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End Of QE?

Tyler Durden's picture




 

Submitted by Detlev Schlichter of DetlevSchlichter.com,

A new meme is spreading in financial markets: The Fed is about to turn off the monetary spigot. US Printmaster General Ben Bernanke announced that he might start reducing the monthly debt monetization program, called ‘quantitative easing’ (QE), as early as the autumn of 2013, and maybe stop it entirely by the middle of next year. He reassured markets that the Fed would keep the key policy rate (the Fed Funds rate) at near zero all the way into 2015. Still, the end of QE is seen as the beginning of the end of super-easy policy and potentially the first towards normalization, as if anybody still had any idea of what ‘normal’ was.

Fearing that the flow of nourishing mother milk from the Fed could dry up, a resolutely unweaned Wall Street threw a hissy fit and the dummy out of the pram.

So far, so good. There is only one problem: it won’t happen.

Now I am the first to declare that the Fed SHOULD abolish QE, and not only in the autumn of this year or the summer of next, but right now. Pronto. Why? –Because a policy of QE and zero interest rates is complete madness. It distorts markets, sabotages the liquidation of imbalances, prohibits the correct pricing of risk, and encourages renewed debt accumulation. It numbs the market’s healing powers – by enabling more ‘pretend and extend’ in the financial industry – and it adds new imbalances to the old ones that it also helps to maintain.

This policy may have prevented – for now – debt deflation but maybe debt deflation is what is needed.

QE is nothing but heavy-handed market intervention. It is destructive. It doesn’t solve the underlying problems. It creates new ones.

Larry Summer’s getaway car

However, none of these objections even register at the Fed. The Fed has a completely different perspective: This policy was a roaring success and as it has worked so well it can now be faded out. Soon there will be no need for it. Larry Summer’s dreadful phrase captures that thinking probably best: The economy will soon have achieved ‘escape velocity’.

Most analogies are somewhat poor but this one is particularly inept. Ironically, though, the reference to mechanics captures beautifully the logic of Keynesians and other interventionists: the economy is like a physical object moving through space and is occasionally in need of a little push to get moving again at an appropriate speed. Policy provides the push.

Bernanke doesn’t use these terms but his thinking is similar. He explained QE to the American public in 2010 by announcing that his job was to occasionally manipulate interest rates and asset prices to encourage lending, borrowing, spending, shopping, and other healthy economic activities, and that once his machinations had stimulated enough of those activities, the economy would again enter a virtuous cycle (his words) of self-sustained growth. Escape velocity has been restored.

I think this is nonsense – however appealing it may sound to many laypersons. The economy is not an object that needs a push, or a machine that needs to be jump-started, or a lazy mule that needs a gentle slap on its behind to get going again (of course, you should never hurt an animal!). The economy is a complex process of coordination, an elaborate tool that allows an extensive and diverse group of actors with different and frequently conflicting goals and interests to co-operate with one another peacefully toward the best possible realization of their own material aims. A crisis is a failure of that coordination process. It is a cluster of errors. The only explanation for the occurrence of such a cluster of errors is a systematic distortion of the market’s coordinating properties, such as occurs when monetary expansion distorts interest rates and other relative prices, and leads to imbalances that unhinge the economy.

The economy went into recession because of massive financial deformations. Easy money had led to excessive indebtedness, a housing bubble and dangerous levels of leverage. The problems were such distortions, not lack of momentum. The real question is not whether the GDP statistics exhibit the right velocity but if the underlying dislocations – which, to the chagrin of the econometricians, cannot be easily ascertained from the macro-data – have now dissolved.

No Escape

The Fed believes it has healed an economy that was sick from easy money with more easy money. The patient is feeling better and can soon be released from intensive care. In my view, the patient is still sick and now suffers from a dangerous addiction to boot. The ‘feeling-better’ bit maybe, just maybe, a lingering drug high from Dr. Bernanke’s generous medication. Withdrawal symptoms may surface soon. If they do, Dr. Bernanke will simply open the medicine cupboard again. Don’t forget, only a few weeks ago the man appeared on TV and tried to talk up the Russell 3000 stock index.

