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By The Time Operation Twist 1 Is Over, The Fed Will Have Quietly Completed 40% Of Operation Twist 2 As Well

Tyler Durden's picture




 

By the time Operation Twist (1) ends in just over 40 days time, on June 30, Fed Chairman Ben Bernanke, according to his previously announced "loose" target, will hope to have extended the average maturity of all bonds in the System Open Market Account (SOMA) to a record of roughly 100 months from 75 month at the onset of the program in October 2011. After all the sole purpose of Twist was to load up the Fed's portfolio with duration, forcing the rest of the market to shift its investing curve even further into risky assets, as the Fed will have effectively onboarded the bulk of securities in the 3-4% return interval. Now as we showed back in early April, hopes that the Fed will simply continue with Operation Twist 2 after the end of "season" 1, as suggested by some clueless "access journalists" who merely relay what they are told by higher powers, are completely misguided as the Fed simply does not have enough short-term securities (1-3 years) to sell, and would have at most 2 months of inventory for a continued sterilized operation. Which however, does not mean that the Fed can not be quietly ramping up its operations in the ongoing Twisting episode. Because as Stone McCarthy demonstrates, as of the past week, the Fed has already surpassed its 100 month maturity target of 100 months, and is at 102.82 months as of May 16. And this is with 6 more weeks of Twist to go: at the current rate of SOMA purchases, the Fed will have a total portfolio average maturity of just shy of 110 months by June 30! Which means that contrary to market expectations of what the Fed's own stated goal may have been, Bernanke will have gobbled up nearly 40% more long-dated Flow relative to estimates! In other words, Ben does not need to do a full blown Operation Twist 2 episode: by the time Twist 1 is over, he will have attained nearly 40% of the goals of the next potential sterilized operation.

Why is this important? Well, recall that over a month ago Goldman Sachs itself admitted what we have been saying for over 3 years: it is not stock that matters... it is flow. Recall the Goldman punchline:

    ...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...

And there you have it.

What the finding above means is that the Fed has been ramping risk assets, read the S&P even more than where it should have been, based on simple flow models, and that contrary to market expectations, the S&P500 should have been about 40% lower compared to where it will be on June 30 if the Fed has pursued its stated goal, and targeted solely a 100 month average maturity.

Which has a rather scary implication for the stock market: if and when Ben announces that Twist ends on June 30 with no successor program, stocks will immediately react, and realize that the Fed's SOMA account holds well more than the expected long-end, and that without further "flow" forcing more 30 year paper into the gaping maw of Bernanke, stocks will have no reason at all to maintain their prior epic surge (all else equal, whcih it won't be).

It also means that unless Bernanke is willing to see the stock market plunge ahead of the Obama re-election, which he isn't, or at least the President most certainly isn't, that the June Fed statement will be quite interesting, as not only will Bernanke have to maintain a program which is now uncovered to have been monetizing the long-end at a rate 40% higher than estimated, but will still have just two more months of capacity left for any potential future sterilized market propping experiments.

Which only leaves the Fed with one option: that of making Bill Gross, and all those others who are loading up on duration-sensitive securities which will benefit from an LSAP based episode, very, very happy. Of course, the list of such assets most definitely includes gold.

 

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Sun, 05/20/2012 - 21:44 | 2446170 El Oregonian
El Oregonian's picture

This Chubby Checkers thing is really starting to get old...

Sun, 05/20/2012 - 23:14 | 2446333 nope-1004
nope-1004's picture

The cock sucker in chief at the Fed knows damn well any public exposure brings the USD into question, and gold and silver skyrocket.  His public appearances and policy toward "a more open Fed" were complete lies, because he has done exactly the opposite - everything under the cover of darkness and in shadow fashion.

He's a two-bit, chicken shit, slime.  Say what you're doing publicly, boy!  Show some balls.  C'mon.... tell the world!  Too scared Ben?  Wimp.

And I always knew you were, anyway.

 

Sun, 05/20/2012 - 23:25 | 2446357 BenLightYear
BenLightYear's picture

Maybe the purpose of twist is for the fed to hold onto longer term bonds because the rates are higher meaning more of the interest is just lobbed back and forth between the fed and the treasury so the total interest on the debt actually has a lower cost for the govt.

Side note....how's the 40-49$ an ounce silver doing for ya guys? Damn hyperinflation just can't come quick enough LMAO...on a long enough time line I get too laugh at everyone who's views are so fixed they can't see what's happening :)

Personally I can't believe Ben is going to drop another 1.5T into the economy this year...further eroding the value of the dollar...wait....he prints what the govt spends...hmmm so if the president and congress actually passed a budget and it happened to be deficit neutral Ben wouldn't add 1.5t into the economy? Ben might not be elected but the pres and congress are...hmmm Ben does his job and America continues to vote back in the same morons...yeah definately blame Ben...definately his doing LMAO

Sun, 05/20/2012 - 23:34 | 2446376 JeffB
JeffB's picture

"Damn hyperinflation just can't come quick enough LMAO..."

I wouldn't get too cocky, BenLY. Folks were laughing at the Austrians jumping up and down warning about the housing bubble back in 2004, then 2005 & 2006.

I remember an editor at the Economist speaking at a conference and asking about the phenomenon of warning about a coming catastrophe too early and losing credibility in the eyes of some when the catastrophe didn't happen immediately.

But you're probably well aware of that.

I'm sure you're hear just trolling. I suppose you even count me as one more on your stringer.

Whatever.

Sun, 05/20/2012 - 23:58 | 2446419 BenLightYear
BenLightYear's picture

So it would be fitting for me too dump my money into a spaceship because eventually the sun will burn out? I'll explain very simply why the fear of hyperinflation is completely unfounded. It requires a loss of faith in the currency. BY THE USERS OF THE CURRENCY. I hate to break it too ya but the average American enjoys the lifestyle they live and the benefits of a fiat currency that is reasonably controlled.

