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"A Classic Minsky Trap Appears To Have Developed"

Tyler Durden's picture




 

From Guy Haselmann of ScotiaBank

Data show quantitative easing (QE) is having ever-diminishing economic benefits while the risks to financial stability accumulate the longer the program endures. Inevitably, there is a point in time when the costs outweigh the benefits. Determining that point is critical, and some believe it may have already passed.

When the Federal Reserve’s current asset purchase program was initiated, both the necessity and scope of it were questionable. Inflation was stable and near the Fed’s target. The unemployment rate had already fallen steadily to 8.1 percent in the second half of 2012 from a high of more than 10 percent in 2009.

The program’s $1 trillion per year in asset purchases equates to the annual GDP of Belgium and Norway combined. The FOMC justified the  open-ended program by pointing to the unacceptably slow pace of the recovery, thereby tying its lifespan and magnitude to making “sufficient progress” toward economic targets.

Focus was purposely directed toward economic benefits, rather than risks, because benefits are easier to explain and ‘guesstimate’ using econometric models. However, large errors can occur in those models, due to the vast complexities of interconnected markets and economies.

Unfortunately, unquantifiable and unintended consequences from the enormous ballooning of the Fed balance sheet may be on the horizon. Recent market volatility might be a warning sign to the FOMC about the extent of risk-taking (which QE policies encourage), and how the market will react when its exit strategy finally materializes. Even with the present sub-optimal economic growth, the Federal Reserve may decide to announce tapering of asset purchases as soon as today. After all, the FOMC can claim success at having ‘made progress’ toward their stated goals. At last
September’s FOMC meeting, their central forecast for the unemployment rate for the end of 2013 was 7.75 percent. The May rate has already fallen to 7.6 percent.

For the past several years, a firmly entrenched psyche of ‘win-win’ for risk-taking behavior has dominated. The thinking has been that the Fed would either help achieve a sustained recovery (allowing distorted prices to be validated by economic fundamentals), or the FOMC would provide more price-boosting liquidity. Now, faith in this proposition is slowly being eroded.

Global central banks have collectively provided $11 trillion in liquidity over the past several years. The initial moves were taken to spark domestic demand, but some recent external actions have been retaliatory in nature, implemented as a means to influence currency levels. These new forms of hostilities are indications that the external ramifications of QE policies may no longer be passively tolerated.

While offsetting actions by non-U.S. entities may not influence the FOMC, they are aware that currency disputes lead to trade disputes, and that protectionist pressures are a great risk to a highly globalized economy.

Invoking the motto, “Don’t fight the Fed,” has rewarded investors. They have ‘reached for yield’ and ‘chased risk’ to take full advantage of the implicit ‘Fed put’. FOMC speeches have hinted at speculative excesses. It has not gone unnoticed that NYSE Margin Debt has risen to all-time high levels. The problem is that as asset prices have veered far from economic fundamentals investors, enjoying ‘right-tail’ benefits, have been lulled into complacency. A classic Minsky Trap appears to have developed.

When market participants sense the Fed’s unwind is beginning, they (and the central bank) may be surprised by the extent of the reversal.

Regulatory constraints may compromise market liquidity during ‘fed-piggybacking trade’ unwinds, leading to a harsh ‘left-tail’ overshoot.

‘Tapering’ earlier might be better for markets in the long run. An early ‘taper’ would allow officials to regain a unified voice and control the market message. They could then emphasize the extraordinary amount of accommodation that they are still providing in an effort to calm markets.

Moreover, a slower pace of asset purchases of, say, $60 billion would allow the FOMC to increase it back to $85 billion should the economy slow over the next few months. Without a slower pace now, the FOMC may run into credibility issues about the program’s efficacy at the same time an increase in purchases might be expected. This would further exacerbate funding stresses and fears of financial instability.

The longer QE persists, the greater the magnitude of the ‘left-tail’ event that is growing in probability. Continuing to provide massive stimulus for a growing economy will turbo-charge the ‘reach for yield’ and ‘chasing of risk’, leading to financial instability.

 

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Wed, 06/19/2013 - 09:10 | 3670944 fonzannoon
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"An early ‘taper’ would allow officials to regain a unified voice and control the market message. They could then emphasize the extraordinary amount of accommodation that they are still providing in an effort to calm markets."

Something tells me this guy could describe in detail what Bernanke's balls look like.

Wed, 06/19/2013 - 09:16 | 3670960 RSloane
RSloane's picture

.. and like it!

Wed, 06/19/2013 - 09:24 | 3670999 i-dog
i-dog's picture

 

"Calm markets" ... bullshit!

Their objective is to create nations of debt slaves by printing a waterfall of money for the banks to lend to NINJAs for houses, cars, college degrees, iShit, 3D-TVs, and marble counter tops.

