Ben’s Cohiba

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homeDARPAcontributorsnewsforumszh-tshirtstoredonaterssmanifesto Subprime Mortgage Processing (visual aids part II) Posted by: williambanzai7 Post date: 10/09/2010 – 02:07 Here is another diagram which depicts subprime mortgage processing after the mortgages have been originated in the pipeline.A basic recycling plant is used for visualization. Ben’s Cohiba Posted by: Bruce Krasting Post date: 10/08/2010 – 16:25 Some thoughts on a funny week. ‘Bernanke Put’ Risk for Shareholders? Posted by: Leo Kolivakis Post date: 10/08/2010 – 21:24 As more come on board with QE2, risk appetite is rising, but betting on a Fed-inspired recovery rally can be a dangerous game… Navigation PollsDonate To Zero HedgeRecent posts Shopping cart View your shopping cart. User login Username: * Password: * Create new accountRequest new password Zero Hedge Reads Angry BearBearish NewsBoom Bust BlogChina Financial MarketsChris Martenson’s BlogContrary InvestorCoyote BlogCredit WritedownsDaily CapitalistDaneric’s Elliott WavesDealBookDealbreakerFINalternativesFalkenblogFibozachiFor What It’s WorthFund My Mutal FundGains Pains & CapitalGlobal Economic AnalysisHamzei AnalyticsImplode-ExplodeInfectious GreedInvesting ContrarianJesse’s Café Américain Market FollyMax KeiserMinyanvilleMises InstituteNaked CapitalismOf Two MindsPension PulseShanky’s TechBlogThe Big PictureThe Mad Hedge Fund TraderThe Market TickerThe Technical TakeThe Underground InvestorWall St. Cheat SheetWashington’s BlogWealth.netWhen Genius Prevailed Home Ben’s Cohiba Bruce Krasting's picture Submitted by Bruce Krasting on 10/08/2010 16:25 -0500

Ben BernankeCopperPOMOTim GeithnerTrade WarUnemployment

Last Sunday night I wrote about the coming week:

If next Friday the Buck is lower across the board and the BoJ is a bit bloodied Ben Bernanke will light a cigar.
Okay, so our boy Ben is smoking a big fat cigar tonight. He could not be happier. Everything is going his way.

-On the week the dollar got crushed against the majors.

-The Japanese central bank did get its nose bloodied. As of the close in NY they are down about $700mm on the 9/15 intervention of $25b. It’s not just the money (actually it is the money). They lost a battle. The USD/JPY has to go lower. The BOJ has tipped their hand. They are playing defense. And that is losing strategy. Their internal effort at QE just got trumped by Ben’s weak dollar policy. They must be pissed.

-Euro group chairman Junker (ZH article) said the weak dollar will hurt EU growth. Sure it will. That is what Ben wants. He wants to export our deflation to our “friends”. They also must be pissed that Ben is dishing this out to them.

-The gold moves were impressive. If I were at the Fed and watching this near daily slap in the face I would be unsettled. I wonder if they even care. At one time they did, but not in the last few years. Ben is probably pleased with the ratchet up in gold. He not only wants to boost inflation he wants to increase expectations on inflation. High marks on that score for the week.

-Stocks keep going up. Why shouldn’t they? A weak dollar makes top line numbers of a big chunk of the S&P look better. Also, you have to look at what money is competing with. The five-year closed at 1.1%. After-tax that comes to 0.7%. Against a very low rate of inflation the tax adjusted yield guarantees the investor a negative 8% return. Not hard to beat, one would think. So stock multiples have to widen. Right? If so, can we do this forever? If not, how long can we continue?

-The commodity numbers are blowouts. Sugar, wheat, corn, copper, every off the run thing you can think of and of course oil are all on the rise. This is coming home to shoppers soon. Ben is just delighted at this. He has been preaching the need for inflation.

-Possibly the most significant achievement by Bernanke this week was in shaping public opinion. Through the press and direct comments from Board members the word went out, “The Feds gotta do something about the unemployment thing”. And sure enough the NFP numbers confirm that the private sector is not doing enough to cover the job losses by the states. So now the thinking is, “That guy BB had it right. We have a real problem again. I am glad that our pal Ben is going to do the heavy lifting.” Look for the press to confirm this over the weekend. It’s part of the propaganda.

So Ben has every reason to celebrate this evening. Everything on his list has a + next to it. I’m looking at the same list and I want to puke. Raise the cost of things that we consume by trashing the dollar is what we need? Destroying savers so they are forced to cut consumption is a cure? For whom? Piss off our “friends” and “investors” is good policy? We shall see. It’s hard to blunt the argument that a good stock market is synonymous with better times. But this market is bought with POMO. And everyone knows it.

There is another thing that Ben can celebrate this evening. He is clearly running the entire show. Treasury has had not one word to say on the monetization of our financial system. I always look into things and ask why? Tim Geithner is out, is why. We just have to wait for the election. Between then and now Tim will be used as cannon fodder in a face saving effort at avoiding a trade war with China. Summers is gone. So Ben is holding all of the cards. Exactly how he wants it.


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by Goldenballs
on Fri, 10/08/2010 – 16:39

Untouchable Ben,what a creep.

Login or register to post comments by SheepDog-One
on Fri, 10/08/2010 – 17:19

Bens untouchable until someone plucks him off the street in a black van and fingers get sent to the media, press release style. When the excrement hits the rotary oscillator in this country rather soon, all bets are off and a suit and fancy title wont mean shit.

