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Santelli On QEternity: "Deflation Vacation Or Inflation Gestation"

Tyler Durden's picture


With gold being horded in Iran and hitting 2012 highs this morning, CNBC's Rick Santelli addresses the 800lb gorilla in the Fed's room - the threat of inflation. Critically noting that the hyperinflation of Weimar Germany "did not happen overnight" but was gestated quietly until it was unstoppable by currency debasement; the question remains of what exactly the Fed thinks it is doing. Santelli makes the important point that if we look at 'printing money' as any type of solution then why not take it to the extreme - "if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?" As he adds "if it was that easy there would be no need for economist, no need for even CNBC, but it isn't that easy," Reflecting on Evans' earlier inability to quantify any metrics for whether QEternity was working, Santelli notes that the Fed man falls back to 'confidence' (animal spirits) but worries that inflation is a lot like soybeans; need sun, water, and time but eventually will grow rapidly.



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Mon, 10/01/2012 - 13:36 | 2845709 Abraxas
Abraxas's picture

Selective inflation is most likely.

Mon, 10/01/2012 - 13:41 | 2845720 Stackers
Stackers's picture

$1million X 300million people = $30 trillion. Drop in the bucket for a central bank

Mon, 10/01/2012 - 13:41 | 2845723 azzhatter
azzhatter's picture

your math is not very good but I get your point

Mon, 10/01/2012 - 13:43 | 2845737 Stackers
Stackers's picture

300 trillion, my calculator doesnt have commas so all the zeros started running together, lol

Mon, 10/01/2012 - 13:47 | 2845755 redpill
redpill's picture

Inflation nation

an Obamanation

If you white you better atone

If you black enjoy your new phone

Mon, 10/01/2012 - 13:54 | 2845787 ZeroAvatar
ZeroAvatar's picture

Yeah, get the new 'Monkey-Spank' app.   Sit around all day, spanking the monk.........

Mon, 10/01/2012 - 14:14 | 2845881 idea_hamster
idea_hamster's picture

     "if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?"

Perhaps not, but it would have done more than printing a million dollars for every man, woman and child and handing it to Goldman Sachs.

Mon, 10/01/2012 - 15:10 | 2846150 Taterboy
Taterboy's picture

Obama just found out about Bernanke printing money and replied,"But I thought money comes out of a unicorn's ass."

Mon, 10/01/2012 - 18:21 | 2846695 3rdgrader
3rdgrader's picture

If we just printed a Million and gave it to each middle class person, that would be better than our current system. Currently they just print a Trillion and give it to each wealthy person, who in turn buy up all the homes and commodities with it. Class warfare to the hundredth power.

Mon, 10/01/2012 - 17:33 | 2846588 Antifaschistische
Antifaschistische's picture

 "if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?"

National Store Chains, being the large slow moving machines that they are would probably get cleaned out immediately because they could not react quick enough to the price changes.

Goods would not be efficiently allocated as the early spenders would clean the shelves.

Smarter more nimble vendors would immediately increase their pricing to the point that would supress the shelf clearing demand.  

Prices would remain at 20x yesterday's price but incomes would be lagging.   When income catches up you'd get a 4x raise to counterbalance the 20x prices.

Wealth would be demolished as people shift from productive behavior to "save my ass" currency trading behavior.  Tens of millions of junior fiat currency traders running around trying to figure out how to keep a bowl of oatmeal on the table for their kids when just a week ago (before the million dollar Keynesian holiday giveaway) their family was living a very comfortable life.

Destabilizing currency destroys wealth...printing money creates value give aways from the Fed in any form (even the discount window) creates a less productive and poorer society.  (score one for the bankers, screw all others)

Mon, 10/01/2012 - 18:03 | 2846656 blunderdog
blunderdog's picture

Not very convincing.

I'd expect that not much would change LONG-term, but SHORT-term it would be pretty wild.

It could grant small groups the opportunity to completely re-adjust their living situations, and the labor market would go through a massive reorganization as retirement became a possibility for so many older workers. 

It's funny to see you saying that the big store-chains would be cleaned out.  It's not likely true (what do they sell that are in such great demand which isn't met elsewhere?), but even if it is--that's not a *problem.*  There's not much use for those organizations these days anyway--they're only still around because of tradition.  They're a lousy business model in a world of high energy costs.  Killing them would be mostly good news.  Killing them with a massive fire-sale would be the least painful way to go about it.

Mon, 10/01/2012 - 19:23 | 2846824 SeattleBruce
SeattleBruce's picture

"I'd expect that not much would change LONG-term, but SHORT-term it would be pretty wild."


Now what if they concluded that the $1M pp just isn't enough and they just starting doing it every day, for about a year, adjusting exponentially during the process...there that oughtta just about imitate the hyperinflation of a Wiemar...

Mon, 10/01/2012 - 14:46 | 2846074 SokPOTUS
SokPOTUS's picture

SEC approved....

Mon, 10/01/2012 - 14:04 | 2845828 lemonobrien
lemonobrien's picture

the phone is the new chain; easier to track a nigga with a phones, ans the poor can do no iphone.


oh, ans you on the list red pill.

Mon, 10/01/2012 - 13:50 | 2845768 Crtrvlt
Crtrvlt's picture

definitely something the fed can handle

Mon, 10/01/2012 - 13:59 | 2845804 exi1ed0ne
exi1ed0ne's picture

You needed a calculator for that?

Mon, 10/01/2012 - 14:06 | 2845832 smlbizman
smlbizman's picture

todays my 2 yr anniversary...closer to 3 but that was the second toughest captcha question i ever met...

Mon, 10/01/2012 - 15:04 | 2846126 Ayn NY
Ayn NY's picture

Should we start looking for calculators that add up to quadrillions yet?

