Late Friday Humor: Quantitative Easing Simplified

Tyler Durden's picture

With recent (post-Minutes) chatter of a gradually-tightening Fed since curtailed by a plethora of Federal Reserve market savants jawboning us back to creditopia - "the liquidity must flow"; we thought a gentle reminder of what Quantitative Easing really is was worthwhile. Whether goldbug, bond-vigilante, or permabull-stock-muppet; two-and-a-half minutes of reality (or comedy) depending on your perspective.

 

 

(h/t Rick B)

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Edward Fiatski's picture

Well, this is clearly a repost. Still, good enough for the lobotomised population.

DJ Happy Ending's picture

Serious question: can anyone cite an example of money printing which did not end in devaluation or hyper-inflation?

BKbroiler's picture

no one does dry humor like the british

Dead Canary's picture

They're Aussies you wanker!

The Proletariat's picture

"Have you ever heard of Rumplestiltskin"....awesome, because I have.  Badass band that played phonic, melodic rock n' roll from the late 60's.  Rock On!  \m/ https://www.youtube.com/watch?v=HjfvUMkCAXU

GetZeeGold's picture

 

 

They're Aussies you wanker!

 

They use to men of thunder from down under. Now they're just unarmed declawed descendants of convicts.

ThorAss's picture

If it is as you Americans believe i.e. that your possession of guns keep you safe, then why is it your system which has devolved into a police state while your chances of being killed by your own guns is higher than anywhere else in the world? In the end it won't be lack of guns which will be your downfall but your ignorance and complacency.

 

Rogue Trooper's picture

John Clark is a Kiwi.... 

A blast from the past.  Clark has 'Fred Dagg'. The Gumboots song.

https://www.youtube.com/watch?v=5tAWwqKNI7g

Well, it's famous in NZ!

Svendblaaskaeg's picture

NZ is something else - respect!

One Man's Dream: The Britten Bike Story:

http://www.youtube.com/watch?v=OerCb40gteY

_ConanTheLibertarian_'s picture

Well yes, but around 80 per cent of New Zealanders have some British ancestry and an estimated 17 per cent are entitled to British nationality by descent.

They definitely have the Britisch humor.

Motorhead's picture

"Michael Baldwin, this is Bruce.  Michael Baldwin, this is Bruce.  Michael Baldwin, this is Bruce."

"Is your name not Bruce then?"

"No, it's Michael."

"That's gonna cause a little confusion."

http://www.youtube.com/watch?v=_f_p0CgPeyA

 

 

DaveyJones's picture

the race to debase

hit shit on fan and face

philipat's picture

@ Serious question: can anyone cite an example of money printing which did not end in devaluation or hyper-inflation?

 

Serious Answer. As of now, The US Fed. QEInfnity continues at a pace yet the DXY has recently increased from 79 to almost 82. Bernanke must be laughing all the way back to the Bank. Two riders:

1. I know you said "End in"

2. The Fed actually NEEDS the Dollar to devalue so as to be able to repay debt in davalued Fiat. So, actually, longer-term, a strong Dollar is counter-productive to their Big Picture Agenda. Unlesss, of course, they plan to default instead............

Water Is Wet's picture

DXY is not going to work for any comparison; the dollar index is a measure of fiat versus fiat.  The Fed/Gov has been successful in suppressing gold prices so far though, and I'd say gold, silver and oil prices are a good barometer of the Fed's success.

philipat's picture

Agreed. And yes the other CB's are all engaged in the same race to debase. So net net, no currency is devalued against any other. Indeed funds tend to flow into USD as a "Safe Haven".

But The Fed NEEDS to devalue the Dollar so as the make repayment of the debt feasible, as the ONLY alternative to default. It has been suppressing PM's in particular and commodities in general (See Crude last week for instance) to maintain the charade of safety in Fiat. But it seems to me that the ONLY way the Fed can achieve its primary goal of depreciating the Dollar would be to allow PM's and other commodities, which have an inverse correlation to USD, to appreciate, using (Or abusing) the position of the USD as the World reserve currency (At least still for a while longer). The Fed simply CANNOT have it both ways forever.

