'Bond Bubble' Explosion now a Fait Accompli

Bernanke is right now caught in an economic conundrum of his own making and he doesn’t want any of the stupid, befuddled Sheeple to   know it. 

What follows is what he said today and what we believe he should have said. 

 

Bernanke Says Fed May Decide Not to Sell Securities

By Caroline Salas Gage & Joshua Zumbrun - Feb 27, 2013 4:24 PM ET

Federal Reserve Chairman Ben S. Bernanke said the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity (1) as part of a review of its strategy for an exit from record monetary easing.

Bernanke told lawmakers in Washington today that he expects to revisit “sometime soon” an exit plan that policy makers outlined in June 2011 (2).

Federal Reserve Chairman Ben S. Bernanke is the third policy maker in the last week to voice support for altering the central bank’s exit strategy to delay or eliminate asset sales.

Under that plan, the Fed would cease reinvesting some or all principal payments from its securities, revise its interest- rate outlook, raise the federal funds rate and then start selling housing debt to eliminate it from the central bank’s portfolio in three to five years.

… 

How Long

Bernanke echoed that view today. “One issue is how long to hold the securities and whether to use that as a substitute, an alternative to asset purchases,” he said. “That’s something worth discussing.”

The Fed is purchasing $85 billion of Treasury and mortgage- backed securities a month in an effort to (3) spur the economy and reduce a jobless rate that stood at 7.9 percent in January.

…  Bernanke said today the central bank’s easing policies are helping to improve demand for homes and cars (4) by lowering long- term interest rates.

Bernanke ‘Confident’

The Fed chairman said he’s “pretty confident” that the “basic outline” of the exit strategy policy makers agreed upon would “still be in force.”

If the Fed doesn’t sell any securities, “it doesn’t mean that our balance sheet is going to be large for many years,” he said. “It just would be maybe an extra year. That’s all it would take to get back down to a more normal size.” …”

Here follows what we believe (thus there are no quotation marks to indicate actual quotes) Bernanke should have said:

#1 Federal Reserve Chairman Ben S. Bernanke said the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity because no one in the financial markets is capable or stupid enough to buy up all that junk debt.  So, the Fed will be forced to eat it.

#2 Bernanke told lawmakers in Washington today that he expects to revisit “sometime soon” an exit plan because he has no idea how in the H_ll the Fed can get out of this mess.

#3 The Fed is purchasing $85 billion of Treasury and mortgage- backed securities a month in an effort to save all the banks from declaring BANKRUPTCY.

#4 Bernanke said today the central bank’s easing policies are totally distorting demand for homes and cars by providing ‘Free Money’ to the banks so that they can provide loans to anyone that can “Fog a Mirror,” just as they did for housing back in 2002 through 2005, which insane policy led to the last economic disaster and the credit-Crisis of 2007/08.