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Here Is Why The Fed Will Have To Do At Least Another $3.6 Trillion In Quantitative Easing

Tyler Durden's picture




 

As we have repeatedly said in the past, the quarterly Flow of Funds (or Z.1) statement is most interesting not for the already public household net worth and leverage data which serves to make pretty charts and largely irrelevant articles, but due to its insight into the stock and flow of both the traditional financial system but far more importantly - into shadow banking. And this is where things get hairy. Because while equities may have returned to 2008 valuations, the credit shortfall across combined US liabilities - traditional and shadow - still has a $3.6 trillion hole to plug to get to the level from March 2008 (see first chart). It is this hole that is giving equities, which have already surpassed 2008 levels, nightmares. Because while the Fed is pumping traditional commercial banks balance sheets via reserve expansion (read: fungible money that manifests itself most directly in $5 gas at the pump) resulting in a $2.3 trillion rise in traditional liabilities from Q3 2008 through Q4 2011, what it is not accounting for is the now 15 consecutive quarters of shadow banking system contraction, which peaked at $21 trillion in Q1 2008, and in Q4 2011 declined to $15.1 trillion... and dropping. It is this differential that will be the source of the needed "Outside" money, discussed yesterday, and that is only to get equity valuations to a fair level! But considering the Fed's propensity to print at any downtick, this is very much a given, much to the horror of Dick Fisher. Any additional increase in stock prices will require not only the already priced in $3.6 trillion, but far more direct Outside money injections.

While we have explained the methodology of approaching consolidated credit money in modern finance before (much more here), here is a quick rerun. In the chart below, conventional wisdom only focuses on the red line, which represents traditional commercial bank liabilities (L.110, L.111, L.112 and L.113 from the Z.1), where Fed reserves and other monetary expansion mechanisms manifest themselves. As can be seen this line is rising rapidly, as is to be expected - in tune with the US deficit spending and Fed reserve growth. That both the US debt chart and the consolidated global balance sheet have now entered an exponential phase is a topic for another discussion.

What, however, is always forgotten is the blue line, which represents the liabilities in the shadow banking system - all the credit money that has been used by various unregulated institutions to perform the traditional transformations of maturity, credit and liquidity that define a "bank." And this line is for lack of a better word, collapsing. It is this collapse that the Fed has yet to tackle, and it is the offset of this collapse which the equity market has somehow already priced in!

Focusing exclusively on shadow banks, here are the 6 distinct components that make up this universe.

Why does the Fed never discuss the shadow banking "conundrum" in public? Simple. The chart below should explain it.

Finally the chart that puts it all into perspective: here is a close up of the consolidated Shadow + Traditional liability total. The delta from the prior peak is an all too real hole of $3.6 trillion (and possibly more when accounting for the factor contraction at the Prime Broker level, a topic discussed previously when we spoke in length on the issue of rehypothecation). Yet it is this hole that the market is 100% certain that the Fed will plug. Because if it doesn't, watch out below.

And not only that, but since it is suddenly fashionable to sell US Treasurys, just who will step in to buy (not China) considering there is about $6 trillion in net new issuance over the next 4 years? Because if US GDP was at least rising faster than US debt one just may have made the case that there will be retained cash by various entities who can buy up US paper domestically. Alas, that is no longer feasible, and the only option is, you guessed it, for the buyer of last resort to step in - the @FederalReserve

In conclusion we wish to say - thank you Chairman for the firesale in physical precious metals. We, and certainly China, thank you from the bottom of our hearts.

 

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Wed, 03/14/2012 - 21:12 | 2256425 spiral_eyes
spiral_eyes's picture

Great work Tyler.

It's not just this, though.

I expect that in 5 years the Fed's treasury holdings will be towering over foreign treasury holdings. The name of the game is to keep rates as low as possible, and as real demand for Treasury paper collapses, the Fed will have to buy a lot more just to keep rates below 2%... 3%... 4%... 5%...

Wed, 03/14/2012 - 21:12 | 2256428 trav7777
trav7777's picture

that's how JPN rolls

Wed, 03/14/2012 - 21:30 | 2256438 nope-1004
nope-1004's picture

QE till bust.  Benocide is lying with every statement he spews.  Banks are insolvent and now nations are teetering.  Of course, having "reserve currency" status only delays the inevitable.

JPN's bigger problem is demographics.  Both pigs are going down.  Election year is delaying action, but printing will come in force.

 

Wed, 03/14/2012 - 21:33 | 2256471 Harlequin001
Harlequin001's picture

Of course, the problem with the Fed benefitting from increasing demand from a collapsing Europe is that the collapse needs to keep on rolling, otherwise demand disappears, interest rates pop and the whole game is over. Perhaps, now that Greece is 'fixed' demand will disappear. I know, let's start another probelm in... Spain.

Wed, 03/14/2012 - 21:44 | 2256502 Big Slick
Big Slick's picture

The Gods of the Copybook Headings

Rudyard Kipling - 1919

 

AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."

On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: "The Wages of Sin is Death."

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

 

 

Wed, 03/14/2012 - 22:22 | 2256563 exartizo
exartizo's picture

Very nice. Never more true than now.

Wed, 03/14/2012 - 22:31 | 2256583 Harbanger
Harbanger's picture

Because we have the memory of a fruit fly.

Wed, 03/14/2012 - 22:48 | 2256604 exartizo
exartizo's picture

Yes. I always did like the genetics experiments with those in High School. :)

Also, I'm a big fan of alliteration and a quirky turn of phrase.

I've actually written a few like this one.

Thu, 03/15/2012 - 00:12 | 2256758 El Oregonian
El Oregonian's picture

Pruno, Baby!

Thu, 03/15/2012 - 07:17 | 2257055 GetZeeGold
GetZeeGold's picture

 

 

Fire will burn........let the ultimate game of chicken commence.

 

I have a plan.....guess what it involves?

 

If you said AAPL........you are wrong.

 

Thu, 03/15/2012 - 16:49 | 2259319 resurger
resurger's picture

Thats Deep!

Wed, 03/14/2012 - 21:48 | 2256512 Clockwork Orange
Clockwork Orange's picture

Spain it will be!!!!

Just wait until GS & MS can collect a few more call buyers into March EXP, then we can roll out the Spain headlines, spike the VIX and open up the trapdoor!!!

Excellent.

Let's rip it down for, what, say 6-10 trading days to collect some puts, then we can QE3 and launch pad it again.

I just love sound fundamental trading environments.

F-ing criminals.

Thu, 03/15/2012 - 07:19 | 2257083 GetZeeGold
GetZeeGold's picture

 

 

GS is a little busy trying to fish out the dagger planted in it's back yesterday.

 

Wed, 03/14/2012 - 21:45 | 2256506 JPM Hater001
JPM Hater001's picture

Brun Apple Panic

Wed, 03/14/2012 - 23:10 | 2256646 JPM Hater001
JPM Hater001's picture

Seriously...no one gets this it was brilliant!
B stood for binary and then
Run started the program...you needed brun as code to run a binary program...

Please don't make me explain apple panic.

Wed, 03/14/2012 - 23:36 | 2256711 UP Forester
UP Forester's picture

Christ, I haven't seen that since BRUN BURGERTIME ....

Wed, 03/14/2012 - 22:19 | 2256560 Harbanger
Harbanger's picture

"Both pigs are going down."  -but: That night, the third little pig had wolf soup for supper.

Wed, 03/14/2012 - 21:18 | 2256440 spiral_eyes
spiral_eyes's picture

Japan ditched the dollar for bilateral trade with China. And they've suffered twenty years of Keynesian fail thanks to Bernank's "Rooseveltian Resolve" solutions. And they don't exactly like Okinawa girls getting raped and molested during downtime.

I think we can safely say where their real allegiance lies. But it's tough expressing those kinds of feelings under American military occupation....

