There She Blows!!!...................Evil Plan 83.0 (by BDI from Slope of Hope)

Tim Knight from Slope of Hope's picture


Well, my fellow Slope-a Dopes, your favorite intrepid seafaring Frenchman got blown out of the water by Benjamin Moby-Dick Bernanke once again.  I have to hand it to captain grey beard, for a guy with a curiously quivering lower lip, who seems so utterly unsure of himself every time he opens his moronic mouth, he sure does have some pair of ballistic brass balls.  Not only did he delivered on his QE3 promise, but he actually turbo charged it into a terrifying trifecta!  Boatswain BDI was left for dead, desperately drowning in a sea of red DOOMs (Deep Options Out of the Money).  So now that Moby Dick has breached and surged the equity waves to new highs, where do we sail from here?  

It now seems clear as day light, that our crazed calculating captain has definitively decided to go all in full monty, embarking on Dalio's deft deleveraging design "hook, line and sinker".  What exactly is this beautiful course our asinine Admiral has set sail for?  For specific directions, be sure to read bearded Ben's most trusted tactician Ray Dalio's definition of beautiful deleveraging:

Enough “printing” occurs to balance the deflationary forces of debt reduction and austerity, in a manner in which there is positive growth, a falling debt/income ratio and nominal GDP growth above nominal interest rates.

I get this cool clever concept, and can see why it appeals to astute academic anuses, as on paper it does have a certain calculable credibility.  Mr. Dalio goes on to further explain exactly what this newly chartered course we have been on since 2008 looks like thus far:

unlike both the US in the 1930s and Japan since 1990, the US has quickly entered a reflation and ended the “ugly deflationary deleveraging” phase of the process (which lasted from July 2008, just before Lehman fell, to March 2009, when the Fed instituted its aggressive program of quantitative easing to monetize the debts). During the “ugly” phase, incomes fell, debt burdens rose from about 340% GDP to 370% and stocks lost almost half their value. Because so much debt around the world is dollar denominated, the contraction in global credit and dollar liquidity created a squeeze for dollars, and the dollar strengthened significantly against a trade-weighted basket. Exports collapsed faster than domestic demand. Following the reflation that began in March 2009, incomes recovered, debt burdens fell below their initial starting level to around 335% and stocks recovered all of their losses.

At this time, the credit markets are largely healed and private sector credit growth is improving. Thus far, this deleveraging would win our award of the most beautiful deleveraging on record. The key going forward will be for policy makers to maintain balance so that the debt/income ratio keeps declining in an orderly way.

I must admit so far so good, all seems to be going swimmingly smoothly, as per the plan's perfectly precise presentation. However, this is the real world we are talking about here, not some PHD graduation thesis on dispay at the Princeton economic petty officers club.  Call me an idiot, but somehow I highly doubt that the advanced global economy, with all its complex inter-connected machinations, can be so easily & readily tamed by a few seasick sailors in the captain's quarters, no matter how much Rum they have run through.  As the saying goes; many a slip between the cup and the lip.  

Are we really going to thread the needle here with this bold balancing act, or are the spinning plates going to come crashing down on us all?  Should we entrust the entire fate of the world's economic ecosystem to few fancy fellows' fabulous footwork?  Myself, I would have much preferred to have let the free markets dictate the pace.  Central planning of this monumental magnitude is absolutely antithetical to USA free market capitalism.  Beware the immeadiate unintended consequences dopes of hope!

Let us now explore a few things that could rock this beautiful banana boat:

OilUp1) The price of Oil. The life blood of modern global based trade, could well spiral upwards out of control. For the first time in history, the national average gas price for the 2nd week of September were over $4.00.  Not a good look for a largely consumption based economy.

2) Will this unprecedented action blow up the Petro-Dollar?  As of this September 6th, China and Russia have decided to trade oil in non-petro dollars. Also, Iran can sell their oil to them without worrying about US sanctions. This is a huge development which has not fully sunk in to the general public yet.  Perhaps the rest of the world will soon refuse to play ball with a the juiced up Fed as a cheating opponent.  Will Asia increasingly turn away from the US capital markets, spending its hard earned reserves elsewhere? I sure as hell would.

