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Taylor Rule Founder Warns US Debt Could "Explode"

Tyler Durden's picture


The other other John Taylor (not the FX trader, nor the guitar player, but the "Taylor Rule" discoverer, which is at the base of all Fed monetary decisions), spoke on Bloomberg TV, and his message was certainly a far less optimistic one than that conveyed by the man charged with putting his rule into practice. "We could get into a situation like Greece, quite frankly. People have to realize it is a precarious situation. The debt is going to explode if we don't make some changes." What changes does Taylor recommend? Why the same that Bill Gross warned about yesterday - that ZIRP4EVA means a liquidity trap pure and simple, and the Fed needs to start rising rates: "the Fed has bought so much of the debt that people don't know how they're going to undo that. They pledged to have interest rates at zero until 2014, but people are saying how can they possibly do that when the economy picks up. This uncertainty had lead people to sit on all this cash. I think if the Fed gets back to the policy that worked pretty well in the '80s and '90s, we would be in much better shape." Ah yes, but the one thing, and only one thing that matters, and that is not mentioned at all, is what happens to the stock market when the Fed officially sets off on a tightening path. Actually make that question even simpler - will the drop in the S&P will be 30%, 40%, or any other greater mulitple of 10% thereof, considering that as we noted previously, the Fed and the other two central banks alone have injected over $2 trillion in just over a year. And about $10 trillion in the past 5. Calculate what the removal of this liquifity would do to stocks...

Taylor interview:

And extracts:

Taylor on the U.S. economy:

"We have to get away from all these temporary things--rebates, monetary policy, quantitative easings, we have to get back to a strategy like we had in the 1980s--monetary policy and fiscal policy. I believe that will get the strong growth. The growth in the early 80s was 5.9% compared to 2.4% we've had in this recovery. There is a lot of evidence that that kind of policy works. Steady as you go, getting the tax rates down and keeping it there, not doing all of these temporary stimulations.

"We could get into a situation like Greece, quite frankly. People have to realize it is a precarious situation. The debt is going to explode if we don't make some changes. What seems to be more important is that people can get back on track, the country can get back on track, with just some sensible adjustments. I argue just bring spending back to where it was in 2007. That's not so long ago. We've had an enormous spending binge in the last few years. If we undo that binge, shouldn't be that hard, we can get back to some sensible pro-growth policies.

On whether the Fed's zero interest rate policy is helping to contribute to the deficit:

"I think it's contributing to the slow recovery because the Fed has bought so much of the debt that people don't know how they're going to undo that. They pledged to have interest rates at zero until 2014, but people are saying how can they possibly do that when the economy picks up. This uncertainty had lead people to sit on all this cash. I think if the Fed gets back to the policy that worked pretty well in the '80s and '90s, we would be in much better shape.

On Greece:

"A walk away would be a default. Nobody wants to do it at this point. The best thing is for the creditors to do as much as they can in conjunction with the Germans and the IMF is there too - to get a deal for Greece so that Greece can grow. Some of these GNP ideas are good, and that way, we get this behind us. They have been kicking the can down the road for years. That's a problem.

On whether credit holders are being unrealistic:

"It's a bargaining. Each side will try to get the best they can. The creditors are arguing that there is going to be contagion. If they don't do a better deal, the Greeks will argue and say hey, we're flat on our back, we have to get some growth. I think the Greeks have an issue here - if they can put in some good economic growth plans that get the economy moving and write down the debt even further. I think that that is the answer to this. It's really how Europe can get back on a growth track."

On U.S. entitlement programs:

"Right now, the entitlement spending is expected to grow way beyond something that anybody expects to be realistic. We just have to contain that growth. In other words, keep the spending from growing even further as a share to GDP. We do that in a way where we use the markets, the rule of law and incentives, it will be a better system. Some proposals out there to reform Medicare, Medicaid and keep spending down will lead to better health care. That is what we should be striving to do.


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Tue, 02/07/2012 - 12:28 | 2134066 taniquetil
taniquetil's picture

Paul Krugman is rolling in his oak-paneled office right now.

Tue, 02/07/2012 - 12:33 | 2134092 Clueless Economist
Clueless Economist's picture

No I am not rolling around.  Where is this clown's Nobel Prize?

Until he wins one, he should shut his piehole and defer to his intellectual superior. (me)

"The only solution to the debt problem, is more debt"

P Krugman

Nobel Winner


New York Times Writer

Ivy Leaguer


All-Around Douchebag

Tue, 02/07/2012 - 12:34 | 2134103 derek_vineyard
derek_vineyard's picture

Does he tap foot in airport bathroom stalls?

Tue, 02/07/2012 - 12:37 | 2134119 Spastica Rex
Spastica Rex's picture

Larry, we hardly knew ya!

Tue, 02/07/2012 - 12:57 | 2134215 JW n FL
JW n FL's picture



BATS Gets SEC Approval for Liquidity Provider Program

Traders Magazine Online News, February 6, 2012

Staff Reports

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Tue, 02/07/2012 - 12:59 | 2134223 JW n FL
JW n FL's picture

BATS Europe Dark Pool

The BATS Europe Dark Pool is a separate midpoint non-displayed order book, which executes at the midpoint of the listing market BBO.

The 0.15 bps usage charge for the BATS Europe Dark Pool is significantly lower than competitor pricing.

Please refer to the Dark Pool flyer for features and details.

Tue, 02/07/2012 - 13:33 | 2134332 JW n FL
JW n FL's picture







- LEWAN MATS: 'Cold fusion may provide one megawatt in Athens' INTERNET CITATION, [Online] 02 February 2011, XP003027505 Retrieved from the Internet:


- See also references of WO 2009125444A1;jsessionid=C0EFC1CB4CE2FFB48F70B8E6F5F79D83.RegisterPlus_prod_1?number=EP08873805&tab=main


Successful Test of 1 MegaWatt Cold Fusion E-CAT w Q&A by Sterling Allan - Oct 28 2011 - Part 3 of 5



Tue, 02/07/2012 - 14:34 | 2134518 JW n FL
JW n FL's picture



Save the Job Creators!!!

or Gods Work will go un-done on Wall Street!

