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Will The Fed Buy EFSF Bonds?

Tyler Durden's picture


From Peter Tchir of TF Market Advisors

EFSF, We Hardly Knew Ye...

EFSF is supposedly going to have trouble getting even 2:1 leverage!  Yes, that should have been obvious to everyone.  We have tried to explain why non of the leverage ideas would work.  We even took the step of trying to make it work and showing how many problems there were.  Leveraged EFSF has always been a figment of the imagination of some politicians who had just enough finance knowledge to be dangerous.

Eurobonds, another impossible dream, seemed to have finally been shelved by Merkel.  Again, they sounded great, but were totally unworkable.

Europe has consistently waited too long to do anything, and while they were busy trying to figure out how to leverage EFSF (in spite of virtually every non sycophantic structured credit analyst said wouldn't work) the market has deteriorated.  A few weeks ago, investors barely wanted EFSF bonds. Now the market barely wants German and French debt. 

It is time to face facts.  I think there is a solution to the financial war in Europe.  It isn't pleasant, particularly if you are a mediocre bank, but it may work.  In the meantime, Europe needs to do something to calm the markets so they can spend a month preparing for orderly chaos in Europe.

The EFSF should announce bonds sales to the Fed.  The Fed should purchase 200 billion Eur of EFSF bonds today.  They should commit to further purchases of 100 billion in Q1 and Q2 next year.  The Fed has been dying to do some quantitative easing and has been looking for a liquidity crisis in need of some liquidity.  It has also been looking (quietly) for ways to keep the dollar weaker. 

I'm willing to say that EFSF is more of a liquidity problem than a solvency problem.  There is limited capital available, and what is out there is not looking for even relatively safe European bonds.  I don't think France is "AAA" but I also don't see default as anything but a remote possibility for them, so I will view EFSF's inability to raise money (and there is no way they get to even 440 billion Eur) in this market as a liquidity event.  The EFSF should skip dreaming about a trillion.  440 billion Eur doesn't solve anything, but it can buy 3-6 months at a minimum to keep the markets somewhat stable so a real plan can be put in place.

I am not sure the EFSF wants to do something this simple, but they need to look at the facts and accept the reality that they can barely issue, let alone leverage up.  This would give them 200 billion immediately and give the market comfort that they will get their hands on the additional 200 billion as PIIGS bonds mature.  400 billion of fresh new money should be enough to plug some holes while Merkozy and the technocrats finally try and work out some painful, but realistic solutions to the problem.

I am not sure the Fed could buy EFSF bonds, but Ben seems to have fewer restrictions than any other entity on the planet.  One of the guests that I was on with at Bloomberg TV mentioned that "the Fed wants to print if the market has a sleepless night".  US stocks are down about 10% from the "close your eyes and pretend it works" rally of October 27th.  Could the Fed use that as a way to get involved in Europe?  If they buy the EFSF bonds, it should stabilize the US stock market for a bit.  It is less risky than buying stocks or HY bonds, which might have a more direct impact on stocks, but are more of a mandate stretch.  They can buy mortgages, but seriously, what will that do?  I think they could justify buying EFSF bonds (at low yields) in an effort to promote market stability and hence employment, and if they do it in Euro's the combination of "printing" and "buying euros with that newly printed money" should put a lot of pressure on the dollar.  In spite of the inflationary risks associated with that, Ben wants the dollar weak so exports can be helped.

While doing this, the IMF should announce that they will take over all the previously agreed to bailouts of Ireland, Portugal, and Greece.  The IMF should be able to do it - they seem to have enough SDR's and guarantees to do it.  Rather than calling on money from their members, they should issue bonds and have the ECB buy them.  The ECB can buy the IMF bonds.  This shouldn't be too negative for the currency because the Fed actions would more than offset this printing.  The IMF can then take care of all the previously agreed plans to those 3 countries, giving the EFSF more flexibility with its 400 billion of fresh money.

I think this is very simple and can only be used to buy time, but the Fed, ECB, and IMF would all be involved showing co-ordination that everyone seems to like.  It wouldn't put pressure on the secondary bond market since they aren't really issuing and therefore aren't putting more strain on banks' already stretched balance sheets.  It also seems to be less of a mandate stretch than many other solutions I have read.  The IMF saves countries, the Fed does QE, and the ECB does something (ok, the ECB role is less clear, but that has been true from the start of this).

If you could figure out a way for China to play, or China and Russia, the plan would have even more credibility and might buy a few more months.  Maybe China would commit buying EFSF bonds - regular bonds, not the leveraged ones that the EFSF couldn't even bother to do a term sheet for.  On a side note, several EFSF members should be fired, replaced or demoted, for their performance.  Trying to raise money on something so complex without even a pitch-book is just pathetic and would not be condoned at even the worst run investment bank.

Anyways, it is not a "Grand Plan" but I think would buy time to put in a real solution.

It may be a good time for Greece or the ECB to remind banks that even on Euroclear, bond payments can be made to specific holders and don't have to go out to all holders - it would be default, but banks don't hold all the cards.



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Fri, 11/25/2011 - 08:56 | 1912491 GeneMarchbanks
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Fri, 11/25/2011 - 08:59 | 1912497 knukles
knukles's picture

Stop it you guys! 
Don't give them any more bright ideas.

Fri, 11/25/2011 - 09:03 | 1912504 GeneMarchbanks
GeneMarchbanks's picture

Ask Peter how this 'plan' helps deal with the solvency issue since this is clearly another liquidity solution? Also, will there be Unintended Consequences? 

Fri, 11/25/2011 - 09:09 | 1912512 GetZeeGold
GetZeeGold's picture



Sooooooo....basically the US taxpayer should bailout Euroland.


That's full tilt retard there.


Our ancestors crossed an ocean to get away from those guys.....and that was a really long time ago.

Fri, 11/25/2011 - 09:18 | 1912555 living on the edge
living on the edge's picture

The Fed needs to stay the fuck out and better yet needs shut down. There should not be a private entity with access to taxpayer funds that could even contemplate this ridiculous idea of a bailout/fuck the US citizens. The US taxpayer does not need to finance Europe.