Thoughts?

WTF_247's picture

This is something I have thought about for a few years, yet no one has provided a sufficient answer.

If all the global major governments print money at essentially the same rate, all the major currencies will remain valued against each other at the same rate.  The divergences will be due to economic differences only, not supply.

If the US prints 10x the current dollars but every other country does so as well at the same time, what happens?  The exchange rates likely remain the same, with the exception that certain countries may not be able to contain inflation as well as the primary currency can (USD).  

Where would money flee to in such a case - a country that does not print?  

In the scenario above, the EUR/USD rate might remain the same even if the 2 currencies are debased 5000%.  

GubbermintWorker's picture

Sell ya a house in Spain if you believe that.

francis_sawyer's picture

 "Where would money flee to in such a case - a country that does not print?"

~~~

Soon enough, there will be enough to build the DEATH STAR...

zhandax's picture

The Fed actually NEEDS the Dollar to devalue so as to be able to repay debt in devalued Fiat.

I keep hearing this line, and it intuitively rings true, but those are not the results achieved to date.  Leaving metal prices off the table for the moment, look at oil or grain over the last four years.  The debt has grown from 10T to 16T.  For a dollar devaluation equivalent, oil prices would need to currently be ~$160bbl, and wheat prices would need to be ~1120.  Clearly the achieved result diverges from theory.  It seems an old cocktail napkin calculation of the runoff of shadow banking liabilities showed that the ~$3.4T overhang would be extinguished sometime around this year.  Could these persistent morning smashdowns of gold be signaling that we are getting close?

philipat's picture

That is my Hypothesis and, Yes, I agree we are getting close. My summary was that "The Fed can't have it every which way forever" and, indeed, probably not for much longer.

DaveyJones's picture

you mean they're not gods?

oh, we're fucked 

gmak's picture

The money printed is not flowing into consumption as previously. The intermediation system is down = velocity of money is dropping. Banks don't want to lend to most, and those they do want to lend to don't want to borrow. This is indicated by the fact that deposits have exceeded the amount of loans outstanding (in the USA at least, I'm not sure about elsewhere - but I think the same is true everywhere except China and some affiliates where credit creation continues unabated and has led to massive malinvestment).  

The money printed is flowing into CB reserves, but also into tradeable assets - mainly equities and credit instruments (debt and its derivatives - yes, again!).

Shadow banking is alive and well as indicated by the resurgence of debt derivatives such as securitization of garbage into AAA (student debt, credit card debt, automotive debt, corporate debt are all being bundled and sliced up into tranches like the old MBS, CDO, CDO squared (!!), etc).

The smashdowns in gold may be nothing more than over-leveraged shadow money managers having to liquidate assets to meet margin calls as credit bets come back on them.  It may also be the result of a vicious circle of borrowing gold to sell in the spot market and then buy gold futures - creating an 'instant gain' on the financial statement and raising capital to put against leverage.

 

The thing about leverage is that it feeds on itself until, at the margin, new debt is insufficient to increase prices anymore (or suppress them as in the case of gold), and the bubble collapses in fits and starts.

DaveyJones's picture

isn't part of this silly story that those silly bankers (silly is latin for criminal) and they're extra silly politicians (hand puppets really) forgot the real world. (Puppets and pompous both suffer from amnesia). And in the real world, stuff changes. Some stuff runs out, other stuff's quality changes and other stuff, well it can damage other stuff. So trying to control the dollar and commodties and more people that need stuff, that's difficult stuff 

 

 

StychoKiller's picture

Many trees died to bring us this intelligence...

philipat's picture

@ Sell ya a house in Spain if you believe that.

 

Actually, I just BOUGHT a Villa in Spain on the basis that:

  1. They virtually gave it to me if I paid cash and the upkeep cost is nothing.
  2. I am a believer in "Buy Low, Sell High". But if you buy for nothing and intend to just use a property occasionally, the "Sell High" part isn't really so important over one generation
tango's picture

We're property investors but have shied from both Spain and Greece (incredible bargains) because we are concerned that foreign owners will be scapegoats in the chaos to come.  I am just not convinced that states in crisis will worry about the rule of law when scrounging for food and energy.

 

 

DaveyJones's picture

history gives you a +1

now can you find me a country cold to chaos?

philipat's picture

At these prices, it would just be a Tax write-off. So long as we are not there at the time, who cares? Even then, drive down to the Marina, drop the keys in the water and bye bye. You win some, you lose some, it's jsut a question of risk/reward.

TrulyBelieving's picture

'Bad money chases out good'  People have naturally kept the desirable coin and spent the less desirable. If this principle is applicable to currencies, then currencies of less desirable countries would be traded first and the more desirable would be saved. But with that being said the question would be, What currency would be more desirable than gold and silver? None of course, so then money will flee to gold eventually. 

e_goldstein's picture

The lightest turd floats to the top.

disabledvet's picture

and of course the dollar is getting much stronger now...which makes perfect sense (?). not only that but gold "is getting monkey hammered" and "the only other safe haven currency appears to be the Yen which not only makes the rest of the Western World look like choir boys when it comes to money printing but has recently suffered a (barely reported) nuclear accident of untold proportions which should have wrecked their society permanently." hmmm. go figure. to which i have to say http://www.youtube.com/watch?v=VyA5rjVQk7M&feature=player_detailpage which while you all are listening...is it wrong to say outrageous things just to get attention? i mean if you told me "the USA could run trillion dollar deficits and pay lower rates" i'd tell you "that's even more outrageous than anything i've ever come up with during my time on the internet...LET'S RUN WITH THAT! And of course it would have to be a complete fabrication since that is too unbelievable for even the crowd i hang out with."

mumbo_jumbo's picture

the debts are designed to never be paid back

All Risk No Reward's picture

No, the debts are designed to be unpayable in the form issued, but they will be paid.

These debts will be paid with money, poverty, blood, sweat, tears, freedom, liberty and millions of lives.

Those who understand this reality are the ones out trying to get everyone else off their collective *sses.

Unfortunately, the boot will rest solely on the neck of most Muppets before they realize this Debt Money Tyranny conspiracy was not a theory, rather, it was an implementation of the highest Sun Tzu Art of War operation in human history.

Detb Money Tyranny

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

If all the bank loans were paid up, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependent on the commercial banks for our money. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent monetary system.  When one gets a complete grasp upon the picture, the tragic absurdity of our hopeless position is almost incredible - but there it is.  It (the monetary system problem) is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon.
Robert H. Hemphill, Credit Manager, Atlanta Federal Reserve Bank, in foreword to 100% Money by Irving Fisher 1936
 
http://www.thetwofacesofmoney.com/files/money.pdf

francis_sawyer's picture

We've long past the point in the Monopoly game where all the properties are taken up [by one player], and the rest are all just trying to keep rolling 10's to jump back & forth between jail & free parking...