Tax Breaks!

Tax Credits! (that can be monetized with other Tax Dollars Collected) Like General Electric paid NO! Taxes and then got back another $3 Billion in Cash thru monetizing the Tax Credits that had been given to them!


.25% Federal Window to Draw down from that is a net gain come tax time! Paid to barrow money!

POMO / SOMOM / STOMO.. any Open Market Operation in which the FED buys stock to PUMP UP! the market! the FED is not buying stock to force the market lower!

No Criminal Laws Apply to Wall Street!

Just Civil Laws!


and the White House standing between Wall Street and the Pitch Forks!


help the executives on Wall Street!! they are struggling!!



Tue, 02/07/2012 - 13:54 | 2134434 Cyrano de Bivouac
Cyrano de Bivouac's picture

Yes, he is a Fred Astaire at it.

Tue, 02/07/2012 - 12:34 | 2134106 taniquetil
taniquetil's picture

Look, not to nitpick here, but I think Paul Krugman prefers to go by "Blogger" nowadays.

Tue, 02/07/2012 - 12:35 | 2134111 ExpendableOne
ExpendableOne's picture

Wiley Krugman, Super Genius!

Tue, 02/07/2012 - 12:41 | 2134133 The Big Ching-aso
The Big Ching-aso's picture



Frankie Blue Eyes would've said to send in the clowns not the entire circus.


Tue, 02/07/2012 - 13:16 | 2134287 battle axe
battle axe's picture

Wait, we have a debt problem that could get way out of hand? I didn't see the memo on this.

Tue, 02/07/2012 - 13:38 | 2134358 JW n FL
JW n FL's picture



We need Tax Cuts for the Job Creators!

That will help the debt load!

We need austerity! (for the poor, becuase they dont do anything anyway!)

We need the Planet to have a Population of WAYYYYYYYYYYYYYYYYYYYY Less than we do now!

Bill Gates

I dont want to post the Rockefellers or Rothchilds as the Sheep have been trained to tune out anything that has to do with thier names.




 wake up sheep!


Tue, 02/07/2012 - 13:44 | 2134391 Flakmeister
Flakmeister's picture

Check out the links I posted below re: lobbyists and CEOs

Tue, 02/07/2012 - 14:30 | 2134582 JW n FL
JW n FL's picture




You might want to consider the little factoid that companies pay more for lobbyists than their tax bill

or that a number of companies pay their CEO more than what they pay in taxes....


Some things need to be posted a few times to get people to really pay attention.. this is one of those things!

Thanks Flakmeister !!

Signed, Christian Constitutionalist 


P.S. Don't forget!! “See Something? Say Something!” and here is the link for you ---- >

Tue, 02/07/2012 - 14:02 | 2134462 smb12321
smb12321's picture

What nobody has yet answered is HOW we can afford the rise in debt payments if interest rates rise.  Adding another 200 or 300 billion will not be offset by cuts and the only alternative is to.,.print more money.  It's like the proverbial hamster in the wheel.  Without cuts, the higher the deficit, the more we print. It's like Illinois (the US Greece)  hawking bonds to pay the interest on current bonds.

Tue, 02/07/2012 - 14:03 | 2134467 Styles9002
Styles9002's picture

also, former Enron advisor

Tue, 02/07/2012 - 22:52 | 2136628 carguym14
carguym14's picture

Hey Krugman-Why don't you head over to Greece and show us how it's done?

Tue, 02/07/2012 - 12:34 | 2134096 Silver Bug
Silver Bug's picture

The debt is literally a ticking time bomb. I can't believe it hasn't gone off yet.

Tue, 02/07/2012 - 12:43 | 2134151 XitSam
XitSam's picture

Do you know what the word "literally" means?

Tue, 02/07/2012 - 13:15 | 2134283 5880
5880's picture


he does not

Tue, 02/07/2012 - 14:01 | 2134457 economics1996
economics1996's picture

No soup for you.

Tue, 02/07/2012 - 13:23 | 2134307 Calmyourself
Calmyourself's picture

Thanks Grammar Nazi you saved us..

"Since some people take sense 2 to be the opposite of sense 1, it has been frequently criticized as a misuse. Instead, the use is pure hyperbole intended to gain emphasis, but it often appears in contexts where no additional emphasis is necessary."

Tue, 02/07/2012 - 13:54 | 2134438 XitSam
XitSam's picture

Words don't mean anything? Or are you saying any word can mean anything?

Tue, 02/07/2012 - 14:01 | 2134458 Calmyourself
Calmyourself's picture

I am saying thank you, please explore the epistimological origins of all the words in common usage that you feel are used improperly so we may be enlightened.  When you have time feel free to leave a comment on the subject at hand; finance, worldwide ponzinomics, the nascent police state, you get the gist, right..

Tue, 02/07/2012 - 15:19 | 2134841 XitSam
XitSam's picture

In common usage, literally means literally, not virtually or figuratively. But since you want to be the ZH Nazi ...

Tue, 02/07/2012 - 16:23 | 2135013 akak
akak's picture

I agree XitSam.

Having corrected many ignorant misuses of words and common grammatical mistakes here on ZH, and elsewhere, I never fail to be amazed at the sheer and consistent, extreme level of violent vitriol and outright hate that is directed towards those who politely point out the grammatical mistakes of others.  What is responsible for this sort of unjustified and extreme response?  Could it be that some 30- and 40-somethings here are embarrassed to be making language mistakes that they should have learned to avoid by the age of ten?

But since we're on the subject, here are some of my grammatical pet peeves:


1) Saying or writing "I could care less", when what is really meant is "I could NOT care less".  I mean come on, just THINK about it!

2) they're/there/their --- knowing the differences here is fourth-grade stuff, people.

3) "could of" instead of "could've"

4) your/you're  (this "should of" been learned by third grade)

5) Using the word "issue" to mean "problem"

6) Dangling past participles: "it needs fixed" for "it needs TO BE fixed", for example

7) Misused apostrophe's'  (hint: use for possessives and contractions, NOT plurals)

8) And for all you clueless Brits out there, please for God's sake learn the difference between "round" and "around" already --- "round" is an adjective, "around" is a preposition, and the two are NOT synonomous.

