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Fed Confused Reality Doesn't Conform To Its Economic Models, Shocked Its Models Predict "Explosive Inflation"

Tyler Durden's picture


Below are several excerpts only the brains of those practicing the world's most useless profession (and we are very generous with that assessment) could possibly come up with, in attempting to explain the shocking outcome of reality continuously refusing to comply with their exhaustive and comprehensive Dynamic Stochastic General Equilibrium (DSGE - don't worry: it sounds complicated - it must be very serious and important, and be thus very credible and good at predicting stuff; it is neither) models.

  • With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. Standard medium-scale DSGE models tend to grossly overestimate the impact of forward guidance on the macroeconomy—a phenomenon we call the “forward guidance puzzle.”
  • New Keynesian DSGE models following the work of Christiano et al. (2005) and Smets and Wouters (2007) are in principle well suited to study the e ffects of forward guidance
  • While the literature has provided strong theoretical justi cations for the use of such forward guidance (e.g., Eggertsson and Woodford (2003)), the evidence on the quantitative eff ects of such a policy tool on the macroeconomy is scarce
  • Empirically, Gurkaynak et al. (2005) and more recently Campbell et al. (2012) found strong evidence that FOMC announcements move asset prices. Yet when Campbell et al. try to assess the impact of exogenous anticipated changes in monetary policy on the macroeconomy, they find that this has the opposite sign than expected, highlighting these identi cation challenges.
  • Given that policymakers seldom if ever experimented with forward guidance this far in the future, there is little data to guide them.
  • The problem, however, is that these DSGE models appear to deliver unreasonably large responses of key macroeconomic variables to central bank  announcements about future interest rates (a phenomenon we can call the "forward guidance puzzle")

It gets better:

  • In general it will always be hard, if not impossible, to test the predictions of DSGE models by looking at the outcome of policy counterfactuals such as the ones in our paper: even if the counterfactual is implemented, this will not occur in a controlled environment.
  • Nonetheless, we argue that counterfactuals like the one performed here are useful for policy makers in order to quantify the potential e ects of their policies, particularly when alternative approaches are lacking as is the case here.

The problem is that the results the Fed's own models predict, fail to comply with the resultant reality:

  • Our proposed solution to the "forward guidance puzzle" is based on the realization that the apparently straightforward experiment "let us fix the short term interest rate to x percent for K periods" has implications for the short term rate that go well beyond the K-th period in medium scale DSGE models.
  • As a consequence, these counterfactuals appear to have an over-sized e ffect on the macroeconomy.
  • We view the implications of these experiments of short term interest rate in the far future as incredible. They are at odds with both common sense and the empirical evidence of the eff ects of announcements

Yes, it is ironic that the Fed is talking about "common sense", we know. But the absolute punchline you will never hear admitted or discussed anywhere else, and the reason why the Fed can no longer even rely on its models is that...

  • Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling fi nding given that the current horizon of forward guidance by the FOMC is of at least eight quarters.

In short: the Fed's DSGE models fail when applied in real life, they are unable to lead to the desired outcome and can't predict the outcome that does occur, and furthermore there is no way to test them except by enacting them in a way that consistently fails. But the kicker: the Fed's own model predicts that if the Fed does what it is currently doing, the result would be "explosive inflation."

You read that right: if Bernanke does what he not only intends to do but now has no choice but doing until the bitter end, the outcome is hyperinflation. Not our conclusion: that of Smets and Wouters, whoever they are.

And these are the people who are now in charge of everything.

Full paper from the NY Fed:



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Wed, 10/03/2012 - 18:08 | 2853681 knukles
knukles's picture

Thus, another faulty model. 
Pay no attention, cast it aside.
Use Paul Krugman instead.
All will be well in NeverNeverLand

Wed, 10/03/2012 - 18:10 | 2853697 Alpo for Granny
Alpo for Granny's picture

Wheelbarrows bitchez!

Wed, 10/03/2012 - 18:13 | 2853711 no taste
no taste's picture

Five charts say it keeps getting worse.

Enjoy the bread and circuses with tonight's "debate".

Wed, 10/03/2012 - 18:21 | 2853745 CClarity
CClarity's picture

What will we distract Americans with when hyperinflation gets going in USA?

Looks like Iran has asked ally Syria to smack Turkey as a distraction to Iranian currency collapse.  Or . . . Turkey sees an opportunity to push back at Syria knowing Iran cannot afford to support Syria right now.  But that's a dangerous assumption.  If the currency is collapsing, Iran will just go all in.

What possibilities do you see?

Wed, 10/03/2012 - 18:31 | 2853779 icanhasbailout
icanhasbailout's picture

I'm shocked - SHOCKED! - that there is gambling going on in this establishment.


or should that be "there is no hyperinflation in Baghdad"?

Wed, 10/03/2012 - 18:33 | 2853782 The Alarmist
The Alarmist's picture

The Models are not wrong ... we obviously need to re-examine reality.

Wed, 10/03/2012 - 21:37 | 2854304 cranky-old-geezer
cranky-old-geezer's picture



Models say exactly what they want to see.

Currency printing and resulting inflation is how they're looting America, stealing everybody's wealth the silent way, giving it to Wall Street banks and the government, exactly what Fed's true purpose is.

It's what they want.  It's the plan.  Loot the nation and give it to Wall Street and the government.

