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Guest Post: Why Is The Fed Not Printing Like Crazy?

Tyler Durden's picture


Submitted by John Aziz of Azizonomics

Guest Post: Why Is The Fed Not Printing Like Crazy?

I try to read all sides of the economics blogosphere, and try and grasp the ideas of even those who I would seem to radically disagree with.

One thing that the anti-Fed side of the economics blogosphere seems to not fully appreciate is the depth of disappointment with Ben Bernanke from the pro-Fed side. For every anti-Fed post bemoaning Bernanke’s money printing, there is a pro-Fed post bemoaning Bernanke for not printing enough. Bernanke, it seems, is tied to everybody’s whipping post.

And in fairness to the pro-Fed side, the data shows that the Fed is not printing anywhere near as much as its own self-imposed interpretation of its mandate demands. (Of course, I fundamentally disagree that price stability should be interpreted as consistent inflation, but that is an argument for another day).

Scott Sumner notes:

Recall that the Fed tries to keep inflation close to 2.0% and unemployment close to about 5.6% (the Fed’s current estimate of the natural rate.)  One implication of the dual mandate is that they should try to generate above 2% inflation during periods of high unemployment, and below 2% during periods of low unemployment.


In July 2008 unemployment rose above 5.6%, and it’s averaged nearly 9% over the past 46 months.  So the Fed’s mandate calls for slightly higher than 2% inflation during this 46 month slump.  Last month I reported that the headline CPI had risen 4.6% in the 45 months since July 2008.  Now we have the May data, and the headline CPI has gone up 4.3% in the 46 months since July 2008.  So the annual inflation rate over that nearly 4 year period has fallen from a bit over 1.2%, to 1.1%.

Raw data:

Note that downward slope in inflation into 2012?

That’s the Fed not doing QE3 when everyone (especially gold prices) expected them to, and when their own self-imposed interpretation of their mandate calls for them to inflate more. And nobody can say that the Fed is out of bullets; central banks are never out of bullets — there was a time when a central bank was limited to the number of zeroes it could fit on a banknote, but in the era of digital currency, even that limit has been removed.

Here’s the younger Bernanke’s views on the subject:

Franklin D. Roosevelt was elected President of the United States in 1932 with the mandate to get the country out of the Depression. In the end, the most effective actions he took were the same that Japan needs to take — namely, rehabilitation of the banking system and devaluation of the currency to promote monetary easing. But Roosevelt’s specific policy actions were, I think, less important than his willingness to be aggressive and to experiment— in short, to do whatever was necessary to get the country moving again. Many of his policies did not work as intended, but in the end FDR deserves great credit for having the courage to abandon failed paradigms and to do what needed to be done. Japan is not in a Great Depression by any means, but its economy has operated below potential for nearly a decade. Nor is it by any means clear that recovery is imminent. Policy options exist that could greatly reduce these losses. Why isn’t more happening?


To this outsider, at least, Japanese monetary policy seems paralyzed, with a paralysis that is largely self-induced. Most striking is the apparent unwillingness of the monetary authorities to experiment, to try anything that isn’t absolutely guaranteed to work. Perhaps it’s time for some Rooseveltian resolve in Japan.

And here’s Paul Krugman pulling a Bernanke on Bernanke:

Bernanke was and is a fine economist. More than that, before joining the Fed, he wrote extensively, in academic studies of both the Great Depression and modern Japan, about the exact problems he would confront at the end of 2008. He argued forcefully for an aggressive response, castigating the Bank of Japan, the Fed’s counterpart, for its passivity.


Presumably, the Fed under his leadership would be different. 


Instead, while the Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. The U.S. economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet the Fed isn’t taking strong action to rectify the situation.


It really makes no sense — except in terms of politics. I really believe that we have reached a point where the Fed is afraid to do its job, for fear of being accused of helping Obama.

I am fairly certain the answer to why Bernanke isn’t increasing inflation when his former self and former colleagues say he should be is actually nothing to do with domestic politics, and everything to do with international politics.

Most of the pro-Fed blogosphere seems to live in denial of the fact that America is massively in debt to external creditors — all of whom are frustrated at getting near-zero yields (they can’t just flip bonds to the Fed balance sheet like the hedge funds) — and their views matter, very simply because the reality of China and other creditors ceasing to buy debt would be untenable.

Why else would the Treasury have thrown a carrot by upgrading the Chinese government to primary dealer status (the first such deal in history), cutting Wall Street’s bond flippers out of the deal?

As John Huntsman (in his days as ambassador to China) reported in a cable back to Washington, China is keen to stop buying low-yield treasuries and start buying other assets, but the US is desperately pushing China back toward treasuries:

The Shanghai-based Shanghai Media Group (SMG) publication, China Business News:

“The United States provoked a trade war again by imposing high anti-dumping duties on Chinese-made gift boxes and packaging ribbon. China has become the biggest victim of the U.S.’s abusive implementation of trade remedy measures. 


The United States no longer sits still; it frequently uses evil tricks to force China to buy U.S. bonds.


A crucial move for the U.S. is to shift its crisis to other countries – by coercing China to buy U.S. treasury bonds with foreign exchange reserves and doing everything possible to prevent China’s foreign reserve from buying gold.


Today when the United States is determined to beggar thy neighbor, shifting its crisis to China, the Chinese must be very clear what the key to victory is.  It is by no means to use new foreign exchange reserves to buy U.S. Treasury bonds.  The issues of Taiwan, Tibet, Xinjiang, trade and so on are all false tricks, while forcing China to buy U.S. bonds is the U.S.’s real intention.

And that, in a nutshell, is why Bernanke is not printing nearly as much as Krugman wishes. In my view only a brutal 2008-style collapse can bring on the kind of printing — QE3, NGDP targeting and beyond — that the pro-Fed blogosphere wishes to see, because it is only under those circumstances that China and other creditors will happily support it.

To a heavily-indebted nation, creditors have big leverage on monetary policy.


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Sat, 07/21/2012 - 11:23 | 2638781 q99x2
q99x2's picture

Could have to do with high food prices sparking revolution.

Sat, 07/21/2012 - 11:30 | 2638793 otto skorzeny
otto skorzeny's picture

it seems God is trying to stymie The Bernank. food prices are gonna skyrocket plus crude is stubbornly staying at around $90 a barrel which doesn't help.

Sat, 07/21/2012 - 11:43 | 2638819 flacon
flacon's picture

Every one deserves a steak dinner. CTRL-P the link below and enjoy - or simply enjoy it right on your monitor from the comfort of your own home! Those who stand for delivery will be prosecuted as speculators!


Sat, 07/21/2012 - 12:07 | 2638877 Spastica Rex
Spastica Rex's picture

You know, I know this steak doesn't exist. I know that when I put it in my mouth, the Matrix is telling my brain that it is juicy and delicious. After nine years, you know what I realize? Ignorance is bliss.

Sat, 07/21/2012 - 12:31 | 2638912 LowProfile
LowProfile's picture


The issues of Taiwan, Tibet, Xinjiang, trade and so on are all false tricks, while forcing China to buy U.S. bonds is the U.S.’s real intention.

Someone explain to me how exactly the US can force China to buy UST bonds?

Because I don't see it...

Sat, 07/21/2012 - 13:14 | 2638918 engineertheeconomy
engineertheeconomy's picture

People lie...

The United States and China are one and the same, they make it look like they are in conflict when they are actually in complete agreement as to how they will divide their plunder

With the press of a button they printed gazillions and already purchased everything

Think about the implications of that

They control every piece of information you recieve

They fabricate your entire reality

You think what they want you to think

Ben Bernanke is following his instructions to lie about the fact that he is printing Quadrillions and Quadrillions of Dollars

Just because you can't see it does not mean that they are not very clever at hiding it

What would you buy if you had Quadrillions and Quadrillions of Dollars, and what would the people you bought it from be left holding?