9) Speaking of Brits (Aussies are equally guilty on this), I am sorry to inform you that there are no such places as "Chinar" or "Indiar". 
Why DO you guys add "r"s onto the ends of words that end in vowels when followed by a word beginning with a vowel, anyway?  I'll never forget hearing my English step-aunt introduce her two children, Rhea and Kevin, for the first time as "Rear and Kevin".  She simply could not understand our amusement.


Tue, 02/07/2012 - 13:53 | 2134433 carguym14
carguym14's picture

You keep using that word.I do not think it means what you think it means............

Tue, 02/07/2012 - 13:29 | 2134321 Sunshine n Lollipops
Sunshine n Lollipops's picture

Quickly! Someone get me a paper clip and Junior Mint!

Tue, 02/07/2012 - 12:34 | 2134101 NotApplicable
NotApplicable's picture

Hopefully you mean stuffed in a whiskey barrel and rolled down a mountain toward a cliff.

Tue, 02/07/2012 - 13:16 | 2134286 DosZap
DosZap's picture

They pledged to have interest rates at zero until 2014, but people are saying how can they possibly do that when the economy picks up.

He IS kidding right?

Tue, 02/07/2012 - 14:13 | 2134500 roccman
roccman's picture

the end of cheap unlimited fuel has put a full stop on "recovery"


the new up is level (at best)


interest rates are not going up - ever

Brent is the new FFR

Tue, 02/07/2012 - 12:28 | 2134067 hedgeless_horseman
hedgeless_horseman's picture



...what happens to the stock market when the Fed officially sets off on a tightening path.

That is a rhetorical question, right?

Tue, 02/07/2012 - 12:33 | 2134088 NotApplicable
NotApplicable's picture

Along with the idea that they can ever unwind their balance sheet.


Tue, 02/07/2012 - 12:33 | 2134094 derek_vineyard
derek_vineyard's picture

Bernanke orders's for end game:  suck up 50%+ of the net worth of the 99% to keep the ship afloat.

Tue, 02/07/2012 - 12:37 | 2134122 NotApplicable
NotApplicable's picture

More like 150% once you count all of the fedgov backed mortgages blowing up.

Tue, 02/07/2012 - 12:40 | 2134138 SheepDog-One
SheepDog-One's picture

50%? Theyre going for every last dime.

Tue, 02/07/2012 - 12:34 | 2134105 Spastica Rex
Spastica Rex's picture

At first I was going to answer you, but that wasn't what you wanted, was it?

Tue, 02/07/2012 - 12:29 | 2134070 GeneMarchbanks
GeneMarchbanks's picture

The debt exploded some time ago. It'll take only one auction and the entire game will change.

Tue, 02/07/2012 - 13:13 | 2134274 DosZap
DosZap's picture

Bernankey & Co, need to take one of his remedial learning classes in mathematics.

Tue, 02/07/2012 - 14:36 | 2134611 Silver Dreamer
Silver Dreamer's picture

When you own both sides of the equation, the answer to the problem doesn't matter.  It's all still yours.

Tue, 02/07/2012 - 13:18 | 2134294 unrulian
unrulian's picture

why? the fed will buy endlessly...and no one cares

Tue, 02/07/2012 - 13:37 | 2134353 Calmyourself
Calmyourself's picture

What are you talking about Gene?  One auction is a game changer?  Is that the auction the laser printer cartridge fails??   Seriously, we have all learned there are no longer any rules we are just here to document the death of the rule of law..

Tue, 02/07/2012 - 12:30 | 2134077 Hondo
Hondo's picture

How much of that growth in the '80's was generated by the debt we still carry, and are paying for, today???

Tue, 02/07/2012 - 12:58 | 2134219 Alea Iactaest
Alea Iactaest's picture

Uh, less than we've seen in the last 3 years? Just going out on a limb here...

Tue, 02/07/2012 - 13:31 | 2134327 kridkrid
kridkrid's picture

You're both right... but it's mathematical, not political.  People want to point towards the Reagan administration to make our debt problem SEEM political instead of simply a part of the monetary system.  I see this over and over.  But really the D's should point towards Nixon who closed the gold window and forever disassociated money with something of value.  Not that the American version of the gold standard represented true value.. but at least it was somewhere in the same zip code.  What we have since that fateful day is a grand experiment of pure fiat/fractional reserve/ponziness backed by an agreement by OPEC to sell oil in dollars.  Why do the D's never mention Nixon?  Because this ISN'T political.  It is just math.  Money that is loaned into existence with interest that begins to accumulate at it's creation (our monetary system) REQUIRES more debt to be generated forever.  

Gov't debt is a bit of a red herring.  It's just one piece of the global debt ponzi scheme... but for some reason... it's the part we are fixated on.  The people collecting interest don't care who owns the debt... and the system doesn't care either... only that it continues to expand.

Tue, 02/07/2012 - 14:57 | 2134700 Flakmeister
Flakmeister's picture

Is it a coincidence that US oil production peaked around the time Nixon closed the window??

Nixon had no other choice... (at least one that was palatable to the American people)

Tue, 02/07/2012 - 15:22 | 2134857 kridkrid
kridkrid's picture

well... that may or may not be true... we'll never know and it doesn't really matter, because that is the choice that was made.  What we do know is that almost everything after that moment has been a version of a lie and collapse that is upon us now has been enivitable all along.

Tue, 02/07/2012 - 15:33 | 2134947 Flakmeister
Flakmeister's picture

Well... my evidence is the reception Carter got for being honest about oil....

Tue, 02/07/2012 - 15:44 | 2135003 kridkrid
kridkrid's picture

That is true.  Have you ever read anything about the "failed assassination attempt" on Carter?  I put it in quotes as it seemed to be more a message sent than any sort of attempt.  The "co-conspirators" were named Raymond Lee Harvey (Lee Harvey) and Osvaldo Oritz (Spanish equal to Osawald).  

Carter is difficult for me to figure sometimes.  He may have been somewhat legitimately elected (i.e. not fully vetted).  Of course his cabinet would suggest otherwise.