The solution for Europe is simple. Default... 

Fri, 11/25/2011 - 09:27 | 1912572 Gief Gold Plox
Gief Gold Plox's picture

Default? Like Greece? Sure... will they allow it next time around and will it be a credit event? You know, i'm starting to see a method to this insanity. Hm... does that make me qoo-qoo?

Fri, 11/25/2011 - 10:40 | 1912725 hedgeless_horseman
hedgeless_horseman's picture



Ah yes, not suprising to see more synchronized diving.  When these purchases occur, my kinky fantasy is that the Fed books the EFSF purchase as an expense (gifts) rather than as assets, because they will NEVER be paid off.  Rolled, sure.  Paid off, never.  

Rename it the LEFSF (Long Emergency Fake Solvency Fund).

Fri, 11/25/2011 - 11:14 | 1912830 IBelieveInMagic
IBelieveInMagic's picture

You folks are operating under the false presumption that the current global financial system is not to the advantage of the US. You are completely wrong on this front!  Net, net it is hugely advantageous to the US (the distribution of the spoils is a different matter).

The US Fed is going to, at the end, do whatever it takes to support the current arrangement. Period!   

Fri, 11/25/2011 - 11:31 | 1912886 Harlequin001
Harlequin001's picture

The Fed knows that a euro collapse will undoubtedly send a great deal of this cash money into commodities and if that happens it is the end of the line.

It will buy because it must...

Sat, 11/26/2011 - 14:15 | 1915471 samslaught
samslaught's picture

The ECB won't print money because they know the FED has to.  The credit event will hit us just as hard as it hits Europe.  To say this is a European crisis is missing the point.  This is a global crisis and worse yet for the US is that the EURO actually has less flaws than the dollar (no mandate for full employment for 1 nation and hasn't defaulted twice on gold) and will most likely replace it as the dominant reserve currency if TSHTF.

The current system has been great for the US, funny that now that the FED is trying to save this advantageous system because of the failure of American politicians, the American people are screaming at them to stop.

Fri, 11/25/2011 - 12:34 | 1913082 rufusbird
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Fri, 11/25/2011 - 13:23 | 1913243 DocinPA
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Better yet, balance your effing budgets and pay your bills.  Then you won't need the ECB, IMF, Teh Bernank or anybody else.  Morons.

Fri, 11/25/2011 - 13:27 | 1913249 cranky-old-geezer
cranky-old-geezer's picture



There should not be a private entity with access to taxpayer funds ...

More accurately, the Fed is a private institution that can tap people's wealth and loan it to whomever they want.

Non-redeemable paper currency like the US dollar is a simple easy way to take people's wealth without permission. Simply by printing more currency the Fed grabs a little of your wealth and my wealth and everybody's wealth and loans it to someone.

Why is the Fed taking a little of your wealth and my wealth and everybody's wealth? Because printing more dollars increases the amount of dollars in circulation (inflation), reducing the value of dollars in your pocket, my pocket, everybody's pocket.

Banks don't create wealth. Banks merely borrow wealth from others and loan it out at interest.

In a gold redeemable currency where banks can't print more currency at will, wealth is borrowed from others and they earn a small amount of interest on it.

In a non-redeemable currency like the US dollar where banks can print more currency at will, they don't have to borrow people's wealth and pay interest on it. They can take it. Without permission, without people even realizing it.

THAT is why central banks hate redeemable currency and insist on non-redeemable currency. It allows them to take people's wealth without asking, without people even realizing it, because they take a tiny about from everybody using that currency. The theft is equally distributed among everybody using that currency.

And yes it is theft. Because the wealth is never given back.

Giving the wealth back requires the Fed to bring those dollars back in and take them out of circulation, reducing the amount of dollars in circulation (deflation), increasing the value of dollars in your pocket, my pocket, everybody's pocket.

When has the Fed ever reduced the amount of dollars in circulation, increasing their value?

Actually it has happened occasionally. Decades ago.

But over the 98 years of the Fed's existence the amount of dollars in circulation has grown steadily, and in the past three years has grown rapidly. It's why the US dollar has lost 1/3 of its value since '08.

Sat, 11/26/2011 - 14:58 | 1915582 samslaught
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you can redeem your dollars for gold any time you want.  The FED isn't stealing your wealth.  They are debasing a medium of exchange.  You are only losing wealth if you are using that medium of exchange as a store of value.  A historically foolish thing to do.  In fact they have gone one further for you.  They have maintained an artificially high value for our dollars allowing you to purchase vast quantities of other people's stuff, including gold, for a big discount.

Fri, 11/25/2011 - 09:20 | 1912558 i-dog
i-dog's picture

Just to show you that they harbour no bad feelings for your ancestors running away from them (and beating them in a revolutionary war), they are now willing to forgive you and let you send them some money ... errr, LOTS of money.

Fri, 11/25/2011 - 11:46 | 1912778 LawsofPhysics
LawsofPhysics's picture

Fair enough, but you forgot the bit about this "all being orchestrated by the banking families/class".  Follow the interest on the debt and who ultimately holds the debt, it all leads to the same few.  They have burnt Europe to the ground before, and they will be all too happy to do it again (along with every single other indebted country that has any sort of valuable physical assets or resources.  The real masters of the world, who are sitting on the other side of all this debt (collecting interest - money for nothing), are very much aware of the laws of Nature and physics and just what the growth limitations are.  They will give humanity a choice, lower your standard of living or kill each other until our growth model starts working again.  The only question that really remains is will history repeat itself or will the world wake up to collectively realize that no agency or institution can guaranty anything regarding your quality of life (especially if you make stupid choices) and work together to throw off the chains of debt?

As optimistic as I would like to be, 6000+ years of human history would suggest otherwise. 

Fri, 11/25/2011 - 09:35 | 1912594 oogs66
oogs66's picture

yeah, but we sent our young there to die to save them from themselves in 1944

Fri, 11/25/2011 - 09:56 | 1912647 Manthong
Manthong's picture

The Fed IS them.

Fri, 11/25/2011 - 09:52 | 1912636 SheepDog-One
SheepDog-One's picture

Peter figured it out...US bail out Euro...

