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Fed's Fisher To Santelli: "This Can't Go On Forever"

Tyler Durden's picture


While notably 'not' the Fed's opinion, Dallas Fed head Richard Fisher provided more than a few compellingly truthy comments in this excellent discussion with CNBC's Rick Santelli. It is fiscal policy that is holding us back, he warns, "we have a massive fog here," and despite the extremely accommodation monetary policy, we are not seeing the transmission to job creation."

The "conditions of total uncertainty," mean the politicians are holding us back; but it is when Santelli asks him about the Fed's exit that things get a little uncomfortable, "no central bank anywhere on the planet has the experience of successfully navigating a return home from the place in which we now find ourselves." When pressed he exposes the flaw (much to the chagrin of Kuroda and Bernanke we suspect), "somewhere we have to have practical limits as to where we can build the balance sheet. We're moving in the direction of a $4 trillion balance sheet. We know we can't go on forever."

Critically, much as we have pointed out numerous times, Fisher reminds his audience that, "[the Fed] is buying a little more than 90% of new gross mortgage backed security issuance," amnd it is there that Mr. Fisher explains his preference for tapering the MBS purchases since "we have had a rebound in housing."

The discussion extends to Dod-Frank's ineptness, the subsidies for TBTF banks, and Fisher's clear dismay at the 'too-big-to-jail' attitude that pervades Wall Street, but he fears he will be "horribly disappointed with our elected officials."




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Wed, 05/08/2013 - 19:48 | 3543021 Shizzmoney
Shizzmoney's picture


"We know we can't go on forever."

Sure you can.....all you have to do is threaten to kill everybody #problemsolved

Wed, 05/08/2013 - 19:52 | 3543031 Pinto Currency
Pinto Currency's picture



Fisher - Another death bed conversion.

Wed, 05/08/2013 - 19:53 | 3543038 nope-1004
nope-1004's picture

They know they can't go on forever, but they have no other choice.


Wed, 05/08/2013 - 19:54 | 3543042 Supernova Born
Supernova Born's picture

This has never been more bizarre.

Wed, 05/08/2013 - 20:06 | 3543073 JPM Hater001
JPM Hater001's picture

Oh wait.  This has shades of bizarre left that will leave almost everyone's jaw wide open.

Wed, 05/08/2013 - 20:10 | 3543083 Pure Evil
Pure Evil's picture

They should replace Obungo with Richard Fisher as POTUS, he lies better and he doesn't need a teleprompter.

Only 2% inflation!?  Must have been remembering the size of his potus when he said that.

Wed, 05/08/2013 - 20:29 | 3543099 Pinto Currency
Pinto Currency's picture


Fisher fears we will be "horribly disappointed with our elected officials".

Never angry with the vapor dollar creators who blew a bubble in the 1920s and crashed the economy in 1929 and who blew two bubbles (.com and housing) and crashed the economy in 2008.

Only angry with the elected officials.   Repeat.

Not quite the death bed confession at first appearanc.  Passing the irredeemable buck.

Wed, 05/08/2013 - 20:37 | 3543144 AlaricBalth
AlaricBalth's picture

From the Office of Debt Management 2Q2013 Report ZH posted earlier today.

Projected evolution of Fed Balance Sheet : Assumptions

QE expected to continue a current pace until end 2013
– Fed stops reinvesting paydowns by end 2014
– In “no asset sales” scenario:
Fed balance sheet allowed to run-off until it reaches trend level in 2022.
Trend defined as 2006 level adjusted for nominal GDP growth (5% in 2013/2014 and 4.5% thereafter).

In “asset sales” scenario:
Approximately $100bn/year in MBS sales from 2016 to 2020.
Capital losses on sales reflect projected yield curves described on slide 17. (Yield curve forecast calls for 10yrT at 2.76 in 2013 and rising to 4.83 in 2018)
Fed balance sheet reached trend level by 2020.

{The GDP assumptions seem very aggressive and the 10Y yield projection is quite conservative. It was an interesting piece of fantasy which is worth the time to look through.}

Wed, 05/08/2013 - 21:01 | 3543206 TwoShortPlanks
TwoShortPlanks's picture

Arhhh, fuck this shit….let’s get this straight.

QE was intended to take Bonds off the Open market thereby forcing Banks to invest reserves into the Private Sector (Commercial and Retail), as well as the Public Sector (Infrastructure)….ok?!

QE today is completely the opposite; Banks and large Companies have been recap’d, then they pumped cash into Bonds and now they’re pumping cash into Indices and Equities.

