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"Hey Mr. Market, That QE Monkey On Your Back Has You By The Throat"

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Mr. Market has one little problem: the Fed monkey on his back has a death-grip on his throat: "One hell of a price for you to get your kicks."

 
One of the enduring analogies of the Federal Reserve's quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)
 
You know the key self-delusion of all addiction: "I can stop any time I want." This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.
 
But Ben, the pusher of QE money, knows his addict--the stock market--will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.
 
You're dreaming, Ben--your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.
 
But like all highs based on addictive substances, the stock market high cannot be sustained without an increase in the drug. But there is a diminishing-return dynamic to ever higher doses of QE smack--the higher doses are no longer generating the same highs. The addict (the stock market) has become desensitized to the QE free money injections, and higher doses no longer generate the desired state of bullish euphoria.
 
The more Ben talks about eventually decreasing the injection of financial smack, the more panicky the addict becomes. The more he increases QE, the less effect it has. The Fed is backed into a corner: increasing QE has no positive effect but decreasing it unleashes a catastrophic breakdown in the stock market.
 
 
 
You may recall the Keynesian parrot, who repeats the same demand for more free Federal money to be squandered on the cartels, grifters, embezzlers, toadies and lackeys of the Status Quo.
 
Here is the Keynesian parrot with the Fed QE monkey on his back: you may notice the Keynesian parrot is none too pleased with the Fed monkey's death-grip on this throat.
 
 
Unfortunately for the stock market, it's in a double-bind: the Fed monkey is choking it, but if the monkey falls off its back then the market goes into cold-turkey collapse.

The other delusion of the pusher and the addict is that the endgame of addiction can be avoided. We all know the endgame of addiction; the 1970s rock band Lynyrd Skynyrd captured it very succinctly in their song Ooh That Smell:

 
One little problem that confronts you
Got a monkey on your back
Just one more fix, Lord, might do the trick
One hell of a price for you to get your kicks

Ooh, that smell
Can't you smell that smell?
Ooh, that smell
The smell of death surrounds you

 
 

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Wed, 06/19/2013 - 18:42 | 3673477 Cacete de Ouro
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Fuck Bernanke Shalom

Wed, 06/19/2013 - 18:56 | 3673506 Zer0head
Zer0head's picture

the addict is not only mr mkt

try tapped out consumers with their free money auto loans

try morgaged to hell consumers with their 4% rates

try every fucking corporation that has of any size or shape that has an income statement with interest expense at a quarter (at least)of where it should be

Wed, 06/19/2013 - 19:01 | 3673514 booboo
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and so as the grinning tribal witch doctor sailed away from the small volcanic island the naked natives shook with fear as to what the gods wanted as they looked upon the smoking mountain top and wondered......

Wed, 06/19/2013 - 19:49 | 3673630 jbvtme
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canceled

Wed, 06/19/2013 - 21:39 | 3673840 AlaricBalth
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Charles, enduring analogy indeed. I posted the following on 15 April 2012.

The stock market is like an opiate addict begging his dealer for another fix. As the drug (stimulus) is administered, it offers an immediate rush and temporary relief from reality. The high from each dose, however, does not last quite as long as the previous one and eventually the addict must constantly be in a drugged state just to function at a "normal" level. Eventually the junkie crashes and bottom is reached, and it is only then that the healing can begin.

http://www.zerohedge.com/news/muppets-vs-ig9-tranches-bernanke-puts-vs-p...

Great minds think alike. ;-p

Wed, 06/19/2013 - 21:54 | 3673881 Dingleberry
Dingleberry's picture

Jim Sinclair is, and has been correct all along. Along with others. There is no rational, sane way the fed can exist QE. I cannot fathom how it could. The nanosecond it does, they will be front run by every HFT in the universe. Rates will rise, and the fed gov will indeed be broke paying simple interest, vice the 1% it's paying now. Once he went down this road, it was not a question of if, but when this shit would explode.

Buy gold. Bitchez.

Wed, 06/19/2013 - 23:14 | 3674056 WakeUpPeeeeeople
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buy ammo-lots of it

Wed, 06/19/2013 - 18:55 | 3673495 NoDebt
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You can mark it on your calendars, ladies and gents.  This is the beginning of the end game/next era/whatever.  I know it looked like it would never happen, but it has finally started.  Talk of continuing QE just failed for the first time.  That goes down as "noteworthy" in my book.

Congratulations, you just lived through an historic event.  Didn't feel a thing, did you?  (Unless you were in bonds, esp. Treasuries)

Wed, 06/19/2013 - 19:12 | 3673547 NotApplicable
NotApplicable's picture

I don't know why you act as if all of this is an accident when it is every bit as contrived as the march to war in Syria.

