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This Is Why, To An Economist, QE Refuses To Work

Tyler Durden's picture


There is practical, everyday common sense... and then there is economics. Because when it comes to explaining why a square peg won't fit into a round hole, only an economist will tell you, over and over, that it will eventually happen, one must just tweak the theory a little first, and then reality will promptly follow. And while even economists have enough of a frontal lobe (and realize there is little grant money) to pursue intractable pegs and hole problems, when it comes to the theory at the heart of their beloved Keynesian voodoo religion, namely Quantitative Easing, the answer is always one, and it is very simple: we need more! Yet even economists are not naive enough to not recognize that QE has not worked in any of its 4 previous iterations (logically, as if it had there would be no need for a fifth, open-ended one). Where it gets fun is watching them come up with amusing yet convoluted, involved and outright demented explanations, some even in chart format, why QE keeps on failing. Below, we present just such a graphic explanation which only an economist could love, or care about.

First, this is how an economist will trace, visually, courtesy of Bloomberg, the monetary "pathway" starting with the policy rate, going through financial conditions, and ending up with output and employment. Not there is no mention of the real pathway: if print trillions, then stocks go up. But economists have never been known to actually simply things if there is grant money to be made from writing research papers on intellectual dead ends.

The above chart is how in an ideal economist world, i.e., that which is 100% disconnected from reality, QE should work.

Now, because even economists realize the deranged theories they concoct in their ivory towers sometimes need defending, especially since billions of lives are at stake, and may die a painful death of starvation once food becomes so expensive it results in food-based genocide, they try to come up with explanations why the chart above explaining the work of QE may, just may, not quite work.

The first reason for this is shown in the chart below.

This is how Bloomberg explains it:

In Figure 20 we plot two different financial conditions schedules in Quadrant B—an elastic schedule corresponding to a Risk-On financial environment (FCON1) and an inelastic  schedule corresponding to a Risk-Off financial environment (FCON2). When investors’ appetite for risk is high, i.e., the market is in Risk-On mode, a decline in the real yield on relatively safe assets should signifi cantly raise the demand for risky assets and, in the process, significantly boost the level of overall fi nancial conditions along the elastic Risk-On financial conditions schedule (FCON1). A signifi cant rise in overall financial conditions should then, in turn, give rise to a signifi cant boost in output and employment (from Y1 to Y2 in Quadrant C).


If, on the other hand, the level of risk appetite was low and the market was in Risk-Off mode, then the financial conditions schedule would be relatively inelastic, which we show as FCON2 in Quadrant B. Because of this relatively inelastic financial conditions schedule, the response of output and employment to a change in the policy rate would be modest at best, increasing only from Y1 to Y3 in Quadrant C.


What Figure 20 indicates is that in order for monetary policy to be effective in boosting output and employment, the real policy rate not only needs to be lowered significantly, but that central bank communication needs to play an equally important role in fostering an environment in which  investors’ appetite for financial risk is high. It would appear that the Fed’s latest open-ended asset purchase program coupled with its forward guidance as to the expected future path of its policy rate is playing an important role in creating a more risk-friendly (Risk-On) financial-market environment (i.e., Federal Reserve communication is helping to contribute to a more elastic financial conditions schedule), which is required for monetary policy to be effective in boosting output and employment.


A relatively elastic financial conditions schedule represents only half the story for the successful implementation of monetary policy, however. For monetary policy to be ultimately successful, output and employment must respond favorably to the policy-induced change in financial conditions. This latter half of the story is depicted in Figure 21, where we shift the focus from financial-sector risk taking to real-sector risk taking.

Or, to paraphrase, one of the lines is crooked. And that is how reality for an economist can be simply reduced to just a line that is angled askew.

But just in case one angled line is insufficient to explain the failure of QE, economists have a Plan B: a second crooked line.


In Figure 21 we illustrate the impact of economic uncertainty on output and employment decisions by comparing the response of output to a change in financial conditions under varying conditions of economic uncertainty. In a world where the level of uncertainty is comparatively low, the output-response schedule will tend to be steeper (shown as IS1 in Quadrant C) and output and employment will tend to respond more favorably to a change in financial conditions. But in a world plagued by high levels of uncertainty, the output-response schedule will tend to be relatively fl at (IS2). Under such circumstances, easier financial conditions might not elicit much change in the level of output and employment, increasing only from Y1 to Y3 in Quadrant C.


From the market’s and policymaker’s vantage point, the success or failure of a central bank’s policy actions will hinge on what the slopes of the financial conditions and output response schedules look like in the real world.

So there you have it: It's all about the slopes. And the economists in charge of the world will continue repeating the same mistakes over and over and over, until the first of two events occurs: i) the slopes of the lines end up "just right", or ii) everyone dies from a hyperinflationary genocide or war, or both.

And now you know how economists "think"


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Fri, 10/19/2012 - 15:51 | 2905284 SheepDog-One
SheepDog-One's picture

OH it's 'Y2's' fault!

Fri, 10/19/2012 - 16:00 | 2905311 Winston Churchill
Winston Churchill's picture

You mean you read that scat ?

Fri, 10/19/2012 - 16:03 | 2905321 The Wizard of Oz
The Wizard of Oz's picture





Fri, 10/19/2012 - 16:07 | 2905330 idea_hamster
idea_hamster's picture

That's how the people in charge think?

We are sooooooooo f'kd.

Fri, 10/19/2012 - 17:40 | 2905542 knukles
knukles's picture

It's really because we're caught in a liquidity trap from which we can only escape if there's an alien invasion.
(courtesy, Paul Krugman)
Honey, could you come talk to the gardener, I don't understand a fucking word he's saying... speak English, fer Christ's sake...