Mon, 10/01/2012 - 13:42 | 2845729 azzhatter
azzhatter's picture

you're getting closer

Mon, 10/01/2012 - 13:58 | 2845802 kaiserhoff
kaiserhoff's picture

He needs a calculator for 4th grade math.  There's the problem.  Great higgly piggly.

Mon, 10/01/2012 - 20:49 | 2847010 jerry_theking_lawler
jerry_theking_lawler's picture

no joke....was at very good businessman's house discussing some business opportunities and had to multiply 15 x 1000.....he pulled out his calculator.

Mon, 10/01/2012 - 13:42 | 2845731 wagthetails
wagthetails's picture

might want to recheck that.  not that i think the Fed would still be afraid of $300T. 

Mon, 10/01/2012 - 14:49 | 2846082 Overpowered By Funk
Overpowered By Funk's picture

For the sake of keeping the math straight, I'm ok with a hundred grand.

Mon, 10/01/2012 - 13:50 | 2845767 jekyll island
jekyll island's picture

Santelli is right, there is no further need for CNBC

Mon, 10/01/2012 - 14:29 | 2845984 Idiocracy
Idiocracy's picture

Santelli is the hedge for CNBC.  When economic apocalypse finally arrives, the "news" director will be able to cover his ass and deflect public rage by pointing out "but, but, we ran Santelli all the time, go throw a brick through some other window"

Mon, 10/01/2012 - 14:50 | 2846087 SokPOTUS
SokPOTUS's picture

You've out-cynic'd me.

Mon, 10/01/2012 - 15:38 | 2846233 Arcturus
Arcturus's picture

The reverse of Nadler.

Mon, 10/01/2012 - 13:39 | 2845718 RSBriggs
RSBriggs's picture

Sounds like a good solution to me.  Wake me up when they start mailing out the million dollar checks...

Mon, 10/01/2012 - 13:58 | 2845803 ncdirtdigger
ncdirtdigger's picture

"Sounds like a good solution"


It depends on your place in the line.

Mon, 10/01/2012 - 14:27 | 2845976 exi1ed0ne
exi1ed0ne's picture

I've thought a lot about this, and while there would be some inflation I don't think it would be pronounced.  Treasury prints greenbacks or Fed created, but it has to be non-debt encumbered fiat - say $250K, or average mortgage outstanding.  Some people would look at their debt load, shrug, and then use the money for vacations, toys, etc.  This would boost the demand side.  Some would pay off/down their debt instantly destroying the newly created money, provide additional spending capacity, and cause chain deflation in the money supply due to fractional reserve banking.  Some would bid up safety assets/food/fuel - aka gamble.

Who gets screwed under this scenario?  The deeply indebted (if they use the new money to pay down all or most of their debt with little left over), and savers (in the inflation spike), and fraudsters (mbs/credit packaging same asset multiple times).

The question is though would the debt destruction deflation be enough to off set the new money spent into the economy?  Not that I ever expect to find out in my lifetime, but it is an interesting thought experiment.

Mon, 10/01/2012 - 15:32 | 2846183 MachoMan
MachoMan's picture

So you thought about this and didn't come to a very quick conclusion that it would be incredibly inflationary?  Look at it this way, how could the net money supply decrease if you printed money and then used all of it to extinguish debt?  (+1-1=0).  So, if ANY of the money is not used to pay down debt, then it would necessarily expand the money supply and, thus, be inflationary.

Mon, 10/01/2012 - 16:02 | 2846314 exi1ed0ne
exi1ed0ne's picture

Think about the reverse.  For each $ borrowed, about 10X that amount is created due to the nature of fractional reserves[1].  It stands to reason that for each $ of debt destroyed, 10X that amount would also go bye bye in the deflation spiral. So the thought experiment is would the ratio be 1 debtor out of every 10 paying down debt, which would have a neutral impact?  2 debtors would be deflationary while 1 out of 20 would be inflationary, not accounting for velocity or mattress stuffing.  I also based this on a 10 to 1 ratio for reserves, which in the US varies from institution to institution.  Regardless, as another poster mentioned below it would have been a better place for the $ to go then the usual bunga-bunga and powder bank bonus fests.



Mon, 10/01/2012 - 17:16 | 2846547 MachoMan
MachoMan's picture


$1,000,000 x 300,000,000 americans = $300T.  Total outstanding household indebtedness is what, $11-12T?

Ok, so if we're levered 10:1, then you've managed to account for 1/3 of the freshly printed dollars.  Now what?

You're overthinking this.

This is also without taking into consideration the effect on velocity...  overall velocity is nil, but that's because it's a weighted measure (composed of billions sitting in banks).  Billions sitting in the hands of J6P tends to be a little more...  mobile and used a bit more freely.

Mon, 10/01/2012 - 21:30 | 2847130 exi1ed0ne
exi1ed0ne's picture

I said 250K, or average mortgage, not 1 mil. That's 3/4 of debt outstanding at 10:1, which would leave some credit money in circulation. However, make it any number you like - remember this is a thought experiment! This would also side step the legal issues, and derivative consequences, of a jubilee I see advocated by some on this board.

Totally agree about velocity, but I think the effect would be muted. Don't get me wrong - I think printing money is a horrible idea, but if its going to be printed then solve the problem of too much debt.

What we have going on now doesn't solve anything except generate commissions for those advocating for more debt. Inflation comes with that too, but the benefits are concentrated to a select minority.

Tue, 10/02/2012 - 09:43 | 2848067 MachoMan
MachoMan's picture

The problem is that you have massive amounts of americans without a pot to piss in.  This means not only do they not have a dollar to their names, but they likewise have little, if any, liabilities.  Essentially, for millions of people, you'd be giving them a massive amount of cash even if you forced them to pay off all liabilities with it.  I think the 'real' velocity number would show its ugly face if this were to occur (meaning, money actually in circulation is turning over a lot, whereas this is being offset in the aggregate figures by billions sitting in electronic depositories).  I think this would occur regardless of the amount helicopter dropped, except for a de minimis amount (see G.W.'s $300/$600 attempt at a helicopter drop).

