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The Stock Is Dead, Long-Live The Flow: Perpetual QE Has Arrived

Tyler Durden's picture


Two months ago, as we were carefully reading the latest Goldman explanation of how the firm had completely missed something Zero Hedge predicted back in January, namely the record warm winter's impact on skewing seasonal adjustments for payroll data (which has since validated our day 1 of 2012 predication that 2012 will be a carbon-copy replica of 2011, and which has made the comedy value of another Goldman masterpiece, that of Jim O'Neill's idiotic "2012: Not a Repeat of 2010 or 2011" soar through the roof) we stumbled upon something we knew was about to get much, much more airplay: Goldman's quiet and out of place admission that what matters for a country's central bank is the flow of its purchases, not the stock (another massive economic misconception we have been trying to debunk since the beginning). Recall these words: "...we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields..." This is how we summarized this observation two months ago (pardon the all caps): "UNLESS THE FED IS ACTIVELY ENGAGING IN MONETIZATION AT EVERY GIVEN MOMENT, THE IMPACT FROM EASING DIMINISHES PROGRESSIVELY, ULTIMATELY APPROACHING ZERO AND SUBSEQUENTLY BECOMING NEGATIVE!"

All caps aside, what this means is simple: if it is indeed flow that matters (and it is), then Fed intervention can never stop, period. If the stock of a central banks' assets is irrelevant, the Fed can have $1 on the left side of the balance sheet or $1 quadrillion: it does not matter - if the market expects the Fed to stop buying assets tomorrow, then the crash is as good as here. That has precisely been the biggest flaw with the Fed-accepted stock model, per which Bernanke can buy up a few trillion in MBS and the stock market will be flat as a frozen lake. Alas, this is increasingly becoming obvious is not the case. Hence flow.

Which is why today, two months later, and a week before Bernanke will almost certainly announce the NEW QE, we were not surprised at all to see that Goldman has actually made the case for flow in the form a of a white paper titled "Flow Effects at the Ultra-Long end of the Curve."

For monetary theory purists this is equivalent to Martin Luther walking up to the front door of the Marriner Eccles building and nailing his 95 theses: we have now entered the era of the monetary reformation, which incidentally as more and more classical economists follow suit, will throw all of Keynesian and neo-classical economics into a tailspin where virtually every core assumption will have to be reevaluated.

Congratulations economists: in their pursuit of another record year of bonuses at any cost, Goldman just sacrificed your precious voodoo. Because where Goldman goes, everyone else promptly follows.

From Goldman Sachs:

Flow Effects at the Ultra-Long End of the Curve (Shan/Stehn)

  • With the scheduled end of the Fed's twist approaching, market participants are debating the extent to which the end of the Fed's purchases will affect the yield curve. The "stock view" – which Fed officials and we have generally subscribed to – suggests that markets tend to price in the Fed's purchases at announcement and then show little responsiveness to the subsequent flow (and end) of purchases. The "flow view," however, would suggest that yields increase when the twist concludes.
  • Using a simple model of the Treasury yield curve, we revisit this issue in today's daily. Our estimates suggest that the flow effect is negligible for short and intermediate maturities (of less than 20 years) but statistically significant at the ultra-long end of the curve (with maturities of 20+ years). Although the uncertainty is significant, these estimates suggest that – all else equal – the end of the twist will have negligible effects on the short and intermediate part of the curve, but might push up yields at the ultra-long end of the curve by around 5 basis points.

With the scheduled end of the Fed's twist approaching, market participants are debating the extent to which the end of the Fed's purchases will affect the yield curve. Economic theory suggests that we need to distinguish between the effects of the announced stock of Fed purchases and the flow of actual purchases. In forward-looking and liquid markets, bond yields should primarily depend on the announced stock of purchases. Therefore, markets should price in the size of the purchase program at announcement and show little response to the subsequent flow of purchases. This means that when the flow of Fed purchases is discontinued—but the size and duration of the Fed's balance sheet is unchanged—there should be little effect on yields. Empirical evidence has generally reinforced this prediction. Our own work, for example, has confirmed that stock effects dominate flow effects. (See Sven Jari Stehn, "Stocks vs. Flows Revisited: End of QE2 Unlikely To Have Significant Effect on Bond Yields," US Daily, April 13, 2011.)

Although the "stock view" appears to be a good description of the effects of Fed purchases at the short and intermediate maturities, flows might be more important at the ultra-long end of the Treasury curve. Intuitively, this would fit with the observation of investment habitat – how purchases of 20-30 year bonds are mostly conducted by more heterogeneous investors that are less sensitive to changes in demand and supply in the Treasury market. Consistent with this view, we found tentative evidence for flow effects at the ultra-long end of the curve in earlier work (see US Daily cited above). However, the number of observations was very small and so the estimates were very imprecise.

With more data on hand and the end of the twist in sight, we revisit the issue of flow effects from Fed asset purchases at the long end of the curve in today's daily.

Following our previous work, we focus not just on one particular point on the yield curve at a time but also explore how the Fed’s purchase program has affected the entire yield curve. Doing so allows us to better separate the effects of economic factors (which affect the entire yield curve) from the Fed purchases (which differ across the yield curve). Making use of the relative movement of yields at different maturities provides more information and should thus provide better identification. (This disaggregated approach is motivated by Stefania D’Amico and Thomas King, “Flow and Stock Effects of Large-Scale Treasury Purchases,” Finance and Economics Discussion Series, Federal Reserve Board, 2010-52.)

Specifically, we construct our model in a number of steps.

First, we use the New York Fed’s Treasury yield curve estimates, which provide coupon-equivalent par yields for maturities between one year and 30 years.

Second, we construct a dataset of daily flows of Treasury purchases from the New York Fed’s website and allocate these into different “maturity buckets.” For example, we match purchases of bonds that have remaining maturity of between 9.5 and 10.5 years with the 10-year bond yield discussed above. Our sample period – which runs from March 2009 through April 2012 – can be divided into three phases: QE1 (March 2009 through October 2010), QE2 (November 2010 through August 2011), and the twist (since September 2011). The distribution of the purchases is shown in Exhibit 1 below.

Third, we control for the announced stock of Treasury purchases. Given our focus on testing for flow effects and the difficulty of identifying the announcement effect at individual maturities, we use a very flexible approach to capture the effect of the stock of purchases on yields. (Specifically, we use an intercept dummy and a linear trend for each maturity bucket in each QE phase.) The advantage of this approach is that we do not have to make a priori assumptions on the magnitude of the stock effect and doing so should raise the bar for finding flow effects. The drawback, of course, is that our model focuses solely on generating a flow estimate and cannot provide an estimate for the magnitude of the stock effect.