But the piper will have to be paid....

Wed, 06/19/2013 - 09:27 | 3671009 fonzannoon
fonzannoon's picture

"But the piper will have to be paid...."

Not if we juuuust taper a bit. Than the piper can keep smoking his pipe...apparently.

Wed, 06/19/2013 - 09:38 | 3671063 davinci7_gis
davinci7_gis's picture

Look, Tyler is right..tapering is like a mouse sniffing around a mouse trap....once the mouse goes too far, the trap is sprung and he's got his cheese but his ass is DEAD!

Wed, 06/19/2013 - 09:39 | 3671074 davinci7_gis
davinci7_gis's picture

If the FED was smart, they would give money freely to the citizens....and then let inflation begin to rise....that's when you taper. If the FED ever tries to taper before inflation hits, it's going to be bad news for the world economy.

Wed, 06/19/2013 - 09:43 | 3671091 fonzannoon
fonzannoon's picture

Why do you think the fed keeps missing the boat on that one?

"Hey guys...listen, why don't we take this months QE.....the 85 billion...and give it to the people instead of the banks? You know....maybe it would spur the economy and give the people on the street a boost".

"Hello 911...yes one of our members just shot himself 7 times in the head...send someone....but no need to hurry, he's definitely dead".

Wed, 06/19/2013 - 09:59 | 3671146 Winston Smith 2009
Winston Smith 2009's picture

That's hilarious.

The primary mission of the Fed is to save BANKS.  That's the very reason it was created.  If it's a choice between (a) screwing the world to save the banks or (b) making the banks accountable for their actions to save the world, path (a) will always be taken.  Always.

Wed, 06/19/2013 - 10:22 | 3671230 SafelyGraze
SafelyGraze's picture

the short-term goal is simply to drive people out of the "market"

it's already working with housing

when the fed's agents are the only ones in the market, they can "buy" and "sell" to establish any "price" that is planned

Wed, 06/19/2013 - 11:39 | 3671542 Pinto Currency
Pinto Currency's picture

 

Minsky's "theory" is, in short, when you print money, things look great and then after a whle they get really crazy.  Minsky is another distraction from the central issue.

We are not experiencing a "Minsky moment".

Instead, we are experiencing a "central banking moment".

Wed, 06/19/2013 - 12:41 | 3671836 El Viejo
El Viejo's picture

Yes, you can lie to yourself, but fundamentals will always catch up to your lie. The fundamental question is: How do you fix a weak or lagging economy by raising rates??

Wed, 06/19/2013 - 12:54 | 3671898 Pinto Currency
Pinto Currency's picture

 

Or how do you fix an economy by debasing the currency and blowing bubbles?

Wed, 06/19/2013 - 10:43 | 3671288 smlbizman
smlbizman's picture

this is an excerpt from a paper i am reading...

Now, this leads us up to 1933. Our country was recovering from a depression and now was declared bankrupt. I know you are saying. Do What, the American people were never told about this? Public policy and National Security overruled the public right to know. Read the following Congressional quote:

"My investigation convinced me that during the last quarter of a century the average production of gold has been falling off considerably. The gold mines of the world are practically exhausted. There is only about $11,000,000,000 in gold in the world, with the United States owning a little more than four billions. We have more than $100,000,000,000 in debts payable in gold of the present weight and fineness. . . As a practical proposition these contracts cannot be collected in gold for the obvious reason that the gold supply of the entire world is not sufficient to make payment." -- Congressional Record, Congressman Dies, March 15, 1933

Before 1933 all contracts with the government were payable in gold. Now I ask you? Who in their right mind would enter into contracts totaling One Hundred billion dollars in gold, when there was only eleven billion in gold in the whole world, and we had about four billion. To keep from being hung by the American public they obeyed the banksters demands and turned over our country to them. They never came out and said we were in bankruptcy but, the fact remains, we are. In 1933 the gold of the whole country had to be turned in to the banksters, and all government contracts in gold were canceled. This is bankruptcy.

