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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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Fri, 01/25/2013 - 10:24 | Link to Comment MFLTucson
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.  

Fri, 01/25/2013 - 10:24 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Money printing is theft from our children

 

Better disarm them before they find out.

Fri, 01/25/2013 - 10:31 | Link to Comment spanish inquisition
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....

Fri, 01/25/2013 - 12:06 | Link to Comment trav777
trav777's picture

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

Fri, 01/25/2013 - 22:36 | Link to Comment All Risk No Reward
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."

Puh-lease...

Fri, 01/25/2013 - 10:34 | Link to Comment oddjob
oddjob's picture

They received manadatory Vaccines in return.

Fri, 01/25/2013 - 11:31 | Link to Comment I am more equal...
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 ....

 

Fri, 01/25/2013 - 12:07 | Link to Comment trav777
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. 

Fri, 01/25/2013 - 22:46 | Link to Comment All Risk No Reward
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
http://www.unwelcomeguests.net/archive/631/Bianca,%20You%20Animal,%20Shu...!%20(John%20Taylor%20Gatto).mp3

The Ultimate History Lesson (The Youtube video is free)
https://www.tragedyandhope.com/th-films/the-ultimate-history-lesson/
https://www.tragedyandhope.com/th-films/the-ultimate-history-lesson/comm...

The Underground History of American Education
http://www.unwelcomeguests.net/The_Underground_History_of_American_Educa...

The Neglected Genius of John Taylor Gatto
http://www.unwelcomeguests.net/631_-_The_Neglected_Genius_of_John_Taylor...

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!

Right?

Fri, 01/25/2013 - 10:39 | Link to Comment francis_sawyer
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']...

Fri, 01/25/2013 - 10:42 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Some children are more equal than other children.

Fri, 01/25/2013 - 10:52 | Link to Comment francis_sawyer
francis_sawyer's picture

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

Fri, 01/25/2013 - 10:55 | Link to Comment Shell Game
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...

Fri, 01/25/2013 - 10:58 | Link to Comment Lewshine
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.

 

Fri, 01/25/2013 - 22:32 | Link to Comment All Risk No Reward
All Risk No Reward's picture

Rothschild != Jewish

Jeffrey Dahmer != You

Elevate your game above pawn.

Fri, 01/25/2013 - 10:24 | Link to Comment 10PastMidnight
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.

Fri, 01/25/2013 - 10:49 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

all of your bernanke are belong to our fiat

Fri, 01/25/2013 - 10:47 | Link to Comment SamAdams
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!

Fri, 01/25/2013 - 10:25 | Link to Comment Jason T
Jason T's picture

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

Fri, 01/25/2013 - 10:25 | Link to Comment Racer
Racer's picture

It is not if but only when will it cause trouble

Fri, 01/25/2013 - 10:27 | Link to Comment tradewithdave
tradewithdave's picture

Bart Chilton to take over MFGlobal investigation?

http://tradewithdave.com/?p=15085

Fri, 01/25/2013 - 10:27 | Link to Comment Cursive
Cursive's picture

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

Fri, 01/25/2013 - 10:29 | Link to Comment fonzannoon
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". "Look....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).

Fri, 01/25/2013 - 10:30 | Link to Comment kridkrid
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.

Fri, 01/25/2013 - 10:44 | Link to Comment Village Smithy
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.

Fri, 01/25/2013 - 10:53 | Link to Comment kridkrid
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.

Fri, 01/25/2013 - 10:50 | Link to Comment Spastica Rex
Spastica Rex's picture

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

+1

Fri, 01/25/2013 - 14:38 | Link to Comment trav777
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 cheap...gold 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.

Fri, 01/25/2013 - 10:31 | Link to Comment Dr. Engali
Dr. Engali's picture

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

Fri, 01/25/2013 - 10:36 | Link to Comment Winston of Oceania
Winston of Oceania's picture

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

Fri, 01/25/2013 - 11:02 | Link to Comment philosophers bone
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.

Fri, 01/25/2013 - 11:49 | Link to Comment centerline
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.

Fri, 01/25/2013 - 14:40 | Link to Comment trav777
trav777's picture

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

Fri, 01/25/2013 - 10:36 | Link to Comment SeattleBruce
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.

Fri, 01/25/2013 - 10:37 | Link to Comment Silvertrader
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.

Sat, 01/26/2013 - 00:04 | Link to Comment StychoKiller
StychoKiller's picture

Is the World gonna be a better place than what you found?  Then try to alleviate some suffering:  http://www.worldvision.org

 

Fri, 01/25/2013 - 10:36 | Link to Comment Kantbelieveit
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.

Fri, 01/25/2013 - 10:41 | Link to Comment kridkrid
kridkrid's picture

They own your mind.

Fri, 01/25/2013 - 12:31 | Link to Comment lostintheflood
lostintheflood's picture

They own your mind.