The reason the US economy hasn’t recovered is two fold. The first is that the debt is too great however, the largest factor by far was that there were no conditions placed upon the pathways in which QE fund flows were to be directed (Infrastructure projects etc). The money never ended up anywhere near the real economy, it was spent at the Casino Americana.

When you throw unlimited amounts of cash at the banks without conditions, do you really think that they’ll feed it into the economy? NO. FUCKING. WAY.

If the Fed guaranteed all deposits, paid-out $XYZ onto either existing debt or asset deposits, and funded large scale infrastructure works, while the US Gov nationalised any failing Banks, then the US probably would see some level of recovery by now.

…..unless this is all about supporting the Derivative Market and the Shadow Banking nightmare

The only thing that would make me happier than that is to see someone, someday, walking around in a Blythe Suit.

"Say blythe, are you about a size four-teen"

Wed, 05/08/2013 - 22:04 | 3543372 NoDebt
NoDebt's picture

Agreed.  When this monetary madness started even the Fed stated outright that they were measures DESIGNED to buy time for recovery.  They said OUTRIGHT that they were playing for time- they made no bones about it.  That language has subsequently disappeared and QE is S.O.P. with vague pegs to things that will never happen (and if they do they'll move the peg).

I know a few memebers of the Fed would love to see an exit to QE.  They wish they could.  They're not so completely blind as to think there isn't damage being done and bubbles being blown (they read ZH, too, you know plus they have access to the REAL data we don't).  But the minute they try it and the markets and economy tank they'll stomp right back down on the pedal.  Politicians will force them to, even if they somehow have the stomach to refuse on their own.

They're in a TRAP.  To whatever extent they want out of the trap, the reality is it will requiring gnawing off a leg at this point.  They aren't desperate enough yet.  They will keep going.  That's why it's a trap.


Wed, 05/08/2013 - 23:15 | 3543522 TwoShortPlanks
TwoShortPlanks's picture

Well put +100

Thu, 05/09/2013 - 00:03 | 3543606 Pinto Currency
Pinto Currency's picture


The Fed's been running a monetary scam for a century.

Now they are just buying time?  For what?  They've suppressed interest rates and blown a debt bubble so the US is in a total debt position (fed, state, corp, municipal, consumer) of $55 trillion now and the economy is collapsing (in real, non-BLS b.s. terms).

So what is the Fed buying time for.  Hopefully buying time so that we can end the fed, put the US onto  gold & silver money and end fiat debt currency.  Any other "we were just (whimper) buying time" argument is hogwash and simply pathetic.

Thu, 05/09/2013 - 01:45 | 3543727 TwoShortPlanks
TwoShortPlanks's picture

The Fed is buying-time to try and get China to blink first. China is the BRICS.

Thu, 05/09/2013 - 16:05 | 3545928 caShOnlY
caShOnlY's picture


I read everyone of your posts yesterday from the JPM eligible post and the links you also provided.   You know your stuff and I enjoy reading them.  I felt almost compelled to, strange but the info seems solid.  I was taught statistics in the 80's to apply in the manufacturing sector for quality assurance.  Using statistics you can surgically dissect something with math and math doesn't lie (ok ok forget the guvmint right now).  So I tend to give credence to statisticians over economists, market monetarists and the like.  There is only one statistician right now I feel almost compelled to seek out and read or listen to what he has to say and that is the infamous GOLDEN JACKASS

After reading your comments on ZH last night I got that same compelling feeling and put 2 + 2 together with the intellegence that was written.  Glad to see you here, Mr. Willie, I appreciate your synopsis.

Wed, 05/08/2013 - 23:38 | 3543553 EscapingProgress
EscapingProgress's picture

The leg that will be knawed off will mostly likely be millions of eaters who don't even know what monetary policy is. We are all only about a week without food away from becoming cannibalistic savages, keep that in mind.

Wed, 05/08/2013 - 20:29 | 3543116 Ness.
Ness.'s picture

'How Bizzare?'  I like the song...  Man,  those was good times//

At one point in the video I think I saw Benny Bucks raining down on the peeps!!

Wed, 05/08/2013 - 22:05 | 3543376 Al Gorerhythm
Al Gorerhythm's picture

Fisher - Another death bed conversion.

There are no atheists in a fox hole, particularly when there is a tank rolling over them.

Wed, 05/08/2013 - 21:47 | 3543339 MrBoompi
MrBoompi's picture

The sun will also burn itself out someday.

Wed, 05/08/2013 - 19:52 | 3543030 Pinto Currency
Pinto Currency's picture


Wed, 05/08/2013 - 19:53 | 3543035 rsnoble
rsnoble's picture

It can't, but they will try.  They need it to so they can get what they want........the guns, world gov't, who knows what the US fucktards have planned.  It's never going to fucking work and I suspect many of us will die before these goddamn clowns are fucking flushed.