Fri, 10/19/2012 - 18:54 | 2905690 NotApplicable
NotApplicable's picture

Those charts look like a bunch of mirrors. Now all they need is to do is add a little smoke, and they've got themselves an economic system worthy of their stature.

Fri, 10/19/2012 - 21:31 | 2905913 francis_sawyer
francis_sawyer's picture

No wonder QE doesn't work... It's the goddamned New York City Subway system map...

Sat, 10/20/2012 - 01:11 | 2906081 economics9698
economics9698's picture

Models at the macro level are useless and a waste of time. 

When money is printed the beneficiaries are the recipients of the counterfeited cash and the victims the public that must pay for the counterfeited cash with higher prices.

One sentence, done.

Second do not classify monetarist, supply siders, and Keynesians with Austrian economist.  We hate the bastards and think they are 18th century John Law retards or just government pimps who sold out 100 years ago.

We fucking know QE doesn’t work, we live this shit everyday.  


Sat, 10/20/2012 - 01:46 | 2906100 NidStyles
NidStyles's picture

I was educated traditionally in Monatarist Theory, but I am an Austrian. I still get confused on where they come with half the shit they do when I look at their models. Oh, this is a Monetarist Model BTW. 

Sat, 10/20/2012 - 10:00 | 2906214 Manthong
Manthong's picture

It's so nice that complex systems respond to economist's notions in a linear fashion.

Sat, 10/20/2012 - 10:21 | 2906234 Vanderdekken
Vanderdekken's picture

That's because its a simplification. Ever heard of a "loglinear" model?

Sat, 10/20/2012 - 09:38 | 2906204 centerline
centerline's picture

Is always funny to see complex systems being painfully represented by simple lines and linear relationships.  

Sat, 10/20/2012 - 10:02 | 2906215 Hulk
Hulk's picture

I always wondered how Stephen Hawking finds the time to announce the subway train schedule...

Sat, 10/20/2012 - 08:46 | 2906184 t_kAyk
t_kAyk's picture

Mmmm, this sounds...  BULLISH!!

Fri, 10/19/2012 - 18:07 | 2905547 3rdgrader
3rdgrader's picture

The act of printing  a Trillion brand spanking new dollares in effect steals a thousand dollars from every living person's pocket (whether they like it or not) 

Now everyone knows that stealing money from someone else only benefits the person that steals it.

If, for example, Bernanke gives it to the War mongers, then the War mongers also benefit.

If he were to give it to you and I, then you and I would benefit.

I don't know about you, but since I have never personally met the cock sucker, then I guess I'm out another ten thousand dollars this month.


And take those retarded godamned charts and shove em up your ass!

Fri, 10/19/2012 - 21:48 | 2905928 francis_sawyer
francis_sawyer's picture

The Taking of Pelham 1-2-3 ^^^^

Sat, 10/20/2012 - 10:15 | 2906228 flacon
flacon's picture

Interesting movie about the rigging of the gold price. 

Fri, 10/19/2012 - 17:47 | 2905561 Panafrican Funk...
Panafrican Funktron Robot's picture

Last call for alcohol.  Blackout levels advised.  Holy jesus.

Fri, 10/19/2012 - 16:38 | 2905412 SheepDog-One
SheepDog-One's picture

Yea I'm a nerd that way.

Fri, 10/19/2012 - 16:57 | 2905458 RockyRacoon
RockyRacoon's picture

Did I miss something?  Has QE worked?  Since the sole purpose was to save insolvent banks (and things that weren't banks until TSHTF) then I'd say it has worked pretty well.   Where was the REAL reason to save anyone who didn't already make a few mil a year?  Them shore is some purty graphs in this here article, but they ain't about whut QE was fer.   Hell yeah, it worked... or is working... so far.   Bailing out just enough bilge water to keep this garbage scow of an economy afloat, but not for long.

Fri, 10/19/2012 - 18:00 | 2905599 Leknam
Leknam's picture

Spot on Rocky !!

Hear what Ben says but LISTEN TO WHAT HE DOES NOT SAY ;-)

Fri, 10/19/2012 - 18:01 | 2905602 Leknam
Leknam's picture

Spot on Rocky !!

Hear what Ben says but LISTEN TO WHAT HE DOES NOT SAY ;-)

Fri, 10/19/2012 - 18:06 | 2905617 New_Meat
New_Meat's picture

dang, we need a new feature around here!  when someone double-posts and I give a greenie on each, my rights are that I should have the ability to double-greenie the post.  And, if this doesn't happen immediately, then I'm off to the ACLU for triple damages.

That means that I'd be able to do a 6xgreenie!!!!!!

And Sac, don't screw around with this required feature, or my lawyerz will get the leverage up to 8x or even 16x by the time they're done with my new feature. ;-)

- Ned

Fri, 10/19/2012 - 20:01 | 2905792 JuliaS
JuliaS's picture

I'd say the goals are even simpler than saving banks. It's all about crooks keeping eachother out of jail.

Look at Enron and other similar fiascos. When a company shuts down, liquidations begin. Lawyers start digging. People get questioned, then it is revealed that they everyone was in on the scam.

Some crooks kill themselves, some escape, some go to jail.

QE's are all about keeping the buffers (the banks) in place, in order to protect people, who Bennie and Timmy went to high school and became friends with at some point.

Fri, 10/19/2012 - 22:26 | 2905958 DeadFred
DeadFred's picture

Bennie has friends?

Sat, 10/20/2012 - 00:35 | 2906068 Clashfan
Clashfan's picture

Notice how the mass shootings never happen at elite prep schools or at Harvard or Yale?