Finally, we combine the data on yields and flows with our stock dummy variables to construct a panel model for these thirty maturity buckets with daily data since March 2009. To take into account variations in duration and/or liquidity factors across maturity buckets, we allow the constant in our model to vary across maturities (that is, we include so-called maturity “fixed effects”). And to disentangle the effect of the Fed’s purchases at the different maturity buckets from economic factors that affect yields across the maturity spectrum, we allow the whole yield curve to shift over time (that is, we include so-called “time fixed effects”). In a nutshell, we estimate the following panel regression:

yield = ?*flow + ?*stock+ fixed effects

where the flow variable captures the purchases, the stock variable is given by the dummies described above and the fixed effects represent maturity and time fixed effects as discussed above. If there is a flow effect, then we should find a negative ? in this regression. To explore whether the flow effect differs at different parts of the curve, we allow ? to vary across different maturity buckets. In our baseline specification, we split the yield curve into seven segments (namely, 1-2 years, 3-4, 5-7, 8-10, 11-14, 15-20, and 21-30 years).

Our results are summarized in Exhibit 2 below. (For the full set of details, see Table 1 in the appendix). Our estimates reveal statistically insignificant ? coefficients at the short and intermediate maturities (up to 20 years), but negative and statistically significant estimates of ? at the ultra-long end of the curve (with 21-30 years maturity). In other words, our estimates confirm previous findings that the flow effect is negligible for short and intermediate maturities but significant at the ultra-long end of the curve. In terms of magnitudes, our results suggest that a $1bn purchase at the ultra-long end of the curve (all other things equal) lowers the yield by 3.3bp at that part of the curve.

We performed a few robustness checks. First, we split the regressions for the 1-10 maturities and 11-30 maturities in two regressions to address the concern that the daily time effects are not appropriate when grouping all 30 maturities together in one regression. The results are qualitatively similar: the flow effect at the very long end of the curve remains significant but the size of the effect drops from 3.3 to 2.3bp per $1bn (see Table 1 in the appendix). Second, we omitted the 1-2 years and 1-3 years maturities since the yields of these maturities have effectively been pinned down by the Fed's guidance language. Again the results are qualitatively unchanged (not shown).

In a final step, we can look at the implication of our estimates for the yield curve should the twist end in June as currently scheduled. As discussed, our model suggests that – all other things equal – we should not expect to see significant effects on the short and intermediate parts of the yield curve. But – again all other things equal – our model would point to an increase in yields at the ultra-long end of the curve. A simple approach to gauging the implied magnitude of this effect is to look at the average monthly purchases at this part of the curve over the last few months and ask by how much yields would move if this dried up. The Fed has purchased around $13bn per month at the ultra-long end of the curve (21-30 years) since the start of the twist. Taking into account that no purchases were actually made at the 21-23 year maturity (see Exhibit 1 above), this comes to an average of around $1.8bn per month in each of the maturity buckets where purchases actually took place. Applying our estimates of the flow effect – the 2.3bp to 3.3bp range per $1bn of purchases – this would imply that an increase in yields at the ultra-long end of the curve of around 5bp.

While we have reasonable confidence in the qualitative conclusion of our analysis – that flows tend to perturb yields only at the ultra-long end of the curve – it is important to keep in mind a number of caveats when interpreting the quantitative implications of our model. First, disentangling the influence of stocks, flows and other variables on the yield curve is a very difficult exercise and the uncertainty is therefore considerable. Second, our estimated magnitudes are only about as large as the average daily volatility of yields over the last three years (around 6bp at the 30-year maturity). Finally, it is important to note that our model's estimate only refers to the effect of the end of the flow of purchases on yields and does not take into account other factors that might influence yields at the same time. For example, the end of the twist could have a significant effect on the yield curve beyond the analysis presented here if Fed officials deliver something different from what the market is expecting for the June meeting


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Wed, 06/13/2012 - 20:54 | 2524044 Kamehameha
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Wed, 06/13/2012 - 21:12 | 2524076 Michael
Michael's picture

The Federal Reserve is a private corporation. The more it loads up on toxic assets on behalf of its member bank owners, the more worthless its private banking cartel becomes, thus paving the way for its own destruction.

QE to infinity and beyond I say Ben.  

Wed, 06/13/2012 - 21:24 | 2524095 Harlequin001
Harlequin001's picture

I don't get it. This is common sense is it not?

If no one is buying then an asset  has no resale value does it not?

Talk about 'bullshit baffles brains', and there's plenty of bullshit in here, or am I missing something...

Wed, 06/13/2012 - 21:31 | 2524112 CommunityStandard
CommunityStandard's picture

Correct.  If one party buys up most of the asset, the price for the asset will stay high... until the party tries to sell.  This is what killed JPM with the failwhale trade.

Bonds work a little different because even if the price collapses, you can still hold to maturity and get full return of principal with interest along the way.  Which is one reason why there won't be much change in short term yields, as you don't have long to wait to get your money back.  It WILL make a big difference in long term yields.

Wed, 06/13/2012 - 21:53 | 2524166 The Big Ching-aso
The Big Ching-aso's picture



The Fed's not gonna ultimately eat the big wiener.  I think 401k's & IRA's ultimately will.  No giant private corp that I know of commits altruistic suicide.

Wed, 06/13/2012 - 21:56 | 2524183 Shocker
Shocker's picture

Lets talk when there is QE4, QE5.

QE3 is already done and over

Thu, 06/14/2012 - 01:48 | 2524254 Harlequin001
Harlequin001's picture

The simple explanation I believe, is that when you examine the events surrounding and leading up to Weimar, and without going into too much detail, there must always be sufficient cash in an economy to liquidate bonds at par, and by that I mean all of them if necessary. If there isn't, then bonds are sold for whatever cash you can get for them, i.e. at a loss, and thus higher yield. Since all bonds will revalue in line with the new yields, or at least should do the important thing to watch is always the quantum of bonds in issue relative to cash available to liquidate them. Whilst the Fed can bluster all it wants, it either prints sufficient to allow bonds to liquidate at par, or self destructs with it's commensurate higher costs through higher yields. When you consider how many of these bailouts are being funded by already over issued bonds, and the liquidity problems we already have in trying to liquidate at par, the bond markets either blow up individually leading to the collapse of individual governments one after another if they don't print, (and no self respecting politician is ever going to accept that), or they all blow up in one go if they do, (which is by far more preferable) in which case all central banks need to print massively and simultaneously and we deal with the currency problems later.