Wed, 03/14/2012 - 21:43 | 2256498 ShankyS
ShankyS's picture

That is where the confiscation of all the retirement plans comes into play - that is whet they will "borrow" from the "patriotic" AmeriKans and use to buy UST. This is part of the master plan. Makes you feel good doesn't it, know ing they will do that and everything will still fail in the long run!

Thu, 03/15/2012 - 06:14 | 2257042 RafterManFMJ
RafterManFMJ's picture

 

 

Looks like I'll be getting laid off here in 3 weeks; I'll empty my 401K as soon as I am able - only way to get it out is a long lay-off.  So being un-employed will have a silver lining..."And remember, always look on the bright side of life! 

Wed, 03/14/2012 - 23:10 | 2256643 TruthInSunshine
TruthInSunshine's picture

I think that what you really meant to say is that the Japanese government in concerted action with the BOJ essentially turned Japanese domestic pension/other retirement funds into its captive source of 'go to' pool for offloading its bonds, right?

Wed, 03/14/2012 - 23:20 | 2256665 spiral_eyes
spiral_eyes's picture

That's another story, but yeah.

Wed, 03/14/2012 - 22:26 | 2256571 tarsubil
tarsubil's picture

Why do we build with steel and stone when you can stack bullshit to the moon? It will never fall over.

Wed, 03/14/2012 - 21:31 | 2256468 true brain
true brain's picture

I concur with precious metal gift from bernanke. But I will wait a little more may be in the 1500 range to plunge in big time. My grand children will surely thank me for it.

Wed, 03/14/2012 - 21:49 | 2256514 LowProfile
LowProfile's picture

Don't be surprised if it drops 200 more from there.  That would make an ~30% correction off the 1900 high, which is what happened the last time the SHTF.

Time to polish up those ZH Titanium Testicles (R).

Wed, 03/14/2012 - 23:11 | 2256649 Harbanger
Harbanger's picture

30% correction off of 1900?  That would be $1330, I always miss all the fkng sales.

Thu, 03/15/2012 - 00:11 | 2256757 LowProfile
LowProfile's picture

~30%...  That means +/-

BBBBBalls of Steel boys...

Thu, 03/15/2012 - 06:57 | 2257063 GetZeeGold
GetZeeGold's picture

That would be $1330

 

Maybe if they outlawed the Fed overnight.......good luck with that.

 

China would backstop $1500 all day long........and they would thank you.

 

Thu, 03/15/2012 - 06:27 | 2257050 spankfish
spankfish's picture

Zero Hedge Titanium Testicles, trademark it while you can.

Thu, 03/15/2012 - 09:26 | 2257352 Race Car Driver
Race Car Driver's picture

The Comex may sell you nice little piles of paper for that price, but good luck getting yer grubby little dick-beaters on the phyzz.

Wed, 03/14/2012 - 21:49 | 2256519 pslater
pslater's picture

"I expect that in 5 years the Fed's treasury holdings will be towering over foreign treasury holdings."

 

It ain't gonna last five years.....

Wed, 03/14/2012 - 23:28 | 2256687 Future Tense
Future Tense's picture

Don't forget about the additional debt destruction coming from the muni defaults.  Merideth Whitney had a great interview with CNBC today saying, ""There's been so much backroom political maneuvering to keep these cities from going bust....There's been every effort on the part of states to prevent this tidal wave of defaults which is going to happen sooner or later. If people want to tell me 'you're wrong because this hasn't played out,' stay tuned."  Full interview here:

http://www.ftense.com/2012/03/meredith-whitney-muni-defaults-still.html

Thu, 03/15/2012 - 00:24 | 2256776 trebuchet
trebuchet's picture

i dont get the qe connection

 

That blue line to me is deleveraging in the RIGHT direction, bringing it back to trend, lower systemic risk, lower interest rates.

If anything, since its largely derivatives of the red line, revertign to trend gives scope for expansion again without qe

please explain. 

coz im a muppet. 

Wed, 03/14/2012 - 21:13 | 2256431 tickhound
tickhound's picture

Zombie banks, bitchez.

Wed, 03/14/2012 - 21:28 | 2256461 brewing
brewing's picture

yamma hamma, it's fright night...

Wed, 03/14/2012 - 21:39 | 2256484 tickhound
tickhound's picture

well put.  I'd also add that this passive game of hot potato lending is gonna speed up, and then freeze up quite nicely. 

Wed, 03/14/2012 - 21:13 | 2256432 SHEEPFUKKER
SHEEPFUKKER's picture

Quantatative twisting clusterfuck-o-rama to infinity. 

Wed, 03/14/2012 - 21:16 | 2256435 SolidSnake961
SolidSnake961's picture

So is Tyler implying that dow 13200 is the top when he says "Any additional increase in stock prices will require not only the already priced in $3.6 trillion, but far more direct Outside money injections" ?

Wed, 03/14/2012 - 21:17 | 2256439 The trend is yo...
The trend is your friend's picture

I remember a whole 4 years ago when these clowns were debating a 750 billion bailout and now we're talking 3.6 trillion on top of the the 4-5 trillion already pissed away.  When will the shit end already.  2 years from now it will be a 10 trillion bailout.

Frustrated short

Wed, 03/14/2012 - 22:00 | 2256530 kridkrid
kridkrid's picture

That $750 billion was a distraction. It was the alphabet soup of other fed sugar that happened behind the scenes that mattered.

Wed, 03/14/2012 - 21:19 | 2256443 Palahniukophile
Palahniukophile's picture

Just one step closer to the coming economic collapse...

Wed, 03/14/2012 - 21:22 | 2256448 blunderdog
blunderdog's picture

In for a dime, in for a dollar.

Wed, 03/14/2012 - 23:00 | 2256621 UP Forester
UP Forester's picture

In for a dollar, worth a penny.

Wed, 03/14/2012 - 23:13 | 2256652 HungrySeagull
HungrySeagull's picture

evicted for not having 99 more.

Thu, 03/15/2012 - 06:45 | 2257058 GetZeeGold
GetZeeGold's picture

 

 

Make sure everything you have is stamped .999

 

Thu, 03/15/2012 - 08:56 | 2257245 Seer
Seer's picture

It's kind of funny reading the US Mint's web page on gold eagles:

http://www.usmint.gov/mint_programs/american_eagles/index.cfm?Action=ame...

Ever since its discovery 5,000 years ago, gold has been treasured for its unmatched luster, beauty and intrinsic value. Today, gold continues to enjoy widespread appeal as an investment and storehouse of value.  Gold is an internationally recognized monetary and financial asset held in reserve by major governments.  It is so rare that all the gold ever mined could fit into a cube measuring just 20 yards on each side.  Most importantly, gold can play a role in diversifying an investment portfolio, since it can move independently of stocks and bonds.  What's more, gold is a tangible asset - one whose beauty and artistry you can literally hold in your hands.

Are they, however, .999% pure?  They don't seem to advertize it as such.

Wed, 03/14/2012 - 21:23 | 2256452 Tsar Pointless
Tsar Pointless's picture

Print it light, taking us through the night
Shadow banking, Benny you do it right
Give us more, QE behind closed door
Shadow banking, all this and nothing more

Sung to the tune of Andy Gibb's "Shadow Dancing", of course.

Or this.

Print, baby, print
Now that the game is over
I got a new printing press
In quantitation
Impossible not to use

Sung to the tune of Inxs' "New Sensation", of course.

Wed, 03/14/2012 - 21:47 | 2256511 LetThemEatRand
LetThemEatRand's picture

Ben to the stock market:

Never gonna give you up
Never gonna let you down
Never gonna run around and desert you
Never gonna make you cry
Never gonna say goodbye
Never gonna tell a lie and hurt you

We've all been Bankrolled.