Helping the economy recover is just a cover story.  They don't give a shit about the economy nor the American people.  If that isn't abundantly clear by now, you've been sleeping.

Wed, 10/03/2012 - 22:25 | 2854495 Bananamerican
Bananamerican's picture

"the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were"pegged at the ZLB between eight and nine quarters"


I need a drink....

This must be the middle class version of "models and bottles"

Wed, 10/03/2012 - 23:37 | 2854703 Pinto Currency
Pinto Currency's picture


This report is not a surprise to the Fed; it may be a surprise that the report got published but perhaps it is just time.


In fact this is a standard central bank policy called an "inflation surprise" and it gets rid of debt by inflating it away.

Wed, 10/03/2012 - 23:41 | 2854717 Richard Chesler
Richard Chesler's picture

They should try plugging fraud and corruption into their model. Then it'd all click.

Wed, 10/03/2012 - 18:36 | 2853793 Desert Irish
Desert Irish's picture

Geography wasn't your best subject was it....

Hint: Tehran

Wed, 10/03/2012 - 18:47 | 2853836 nmewn
nmewn's picture

Don't blame the student...blame the teacher.

Wed, 10/03/2012 - 19:28 | 2853923 SilverIsKing
SilverIsKing's picture

Let me introduce you to Baghdad Bob's young cousin, Tehran Ted.

Tehran Ted says: "we have no inflation but we do have skittles shitting Unicorns and candy rainbows."

Wed, 10/03/2012 - 20:10 | 2854037 nmewn
nmewn's picture

No ones ever gonna get that Ahmadinejad social

"In Iran we do not have this phenomenon, I don't know who has told you that we have it..."

Thu, 10/04/2012 - 07:43 | 2855211 StandardDeviant
StandardDeviant's picture

It's almost a straight line, isn't it?

Wed, 10/03/2012 - 20:28 | 2854088 lineskis
lineskis's picture

Looks like we can now print gold, or sort of:


Thu, 10/04/2012 - 16:56 | 2857294 Thisson
Thisson's picture

They found a way to turn gold into gold.  BFD.  Read the article.  It's silly.

Wed, 10/03/2012 - 18:40 | 2853808 CPL
CPL's picture

Correct, It's not just in Iran.


UAE is concerned about the state of affairs around the world concerning food.  Appearently nothing is showing up for delivery and it's getting tight.  So expect UAE to go into spring time soon as well.

Wed, 10/03/2012 - 20:56 | 2854171 mccoyspace
mccoyspace's picture

Yup, that place is wholly dependent on food imports. When I was living there that though was front and center in my mind. They import all of their gasoline, too. They don't have any refineries there. They export a boatload of nat gas and oil, though.


another fun link from over there:

Wed, 10/03/2012 - 19:20 | 2853911 falak pema
falak pema's picture

Baghdad is gearing up oil production while Tehran gears down.

Eternal tweedle-dee, tweedle-dum. 

The CIA prints RIAL that helps the oil to fall in Iran. I hope it doesn't help it to block Hormuz. 

50% rial fall and you'll have 50 million iranians swimming to Bahrein. THe Hormuz will look like those autoroutes in China, all cars no traffic. 

Wed, 10/03/2012 - 18:24 | 2853753 bank guy in Brussels
bank guy in Brussels's picture

Smets and Wouters, bitchez! They rule!

'Explosive Inflation', just like they say!

As Tyler writes:

« ... Smets and Wouters, whoever [the f*ck] they are ... »

Wed, 10/03/2012 - 18:45 | 2853830 nmewn
nmewn's picture

I had a model once, the Bounty. It took me long hours of concentration, diligence, patience, money and paint to get it all nice & was just right, so I thought. 

It keeled over to port & sank like a rock...not a cloud in the sky...I'm sure theres a lesson in there somewhere ;-)

Wed, 10/03/2012 - 19:04 | 2853881 knightowl77
knightowl77's picture

that was funny +1

Wed, 10/03/2012 - 19:09 | 2853891 RockyRacoon
RockyRacoon's picture

Take on ballast.  Ships are designed to haul freight/weight.  An empty ship is unstable.

Wed, 10/03/2012 - 19:39 | 2853944 nmewn
nmewn's picture

lol...I think it was just never meant to was meant to be admired, adored and talked about as a work of art sitting on a shelf somewhere. 

Kinda like most models, they just can't stand the test of reality.

Wed, 10/03/2012 - 20:16 | 2854056 BidnessMan
BidnessMan's picture

All models are wrong. But some models are useful. From my buddy Leon.

Wed, 10/03/2012 - 20:43 | 2854139 nmewn
nmewn's picture

Models are useful until they break or breakdown.

I think that is the interest...the desire to understand and predict...but its really a fools errand in my opinion (in regards to economics) as no one can predict the human mind.

The worlds best & brightest minds thought and modeled that unprecedented low interest rates would make humans go into even deeper debt...the exact opposite turned out to be true.

Instead of a negative (debt) maybe they should experiment with something positive for a change ;-)

Thu, 10/04/2012 - 03:08 | 2854999 Poor Grogman
Poor Grogman's picture

The models failed to take into account what would happen when the lab rats became " aware of how the game works".

Dammit now we need a new model...

Or better tranquilizers for the lab rats...