There is already no alternative to that. You'll see QE100 if the market doesn't fail long before it, which it will, but not yet.

Whichever way you look at it, the bond market is toast. So unless Bernanke is actively buying the long end with CASH and not more debt issuance, neither flow nor stock have any real relevance because default is ultimately unavoidable since we are exacerbating the same problem that started it i.e. a lack of cash to liquidate at par because there are too many bonds waiting to be sold. The bond markets will never recover from this because they cannot. The instant the Fed stops buying everything fails, and they, and we know it.

It doesn't help that prices have already been distorted beyond comprehension, including pm's, which are far too cheap at these prices when you consider how much cash MUST yet be produced.

'To QE or not to QE' is really not an option...

Fri, 09/07/2012 - 13:58 | 2772473 SafelyGraze
SafelyGraze's picture

" So unless Bernanke is actively buying the long end with CASH and not more debt issuance, "

you lost me at "cash"

does Bernanke have access to "cash" that is other than "debt issuance"?

is his "cash" an asset or a liability of the federal reserve?

Wed, 06/13/2012 - 21:59 | 2524193 CommunityStandard
CommunityStandard's picture

Yeah.  Corps have a LOT of cash sitting in their accounts, but they'll only be in short term.  A lot of mutual funds, pensions, foundations, and endowments own t-bonds, which would take a beating should the easing stop.

Wed, 06/13/2012 - 22:10 | 2524234 Sam Clemons
Sam Clemons's picture

Unless stock markets take a beating.  Is it worth cutting off your hand to save your arm?

Wed, 06/13/2012 - 22:13 | 2524251 Precious
Precious's picture

Hail Caesar !

Thu, 06/14/2012 - 00:05 | 2524542 CommunityStandard
CommunityStandard's picture

I have to remember when I post here to make extra clear that I am not expressing or implying an opinion when I state fact.  Yes, bonds will lose value should easing stop.  Despite this, I DO NOT SUPPORT FURTHER EASING.  Nor am I saying these accounts should move into equities.

Thu, 06/14/2012 - 03:30 | 2524728 Sudden Debt
Sudden Debt's picture

As the Yakuza would say: Let's start with your pinky and see how we'll move along for the rest of the day...

Thu, 06/14/2012 - 01:06 | 2524619 BooMushroom
BooMushroom's picture

Do they have cash in their accounts, or do they have a whole lot of ones and zeros?

Wed, 06/13/2012 - 21:35 | 2524125 mcguire
mcguire's picture

i think im on the same page as you.   why would flow matter, and not stock?  is it because the flow of purchases by the Fed lets you know that there will always be a buyer of 'last resort' there???  

if so, is this a reflection of the volatility and liquidity at that end of the yeild curve???  

Wed, 06/13/2012 - 21:42 | 2524139 potlatch
potlatch's picture

at the end, is a wall of noise screaming Fiat! Bitchez!  Wonder how long that yell can last?  It will run out of its animal spirit sooner or later.

Wed, 06/13/2012 - 21:45 | 2524144 CommunityStandard
CommunityStandard's picture

While you wouldn't call them a buyer of 'last resort', your line of thinking is accurate.  Treasuries are offered at auction.  If you are a firm buying treasuries for your clients who want them, and the Fed comes in and buys up 60% of them, you now have to compete for the remaining ones and accept lower yields.

That's why flow is more important than stock - it doesn't matter how many t-bonds the government owns.  Once the Fed stops buying up bonds at auction, there's more supply, hence the higher yields.

Wed, 06/13/2012 - 21:37 | 2524128 Go Tribe
Go Tribe's picture

Yep. As long as there is one more sucker to buy, that sucker will be the fed, and all things are good.

Wed, 06/13/2012 - 21:40 | 2524135 potlatch
potlatch's picture

isn't that one of the classic problems in set theory?

Wed, 06/13/2012 - 21:48 | 2524156 WmMcK
WmMcK's picture

Still fuzzy on that ...

Wed, 06/13/2012 - 21:59 | 2524191 potlatch
potlatch's picture

Fed = a set that continuously tries to not include itself in the set

Thu, 06/14/2012 - 00:53 | 2524604 Michael
Michael's picture

Chart of who "owns" the Federal Reserve

Thu, 06/14/2012 - 01:04 | 2524615 Harlequin001
Harlequin001's picture

So, England owns the Fed, oh yeah...

Thu, 06/14/2012 - 07:11 | 2524860 ZeroAvatar
ZeroAvatar's picture

Michael: Thank You.

Thu, 06/14/2012 - 02:41 | 2524693 QuantumCat
QuantumCat's picture

Precisely.  However, game theory tells me the Fed will pursue this only as long as needed to outlast the Euro and the Yuan. The FRN is the supreme debt slave currency with oceans of debt many orders of magnitude beyond all other currencies. Why kill the golden goose?    

Thu, 06/14/2012 - 03:03 | 2524715 RECISION
RECISION's picture


This is a - I can last longer than you - game.

Wed, 06/13/2012 - 21:27 | 2524096 Cult_of_Reason
Cult_of_Reason's picture

Germany signals shift on €2.3 trillion redemption fund for Europe

 The German government has begun opening the door to shared debts for the first time in a profound change of policy, agreeing to explore proposals for a €2.3 trillion (£1.9 trillion) stabilization fund in order to stop the eurozone’s crisis escalating out of control.

Officials in Berlin say privately that Chancellor Angela Merkel is willing to drop her vehement opposition to plans for a "European Redemption Pact", a "sinking fund" that would pay down excess sovereign debt in the eurozone.

Wed, 06/13/2012 - 21:59 | 2524189 jimmyjames
jimmyjames's picture

Officials in Berlin say privately that Chancellor Angela Merkel is willing to drop her vehement opposition to plans for a "European Redemption Pact"


Maybe this little enticement changed her view-


Experts say this overlooks the tough conditionality. Italy and other states would have to pledge gold and other forms of collateral equal to 20pc of their debt in the fund.

"The assets could be taken from the country's currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations," said the proposal.


How can those countries ever grow and tax their way out in these economic conditions?

They can kiss their gold reserves good-bye and then watch their bond yields rip-

Wed, 06/13/2012 - 22:11 | 2524241 Matt
Matt's picture

It depends on what they do with this program; if they buy everyone's debt down to 1 percent yield, things will be peachy.

Are they sure 2.3 trillion is enough? Let's just get this fixed once and for all, make it at least 20 trillion to be sure, as a one-time bailout atom bomb.