"Mr. Speaker, we are here now in chapter 11. Members of Congress are official trustees presiding over the greatest reorganization of any bankrupt entity in world history, the U.S. government." -- Congressman Traficant on the House floor, March 17, 1933

The wealth of the nation including our land was turned over to the banksters. In return, the nations 100 billion dollar debt was forgiven. I have two papers that have circulated the country on this subject. Remember Jesus said "money is the root of all evil" The Congress of 1933 sold every American into slavery to protect their asses. Read the following Congressional quotes:

"I want to show you where the people are being imposed upon by reason of the delegation of this tremendous power. I invite your attention to the fact that section 16 of the Federal Reserve Act provides that whenever the Government of the United States issues and delivers money, Federal Reserve notes, which are based on the credit of the Nation--they represent a mortgage upon your home and my home, and upon all the property of all the people of the Nation--to the Federal Reserve agent, an interest charge shall be collected for the Government." -- Congressional Record, Congressman Patman, March 13, 1933

 

"That is the equity of what we are about to do. Yes; you are going to close us down. Yes; you have already closed us down, and have been doing it long before this year. Our President says that for 3 years we have been on the way to bankruptcy. We have been on the way to bankruptcy longer than 3 years. We have been on the way to bankruptcy ever since we began to allow the financial mastery of this country gradually to get into the hands of a little clique that has held it right up until they would send us to the grave." -- Congressional Record, Congressman Long, March 11, 1933

more can be founf here

http://www.barefootsworld.net/admiralty.html

Wed, 06/19/2013 - 10:46 | 3671309 Oldwood
Oldwood's picture

Even if you dismiss the very likely possibility that these bankers are evil shits, they, like so many of our "elites" firmly believe that the world cannot survive without them. So they believe that their financial health is of absolute importance to the well being of the world and so they are enriching themselves not for their own personal satisfaction but as a sacrfice to the greater good. How do you fix that? So the criminal has his gun to your head while explaining to you that you should be preparing him an excellent meal because afterall, he wouldn't be there but he has a blood sugar problem and gets really testy when its off. Bon Apetit!

Wed, 06/19/2013 - 13:10 | 3671927 fuckitall
fuckitall's picture

"The primary mission of the Fed is to save BANKS"

Yes, correct.

Well.... almost.  More like help banks loot the nation, and QE is looting on overdrive.

"Help the economy recover" is nonsense.  Just a cover story.  Like handing a million dollars to your city govt then saying you'll do better.  Or handing a million dollars to your greedy cheapskate cousin then saying you'll do better.

How is it looting you?  Simple, currency debasement.  That trillion dollars printed each year debases the currency, taking purchasing power right out of your pocket / bank account / CDs / money market funds / and paycheck too.  It's why USD has lost 50% of its value since 2007 (and prices have doubled).  If you haven't received a raise since 2007, you're now working for HALF the pay you got then.  They're stealing HALF your pay ...and that's before taxes.

Of course there's nothing you can do about it.  You can't force your employer to double your pay.  You can't force Fed to stop printing and debasing the currency.

Bernanke is fully aware of this. In 2002 he said printing debases the currency.  Everybody in banking knows it does.  But nobody in banking talks about it.  It's not mentioned in this article. And sell-out suck-up economists don't talk about it either.

And every banker sticks with the cover story including the author of this article.  And every sell-out suck-up economist too. 

Now they're seeing diminishing returns from QE.  That's what they're whining about.  Printing and buying a trillion dollars of trash doesn't boost asset prices like it did before.  Because the economy is getting worse.  Fundamentals are getting worse, not better.  The gap between their fantasy inflated paper asset prices and the real physical economy is getting wider. MBS stay inflated while fewer people make mortgage payments and home prices drop.

"Tapering"?  Forget it.  Not gonna happen.  Opposite will happen.  More printing and buying more trash to keep prices up. 

Eventually Fed will print and buy every MBS created.  And every treasury created.  Prices stay high but the currency keeps losing value till one day other nations say "enough" and stop accepting US dollars.  That's when the crash happens.  US dollar crash.  Sudden and chaotic.   Catastrophic more like.

And yes they know it's coming.  And they probably know what they'll do.  New fiat currency?  Nope, nobody would trust it.  New PM-backed currency?  Nope, they wouldn't dare.  SDR?  Nope, they're only for international settlement.

Someone else's currency?  Yes.  USA will no longer have a currency.  And no longer have any sovereignty.  And that's the plan I believe.

Wed, 06/19/2013 - 15:54 | 3672803 RallyRoundTheFamily
RallyRoundTheFamily's picture

I agree, this piece fits the puzzle.

Wed, 06/19/2013 - 09:49 | 3671117 Dr. Engali
Dr. Engali's picture

If the fed was smart...isn't that an oxymoron? I get the impression that you think the fed is in this for anybody else besides the banks, which they aren't. If they started giving money out to the unwashed masses they might start paying off their debts and we can't have our nation of slaves doing that.

Wed, 06/19/2013 - 10:21 | 3671223 Bay of Pigs
Bay of Pigs's picture

And giving money away freely to its citizens? What kind of logic is that? 

The FED itself is the problem. Counterfeiting is the problem. How do people miss that?