Login or register to post comments by kengland
on Fri, 10/08/2010 – 17:51

What is it with you ZH’rs and Cohiba? Man o War by Aj Fernandez runs laps around that weed

Login or register to post comments by Bruce Krasting
on Fri, 10/08/2010 – 20:04

Was just trying to connect the picture of Ben and a Cuban cigar. Those from Nicragua may be taste better. But those from Cuba tell my story better….

Login or register to post comments by jeff montanye
on Sat, 10/09/2010 – 00:25

and well told.

Login or register to post comments by Conrad Murray
on Sat, 10/09/2010 – 00:36

I’ve been meaning to try these, thanks for reminding me.  Partagas Black Label, FTW!

Login or register to post comments by MaxVernon
on Fri, 10/08/2010 – 16:40

I predict this article will in time be seen as highly prescient.  And by “in time” I mean next week.

Login or register to post comments by StychoKiller
on Sat, 10/09/2010 – 02:00

Been keeping tabs on the “Massive Mortgage Mess?”

Login or register to post comments by Chartist
on Fri, 10/08/2010 – 16:41

I’ll put a Connecticut wrapper around my shlong and Ben can smoke that…..HMO premiums are killing america.

Login or register to post comments by SheepDog-One
on Fri, 10/08/2010 – 17:16

Laughin out loud!

Login or register to post comments by barkster
on Fri, 10/08/2010 – 17:57

You’ll probably get a yeast (rising dough) infection…

Login or register to post comments by Mitchman
on Fri, 10/08/2010 – 16:53

No question that Tim is gone after the election.

Login or register to post comments by knukles
on Fri, 10/08/2010 – 18:08

Uh, why?

If DC wants a weak dollar (check) higher inflation and inflationary expectations (check, meaning higher GOLD as I’ve been hammering on for weeks now and commodity prices, check and double check) then by no means does one want a noble, precinct, intelligent, believable, considerate, thoughtful, mature, astute, statesmanlike, politically adroit, masterful, brilliant or knowledgeable and experienced (in the practical sense) individual whose legally pristine (as in paid his taxes) and cleaner than Ceasar’s wife in that position.  To the contrary…

Hah!  Timmah Two Hands is the absolutely perfect steward along America’s Road to Ruin.  For any fellow (or lady) with a modicum of quality credentials would not touch either that job or be associated with what’s unfolding alongside the current Administration.

Timmah is God of the Department of Treasure for the moment, given the current political and economic objectives. Not that they are good objectives, but the man simply personifies the  role.

Go ahead.  Laugh.

Login or register to post comments by Optimusprime
on Sat, 10/09/2010 – 06:47



Huh?  Usually I can figure out what the writer intended, but this one has me stumped!

Login or register to post comments by bingaling
on Fri, 10/08/2010 – 17:00

What about home prices – If the price of equities went up less than corn,wheat ,oil , gold etc aren’t people still losing money because purchasing power is declining?

He just made things a lot harder for those who are barely getting by with benefits or on the U6 or off benefits people otherwise known as the poor . Bravo dickhead

He also just made things harder for a struggling middleclass . Bravo dickhead .

He also just made the costs for small businesses rise therefore creating more unemployment . Bravo dickhead .

Ben Bernanke = FAIL or the head of Infinitehedge Gate where on a long enough timeline everything was supposed to go to infinity but didn’t(except those things which people need to live)

Login or register to post comments by SheepDog-One
on Fri, 10/08/2010 – 17:15

All grains maxed out today and locked up, gold up $13 again, so the equities pop is an actual big loss and assets are in the crapper.

This idea that Ben is running the show and does what he wants day after day comes to a screeching halt in a natural disaster or some type of coup, where people take to the streets and declare their own martial law or an outright military coup. Its not out of the realm of possibility, and actually highly likely. This is what ‘financial only’ people never take into consideration and never see coming, ever. Yet happens all the time.

Login or register to post comments by Ned Zeppelin
on Fri, 10/08/2010 – 17:39

I sees these as bad signs. When was the last time the grains locked like that?

Login or register to post comments by binky
on Fri, 10/08/2010 – 20:02


Login or register to post comments by Johnny Dangereaux
on Fri, 10/08/2010 – 20:56

I was in the Grains today. What you didn’t see was Corn trading 30-40 higher in the “synthetics” and beans 30 higher than limit up. At one point the Soybeans were 10 cents wide…option boys clean up on a day like today…there is really no such thing as a “limit” if you can call the floor or know how to trade options. Corn will most likely be limit up Sunday night. Grain floor open Monday. Sorry for the disrespect Tony and Pauly.

Login or register to post comments by tip e. canoe
on Sat, 10/09/2010 – 07:44

CORN ETV up 14.61% on Friday.   Sunday most likely is right Johnny.   have any thoughts on who/what might have been driving the price action yesterday?

Login or register to post comments by SteveNYC
on Fri, 10/08/2010 – 18:24

Ben’s ideological ways are also contributing to starvation in 3rd world countries:…

Ben doesn’t understand, he’s been Princeton-brain washed his whole life, he really can’t see/feel the impact of his policies. Regardless, his Karma is ripening, it won’t end well for Ben when it’s all said and done.