Sat, 10/20/2012 - 10:09 | 2906221 RockyRacoon
RockyRacoon's picture


Sat, 10/20/2012 - 10:33 | 2906246 Vanderdekken
Vanderdekken's picture

Dude, I'm sorry that you don't understand simple f'king chart graphics. Remember all that bitchin that you did, saying that "lowing interest rates moar isn't going to do sh!t"? That's what we've been saying with the slopes of our f'king lines. Its okay to not understand something but its not okay to bash it because of your stupidity. 


that's just being a complete douchebag

Fri, 10/19/2012 - 15:53 | 2905292 chart_gazer
chart_gazer's picture

this is f___g hilarious!

Fri, 10/19/2012 - 16:30 | 2905388 kaiserhoff
kaiserhoff's picture

It's worse than that...  No economist really trusts his data, unless he can use calculus or some totally inappropriate statistics.  As if higher math compensates for ignorance.

What rainman and I have posted for a while, is that this experiment has been run, in Japan, for 23 years, with the same crappy results Ben and Timmy are getting.  What was that definition of insanity?

Fri, 10/19/2012 - 17:42 | 2905546 knukles
knukles's picture

To let Timmah get involved?

Fri, 10/19/2012 - 17:49 | 2905562 NewWorldOrange
NewWorldOrange's picture

Is it that they don't trust their data? Or that they just don't want to admit what it reveals? Apparently they know their data would actually prove "stimulus" doesn't work.

"The $831,000,000,000 economic “stimulus” that President Obama spearheaded and signed into law requires his administration to release quarterly reports on its effects.  But “the most transparent administration in the history of our country” is now four reports behind schedule and has so far not released any reports whatsoever in 2012.  Its most recent quarterly report is for the quarter than ended on June 30, 2011.""

Fri, 10/19/2012 - 18:04 | 2905615 Skateboarder
Skateboarder's picture

"We're so transparent that our reports are invisible."

Fri, 10/19/2012 - 19:17 | 2905725 James-Morrison
James-Morrison's picture

I wish those pop-over ads at the the bottom of the page were more transparent.

The Tylers must be economists: we seem to get more of them!

Fri, 10/19/2012 - 23:12 | 2906004 Oracle of Kypseli
Oracle of Kypseli's picture

So you want all these zerohedge articles and advise for free to go with your free foodstamps?

Sat, 10/20/2012 - 00:24 | 2906054 GMadScientist
GMadScientist's picture

No, to go with the free food.

Sat, 10/20/2012 - 18:44 | 2906992 WeekendAtBernankes
WeekendAtBernankes's picture

Only if I can read it on my Obama phone while riding the light rail for free.

It doesn't cost anything!

Fri, 10/19/2012 - 19:55 | 2905782 Totentänzerlied
Totentänzerlied's picture

Brains too.

Fri, 10/19/2012 - 17:52 | 2905577 Urban Redneck
Urban Redneck's picture

To the economists- if you can't reduce it to small words and simple arithmetic, then you don't actually understand it.

Fri, 10/19/2012 - 17:57 | 2905590 knukles
knukles's picture

I always said that if I can't tattoo it on the underside of my penis, I don't understand it.


Fri, 10/19/2012 - 18:25 | 2905648 nmewn
nmewn's picture


(Spitting brew everywhere)

Fri, 10/19/2012 - 21:48 | 2905929 This just in
This just in's picture

Well, to apply that principle, sir, it would stand (pun intended) to reason that size matters.

Fri, 10/19/2012 - 23:10 | 2906002 nmewn
nmewn's picture

It may not be very big around...but it sure is short!!!

Fri, 10/19/2012 - 23:33 | 2906025 Cheesy Bastard
Cheesy Bastard's picture

Sure.  I did the back stroke in Loch Ness once, and look what happened...

Fri, 10/19/2012 - 21:41 | 2905919 RockyRacoon
RockyRacoon's picture

Your tattoo says "WENDY" too?

"Welcome to Jamaica, mon. Have a nice day."

Fri, 10/19/2012 - 22:26 | 2905960 francis_sawyer
francis_sawyer's picture

One Love...

Sat, 10/20/2012 - 00:26 | 2906056 GMadScientist
GMadScientist's picture

Dexter St. Jaques

Fri, 10/19/2012 - 23:24 | 2906015 Hulk
Hulk's picture

Mine has instructions tattoed on it.

Insert Tab D into Slot P...

Sat, 10/20/2012 - 01:59 | 2906105 NidStyles
NidStyles's picture

Honestly, there in no understanding that shit, because it does not actually make sense. It's not based on the real world. It's based on the idea that making something creates the demand for that something.


I had a Ph.D. in my department that taught these charts and they make no sense to him either, but he still went by them. His comment on the matter was that Keynes and Friedman were simply more intelligent than he was, so they were absolutely genius if they understand this shit. This is actually how almost all Econ departments are ran. There is literally no critical thinking anymore, just spouting and citing "facts" they get from other economists that are citing Keynes or Friedman/Irving.

Sat, 10/20/2012 - 10:13 | 2906223 RockyRacoon
RockyRacoon's picture

Rest assured that the more terms of art within a certain field, the less accurate and efficacious the execution thereof.   Ever seen Black's Law?

Either baffle 'em with bullshit, be it numbers or Latin, or just make it illegal as the last resort.

Sat, 10/20/2012 - 18:46 | 2906996 WeekendAtBernankes
WeekendAtBernankes's picture

So you're saying the physicists who worked on the Manhatten Project and Apollo 13 didn't understand what they were doing?

Fri, 10/19/2012 - 15:54 | 2905295 duo
duo's picture

Uncertainty is pretty much all that is left.  Thanks, Ben.

Fri, 10/19/2012 - 15:56 | 2905298 Plausible Denia...
Plausible Deniability's picture

Don't look now boys but somebody hit the BTFD button! They were a little late to the party today

Fri, 10/19/2012 - 15:58 | 2905307 razorthin
razorthin's picture

And I never thought I could gain respect for weathermen.