 

Wed, 06/19/2013 - 13:25 | 3671887 El Viejo
El Viejo's picture

The logic goes like this:  Corporations like GE pay 0 taxes leaving the govt with two options(to keep govt spending in check): Lay off govt workers or raise taxes from individuals. Individuals are already fearful and burdened and so DO NOT BUY. Aggregate demand is less and so more layoffs occur downsizing the workforce and exacerbating the low demand problem.  Giving tax breaks to individuals expecially on the pay check tends to help them spend moar. If you lay off govt workers they then join the spend less crowd also further exacerbating the situation. With the baby boomers retiring and spending less leads me to believe that this is only going to get worse and fighting it will only create a stair step down effect. It is like static friction and some stevedore moving a crate along a floor. The CB resistance is like the static friction and the moving forces will increase until friction is overcome. When the CPI drops it tells BB that demand is further weakening and HE WILL PRINT. Of course they could reinstate the FICA tax rebate, but one time rebates tend to go into the bank, which pays down personal debt, but also raises govt debt.

To come full circle for you: The govt can't tax cash rich corps because many have moved over seas or are politically connected. So the madness continues until the fat lady sings. Individuals have no lobbyists. Essentially our country has been stolen from us. This same kind of power structure existed in pre war Germany.

My recommendation to everyone is to do what I did. GET YOUR ASS OUT OF DEBT and that includes your house(preferably a smaller one that you can share with family members). You will lose some equity during deflation but at least you will have a roof over your head if you lose your job.

That describes what has happened and how I successfully dealt with it. (except for the ramp up in stock prices) Where we go from here is debatable, but many think we are in for another stair step down.

Actually, there was another partial solution. Federal employees salaries were frozen first for three years and I hear now that it may be 5 years. State govts need to adopt this, but many are resorting to the easy solution for an idiot govt politician and that is to raise property taxes on already burdened private sector which causes a mini revolt and you see what happened in Wisconsin. Grandiose public worker pension funds have also exacerbated this problem.

People claim that giving money to individuals is liberal economics and a moral hazzard, but how has giving money to banks solved anything?? and what about that moral hazzard???

If you look at personal debt it started climbing right after Reagan (Seems trickle down never trickled) Granted some just had to go to the extreme in getting into debt, but a 20% Self Employment Tax on top of income tax??? Come on really. This was pure Republican favoritism to corporations and it cost us dearly. Also look at the graphs for govt workers salaries vs private sector. They just kept climbing until they were larger than the private sector workers.

Wed, 06/19/2013 - 10:23 | 3671231 Meat Hammer
Meat Hammer's picture

<---Scandals used to distract from upcoming economic crash

<---Upcoming econmic crash used to distract from scandals

Wed, 06/19/2013 - 10:26 | 3671238 mess nonster
mess nonster's picture

The definition of a trap:

An apparent chance of immediate reward with little or no risk, when in actuality, risk is not only great, but enhanced to the level of inevitability.

The "immediate reward" is the bait. The appearance of little or no risk is the appearance that the reward (bait) is easy to obtain, ie "there for the taking".

With any trap, there is no sign of doiownside risk. To the potential trapee, the reward to risk ratio is too large to resist.

This is a classic mousetrap. The caloric rewards of the cheese, obtained with no effort, are to great to resist, especially since it appears to just sit there for the taking.

Some traps are compounded by an event tunnel. That is, the approach to the trap is designed to focus the prey into the trap, and to minimize the prey's ability to make alternate decisions.

Well, ZH has long commented on the inability of QE to stimulate the economy. All that free money has done is create a bubble, or, in the trap anaology, to "load" the entrapment mechanism. As margin debt approaches 3%, it appears the trap is about to be sprung. All traders should stay on the ground floor for the next six months.

 

 

Wed, 06/19/2013 - 10:37 | 3671273 seataka
seataka's picture

The Piper will be paid in worthless paper.

 

 

Wed, 06/19/2013 - 11:05 | 3671355 i-dog
i-dog's picture

I very much doubt it. Those who are in debt are not holding any of that paper, and more and more each day are losing their income as well.

Best for them to learn the lyrics to "Jump down, turn around, pick a bale of cotton" ... because they will be required to sing it, soon enough....

Wed, 06/19/2013 - 09:22 | 3670988 idea_hamster
idea_hamster's picture

Only if he has eyes on his chin.

Wed, 06/19/2013 - 10:06 | 3671183 fuu
fuu's picture

"They could then emphasize the extraordinary amount of accommodation that they are still providing in an effort to calm markets."

You skipped right over the part that the QE will continue even with full taper in place. The QE that we can see is the iceberg's tip.

Wed, 06/19/2013 - 11:34 | 3671521 Petrus Romanus
Petrus Romanus's picture

He can probably provide a complete flavor profile as well.