So if by "he had no other choice" you mean he wasn't making the decisions... I would agree completely. 

Tue, 02/07/2012 - 14:22 | 2134540 lemonobrien
lemonobrien's picture

it was all generated by debt, and it almost all went into the military. It was basically what my grandparents did to help their kids (the baby boomers) so they could have a good life.

Tue, 02/07/2012 - 12:30 | 2134078 Everybodys All ...
Everybodys All American's picture

Do ya think!!!!


Tue, 02/07/2012 - 12:30 | 2134079 SheepDog-One
SheepDog-One's picture

The FED cant even HINT at raising rates, and they know this. Theyve built a bubble based upon ZERO% rates, end of story.

Tue, 02/07/2012 - 12:35 | 2134113 Al Huxley
Al Huxley's picture

Exactly. Carrying 15 trillion in debt with a multi-trillion dollar deficit means they can never raise rates. Not that the current path is sustainable, just that there's no way out now.

Tue, 02/07/2012 - 12:50 | 2134179 Watauga
Watauga's picture

The way out is easy--default, either outright or through inflation--and that is what will be done.  What do the U.S. Govt, the Fed, and the Big Monied Interests care about the dollar, your savings, or the price of gold and stocks?  They will use the collapse to seize greater power, possibly internationally, and create the New World Order they have always wanted. 

Tue, 02/07/2012 - 12:53 | 2134189 Waffen
Waffen's picture

They need political cover to dupe the masses and history. They need a war which they can blame it all on.

Tue, 02/07/2012 - 13:34 | 2134337 Sunshine n Lollipops
Sunshine n Lollipops's picture

There will be no WWIII. Nobody wants that. Nobody.

Tue, 02/07/2012 - 14:45 | 2134639 Silver Dreamer
Silver Dreamer's picture

How do nations fight wars when they are broke?  The answer to that question is what sometimes keeps me awake at night.  Those who suggest it isn't possible have not been paying attention either.  Our government is still preparing for it, so why aren't we as individual families?

Tue, 02/07/2012 - 16:00 | 2135072 aphlaque_duck
aphlaque_duck's picture

Nation states know full well how worthless their money is. The only wealth that matters is oil... it's like gold, but better, and whoever controls it is NOT broke. 

Tue, 02/07/2012 - 17:29 | 2135499 ChrisFromMorningside
ChrisFromMorningside's picture

No sane, rational person wants that. There are a lot of insane, irrational people who want exactly that, however, and they have the power to make it happen. The industrial demand created by World War II allowed the U.S. to lift itself out of the economic malaise it was in, far more than the New Deal did. An "intervention" in Syria and/or Iran (which would probably set things off throughout SW Asia) might allow Obama to finally fulfill his goal of bringing manufacturing back to the U.S. (someone has to manufacture all those bombs and planes! not to mention mlitary recruitment equals jobs!). If the global economy unraveled just as the U.S. was at its peak of power in the Mideast, it might allow for an "orderly" (i.e. completely U.S.-led) reset of the global financial system.

Tue, 02/07/2012 - 14:22 | 2134517 Ropingdown
Ropingdown's picture

The Fed never actually has to pay off it's balance sheet.  For all it cares it can just let the stuff run off, which is why it is quickly extending duration. (Can't let all the short-term run off.)   But the Fed has sent a message to Congress, for sure: "We've about done our part and it hasn''t worked.  You politiicians have no more time.  Either you fix the fiscal mess with realistic entitlement changes regardless of your political risk, or due to your inaction you'll see your debt explode in servicing cost.  Which will it be, Mr/Ms Congress person?  You can choose to rein in entitlements and raise taxes a bit OR you'll see the public slapped out of its stupor and asking you 'Why is 60% of our tax payment this year going just to pay interest on recently-issued treasury bonds?' "  It's coming.  It's obvious.  Ben isn't stupid.  He just knew that the political inside-game of the Fed means the Fed had to go first.  It can't and won't go on this way forever.  I expect the Fed to try to dance until mid-November fighting to maintain the status quo.  At that point I expect them to lateral the ball and force Congress to decide which way it wants to run.

Tue, 02/07/2012 - 12:40 | 2134141 BandGap
BandGap's picture

No shit, they have painted themselves into a corner, along with every politician who has made promises.

The mainstream pundits are almost to the point of stating that the emporor has no clothes. Almost. All hell breaks loose when they do.

Tue, 02/07/2012 - 13:37 | 2134355 kridkrid
kridkrid's picture

I wouldn't count on the mainstream pundits doing anything.

Tue, 02/07/2012 - 12:34 | 2134099 alien-IQ
alien-IQ's picture

I believe that the US will keep it's promise to pay it's debts regardless of how big that debt gets....HOWEVER, they never promised that the dollars with which that debt is to be repaid will be worth anything. And that is what concerns me.

Tue, 02/07/2012 - 12:35 | 2134112 SheepDog-One
SheepDog-One's picture

US will spark off WW3 before the govt ever pays off a damn dime of debt.

Tue, 02/07/2012 - 12:41 | 2134145 BandGap
BandGap's picture

They will generate a war in order to hide the real reason for doing so.....

Tue, 02/07/2012 - 13:20 | 2134302 5880
5880's picture

War with who?

Who's big enough? We have 11 carriers, next most is Italy.... and it has ski jumps!

We would have to fight the whole World......... wait........ oh chit

Tue, 02/07/2012 - 13:44 | 2134393 kridkrid
kridkrid's picture

Who else needs war?  China has a bunch of frustrated young men who will never find wives because of a one child policy.  I bet they'll play.

Tue, 02/07/2012 - 14:28 | 2134567 Calmyourself
Calmyourself's picture

China and US against the caliphate...  That is where this is headed.

Tue, 02/07/2012 - 14:49 | 2134662 Silver Dreamer
Silver Dreamer's picture

Do not assume the goal would be for America to win either.  We have to keep the end goal in mind, and America, as she once was, is no longer useful.

