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Former Fed VP Accuses Bernanke Of Bailing Out Europe Via Currency Swaps

Tyler Durden's picture


First it was Zero Hedge. Then Ron Paul joined in. Now it is the turn of a former Dallas Fed Vice President, Gerald ODriscoll, to outright accuse the Fed of bailing out Europe courtesy of "incomprehensible" currency swaps, and implicitly accusing Bernanke of lying that he would not bail out Europe even as he has done precisely that. And not only that: by cutting the USD swap spread from OIS+100 to OIS+50, the Fed has made sure it gets paid less than ever for extended Europe the courtesy of bailing it out all over again. Incidentally, O'Driscoll says, "America's central bank, the Federal Reserve, is engaged in a bailout of
European banks. Surprisingly, its operation is largely unnoticed here.
" One thing we can say proudly - it has been noticed loud and clear here...

From the WSJ:

The Federal Reserve's Covert Bailout of Europe 

When is a loan between central banks not a loan? When it is a dollars-for-euros currency swap.

America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here.

The Fed is using what is termed a "temporary U.S. dollar liquidity swap arrangement" with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or "swaps" dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

Why are the Fed and the ECB doing this? The Fed could, after all, lend directly to U.S. branches of foreign banks. It did a great deal of lending to foreign banks under various special credit facilities in the aftermath of Lehman's collapse in the fall of 2008. Or, the ECB could lend euros to banks and they could purchase dollars in foreign-exchange markets. The world is, after all, awash in dollars.

The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.

The ECB is entangled in an even bigger legal and political mess. What the heads of many European governments want is for the ECB to bail them out. The central bank and some European governments say that it cannot constitutionally do that. The ECB would also prefer not to create boatloads of new euros, since it wants to keep its reputation as an inflation-fighter intact. To mitigate its euro lending, it borrows dollars to lend them to its banks. That keeps the supply of new euros down. This lending replaces dollar funding from U.S. banks and money-market institutions that are curtailing their lending to European banks—which need the dollars to finance trade, among other activities. Meanwhile, European governments pressure the banks to purchase still more sovereign debt.

This Byzantine financial arrangement could hardly be better designed to confuse observers, and it has largely succeeded on this side of the Atlantic, where press coverage has been light. Reporting in Europe is on the mark. On Dec. 21 the Frankfurter Allgemeine Zeitung noted on its website that European banks took three-month credits worth $33 billion, which was financed by a swap between the ECB and the Fed. When it first came out in 2009 that the Greek government was much more heavily indebted than previously known, currency swaps reportedly arranged by Goldman Sachs were one subterfuge employed to hide its debts.

The Fed had more than $600 billion of currency swaps on its books in the fall of 2008. Those draws were largely paid down by January 2010. As recently as a few weeks ago, the amount under the swap renewal agreement announced last summer was $2.4 billion. For the week ending Dec. 14, however, the amount jumped to $54 billion. For the week ending Dec. 21, the total went up by a little more than $8 billion. The aforementioned $33 billion three-month loan was not picked up because it was only booked by the ECB on Dec. 22, falling outside the Fed's reporting week. Notably, the Bank of Japan drew almost $5 billion in the most recent week. Could a bailout of Japanese banks be afoot? (All data come from the Federal Reserve Board H.4.1. release, the New York Fed's Swap Operations report, and the ECB website.)

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Wed, 12/28/2011 - 13:01 | 2016411 SwingForce
SwingForce's picture

It won't technically be a bailout until the ECB defaults on repayment...

Wed, 12/28/2011 - 13:07 | 2016433 Hard1
Hard1's picture

Would it be a bailout if the ECB defaulted had it not received the loans?

Wed, 12/28/2011 - 13:26 | 2016542 vast-dom
vast-dom's picture

Yet another ILLEGAL action by Bernank et. al. The only question that matters is WHEN WILL ANYONE BE CALLED OUT AND PROSECUTED? But alas, we all know the unfortunate answer to that.....outrageous really. 

Wed, 12/28/2011 - 13:41 | 2016571 BaBaBouy
BaBaBouy's picture

"Save The Beast... SAVE THE EURO"


Yes, Im sure thats The Top Priority on EVERY Americans Mind right now...

Wed, 12/28/2011 - 16:12 | 2017041 gmrpeabody
gmrpeabody's picture


Wed, 12/28/2011 - 16:16 | 2017053 gmrpeabody
gmrpeabody's picture

"It won't technically be a bailout until the ECB defaults on repayment..."

And with the FED agreeing the a 20% haircut, it can't actually be declared a default.

Wed, 12/28/2011 - 13:34 | 2016584 vast-dom
vast-dom's picture

And SILVER is getting raped today!!!!!!!!





Wed, 12/28/2011 - 14:02 | 2016658 alchemystic
alchemystic's picture

I'm asking is this just about people shredding their paper?

Wed, 12/28/2011 - 15:37 | 2016933 ebworthen
ebworthen's picture

No, it is the FED sending U.S. Taxpayer $'s to European banks using sleight of hand and terminology.

Let's say I give you $100 for 130 Euros and that is an even deal or fair exchange rate. 

Then, I say I'll give you $200 for 130 Euros ad infinitum. 

Well, I'm either lending you money or giving you money outright. 

You are "giving me money" or swapping it, but you make $70 everytime we do it. 

I tell my Wife I am doing a "currency swap to provide liquidity" and not losing money.  "Yeah right" she says.

Wed, 12/28/2011 - 15:43 | 2016961 Badabing
Badabing's picture

I'm asking is this just about people shredding their paper?

when you say people who do you imply?

