The Case Against QE: "Zombie Banks, Companies, Households, And Governments"

Tyler Durden's picture

In a quiet corner of Davos this week, Davide Serra (hedge fund manager) and Nouriel Roubini (doom-monger) laid out to the great and good attending just exactly what their puppet central-banking transmission channels were doing to our world. As The Telegraph reports, "Money printing is theft from our children and may merely be storing up problems for an even bigger crisis." QE has led to gross mis-allocation of capital, the two gentlemen go on to note, adding that they comprehend the reasoning why Bernanke's Put has replaced Greenspan's but add that in doing this money-printing-by-another-name, they have "made it difficult for bond vigilantes to do their job - force fiscal reform." QE just buys time - but the time must be used wisely. Roubini warned that central bankers need to think about turning off the cheap money tap or risk creating another, possibly even worse, bubble.


Via The Telegraph,

Speaking at the World Economic Forum in Davos, Davide Serra, founder of leading hedge fund Algebris, and Nouriel Roubini, the head of Roubini Economics known as Dr Doom for predicting the financial crisis, set out the case against those who think quantitative easing (QE) and low rates are benign policy tools.


“When governments borrow, they are taking money from our children. QE is the same – we are lowering returns for future generations. QE creates an inter-generational dilemma,” Mr Serra said.


Mr Roubini warned that central bankers need to think about turning off the cheap money tap or risk creating another, possibly even worse, bubble.


He argued that policymakers have encouraged markets and individuals to take on crippling levels of debt by leaving asset bubbles unchecked in a boom and coming to borrowers’ rescue in a crisis.


"Ten years ago we had the Greenspan put, now we have the Bernanke put. What are the long term economic consequences?" he asked.


He said loose monetary policy is creating a system biased to creating bubbles, "that's why we've been moving to more unconventional territories" in policy responses - from low rates to QE to credit easing.


"Central bankers have affected the behaviour of the private sector. They have to think about that," he said. "As you do a slow exit out of QE you may create another bubble and make another crisis.


“At some point, the consequence of postponing deleveraging is that you end up with zombie banks, zombie companies, zombie households, and zombie governments.”


The warnings came after the Bank of Japan caved into political pressure and pledged to buy government debt in potentially unlimited quantities in an attempt to stimulate growth.


The move prompted accusations that Japan had launched a fresh attempt to debase its currency and improve the competitiveness of its exports.


As an investor, Mr Serra said QE had led to a “misallocation of capital”, echoing concerns voiced by the Bank of England and others that QE might be distorting markets and creating new risks.


Both Mr Roubini and Mr Serra agreed that QE had been essential at the start of the crisis but, by protecting governments from attacks in the bond markets, it was now making it “difficult for the bond vigilantes to do their job – force fiscal reform”.


For Mr Serra, the time to stop increasing QE had come. "QE just buys time. When you buy time, you must use it. I'd follow the ECB [European Central Bank] model and not the Bank of Japan and US Federal Reserve model,” he said.


Defending QE in the panel debate, Adam Posen, director of the Peterson Institute for International Economics and a former UK rate-setter, argued that QE was merely an extension of normal monetary policy and has been used throughout history. The decision on whether to use the tool depended on the balance of growth and inflation, he added.


“Will the economy in two to three years be below where it should be, and is there an inflation risk? That’s the question. And it’s the same if you’re using interest rates or QE.”


He added that the current problems regarding the effectiveness of QE were less to do with monetary policy and more to do with investor behaviour.


“The same investors who blamed the crisis on central banks keeping rates low are now saying low rates are reducing risk appetite,” he pointed out. “We should shift the focus to investor behaviour.”

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MFLTucson's picture

Money printing is theft from our children and may merely be storing up problems for an even bigger crisis.


This does not matter, all that matters is that the Jewish banking cartel rape the sytem and use the taxpayers for the fools they continue to be.  

GetZeeGold's picture



Money printing is theft from our children


Better disarm them before they find out.

spanish inquisition's picture

and may merely be storing up problems for an even bigger crisis

Seems to be the point of it all, just not enough stored up for the problems being planned....

trav777's picture

roubini just wants his deflation crash so he can score more hoez

All Risk No Reward's picture

QE = Quantitatively Easing the debt loads and cash shortages of the Owners and Controllers of the international banking cartel (and the multi-national corporate fronts they own/finance/control).