I do not doubt that, if measured by overall GDP, the US economy is presently doing better. I would be foolish to take on the Fed on this point. The Fed has a staff of 200-plus economists, most of them, I assume, from America’s finest universities, which doesn’t mean they are good economists but at any rate probably good statisticians. If they say there are signs of life in the economy, that’s good enough for me.

Where I disagree is on the narrative. The deformations are largely still there. How can they not, given the enormous policy effort to suppress the very market forces that would – in a free market – have exposed and liquidated these deformations? They are still visible, among other indicators, in high degrees of indebtedness. And they matter. That is why I am mistrustful of the Fed’s projections. Their theories compel them to believe in virtuous cycles and ‘escape velocity’ and to disregard imbalances and distortions. Any sustained removal of super-easy money will allow these deformations to resurface and immediately cloud the near term cyclical outlook. According to my worldview, this should be allowed to happen as it is part of the essential healing process. But it runs counter to the Fed’s worldview and the Fed’s view of its own mission.

The one institution that lacks ‘escape velocity’ is the Fed. It will remain hostage to the financial monsters it created and the dangerous misconception of its own grandeur.

 

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Sat, 06/22/2013 - 18:04 | 3682486 lolmao500
lolmao500's picture

Bernanke and the next FED head are gonna end up with their heads on spikes...

/GOOD!

The FED game is this : give free credit and free money so the rich can get richer... then bring in super deflation by ending QE so the rich are even richer while the poor get screwed even more...(they lose their job/salary get reduced... while the banks still collect interest on their debt)

Sat, 06/22/2013 - 18:05 | 3682500 Meat Hammer
Meat Hammer's picture

How does more purchasing power hurt the poor?

Sat, 06/22/2013 - 18:07 | 3682504 lolmao500
lolmao500's picture

More purchasing power? A lot of people are gonna lose their job or their salaries will get crushed due to deflation... and even if it doesn't happen, the purchasing power of a poor person increasing by a few percentages doesn't mean shit.

Sat, 06/22/2013 - 18:12 | 3682517 Meat Hammer
Meat Hammer's picture

Gotcha.  By poor I thought you meant EBT poor, who would still get their bennies but could buy more with them.  You meant the new poor, aka the middle class.

Sat, 06/22/2013 - 18:16 | 3682530 lolmao500
lolmao500's picture

Yep...

Sat, 06/22/2013 - 18:20 | 3682543 Troll King
Troll King's picture

Deflation - even though gold has quadrupled, oil sits near $100/b, stocks have roared back from the lows to all time highs, and bond yields are rising.

Yeah, deflation.

Sat, 06/22/2013 - 18:23 | 3682549 Meat Hammer
Meat Hammer's picture

And people are running to cash which sucks it out of the system, creating less supply and more demand.  I may not be the sharpest knife in the drawer but even I can figure that out.

Sat, 06/22/2013 - 18:36 | 3682583 Troll King
Troll King's picture

Running to cash - as in trading one piece of paper (in the form of a certificate) for another in which the only difference is that instead of the faith and credit of a corporation it is the United States Treasury that backs it.  Also, there is no return - just constant devaluation.

I'll take bonds or stocks over cash, thank you.

Sun, 06/23/2013 - 02:47 | 3683148 NidStyles
NidStyles's picture

Doesn't make it deflation, the total amount of currency is staying the same, it's just not being left at the hands of bankers. It's called people pulling out of the theft mechanism.

Sat, 06/22/2013 - 19:25 | 3682668 Meremortal
Meremortal's picture

Inflation, with a 10 year bond yielding 2.5%.

Inflation, with declining wages and low (and dropping) participation in the labor market.

Inflation with virtually NO velocity of money.

Inflation, with the antique, collectible and non-museum quality art values down 25-40%

Inflation, with the spread closing between regular 10-year Treasurys and TIPS.

Yeah, inflation.

