Vanishing Airplane

The beauty of your Grandfather making a quarter disappear and then come out your ear is its simplicity. As a kid you want to believe, or at least be amused. The "simple" in the trick is you. As we get older the illusions  become more elaborate but you either buy in or you don't. David Copperfield had to make a 7 ton Jet disappear. Here's the rub: Everyone knows its not really happening.

The amusement can be a rush but no one buys into the premise. Enter the Fed. No longer pulling quarters from behind BofA's ears an illusion of greater production value is being brought out. Operation Twist will extend the average duration in the Fed SOMA account. They even decided to step back into mortgage paper. This is a technical operation, nothing really "happens". Sadly, everyone involved is in on it. There's no one in the audience, let alone anyone believing. The Fed is magically making 1/2 Trillion in 10 year equivalents vanish.  To put into perspective, its every bit as big as QE2 for 10s.  What's behind that curtain?

Ben Bernanke may be changing from Copperfield to David Blaine. Blaine's illusions are centered on how long he keeps them up. Permanent Zero just got a lot more permanent.

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