 

no...what he says is true...it'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.

Fri, 01/25/2013 - 10:49 | Link to Comment SeattleBruce
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.

Sat, 01/26/2013 - 00:08 | Link to Comment StychoKiller
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...

Fri, 01/25/2013 - 10:37 | Link to Comment sodbuster
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".

Fri, 01/25/2013 - 10:43 | Link to Comment Peter Pan
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.

Fri, 01/25/2013 - 14:42 | Link to Comment trav777
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.

Fri, 01/25/2013 - 10:42 | Link to Comment gjp
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.

Fri, 01/25/2013 - 10:57 | Link to Comment kridkrid
kridkrid's picture

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

Fri, 01/25/2013 - 10:51 | Link to Comment cranky-old-geezer
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.

Sat, 01/26/2013 - 00:10 | Link to Comment StychoKiller
StychoKiller's picture

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

Fri, 01/25/2013 - 10:44 | Link to Comment Kantbelieveit
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?

Fri, 01/25/2013 - 11:00 | Link to Comment kridkrid
kridkrid's picture

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

Fri, 01/25/2013 - 11:31 | Link to Comment barroter
barroter's picture

As far as I can see, the liberalization of finance has been a pathetic failure.  We're living in it's wreckage.  "Freedom!" I hear these libertarians shout. All I see is the noxiousness created by these free "individuals."  These few want the right to besmirch the rest of us as they grab the goodies?  You know what to do to the obnoxious bastard who is rocking the life boat, threatening to capsize us all? You throw the bastard overboard to the sharks.

I don't give a shit about the "freedom" of some pestilant and infectious jerk whose actions threaten the rest of us.  Fuck.Them.

Sat, 01/26/2013 - 00:12 | Link to Comment StychoKiller
StychoKiller's picture

Hmm, precisely WHO stuffed everyone in those lifeboats?

Bitchin' about the joo-joo-flop situation ain't helping, I suggest you buy

beans, bullets and bullion...

Fri, 01/25/2013 - 10:45 | Link to Comment HoaX
HoaX's picture

"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.

nuff said.

Fri, 01/25/2013 - 10:52 | Link to Comment SeattleBruce
SeattleBruce's picture

Wow, those are our only choices, huh?  I don't think so...

Fri, 01/25/2013 - 15:30 | Link to Comment Nehweh Gahnin
Nehweh Gahnin's picture

And Iceland says, "Yeah, go ahead and try that out, you brilliant fockers."

Fri, 01/25/2013 - 11:13 | Link to Comment Miles Kendig
Miles Kendig's picture

Adam Posen equating central bank interest rate policy during the bubble years and now with the notable difference being investor behavior provides one of the clearest examples yet of how economic theory devoid of financial services implications, well, beyond some sell side shit slingers forms the foundation of the great global economic equilibrium we all enjoy today.

Fri, 01/25/2013 - 10:49 | Link to Comment thepigman
thepigman's picture

Fuck em all. Global GDP growth will be 1% this year(tops) and they've used QE to take the markets to  5year highs. Just listening to the overpaid media pundits....(that's you Tom Keane)sucking up to the central bankers makes me want to puke in my Cheerios.

Fri, 01/25/2013 - 10:50 | Link to Comment wstrub
wstrub's picture

If the money moves in tact to the next generation we will have a non-productive workforce.............and that will definately will not work....pardon the pun.  Inflation and taxation will take it away before it moves................Sadly, it has to!  It will not matter what wealth you have created through enterprise.  All generations before us have lost the value of their savings and the baby boomers are a more extreme case because they had less children that  the previous generation.  This massive imbalance will force a significant devaluation in all of our holdings so they don't move to our children.

Fri, 01/25/2013 - 10:54 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

American's will have to become self-reliant when this paradigm shifts, and of course we appear to be entering the last stage of the fiat ponzi. Do not fear solely for your children. Rather fear for yourself and all your family. Paradigm shifts can be ugly, and we must be vigalente and brave to enure the next paradigm does not include our slavery.

Fri, 01/25/2013 - 10:53 | Link to Comment Downtoolong
Downtoolong's picture

“We should shift the focus to investor behaviour.”

Anyone but us right? Like Cramers article yesterday blaming Apple's fall on management's failure to provide Wall Street analysts with sufficient information about the company; and Goldman paying massive fines but refusing to admit any wrongdoing.

It's always someone else's fault on Wall Street.

There's your real problem.

 

Fri, 01/25/2013 - 10:59 | Link to Comment Vooter
Vooter's picture

Yup..."shifting focus" is Wall Street's stock-in-trade...

Fri, 01/25/2013 - 11:01 | Link to Comment NoDebt
NoDebt's picture

I thought it was pretty obvious that QE was to support the orderly transfer of most everything to government control.  As long as the banks get their cut along the way, they're happy, as bankers always are in such favorable situations.  And since they have proven they are too important to ever fail, they know they have nothing to fear moving forward.  They know they're on the inside lane.