Man, everyones minds are snapping. 

Fri, 11/25/2011 - 11:12 | 1912823 ISEEIT
ISEEIT's picture

So I admit that I read his article at 'stupid' speed and maybe didn't comprehend it, but the impression I have is that he is speculating on a POSSIBLE move? Not ADVOCATING for the move?

I don't really see his move taking place. It does seem that fear is desired right now and cooperation between the western and eastern axis is not so likely. China & Russia stepping in to participate in the can kicking exercise that would allow Europe more rope while supporting obaumma's reelection?

If it does happen we are quite truly fucked.

Fri, 11/25/2011 - 09:09 | 1912522 The Limerick King
The Limerick King's picture



The FED has no choice but to buy

The Euro contagion is nigh

The will buy with both fists

Using QE and Twists

These Elites are unwilling to die

Fri, 11/25/2011 - 09:15 | 1912528 GetZeeGold
GetZeeGold's picture



Let the elites die......they're not really elite to begin with.

Stop bailing them out.

Let the fail ensue.

Fri, 11/25/2011 - 09:23 | 1912565 i-dog
i-dog's picture

They are a bunch of religious zealots and should be exterminated to prevent them [in]breeding further!

Fri, 11/25/2011 - 09:39 | 1912573 GetZeeGold
GetZeeGold's picture


Never bring up extermination where Europe is involved.....that's just poor form there.

Fri, 11/25/2011 - 09:53 | 1912624 The Limerick King
The Limerick King's picture

I must apologize for broaching this topic.....I was a little too quick on the rhyme.  I don't advocate violence in any form. I meant it as a metaphor for the "system" that allows for the misappropriation of wealth through deep regulatory and political capture. In a just society, both the rich and the poor get richer together....this has not been the case for the past 30 years.

Normally I would edit this type of faux pas, but the replies won't allow me to do this....perhaps Tyler could have some new code written to enable this?

Fri, 11/25/2011 - 10:15 | 1912685 Hulk
Hulk's picture

I agree entirely LK, that is, with your Limerick. OFF WITH THEIR FUCKING HEADS !!!

Fri, 11/25/2011 - 10:23 | 1912699 GetZeeGold
GetZeeGold's picture



Yup....right after we note that you are one of them.

Fri, 11/25/2011 - 10:42 | 1912741 APC
APC's picture

Apology accepted!  Dang, well said your highness.

Fri, 11/25/2011 - 10:59 | 1912791 The Limerick King
The Limerick King's picture

Much thanks APC.

Fri, 11/25/2011 - 11:17 | 1912841 ISEEIT
ISEEIT's picture

Perhaps you could pay for that?

Just 1/2 kidding.

Good comments.


Fri, 11/25/2011 - 10:54 | 1912776 JungleJim
JungleJim's picture

Of course not, it's much better to slowly strangle the honest working population.

Fri, 11/25/2011 - 09:14 | 1912543 knukles
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Gene!  I was gonna ask exactly that, but we must restrain ourselves, for MDB as arisen to bless us with wit and wisdon.  I shall defer accordingly.
(But of course it is all merely monetization wrapped in the guise of sophisticated financial engineering salving the hubris of evil.)

Fri, 11/25/2011 - 11:49 | 1912935 donsluck
donsluck's picture

I think you missed the point. It's a prediction of a possible response to the Euro crises which, I think, could happen. It's not an attempt at offering a true solution.

Fri, 11/25/2011 - 12:11 | 1913016 LynRobison
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Discussions of potential "solutions" are completely irrelevant. No one who reads ZH gets to decide any of this. The powers that be, the cabal, the power elite, they are the ones who are deciding what will happen. Now that everyone and every institution is deeply in debt, and now that the cabal owns that debt, they are going to intentionally crash the financial and monetary system to destroy everyone's ability to pay those debts. Then the cabal will own everything. In the wake of the destruction of the Euro and the Dollar, the cabal will come out with a world currency, and they will be the Lords of the entire world. We will have a feudal system with the cabal at the top.

Fri, 11/25/2011 - 09:06 | 1912513 MillionDollarBonus_
MillionDollarBonus_'s picture

Give them bright ideas? As if doomer redneck day traders could give economic advice to top Ivy League economics grads at the Federal Reserve? I have long been an advocate of this policy, and i am confident that Dr Bernanke will come around because the EFSF needs help. Many of our financial institutions have exposure to EU sovereign debt, including some of our PRIMARY DEALERS. These institutions must be protected AT ALL COSTS because they are vital to American prosperity and freedom.

Fri, 11/25/2011 - 09:09 | 1912523 GeneMarchbanks
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Fri, 11/25/2011 - 09:22 | 1912546 Gief Gold Plox
Gief Gold Plox's picture

Wouldn't be funny if it wasn't true.

Oh wait! But, I'd really really like to see what ISDA manages to pull out of it's ass when the next EU country defaults. "Voluntary under threat of nuclear fallout" comes to mind.

Fri, 11/25/2011 - 09:20 | 1912560 dcb
dcb's picture

you have it so right except for one word:

Many of our financial institutions have exposure to EU sovereign debt, including some of our PRIMARY DEALERS. These institutions must be protected  destroyed AT ALL COSTS because they are it is vital to American prosperity and freedom.

Fri, 11/25/2011 - 09:22 | 1912562 imaginalis
imaginalis's picture

Top Ivy League economics grads are well trained to follow instructions in herd like fashion. 

Fri, 11/25/2011 - 09:32 | 1912585 GetZeeGold
GetZeeGold's picture


Paul Krugman......former Enron economic advisor. Should definitely listen to him......Google it if you don't believe me.

Fri, 11/25/2011 - 09:48 | 1912623 paint it red ca...
paint it red call it hell's picture

i remind everyone, ivy leaguers brought us this mess.

thank you sir, may i have another??????

Fri, 11/25/2011 - 09:55 | 1912643 itstippy
itstippy's picture

Precisely, Mr. Million Dollar Bonus. Our Primary Dealers are the bulwarks of Truth, Justice, and the American Way; they must be protected at all costs. American economic health and growth is entirely dependant on the health and growth of our Primary Dealers.  They MUST remain robust and firmly in exponential growth mode.