Wed, 03/14/2012 - 22:18 | 2256556 tom a taxpayer
tom a taxpayer's picture

 

The bartender at 1:20 was the market reaction to Jamie Dimon's JPM stress test announcement.

http://www.youtube.com/watch?v=oHg5SJYRHA0

 

Wed, 03/14/2012 - 21:31 | 2256465 BW
BW's picture

The FED has been doing this for 99 years why the surprise.  Treasuries will rise until the Gold/USD revaluation is done, and Gold has a long way to go.  Gotta print to buy more treasuries to keep those rates low.

Wed, 03/14/2012 - 21:31 | 2256466 BLOTTO
BLOTTO's picture

In a nut shell, the whole fuckin piece of shit stinks.

It will take light years to pay this thing off...Au- might as well measure it like that...in astronomical units. 

Scotty beam me the fuck up.

Wed, 03/14/2012 - 21:53 | 2256522 Beam Me Up Scotty
Beam Me Up Scotty's picture

The shields are up and the warpndrive is out!! I canna beam you up Captain!! Sorry to tell you that you are trapped on a planet with little intelligent life!!

Thu, 03/15/2012 - 07:16 | 2257082 GetZeeGold
GetZeeGold's picture

 

 

I've seen this episode.......we just need to fashion a cannon and shoot the lizard.

 

Wed, 03/14/2012 - 21:57 | 2256525 Curtis LeMay
Curtis LeMay's picture

Years as in...generations.

Wed, 03/14/2012 - 22:28 | 2256574 Unprepared
Unprepared's picture

Light generations? Interesting concept.

Wed, 03/14/2012 - 21:32 | 2256469 Chartist
Chartist's picture

I believe we all should stay long equities....Wiemar republic is repeating.

Wed, 03/14/2012 - 21:49 | 2256517 GovtMediaLiars
GovtMediaLiars's picture

It actually makes a lot of sense to hold equities if you're going on a hyperinflation thesis. But nothing beats gold for its adaptability. Inflation, deflation, financial collape, political collapse. You name it, gold's got ya covered for that situation. Natural Insurance Policy.

Index charts are looking frustratingly healthy about now though. I say "frustratingly" only beacuse the price action so conflicts with our overall macroeconomic view.

Wed, 03/14/2012 - 22:17 | 2256555 youngman
youngman's picture

Gold did the best in the Weinmar.....stocks did well..so did anything material..factories..machines...real estate did OK..but the politicans put limits on rents...

I think the holders of our treasuries...meaning the outsiders have seen teh writing on the wall..they were kind the last 3 years...waiting...but now they are starting to exit...and as others see them exit they will run to the door too...this is when Ben will have to buy everything coming thru the door or intrest rates will sky rocket and this will destabilize teh dollar and its reserve status....let alone throw our deficits to the moon....SO Ben will buy..but we will not know it...but something will stink...there will be hints of what is going on....maybe we will see Hedge funds selling positions and no movement in the interest rates...some statistic will show that interest rates should be going up...but they are not...it will just smell wierd...buy the time we figure it out as in the facts....they will be in the trillions.....game over....at least for the reserve status...hello hyperinflation...and who will the politicians blame...the oil cartels...China...everyone else for the higher prices or for not accepting dollars anymore....and yes I think they will try to confiscate PM´s ....anything of trading value...trading value to the countries we need things from..I think we are getting close to this moment....I am watching China very close...they like things..not paper.....they are buying coal...oil..copper...what ever and will store it for the future....we are not..we are shutting down production by new rules and regulations...new ADA rules...great for lawyers..bad for business...so it leaves...eyes wide open boys and girls...they have us watching the APPLE game ...but the real action is under the table..

Wed, 03/14/2012 - 22:54 | 2256616 GovtMediaLiars
GovtMediaLiars's picture

I'm not much for predicting the future, unless I think I can profit from it, but you're certainly right about one thing. When it happens, it will happen very fast. Too fast to do anything about it if you were "waiting for the right signals" before preparing for such an eventuality.

Cheers!

Thu, 03/15/2012 - 04:27 | 2256981 AldousHuxley
AldousHuxley's picture

China isn't buying but Europeans doing worse than America are buying....UK bought tons of US T-bills.

 

don't worry. US war machine will attack Iran and offset inflationary printing with cheaper oil

Wed, 03/14/2012 - 23:18 | 2256661 luna_man
luna_man's picture

 

 

@youngman..."SO Ben will buy..but we will not know it"

 

I KNOW WHO will know it...MY MAIN MAN!!

sleeps with one eye open, an ear to the wind and an nostril sniffing the air at all times!...(was born with the gift)

Oh, we both despise the CRIMINALS!!

 

Wed, 03/14/2012 - 21:50 | 2256521 LowProfile
LowProfile's picture

You may want to price those Wiemar equities in gold and then rethink your thesis.

Wed, 03/14/2012 - 23:11 | 2256648 Dead Canary
Dead Canary's picture

Exactly. When you sell those bloted stocks, they are going to give you pretty toilet paper. Not real money.

Thu, 03/15/2012 - 00:14 | 2256763 LowProfile
LowProfile's picture

Not exactly.

Gold did better than equities during Wiemar.

Thu, 03/15/2012 - 16:41 | 2259276 MeelionDollerBogus
MeelionDollerBogus's picture

okay, let's say you were smart & kept food stocked, guns & gold, but you still held some equities.

you could buy calls to get some paper profits without holding the stocks themselves if the rise is sharp enough in a short time. If it's not quite that sharp you can write calls & so long as you aim above where the price actually hits you'll keep the cash, use it to buy gold, guns, etc., and be able to play again. Dunno. Thoughts? I don't know, I have a bad feeling about it but I thought I'd put it out there.

Wed, 03/14/2012 - 21:32 | 2256470 Great Depressio...
Great Depression Trader's picture

And what if banks are simply deleveraging? ZH shows us declining shadow bank liabilties but what about their assets? Whats the asset side look like? If the leverage ratio is falling then why is that necessarily a bad thing?

Wed, 03/14/2012 - 21:35 | 2256480 Tyler Durden
Tyler Durden's picture

-> credit money.

Mon, 09/24/2012 - 09:16 | 2823932 WhiteNight123129
WhiteNight123129's picture

Do not confuse Monied Capital with Credit Circulation two different things Tyler.

Wed, 03/14/2012 - 21:44 | 2256501 spiral_eyes
Wed, 03/14/2012 - 23:06 | 2256635 GovtMediaLiars
GovtMediaLiars's picture

The FED controls the "Base Money" supply. They also have a great deal of control over the "money multiplier," through which fractional reserve works. They don't control exactly how much that base money is multiplied (credit supply/demand dynamics have the largest effect) and they don't have a great deal of control over where that money goes.

On balance though it is patently absurd to suggest, as some disengenuous economists do, that the FED doesn't control the money supply.

Here's todays index charts update with some brief commentary

Cheers!
Curtis 

Wed, 03/14/2012 - 23:17 | 2256659 spiral_eyes
spiral_eyes's picture

I used to believe this, but recent evidence, i.e. the recent negative correlation between M3 (deleveraging) and the monetary base (huge increase), proves otherwise.

Wed, 03/14/2012 - 23:32 | 2256705 GovtMediaLiars
GovtMediaLiars's picture

Market forces will always overpower governments and central planners in the end. Always have and always will.
That market forces eventually reassert themselves, however, is no reason to let the FED of the hook. 

Mon, 09/24/2012 - 09:40 | 2824015 WhiteNight123129
WhiteNight123129's picture

Base Money and Money multiplier you can trash that in the carbage can, it is useless crap. Understand circulation and you understand how it works.

 

Thu, 03/15/2012 - 02:47 | 2256900 xtop23
xtop23's picture

Perhaps a stupid question but you never learn if you don't have the balls to ask so,

When you hear people talk about the "velocity" of money, they are talking about the conversion of M1 to M3 then?

Mon, 09/24/2012 - 09:54 | 2824048 WhiteNight123129
WhiteNight123129's picture

Circulation can be done with bills of exchange, with money, with bank of issues notes (called deposits today), Central bank notes, whatever. You can even create a transaction with oral creation of credit when you go to the small mom and pop shop in country side and he puts that on your tab, you have created circulation with verbal credit. Those M1 and M3 things are useless crap except to tell you if you are leveraging or in deleveraging mode. Unless it is used a lot of deposits are actually more like monied capital than circulation.