2313)  Agricultural commodities. The price of domestic Corn & Wheat are already at or near all time highs.  A devalued USD caused by excessive money printing increases the cost of imported foodstuffs as well. QE3 will only make matters worse.  Again, not a good look for a consumption based economy. 

4)  Much of the recent social upheaval / military conflicts in MENA, have at their roots the caustic effect of high food & oil prices in the region.  The US open ended QE policy is exporting inflation, and therefore misery to many impoverished parts of the world. Will the continued instability in the area rapidly lead to even larger major military conflicts which we can already ill afford, not to mention the ominous oil price spike that would ensue?

China_1237680c5) The last thing that Europe needs right now is a weaker USD. Germany the only remaining ezone economic engine will suffer significantly, as their exports become less competitive vis a vis the US. The poor pathetic periphery counties will have zero chance to compete at all. While the ECB's printing money ability has increased within the past year, they don't have the same structural capacity as the U.S. to do so.  Ben's destruction of the USD will adversely affect Chinese exports as well. We could soon see a collective Japanese/Chinese/European intervention in the currency markets buying up the USD to counter the effects of QE3, and this could quickly descend into Jim Rickard's dreaded currency wars.

ZeroPercent6)  ZIRP forever.  Are we not penalizing all savers by keeping rates so low for so long, and thus keeping the money they would have earned in their savings accounts from ever entering the real economy?  And won't inflation and a weaker dollar further erode their purchasing power?  Ben's policy hurts most retired folks living off a fixed income, and all who have a conservatively allocated retirement account they are counting on for future living expenses.  Also, anyone who buys insurance, will now have to pay higher rates because insurance companies can't make money on their premiums anymore.  Again not too cool for a consumption based economy.  

7) Every municipality, town, city and state that consistently adds to their conservative Government bond holdings, will now earn less income from those fiscally prudent investment portfolios. The Fed's forever ZIRP policy is now effectively forcing comptrollers of already dangerously over leveraged fiscal budget balance sheet all over the country to take on even more risk, by shepherding them towards a questionable search for higher yields.  Sounds dicey to me at best.

120504_jobs-analysis_hmed_1052p.photoblog6008)  QE does little to promote job growth. QE1 cost $1.7 trillion. QE2 cost $600 billion. Using Bernanke's math, it cost the Fed $2.3 trillion to create two million jobs. The average annual salary in the U.S. for 2010 was $41,674.  By the math given to us by Bernanke himself, each job created by QE has cost the Fed $1,150,000.  Doesn't seem to be very cost effective.  Can't we figure out a better way to spend the Nation's limited financial resources. Is bailing out a busted bloated banking system all that matters in the world!  Where is the outrage???

9) Effect on the Federal deficit. The continued unabashed monetization of debt actually encourages the fiscal cliff to become the greatest divide.  Why would the easy money law makers be induced to significantly cut Governement spending if they are not penalized for further borrowing.  Giving too much candy to a baby is usually not a good thing.  Money for nothing and your chicks for free, is that the new American way?

A8e8d47799efc3b059c381ce1f5ba4b5856eb59310) The wealth effect.  The Bernanke puts way too much emphasis on the positive impact of a "feel good" consumer. He has directly mentioned the stock market & consumer sentiment as very important drivers of further economic growth. Does he not realize that most people actually don't own any stocks, other than a 401K, which cannot be touched until retirement. The average consumer uses regular savings to make additional discretionary purchases, not 401K gains. By keeping rates near zero, their meager savings returns are not even keeping up with real inflation, which is much higher than he admits to begin with.  Not to mention that real wages have been staganant for decades now. Dr. Feelgood has it backwards, the man on main street feels mainly the pain of QE, and not the gain.

Home-values-reach-bottom11)  QE3 and home prices.  You would have to draw the 10-year yield down close to zero in order to get more people then are currently refinancing to refi again. This further MBS purchasing program by the Fed will only bring in a handful of new refinancings for the banks, and if you were looking to buy a home, you still have the same problem of selling your current residence because you owe more then its worth. This means you need to qualify for a new loan with your old mortgage counting as reoccurring debt. Not many can do this.  As far as new home buyers go, interest rate levels on mortgages are not the problem, they are already at historic lows. This Mortgage purchase program announced as part of QE3 has much more to do with the Fed buying the MBS from Fannie and Freddie, because no one else will want to touch these zombies once the draw down requirements are imposed on the Federally chartered mortgage finance companies after the 1st of the new year.  I'm afraid there is no housing boost news here at all, just more duct tape & baling wire.