I fully grasp and understand the basic argument against fiat. Not only that but I can not argue against the case made on paper against it. The dollar has lost value. The dollar will continue ue to lose value. It benefits the first to recieve fresh injections of said capital. My argument rests on one very simple point. That the negatives are a small price to pay for the positives. Let me use a clear cut example. Do ya think we would have walked away from the cold war in the position we are currently in if we didn't have the ability to print perceived wealth and could force people around the world to accept it as such? Could we have spent the amount we did if we had "hard money"? So I must ask you what ya think life would be like if we were on the other side of the coin after the cold war settled down? Do ya think Russia would have been as kind to us as we have been to them?

If no one has noticed in none of my arguments have I disputed the core premise made against fiat. I get downarrowed constantly and ridiculed because I am anti assets in a deflationary/deleveraging atmosphere and love the benefits we enjoy today that come from the Fed Res actions in maintaining our currency while preventing hyperinflation. The few comments I recieve in rebuttal to my statements are laughable at best. They are one of two types of comments. Hyperinflation ie the dollar is worthless LMFAO...worthless huh? Ask Gaddaffi or Saddam about that one. Or entirely off topic to what I actually said. Or like one person who could offer no actual rebuttal went off on me for mispronouncing Fabers last name. Are you kidding me? I write 1000 words on a relevant often discussed topic and all I get in return is I'm an idiot because one of 100 names I refer too is misspelled by a letter.

I understand the anger that can emanate from malinvestment. The boxes of eagles and maples at half their purchased values, the stockpiles of food that you would only want too eat if it was the only available food source, more guns than a large family in Texas could fire in a day and so on. Don't be blinded to the reality before you.

Mon, 05/21/2012 - 00:59 | 2446500 Western
Western's picture

The users of the currency, as you put it, are the nations of the world. China has been setting up bilateral trade agreements with other nations to dump the USD as their medium of trade, as have the BRICS.

It doesn't get any more obvious than this.

 

Sophisticated ignorance or stupidity, which one is it BenLY?

Mon, 05/21/2012 - 01:54 | 2446545 BenLightYear
BenLightYear's picture

I love the way you ended your comment after saying china and the BRIC's. Pretty sure the C in BRIC's stands for china. I can not dispute that some conpunteies included members of the so called BRIC's have started conducting SOME trade in currencies other than the USD. I guess my question would be why would a country accept more than a nominal amount of RMB to diversify away from dollars while the RMB is not free floating against the dollar and most importantly is printed in relation to the USD that china receives in trade surplus? The main flaw I must point out is your use of the word DUMP. China has hardly DUMPED the USD. Suffice to say they won't be doing that for a long time. They dump the USD and the US stops trading with them. China drops like a rock and we get our jobs back. I would love too see china commit economic suicide and for us to get our jobs back. Wouldn't be happy about the influx of USD coming back and would hope Ben would do the smart things and destroy those access reserves as they came flying back or we would see very a very high, one time inflation shot of maybe around 15%, which might not sound like a lot but we are talking about just from those not taking into consideration normal inflation added yearly by the fed.

Mon, 05/21/2012 - 02:22 | 2446569 mcguire
mcguire's picture

ben.  in a heavily manipulated environment, nobody knows when it will happen.. i thought the system was permanently broken when the dow went from 4k to 6k in a little over a year.. that is a long time to be "wrong".  but that is just the thing.  i am not wrong.  the system is hopelessly broken.  further, the longer the illusion is drawn out, the tighter the spring gets, and the more violent its eventual release will be.   the delta of a game changing event grows stronger every month, not weaker.  i will admit i have been surprised at how far and how long the can has been kicked down the road.. that does not mean that diagnosis is wrong.  how will it happen??  >> "slowly, then all at once"

Mon, 05/21/2012 - 04:38 | 2446628 Western
Western's picture

Fact is settling international trade with anything other than the reserve currency is not a good development re: the trust of the USD.

 

China settled it's purchase of Iranian oil with gold, the anti-dollar.

Mon, 05/21/2012 - 02:19 | 2446564 SilverSavant
SilverSavant's picture

I don't think you are half as smart as it is obvious that you think you are.     Mocking people about their eagles and maples might well bring the shark to tear off half your ass in the first bite.   I will feel such sympathy for you then.   Seems to me that we have been dancing on the edge of fiat disaster for several years already and those who haven't stocked up on pm coins have been taking more risk than those who did.  At least 20% weighting minimum for the last few years and a growing percentage everyday.   We almost had a banking holiday in 08 and today it will be even bigger when it finally happens.  You have to quit playing with their money if you want to protect yourself from their game.   Your point that a loss of con in the currency will not happen is occuring at the very same time as confidence is rapidly being lost.   More and more people have awakened to the need to get their savings out of the dollar, as it's purchasing power is dropping.   On a final note, when silver prices are over $500/oz, $50 dollar silver eagles will look like a damn fine decision.   Many people like to take the longer view when they invest. 

Mon, 05/21/2012 - 04:04 | 2446620 BenLightYear
BenLightYear's picture

There is no scenario possible where you could see 500$ an ounce silver in the next 10 years. It is fundamentally impossible. I would love very much to hear you play out a scenario where silver hits 500$ an ounce and people could access their money to buy said silver. The only plausible scenario would be hyperinflation and in such a scenario owning stocks, land, cars, iPads or anything else would be the same as owning silver. The idea that one day some event is going to occur where everyone says oh shit I need to sell my 150k house and buy 300 ounces of silver is just ridiculous. First off even if you could formulate such a scenario silver would take a back seat too gold. In which case you make the argument gold would be at 25k an ounce. I hate to break it to ya but at 6-8 ounces of gold for the median valued home no one would care about gold anymore because their is no rational way to view 6 ounces of a non productive material contains the same value as your house and land.

The only argument that can be made is it is a hedge against inflation over a long period of time which I don't dispute. But the thinking that the price doesn't matter is just assanine. I sold mine in the low to mid 40's and will buy back in the low 20's. IF aliens came to the planet and offered you 500$ an ounce which is the best chance to see that price it would still have mattered what ya payed because I got twice as much at 21$ then you did at 42$. How is it that no one can understand that when you purchase it for half as much you end up with twice as much.