Wed, 06/19/2013 - 09:16 | 3670961 Cursive
Cursive's picture

Fine article, but all he had to say was, "If monetary policy (including QE) works so great, why aren't we talking about ending it four years into the "economic recovery?"

Wed, 06/19/2013 - 09:19 | 3670977 HulkHogan
HulkHogan's picture

A taper to 60 billion a month is still 3/4 of a trillion dollars a year. Just rip off the band aid and end QE already.

Wed, 06/19/2013 - 09:24 | 3670998 Tyler Durden
Tyler Durden's picture

With taper and without:

Wed, 06/19/2013 - 09:32 | 3671035 SheepDog-One
SheepDog-One's picture

Right....'taper vs no taper' is basically 'do you want fisted up to the shoulder or just to the elbow?'

Wed, 06/19/2013 - 09:45 | 3671096 Cursive
Cursive's picture

@Tyler

Is it possible to do an update on ECRI/Lakshman Achuthan?

Wed, 06/19/2013 - 09:49 | 3671121 francis_sawyer
francis_sawyer's picture

Not without a ruler & a purple crayon...

Wed, 06/19/2013 - 14:11 | 3672251 Uncle Remus
Uncle Remus's picture

Aaaaaaaand it's not gone.

Wed, 06/19/2013 - 09:24 | 3671000 fonzannoon
fonzannoon's picture

First off, as ekm points out...who says it's 85 billion? The fed? You believe em? How do you know it's not 250 billion?

Go ahead and rip that bandaid off. I'm sure it's just a flesh wound. Maybe it jus needs some fresh air..

Wed, 06/19/2013 - 10:05 | 3671176 Scro
Scro's picture

Isn't there at least 4 recognized "funds" the government/fed can use to "stabilize" the markets such as the Economic Stabilization Fund. I seriously doubt they spend less than 100 billion a month.

Wed, 06/19/2013 - 09:22 | 3670990 fonzannoon
fonzannoon's picture

Cursive, with all due respect. This article was awful.  Granted I did not really read it, but that's not important.

"The longer QE persists, the greater the magnitude of the ‘left-tail’ event that is growing in probability"

Is this guy freaking kidding me? That statement is such an understatement it's ridiculous. It's these types of articles that imply there is some sort of way out and it's not that bad that make me ill.

 

Wed, 06/19/2013 - 09:26 | 3671007 SheepDog-One
SheepDog-One's picture

100% controlled manipulated market only where it's at and not 50%+ lower than here due to massive printing and intervention hand holding, and they're debating how this Mastadon can probly fly on it's own a bit now? Ridiculous.

Wed, 06/19/2013 - 09:29 | 3671027 fonzannoon
fonzannoon's picture

I must be cracking up. What the hell is going on. I am watching people who have been on here for years continue to hang onto every word of a madman and fall for this taper bullshit as if the fed actually has a way out of this. It's surreal.

Wed, 06/19/2013 - 09:44 | 3671095 SheepDog-One
SheepDog-One's picture

Suddenly everyone's a 'Taperist', PHD', it's just hillarious. 

Something tells me if they're even talking about this things are on very shaky footing right now.