Thats right

The transfer of wealth continues

Along with your daily demotion

Do you know why you can't find "Rate of Usury to Foreclosure Ratio" Charts on the internet?

Or how about "Usury is Unpayable"

Maybe they control the internet

 You think?

Sat, 07/21/2012 - 15:53 | 2639140 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

If the Bernank did turn on the taps and wrote an automatic Cntl-P program, it would be admitting failure. People would figure out that our leaders failed us. These types of arrogant supposed intellectuals are never wrong (at least in their deluded heads) Printing like Zimbabwe will only occur during a real crisis and everything is imploding quickly. Until then, we are going to get gradual printing (it really is not printing but debt generation) until they are forced to.

Sat, 07/21/2012 - 18:46 | 2639378 caconhma
caconhma's picture

WOW! How long will yellow-stupid people buy useless American paper like US Treasuries or exchange their goods and services for US$$$?

It is obvious that America does everything in its power to subjugate Red China. The objectives of all these endless wars are to encircle China and deny China the access to natural recourses and technology. An a top of it, America is trying to provoke a confrontation economic & military between China and India as well as between China and the rest of Asia including Vietnam, Philippines, Indonesia, etc.,

Granted Japanese are not much smarter.


It cost lots of money to conduct the Libyan and Syria military campaigns. After all, Saudis and Qatar just cannot print US$$. These stupid Chinese were/are also paying for the American takeover of Libya throwing out Chinese companies as well as 40,000 Chinese out of Libya.

This fucking world went absolutely crazy.


Sat, 07/21/2012 - 22:13 | 2639647 Bringin It
Bringin It's picture

Undeniably true.  They were paying America and Nato to destroy their Lybian investment.  This is beyond the Milo Mindbender/ Catch 22 fantasy.

China was trumpeting it's support for the Euro.  How many Euros were expended over the lybian desert?

Sun, 07/22/2012 - 00:39 | 2639795 LowProfile
LowProfile's picture


People lie...

Rhetorical question, but thanks for the spot on rant, engineertheeconomy.

Sun, 07/22/2012 - 00:52 | 2639811 bankruptcylawyer
bankruptcylawyer's picture

well, war actually doesn happen with enough frequency that you can both be right and still agree to the idea that the chinese and american military can also cooperate to have war until one of them 'wins' at some point. 


read the japanese chinese 'peace treaty' negotiated multiple times since world war ii . if you read the language , it is more than clear that the treaty is really designed to allow war to happen when convenient. it is as if both parties agreed that they would just fight later, when the need to fight reared its ugly head once again. 


Sun, 07/22/2012 - 03:16 | 2639882 All Risk No Reward
All Risk No Reward's picture

All Bernanke does is lie.

Scott Sumner and the author of this article that quotes him are either useful idiots or liars as well.

Let me be crystal clear:  THERE IS NO DUAL MANDATE.  IT DOESN'T EXIST.  It's all a propaganda lie.

Read Section 2A of the Federal Reserve Act yourself.  The mandate is singular - keep credit and monetary aggregates commensurate with the long term productive potential.  Of course, they criminally broke their mandate and needed some cover - so they went Orwellian and claimed the expected resultf of following the mandate were the mandate itself.

Proof beyond any and all doubt right here:

Spread the word...

Sat, 07/21/2012 - 12:42 | 2638930 zaphod
zaphod's picture

Comments like "focing to buy" are just typical whinning from over other because they want to have their cake and eat it too. China buys a ton of treasuries so they can keep the exchange rate at a level that keeps exports up. But that admits to manipulation and exposes the myth of their economy.

As for why Ben is not printing, he knows that the next $1-2T of funny money will start to have a serious effect on prices, so he won't do it until everyone begs for it. i.e. during the next major crash. But yes, he will print then.

Sat, 07/21/2012 - 14:21 | 2639032 engineertheeconomy
engineertheeconomy's picture

After the Great Depression (caused by the Bankers) we were able to come out of it because the people still owned some of the Land and some of the Gold

The depression that we are all currently in Globally here and now in 2012 (also caused by the Bankers) is way, way differrent

It's much, MUCH worse

Thats why it is being refered to by Hillary as the Long Depression,

she calls it Planned Future Generations of Slavery by design of the few Elite

and yes, their long range target is to eliminate the majority of us useless eaters

they have machines and robots to do  practically all of their dirty work now

and technology is increasing at an exponential rate

think about it


Sun, 07/22/2012 - 04:26 | 2639895 Lucius Corneliu...
Lucius Cornelius Sulla's picture

I hate to poke holes in your hypothesis but there was something called the Dust Bowl that rendered most farmland useless (most of which was farmed by tenents).  Furthermore, the peoples gold was taken by force by FDR's agents then devalued.  It was blatant theft on a grand scale.  It was illegal to own gold until 1971.

Caused by the bankers?  I say maybe 50% of the problem.  But none of this would have happened without the government's full compliance.  There are plenty of laws on the books and regulatory agencies that had the full power to stop the banks and prosecute the criminals.  However, none of this happened because the USG, being the biggest debt junky on the planet, needs the bankers just as much as the bankers need the USG.  Until we address the issue of moral hazard, largely caused by USG involvment in the finance industry we will continue to have more of the same.  The worse thing you could do to the banks is shut down all USG loan guarantee programs and close the FDIC.  Believe me, the banks would change risk and leverage levels over night.

Sat, 07/21/2012 - 23:51 | 2639747 Muppet of the U...
Muppet of the Universe's picture

Very true.  Note when QE1 - 2 - silent 3 all came out. 

BBKing aka woppa junyah saved the market from bearitory.

People talking about QE for the hard economy like states and towns?  Look at Chicago.  It AIN'T mofuckin, coming.

Ben's job is to keep the stock market afloat, and with it, banks.  So all the idiots going, qe3 is coming!

We are fuckin still in 12000's with no signs of major weakness, hft is stomping muppets, mmf's and m&p funds are losing to inflation...

Second, its not QE3, qe3 already came.  Get your heads out of your asses. 

this is fuckin qe4 coming up, if it comes.  & if it does, it will be coming at like 2000 points down from here.

Sat, 07/21/2012 - 12:52 | 2638946 JamesBond
JamesBond's picture

why continue to bail water out of a sinking ship?

Because you are in it.



Sat, 07/21/2012 - 14:52 | 2639078 michael_engineer
michael_engineer's picture

The real issue is not forcing China to buy new USTs, but rather in keeping them from selling those that they already have, and Ben knows that.

Sat, 07/21/2012 - 11:45 | 2638823 TruthInSunshine
TruthInSunshine's picture

Food crop commods are exploding and refined gasoline prices at the pump are causing pain at present level.  If Bernank does QE3 in any significant way, it'll literally be the spark that sets fire to food and gasoline prices, and at a time when moribund economy is least able to filter it without it causing even faster and more widespread consumer deleveraging, especially in anything discretionary.

I'm not saying The Bernank will or won't further break all markets (equities, bonds, commods, etc.) by engaging in more significant asset purchases.  it's getting dicey when the costs of doings so are higher than ever and any alleged benefits of doing so are rapidly shrinking.  There can be no additional utility to consumption by driving interest rates any lower.

All QE3 would do is doom Obama as gas, utility and food prices would soar, soaking the already feeble consumer, who is already quite pissed.

Bernanke literally can't do anything remotely resembling QE3 in any form (LSAP, tnote purchases) without causing a spike in gas, food and utility prices.

This is what happens when fractional reserve banking charlatans intervene in radical ways with the clearing function of markets by implementing idiotic, counter-productive monetary policy, and then break the markets.

Fiat games.

