Denninger's Warning, Bernanke's Treasonous Shenanigans, and the Final Shoe to Drop
Karl Denninger is awesome, and if you don't already skeeze through his work over at the Market Ticker, consider this my final warning to do so. Frightening, yes, but real and we need all the reality we can get these days.
"If Foreign Central Banks are selling into Ben's bid then the game is literally weeks or even days away from being over," says Denninger in regards to the threat of a pending bond implosion. You saw this coming, right? Who didn't? Well Ben Bernanke probably doesn't; if he does, he's merely scrambling to buy time before his card gets pulled. If he doesn't, we are far worse off than originally suspected. Either way it's a lose for the ruse and it won't be pretty.
Bernanke, if he continues to play his "QE" games into this, assuming it is real, must be immediately forced from office by President Obama and/or Congress.
In short we must choose the (much) higher interest rate path and choose it now, because that is now an assured outcome.
We can choose between significantly higher interest rates and an economic collapse along with significantly higher interest rates.
Avoiding the higher interest rate outcome no longer appears to be possible exactly as I have been talking about for more than a year.
And exactly as in the 1930s, we will wind up in the same place with "The Fed" being blamed for the "loss of liquidity" when in fact the truth is that it was the government attempting to spend more than it made, and finding the market unwilling to support insane deficit spending, that led to the bond market dislocation, much higher interest rates, and the second phase of the economic collapse.
We are following the precise same path we went down in the 1930s.
Hope you're ready, and say thanks to Ben, Hank, Geithner and of course Obama, all of whom think they can ignore the realities of the market.
Disclosure: The time to short the phone book is approaching.
It was ugly in February, why should May be any different? The "experts" may not understand this but Q4 is coming much sooner than they realize, so time is running out to get this upended ship out of choppy water. But sustainable recovery doesn't matter, they are still obviously intent on keeping up the production. Exit stage left already, Bernanke, you're acting like a schizophrenic who has gone off his meds.
Via Telegraph UK:
The yield on 10-year US Treasury bonds – the world's benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.
This level will asphyxiate the US economy if allowed to persist, as Fed chair Ben Bernanke must know. The US is already in deflation. Core prices – stripping out energy – fell at an annual rate of 2pc in the fourth quarter. Wages are following. IBM, Chrysler, General Motors, and YRC, have all begun to cut pay.
The "real" cost of capital is rising as the slump deepens. This is textbook debt deflation. It was not supposed to happen. The Bernanke doctrine assumes that the Fed can bring down the whole structure of interest costs, first by slashing the Fed Funds rate to zero, and then by making a "credible threat" to buy Treasuries outright with printed money.
Mr Bernanke has been repeating this threat since early December. But talk is cheap. As the Fed hesitates, real yields climb ever higher. Plainly, the markets do not regard Fed rhetoric as "credible" at all.
The jury is still out on the "deflation" argument but I'd say that this is definitely an indication of some serious trouble down the road. Not months or years down the road, directly in front of our faces WTF is so hard to see about this?!
Catastrophe bonds indeed.
To answer the question posed in Mr Denninger's article today, I would say yes, real money has had enough. Why? Because it was never real to begin with. The world is coming to that realization and now the real money will have to do the same.
diclosure: I am long on getmethefuckoutofhere since the $SHIT is about to hit the $FAZ [sic]