I would, however, argue that it is outside of the Federal Reserve's mandate to purchase EFSF bonds.  It is clearly the U.S. Defense Department's domain, being a matter of National Security.

Fri, 11/25/2011 - 10:08 | 1912670 MillionDollarBonus_
MillionDollarBonus_'s picture

"I would, however, argue that it is outside of the Federal Reserve's mandate to purchase EFSF bonds.  It is clearly the U.S. Defense Department's domain, being a matter of National Security."

I appreciate your perspective, and I agree that it is certainly a matter of national security. But the MF Global incident shows that a Primary Dealer bankruptcy can have a significant influence on price stability and hence I believe this issue is firmly within our Federal reserve's dual mandate.

Fri, 11/25/2011 - 10:17 | 1912688 i-dog
i-dog's picture

"MF Global incident ...... influence on price stability"

That's just conjecture. One bad apple. Won't happen again. Next time will be different.

Fri, 11/25/2011 - 10:46 | 1912738 itstippy
itstippy's picture

Your point about the unfortunate MF Global incident's impact on price stability is well taken; I had overlooked that important aspect.  My bad, and I see why you earn 7-figure bonuses.

The MF Global issue is not yet resolved, but it's in good hands and an equitable ending is not in doubt.  Since the price stability concerns are domestic in natuie, clearly intervention by the Federal Reserve and/or Department Of Homeland Security would be both desirable and fully justified.  

Fri, 11/25/2011 - 10:51 | 1912767 i-dog
i-dog's picture

Good point. Maybe some TSA groping through Corzine's pockets may turn up a few hundred billion of the "mislaid" funds?

Fri, 11/25/2011 - 11:00 | 1912797 JungleJim
JungleJim's picture

Then by your own reasoning and the Patriot Act, they are Terrorists and can be prosecuted. maybe even executed !

Fri, 11/25/2011 - 11:54 | 1912959 donsluck
donsluck's picture

I noticed your use of the word "incident" when you actually meant "heist".

Fri, 11/25/2011 - 11:35 | 1912899 XitSam
XitSam's picture

"I would, however, argue that it is outside of the Federal Reserve's mandate to purchase EFSF bonds."

And when has the Fed actually concerned itself with its Congressional mandate?

Fri, 11/25/2011 - 10:18 | 1912691 TuborgGold
TuborgGold's picture

At ALL COSTS includes the bankruptcy of the nation while the ivy league geniuses get tens of millions in compensation for running the whole system into the ground.  there is no more american prosperity and freedom.   we are slaves to this system and  the sooner the whole thing burns down the better. 

Fri, 11/25/2011 - 10:37 | 1912730 Elwood P Suggins
Elwood P Suggins's picture

Ben the Magic Dragon

Flies through the air

All around the world it goes

Shitting money everywhere

Someday in the future

Real inflation will arrive

Then every single one of us

Will be lucky to survive


Fri, 11/25/2011 - 09:08 | 1912520 knight99
knight99's picture

i have been reading Peter Tchir of TF Market Advisors on ZH for awhile now and this has to be one of the worst post i have ever seen. have you not seen what the inflation rates are in the US. This would KILL the middle class to help out lazy fking europeans. Simply amazing he would write this after all his intelligent post previously.

Fri, 11/25/2011 - 09:13 | 1912540 spinone
spinone's picture

So they kill two birds with one stone.

Fri, 11/25/2011 - 09:34 | 1912591 Jonathan E
Jonathan E's picture

"Lazy fking europeans"? Too lazy to monetize their own debt maybe.

Lazy is printing your own money.

Fri, 11/25/2011 - 09:41 | 1912610 g speed
g speed's picture

And don't forget stupid--gave their guns to the gov't so they could be protected---lolololololo

Fri, 11/25/2011 - 09:46 | 1912622 GetZeeGold
GetZeeGold's picture


Naw.....just sell them to the Mexicans. It's brilliant if you think about it.

Fri, 11/25/2011 - 09:50 | 1912629 Jonathan E
Jonathan E's picture

I read a lot of tough talk but really I think you'd rather just all kill each other.

Fri, 11/25/2011 - 11:50 | 1912940 riphowardkatz
riphowardkatz's picture

1/2 are suicides. remove gang on gang violence and you end up at the bottom of that chart,F'ing moron

Fri, 11/25/2011 - 11:58 | 1912969 donsluck
donsluck's picture

Proving what, that gang on gang violence isn't, actually, violence and doesn't affect citizen safety?

Fri, 11/25/2011 - 12:13 | 1913020 riphowardkatz
riphowardkatz's picture

A gang member killing another gang member is a net positive for citizen safety. One less thug on the streets and another with a legitimate reason to be arrested and incarcirated for life. A 2 for 1 if you will. 

Plus the machete/switchblade/fists/beat downs/chinese stars/numchucks work for lots of gangs, they would kill each other with or without guns.

Fri, 11/25/2011 - 17:01 | 1913888 falak pema
falak pema's picture ur reasoning

Fri, 11/25/2011 - 09:52 | 1912635 knight99
knight99's picture

Dont blame the US goverment stupidity on that of the American people. They are still one the hardest working nations out there. Europeans get to take 5 weeks vacation and retire at 55 with full pension and benefits Americans cant even dream of.

Fri, 11/25/2011 - 10:04 | 1912668 Jonathan E
Jonathan E's picture

The average retirement age in the US is 62, it is 61 in Greece, 62 in Germany and 59.4 in France (the lowest).

I keep hearing and reading about how US citizens are the most hardworking blah blah, usual propaganda that the whole globe has to suffer. It's embarassing.

So why the is the US' budget deficit so fucking atrocious?

Fri, 11/25/2011 - 11:54 | 1912955 riphowardkatz
riphowardkatz's picture

When you look at the wealth the US produces per person vs Greece then you would expect the US retirement age to be significantly lower than an unproductive country like greece. 

Fri, 11/25/2011 - 16:59 | 1913879 falak pema
falak pema's picture

its net wealth production per capita that counts; ((GDP+(exports-Imports))/capita); and in those terms the US has been living more on debt than the whole world combined; Greece is not as much in debt as US globally; if you include off BS bank debt to private sector and public; and every day the US increases its deficits in huge amounts.