Sat, 07/21/2012 - 11:47 | 2638830 fonzannoon
fonzannoon's picture

Bernanke has everyone convinced that he has the tools to fix things. He also has the tools to keep things in place until Congress can fix them (spending cuts and tax increases). Congress knows damn well with us still in a depression that they ain't raising taxes and are absolutely not cutting spending. So they keep punting it back to Bernanke. Bernanke is now in his painted corner. "Get to work" or else you will absolutely take the blame for standing idly by while everything broke down and you did not use the tools you claimed you had.


Sat, 07/21/2012 - 12:19 | 2638895 Rainman
Rainman's picture

My crystal ball says Bernank wants a Romney win so he can get himself un-reappointed and dump this whole mess on the next ChairSatan. He should be keeping a short timer's calendar by now. He belongs in academia, anyway, where nonproductive bullshit is celebrated and glorified.

Sat, 07/21/2012 - 12:37 | 2638921 The Big Ching-aso
The Big Ching-aso's picture



Larrdy Summers has an excellent trak record of phucking things up.  Perfect candidate.

Sat, 07/21/2012 - 13:15 | 2638982 ThisIsBob
ThisIsBob's picture

... and the living is easy off the proceeds of students' loans.

Sat, 07/21/2012 - 14:38 | 2639066 Antifederalist
Antifederalist's picture


I have held this theory for some time.

He is screwed and knows it. His only move is to get out.

Romney win assures that

Sat, 07/21/2012 - 13:03 | 2638962 deez nutz
deez nutz's picture

"Get to work" .....

when the congress of the united states of america points to the federal reserve to save our country....... and then the fed points back ......

you know it is just about over.


Sat, 07/21/2012 - 14:25 | 2639054 TruthInSunshine
TruthInSunshine's picture



"Get to work, Mr. Chairstain. You know what you need to do."


-- Charles 'Fuck Flyover USA Homies - I Serve the Global Financial Interests Having Offices in Manhattan' Schumer

Sat, 07/21/2012 - 21:37 | 2639601 Arnold Ziffel
Arnold Ziffel's picture

Banker bonuses are record high. Unless and until these are jeopardized, there will no reason for Ben to print faster.

Unemployment, etc are not in his equation. Like most entities, they are beholden to only one group---their owners.

Sat, 07/21/2012 - 12:45 | 2638936 Global Hunter
Global Hunter's picture

that's a good point, one needs not a single economic model or complicated theory to conceptualize a world with US and Western economic contraction coupled with core inflation (oil, food, raw materials).  Bernank can waffle on all he wants quoting statistical study after statistical study but all he needs to know is the oil, gold, commidity price and then look at the unemployment rate and payroll numbers. 


Its not very complicated.

Sat, 07/21/2012 - 13:11 | 2638968 JuicyGrabs
JuicyGrabs's picture

You`ve nailed it. This is one reason many fail to notice. While Obama and democrats apparently keep pushing for QE(which would only affect stocks mostly and not the real economy), they don`t really want a QE to happen. They seemingly keep pushing for it to give the impression GOP are the bad guys preventing good policy to be implemented.

A QE3 would trigger higher food and oil prices which could really hurt Obama`s chances and provoke more unrest in the country.

A QE3 would actually hurt purchasing power of everyone, including Obama`s loyalist food stamp crowd. Money from QE2 and QE1 is still sitting unused in banker`s pockets, stashed away  in treasury bills and some in stocks. Most of the money never got to the real economy.

By the contrary, deflation is helping the average joe by increasing purchasing power. People can do more with same amount of money. Even food stamps can buy more and better food. While whole world is running to the dollar as safe heaven, US consumer can really benefit.

Sure some exporters would be hurt but since US imports surpass exports, US having big trade deficit, deflation is good news.

There`s also the fastly approaching war with Iran. Brzezinski thinks will happen before November elections. QE can`t possibly take place as even without a QE oil prices could get to 200$ in the event of an Iranian war.

Sat, 07/21/2012 - 15:38 | 2639125 michael_engineer
michael_engineer's picture

Just the hope that new QE could happen and boost the Markets gives the markets a high bias. Stocks went up on the other QEs so those investors that think new QE will come will pay more for stocks.

Sat, 07/21/2012 - 20:34 | 2639508 andrewp111
andrewp111's picture

BK thinks the Fed will cut the deposit rate instead of doing QE. If Bernanke does this, nominal interest rates will go negative.

Sat, 07/21/2012 - 11:59 | 2638785 Daily Bail
Daily Bail's picture

F-BOMB DETAILS - Geithner's Transparency Exposed In New Book By Neil Barofsky


It sounds like Geithner does not like to be challenged behind closed doors...


Sat, 07/21/2012 - 11:27 | 2638786 Alex Kintner
Alex Kintner's picture


In the end, the most effective actions he took were the same that Japan needs to take — namely, rehabilitation of the banking system and devaluation of the currency to promote monetary easing.

So say the smartest men in the room.  Devaluation is that all you've got?!

Sat, 07/21/2012 - 12:28 | 2638909 disabledvet
disabledvet's picture

This is an EXCELLENT point. One Greenspan was REMOVED his replacement was named "to solve the catastrophe of Greenspan" which...if understand Government at all...amazingly Ben Bernanke did in fact do. (The yield curve had been inverted for years so the Alan Greenspan could "phuck your normal" and replace it with his "Abbie Normal.") Interest rates were in fact well into a decline when the catastrophe of 2008 occurred and thus "Ben Bernanke could experiment so as not to be Japan" which in fact he did do. The results have been fascinating actually...but far from "non predictable" now that the crisis has passed. First and foremost "there is no inflation"...which of course was the stated goal of the policy by Ben Bernanke..."TO CREATE INFLATION." Hence where i disagree completely with this article. "The initial response worked to prevent a total collapse of the financial system"...unlike Japan where their Fed "let market forces prevail!" and now have Nikkei that in nominal terms is 75% less than it was in 1987! So how to get prices to rise "going forward" with Wall Street "buying bonds like Madmen and telling the recovery to "GO TO HELL! WE'RE SPECULATING IN EURO'S, SHORTING THE CRAP OUT OF YOUR USELESS AMERICAN SHIT AND GOING LONG COMMODITIES CUZ THAT'S A WINNER EVERTIME!" )(thus driving themselves into TOTAL bankruptcy this time.) This obvious condition has presented the Fed with a dilemma...which they have responded to quite capably by "throwing Wall Street under the bus and trying to see if maybe the Chinese are interested in buying into equities" or even "taking a little outside the risk profile of the totally insane." For public consumption the media has told all the CNBC clown watchers "THE CHINESE ARE NOT INTERESTED! THEY ARE BUYING BULGARIA INSTEAD!" (and now they are watching as the entirety of that investment portfolio explode in an orgy of euro-crap histeria.) What the media isn't telling you is "that clown on the TV isn't China." You may proceed to infer what you like from here on of course. I dictate to no person what he/she wishes to do with his/her personal money. Nor am i about to start by doing so now cuz quite honestly "i don't give a phuck." I ain't paid for this shit but i'm sure interested in the people who are! This is just my take "On History" and nothing more. If you wish to take advice from the other "economic historians" by all means...

Sat, 07/21/2012 - 11:38 | 2638795 Daily Bail
Daily Bail's picture

Bernanke is feeling the anti-printing heat from several sources.

Here are a few:

  1. Some in the MSM media...
  2. Some memebers of Congress...
  3. The economic blogoshpere minus outlets like Brad Delong/Krugman who want him to print to infinity...
  4. Foreign governments holding Treasuries who don't want the dollar destroyed...

Meanwhile tools such as Barney Frank, Chuck 'The Spending Truck' Schumer, Maxine Waters and others want the Bernanke to go FULL PRINT.

And without a doubt, Obama the Obankster is begging for some QE sauce to help him slide into Novemeber on a more favorable footing.

So, ZimBenwe is getting flack from all sides, and frankly, it couldn't happen to a more deserving stooge.