The argument against QE is that we aren't Muppets and we want our faces back.

The mainstream alternative authors are beginning to come off as Vichy by pretending the false narrative is real and trying to "figure it out."


oddjob's picture

They received manadatory Vaccines in return.

I am more equal than others's picture

Deep thoughts...

'it is all the Jews and blacks fault, if we could only get rid of them...' /sarcasm

Yeah, them some other schmucks (insert group name here) would replace them ....


trav777's picture

what group has an average IQ of 70 that could replace them?

There isn't one, you freakin moron, people and groups are not interchangeable. 

All Risk No Reward's picture

Maybe insecure higher IQ (big assumption, but OK) people that lack critical thinking abilities, perhaps?

Bianca, Shut Up You Animal,%20You%20Animal,%20Shu...!%20(John%20Taylor%20Gatto).mp3

The Ultimate History Lesson (The Youtube video is free)

The Underground History of American Education

The Neglected Genius of John Taylor Gatto

Ignorance is a choice.  I guess if you make it, though, you might as well wear it like a badge of honor. 

This system relies on one people starting up anymosity amongst the various groups of victims.

Bravo - an unwitting tool of the New World Order is proud of his divide promotion so that others can more easily conquer!

Now that's HIGH IQ!


francis_sawyer's picture

It's "theft from our children"... Ummm ~ yeah... I guess CERTAIN people's children will not be so poorly affected, how lucky for them... [Of course ~ it's all RANDOM, francis_sawyer would never dream of implying 'causality']...

GetZeeGold's picture



Some children are more equal than other children.

francis_sawyer's picture

It's [actually] a 'SMALL' club & you ain't in it...

Shell Game's picture

The moral arguments against QE and endless borrowing/spending have fallen on deaf ears.  To bemoan theft to a culture of theives is like ranting in mime.  Engali is right, this is buying Leviathan time to divide this society as it enters the final endgame. 

Collapse, Cull, 'Peace' through military law and a new world SDR currency. 

I think the surviving peeps will know this to be the time to go insurgent and end the control freak's big wet dream.  We'll see...

Lewshine's picture

Exactly MFL...

Anyone here think these Vultures in Davos give a care to do what is right?? What a joke, the central planners get a hard-on knowing they are stealing money from the poor and middleclass through taxation, job loss, food and energy inflation and interest return on savings. They laugh over their brandy and cigars knowing how their gains remain private and their losses are backed by taxpayers, how the assistant DOJ said in plain words that the banks are too big to prosecute. Anyone who thinks these guys aren't entertained by these facts...Suffers from a brain disorder known to all as being...A Democrat.


All Risk No Reward's picture

Rothschild != Jewish

Jeffrey Dahmer != You

Elevate your game above pawn.

10PastMidnight's picture

“When governments borrow, they are taking money from our children. QE is the same – we are lowering returns for future generations. QE creates an inter-generational dilemma,” Mr Serra said.


no, it creates a crisis not a fucking dilema but of course he may mean a dilema in how our chidren are FED raped in the future.

dick cheneys ghost's picture

all of your bernanke are belong to our fiat

SamAdams's picture

"Mr Roubini warned that central bankers need to think about turning off the cheap money tap or risk creating another, possibly even worse, bubble."

Whew, just in the knick of time.  That was a close one!

Jason T's picture

Tis our destiny and there is no power great enough to stop it.

Racer's picture

It is not if but only when will it cause trouble

tradewithdave's picture

Bart Chilton to take over MFGlobal investigation?

Cursive's picture

"Give me control of a nation's money and I care not who makes the laws." - Mayer Amschel Rothschild

fonzannoon's picture

"At which point they all looked at each other and burst out laughing....One of them (inaudable) mumbled something to the effect of "I can't...I'm sorry I could not hold it". "'s too late. We are so fked"...."I mean what are we going to do...stop QE? (more laughter all around)....."So we stop buying bonds....better yet the Fed starts selling them....on top of the treasury issuing a trillion dollars this year of new bonds....(the producers start talking loudly about having to go to a commercial) "interest rates start spiking and then people start selling their bonds... Where do you think this ends?" (The guest is ripped away by security as the camera bounces around and they hastily cut to an Etrade commercial).

kridkrid's picture

Mr. Roubini puts forward an argument that hides the real problem.  And of course this is the case... he's presenting to the world who created and who benefit from said problem.  The problem isn't "cheap money"... cheap money is the symptom of the problem and there is no way to "turn it off".  The problem is credit money.  Cheap money is what you get when you come to the end of a credit money cycle.  Mr. Roubini may or may not know this... but he certainly doesn't care.  He's a rock star, so to speak.  Fuck him.