Wed, 06/19/2013 - 09:51 | 3671127 francis_sawyer
francis_sawyer's picture

@fonz

~~~

They all need a shrink... I highly recommend 'Dr. Lilith Sternin'...

Wed, 06/19/2013 - 10:24 | 3671235 Bay of Pigs
Bay of Pigs's picture

"Doctor Taper to the ER, paging Doctor Taper!"

Wed, 06/19/2013 - 11:00 | 3671340 Uncle Remus
Uncle Remus's picture

"stats"

Wed, 06/19/2013 - 13:25 | 3672033 Pinto Currency
Pinto Currency's picture

 

Central banking is bullshit.

By extension, analyzing the potential plans of cental bankers is bullshit.

Wed, 06/19/2013 - 09:45 | 3671104 Freewheelin Franklin
Freewheelin Franklin's picture

This is a  market that is looking for a reason to sell off. Any tapering bullshit from the Fed is going to cause an event. All of this "talk" is just an attempt to lessen the pain. It's like in those old Westerns where they give the guy a stick to bite down on while they cut out the bullet.

Wed, 06/19/2013 - 09:28 | 3671020 gjp
gjp's picture

+1 I'm with you, Fonz, as I always find myself nodding along to your posts.  I don't like Bass's ignoring the US financial elephant in the room in favour of Japan bashing, but he has it right from last night's post: the financial power structure is shot through with denial from top to bottom.  This is the last play, and there will be no credibility when it's over, no matter what fine tuning is done on the margin from here on out.  Epic collapse was ensured from the day they bailed out everything in 2008.

Wed, 06/19/2013 - 10:13 | 3671203 Pareto
Pareto's picture

yup.  +100  for Epic collapse was ensured from the day they bailed out everything in 2008.

Wed, 06/19/2013 - 09:29 | 3671025 insanelysane
insanelysane's picture

Fonz,

Thanks for this morning's first dose of reality in an unreal world!

Wed, 06/19/2013 - 09:41 | 3671085 Cursive
Cursive's picture

@fonz

When everyone else is mad, all you are left with are your own wits.  That's about all that I can advise about this craziness.

Wed, 06/19/2013 - 09:17 | 3670966 Eireann go Brach
Eireann go Brach's picture

Everyone is a fucking expert on tapering these days! Unless you sit at Bernankes dinner table, shut your fucking pie hole!

Wed, 06/19/2013 - 09:23 | 3670997 SheepDog-One
SheepDog-One's picture

Yea now all the talk is about 'when and how much Bernank stops QE' when we all know that's the only thing keeping it all from crashing and burning completely. Sure everyones suddenly an expert on 'the tapering' now. Nonsense.

Wed, 06/19/2013 - 09:18 | 3670970 vmromk
vmromk's picture

QE can NEVER end, end of story.

QE ends and the banks and the U.S. government go BOOM.

Wed, 06/19/2013 - 09:20 | 3670981 HulkHogan
HulkHogan's picture

QE ends now or with blood in the streets later.

 

 

Wed, 06/19/2013 - 09:23 | 3670994 fonzannoon
fonzannoon's picture

Another one who does not freaking get it. You think we end QE now without blood on the streets? What the fuck is going on here?

Wed, 06/19/2013 - 09:33 | 3671040 insanelysane
insanelysane's picture

"should the economy slow over the next few months"

The economy is stalled at best.  They know QE is not working for the economy but if they kill the markets, people will be traumatized that their pensions/retirement plans have lost 50% of value.

Wed, 06/19/2013 - 11:37 | 3671547 Meat Hammer
Meat Hammer's picture

You're on fire today, fonz.  QE doesn't end.  WE end because of QE.

Wed, 06/19/2013 - 09:30 | 3671030 Dr. Engali
Dr. Engali's picture

There will be a blood bath whether qe ends now or ends later.

Wed, 06/19/2013 - 11:12 | 3671399 Overflow-admin
Overflow-admin's picture

C'EST FAUX!!!

 

U.S. government goes BOOM and THEN QE ends.

Wed, 06/19/2013 - 09:18 | 3670974 Midasking
Midasking's picture

Just end it already and let it collapse so we can all get on with our lives.... http://tinyurl.com/mem7o7x

Wed, 06/19/2013 - 09:20 | 3670979 Unknown Poster
Unknown Poster's picture

FWIW there is a rumor that Benny will announce "I'm a short-timer and I don't give a shit."

Wed, 06/19/2013 - 09:37 | 3671060 DOT
DOT's picture

He is short and he has NEVER given a shit.

Wed, 06/19/2013 - 09:20 | 3670980 notadouche
notadouche's picture

The very notion of being able to "control the market message" has been the problem all along.  The market should be the lone and ultimate messenger to participants, not the other way around.

Wed, 06/19/2013 - 09:29 | 3670982 SheepDog-One
SheepDog-One's picture

Like debating how few sugar pills per hour are needed to help the heroin junkie 'ease down' from his I.V. pump of free heroin. Ridiculous. Without massive constant Fed involvement the so-called markets will collapse spectacularly. There's no easy way out of this with the administering of a placebo.

Wed, 06/19/2013 - 09:22 | 3670992 Confundido
Confundido's picture

I thought he would describe what a fuck a fucking classic Minsky trap is about....How do I know if what he said is correct? How the fuck do I know what a fucking Minsky trap looks like???

Wed, 06/19/2013 - 11:36 | 3671529 kennard
kennard's picture