Login or register to post comments by tip e. canoe
on Sat, 10/09/2010 – 07:45

Ben Burn-a-karma

Login or register to post comments by Commander Cody
on Fri, 10/08/2010 – 17:00

Assets will deflate due to lack of consumption (houses, boats, cars, stuff) (except stocks due to POMO) and necessities of life will inflate.  The sheeple (me included) get it from both ends.  Ouch!  Not that 60 ring gauge Cohiba!

Login or register to post comments by Waterfallsparkles
on Fri, 10/08/2010 – 17:02

It appears that Bernankie wants to Destroy the little People and the Eldery.  Beat them into submission of losing everything they have to the Banks.  Bernankie as a student of the Depression seems to think that the only way out is to put People in Soup lines.  He refuses to do anything to create Jobs that is in his Manate.

All of the Monitization that has been done only raise the cost of Oil, Copper, Gold, Wheat, Oats, Sugar, Pork Bellies, and the devaluation of the Dollar.

Bernankie wants to get rid of Social Security and Medicare to pay down the Debt that he continues to create to give to the Bankers.  It appears to me that the Bankers an Bernankie will not be happy until they destroy the Middle Class and the United States.  As then they will own it all and we as Citizens will have nothing.  It will go back to the literal Land Lords where you could farm the land for a large percentage of your goods going to the Lords.

They used to have a name for it SLAVES.

Login or register to post comments by breezer1
on Fri, 10/08/2010 – 17:20

if not bernake it would be someone else. who is behind the fed?

Login or register to post comments by quadcap
on Sat, 10/09/2010 – 09:45

Exactly right.  Ben is just the water boy for the true masters.  Remember who owns FRBNY.


And all this talk of people taking to the streets and hanging banksters from lamp posts is some kind of demented fantasy.  The feds way outgun the people, and the storm troopers are salivating as we speak at the prospect of getting out to play.  There will be no revolution.  The best we can hope for is devolution, people.



Login or register to post comments by SheepDog-One
on Fri, 10/08/2010 – 17:11

Well everything is going Bens way, but likely he’s being kept up at nite by the specter of armed pissed off americans or even the military itself sieging the whole clownshow. Then what, offer the troops a bailout? Military coup is a bitch, and its not only possible but highly likely.

Login or register to post comments by mynhair
on Fri, 10/08/2010 – 17:37

Amerikan military?  Spare me.  More like Chavez military.

Login or register to post comments by cossack55
on Sat, 10/09/2010 – 06:25

Military coup is worriesome with todays “pampered princes” to borrow a phrase from David Hackworth.  If it was the “Hack” or “The Gunfighter” behind it I would be a little more optomistic.  Alas, there time is gone.

Login or register to post comments by liberal sodomy
on Sat, 10/09/2010 – 12:30

I’ve been praying for the military to uphold their oaths.

Login or register to post comments by Mitchman
on Fri, 10/08/2010 – 17:29

“So Ben is holding all of the cards. Exactly how he wants it.”

For now.  There’s an old Italian proverb:  The furrier catches more skins of foxes than asses.

Login or register to post comments by Shell Game
on Fri, 10/08/2010 – 17:30

I’d like this to be BB’s last smoke, before twisting in the wind from hemp.

Login or register to post comments by mynhair
on Fri, 10/08/2010 – 17:36

And everyone knows it.


but don’t get it.  Yet.  Soon, in the neck.

Login or register to post comments by Goldenballs
on Fri, 10/08/2010 – 17:39

Yes things are totally f****d.Now looking at the short term with Christmas coming up I am currently taking order,s for your Xmas dinner essentials.Remember it is only just over 2 months away and most shops should be bankrupt by then,however please note due to the fact that food and commodity prices are more volatile than anytime in the last 200 years I cannot accept any of the following crap,



Fiat currency apart from the reliable and dependable types such as Zimbabwe,Somalia,etc.

Paper Gold and Silver Certificates.

Domestic or Commercial property of any kind.

Pension books or food stamps are another no,no as probably worthless as Xmas arrives.



Only Physical Gold,Silver,Diamonds (real no cubic zirconia crap)Rubies,Emeralds,Saphires,Opals,coins such as Doubloons,Pieces of Eight,Gold Pistols,Gold Aureus are perfectly acceptable,full oil tankers,agricultural land,Uranium,Paladium,Platinum,etc.


Prices are as follows,

Turkey Small – 20 Gold Eagles.

Potatoes – 25lb Bag  – 15 Gold Eagles.

Cabbage (no Obama or Bernanke varieties) -10 Gold Eagles.

Sprouts – Small bag – 5 Gold Eagles.

Xmas Pudding – Small – 12 Gold Eagles.

Bottle of 20 year old Scotch Single Malt Whiskey – Unobtainable


Due to Continual and Severe upward movement of product prices the management reserve the right to increase prices at 2 seconds notice and delivery is not guaranteed.

All the best for Xmas.


Login or register to post comments by mynhair
on Fri, 10/08/2010 – 17:40

Bottle of 20 year old Scotch Single Malt Whiskey – Unobtainable


Geez, learn how to make your own, and wait 20 yrs to sample it.


Moonshine will rule! Got Copper (tubing)?


Login or register to post comments by nmewn
on Fri, 10/08/2010 – 18:50

“Moonshine will rule! Got Copper (tubing)?”

Yep…and a cooker. It’s been a while…but it’s pretty basic…just mind your heads & tails lessen ya get a headache 😉

Take me home Bocephus.