Wed, 06/13/2012 - 22:49 | 2524368 MsCreant
MsCreant's picture

20% is enough if gold goes through the roof. Lure them out, SUUUUUUEEEEE! Here PIIGS, PIIGS, PIIGS. Man this is a tense game of chess.


Thu, 06/14/2012 - 01:09 | 2524621 BooMushroom
BooMushroom's picture

So they pledge the assets. Then they default. Germany says, "oh, that's too bad - we'll take those assets pledged as collateral."
And the PIIGS reply:
"Molon Labe."

Then what?

Thu, 06/14/2012 - 21:15 | 2527862 Matt
Matt's picture

You think the PIIGS gold are in their own vaults? You don't think they are sitting in London, New York and Switzerland? Or if they are holding their own gold, do you want to bet that as part of the conditions, the gold pledged for backstopping the debts will not be required to be moved into above mentioned vaults?

Wed, 06/13/2012 - 21:47 | 2524153 world_debt_slave
world_debt_slave's picture
1. Ne4 d2
2. Nf6+ Kh8
3. Ne7 (if Black did not have the pawn at this point, the game would be a draw because of stalemate)
3... d1=Q
4. Ng6#

If Black did not have the pawn move available, White could not force checkmate.

Wed, 06/13/2012 - 22:52 | 2524382 MsCreant
MsCreant's picture

I posted a chess thing before reading your post. Only maybe a game of Chest, as in treasure chest.

Wed, 06/13/2012 - 22:04 | 2524218 MunX
MunX's picture

Oh yeah now I remember calculus. Exponential functions have limits. Sorry I forgot.


Future Ben Bernanke Quote.

Thu, 06/14/2012 - 03:28 | 2524727 SeattleBruce
SeattleBruce's picture

Mind reminding Krugman, Obummer, and Mittens of that while you're at it?

Wed, 06/13/2012 - 20:59 | 2524050 Snakeeyes
Snakeeyes's picture

I agree. But it also means that The Fed will be purchasing assets that it was NEVER intended to purchase. See chart for details of things other than Treasuries.

This means MORE MBS, bad credit paper, etc. The Fed will be a toxic waste dump.


Wed, 06/13/2012 - 21:37 | 2524130 tekhneek
tekhneek's picture

If Ben Bernanke was on Dancing With The Stars we'd already be using a commodity based currency, unfortunately people have no idea what the Federal Reserve is.

Maybe that's the plan? At the end of this charade the Fed files bankruptcy and admits their "money" is bullshit thus removing all wealth globally?

Who knows. Sometimes I have a hard time wrapping my head around why a lot of this stuff is happening and then there's moments of clarity... followed by alcohol.

Wed, 06/13/2012 - 22:11 | 2524242 Dr. Richard Head
Dr. Richard Head's picture

Alcohol is what I use kill the Buddha I meet in the road. The actions taking place in these financial intermediaries is the strangest game of musical circle jerks I have ever seen...intention based on what and why is hard to understand anymore.

Wed, 06/13/2012 - 22:18 | 2524273 Raisuli
Raisuli's picture

Uh, what is the Federal Reserve? JK. What is wealth? Not Kidding.

Wed, 06/13/2012 - 22:53 | 2524383 MsCreant
MsCreant's picture

Bad bank. Naughty bank. Spankies for you.

Wed, 06/13/2012 - 21:00 | 2524051 stocktivity
stocktivity's picture

Greek election too close to call. Who will have the guts to hold over the weekend. Could be up or down 400 - 500 points Monday. I smell a sell off Friday.

Wed, 06/13/2012 - 21:12 | 2524075 Christoph830
Christoph830's picture

I don't think the upside and downside are of equivalent magnitudes.  Attention has already shifted to Spain/Italy and France is on deck which will all but negate the upside from a New Democracy party victory in Greece.  I believe a New Democracy win would be good for a 200-300 pt pop on the Dow but it will be short-lived.  IMO, a victory by Syriza could signal the 400-500 pt drop you are talking about.  That being said, this drop would also be short-lived as I believe it would prompt the Fed to do something drastic to prop up the "market."  The prudent move would probably be to stay all-cash for now but if you want to go for the homerun, I'd be short going into the weekend.

Wed, 06/13/2012 - 21:01 | 2524052 Poor Grogman
Poor Grogman's picture

I wonder how the private shareholders of the FED feel about being the eventual future owners of most of the encumbered assets in the western world.

Oh disregard, I forgot..

That was the plan all along....

Thu, 06/14/2012 - 02:23 | 2524680 merizobeach
merizobeach's picture

Bingo.  It doesn't matter to the Fed how 'toxic' it all is so long as they eventually own everything.

Wed, 06/13/2012 - 21:02 | 2524053 IMA5U
IMA5U's picture

Just imagine if the Fed dissapoints next week

Wed, 06/13/2012 - 21:10 | 2524072 CommunityStandard
CommunityStandard's picture

It'll be crazy.  So sad that since the Fed has gotten involved, it's going to stay involved to avoid tanking everything.

Wed, 06/13/2012 - 21:26 | 2524102 Sophist Economicus
Sophist Economicus's picture

"So sad that since the Fed has gotten involved..."

They've been actively involved since WWI

Wed, 06/13/2012 - 21:34 | 2524122 junkyardjack
junkyardjack's picture

Exactly, but now the system will collapse, ignore the past 90 years.  This time is different...

Wed, 06/13/2012 - 22:00 | 2524198 earleflorida
earleflorida's picture

The FRB's 100 year charter is up for renewal on 12/31/12 [give or a take few days?].

If  only Andrew Jackson were alive today to witness what democracy has become -- that a single unelected official can control the purse-strings of an entire free country built on the principles of 'Free Market Capitalism' -- making matters even more bizarre,... it is a private entity whom no one has any idea controls! Can you imagine the Chinese, Russians and Fucking British still actually pulling the strings via "The Golden Temple?

Great read tyler :-))


Wed, 06/13/2012 - 22:18 | 2524276 Matt
Matt's picture

Do you have a source for the charter expiry, and are you certain it is 2012, not December 2013 that it expires? it is a 100-year charter, not 99-years, right?

Hong Kong was a 99-year lease to England from 1898 to 1997, so a 100-year charter from 1913 should go to 2013.

Wed, 06/13/2012 - 23:02 | 2524412 Milestones
Milestones's picture

I question your first sentence. See 12 USC 341:"Third To have seccession after February 25, 1927, until dissolved by an Act of Congress or until forfeiture of franchise for violation of law.                          '

Congressional Act as captioned above pertaining to the Federal Reserve Act of 1913.