Tue, 02/07/2012 - 14:57 | 2134696 kridkrid
kridkrid's picture

Trying to think like a psychopath, I think depopulation could be a primary goal.  That doesn't require a "winner"... almost discourages one.

Tue, 02/07/2012 - 14:53 | 2134676 kridkrid
kridkrid's picture

Maybe.  Or maybe China and the caliphate against the US.  The enemy of my enemy is my friend.  Until, of course, the enemy is gone and then all bets are off.  But who knows, really.  The world is run by psychopaths.  No reason to believe that anything has to follow a logical path.

Tue, 02/07/2012 - 17:42 | 2135588 ChrisFromMorningside
ChrisFromMorningside's picture

Iran alone would keep the U.S. busy for a while. Especially if a bombardment of Iran led to violence in Palestine and Lebanon (pretty much a given).

The one that worries me is Pakistan. The civilian central government in Pakistan has a tenuous hold over the country. The military is rife with Jihadists and others who want to break with the U.S. diplomatically. The U.S. military has already engaged the Pakistani military directly. If things spiraled out of control there, the U.S. would HAVE to put boots on the ground in the country to secure the nuclear stockpile, it wouldn't just be an aerial bombardment as most expect with Iran.

Tue, 02/07/2012 - 12:45 | 2134161 alien-IQ
alien-IQ's picture

It will pay the debt with worthless paper. (yes, even more worthless than it is today)

WW3 will be but an excuse to further devalue the currency rapidly. (and yes, I do believe the US (or more likely Israel) will start WW3)

Tue, 02/07/2012 - 12:42 | 2134147 uno
uno's picture

nailed it, only reason we are got into Libya, Iraq and soon Iran, maybe one day Kuwait, Saudi is because the US dollar was rejected, look at the the bi-lateral trades now.  As long as we get the oil, a lower US dollar is what the government wants.

Tue, 02/07/2012 - 12:53 | 2134192 SheepDog-One
SheepDog-One's picture

So just as long as we can invade and seize all the oil, and no one like China or Russia does anything about it, we're good, for a bit longer.

Tue, 02/07/2012 - 13:09 | 2134261 uno
uno's picture

yep, no-one is buying the Treasuries outside the Fed fairies, China is on the defensive in the South China Sea (US in Australia, soon Phillipines and maybe Vietnam) and Russia is happy with higher oil prices, win-win for the 0.1%, S&P and Dow go to nominal All time highs; not so good for the 90%; food prices, energy, police state

Tue, 02/07/2012 - 15:20 | 2134848 Things that go bump
Things that go bump's picture

Remember that huge navy base in Subic Bay? Well they've been trying to market the military housing as vacation units (I don't know how they get around the law against foreigners owning propery)! That base is still there, more or less intact, just waiting to be occupied again. I don't know about Clark Airforce Base,

Tue, 02/07/2012 - 12:34 | 2134100 SheepDog-One
SheepDog-One's picture

'Right now, the entitlement spending is expected to grow well beyond something expects to be 'realistic'....LMAO! Right now at least 50% of americans are ONLY alive due to streams of various 'entitlement' paychecks from govt...its not realistic at all its already INSANE!

Tue, 02/07/2012 - 12:34 | 2134104 Chupacabra-322
Chupacabra-322's picture

The Congress needs Huge Governerment.  Without it, they couldn't get all those Bribes, I mean campaign contributions from the lobbiest and free fake money the Fed prints.  I guess Bernie Madoff was right, Government is a huge Ponzi Scheme. 

Tue, 02/07/2012 - 12:35 | 2134107 i love cholas
i love cholas's picture

Trish Regan!

Tue, 02/07/2012 - 12:35 | 2134110 RobotTrader
RobotTrader's picture

SPY only 15 cents from taking out the May 2011 highs.

Tue, 02/07/2012 - 12:38 | 2134125 derek_vineyard
derek_vineyard's picture

Robot Trader only 15 comments away from taking out 'attention whore' May 2011 high.

Tue, 02/07/2012 - 12:38 | 2134127 SheepDog-One
SheepDog-One's picture

Based upon what? How great things are? 

No, free 0% money keeping it all afloat....tic toc, tic toc...

Tue, 02/07/2012 - 12:39 | 2134131 caerus
caerus's picture


Tue, 02/07/2012 - 12:39 | 2134132 Careless Whisper
Careless Whisper's picture

would you like to buy some lady lu today? (LULU) i dare ya


Tue, 02/07/2012 - 12:40 | 2134140 alien-IQ
alien-IQ's picture

wouldn't you be more comfortable at I-Hub with the rest of the momo chasing monkeys? I know we'd all be happier if you were there.

Tue, 02/07/2012 - 12:42 | 2134148 LawsofPhysics
LawsofPhysics's picture

You mean back when you made your "all-in" comment?  So you have almost broken even.  Thanks for yet another rear-view mirror comment.  We can all "see" what the market is doing by looking at our screens too.

Tue, 02/07/2012 - 12:45 | 2134159 SheepDog-One
SheepDog-One's picture

Decent gold spike...THANKS Bernanke! Too bad you called the top and sold your gold many $100's ago Robo, and now reduced to admiring stocks you wish you owned.

Tue, 02/07/2012 - 12:50 | 2134181 Pladizow
Pladizow's picture

So a contrarian should do what?

Tue, 02/07/2012 - 12:52 | 2134185 uno
uno's picture

hows the Nasdaq Comp looking compared to it's All Time High

Tue, 02/07/2012 - 12:58 | 2134220 juicyfruit
juicyfruit's picture

wasn't the SPY high from may 2011 $137.18? seems SPY high today is $134.82

am I missing something?

Tue, 02/07/2012 - 13:24 | 2134310 5880
5880's picture

Maybe he is including Divs

total return

Tue, 02/07/2012 - 13:22 | 2134304 DosZap
DosZap's picture


SPY only 15 cents from taking out the May 2011 highs.

Do you ever ask yourself WHY this is the case?.

All i can say is suck the gubs teat as they continue to hold this mkt up, because that BOOM your going to hear will be a 70% drop Min.

Tue, 02/07/2012 - 12:37 | 2134118 kaiten
kaiten's picture

Could? It WILL!