The author is conflating Hyman Minsky, a post-Keynesian, and in my view, socialist, economist, with Keynes' notion of a liquidity trap. Minsky viewed "capitalism" as generating speculating excesses that ultimately result in what Paul McCulley of Pimco dubbed a "Minsky moment". Austrians would say that the excesses result from malinvestment due to government interference in economic activity. Minksy lays it at the feet of capitalism. Minsky was much admired on Wall Street in the 60s and 70s, go figure. As for Keynes' "liquidity trap", there is the pretext for spend more, print more: read Krugman.

So what we have here is a Minsky, Krugman acolyte at Scotiabank telling us how it is. Look elsewhere for trading insights.

Wed, 06/19/2013 - 09:23 | 3670996 Dr. Engali
Dr. Engali's picture

"Moreover, a slower pace of asset purchases of, say, $60 billion would allow the FOMC to increase it back to $85 billion should the economy slow over the next few months"

 

Thank goodness we can magically make up numbers so it apperas the economy is growing and inflation is in check so we don't have to worry about increasing QE again once tapering is never started.

Wed, 06/19/2013 - 09:28 | 3671019 SheepDog-One
SheepDog-One's picture

Well, one thing it shows me is there's a bit of panic goin on behind the curtain there.

Wed, 06/19/2013 - 09:35 | 3671047 insanelysane
insanelysane's picture

There's a lot of panic going on there.

Wed, 06/19/2013 - 09:26 | 3671002 DOT
DOT's picture

The taper will go through on the very public QE. A new pipeline of cash injection will be opened in secret to replace it.

Bullish!

Wed, 06/19/2013 - 09:29 | 3671006 Zen Bernanke
Zen Bernanke's picture

The costs outweigh the benefits on every single ill-conceived special interest vote buying political program.   Now we all know the fed is highly politicized and acting for the benefit of its membership and a small minority.   For if they were not, the QE initiative would never have passed scrutiny and if it did, most certainly would have died a long time ago when it first failed to achieve its objectives. 

Wed, 06/19/2013 - 09:28 | 3671008 chubbyjjfong
chubbyjjfong's picture

Finance has gone beyond dillusional when we debate not the affect of the economy on the stock market but how some lunatic describes the word "taper".  Its truly mind boggling.

Wed, 06/19/2013 - 09:30 | 3671029 sunny
sunny's picture

I'm trying to remember when I saw a greater collection of weasel words in an article.  Rife with "could" "might" "may" "should" etc....hopium is thick on both sides of the fence.

sunny

Wed, 06/19/2013 - 10:02 | 3671168 Apostate2
Apostate2's picture

Sleazy subjunctive.  Got to love the new disembling

Wed, 06/19/2013 - 09:37 | 3671057 Confundido
Confundido's picture

Gold at $1,250/oz by 3pm today?

Wed, 06/19/2013 - 10:34 | 3671263 sudzee
sudzee's picture

And oil at $20.00.

Wed, 06/19/2013 - 11:36 | 3671539 Non Passaran
Non Passaran's picture

That would be great, I am feeling the urge to keep stacking...

Wed, 06/19/2013 - 09:41 | 3671083 dcohen
dcohen's picture

 

 

 

Prayer for the day -

Our Ben,
Who art in heaven,
Hallowed Be-nanke,
Thy auctions come,
Thy Bill's be done,
In Twos as they are in Sevens,
Give us this day our daily Fed,
And forgive us our Treasuries,
As we forgive those that default against us,
And lead us not into recession,
And deliver us from deflation,
For thine is the borrowing, the easing, and the printing,
For ever and ever.
Amen.

 

http://macro-man.blogspot.se/2013/06/prayer-for-day.html#.UcG0Qsya_6Y.twitter

Wed, 06/19/2013 - 09:57 | 3671147 Apostate2
Apostate2's picture

That is one sick parody, but I'm having a laugh.

My bad.

Wed, 06/19/2013 - 10:00 | 3671159 dick cheneys ghost
dick cheneys ghost's picture

thats fucking beautiful.........

Wed, 06/19/2013 - 09:54 | 3671135 TrustWho
TrustWho's picture

Daddy Bernanke has demonstrated little Chess playing skills. I think this statement is the essence of the FOMC market test today"

 

Moreover, a slower pace of asset purchases of, say, $60 billion would allow the FOMC to increase it back to $85 billion should the economy slow over the next few months.

 

If Daddy Bernanke fails to create a Plan B, assuming the game is not already over, GAME OVER and central banks will lose their faith and trust as the Wizard of Oz. Once lost; there is no pathway, skyway, wormhole to Kansas. 

Wed, 06/19/2013 - 09:55 | 3671140 yogibear
yogibear's picture

Tappering will be minor. It's QE until the US dollar blows.

The fed members running the show are insane money printers. It's how they solve. Print!

They will buy up all the US debt, maybe even Europes and Japan's.

Wed, 06/19/2013 - 10:40 | 3671281 TrustWho
TrustWho's picture

Absolutely, in the central bank world, your debt is my asset, so who cares. Japan can print yen and buy US treasuries. BAM, BAM, THANKYOU MAM!

Wed, 06/19/2013 - 10:46 | 3671148 Flakmeister
Flakmeister's picture

This a serious read for anyone comtemplating the future of Growth. Warning: contains physics concepts that may disturb cornucopians

http://physics.ucsd.edu/do-the-math/2012/04/economist-meets-physicist/