"America's central bank, the Federal Reserve, is engaged in a bailout of
European banks.

when the WSJ spins a story the Federal Reserve implys the people or the US tax payer.

How hard will we have to work untill its easier to fight!

Wed, 12/28/2011 - 14:24 | 2016726 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Chill out, the bottom's not far away now

Wed, 12/28/2011 - 14:19 | 2016714 SheepDog-One
SheepDog-One's picture

'When will anyone be prosecuted'.

Likely never. this will end up with people hanging from street lamps.

Wed, 12/28/2011 - 19:01 | 2017449 CapitalistRock
CapitalistRock's picture

Unfortunately, it is not illegal. Depending on the judicial branch of government to protect the value of our fiat paper will ensure it all becomes toilet paper. People have no idea how much power congress gave to the federal reserve when it was created.

News flash: the fed can create all the money it wants and do with it as it pleases. Seriously. That's not a joke or exaggeration. There are no laws that protect the value of the dollars in your wallet.

Wed, 12/28/2011 - 21:10 | 2017801 Papasmurf
Papasmurf's picture

Like any other corporation, their obligation is to the shareholders.  The will manufacture the optimum amount of money to profit in the markets.  That is just shy of what will cause them to be legislated out of existance.

Wed, 12/28/2011 - 13:58 | 2016618 FinHits
FinHits's picture

SwingForce has a a good point. It does not sound very risky to Fed.

If I understand this correctly, Fed is doing secured lending: it giving $1 to ECB, receives as collateral €1 and then after 3 months or whatever, the $1 goes back to Fed and €1 back to ECB. What both do with their €1 and $1 is up to them.

ECB is easier: there is a line of banks wanting to borrow the $1 from ECB.

Fed is a bit harder, but I guess Fed could park its €1 to ECB account and earn a swanky 0.25% rate for it! ;-)

I am sure there is some sort of subsidy and possibly even open risk there, so that worry in the post is correct. What I don't understand is this: "The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made". Is this guarantee an option or forward trade fixed between ECB and FED utilising their marginal lending rates (which ones?).'

What happens with the currency movement risk if EUR-USD moves violently (sounds like Fed is covered but the other CB is not)? USD has since the arrangement strenghtened, so there could be a loss for ECB built in the trade? How will ECB cover this loss? 

Wed, 12/28/2011 - 14:00 | 2016656 blindfaith
blindfaith's picture

gosh...remember just a few short months ago how the euro and yuan were going to bury the dollar in trade settlements?  Where are the communist red Chinese big shots now and their talk-talk?  Let them buy the damn euro from the FED...after all they want out of our "lousy dollar" anyway.

Lets hope the FED has the inteligence to not exchange at par...that would cost us 30% plus.

Wed, 12/28/2011 - 14:02 | 2016659 IBelieveInMagic
IBelieveInMagic's picture

How will ECB cover this loss?

The same way, by borrowing some more. 

Wed, 12/28/2011 - 16:39 | 2017117 Iam_Silverman
Iam_Silverman's picture

"How will ECB cover this loss?

The same way, by borrowing some more."


Or by printing to devalue their currency to the point the swap is a wash.

Wed, 12/28/2011 - 14:03 | 2016660 NooooB
NooooB's picture

Would this not also equate to printing Eurodollars. Soaking up those extra Euros and thinning out the dollar at the same time? An effort to stabilize the EUR/USD perhaps? Markets aside, the inflationary effect would not be felt in the us right away I think?..

What happens when they raise the debt ceiling though I wonder....

Wed, 12/28/2011 - 14:38 | 2016779 RockyRacoon
RockyRacoon's picture

One must wonder where the Euros came from to "swap" to the Feds for dollars.   Could they be printing them?  Ya figger?   Where did the dollars come from to "swap" for the Euros.   Wonder what will happen when these "swaps" are settled?  Where will those Euros and Dollars end up?  Oh... so many questions.

Wed, 12/28/2011 - 15:57 | 2017000 FinHits
FinHits's picture

Good questions. 

I guess as of today, €1 would be given by ECB to FED in exchange for $1.295. Three months from now, ECB would simply return those $1.295 plus that +50 bps (?) interest to Fed, and Fed would return the €1. If the exchange rate were $1.100 instead, that might not matter to them, but Fed would "win" and ECB would "lose"? Would it matter? I am not sure.

I guess at that 3 month point, they could cancel these amounts? Return it to their shareholders (US Governemnt and National Central Banks of Eurozone, Japanese Government, UK Government, Canadian Government)? Keep them and invest them somewhere?

Wed, 12/28/2011 - 16:10 | 2017038 optimator
optimator's picture

Not "From", but "Too" would answer your question.

Wed, 12/28/2011 - 13:06 | 2016434 AngryGerman
AngryGerman's picture

Vielen Dank für das Geld, meine Amerikanischen Freunde!

Wed, 12/28/2011 - 13:09 | 2016449 GeneMarchbanks
GeneMarchbanks's picture

Bolded German is scary.

Wed, 12/28/2011 - 13:14 | 2016483 GOSPLAN HERO
GOSPLAN HERO's picture

Being cussed-out in German is worse.

Wed, 12/28/2011 - 13:23 | 2016515 BaBaBouy
BaBaBouy's picture

IMO the ENTIRE Financial System has been Hyjacked and Corrupted.


Nothing can be believed anymore.

All the purported "Money" out there is mostlly 1's and 0's in some select Banks' Hard-drives.

(IE. it's not even physical Paper Money)


So its a Banksters' Giant Computer game, played by the worlds elites.