Essentially, Ben has contemplated this thought experiment and come to the only conclusion possible, that any drop directly to the populace would force his hand and bind him from further easing.  Granted, allowing the debt serfs out of the dungeon is not one of his goals, but his hands are tied either way here.  In order for the FED to remain in power, there must be a constant need for its supervision/services (which is obviously done mostly through its "independent" funding of the deficit, but I digress).

In the end, the amount of freshly printed dollars would exceed the amount destroyed, despite the leveraged fractional reserve system...  remember, as an inherent measure, people demand to receive today and promise to pay for it tomorrow.

The monetary policy is clearly punitive for all but a select few.  The problem is that in order to fix it, you have to stop the moral hazard...  you cannot fix moral hazard with moral hazard.  The thought experiment was dead from the start.  There is no free lunch.  [NOTE: external creditors have not been contemplated...]

Mon, 10/01/2012 - 14:05 | 2845826 Sofa King Confused
Sofa King Confused's picture

Ha Ha mail out checks to the indentured servants..Bernanke has much bigger things to do.  He needs to buy a whole bunch of shitty MBS from the banks so the banks can use that money to buy new treasuries so they can clean up their balance sheet and stay afloat and fund more govt debt so it doesn't look like the fed is the buyer of last resort

Mon, 10/01/2012 - 15:40 | 2846251 Arcturus
Arcturus's picture

think of all those stamps. The USPS would be solvent for a couple of months.

Mon, 10/01/2012 - 13:39 | 2845721 QE49er
QE49er's picture

The Fed could have handed out $40,000 to each person in the US since QE1!  That's a lot of gold I could have bought.  Where's my Obama Gold?

Mon, 10/01/2012 - 13:42 | 2845730 RSBriggs
RSBriggs's picture

Or sent a $250,000 "rebate" to anyone that actually paid any texes.

Mon, 10/01/2012 - 13:48 | 2845758 wagthetails
wagthetails's picture

you make a good point.  The Federal debt is obvioulsy only deferred taxes....and with barely half of us paying taxes....we should be calculating the debt based on debt/tax payers.  that may wake a few people up. 

Mon, 10/01/2012 - 13:55 | 2845788 RSBriggs
RSBriggs's picture

68 million in the labor force / 310 million = 22% of the people paying taxes.  And steadily decreasing.

Mon, 10/01/2012 - 13:56 | 2845795 A Lunatic
A Lunatic's picture

More like 20% of us paying taxes once you add taxpayer subsidized jobs onto the 40 odd percent of freeloaders.

Mon, 10/01/2012 - 14:00 | 2845812 EINSILVERGUY

I think you are forgeting the people that pay taxes on investment income and taxes on social security income.

Mon, 10/01/2012 - 14:11 | 2845864 RSBriggs
RSBriggs's picture

No, if you're married and at full retirement age, you don't pay taxes on social security unless you make over $44,000 per year.

Mon, 10/01/2012 - 15:56 | 2846295 ATM
ATM's picture

You don't pay taxes on Social Security. It is simply a refund of excess payments made by the government. It's means testing.

Mon, 10/01/2012 - 14:20 | 2845932 Common_Cents22
Common_Cents22's picture

Who would have invested that money more wisely?  Individuals investing their own money? or the government?      Clearly obama thinks he is a better investor than each one of us.   Look at his successes in GM and the solar business!  haha

Mon, 10/01/2012 - 13:40 | 2845722 azzhatter
azzhatter's picture

they want inflation for existing homeowners but not for new buyers. can't have it both ways

Mon, 10/01/2012 - 13:43 | 2845734 lesterbegood
lesterbegood's picture

"the threat of inflation" lol

Been to the grocery store lately?

Mon, 10/01/2012 - 13:45 | 2845749 RSBriggs
RSBriggs's picture

Ahh - but you forget...  They took food prices and gasoline prices out of the inflation calculation, so grocery store prices don't count anymore. 

Mon, 10/01/2012 - 14:18 | 2845919 Nothing To See Here
Nothing To See Here's picture

I'm really puzzled about what's going to happen to the inflation calculation formula once they start selling iPhones in grocery stores...

Mon, 10/01/2012 - 16:21 | 2846384 ParkAveFlasher
ParkAveFlasher's picture

Apple added a fifth row of icons to iPhone5, which probably means it is calculated as a 25% improvement over the four-icon-row'n iPhone4, which probably means you can charge customers a 25% higher price and net "0" in the inflation calculation.  See?  No inflation.

So sayeth the Fed.  So writeth the MOPE.  So doeth the Sheeple.

Mon, 10/01/2012 - 13:51 | 2845771 A Lunatic
A Lunatic's picture

I'm eating  $3 can of shitty soup as we speak.......

Mon, 10/01/2012 - 18:06 | 2846664 blunderdog
blunderdog's picture

Monetary policy can't help ANYONE who spends like an idiot.  Come on, man.

Mon, 10/01/2012 - 13:52 | 2845781 Slightly Insane
Slightly Insane's picture

I just returned from the grocery store, and I feel like I was just robbed!   I can't wait til they hang these sumnabitches ....

Mon, 10/01/2012 - 13:49 | 2845736 pavman
pavman's picture

Well at least they're going to do the right thing to offset inflation by raising taxes and cutting spending....


Hey now, I'm not advocating it, I'm just the messenger!  It is the right response given the situation.  Now, will that help the 'recovery?'  Doubtful.