Either way the old paradigm and all it's preists are toast.

Thu, 10/04/2012 - 08:00 | 2855239 XitSam
XitSam's picture

When I was a kid and we got tired of our ship models, we would go to the 8 foot falls in the local canal.  We would put firecrackers in the ship and time it so they would blow up right as it went over the falls.

Wed, 10/03/2012 - 20:14 | 2854053 nofluer
nofluer's picture

That's what I was gonna tell him. The ship is not complete without ballast. Isn't the foundation of ellis Island made up of rocks tossed overboard when ships took on freight?

Must be a land-lubber.

Wed, 10/03/2012 - 20:33 | 2854109 nmewn
nmewn's picture

Try not to get caught up in reality when dealing with the absurdities around you my friend, you'll only stay in the asylum longer ;-)

Wed, 10/03/2012 - 20:56 | 2854185 RockyRacoon
RockyRacoon's picture

I used to summer on Dog Island in the Gulf.  There is a Ballast Cove on the island where ships would anchor and drop ballast before going to the mainland to take on cargo.   The ballast stones were mostly huge, near perfectly round, granite balls.  Quite a treat to find and take back for decorating the cabin.

Wed, 10/03/2012 - 21:18 | 2854252 nmewn
nmewn's picture

Ah yes, from the old nautical days, those are good treasures to be sure. Good on ya, half the fun is searching.

I'm familiar with the area. My great-grandfather was part of a unit that guarded the salt works down the road from Carrabelle around St.Marks back in the WBTS...its a long story.

I was raised in Fla...worked at a place called CSY Yachts back in the day, I'm very familiar with ballast. I have friends who are still captains, one was a harbor master out of Tampa, the other sells yachts...all the way down to what we can afford as a boat

I'm surprised so much attention was paid to ballast instead of the "model theory" I introduced ;-)

Wed, 10/03/2012 - 22:32 | 2854535 DanDaley
DanDaley's picture

A boat is a hole in the water where you throw your money in, just like government.

Thu, 10/04/2012 - 00:48 | 2854855 RockyRacoon
RockyRacoon's picture

Nature Conservancy took over most of the island -- took all the fun out of it.  Where we used to walk the beaches and pick up trash are now... well, trashed.   Nobody to pick it up.  We'd be a hindrance to "nature" don't ya know.

Thu, 10/04/2012 - 06:24 | 2855140 nmewn
nmewn's picture

I hear ya...people can be pigs ;-)

Its really not that hard to take care of ones own garbage.

Wed, 10/03/2012 - 19:15 | 2853903 falak pema
falak pema's picture

but before it did that, did it mutiny?  You gotta tell the whole story! 

Wed, 10/03/2012 - 19:46 | 2853960 nmewn
nmewn's picture

As the "modeler"...its my own fault for not having flammable liquids on hand, to give it a proper send should be noted, the life boats were glued to the sides & deck...everyone died on that model ;-)

Wed, 10/03/2012 - 20:49 | 2854158 FoxMulder
FoxMulder's picture

I had a model once, her name was Karen. She had great legs, but she just layed there.

Wed, 10/03/2012 - 20:13 | 2854051 BidnessMan
BidnessMan's picture

Just like the Vasa! Sweden's great ship that made it a whole mile out to sea. History does rhyme....

Wed, 10/03/2012 - 20:28 | 2854091 Landotfree
Landotfree's picture

"Wheelbarrows bitchez!"

I think not.  All you guys can go dash to the bank tomorrow at 9am and by 9:05am they would be closing the doors.

True inflation of the global credit system died a few years ago, what you are witnessing is the dead cat bounce, eventually the collapse will continue.

Wed, 10/03/2012 - 18:18 | 2853733 LMAOLORI
LMAOLORI's picture



They are already using Krugman suggestions and Marx

Wed, 10/03/2012 - 18:08 | 2853685 fonzannoon
fonzannoon's picture

I bet these guys were debating money velocity and inflation when one of them lit their fart on fire and they saw how the sulfer ignited and whamo, it all made sense.

Wed, 10/03/2012 - 18:09 | 2853687 zorba THE GREEK
zorba THE GREEK's picture

We thought for sure this time would be different.

Wed, 10/03/2012 - 19:12 | 2853899 RockyRacoon
RockyRacoon's picture

Lemme see if I get the article right:   All their own evidence says that what they are doing will cause "explosive inflation".   Yet they are doing it anyway.   Did I get it about right?   Too bad Congress can't understand simple math, or a confession by a sociopath.   Ending the Fed won't happen until they blow the ship of state right out of the water.   Too late.

Wed, 10/03/2012 - 19:51 | 2853970 nmewn
nmewn's picture

They're a one trick pony...just print...and it is a creation of Congress to absorb the debt it (the elected Congress & Presidents) issue.

What could possibly go wrong?

Skittles for everyone!!! ;-)


Wed, 10/03/2012 - 19:57 | 2853984 akak
akak's picture

When your only tool is a printer, every problem looks like an opportunity to print.

Wed, 10/03/2012 - 20:05 | 2854019 TheFourthStooge-ing
TheFourthStooge-ing's picture

When your only tool is unconditional immunity to all laws, every problem looks like an opportunity to ass rape the world.

Wed, 10/03/2012 - 20:16 | 2854057 nmewn
nmewn's picture

I always mentally picture them like a monkey with a hammer.