12)  QE3 Inflation acceleration.  Unlike the mega yet sterilized bond buying announced by ECB, the FED's reckless QE3 to infinity program does not mention anything about sterilization.  This implies that there is no promise to contain the newly minted money via sterilization operations whatsoever, as was the case with QE1, QE2, and all other previous mortgage security purchases, instead it appears that the fubar fabricated funds will free flow directly into the economy, on a potential unlimited basis. $85 billion created per month out of thin air, $40 billion of which are perpetual unsterilized high octane fuel injections into an energetic economic engine is simply mortifying monster truck madness. This drastically increases the immediate dangers of an inflationary inferno flame out.

Inflation13) Effect on future US interest rates.  Here is where I believe we may see an immediate and very lethal blow back. If we are to assume that this new QE to infinity policy will quickly ignite new growth / jobs for the economy as advertised, it will also inevitably put upward price pressure on non-discretionary essentials such as food and energy, which have clearly shown their propensity to move up in tandem along side every previous QE operation.  This real inflation felt at the ground level will not only reduce direct consumption by the cash strapped classes, but it will also force the cash flush classes away from low interest earning financial accounts of all kinds, and into existing hard non producing assets of every kind (commodities, PM, art, land, real-estate).  Furthermore, prudent investors will soon understand that most corporate earnings suffer mightily from inflation, and thus will stay away from equities at these elevated levels.  The elite financial institutions will face a double wammy here; not only will they lose straight low end deposit savers, but they will also suffer massive equity & bond account draw downs from the more affluent.  At the end of the day, if they are going to keep excessive capital flight from accelerating, they will have no choice but to raise rates of return on funds deposited with them.  

Higher rates are just what the Bernanke was trying to avoid!  Get ready for a midair mid flight stall into a deadly death spiral captain Ben, you have clipped your own wings. We are heading straight into an inflationary depression storm of epic intensity. Inflation in the things we require, and deflation on the things we already own.  The greed trap has been hatched from the heavens above, same as it ever was.

Up until now, the stock market has enjoyed the free QE bus ride no questions asked, however when the prosperous peeps are surprisingly startled by the tremendous thundering QE3 tailpipe backfire blast, they will quickly realize that the vehicle is running on nothing but fumes, and will all jump off at once before it runs out of regular real gas.  Be sure to be the first ones out before the passengers crash the plexiglass doors.

Holy hubris !  Inflation Nation !  The Bernanke has blown the lid off his chrome dome!

Fear no beard....................P3 is here.

Lift off.........Rocket launch failure.........Houston we have a problem.........Evil Plan 83.0 

              BDI SOH's Idiot Savant

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mendolover's picture

The market can stay irrational longer than you can stay liquid.

avidtango's picture

Maybe.  But, as Chris Martensen has said for years, it is mathematically impossible to continue our current patterns foreverr - whether it's mineral resources, energy, food or (especially) debt.   Anyone not stocking a huge pantry or purchasing precious metals is a fool and yet, the vast majority are clueless.  The only outstanding question - has China decided that losing a trilion dollars is worth becoming Numero Uno?  If the dollar collapses those with holdings also lose.  

Amagnonx's picture

When this all crashes and burns, people need to keep a clear mind as to where all the loot has gone.  This is outright theft, and when and if the people actually regain control the stolen money of the people needs to be ripped out of the thieves - along with their black hearts.


If we can't stop the theft now - lets at least agree that the creditors of the bank, the shareholders of the Fed and all the political enablers need to be impoverished and have all their wealth expropriated at the eariliest convenience of the people.

avidtango's picture

Actually, much of the vanished wealth will be phony, something out of smoke & mirrors.  Much of it is in the form of promises we can't keep or is a claim on our children's future. Lots of wealth is is perceptual, especially that made by trading debt and shuffling paper. 

