What Mitt Romney Also Said: A Glimpse Of The Endgame?

Tyler Durden's picture

By now everyone has heard the infamous Mitt Romney speech discussing the "47%" if primarily in the context of how this impacts his political chances, and how it is possible that a president "of the people" can really be a president "of the 53%." Alas, there has been very little discussion of the actual underlying facts behind this statement, which ironically underestimates the sad reality of America's transition to a welfare state. Recall Art Cashin's math from a month ago that when one adds the 107 million Americans already receiving some form of means-tested government welfare, to the 46 million seniors collecting Medicare and 22 million government employees at the federal, state and local level, and "suddenly, over 165 million people, a clear majority of the 308 million Americans counted by the U.S. Census Bureau in 2010, are at least partially dependents of the state."

Yes, Romney demonstrated potentially terminal lack of tact and contextual comprehension with his statement, and most certainly did alienate a substantial chunk of voters (most of whom would not have voted for him in the first place) but the math is there. The same math that inevitably fails when one attempts to reconcile how the $100+ trillion in underfunded US welfare liabilities will someday be funded. Yet the above is for political pundits to debate, if not resolve. Because there is no resolution. What we did want to bring attention to, is something else that Mitt Romney said, which has received no prominence in the mainstream media from either side. The import of the Romney statement is critical as it reveals just what the endgame may well looks like.

In response to an audience question:

Romney: [The] former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we're issuing—which they've been doing, the Fed's buying like three-quarters of the debt that America issues. He said, once that's over, he said we're going to have a failed Treasury auction, interest rates are going to have to go up. We're living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who's loaning us the trillion? The Chinese aren't loaning us anymore. The Russians aren't loaning it to us anymore. So who's giving us the trillion? And the answer is we're just making it up. The Federal Reserve is just taking it and saying, "Here, we're giving it." It's just made up money, and this does not augur well for our economic future. You know, some of these things are complex enough it's not easy for people to understand, but your point of saying, bankruptcy usually concentrates the mind.

Source: Mother Jones

And that is how the Fed effectively took over control of the United States, as without it, it is game over. This is also why the ongoing presidential election is a farce, and has absolutely no bearing or significance for the future of the US, whose true ruler does not reside at 1600 Pennsylvania Avenue, but instead holds America hostage in a powerful Stockholm Syndrome grip from the deep recesses of the Marriner Eccles building located, paradoxically, on Constitution Avenue.

Don't worry though: like any "true democracy", the real "leader" of the nation will never be eligible for popular vote. Ever.




P.S. It appears that Paul Krugman has promptly taken offense to the realization that Bernanke is "monetizing 75% of all debt." He has even promptly penned an article "Misinformed Monetary Mitt" proving the Noble prize-winning economist really has little understanding of the dynamics of debt monetization.

Here is the reality: under ZIRP, all bonds with a maturity inside the guaranteed 0% envelope are essentially cash equivalents. This means all bonds 3 years and less, which as is to be expected for riskless paper, have a coupon of roughly 0% (except Fed counterparty risk of course, because the only reason they should trade above 0% is if the Fed loses control of inflation and ends ZIRP prematurely before its announced end date now sometime in 2015). When the Treasury issues them the buyers takes on ZERO risk, thanks to ZIRP. This is also the reason why the Fed sells $45 billion in short-end paper each month, as part of Twist sterilization. In essence the only debt issuance that matters for the US Treasury is that of longer-dated issuance. This amounts to roughly $45 billion per month in the 10-30 year window, and is virtually all the debt that the Fed monetizes on the long-end as part of Twist. This is also knows as Flow as we have explained repeatedly, but we don't except someone still stuck teaching 1980s economics to understand this (Goldman explained this here)

But this is not news: back in February we noted that Under Twist the fed has monetized 91% of all LT gross issuance.

Between Twist 1 and 2, the Treasury has not auctioned off one dollar of gross LT debt to the private market, as evidenced by the total inventory of 10-30 year paper which has remained fixed at $650 billion. It is this liquidity limitation that forced Bernanke to monetize not more TSYs, but to commence buying Mortgage Backed debt.

The fact that Krugman does not get this simplest fact about the nuances in the Fed's monetization activities demonstrates just how dangerous it is to assume that just because someone has been awarded a Nobel, they automatically are an expert in something, anything, especially involving numbers.

