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Art Cashin Explains QE2 Using Bernanke As Chief Horticulturalist
Art Cashin is in his element today, using vivid allegorical imagery to explain QE2, assuming there is still anyone confused about why the Fed's latest all-in attempt will be a total catastrophe, and why the squirrels will be pissed. To wit: "Our friend, Rich Yamarone, over at Bloomberg had a terrific analogy in his column today. Here’s how it began:
Every year as it begins to get cold in the northeast, oak trees drop acorns. The annual bounty helps countless squirrels, chipmunks, rabbits and other rodents endure the bitter winter months.
Let's say oak trees dropped 1.3 trillion acorns last winter and that an industrious squirrel hunted and gathered far more nuts than he needed. He sought to loan some to others, but the neighboring chipmunks and deer already had plenty. The Nuts, Acorns, and Seeds Administration, surveying the landscape, found the level of acorns unchanged at 1.3 trillion. Worried about another tough winter, it recommends that trees drop another 2 trillion acorns.
That analogy perfectly sums up the Fed’s predicament at this point. They have made an ample amount of funds available but there is little demand for them. That is why many folks see QE 2 as a potential victim of the law of diminishing returns. Does it matter if you push the string with two fingers instead of one?"
And this being Art, here is the required daily bit of historical trivia:
On this day in 1492, Christopher Columbus landed at the Bahamas, believing that he had landed in the islands off Japan. And so history is indebted to a man with a flawed theory who set out on a venture where he didn't know where he was going, suffered sharp losses on the way and didn't know where he was when he got there. And he did it all on borrowed money.
But if Columbus had things confused, folklore has really muddled what happened. Back in August of 1492 Columbus had set sail from the port of "Palos de Frontera" on the west coast of Spain with a squadron of three ships to seek the riches of the East.
Error #1 - Columbus headed for a new land. (Actually, he thought he was sailing to China or Japan.) Error #2 - he was a mighty sailor. (In two earlier launches some of the ships he selected leaked so badly they had to rush back to port and were replaced.)
Anyway, as we all know, the advisors to Ferdinand and Isabella warned their collective royalness that Columbus would sail off the edge of the earth. That's error #3 - actually, they thought Columbus had underestimated the size of the globe and thus would run out of fresh water before he could reach China. Perversely, today's computers indicate the negative advisors were very accurate while Columbus was off by many thousands of miles. Luckily, the unexpected "New World" and its fresh water stood in the way.So! You say - "So what! Mr. Smarty Pants!" Even if he was not who he seemed to be, nor was much of a sailor, landed in the wrong place and miscalculated much of the way - the great drama was that he did it - and on borrowed money at that. (Op. Cit. Queen's necklace fable.)
Well, despite what your version of Sister Herman Joseph told you that's error #4 - the Queen never hit the hock-shop with the jewels. What had really delayed the trip for nine month's was greed - Columbus'.
In his employment contract he demanded: 10% of whatever he found, a Knighthood, an Admiral's title and a Viceroy's title (both to be hereditary) and 10% of the profits on all naval imports thereafter.
When F and I turned him down, he then tried for the same deal at various palaces around Europe. Finally, an advisor convinced Isabella that actuarially Columbus had a good shot of dying on this or some subsequent voyages, so the Queen signed the deal.
To celebrate make note of some valuable discovery you've recently made. Then drop a hefty employment contract on the boss's desk - but don't insist on an Admiralcy - you'll look greedy.
Traders did have a tough time navigating the markets yesterday. And, as hard as they tried they could not find a compass nor a landmark to steer by.
Stay nimble people.
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The answer is QE, what is your question?
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Crap analogy by Mr. Yamarone.
It should read "Some of the neighboring chipmunks and deer don't have enough and they don't want to borrow and some of the neighboring chipmunks and deer will pig out with no intention of ever paying back".
"Industrious squirrel will not ever say exactly how many acorns he has even though he is required by law to do so."
"Industrious squirrel should check his neck."
42 million squirrels (food stamps recipents) are getting acorns on the first of each month, millions more on extended unemployment are getting their acorns each week, states are lining up for their acorns .... There is plenty demand for "free" acorns, not so much for acorns that need to be paid back.
Want some inflation? Send everyone with a social security number a check for $1K, $10K or $100K most will spend it, some will reduce debt and a few may invest it, but it will get into the system.
How is that inflation?
I thought we call that "economic growth" in this country.
Inflation is bad. Economic growth is GOOD.