Login or register to post comments by MrSteve
on Fri, 10/08/2010 – 22:29

Just put 3 cups of sugar into 4 1/2 gallons of fresh apple cider in a plastic bottle and let it ferment in a cool basement. Use a winemaker’s airlock to keep it from spoiling. Leave the fermented cider outside and when the February cold freezes out all the water, drain the heavy apple jack out of the center of the frozen water. Strain out the solids including the yeast and age the brandy for extra smoothness. Let Jack Frost distill the alcohol for free.  You could use a wooden barrel also, just leave room inside the container for the expansion of the frozen water.

Login or register to post comments by jeff montanye
on Sat, 10/09/2010 – 00:46

nice post (i was about to put up a less sophisticated version).  related topic:  on the frontier, as it moved from the alleghenies to the rockies, cider (wasn’t even called hard, there wasn’t any other kind) was the most common drink, often safer than the water, even for children.  it was about half the proof of wine.  that’s why johnny appleseed (john chapman) was made into a myth: apples grown from seed are unpalatable; the tasty ones are all grafted.  but they made cider just fine.

Login or register to post comments by RoRoTrader
on Fri, 10/08/2010 – 17:41

2 points BK;

Terrific summation of the FED’s thinking, strategizing and risk of collateral damage.

The other point being related to the publics’ perception of the FED’s sudden concern over the employment issue.

Just wondering out loud as to why didn’t the FED think about general employment before bank bonuses?

The simple answer is that the FED did, but chose the lowest common denominator which is public stupidity.

Not a certainty the public is that stupid this time around……always hope.

See the J Hilsenrath interview where Charles Evans of the Chicago FED works public relations front-running the next gouging of the taxpayer into an artform with the phony clean cut appearance for a photo op and fake look of sincere and intellectual concern.…

Bloomberg NewsChicago Fed President Charles Evans




“The Feds gotta do something about the unemployment thing”

Login or register to post comments by mynhair
on Fri, 10/08/2010 – 17:44

Yep, rely on a bunch of intellectually bankrupt morons to fix things.  Typical LSM.

Login or register to post comments by RoRoTrader
on Fri, 10/08/2010 – 20:34

Stealing from the blind……..ring of truth?

Login or register to post comments by Ned Zeppelin
on Fri, 10/08/2010 – 17:52

Bruce: what say you of MortgageGate. Here’s how I see it:

1. Problem is not foreclosures, problem is that in defending foreclosures the defects in the formation of the private MBSs have been revealed.

2. No one knows the extent to which the MBSs, and their bastard offspring CDOs containing the BBB tranches, are defectively formed. Consider this the 28 day “infection.”

3. Not knowing, and not having the ability to know, whether a particular MBS is “infected,” without massive due diligence, reduces value of all AAA rated MBSs to zero.

4.  MBSs posted as collateral are suddenly questioned.  Credit default swaps begin to click and whir. CDOS fall under the spotlight –  toxic assets become even more toxic; investors ask, “does my private label MBS have anything in it, or is the MBS box empty once you tear off the lid and look inside?”

5. Transactions in any real estate touched by or involved in a securitized mortgage, any transaction, beginning with that monthly payment of principal and interest, and ending in foreclosures done months ago, instantly fall into question. Title companies cannot close on sales, unable to be certain if the payoff statement comes from the true party in interest, whether the foreclosed title is any good, generating insurability and marketability of title concerns.

I could keep going – it gets very ugly, very quickly and begins to spiral out of control. I see this going from spark to a roaring forest fire within a week as what I am saying begins to sink in.


Login or register to post comments by Mitchman
on Fri, 10/08/2010 – 18:07

Correct.  It is even more simple than that.  Did the banks own what they sold to the MBS trustee?

Login or register to post comments by Orly
on Fri, 10/08/2010 – 18:39

I smell a “null and void” coming down the road.  I can only imagine the chaos that would ensue if all these mortgages, hence their derivatives, are not even worth the paper they’re written on.

Who is in a precarious position with that, I wonder…

My bet, though I have no clue as to how, is the Chinese.  Sounds like this economic war plan was put in place many, many moons ago by some very bright boys and girls.

This could get very interesting very quickly.


Login or register to post comments by Mitchman
on Fri, 10/08/2010 – 18:51

My point was that the original sellers were the ones in the precarious position because they were selling something they did not own.

Login or register to post comments by Orly
on Fri, 10/08/2010 – 19:16

And my point was that if they can’t prove it, or a judge finds that the bulk of the legalese was unacceptable to a court of law, the ~$4 quadrillion worth of derivatives disperses into the ether.

Login or register to post comments by Kayman
on Fri, 10/08/2010 – 19:14

The criminals knew all along, hence the Bonuses, even in face of the heat.

Login or register to post comments by cossack55
on Sat, 10/09/2010 – 06:33

Road to Roota?  I find this particular theory fascinating.  Just can’t pin it down.

Login or register to post comments by Bruce Krasting
on Fri, 10/08/2010 – 20:00

I have trouble keeping up with this story. Where will it go is the question. I can’t imagine a soft landing. Worse case would be a freeze in new mortgage lending by the Feds. That would be one of those Black Swans we keep hearing about.

Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 06:49

“I have trouble keeping up with this story. Where will it go is the question.”


Answer – Probably off the rails……..2 questions; how long before it pulls the stock market down with it, or pushes the QE To Infinity deployment much closer than previously anticipated by the FED or the market for that matter.