It is going to take a bullet(s) to kill this snake.            Milestones

Wed, 06/13/2012 - 21:34 | 2524120 junkyardjack
junkyardjack's picture

They won't print and then everyone will hope for next month.  Summer reruns...

Wed, 06/13/2012 - 21:04 | 2524057 Cursive
Cursive's picture

Yes, it's equivalent to stall speed.  Gots to have the flow or money velocity stagnates. But I don't think we get any QE announcement next week.  Maybe extension of OT, but not LSAP.

Wed, 06/13/2012 - 21:39 | 2524133 DeadFred
DeadFred's picture

Tyler seems so confident in June QE and you have to respect his view but still where is the panic to justify it? When I look at the Bernank testifying before congress I see a smug grown-up who used to get his head swirlied in the toilet as a kid. He's saying to himself "Yes I'm going to give you QE3 but you're going to have to beg first!" Besides, why would Goldman keep saying it's coming in June except that they're prepped for the fail that will happen when it doesn't come. It makes no sense for them to be telling the truth. It also goes against their basic nature.

Wed, 06/13/2012 - 23:18 | 2524448 metastar
metastar's picture

I am looking at this article and asking, will the Bernank print, or won't he.

You have provided the convincing argument, reminding me of the vampire squid's reverse logic (unless it's using a double negative)!!!??

Thu, 06/14/2012 - 03:36 | 2524734 SeattleBruce
SeattleBruce's picture

"It makes no sense for them to be telling the truth. It also goes against their basic nature."

LOL - that is so true.  And true for most of these banks and their 'economist' mouthpieces that spout off in the MSM financial media all the time.

Wed, 06/13/2012 - 21:06 | 2524060 InconvenientCou...
InconvenientCounterParty's picture

before very long, it will look cheap to just set a flat US Income tax rate of 0% and monetize the deficit for "a few" years.


Wed, 06/13/2012 - 21:54 | 2524173 rosiescenario
rosiescenario's picture

While I am sure someone has suggested this concept here before, that would certainly be a hell of a way to jump start consumer spending. A one year tax grace, provided all the money one earns is spent that year.

...maybe it would take 2 years? Who cares, just monetize the deficit resulting from it. Sell the treasury notes to Europeans looking for some safety, and off we go....they are always pretty slow tofigure things out, maybe we could make it 3 years????

Wed, 06/13/2012 - 21:55 | 2524178 you enjoy myself
you enjoy myself's picture

i'm amazed a politician hasn't hammered on this reductio ad absurdum to get the sheeple to recognize the damage the Fed is doing.  it would take a couple minutes for the avg idiot to digest, but you'd then create a lightbulb that couldn't be turned off.

Wed, 06/13/2012 - 21:06 | 2524062 monopoly
monopoly's picture

I am not selling anything. Of course all I have is real money and some miners.

Wed, 06/13/2012 - 21:06 | 2524064 Peter Pan
Peter Pan's picture

So what we have is a bucket in need of constant filling because it's full of holes. How long before they realise that the bucket needs repairing?

Wed, 06/13/2012 - 21:45 | 2524150 potlatch
potlatch's picture

when the people who put their trust in the water realize what kind of madness is happening on their dime

Wed, 06/13/2012 - 21:10 | 2524068 post turtle saver
post turtle saver's picture

Looks like it's time to start an EPA Superfund for the Fed... toxic assets as far as the eye can see.


When the term "great American melting pot" was coined I don't think they had this in mind...

Wed, 06/13/2012 - 21:09 | 2524070 Calls and Putz
Calls and Putz's picture

Yes - turn off the Money Pump, and the markets fall. No Flow, No Go.!/spiralcal/media/slideshow?

Wed, 06/13/2012 - 21:10 | 2524074 Robot Traders Mom
Robot Traders Mom's picture

Not only is ZH fucking spot-on, the wit is priceless-especially the line about that piker Jim O'Neil...

Wed, 06/13/2012 - 21:48 | 2524154 potlatch
potlatch's picture

ZH is to these days what, for some us, certain political sites were during the lead up to the Iraq Shenanigans.  A breath of fresh and reasonably sane air.

Wed, 06/13/2012 - 21:12 | 2524077 dolph9
dolph9's picture

Lots of fancy words to confirm what a child of 6 could tell you.

Wed, 06/13/2012 - 21:15 | 2524082 Zgangsta
Zgangsta's picture

They will be able to manage things with QE flow for about two years.  Then they will have to start adjusting the QE jerk.

And once the market has leveled off from the QE jerk, they can move on to manipulating the QE jounce.  By then, as an added bonus, the general populace will become well-versed in such advanced numbers as "quintillion", which they will use on a daily basis when purchasing a loaf of bread.

Wed, 06/13/2012 - 21:27 | 2524106 WmMcK
WmMcK's picture

More bounce to the jounce --
I either need a fifth derivative or a fifth of scotch.

Wed, 06/13/2012 - 21:45 | 2524152 Manthong
Manthong's picture

Phew… Quintillions?  No BFD..

I was getting worried that we would be seeing octillions within the next couple of years.

Wed, 06/13/2012 - 23:01 | 2524410 MsCreant
MsCreant's picture

We have Octo-mom. Ben will be Octi-dad. What he spawns will melt the fabric of reality itself.

Wed, 06/13/2012 - 21:19 | 2524083 CommunityStandard
CommunityStandard's picture

The flow can potentially continue without the Fed if Europe collapses and the new European "flight to safety" is US Treasuries.  The German and Swiss negative yields are bets on currency policy changes (return to the mark and unpegging of the franc), but negative yields aren't exactly "safety" for investors.

Though with the Bernank in charge, I'm with Tyler on perpetual QE.

Wed, 06/13/2012 - 21:23 | 2524085 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

Well done ZH.

Wed, 06/13/2012 - 21:20 | 2524091 Hedgetard55
Hedgetard55's picture

Do people really pay money for this type of "analysis"? Do they actually read it? Do they understand it? Hell, a dozen or so regulars here on ZH (talking about commentors, not contributors) have been making this point for three years. The day Ben started printing there was no going back. The balloon has a hole in it and Ben is trying to blow it back up, but if he stops blowing the balloon collapses. He has never thought to patch the balloon. Hell, a 6th grader could see this.

Wed, 06/13/2012 - 22:02 | 2524209 Matt
Matt's picture

How, exactly, would the Federal Reserve fix the Federal Budget? Ben Bernanke is in the same spot as Gideon Gono, trying to keep things going but there is no political will to stop the deficits. The problem is the political system is broken, so the budget, tax laws, regulations, etc cannot get fixed, so the deficit goes on and on, growing.

