picture

This is a recipe to blow up all financial markets.

CUI BONO??????

Thu, 06/19/2014 - 12:45 | 4874146 saveandsound
saveandsound's picture

Well, heck.

Cui Bono? What is this maneuver for? Somebody a reasonable good idea?

I don't get it.

Hmmm, maybe... hmmm, start a bond crash. Hmmm... only safe haven left... europe having a proxy-war... no idea.

Thu, 06/19/2014 - 13:46 | 4874481 gcjohns1971
gcjohns1971's picture


This is a Financial Nuclear Bomb.

The losses in the bond market would only be the first wave.

OTC?  Bye, bye.

And don't get me started on CDS.

Through CDS alone this could instantly bankrupt every financial institution on the 3d rock from the sun.

Thu, 06/19/2014 - 11:39 | 4873888 chinaboy
chinaboy's picture

Now that's what they call 'hands on' in the USA.

Thu, 06/19/2014 - 11:55 | 4873936 huggy_in_london
huggy_in_london's picture

Yeah except the bond market knows the data and the economy stinks

Do NOT follow this link or you will be banned from the site!