What
Mitt Romney Also Said: A Glimpse Of The Endgame?
Submitted by Tyler
Durden on 09/19/2012
http://albertpeia.com/mittalsosaid.htm
‘By now everyone has heard the infamous
Mitt Romney speech discussing the "47%" if primarily
in the context of how this impacts his political chances, and how it is
possible that a president "of the people" can really be a
president "of the 53%." Alas, there has been very little
discussion of the actual underlying facts behind this statement, which
ironically underestimates the sad reality of America's transition to a
welfare state. Recall Art
Cashin's math from a month ago that when one adds the 107 million Americans
already receiving some form of means-tested government welfare, to the 46
million seniors collecting Medicare and 22 million government employees at the
federal, state and local level, and "suddenly, over 165 million people, a
clear majority of the 308 million Americans counted by the U.S. Census Bureau
in 2010, are at least partially dependents of the state."
Yes, Romney demonstrated potentially
terminal lack of tact and contextual comprehension with his statement, and most
certainly did alienate a substantial chunk of voters (most of whom would not
have voted for him in the first place) but the math is there.
The same math that inevitably fails when one attempts to reconcile how the
$100+ trillion in underfunded US welfare liabilities will someday be funded.
Yet the above is for political pundits to debate, if not resolve. Because there
is no resolution. What we did want to bring attention to, is something else
that Mitt Romney said, which has received no prominence in the mainstream
media from either side. The import of the Romney statement is critical as it
reveals just what the endgame may well looks like.
In response to an audience question:
Romney: [The] former
head of Goldman Sachs, John Whitehead, was also the former head of the
New York Federal Reserve. And I met with him, and he said as soon as
the Fed stops buying all the debt that we're issuing—which they've been doing,
the Fed's buying like three-quarters of the debt that America issues. He said, once
that's over, he said we're going to have a failed Treasury auction, interest
rates are going to have to go up. We're living in this
borrowed fantasy world, where the government keeps on borrowing money.
You know, we borrow this extra trillion a year, we wonder who's loaning us the
trillion? The Chinese aren't loaning us anymore. The Russians aren't loaning it
to us anymore. So who's giving us the trillion? And the answer is we're
just making it up. The Federal Reserve is just taking it and saying,
"Here, we're giving it." It's just made up money, and this does not
augur well for our economic future. You know, some of these things are complex
enough it's not easy for people to understand, but your point of saying,
bankruptcy usually concentrates the mind.
Source: Mother
Jones
And
that is how the Fed effectively took over control of the United States, as
without it, it is game over. This is also why the ongoing presidential election
is a farce, and has absolutely no bearing or significance for the future of the
US, whose true ruler does not reside at 1600 Pennsylvania
Avenue, but instead holds America hostage in a powerful Stockholm Syndrome grip
from the deep recesses of the Marriner
Eccles building located, paradoxically, on Constitution Avenue.
Don't
worry though: like any "true democracy", the real "leader"
of the nation will never be eligible for popular vote. Ever.
P.S. It appears that
Paul Krugman has promptly taken offense to the realization that Bernanke is
"monetizing 75% of all debt." He has even promptly penned an article
"Misinformed
Monetary Mitt" proving the Noble prize-winning economist really has
little understanding of the dynamics of debt monetization.
Here
is the reality: under ZIRP, all bonds with a maturity inside the guaranteed 0%
envelope are essentially cash equivalents. This means all bonds 3 years and
less, which as is to be expected for riskless paper, have a
coupon of roughly 0% (except Fed counterparty risk of course, because the only
reason they should trade above 0% is if the Fed loses control of inflation and
ends ZIRP prematurely before its announced end date now sometime in 2015). When
the Treasury issues them the buyers takes on ZERO risk, thanks to ZIRP. This is
also the reason why the Fed sells $45 billion in short-end
paper each month, as part of Twist sterilization. In essence the only debt
issuance that matters for the US Treasury is that of longer-dated issuance.
This amounts to roughly $45 billion per month in the 10-30 year window, and
is virtually all the debt that the Fed monetizes on the long-end as part of
Twist. This is also knows as Flow as we have explained repeatedly, but
we don't except someone still stuck teaching 1980s economics to understand this
(Goldman explained
this here)
But
this is not news: back in February we noted that Under Twist the fed has monetized
91% of all LT gross issuance.
Between
Twist 1 and 2, the Treasury has not auctioned off one dollar of gross LT debt to
the private market, as evidenced by the total inventory of 10-30 year paper
which has remained fixed at $650 billion. It is this liquidity limitation that
forced Bernanke to monetize not more TSYs, but to commence buying Mortgage
Backed debt.
The
fact that Krugman does not get this simplest fact about the nuances in the
Fed's monetization activities demonstrates just how dangerous it is to assume
that just because someone has been awarded a Nobel, they automatically are an
expert in something, anything, especially involving numbers.
And
because we enjoy spreading knowledge, and for the benefit of even the most
math-challenged Economics professors, here again is a simple clip showing how
Romney is actually lowballing the real number of relevant gross issuance, which
is nearly all in the critical 10-30 year ballpark, and where the Fed will soon
be virtually the sole marginal market player.’