Sat, 07/21/2012 - 11:40 | 2638814 Popo
Popo's picture

The last one (#4) is true, but a non-issue.  There's no yield anywhere.  It's not like China can dump UST and pile in to some other paper that's got a better yield (without risking the principal to a dangerous level)

China has repeatedly voiced disagreement with US monetary policy and vice versa.  If China was going to dump they would have done it years ago.  Yes, the Fed is in a bind.  But it's not because China is "threatening to dump Treasuries".  That's an old saw that's not cutting.    China would dump in a nanosecond if there was yield to be had at the scale they need.   The whole world is slowing down and central banks are coordinating interest rate policy.  There's nowhere to run.


Sat, 07/21/2012 - 11:55 | 2638851 Daily Bail
Daily Bail's picture

You are correct on China and their lack of yield alternatives.  Still, it's pressure of some sort.  And just about the only satisfaction I can wring out of the past 24 months of QE, is the comforting knowledge that Bernanke is constantly stressed and under pressure from all sides.

I get measurable satisafaction from knowing that he doesn't get to enjoy his weekends, at least like he did back in his Princton days of Keynesian fluffing with fellow troglodyte Krugman.

Sat, 07/21/2012 - 12:21 | 2638900 DeadFred
DeadFred's picture

I've talked with several people recently who understand the Chinese mindset (most were Chinese) and all agreed that it's foolishness to impute Western short term profit motives on the Chinese. The Chinese are different. If losing half the value of their foreign reserves will give them an advantage in the wrestling match for alpha-dog position in the world they won't hesitate longer than an algo would. Who knows what plans they might have but don't think they're worried about quarterly reports the way the west is.

Sat, 07/21/2012 - 11:59 | 2638861 Buckaroo Banzai
Buckaroo Banzai's picture

It has less to do with finding yield, and more to do with making sure their principal isn't inflated away.

That said, I think that domestic political concerns would easily trump international ones. Obama comes from the Chicago School, where political enemies are punished, and threats eliminated, by assassination if necessary. So that's a big flaw in the argument here.

Sat, 07/21/2012 - 16:27 | 2639189 you enjoy myself
you enjoy myself's picture

It's not like China can dump UST and pile in to some other paper that's got a better yield

why other paper?  they've been hording gold for a reason.  we may not be there just this minute, but there will come an inflection point where China determines their gold portfolio's gains will outweigh their Tbill losses.  Ben is boxed into a corner on this - if China dumps treasuries the Fed can't/won't allow rates to rise.  which means the only possible response is for the Fed to conduct massive LSAPs. 

the offsetting gain/loss from massive printing at this point is assymetrical though - China's Tbills maybe take a 25% hit, but their gold could rise 500%-1000%.  god forbid if they expose a shortage at COMEX or LBMA in the process.


Sun, 07/22/2012 - 07:57 | 2639964 CSA
CSA's picture

That 500%-1000% would be against a worthless dollar.  The value of gold is the value of gold.


The intent would not be as evil as we percieve.  The China dump would be for survival and because their wings would be fully developed for flight as the new "only" game in town.


I'm not an economist, but last night I did stay at a Holiday Inn Express.

Sat, 07/21/2012 - 12:25 | 2638906 narnia
narnia's picture

He's not outwardly announcing a program because we have trillions of excess reserves in the system & he knows this won't work- which, if tried, will only further undermine the Fed's credibility.

He doesn't care about what our creditors do. The Fed will buy UST if the rate goes up past a magic number. If that means buying the Chinese position, so be it. They dump, they pay for it in devalued currency. This reality hasnt changed for years.

Sat, 07/21/2012 - 11:31 | 2638798 MGA_1
MGA_1's picture

The stock market has to go down....

Sat, 07/21/2012 - 11:34 | 2638802 blueridgeviews
blueridgeviews's picture

Could have a lot to do with the masses not being able to afford a roof, clothing, fuel  and shelter.

Sat, 07/21/2012 - 12:31 | 2638816 The Big Ching-aso
The Big Ching-aso's picture



Gotta wait 4 Europe to implode 1st.  Then mash the C-Pee B4 doo-doo button.

Sat, 07/21/2012 - 15:45 | 2639131 Mugatu
Mugatu's picture

Sorry, but I don't think the Chinese run our country yet.  The real reason is real simple:

Bernanke is playing Chicken with Congress.  The Fed is tired of doing all the heavy lifting and this is a subtle poke at Congress. If one corner of the government printing is fun, just imagine the fun the Fed and Congress can have together?  He wants his "Roosevelt" and his own "Roosevelt Congress". 

Sat, 07/21/2012 - 12:13 | 2638822 JustObserving
JustObserving's picture

US is desperately pushing China back toward treasuries

I think Aziz is very correct - the Fed is not printing to prevent the price of gold, alternate money, from threatening the hegemony of the dollar.

It is clear that problems are developing the gold market and the Fed is pushing gold and silver down.  Every statement by Bernanke is followed by a crushing move down in silver and gold:

"It is now beginning to be discussed, openly, that the unallocated gold is not at the banks.  This is definitely the case with many of the allocated accounts as well.  The reason I’m pointing this out is you have a more ‘open’ disclosure that’s taking place with regards to this.

The London Trader continues: 


“This tells me there is something major that is happening behind the scenes.  It tells me that the LBMA’s price fixing scheme is coming to an end.  You have these naked short positions, that are incomprehensible to most people, in both gold and silver....


Sat, 07/21/2012 - 12:43 | 2638932 disabledvet
disabledvet's picture

I think the Fed has the Treasury market cornered just fine thank you very much. The question is "how to get the US Economy off the financial heroin that Wall Street is on." China is a good an answer as any...makes sense...stands to reason...was the plan to begin with as "they were our top creditor" at the time of the collapse. With the EZ imploding I think China will be loathe to "try and lose anew" in that space. The Song Remains the Same however: "what does the US get out of deal." A war in Syria doesn't sound like a good result to me. But i'm just a Lonesome Cowboy here...riding across the Plains with me Guitar..

Sat, 07/21/2012 - 11:46 | 2638829 CrashisOptimistic
CrashisOptimistic's picture

There is a better answer for all this stuff.

He's not printing because he tried that and didn't get good results.

He has concluded, rightly, that the problems are not monetary and a monetary flailing about for a fix is likely to do more harm than good.

The problems are oil scarcity, and fiscal devastation, in that order.  He has no control over either.

Sat, 07/21/2012 - 11:54 | 2638839 fonzannoon
fonzannoon's picture

Crash if it ever even dribbled out that he felt that way you would see the biggest immediate deflationary crash in history. If he feels that way (and he must) maybe our descendants will read about it in his memoirs which will be made public in the year 3000

Sat, 07/21/2012 - 11:54 | 2638853 CrashisOptimistic
CrashisOptimistic's picture

How much more deflationary crash do you want to see than 1.45% 10 yr paper and negative yields on German paper?

How can it be anything other than deflation?  The population rises 1 billion people per 10 years and oil output is flat or declining.

You can't rev an engine to higher RPMs as you load it down and pinch its fuel line.  It is going to slow.  Relentlessly.  Forever.

Sat, 07/21/2012 - 11:59 | 2638860 fonzannoon
fonzannoon's picture

I completely agree. This is deflation to the likes of what people have never seen. My point is the only reason this is even barely held together is by the belief that he will print more and that somehow will help. If he acknowledged that it won't work these banks will blow up, like overnight. It will be the end of it.

I actually think that is what is going to happen. However thats when Bernanke really will show up to work. The inflationary reaction to that deflationary scenario is what most people on here are expecting. It's going to be one hell of a ride, and most people will fall off.

Sat, 07/21/2012 - 11:48 | 2638835 Crimedog
Crimedog's picture

Queue the ZHers whining for Bernanke to print NOW so their precious gold goes to "DA MOONZ".  Would somebody please reconcile this conflicting position for me?  You all hate Bernanke for supposedly destroying this economy with QE, ZIRP, etc., but without any new QE that also confers realized inflation, your gold holdings will take a major hit.  I get the impression that a lot of ZHers actually despise Bernanke because he has NOT introduced a new QE program this year, and most likely will not.