Mon, 10/01/2012 - 13:56 | 2845794 Slightly Insane
Slightly Insane's picture

That's right .... Destroy all incentive to work because the parasites are going to steal it from you,  I would say what we need is a tax holiday for all the a-holes that work for a living (not in the public sector), and pass those  taxes on to those in the public sector.  These a-holes ain't cutt'in shit, I'll believe it when I see it. 

Mon, 10/01/2012 - 14:21 | 2845937 CommunityStandard
CommunityStandard's picture

Don't hate on all public employees.  Someone has to clean Bernanke's toilet.

Mon, 10/01/2012 - 15:20 | 2846171 Shizzmoney
Shizzmoney's picture

That's another way to "CTRL-P"

Mon, 10/01/2012 - 13:43 | 2845739 wagthetails
wagthetails's picture

so lets assume shadow banking goes down another $3T, while the Fed prints another $3T...will there be inflation? 

Mon, 10/01/2012 - 13:50 | 2845770 Quinvarius
Quinvarius's picture

Yes.  It is making that money real.  This is how we find out how real it was the whole time.

Mon, 10/01/2012 - 15:40 | 2846250 MachoMan
MachoMan's picture

Depends on whether the entirety of the shadow banking figure is money supply proper, but presuming it is, then no...  it will not cause inflation.  However, it does not really work like this in practice.  The FED, as a rational, risk averse actor, is forced to overshoot.  Inevitably, some of the freshly printed money finds its way into the real economy and begins turning over...  leading to price increases.

Mon, 10/01/2012 - 13:45 | 2845740 Dead Canary
Dead Canary's picture


I'm pinning my hopes on rainbow shittles and Unicorn farts. You can keep your, so called, numbers!


Mon, 10/01/2012 - 13:50 | 2845759 RSBriggs
RSBriggs's picture

Thanks a lot.  You just triggered a bunch of Charmin toilet paper ads.  I want tee-shirts and camel-toe back.

Mon, 10/01/2012 - 14:00 | 2845810 ZeroAvatar
ZeroAvatar's picture

There's a Camel Towing in my city, too.

Mon, 10/01/2012 - 14:12 | 2845878 RSBriggs
RSBriggs's picture

Dude, there's a major difference between "toe" and "tow" in this context.

Mon, 10/01/2012 - 18:12 | 2846678 blunderdog
Mon, 10/01/2012 - 13:50 | 2845750 LMAOLORI
LMAOLORI's picture



"if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?

No obviously not someone has to pay for it and the someone in the U.S. Taxpayer is US.

Not only do we have to pay for it literally through our taxes but we also pay in loss of purchasing power and inflation in the most needed items, food, heating fuel, etc.

Mon, 10/01/2012 - 13:57 | 2845801 asteroids
asteroids's picture

But, you will also have the pleasure of paying $4T in debt that Obozo will certainly have generated by the end of his second term. In order to do that, I suggest you appreciating the taste of cat food. Most Amerikans will be able to afford little else.

Mon, 10/01/2012 - 15:05 | 2846137 philosophers bone
philosophers bone's picture

Set the over / under at $4 Trillion of new net natiional debt for Obsma's second term, I'll take the over.  Over / under for PMs in 2016?  $5,000 for gold and 100 for silver?  I think I like the over on those also.

Mon, 10/01/2012 - 14:03 | 2845820 indio007
indio007's picture

That's the inherent flaw in the system. Everyone can't be rich. Who would work at McDonalds? or wash your car? or trim the hedges?

It's the relative amount of money to someone else that matters.


Tue, 10/02/2012 - 03:55 | 2847588 MisterMousePotato
MisterMousePotato's picture

Actually, if you study Vietnamese peasants, it's the amount of water buffalo to someone else's that matters. (True. There's actually a study done 15 or 20 years ago on the subject.)

Mon, 10/01/2012 - 14:12 | 2845877 mckee
mckee's picture

Fun sponge!

Mon, 10/01/2012 - 13:47 | 2845756 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I am sure gold and silver will crash when everyone realizes they can eat dollars and trade in their stawks for the fiat standard that everyone bases the whole financial system on.

King dollar!

Mon, 10/01/2012 - 13:47 | 2845757 Zap Powerz
Zap Powerz's picture

People that pay attention and can read the writing on the wall pretty much understand the dire circumstances we are in, but the big mystery to me is was this pre-planned and done on purpose or is our situation the byproduct of political cowardice and simple human stupidity?

Mon, 10/01/2012 - 14:02 | 2845818 EINSILVERGUY

Clower and Piven


Mon, 10/01/2012 - 14:03 | 2845823 EINSILVERGUY

The Cloward-Piven Strategy was inspired by the August 1965 riots in the black district of Watts in Los Angeles (which erupted after police had used batons to subdue a black man suspected of drunk driving). In their 1966 article, “The Weight of the Poor: A Strategy to End Poverty,” Cloward and Piven charged that the ruling classes used welfare to weaken the poor; that by providing a social safety net, the rich doused the fires of rebellion. Poor people can advance only when “the rest of society is afraid of them,” Cloward told The New York Times on September 27, 1970. Rather than placating the poor with government hand-outs, wrote Cloward and Piven, activists should work to sabotage and destroy the welfare system; the collapse of the welfare state would ignite a political and financial crisis that would rock the nation; poor people would rise in revolt; only then would “the rest of society” accept their demands. The key to sparking this rebellion would be to expose the inadequacy of the welfare state. Cloward-Piven’s early promoters cited radical organizer Saul Alinsky as their inspiration. “Make the enemy live up to their own book of rules,” Alinsky wrote in his 1972 book, “Rules for Radicals.” When pressed to honor every word of every law and statute, every Judaeo-Christian moral tenet, and every implicit promise of the liberal social contract, human agencies inevitably fall short. The system’s failure to “live up” to its rule book can then be used to discredit it altogether, and to replace the capitalist “rule book” with a socialist one.