The wealth of all those responsible doesn 't hold a finger to the imaginary wealth we create through politics and the Fed.   We, the people, have enthusiastically supported a system whose foundation is 50% debt (and rising inexorably).

OutLookingIn's picture

"Thar She Blows!..."

Thought the article was on Iran and what about is to happen.

As in mushroom clouds.

Damned hard to export oil from a smoking hole in the ground, surrounded by desert turned into a glass topped parking lot! Three ways a country handles debt;

1/ Pay it off

2/ Default

3/ Take the nation to war

Looks like option number three has it! Full employment on the way. 'We're in the money, we're in the...

GeezerGeek's picture

At first glance I thought of Moochelle pontificating about obesity being threat number 1. Then I thought of Hillary.

Finally I thought it was the title of Monica's forthcoming book.


masterinchancery's picture

4. Hyperinflate the currency.  Most popular product!

ebworthen's picture

Ideas have a life as long as the perception that they are valid.

The Bernanke is running on vapors - just so many believers and equity pumpers.

When they are extinguished his fantasy will crash to the Earth in a ball of flames.

Dr. Sandi's picture

Unfortunately, he will crash into a densely populated area, resulting in widespread panic and destruction.

Bartanist's picture

The stock market is a rigged game. The banks with their computers run price. Individual investors mean nothing and no amount of individual selling will have any effect on price unless the banks with their computers want the price to go down.

Some may think that the Bernank blast into the stock market is all for the Obama re-election and there will be a hangover . I think not. The banks steal the most money by moving price in the exact opposite direction of rational thought and sentiment (and then come up with kame media nonsensical rationalizations afterwards).

So, IMO, not only will the market cruise higher through the election, even with the abysmal fundamentals and wars heating up, but it will cruise higher after the election.

elementary's picture

The last picture in the article looks like a penis (and a rather skinny one at that) on fire with syphilus on the downswing, as the gonads vaporize on high. Very befitting the state of manhood in this world.

elementary's picture

This only proves how much bigger the problem really is and how out of control the banksters are.  Hmmm . . . do you think the first QE, which we were told was "only" 800 billion, but in reality was 16 TRILLION and sent outside the U.S., has aything to do with this latest, most obvious panic? Ya think?

And how many Trillions were given away with QE2? And now, how many more Trillions have been given away with this latest excuse called QE3? 

Somebody, anybody . . . please put these criminal bastards out of my misery!

Cult of Criminality's picture


 Thanks for including the dogs,they appreciate it.

XtraBullish's picture

Who has stayed long hard assets (gold/silver/metals shares) since 2003? A bunch of us is the answer but the true morons are the hedgies that got "lucky" in the SubPrime Meltdown phase (2007-2008) and were short for a brief moment when Jamie and Lloyd wanted Dick's balls on a platter. But the Kyle Bass's and the Eric Sprott's of the World are making quadrillions simply SHORTING "fiat" at every chance. Every time you save a few extra shekels/dollars/euros/rubles, you take it OUT of the banking system and buy coinage in Au and Ag. That has been the only trade OVER TIME (the last DECADE!) that has worked. Period end.

zorba THE GREEK's picture

XB    Not only is 'taking money out of the banking system and buying PMs

the best trade', it is the most effective way to express our outrage and

counter the actions of the bastards that got us into this mess.

Dr. Sandi's picture

I find that knowing where my silver hides makes me feel a lot better than the idea of protesting a broken and hopeless system to whoever in hell might be paying attention.

elementary's picture

QE to infinity has long been predicted by other astute analysts.  Where do all of you think Europe is going to get the money they need to bail out their banksters?  Bernanke printing, to tide them over until they can (and now are) counterfeiting their own currencies. European and U.S. banks are too intertwined for the U.S. not to save their interests across the Atlantic.  Not only are we, our children, grandchildren, et. al., going to bail out U.S., we have the "privilege" of bailing out Europe.

It all sucks!!!!!

Anusocracy's picture

The FED will eventually backstop Germany.

elementary's picture

The Fed has guaranteed they will backstop anybody, even your slut whore sister!

GeezerGeek's picture

You are right, except 'anybody' should read 'amybody but We the People', because none of this will help the 99%, or at least the portion of the 99% who are not on EBT/disability/other government handouts.