We are headed into a Giant Financial SHIT STORM!

Wed, 12/28/2011 - 13:43 | 2016611 BalanceOrBust
BalanceOrBust's picture

You are right.  It has been hijacked by those who have access to unlimited capital.  It is like playing roulette and continuously doubling down on winning bets.  This is a losing strategy for mortals.  But for banks that have unlimited access to bailouts and fresh money, it is a strategy that can win.


Corruption -- through and through.

Wed, 12/28/2011 - 13:51 | 2016634 BaBaBouy
BaBaBouy's picture



And this is how they are controlling GOLD.

Imagine, unlimmited Electronic Dollars to short Paper GOLD.


IMO the Real Value of GOLD right now is probably North of $25K.

The current CORRUPTION will not last forever...

Wed, 12/28/2011 - 17:18 | 2017219 economics1996
economics1996's picture

The politicians and bankers believed their own Keynesian crap.  When you believe in fairy tales bad shit happens.

Wed, 12/28/2011 - 13:54 | 2016621 Momauguin Joe
Momauguin Joe's picture

This clown Bernanke only answers to his bosses, his REAL bosses: The eight families that OWN the Federal Reserve:

"  They are the Goldman Sachs, Rockefellers, Lehmans and Kuhn Loebs of New York; the Rothschilds of Paris and London; the Warburgs of Hamburg; the Lazards of Paris; and the Israel Moses Seifs of Rome. "

Their interests in Europe and elsewhere must be protected at all costs. They pull the stings on all things financial. They are the squid.


Wed, 12/28/2011 - 14:16 | 2016698 Ying-Yang
Ying-Yang's picture

Thanks for the names. Zh needs to put the family members on its no fly list!

Wed, 12/28/2011 - 14:19 | 2016706 Ying-Yang
Ying-Yang's picture

ZHA can patdown a Rothschilds or two. Even nude scans of Rockefellers... (uuuuugly)

Thu, 12/29/2011 - 01:31 | 2018314 JPM Hater001
JPM Hater001's picture

Pretty sure these families avoid commercial airlines...I mean they own some but it's only so you won't travel with them.

Thu, 12/29/2011 - 00:44 | 2018243 YesWeKahn
YesWeKahn's picture

Don't talk about those, they would silence you for good.

Wed, 12/28/2011 - 13:19 | 2016502 wandstrasse
wandstrasse's picture

Seien Sie beruhigt, wir können Bens Geld genauso gut verbrennen wie Ihr Amerikaner!

Wed, 12/28/2011 - 13:25 | 2016535 Irelevant
Irelevant's picture

Arbeit macht frei ... They just need to translate it into greek and italian.

Wed, 12/28/2011 - 13:32 | 2016575 Yikes
Yikes's picture

Your welcome.  You will pay us back, won't you?

Wed, 12/28/2011 - 14:13 | 2016686 Ray Elliott
Ray Elliott's picture

Nichts zu danken.

Wed, 12/28/2011 - 16:14 | 2017048 optimator
optimator's picture

In your language:  beschissen

Wed, 12/28/2011 - 14:45 | 2016798 jdelano
jdelano's picture

It's worth repeating though I'm sure most everyone here knows it--the FED did bail out Year Up.  Those swaps, when implemented create new dollars (debt) at absurdly low rates.  What merits consideration at this point is Gold.  Everyone knows it should be continuing to skyrocket.  The fact that it is not means that CBS/TPTB are very adept at manipulating gold prices.  That means there really is nowhere to hide.  I'll keep my gold, but the evidence tells me it won't matter in the least.  It will not be allowed to appreciate wildly--or that is, appropriately, and if it does, it will be confiscated like it was last time around.  I think ZH, aka the Tylers, should spend a little more time thinking about the proability that gold will never be allowed to act as a true store of value.  Personally, I'm doing some hard thinking about oil and arable land.  

Wed, 12/28/2011 - 13:02 | 2016414 SHEEPFUKKER

Who will Bernanke accuse of f'ing this whole thing up after he becomes the former chairman?

Wed, 12/28/2011 - 13:07 | 2016439 GeneMarchbanks
GeneMarchbanks's picture

I believe you're looking for the person who'll be in charge then. Probably Ron Paul.

Wed, 12/28/2011 - 14:31 | 2016751 CORNGUY
CORNGUY's picture


Wed, 12/28/2011 - 13:02 | 2016415 Snakeeyes
Snakeeyes's picture

I testified in the House of Representatives a couple of weeks ago saying the same thing.



Wed, 12/28/2011 - 13:15 | 2016487 JPM Hater001
JPM Hater001's picture

Good man.  Press on soldier the war is only just starting.

Wed, 12/28/2011 - 14:46 | 2016799 Things that go bump
Things that go bump's picture

Were they unsuprised?

Wed, 12/28/2011 - 13:03 | 2016417 Mercury
Mercury's picture

If we don't bail out Europe the terrorists will have already won. Duh.

Wed, 12/28/2011 - 13:08 | 2016443 hedgeless_horseman
hedgeless_horseman's picture



So it is a win-win for, "terrorists."

Wed, 12/28/2011 - 13:10 | 2016453 GeneMarchbanks
GeneMarchbanks's picture


If you can, please fix that.

Wed, 12/28/2011 - 13:03 | 2016418 Pladizow
Pladizow's picture

America is the frog in an increasingly warm pot of water, with Bernake at the dial!

Wed, 12/28/2011 - 14:08 | 2016676 Kayman
Kayman's picture

Bernanke is in the pot too. 

When your ass is being bitten daily by alligators, it is hard to remember your job is to drain the swamp.