Hell, when Obama becomes a lame duck President in a couple of years, I wouldn't be surprised to see reparations for slavery to be paid out. Send every descendant of slavery (and farm workers, too) a check for $100K. The moral equivalent of "drinks on me", then putting it on a credit card you are never going to pay off.
When will someone at the Fed walk into Bernankes office and step up onto his thrown and slap him in the face? Doing this while saying "Do you realize that what we are doing is just making things worse?".
No -- it matters which finger you use, and who the recipient of that finger is.
I thought congressional Democrats killed ACORN?
http://www.flickr.com/photos/21322890@N07/5075678338/
It's baaaaaack.....
you have to repost that after 4ish when all the obama zombies come on to junk things; might have captured a pic of some of them
Well, we're obviously gonna need some bigger squirrels in order to boost aggregate demand!
Squirrel Catapault
http://www.youtube.com/watch?v=UjYLRLwphcs
"Protect your nuts."
[Bullwinkle is going for a walk in the woods]
Rocky: But Bullwinkle, there aren't any more woods.
Bullwinkle: You don't have to tell me, I'm the Chairman for the Frostbite Falls Society of Wildlife Conversation.
Rocky: You mean "wildlife conSERVation."
Bullwinkle: What'd I say?
Rocky: You said "wildlife conVERSation."
Bullwinkle: Well, somebody's gonna have to start talking about these things.
Karen: Boris Badenov. I've seen you on TV. You're a crooked, creepy, no-good rotten worm.
Boris: Oh, thank you.
Karen: You're slimy, sneaky, sleazy...
Boris: Please. You'll turn my pretty head.
Karen: You're a sadistic spy and a really bad person
Boris: Stop. You're embarrassing me.
Boris: We don't need computer weapon to kill moose and squirrel. We've been trying to kill moose and squirrel for 35 years.
Natasha: And we've never even come close.
Boris: Exactly.
Fearless Leader: How many times in the past have they stood between me and my dreams of glory? How many times have they foiled my plans with their bungling interference?
Boris: Er... 28?
Fearless Leader: Quiet, idiot!
[in the White House]
Cappy: Bullwinkle, allow me to be frank.
Bullwinkle: Okay, Frank. Allow me to be Bullwinkle.
Cappy: [putting out hand] I'm Cappy Von Trapment, FBI.
Bullwinkle: I thought you said your name was Frank.
Cappy: SHUT UP, BULLWINKLE.
Bullwinkle: Okay, Frank.
Shoot the Suckers, FED's that is!
Hmm - seems to me there's one squirrel that's actually consuming nuts - and thus needs re-supply - at a furious pace, is there not?
Specifically:
http://research.stlouisfed.org/fred2/series/FYGFD
And since when did banks actually have to lend the money they receive? Are they not instead using it to buy stuff (i.e. speculate) - like commodity futures for instance? Thus the price of these going through the roof currently?
QE2 will happen because of the elections, not because it will aid the economy.
It will accomplish nothing other than ensure some key Democrats retain their seats. That alone is sufficient reason for QE2.
There is nothing that will aid this economy. This economy has been a swindle for years and the new money isn't holding up the old money. Everyone knows this. The ones still playing are just making an extra buck on the churn while they can, before the wheels come off.
The danger in propping all this up via QE1/2 and all the bailouts is that when it drops, it will drop like a stone. This is of no concern to anyone living in the top 2% of the wealth tree. The rest of us however will have the fight of our lives.
I give it 9 more months. Q2-11 will likely close out on the threshold of a creeping, incipient nightmare.
You're assuming that the Fed actually cares which party wins the elections, I'm betting that they don't.
Krusty the Klown (Bernanke) should listen to this Peter Sellers clip which pretty muchs sums up the current situation and the effectiveness of adding more stimulus.
"We are upset by the seasons of our economy"
http://www.youtube.com/watch?v=YgGvd1UPZ88&feature=related
bundle up kiddees, it's starting to get a bit nippy out there.
just remember there will be growth in spring.
Any chance someone can relate all this fancy economics to me in a more universal analogy. One involving beer for example.
Here's the rest of the story...several years ago Mr squirrel showed up in the forest with another even bigger batch of acorns and this time everyone in the forest ate. They ate and ate and ate. It was a giant acorn party and they absolutely trashed the forest in this acorn party.
Soon everyone started getting sick. The deer got acorn fever, the chipmunks died and pretty much everyone vomited until they felt that their insides were coming out.
Now all the animals in the forest are picking themselves out of the puke and dead bodies when suddenly Mr. Squirrell shows up again with another trillion free acorns and he can't understand why no one wants any.