 

Thu, 03/15/2012 - 16:45 | 2259301 MeelionDollerBogus
MeelionDollerBogus's picture

I found that very informative & appreciate the input

Wed, 03/14/2012 - 21:46 | 2256508 mayhem_korner
mayhem_korner's picture

Whats the asset side look like?

 

Are you serious?  What does the asset side look like?  Well, let's see...for banks, loans are assets.  How do you think loans are "performing" when so many of the real assets those loans have underwritten are underwater?  That's why they had to swap out so many toxic loans for shares of gov't debt through QEI and II.  What's more, do you see banks making any new, theoretically performing loans????  Nothing worth writing home about.  And they can't lend money because (i) they will go insolvent and (ii) the increase in money velocity will unleash hellish inflation.

Other than that, I'd say the banks are in pretty good shape.

Wed, 03/14/2012 - 22:37 | 2256593 TruthInSunshine
TruthInSunshine's picture

Fractional reserve banking, conjuring what they claim is 'money,' but that which is really debt (since there is nothing of inherent value backing it), from thin air, leveraging it up by many multitudes, getting a nation to endorse it as monopolistic fiat (and enforce the monopolistic recognition of it as such), is the problem.

If 90% of loans go bad (or more), the fractional reserve bankers lose nothing. They created money from nothing and received the protection of the nation in distributing fiat monopoly currency. Not only do they lose nothing, they actually gain all real assets that were pledged as collateral to securitize most of the loans that went 'bad' - Harvest.

Repeat this process of Harvest by first inflating the money supply, getting people deeply indebted (many of whom weren't indebted before), and soon enough, with enough cycles of harvest, what belonged to many will be concentrated in the hands of a few, all via the sham that is fractional reserve banking.

It's the biggest scam in the history of mankind.

Once a person grasps this basic concept, they'll understand why events have taken place as they have (Bretton Woods*; Plaza Accord; Federal Reserve Act of 1913; closing of the gold standard in 1971*, etc.), and they'll finally grasp how a select few have rigged the game to be able to harvest assets continually, and concentrate wealth and power, by doing nothing other than maintaining Deep Capture of a nation's legislative and judiciary branches (and executive, in the case of the U.S.) of government.

 

*On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully fiat currency, backed by nothing but the promise of the federal government." This action, referred to as the Nixon shock, created the situation in which the United States dollar became the sole backing of currencies and a reserve currency for the member states. At the same time, many fixed currencies also became free floating.

Wed, 03/14/2012 - 23:29 | 2256692 oldman
oldman's picture

Dear TIS,

"Fractional reserve banking, conjuring what they claim is 'money,' but that which is really debt (since there is nothing of inherent value backing it), from thin air, leveraging it up by many multitudes, getting a nation to endorse it as monopolistic fiat (and enforce the monopolistic recognition of it as such), is the problem.

If 90% of loans go bad (or more), the fractional reserve bankers lose nothing. They created money from nothing and received the protection of the nation in distributing fiat monopoly currency. Not only do they lose nothing, they actually gain all real assets that were pledged as collateral to securitize most of the loans that went 'bad' - Harvest"

 

 I have read this over ten times at least and still do not 'get it'.

Sooner or later, it seems to me, someone has to:

1. buy the asset at a price in line with what has been borrowed against it

2. sell it at a loss and take the hit to the asset base

3. keep rolling the loan at no cost and no reduction to the principal amount as well as maintain the asset

4. ??????????????????????????????????

This as far as I can get. With the debt increasing, if only by the cost of maintaing the asset, and no new money added to the equation except in the form of additional debt, how do you escape paying the loan, taking the hit, and unwinding the fiction?

Sorry to be so foggy on the question, but I am completely befogged by all of this

I hope you can make some sense of the question I am grappling with and help clear the fog     om

 

Wed, 03/14/2012 - 23:58 | 2256723 TruthInSunshine
TruthInSunshine's picture

If you could print a currency at no cost, that had no instrinsic value, and get the legal system to recognize it as the only legally permissibly 'tender' to satisfy all debt, public and private, would you print as much as you could, loan it out to as many entities and people as you could, and sit back, not caring whether 90% or 9% of the loans were repaid, since it cost you nothing to produce the loan, meaning that you can only gain assets (securitized) and indebt institutions (create indebted parties that you can then garnish), and literally lose not one atom of anything of inherent value?

Further, if you had access to an entity that could do the above, and you could borrow that currency at absurdly low interest rates, and moreover, you had an express or at least implicit taxpayer guarantee against losses (too big to fail), would you also not do exactly the same?

If you're the former entity, you literally can lose nothing, no matter how reckless your actions or lending standards.

If you're the latter party, your risk of loss is inconsequential, since you're backed by the taxpayers (involuntarily), and even if you weren't, if you're a very large entity able to tap absurdly low interest loans from the former, unless you are galactically idiotic on a level that equals Lehman or beyond (where derivatives did them in, along with a non-bailout), you'd be hard pressed to lose money if even - completely hypothetical and arbitrary % - 20% of the cheap interest money you borrowed and then re-loaned out wasn't paid back to you.

If you're the former, you have not only no risk, but you can't possibly lose anything, since your investment is nothing.

If you're the latter, your risk is incredibly small.

This is why our economy, under fractional reserve banking practices, using currency created from thin air, tied to absolutely nothing of inherent value, and bestowed monopoly status as legal tender, is a factual, literal Ponzi Scheme.

This is why we had to close the gold standard, lest we couldn't show "growth" (even though it was merely nominal, credit/debt based transactions) in our official GDP going forward.

You don't even have to tie the fiat to gold in order to force the economy to produce honest numbers and detect the real level of economic growth or contraction: tie the currency to anything that has inherent value, and that can be stored, and that isn't infinite in quantity.

Thu, 03/15/2012 - 00:20 | 2256766 oldman
oldman's picture

Truth,

Thanks for this explanation because it is as exactly as I have always understood it; I do not feel quite so fogged in now, so------------THANK YOU A BUNCH!

In reading the rest of your comment, I also find that it is exactly as I imagined all along; what I don't understand is the apparent assumption that this debt never has to be repaid-------this seems to be the crux of what I think of as the 'virtual reality'.

However, this virtual reality has to be covered by the 'taxpayers' and there are none with the possibility of earning enough 'money' to ever repay the debt, even if tax rates are 100%. So, at some point it seems to me the virtual reality has meet the street or 'real world' (if there is any such entity), and the 'Ponzi' has to fail.

This virtual reality is way beyond itself already; so it has failed--------the collapse has already occurred and we are simply watching the death throes of the machine and its beneficiaries----------

and that is where we are and there are no assets and there is no money-----only DEBT!

Thanks again for the clarification and please send me a bill for whatever I owe you for the successful therapy session----it truly helped

And, oh yeah, if I am still off the beam on this, please let me know      om

 

 

 

Thu, 03/15/2012 - 00:53 | 2256787 TruthInSunshine
TruthInSunshine's picture

For the most part, right, IMO.

There's wealth in the system - "money" is a moot term in this system - but that wealth is encumbered and swallowed wholesale by indebtedness, which is the blueprint ('they' loan some entity or person fiat in exchange for the opportunity to seize their real estate in the event of a default); the debt, in the aggregate (public + private sector) far exceeds the arbitrary values assigned to the things of wealth (e.g gold, oil).