Ned Zeppelin's picture

"Is bailing out a busted bloated banking system all that matters in the world! Where is the outrage???"

Answers are yes and MIA.


boogerbently's picture

The "outrage" is long and strong in the 99%, but DENIED any validity or coverage in the MSM. So we THINK no one hears us, leading to the belief that we are in the minority.

Washington/WallSt not acknowledging our concerns is the equivalent of there not being any.

DeficitAlchemist's picture

Thanks for the article I believe Stagfation best describes what we will face, as growth will be dire with Inflation stubborn and high but not hyperinflationary (Zimbabwe).

Hyperinflationary typically can run to 3 digits and beyond 100% - 1000%


With debt levels as they are it will bring the default on, on interest payments immediately, which is why it will not occur we will have our Reset event well before at normal inflationary levels think double digitd and before.


Expect gross crookery on inflation figures, already occuring but getting worse, to Mask QEternity effect.. search youtube on basket of goods... Retailers already making smaller packaging on size at same prices on measured baskets (no doubt under pressure from Gov Hacks/Spooks. Loo rolls are 20% shorter in one clip for same price on inflation measured brand.


Thanks for the work, as an aside dont get sucked in to the keyboard warrior thing, with the illiterati, is my advice, non-response retains the dignity over regular utterances of 'blow me' ;-)

Be well.

bilejones's picture



The whole idea of a "consumption based economy"  is so fucked up as to be beyond belief.


When you have a situation where the most popular gun used by police is made in Austria and the standard issue sidearm for the military is Italian, there's a manufacturing problem in the US.


Ever seen the discovery channel? All the vehicles used in Africa are Land Rovers or Toyotas. No one uses a US made truck where it really matters.

Bruno de Landevoisin's picture

Thank you for your kind words


"blow me" is my signiture's a term of endearment

DeficitAlchemist's picture

Thanks for the article I believe Stagfation best describes what we will face, as growth will be dire with Inflation stubborn and high but not hyperinflationary (Zimbabwe).

Hyperinflationary typically can run to 3 digits and beyond 100% - 1000%


With debt levels as they are it will bring the default on, on interest payments immediately, which is why it will not occur we will have our Reset event well before at normal inflationary levels think double digitd and before.


Expect gross crookery on inflation figures, already occuring but getting worse, to Mask QEternity effect.. search youtube on basket of goods... Retailers already making smaller packaging on size at same prices on measured baskets (no doubt under pressure from Gov Hacks/Spooks. Loo rolls are 20% shorter in one clip for same price on inflation measured brand.


Thanks for the work, as an aside dont get sucked in to the keyboard warrior thing, with the illiterati, is my advice, non-response retains the dignity over regular utterances of 'blow me' ;-)

Be well.

Earl of Chiswick's picture

Tim, the sun according to the experts will explode; so yes, there will be inflation, bravo for making that call.

Now  if you would be so kind as to attach an addendum to your treatise with  time-lines and rates perhaps your detractors and fan will be able evaluate your bold call. Without specifics your words are so many wasted pixels.   



Bruno de Landevoisin's picture

I think I was crystal clear......sell earl sell......


Earl of Chiswick's picture


I missed your name in the byline - you're one of Tim's acolytes


spare the solicitations and answer the question, otherwise leave this place and go back to Tim's playground.


I mean holy fuck bad enough that we have Tim posting but now we have one of his knob gobbling toadies posting under his name, give me a fucking break


a link that you, dear BDI will find of interest *


*ZHr's would be well advised to avoid

Bruno de Landevoisin's picture

I'm BDI.......your gripe's with me not TK


blow me

steve from virginia's picture


Sorry folks, when yr countries are run by money-lenders and merchants this is the outcome: nonsense.


We'll see but it looks like Mr. Bennie just dropped the hammer on the US auto industry. If so, he's welcome to a dinner on me any time!

eddiebe's picture

" Money for nothing and your chicks for free, is that the new American way?"

Hey, I can only hope!

Dollar Bill Hiccup's picture

Hmmm, I thought this piece was going to be about Mr. Clinton and his intern several years back.