Wed, 05/08/2013 - 19:54 | 3543041 max2205
max2205's picture

Who isn't horribly disappointed with our POS elected, if they really are, elected officials?

Wed, 05/08/2013 - 20:00 | 3543055 Stockmonger
Stockmonger's picture

Paul Krugman teaches us that this is nonsense.  The Fed and government can't default and the Fed has proven it can defeat the bond vigilantes.  If spending creates inflation that's good because it will raise output thanks to the Inflation Fairy and export competitiveness, as long as everybody doesn't devalue.

The solution to our problem is taxing and spending to raise aggregate demand and pauperize those selfish thrifty individuals who are keeping this slump going.

Wed, 05/08/2013 - 20:07 | 3543075 venturen
venturen's picture

Did the FED get it right last time? The same idiots are on Wall Street and they are controlling virtually the same FED. They are happy to kill the host beast for one more bonus. Next time is going to be ugly. If you look in Greece the far right are now gaining 30% of the vote. The people getting ripped off by the wonton fraud on Wall Street aren't going to wait for police next...there will be direct action!

Wed, 05/08/2013 - 20:11 | 3543087 Hedgetard55
Hedgetard55's picture

Wanton fraud. The wonton fraud is in Chinatown.

Wed, 05/08/2013 - 21:28 | 3543294 ziggy59
ziggy59's picture

Spelling Cop^ awhere...:)

Wed, 05/08/2013 - 20:28 | 3543131 Ropingdown
Ropingdown's picture

It makes me laugh:  We have ZIRP because, supposedly, people are consuming too little.  Yet the theory has always been that the deposits of savers are to be channelled to deserving investments through credit extended to producers.  Any push to make our own national economy efficient enough to increase export share has been abandoned.  Indeed, we have US companies taking US-created tecnnology offshore, producing the goods, selling them back into the US, but keeping the profits in the (or 'a') foreign subsidiary.  Politicians spoke about "the ownership society."  Well, congratulations.  We have it.  Those of us who own steer our assets to corps producing abroad.  Sayonara to "the production society." 

Wed, 05/08/2013 - 20:07 | 3543074 booboo
booboo's picture

Fisher bad cop
Benanke good cop
Nuff said

Wed, 05/08/2013 - 21:12 | 3543257 Bay of Pigs
Bay of Pigs's picture

Kocherlakota the Village Idiot?

Wed, 05/08/2013 - 21:33 | 3543310 CrimsonAvenger
CrimsonAvenger's picture

So much competition for that role. Do we have to have just one?

Wed, 05/08/2013 - 20:08 | 3543078 ebworthen
ebworthen's picture

Dodd-Frank is a joke.

Restore Glass-Steagall.

Zero Bailouts.

No derivatives or securities.

20% down and bank holds the loan for life.

Enforce the rule-of-law.

End the FED.

Too simple, I know.

p.s. - Funny how he compares MBS purchases by the FED to the Hunt brothers buying Silver.

Wed, 05/08/2013 - 21:11 | 3543251 MonsterBox
MonsterBox's picture

AND term limits!

Wed, 05/08/2013 - 20:10 | 3543081 Mojeaux18
Mojeaux18's picture

"Best looking horse in the glue factory" 

Wed, 05/08/2013 - 20:13 | 3543093 Hedgetard55
Hedgetard55's picture

It can't go on forever, but it will go on until Ben leaves the FED.

Wed, 05/08/2013 - 20:13 | 3543095 I am a Man I am...
I am a Man I am Forty's picture

"not forever", now that's some good intel, quick, hit the sell button they are going to stop buying bonds in "not forever"

Wed, 05/08/2013 - 20:15 | 3543100 logicalman
logicalman's picture

No point in Dorothy clicking her heals

Wed, 05/08/2013 - 21:09 | 3543246 Hedgetard55
Hedgetard55's picture

Heels. You went to public school, right?

Wed, 05/08/2013 - 21:55 | 3543357 TwoShortPlanks
TwoShortPlanks's picture

and Wall Street is run by cunts which attended Private Schools...who's more dangerous?

Wed, 05/08/2013 - 20:18 | 3543103 Tuffmug
Tuffmug's picture

 Fisher was not honest.

He should have admitted that this whole mess was caused by the Fed and the Fed should be abolished. Then he should have taken a gun to his head and fired.



Wed, 05/08/2013 - 20:21 | 3543115 Vooter
Vooter's picture


Wed, 05/08/2013 - 23:16 | 3543524 sgorem
sgorem's picture

+16 trillion...........and counting

Wed, 05/08/2013 - 20:18 | 3543106 mendigo
mendigo's picture

Dirty trick, telling the truth when people have learned to assume that he is lying. Next they will find he is sending inappropriate emails to clerks. So people with associate financial honesty with perversion.