 

 

Sat, 06/22/2013 - 21:32 | 3682855 Dingleberry
Dingleberry's picture

Tuition, medical insuarance, car insurance, food, gas allwent up last year, MY FUCKING RENT UP BY 10%,.....yeah, deflation.

 

Sun, 06/23/2013 - 02:48 | 3683150 NidStyles
NidStyles's picture

Inflation doesn't require velocity of currency. When will people learn that MMT is wrong?

Sat, 06/22/2013 - 18:21 | 3682545 Meat Hammer
Meat Hammer's picture

Paging ekm....is this deflationary event the destructive drop in crude (circa W. Bush admin) you've been talking about?

Sat, 06/22/2013 - 19:23 | 3682664 FreeMktFisherMN
FreeMktFisherMN's picture

I trade crude futures and while the move from 99.20 to 93 was amazing, keep in mind this was during OpEx as well as the chaotic markets in general mid to late last week. Thus I would expect crude to at least go back toward 97 before maybe resuming this new trend.

 

 

Sat, 06/22/2013 - 18:57 | 3682617 Dre4dwolf
Dre4dwolf's picture

The poor have no savings... a rise in purchasing power without a job doesn't really benefit anyone.

Deflation is bad for business.... inventory drops in price.... 

 

its really just a math problem.... the businesses need time to adjust to decreasing prices of their inventory... its an accounting problem that will leave businesses in the red and force them to .... make cut-backs.... cutbacks lead to lower consumption, gdp shrinks govt and banks panic, stocks fall... its a mess.

 

The problem is the accounting system really.... its not designed for a real monetary system that doesn't involve printing money out of thin air... the accounting system is designed around inflation.... and if there is no inflation the accounting system bankrupts all the businesses.

 

Company X purchases 10 widgets for 100$

Company X's widgets won't sell for 10$ each because of deflation.

Company X's lowers price because they are stuck witn inventory that wont sell.

Company X sells inventory for 60$

Company X takes a loss of 40$ on inventory

Company X lets go of staff to stay in business.

If company X finds a supplier willing to sell widgets for 5$ ea. instead of 10$ea. company X may turn around and sell widgets for 6$ and make a profit.

If not, company x closses.

The accounting does not allow for a business to stay alive in a deflationary invironment.

Something has to fall... labor costs or something... anything to allow the companies to "profit".

Big companies will fail first (walmart/best buy ) etc... as they can not absorb giant shocks like this for prolonged periods.

Small companies will evade taxes to stay afloat for a while...

Sat, 06/22/2013 - 19:02 | 3682629 Meat Hammer
Meat Hammer's picture

Thank you for the illustration

Sat, 06/22/2013 - 21:15 | 3682826 css1971
css1971's picture

The concept of accounting makes the assumption that the money is a reliable and stable measure of account. Which it isn't. Ever. The value of money is different in every single transaction.

Deflation is self limiting though. As bank loans get written off the level of indebtedness declines. The credit which was created along with the debt is remains in circulation and can pay other debts off.

Sat, 06/22/2013 - 21:35 | 3682860 Dingleberry
Dingleberry's picture

I will make it SIMPLE:

INFALTION=MORE wealth for those with assets. Who owns the assets? Like 90 fucking percent of them?

FREE CLUE: NOT YOU, or anyone else who reads this shit.

DEFLATION=EVERYONE takes it in the ass as assets drop. EVERYONE except for a ballsy short seller (Livermore) or a Rothschild.

Understand now?

This is why the Fed props up assets. Not for you, for their REAL constituents. 

 

Sat, 06/22/2013 - 23:48 | 3683022 Harry Dong
Harry Dong's picture

I hope you're right. I really do. But I think the chips are all stacked in favor of the big companies. Just when you think it's stage right...they get the bailout and you (the small company) get the "turn left and cough".

Sun, 06/23/2013 - 01:23 | 3683097 Jam Akin
Jam Akin's picture

You are correct HD, large firms do have more staying power for a number of reasons.  