Wed, 06/13/2012 - 23:07 | 2524423 MsCreant
MsCreant's picture

I sorta agree and sorta don't. The economy is broken. Politics don't exist.

Wed, 06/13/2012 - 22:09 | 2524229 you enjoy myself
you enjoy myself's picture

of course its worth it -- they used a "disaggregated approach" and performed "robustness checks".  and then they managed to give an Emily Litella "never mind" with two sentences:

"The drawback, of course, is that our model focuses solely on generating a flow estimate and cannot provide an estimate for the magnitude of the stock effect"


"For example, the end of the twist could have a significant effect on the yield curve beyond the analysis presented here if Fed officials deliver something different from what the market is expecting for the June meeting"

Wed, 06/13/2012 - 21:21 | 2524092 deflator
deflator's picture

It's the logical conclusion of, "the end game"

Wed, 06/13/2012 - 21:48 | 2524159 Manthong
Manthong's picture

Anybody ever find out who that presentation was given to in Shanghai?

Wed, 06/13/2012 - 21:22 | 2524094 Johnk
Johnk's picture

Anyone really think that the US dollar will have more purchasing power in 5 years than it does today?  Seriously?

Wed, 06/13/2012 - 21:29 | 2524108 mt paul
mt paul's picture

there might not be any thing 

left to purchase

Wed, 06/13/2012 - 23:08 | 2524430 MsCreant
MsCreant's picture

Name me a fiat that will?

Wed, 06/13/2012 - 21:23 | 2524097 disabledvet
disabledvet's picture

It would steepen the yield curve thereby creating a "carry trade" thus allowing banks to borrow short to lend long thereby creating more credit creation, bank profits, economic growth and higher equity prices. Did I miss anything other than "why are we twisting again"?

Wed, 06/13/2012 - 21:26 | 2524104 Tyler Durden
Tyler Durden's picture

Yes. The fact that the Fed is increasing its duration (average maturity now 105 months) not shortening it.

Wed, 06/13/2012 - 21:45 | 2524151 SilverTree
SilverTree's picture


Wed, 06/13/2012 - 21:23 | 2524098 Cabreado
Cabreado's picture

When many years ago I recognized that I surely was born on the wrong planet, I should've trusted myself, and moved.

Wed, 06/13/2012 - 21:29 | 2524109 Stuck on Zero
Stuck on Zero's picture

In electronics we refer to the QE dilemna as a "race condition."  No winners. No losers.  Just a lot of noise and heat.


Wed, 06/13/2012 - 21:53 | 2524169 potlatch
potlatch's picture

In philosophy i think the term would be, "antinomy" -- just a pointless, circular, non-resolvable pursuit.  And eventually, people always realize that.  It can take a long time however.  Look at religion; still makin' the case.

Wed, 06/13/2012 - 21:38 | 2524132 Moon Pie
Moon Pie's picture

"People disagreeing everywhere you look,
Makes you wanna stop and read a book.
Why, only yesterday I saw somebody on the street
That was really shook.
But this ol' river keeps on rollin', though,
No matter what gets in the way and which way the wind does blow,
And as long as it does I'll just sit here
And watch the river flow." 

 - Watching the River Flow, Bob Dylan

Wed, 06/13/2012 - 21:42 | 2524141 nmewn
nmewn's picture

My mouth flows with saliva for what they will have to do again...and again.

Keep stackin...its just like a completely separate, unmonitored, untouchable, off the books, retirement account.

Wed, 06/13/2012 - 21:51 | 2524147 ekm
ekm's picture

There's no such a thing as Perpetual QE. If that happned, the Fed (via Primary Dealers) can literally buy the whole stock market within days and USA could officially become USSA.

The Flow is the correct thing that matters, but it makes sense only if there is DESTRUCTION like in 2008.

Since its creation the Fed has done only the FLOW, but it makes no sense that they buy the whole S&P, though it's theoretically possible.

3-5 years of FLOW, then DESTRUCTION. It's time for Destruction, then Flow.

No QE on the upcoming meeting. Period.

In 2011 the Fed intervened 6 times at S&P 1150. I'd say when S&P is about to go 1100, we'll have the FLOW re-start.

Wed, 06/13/2012 - 21:45 | 2524148 rosiescenario
rosiescenario's picture

This reward theory also applies to dogs...they will do the trick in expectation of the reward. While they eat the reward no tricks are performed. If they are still hungry, they will do another trick in expectation of another reward. After awhile Milk Bones do not cut it anymore and you need to be using prime rib....

Wed, 06/13/2012 - 22:03 | 2524157 Zero Govt
Zero Govt's picture

"..what this means is simple:  ......Fed intervention can never stop, period."

i get it, it's a shark

and if it stops.....    shark fin soup anyone?

personally i'd like the Fed off the printer, in fact all CB's out of the economy, Govts and banks bankrupt, corrections left right and centre and deflation

..shoot Jaws in the throat and get the correction on 

Wed, 06/13/2012 - 21:59 | 2524190 RobotTrader
RobotTrader's picture

The Fed has fallen down on the job by not printing fast enough and jawboning commodity prices down.

Bernanke overshot with his effort to "whip inflation".

Now he needs to start buying anything and everything to get the economy moving.

That means the Fed needs to start buying overshorted stocks, more Cabela's Nightcrawler receivables, more rotting MBS securities, whatever it takes to reverse the deflationary forces.

Which I"m sure he'll do if Europe gets out of hand.

Wed, 06/13/2012 - 22:13 | 2524252 nmewn
nmewn's picture

You been hangin out with MDB?

"Bernanke overshot with his effort to "whip inflation"."

Bernanke overshot on his >>>first shot<<<...he went to damned near zero in a he's fallin to zero and cahhhn't get

"...whatever it takes to reverse the deflationary forces."

A purely monetary phenomena, so he's got it all under control...right? ;-)

Wed, 06/13/2012 - 22:36 | 2524332 Beam Me Up Scotty
Beam Me Up Scotty's picture

The Bernank should short the shit out of oil, and pay everyones taxes then.

Wed, 06/13/2012 - 23:11 | 2524434 RiverRoad
RiverRoad's picture

You wanna see the economy move?  Put some money in people's hands again instead of the bankers.

Wed, 06/13/2012 - 22:01 | 2524206 chancee
chancee's picture

QE is a virtual lock, because if it isn't... Obama doesn't get re-elected.  That's what this all comes down to.  Obama's worst fear in life is being a ONE-TERMER.  Based on all the stuxnet leaks, etc. he's already proven he's desperate and will stop at nothing.  Extension of useless TWIST at the very least.