Fri, 10/19/2012 - 16:56 | 2905454 Winston Churchill
Winston Churchill's picture

Think you meant ' the weathermen'.Boom,boom.

Sat, 10/20/2012 - 00:26 | 2906059 GMadScientist
GMadScientist's picture

Or any other three-fingered anarchists.

Fri, 10/19/2012 - 15:59 | 2905309 Cognitive Dissonance
Cognitive Dissonance's picture

Modern economics..........where the sublime meets the stupid.

Fri, 10/19/2012 - 16:50 | 2905439 Skateboarder
Skateboarder's picture

Skateboarder's corollary: "and where the subprime meets the stupid too."

Fri, 10/19/2012 - 20:30 | 2905836 Almost Solvent
Almost Solvent's picture


Where the sublime meets the stupid modern economics? 

Fri, 10/19/2012 - 16:00 | 2905315 I Am Not a Copp...
I Am Not a Copper Top's picture

Cue Maria to say stocks close off of their lows...

Fri, 10/19/2012 - 17:43 | 2905550 knukles
knukles's picture



(squeezing eyes shut, head pounding, holding breath....)

Fri, 10/19/2012 - 16:03 | 2905322 the not so migh...
the not so mighty maximiza's picture

we are soo fucked

Fri, 10/19/2012 - 21:53 | 2905934 This just in
This just in's picture

You are not looking at this the right way.  You are not being fucked.  Your inner core is being strengthened by the new paradigm.  That's the new paradigm strengthening you, nothing more. 

Yes we can!

Fri, 10/19/2012 - 16:04 | 2905324 ebworthen
ebworthen's picture

The real crooked line is the absence of rule-of-law and the moral hazard of bailing out falied banks and corporations with taxpayer money while allowing theft and debasement of citizen assets.

But again, that would involve employing the complex theory and calculation of COMMON SENSE; not in an economist's or politician's lexicon.

Fri, 10/19/2012 - 19:00 | 2905697 disabledvet
disabledvet's picture

did say something about "the problem with the crooked line...

Fri, 10/19/2012 - 16:05 | 2905325 nmewn
nmewn's picture


Ok, so if we think of the economy as a house, the first chart represents a house defying gravity which is impossible to begin with...the second shows them removing one of the rafters and impaling the house on the wrong side instead of bracing the left side trying to correct the initial design flaw...the third shows the rafters now splitting a perfectly good foundation and the side of house that was already finished, which will lead to its total collapse.

I didn't build that!!!

Fri, 10/19/2012 - 18:01 | 2905603 New_Meat
New_Meat's picture

"I didn't build that!!!"

It was the government-university-complex.  They thought and ... voila!

Thar she b.

- Ned

{It will take the new Americorps graduates to come by, stop any actual work, and fix it.}

Fri, 10/19/2012 - 18:22 | 2905645 nmewn
nmewn's picture

I did see where the FEMA Corps just had its first brown shirt class graduation.

Oh joy.

"Those who beat their swords into ploughshares will end up plowing for those who kept their swords."

Sat, 10/20/2012 - 06:35 | 2906152 StychoKiller
Fri, 10/19/2012 - 16:07 | 2905332 Umh
Umh's picture

I didn't believe it in college and I believe even less in it now. People and economist are people always try to use the tools they like whether or not it fits the problem.

Fri, 10/19/2012 - 16:23 | 2905374 Zadok
Zadok's picture

I thought it a joke when first presented to me in college. I predictably laughed and made a smart comment... The ensuing silence indicated to me the gravity of poking at the sacred cow.

Mooooooooo! It's what's for dinner!

Fri, 10/19/2012 - 18:53 | 2905687 NotApplicable
NotApplicable's picture

To think I took economics classes for all of my "Humanities" requirements as it represented the only area I saw any value.

I gotta drink more.

Fri, 10/19/2012 - 21:44 | 2905921 RockyRacoon
RockyRacoon's picture

Since I quit drinking, I'll skip that option and go to the gun show this weekend.

Fri, 10/19/2012 - 23:31 | 2906023 cosmictrainwreck
cosmictrainwreck's picture

I was wondering about that, RR, when the other day you misquoted a prior post by saying "restless, irritable & discontent..." :) 

Sat, 10/20/2012 - 10:14 | 2906227 RockyRacoon
RockyRacoon's picture

22 years as a Friend of Bills.

Sat, 10/20/2012 - 05:08 | 2906137 OldPhart
OldPhart's picture

My micro professor had an accent that was so bad all we could do was wait for him to write shit down while we read our texts.  He must not have been a monetarist becuase the only time I understood him was when he got on a tear about the phillip's curve and that led to an amazing diatribe about charts and math and it went on for the whole two hours.  It was like watching donald duck shit a pinecone. 

He lost it, and ended up sputtering some gibberish, sweaty and out of breath.  It was so awesome I had to compliment him and ask him to slowly go through it all over again.  We went to a bar and once he slowed down he started making sense.

Besides the rant, the other thing I remember was that he was really greatful that someone had interest enough to want to hear what he thought was critical.

The following year he went bat-shit crazy in class to the point that police were involved and we never saw him again.



Fri, 10/19/2012 - 18:24 | 2905650 DanDaley
DanDaley's picture

Somebody gave 'em a hammer and now everything's a nail.

Fri, 10/19/2012 - 18:46 | 2905679 NotApplicable
NotApplicable's picture

Ow! Stop that!

Fri, 10/19/2012 - 16:10 | 2905333 Dr. Engali
Dr. Engali's picture

Headline pushed to me by CNBC on my phone…… How closes down 200 but up for the week. At least he didn't say Dow closes off the lows.