Tue, 02/07/2012 - 12:38 | 2134128 Bullwinkle Moose
Bullwinkle Moose's picture

We crossed the point of no return a long time ago. Now we must pay the fiddler. 

Hang on tight.

Tue, 02/07/2012 - 12:39 | 2134129 CvlDobd
CvlDobd's picture

So he is in a way proposing higher rates? Kind of like the evil RBA?

Tue, 02/07/2012 - 12:41 | 2134135 CrashisOptimistic
CrashisOptimistic's picture

How can you let rates rise on 16 trillion in debt?


Another question is what happens to the budget baseline in all the debt ceiling negotiations when labor participation rate is NOTHING like what was in the projections?

Tue, 02/07/2012 - 12:43 | 2134155 Waffen
Waffen's picture

It's retarded is what it is. Do these guys not put any thought into what they are saying? What are we gonna tax our way out? Sure if you want people to go from the tea party to the pitch fork party.

Tue, 02/07/2012 - 12:48 | 2134168 SheepDog-One
SheepDog-One's picture

'Now that the economy is destroyed and a 'good job' is now $10 an hour, no benefits...HEY I got it, we can get ourselves out of it by raising taxes!' BRILLIANT!

LOL...sharpen up those pitchforks and grab a rope, people.

Tue, 02/07/2012 - 12:55 | 2134198 Temporalist
Temporalist's picture

Actually I've read that 80-90% of what the Fed does is discuss their "message" so they put the vast majority of their time into what they are saying.  That is what a PhD in economics from and ivy league school does for you; prepares you to write bullshit good enough to fool your professors therefore good enough to fool the congress and the rest of the masses of self-interested dipshits.

Tue, 02/07/2012 - 12:59 | 2134222 Zero Debt
Zero Debt's picture

Fooling all of the people all of the time 101

Tue, 02/07/2012 - 14:54 | 2134685 Silver Dreamer
Silver Dreamer's picture

Most of congress does not need to be fooled.  They are in on it along with most other elected and appointed government representatives these days.

Tue, 02/07/2012 - 12:45 | 2134160 spartan117
spartan117's picture

Tyler's question should have been: "What happens to the Debt market when rates rise?" 

Tue, 02/07/2012 - 13:01 | 2134234 Zero Debt
Zero Debt's picture

It vaporizes.

Tue, 02/07/2012 - 12:39 | 2134136 Waffen
Waffen's picture

Why do these guys continue to pretend that there is a solution to this? 2007 spending? Really? Where is the growth gonna come from huh?

It's over; austerity will bring violence, which means we will have inflation.

Governments that can print, print, because the alternative is politicos hanging from light posts.

Tue, 02/07/2012 - 12:40 | 2134139 Vincent Vega
Vincent Vega's picture

Taylor Rule Founder Warns US Debt Could Explode. So what would you call what it has done to date???

Tue, 02/07/2012 - 12:40 | 2134142 WonderDawg
WonderDawg's picture

Whew, what a relief. There for a while I was thinking the US debt had already exploded.

Tue, 02/07/2012 - 12:49 | 2134176 SheepDog-One
SheepDog-One's picture

Just shows how insane it all is when this guys commentary is considered 'highly charged and controversial'...hell he's not even scratching the surface of reality here.

Tue, 02/07/2012 - 12:41 | 2134143 wswarrior
wswarrior's picture

The debt is going to explode?  It hasn't already?

Tue, 02/07/2012 - 15:05 | 2134750 Silver Dreamer
Silver Dreamer's picture

Our debt to GDP ratio is no where near what it will be come in the near future.  15 trillion is peanuts compared to what's coming.

Tue, 02/07/2012 - 12:43 | 2134154 LawsofPhysics
LawsofPhysics's picture

Whatever.  Following this guy's logic I sure hope "the rich" taste like chicken.

Tue, 02/07/2012 - 13:24 | 2134309 unrulian
unrulian's picture

...whew, when i wiped the tears from my eyes (laughter) i realized you said chicken not children

Tue, 02/07/2012 - 13:51 | 2134422 SillySalesmanQu...
SillySalesmanQuestion's picture

Eat the rich!

Tue, 02/07/2012 - 15:08 | 2134769 Silver Dreamer
Silver Dreamer's picture

The dead are not hungry, and I do not expect a zombie apocalypse.

Tue, 02/07/2012 - 12:47 | 2134166 LawsofPhysics
LawsofPhysics's picture

This guy says "we need to get back to the eighties".  Right, back when the debt exploded.  Fucking hypocrite.


How about we prosecute the fucking fraud already and restore the rule of law?  Hang the fucking bankers and financial fucknuts who profited from the collapse and the bailouts and I promise the market and eCONomy would recover.  At this point I welcome the collapse, at least then, compensation (in numerous forms) will return to people who's labor is actually worth something.

Tue, 02/07/2012 - 12:55 | 2134201 Salah
Salah's picture

Just watch, they will pull the plug on this liquidity trap over a presidential transition period.  It's the old "Mexican Model" of disaster capitalism, and confuses the sheeple as to who exactly to blame.

Voila' our puppetmasters get to keep their tired old brands, Jackass & Pachyderm intact, and no one's the wiser, while the media spins its confusing swill for the masses.  Works everytime it's tried.


Tue, 02/07/2012 - 12:58 | 2134221 LawsofPhysics
LawsofPhysics's picture

Don't forget capital controls and gold revaluation.  Then the real wealth transfers start.

Tue, 02/07/2012 - 15:13 | 2134797 Silver Dreamer
Silver Dreamer's picture

Americans never thought the economic hitmen would one day target them.

Tue, 02/07/2012 - 12:58 | 2134218 Temporalist
Temporalist's picture

The debt creation started in 1971 in preparation for "War In-Continuum" which has not ended to date but has created a whole lot of global weapons sales for the U.S and a high death count.

Tue, 02/07/2012 - 12:49 | 2134173 Central Wanker
Central Wanker's picture

No liquidity => no banks.

There will be lots of liquidity.