The mind bender part for the newly initiated (as I was at one time) to the Matrix is that there's no real 'debt' from the perspective of the fractional reserve central bank; it's hard for those steeped in conventional economics to rip out the notion from their brain that the fractional reserve central bank can't lose anything (they didn't lend anything of value or that cost them anything - they have ZERO skin in the game), and that their favored entities that are TBTF have only slightly less risk (because they will always be able to socialize their losses via taxpayer bailouts in the wake of busts, while they retain their ill-gotten gains during the booms), and that what most refer to as debt in this system is only a liability for the debtor. If the debtor doesn't repay what was they borrowed (a monopoly currency that cost the lender nothing to produce), they can lose their farm, construction equipment, home, machinery, infrastructure, vehicle, etc. that was used to securitize or collateralize the loan, or even if the loan was unsecuritized, they can at least see their revenue or wages garnished, be sent into involuntary bankruptcy (where their general pool of assets will be seized upon by creditors, including lenders), and squeezed in other ways.

The only way to avoid this is to not play the game. During crack up booms, you miss out on fiat-based gains, if you don't play the game, and the incentive for playing that game is that if your timing is correct, you can get rid of all debt and convert the excess fiat gains into hard assets having inherent value or other things of inherent value, before the fractional reserve alchemists induce another inflationary-deflationary (or vice-versa) harvest.

If one were fortuitous enough to play the game, and have the skill and/or luck to convert fiat gains into real wealth before the boom turns to bust, they'd probably be idiotic to repledge their real wealth assets as collateral for loans ever again (I say probably, because there are exceptions to every general rule, but these people would have to be extremely smart, competent and or connected to the alchemists in such a way that they'd be assured a bailout in the event of another bust whereby their real assets are pledged as collateral for fiat loans).

The Harvest is the end game for the fractional reserve bankers and their minions. As just one example of the rape that is harvest, even generations of families that were land rich (let's say a family that has owned two square miles of prime farmland yielding high value crops for three generations, carrying no debt) can find that an economic downturn suddenly forces them to take the step of obtaining a loan, pledging their farm and equipment as collateral, in the belief that the loan will allow them to survive the downturn and become more profitable at some future point - they're now 'harvestable.'

Thu, 03/15/2012 - 02:20 | 2256893 oldman
oldman's picture

WOW!!!!!!

You make me seem like the genius which I was told I was at the age of 15, and vowed never to do a thing with a genius mind, but rather---just live my own life being, not do-ing.

"The only way to avoid this is to not play the game. During crack up booms, you miss out on fiat-based gains, if you don't play the game, and the incentive for playing that game is that if your timing is correct, you can get rid of all debt and convert the excess fiat gains into hard assets having inherent value or other things of inherent value, before the fractional reserve alchemists induce another inflationary-deflationary (or vice-versa) harvest."

I bailed out legally of all debt in 1993. I walked away from the game a free man and never looked back. The paragraph above describes me---and this is why the "WOW!!! You make me seem like a ---genius" comment.

I played the game for others five hours a day----I was never interested in money----too much trouble, but I loved the illusion of reality that being in these markets brought with it. 

"If one were fortuitous enough to play the game, and have the skill and/or luck--------"

Truth, the line above tells an oldman that you too live in a 'state of grace'.

I'm very happy that there are people like yourself in the universe---thank you om

 

 

Thu, 03/15/2012 - 02:42 | 2256906 Steverino
Steverino's picture

raed this a few times through... bloody brilliant Truth... many thanks...

Thu, 03/15/2012 - 03:39 | 2256943 oldman
oldman's picture

Truth,

I missed this last paragraph the first two times I read the above:

"The Harvest is the end game for the fractional reserve bankers and their minions. As just one example of the rape that is harvest, even generations of families that were land rich (let's say a family that has owned two square miles of prime farmland yielding high value crops for three generations, carrying no debt) can find that an economic downturn suddenly forces them to take the step of obtaining a loan, pledging their farm and equipment as collateral, in the belief that the loan will allow them to survive the downturn and become more profitable at some future point - they're now 'harvestable.'"

The same may be said for one who 'owns' 2 square miles of self-contained watershed covered in mature forest.

The harvest game ends, however, as soon as the population growth ends since the entire growth machine model must be based on more people or a wider and more equitable distribution of the goods and services of the society. My intuition of this, supported by mere bits and pieces of the data that slip through the curtain of ignorance with which the MSM binds us, is that TPTB already know the old game is up and are wringing all they can wring out of it before the cat is out of the bag. Hence, the plethora of 'peak' events. They see the lack of demand that will come from population decline and are still loaded with inventory.

The truth is that TPTB are so frightened of this that they are rocking and rolling completely out of control---their rigid minds lacking in imagination are terrified of a new game. These dudes are the bottom of the bucket and can maintain only an illusion of control over the rest of us by our default. Even a five-year old would say 'no' to the idiocy under which we live if his mommy and daddy were not so frightened of living their own lives.

TPTB have no fucking power except to bluff what they have always considered to be a pack of fools with mindless and idiotic bravado----anyone can list the main players names----all of the same family: the Nobody Home Clan.

The game is over. I don't know exactly when, but we are very near a non-revolution revolution; a complete awakening into a new way of being that has already raised its head in a few places.

The rest of the nations are not waiting for us and yet, are hoping that at least the american people will join them, if not the american government. They are moving ahead in full survival mode, while we laugh and point at them because they are of a different color, religion, culture, and speak different languages.

They will not be harvested-----this oldman will not be harvested-----the party is on and we are also invited.

Thanks, Truth---I got a lot out of your last paragraph               om

Thu, 03/15/2012 - 00:22 | 2256773 LowProfile
LowProfile's picture

Unless those entities are nationalized.

Better hope that deep capture stays captured...

Thu, 03/15/2012 - 01:14 | 2256805 TruthInSunshine
TruthInSunshine's picture

Right.

The difference between banks in Venezuela or other purely socialist states and the few TBTF banks at the top of the food chain in the U.S. (their % is tiny; most banks are feeder fish for the TBTF entities at the top) is that both losses and profits are socialized in Venezuela, whereas only the losses at the TBTF entities are socialized in the U.S.

The notion that financial institutions could privatize their profits (based on smart decisions, mainly, but regardless..) but also be forced to privatize their losses, as well (as a result of their recklessess, mainly, but regardless) was a quaint notion from a distant past in a nation once called The United States of America.

Thu, 03/15/2012 - 01:28 | 2256848 Calmyourself
Calmyourself's picture

Further if you could foist it upon a populace with no clue, deliberately so, it would work for a long, long time.  Now imagine you couple that with a world dominating hypermilitary which controls the oceans indisputably.  This will end boys and girls but it is going to take a long time and when it does their plans will be their waiting for us to slip into the next iteration of unseen shackles.  Free your mind because they own your ass..

Thu, 03/15/2012 - 02:38 | 2256882 TruthInSunshine
TruthInSunshine's picture

Right. Military hegemony allows harvest on a global scale.

"Those are some fine crude oil deposits you've got there, Saddam/Colonel Q/Iran. And we happened to notice you lack a fractional reserve central bank."

Thu, 03/15/2012 - 03:19 | 2256928 TruthInSunshine
TruthInSunshine's picture

Bernanke or his boss is junking me.

Or maybe it's old man Rothschild from the grave. lulz.

Thu, 03/15/2012 - 03:43 | 2256945 oldman
oldman's picture

Come on, Truth,

He was never an oldman

only a vampire and he's gone                        om

Thu, 03/15/2012 - 03:40 | 2256944 Marigold
Marigold's picture

Who is the spaced out idiot who gave you a down arrow. ... They should revert to the MSM.

Thu, 03/15/2012 - 09:43 | 2257435 buckethead
buckethead's picture

I have understood this concept, and have been trying to share it for a few months now. Especially the point that the term "money" is useless, although ubiquitous.

You have worded this concept so eloquently, yet understandably that I seek permission to C/P with credit and link to the comment.

 

What say you?

 

Thu, 03/15/2012 - 09:47 | 2257456 buckethead
buckethead's picture

Additionally: Any comments to the argument that treasury notes are a competitng currency?