Wed, 05/08/2013 - 20:20 | 3543110 sitenine
sitenine's picture

WTF? I used to admire this man, but WTF? He's straight up asserting now that the Fed is doing the right thing? And it's the government's fault that there are no new jobs being created? Seriously? We're so fucked.

Wed, 05/08/2013 - 20:35 | 3543147 logicalman
logicalman's picture

You have to understand that the government is irrelevant - they just dance to the tune of the banksters.


Nearly all the world's ills are the responsibility of the banksters.



Thu, 05/09/2013 - 08:26 | 3544000 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

He is partially right. Government policy aka regulations and taxation are absolutely killing the entrepreneurial spirit and choking how the remaining money might be invested. You try getting money to do a non tech or green business start up that the government won't subsidize or back stop in some form. There is that old catch 22 it takes money to make money and with little to no resources it grinds small business creation which in turn creates employment to a halt. Reality is kicking in on this level and more off the books cash work is going on to keep things moving. The keep it in the family operating procedures becoming more common again as of late. Like a family business if you make $100 and employ your kid giving him a $10 salary the family income still is $100 at the end of the day not $90 if you had to employ someone from the outside. Smaller businesses as of late are doing the same when they need work done instead of contracting out for normal things like landscaping for example they will pay cash to their employees who want to make some extra dollars on their day off. Obamacare is going to be a job and wage killer also once it is fully phased in though I do know some businesses that are only putting people on the books for 29 hours a week but at the same time having the people work 40 hours and paying the 11 hours in cash under the table also so the people can afford to buy Obamacare insurance.

Wed, 05/08/2013 - 20:20 | 3543114 QQQBall
QQQBall's picture

"Where we find ourselves." Correction - where you put us...

We are right, the politicians are wrong. 

Money not going into the economy - asset prices have been inflated against low yield; low IRs are allowing some cash flows at low cap rates...there is uncertainty from Washington DC, but also what happens when you end the bond buying?  Too many marginal investments, businesses, underwater homemoaners etc., continue to limp along and I have NO IDEA what comes next from DC or the FED... also, the rule of law is being ignored - its like a 3rd world country and NOBODY is gonna accept super-low yields.


Wed, 05/08/2013 - 20:25 | 3543121 fonzannoon
fonzannoon's picture

Fisher is just laying the groundwork for when the fed aborts QE and throws this whole disaster at the politicians feet.

Wed, 05/08/2013 - 21:17 | 3543266 Bay of Pigs
Bay of Pigs's picture

You've been connecting the dots quite nicely lately.

Now, what about that JPM gold vault...

Fri, 05/17/2013 - 01:02 | 3571907 Ctrl_P
Ctrl_P's picture

AND the community and regional bankers...  nothing like thinning out the competition - again.

Wed, 05/08/2013 - 20:25 | 3543124 Kirk2NCC1701
Kirk2NCC1701's picture

Nothing goes on forever.  So, who cares!

The only relevant questions for them/anyone to answer are: 

   1. How long will it go on?  Weeks, months, years? 

   2. How will it end and what comes after?

I can use my broken clock twice a day, so I expect more from 'experts' and I really don't give a damn who best tea-leaf readers or intellectual masturbators are.

Thu, 05/09/2013 - 00:27 | 3543647 AynRandFan
AynRandFan's picture

Finance is all games right now, with little money being put to work.  Someday maybe money won't matter, because either nobody will take it or nobody spends it.  Monetary collspse is easy if money ain't moving.

Wed, 05/08/2013 - 20:26 | 3543126 WhiteNight123129
WhiteNight123129's picture

~No central bank has any experience of successfully going back home~.

True and False.

It was not the Central bank but McCulloch post civil war did contract the money supply.

Very painful for those in debt, very rewarding for those who held the USD dollar.

The Bank of ENgland restore in 1821 the convertibility to Gold, massive price plunge, big depression and guess the fucking what.

Both US post 1866 and UK post 1825 were leading economies!!

Why? Because working and hard labor is worth sweating for it, the money you get paid with do not get debased, it keeps its purchasing power, you save more and more and produce more and more because you know what every you earn you will be able to keep, you will not be stolen by speculators and the government, you save and work your ass off instead of speculating.


Wed, 05/08/2013 - 20:29 | 3543136 kahunabear
kahunabear's picture

Blah, blah, blah. Lip service.

Wed, 05/08/2013 - 20:42 | 3543166 Supernova Born
Supernova Born's picture

Fisher: This can't go on forever.