Bullard came across in public statements today as dazed and very confused about QE, if at all. ODD, given that Bullard was put out in the earlier stages of the verbal interventions with the NYTimes piece on the threat of deflation.


All of this stuff is getting harder to keep up with as it seems to have reached something approaching a critical mass with a new order, whatever that is, on the verge of subsuming the previous.


Just ask Dorothy and Toto, I guess. And, what reaps the whirlwind? Price?

Login or register to post comments by StychoKiller
on Sat, 10/09/2010 – 02:10

Black swan?  More like a Nazgul!

Login or register to post comments by tip e. canoe
on Sat, 10/09/2010 – 07:55

or Tezcatlipoca?


Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 08:45


Thx for that very interesting link, tip e……….gods of the modern culture?

Wikipedia – Karl Taube and Mary Miller, specialists in Mesoamerican Studies, write that, “More than anything Tezcatlipoca appears to be the embodiment of change through conflict.”

Tezcatlipoca had many epithets which alluded to different aspects of his deity: Titlacauan (“We are his Slaves”), Ipalnemoani (“He by whom we live”), Necoc Yaotl (“Enemy of Both Sides”), Tloque Nahuaque (“Lord of the Near and the Nigh”) and Yohualli Èecatl (“Night, Wind”), Ome acatl (“Two Reed”), Ilhuicahua Tlalticpaque (“Possessor of the Sky and Earth”)

Login or register to post comments by thegr8whorebabylon
on Sat, 10/09/2010 – 11:14

And the best part is…the holy soccer games played to the death, and the ripping out of the hearts of the best and brightest in homage to aforesaid diety.  halleluiah.  be careful peeps.

Login or register to post comments by Waterfallsparkles
on Sat, 10/09/2010 – 06:32


I was thinking the same thing about if they are paying off the Mortgages in the Traunches when they are sold or Foreclosed.

If they do not know who Ownes the Mortgages and have not kept records, what is being done with the Money once the House is Sold in a short sale or Forclosed?

Login or register to post comments by ThroxxOfVron
on Fri, 10/08/2010 – 18:10

Here, let Me light that for You, Ben.


Every Condemned Man is entitiled to one last smoke…

Login or register to post comments by euclidean
on Fri, 10/08/2010 – 18:24

Are you missing the bigger picture here? You have a large trade deficit and poor domestic activity. A weak currency is what saves you, not a strong one. It is a free riding policy that pressures domestic production by increasing the cost of imports while increasing your export revenues without having a tariff or levee. It also encourages foreign investment as it makes it cheaper to invest in the US.

Saying a weak USD is doing harm is rubbish. You want a weak currency to help get you out of the shit in times like this, as it is a better friend to you than a strong USD. Foreign investment will decide the price/yield like every other time in history. Apart from smelling it, you can see the bottom in the US economy now would be a time to buy US.

But I don’t think the market is all that strong for myopia, corruption and negligence right now.

Login or register to post comments by Kayman
on Fri, 10/08/2010 – 19:24

Hey euc


The biggest components of the U.S. trade deficit are Chinese Imports and Foreign Oil.

China pegs its Yuan to the USD and squeals like a stuck pig whenever someone suggests they are cheating in the currency game (they are.)

And all our Politicians (including Mr. Hope and Change You Can Believe In) have promised to get this country off its Foreign Oil Addiction for decades. How’s that going for ya?

And I cannot agree that trashing your currency will attract foreign investment.  Hot money, maybe, Long Term Investment- doubtful.

Login or register to post comments by euclidean
on Fri, 10/08/2010 – 23:05

Kayman, the BushCo & Dumbsfeld MiddleEast Oilfields Subterfuge Act is in full swing, So not long now to wait for the oil dependency issue to disappear. You should be seeing declining imports already not just from a comatosed economy. Iraq was a success, but only half what Iran will yield. As for your assumptions, politics can blame the world on poor currency rates and still win government. It’s the ponzi scheme of the USTreasuries and Fed Fumds rate that is to blame for most of the USD selloff currently, funded in Yen borrowings to add an arbitrage margin for the cherry on top. This way Japan is the blind leading the blind.

Login or register to post comments by Bruce Krasting
on Fri, 10/08/2010 – 19:49

Take a look at the post war chart of the Yen. Then look at the Deutche mark and how it became the Euro. They had strong currencies for 60 years. We have been going in the opposite direction. Who did win that war?

When your system is based on fiat money it is dangerous to debase it. Unwanted consequences are the result.

Login or register to post comments by Orly
on Fri, 10/08/2010 – 21:21

If I may suggest that the USD was on a plateau by itself until deliberate debasement occurred in order to level the playing field between the major Western currencies after the Second World War.

What we are witnessing is the end-game of said equalisation in the post-war world with all the Western powers, including the Japanese, going through the spasm of the process.  Once the USD basically comes to some stasis relative to the other major currencies, we can easily beat down any sort of renminbi/won/peso “Axis of Evil.”  I have no doubt.

Divisi cademus.

Thanks, Bruce.  I have noticed that you keep saying that we are exporting our deflation to our poor “friends.”  In a future article, will you explain what that means exactly, plus the mechanism the Fed is using to perform such a trick?  I would appreciate it.


Login or register to post comments by RoRoTrader
on Fri, 10/08/2010 – 23:19


Forget about the deep BK…….think about us……..last week we had the chance to get long the DAX. Remember?