Dancing on the edge of disaster for the last few years. Is that when you first started paying attention? Unless your under 25 you missed quite a few times we were flirting with disaster. It's not bernanke's doing. Society has flirted with disaster since the dawn of civilization but somehow a credit problem, bank failure, new military conflict and so on that might happen is going to change the course of history to such an extent that an element that has been known, valued, and used for thousands of years is all of a sudden going to all on its own change the course of human civilization from that point on.

Confidence is being lost? You do realize that after the republican convention and Ron Paul isn't nominated he is retiring. That factor alone should change your view on that subject. If you think confidence is being lost and think I'm an idiot then make an actual case for either. I have continuously made fundamental assertions as to why I have the view I have and all I keep getting in rebuttal is hyperinflation with no evidence, fiat sucks with no comparison of the negative over the good, and a bunch of guys angry at me like it's my fault they are down almost 50% off the highs on silver.

Mon, 05/21/2012 - 11:43 | 2447651 JeffB
JeffB's picture

BenLY: "The only plausible scenario would be hyperinflation and in such a scenario owning stocks, land, cars, iPads or anything else would be the same as owning silver."

Stocks often don't do so well in an inflationary environment. Benjamin Graham, for one, showed that to be the case historically.

Big time inflation can crash an economy. Strikes and plant shutdowns can be rampant. Unions are wanting to renegotiate their wages very very frequently. It becomes difficult to do any sort of planning. Imports can become prohibitively expensive and constantly changing which can throw manufacturing for a loop.

A country in the midst of the chaos of hyper inflation is not the best of business environments.

 

Mon, 05/21/2012 - 12:14 | 2447898 SilverSavant
SilverSavant's picture

You are ignorant and will remain that way since you think you are knowledgeable.   There are several reasons why silver will go easily past $500.    First off and most important,  investible silver is rarer than gold.  Not just a little bit rarer, but much rarer.   There is a very well hidden shortage of silver and as soon as it is recognized industry will rush to secure supplies of what is the most critical resource excepting oil.   The second reason the price will rise so much, is that the current price is a missprice and when it comes back into balance there will be a mainia phase.   There hasn't been a real price in silver for 60 years and in all that time there has been more silver used than was mined.   So we have 60 years of declining stocks amid 60 years of increasing currency and increasing population.   The Demand/Supply number is completely unknown except that the current price is very wrong.   It would take way too much time to set out the proofs of what I have just stated, but if you really want to know the truth you will need to dig it out yourself.  Now you have the clues. 

Mon, 05/21/2012 - 02:42 | 2446579 pcrs
pcrs's picture

We would not have had a cold war without fiat. If people had to be taxed directly for making it possible to destroy the world 100 times over, they would have revolted then and there.

1913 fed, 1914 war. Vietnam war, high inflation in the seventies after this war. For what? wasting a lot of lives, traumatising many more, creating a ton of enemies, burning valueable fuel, spending labor and creativity on war production. All pointless.

So the question is not:"How would we have dealt with war expenses without fiat?" You wouldn't have had war without fiat. Your argument is not worth a continental.

and a deficit neutral budget? get real, you know what the unfunded promisses and obligations are, you can't be serious. It almost never happened. Instead Timmy can't believe how the deficit debate came back on the table again so soon. perhaps you can explain.

Mon, 05/21/2012 - 04:09 | 2446622 BenLightYear
BenLightYear's picture

Your right. Before fiat there were no wars. The printing press was the harbinger of the first wars civilization has ever experienced. Did you actually think before you typed that? I'm even ready to argue without fiat we would have more wars because every govt and empire in history has fought wars for the same thing. WEALTH. For the first time countries can create their own. If ya don't think that the creation of the USD was a creation of wealth in the simplest of forms I ask you to study the ascent of this Country since the charter was given and most importantly starting with the second world war.

Mon, 05/21/2012 - 12:49 | 2447996 JeffB
JeffB's picture

"For the first time countries can create their own."

---

Wow, if only mankind had figured out much sooner that printing pictures of dead politicians on green pieces of paper created wealth we would be on easy street by now.

They probably could have landed a man on the moon back in the stone age.

At least we figured it out last century. Easy street, here we come !!!!!

 

Mon, 05/21/2012 - 04:24 | 2446635 constantine
constantine's picture

BenLY, It seems to me that, for the first time in history, the USA is unable to roll over its debt without the FED buying 61% of issuance.  This is the difference between now and the past that, I humbly believe, you are overlooking.  When more of something is entered into an economy, it will become less valuable; in this case that is the USD.  The USA, like all other economies that have overspent, will have its currency crisis.  Many respectable economic organizations, including MIT, already report inflation far more significant than the BLS would care to admit... it is just a matter of time.  You are cherrypicking your starting point in analyzing the precious metals and apparently assuming that everybody on this board bought at that time when in reality many of us were buying silver in the $15 or even $5 range.

Mon, 05/21/2012 - 04:42 | 2446647 BenLightYear
BenLightYear's picture

I am well aware of the Feds purchasing of treasuries however that's clearly caused by the rates offered by said treasuries. What is actually being added is the amount of the federal deficit and since it is being spent in the form of the govt as the aggregate they are getting horseshit value for the money they are producing which means it won't be in the economy long so won't have much of an impact on inflation. For example if I gave you 10T dollars and you put it in your closet it would not cause any inflation. However if you went on a 2 year shopping spree buyign everything you cam across it would impact the rate of inflation. I don't assume everyone started high. I never stated that I did. But you cannot honestly tell me you don't wish you had unloaded in the 40's and bought back now. You can't tell me that you could have booked a lot more profit selling the silver you bought at 5$ for 45$. In fact that is the silver you really should have sold high because the gain was much higher than the silver you bought at 20 or 30$. Simply 5-45 is 900% where 22.50-45 is only 200%. Once again I am a big fan of metals however not so blinded that I would hold it through deleveraging/deflation. I was buying silver back when 90% came at a nice discount to spot. Before the hype started and it went nuts. I plan to buy back the metals I sold and probably even double my exposure but will do so at half or 2/3 the price.

Mon, 05/21/2012 - 15:49 | 2448604 Matt
Matt's picture

I think you are talking about trading, while most people are talking about investing.