Thu, 03/15/2012 - 10:17 | 2257604 TruthInSunshine
TruthInSunshine's picture

I agree, and many here have watched the Bernank suppress tnote yields to absurd levels, via an end run around what he's legally barred from doing (authorizing the fed to buy USTs directly from Treasury) through arguably a still violative of law policy of buying such USTs in the secondary market, thus allowing publicly traded corporations to float reams of only slightly higher yielding corporate bonds (much of which is used to repurchase their own stock).

Thu, 03/15/2012 - 10:13 | 2257537 TruthInSunshine
TruthInSunshine's picture

Copy away.

I am merely passing on my understanding (and genuine belief) of the system as it now functions as I learned it from other, wiser people, essentially copying from them.

Society would transition into a far better place if more people realized the source of the rot.

*One important factor I omitted above is that 'Harvest' is intentionally induced. It's not some random event. Just as the crack up credit booms are created by opening the spigots with EZ & abundant fiat loans/credit for all, enticing the masses to deeply indebt themselves, pledging whatever they own or will own that actually has inherent value as collateral for zero cost of production fiat loans,  so are the episodic droughts of credit, whereby the economy is driven off the rails sooner than it would ordinarily would be, as the spigots are abruptly closed, and the money supply is contracted suddenly, creating the waves of defaults that allow the Harvesting.

Wed, 03/14/2012 - 22:59 | 2256619 oldman
oldman's picture

Great Depression,

"And what if banks are simply deleveraging?"

How are the banks going to deleverage unless they wiggle out of the big loan they made on RE? They own everything.

The assets are there at imaginary prices, but there are no buyers for what, another 30%-50% lower prices ,and the 'assets' will decline with each sale. What do you expect the asset side will look like?

All of this is way over my head, but deleveraging, to me, implies lower prices and a rapidly declining asset base

I'm so confused that I am repeating myself like an old fool

Can someone or someones make some sense of your very appropriate questions?

Thank you GD for stirring the cobwebs           om 

Wed, 03/14/2012 - 21:33 | 2256473 putaipan
putaipan's picture

'scuse the dummy perspective... but isn't this just how the banks are made whole and we get pwned?

on a lighter note- i really think the fed's new hip twitting campaign and constitutional grade school outreach program needs a cute little mascot that we can all relate to and snuggle with.

Thu, 03/15/2012 - 03:16 | 2256926 StychoKiller
StychoKiller's picture

I bought my Daughter a gray, plush octopus in San Diego over 15 years ago, perhaps there's a plush squid out there...

Thu, 03/15/2012 - 17:10 | 2259396 MeelionDollerBogus
MeelionDollerBogus's picture

I believe this plush Cthulu is what you're looking for.

 

Wed, 03/14/2012 - 21:33 | 2256474 slewie the pi-rat
slewie the pi-rat's picture


what is that giant, sucking sound we hear?

Wed, 03/14/2012 - 21:33 | 2256475 TradingJoe
TradingJoe's picture

Benjie can print all he wants and then some, eventually, while he is still at it, it will all collapse over him like a row of books from a shelf! 3.6T my ass, they would need a lot more to stop the endless bleeding, won't get to it because someone needs to "approve":())) gold will take another dump before PHYZZZZZZ becomes CHEAP(er) again :()))!
Ride On Benjie, we the traditionals got you back:()))))))))))!

Wed, 03/14/2012 - 21:36 | 2256481 lettuce
lettuce's picture

great read, thanks

Wed, 03/14/2012 - 21:37 | 2256482 nothing can go wrogn
nothing can go wrogn's picture

Nice work. This article illustrates why ZH is about the best financial news source you can lay your eyes on.

Wed, 03/14/2012 - 21:37 | 2256483 leathaface
leathaface's picture

Had a stash of frn's layin around, and i figured since summer is comin right around the corner (in so. AZ) and i wouldnt be needin to burn those for warmth or wipe my ass since i got a good supply of tp, why not get in on the sale. 

Discount Bitchez!

Wed, 03/14/2012 - 21:39 | 2256485 SillySalesmanQu...
SillySalesmanQuestion's picture

Damm..The Bernank is going to have to order a few more helicopters.

Wed, 03/14/2012 - 23:06 | 2256636 UP Forester
Wed, 03/14/2012 - 21:39 | 2256488 q99x2
q99x2's picture

If they can get enough people on their side by inflating the stock market it will be more difficult for the hungry to cause a revolution. This is probably their best route. They will print at ever increasing rates until poof and then move in with heavy military actions to mow the hungry down. Not the first time they've done it.

Wed, 03/14/2012 - 22:19 | 2256559 tickhound
tickhound's picture

and BOOM goes the dynamite!

Wed, 03/14/2012 - 22:21 | 2256562 espirit
espirit's picture

In my neck of the woods violent crime is on the rise, no matter what the MSM spews nightly.

How long before people are jacked for their groceries?

Coming soon to a town near you.

Wed, 03/14/2012 - 23:07 | 2256637 UP Forester
UP Forester's picture

Just hand over the Tide.  That'll keep 'em satisfied for a while.

Wed, 03/14/2012 - 23:26 | 2256679 TruthInSunshine
TruthInSunshine's picture

I was just going to mention the 'Tide theft' craze apparently sweeping the nation.

I ordinarily pay little attention to the banal details and triviality that the Main & Very Lame Ass Stream Media harps on continuously, but in catching the apparent trend of Tide Laundry Detergent thefts that are an epidemic (whereby the stolen Tide is sold for drug money), we get an economic twofer:  1)  Tide has apparently been whacked with the CPI 'substitution stick' and Acme Suds are the new Tide, and 2)  More people are choosing to buy a fairly non-discretionary clothing cleaning product on the black market, at a heavy discount.

I'm sure I'm inflating this into more than it really is, and could only be vindicated when people see Americans, en masse, washing their clothing in rivers and streams like Indians do in the Ganges.

Wed, 03/14/2012 - 23:38 | 2256717 UP Forester
UP Forester's picture

Brings a whole new meaning to "Laundry Run"....

Thu, 03/15/2012 - 01:47 | 2256863 ClassicalLib17
ClassicalLib17's picture

@ esprit,  It's even more worrisome for those of us who live in Illinois.  As you are probably aware,  my state doesn't believe in the 2nd amendment and, in some of the more liberal jurisdictions, you may find that you are now viewed as the perpetrator rather than the victim.  In spite of that,  at least we are number one in two categories:  corruption and unfunded obligations.

What other state can say they have two governors doing time in federal prison, simultaneously.  Move over Jersey and Louisiana,  Illinois is topping the charts!  

Wed, 03/14/2012 - 21:40 | 2256492 Cabreado
Cabreado's picture

While there is irony in this end-game struggle of those who live and thrive by numbers to arrive at the results of 2+2,

in their pathological self-absorption, it is their very nature to ultimately miscalculate.

Of course there is no levity in this, now that irony has taken a back seat to real pain for millions.

Self-Absorption is a dangerous disease.  It destroys lives, and it destroys societies, and there is no cure.

Wed, 03/14/2012 - 21:41 | 2256494 Hedgetard55
Hedgetard55's picture

It appears we have passed the event horizon and everything is going to be dragged into the financial black hole as Bernankicide prints to total dollar destruction. Bartertown here we come. Thanks Uncle Ben!

Wed, 03/14/2012 - 21:44 | 2256503 ljag
ljag's picture

What is with this story I read about the Fed "wanting to help the small commercial banks"? What does the Fed have to do with small commercial banks anyway? Someone please explain this to me......I smoke alot at night and I'm a little slow on the uptake tonight. TIA

Wed, 03/14/2012 - 21:46 | 2256507 John Wilmot
John Wilmot's picture

That's Steve Liesman under the table at an FOMC meeting; he's just providing liquidity.

Wed, 03/14/2012 - 21:47 | 2256509 gwar5
gwar5's picture

To loosely paraphrase Larry Sinclair:

 

"...So, if those Fucktards at the FED are so brilliant they think they can fine tune the economy without a dflationary crash, or without causing another Weimar inflation, how is it that they managed to get us into this mess in the first place??" 