Login or register to post comments by Orly
on Sat, 10/09/2010 – 09:23

And I said it was a really bad idea.

DAX6K, remember?

Now if you’ll excuse me, I have a sudden need for a shower…


Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 09:59

Yea, so what is it supposed to mean?…….hmmm, BK probably knows, but I don’t……..what are you, like a farmgirl with a PhD or something?

Login or register to post comments by Orly
on Sat, 10/09/2010 – 12:54

It means that to go long DAX here would be unwise.  The German Index will follow the SPX down on this next leg.

The near-side target for the DAX is 6,000 (6K).



I went to a farm once and found that horses frighten me.  They’re giant!  And no Ph.D. here, I am afraid.  I am just a charting junkie who loves 4X and with no formal education in economics whatsoever.  (So, please forgive my ignorance at times…)

The best education I have had in trading was lucking upon a textbook about the Psychology of Crowds at a garage sale in Clarion, Pennsylvania.

The lesson: extremes don’t last but no one wants to be in the middle for very long.  Very enlightening.

I got that book for a buck.

Login or register to post comments by Bruce Krasting
on Sat, 10/09/2010 – 05:44

Orly, This is simple. A currency adjustment is the mechanism where a deficit country cures its problems. We have no jobs and we have a big current account trade deficit. What would fix that? A devaluation of the currency. Normally the markets do this and it is a self adjusting mechanism.

If tomorrow morning you woke up and the Yen rate was 60 and the Euro was at 2.00 you would see that the US would stop importing “stuff”. The stuff that we make here would be cheaper overnight so we could sell some of our “stuff”.

As a result we would sell more planes and tractors and all the other stuff. As this happens we would have to hire more people to make all this stuff that now everyone wants. So our jobs picture would improve.This would cause inflation in the US and cost workers jobs outside the US. So we would be exporting our deflation elsewhere.

Of course this would cause all manner of problems. It would not be a “cure” at all. It would just cause distortions and inflation. As the inflation runs its course the advantage we got from devaluation would go away as we would once again price ourselves out of the market.

Login or register to post comments by Orly
on Sat, 10/09/2010 – 09:22

Gotcha.  So you’re saying that we basically switch shoes with the other party and now their economy is in deflation while ours would begin growing.  We put the shoe on the other foot?

Thanks, Bruce.  I appreciate all of your very interesting ideas.  They are thought-provoking and elicit quite an eclectic thread every time.  Very enjoyable stuff.


Login or register to post comments by DoctoRx
on Fri, 10/08/2010 – 23:29

Re Japan, we continue to win.  They work and in return they get depreciating dollars.  They continue to pay for Pearl Harbor IMHO.  Re Germany and Europe, more complex.  But we have troops on their soil still, not the other way round.

Login or register to post comments by Species8472
on Fri, 10/08/2010 – 18:27

How will inflation help? It only helps the debtor if income that is available to service the debt rises with inflation. For most people that will only happen if there is some demand push and a wage price spiral. Not guna happen any time soon.

It will only happen for the gov if the ecconomy improves and tax revenue rises.



Login or register to post comments by chindit13
on Fri, 10/08/2010 – 18:56

Orzag, Romer, Summers, Rahm, Jones,…..

Axelrod wants to go home, too.  As does Gates.

The line at the West Wing cafeteria just got manageable.  And I believe Simon Property Group posted a sign on W. Executive Ave. that says “Space to Let”.  That could help the deficit if they can lure a tenant.

As for Tim, I believe he is going to play the part of Wilmer in the Maltese Falcon, taking the rap for the whole nasty crime.  Fittingly, he and Elisha Cook, Jr. are about the same size and tend to wear the same bewildered mien.


Login or register to post comments by Fred Hayek
on Fri, 10/08/2010 – 19:18

The cheaper the treasury secretary, the snappier the patter.

Login or register to post comments by jeff montanye
on Sat, 10/09/2010 – 00:59

geithner the gunsel.  about to have his jacket pulled down and his .45 removed.

Login or register to post comments by gwar5
on Fri, 10/08/2010 – 19:40

It’s a freight train waiting for a streetcar named disaster.

Login or register to post comments by Ned Zeppelin
on Fri, 10/08/2010 – 20:10


Login or register to post comments by Leo Kolivakis
on Fri, 10/08/2010 – 19:41


A+++…vintage, one of your best ever!

Login or register to post comments by Bruce Krasting
on Fri, 10/08/2010 – 19:44

Actually I would prefer you hated it.


Login or register to post comments by Ned Zeppelin
on Fri, 10/08/2010 – 20:11

Leo does hate it.  He’s trying reverse psychology.

Login or register to post comments by 99er
on Fri, 10/08/2010 – 19:50

Chart: SPX

Ben may prefer a Montecristo next week.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 19:58

You need to provide the evidence of the “current QE.”  all i’ve heard is chatter.  needless to say “the chatter is worse” although that is not in my opinion why Chairman Bernanke is in deep dookie.  Paying our country’s Judges, Generals and Admirals in money that hasn’t been burnt beyond recognition comes to mind.  We’ll ignore “the rest of us” since “we’re just canon fodder for a nuclear armed Pakistan who we are currently bombing.”  The idea that “we are exporting deflation” I also find “out there.”  How is it possible to debase one’s currency and “export deflation”?  If you say “because the price of food is soaring” you will cause me to disagree.  Now you could argue “because you have no food anymore” and I will acknowledge that as a possibility. I believe that’s called “starvation” though and not “deflation.”  I could be “definitionally challenged” however.