Mon, 10/01/2012 - 16:37 | 2846442 ParkAveFlasher
ParkAveFlasher's picture

What's a "capitalist"?

Mon, 10/01/2012 - 14:03 | 2845822 Slightly Insane
Slightly Insane's picture

Pre-planned.  There are "no accidents" in politics, only "accident victims".  The direction is for a totalitarian regime, within 4 years (get it)?

Tue, 10/02/2012 - 04:00 | 2847593 MisterMousePotato
MisterMousePotato's picture

Mencken, I believe, wrote something to the effect of: "Never attribute to mendacity what can be explained by [incompetence? ignorance? (something like that ... can't recall. Sorry.)].

Having said that, I think that some broad plan is being carried out.

Really can't understand why, though. I mean, when I think of what an ideal world would be like, it would be some Hobbit like village with comfortable, homey, attractive, odd, warm houses. Green fields, woods, rivers, mountains, and cattle everywhere. People sitting by a fire reading and drinking ale.

And not just some of them.

Mon, 10/01/2012 - 14:04 | 2845827 ZeroAvatar
ZeroAvatar's picture

That is INDEED the $6,000,000 question.

Mon, 10/01/2012 - 14:09 | 2845855 WillyGroper
Mon, 10/01/2012 - 15:21 | 2846175 10mm
10mm's picture

Pre-planned.A collaboration of many,not a figure head.

Mon, 10/01/2012 - 16:43 | 2846464 Ghordius
Ghordius's picture

Cowardice and stupidity pays. Nixon could have come clean and paid in gold. Instead he chose the current path. Since 1971 various congresses, senates and presidents could have gone back. Dubya was not the first president to talk about the addiction to oil. Reagan was not the only one to talk about small government. Ike warned about the Complex.

41 years Las Vegas with a platin credit card with unknown limit and counting. I call this tempting. Corrupting.

The writing on the wall is there since VietNam.

Long timelines are distracting if you live in them. Later historians will "clearly see it" and tie back everything to an agreed point in the 20th century.

Tue, 10/02/2012 - 04:11 | 2847596 MisterMousePotato
MisterMousePotato's picture

Long timelines are distracting if you live in them.

That is positively profound. Your own original thought? Can't say I've heard it before.

Tue, 10/02/2012 - 06:18 | 2847650 Ghordius
Ghordius's picture

happy you liked it - I think it's my original thought but I can't be sure, I read a lot and some memes have the habit of disappear from the surface and reappear as "own thoughts"

I'm personally not happy with it, I'd prefer a more elegant form

but as concept it should be more obvious for those who have bought (or inherited) gold from the seventies

Tue, 10/02/2012 - 07:39 | 2847720 i-dog
i-dog's picture

You got an uptick from me, too, Ghordie. It's obvious to those who study history, but not to those who focus on the daily news and the current puppet-of-the-moment.

The only similar image that comes to mind, without detracting from your succinct thought, is the parable of the blind men and an elephant. Each interprets the elephant based only on the local part he is touching, without seeing the bigger picture.

Tue, 10/02/2012 - 12:17 | 2848578 Ghordius
Ghordius's picture

happy you like it, too, I'm quite sure someone said it better and earlier. love that parable

"A blind Jew from Kattowitz wants to marry and the go-in-between presents him without warning him a very fat damsel as Rebecca. He asks her if he is allowed to touch her and she shyly allows it. He starts to touch, then touch, then touch further, until he puzzled asks: is this still Rebecca?"

I'm still studying the matter of the Code Alimentarius and I'd appreciate a lead. Who gets stiffed by whom? My might-be-wrong prejudice about that stuff is that usually it favours big biz established players and stiffs the small fry out of the market.

The EU is doing a different-but-similar thing called REACH with imports of chemicals that is - at the end - an import barrier camouflaged as a "green" initiative.,_Evaluation,_Authorisation_and...

But of course that's one of the scopes of the EU: preparing tools for a possible trade war. A MAD principle applied to trade, if you want. The true common fear of all europeans is still the dreaded embargo. The US could be autarchic, in a pinch. Not us. We have to trade to keep the heads out of the water. I'm sure I'm repeating myself, here.

Mon, 10/01/2012 - 13:49 | 2845760 Xibalba
Xibalba's picture

I'm with the hippies....WHERE'S MY BAILOUT?!?!?!  I want MY pound of flesh dammit!!  A million for every man woman and child?  Seriously?  When they do that, and they WILL do THAT, a bowl of blueberries will cost upwards of 30million.  And like mens warehouse, I guarantee it. 

Mon, 10/01/2012 - 14:22 | 2845947 CommunityStandard
CommunityStandard's picture

Long blueberries.

Mon, 10/01/2012 - 13:49 | 2845762 disabledvet
disabledvet's picture

The City of Chicago's primary fuel source is natural gas...which is up over 50 percent in just the past 9 months...and surging higher I might add into winter. Not only that buy Rahmbo's commitment to nuclear power has been...shall we say..."fanatical." now coal mines are shutting down just in time for electrical rates to soar IN ADDITION to nat gas. As a consequence I see the equity in Wisconsin Energy doubling over the next six to nine months "to stick it up these phuckers' asses." so to speak. And why? Because the good folks of Wisconsin had the brilliant insight to keep a Governor from being removed because he wasn't afraid to pay the bills of his State!

Mon, 10/01/2012 - 13:51 | 2845772 Xibalba
Xibalba's picture

80 degree weather via HAARP can fix all things...until it can't 

Mon, 10/01/2012 - 13:56 | 2845796 adr
adr's picture

Natural gas is just about to hit a 100% gain since April. What the capital F is up wth that?