Fri, 10/19/2012 - 17:45 | 2905556 knukles
knukles's picture

He meant Maria saying it as in "she"

Fri, 10/19/2012 - 16:11 | 2905340 silverserfer
silverserfer's picture


Fri, 10/19/2012 - 16:12 | 2905343 Turin Turambar
Turin Turambar's picture

"Or, to paraphrase, one of the lines is crooked..."

My paraphrase is a little different:

"All of the central banksters are crooked."


Fri, 10/19/2012 - 16:14 | 2905352 drbill
drbill's picture

When reality doesn't match theory there's obviously a problem with reality...

Fri, 10/19/2012 - 16:15 | 2905353 BlueCollaredOne
BlueCollaredOne's picture

It's Friday, and since I've already started drinking this post makes no cents to me.

A little financial humor for that ass.

Bid dump shiiish.

Fri, 10/19/2012 - 16:16 | 2905358 Unprepared
Unprepared's picture

So they mean there is a positive and strong correlation between Output/Employment and Financial Conditions?

Do they mean that Main Street and Wall Street are the same animal?


What about a flat Output/Employment line?

What about a downward-sloping line?

Fri, 10/19/2012 - 16:22 | 2905371 lasvegaspersona
lasvegaspersona's picture

For your brain's sake don't get all serious and were weren't you?....actually going to try to make sense of it...?

Fri, 10/19/2012 - 16:37 | 2905411 Unprepared
Unprepared's picture

Is this what they mean when they say to never explain a joke?

Fri, 10/19/2012 - 17:46 | 2905560 knukles
knukles's picture

Would you explain that to me?

Fri, 10/19/2012 - 18:02 | 2905607 nmewn
nmewn's picture

Does that require a BS in BS?

Fri, 10/19/2012 - 19:01 | 2905701 disabledvet
disabledvet's picture

Phd actually...

Fri, 10/19/2012 - 19:16 | 2905722 nmewn
nmewn's picture

lol...yeah, its more of an art than a science...thats where the second BS comes in ;-)

Fri, 10/19/2012 - 16:16 | 2905359 SRVDisciple
SRVDisciple's picture

Seriously? They think responses are linear?  And oh BTW, the only way Keynesian economics could work if it no one, NO ONE, knew it was a temporary stimulus that was maintaining the motion of money. As soon as anyone comprehends that the underlying economic velocity is a government-induced illusion they stop reacting as if it's real. Rather than assume a long term risk strategy to grow and establish businesses they respond with short-term tactical maneuvers for survival.

Fri, 10/19/2012 - 19:08 | 2905710 disabledvet
disabledvet's picture

this is actually an interesting comment. "they created what they believe to be a perpetual motion machine" if you don't mind me reading into your thinking here. something which of course is impossible. there is "friction" as it were with all this "debasement"...hence "while it worked quite well the first time" in each successive iteration it has performed..."less well." the purpose is the same folks: widen the spread between short and long duration rates such that a carry trade is effected. inititally long rates spiked spectacularly higher actually. epic FAIL this time around..."and it's Senator Schumer's fault." Cold Turkey bitchez! this party is OVER.

Fri, 10/19/2012 - 16:17 | 2905361 BadKiTTy
BadKiTTy's picture

Got lost a bit in all that to be honest....

Are all the graphs the "?" part of the formula 

Underpants + ? = Profit 

Just asking 


Fri, 10/19/2012 - 16:22 | 2905372 Atlantis Consigliore
Atlantis Consigliore's picture

Picture of the Bernank tying off another heroin QE fix.

I need another shot, just another one, Dr,  another shot


Fri, 10/19/2012 - 16:32 | 2905375 EscapingProgress
EscapingProgress's picture


Fri, 10/19/2012 - 16:32 | 2905396 wagthetails
wagthetails's picture

but if a line is crooked, then the beautiful right angles go away.  wouldn't look good in an econ text book graphic. please don't tell me the world is chaotic! say it ain't so!

Fri, 10/19/2012 - 16:35 | 2905407 perelmanfan
perelmanfan's picture

Spare me. QE has failed because it's a screwy, unpredictable signal - fucks up the normal process of price discovery. Since no business can make plans because Ben may or may not keep going Gono, business owners hoard cash and keep hoping the normal monetary ecosystem will get a chance to work again and start sending out sensible signals. Central bank meddling, by the way, is why the 1930s depression took 10 years to resolve instead 2 years like the crash of the early 20s.

Fri, 10/19/2012 - 16:36 | 2905408 Pairadimes
Pairadimes's picture

"If all economists were laid end to end, they would still not reach a conclusion." - George Bernard Shaw

Fri, 10/19/2012 - 16:42 | 2905422 PUD
PUD's picture

You cannot print prosperity in a money as debt usury system...I will accept my nobel prize now thank you

Fri, 10/19/2012 - 16:45 | 2905428 dtwn
dtwn's picture

Fuck you Keynes, your people set the economy back decades just like Freud set sexuality back decades.  Time for general acceptance of new economic theories with elected leaders who display Austrian economics priciples such as Nigel Farage and Peter Schiff.

Fri, 10/19/2012 - 17:48 | 2905564 knukles
knukles's picture

Freud set sexuality back?
Freud was the bone head that inspired Bernays
Who set mankind back for eternity!

Fri, 10/19/2012 - 18:06 | 2905618 nmewn
nmewn's picture

"Freud set sexuality back?
Freud was the bone head that inspired Bernays"

Cocaine bitchez!!!

I'm sorry, I really can't help myself sometimes, Freud was a coke head ;-)

Fri, 10/19/2012 - 18:31 | 2905660 yogibear
yogibear's picture

Keynesians, your economic policies will end up the same way Keynes ended up. Just ashes.