Login or register to post comments by Bruce Krasting
on Fri, 10/08/2010 – 20:40

A policy that has at its core the objective of devaluing ones currency is a “beggar my neighbor policy”. It has the affect of making others less competitive just by manipulating the currency. When we devalue versus the Euro it is also a subsidy for John Deere, CAT, Boeing and hundreds of others.

But this is exactly what Timmy G. has been bitching about this week. The terrible Chinese are being so mean by manipulating their currency that we should punish them with sanctions. The US Congress said so.

Complete bullshit. The Chinese are doing exactly what we are doing. Manipulating their currency value with purely domestic considerations as the motivation.

Who are we fooling with this crap? Ourselves? Shame on us then.



Login or register to post comments by zen0
on Fri, 10/08/2010 – 21:59

If everybody does it, who is in the best position to win at losing?

Login or register to post comments by earnyermoney
on Fri, 10/08/2010 – 21:59

Everyone’s pissed coming into Washington for the annual IMF meeting.  Destroy the value of the dollar knowing the Chinese currency will fall in tandem all the while hoping this action increases pressure on our “friends” to ratchet up the pressure on the Chinese.

Got a feeling the Chinese will give Bernanke the middle finger.

Login or register to post comments by 99er
on Fri, 10/08/2010 – 21:55

Does Sheila Bair Have Balls?

The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis.

The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview.…

Login or register to post comments by zen0
on Fri, 10/08/2010 – 21:56

The best cigar I ever had was one I got in Trinidad de Cuba. A woman in a nick-nack store was rolling them. She had one on display that was at least 2 feet long.

It cost maybe 2 American dollars and was delicious.

Ben can’t even hope to get one like that, unless he goes on the lam.

Login or register to post comments by 99er
on Fri, 10/08/2010 – 22:03

From Men Who Smoke Montecristos

One conclusion was crystal clear: Expect realignments in financial power both globally and nationally. The financial services industry worldwide will never be the same. Asian and Latin American banks survived the storm better than U.S. and European banks. Therefore, the global pecking order among financial institutions is shifting.…

Login or register to post comments by zen0
on Fri, 10/08/2010 – 22:18

What I dimly understand from reading the meanderings of the Governor of the Bank of Canada, G20 and Basel III recommendations lead towards a more guerilla banking system worldwide, where a Lehman collapse would not threaten the whole system.

Whether they can do it or not remains to be seen, but Bernanke etc. are trying to preserve a system that has had its day.

The world doesn’t want to put up with American hegemony anymore, because American institutions have become corrupt and incompetent, but like an abused spouse, they have to extricate themselves with extreme caution.

Login or register to post comments by Rob Jones
on Fri, 10/08/2010 – 22:10

It seems that QE is creating a lot of liquidity which is going into treasurys, bonds, stocks, and commodities. But somehow it doesn’t seem to be creating any jobs. So I somehow doubt that Ben is celebrating this evening.

I also wonder whether how much the recent decline in interest rates was actually caused by QE. Certainly QE had a big effect. But during the housing bubble a huge amount of money was going into the purchase of mortgage backed securities. Then the bubble collapsed and the MBS market went with it. So now where is all the new investment capital going to flow, given that MBS is no longer an option? My guess would be into treasurys, bonds, stocks, and commodities. So some of the effects that we are attributing to QE may really be due to the collapse of the MBS market.

The question which is probably vexing Ben and others is how to create jobs. I don’t see how treasury purchases (where a lot of the liquidity now seems to be going) is going to lead to new jobs. Stock and bond purchases might be partly used to fund new companies and new factories (if there was any sign that demand was going to pick up). Higher commodity prices might lead to job creation in mining and agriculture (although not necessarily in the US). A lower dollar might help somewhat, although it may just shift production from Japan and Europe to countries that have tied their currencies to the dollar.

What would really help would be a policy to increase demand for goods and services. Why is demand low? Partly because a lot of people are struggling to pay down mortgages on houses that they probably shouldn’t have purchased. In theory, lower interest rates should help these people. But many may not be eligible for refinancing. Some form of debt forgiveness might help with this.

But another reason why many people may be cutting expenditures is that the dotcom and housing bubbles mislead them into saving too little for retirement. Now they are cutting back their spending in order to make up for lost time.

I don’t see a way for the Fed to magically fix all of these problems. Let us just hope that they don’t wreck the currency trying.

Login or register to post comments by 99er
on Fri, 10/08/2010 – 22:12

Another Take

Anyway, this $144 billion in additional federal debt, accumulated in Two Freaking Days (TFD), is, annualized at this astounding rate for each of the government’s roughly 250 working days per year, an outrageous $18 trillion a year! This incomprehensible sum is about $5 trillion more than the entire GDP of America! And more than half of GDP is already composed of government spending right now! We’re Freaking Doomed (WFD)!

Login or register to post comments by alexwest
on Fri, 10/08/2010 – 23:06

Bernanke is crying a river… 

why ?? check out us debt at

on sept 2010(end of fin year) it was +13.6 trln $… do you know diff one year earllier 1.7$ trln…

according CBO (monthly treasury statement didnt out yet) 2010 receipts AKA all taxes were 1.9 trln $..

so that makes US FEDRAL DEFICIT IS ALMOST 100% ( 89%)… 

I’d give this ponzi scheme 2,max 3 years before it blows off..