Sat, 07/21/2012 - 11:51 | 2638842 fonzannoon
fonzannoon's picture

It's not that crimedog. It's just like the banks have front run him by buying treasuries knowing he will, and are now stamping their feet and screaming for him to buy them. Most ZHers are also frontrunning him buy buying gold, knowing he will expand that balance sheet.

Sat, 07/21/2012 - 12:47 | 2638941 disabledvet
disabledvet's picture

indeed. "the battle for real return has begun."

Sat, 07/21/2012 - 11:51 | 2638845 CrashisOptimistic
CrashisOptimistic's picture

You make a good point.

No one will care, inside ZH or outside ZH.  It doesn't matter now.  The system is too far gone.

Sat, 07/21/2012 - 12:20 | 2638897 Hulk
Hulk's picture

Doesn't matter a bit what Bernanke does at this point. Debt is in a upward spiral that the world cannot stop.

Thats all I need to know. Fiat will do what Fiat always does, goes to 1/t,  t=time.

Got Gold???

Sat, 07/21/2012 - 13:42 | 2639010 ddtuttle
ddtuttle's picture

The apparent contradiction comes from knowing the Fed will NEVER do the right thing.  So ZHer's are reconciled to the QE to infinity paradigm, and have set up their personal situation to proift from it.  We all know it won't work in the end, but we also know they'll do it anyway.  

But when Bernak sits on his hands, we get a little impatient.  This long drawn out descent into financial hell is driving us all nuts.  Get it over with already so we can start fixing our broken system.

Bernanke is also waiting to see what happens Europe.  Even though he knows much more than any of us, I don't think he knows what's going to happen to the EMU.  If Germany leaves, he'll have to support the new pygmy Euro with swaps.  If the whole thing comes apart, he'll have to do swaps in 17 new currencies!

BTW: The right thing is stop trying to fix a debt crisis with more debt.  Break up the TBTF banks and restore a glas-stiegel barrier between retail and investment banks.  OF course, our global money center banks are the aircraft carriers of economic imperialism, and we won't dismantle our banks until the foreign money center banks are broken up too.  So we go on and on and on with this nonsense. 


Sat, 07/21/2012 - 15:12 | 2639098 RockyRacoon
RockyRacoon's picture

"So ZHer's are reconciled to the QE to infinity paradigm, and have set up their personal situation to profit from it."

Profit?  Nah.  Just trying to keep the nostrils above the water-line.  That's all.  One has to take a philosophical stand since a stand based on the technicals is useless.   Technicals tells us nothing in a rigged market.   All ya can do is follow your gut.

Sat, 07/21/2012 - 11:50 | 2638841 Hmm...
Hmm...'s picture

The answer to this seems obvious.  He's not printing because he doesn't need to.

Superprinting only happens when the banks are in overt crisis.  The banks are not in overt crisis.  He doesn't give a flying F about the rest of the world economy, so long as the banks do well.

Thus, he superprinted when the banks were teetering on collapse.  but now that they can show accounting trick profits, and the banker bonuses are rolling in, who cares?

He won't print until the banks are teetering again.  By that time he'll have the political cover and the plebes will be literally BEGGING him to print.

Love him or hate him (I hate him), he has done a masterful job (for his masters, the banks).  Be honest.  At the depths of the crisis (S&P down below 700, people lining up at TBTF banks to withdraw their money), how many of you thought that we would be this good (superficially) in 2012?


Sat, 07/21/2012 - 20:28 | 2639500 buzzsaw99
buzzsaw99's picture

This comment is exactly right. the bernank knows the only thing he can save is the federal reserve banking system and their attendant looting operations. that is all he cares about the rest of us could die and he wouldn't give a flying fukkk.

Sat, 07/21/2012 - 11:56 | 2638854 toady
toady's picture

Who says he isn't printing? Where do you think these low volume melt ups are coming from?

Decades from now we will hear how the 'stealth QE' gave the elites the years needed to set up the new world order.

Sat, 07/21/2012 - 12:05 | 2638874 tony bonn
tony bonn's picture

"....but in the era of digital currency, even that limit has been removed...."

better hope your software achitect specified the right data types to support all of those zeroes or you will find yourself in the same situation as the zimbabweans who could not get cash because the atms were not programmed to support the requested number of zeroes.....

as to the point of the chinese not buying bonds - long as the chinese trade with the usa and run surplusses, they will always buy bonds - there is no where else to put the usd unless you just want to hold interest free dollars....china is fucked and it knows it.....that is why they are scrambling to get bilateral currency trade deals....even that does not solve the problem....

the only solution is either a new reserve currency (still a fucked place to be ) or gold (another fucked place to be as the iranians are the battle in iran has nothing to do with nuclear weapons but oil and financial is the casus belli )

Sat, 07/21/2012 - 12:11 | 2638879 RobotTrader
RobotTrader's picture

Bernanke is laughing now because he can start printing whenever he wants, but he doesn't need to now with the 10-yr. down to 1.45% and the Dow close to 13,000.


And the retail index and the REIT index are not too far from world record highs, so there is definitely no worries there at all.

He won't be motivated until we see a major break in U.S. stocks, led by the consumer sectors.

For now, the consumer sector is leading the tape, so no worries until next year after the elections.

Sat, 07/21/2012 - 13:01 | 2638958 disabledvet
disabledvet's picture

possibly. the Greenback can still tank "and then all hell would break loose." The crime wave currently sweeping Chicago is of epic proportions. There is no "return to normalcy" as Hoover promised...and delivered on I might add...but instead municipal bankruptcies..."none of which were suppose to happen" (if we listen to CNBC) but which are now happening "in a wave" as well. You have "the worst drought since 1952" which could cause food shortages in the USA for the first time in its history. If there is a rash of bankruptcies in the Supermarket business "you'll need gas stamps to redeem your foodstamps." And that's not including the need for Wall Street Bailout 2.0 for all there euro bets totally imploding. Shall the bondholders take precedence over the entire US economy yet again? So many questions...all of which are being screamed about at Fedquarters as I write. And "so many more" i might add. My view is the same: "if it's working don't do a phucking thing. It only make IT angrier when you do." If it's not working, has been sung in my direction oh these many years...
i'm not sure what all the cheering is about actually. perhaps because a woman is singing it...

Sat, 07/21/2012 - 12:10 | 2638881 TWSceptic
TWSceptic's picture

That is one explanation. Another is that the fed only cares about the stock prices, and they simply haven't dropped sufficiently to warrant any fresh QE.

Sat, 07/21/2012 - 12:10 | 2638882 mark7
mark7's picture

"For every mark that was issued we required the equivalent of a mark's worth of work done or goods produced"...Hitler said its best! Yeah, I know, I should now apologize to Wiesenthal Center for saying such or check?

Sat, 07/21/2012 - 13:06 | 2638969 disabledvet
disabledvet's picture

"sometimes you need a little Hilter in ya." Have we gone too far tho? "We are only told what we want to hear." Everything else..."is a lie."

Sat, 07/21/2012 - 12:17 | 2638892 dcb
dcb's picture

I think almost every analysis on this subject is deeply flawed, and looking at any conventional economics issues misses the most valid reasons.

I would like to hope the bernek isn't doing it because it doesn't work, that the transmission mechanisms of monetary are so broken, there is no point in doing more. Since the purpose of QE is to keep asset values high enough so the banks can appear solvent, there is no need to do more until margin calls start happening. the other purpose of qe was to allow the big banks to trade their way to solvency.


There is zero point of loose monetaqry poolicy when the big boys don't lend, or lend at much higher rates, and cust buy a foreign currency and make the spread, or invest the money in emerging markets, etc


tese central bankers, and economists almost never talk about structure, and that's where the changes need to be made, not to monetary policy.