Q: So it should end?

Fisher: I didn't say that.

Wed, 05/08/2013 - 20:38 | 3543157 Umh
Umh's picture

Sometimes the only way to get support from a bad employer is to fail. Most people will just change jobs when faced with the choice of doing a bad job or failing outright and a few will continue working harder until they can't anymore.

I sometimes feel sorry for the FED considering who they have to work with.

Wed, 05/08/2013 - 20:40 | 3543162 buzzsaw99
buzzsaw99's picture

so infinity minus one then bitchez? ;/

Wed, 05/08/2013 - 20:42 | 3543171 Doctor of Reality
Doctor of Reality's picture

Not to get all conspiracy theory, but isn't it a little "Biblical" that there are 12 Federal Reserve Districts? 


Wed, 05/08/2013 - 21:01 | 3543228 Whiner
Whiner's picture

Satan's Twelve Disciples. Counterfeits.

Wed, 05/08/2013 - 20:46 | 3543176 horot
horot's picture

"too big to jail."


No argument there, Dick!

Wed, 05/08/2013 - 20:47 | 3543181 Fuku Ben
Fuku Ben's picture

"We're the best looking horse in the glue factory"


is far more telling

Wed, 05/08/2013 - 20:58 | 3543201 Cabreado
Cabreado's picture

He's had eight years to stand up and yell...

The most pathetic trait of Such Persons is that they have no clue how transparent they are.

Wed, 05/08/2013 - 20:53 | 3543203 koncaswatch
koncaswatch's picture

"Inflation is not hurting the economy"  Really!!? With no interest on saved capital and price inflation a reality what is Mr. Fisher taliking about? Inflation is killing me... Oh! I'm not the economy, now I get it.

Wed, 05/08/2013 - 20:58 | 3543218 blindman
blindman's picture

Angel From Montgomery - Bonnie Raitt w/ John Prine
" ... hard way to go." j.p.

Wed, 05/08/2013 - 20:57 | 3543220 kwatinhu
kwatinhu's picture

You know it's crazy with all these bailouts and government programs getting scammed by the trial lawyers. ( as in Pigford et. al) It's not like the money ( bonuses, Fannie Freddie crook directors et al.) just vaporized. We now who got it, how about some good old fashion Claw backs? Just take a few well armed individuals with you and tell the thieves you we want the money back.

Or else.I bet it would work in Russia

Wed, 05/08/2013 - 21:09 | 3543230 Trampy
Trampy's picture

First Law of Thermodynamics (1850, Clausius & Rankine):

Energy can be neither created nor destroyed; it can only change form.


ZIRP, QE4EVA, "whatever it takes," yadayada ...

The central bankers of FRB, BoJ, ECB, and BoE are con artists hawking a perpetual motion machine.

Wed, 05/08/2013 - 21:08 | 3543238 devo
devo's picture

They put this guy in the FED to dissent and appease libertarians, so when wealth gap increases and the FED blows up the economy, they can replay this and say they saw it coming yada yada. He's placed to make the FED look benign. Surprised ZH falls for this and places any credence in the interview.

Wed, 05/08/2013 - 21:56 | 3543359 espirit
espirit's picture

ZH is fight club, and no punches are pulled.

This is an old "goodcop, badcop" playbook.

Wed, 05/08/2013 - 21:11 | 3543250 btdt
btdt's picture

Fisher, the mild-mannered bag man

Look at his work in NAFTA and Japan's "opening".

Wed, 05/08/2013 - 21:35 | 3543292 fuckitall
fuckitall's picture

Yes it can go on forever, but they'll destroy the dollar and implode what's left of the economy. The Zimbabwe model. Seems to be the plan here too.

Wed, 05/08/2013 - 21:39 | 3543320 Notarocketscientist
Notarocketscientist's picture

Santelli exposes himself as the toady of the big banks that he is.

He NEVER criticizes them.  That is because it is CNBS policy to lick the ball sacks of bankers.... Santelli can rant and rave about little old ladies fucking the system and just about anything else but there is one thing that is OFF LIMITS and that is he can NEVER say a bad word about banks.


Thu, 05/09/2013 - 02:56 | 3543765 RaceToTheBottom
RaceToTheBottom's picture

totally captured journalist

Wed, 05/08/2013 - 21:43 | 3543326 SnatchnGrab
SnatchnGrab's picture

Huh. Is this why Texas decided to reclaim all of its gold from outside the state? (From an earlier ZH article)

Wed, 05/08/2013 - 21:47 | 3543338 kevinearick
kevinearick's picture

Empires, Monuments to Denial

The impetus for control is maladaptation, insecurity and fear. The empire education system projects maladaptation onto its input and stratifies its output accordingly, to preserve the status quo, to justify / compute / replicate / comport itself. It’s an observation prism acting as a gravitational multiplexer.