Mon, 10/01/2012 - 14:26 | 2845971 CommunityStandard
CommunityStandard's picture

The original plummet in prices was due to fracking, which releases 90% of the well's gas in the first year of production.  When prices dropped, wells stopped being drilled.  Meanwhile, coal plants across the country are being refitted for natural gas.  This process won't be reversed and will significantly help drive prices up.  Once prices get high enough, wells will be drilled again, and prices will plummet yet again due to oversupply. Rinse and repeat.

Mon, 10/01/2012 - 13:50 | 2845769 Haager
Haager's picture

To stay with the soy-beans:

There won't be inflation as long as there is drought in the economy...

Mon, 10/01/2012 - 13:54 | 2845784 Quinvarius
Quinvarius's picture

I don't think they actually need any water as Rick points out.  These soybeans mostly stampede rather than grow.  They are GMO fiat soybeans. 

Mon, 10/01/2012 - 13:51 | 2845774 polo007
polo007's picture

According to former Morgan Stanley chief economist Stephen S. Roach:

The disease is a protracted balance-sheet recession that has turned a generation of America’s consumers into zombies – the economic walking dead. Think Japan, and its corporate zombies of the 1990’s. Just as they wrote the script for the first of Japan’s lost decades, their counterparts are now doing the same for the US economy.

Two bubbles – property and credit – enabled a decade of excessive consumption. Since their collapse in 2007, US households have understandably become fixated on repairing the damage. That means paying down debt and rebuilding savings, leaving consumer demand mired in protracted weakness.

Yet the treatment prescribed for this malady has compounded the problem. Steeped in denial, the Federal Reserve is treating the disease as a cyclical problem – deploying the full force of monetary accommodation to compensate for what it believes to be a temporary shortfall in aggregate demand.

Mon, 10/01/2012 - 13:51 | 2845775 ian807
ian807's picture


"if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?

Actually, yes, it would, at least for the short run. Every underwater homeowner in the USA would essentially have their debt cancelled as they paid it off in cheaper dollars. Ditto for all other personal debt for most middle class individuals. After that, there might be some left over for consumption. Perhaps a new car, or real estate repairs.


In the long run, price increases outpace wages, at least for a while, but wage rebalancing would probably tend to reflect that of other industrialized countries so you'd see an effective wage decrease over time, reducing purchasing power of most individuals in the USA.

Mon, 10/01/2012 - 14:03 | 2845821 centerline
centerline's picture

Your kidding, right?

Mon, 10/01/2012 - 14:06 | 2845836 EINSILVERGUY

I have a 50 trillion dollar zimbabwe note.  Thats makes me rich now, right?

Mon, 10/01/2012 - 14:08 | 2845844 Dr. Richard Head
Dr. Richard Head's picture

I throw this number out constantly, but it shows that the central pranks do NOT want to save the average Joe, rather they wish to continue the debt servitude scheme going. In 2008 the TOTAL number of credit and mortgage debt in the US was about $12 Trillion.  The Federal Preserve sent our over $24 Trillion to keep the banks solvent and the US dumpster in debt.  Fancy that.  Oh yeah, bitchez!

Mon, 10/01/2012 - 14:11 | 2845861 css1971
css1971's picture

What if you printed a million dollars for every man woman and child, handed it to them and then simultaneously increased the bank reserve ratio to 100% to prevent the fractional reserve expansion of the monetary base.

Mon, 10/01/2012 - 14:10 | 2845776 ZeroAvatar
ZeroAvatar's picture

Bernanke needs to stop monkeying around with interest rates.  That's all there is to it.

Mon, 10/01/2012 - 13:53 | 2845778 MillionDollarBoner_
MillionDollarBoner_'s picture

Great thing about soybeans? They love bullshit.

The more bullshit, the better they grow...:O)

Mon, 10/01/2012 - 13:52 | 2845780 polo007
polo007's picture

The three ways in which QE3 can succeed;

“The first being the direct effect via the impact on the prices and liquidity of the assets purchased – in this case, mortgage-backed securities (MBS).But US mortgage rates are already very low and the housing market is recovering of its own accord.”

“The second route is the diffusion of the additional money through the economy.” However they add that simply swapping relatively liquid securities for cash doesn’t necessarily result in stronger growth in the broad money and credit aggregates which really matter. They highlight the plight of Japan and more recently the UK as examples of this. They also note that the USD has also already fallen substantially since its 2009 peak and is more likely to rebound as and when the crisis in the EZ escalates again.“

Finally there is the potential boost to confidence from the Fed’s open-ended commitment to buy more assets until the labour market improves.” However, they feel that it is debatable whether this is a 'gamechanger’. They note that “Most people would surely already have expected the Fed to loosen policy further if unemployment remained high.”

Instead, Capital Economics expect the focus to return to the deterioration in “underlying economic and financial onditions that made the additional stimulus necessary in the first place.” Something which they feel could already be happening.

Mon, 10/01/2012 - 13:53 | 2845783 PUD
PUD's picture

Be confident animals! Borrow, spend, obey!

Mon, 10/01/2012 - 13:53 | 2845786 Diesel Seven
Diesel Seven's picture

What kind of animal spirits???  A Weimaraner???

Mon, 10/01/2012 - 13:56 | 2845791 magpie
magpie's picture

The squid's ink sac ?

Mon, 10/01/2012 - 14:58 | 2846118 SokPOTUS
SokPOTUS's picture

Grey Goose.

Mon, 10/01/2012 - 13:56 | 2845797 polo007
polo007's picture

Prof. Hudson: Central banks began to be created in 1694 with the Bank of England, and down to the Federal Reserve in the United States in 1913 their function was to finance government budget deficits by printing money. All governments over time run deficits – at least, most of the time – because that is how they supply the economy with the purchasing power and the money it needs to grow. The role of a central bank is to create money to finance the deficit.