Wed, 12/28/2011 - 14:28 | 2016740 Troll Magnet
Troll Magnet's picture

yup.  that's what i'm saying.  but most of us aren't aware of this fact.  we're too happy to give up our liberty to the elites and way too eager to oblige like a bunch of fucking morons.  so it's funny to me when i see a bunch of americans and our MSM poking fun at countries like north korea, syria, etc, and act like we're superior.  hello?  we're not free either.  and contrary to what we've been told, we're not rich.  we're fucking broke and we are indebted to fucking chinese!  wake the fuck up and smell the coffee, sheeple!

Wed, 12/28/2011 - 14:51 | 2016814 Things that go bump
Things that go bump's picture

House slaves might well put on airs and think themselves superior to field slaves. 

Wed, 12/28/2011 - 13:06 | 2016424 GOSPLAN HERO
GOSPLAN HERO's picture

Ben Bernank (the former Alchemist) will print us to prosperity.

Wed, 12/28/2011 - 13:04 | 2016426 max2205
max2205's picture

4 years ago I would be, just like well who gives a shit....Ben is the King

Wed, 12/28/2011 - 13:08 | 2016446 Ignatius J Reilly
Ignatius J Reilly's picture

That's the way incremental losses in liberty works.  Thanks for playing along so well.

Wed, 12/28/2011 - 13:19 | 2016506 JPM Hater001
JPM Hater001's picture

Yes.  In this game rule 3 allows for the unmitigate swap of debt laden currency...your animal crackers for say, the pile of poop johnny just pull out of his diaper.

In this swap you are allowed to spread the now distributed feces by any method unless you land on the red warning square.  Then you have to distribute by fan.

Wed, 12/28/2011 - 13:26 | 2016539 Ignatius J Reilly
Ignatius J Reilly's picture

Is that the new Life game or the new version of Monopoly?

Wed, 12/28/2011 - 13:42 | 2016609 iDealMeat
iDealMeat's picture

The new Monoply games marketed this xmas use Credit cards and readers..


sad..  and scary..

Wed, 12/28/2011 - 13:45 | 2016616 JPM Hater001
JPM Hater001's picture

Niether...this one is based on mousetrap.  You store the feces in the bathtub but if you dont keep it balanced it tips over onto the fan.  Red square is an automatic tip.

Wed, 12/28/2011 - 13:04 | 2016428 Jlmadyson
Jlmadyson's picture

89 day swap window right? And just how much has been taken from the window? Pay day is going to be a B.

Wed, 12/28/2011 - 13:04 | 2016429 pods
pods's picture

I am Jack's complete lack of surprise!


Wed, 12/28/2011 - 13:04 | 2016430 Tsar Pointless
Tsar Pointless's picture

The Fascist States of Amerikkka:

The Land of the Fleeced and Home of the Enslaved.

Seriously. What proportion of the 99%-ers ever step foot outside of Amerikkka, let alone their county? And, NO - Canada doesn't count.

North Korea has nothing on the denizens of the FSA when it comes to being isolated from and ignorant of the rest of the world.

Wed, 12/28/2011 - 13:34 | 2016582 Return2Sanity
Return2Sanity's picture

I think people are starting to really wake up. They say that you can fool some of the people some of the time, but you can't fool all of the people all of the time.

I have seen ZHers express frustration that they can't get through to their friends and family, but you need to understand how people's brains work. The first time you bring it up, they just ignore it, the second time they hear you, but doubt that it's a real concern. It's not until they hear it from a different source that it jumps to the front of their brains.

You know the game the establishment plays: first they dismiss anyone who doesn't agree with their narrative as a kook, then when the predictions of the "kooks" come to pass, they wave it away, claiming that "no one saw it coming". Well, your friends and family may not take you seriously now, but when your predictions come to pass, their eyes will narrow and the little gears will start to turn, and they'll think to themselves, "Even Cousin Bob knew what would happen, he told us so at the New Year's party".

For those who think it's not important to wake people up because we're going to collapse anyway, just remember that life will still go on afterwards, and how we rebuild the system is very important. Getting people into power who really understand what's happening and why is essential.  Always remember that we have never gone so far down a road that we can't turn back.

Wed, 12/28/2011 - 13:50 | 2016631 TheGardener
TheGardener's picture

Getting through to your friends and family is important,
no matter how frustratingly long it takes.

Because they will be the first ones on your door if things
go bad and you won't turn them away at the point of a gun.

Wed, 12/28/2011 - 14:17 | 2016691 blindfaith
blindfaith's picture

you are dreaming.

They, I mean THEY...will mark you as a subversive and you family will spend all they have to find out your whereabouts in THEIR prisons.

IF the new homeless, unemployed, and returning vets haven't 'marched' yet...they won't.  No i-phone app, no interest by john-Q-public, who Can't be bothered by investigating this 'stuff' complicated.... and besides it interfers with TV shows.

Wed, 12/28/2011 - 15:34 | 2016943 johnnynaps
johnnynaps's picture

Well, I'm just waiting for nicer weather! Then, it's going to be occupy some rich guy's/public official's private beach! Maybe ruining their vacations will get their attention!

Wed, 12/28/2011 - 14:15 | 2016694 Kayman
Kayman's picture


Well said.  More and more people are becoming aware of the financial criminals and their dangerous conjuring.

I keep wondering what happens when the fall of 2008 returns, with governments unable to provide liquidity.  Will the banks step in to save the day ?  sarc/

Wed, 12/28/2011 - 14:52 | 2016821 TheKinski
TheKinski's picture

You know the game the establishment plays: first they dismiss anyone who doesn't agree with their narrative as a kook, then when the predictions of the "kooks" come to pass, they wave it away, claiming that "no one saw it coming". Well, your friends and family may not take you seriously now, but when your predictions come to pass, their eyes will narrow and the little gears will start to turn...