All politics are local, aggregated. All money is generated on the margin locally, in the underground economy, and leveraged up. Without local organic growth, the central banks, feds, states and counties can only print to dilution, which is why the speculators have moved into gold.

There are two basic forms of ‘unlawful’ printing, illicit operations and technology development. All government workers are not a-holes, but they are all dependent upon a-holes without organic growth – cops, firefighters, doctors, etc that control the drug trade, and your second and third tier kids providing public, private, and non-profit corporations with best business practices out of the university system, like the unprosecuted digital financial instruments causing so much angst.

First tier technology developers are stacking in a global hash table beyond the empire’s control. Propulsion to the future is fueled by selling the past short. The majority, residing in the master and slave chain of event horizons is “learning” that only they will accept the fiat currencies; their economy is rudderless, which is why boomers committing suicide in McMansions now exceeds auto fatalities.

The economic clutch is engaged. The ‘Boom Heard Round the World,’ as Mr. Buffet knows, will come from labor, not from capital. The part of the middle class not consumed by the imploding corporate vortex, those not inhibited by currency, will engage to cross the bridge before it collapses. Labor is selling everything short but its development.

An empire is a pyramid of small gears combined to transmit / translate large gears. Drop it dead, take one step back in the cycle, from the end to the beginning, and jump forward. You have only talked yourself into the perception of falling back. Relative to the empire, look out from the inside of the multiplexing mirror, in both directions.

Pension collapse began decades ago, and has reached the tipping point, with associated outright capital confiscation; defined contribution plans were just one point among many along the way.

They can only confiscate and dilute. That's it. Or the mob will steamroll them, just before steamrolling themselves. If/when this baby drops, the lights are going to go out, much of the dc grid will not come back up, and all the people who had actual manual experience are dead and gone. They have no choice but to inflate fixed capital and deflate currency, event horizon by event horizon. What is the relative price of oil in gold?
Wed, 05/08/2013 - 22:05 | 3543375 espirit
espirit's picture

This is sort of like a dream rant, isn't it?

Wed, 05/08/2013 - 22:14 | 3543391 kevinearick
kevinearick's picture

Credit is not currency. Its like paper gold. What is the credit price of an ipad? what is the cash price on the street? what is the difference? if you are at the top? if you are at the bottom? if you are in the middle somewhere?

Wed, 05/08/2013 - 22:17 | 3543400 blindman
blindman's picture
Sunday, May 05, 2013
Antal Fekete: Gold Backwardation and the Collapse of the Tacoma Bridge
With Anthony Wile
"..Daily Bell: Is the Misesian business cycle theory valid?

Antal Fekete: I have criticized the Misesian business cycle theory for suggesting that businessmen are unable to learn. Time and again they fall for the false signals of low interest rates, caused by the propensity of the banks and the government to expand credit, leading to economic miscalculation as to the quantity of available capital goods. But in fact successful businessmen are the most intelligent people we have. Why don't they learn and take correction, factoring in the undercutting of interest rates by the banks and the government, in their calculation of available capital goods? Engineers make such corrections routinely. Why can't businessmen?

An improved theory of the business cycle would consider the causality relation between prices and interest rates. It is reasonable to appeal to the phenomena of economic oscillation that has often been talked about, and economic resonance that has been talked about much less. Here are the details. Apart from leads and lags rising (or falling) prices make interest rates rise (or fall) and, conversely, rising (or falling) interest rates make prices rise (or fall). Prices and interest rates oscillate. There are three types: damped, steady and runaway oscillation. The first, where the amplitude peters out in time due to friction, is extremely common. Steady oscillation occurs if carefully measured boosting provided by resonance is present – as in generating alternating current or radio waves. Runaway oscillation is also due to boosting – not to say 'overboosting'. It makes amplitudes get ever larger due to periodic injection of energy. The injection of energy, here just as in the case of steady oscillation, is provided by resonance. Unless injection is cut back below the level of steady oscillation, runaway resonance will end in the self-destruction of the resonating system. Prices resonating with interest rates make for such a system. The oscillation of prices is boosted by the oscillation of interest rates. Resonance results. But because of the ignorance of the Federal Reserve, overboosting occurs: the periodic injection of excess credit kicks the system to ever higher energy levels. Empirical evidence is provided by the sloshing of excess money back and forth, like tide and ebb, between the commodity market and the bond market with increasing intensity, until the system breaks down. If breakdown occurs during the phase when the rate of interest is rising and money flows from the bond market to the commodity market, we talk about hyperinflation.

