http://www.bloomberg.com/news/2013-02-27....

Norway Faces Liquidity Shock in Record Redemption: Nordic Credit

like this?

Sherman is quizzing Bernank on this right now...

Yes, something exactly like that..

Karl - great interview! It helped to clarify a couple of points that I was unclear on. Thank you for everything...

..so he (ben) aims for a "Japan" outcome...no KABOOM, no riots,...just 3 decades of additional can kicking...

kinda like Apollo 13..."a successful failure"?

Well, Japan was only able to pull off what they did because their population had savings.

I personally think it is very very unlikely that the US will be able to pull of anything like what Japan did. Japan benefited from a relatively quite global financial sate. The central banks around the world were blowing bubbles and that helped Japan and getting away with it. Now the central banks are a mess, and the bubbles are not working.

For us to pull off Japan, we would have to be able to ramp government spending right up into the curve without ever stopping or being forced to pull back. It will not happen, the exponents are out to kill us all.

Rickysa,

The problem with the Japan theory, is that if Japan has any ill effects due to their QE, that will weigh heavy on us since we have taken the same path.

Given the obvious fears of an exogenous event that leads to a domestic economic catastrophe, I wonder how engaged U.S. diplomats/spies are in trying to ensure that Europe eats its own cooking (continues to bail out the PIIGS), complete with threats to individual personal safety ala Perkins' Confessions of an Economic Hitman. It would not surprise me in the least.

Thanks for the feedback, as I really am having a hard time digesting this "we could wind up like Japan" discussion of the last few days. I remember reading here many times the utter stagnation Japan has endured over the last 30 yrs. and their ability to survive such due their (then) savings.

So, if I'm understanding you, Japan has whittled away their attempt at staving off financial catastrophe over the last 30 years via their savings, and now they are at the same tipping point as we are...and if Ben decides to "go Japan", we are still at that same tipping point, averting immediate KABOOM for now?

Well, maybe.

Except that somehow we have to keep funding the FSA. And if we fail at any time to do that, well, it's Kaboom.

http://market-ticker.org/akcs-www?post=2....

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http://market-ticker.org/akcs-www?post=2....

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Pure Awesome.

Lot of info there. Gonna have to re-read yesterday's ticker and watch this interview a couple of times to soak it all up ;) Thanks man.

Karl, if they loaned all that money, they would still have it. Bernanke will raise the reserve requirement and force them to keep it.

The best question I heard was when Hensarling asked Bernanke what the hell he was doing, citing the Fed guys that opposed his actions. The fact there is well over $1 trillion parked at the Fed tells me they are*****ing up a rope. The market appears to be going up because the idiots in Congress aren't challenging Bernanke on anything. One attacks, the next throws fat pitches.

QE is a bunch of nonsense. It should be changed to PAB, as in pumping asset bubble. Note the big change in the price of gold yesterday and late Monday. This tells me a bunch of Fed money flowed into the system to support the markets. Clearly the Fed's real plan is to **** the middle class out of a couple more trillion. Gotta keep us working you know.

I think the Fed could find an exit. Mark to fantasy to start, as they don't pay much for their money. In Bernake's case, merely stop accomodating is the same as tightening. Mortgages roll off pretty fast and they roll faster in a bubble, as people can sell and move up. They have covered up more complex schemes than this. This isn't their biggest problem. Their biggest problem is what are they going to do to clean up this current bubble? The other potential problem is a run on the currency, but as long as the ECB is holding the crap they are holding, the Swissie is in the mess it is in and not sizable enough for mass refuge, that is not likely. Yuan? The Chinese economy would collapse in a week if it had to support all its bad debt on a free trade basis.

In the meantime, there isn't a red 30 minute bar on the Dow chart since 2:30-3:00 Eastern yesterday.

we sure seem to be funding that FSA in pa., the local cbs affilate did a story on welfare, a woman with 2 kids making less than 20 grand is eligable for 82,000 per year in welfare. included in the story was the fact that 11 states have more people collecting welfare than people employed!

I think that was the best interview I have seen from you Karl, You look great man, keep it up.

The reason Karl says we are going Japanese is the problem in Japan is they are debt bound. Rather than cleaning out their banks, which are a mafia of their own, fighting their organized crime, they fed the animal more food. There is no willingness to recognize losses. Their capital is frozen in cash (Someone has to hold cash or use it to pay debts) and spent government debt. The price of current stability is future instability and slow or no real economic growth. The actions of the government and the Central bank are too heavy for the real economy to overcome..

This is quite bullish too... bank deposits are going down fast.

That 19 trillion dollar retirement fund would kick that can 10 years down the road.

Yep, great interview Karl. You actually made it simpler to understand just talking about it on air rather than writing about it.

My fear is that we're Japan now, and this **** will just go on forever. I remember a lot of folks saying that four years ago, and, well, here we are four years later. Only difference is we can lie about data so much better than the others. Wonderful.

So there are a number of ways interest rates could bump up with very bad results. Now I've got to ask the question as there have been many times since 08 that the final straw was virtually inevitable.

What is it the fed could and may well due that will postpone or mitigate interest rate increases? This leaves open options for unconventional solutions and perhaps less than letter of the law ones also. If there is an out for the fed to take it would be common sense that they will.

Oh the simplest one is that the employment rate continues to suck and so does the actual economy. The problem with this is that the current multiples for the market won't hold up forever under that paradigm either.

That will be useful for holding rates down -- for a while. But if margin selling gets going the paradox is that it can go the other way on rates, and if it does there's nothing that can be done about it.

There was a real risk of this in 08 and 09; it didn't happen, but it could have. If it does you're ****ed.

The only way Benny can Japan-ify this is to sack the 401(k), IRA, 403(b), etc. pools, guarantee the return, use the money to backstop his balance sheet, pay out the interest on sitting reserves and keep the bankers afloat for a few years longer. But that's it.

You do that you get ONE SHOT. After that NO ONE will save ONE PENNY ever again.

The USSA already has meek savings. After a 401(k) grab there would be nothing left. Japan had the Japanese recycle nearly ALL of the surplus earnings capacity (savings) capital into JCB bonds.

USSA, not so thrifty.

Maybe he won't cause riots if they game it and force all 401(k)s into the Treasury/FOMC and then all FUTURE contributions AND matches are sucked into the gaping maw as well.

But I don't see many standing still for that.