You are talking about flipping the silver as soon as it appreciates, rather than accumulating it over time for the long run; the difference between speculating and saving.

You specifically asked how people were doing with their $49 silver down 50%. Very few people are down 50%. Nearly anyone trading would have stopped out much sooner, and nearly anyone investing has been buying it gradually over years to have a much lower average price.

Sure, there must have been a few people who actually maxed out credit cards buying monster boxes at $49 per ounce, but I bet very few.

Mon, 05/21/2012 - 11:07 | 2447576 JeffB
JeffB's picture

"the average American enjoys the lifestyle they live and the benefits of a fiat currency that is reasonably controlled."

"My argument rests on one very simple point. That the negatives are a small price to pay for the positives."

"the fear of hyperinflation is completely unfounded. It requires a loss of faith in the currency."

---

I think the fatal flaw in your argument is an assumption you seem to be making in support of quote #3 above. Namely, that the Fed can continue propping up the house of cards, even as they necessarily continue to build it ever higher and more complex in order to do so.

People made similar arguments in favor of the stock market and housing prices back in 2007. Ben Bernanke did so on national TV programs. People didn't lose faith in the stock market, the housing market, or GM until it came crashing down around them, and then people lost faith very very quickly. The exits weren't nearly big enough to accomodate everyone who lost faith at that time.

A family living far beyond its means often doesn't lose faith in buying things on credit until their creditors cut it off. That's when the panic hits. Before then they may realize their finances are out of balance. They may even take some steps to try and bring it a little closer to balance. But they all too often don't take the necessary steps to bring it into balance until they hit that brick wall when they're suddenly forced to do so against their will. That's when their "faith in the [currency]" collapses.

Some of peopple in countries that have experienced hyperinflation episodes may have done the math and seen the warning signs long before the catastrophe struck, but the majority went merrily along their way until inflation started getting uncomfortably high, then painfully high, and then became catastrophic. "Having faith" couldn't have prevented the catastrophe. Lack of faith didn't destroy the currency, the inflation is what destroyed the faith.

The U.S. can't keep up the status quo with an inflation rate similar to what we've had up until now, even if other countries continued to throw their savings down the treasury rathole, which they aren't.

Not only is our official debt to GDP already 100% and rising rapidly (far above the 90% threshold history teaches is a tipping point for much pain), but our increase in liabilities (funded and unfunded) was in excess of 53% of GDP last year, and 346% of total revenues.

And that's at near zero interest rates. If the BRIC nations, among others, are already taking the preliminary steps towards moving away from the U.S. as a reserve currency, and have been screaming loudly and publicly about the Fed's money printing already, don't you think that's already evidence of some loss of faith in the currency?

The problem is that once it gets out of hand, the central bank can't keep things relatively under control, any more than Bernie Madoff could have kept his Ponzi scheme going as long as everybody "kept the faith".

Look at this graph of the U.S. debt. It doesn't include the "off the books" & "unfunded liabilities" that dwarf the official debt. Social Security & Medicare taxes have been counted as revenues in the pay as you go U.S. version of Madoff's Ponzi scheme. The first of the baby boomers hit age 65 at the tail end of last year. I believe it's something like 9,000 people are retiring every day. A Zerohedge article a couple of days ago said we're already at the point that we only have one full time worker for every retired person.

Those deficits are going to skyrocket.

As Chris Martenson so ably shows, Compounding is the Problem. It becomes mathematically impossible to continue on this path, and "faith" can't make up the difference. Reality will crush an unfounded faith in a government that betrayed that faith, and upon a fiat currrency backed only by a faith and trust in that government.

At this point, massive tax increases all the way to 100% of all tax payers earning above $250,000 wouldn't even come close to balancing the budget as Tony Robbins shows in this short video. Doing so and then confiscating all of the assets of millionaires and taxing the top 500 corporations at 100% would barely balance the budget for one year (if they stood for it, of course), but that couldn't be repeated the next year, obviously. You can only take all of their asssets once. You killed the golden goose.

Bottom line, our only options are a massive austerity program, which just will not happen until absolutely forced upon us one way or another, defacto default through inflation/hyper-inflation, or outright default.

Most governments go the inflation/hyperinflation route by default. It seems to be the least painful way to kick the can down the road a bit further, and it's less obvious to many people who's at fault. The results are delayed at least somewhat and the people scatter the blame among multiple targets... It's big business' fault, or "the speculators", or "bond vigilantes", or "gold and silver hoarders" etc.

Don't get too cocky when in the eye of the hurricane. It may well be that "You haven't seen nothin' yet."

 

 

Mon, 05/21/2012 - 00:04 | 2446429 FL_Conservative
FL_Conservative's picture

In an environment where everyone knows that rates will be going up, it makes NO sense for Ben to have been selling ST and buying LT.  Any finance or treasury schmuck with half a brain cell would have been locking in low rates for the LT to control interest cost.  Brilliant Ben has done just the opposite.  That way, when our dollar crashes and we're at 125-130% debt to GDP we can turn over all the ST debt that's out there and bust our budget even worse than its set up to do now.  Is anyone awake at the Fed or Treasury?????????????

Mon, 05/21/2012 - 00:11 | 2446441 JohnKozac
JohnKozac's picture

I'm waiting for food prices to double in again (like it did in the last two years), especially dark chocolate, one of the 12 essential nutrients of mankind.

Mon, 05/21/2012 - 00:44 | 2446477 BenLightYear
BenLightYear's picture

Not when the fed is kicking the interest payments right back to the treasury. It means that minus the Feds 6% cut we are paying no interest on that debt. I'd much rather the fed hold long terms than short for that reason. It's a big circle jerk. Normally would be enough to collapse a currency but Ben understands the American public doesn't understand monetization nor twist, nor zip...so he can play any games he wants and keeps it rolling...good job Ben.

Mon, 05/21/2012 - 03:07 | 2446592 taraxias
taraxias's picture

I totally agree the average Joe doesn't understand Ben's machinations but evidently neither do you.