And because we enjoy spreading knowledge, and for the benefit of even the most math-challenged Economics professors, here again is a simple clip showing how Romney is actually lowballing the real number of relevant gross issuance, which is nearly all in the critical 10-30 year ballpark, and where the Fed will soon be virtually the sole marginal market player.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Daily Bail's picture

This is pretty funny for anyone who hasn't seen it.

Hypocrite DEMs run for the hills as soon as they hear the question.

Gawker Asks The DNC: "Can Americans Trust Mitt Romney To Make The Right Call On Which U.S. Citizens To Assassinate?"

buchesky's picture

Now that's great journalism!

Vagabond's picture

So apparently Mittens understands our economic situation.  Does he think we can survive higher interest rates?  Pretty doubtful.  So what's his plan?  Get into more military conflicts, spend more money, and be the guy in charge when everything goes wrong?

iDealMeat's picture

I'm getting the sense that Bibi the War Pig is gonna let the missiles fly sooner then later..


New_Meat's picture

neither kosher nor tasteful. ;-)

Paul Bogdanich's picture

Speaking of war pigs and borrowed money, there is no way to sove the deficit problem by railing agaist poor Americans when the "defense" budget is running $1.4 trillion dollars a year (include defense proper, VA, DOE nuclear weapons and SSA Survivors benefits as well as SDA disability to war veterans).  So Romney's problem, just like Obama is that they either don't understand or don't care about the underlying problem and the suggestion to cut the poor people off and continue on with the Imperial Spending is less than intelligent.  It ain't gonna work.  All it will do is cause massive social unrest.   

Surly Bear's picture

'War pig? Is that kosher?'

You, Sir, are a genius. Much love to you.


EDIT: drunken spelling

SeattleBruce's picture

So you could cut the defense spending to zero, and it would then cover the $1.2+ Trillion (on the books) annual budget deficits we're racking up, but certainly not the unfunded liabilities of SS, Medicare, Medicaid, et al.  Oh no, forget about $16 or $17 Trillion - try $100 Trillion plus.

Now what Paul?

Look I'm all for ending these crazy never ending wars, but the solution clearly involves more than just slashing the defense budget to smitherines.  It will involve every department of the goobermint and all of the financial system starting with dismantling the FED, and putting in its place a system of sound non-debt based money. 

At least that's how I want the reset to go.

Vampyroteuthis infernalis's picture

It is bad enough to disrespect those with lesser means who are trapped on gov't largess Mitt. Are you going to talk about all of those banksters and other hard hit billionaires who were bailed out by Congress and the Fed? They are most likely going to vote for your sorry ass. Eh, Mormon roach?

Paul Bogdanich's picture

My point was that neither of these guys want to reset or solve anything.  All they are afraid of, and rightfully so, is massive social unrest either here or in Europe.  They are so scared that they are pushing through the NDAA with it's obscene provisions so when we have a war with Iran or the economy collapses or something else happens thay can resort to totalitarian tactics to "keep the peace."  Nobody is having a rational discusiion about anything becase any rational discussion would ential broaching the subject of contracting or ending the empire and that is something that none of them are even willing to suggest let alone entertain.  Ron Paul at least aired the opinion and was barred from the convention (even though he had elected delegets) as his reward.  But if one was rational one would recognize that the medical oligopoly would need to be ended, medical spending would need to be brought down and held below 10% of GDP, social security benefits wouuld have to be means tested and scaled and the empire would have to be cut back at least 50%.  So not willing to entertain even the discussion of any of those inevitable results they are going to bring us to a rather dramatic end.  It is quite rediculous but it happens all the time.  I'm sure the French under Louie the 15th ad 16th were having the same discussions but then as now the rulling classes are so insulated they refeuse to entertain the idea that there may even be a problem with their steadfast leadership.  I would also point out that this is the fear of social unrest.  They know, and rightfully so, that the French, Russian, Spanish, Italian and German political upheavals all ended in disaster, war and millions of dead.  The only modern empire that ended gracefully was the Soviet Union in 1990 through 1996 and I don't see any more Gorbachev's or Putin's on the horizon.          

New_Meat's picture

please check out  silent Calvin Coolidge,

Not sayin' that the Mittztaz are there, but clearly from some non-encumbered people, there is a chance, real movement.

- Ned

Bill Shockley's picture


You have also written...