Fri, 11/25/2011 - 09:49 | 1912627 kill switch
kill switch's picture

This would KILL the middle class

What middle class? In the U.S.? hahahahahahahahaha the food stamp capitol of the world.

Fri, 11/25/2011 - 10:24 | 1912702 ZeroPower
ZeroPower's picture

Printing more currency would keep the USD "at bay" and ensure exports grow as theyre supposed to - you know, to get rid of any possible looming recession.

Im not a fan of this plan - but its at least somewhat feasable unlike the plan of a plan of a never released plan which was all the hubbub back in Oct.

Fri, 11/25/2011 - 15:54 | 1913694 lotsoffun
lotsoffun's picture

i actually think this is what is going to happen.  1 - they can't allow a crash to US markets during shopping season.  they have to see 'robust' retail sales.  2 - 400 billion isn't enough to save anything, but it will delay it into next year.  new year is only 5 weeks away, and people have plenty of other things on their minds.  3 - wall street bonuses need to be paid out.  can't have a collapse in that.  etc. etc.  they will kick the can as far as possible.

mr. b.b. already knows that he is going to lose his job.  i don't understand what motivates this man, (and i think i do understand what motivates lloyd, and jamie for example), but, he already knows he's finished, so he's going to go full out.

this was a very good thread in the beginning.  inflation doesn't exist.  ben has told you over and over.  and besides, if it does, he needs 15 minutes.  he also told us last week that if we want 'returns on investments' buy stocks.  he knows he loses in the end, but it's not his money, so at point, he needs to extend for as long as he can get away with it.

and then - possibly - after he goes and everything falls apart - he can say 'but you see, when i was printing, everything was fine, and it would have been fine if you had let me keep on printing - so it's all YOUR fault, you dummies.  you think i got the phd for nothing??'



Fri, 11/25/2011 - 10:00 | 1912658 MFL8240
MFL8240's picture

Look at their current balance sheet, I think some bonds from Greece could improve the grade of what they are holding.

Fri, 11/25/2011 - 15:56 | 1913696 lotsoffun
lotsoffun's picture

compared to maiden lane - yes.


Fri, 11/25/2011 - 15:56 | 1913699 lotsoffun
lotsoffun's picture

or maybe made in spain?


Fri, 11/25/2011 - 12:28 | 1913069 masterinchancery
masterinchancery's picture

If Bernanke does any such thing, he should be prosecuted, after being impeached.

Fri, 11/25/2011 - 08:56 | 1912492 Mongo
Mongo's picture

"iT MaY WoRk" ... I see a potential WilliamBanzai7 theme here...

Fri, 11/25/2011 - 09:47 | 1912615 williambanzai7
williambanzai7's picture

I can't wait to find out what the real solution he is suggesting we should be buying time for is.

I think he's getting scared.

You know how in a three card monty game all of a sudden all that is left is a card board box and a newspaper laying on the floor. We are just about there...

Fri, 11/25/2011 - 12:37 | 1913089 rufusbird
rufusbird's picture

A good reminder, when people start to buy time, it is time to look for the exits...

Fri, 11/25/2011 - 16:01 | 1913710 lotsoffun
lotsoffun's picture

wb7 - remember the first time i lost money on that in nyc.  the second time, i actually won - but they refused to pay out and then they started to circle.  i remember well how suddenly, the real players disappeared and i had 4 or 5 nasty looking characters suddenly appear.  after some polite protest, i got the message.

mf global clients don't look much better to me.  and bernake and company don't care.  i really think they are going to print to infinity.  they know the end result, but they are addicted and can't stop.  besides, all the while, they skim off more.  the 3 card monte guys all know that at some point, they are going back to rikers.  but do they stop?  same people, same mentality, better university degrees.



Fri, 11/25/2011 - 09:14 | 1912499 pmcgoohan
pmcgoohan's picture

It would be suicide for the Fed to be seen to bailout Europe so directly.

And the markets are way way too high, and the election is way way too close.

Fri, 11/25/2011 - 09:43 | 1912612 g speed
g speed's picture

and renewal of the charter is just around the corner-----just thinking

Fri, 11/25/2011 - 09:02 | 1912502 BW
BW's picture

They are selling German bonds, and buying French bonds looks like markets are sending a message, print Germany or you will be paying higher interest rates, you choose.

Fri, 11/25/2011 - 16:49 | 1913855 falak pema
falak pema's picture

u said it; the GS squid sqeeze on Merkel. Its you or it us... one has to crack. and start printing...

Fri, 11/25/2011 - 09:02 | 1912503 orca
orca's picture

If the IMF lends to the ECB and the ECB lends to the IMF, and they net the positions out, then all problems are solved. Am I Paul Krugman or what?

Fri, 11/25/2011 - 09:08 | 1912521 knukles
knukles's picture

True Krugmanittic thought.
Add in tablespoon of it's all Bush's fault, a dose of those fucking Republicans stopping progress when we had a supermajority, a pinch of the Messiah's Blessings and a twist of demented logic and you've got the froward by Paul to Tom Freidman's new book, edited for astounding clarity and plagarism by Maureen Dowd.

That sir, is sheer brilliance.

Fri, 11/25/2011 - 09:44 | 1912616 g speed
g speed's picture

close--but you left out the war thingy

Fri, 11/25/2011 - 12:30 | 1913073 masterinchancery
masterinchancery's picture

And the Alien invasion.

Fri, 11/25/2011 - 09:03 | 1912505 Curtis LeMay
Curtis LeMay's picture

Will The Fed Buy EFSF Bonds?

When PIIGS fly...

Not even bin Bernanke is that stupid - no one is buying those junk bonds...

Fri, 11/25/2011 - 09:27 | 1912574 max2205
max2205's picture

He bought all the MBS. don't put it past him. He's insane. Repeat repeat

Fri, 11/25/2011 - 11:07 | 1912811 JungleJim
JungleJim's picture

No, he's not insane, he's just working for a different "tribe" than than the American public.