Qe helps the 1% and costs the 99%. the money saved from the drop in oil prices will be more fo a stimulant than any QE policy.

It is an asumption that Qe heklps the economy, and assumption that nobody seems to challenge, and I have real issues with the idea it's true and it bother me that it isn't even debated

Sat, 07/21/2012 - 12:17 | 2638893 HurricaneSeason
HurricaneSeason's picture

I thought he wrote a few trillion in bad checks. How much more could he write in bad checks? How about $10 trillion more over the next 5 years while backstopping trillions in bad mortgages. Wouldn't somebody complain if he is collecting 1% in interest on $13 trillion he loaned that he never had? They want to see interest rates go back up on the $3 trillion they've already loaned(that they didn't have) without the guillotines coming out.

Sat, 07/21/2012 - 12:21 | 2638899 Solon the Destroyer
Solon the Destroyer's picture

Does anyone really think that China wants to devalue its portfolio by selling large portions of it?

Does anyone really think China wants to risk coupons being paid by heavy selling -- thus generating large instabilities in the system and putting the coupon payor at risk?

Does anyone really think they have better returns elsewhere?

Does anyone really think they want to put pressure on the yuan and exports?

Does anyone think that a significant part of their reserves doesn't come from profitable bond speculating (and not just trade)?

China has nowhere near the leverage ascribed by Mr. Aziz.

China will slowly buy gold and silver, taking great care not to create any ripples in the system. They know they will take a future loss on their portfolio, but in the meantime they will take as much profit as they can.

Sat, 07/21/2012 - 12:23 | 2638904 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

The Chinese can buy other sovereign bonds, no? Spain is cheap. So is Italy. And why not Syrian, or Iranian paper?

The Chinese buy US Treasuries because of the enormous trade deficit in favor of China's cheap exports, full stop.

The demand for Chinese goods translates into the bid China supports for USTs. When the demand dries up, they won't need to buy those govies any longer.

When the demand dries up, however, they will most certainly have other fish to fry.

Sat, 07/21/2012 - 12:47 | 2638940 Winston Churchill
Winston Churchill's picture

What UST's are China buying ?

They haven't bought UST's since July 2011.

The Bonds they had at that point,they are gradually vesting out off.

On average $75 bn per month since then.The Fed gave them primary dealer

status to hide this,not facilitate buying,but cover the non buying.

Thats why there will be no QE3.All Uncle Ben can do now is talk up the

market.This bubble is going to be a doozy when it bursts.

Sat, 07/21/2012 - 13:26 | 2638994 HurricaneSeason
HurricaneSeason's picture

Yeah, but China was only buying $30 billion a month in mortgage backed securities and treasury bonds. That's a drop in the bucket these days. Now that American households are buying $150 billion a month, plus the maturing bonds for probably the same amount, we really don't need the Chinese debt. It's better that the debt is domestically held than foreign held, anyway.

Sat, 07/21/2012 - 13:54 | 2639026 jomama
jomama's picture

oh, ok, that makes me feel so much better. thanks!

Sat, 07/21/2012 - 14:55 | 2639074 Goldilocks
Goldilocks's picture

Lesley Gore - Sunshine, Lollipops and Rainbows (Shindig 1965) (1:37)

Lesley Gore - Sunshine, Lollipops And Rainbows (1:33)

Sunshine lollipops and rainbows (1:38)

Sat, 07/21/2012 - 15:20 | 2639105 RockyRacoon
RockyRacoon's picture

"Now that American households are buying $150 billion a month..."   Heh, heh, heh.  You really believe that "category"?  So much has been written about what is not revealed in that balance sheet entry that I won't even try to go there.  You've been at ZH long enough now.  How do you come to post that silly comment?   Households.  That's a good one. 

Sat, 07/21/2012 - 14:53 | 2639084 jimmyjames
jimmyjames's picture


Exactly-as long as the US runs a trade deficit with China as it does with most countries in the world-those countries will buy UST's-

When/if the trade balance shifts to US surplus-those bonds will be sold and the dollar will come home and that could be a big problem-but i don't see it as an near term problem-

Sat, 07/21/2012 - 12:30 | 2638910 UrbanBard
UrbanBard's picture

Ben is printing in a way you are not seeing. He is swapping Dollars for worthless Euros at a rapid rate.: 3.2 trillion Dollars in the last nine monthis. Don't worry those dollars will come home.

If Ben had done a QE rather than operation Twist and the Euro swap, they would appear as excess funds at the FED anyway. 

Sat, 07/21/2012 - 13:30 | 2638988 Cthonic
Cthonic's picture

Would you cite where one can find this info?  Only thing found on Fed's site concerned old swap lines through Oct 2010. Mentioned new swap lines through Fed 2013 though not current amounts.  The ron paul editorial only mentions amounts around $100b, not trillions.

Sat, 07/21/2012 - 15:02 | 2639090 GMadScientist
GMadScientist's picture

Outstanding swaps with the ECB are currently at ~$25B  

Sat, 07/21/2012 - 12:36 | 2638919 belogical
belogical's picture

Don't fool yourself they are already printing. There is no way California or Chicago or a number of other high profile states/cities would have made it this far with out help. The healthcare industry has had massive amounts of medicaid and medicare pumped in and even reprocessing of old claims to push money in the system.

Moving people to disability payments from unemployment is another, not foreclosing on people and persuing bad debts by the banks is another. The list goes on.

Sat, 07/21/2012 - 12:36 | 2638920 Snakeeyes
Snakeeyes's picture

Because we are approaching the zero bound (classic liquidity trap) where M2 Money Velocity is plunging. The money would just accumulate in the banks as reserves, not being loaned out.

So why do it?

Sat, 07/21/2012 - 12:37 | 2638922 mick_richfield
mick_richfield's picture

Too Dumb Didn't Read

Sat, 07/21/2012 - 15:22 | 2639109 RockyRacoon
RockyRacoon's picture

I'll presume that you meant that you are too dumb to read the article.  Obviously not too dumb to comment, however.  And I'm just dumb enough to reply.

Sat, 07/21/2012 - 18:37 | 2639362 mick_richfield
mick_richfield's picture

You lost me.

Sat, 07/21/2012 - 18:52 | 2639387 RockyRacoon
RockyRacoon's picture

Thank you for illustrating my point.   You should see some of the great tricks my dogs are amazed at.   A treat can disappear from one hand and magically appear in the other.  I've got 'em mesmerized.

Sun, 07/22/2012 - 11:25 | 2640233 TideFighter
TideFighter's picture

I chuckled. Racoons must wash everything before they eat it, even fish.

Sun, 07/22/2012 - 15:29 | 2640730 RockyRacoon
RockyRacoon's picture

That's because we have to survive on garbage from humans.  Have you ever seen some of the crap they eat?  You'd wash it too.

Sat, 07/21/2012 - 12:38 | 2638925 Fix It Again Timmy
Fix It Again Timmy's picture

The "system" needs a minium of one quadrillion dollars on the sidelines, in reserve, ready for instant deployment.  Just because they haven't hit the PRINT button yet, does not mean they won't.  Bernanke's playbook consists of one page with one word:"PRINT....."

Sat, 07/21/2012 - 12:50 | 2638929 Cult of Criminality
Cult of Criminality's picture

Off Topic

 Russia joins WTO ......................

Sat, 07/21/2012 - 12:44 | 2638935 Debugas
Debugas's picture

because the Fed can not print to give money away for free. Fed can only print if there are borrowers with valid obligations to repay back

Sat, 07/21/2012 - 13:30 | 2638995 sessinpo
sessinpo's picture

All legal contracts are valid obligations, but in the real world, not all contracts are upheld. That is what courts are for. The difference is in real expectations of repayment versus unrealistic hopes of repayment. We have been dealing with unrealistic expectations for years now - thus the financial problem. One can make trillions of dollars of valid obligations to repay which is totally different from actually getting repaid back. Money is still being printed and banks to give it away for free. It's called NIRP (negative interest rate policy). The money is simply being kept at those institutions or being used to service old debts and not circulating throughout the economy and creating massive broad inflation. Yes, some prices have gone up in various sectors. But if you consider how many trillions that have been printed, inflation is low.