"Do you remember when the Soviet Union collapsed 20 odd years ago? Remember how fast and without warning it was? Today we realize that the cause was not that Russia was unviable or that their system didn't work but rather the real cause was that the could no longer afford to maintain the Empire they collected at the end of the Second World War. It just got too expensive.
At their core they still had the population, resources and the will to be a viable nation and they are. Increasing standards of living today in fact. Historically it is now clear that the costs of maintaining East Germany, Ukraine, Belaruse, Latvia, Estonia, Poland, Checkoslovakia and so forth got to be too much for them so they had to let them go.
How do you rate the probability that we are in the same shape today with our two foreign wars, 800 military bases, trillion dollar a year defense budget which doesn't really "defend" against anything (which is why we had to create Homeland Security), our fixation with Iran and their desire to expand their influence in the Middle East and so on.
If our Imperial costs somehow vanished and we renogiated the debt repayments sans interest we would find that we had plenty of population, resources, money and so on and wouldn't have to engage in quantitative easing to fund the federal budget.
But anyway please remember the speed at which these things happen. The wall was still standing it was just that literally, one day, there was no money to pay the guards. If history repeats our outposts will still be there but they will have to be abandoned and the teritory ceded. If it happens it will be very quick. As a realist I see no reason why we sould be any different. This of course runs against the belief in American Exceptionalism but that belief is what got us to this point. So let's see.

Paul Bogdanich


Very beautiful stuff and so true. It is not socialism or capitalism per se that is the problem although capitalism is a step toward a socialized world.

It comes down to the cost of things.

No society can support a war machine forever.




Paul Bogdanich's picture

Well I suppose my opinions are pretty clear then.  Hope I don't get rounded up and shipped off because of them but my opinions generally represent my best judgement at the time. 

rbg81's picture

Solve it?  Fix it?  You must be joking.

The reason the Fed is doing what its doing is because there ARE NO VIABLE SOLUTIONS.  When I say this, I mean no solutions that wouldn't cause unthinkable social upheaval.  Basically, we have promised ourselves into a corner where interest rates can NEVER be allowed to go up.  Ever.  If short term UST rates went up, even by 1%, the cost of servicing the debt would render Government instantly bankrupt.  And then someone would have to explain to everyone from the Seniors to the Gangbangers as to why they can't keep their cell phones and eat pork steak. 

Yes, there is not enough $$ in the world to keep the farce going so we make it up out of thin air--because we have no alternative.  Globally, its the same deal.  Everyone is playing to continue the farce because no one can fathom the consequences of pointing out the Emperor has no clothes.  The US is the biggest, baddest MF on the planet.  If we go under, its the start of chaos and ultimately the dawn of a new Dark Age.  So everyone will continue to take our worthless $$ and pretend 'cause they are scared shitless.

Are we clear?

Eally Ucked's picture

We have to understand that any meanigful reform of the system would mean immediate cut to GDP by 50%! And that's what is needed for America to start to grow again!

rbg81's picture

If you cut GDP by 50%, there would be rioting in the streets.  Cities would burn.  And there were be no cops there to stop them 'cause they would be laid off too.  Eventually, the truly useless would die off and then you could start over.  The sad thing is that this would have been easy to head off two generations ago if our Elders had the guts to tell people NO!  They didn't.  As a result, the inevitable reckoning will be very bloody indeed.  Because while the Fed might succeed for a while, the game can't go on forever.  But the longer it goes on, the worse the hangover will be.

Go Tribe's picture

Why can't we just sell off assets by exchanging the Fed's bonds for physical stuff - national forests, gold in Ft. Knox, public highways, etc.? There are far more assets than liabilities, so let's liquidate them. Yep Fed winds up owning a lot of the U.S., but at least it puts us back into a physical dollar backing.

BoNeSxxx's picture

For one, the Fed is a PRIVATELY owned entity.

Two, they didn't exchange anything for the $ they issued in the first place... it's all fiat paper.  To trade that paper debt for real sovereign assets is about as disgusting a proposal as I have heard.

Three, and most importantly, they already own you.

Urban Redneck's picture

That was the Weimar solution.

boiltherich's picture

Not exactly right.  It is true that they replaced the worthless hyperinflated Papiermark with the Rentenmark which was backed in THEORY with all the real estate and productive capacity of Germany at the time, but that alone was not enough, it was the backing promised by governor of the Bank of England, Montagu Norman, and the British government and that assurance was enough to end the hyperinflation of the previous currency, but the backing did not include actual confiscation of public or private hard assets, only the "full faith and credit" of the confiscation authority of the government, very much like the full faith and credit of the taxing authority of the US government today, and after all what is taxation but a form of confiscation anyway?  Oh, and by the way, part of the reason for the downgrades of US credit ratings is that the raters no longer have the FULL FAITH in US ability to tax, because the ability to raise revenues is the ability AND willingness to raise taxes when the outgo so exceeds income, something it has demonstrated it either cannot do economically or politically and no matter what the reason is it is not being done. 