Mon, 05/21/2012 - 04:11 | 2446623 BenLightYear
BenLightYear's picture

Explain to me where I was incorrect. It's easy to say I'm wrong but obviously much harder to tell me why. Please enlighten me.

Mon, 05/21/2012 - 05:58 | 2446701 taeonu
taeonu's picture

First off, a 6% cut from money that was conjured out of nowhere is huge and involves zero risk.  You sound ridiculous defending the Fed and touting the benefits of money created at 0% interest at the same time.

Second, the Fed isn't designed to be the primary beneficiary of the scam - the banks are.

Third, the reason Ben is able to "play any games he wants" is because the markets are rigged.  

-------

Also, the fact that you think it's a good thing that the Fed can steal from an uninformed public obviously outs you as a troll.

Mon, 05/21/2012 - 15:37 | 2448568 nope-1004
nope-1004's picture

+1

Mon, 05/21/2012 - 18:10 | 2449014 JeffB
JeffB's picture

It's easier to distract people from a snowball rolling down a mountain, but when it's a large one and growing very rapidly, it's going to become much harder to hide the further it goes.

You can't say, "It went the 1st 10th of a mile without frightening anyone too much, and any harm done was relatively minor, so projecting forward, this should be no big deal."

The next 10th of a mile it's going to be much larger, growing much faster and picking up speed.

By the time it gets to the bottom of the mountain, the whole town could be wiped out.

 

Mon, 05/21/2012 - 02:56 | 2446586 pcrs
pcrs's picture

Isn't all ST debt held by foreign governments?

Mon, 05/21/2012 - 04:12 | 2446624 BenLightYear
BenLightYear's picture

Ben is currently sitting on what just shy of 2T, china and Japan right over and under 1t, and pensions, funds and so on sittin on the bulk of it.

Mon, 05/21/2012 - 06:36 | 2446730 taeonu
taeonu's picture

$2 trillion loaned to the government at (2%) = $40 billion.  The Fed gets to keep (6%) = $2.4 billion.  Not bad for loaning the government the use of it's own money which the Fed created out of nothing.

Mon, 05/21/2012 - 11:14 | 2447610 JeffB
JeffB's picture

They're between so many rocks and hard places they're guaranteed to do stupid things. They really have little choice, if the primary goal is kicking that can down the road.

They're trying to protect the banks via the housing market. No one in their right mind would be buying 30 year paper and interest rates that wouldn't totally hammer the housing market. Of course the Fed has tons of mortgages in their portfolio already and they're in effect insuring tons of others. Not to mention all of the banks that are already struggling with defaults and a higher percentage of their portfolio already under water.

Their backs are to the wall and their fighting the most urgent crisis in front of them at any given time. Sometimes their strategies make some of the other crises a little further away much worse, but they'll deal with those crises when they're in their faces and more urgent than the others at any given point in time.

 

Sun, 05/20/2012 - 21:45 | 2446173 nmewn
nmewn's picture

A pig in a poke.

Sun, 05/20/2012 - 21:50 | 2446177 T-Bond
T-Bond's picture

The federal reserve has betrayed the people of the united states.

Sun, 05/20/2012 - 21:52 | 2446189 kridkrid
kridkrid's picture

Ya think?

Sun, 05/20/2012 - 22:09 | 2446223 SHEEPFUKKER
SHEEPFUKKER's picture

You mean the whole world. 

Sun, 05/20/2012 - 22:42 | 2446291 LetThemEatRand
LetThemEatRand's picture

As Ron Paul observed, the Federal Reserve is as federal as Federal Express. Imagine a bunch of private bankers betraying the average Joe.  Who could have predicted it?

Mon, 05/21/2012 - 03:02 | 2446589 pcrs
pcrs's picture

I don't get this private public stuff. It's just a monopoly defended with government violence against competition. What does it matter what it says on a piece of paper who the owners are. They thunnel back 96% of their profits to the treasury, which company does that?

This whole:the fed is private meme, bothers me to no end. Like you would control it with your pitifull vote when it was public on paper. Like people who voted for change, change, change and closing of GItmo and end of the wars when they crossed Obama on the ballot, had any influence. It's all bogative, you do not have influence on government, that is why they have all guns an military.

It is just a government protected monopoly and there is nothing you need to know after that. Guns surround it, pointing at the slaves who have to use their depreciating theft money and as such, that is all. They print money and give it to the government and call it loans. It's as independent of government als de sales department of coca cola is of the customer service of coca cola.

Sun, 05/20/2012 - 23:31 | 2446366 BenLightYear
BenLightYear's picture

All the people of the united states have to do is vote in reps and senators to repeal the charter...by not doing so they are condoning bens action...I have to wonder if it's so bad why wouldn't congress repeal it...I would imagine the great awesome economy that would transpire afterwards would guarantee them all re-election without the need to pander for campaign contributions...Just a thought...maybe if everyone sent their respective politicians a simple letter stating the foresight of said action and the utopian economy that would result would secure their re-election bids :)

Sun, 05/20/2012 - 23:31 | 2446368 BenLightYear
BenLightYear's picture

All the people of the united states have to do is vote in reps and senators to repeal the charter...by not doing so they are condoning bens action...I have to wonder if it's so bad why wouldn't congress repeal it...I would imagine the great awesome economy that would transpire afterwards would guarantee them all re-election without the need to pander for campaign contributions...Just a thought...maybe if everyone sent their respective politicians a simple letter stating the foresight of said action and the utopian economy that would result would secure their re-election bids :)

Mon, 05/21/2012 - 04:17 | 2446629 boattrash
boattrash's picture

I agree to a point, we should vote, from the ROOFTOPS.

Sun, 05/20/2012 - 21:50 | 2446183 Stoploss
Stoploss's picture

Yeah, cause it's different this time, cause the FED's doing it..

Just call Jaime if there are any questions.

Sun, 05/20/2012 - 21:51 | 2446186 kridkrid
kridkrid's picture

I don't understand why people believe that Bernanke (or TPTB, the Central Bankers or "they") care if Obama is reelected.  Both candidates and both parties are captured, completely.  They use the charade that they are not against us.  They may want Obama to be reelected, but not because they care about Obama or his policies vis-a-vis Romney and his.  It only matters in the mileage that can be generated via propaganda with one outcome vs. the other.  Everything else is meaningless.  I could create a dozen scenarios where a Romney win advances "their" agenda more easily. 