It's got a Dick in it, so not a total miss.

monopoly's picture

Nah BDI, you are one cool Frenchman. And you are right on. But I do think it will be a while before you are proven 100% correct. 2013 has a nice ring to it. Well done.

sosoome's picture

How will all those unsterilized billions will get in to the economy?

roadhazard's picture

Trickle down... can you feel yourself getting rich already !

James's picture

How will all those unsterilized billions will get in to the economy?


A few keystrokes.


It used to be called fraud.

Now they call it S.O.P.

Dr. Sandi's picture

The US military alone uses half of all the oil in the country.

Gov can win all they need at any price, while we give them the money to do it. And we also get to pay the same new, improved price for our personal and company gas and oil needs.

lasvegaspersona's picture

the government cannot stop will spend new dollars got from the fed into the economy. they will compete with us citizens for all the stuff we both need. A Presidential memo from January this year instructs each of the department heads to ignore rising costs and get what they need. $2.3 billion a day goes into our economy to be sure the greedy beast is fed. We voters are left to fend for ourselves.

TrustWho's picture

Thank you Tim Knight for decoding the absurdity of QE Infinity launched September 2012 element by element.

If this was not so serious, this would be a focking comedy. In the Greatest Democracy the World has ever seen (cough, cough), we the people allow a group of intellectual, UNelected, eggheadish, Phds (12 focking PEOPLE) spend 25% of the Wealthiest Nation on the Face of this Earth's GNP (cough, cough), without ANY control or oversight.

Has an elected Head of State autocratically spent $4 trillion? Any democracy must be eliminated, because they do not have autocratic powers, except in the good ole USA. Maybe, the King of Saudi Arabia challenges Daddy Bernanke's power, but I think NOT.

QE powers are just focking absurd.

James's picture

The PTB are demanding $150.00 + oil.

Russian navy just pulled out of Syria telling Assad he's on his own so Assad best leave or die.(Russia needs oil @ $120.00 to break even.) They also recently found a huge feild.

BP just quit drilling in Prudhoe Bay and will not resume 'til $150.00 oil is reached.

The King of Saudia Arabia is next after Syrias Assad for a death sentence. Look to Muslim Brotherhood to be installed.

ALL Mid-east turmoil witnessed over the last year,and will continue, was FORCED to achieve this.

U.S. gas prices will be $6.00-$7.00 b4 long.

These peeps are playing for keeps.

But what do I know?

roadhazard's picture

Oh No !, not ANOTHER huge oil field. Peak Oil ! Peak Oil ! lol 911 ! 911 !

Bruno de Landevoisin's picture

Tim Knight kindly posted an artcle wriiten by BDI, a Sunday afternoon favorite at

Sir Edge's picture

Yes... But Our Lips Are Worn Out... :o)

Vegetius's picture

Pretty much on the Money  with upcoming events Tim. Harvests in key export locations are under pressure, by that I mean the swing exporters due to a number of problems mainly weather related.

Of course the poor do not mind becoming poorer ask Gina Rinehart she knows how to tell the working man a few home truths. Might not be such fun when they burn your house down with you in it Gina.

When people are hungry and see no hope there will be Blood


“Poverty is the parent of revolution and crime.”
  - Aristotle

MrSteve's picture

Revolution is one meal away, the meal your kids don't get. That's the history of human nature.

booboo's picture

With each new failure to enforce the black letter laws of finance the result is to add another knob and button for Captain Insane to turn, tweak and push. Never underestimate the ability of a mad academic hell bent on proving out his thesis even if it means skinning his own mother in the process. Everyone's time would be better spent building up their spiritual life and strengthening their bonds with their loved ones and let the fucking god of this world manipulate the malleable 

malikai's picture

Regarding #2.

This one has struck me from the beginning. With the sanctions against Iran, have we not just given Iran as a supplier directly to the Chinese? I mean, they now have a 'captive supplier' thanks to our sanctions. Man, what I would give to get a captive supplier for the things I need.

Dr. Sandi's picture

Another important part of the Oil for Yuan development is that China can now sell 'excess' crude to whoever they wish without either party using the USD.

China can become a major petroleum arbitrageur, should anything unpleasant happen to the world oil supply.