This is precicely where my co-workers are right now.  Be patient, everyone.  Regular, American Idol watching types are starting to question everything.  I began trying to enlighten my co-workers, friends, and family 3 and 4 years ago and was frustrated as well.  

Recently, the alarm bells have gone off in several of these same people, and I am Nostradamus all of a sudden.  It was worth the wait and it is real difficult to hide my sh*t-eating grin.

It is happening.  Whether enough people wake up in time enough for the elections I'm not sure.  But it is happening.




Wed, 12/28/2011 - 13:07 | 2016435 Quintus
Quintus's picture

Why would Ben do this?  Because he knows that if the Euro breaks up, the dollar will have only days left to live as the financial system breaks up across the Globe.

I think anyone who thinks that a Euro breakup will leave the Dollar sailing serenely into the sunset, secure in its status as the unchallenged safe haven currency and unaffected by the turmoil across the water is mistaken.

Wed, 12/28/2011 - 13:11 | 2016463 Ignatius J Reilly
Ignatius J Reilly's picture

If the Euro fails, I assume you mean the currency, the Europeans will return to their old currencies.... or dollars.  The dollar will last for a little while, maybe a few years, before you will be correct in its tumble.

Wed, 12/28/2011 - 13:20 | 2016507 Quintus
Quintus's picture

A poxy little bank like Lehmans nearly took the whole system with it due to fears of unknown counterparty risk.  

The paralysis and panic that a continent-wide financial system lockup would cause as the Euro fragmented into national currencies and everyone tried to figure out what the legal situation was with regards to contracts denominated in Euros would be orders of magnitude greater.

Wall St would be a smoking ruin within days, and I can't see the dollar trundling along for much longer with all the money centre banks shuttered.

Wed, 12/28/2011 - 13:32 | 2016574 Ignatius J Reilly
Ignatius J Reilly's picture

I don't disagree.  That's why i have silver in my posession.  I'll soon be adding gold, firearms and bullets.

Wed, 12/28/2011 - 13:52 | 2016636 Jayda1850
Jayda1850's picture

World War III would be the next logical conclusion.

Wed, 12/28/2011 - 14:03 | 2016661 Urban Redneck
Urban Redneck's picture

It's a great parbolic boomerang trade for someone with cash to burn and a fortified stomach, but if the timing is sligtly off it can be a one-way train wreck.

Wed, 12/28/2011 - 13:51 | 2016633 BalanceOrBust
BalanceOrBust's picture

I think the dollar will survive, but only through massive devaluation.  I have been wrong up until now however.  I have been betting strongly on precious metals and against US bonds.  The previous metals part have done alright (excepting the recent pull back) but the bets against US bonds have been costly.

Wed, 12/28/2011 - 13:21 | 2016512 dick cheneys ghost
dick cheneys ghost's picture

Sucks to be the worlds "reserve currency".......gotta defend the dollar........

Wed, 12/28/2011 - 13:07 | 2016437 mrgneiss
mrgneiss's picture

Bernanke lied?  Shocked!  So does that mean CB's don't buy gold for the sake of tradition?

Wed, 12/28/2011 - 13:10 | 2016454 Quintus
Quintus's picture

Of course they don't buy it for tradition's sake.  They just like having it around.  Normally, they stack it up right beside the big piles of cotton, wheat, crude, pork bellies and all the other Commodities-that-definitely-aren't-money that they keep in their reserves.  Because it definitely isn't money.  No way.  And it's useless - did I mention that?  Can't even eat it.

Wed, 12/28/2011 - 13:40 | 2016605 chdwlch1
chdwlch1's picture

From a Feb, 2010 essay from Peter Warburton...

"What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

Central banks, and particularly the US Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade."

more from this essay at

Wed, 12/28/2011 - 13:54 | 2016641 BalanceOrBust
BalanceOrBust's picture

I believe Warburton was right.  Playing the devil's advocate, though, how do central banks incite investment banks to bet against precious metals?

Wed, 12/28/2011 - 14:26 | 2016735 chdwlch1
chdwlch1's picture

My answer would be that the central banks are the real power behind regulatory capture and the judicial impotence that allows the investment banks' un-checked pillage of the financial system (and record bonuses). The unlevel playing field will remain so, as long as the investment banks do their master's bidding. Besides, the investment banks aren't investing their own money anyway. They just use their "excess federal reserves" that sit on the Fed's balance sheet to make their over-leveraged derivitives bets on the unregulated ICE market. They just get a smaller return of "free money" from the interest earned on their remaining reserves at the Fed. But there will be more Treasury auctions, and the Primary Dealers will take down a higher percent of each subsequent auction which means more excess reserves at the Fed and more "free money" on the interest paid on those reserves. More worthless fiat to beat down the PMs and the rest of the commodities market (no inflation!!). Wash, rinse, repeat....

Wed, 12/28/2011 - 13:10 | 2016442 onebir
onebir's picture

"The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan." Plus it helps weaken the $ vs the euro... (Without "expanding the Fed balance sheet" due to the latter point?)

Wed, 12/28/2011 - 16:56 | 2017088 optimator
optimator's picture

One Bankster goes down, he takes the rest with him.  Hundreds of great years of profit mostlly down the drain.  They won't allow it.  They can't go back two thousand years to the salt trade!