Wed, 06/13/2012 - 22:04 | 2524217 fonzannoon
fonzannoon's picture

Sure it's like a shark and it has to keep moving. But it's a shark swimming with a bunch of sharks. Everyone is trying to re-inflate their own balloon. If they keep replacing the escaping air at the same rate that the air is escaping the balloon does not pop. So if the balloon is ultimately the dollar the only question to me is when do they not inflate enough air (deflation crash) or push in too much new air (hyper inflate)? 

Wed, 06/13/2012 - 22:10 | 2524237 HD
HD's picture

So regardless to what happens in the world the S&P will march higher forever...

 I find it difficult to believe that the Fed can deliver enough "flow" to keep the markets happy very long. Isn't QE3 priced in already?

Wed, 06/13/2012 - 22:34 | 2524321 insanelysane
insanelysane's picture

Are you skipping protocol and triple dog daring the Fed to deliver enought flow?

Wed, 06/13/2012 - 22:53 | 2524384 HD
HD's picture

Indeed. Wouldn't mind watching Ben helpless with his tongue frozen to a flagpole.

Wed, 06/13/2012 - 22:16 | 2524266 tahoebumsmith
tahoebumsmith's picture

Here it is Bitchez... The final days before the ponzi blows up. Hot potato here, hot potato there, nowhere left to throw it. Remember this photo of Madoff suffering in his last days in the Manhattan penthouse?  Might just as well be Bernanke at this point because this game is fricken over...

Wed, 06/13/2012 - 22:38 | 2524336 q99x2
q99x2's picture

Hey Ben how bout buying my student loan you fool.

Wed, 06/13/2012 - 22:40 | 2524341 slewie the pi-rat
slewie the pi-rat's picture

i think we've done this all before even the goldman discovery of the correlation and so on

and of course, what it means as far as a chance to get some QE going.  again

this argument is valid, imo, but not for the FED, since right now i think we are seeing the exception that proves the rule (altho the FED is doing QE, too)

the market is getting fungibility flows from other centralBanksters' QE-aiding their Treasuries/goobermints and commodity deflation is leading to a stronger dollar and dollar-priced stocks are benefitting P/E wiZe from the fx 'flows' too, n'est ce pas?

but the banksters will [hopefully] not try to fix the recession any more, ok?  or fix their friends up too plush

let's just live with our beloved and everPresentRecessiongrande for a while and see if that might actually be just the ticket, ok? 

maybe the sky won't fall...  ?  maybe everything won't crash?  too far? maybe some of the zombies will be vaporized, themselves, for a change?   YaY!!!

Wed, 06/13/2012 - 22:42 | 2524355 The Gooch
The Gooch's picture

All of your helicopters are belong to us.

Wed, 06/13/2012 - 22:45 | 2524363 reader2010
reader2010's picture

Folks, it seems to me everyone and his cousin firmly believe inflation or even hyperinflation is in store. However, I can argue Bernanke and his company alone simply just can't fight the tide. In the end, it's going to get very ugly. So buckle up for the ride. 

Wed, 06/13/2012 - 23:02 | 2524417 General Debility
General Debility's picture

This is, by far, the pithiest, most succinct, evaluation of the situation I have ever heard. He runs rings around Keiser, Banzai, Tyler and Farage. (Antipodeans have a mean ability to get to the heart of the matter!)

Thu, 06/14/2012 - 03:56 | 2524741 SeattleBruce
SeattleBruce's picture

That's worth the watch!

Thu, 06/14/2012 - 04:03 | 2524744 SeattleBruce
Wed, 06/13/2012 - 23:16 | 2524441 ReactionToClose...
ReactionToClosedMinds's picture

some good posts tonight on top of another great catch & post by ZH.

Now don't start to attack me when you read this ..... a lot of thought (?) went into this:

Why is Ron Paul so seemingly comfortable with Romney? Why did Rand almost enthusiastically endorse Romney?

I have NO facts, but am very good at reading how & why people behave as to bely what they are actually doing versus saying.

Romney is going to put reform of the Wall Street dominated Federal Reserve Bank very high on his top 10 to do list.  Ron P ( and maybe Rand) will spearhead it ... do the bloody part.

Romney knows finance ... but he is not a Wall Streeter.  he had to deal with 'real' companies .. .manage them, operate them, run them, deal with rank & file, deal with unions, deal with vendors, ....  deal with investors.

He knows the Fed Reserve as we know it has become a tool for Wall Street over Main Street and primary co-option of the WashDC political & media class.  Main Street can no longer function under these conditions.  It is obvious and has been obvious since Robert Rubin took over Treasury.  The NY Fed has to be emasculated without cutting off flow of information and cooperation.  The NY Fed has to lose it's predominancy within FRS at a minimum




Wed, 06/13/2012 - 23:23 | 2524462 Nukular Freedum
Nukular Freedum's picture

If the Fed ceases to purchase treasuries then the yield must go up, unless there are lots of other buyers at the zero bound. Yields will rise to match the natural rate of inflation, which is a good thing. At this point the Fed has a big loss on its books and is perhaps looking at hyperinflation. Solution, more QE.

Wed, 06/13/2012 - 23:33 | 2524486 Centurion9.41
Centurion9.41's picture

Yep, and the Fed blows up, which means the whole thing blows up.

And only the insane or enslaved expend sweat to acquire anything at the zero bound.

The cabal has to print, they never can stop.  They can only hope to do so at a flow that does not diverge so far from the true underlying driver of economics, demographics, that they can continue to control the flow.

When control of the flow of spice is lost, man's lead horse of the apocalypse rides into town - war.

Wed, 06/13/2012 - 23:27 | 2524465 Centurion9.41
Centurion9.41's picture

Seriously, only practitioners of the Dismal Scientist require such verbosity to QED the inherent flaw in the Fed's approach to a fractional fiat system that has reached it's debt limit end point.

Here it is simply put. 

When EVERYONE except a fiat system's creater of fiat, is so deeply in fiat debt to other fiat users, the demand side of the supply/demand relationship goes to zero.  When one side of a relationship goes to zero, there is no relationship.

That one side of the relationship has reached the point on the curve where asymptotic and zero become a semantic distinction, means only that the question of the relationship being dead or non-existent is semantics.

The fact is, the relationship ceases to exist because there is but one entity in existence.

In a fractional fiat currency system, the only way the system can continue is for the supply side, the printer of the lynch pin currency, to continue to FIAT the relationship and create more fiat to create the illusion of others demanding the fiat.  This is why banks and corporations seem so much "healthier" than people; their health, their life is dependent, and measured by, the flow of fiat through them.  Not by any real or existential measure.