Tue, 02/07/2012 - 12:49 | 2134174 STS813
STS813's picture

Dominos.... 1) The retail bond holders capitulate and chase equities for the dividends and capital gains; 2) "Smart" money sells-out and sits in cash; 3) FED raises rates; 4) Equity markets crash; 5) Retail equity holders are convinced to ride the "temporary" downturn by the "smart" money before realizing things are getting bad; 6) The "smart" money rakes-in higher yielding bonds; and 7) The "smart" money buys-up the equities from retail holders who bought high and sold low.... Rinse and repeat.... 

Tue, 02/07/2012 - 12:55 | 2134199 J 457
J 457's picture

+1.  Same as it ever was....

Tue, 02/07/2012 - 12:56 | 2134186 hairball48
hairball48's picture

Glad I have my stockpile of gold, silver, bullets, and non perishables. 2012 is looking more and more like the year of TSHF :) 

There is no possible way for "real" growth to occur under the present conditions. No "real" growth will result in food riots and anarchy.

The rioting here in America will make the coming riots in Greece(and rioting is  coming to Greece, and soon) look like a Sunday picnic

And I'm ready for it!!

YeeeeeHaaawwwwwwwwww :) :)

Tue, 02/07/2012 - 13:02 | 2134237 Chump
Chump's picture

You should be happy that you're prepared.  Instead you seem happy that death and destruction is coming.

This shit isn't going to be a camping trip where you're the only one with a water filter.

Tue, 02/07/2012 - 13:10 | 2134265 Temporalist
Temporalist's picture

I was going to say something similar but not nearly as eloquently.

Tue, 02/07/2012 - 13:33 | 2134331 unrulian
unrulian's picture has to happen, how else will i be rich? my water filter, silver nuggets and rice bags will be worth millions...

Tue, 02/07/2012 - 13:55 | 2134437 Shizzmoney
Shizzmoney's picture

I'm torn with this, too.  I think inside, we all want to see fail, especially since we've been so economically raped by the top.  To see big fat cats, defenders of the system in the lower pay brackets, lose everything they have...I mean, great schadenfruede there.  Just hilariously fucking brilliant to see some guy who rails against OWS look into his ING account one day to see everything has been wiped away because the same banker he defended to some 20-something with a college degree and no job, was the same banker who tied his pension to derivitives on European soverign debt.

Then you'd have the riots, would be fun to watch on TV, but not fun to deal with.  Being holed up in your house late at night, running out of food, worrying about family members and such.

But, in the end, we deserve this type of collapse.  We let the bankers, the corporations, the agenda-driven extrememists install fascism in this country. 

In order to rebuild everything, we have to tear it down, first. 

Tue, 02/07/2012 - 14:44 | 2134637 Calmyourself
Calmyourself's picture

I have stated in the past we deserve what is coming to us..  I am torn by that thought as I still  think on balance we possess the attributes to be the best culture in the world but it is damaged almost beyond recognition.  Be proud you were aware enough to be prepared but be warned you'll see hell on earth if that type of thing comes to America.  I do not think those that welcome the reset have thought it through, necessary but certainly not desirable.

Tue, 02/07/2012 - 14:50 | 2134668 Chump
Chump's picture

...necessary but certainly not desirable.

Perfect description.

Tue, 02/07/2012 - 14:46 | 2134643 Chump
Chump's picture

I think the worst aspect of what's coming is that society will be devolving into the most basic of Freud's hierarchy of needs.  Do you think your average father of 3 is going to give one half of one fuck about Citi or JPM or GS when his kids are starving?  Nope, he's going to go up the road to his neighbor - who has never sold him a property with clouded title, who never defrauded his pension fund by selling it AAA+ rated dog shit, who never destroyed his purchasing power with ZIRP - and kill and rob him, or be killed himself.  Millions aren't going to march on Washington and demand blood for the decades of raping our "leaders" have subjected us to.  Nope.  Instead we'll riot and burn cities to the ground and give TPTB even more justification to clamp down..."for our own good."

Sure, it would be great to see Blankfein swinging from a lamp post, but highly doubtful.  He has his getaway, and guaranteed he has at least some supplies or access to them should TSHTF.  He will be untouchable by someone in middle America who's primary focus will be catching enough squirrels to get through one more day.

That's why I said in another thread that stockpiling ammo and going it alone is a non-starter.  That's not to say that ammo is worthless, since someone who responded seemed confused about my point.  The point is that without help and support you simply won't make it.  Unless we can band together locally we will constantly be just on the edge of starvation, and thus unable to rebuild.

Tue, 02/07/2012 - 13:04 | 2134241 Dr. Engali
Dr. Engali's picture

No you don't. You lost all that in a horrific boating accident. Remember? By the way even if you did, I sure as heck wouldn't be excited about it.

Tue, 02/07/2012 - 12:52 | 2134188 Dick Darlington
Dick Darlington's picture

Exploding debt? Gee, that's what the World Economic Forum and every central planner in the world call economic growth. Most of them even call it SUSTAINABLE economic growth. So does this mean DOW 36K in no time? We are fookin doomed...

Tue, 02/07/2012 - 12:57 | 2134211 r101958
r101958's picture

"We have to get away from all these temporary things--rebates, monetary policy, quantitative easings"


"we have to get back to a strategy like we had in the 1980s--monetary policy and fiscal policy. I believe that will get the strong growth."

-Anybody that uses '"we have to get back to...." is in denial. We need to change the very foundation of our economy.

Tue, 02/07/2012 - 13:00 | 2134233 Flakmeister
Flakmeister's picture


Tue, 02/07/2012 - 13:04 | 2134244 Chump
Chump's picture

No kidding!  "We have to get back to...the 1980s..."  Oh, you mean when we earnestly started propping up our GDP with government borrowing, like, for realz??  What a joke.