Sat, 07/21/2012 - 13:05 | 2638965 Quinvarius
Quinvarius's picture

They are printing money. Do you really need to have a CNBC anchor explain to you what they are doing before you will understand what is going on?

Wake up dude.  They only talk about it when they want a certain effect.  There is no way they want to talk about it right now because they have probably secretly dropped 5 trillion into the system since Greece defaulted and are ramping up even more bailouts.

Sat, 07/21/2012 - 13:36 | 2639001 engineertheeconomy
engineertheeconomy's picture

The Global Ponzi Fiat Economic Collapse is being monetized by Dollars, in exchange for their GOLD

 the names have been changed to protect the guilty

Like a predator, they are getting ready to set in for the kill

The entire world including the United States is currently under Martial Law disguised as Law Enforcement, but the Endgame is TOTAL SLAVERY 


Sat, 07/21/2012 - 13:10 | 2638975 Fix It Again Timmy
Fix It Again Timmy's picture

The principal does not matter, it will never be repaid.  Only the interest income stream matters and it matters only in the sense that it puts a nanometer of respectability on outright THEFT.  Unfortunately, this nanometer is enough to completely pull the wool over the eyes of the masses and make bankers seem to be productive, hardworking members of society instead of the outright thieves and scammers they truely are...

Sat, 07/21/2012 - 13:11 | 2638978 Segestan
Segestan's picture

Controlled markets, controlled FED.... we're all communist now.

Sat, 07/21/2012 - 13:18 | 2638981 Jumbotron
Jumbotron's picture

"To a heavily-indebted nation, creditors have big leverage on monetary policy."

From here on out....and forever more until we are debt free....we are not now nor will we ever be the land of the matter how many times you sing The National matter how many times a politcian tells you we are the land of the free or they want to make you "freer" or "bring back freedom" or whatever bullshit line they come up with. of us....are simply slaves.....and all of our collective work goes to nothing but paying off our various personal, local, state, Federal and now International debts.

We are nothing but slaves.....who will do nothing more than vote for the "Head Slave Foreman" come November.

Sat, 07/21/2012 - 13:22 | 2638989 sessinpo
sessinpo's picture

It is interesting the silly comments about commodities (food crops) being the reason. Examine John's thought (which I think is flawed).

"Note that downward slope in inflation into 2012? That’s the Fed not doing QE3 when everyone (especially gold prices) expected them to, and when their own self-imposed interpretation of their mandate calls for them to inflate more."


The problem with concluding it is commodities (food crops) is tha that the downward slope started in 2009. It is only now that there is a food price scare (brought to you by the MSM and eaten up by many here) with the drought effecting corn prices.


Look for other reasons why the FRB hasn't gone crazy with printing in the manner some expected.

Sat, 07/21/2012 - 20:50 | 2639535 andrewp111
andrewp111's picture

A doubling of wheat prices caused the Revolution in Egypt. Do not underestimate the impact of food prices in foreign lands where the population lives at a subsistence level.

Sat, 07/21/2012 - 13:41 | 2639008 AustrianJim
AustrianJim's picture

In my view only a brutal 2008-style collapse can bring on the kind of printing

Well I think we're all in luck, then, because that's probably coming.

Sat, 07/21/2012 - 13:45 | 2639014 loveyajimbo
loveyajimbo's picture

We would already be way above Bernank's target of 2% if the Euro was not collapsing, increasing demand for our deeply flawed dollars... if he trys to reach his target in this situation, when it is our turn in the barrel (soon), inflation will be uncontrollable. Two possible outcomes, system collapse or hyper-inflation.  No wonder little fagela Geithner is throwing F-bombs in interviews...

Sat, 07/21/2012 - 13:46 | 2639017 pmm009
pmm009's picture

You answered your own question.  The Chairman and FDR are on the same page...If the banks, especially the money center banks and Primary Dealers are in risk of bank runs and insolvency...the entire system will be in a cronic state of risk.  That is why they are not stamping on the floor to increase monetary velocity.  The banks won't lend, and they surely are not going to lend long-term at even lower rates, and the FED likely doesn't really want them to take increased credit risk just yet.  The banks are getting steadily better on the balance sheet and when they do start lending the economy should pick up quickly.

Sat, 07/21/2012 - 13:54 | 2639027 Waterfallsparkles
Waterfallsparkles's picture

When Bernake prints it helps Wall Street and devistates Main Street.

The QE1 and QE2 started to cause mass starvation thruout the World because of high Corn, Soy, Wheat etc.

Because of the explosion of Oil, Gas and Food prices the average American was not only suffering the lost value of their Home but lost Jobs and lower wages.  This crippled the American people. 

They were losing their Jobs and could not affort to Heat their Homes, buy Gas for Job interviews and feed their Family.  We now have the highest amount of people ever on Food Stamps so people can just get by.  Not to mention Disability, Welfare, Medicade.  All Government paid by the way.

More printing would only make matters worse.

It is unfortunate that Wall Street looked at the FED printing as a virtual Gold Mine and used the Money to run up beyond any reason the price of Food, Comodities and Oil.  They in essence stopped the Goose from laying Golden Eggs.

Sat, 07/21/2012 - 14:08 | 2639038 Waterfallsparkles
Waterfallsparkles's picture

P.S. The people that got hit the hardest were the Elderly.  Their Cola on their Social Security has been re manufactured so it does not reflect the real inflation.  Very few increases in the SS payments in the last 5 years. Their Heating, Gas and Food prices skyrocked with no means to offset the rise in prices. Any savings they have are getting almost 0% so they cannot live off the interest.   Many are not savy enough or do not have enough Money for a Financial Advisor to be able to invest in the Stock Market.  Remember Brokers now only want people with over a Million in net worth as clients and that is the bottom rung.

If Bernanke would contiue to print we would be putting our Elderly on Skid Row.  Not that it matters to Wall Street as all they care about is there next 5 Million Dollar Bonus.

Sat, 07/21/2012 - 18:30 | 2639350 Kamehameha
Kamehameha's picture

Average Net Worth of Americans

Under 25





65 and Over ("elderly")

Sat, 07/21/2012 - 14:15 | 2639040 bobbydelgreco
bobbydelgreco's picture

i admire aziz he is young & smart but he is wrong i am old and not so smart but i know that ben (who i think i understand) loves being smarter then us and thinks he can do what he wants (hell scumer sic told him so) ben has his tricks some of them illegal (see the euro) in the end he will have to qe big & in the end he will faill    

Sat, 07/21/2012 - 14:18 | 2639044 Peter Pan
Peter Pan's picture

What we perceive as management of the US economy is nothing more than an exercise in extending the ledge over a black abyss.

Neither China nor the USA are confronting the true nature of their mutually parasitic relationship and instead opt for more and more imbalances to build.

Sat, 07/21/2012 - 14:29 | 2639056 Waterfallsparkles
Waterfallsparkles's picture

It also appears to me that the more Bernanke prints the more People pay off Debt.

When you think about how the Money supply is expanded from just one loan of say $1,000. into 10,000.  When just one person pays off a Loan it contracts the entre Money supply like a set of dominoes.

When the Banks raised the CC interest to 29.9% people used all available cash to pay off those loans or declared Bankruptcy to wipe them out.  When the interest on savings is .05% then people will pay off any loan with a greater interest rate as that is the only way they can use their Money to get a higher yield.  Why have $50,000. in the Bank at .05% when you can pay off your Mortage which is at say 5%.  You then effectivly get a 5% return on your Money.  Same with a Car loan.  If you have say $30,000 in the Bank at .05% why borrow money to buy a Car.  Just use your Money in the Bank and save 5% interest over 4 years.  Kind of like a 4 year CD.