Also, remember that major parts of Germany were occupied post WWI and Berlin operated under stiff conditions imposed by the Treaty of Versailles.  France wanted and was actively seeking to dismember Germany and render her unable to make war again.  You know how unintended consequences work though right?  French and Belgian punishments only made Nazis and Hitler, as well as the the second world war inevitable. 

The thing to ask is how can financial folly today contribute to or make such events inevitable again? 

Moon Pie's picture

Most cogent comment I've read in awhile.  Nice work rgb.  Your are dead right...the whole carosel keeps on spinning.  Had been for years, but is speeding up now. 

I think the seminal event will be centered on "foodstuffs".  Wait til Yemen, Egypt or Libya don't get grain or other shipments...then what happened last week will look like a hang nail....and its going to happen.  They'll blame the Israelis, the "west", etc., but the real culprits will be the central banks.

Coming soon....

Love the pork steak ref.  Bueno.

rbg81's picture

Very interesting article.  I bookmarked it.  One problem with the the FED's plan though, is property taxes.  I've been looking at increasing my real estate holdings too as prices do seem to be ticking up lately.  However, the annual cost of property taxes, even on modestly priced homes/condos is a deal buster.  In many (really most) cases, the property taxes are LARGER than even a no-equity mortgage.  And property taxes are sure to increase signficantly as the burden of pensions weighs on muncipalities.  And let's not even mention the impact of a "fiscal cliff".  I was joking with my wife that soon they'll be giving houses away FOR FREE just to get people to pay the insane property taxes.  But, the more I think about it, the less funny it seems to be.

Urban Redneck's picture


NEITHER party advocates them.


rbg81's picture


There are measures that can be taken.  I don't call these measures "solutions" as they will cause someone (or some group) considerable pain.  Since "pain" is not longer politically acceptable, only measures that can be enacted by total stealth or misdirection (leaving politicians plausible deniability) will be taken.  As we all know, one such measure is ZIRP, or increasingly NIRP.  ZIRP has been screwing savers big time in Japan for decades and now has come to the US.  Basically, ZIRP/NIRP is a backdoor tax on savers.  No doubt that Bernake thinks ZIRP/NIRP justified because these people have the GAUL to want to preserve their capital rather than risk it in the Casino (ahem, Market).  Right now they are the only ones taking it in the shorts because: 1) its being done by policy with no one's fingerprints on it but Bernake; 2) most people are too dumb to realize they're being screwed; 3) under NIRP, the Government can actually make $$ off the deficit and has no restraint on spending (imagine that);  4) And most importantly: people who save are generally responsible citizens to begin with and tend to be the last to riot.

Urban Redneck's picture

The fundamental flaw of any 2-party political system (much less the US model which is built on entirely artificial divisions and lacks any moral, philosphical, or ideological consistency) is that it enables other objectives to take primacy over  success through finding consensus and shared sacrifice.  In the US the bar is 51% in one House and 60% in the Senate, and that beomes the primary objective- a simple tyranny of the majority.

There is an entire generation of politicians in Washington whose entire experience is that this is the natural state of Government and an acceptable method of Governing.

Solutions involve spreading a modest amount of pain accross the largest area (larger than the existing area), thereby minimizng the the burden on each individual.  But solutions are not the objective politicians seek, and that is the problem.

knightowl77's picture

And yet "defense" spending is the only thing Constitutionally authorized....everything else our government spends on (with some minor exceptions) are the responsibility of the state and local governments, and to the people themselves.......it is when the government starts to do other crap....like undeclared wars, rebuilding other countries, unemployment bennies, loans to banks and car companies that truly get fooked!

boiltherich's picture

I do not wish to attack your sentiments about the spending authority of the federal government, or what constitutes state responsibility, but to say the CONSTITUTION of the US only allows for military spending is just not the case. There were a number of items the founders carved out as federal responsibility and these were NOT "minor," as you assert.