But there is also a second variety for which no precedent exists because we have no previous historic example of experimentation with global fiat paper money. If breakdown occurs during the phase when the rate of interest is falling and money flows fromt he commodity to the bond market, then we have what I call hyperdeflation. That is what we are apparently having right now. It started over thirty years ago in the early 1980s. When in January 1980 interest rates failed to break out on the upside (as appeared likely at the time, with the gold price hitting $875), the system went into the mode of declining interest with such a force that put the Fed out of control. For the past three decades interest rates have been falling relentlessly. Of course, the Fed would like to have us believe that this is the result of deliberate monetary policy. I suggest it to you that it's not. It is runaway resonance in action – on the side of interest rates and the velocity of money falling to zero. Fall they do inexorably. It is hyperdeflation. The Fed is desperately trying to fight it, but all is in vain. We are on a roller-coaster ride plunging the world into zero-velocity of money and into barter. In my lectures at the New Austrian School of Economics I often point out the similarity with the collapse of the Tacoma Bridge in 1941.**

Wed, 05/08/2013 - 23:47 | 3543586 James
James's picture

I often point out the similarity with the collapse of the Tacoma Bridge in 1941.**


Video of the Collapse of Tacoma Bridge.

Wed, 05/08/2013 - 21:52 | 3543350 MrBoompi
MrBoompi's picture

The people who think the Feds policies have failed always forget who the Fed is really trying to help.

Wed, 05/08/2013 - 22:10 | 3543385 deerhunter
deerhunter's picture

A fire in the kitchen does not matter if there is a hole in the hull of the boat.  The stench in this country is palpable. We are morally, spiritually and financially bankrupt.  If Harry Reid showed up to date your older sister when they were in high school would you let him off the front porch with her?  And he gets elected again and again???  Who cares about Benghazi???  Shelter in place.  Cower like scared rats?  Turn our boys into girls  because they don't want to sit still in school???  Kick them out for making play guns?? Did any man in here want to sit still in school in grade school?  We used to climb water towers.  Someone fell and died doing it.  Now it is razor wired with no access.  I guess I knew I would die or that sudden stop would hurt at the age of 12 but you know what ?  We did it anyway.  No risk, no reward has become no risk all reward if you are in the right group.  The good book says hope deferred makes the heart sick.  I think indifference will be the death of what remains of America.  America has a sick heart.   Who cares about Benghazi?  I do.

Wed, 05/08/2013 - 22:59 | 3543484 TheMeatTrapper
TheMeatTrapper's picture

America does indeed have a sick heart. I no longer recognize the country I grew up in. I remember when the neighbors mom would snatch your ass up and administer a spanking on the spot if you deserved it. I remember 50 cents a gallon gas. I remember walking to the gas station and filling a gallon milk jug with gas and then pushing the lawn mower around the neighborhood asking folks to cut their grass for a few bucks. I remember walking up and down the roads collecting glass Coke bottles and taking them back to the store to collect the deposit.

I remember being told to come home when the sun went down and it got dark. I remember catching snakes out of the local creek and putting them in a pillowcase to sell to the local pet shop.

I remember getting pissed off at another kid at school and having the PE coach telling us to "put on the gloves" and go settle it.

I remember getting pulled over by an Alabama State trooper while on a date and sitting in the passenger seat of his car and talking the pro's and con's of the Mini-14 while my date sat worried in my car.

I think it's the knowledge of then versus now, and the knowledge that my son will never experience the growing up that I did, that causes me to reach for yet another IPA.

Wed, 05/08/2013 - 23:37 | 3543566 Westcoastliberal
Westcoastliberal's picture

MeatTrapper, I can remember buying 19.9 cent gas for my 53 Olds 330 4 BBL with "maypop" tires.  When you mashed the gas pedal you could literally see the gas gauge drop.  I used to hang at the Marathon gas station where the owner would give me used tires just for the cost of mounting. I used to crawl under my car and work on it in his driveway; borrow his tools.  One crazy dude who also hung there had a 55 Chevy with a 283, race cam, 3 deuces & 4 speed.  A right of passage was to take him up on a "ride" which consisted of swigs of Jack Black while screaming down gravel roads at 110 mph and drifting through the curves.  If you could hang on for dear life and made it back from the ride in one piece you had arrived.  Those were the days. The big event was the coon hunters annual competition. Lotsa guns, hound dogs & whiskey!

Wed, 05/08/2013 - 23:23 | 3543537 sgorem
sgorem's picture

+100 Deerhunter.................