Wed, 10/03/2012 - 23:50 | 2854731 Osmium
Osmium's picture

Strange, my mental picture of them is a monkey fucking a football.

Wed, 10/03/2012 - 18:10 | 2853690 TheSilverJournal
TheSilverJournal's picture

Bernanke is a Liar...check.

Get out of bonds...check.

Get out of dollars...check.

Assets propped up by cheap credit will be devastated...check.

Buy silver...check.

Wed, 10/03/2012 - 18:11 | 2853706 saturn
saturn's picture

Humans are irrelevant ... double check!

Wed, 10/03/2012 - 19:12 | 2853898 falak pema
falak pema's picture

our great forex trader only trades in USD. You know who I mean. So he is never out of dollars!

Wed, 10/03/2012 - 23:01 | 2854623 ZeroAvatar
ZeroAvatar's picture

Yen,,, Yen dollar.....It's right on the tip of my tongue....

Wed, 10/03/2012 - 20:21 | 2854066 TWSceptic
TWSceptic's picture

Don't put everything on silver though. 60% gold 40% silver is about right. Silver is partly industrial, economy down means silver price at least affected.

Wed, 10/03/2012 - 20:45 | 2854143 TheSilverJournal
TheSilverJournal's picture

That's a bonus, not a detriment. Even when the price of silver increases dramatically, large amounts will still be used up in industry. 

Sat, 12/29/2012 - 08:46 | 3104392 laboratorymike
laboratorymike's picture

Actually, it could be a detriment. If worldwide industrial demand falls during a downturn, it will be a negative on the price of silver, which certainly could happen if the US drags the world into recession with it. But, if worldwide demand is decoupled from an American recession/depression, then certainly we'd see the bonus.

Wed, 10/03/2012 - 18:10 | 2853692 PiratePawpaw
PiratePawpaw's picture


Gold and Silver Bitchezz!!

And maybe a firearm. ;)

Wed, 10/03/2012 - 18:15 | 2853722 Gamma735
Gamma735's picture

Just one firearm.  How about dozen.

Wed, 10/03/2012 - 18:37 | 2853796 PiratePawpaw
PiratePawpaw's picture

Didnt want to advertize. (the web has ears)

Besides; My ONE firearm was lost in the same boating accident which claimed all my PM.

Long Empty Boat Trailers.

Wed, 10/03/2012 - 18:10 | 2853693 Robslob
Robslob's picture



And less I digress:



Wed, 10/03/2012 - 18:11 | 2853702 FL_Conservative
FL_Conservative's picture

Glad to find out that everything is under control.  For a minute, I was worried that something BAD was going to happen.

Wed, 10/03/2012 - 18:12 | 2853710 EscapeKey
EscapeKey's picture

The problem is that we don't print enough! Unless we print more, we are in serious danger of hyperDEflation. DEflation, I tell you.

Wed, 10/03/2012 - 18:23 | 2853749 akak
akak's picture

Oh my God!  RUN!!!!!

It's ManBernDeflaKrug! 

I'm serial!

Wed, 10/03/2012 - 18:28 | 2853766 EscapeKey
EscapeKey's picture

Don't worry. Soon, there'll be TWO interstates from Ogdenville to North Haverbrook.

After that - and Krugman will really enjoy this one, we start to waste precious resources on er I mean prepare for alien invasion.

Wed, 10/03/2012 - 18:38 | 2853804 PiratePawpaw
PiratePawpaw's picture

Totally Serial

Wed, 10/03/2012 - 18:49 | 2853845 nmewn
nmewn's picture

Oh gaaawd the humanity!!!...somebody break some windows!!!

Wed, 10/03/2012 - 20:36 | 2854112 nofluer
nofluer's picture

Well... the Bernank TOLD Anna and Milton that he knew what happened in the '30s and promised that it would never happen again! So the 30's was DEflation - now we get hyper INflation. He's keeping his promise.

Wed, 10/03/2012 - 23:18 | 2854511 Carl
Carl's picture

Funny thing about the 1930's DEflation, the amount of actual money in circulation didn't change that much.  Funny thing about all the "liquidity" that's been added to the system since 2008, the actual cash money supply hasn't change that much.

The 1930's DEflation was a cascading collapse of credit as money.  When the "liquidity" that was driving the roaring 20's ceased to function as money in the 30's, what did it become?  Debt.

When Bernanke's $14 Trillion in "liquidity" ceases to function as money, what will it become?

Hint: It won't be hyperinflation....

Wed, 10/03/2012 - 23:07 | 2854513 Carl
Carl's picture

Got cash?

Thu, 10/04/2012 - 06:05 | 2855125 Just Ice
Just Ice's picture

Air is definitely coming out of gargantuan credit bubble.  As it contracts real dollars lose all the credit competition they've had.

Wed, 10/03/2012 - 18:11 | 2853705 Serfs Up
Serfs Up's picture

My's coming.

Wed, 10/03/2012 - 18:12 | 2853708 Wakanda
Wakanda's picture

I'm shocked!  SHoCKeD!


Wed, 10/03/2012 - 18:12 | 2853709 Thought criminal
Thought criminal's picture

Printing endless amount of money can lead to hyperinflation? Damn those FED guys are brainiacs. Glad we have them.