And let's not forget the dynamic of producers having to raise prices to cover overhead on smaller volumes.  Costs of running businesses in a variety of market segments can only be cut back so far in the face of declining demand/volume.  Add in costs of long haul logistics with $90+/bbl oil and higher prices are a lock for damn near any material goods.  As one form of austerity or another takes effect for the "sufferers", this path to raise prices will be more necessary for more firms.

Sun, 06/23/2013 - 07:21 | 3683320 Snoopy the Economist
Snoopy the Economist's picture

"Deflation is bad for business.... inventory drops in price.... "

Q: What companies carry large inventories? A: The one that already went bk. Companies do not carry excessive inventories in this economy - 5 years of pain have taught the ones that have survived thus far.

Sun, 06/23/2013 - 07:41 | 3683347 Moe Howard
Moe Howard's picture

Just in time inventories has been a business meme for at least a decade.

Sun, 06/23/2013 - 12:32 | 3683980 Midasking
Midasking's picture

Rising Rates will blow this fake economy sky high and take the currencies with it... welcome to the inflationary depression.. http://tinyurl.com/mem7o7x

Sat, 06/22/2013 - 18:07 | 3682507 Banksters
Banksters's picture

Taper most likely a deflationary collapse.   This scenario leads to revolt in short order.

Continue QE- Inflation and ultimately civil unrest.

Anyone who thinks the fed is going to allow treasuries to blow up is thick.  My bet, MOAR QE under new and improved jargon.

 

 

 

Sat, 06/22/2013 - 19:00 | 3682627 Dre4dwolf
Dre4dwolf's picture

New Federal Reserve Chairman will continue QE when pressured.

The Fed will cave, because ultimately they like their pretty car and giant house and prostitutes visiting them in their limo, they will not give it up.

 

If they don't cave, they risk lossing it all too.... and 100years of social engineering/control gets thrown out the window.

Sat, 06/22/2013 - 18:09 | 3682509 reload
reload's picture

Will they taper ? Well they might. Problem with rationalising what thhe effect on the economy is :they do not care.

I see bank reserve to loan ratios off the clock, the real possibility of a lasting sprawling ME conflict, and I wonder:are they ready? Those reserves will buy a lot of assets all over the globe in a sudden deflationary collapse. 

Sat, 06/22/2013 - 19:02 | 3682631 Dre4dwolf
Dre4dwolf's picture

What are they going to do with assets that are depreciating in value in a deflationary environment? 0o thats suicide to buy assets in a deflationary environment (in the short-term) in the long term if they stay liquid enough they might be able to survive and make-out like bandits.

 

Most people will be forced to sell assets to eat in such a scenario.

 

Its time to become Farmers..... they will be in the best position to prosper.

Sat, 06/22/2013 - 21:08 | 3682818 Kinskian
Kinskian's picture

 People seem to have a romantic notion of what life is like on a small farm, but our grandparents and great grandparents left the farms for a good reason: life was difficult. In the future, we might end up back on the farms, but I doubt that many will prosper. As Warren Zevon put it, "there ain't much to country living, but sweat, piss, jizz and blood".

 

Sat, 06/22/2013 - 23:38 | 3683011 Bringin It
Bringin It's picture

http://www.zerohedge.com/news/guest-post-going-grid-montana-style

Like most things in life, you make out of it what you want.  If you go in thnking it's gonna be pretty awful, then it probably will be.

In some parts of the world, people still know what they're doing.

Sun, 06/23/2013 - 00:20 | 3683051 Totentänzerlied
Totentänzerlied's picture

They can cry me a fucking river. Life IS hard. The 100 year debt orgy merely allowed the lucky ones to forget that fact, and they happily did. That time is rapidly coming to and end. Anyone who thought was life was supposed to be easy has been hitting the hopium pipe. This culture of extreme lazy decadence has sent every empire in history on an express ride to hell, and this time will be no different.

Sun, 06/23/2013 - 07:46 | 3683356 Moe Howard
Moe Howard's picture

Warren Zevon was a Chicago born Jew entertainer who I doubt spent more than 15 minutes on a real farm. Be that as it may, I agree with your first part.