Village Smithy's picture

I don't think we want to fuck Mr. Roubini. He has been a constant and vocal opponent of money printing since the beginning. I agree that he is "presenting to the world who created and who benefit" and I agree that they could care less. Their children will not want for anything.These people are amassing so much wealth that even as squandered as it is sure to become it will last for generations. Roubini in my opinion, is using this platform to try and inform the masses who are so busy digging in their debt fueled fantasy world they can't look up and see the truthful reality.

kridkrid's picture

Perhaps.  Though I tend to view him more as controlled opposition.  To blame governments for printing distracts from the real conversation that should take place, but never does.  What is money?  What is money in our system?  How is it created, who creates it, what is attached to it, etc.  Once you understand this, you can understand why there is no solution, only collapse.  It's just math.

Spastica Rex's picture

Celebrity and "leadership" are currently big problems, not solutions.


trav777's picture

Money SHOULD BE cheap!!!

It should be FREE.

What is cheap?  Money is...good; it can be manufactured AT WILL by banks.

Oil isn't isn't cheap.  These things are not in infinite supply by computer click.

Money previous was nearly free; it was a placeholder for something real.  If you had the real thing, a bank could discount a Real Bill for you cheaply and presto, there is "money" or currency, something in paper.  Even the old BOE with their sterling bill prior to when they used it as an imperial weapon, it was ok, you have gold, you have money.  Seigniorage was a low transaction cost.

I'm sick and tired of people who think by virtue of having some wealth that they are ENTITLED to have that wealth magically grow by 6% YoY.

Dr. Engali's picture

QE buys time alright...buys them time to further divide us and lock down the police state.

Winston of Oceania's picture

Can't steal the sheeples retirement funds and pensions without proper backup...

philosophers bone's picture

I know what you're saying, but in reality these retirement / pension /other benefits were never really paid for by the recipient / annuitant.  The actuarial calculations don't work, but of course that doesn't stop a union from negotiating for the benefits, or a company from agreeing to the benefits.  Every day that goes by without proper entitlement reform is just digging the hole a little deeper and the complacency on all sides is astounding.  These defined benefit plans are insane and to my thinking if any company adopts a defined benefit plan today, or hires any person with defined pension benefits, the entire board should be fired and sued by the shareholders.  The math simply does not work and these companies are taking on liabilities that they cannot possibly pay for.

centerline's picture

Entitlement reform at this point means no more entitlements.  Zero.  End of system.  Start over.

So, we will continue along playing the game hoping that the system dies on the other guy's watch.  Everyone knowing that the bear is coming to eat them - and each thinking they can outrun the next guy such that the calamity that is to happen is not on their shoulders.  Just brilliant in the fact that when the defication hits the rotary oscillator the finger pointing will be every direction possible instead of focused on Washington and Wall Street.

trav777's picture

dependency on MORE people later to pay for your benefits is now a fool's errand.

SeattleBruce's picture

"QE just buys time. When you buy time, you must use it."

Herein lies the problem in kicking the massively heavy 55 gallon full oil drum-like can ("Did it move this time??").  Almost no politician and certainly no banksta is going to use time "bought" for the good of society, the good of the general economy.  And so true solutions like auditing/removing the FED, shifting the money system to non-debt based money (money created by Congress as per the US Constitution) will of course not happen, and the crisis will deepen and the bubble(s) fill, until they burst.  Prepare.

Silvertrader's picture

QE buys time, but the crash will be as hard or even harder. And yes, it is theft from our children!! One can only take care of its own children and try to make their financial future as bright as possible. I try to do so by making money trading CFD.