Wed, 10/03/2012 - 18:57 | 2853871 CPL
CPL's picture

Well it gets better, page 17, middle paragraph.


It's pretty much spelling out double digit interest rates for short term credit facilities and I would interpret it as "modest" interest rate changes to the long term.  If I'm reading this right, it would be an everything industry killer. 

Wed, 10/03/2012 - 18:13 | 2853712 Wile-E-Coyote
Wile-E-Coyote's picture

We are so f***d

Wed, 10/03/2012 - 20:16 | 2854059 cynicalskeptic
cynicalskeptic's picture

But, on the UP side, it's a LOT easier to pay off TRILLIONS in debt when a loaf of bread costs $20,000,000

Maybe that's the INTENT - inflate the hell out of the dollar and stick it to all the debt holders without having to default on our national debt.... of course that also means the average US standard of living will level out to the third world poverty level typically found on a Native American reservation

Wed, 10/03/2012 - 18:13 | 2853715 Gamma735
Gamma735's picture

Printing money steals from the 99% and aggreates wealth for the 1%. 

Wed, 10/03/2012 - 18:16 | 2853726 Robslob
Robslob's picture




Or in modern terms Gamma: He who owns the printer makes the rules!

Wed, 10/03/2012 - 21:33 | 2854305 Anusocracy
Anusocracy's picture

Basically what government has been doing since it's inception.

Wed, 10/03/2012 - 18:16 | 2853723 drexlraw
drexlraw's picture

planned obselesence?

Wed, 10/03/2012 - 18:16 | 2853728 NewWorldOrange
NewWorldOrange's picture

"the Fed's own model predicts that if the Fed does what it is currently doing, the result would be explosive inflation."

Whew! Damn I'm relieved. This proves there won't be any inflation after all.

Wed, 10/03/2012 - 18:18 | 2853735 123dobryden
123dobryden's picture

always must laugh when americans predict themselves lost decade like this case it will be lost centuries, just look Mongolia, Turkey, Greece, those where once mighty emipres as well....Decline has begun 10 years ago :)it will be only downhill i am afraid...

Wed, 10/03/2012 - 18:24 | 2853746 NewWorldOrange
NewWorldOrange's picture

Yeah but mammals don't even have centuries left. First major global conflagration and thousands of nuclear plants around the world will go Fukushima for lack of maintenance, electric power, whatever...only takes a day or two...if that...once the backup batteries cut out, or the employees are too busy starving, fighting, and dying to show up for work.

Cesium 137 bitchez.

Wed, 10/03/2012 - 18:47 | 2853841 El
El's picture

You could be right. I wonder though... because it seems to me if I were one of the few people standing between the assured destruction not only of myself and my family, but also of every living thing...I think I would show up to work. If it got that bad, I think I'd try to be figuring out a way to dismantle it or whatever it is that they do to get rid of that stuff. Admittedly, I am clueless about nuclear plants, but it just seems to me that walking away to starve or to fight elsewhere would be counterproductive if the goal is to stay alive. I don't know about anyone else, but as long as I had any resources, I would certainly be willing to contribute to the sustenance of those keeping the power plants from melting down.

Thu, 10/04/2012 - 03:18 | 2855007's picture

When the USSR fell people acted just as you described.

Thu, 10/04/2012 - 11:41 | 2855951 NewWorldOrange
NewWorldOrange's picture

When the USSR fell there wasn't mass starvation, or mass looting and fighting in the streets and there was no interruption in electrical service. . None of that was going on after the Chernobyl disaster either, yet a lot of those people abandoned their posts. Just sayin'

In addition, a massive global upheaval would likely disrupt the entire chain of production of every sort of product needed to keep the reactors functioning properly. Ever read that story on all the processes all over the world that go into the making of a pencil?

Sat, 12/29/2012 - 09:02 | 3104400 laboratorymike
laboratorymike's picture

Based on my very limited understanding of nuclear energy, the heat production rate is supposed to be controllable by using graphite "control rods" to absorb fast neutrons and limit the power production rate to an acceptable amount (i.e. so the reactor doesn't overheat). Properly designed, a nuclear plant should have a "fail-safe" mechnism that would stop nuclear power generation in an emergency. This was explained to me by a plant operator in my state that I went to school with; apparently every critical system in every nuclear plant in the US has two backup systems, but that said, I am not the NRC and I don't know how up-to-date our plants are, so for all I know we could e 20 years behind on nuclear safety tech.

Wed, 10/03/2012 - 18:52 | 2853859 michael_engineer
michael_engineer's picture

Small mammals that breed fast would likely make it through your scenario. The mutation rate might be high but they breed faster than the cancers that would tend to knock them back. Anything that breeds fast would likely continue on. Plants too as they breed fast.

Wed, 10/03/2012 - 20:41 | 2854128 nofluer
nofluer's picture

Cockaroaches would survive

Wed, 10/03/2012 - 21:09 | 2854221 mccoyspace
mccoyspace's picture

'no time for pillow talk sweetie, I gotta get on to the next one'

Wed, 10/03/2012 - 23:08 | 2854641 ZeroAvatar
ZeroAvatar's picture

'Mayfly Syndrome'

Thu, 10/04/2012 - 11:34 | 2855935 NewWorldOrange
NewWorldOrange's picture

"Small mammals that breed fast would likely make it through your scenario"

I guess it just depends on how much radiation seeps into the biosphere as a result a thousand or three Fukushimas. There is a limit on how fast mutations can occur and the species still survive. I wouldn't bet on those mice just yet.