Simply put, the instant that QE was birthed, the arrival of this day was inescapable. What is being done now is to manage expectations, like the one you have here. Nothing noteworthy happened here today except they turned the page on the script.

To believe that "talk of QE failed for the first time" is to assume that talk of QE ever did anything in the first place, when in reality, the talk is merely the facade that provides plausibility for what really goes on.

Plato's "Allegory of the Cave" is a far better explanation than the idea that "markets reacted." Shadows may appear as substance, but as always, they mislead those who observe them.

Wed, 06/19/2013 - 19:13 | 3673552 The Shootist
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Great posts. But is the combined mkt cap of the U.S. 10 & 5 year greater than that of the DJIA? Still, I think (hope) you're right about the beginning of the end. Age of Aquarius!

Wed, 06/19/2013 - 18:53 | 3673498 observer007
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The United States uses drones for surveillance in some limited law enforcement situations, FBI Director Robert Mueller said on Wednesday, sparking additional debate about President Barack Obama's use of domestic surveillance.

More:

FBI says it uses surveillance drones on U.S. soil

Wed, 06/19/2013 - 18:54 | 3673501 PAWNMAN
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Get ready for one hell of a hangover!!!

Wed, 06/19/2013 - 19:09 | 3673539 BlueCollaredOne
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Had Titos at happy hour, have since progressed to Glenfiddich12.

 

No hangover expected.  

Wed, 06/19/2013 - 22:04 | 3673894 max2205
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Ben bought all the MBS so of course we can't short them now..fucker

Wed, 06/19/2013 - 18:54 | 3673502 BadDog
Wed, 06/19/2013 - 19:01 | 3673515 YesWeKahn
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BB is fucked!

Wed, 06/19/2013 - 19:04 | 3673526 Anonymouse
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The Knack "Siamese Twins" says it best

He's on my back. He's on my back. He's on my back.
He's on my back. He's on my back. He's on my back.

Please cut me free
He's making me strange
The monkey and me
Sits on my back. Shits on my back. Piss on my back.
Sits on my back. Shits on my back. Piss on my back.

Kill it for me
It's time for a change
The monkey and me

Lyrics from <a href="http://www.elyrics.net">eLyrics.net</a>

http://www.youtube.com/watch?v=QS5uOBjgIVg

Wed, 06/19/2013 - 19:05 | 3673527 A Lunatic
A Lunatic's picture

You keep assuming that the FED is acting in a way that will harmonize and strengthen the markets and U.S. economy. Their mission statement is about as binding as the Constitution........

Wed, 06/19/2013 - 19:17 | 3673559 flacorps
flacorps's picture

Perhaps Main Street, battered though it may be, will nonetheless outlast Wall Street.

Wed, 06/19/2013 - 19:20 | 3673562 nmewn
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"You know the key self-delusion of all addiction: I can stop any time I want." 

Waaahhh!!!...gimme my debt binky!

Wed, 06/19/2013 - 19:21 | 3673567 ebworthen
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QE Smack, precisely.

And the dealers don't want the supplier or the junky to quit.

Wed, 06/19/2013 - 19:23 | 3673569 notquantumdum
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You can't fix some (if any) fiscal problems with monetary policy.  (But, you sure can goose a bubble in asset prices!)

Wed, 06/19/2013 - 19:26 | 3673579 Aquarius
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Memo to "elite leadership": Includes Economists, Bureaucrats, Priests, Corporates, Judges, Politicians, Bankers and all that hangs off this structure and organization.

"Money" is the measure of the Social Order; the measure of man governed; the measure of mans' government.

http://verbewarp.blogspot.com.au/2012/05/on-money.html

From Ayn Rand on Money:

"Do you wish to know when that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by Compulsion -- 

when you see that in order to produce, you need to obtain permission from men who produce nothing -- 
when you see that money is flowing to those who deal, not in goods, but in favors --  when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you --  when you see corruption being rewarded and honesty becoming self-sacrifice --  you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot."
-- Ayn Rand
(1905-1982) Author
Source: Atlas Shrugged, P. 385 (1957) "You have been weighed, measured and found wanting" Daniel  You would have thought that those of the FedRes would have known all this, yes? Ho hum
Wed, 06/19/2013 - 19:39 | 3673617 Pareto
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Fuck I love that quote!