There is nothing about this situation that in any way would be fertile ground for "using this bought time to make important changes".  They like it this way.  They want it this way.  They want to go further this way, certainly not move away from it.  Those few in power can FEEL the power accruing to themselves.  They're giddy with it.  And they want MORE.  Always MORE.

 

Fri, 01/25/2013 - 11:02 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

Does anyone really think the .01% is gonna be hurt no matter how bad it gets?  To funny!  Hence, they do not give a shit anyone.

 

Fri, 01/25/2013 - 11:13 | Link to Comment Cycle
Cycle's picture

The Fed is flying "instruments only" and when it doesn't like the readings, it just kicks in the dials by completely screwing up market mechanisms for pricing future risk and future value of capital.

Fri, 01/25/2013 - 11:36 | Link to Comment Kantbelieveit
Kantbelieveit's picture

The sad thing about ZH is how it inflames paranoid hatred of THEM. This makes for good site traffic, but it is toxic to social cohesion. This is a perfect example of how "real entrepreneurs" can poison society while achieving personal "success."

ZH readers are encouraged to hate the BLS for cooking the books. They are urged to hate the Fed for money printing. They are told to hate the Keynesians for advocating fiscal stimulus. Anger is stoked, but nothing constructive is offered. Consistency is not a problem at ZH. While denouncing crippling austerity in Europe, the opposite policy is mocked and discredited at home.

One is left with the impression that the only governing principle at ZH is the maximization of page clicks. Mission accomplished. Witness another splendid example of the private sector contributing to public paranoia and tearing down social capital. I look forward to the extension of ZH brand marketing to survival biscuits, assault weapons and concertina wire.

 

Sat, 01/26/2013 - 00:18 | Link to Comment StychoKiller
StychoKiller's picture

Hmm, the site you're looking for is ---> www.godlikeproductions.com

Besides, if you've a mind, I'm sure that the stawk-tradin' bots on Wall St.

will be happy to trade yer FRNs...

Fri, 01/25/2013 - 11:41 | Link to Comment steve from virginia
steve from virginia's picture

 

 

QE doesn't buy time, it buys assets that may or may not be worth anything.

 

QE doesn't rob from the future it doesn't do anything. Robbing from the future is the job of automobiles and luxury housing ... vacations in Davos and empty cities in China ... it isn't finance that is bleeding us but rather our precious industrial enterprises we claim as 'productive'. They aren't ... they are thieving enterprises ... the plutocrats use them to borrow immense fortunes that the rest of us are required to repay.

 

Clever criminals offer 'technology' with one hand while stealing the elderly folks' pensions with the other ... we have a system built out of a fabric of lies, we've been fooling ourselves for 400 years now we are literally running out of gas and can fool ourselves for only a little while longer.

 

It is the capitalists who give capitalism a bad name ...

 

 

Fri, 01/25/2013 - 11:51 | Link to Comment Kantbelieveit
Kantbelieveit's picture

We live in a society that manufactures and empowers sociopaths. How else could a psychological cripple like Steve Jobs be hailed as a great business leader? What is off limits if it makes you insanely great? How many FoxConn suicides does an iPhone justify? Popular culture exalts crazies who achieve impressive monetary results. This sickness will end up killing us all, because crazies don't care about ANYTHING other than their immediate obsessions. The more we empower crazy people, the more dangerous our world becomes.

Sat, 01/26/2013 - 00:20 | Link to Comment StychoKiller
StychoKiller's picture

You understand this, yet you piss'n'moan about all the pessimism on ZeroHedge -- stay on one

side of the fence or the other.

Tue, 02/05/2013 - 10:25 | Link to Comment e-recep
e-recep's picture

design what jobs designed and i'll hail you as a business leader.

Fri, 01/25/2013 - 12:27 | Link to Comment polo007
polo007's picture

The minutes from the Federal Open Market Committee’s Dec. 11-12 meeting show participants were “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those who said they should continue beyond that date. A number of policy makers are concerned the size of the Fed’s holdings “could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation,” according to the minutes.

The central bank’s balance sheet has provided record windfalls to the U.S. Treasury. The Fed uses interest income from its bond holdings to cover its own expenses and sends the rest to the Treasury. In 2012, that dividend to taxpayers was $88.9 billion.