Tue, 02/07/2012 - 14:34 | 2134601 the grateful un...
the grateful unemployed's picture

the two decades of stock market growth up to 2000 the S&P was done on rising Pro Forma earnings. No one talks about it much anymore, the notion of ignoring chargeoffs, defining them as 'outside' the companies business, (off balance sheet if you will). the critics at the time were calling the S&P overvalued in the same way that critics say GDP minus government growth would be nada. really the same thing isn't it ? the practise of phony earnings was done to mask growth done on the back of government spending (think Reagans defense budget)

if you look at the XAU, the only measure of gold stocks which goes back that far, you'll see the gold stock index crashed in 94, from about 140+ to 40+ in 2000, while the greater market was rising. massive divergence which foreshadowed the crash and recession of 2000 which we never really come out of until government spending once again found its cause, the war in Iraq (terrorism wasn't really enough)

now of course no one blinks when you associate company earnings with financial engineering, low rates and access to capital to do share buybacks and pay dividends. so if you pay a 3% dividend while interest rates are ZIRPlike, you might add 10% to the value of your company stock, even if you have to borrow the money to do it. borrow at 3% from the taxpayers, then give the rich 1% the money you borrowed in dividends, for which they (think Romney) only pay 15% in taxes. sweet


Tue, 02/07/2012 - 15:06 | 2134759 Chump
Chump's picture

You know I don't speak Spanish...

Seriously though, good comment, I just wish it didn't feel like I have homework now.

Tue, 02/07/2012 - 15:24 | 2134881 Silver Dreamer
Silver Dreamer's picture

I suppose he could be referencing the 21% interest rates? har har  That'll certainly help the economy.

Tue, 02/07/2012 - 13:00 | 2134228 blunderdog
blunderdog's picture

We've had an enormous spending binge in the last few years. If we undo that binge, shouldn't be that hard...

Sure.  Cut Medicare/SS and end the perpetual wars.

Shouldn't be that hard.

Tue, 02/07/2012 - 13:06 | 2134252 Flakmeister
Flakmeister's picture

You might want to consider the little factoid that companies pay more for lobbyists than their tax bill

or that a number of companies pay their CEO more than what they pay in taxes....

Tue, 02/07/2012 - 14:21 | 2134534 Sandmann
Sandmann's picture

That should be made impossible by setting a tax-deductible cap so the excess comes directly from Shareholders rather than from the top line, that way the CEO can be aligned with Retained Earnings. The other thing would be to switch to the European system of Dividend Taxation to reduce the tax advantages of leverage

Tue, 02/07/2012 - 14:35 | 2134604 Flakmeister
Flakmeister's picture

I am willing to bet you that any lobbyist you may hire to point this out to Congress will be paid less than their lobbyist...

BTW, your observation is why I prefer MLP type corporate structures vis a vis the shareholder....

Tue, 02/07/2012 - 15:18 | 2134826 blunderdog
blunderdog's picture

Irrelevant.  It's not going to be possible to cover the entitlement spending with taxes.

Tue, 02/07/2012 - 15:27 | 2134895 Silver Dreamer
Silver Dreamer's picture

Exactly.  End corporate and individual welfare, shut down the empire, and put the federal government back into the box it was designed to be kept in.  Then we wouldn't have a spending or tax problem.

Tue, 02/07/2012 - 15:32 | 2134932 Flakmeister
Flakmeister's picture

Fair enough....

I can count on you to tell the American people that Medicare and Medicaid will be phased out over the next 5 years.

Oh, and for a grandfather clause, here is a $2,500 voucher to purchase a private plan to help cover (on average) the $250,000 in health care expenses one racks up as the end approaches...good luck with that Grandma...

And before you get your panties in a knot, all I want out of D.C. is a little honesty... If Americans want some level of govt. health care, then these are the costs and these are the required taxes... If they don't want to pay 'em, fine with me... Just as long as everyone knows where they stand...

Finally, I don't really give a fuck about what health care system the average American thinks is best or even what they want.... after all I only have personal experience with *4* different countries Health Care systems and feel that I emminently qualified to decide for myself what is best ......

Tue, 02/07/2012 - 15:45 | 2135007 blunderdog
blunderdog's picture

I can count on you to tell the American people that Medicare and Medicaid will be phased out over the next 5 years.

I do it constantly.  Everyone just laughs.  I don't worry about it--I've started to prepare for my future.

But this is really a very simple issue.  In a GLOBAL economy, wage-arbitrage is in decline.  The choice to be made is between wages and profits.  EVERYONE has chosen profits for the past 40 years, and wages are insufficient in *every* post-industrial state to support the legislated entitlements.  Unfortunately, despite the fact that this should be patently obvious to anyone who's bothered to think about the issues, most Americans remain in blissful ignorance of the problem.

To use a dead-simple (and rough) example--Americans live into their 70s.  At those ages, people often get expensive surgeries to correct joint and vascular problems which occur to EVERYONE. 

In a comparable world, where government intervention was reduced, what percentage of Americans *could* ever have had even the potential opportunity to set aside $150,000 for their knee operations when they get old?  Or for their heart-valve replacements? 

Is the percentage higher than 5%, you think?

You want to change things, and I say sure.  Social revolution is inescapable.  This can't go on for another generation, thus it WILL NOT.

Tue, 02/07/2012 - 16:12 | 2135121 Flakmeister
Flakmeister's picture

One last comment...

The US system is so fucked that it is hard to find a place to begin an analysis of it...

Here is a try....

Take a look at a place like Canada and compare the earnings of a typical doctor or nurse with the earnings of an health care administrator there.... do the same  for the US but also include the health insurance execs in the comparison...combine that with the backhanded corporate welfare program that passes as Medicare...

Thats all for now....

Tue, 02/07/2012 - 16:22 | 2135154 blunderdog
blunderdog's picture

Personally, I'm starting to think you're actually in denial.  What country has pulled off anything like universal healthcare in a SUSTAINABLE way?  No problems in France or the UK, right?  Those were the BEST SYSTEMS.  (Maybe you want to call in Norway or Sweden or something--I don't know enough about them to discuss.)

Yes, obviously we can improve things.  We can migrate some of our fascist policies to more socialistic policies. 

With proper effort, it'd be possible to spend all the money we currently spend on promoting wealth-inequality on providing services instead. 

And in another decade, the exact same corruption (on the part of the wealthy and our politicians) of the system would result in the same exploitation of the system and the same theft from the public coffers and the future generations.

The human condition seems to require an awful lot of lying to ourselves.

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