 

 

Wed, 03/14/2012 - 23:58 | 2256741 blunderdog
blunderdog's picture

There's a really easy out on that, though: it's not like there's anything technically *wrong* with blaming the banks and/or the politicians, too.

Thu, 03/15/2012 - 19:02 | 2256877 ClassicalLib17
ClassicalLib17's picture

@ gwar5,  I think you mean Jim Sinclair.  Larry Sinclair is the Chicago author/homosexual who claims to have done coke and had sex with our president in the back of a limousine as he related in an interview with the fiery New York preacher, Dr. James David Manning.  http://www.youtube.com/watch?v=Li19mPc-R3k 

Wed, 03/14/2012 - 21:53 | 2256523 cocoablini
cocoablini's picture

bots are scrubbing the tweets for code words to frontrun. look at the tweets-total fluff bullshit. i bet GS and JP have algos to run trades on tweets now. totally evil

Wed, 03/14/2012 - 22:04 | 2256540 847328_3527
847328_3527's picture

$88 Trillion of unfunded liabilities says Kotlikoff at Boston Univeristy.....the QE will not stop in my lifetime. IN ten years the dollar will be worth 80% less is my guess.

Wed, 03/14/2012 - 22:09 | 2256546 the 300000000th...
the 300000000th percent's picture

When will we hear the dreaded "quadrillion" on this exponential shit slope? 5 years? 10 years?

Wed, 03/14/2012 - 22:17 | 2256549 Atomizer
Atomizer's picture

We threw everything we had to keep this monetary system functioning. We couldn't resuscitate our patient,  it’s gone POOF. Don’t panic peasants, we have this new system to revive your freedoms, financial prosperities, new economical growth, and a new beginning, where the old system failed.  <---wink

 

Starting today, every International country will work together by making sacrifices. These setbacks will cause transitory pains. Once the international community adapts to these changes, unity amongst our international counterparts will pave the way for equality in sharing equal rights.  [I can go on, but will not] Blah, blah, blah

 

Drafting future speculative speeches is not my gig, but a warning too all peeps.  Book mark this, you will thank me.  This shit is so blatantly obvious.

Wed, 03/14/2012 - 22:23 | 2256557 LouisDega
LouisDega's picture

Cancel my iPad3 order. I wont be alive to accept my delivery bitchezzz

Wed, 03/14/2012 - 22:50 | 2256612 Atomizer
Atomizer's picture

 

 

Noooo, you cannot cancel your new order. That new screen is retina log on quality. Just look for your new iSecurity Retina login application to roll out shortly.

 

Future MSM story,  He/She left the tablet on the bar stool and someone stole it. All of the pictures/video’s having sex with midgets have been compromised. I need a iRetina app to protect my civil rights.

 

/sarc

 

Wed, 03/14/2012 - 22:12 | 2256550 M.B. Drapier
M.B. Drapier's picture

I'm feeling pretty good about my little wild-arsed prediction. I wouldn't bet on seeing three consecutive quarters of increase in that shadow + traditional bank liabilities figure anytime soon. (Unless 2Q 2011 counts as an increase.)

Wed, 03/14/2012 - 22:22 | 2256564 hamurobby
hamurobby's picture

Well, Krugman said 7 trillion...

Wed, 03/14/2012 - 22:22 | 2256565 Dre4dwolf
Dre4dwolf's picture

The liabilities are higher than that for sure, the banks can make up arbitrary numbers to valuate these things.... to a point....  i expect that the liabilites are probaby 30% higher than projected.

Wed, 03/14/2012 - 22:30 | 2256579 Dr. Engali
Dr. Engali's picture

I'm sure we will see analysis like this on CNBS. I just wonder if they can afford to wait and print until after the election or are they going to be forced to print ahead of time and jack gas prices up even further.

Wed, 03/14/2012 - 22:31 | 2256581 Bloodstock
Bloodstock's picture

This evening I attended an appearance/speech given by RON PAUL at the University of Illinois. The man speaks what I want to hear. There were at least 4800 people there!

End The Fed! End the Wars! Restore America, Liberty, Freedom, etc.

Wed, 03/14/2012 - 22:44 | 2256602 Tsar Pointless
Tsar Pointless's picture

By the time the vote manipulators - I mean, counters - tally the results of the Illinois Republican primary, Ron Paul won't even have 4,800 statewide votes.

Diebold giveth (GWB) and Diebold taketh away (Ron Paul).

Wed, 03/14/2012 - 23:25 | 2256676 Savyindallas
Savyindallas's picture

if they could pull off 9/11, they can certainly pull off a little minor vote fraud. The American sheeple will believe anything they are told. Over the years there has been a surreptitious invasion of the pod people – – and we lost. Some of Us still believe that just like in the movies we will prevail – – That we can and will beat the evil pod people. I refuse to believe that the battle is over. Ron Paul in 2012 – – hope for America! Perhaps our only hope.

Wed, 03/14/2012 - 22:33 | 2256588 Benjamin Glutton
Benjamin Glutton's picture

 I bid $30 Trillion by 2020.

Wed, 03/14/2012 - 22:37 | 2256594 Pumpkin
Pumpkin's picture

$3.6 Trillion?  Are they scaling back?

Wed, 03/14/2012 - 23:23 | 2256622 bluebare
bluebare's picture

Fine brew 2U.  While patiently waiting for the VIX to explode, making me a millionaire, (stop lying, you liar, you're as bad as GS) I'm working on my Pandora station.  Based on my previous investments of time and talent, I'm pretty sure they'll go under about the time I've got it to where every single track the sytem picks for me is a hair raising black goose bumping spine tingling mind blowing aural exhuberation.  Disclosure: My son aspires to a career in music production and I'm wearing his headphones.  Now Playing: Burning Hell by Joe Bonamassa on Blues Deluxe.

Wed, 03/14/2012 - 23:08 | 2256638 Clowns on Acid
Clowns on Acid's picture

But Tyler - Jim Cramer said that this is the start of a great bull market.

As Marlon Brando in "On the Waterfront" says to his innocent andf inquiring paramour, "Stop thinking so much about the truth". "Start thinking about yourself".

 

Wed, 03/14/2012 - 23:11 | 2256650 yogibear
yogibear's picture

Oil, Food, commodities to the moon while Bernanke and the Fed QE to the moon to compensate. This will drive people on the low end not being able to afford food, fuel. Go long on guns, ammo and guillotines with this happens. 

Wed, 03/14/2012 - 23:16 | 2256654 And Its Gone
And Its Gone's picture

Isn't less shadow bank liablility  and less bank liability a good thing?

I don't understand the charts...

Wed, 03/14/2012 - 23:16 | 2256657 Dermasolarapate...
Dermasolarapaterraphatrima's picture

Excellent artilce. The aritlce with graphs support the QE future....

Wed, 03/14/2012 - 23:36 | 2256671 Bill Shockley
Bill Shockley's picture

So I am in debt  as far as I can go with PM back up praying for the hyper to start so I can pay my debts and actually own my house.

For all of you smart guys including Tyler, please answer this.

What was the price of gold in G. Marks 5 years after the Weimer colapse, please compare to 5 years before the collapse.

And please answer, were Marks up or down against the US dollar 5 years after the colapse?

And how did they do that??????

You gotta know when to hold 'em and when to fold 'em.

And study history or only know half the story.

Bill Shockley

Thu, 03/15/2012 - 05:14 | 2257012 lunaticfringe
lunaticfringe's picture

This is an interesting question. One that caused me to waste 30 mins and offer a reply... In 1919 one loaf of bread cost 1 mark; by 1923 it cost 100,000 million marks.

I can no find no comparison because the Weimar meltdown was limited to Germany. The inflation you and I are preparing for is a worldwide event brought on by the collapse of the reserve currency.