Sun, 05/20/2012 - 21:57 | 2446199 Zero Bid
Zero Bid's picture

Bernanke will be unemployed on Feb 1 2012 if Romney gets elected; that's why he should care that Barry O'Bama wins.

Sun, 05/20/2012 - 22:04 | 2446212 kridkrid
kridkrid's picture

Why would you say that?  Romney will renominate him if he is told to, just as Obama did.  You are aware that Bernanke was originally nominated by Bush, right? 

Sun, 05/20/2012 - 22:48 | 2446302 LetThemEatRand
LetThemEatRand's picture

Romney probably won't be told to renominate Ben.  Bernanke is ready for greener pastures, and they will want to make it appear that things are changing.

Sun, 05/20/2012 - 23:37 | 2446381 Prometheus418
Prometheus418's picture

I don't think Romney will be appointed- but in the case that he is, I'm betting that you're right here.  In that scenario, I would expect to see a new Fed chair who is going to emulate Volker.  It's a crap shoot all around at this point- everyone knows the system is broken, and all of this is just one head-fake after another to get as many people as possible into the wrong positions.

Big game going on right now, and the winner stands to gain most of the world- it's no wonder that the path forward is so muddy.  I'm sticking with silver, but it's no less a gamble than anything else right now- I just like the fundimentals better, and it has a built-in hedge (monetary V. industrial/medical metal.)  

God, I hate playing roulette with my family's lives.  Any position any of us takes is dangerous at best.

Sun, 05/20/2012 - 22:47 | 2446295 LetThemEatRand
LetThemEatRand's picture

Even if Romney pretends to fire Bernanke to make it appear that his election means something (if he does, he'll put in someone equally bad), Bernanke will be hired by Lloyd or Jamie out of the box at 50x the prior salary.   Briar patch and all.

Sun, 05/20/2012 - 23:52 | 2446404 HD
HD's picture

Ridiculous... After his time at the Fed, Greenspan decided to selflessly spend his few remaining years focused on serving humanity. Isn't PIMCO a global relief agency? I expect Ben will do the same - probably distributing mosquito nets in Africa.

Sun, 05/20/2012 - 22:13 | 2446187 JackT
JackT's picture

You know in controlled demolition it is possible to snuff one explosion with another. The keyword being "controlled".

Sun, 05/20/2012 - 21:55 | 2446193 AUD
AUD's picture

As I've said before, the 'assets' of the Fed are junk, so it doesn't matter what they do or don't buy. Eventually, there will be a run on the biggest bank of all, the Fed itself, otherwise known as hyperinflation.

But I'm not about to pick the top. Trying to prdict an irrational credit bubble is next to impossible, particularly one as entrenched as the credit of the Federal Reserve & US government.

It is instructive to look from where the term credit bubble originated. Supposedly it was from the South Seas bubble in 1720, so called because it was unpredictable & irrational, a bit like the behaviour of a soap bubble floating through the air, which eventually bursts.

Sun, 05/20/2012 - 21:59 | 2446203 Zero Bid
Zero Bid's picture

repeat after me - world reserve currency

Sun, 05/20/2012 - 22:05 | 2446213 AUD
AUD's picture

Which means nothing when the bid is zero. It just means, like the chumps who bought into the South Seas Company, they'll all be ruined.

The south Seas Company had the full faith & credit of the British government. In fact, the South Seas Company got its start by assuming the debts of the British government in exchange for trade monopoly with the 'South Seas'.

Sun, 05/20/2012 - 22:20 | 2446250 Clint Liquor
Clint Liquor's picture

'History doesn't repeat itself, but it does rhyme' Mark Twain

 

Sun, 05/20/2012 - 22:02 | 2446208 Mae Kadoodie
Mae Kadoodie's picture

Bubblicious with a twist.

Sun, 05/20/2012 - 22:16 | 2446240 Clint Liquor
Clint Liquor's picture

Bubblicious with a twist

Mae, I'm having T-Shirts made, with your permission.

Sun, 05/20/2012 - 22:05 | 2446215 nmewn
nmewn's picture

"As I've said before, the 'assets' of the Fed are junk, so it doesn't matter what they do or don't buy."

This is the truth of the matter. It can't be repaid now, so it's junk.

So, again, why do we pay taxes so others can benefit off our labors?

Sun, 05/20/2012 - 22:05 | 2446201 SWCroaker
SWCroaker's picture

I keep saying, that tree falling in da woods makes a noise, whether it pre-announces "timber" via the MSM and some FOMC verbiage or not....

 

Fundamental truth: the Fed has been easing, to one degree or another, since 1913.  Stop listening.  Put them on mute, and watch their *actions*.  When you do, they stop even having a pretense at caring about Americans, unemployment levels, or constraining inflation.  Their actions say they exist solely to support a networked power structure, which thrives on power over the masses.

Sun, 05/20/2012 - 22:14 | 2446234 T-Bond
T-Bond's picture

I couldn't agree more. Pure evil.

Sun, 05/20/2012 - 22:40 | 2446287 IBelieveInMagic
IBelieveInMagic's picture

Not true. The Fed has enabled the US to benefit tremendously at the expense of the rest of the (non-OECD) world (along with the unmatched Military). It is just that the large financial players (banksters) are positioned to take advantage because of their front row seats and have been front running Fed policies -- in fact the large financial players are agents of the Feds (similarly each European country has at least one hugely overgrown bank that has been franchised to front run ECB policies and secure the country's share of the loot (in form of floating worthless paper in exchange for real stuff from third world) in proportion to US/other European countries). In other words, the large banks are financial military units of the OECD countries.