Wed, 06/19/2013 - 21:15 | 3673638 notquantumdum
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Regarding your post, check out the following charts:

http://www.usgovernmentspending.com/spending_chart_1890_2012USp_13s1li01...

http://www.usgovernmentrevenue.com/revenue_chart_1890_2012USp_13s1li011l...

http://www.usgovernmentspending.com/spending_chart_1890_2012USp_13s1li01...

http://www.usgovernmentspending.com/spending_chart_1970_2012USp_13s1li11...

What's up with the fall-off in revenues in the second chart.

Is that Atlas, I see?  Shrugging?

(PS, please note, these charts are supposed to be for all of the governments in the US:  state, local, municipal, federal, etc.)

(PPSS, can anyone guess what happened in 1913?)

(PPPSSS, isn't a chart of government spending by politicians really just a chart of their power?  If so, isn't that also then, necessarily, also just a chart of their corruption?)

Wed, 06/19/2013 - 19:30 | 3673580 EclecticParrot
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Just for the record, I am definitely NOT a Keynesian parrot (perhaps more Dionysian), and if that little fucker was on my back, I'd make a quick, deft forward motion to flip him onto the pavement, cracking his skull, then just before thrusting my beak through his thorax I'd say: "well, Paul, this is indeed an honor -- I've always wanted to meet you ... I've got another prize for you ... No, no,  this one's definitely not from Sweden . . ."

Wed, 06/19/2013 - 19:32 | 3673604 notquantumdum
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That would appear to be what the bond and stock "vigilantes" might eventually do, too.  "Sell, Mortimer, Sell!"

Wed, 06/19/2013 - 19:26 | 3673582 Everybodys All ...
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Listened only for a minute before I couldn't take it anymore when CBS News led in tonight's news with the market dropped because in their words the economy was doing so good they would probably not need the Fed to proceed with as much QE. The only thing doing well is the psy ops program the news media is playing on the uninformed. It's really unfathomable the depths to which we've sunk intellectually in this country.

Wed, 06/19/2013 - 19:29 | 3673595 yogibear
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All is well for the sheeple and muppets until it isn't.

Wed, 06/19/2013 - 19:31 | 3673601 Winston Churchill
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More like coming off a 12  months of speedballs.

The best, and the worst of a combined heroin/cocaine addiction.

Once you get rid of the nervous ticks.seizures,fits, and paranoia it only takes six months to start

sleeping again.

Wed, 06/19/2013 - 19:37 | 3673609 notquantumdum
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'And, you may never fully recover.  (Or, so I read.)

Wed, 06/19/2013 - 19:49 | 3673635 Cursive
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I know it's extremely early, but is Krugman on death watch yet?

Wed, 06/19/2013 - 19:50 | 3673637 wisehiney
wisehiney's picture

This bond money is'nt running to commodities.....yet.

Forget your lust, for the rich man's gold
All that you need, is in your soul,
And you can do this, oh baby, if you try.
All that I want for you my son,
Is to be satisfied.

And be a simple, kind of man.
Oh be something, you love and understand.
Baby be a simple, kind of man.
Oh, won't you do this for me son,
If you can?

(Sorry mama.)

Wed, 06/19/2013 - 20:01 | 3673654 Duc888
Duc888's picture

Don't look now but you got a little bernankeFEDjizz dripping out of your left ear where the "monkey" had his way with you.

Don't worry, it's water soluable.

Wed, 06/19/2013 - 20:13 | 3673676 Cacete de Ouro
Cacete de Ouro's picture

This thread (and others) are eerily quiet. Its like zombies (or the NSA) have have taken over in the US. Have they, I don't know...you tell me?

Wed, 06/19/2013 - 20:17 | 3673683 wisehiney
Wed, 06/19/2013 - 20:38 | 3673723 The Shootist
The Shootist's picture

It's quiet. Too quiet...

Wed, 06/19/2013 - 22:45 | 3673997 Black Swan 9
Black Swan 9's picture

Anticlimatic for some, and/or the calm before the storm?

Wed, 06/19/2013 - 20:15 | 3673680 q99x2
q99x2's picture

Dat Da Monkey. He look like one of them Rothschild.

Wed, 06/19/2013 - 20:33 | 3673712 PeeramidIdeologies
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So, in the game of blame, Who's the guilty party? The pusher or the addict?

Looks to me like they are both due for an "intervention"

Wed, 06/19/2013 - 22:13 | 3673922 lamont cranston
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Whenever I see a parrot, I feign back to "Polly", Jack Benny's parrot voiced by the immortal Mel Blanc. When he got pissed at Polly, he threatened to open the cage and give him a road map to San Capistrano and leave forever. Polly would then recant and behave. 

Aren't we like that? We just take the monkey, er $$$$, and when we want to escape we just don't do it? 

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