Wed, 05/08/2013 - 23:23 | 3543540 sgorem
sgorem's picture

+100 Meattrapper

Wed, 05/08/2013 - 23:26 | 3543546 Westcoastliberal
Westcoastliberal's picture

So true things are SO fucked up.  Truly FUBAR! Good post earlier today here with CHS and that other guy; the gist is only default/jubilee is going to solve this.  It's what should have happened in 08.  Tell TBTF banks to fuck off.

Wed, 05/08/2013 - 22:28 | 3543418 notquantumdum
notquantumdum's picture

There is no doubt in my opinion that the fiscal policies implemented in the US in the last 6 years have not been very very harmful.  They obviously have been very harmful, in my opinion.

What a pass the fed has given them!

Wed, 05/08/2013 - 22:32 | 3543426 notquantumdum
notquantumdum's picture

Actually, maybe they have been very very harmful.

Wed, 05/08/2013 - 23:13 | 3543516 W T F II
W T F II's picture

Fisher and Santelli are full of it. The Fed's efforts have only succeeded in bloating excess reserves. There is still a dreaded de-leveraging going on. Metrics showing any recovery and increase in loan demand/velocity are fudged and cherry-picked for their headline luster.There is a deflationary undercurrent to it all. Bernanke knows this. So does Fisher. Check their VOTES on the public record.

The truth is that deficit-spending and huge fiscal expansion from D C is the ONLY thing keeping nominal GDP barely above the water-line. If we had a 'balanced-budget' we'd be -5% GDP or worse.


Wed, 05/08/2013 - 23:23 | 3543541 Westcoastliberal
Westcoastliberal's picture

Do they really think pouring $85 Billion a month into Wall St will result in creating jobs?  How disconnected from reality are these fucks?

Thu, 05/09/2013 - 08:33 | 3544018 W T F II
W T F II's picture


I do not believe they ACTUALLY believe this. There is dissention on the Fed. Plosser was on Bloomberg this AM and unequivicolally asserted the lack of traction QE engenders. In financial markets and re-fi for private equity and corporations, sure, it induces behaviors. But, jobs..?? Hell no. There's no inflation either. Deflation still looms from DEMAND DESTRUCTION.

Bernanke knows he has limited tools and DOES believe in inflated markets engendering 'animal spirits'.

The more sinister view is that this is all a pretense in front of a complete 'risk-off' collapse in advance of rolling out a new currency regime. There is VERY good reason to believe in this possibility.

Wed, 05/08/2013 - 23:29 | 3543550 Monedas
Monedas's picture

Hope .... and NO CHANGE .... brother, can you spare a dime .... go up and ask someone for a silver dime .... and .... see .... what .... happens !

Wed, 05/08/2013 - 23:56 | 3543603 kurt
kurt's picture

Mr. Fisher, may I call you Dick?

Thu, 05/09/2013 - 02:22 | 3543755 Rip van Wrinkle
Rip van Wrinkle's picture

The entie interview was nullified by one quote right near the end: -


"the too big to fail banks are also too big to jail"


The rest is pure bullshit.

Thu, 05/09/2013 - 02:53 | 3543764 aicohn
aicohn's picture

"once you start down the path to the dark side, forever will it control your being..."

Master Yoda

Thu, 05/09/2013 - 03:00 | 3543767 RaceToTheBottom
RaceToTheBottom's picture

Santelli is a one sided slob.  He is quick to bash mortgage scum, but he NEVER bashes Wall Street scum

Thu, 05/09/2013 - 07:21 | 3543884 overmedicatedun...
overmedicatedundersexed's picture

corzine and buffet say the FED is just all right. high praise indeed.

Thu, 05/09/2013 - 09:14 | 3544159 venturen
venturen's picture

Of course it can go on is called QE INFINITE. Unlimited money for banks over unlimited time!

Thu, 05/09/2013 - 09:20 | 3544190 Random_Robert
Random_Robert's picture

Fisher calls out the ineptness of our elected officials, which I have no argument with, but let's not look past the utter INCOMPETENCE of the non-elected "officials" as well, vis-a-vis:

1) A Justice Dept head that has released more convicted criminals than he has earned in new convictions. All while the unprecedented fraud at the top of the food chain on Wall Street accelerates to ever greater acts of open brazenness.

2) A Secetary of State who is about to be Benghazi-Q'd after perjuring herself

3) A Homeland "Security" head who is one of the most fearful people on Earth, and cowers from her own shadow

And it goes on and on...   I wish Nigel Farage was American. I know his American counterpart is out there somewhere... 

Some days I wish Thomas Sowell would man up and get a little more inflammatory with his rhetoric. His head is right, but he is still too PC in his delivery.

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