Login or register to post comments by taraxias
on Sat, 10/09/2010 – 02:04

Anyone who presumes that the FED, the BoJ and the ECB are not acting in coordination is naive (sorry Bruce, otherwise I love reading your stuff).

Here’s the deal.

The FED is delivering (as promised) an insanely rising stock market to Obama (POMO alone couldn’t have gotten us to these levels) to help the Dem’s cause in the mid-terms, while the rest of the world in the mean time gets cheaper energy. Uncle Ben knows that this is not sustainable since it threatens the very existence of the FED and the course will change violently after the midterms.

Those who convinced themselves that a trillion plus monetization ANNOUNCEMENT is coming are in for a rude shock. Uncle Ben is bound by no law, he can still provide enough money for our out of control spending government to function through stealth monetization.

And Bruce, HE DOES care about gold, always has, always will. It’s the only thing that continues to shine a light on the FED’s activities and Uncle Ben knows it. I expect a big “correction” is coming………and I’m a goldbug.

Login or register to post comments by Ned Zeppelin
on Sat, 10/09/2010 – 07:15

Obama is an employee of those who are directing the Fed’s policies. Nothing the Fed does is for a sitting President. The sitting President answers to the same board of directors as Ben.

Login or register to post comments by RoRoTrader
on Sat, 10/09/2010 – 07:14

Bullard came across yesterday as dazed and confused implying doubt about the need for QE, if at all.

ODD for that kind of hesitation in public given that Bullard was out in the early stages of the verbal intervention with the NY Times piece using the scare of deflation as a prop to put QE up as the viable solution.

If you are right taraxias then how does the FED manage the comedown post Nov 3? Or, does it just not matter after election day?

The FED must be aware of the risk of a no bid market in the event of a rude shock you describe as a possibility.

Login or register to post comments by 99er
on Sat, 10/09/2010 – 08:18

“Breaking News: China Takes Fannie and Freddie Hostage”

It would not surprise me at all if discussions between the US and China this weekend in Washington are focused on the possible outright exchange of Agency paper for US Treasuries of all tenors–a result of the realization that real estate MBS are appropriately marked to zero. China, in addition to its $755 billion in government securities, holds over $400 billion of Fannie and Freddie issues and now–with the “mortage mess”–realizes that it will be unable to get a bid. That’s a hell of a lot of shit to be holding in your hands.

China has a gun and holds America hostage.


Login or register to post comments by tom
on Sat, 10/09/2010 – 11:52

Breaking news, dateline February?

China’s not directly at risk from the mortgage mess, which will makes losses for the US government and owners of private MBS, not for owners of GSE issues, which are de facto guaranteed by the federal government. (The GSEs guarantee them, and the federal government bails out the GSEs’ losses).

That said, the mortgage mess is one more step towards US default on its debts to China.

Login or register to post comments by 99er
on Sat, 10/09/2010 – 13:24

Sorry about the confusion: “Breaking News” is a joke; the problem, as we know from William Black, is an old one. Only now China and institutional investors around the world will soon realize that there may not be a bid for Agency paper because the MBS held by Fannie and Freddie (purchased near par from TBTF banks) may actually be worth zero. That is, the entire fraud is becoming unraveled.

Edit: See this.…

Login or register to post comments by MiningJunkie
on Sat, 10/09/2010 – 10:33

Never underestimate the replacement power of U.S. stocks within an inflationary conflagration…think Zimbabwe.

We are in a Fed-induced bear market in the purchasing power of U.S. FRN’s (cash).

And the big losers are: the global middle and working classes and retirees living on fixed income.

Oh yeah – and anyone short ANYTHING denominated in FRN’s is fucked.

Vive la Ben!

Disclosure: I am long gold and gold stocks (plus silver) since 2001.

Login or register to post comments by tom
on Sat, 10/09/2010 – 11:41

Spot on. What are our German friends for if we can’t beggar them by devaluing against their stubborn austerity? The nerve of those Asians and Latins, thinking they can deflect by devaluing right back at us. They ain’t seen nothin yet!

Login or register to post comments by thegr8whorebabylon
on Sat, 10/09/2010 – 11:47

Still waters Bruce.  Beautiful.

Let the great culling commence.

Login or register to post comments by 99er
on Sat, 10/09/2010 – 12:39

Uh Oh…

Login or register to post comments by the grateful un…
on Sat, 10/09/2010 – 12:59

hmm, so Bernanke tries to put a bid under the political incumbents, the danger being the Tea Party might acquire enough power to stop QEII, (which is why the POMO driven rally is being rolled out, for one thing it helps demonstrate to the rebels that even if they take the capital they don’t control the highways. We can still move the money around. Wall Street appreciates their efforts too)

The price they pay however is a weakened balance sheet. Its like one of those video games where you keep shooting the monster until his defenses break down. The difficulty with the Feds dabbling in the political situation is their mistaken notion that nominal gains are what matters, which ignores the leverage third parties can exert, such as that 1% Nader took from Gore in 2000.

Playing politics is not their game, and they will get burned if they try it. To take a stand on unemployment merely underscores the futileness of their actions. Truly they have expanded their power beyond their charter, but at the cost of their balance sheet. The rogue traders are waiting for them in the alley. Flash Crash coming and the bottomless selloff. There is no one left to buy the next bottom, because the Fed will have seen their fingers slammed in the cookie jar.

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