Fri, 11/25/2011 - 09:29 | 1912576 i-dog
i-dog's picture


"Not even bin Bernanke is that stupid"

Sez who?

Fri, 11/25/2011 - 09:37 | 1912598 oogs66
oogs66's picture

he is worse than stupid, he thinks he is perfect and doesn't think he can be wrong....i wish he was stupid

Fri, 11/25/2011 - 10:25 | 1912705 TuborgGold
TuborgGold's picture

Stupid?  I thought he was brilliant.  Almost as smart as Timmy, who assured Cramer that a Europe implosion was off the table.  So what's to worry, let's go shopping.

Fri, 11/25/2011 - 16:03 | 1913714 lotsoffun
lotsoffun's picture

and a US downgrade.

and a tax return.

smart guy.  i haven't seen any downside for him yet as to his lying.....



Fri, 11/25/2011 - 09:04 | 1912506 ZippyDooDah
ZippyDooDah's picture

I'm surprised to see such a lame can-kicking proposal posted on ZH.  WTF.

Fri, 11/25/2011 - 09:21 | 1912561 GetZeeGold
GetZeeGold's picture



Just when you think no one is that stupid.....think again.

Fri, 11/25/2011 - 09:04 | 1912507 belogical
belogical's picture

BS, none of us get bailed. Cut your damn budgets. I run a small business and my budget is down 20% from 2007. Time for the rest to tighten too.

If you want QE, then put money in people's pockets and have a temporary futures restriction on specs for food and fuel

Fri, 11/25/2011 - 09:10 | 1912508 o_rly
o_rly's picture

This is more status quo anti-democratic markets rule the world nonsense. I'm not saying I'm advocating for a meltdown, but lets let the deleveraing process take its hit and have politicians/policy makers focus on expanding their local economies instead of worrying about expanding the world economy. While painful, this globalizatino project needs to shrink in order to save what little bit of "humanity" is left in the Western world. Letting deflation set in might not be such a bad thing at this point. Endless growth and this targeted inflation seems to be benefitting only a very few, financial analysts such as Tchir included. 

And how does this not bring on more moral hazard? It's just more transferring of bad debts on to the balance sheet of citizens. This elite cares more about each other than their own countrymen, a fatal flaw in this global "meritocracy" that will not be remedied with more bond purchases and endless stock market growth.

I hate to be cynical, because I usually enjoy reading Tchir's comments, but I wonder if he has any longs on the line that he is concerned about. We all know the major banks, policy makers, virtually everyone in power has a lot of money invested in the stock market. We should all know the top 10 percent owns close to 80 percent of stock market assets (in America). These people are desperate to keep their assets and have them grow, and will throw every last bit of their being into making sure the status quo continues even if the outcome is bad for the rest of us. 

Fri, 11/25/2011 - 09:51 | 1912632 g speed
g speed's picture

-but the're going to lose it all aren't they?  Or most of it and maybe their strangle hold on the world--

I love the times I'm living in--

Fri, 11/25/2011 - 09:04 | 1912509 bluehorsesandal
bluehorsesandal's picture


Your comments are usually spot on, but let me ask you a question.

what did y smoke this morning?

Fri, 11/25/2011 - 09:04 | 1912510 Gringo Viejo
Gringo Viejo's picture

Will a fart vanish in the wind?

Fri, 11/25/2011 - 09:41 | 1912607 GetZeeGold
GetZeeGold's picture




Fri, 11/25/2011 - 11:12 | 1912826 JungleJim
JungleJim's picture

Soverign "farts" are ephimiral, Gold "farts" are eternal.

Fri, 11/25/2011 - 12:09 | 1913008 RichardENixon
RichardENixon's picture

Mine usally don't, unfortunately.

Fri, 11/25/2011 - 09:05 | 1912511 oceanview76
oceanview76's picture

A sitting US President residing over the worst recession since the Great Depression, still in his first term, would in no way, shape or form allow the Fed to buy foreign bonds.  Add in the lowest approval ratings of Congress for a long time, a social movement like OWS, ongoing angst from bailing out the TBTF banks, high unemployment here at home (in the US), a gridlocked "Super Committee" that is unwilling to compromise get our own debt crisis under control,  and I think this is a fantastical fiction story that couldn't possibly become a reality.  

Fri, 11/25/2011 - 09:11 | 1912534 Jayda1850
Jayda1850's picture

 I think this is a fantastical fiction story that couldn't possibly become a reality. 

Which is exactly why this will probably be what happens. In this bizarro world, usually the most fantastical impossibility becomes the reality.

Fri, 11/25/2011 - 10:40 | 1912734 Snidley Whipsnae
Snidley Whipsnae's picture

Yeah, the banksters misplaced Occam's Razor.

Sanity will return when someone finds it... and uses it to apply haircuts where needed... pretty much everywhere.

Fri, 11/25/2011 - 09:07 | 1912514 falak pema
falak pema's picture

The attitude of the FED to the breakdown of Eurounion and Euro melt will be interesting; their whole FED strategy as the squid controlled financial system hinge on avoiding a rush to USD haven from world markets as it will kill risk assets, as will the financial reverberations destroy the US financials, notably the Pds. Only way to high, dry land, even provisionally, is to print to infinity. 

Fri, 11/25/2011 - 09:06 | 1912515 PulauHantu29
PulauHantu29's picture

Monetization seems to be the only way out combined with some assets destruction. Seems the CBs will decide (instead of markets) who loses and who wins when they open the Fed window to the EU.

Fri, 11/25/2011 - 10:10 | 1912519 Quintus
Quintus's picture

"The EFSF should skip dreaming about a trillion.  440 billion Eur doesn't solve anything, but it can buy 3-6 months at a minimum to keep the markets somewhat stable so a real plan can be put in place."


If such a plan was feasible, it would have been proposed by now.  There is no 'Real plan'.  Any proposal must involve massive destruction of debt and this will certainly run aground on the rocks of political impossibility.

This is the end of the road down which politicians and bankers the world over have been busy kicking their cans since 2007/8.  

If anyone can think of a plan that makes several trillion of excess debt disappear without making several trillion in 'Assets' on the other side of the ledger vanish, then such a towering intellect could surely progress to solving the world's energy problems by inventing the perpetual motion machine.