Truck farming is time consuming, demands much physical labor, and is at the mercy of nature even today. It is not romantic. 

Not many fat farmers back in the day.

Sat, 06/22/2013 - 23:55 | 3683030 Totentänzerlied
Totentänzerlied's picture

During the worst Weimar years, farmers were (literally) butchered.

Sat, 06/22/2013 - 21:25 | 3682842 TWSceptic
TWSceptic's picture

"the rich"

 

you sound a bit like an Obamabot who hates people just because they earn more than they do... let's not use that word as a pejorative shall we? It's not the rich in general who are the problem here, it's the parasites on Wall street, the bankster buddies and the politically connected thieves.

Sun, 06/23/2013 - 03:40 | 3683165 NidStyles
NidStyles's picture

Haven't seen you in a while...

Sat, 06/22/2013 - 22:45 | 3682955 xtop23
xtop23's picture

Not sure why the kid in the caption is screaming. Anyone with any sense knows moar is coming :)

Take your Ritalin, kid. I give it 1 month of actual "taper" and Mr. FED will be printing so fast you'll be going number 1 on Franklin's face in no time.

Carpe diem fatuus faeneratorem!!

Sat, 06/22/2013 - 18:01 | 3682493 knukles
knukles's picture

Either way we're fucked royally.

Sat, 06/22/2013 - 19:15 | 3682653 tarsubil
tarsubil's picture

Yeap, it is like when an alcoholic gets so bad he'll have a seizure if he quits and his liver will rupture if he doesn't quit. The damage has been done at this point.

Sat, 06/22/2013 - 18:03 | 3682494 Dre4dwolf
Dre4dwolf's picture

The market is going to be bombarded with shorts/naked shorts.

Stocks are going to plumet.

And as the govt strives to generate revenue treasury rate swill spike.

 

Its the end of the world as we know it.

 

And

Its about time.

This world was getting boring anyway.

 

Gold/Silver/Cash/Land/Food/Ammo

Sun, 06/23/2013 - 08:54 | 3683472 Go Tribe
Go Tribe's picture

Don't forget guns and golf clubs. These finely crafted tools will help blunt the collapse.

Sat, 06/22/2013 - 18:03 | 3682495 nmewn
nmewn's picture

Gimme my debt binky!!!

Sat, 06/22/2013 - 18:04 | 3682496 Meat Hammer
Meat Hammer's picture

I have to admit, when i saw gold get blasted on Thurday I thought maybe we've been wrong this whole time.  Then I remembered that we've discussed the scenario of deflation as everyone runs to cash before Benny stomps on CTRL-P even harder.

Sat, 06/22/2013 - 18:09 | 3682506 Dre4dwolf
Dre4dwolf's picture

At this point its fairly certain that we will have massive deflation before hyper inflation. (as they carpet drop bricks of cash everywhere) to save their control structure.

 

If people rush to cash / gold they lose all control over the slaves.... control that took them 80~ 100 years to construct.

They need the people dependant on credit or they lose power.

 

They will have to flood the streets with cash to get people OUT OF CASH (make it look worthless) to make them spend it/get rid of it to boost the economy.

 

Hoarding cash is the worst thing that can happen in their eyes.

Sat, 06/22/2013 - 18:10 | 3682511 Meat Hammer
Meat Hammer's picture

How will they sell the need to print money and cause inflation?  Let me guess...the much needed liquidity?  

Not challenging the idea, I'm just trying to learn.  

Sat, 06/22/2013 - 18:49 | 3682599 Dre4dwolf
Dre4dwolf's picture

I think the govt will have funding issues.

Tax Revenue will fall very sharpely.

GDP will shrink

Unemployement will rise

Pressure will be on the Fed to "do something, do anything" and well....

They only have two tools

Increase money supply

Decrease money supply

But the tools they need are

Debt liquidation/discharge

Switching from credit system to debt free money simply putting money into circulation not as a loan, but simply as printing a currency to fullfill the need of a currency.

For every 1$ people will recieve 10 new dollars and this money will have no debt associated with it.

simply wipe the debt, and start over with more zeros...