In short, and in the end, the truth is this.

In a fiat, there is no relationship, there are only those fiat-ing and those being fiat-ed.  

Wed, 06/13/2012 - 23:34 | 2524479 Jim in MN
Jim in MN's picture

The flow is from a major vein.  But some call it medicine.

Wed, 06/13/2012 - 23:44 | 2524507 Centurion9.41
Centurion9.41's picture

Jim, it isnt the real estate bubble that is killing western civilization. 

It was western civilization's throwing out of its most important economic and civil virtues, and replacing them with "rights" and "entitlements".  The "right" to health care, education, retirement, a home, etc., etc.

Want the proof.  I can fix the whole thing with one simple act of will.

If every single baby boomer in western civilization were simply to, for the rest of their life, never go to any doctor other than a GP and that they, like virtually every other generation in the history of man before them, simply let life and health run its natural course.  No drugs, no surgery, no extra-ordinary medical procedures.   If they were to do this, the whole economic crisis wold literally go away.

It is the false rights claimed by western civilization that can not be paid for.  Not the real estate bubble.

Thu, 06/14/2012 - 01:15 | 2524620 potlatch
potlatch's picture

I would grant your argument if you would stipulate, down-neighborhood where I live?  people just want an honest natural death.  they ain't the boomers you are speaking of, who, I agree, will sap the system dry in the name of "I promised myself I would make it to 90!  Just like I climbed Everest!"

These people are so soulless, they think life is more than a "now" -- they think it all adds up



I fear we do not realize just how drunk the Boomers are on themselves.  They are all Tessier-Ashpools


I remember one Boomer, who as he passed demanded the doctors keep him lucid as long as possible.  I remember thinking, sir, if there is an afterlife, whatever you plan on seeing as you wink out will just be there waiting for you, and if there is nothing, to what point are you claiming this pointless experience?


But I let him die, lucidly.  It apparently was the only humane thing to do.

Thu, 06/14/2012 - 06:48 | 2524826 Vince Clortho
Vince Clortho's picture

Another "The Boomers fault".

Fractional-Fictional-Reservere Banking; Fiat Money System; Kleptocratic Parasites leeching the blood out of society; endless wars; A once-productive country that has all its manufacturing removed to 3rd world countries where laborers get paid a dollar a week; middleman, money-shuffling, no-value-added economy; $450+ Billion interest this year alone on the "national debt"; and so on and on and on ...

And some scintillating intellect is able to pronounce "it's all the boomers fault".

Wed, 06/13/2012 - 23:35 | 2524490 Whiner
Whiner's picture

Folks there's only four things a debtor can do with a debt claim: pay it, compromise it, or completely discharge it by bankruptcy or repudiation legislation. If a sovereign with a printer, four: debase the currency and "pay", The longer the debtor finagles, the harsher the results to him, but calamitous the results to the debt holders: pensions? Poof! (USA pensions already $3,7 T underfunded). Annuities? Poof! Savings? Swoosh! Life policies? Zip (Weimar policies not worth postage to collect or redeem). Bush shoulda told Paulson to go fuck himself. 1000 convictions out of '85 S&L crisis ($375 M loss or so). Over in months. Out of the 2008 subprime fraud machine collapse? Zero, ZHers. No big dose of penicillin, your pud drips and your brain rots. Ugly and takes a while. Shoulda gone for the big dose of penny.this will take a while until brain rot advances, the the bad movie ends real fast.

Thu, 06/14/2012 - 01:04 | 2524614 potlatch
potlatch's picture

'85 S&L crisis is the patient zero of the government/finance shenanigans that is now global zombie proportions


Wed, 06/13/2012 - 23:37 | 2524494 Rastamon
Rastamon's picture




even more simply.... it's the CHURNING that matters to keep up the appearance of solvency....not what they own. (and we're witness to evidence of this tactic in the physical silver/gold vaults of the COMEX, ETFs and bullion banks' holdings)

Wed, 06/13/2012 - 23:48 | 2524511 EZYJET PILOT
EZYJET PILOT's picture

Hang on, I thought Tyler was saying only a few weeks ago that the credit markets indicated that there would not be any QE?

Thu, 06/14/2012 - 00:16 | 2524558 New American Re...
New American Revolution's picture

All well said, but at the end of the day, we're talking about replacement for the failure.   It is as much the immobilization of capital out of sheer economic fright from this endless cycle of accelerating debt that causes the bankruptcy (i.e. revolution) in a nation, as it is from the draining effect of wealth to maintain the kleptocratic ruling elite.  This is how government breaks down, and you can twist your hands and explain it and try to figure out ways to deal with it, but it's no use.   YOU HAVE TO HIT THE FUCKING RESET BUTTON! 

Learn where to push it at


Thu, 06/14/2012 - 00:16 | 2524559 Totentänzerlied
Totentänzerlied's picture

So the Heidelbergers in Ben's basement are just idling ...

but we've already rocketed through the region of the exponential curve labeled "billions", we've just entered the region marked "trillions"

... so the Heidelbergers are idling at maximum overdrive, next comes hyperspeed, then warp-speed, then we-need-128-bit-registers-to-hold-this-shit speed.

Stock doesn't matter, until it does. Long MaxiPads, Fed meteorologist Ben "Make it Rain" Bernanke forecasts a  very heavy flow.

Thu, 06/14/2012 - 00:27 | 2524579 Mr.Really.Fed.Up
Mr.Really.Fed.Up's picture

All this analysis will be worthless when we lose reserve currency status, a privilege we do not deserve since we run huge deficits and our political system is dead-locked

We are drunk on our reserve currency status. And we have enjoyed it so long, we don't even know we are drunk.

Gonna be a bad hangover when the bottle is taken away from us.

Thu, 06/14/2012 - 02:09 | 2524669 Bohm Squad
Bohm Squad's picture

More proof that prices are determined at the margin.

Thu, 06/14/2012 - 03:06 | 2524719 ebworthen
ebworthen's picture

Next they raise rates while eliminating cash and outlawing precious metal transactions.

Thu, 06/14/2012 - 07:03 | 2524851 wagthetails
wagthetails's picture

Never mind the impact of the end of Operating Twist and Shout (lies) there any event that would cause the Fed to actually be forced to unwind their position?  I imagine they can just hold these assets forever...but for all you people much more versed than me in these matters...can you think of anything that would force the Fed to sell its holdings at the worst time?  I sure hope not...

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