One risk from a large balance sheet is the possibility that the Fed’s interest income could evaporate in coming years as rates rise, according to a paper released last week written by researchers in the Fed’s monetary affairs division. The paper studied different scenarios and concluded that the central bank’s payments to Treasury “will likely decline for a time, and in some cases fall to zero.”

http://www.bloomberg.com/news/2013-01-25/fed-pushes-into-uncharted-territory-with-record-assets.html

Fri, 01/25/2013 - 12:28 | Link to Comment polo007
polo007's picture

http://www.safehaven.com/article/28522/its-all-in-the-flows

The 2007 Federal Open Market Committee (FOMC) transcripts were released last week. Media reports have concentrated on the Fed's forbearance during the credit meltdown. Implied, but not stated (in what I have read) is the major reason for such nonchalance: The Fed only acknowledges flows, not stocks. This might sound boring. It is also very important to understand.

This approach to central banking has not changed. All of the major central banks use the same framework. The media and Wall Street spend most of their time interpreting the meaning of central-bank talk. Central banks will never mention a growing concern about loan defaults since the academics can always thwart potential catastrophes by modeling preventive flows (e.g., liquidity). The catastrophic financial failure that most of us endured in 2007 and 2008 was not a failure at all, according to central bankers. Their models still conclude there is always a central-banking solution that will prevent any catastrophe. In conclusion: when the current financial bubble topples, there will no forewarning from central bankers, the media, or Wall Street. Given their processes of thinking, they will be more surprised than the average hairdresser.

"Stocks," in this case, does not refer to common stocks, but the accounts and categories in which assets (and their liabilities) accumulate. The Fed, a creature of academia, knows everything. Knowing everything limits policy to sufficient "liquidity": flows. It - to be more precise - its DSGE model, does not care about accumulations: stocks.

The Fed was taken unaware when credit cracked up in the summer of 2007. Unlike many local realtors and carpenters, the FOMC did not understand the connection between flows (bad loans pouring into off-balance sheet Special Investment Vehicles) and stocks (of mushrooming mortgage credit going sour). The Fed presumably noticed pieces of the mortgage machine (subprime lenders, appraisers, Fannie Mae, commercial banks, investment banks, CDOs) even though it did not comprehend the artificiality of this contrived structure. Hence, the Fed missed the connection between the economic expansion of the mid-oughts and its artificial nature. (As we know now, the Fed does not blanch at running an economy by rigging its prices, so, we know now, central banks do not understand an artificial economy is unsustainable.)

All of which is to say the Fed and its FOMC did not know a loss of forward momentum would be followed by an abrupt shift to backward momentum. Again, this has not changed. Despite talk of deleveraging, the U.S. economy has continued to lever up since the non-catastrophe of 2007 and 2008. Total non-financial debt has risen from 240% of GDP in the fourth quarter of 2008 to 249% of GDP after the second quarter of 2012.

The Fed does not understand the artificial credit created by central banks that has flowed since 1971 has coagulated into unsustainable imbalances around the world. The FOMC will be in the caboose when government debt loses its imaginary, "riskless" character (e.g., banks do not need to reserve against most sovereign bonds). As in 2007 and 2008, the stated price of artificially produced assets is illusory, so the assets cannot stand on their own without ever increasing flows to support prices. The flows accumulate in stocks, the artificial composition of which will topple.

Fri, 01/25/2013 - 12:29 | Link to Comment polo007
polo007's picture

Oaktree Capital's Howard Mark's most recent memo titled Ditto

http://www.oaktreecapital.com/MemoTree/Ditto.pdf

Fri, 01/25/2013 - 13:39 | Link to Comment DR
DR's picture

Sorry to disappoint you Mr. Serra but my children are going to default on this debt and your trust fund children will end up broke and will have to go work for a living. 

Fri, 01/25/2013 - 14:13 | Link to Comment terryfuckwit
terryfuckwit's picture

good comments mr polo  keep em comin

Fri, 01/25/2013 - 14:37 | Link to Comment RougeUnderwriter
RougeUnderwriter's picture

http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...

 

Read Matt Tailibi recent article on the lies told

Mon, 01/28/2013 - 14:54 | Link to Comment neutrinoman
neutrinoman's picture

It's funny how cautious they are, "may create another bubble." Of course, bonds are in a bubble, a large one, and have been for 2-1/2 years (at least). It's even reached the retail press, like the WSJ. Only CNBC remains to catch up with the absurd situation with bonds.

The real question is, can the central bankers/planners move fast enough to deflate the bubble without doing a lot of damage. Their dilemma now is, if they avoid doing something now about the bubble that they created, a larger, more violent collapse will happen later, forcing the central banks' hands.

Furthermore, ALL financial assets of any significance are inflated: stocks are inflated, bonds are inflated, commodities are inflated, etc. The normal relationship between stocks and bonds has been destroyed.

Adam Posen is just pathetic -- he blames investors for not behaving the way the central (planning)(banking)(take your pick) Five-Year Plan says they should -- shame on them! Wreckers! They're probably putting glass grounds in the butter. Onward! Avanti populo! Euthansia of the rentier! There's an infinite supply of capital out there, at zero cost, if the greedheads would just get out of the way!

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