PS Should have mentioned that I keep track of up/down arrows as part of a new study on Agnatology (look it up)....

Wed, 06/19/2013 - 10:22 | 3671229 ejmoosa
ejmoosa's picture

Taper or not, it does not fix anything.

 

One must restore the ability of the American entrepreneur to see an opportunity, pursue it, and succeeed or fail, without unnecessary regulation, punitivie taxes, and artificial wage levels.

Until then, it really does not matter.  We are just pissing in the wind.

Wed, 06/19/2013 - 10:29 | 3671252 Hohum
Hohum's picture

ejmoosa,

The entrepreneurs, unfortunately, cannot make the machines pay for themselves.  A breakthrough is possible, but that will come about through a very small number of people.

Wed, 06/19/2013 - 11:16 | 3671424 ejmoosa
ejmoosa's picture

Entrepreneurs have not asked for machines to pay for themselves....

Wed, 06/19/2013 - 10:35 | 3671269 Bansters-in-my-...
Bansters-in-my- feces's picture

Everything is fine.

Inflation is at it's lowest in 60 years.....

Thats what these two losers from bloomberg wrote.

This Joshua zumbrun and Jeff Kearms dudes.

 

WOW,,,,,

How fucking stupid can one get...?

Wed, 06/19/2013 - 10:44 | 3671295 TrustWho
TrustWho's picture

Joshua and Jeff trying to be a journalist. If they were any good, they would not be trying to be journalist. You read it, so who is stupid?

Wed, 06/19/2013 - 10:44 | 3671298 Zen Bernanke
Zen Bernanke's picture

The fed should not even be in the game of propping up markets or installing policies that artificially inflate markets.   they are supposed to be market neutral and over the last 20 years their constant meddling has caused bubbles and crashes in multiple markets.  They have never seen trouble on the horizon and are continually behind the curve in their actions.   The fed over the last 20 years has been an abject failure and it amazes me they have any credibility remaining with the citizens of the USA

Wed, 06/19/2013 - 11:11 | 3671392 stewie
stewie's picture

Change your point of view from Citizen to Banker.  An epiphany will ensue.  Wow the Fed rocks!  It's all a matter of perspective.  QE will end when the banks are recapitalized via interests on excess reserve and positioned for the after effect.  The rest is just noise.

Wed, 06/19/2013 - 10:47 | 3671311 Bansters-in-my-...
Bansters-in-my- feces's picture

"From Guy Haselmann" from Scotia bank.....

My my my.......

Isn't that Scotia bank ANTI GOLD.

That Scotia Macotta thing is part of the price supression crew.

 

Go try buy even an oz of gold from scotia bank and see how fun it is.

Wed, 06/19/2013 - 10:59 | 3671331 Darksky
Darksky's picture

Santelli just had a great rant. I know i shouldnt be watching cnbc, but it was a good one. Grabbed a trash can at the end and almost threw it across the trading floor when simon the idiot made a stupid childish comment.

Wed, 06/19/2013 - 10:59 | 3671332 the grateful un...
the grateful unemployed's picture

Economics is a way of directing human consciousness toward some collective purpose. You begin with a free market, which people understand because it mirrors the natural world. When the natural world proposes limits, mankind always wants to figure out a way around them, and poof, the free market gives way to a centrally planned economy. Now you have to reeducate people to deny the laws of physics, the natural world. Mass participation ensures that these things work, while it doesn't matter a whit how many people believe that pigs can fly, they still can't, unless you build some bionic wings and something to program their flight other than their pig brains. So in the end even Physics is corrupted, and only scientists with agreeable thesis are allowed to have grant money. More pigs fly every year, and economic growth continues, until someone say, what the hell kind of world is this? Someone has corrupted the laws of Physics to make pigs fly, and suddenly it is raining pig shit on everyone. Some people want to shoot the pigs down, and others want to figure a way to make pig shit lighter then air, so it disappears into the atmosphere.

Now its impossible to ignore the problem and there are only two lesser of two evil solutions, while at one time you could have chosen either a free market or a centrally planned market, now there is no choice, because the social consciousness was altered to accept the notion that pigs should really fly. that was their mistake, and of course there are no do overs when you take a new technology into the social consciousness without considering the consequences...

Wed, 06/19/2013 - 11:05 | 3671353 DOT
DOT's picture

QE to absurdity, and beyond!

The cake is a lie; ain't no pie in the sky.

Wed, 06/19/2013 - 11:26 | 3671480 Petrus Romanus
Petrus Romanus's picture

" Who's the more foolish, the fool or the fool who follows him? ", Obi-Wan Kenobi

" Words of wisdom, Lloyd, my man. Words of wisdom. " , Jack Torrance

Take your pick, nothing is REAL anymore!

Wed, 06/19/2013 - 11:34 | 3671519 fijisailor
fijisailor's picture

Summary:  Withdrawl from drug addiction is a bitch

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