Keynes wanted to be buried in the chapel of King's College, Cambridge. But his brother (Sir Geoffrey Keynes, an eminent surgeon) was unaware of Keynes' wishes, and the great economist was instead cremated. His ashes were scattered on the Downs at Tilton, in Sussex. (


Fri, 10/19/2012 - 19:25 | 2905740 nmewn
nmewn's picture

And thus, the evil was carried by the winds to the four corners of the globe and the irony of unintended Keynesian consequences are still with us...metaphysically speaking of course ;-)

Fri, 10/19/2012 - 16:55 | 2905452 hidingfromhelis
hidingfromhelis's picture

Zoinks, they've raised the QE level to F-Con 1...Fucked, Condition 1!

Fri, 10/19/2012 - 17:01 | 2905466 Winston Churchill
Winston Churchill's picture

Deffcon  1; definitely fucked condition 1.

Fri, 10/19/2012 - 17:02 | 2905469 AgShaman
AgShaman's picture

Economists remain puzzled.... mainly because they are new age alchemists, fumbling recklessly to ascertain the secrets surrounding their sham of a religion.

They fail because they are minions working for despotic forces too inbred and antiquated to envision anything beyond their original hamster wheel inventions

Fri, 10/19/2012 - 17:26 | 2905528 q99x2
q99x2's picture

Oh boy. I missed my calling.

Fri, 10/19/2012 - 17:41 | 2905545 IridiumRebel
IridiumRebel's picture

"everyone dies from a hyperinflationary genocide or war, or both."


That's my Zerohedge!

Fri, 10/19/2012 - 17:46 | 2905558 negative rates
negative rates's picture

Ah, the old square peg in a round hole trick. It actually evolved from the circle your wagons in defence of an Indian attack. But the proper method was to square your wagons inorder to force the Indians further out, so their arrows would have less chance of injuring a settler. That was how you could jam a square object into a round fitting, no one figured it out, so it became a folklore joke as to simply answering a difficult question.

Fri, 10/19/2012 - 17:49 | 2905567 knukles
knukles's picture


Fri, 10/19/2012 - 19:03 | 2905704 negative rates
negative rates's picture

Well its been awhile, but I believe that's the way it went down.

Fri, 10/19/2012 - 17:49 | 2905565 adr
adr's picture

This is what happens when you create a new math to teach kids in the 50s that has no real world applications.

Those kids grow up and work at jobs with no real purpose.

Fri, 10/19/2012 - 17:49 | 2905566 Fix It Again Timmy
Fix It Again Timmy's picture

The bankers are getting a relatively good interest income from money that was given to them; they are holding on to their money, waiting to buy real assets for pennies on the dollar as they have repeatedly in the past.  But, they must be careful for what they wish for - this ain't your daddy's or grand-daddy's typical depression - things won't unfold so nicely this time, this time will truely be different...

Fri, 10/19/2012 - 17:50 | 2905569 lizzy36
lizzy36's picture

The ONLY function of economic forecasting is to make Astrology look respectable.

John Kenneth Galbraith

Fri, 10/19/2012 - 19:03 | 2905703 ebworthen
ebworthen's picture

Scorpio, ruling planets Mars and Pluto, moon waning crescent on day of birth - a Monday.

My astrological characteristics are truer and more consistent than my financial planner or portfolio trapped in a 401K.

Fri, 10/19/2012 - 17:50 | 2905570 ZeroAvatar
ZeroAvatar's picture

I get it!!!!  


The range of the change depends on the slope of the hope! 


Am I missing anything?

Fri, 10/19/2012 - 19:19 | 2905705 ebworthen
ebworthen's picture

"The angle of the dangle is equal to the heat of the meat if the mass of the ass is constant."

Hope springs eternal; as long as there is a nice ass and Viagra.

Fri, 10/19/2012 - 17:51 | 2905574 New_Meat
New_Meat's picture

This Is Why, To An Economist, QE Refuses To Work

We do need our very own Cognitive Dissonance to chime in on this statement.

- Ned

Fri, 10/19/2012 - 17:53 | 2905581 knukles
knukles's picture

Alternatively:  Economists don't work and this is why we get shit like QE.

Fri, 10/19/2012 - 17:54 | 2905587 kito
kito's picture

bernankes qe goals:


recapitalize banks ...............check..............levitate the dow................check..................lower interest rates.................check.........................cushion shadow banking............................check......keeping inflation from soaring to the point that he loses his exactly what has bernanke not achieved that he set out to achieve??? shirley, this article cant argue the ridiculous notion that bernanke gives a shit about employment, gives a shit about savers, gives a shit about wages, gives a shit about america....................................


Fri, 10/19/2012 - 19:24 | 2905738 disabledvet
disabledvet's picture

political pressure was applied. FORCEFULLY. i don't blame the Bernank for buckling. Do any of you think you could handle it? I know i haven't been able to. Crony capitalism at its WORST. I still think trying to throw the assasination of the Ambassador under the bus was a BIG mistake as this strikes at the heart of the entire war effort from the US end and gives lie to those who think the purpose of retaliating for 9/11 was to make the American people safe. in fact it appears the war effort has been determined to be the exact opposite. to put the American people in HARMS WAY. of course the problem is "there are a lot of Americans over here New York...and not many over there" and so if what i am saying here is in fact true (and those data points are closing in fast are they not?) you don't want to end up over there while "zee Americans" are STILL over here AND over there. how do they dance on box...

Fri, 10/19/2012 - 17:55 | 2905589 Racer
Racer's picture

If the money that you get in is less than the money you need for subsistence = you DIE


there... can I have my grant money now?

Sat, 10/20/2012 - 00:55 | 2906075 Prometheus418
Prometheus418's picture


Because the correct answer is this:

While MoneyIN + (savings/weekly_defecit) > 0;

Then Kick can();


Riots() + Theft();


(Sorry to the real coders, I'm just pissing around here- though the algo should hold true, shoddy syntax that it is.)