~~~

At this point in the game, it either becomes strip Monopoly, or the debts just add up as figurative amounts in somebody's head until somebody gets bored...

All Risk No Reward's picture

This is an active operation to create a depression and destory the Republic.  It is a grave mistake to think this is some kind of passive actrivity that will end up all right for debtors.  That's as foolish as thinking the hang man was passively tieinig the knot on the hang man's noose.

"The new law will create inflation whenever the trusts want inflation...they can unload the stocks on the people at high prices during the excitement and then bring on a panic and buy them back at low prices...the day of reckoning is only a few years removed."
~Charles A. Lindbergh, Sr. quotes

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.”
~Henry Ford

"If all the bank loans were paid up, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependent on the commercial banks for our money. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent monetary system.  When one gets a complete grasp upon the picture, the tragic absurdity of our hopeless position is almost incredible - but there it is.  It (the monetary system problem) is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon."
~Robert H. Hemphill, Credit Manager, Atlanta
Federal Reserve Bank, in foreword to 100% Money by Irving Fisher 1936

Two Faces of Money

http://www.thetwofacesofmoney.com/files/money.pdf

Shadows of Power
http://www.youtube.com/watch?v=j_gj1uZ6194

So many on Zerohedge think they are soooo smart trading fiat for real assets.  They think the establishment is sooooo dumb that they don't know the very same principle.