Wed, 12/28/2011 - 13:08 | 2016444 digalert
digalert's picture

I saw the CNBS piece, the Bernank needs to explain exactly how he's not bailing europe as he promised. Hmmm? Ben? Ben???

Wed, 12/28/2011 - 13:10 | 2016459 Irish66
Irish66's picture

denial this afternoon

Wed, 12/28/2011 - 13:11 | 2016445 Boilermaker
Boilermaker's picture

Watched that live with my jaw gaping open.

Yea, that was some amazing shit and CNBC actually allowed him to speak...which was more amazing.


Too bad he has kiddie porn on his computer now....that's going to be a real 'character' issue for him.

Wed, 12/28/2011 - 14:24 | 2016727 blindfaith
blindfaith's picture

I don't think the charge card used at The Scrub Club is his.

Wed, 12/28/2011 - 13:12 | 2016447 Manthong
Manthong's picture

Like, um.. didn't he do that in 2008, too?

Wed, 12/28/2011 - 13:17 | 2016461 Wakanda
Wakanda's picture

Yo Tyler!

I hear you LOUD AND CLEAR!

Wed, 12/28/2011 - 13:12 | 2016464 Kaiser Sousa
Kaiser Sousa's picture

Gold & Silver especially on mutha fuckin sale...keep up the good work Ben "bitch ass" Berstanke...

to the coin dealer bitchez.....

Wed, 12/28/2011 - 13:28 | 2016555 dark pools of soros
dark pools of soros's picture

it might get much worse in the first part of 2012.... i am thinking deflation hits hard going into the election..  they all love a new crisis to take advantage of..


I might sell some gold soon since it could get ugly so why not hedge a little?  Gold might see sub $1300 before the money dam bursts and EVERYTHING rises in prices as the dollar gets cornered



Wed, 12/28/2011 - 13:45 | 2016588 lynnybee
lynnybee's picture

to the coin dealer bitchez.....   

Yes, to the coin dealer today & tomorrow & the next day ......... TO THE COIN DEALER, GENTLEMEN !!!   ..... HAHHHAAA !  I'm laughing all the way back home with my silver jingling in my pockets; i don't give a damn what the price is, I have some.    damn criminal bank & government.      l.o.l. ..

Wed, 12/28/2011 - 14:32 | 2016754 pine_marten
pine_marten's picture

Certainly PM's have a talisman quality that is pleasing.  These days anything that makes one happy is valuable.  Good for you!

Wed, 12/28/2011 - 14:51 | 2016813 RockyRacoon
RockyRacoon's picture

An ebullient sentiment that, lynny.    However, as a coin dealer I must protest at the phrase structure of the coin dealer bitchez.....  tossed about here.  There should be a comma between dealer and bitchez.

A direct address requires a comma between the command and the one addressed.

Otherwise, the sentence reads as bitchez being an adjective describing the coin dealer.   I must protest at such a grammatical construction.

Wed, 12/28/2011 - 14:55 | 2016830 lynnybee
lynnybee's picture

"  An ebullient sentiment that, lynny. However, as a coin dealer I must protest at the phrase structure of the coin dealer bitchez..... tossed about here. There should be a comma between dealer and bitchez. "

Oh, no.   I was only quoting someone.   I would never swear.    I am polite, you'll only read me saying, " to the coin dealer, gentlement ! "   

I was quoting the comment above me .

Wed, 12/28/2011 - 15:25 | 2016916 Dave Thomas
Dave Thomas's picture

I would only possibly add the word bitchez, after seeing the premiums on your 1/10 oz pieces.

Wed, 12/28/2011 - 17:54 | 2017305 RockyRacoon
RockyRacoon's picture

1/10th oz?  Ha.  That's a good one.  I don't sell tenth ounce gold, I accumulate them.   Everybody talking about trading an ounce for a loaf of bread is BS.   It's the smaller sizes that will trade -- if ANY gold does at all.  That's what silver is for.   Gold is for holding wealth over the long term.  And I don't mean options expiry cycles either.

Wed, 12/28/2011 - 13:12 | 2016465 Jlmadyson
Jlmadyson's picture

The thing is look at that swaps chart from last week which included where they were at right before Lehman failed; they had taken more swaps than before Lehman went down. Yea they saved something alright. Maybe the entire system but for how long? It all comes back around....

Wed, 12/28/2011 - 13:12 | 2016467 gbresnahan
gbresnahan's picture

Is this considered treason?

Wed, 12/28/2011 - 13:23 | 2016492 hedgeless_horseman
hedgeless_horseman's picture




As Jesus said...

Give to everyone who asks you, and if anyone takes what belongs to you, do not demand it back. 


Luke 6:30


Ben Shalom Bernanke is just doing the Christian thing.

Wed, 12/28/2011 - 13:23 | 2016521 JPM Hater001
JPM Hater001's picture

Jesus also said it was a bad thing to change a word of the teachings.

I'm sure somewhere in there you lose a hand for stealing.

Wed, 12/28/2011 - 13:18 | 2016500 El Hosel
El Hosel's picture

Treason?.... Only in the real world, its Business as usual in DirtyFrkrville.

Wed, 12/28/2011 - 13:12 | 2016468 rosiescenario
rosiescenario's picture

"...currency swaps reportedly arranged by Goldman Sachs were one subterfuge employed to hide its debts."


Now isn't that a surprise...."As the U.S. economy circles the drain, Goldman Sachs shall be that drain.".....ditto the European economy and Japan.....

Wed, 12/28/2011 - 13:12 | 2016469 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bernanke lies all the time, this is nothing new.