Furthermore, they specifically included in the preamble to the constitution a very broad guide as to federal responsibility, and federal discretion of what constituted the "general welfare" of the citizens of the United States. To that crucial end in the constitution they provided for that discretion and duty of the government through a series of checks and balances, which worked brilliantly till say 1913. The fact that those checks and balanced then became corrupted by a few wealthy men does not mean that the USA is a corrupt or destroyed entity, it only means that the brave and the free better get off their asses and fix those checks and balances before it is too late.

I only fear that it might already be too late because in our constitution the founders constructed the nation such that it is inherently a two party system, they deemed the parliamentary system headed by a monarch to be fatally flawed and a certain path to end liberty. They wanted a system where there would be at least two voices (parties), as opposed to the single voice of a king, in order to debate policy, thinking that reasonable people would then come to compromises that benefitted all but with the afore mentioned checks and balances because they knew that the baser instincts of men would be as potent a threat to individual freedom as any tyrant on a throne. They made the constitution and the governing rules adaptable because they knew that the world would not be static frozen in amber forever. That there would always be competing values, competing needs, and competing greeds.

The civil war for example, many here state openly that it CAUSED the end/sharp curtailment of states rights. But that of course is idiotic, it was the assertion of obtuse and fictional states rights (without accompanying states responsibilities I say) that so egregiously violated federal rights that triggered the war not the other way around. One hundred and fifty years later the losers of that argument still bitch about it, but they can't grasp that their theories are marginal at best. They lost, end of story. But that has not stopped them from trying endlessly to control the lives/liberty of others they feel so personally superior to. To them states rights is a simple code to mean your rights are better or more important than mine, or to blacks, or to women, or to the poor, or, well, pick any subcategory you like. In fact they are saying they have rights and the rest have privileges doled out in the measures they deem appropriate and not the other way around, they just can't absorb the fact that rights are equal and freedom and LIBERTY are what we COLLECTIVELY define it to be, not what they have come to assert because they are greedy and do not want to pay for that very nation that bestows any rights in the first place.

fajensen's picture

All it will do is cause massive social unrest.  

"It" cannot work any other way: Social unrest is both neccesary and planned to justify the bloated security/defence circus, to absorb the troops coming home and to disappear dissidents. To keep the racket going, IOW.

trichotil's picture

if properly roasted on a spit bibi could be tasty, tasteful,and kosher; win all around. 8)

sessinpo's picture

To call Bibi a War Pig compared to others such as the US is humorous. With all the rhetoric that has gone on for decades, Israel, if a War Pig, could have laid waste to all of Middle East years ago.

john39's picture

so why is he making the rounds pounding for war to the extent that even U.S. military brass have to publically diss him?

Yes We Can. But Lets Not.'s picture

Um, perhaps he takes seriously the Iranian leadships' constantly stated intent to annihilate the Jews?

Gringo Viejo's picture

Yes We Can: You're in Jew Hater Heaven here. Don't try posting anything positive about Israel or Jews no matter how rational your point.

Doomer's picture

That's funny, because there is absolutely nothing rational about Israel.  It wouldn't exist but for the support of the United States, yet we gain nothing from that support.

Gringo Viejo's picture

I learned as a young man that you never try to teach a pig to sing. It wastes your time and annoys the pig.

Almost Solvent's picture

Fuck yea. It's like taking nailclippers to a gun fight. Aint' gonna work no matter how sharp those blades are.

Dr. Sandi's picture

Wow, down votes for a Robert A. Heinlein quote. What a fucked up world we live in.

Ponzi_Scheme's picture

The Jews that run this global conspiracy of shit are not the same Jews we wave hello across the shrubbery.... Unless you live next to Greedscam, Bernanke, Rubin, Kristol, Bair, Fwank, Blankfein, Shapiro, Cantor, Orzag, Weil, Summers etc... You get it yet ?

RockyRacoon's picture
Camelum saltare doces.

Teaching a camel to dance.  It's an old concept.

moonshadow's picture

thats right gringo and yeswecan. i have found the same to be true- many zerohedgers are anti-semitic. they are very intelligent and knowledgeable but when it comes to seeing plain sense and confronting facts about the mideast they wont face. Won't face how Israel has been merely trying to survive. and how if Israel had wanted to, they could have kicked the sorry asses of all their oppressors long long ago. that shows how much restraint they truly have had. they reserve their military force for last resort when they are pushed against the wall. that's just the historical fact. but this will bring down arrows anyway. it's so peculiar too..because these ZH guys pride themselves on just facing truth and dealing with it