They are victims of the Art of War psy-op.

"Pretend to be weak, that he may grow arrogant."
~Sun Tzu, Art of War

The deflationary collapse is the spiked pit between here and hyperinflation and that will allow the the Big Finance Capital criminals to come in and seize physical assets from nation states and buy the rest up for pennies on the dollar.

Snoopy the Economist's picture

Phiipat: how about the currency I have? That seems to have been devalued quite a bit.

philipat's picture

That is what everbody in every country is saying. And it is the other side of "The Con" isn't it? According to The Bernank and the other CB's, "Inflation is under control". Because they don't include the things we all use daily, like energy and food. Like everything else, put simply, The Data is "Fixed". But in a way, that is my point. The Fed can't have it every which way for much longer. They are running out of options.

The Fed Dilemna is that they NEED to devalue the Dollar BUT to do so must allow PM and Commodity prices to appreciate. Once unleashed, this trend will cause immesurable suffering for ordinary people and the daily inflation will become more than obvious. The ONLY alternative is default. Catch-22?

The end game is approaching

All Risk No Reward's picture

Your money isn't being "devalued" now.  Credit and monetary aggregates are essentially flat.

http://market-ticker.org/akcs-www?singlepost=2958798

Note that monetary and credit aggregates are flat. 

The devaluation occurred previously.

Your prices are going up, BUT NOT BECAUSE OF INCREASES IN THE MONETARY AND CREDIT AGGREGATES.

Repeat that enough times until you understand it.

Your prices are going up because the mega banks are looting society and GAMBLING THEIR LOOT IN COMMODITIES AS THEY TRY AND EARN A RETURN.

This gambling bids up prices which makes people think that money/credit supply must be increasing.

Nope.

The key is money is debt and it will all be called in, with unpayable interest, at some future point.

Then the Muppets will realize they won't even be allowed into the theater to perform for the Debt Money Tyrants.

seek's picture

Countries with fiat currencies that were invaded and currency replaced. While technically it would hyperinflate/collapse, the speed in which it happened was measured in days or hours, and really does seem to be a unique case compared to the others. It was so serious a problem for Germany in WWII that they created a special logistics currency to manage it, the Reichskreditkassenscheine, which was a country-specific replacement currency.

Kirk2NCC1701's picture

+1  Good one, DB!  I guess I'm still (shell)-shocked by the shot around the world that few heard, and another ZH blogger posted earlier:  http://www.reuters.com/article/2013/02/22/us-britain-china-swap-idUSBRE9... "The UK nears Yuan swap deal as London eyes offshore leader status".  Well, Phaser-stun-me and send me to Sick Bay to Dr. Crusher!  No, not to Bones.  To crush-her Crusher!

WillyGroper's picture

link not found. got another?

 

All Risk No Reward's picture

This grilling was pretty sweet as well...

http://www.npr.org/blogs/thetwo-way/2013/02/14/172045516/watch-sen-eliza...

Look into the eyes of those Vichy traitor Debt Money tyrant sycophants.

They will get burned eventually, too.  The Libya ambassador thought he was part of the team as well...  until he wasn't.

Edward Fiatski's picture

Not an example per se, but when the central bank is run by the Rothschilds, I would say that they don't want the world reserve currency in shambles, not yet anyway.

Perhaps, after a World War or two.

2bit Hoarder's picture

you can only be a trillionaire for so long without getting really, really bored.  they will decide to destroy the world at some point just for something to do.

Haager's picture

If I am in that position of a Rothschild I won't care a lot about the name or value of money the world needs to spin - as long as the values in rent paid by the world is enough to close any way out of this situation.