Anyone with Money is using it to pay down or pay off Debt.  More printing will only excellerate that.  Which will cause Banks to lose Money on the interest they previously were getting from those loans.  This in effect will lower their earnings and leave them with no way to earn an interest income other than interest on Deposits at the Federal Reserve.


Sat, 07/21/2012 - 14:41 | 2639070 Michelle
Michelle's picture

Anybody else notice the tax refund effect that happens every year during Q1? Spending is up and people have a temporary liquidity injection - once the money is spent then the economy goes in the toilet. We need jobs and BB can't create them via QE. Congress needs to do their job by developing and implementing a plan that will create jobs. QE at this point has diminishing returns.

Sat, 07/21/2012 - 14:58 | 2639086 GMadScientist
GMadScientist's picture

"...not printing nearly as much as Krugman wishes..."

More like not distributing the results of the printing in the manner Krugman has suggested (unless you've forgotten that he's not an elected official), but for simple saps who can't tell a monetarist, from a keynesian, from a neokeynesian, I suppose it all looks the same.

Sat, 07/21/2012 - 15:00 | 2639089 Grand Supercycle
Grand Supercycle's picture

As mentioned before, market intervention has only postponed the inevitable.

Despite short and medium term market vacillation - the following remains a constant :

>> USDX monthly indicators [ie big picture] continue to warn of significant long term USD upside. (thus EURUSD & AUDUSD etc bearish)

>> SPX monthly indicators [ie big picture] continue to warn of significant long term downside for equities which will be worse than 2008.

Sat, 07/21/2012 - 22:30 | 2639103 jimmyjames
jimmyjames's picture

That’s the Fed not doing QE3 when everyone (especially gold prices) expected them to,


I think it is a mistake to hinge the gold price on QE-

The rise in the gold price is only partially influenced by QE and only partially effected by the dollar-more knee jerk than anything-

Otherwise how do you explain the gold move from 250 to 1000 with no QE and a decrease in dollar printing right up to 2008-

The dollar index is sitting where it was in 2005 and in 2005 gold was trading at 450 .so if there is such a high $/gold correlation exists-why hasn't the dollar index decreased 4X--edit: or why isn't gold still trading at 450?

Gold has its eye on something else and it has right from the start-

Sat, 07/21/2012 - 16:00 | 2639150 Peter Pan
Peter Pan's picture

What we perceive as management of the US economy is nothing more than an exercise in extending the ledge over a black abyss.

Neither China nor the USA are confronting the true nature of their mutually parasitic relationship and instead opt for more and more imbalances to build.

Sat, 07/21/2012 - 16:27 | 2639190 TrainWreck1
TrainWreck1's picture

"Why Is The Fed Not Printing Like Crazy?"

No idea. Maybe the UAW organized their print shop?


Sat, 07/21/2012 - 16:55 | 2639225 Greyzone
Greyzone's picture

The primary problem with the print-print-print thesis is that any central bank that prints too much ultimately destroys itself and the power that it wields. Hyperinflation is a self-destructive act. It's suicide, from a central bank's perspective. And I am sure that Bernanke knows this.

So what has actually happened instead of hyperinflation printing? Bernanke has printed just enough to cover the essential liabilities of his buddies, the crooks on Wall Street. They've parked much of these "reserves" back with the Fed rather than loaning them out, where they would then be at risk. Bernanke's actions don't make sense from the perspective of what he wrote years ago but they do make sense from the perspective of protecting his cronies and nobody else!

Think about that.

Sat, 07/21/2012 - 20:33 | 2639507 buzzsaw99
buzzsaw99's picture


Sat, 07/21/2012 - 17:07 | 2639244 exartizo
exartizo's picture

Excellent insight Tyler.

I've been looking for a reason why the Fed will not do QE3 also. It seems that everyone is expecting it.

I think you may be right about China, and the rest of the world letting us use their money for almost free, or worse, inflating away the value of their holdings.

I just hope that things don't get so bad that Bernanke has no choice but to overrule even the likes of China to prevent economic catastrophe in this country.

Frankly it doesn't look like Bernanke will have a choice to me.

Sat, 07/21/2012 - 18:32 | 2639346 Kamehameha
Kamehameha's picture

QE keeps fedgov running and they will do it announced or unannounced.  The added funds create 8-12% inflation per year just from the government spending.

Sat, 07/21/2012 - 19:18 | 2639422 gatorengineer
gatorengineer's picture

A pretty Naive Analysis based on two fundamentally flawed assumptions.....

1)  That the Fed is Apolitical, it is not its highly political and on the Goldman / Bilderberg Agenda

2)  That the inflation measure is real.... Ask the Man on the street whose market basket includes food and energy and state and local taxes what inflation really is.  He prints any more and they loose control of the masses.

QE3 is comming and it wont be what people think, it will be a bailout of Europe via the purchase of European Sovereign debt from US banks, and financial institutions and will be done under the price stability mandate.....



Sat, 07/21/2012 - 19:42 | 2639441 surf0766
surf0766's picture

They are not printing. They know the dollar is toast. Printing anymore will just speed it up. I can only assume the prep's for those in the know are almost complete.

Sat, 07/21/2012 - 20:45 | 2639527 PatientZero
PatientZero's picture

I just want the economy to collapse already. America can no longer be saved. It needs to be cleansed and we start again with a clean slate. We've gone beyond the event horizon with shit like NDAA, Rex 84, the militarization of cops, the TSA among others.

Do it, Ben! DO IT YOU FAG!

Sat, 07/21/2012 - 20:53 | 2639538 Vic Vinegar
Vic Vinegar's picture week and three days here and you already want the economy to collapse.  You move fast!

I don't get the last Gentle Ben involved in Rex 84 or NDAA?  And what does his love of cock (or lack thereof) have to do with it? 

Sat, 07/21/2012 - 21:59 | 2639626 unemployed
unemployed's picture

Tyler, you ignorant sl#t,  the Fed does not print money,  the Fed's owners, the banks create money out of thin air,   debit a deposit,  credit a loan,  and voila,  the Fed only asks for 90 billion in reserve deposits for over 6 trillion in bank deposits ....    Bernanke aint holding the strings,   the banksters are bernake's puppet masters.   Krugman just wants more government debt and spending,  a different issue than the puppet.


Sun, 07/22/2012 - 17:23 | 2639639 paint it red ca...
paint it red call it hell's picture

It ain't this and it ain't that. Not just one reason, its all sides to the center for the Bernank.

Yea, he has bent way over for the chinese. I doubt Ben is holding his breath waiting for a reach around thats not coming.

Yea, food prices could rocket away next year, but I seriously doubt the drought has been as hard on corrn as advertised. Policies are already in place to handle disgruntled natives.

Yea, the puppets in brussels are scrambling to put a good face on goldman's super mario's shortcomings trying to sucker the Germans down a dead end street.

But my guess is oBama has played his role, he shielded the globalists henchmen and enabled the security state. Next up the romney-cons, hand picked staff of fresh faced facists with marching orders in hand to press the cause..No one administration will be granted a second term to continue installing NWO policies while screwing the public. No, to keep the game moving forward they have to put in new players. Besides, Sheriff Joe has his posse on the incumbents trail.

Timing is everything, the Bernank will ease when the market shits, timed to make the incumbent look as impotent as he actually would be in a 2nd term..  Anybody doubt an oBama 2nd term would be called onto the conservative and Constitutionalist carpet from its onset? Impotence in the whitehouse is not to be tolerated by those that bring us the NWO.

for what its worth

Sun, 07/22/2012 - 09:47 | 2640064 Grand Supercycle
Grand Supercycle's picture

SP500 downleg expected to continue next week onwards.

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