Sun, 05/20/2012 - 23:38 | 2446383 BenLightYear
BenLightYear's picture

It is amazing so few see the benefit Fiat has been over the last 100 years to this country. Correct the dollar has lost a lot of the starting value however wages and assets have proportionately increased in relation. The average earnings of an individual equate to the same amount of gold as they did when they were payed in gold. While at the same time the progress created by expanding the money supply, forcing it to recirculate, and expanding credit is nothing short of the largest technological increase in history. A poor man today lives better than a rich man 100 years ago. 100 years ago you could not say the same....that's called progress fellas.

Sun, 05/20/2012 - 23:59 | 2446420 lasvegaspersona
lasvegaspersona's picture

I agree that fiat is here to stay. We all like it too much. It does however make a shityy means of saving and for this purpose will likely be replace in this function with physical gold. When I get my next mortgage I'll have it in fiat please. When I shove my excess production (over consumption) under my mattress however it will be gold not paper.

Mon, 05/21/2012 - 00:48 | 2446482 BenLightYear
BenLightYear's picture

Lasvegaspersona

Spot on entirely. The only thing I would add is too wait to make your purchases of gold silver when the cost is more in line with where it should be....still overpriced by any measure. Personally I like 18-22 and 1k. I hate holding cash as much as the next guy and would never do it long term but I think by start of winter we will be at those prices at the latest then hopefully gold returns to its usual place of rising in reaction to the devaluation of the currencies your buying it with.

Mon, 05/21/2012 - 03:20 | 2446604 taraxias
taraxias's picture

Spot on my ass.

There's no point in setting you lot straight, your views are so misguided it would be a complete waste o f time.

Shame you keep polluting this site with this shit though. Even scrolling past your posts without reading them every time I spot your name on here is painful.

Please accept my apologies if you *really*know better but you're paid to post this shit.

Mon, 05/21/2012 - 04:16 | 2446627 BenLightYear
BenLightYear's picture

It's clear what prevents you isn't the pointless nature but your inability. It would take what 5 minutes to state why I'm wrong on any of my comments yet for the 2 nd time tonight you say nothing more than I am wrong. It's clear who the troll is, and it isn't me sir. I'll tell ya what taraxias. You want me to stop polluting I'll make a deal with ya. Explain how and or why I'm wrong and I'll never post on this website again. 5 minutes and I'm gone. Make me feel stupid please.

Sun, 05/20/2012 - 22:01 | 2446206 Ted Baker
Ted Baker's picture

THE FED IS THE LARGEST MANIPULATOR OF MARKETS PERIOD AND HOPEFULLY YOU SHOULD ALL BY NOW BE AWARED OF THAT NOTION....THE FED IS ALSO BANKRUPT MORE PRINTING IS EXPECTED PUSHING GOLD PRICES TO RECORD HIGH ABOVE $2,000 THE OUNCE

Sun, 05/20/2012 - 22:11 | 2446228 Sutton
Sutton's picture

To raise rates just 25 bips now will cause the greatest market collapse in history.  Good job Doctor Bernanke

Sun, 05/20/2012 - 22:31 | 2446268 Alpacanio
Alpacanio's picture

And thats why rates will go up. That will be the end at that point.

Sun, 05/20/2012 - 22:13 | 2446230 Clint Liquor
Clint Liquor's picture

And the deflationists still cover their ears and eyes while saying 'na, na, na' I can't hear you! Cash is king!

 

Sun, 05/20/2012 - 23:42 | 2446391 BenLightYear
BenLightYear's picture

My cash has appreciated quite nicely against your assets in the last 5 months. Cash isn't always the best thing too hold. In fact I'll agree often is the worst thing too hold. Just so happens that right now is one of those once every 6-15 year periods where ya wanna be holding cash. I know I know...ya gotta keep up the hopium so ya don't feel bad about dumping all your disposable income into an asset at the height of a bubble and not unloading before the air got let out

Sun, 05/20/2012 - 22:29 | 2446263 barliman
barliman's picture

 

One takeaway is still missing ....

"What the finding above means is that the ..." Goldman soothsayers are reading ZeroHedge before saying their sooth.

The chicken entrails market has crashed as a reult.

barliman

Sun, 05/20/2012 - 22:31 | 2446267 midgetrannyporn
midgetrannyporn's picture

I really like reading zh matter of factly state that politics and fed policy determine stock prices not fundamentals. May the farce be with you.

Sun, 05/20/2012 - 22:31 | 2446269 q99x2
q99x2's picture

Bilderberg gave up on the Kenyan Barry Sotero and is now backing an apostle of Joseph Smith so I'm thinking the FED may let the market correct at least down to a point that makes it easy to pump back up.

Sun, 05/20/2012 - 23:06 | 2446331 LetThemEatRand
LetThemEatRand's picture

They did not "give up" on anyone.  They created a narrative that the bankers = Obama, which is quite brilliant.  They are all the same.

Sun, 05/20/2012 - 22:55 | 2446318 Hedgetard55
Hedgetard55's picture

It is astonishing to think how thoroughly the Mad Professor has set the US currency up for complete and utter destruction.

Sun, 05/20/2012 - 23:16 | 2446343 Clint Liquor
Clint Liquor's picture

If it is any comfort, the Yen and Euro are going with it.

Sun, 05/20/2012 - 23:23 | 2446354 Hedgetard55
Hedgetard55's picture

Yes, agreed sir, but what fiat currency will NOT go with it is my question. The SNB has tied it's lifeboat up to the Titanic, the pound is history... PMs seem to be the one safe haven, yet... they are so heavily manipulated that it takes courage to add more when they are constantly trying to pull the rug out from under them.

Sun, 05/20/2012 - 23:20 | 2446348 Flakmeister
Flakmeister's picture

The Fed is corrupt and venal.... no argument from me there, but a lot of you fail to realize two salient points, one is that the "Printin' Dude" is a lot smarter than any you of asshats give him credit for. I am amazed that he has kept the show going for as long as it has... the second thing is that there is no hyperinflation or collapse of the US dollar as long as the military is able to maintain the oil-USD connection....

Now, if it were the case that that new significant supplies of oil could be created out of thin air, I have no doubt that the "Printin' Dude" would be able to balance the amount of printing to forestall the deflationary collapse that  in the offing... But we all know that the oil fairy packed her bags and split for the coast in 2005, ergo, the days of USD hegemony are numbered. But, even given that foregone conclusion, those of you salivating at the prospects of a USD collapse will have a few more grey hairs before your fantasy is realized...