Wed, 10/03/2012 - 18:30 | 2853776 bank guy in Brussels
bank guy in Brussels's picture

A commenter on ZH 20 months ago:

« The USA had 40 years of stability and power. In the future it will be a shithole. So what? Just another new-world shithole. Life goes on. »

- ZeroHedge commenter 'Fat Ass', 17 January 2011

Wed, 10/03/2012 - 18:43 | 2853815 PiratePawpaw
PiratePawpaw's picture

How many Romans in the first few centuries AD would have forseen that their once great empire would be begging Brussels (read Gaul) for a handout?

History may not repeat itself, but it sure rhymes alot - Mark Twain

Welcome to New-Rome

Wed, 10/03/2012 - 18:44 | 2853824 blunderdog
blunderdog's picture

FatAss was a prick, but he had some legitimate insights.

But 40 years?  The run's been hecka longer than that, and it ain't over yet. 

Who else out there is doing BETTER right now?

Sat, 12/29/2012 - 09:06 | 3104403 laboratorymike
laboratorymike's picture

At least nine other countries according to the Heritage Foundation:

Wed, 10/03/2012 - 18:18 | 2853736 jimod
jimod's picture

Maybe both the .01% rich people and Bernanke both know hyperinflating is coming.

It's like a game of chicken,

Dems vs Republicans:

Dems via Bernanke saying pony up the taxes to pay for our social programs rich people or we'll pauperize you with hyper-inflation..

Rich people, via the Republicans, saying go ahead impoverish yoursleves, see if we care.


Wed, 10/03/2012 - 18:44 | 2853825 max2205
max2205's picture

Ben is a registered Republican..... And felon

Wed, 10/03/2012 - 18:20 | 2853739 kill switch
kill switch's picture

It all goes back to simple understanding,,,, of Republic,,, We are fucked!!!!!




Wed, 10/03/2012 - 18:21 | 2853743 Insideher Trading
Insideher Trading's picture

The Fed is either always really confused or just acts really confused for shits and giggles.

Wed, 10/03/2012 - 18:26 | 2853760 catch edge ghost
catch edge ghost's picture

 uck the  ederal Reserve.  orever.

Wed, 10/03/2012 - 18:30 | 2853775 Insideher Trading
Insideher Trading's picture

What you did there, I saw it.

Wed, 10/03/2012 - 20:31 | 2854098 Beam Me Up Scotty
Beam Me Up Scotty's picture

I missed it, I was looking at your avatar.

Wed, 10/03/2012 - 23:15 | 2854657 ZeroAvatar
ZeroAvatar's picture

You got caught prestidigitating!


(You're probably a Neophiliac, too!)

Wed, 10/03/2012 - 18:27 | 2853761 max2205
max2205's picture

Not our conclusion: that of Smets and Wouters, whoever they are.


WTF is counterfactual. Is that like ... Never mind

Wed, 10/03/2012 - 18:35 | 2853788 Canucklehead
Canucklehead's picture

An Estimated Stochastic Dynamic General Equilibrium Model of the Euro Area - by Frank Smets and Raf Wouters

Wed, 10/03/2012 - 18:37 | 2853794 MsCreant
MsCreant's picture

I plan for both stagflation and hyperinflation. I have a small deflation hedge. It looks like hyperinflation to me, but we can't know when it will be ignited.

HOWEVER, I keep wondering if there is something that could happen this time that really would be different. 

This thing is world wide. This thing is all the so called developed countries. This thing is computerized. Things happen instantly now, people will have no warning (you know what I mean, all of us here have been warned). There will be no wheelbarrows, only electronic signals, computer code. 

I am only thinking metaphorically, of oxygen being burned off rapidly in a fire, creating a vacuum, a void, an implosion. I know that is only a metaphor...

Resonance disasters or harmonic oscillations in the markets causing collapses and fat fingered fuck yous in the charts...this is real thanks to HFT.

We have heard of critical mass and waterfall effects...

I just don't know if we can even conceive of how this is "really" gonna go down.

Wed, 10/03/2012 - 18:41 | 2853810 blunderdog
blunderdog's picture

The econometricians are about to have their own "quantum" realization.  It's been a long time coming.

      "Holy shit!  These outcomes are all just TOTALLY CRAZY!  We may as well be tossing dice!"

Wed, 10/03/2012 - 18:44 | 2853826 SilverTree
SilverTree's picture

Well said.

Wed, 10/03/2012 - 18:58 | 2853850 Insideher Trading
Insideher Trading's picture

Your comment gave me harmonic oscillations.

Of course we can conceive of how this is really going to go down.

We will all suffer from 787.6 on the DSM-IV scale (metaphorically) from the magic drugs being administered into the financial system by our unelected monetary masters.

Wed, 10/03/2012 - 20:40 | 2854126 Hulk
Hulk's picture

The great thing about the modern age is that we no longer need to own a wheelbarrow.

We can carry around all our cash in a 4 gig USB stick !!!

Who knows how this is going to go down, but 2008 did demonstrate that in the computer age, it does happen fast... 