Wed, 12/28/2011 - 16:11 | 2017040 catacl1sm
catacl1sm's picture

You can tell he's lying whenever his lip quivers.

Wed, 12/28/2011 - 13:12 | 2016470 Ignorance is bliss
Ignorance is bliss's picture

If the fed does not lend the money, then Europe falls into a depression and would probably effect both the U.S and China. This is can kicking at its finest. It obvious that the system is heading for a reset. Too much debt pressures have built up around the world. The Fed is simply pushing it out further. I assume the elitist oligarchy has a new system that is not ready to be deployed. What impresses me is how little ordinary Americans really care about the whole financial disaster and it's reprecussions.

Wed, 12/28/2011 - 13:23 | 2016524 Ignatius J Reilly
Ignatius J Reilly's picture

They will kick the can until it reaches critical mass and can no longer be kicked.  Bank on it.


Oridnary Americans don't know algebra let alone how GDP is calculated.  They do not understand that 1.8% GDP for the next 10 years will mean the economy we have is the economy we are going to have.  They do not understand that if governments need more and more of tax dollars to just pay the interest on DEBT, that there is no new money for anything.  And soon, there will be less and less money for the things we have taken for granted, like education.


And why don't they understand?  Who, exactly has taught them?  GDP you'll learn about in college, and only in good schools.  News outlets?  Really?  Can you just see NBC running an after school special for adults on what this all means?  What would ratings be for that dog? 

Wed, 12/28/2011 - 13:29 | 2016564 JPM Hater001
JPM Hater001's picture

I have a brother from my mother...I was the first child and adopted at birth.  I have spent very little time since meeting him 10 years ago but he camethrough town last night and we had dinner (my birth half sister lives here too).

He works in the pipeline industry in Alaska and he agreed and sees everything I do.  He even owns some silver and is putting his balance in oil.

I am now fully convinced of nature over nuture.

Darwin is about to see his theory put to the test in a whole new way.

Wed, 12/28/2011 - 14:13 | 2016687 Vergeltung
Vergeltung's picture

how the heck does that post get you two down-dings? sometimes I just don't get this place.....

Wed, 12/28/2011 - 15:46 | 2016967 ebworthen
ebworthen's picture

Maybe the grammar/writing police.

I think he meant to say "nurture over nature" as he was adopted, no blood between them, but Mom taught them the same things.


Thumbs up from me.

Thu, 12/29/2011 - 01:35 | 2018326 JPM Hater001
JPM Hater001's picture

Nope, nature over nurture. The family I grew up with (nurture) can't be bothered but my 1/2 brother (nature) sees it too.

Wed, 12/28/2011 - 17:46 | 2017288 TheAkashicRecord
TheAkashicRecord's picture

They can't let "the reset" occur while the baby boomers (who have the majority of the wealth from a demographic perspective) are retiring, it would be politically inexpedient.


Wed, 12/28/2011 - 13:14 | 2016477 zilverreiger
zilverreiger's picture

So the american dollar wants to be a world currency, but without the downsides of being one?

Wed, 12/28/2011 - 13:15 | 2016485 XtraBullish
XtraBullish's picture

Short the metals - the game is now over until Q4 2012 - put these shorts on last week north of Au $1610 and Ag $30.00.

SELL!!!!!! The tinfoil hate crowd are doomed!

Wed, 12/28/2011 - 13:15 | 2016486 xcehn
xcehn's picture

This is the transparency Odumbo promised.

Wed, 12/28/2011 - 13:17 | 2016497 GOSPLAN HERO
GOSPLAN HERO's picture

What's happening on Dancing with the Stars?

Now that is some important shit.


Wed, 12/28/2011 - 13:17 | 2016498 EL INDIO
EL INDIO's picture

Did anyone find it curious that the FED promised ZIRP until 2013 when it will be 100 years old ? !

Is 2013 the time when the FED expires (and the dollar too) ?

Wed, 12/28/2011 - 16:15 | 2017055 catacl1sm
catacl1sm's picture

I keep hearing people say that the Fed's charter expires in 2013, but never any proof to back up it. If true, it certainly presents an issue to TPTB, especially if Paul wins the election. However, the only information I've ever found notes that there is no expiration on Fed's charter.

Wed, 12/28/2011 - 13:19 | 2016501 Jlmadyson
Jlmadyson's picture

That piece about Obama and Geithner acting just like Enron execs before the ship went down is so on point.

Wed, 12/28/2011 - 13:20 | 2016508 Asher88
Asher88's picture

Interesting to see the MSM ramping up the attacks on THAT was hard to predict!

Wed, 12/28/2011 - 13:22 | 2016518 youngman
youngman's picture

Its an out an out lie.....and no one but US here are screaming ....they are talking how Google is now over 600 again...BFD...we are now being lied to on a daily basis...successful bond sales in Italy...sure yeah right...great buys whoever bought them...WTF....

Wed, 12/28/2011 - 13:33 | 2016580 HarryM
HarryM's picture

hence the consumer confidence

Wed, 12/28/2011 - 13:22 | 2016520 curbyourrisk
curbyourrisk's picture

For regular ZH readers just file this under "NO SHIT".


Wed, 12/28/2011 - 17:11 | 2017190 Almost Solvent
Almost Solvent's picture

I prefer the "Welcome to last year's conversation . . ."

Wed, 12/28/2011 - 13:25 | 2016530 j0nx
j0nx's picture

Who cares. The sheep are all too preoccupied with their iStuff to care. Why mah food so high, why mah gas so expensive. Damn those A-rabs! Bahhh bahhh....