Sun, 05/20/2012 - 23:32 | 2446372 Hedgetard55
Hedgetard55's picture

Flak,

 

     The dollar has already "collapsed" against gold and oil, despite being the reserve currency, hasn't it? $300/oz to $1600/oz, and $25 /barrel to $95/barrel. The dollar buys 25% or leass of both, I would call that a collapse. Also, recognizing that collapse and seeing even more coming is not "salivating" over it. I imagine few here ever wanted to see such a thing, but the average hedgetard is not one to deny reality. As for Ben being "smarter" than we thought, I would say he is a fool and not smart at all, he has delayed the inevitable and made it worse, unless in your eyes that delay makes him a genius. It doesn't take brains to print money.

Mon, 05/21/2012 - 00:54 | 2446493 BenLightYear
BenLightYear's picture

Your using as a basis for your collapse on a time frame of irrational appreciation. By that statement one would conclude that the drop from 1900 an ounce to 1550 means the dollar appreciated 15% which is obviously not the case. You must include in your hypothesis the fact that they are traded in markets where people want prices to rise so they can book a profit. Sometimes they go overboard. 1900$ an ounce gold was overboard. 1k is a bit more reasonable in relation to other goods, especially land.

Sun, 05/20/2012 - 23:32 | 2446373 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The MIC needs oil, not the other way around.  The dollar will only work as long as the world decides it does.  Once the dollar is realized for what it is, paper and nothing more, then the MIC will be dead in the water, just like Hitler when his oil was cut off and he was forced to try and run his military off of liquid coal, thus the main reason he lost the war.

Mon, 05/21/2012 - 00:57 | 2446498 BenLightYear
BenLightYear's picture

The US and Canada produce enough oil to supply the military to take over Venezuela. If not for the US, the Saudi royal family would have been overthrown a long time ago. So let's add that oil up...US, Canada, Venezuela, and Saudi Arabia. Hmmm. Total production of those 4 Countries is more than we are currently using. Hitler was in the midst of war and wasn't able to occupy the necessary countries countries and control said production. Apples and oranges.

Mon, 05/21/2012 - 01:23 | 2446525 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

This is your theory explained by a comedian.  I love his Dali reference. 

http://www.youtube.com/watch?v=Z3ZVgj_-VAg

I happen to think there is a LOT more to the story.

 

 

Mon, 05/21/2012 - 00:49 | 2446483 jonjon831983
jonjon831983's picture

"Twist to open bottle."

Mon, 05/21/2012 - 00:53 | 2446490 holdbuysell
holdbuysell's picture

Crisis...reaction...solution...is in full swing by August.

Mon, 05/21/2012 - 01:59 | 2446548 BenLightYear
BenLightYear's picture

Holdbuysell

I sure as hell hope so. I don't short tbh. Which means I'm sittin on cash til something happens. I've been cash for about 5 months and will start getting pissed if it stretches for more than another 6-7 months.

Mon, 05/21/2012 - 02:28 | 2446571 reTARD
reTARD's picture

Wow, the Bernank must have been an "A" student in government school... he's ahead of the class and already done extra credit!

Mon, 05/21/2012 - 02:33 | 2446575 Floodmaster
Floodmaster's picture

Bankers props up insanely rich people to new insanities.

Mon, 05/21/2012 - 03:33 | 2446613 cnhedge
cnhedge's picture

what the economy can tell us about the election
http://www.cnhedge.com/thread-4831-1-1.html

Is the Euro area Credibly on Target?
http://www.cnhedge.com/thread-4838-1-1.html

Mon, 05/21/2012 - 04:31 | 2446637 Dre4dwolf
Dre4dwolf's picture

It's game over, the stimulus and money printing didn't work the markets will not see another rally.

People are starting to realize its all fake, look at the facebook........ everyone knows its worthless, only the trendy morons will invest to lose their money.

Mon, 05/21/2012 - 23:31 | 2449680 halfacanuck
halfacanuck's picture

the Fed simply does not have enough short-term securities (1-3 years) to sell

If only Treasury could issue more...

The Fed is (effectively) part of the govt. The govt is the currency issuer. The Fed is never going to "run out" of US govt assets of any kind. Surely you understand this by now?

Mon, 05/21/2012 - 23:44 | 2449693 halfacanuck
halfacanuck's picture

In fact, if the govt shortened the duration of its borrowing it would then be doing so at negative rates, decreasing its debt load in real terms. Why do you think Treasury has been talking about issuing floating-rate bonds?

And as I know you're aware, there are bank/currency runs beginning in multiple countries. Have you been watching USD/EUR, USD/CAD and USD/AUD? Any money fleeing those currencies (not to mention the yuan) into USD will be used by the banks to buy long-duration Treasuries, which means the Fed won't have to.

The Fed/Treasury, as the currency issuer, controls the entire yield curve. Forget about the Fed's stock of assets denominated in its own currency: the more interesting question is what are they going to do with all that money repatriating from emerging markets and previously hot destinations?

Sat, 06/02/2012 - 21:55 | 2488178 Caviar Emptor
Caviar Emptor's picture

There'll be no hyper-anything for now: no hyperinflation or hyperdeflation. All the -istas have been befuddled because the facts haven't fit their models and predictions. But they're missing a key fact: they're both right about 1 thing, the value of money aka the buying power of fiat and paper assets hsa been eroding away at a faster clip than before. And the trend is accelerating. 

It's because we've got biflation: a touch of inflation and deflation at the same time, both unfortunately hitting in the worst possible places for the economy. incomes, wages, employment, advancement opportunities, real estate and personal net worth are all spiraling slowly down. But cost of living, doing business and even working spirals up: insurance and banking costs, energy and raw materials, food, apparel, telecom, entertainment, transportation, security, taxes, municipal services etc...

All that we predicted here on ZH since late 2009 has come to pass: we live in a biflationary world and now it has gone from causing near zero growth to perpetuating the depression. And monetary policy is powerless to tackle it, boxed in. 

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