Very difficult to compare these two events. Five years fter the collapse in Weimar, gold was most likely at some appropriate level since the crisis had passed and new money had been issued. Lastly, I have to guess that since the dollar was fully backed by gold, we had the stronger currency.

 

Bill, just hang onto your shit.

 

Thu, 03/15/2012 - 07:56 | 2257108 Winston Churchill
Winston Churchill's picture

Your time will come.

Like everything its timing.At some point gold will reach the price you need to settle yor debts if thats what

you want to do.

There is a good biography of Gustav Stroessman(spelling may be off) out there,I read it years ago in college.Cannot remember the title(senior decade).

He was the German chanvellor that sorted out the Weimar mess.The book details all the actions and results of his measures.

He died prematurely before finishing.Probably if he had lived a little longer there would have been no Third Reich.

Thu, 03/15/2012 - 17:23 | 2259440 MeelionDollerBogus
MeelionDollerBogus's picture

These are the charts:

marks to dollars

marks to gold

Wed, 03/14/2012 - 23:26 | 2256680 Essential Nexus
Essential Nexus's picture

Where can I go to find the knowledge to get the most out of reading these articles?

All responses greatly appriciated.  Thank you.

 

Thu, 03/15/2012 - 08:31 | 2257160 buckethead
buckethead's picture

Novice/Layperson here.

 

Google acronyms and terms you don't understand... even terms you have heard daily for years: (Bonds... Treasuries... equities...). Do it.

 

Investopidia is also a great way to get a basic understanding of what's being said.

 

Even wiki.

 

Whatever you do, keep reading. Don't understand? Keep reading... slowly.

 

Chime in with the occasional quip. If you get lambasted, so what. It's another learning experience.

ZH seems to be intended for professionals, but as it turns out, it's power to the people if for no other reason; Tyler's writing style is sardonic prose (enjoyable) while also being spot on technical analysis (as far as my simple mind can tell)

 

Need a picture drawn? ZH covers that as well WBanzai is (apparently) the resident artist. Check his stuff daily. Spread it around the web. 

 

A picture says a thousand words.

Wed, 03/14/2012 - 23:27 | 2256683 kito
kito's picture

100 year bonds coming to a theatre near you....just think, the can can be kicked for another 100 years.....bond swaps anyone? I'll trade you my 10 year for some of that 100 year paper ....plus an autographed Ben bernanke rookie dollar bil.......

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/03/14/bloomberg_ar...

Wed, 03/14/2012 - 23:46 | 2256725 Tom Green Swedish
Tom Green Swedish's picture

So what is your proposition to fix the problem Tyler?  Besides buying gold?

 

  • CHOOSE YOUR PATH
  • Iraq and Afghanistan
  • Reduce Troops to 60,000 by 2015

    -$580B

  • Reduce Troops to 45,000 by 2015

    -$840B

  • Maintain Current Funding Levels

    $0

  • 2001/2003 Tax Cuts
  • Renew All the Tax Cuts

    $4,530B

  • Renew the Tax Cuts on Income Below $250k/200k

    $3,430B

  • Renew the Tax Cuts Available at Lower Incomes and Continue AMT and Estate Tax at 2009 Level

    $2,660B

  • Allow All the Tax Cuts to Expire, Except for AMT Patches and Estate Tax at 2009 Level

    $1,130B

  • Alter the Sustainable Growth Rate
  • Freeze the Sustainable Growth Rate

    $320B

  • Grow Sustainable Growth Rate at Medicare Economic Index

    $380B

  • Adopt the Bowles-Simpson Fiscal Commission Recommendations for the Sustainable Growth Rate

    $280B

  • DEFENSE, DIPLOMACY & SECURITY
  • Replace the Joint Strike Fighter Program with F-16s and F/A-18s

    -$80B

  • Foreign Aid
  • Cut Foreign Economic Aid in Half

    -$90B

  • Increase Foreign Economic Aid by 50%

    $90B

  • Veteran Benefits
  • Reduce Veteran Income Security Benefits

    -$60B

  • Expand Veteran Income Security Benefits

    $40B

  • Reduce Spending Related to the Nuclear Arsenal

    -$80B

  • Reduce US Navy Fleet to 230 Ships

    -$170B

  • Increase Homeland Security Spending

    $60B

  • Troop Levels
  • Increase Number of Troops by 46,000

    $80B

  • Reverse "Grow the Army" Initiative

    -$110B

  • DOMESTIC SOCIAL & ECONOMIC SPENDING
  • Restart the NASA Moon Mission and Create a Moon Colony

    $160B

  • Enact New Jobs Bill

    $300B

  • Highway Funding
  • Limit Highway Funding and Increase Fees for Aviation Security

    -$130B

  • Enact Increased Transportation Funding

    $260B

  • Block Grant Food Stamps and Reduce to 2008 Levels

    -$180B

  • Cut Temporary Assistance to Needy Families (TANF) Program

    -$30B

  • Cut Federal Funding of K-12 Education by 25%

    -$80B

  • Eliminate the New Markets Tax Credit

    -$50B

  • Cut School Breakfast Programs

    -$40B

  • Double Funding on Adoption and Foster Care

    $80B

  • Increase Education Funding by $10 Billion Each Year

    $130B

  • SOCIAL SECURITY
  • Raise the Normal Retirement Age to 68

    -$160B

  • Slow Initial Benefit Growth
  • Gradually Reduce Scheduled Benefits

    -$140B

  • Progressively Reduce Benefits, Protecting Low and Middle Income Earners

    -$40B

  • Progressively Reduce Benefits, Protecting Low Income Earners

    -$90B

  • Use an Alternate Measure of Inflation for COLA

    -$110B

  • Reduce Spousal Benefits from 50% to 33%

    -$20B

  • Increase Years Used to Calculate Benefits

    -$50B

  • Include all New State and Local Workers

    -$100B

  • Institute a Minimum Benefit

    $200B

  • HEALTH CARE
  • Modify Health Care Reform Law
  • Establish a Public Option in the Health Exchanges

    -$100B

  • Repeal Insurance Mandate

    -$330B

  • Repeal Entire Legislation

    $150B

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    -$700B

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    -$110B

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    -$50B

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    -$140B

  • Replace Traditional Medicare with Premium Support>-$150B

  • Modify Federal Medicaid Funding to States
  • Reduce the Floor on Federal Matching Rates for Medicaid

    -$160B

  • Block Grant Medicaid and Grow With Inflation Plus Population Growth

    -$300B

  • OTHER SPENDING
  • Use the Chained CPI for Other Indexed Programs

    -$70B

  • Reduce Federal Civilian Employees’ Pay Increases and Cap Increases in Military Pay

    -$60B

  • Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life

    -$50B

  • Reform Federal Retiree Benefits

    -$70B

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    $110

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    -$10B

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    $60B

  • REVENUES
  • Raise Tax Rates on Capital Gains

    -$60B

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    -$150B

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    -$410B

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    -$120B

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    -$410B

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    -$50B

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    -$10B

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  • Tax Fringe Benefits as Regular Income

    -$80B

  • Gradually Phase Out Mortgage Interest Deduction

    -$240B

  • Curtail State and Local Tax Deductions

    -$590B

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    -$280B

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    -$180B

  • Make Research & Experimentation Tax Credit Permanent

    $40B

  • Reinstate $400/person Making Work Pay Credit

    $530B

  • Cut the EITC and Child Tax Credit

    -$80B

  • Expand the EITC and Child Tax Credit

    $110B

  • Extend American Opportunity Tax Credit

    $50B

  • Tax Treatment of Employer Sponsored Health Insurance
  • Accelerate and Modify Excise Tax on High-Cost Health Plans in 2013

    -$60B

  • Repeal Excise Tax on High-Cost Plans

    $120B

  • Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)

    -$450B


Wed, 03/14/2012 - 23:55 | 2256738 HD
HD's picture

You didn't mention the premium floor mats, the protective undercoating and the AM/FM 8 track player.

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