Seriously, fuckwads- if there are any who are "in the know" reading this, your time is up.  I give it six weeks before I am forced to start robbing liquor stores to feed my kids.  (I would rob a bank, but they don't have any f'ing money.)

Sat, 10/20/2012 - 01:17 | 2906084 GoinFawr
GoinFawr's picture

Seriously, fuckwads- if there are any who are "in the know" reading this, your time is up. I give it six weeks before I am forced to start robbing liquor stores to feed my kids. (I would rob a bank, but they don't have any f'ing money.)

erm, I thought that you told us you were out there everyday kicking it for Reightheeawn...

So 'knew', whaddya know?

Sat, 10/20/2012 - 11:00 | 2906280 Diogenes
Diogenes's picture

You mean if your outgo exceeds your income, your upkeep will be your downfall.

Fri, 10/19/2012 - 17:59 | 2905595 AldoHux_IV
AldoHux_IV's picture

What I love about economics are the assumptions and presumptive correlations you can infer, outright fabricate, and thus make into law.

However, lest we forget, when one assumes, one makes an ass of you and me. Or a central bank makes a hitler out of you or me

Or in the parlance of our time: shut up and give us more inflation!

Hocus Pocus look over here while I pick your pocket (in fantaseconds)

It only failed because prices didn't rise fast enough so let's bail everyone out and try it again-- this time with higher prices... in slope we ask. Amen

Fri, 10/19/2012 - 18:03 | 2905610 Pancho Villa
Pancho Villa's picture

Economists use lots of charts, technical jargon, and complicated Rube Goldberg-like descriptions of the economy to conceal the fundamental fact that they really have no clue about how the economy really works.

Most economists are really in the same business as astrologers, palm readers, fortune tellers, psychics, tarot card readers, mediums, and court jesters: entertainment.

Fri, 10/19/2012 - 18:17 | 2905635 ZeroAvatar
ZeroAvatar's picture

You forgot to mention Technical Analysts.

Fri, 10/19/2012 - 18:17 | 2905638 Skateboarder
Skateboarder's picture

"We must pray to the great economy and offer it three associate junior analysts as a sacrifice, FOR ITS WRATH BE TOO GREAT FOR US TO INCUR OTHERWISE!"

- Wisearsecles, Economist, 300BC.

Fri, 10/19/2012 - 18:09 | 2905616 Shigure
Shigure's picture

So...economists think that creating a more risk-friendly environment for  TBTFs is a worthwhile aim?

Fri, 10/19/2012 - 18:13 | 2905628 nmewn
nmewn's picture

They think levering optimism at all costs, is more important than that cost itself.

Its very complicated ;-)

Fri, 10/19/2012 - 19:47 | 2905767 Yen Cross
Yen Cross's picture

 There is always some "passive aggressive" wanabe, in jeapordy of losing their power, to stir the pot! I got it nwewn. :-)

Sat, 10/20/2012 - 17:07 | 2906814 Shigure
Shigure's picture

+1's keep on dancing then?

"Gold and Silver shine"!

Fri, 10/19/2012 - 18:16 | 2905632 cranky-old-geezer
cranky-old-geezer's picture



Anyone still believing QE is supposed to help the economy recover is ...well... pretty stupid.

It's meant to help Wall Street recover.  Screw the economy, nobody cares.

Even that explantion doesn't quite get it.  It's meant to loot the economy, steal everybody's wealth and give it Wall Street, what's really happening.

It's amazing how far "economists" will go to hide this truth and stay "politically correct".  They'll ignore every economic principle to keep the fraud going.


Fri, 10/19/2012 - 19:30 | 2905748 disabledvet
disabledvet's picture

actually it's crushed Wall Street Cranky. there hasn't been any recovery on the Street because of this policy. sure...EQUITIES have recovered...but this is nothing like the boom years of the 80's, 90's or 2000's. there are no mega deals...this is all small media has imploded, real estate is NOT recovering and the media besides being an embarrassment for all of planet earth to behold is up to pure evil "behind the scenes." if this "virus" they launched on the entire face of humanity ends up setting off a large debt bomb here in the USA then the "war effort" and "Homeland Security" will take on an entirely new meaning than it does right now. I'm surprised these clowns have sustained it as long as they have actually. I think a lot of people are in for a shock come election day...

Fri, 10/19/2012 - 20:20 | 2905823 cranky-old-geezer
cranky-old-geezer's picture



Wall Street would have died in '08 after the MBS market collapsed and trillions of CDS triggered.  

It would have been a bloodbath but it would have cleared a lot of worthless paper out of the system and worthless banks out of the system.  The economy really would be recovering now, home prices would have bottomed out, people would be buying again (at 25% of '07 prices),  USD wouldn't have lost half its value from all the printing, etc.

But no, Bernanke wouldn't let his Wall Street masters go down, so he turned on the presses and transferred trillions of dollars of American wealth to them.

You're right, all it did was postpone the day of reckoning.

Fri, 10/19/2012 - 20:52 | 2905860 Hulk
Hulk's picture

Denied us some good music too

"Thats the night that the lights went out on wall street

Thats the night that they hung all those men

dont trust yo money to no non segregated entity

cause the bankers in town have the politicians in their hand"


Wonder if Vicki Lawrence is still alive?

Somebody get Reba ready, just in case...


Fri, 10/19/2012 - 18:28 | 2905646 breezer1
breezer1's picture

In other words it's our fault for not giving Qe our full support and even criticizing it.
Shame on us all.

Fri, 10/19/2012 - 18:30 | 2905658 Lloyd_Xmas
Lloyd_Xmas's picture

It is soooo simple. Those silly economist forgot to exclude food and energy costs.