Wed, 10/03/2012 - 23:22 | 2854675 ZeroAvatar
ZeroAvatar's picture

Or, maybe we'll use these to store our cash:


I'm gonna need at LEAST 32 gigs.

Wed, 10/03/2012 - 18:37 | 2853797 bnbdnb
bnbdnb's picture

Their models are fine. The data is lying

Wed, 10/03/2012 - 18:42 | 2853803 EZYJET PILOT
EZYJET PILOT's picture

"You read that right if Bernanke does what he not only intends to do but now has no choice but doing until the bitter end, the outcome is hyperinflation."  Why does Zerohedge always make out that Bernanke does not have a choice? This sort of talk is almost supportive of the corrupt status quo; which I find at odds with the general theme of the website. He should do the right thing, make a choice for himself and let the whole stinking edifice collapse.

Wed, 10/03/2012 - 20:08 | 2854032 sschu
sschu's picture

IIRC the DV01 for the Fed is $4B.  Interest rates go up by .1% and Bennie loses $40B in value.

Bennie raises rates where they should be, let's say by 200 basis points and he drops $800B in value of his holdings .... and they string him up somewhere.

Who wants to be responsible for this catastrophe?  

He is boxed in by his own doings, and we will suffer the consequences as he writes a book while sipping scotch on a tropical island about no one being able to see it coming.




Wed, 10/03/2012 - 18:39 | 2853806 razorthin
razorthin's picture

After a brief respite, I just observed the greatest increase in gasoline prices within a 24 hr period that I have ever witnessed.

Wed, 10/03/2012 - 18:42 | 2853819 All Out Of Bubblegum
All Out Of Bubblegum's picture

> "Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation..."

The average American is about to get smetzenwootered, good and hard.

Wed, 10/03/2012 - 18:47 | 2853837 newengland
newengland's picture

IF I was a Zionist and New World Order person, then I would sack every single academic whose theories failed.

You first, Krugman.

Wed, 10/03/2012 - 22:31 | 2854524 JoBob
JoBob's picture


Wed, 10/03/2012 - 18:46 | 2853833 spdrdr
spdrdr's picture

But... But.... Models always work!

The more money that is poured into the models, the more accurate they become.

Just look at the Catastrophic Anthropogenic Global Warming modelling industry.

Oh, wait...


Wed, 10/03/2012 - 19:38 | 2853931 blu
blu's picture

Not sure what point you are trying to make, because climate models are nailing it.

  • North Polar Sea predicted ice-free in summers by 2015 -- check
  • North Pole heating greater relative to South Pole -- check
  • Polar climates heating faster and to a greater degree than equatorial climates -- check
  • Upper atmosphere cooling relative to troposphere. -- check
  • General and wide-spread failure of circumpolar jet stream -- check
  • Severe weather events increasing due to slow down in storm front advance -- check

And yeah, explosive inflation don't sound too good either.

Wed, 10/03/2012 - 20:20 | 2854063 cynicalskeptic
cynicalskeptic's picture

Maybe accelerating climate change means a near extinction event for the human race... our leaders know the merde is about to hit the fan and they only care about grabbing all they can to build their own bunkers

sure would explain a lot

Wed, 10/03/2012 - 20:50 | 2854162 nofluer
nofluer's picture

Bunkers will not help protect you from a perfect storm... (ie a multi-hazard simultaneous explosion of BAD STUFF!!!)

Wed, 10/03/2012 - 22:25 | 2854498 spdrdr
spdrdr's picture

"because climate models are nailing it"

Umm, come back to me in 2015, and tell me that the model nailed an ice-free North Polar sea.  Until then, you are modelling the model's outcome.

Open system modelling isn't science - it's guesswork.  Follow the money.

You may wish to ponder the Viking settlements in southern Greenland, where farming and built structures and whole communities existed thousands of years ago.  A lot warmer then, compared with today.  A lot less CO2 in the atmosphere, as well.  Curious, isn't it?


Wed, 10/03/2012 - 23:19 | 2854669 Diogenes
Diogenes's picture

Predicted when, and by whom? Cherry picking 6 predictions out of 1000 made over the last 30 years doesn't count. Predictions made after the fact don't count.


“The problem is we don’t know what the climate is doing. We thought we knew 20 years ago. That led to some alarmist books – mine included – because it looked clear-cut, but it hasn’t happened,”

-James Lovelock, global warming Jeremiah and father of the Gaia hypothesis.

Thu, 10/04/2012 - 03:20 | 2855008 Poor Grogman
Poor Grogman's picture

Warmers may eventually become extinct, but take heart someone may stuff one and put it in a museum as a curio..

Wed, 10/03/2012 - 18:46 | 2853834 VonManstein
VonManstein's picture

gold moving in on 1780


never seen this action this time of day before

Wed, 10/03/2012 - 18:51 | 2853855 divide_by_zero
divide_by_zero's picture

The Fed predict the future? Heck they can't even in the words of Keynes "in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again", ergo "subprime is contained".

Wed, 10/03/2012 - 19:04 | 2853878 Racer
Racer's picture

yep in the eye of a hurricane the FED says all is well, go outdoors about your business it is very safe

Wed, 10/03/2012 - 18:53 | 2853860 three chord sloth
three chord sloth's picture

Their models predict explosive inflation, huh? Well, my models say that when I am reduced to eating roadkill, I end up with explosive diarrhea... how about you FED guys pull your heads out of your asses so we BOTH can avoid that messy future. Whaddaya say, guys?