If it does not do this, then the commercial banks end up performing this function. However, the commercial banks creating credit on their own computer keyboards have a different role from that of the central bank. When the central bank finances government spending, this is supposed to promote growth, full employment and industrialization. But that is not the object of a commercial bank. Banks, in the first instance, make loans against property already in place – mainly real estate and also the buyout of entire corporations. So they provide credit that bids up the price of housing, making it more expensive for workers. They also loan to buyers of commercial buildings, making it more expensive to do business, Takeover loans enable corporate raiders to bid up the price of stocks and bonds, making them yield less, so it costs more to buy a retirement income. And now, commercial banks are moving from finance capitalism to casino capitalism to make big gambles. They are essentially financing gambling. That’s what derivatives and “hedge fund” trading are.

None of this funds industrial investment. From the United States to Germany, almost all industrial capital formation is now funded by the retained earnings of corporations, not by bank borrowing. Even the stock market does not fund new direct investments. It has become a vehicle for corporate raiders to go to the banks to borrow the money, to buy a corporation on credit with junk bonds, retire the stock, and use the corporate profits to repay the banks – and then try to steal for themselves the pension funds, or sell off the assets, or just work the labor force more intensively; longer hours, outsource labor and move to the un-unionized labor. So the banks are no longer part of the industrialization process; they are part of the de-industrialization process. This is applauded as the post-industrial economy.


Prof. Hudson: So the flip side of asset price inflation is debt deflation. More and more money has to be spent to carry the debt overhead. The problem is not central banks financing domestic government budget deficits. Every hyperinflation in history has come as a result of the collapse of the balance of payments. The Germans are most familiar with 1921, but they tend to forget that the Weimar inflation was a result of Germany trying to pay reparations abroad. They were ordered by the Allied powers to print Deutsche Marks not for domestic spending, not to run a domestic deficit, not to rebuild Germany, not to employ labor, but to throw reichsmarks onto the foreign exchange market to obtain the foreign currency to pay the Allies, so that the Allies could turn around and pay the arms debts for what they bought from the United States before entry into World War One. It was the collapse of the foreign exchange that caused the hyperinflation, not domestic spending. And Germany’s hyperinflation was not cured by the central bank creating less money. It was cured by setting up a triangular flow of international payments. American bondholders would lend money to German municipalities that would issue bonds. The municipalities would receive dollars, and turn them over to the Reichsbank. It then would issue German currency against this for local spending – using the dollars to pay the Allies. The Allies would pay America, and that would keep the circular flow going. But to do this, interest rates had to be held down in the United States, to make German and other European borrowing more profitable for international lenders.

Mon, 10/01/2012 - 14:11 | 2845866 LawsofPhysics
LawsofPhysics's picture

Enough with the growth bullshit.  In order to do anything a certain amount of energy is required, if you want to do more, you need to increase the flux of energy through the system and you can't "print" more energy.  Money is a human construct and the laws of Nature and physics don't give a shit about it.  Money is a means by which the masses are controlled by a relative few well-positioned elite, please wake the fuck up. What you are talking about can be summarized much more succinctly; "capital and resource mis-allocation and mal-investment at an exponentially increasing rate."

humanity is the ultimate ponzi,  only massive deflation will "fix" it.

Hedge accordingly.

Mon, 10/01/2012 - 14:16 | 2845905 Sandmann
Sandmann's picture

The Bank of England was set up by William of Orange to finance wars on the Continent.

The main focus was to pay for war and that is where the bulk of British National Debt pre-2007 was incurred

Mon, 10/01/2012 - 14:01 | 2845815 MillionDollarBoner_
MillionDollarBoner_'s picture

Buying MBS, huh? Well how about this?

FED buys MBS at par. FED then offers said MBS on market. Market sets rate = par less n%. FED then recoups n% via 1) clawback of originator bonus on said MBS and 2) clawback of salesman's commission on mortgages within that MBS and 3) pursues homeowners for defaulted payments to complete balance.

What?...too difficult?...too complex? We live in an age where you can be arrested for a raycist tweet, so the data is definitely out there, traceable and actionable.

What is missing is the will and the sense of moral outrage. Also the political courage. Go figure.

Mon, 10/01/2012 - 14:01 | 2845816 jaxville
jaxville's picture

  Problem with the current monetary model is that the Fed wouldn't just hand every citizen a million dollars. They would LOAN it to them with interest. Understanding that is key to holding inflationary or even deflationary expectations. Either way, having most of one's savings in gold makes for a good sleep at night

Mon, 10/01/2012 - 14:05 | 2845833 alien-IQ
alien-IQ's picture

Let's be perfectly clear and honest here; Regardless of Fed policy, there is NO NEED FOR CNBC.

Mon, 10/01/2012 - 14:09 | 2845848 Sandmann
Sandmann's picture

The Weimar Inflation however was caused by ForeX shorting by France. It was France trying to prevent Germany acquiring Gold to pay Reparations by forcing down the Reichsmark on the currency markets, and then occupying The Ruhr with Belgium because Germany was behind with payments. France occupied Duesseldorf in 1921 then The Occupation of The Ruhr on 27 December 1922 and dismantling of German manufacturing plant caused a General Strike which lasted until September 1923 and simply screwed inflation ever higher.

That coupled with attempted coups by the Black Reichswehr, the Communists, and Hitler in Munich led to the country coming apart at the seams.  It was 5 May 1921 that Germany was saddled with 132 billion Reichsmarks in Gold as Reparations by the London Ultimatum which became equivalent of $834 billion (2012 US$)


The joke was that Germany was forced to obtain international loans in London and New York to service the Reparations payments so had a large external foreign debt which started to be called once Wall Street crashed in 1929 which is why Germany folded into Depression. The French had their budgets predicated on Reparations Payments propping up their Government basically unless Germany could run large export surpluses it could neither fund France nor repay loans to Anglo-American banks.