Wed, 12/28/2011 - 13:24 | 2016531 LucasATX
LucasATX's picture

Why all the fuss? It is only $54 Billion. I don't think that is a lot of dollars these days. Probably what it will cost to buy a used car in a couple of years.

Wed, 12/28/2011 - 13:25 | 2016536 Dealer
Dealer's picture

So this is going to end well, right?

Wed, 12/28/2011 - 13:27 | 2016545 dcb
dcb's picture

I aid on this site and huff post that he was telling a lie. maybe not in the olegal definition, but that the bailout would come as a loan, opr something else, but they wouldn't call it a bailout because the money wasn't given away. I stated and hoped that this statement could be used in a court of law in some manner in the future to go after the guy.

Wed, 12/28/2011 - 13:28 | 2016547 MFL8240
MFL8240's picture

So he is a liar, so is Obama.  It doesnt matter in America wether you tell the truth, all that matters is how much money you have or how much power you have. 

Wed, 12/28/2011 - 14:58 | 2016843 e-recep
e-recep's picture

in USA you are either a loser or a winner. it does not matter if you are right or wrong. "win at all costs" is the motto, and the ultimate cost will be the total collapse of the global financial system.

Wed, 12/28/2011 - 13:28 | 2016551 HarryM
HarryM's picture

If the GOP isn't involved , they will use this to topple the O-Ring.

This came from the top - Obama willing to burn this country to the ground to be re-elected

Wed, 12/28/2011 - 13:33 | 2016576 dark pools of soros
dark pools of soros's picture

does it matter?  if Paul gets in we'll have a longer stretch of deflation before the hyperinflation (4 years till he gets kicked out?) or if he doesn't we'll just get small taste as deflation slides down until this elections and either Romney or Obama just bring in the hyperinflation pronto

Wed, 12/28/2011 - 14:16 | 2016699 HarryM
HarryM's picture

A horrible end or a horror without end ?

Wed, 12/28/2011 - 17:36 | 2017266 dark pools of soros
dark pools of soros's picture

that's what the road sign reads

Wed, 12/28/2011 - 13:28 | 2016558 youngman
youngman's picture

So when is it going to end...when we hit 500 trillion in debt..or more...????  That is the question.  And what will the 10 year be paying then.   And the price of gold...1 cent...

Wed, 12/28/2011 - 13:36 | 2016592 sabra1
sabra1's picture

it ends when the soon to be in hell globalists own all the debts, then demand repayment! it'll be property, infrastructure, taxes on everything! oh, i forgot, our souls!

so, where are the pitchforks already?

Wed, 12/28/2011 - 13:31 | 2016569 vegas
vegas's picture

And next on the docket is Japan with debt to GDP of over 200%. There will be no end to this as banksters and poiticos cling to power. Of course this will end well.

Wed, 12/28/2011 - 13:34 | 2016583 grid-b-gone
grid-b-gone's picture

The bailout is for Federal Reserve member banks. Europe is just a secondary beneficiary.

The U.S. taxpayer is the screwee, and congress, save Ron Paul and a couple others, does not even understand what is happening.

Congress and Obama are earning their single-digit approval ratings again today.


Wed, 12/28/2011 - 22:07 | 2017944 Questan1913
Questan1913's picture

Grid b gone:


Wed, 12/28/2011 - 13:35 | 2016586 Jlmadyson
Jlmadyson's picture

Whoever watched Live on CNBC was the interviewer Maria B? Was she in shock haha?

Kind of like, "but how sir can you question the AAA status of the USA"?

Because we are an effing Ratings Agency that's how Maria!

Wed, 12/28/2011 - 13:36 | 2016589 YesWeKahn
YesWeKahn's picture

Unfortunately they (the FED) aren't accountable and whatever they do (crime after crime) is in the best interest of the american people.

Wed, 12/28/2011 - 13:36 | 2016590 Hubbs
Hubbs's picture

Don't sweat it guys. It's all paper money and appearances at this point. The important thing is that as long as Zerohedgers et al complain bitterly and voiciferously that we are actually sending "real money" to bail out Germany and the rest of Europe, then everyone will keep thinking we are sending them "real money. "


This gives the appearance that we are still dealing in a real money world. That's long gone.  Of course it will never be paid back-because we haven't really loaned them anything in the first place!

Wed, 12/28/2011 - 13:40 | 2016606 MarcusLCrassus
MarcusLCrassus's picture

After the bailouts of 2008 TBTB learned that the dumbest thing  you can do is to publicly announce that you will be doing a bailout.  So their policy since then is to just do the bailout on the sly and hope no one notices. 

And even if someone does notice it, the MSN will not report on it- a media blackout.  The only way to find out about it is independent media such as ZH and every once in awhile when these (former) insiders call it out. 

And even then, it just continues as the herd has no  idea it has even happened.  Tell them that the Fed has been bailout out Europe to the tune of trillions of dollars over the last year and they would look at you as though you just grew an arm out of your forehead. 

Wed, 12/28/2011 - 15:51 | 2016985 ebworthen
ebworthen's picture

Hey, when is the Packers game on this Sunday, and will the family size Doritos be on sale at Walmart?

Wed, 12/28/2011 - 13:44 | 2016614 non_anon
non_anon's picture

TBTF lives on

Wed, 12/28/2011 - 13:48 | 2016622 GrinandBearit
GrinandBearit's picture

Bernanke should be tortured, beaten and hanged.

Wed, 12/28/2011 - 13:49 | 2016625 lunaticfringe
Wed, 12/28/2011 - 13:50 | 2016626 SamAdams1234
SamAdams1234's picture

Arm the barricades, sharpen the blades mes amis.

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