Wed, 10/03/2012 - 20:51 | 2854170 nofluer
nofluer's picture

Won't be no road kill if no one can afford gas...

Wed, 10/03/2012 - 20:59 | 2854192 nofluer
nofluer's picture

Won't be no road kill if no one can afford gas...

Wed, 10/03/2012 - 19:00 | 2853875 notbot
notbot's picture

Man, truth is stranger than fiction

Wed, 10/03/2012 - 19:46 | 2853959 blu
blu's picture

Maybe you need to upgrade your fiction, then:

Q: What do you call an economic model that generates a predetermined outcome set in advance by the banksters?

A: Propaganda.

And there's nothing a hyperactive archangel hates more than Statist propaganda.

Wed, 10/03/2012 - 19:01 | 2853876 Racer
Racer's picture

And anyone looking at a BofE fuzzy charts on inflation, who doesn't come to the conclusion they haven't the foggiest, hasn't the foggiest!

Wed, 10/03/2012 - 19:06 | 2853885 blu
blu's picture

Economists have the best names. Now all we need is either or both of Smets and Wouters as Fed Chair.

Think of the name-freak fun we could have with one of those.

Wed, 10/03/2012 - 19:15 | 2853905 MsCreant
MsCreant's picture

Those are nice Wouters there blu.

Wed, 10/03/2012 - 19:36 | 2853937 blu
blu's picture

Yeah, and big Wouters make all the guys Smets their pants. I live for moments like that.

Wed, 10/03/2012 - 19:08 | 2853888 holdbuysell
holdbuysell's picture

I'm a bit confused. The Fed's been at the ZLB for years now without this effect of explosive inflation. Is the point that the combination of such extended time guidance of eight or nine quarters plus ZLB the catalyst for explosive inflation, the combination which has not been seen until now?

Wed, 10/03/2012 - 19:16 | 2853906 khakuda
khakuda's picture

It's all about velocity of money. When the point comes that even the shoeshine boy realizes that he has to get rid of his dollar as soon as possible because it won't be worth anything, it's over. Right now people are buying gold, stocks, bonds, oil, etc. At some point, they start stocking up on anything and everything and prices go ballistic. Hyperinflation is the death of confidence and trust in fiat money. One day they print a dollar to many and the dam breaks open.

Wed, 10/03/2012 - 23:34 | 2854696 ZeroAvatar
ZeroAvatar's picture

I'm the shoeshine boy, and I approve this message.

Wed, 10/03/2012 - 19:17 | 2853907 Racer
Racer's picture

You obviously don't pay for food or fuel in your house

Thu, 10/04/2012 - 08:05 | 2855254 Vooter
Vooter's picture

Here in NYC, the bridge and tunnel tolls now go up every eight months or so. Literally. Totally insane...

Wed, 10/03/2012 - 19:31 | 2853895 khakuda
khakuda's picture

When it blows up on them and they write the book, we are going to find out that Charlie Evans and Krugman actually escaped from an insane asylum years ago. Has not anyone noticed the crazed look in their eyes?

Those were the guys in college that the girls stayed away from. They'd be drinking together late into the night, laughing too loud, talking about their favorite episodes of Star Trek and trying to convince the dog to lick their nuts.

Wed, 10/03/2012 - 19:12 | 2853896 Racer
Racer's picture

"But the kicker: the Fed's own model predicts that if the Fed does what it is currently doing, the result would be "explosive inflation.""

Hmm mandate STABLE prices.... not compute, not compute




FED: 'shut the FUCK up... we want to steal more you stupid  alarmist whistleblower'

Wed, 10/03/2012 - 19:13 | 2853900 Schmuck Raker
Schmuck Raker's picture

What is a "counterfactual"?

Is that anything like a lying-piece-of-shit-treasonous-fuck?

Wed, 10/03/2012 - 19:24 | 2853908 newengland
newengland's picture

High Treason.

The Federal Reserve Board is not for the federal good and has no reserves. It is a privately owned entity of old European banks that hate the Republic of the USA, and prefer monarchy, communism, corporatism...the New Feudalism we witness today.

It is the plaything of the Trilateral Commission and Zionists.

See this:


Fascists and fashionistas serve themselves, and are probably too short tempered to see past the clothes on this video, and can't comprehend the genuine words and smiles among people whose culture made the West at its best.


The Tora and Bible gave the Western world all good things. The Zionists give the world hurt, mayhem and endless war.

Thu, 10/04/2012 - 04:17 | 2855054 supermaxedout
supermaxedout's picture

A great video. It shows clearly the difference between the true Jewish religion and Zionism. The rabbis are very brave men showing the world that the current State of Israel is the absolute opposite, completely different what true Jewish believers are wishing for.

When thinking about Achmadineschad he is for sure not a holy man.  He is the political leader of a nation which is circumvented by the strongest military power ever in this world.  For sure many of his doings are cruel and heartless. This is his fate as the leader of Iran in such a situation.  Only such kind of person can resist the pressure put on Iran building up over generations. The Brits and US have breeded Achmadineschad and his kind for over 50 years with the permanent interventions in Iran. Just because  oil and the superpower status of the US.  So its no surprise at all that such a man is now in power in Iran.

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