Fri, 11/25/2011 - 12:49 | 1913133 rufusbird
rufusbird's picture

Until "real plan" is put into place. Maybe they can appoint a "Super Committee"

Fri, 11/25/2011 - 09:09 | 1912525 dcb
dcb's picture

When push comes top shove the fed will step in. It doesn't matter. But I'd love to see him get in front of congress and explain buying them when the ecb won't. Maybe it will work to take down the fed another peg. I also think these programs should only be started when the market is at least 10% below long term cyclic pe values, and never run above fair value. attempting to keep the markets above fair value got us into this endless stimulus. we aren't close to that low yet.

Fri, 11/25/2011 - 09:13 | 1912541 o_rly
o_rly's picture

Ben can do whatever he wants. There would be a big dog and pony show in front of congress that would get a little airtime and then poof, who cares? Does anyone see Greenspan in an orange jumpsuit? No, he is still a "respected" economist despite a general consensus that he had a huge role in this crisis.

At the end of the day, most Americans won't even know it happened. It's true! Ben could spend trillions upon trillions and the whole system could blow up and people would blame Bush or Obama without even thinking Bernanke might have had a role himself.

Fri, 11/25/2011 - 09:39 | 1912603 oogs66
oogs66's picture

greenspan in a jump suit, ha, I just wish he wasn't still idolized by so many.  jump suit would be more fitting, but somehow he still has people who almost worship him

Fri, 11/25/2011 - 10:10 | 1912676 fajensen
fajensen's picture

The EU can print (and backdate) new derivatives faster than Benzedrine Ben can buy them at par! The FED buying that deluge of debt indirectly via the ESTF and failing will blow that wide open and the "stick the duff securities to taxpayers"-game will be over.

Fri, 11/25/2011 - 09:09 | 1912527 DormRoom
DormRoom's picture

Feds can no longer print.   My theory is that any new massive printing program will collapse USD-JPY, and implode Japan.  So yeah---If the Feds wants to ruin Japan, print ahoy.


So no QE3. No helping Europe.   All talk. no action.  Unless we have to deal with EZ & Japan.. Then who will bail out Japan?

Fri, 11/25/2011 - 09:12 | 1912539 youngman
youngman's picture

I think Japan is the sleeper here.....I have this bad feeling that they will be the first all eyes are on the EU....Japan craters...

Fri, 11/25/2011 - 10:12 | 1912681 oogs66
oogs66's picture

treasuries are down with futures down 2 days in a didn't last on wednesday, but maybe US is also "behind the curve"

Fri, 11/25/2011 - 09:10 | 1912529 Everybodys All ...
Everybodys All American's picture

They already are Peter ... what the hell do you think the EU banks are using with the US dollar swaps.

Fri, 11/25/2011 - 09:11 | 1912531 youngman
youngman's picture

In these EU meetings do you wonder if they are talking about the financial facts...or just trying to come up with "statements" that will quiet the masses....the " how does this soundbite sound" moment....

Fri, 11/25/2011 - 09:11 | 1912533 Waterfallsparkles
Waterfallsparkles's picture

NO WAY.  I do not want to increase the National Debt or put sub prime Debt on the Feds Balance Sheet, that I have to pay for to bail out Europe.

Fri, 11/25/2011 - 09:14 | 1912544 spinone
spinone's picture

When will you realize, its not your money.  Its your debt.

Fri, 11/25/2011 - 09:41 | 1912608 oogs66
oogs66's picture

and if ben prints it is probably an asset!  heck maybe they can use the interest to offset the deficit?  the whole thing is crazy, but at some point embrace it, becuase the people in charge do

Fri, 11/25/2011 - 09:11 | 1912535 GOSPLAN HERO
GOSPLAN HERO's picture

Print, print, print!

Fri, 11/25/2011 - 09:13 | 1912536 DarkMath
DarkMath's picture

The Fed can only buy US Treasuries. Even buying MBS was a stretch. Given today's "occupy" movement flagrantly ignoring The Fed's own by-laws is unlikely if not politically impossible.

The only thing that might work is The Fed accepting toxic Eurepean Sovereign debt as collateral for its Dollar Swap Lines to Europe. The Fed doesn't have to report what it takes as collateral, they only have to report the amount. So Euros or Euro Debt are the same thing to The Fed right?

Fri, 11/25/2011 - 09:13 | 1912538 tuco13
tuco13's picture

Why don't we just buy the Louvre, Eiffel Tower, Tower of London, Coliseum, etc.  Let Disney run them as a real EPCOT.  Or, just buy their gold. their worthless debt and screw the American people out of any current or future wealth they may have accumulated.

Fri, 11/25/2011 - 09:18 | 1912545 scratch_en_sniff
scratch_en_sniff's picture

Open the bids to the public, get on the phones and start knocking on doors immediately, for fuck sake do something fast before we all piss ourselves and hand over our sovereignty to the goose steppers. I'll buy five, sign me up.


(we only need every man, woman and child to buy e4,103 worth to get our 3trln...dig deep folks) 

Fri, 11/25/2011 - 09:16 | 1912547 NervousRex
NervousRex's picture

This is too close to Underpants Gnome Thinking Process.

Do NOT, repeat, do NOT give money away with the second part of the plan being 2) ??????

This can't be Peter typing. Someone nabbed his keyboard.


Fri, 11/25/2011 - 09:16 | 1912549 HD
HD's picture

My blood pressure just went way the hell up.

Fri, 11/25/2011 - 09:17 | 1912550 MarkTwainsMustache
MarkTwainsMustache's picture

I say no...the Fed is only supposed to buy money-good assets.  The EFSF certainly does not qualify.

Fri, 11/25/2011 - 09:18 | 1912556 apberusdisvet
apberusdisvet's picture

The end game has always been that when all else fails.........................  start WWIII, and declare martial law in every country.  The resulting civil and social unrest will force the mentally challenged to willingly accept the NWO.