Fri, 10/19/2012 - 18:52 | 2905688 Bag Of Meat
Bag Of Meat's picture

Thanks for answering my email Tyler!!! You guys rock

Fri, 10/19/2012 - 19:18 | 2905730 besnook
besnook's picture

as a reformed economist(post 30 years) i resemble that remark. i even had my wedding band designed as a square that i fit my round peg in to prove it could be done.


these charts make perfect sense. what the model is missing are the countervailing factors(forced deleveraging) that prevent the desired outcome. the fed is finally on the right track. they should have bought all the bad mortgage paper from around the world at a dollar to dollar from the beginning(which they originally said they were going to do with tarp) then the banks would not have the continuing reserve issues they still have because they are technically insolvent. all the associated derivatives would go to zero without any counterparty obligations and the world would be a happy place for all. trust me. i am an economist.

ps. my epiphany was a class in the new field of environmnetal economics where we discussed such stupid stuff like building models to determine the value of a view(roadside view, private view, unknown or inaccessible view, is a view diminished and by how much if the view is shared). the model that got me was the model of a value of a tree to the paper or lumber company and what the prof called the real value of the tree when all the inputs for the growth of the tree(water, minerals, etc) were included. the industrial value of the tree was a coupla hundred dollars. the environmental value of the tree was 100+ thousand dollars. i said to myself, "oh, so it is all bullshit. it is just having fun with numbers." at the time it meant freedom for me to get as creative as i wanted. obviously a lot of my former peers took themselves seriously.

Fri, 10/19/2012 - 20:28 | 2905835 New_Meat
New_Meat's picture

"as a reformed economist..."

shhhh, this is just u'n'me talkin' here.  How does one go through the entire course of treatment to become a "reformed economist"?

Here's our business model, you be the technical boss, I'll do the finance thingie--we'll clean up!! I tell ya'!!!

'cuz there is a huge business opportunity here: the world is about to be filled with surplus Keynsian-trained economists.  These will be of all levels, but will all be in the need to be retrained into either the true Marxian school, the Austrian School, the Friedman School. Other schools will emerge and can be added later.

The idea is that these poor bastards have been mislead throughout their entire scholastic and professional lives, they are devastated, and need help.  Otherwise they will go onto permanent  SSDI and never see the light of day again (ok, maybe 1% will).

So we do the "Total Economist Transformation" thingie on them.  We have Hilda be the tough broad and get their attention, then we train them to be economists in the school of their choice.  As each graduates, a certain percentage will achieve their goals.  But another certain percentage will fall off the so-called wagon (in which they are being carried, don't cha' know) and will require retraining into another economic School.

BRILLIANT, if I do say so.

Rinse and Repeat!!!

Wadda' u Say?

- Ned

Fri, 10/19/2012 - 21:27 | 2905907 besnook
besnook's picture

first, they will have to be shocked into terror of their present mindset. i think a cylindrical room with high ceilings outfitted with an imax film projector with no chairs so they have to stand or sit on the floor should be their home for the first week of treatment. a popout commode that has a 30 second timer should be installed. also a food and drink dispenser that operates at the signal of a biometric sensor that only responds to extreme happiness could be used to reinforce their new way of thinking. the beginning of the treatment would start with a flood of cannibis vapor to lull them into comfort followed by vaporized lsd that is followed by an imax projection flashing alternate images of keynes, bernanke and greenspan with crashing charts, riots and war, starving people and mangled bodies on the entire wall including the ceiling. at the hieght of their terrified state images of serene vistas and busy markets and happy working people with subliminal suggestion of austrian and free market theory and policies interspersed are introduced until they are conditioned to respond with a sigh of relief and a happy face that they will connect with their source of sustenance. once they achieve this level a hypnotist will be introduced to instilll a subconscious level of abhorrence to anything keynesian. that should do it. another week to test the treatment's effectiveness with another followup treatment may be neccessary. an annual refresher treatment could be reccommended or included with the initial package and group rates might be offered for those who don't want to go it alone. economists make pretty good money today so a very high price point should be doable.

i am ready when you are, partner.

Fri, 10/19/2012 - 21:39 | 2905917 New_Meat
New_Meat's picture

My goodness, let's play!  We can catch a few of the less robust econz and do trials, then have validated data (no one will see that coming) then we're off to the races and the $$$$$ boyz and girlz.

They will be so desperate that they will shower us with cash, and we'll clean up.

Please don't tell anyone else about this master plan, 'cuz I have all of the finance side covered.

- Ned

Fri, 10/19/2012 - 19:21 | 2905734 Yen Cross
Yen Cross's picture

 From a layman, it looks like "ZERO OUTFLOW", in a cube shaped " Black Hole"!

Fri, 10/19/2012 - 19:38 | 2905758 JR
JR's picture

TARP was used by the FED to further implement Congress in its crimes.

With the death of representative government and its checks and balances, the FED cartel of private international bankers now controls the U.S. government’s borrowing and interest rates, creating booms and busts at will to the point that even the purchase of a man’s house or his savings nest egg have become unsafe investment risks. The Fed and its policies have impoverished the American people. Not only that, our country is now bankrupt.

"If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied." – Thomas Jefferson

The world’s economy is increasingly unstable and at risk, in a process of ruination, because a purchased U.S. Congress working solely for the international bankers who control the world’s reserve currency now operates as a buffer between the bankers and the will of the people.

As Horace Greely put it, "While boasting of our noble deeds, we are careful to conceal the ugly fact that by an iniquitous currency system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery."  

Fri, 10/19/2012 - 19:51 | 2905775 Yen Cross
Yen Cross's picture

Missed you J.R.? Horace was/is correct. The masses lose reference over time, and History repeats<>

  It's a shame we aren't all Vampires. /sarc

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