That is the real similarity with today - not the prospect of Inflation


Mon, 10/01/2012 - 14:08 | 2845849 Klazy Plick
Klazy Plick's picture

Hey did you hear about the constipated central banker?  He could liquidate, but he couldn't consolidate.

Mon, 10/01/2012 - 14:09 | 2845850 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

<-- Deflation will happen before hyperinflation

<-- The dollar will not be able to soak up enough investment for deflation to occur in any substantial amount

Mon, 10/01/2012 - 14:10 | 2845860 edwardo1
edwardo1's picture

The Fed serves its constituency, i.e. (big -but corrupt and hollow as a drum- commercial banks) and its master Uncle Sugar and no one else. Any benefits that may result to others than the aforesaid are merely a happy accident.

The Fed is ensuring that Uncle Sugar's lifestyle will not crash. Weimar is coming because the amount the Fed will have to print, aka exchange base money for dying credit money, will continue to grow in the absence of foreign support for our sovereign debt. In the meantime, nothing The Fed is doing helps economic growth, so tax receipts will continue to collapse further racheting up the pressure on Uncle Sugar to "make up the difference" between what Uncle takes in and what he needs to continue to operate.

In time, and not too much time- I estimate within three years- dollars outside our borders will start furiously bidding against the government's dollars and we will see "hot" inflation. That will be the first manifestation that hyper-inflation is in the offing. There have been many signs that hyper-inflation-which I hasten to add is not inflation on steriods- was in the works, but when hot inflation shows up, we will umistakably be on the cusp of the sort of exponential rise in the cost of raw and finished goods that correlates with a Weimar like hyperinflation. It won't be long after hot inflation arrives that the government is printing-see the prior definition of printing- like mad to keep up with physical goods that increasingly are behaving as if they are "no bid" assets in U.S. dollars.

Mon, 10/01/2012 - 15:09 | 2846147 yogibear
yogibear's picture

Push the print button too much and it sticks. They cannot stop the inflation once it really starts. They will let inflation hit double digits, probably herald it as a success, Once it takes hold it like a runaway freight train. Bernanke and the Fed doves will not stop it.

Mon, 10/01/2012 - 14:22 | 2845943 ZeroAvatar
ZeroAvatar's picture

A good read on inflation this A.M. :


As much as I like Mish, I've never agreed with his stand on Hyperinflation.


Edit: Hat Tip 321gold

Mon, 10/01/2012 - 15:18 | 2846155 akak
akak's picture

Thanks!   That was a great and devastating critique of the laughable, woefully erroneous and outright disingenuous idiocy of Mish (along with all the other deflationary flat-earthers) on the topic of inflation, so-called "deflation", and the ongoing currency debasement (and threat, if not certainty, of much more of the same) that he and his fellow deflationary fools refuse to acknowledge.

Mon, 10/01/2012 - 14:23 | 2845949 daxtonbrown
daxtonbrown's picture

The Bernank has created a Biflationary depression. A raisin muffin of both inflation and deflation. Look at the velocity numbers, they have been absolutely crushed as faith has been stripped from fiat. GDP=M*V which has two variables, both money and velocity. So The Bernank is pushing on a balloon. So far he has been lucky and pushed off general inflation by crushing V and because as Tyler has noted a collapse in shadow banking. That won't go one forever. Weimar here we come.

Mon, 10/01/2012 - 14:23 | 2845952 Common_Cents22
Common_Cents22's picture

Stagflation is the nice tortuous path we are taking now.    Slowly killing the future of the seniors on fixed income and the lower/middle income with higher prices and no job prospects.   A double whammy.

Mon, 10/01/2012 - 14:25 | 2845965 Dre4dwolf
Dre4dwolf's picture

ACTUALLY, printing a million and handing it to everyman woman and child would probably solve a lot more than prrinting 100 trillion and handing it to big banks, just saying.

Mon, 10/01/2012 - 15:20 | 2846174 Clowns on Acid
Clowns on Acid's picture

Dre - actually you are 100% correct ! One of the reasons that velocity has nose dived is that the banks are NOT distributing the money on terms that everyman can take advantage of.

Of course the banks have that credit issue of owning billuions of dollars of underwater real estate.

So whats a Keynesian to do ? Print more, and then "encourage" the banks to lend more freely.

I know that is what caused the bubble and burst issue in the first place...but so what? What else is a central banker to do? Raise interest rates?


Mon, 10/01/2012 - 20:06 | 2846900 Common_Cents22
Common_Cents22's picture

what? anyone can get a loan!!! as long as you have double collateral.   the lending environment is a joke.   Private money will start to go around the traditional lending routes now.    Small/Med biz will become largely receivables financed at 24-36% annual rates.  Private equity will jump in this.

Mon, 10/01/2012 - 14:28 | 2845982 debtor of last ...
debtor of last resort's picture

Inflation = see the value of your gas tank double by the time it's half empty.

Mon, 10/01/2012 - 14:37 | 2846014 bugs_
bugs_'s picture

just imagine - no need for CNBC!

Mon, 10/01/2012 - 14:46 | 2846073 Shizzmoney
Shizzmoney's picture

"if we just print a million dollars for every man, woman and child and handed it to them, wouldn't that fix everything?"

Actually, it would be better than we do now, where we just print a million dollars for around 400 people.

Mon, 10/01/2012 - 21:15 | 2847080 boiltherich
boiltherich's picture

B.  You said million with an "M" when you should have said billion with a "B."

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