Fri, 11/25/2011 - 09:24 | 1912568 max2205
max2205's picture

Ben knows he will have to save his $$$ to backstop all the bad things that will happen when the euro blows up.. Like mmkts Yankee bonds ect. How will Ez countries buy his crappy T bills? Interesting

Fri, 11/25/2011 - 09:31 | 1912570 common_sense
common_sense's picture

Nein! nein! nein!  Germany doesn't want to be in Eurozone, that's all !!  and USA is going to bankrupt very soon, There is no more money for debt folks, forget it !!


EXCEPT if they want to accelerate the bankrupt, OF COURSE !!!

FED & ECB can do it, YES!

Fri, 11/25/2011 - 10:02 | 1912665 GetZeeGold
GetZeeGold's picture


Instead of going to war this time. Maybe Germany just needs to walk out of the room.


Fri, 11/25/2011 - 09:28 | 1912575 agNau
agNau's picture

Every step of the way through this "crisis", we need to consider gold. Each countries hoard of gold is theoretically "in play" at some point.
(ie recent Germany) It is only logical.
? What happened to Iraq, Libya gold?
IMO gold is the underlying driver. Only the very strongest hands will retain gold.

Fri, 11/25/2011 - 09:30 | 1912579 Dr. Engali
Dr. Engali's picture

Fuck you. The fed doesn't need to do shit. We don't need to and shouldn't buy that crap. The fed already has enough shit on their balance sheet. How about this..... Let the Eurofuckinpeans figure it out and solve their problems. Fuck you!

Fri, 11/25/2011 - 09:33 | 1912589 knukles
knukles's picture

So you concurr with Million Dollar Bonus about all this then, eh?

Fri, 11/25/2011 - 09:39 | 1912602 Dr. Engali
Dr. Engali's picture

I certainly hope you are being sarcastic. If you aren't let me be clear. I don't think our fed should be buying shitty paper from bankrupt countries that backs shitty paper from bankrupt countries. It's their mess let them figure it out. We in turn need to fix our shitty ass fiat problems.

Fri, 11/25/2011 - 09:49 | 1912626 youngman
youngman's picture

Wouldn´t it be nice if Ben bernanke printed his phone call list on a daily basis...I would love to see who he is talking to....

Fri, 11/25/2011 - 10:32 | 1912724 Ace Ventura
Ace Ventura's picture

Not that I disagree, but haven't we ALREADY been in the process of bailing out europe? Hasn't the fed given well over $1 trillion to european entities through TARPs and the swap lines?

This article is odd to me, because it's advocating something which has been an ongoing process all along. The infernal criminal fed has been operating as the 'lender of last resort' to the entire world for some time now.

And still boobus amerikanus drools contentedly as we furiously tinker with our latest iGadget, and get into outright revolutionary fervor.....for a spot in line outside a retail store 24 hours before black friday. "Bitch I'll kick your ass if you cut in front of me in the Modern Warfare XX line!"

I often find myself asking....just WHAT the f**k is going to take before we finally rise up (en critical mass) and cast off the oligarchical tyranny that is methodically choking the life out of this near-death republic?

Sigh. Sorry I should be in a better mood this Thanksgiving.

Fri, 11/25/2011 - 09:31 | 1912583 mayhem_korner
mayhem_korner's picture

Anyways, it is not a "Grand Plan" but I think would buy time to put in a real solution.


LOL.  The thought that a real solution is in the offing. We'll just wait until we're down 4 touchdowns and then go into our two minute offense.

Fri, 11/25/2011 - 09:31 | 1912584 Silver Dreamer
Silver Dreamer's picture

From what I understand, the central bank of Germany bought most of the bonds they put up for their recent failed auction.  It's no different there than here in other words.  The Fed buys ours.  There's really no difference anymore from one central bank to another either.  The nation state central banks are just arms of the same beast, and the beast needs to be slain once and for all.

Fri, 11/25/2011 - 09:32 | 1912586 tradewithdave
tradewithdave's picture

The "grand plan" is and always has been "to buy time"....another thing, like love that money can't always buy.

Dave Harrison

Fri, 11/25/2011 - 09:40 | 1912604 lizzy36
lizzy36's picture


The Fed buys EFSF bonds, and it writes its own obituary. It is that simple.

Although Ron Paul has to be salivating at the thought s of this stupidity.

Fri, 11/25/2011 - 09:43 | 1912613 oogs66
oogs66's picture

it is crazy, but Bernanke seems like the sort of person who would rather go down for doing what he "knows" is right, rather than having failed to put his pet policies to the test when given the chance

Fri, 11/25/2011 - 09:53 | 1912617 GP237
GP237's picture

that is the delay in qe3, the fed will certainly buy euro bonds


Fri, 11/25/2011 - 09:49 | 1912625 jcaz
jcaz's picture

Sorry Peter- you're off the mark on this one.....  All you do with this idea is send things back to 1920......

Fri, 11/25/2011 - 09:50 | 1912630 Dr. Engali
Dr. Engali's picture

Peter Tchir had written some good insight in the past. Now I think I'll avoid him like I do Phoenix Capital.

Fri, 11/25/2011 - 10:10 | 1912678 dbells32
dbells32's picture

This is the first article written by Tchir that I completely disagree with.  Often I find his writing very insightful but this article is just plain nonsense.

Fri, 11/25/2011 - 10:13 | 1912683 Bicycle Repairman
Bicycle Repairman's picture

Europe's economy is intertwined with the USA's.  After the FED bailed out the USA and Europe indirectly, who thinks they'll give it up now?  The FED is not letting their banks fail.  Period.  All of this debate is kabuki.  They are trying to shake off "unauthorized" speculators, so the policy has maximum effect.  They're going to try and get as many people as possible on the wrong side of the bet, then they'll print.  And they'll print as much as they have to to save those banks.  $200 billion or $600 billion or $1 trillion++.  They have no legal or political constraints.

Fri, 11/25/2011 - 10:21 | 1912686 gnomon
gnomon's picture

Don't kill the messenger.  The Fed will undoubtedly embark upon this path after two more weeks of market contagion.  And just in time for Christmas the U.S. will buy the Euro goose with a flourish of self-righteous idiocy as we descend further into our own fiat/fiscal madness. 

Fug 'em all.

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