StychoKiller's picture

Is the World gonna be a better place than what you found?  Then try to alleviate some suffering:


Kantbelieveit's picture

Curiously absent from all this fulminating about the fed is how a few dozen Tea Party cavemen in the US Congress are preventing FISCAL policy stimulus from doing effectively what Bernanke is forced to do, ineffectively, by buying up securities.

The infrastructure of the USA is falling apart, while millions of workers are unemployed and the government can borrow at 1%. The response from the Tea Party? CUT SPENDING, so that we can have another recession.

Just how does reducing the income of most consumers lead to prosperity? Ask Cameron in the UK! Bernanke's "money printing" is the only thing keeping us out of recession. It is not the best policy, but the Tea Party idiots are preventing the necessary FISCAL stimulus.

lostintheflood's picture

They own your mind.


no...what he says is's all monopoly money anyway - virtually free money - instead of using it to bail out the tbtf or hoarding it in the vault, why not spend it on our infrastructure while it still has some value?


there are no long-term solutions.

SeattleBruce's picture

"Bernanke's "money printing" is the only thing keeping us out of recession."

Does this sound like a long term solution to the economic woes?  Then what?  Where does this end Kant?  I'll tell you what, it doesn't end well - and that's all on Bernank/Greenspan and their buddies in the banking cartel, as well as the captured politicos of both parties.  Realize the Tea Party didn't exist in 2007/2008 and before...!  So unless that's your timeline starts in Feb. 2009 on how these problems have developed (try 1971, and 1913 for a couple more resonable dates), then you're just way off.

StychoKiller's picture

How much corporate welfare does GE, ADM, Exxon, GM, etc, need?  Does subsidizing mohair production benefit you?  WHERE in the Constitution does it mandate EBT cards for poor people?

Check yer premises, you're looking foolish right about now...

sodbuster's picture

“We should shift the focus to investor behaviour.”

Looks too late- central bankers already shit the bed. Real entrepreneurs want nothing to do with a market that is "managed".

Peter Pan's picture

QE has not borrowed time, it has stolen it, squandered it and will be unable to pay it back. QE is temporarily masking the fact that the sum of available resources is less than the sum of future expectations. For the time being the world is allowing the USA to steal from its resources in exchange for worthless dollars but at some point this will cease and QE will no longer work.

In the short run QE is nothing more than wealth redistribution by sleight of hand.

trav777's picture

we have ag products, NG, a few minerals here and there, commercial aircraft, computer high-tech stuff, trucks, bulldozers, heavy equipment, far and AWAY the most "knowhow" in every engineering discipline from construction to superconductors, and we make a lot of good weapons.

gjp's picture

'risk' creating another major bubble?  Come on, if they're talking about bubbles as hypotheticals when we are right in the very late stages of the greates bubble in history then don't listen.  Just part of the good cop / bad cop media whore routine on the Davos champagne circuit.

The bubble mentality in paper markets is insane right now.

kridkrid's picture

perfect post.  Every "bubble" is merely a symptom of the greatest bubble in history. 

cranky-old-geezer's picture



When governments borrow, they are taking money from our children.

No, they're taking money from us, right now, via currency debasement, which is happening now.  

and may merely be storing up problems for an even bigger crisis

No, the crisis is happening right now, currency debasement leading to currency collapse at some point.  

Ok, currency collapse may be the actual crisis per-se, but loss of purchasing power on the way to currency collapse is causing a crisis for many people right now.

The elite just flat out ignore currency debasement.   They act like it's not happening.  They refuse to talk about it.

And no, nothing is going to change untill BRICS come out with their PM-backed currency and knock USD out of reserve status.  Then everything will change, and it'll be disaster for America.

StychoKiller's picture

Hmm, guess you don't like Fancy Feast™...have you tried Kibbles'nBits™?

Kantbelieveit's picture

I am sick to death of hearing about the magical "real entrepreneurs" who would save us if we rolled back the New Deal and had people starving in the streets again. Are the real entrepreneurs going to repave the crumbling streets in my town? Are they going to address climate change? Are they going to build spacecraft without government subsidies?

Real entrepreneurs don't give a shit about the collective welfare of society. They typically want to become rich and famous, and will take the shortest path to those goals. Real entrepreneurs sometimes engage in philanthropy, but more often buy personal jets and build palaces. How is that trickle down working for us these days?

kridkrid's picture

Your mind is soft and easily controlled.  I actually don't think you're real.