People will use new money to discharge old loans and the economy starts roaring again since it has severed the chains of debt that have been holding it down causing it to drown.

The problem is, too much debt.

you can't solve that problem with more debt unless in the end the bank lending is willing to discharge the obligation.

 

 

What goes up, must go down, the Debt Clock is no exception.

 

The ability of the Fed and Government and Wallstreet to decrease future stability and certainty in return for short term profit is running dry.... the more they print the less effective it gets.

There comes a point where the required dosage is lethal.

Sun, 06/23/2013 - 00:59 | 3683082 Non Passaran
Non Passaran's picture

> For every 1$ people will recieve 10 new dollars and this money will have no debt associated with it.

As long as POG stays the same and I am at the front of the line for handouts, I like the idea

Sun, 06/23/2013 - 09:25 | 3683535 Herd Redirectio...
Herd Redirection Committee's picture

Ka-Poom Theory

Ka= Deflation

Poom = inflation w/ a vengeance

We all know banks are sitting on huge reserves, and most agree that when those reserves are mobilized there will be a substantial impact on the real economy viz a viz inflation.

Now what makes the banks lend, when they have already sat on reserves for years?

The answer, when they are forced to pay interest to their depositors (!) and bondholders.  That time is fast approaching

Sun, 06/23/2013 - 09:40 | 3683564 SeattleBruce
SeattleBruce's picture

"simply wipe the debt, and start over with more zeros..."

I'm all for non debt based money, but the supply has to be statutorily controlled by a responsible Congress (now there's an oxymoron!), or else we'll continue to be plagued by too much inflation or deflation. For instance, the money supply needs to keep up with population growth (or you'll have deflationary issues), but can't be so much (to accommodate government excess say), that we have inflationary pressures.

So there must be strict controls on Congress' ability to print non debt based money (after all Congress' ability to coin money is part is the USC) - like inflation targets, and severe jail sentences for corruption. You can't have Corzines running around for such a monetary system to succeed!

Sat, 06/22/2013 - 18:03 | 3682497 LetThemEatRand
LetThemEatRand's picture

Public (the few who pay attention) to Fed:  "we'd like to negotiate an end to QE."

The Bernanke:  "Negotiation is irrelevant.  Resistance is futile."

Sat, 06/22/2013 - 18:06 | 3682501 Gary J
Gary J's picture

Nice read....needs a conclusion...stagflation?

Sat, 06/22/2013 - 18:06 | 3682502 NoClueSneaker
NoClueSneaker's picture

It's time for PBoC to do some mega-QE : trashing the 1.17 Tr. T-Bond junk on the market. Shalom Ben Printer will be deli(gh)ted ....

Sun, 06/23/2013 - 09:26 | 3683541 Herd Redirectio...
Herd Redirection Committee's picture

Biflation, or Ka-Poom Theory also apply.

For the layman, the price of everything you own goes down (as cars, houses, financial markets are bought using financing, so are most affected), and the price of everything you need goes up (food, energy, etc.)

Sat, 06/22/2013 - 18:06 | 3682503 noless
noless's picture

Until i have the ability to find and keep a job which pays enough to raise a family without government assistance, based on my skill and intelligence alone, i believe a town in Alaska.

Sat, 06/22/2013 - 18:07 | 3682505 vincent
vincent's picture

Foarward Bitchez!!

Fuck you FED

Fuck you Wallstreet.

Fuck you NSA.

Fuck all of you criminal politicians.

I hope I live long enough to see them suffer.

My kid graduated high school this week. Where does one begin to explain.

 

 

 

Sat, 06/22/2013 - 18:16 | 3682529 MsCreant
MsCreant's picture

Mine did too. He grew up with me telling him the truth. He has heard it since he was nine so he knows the score.

I work this stuff into my lectures, I teach.

Start with the housing crash. It is really easy to explain-- subprime loans, no one knows anyone at the bank, the bank sells the loans on...show him this, it should make him laugh...http://www.businesspundit.com/the-sub-prime-primer/

Then show him this short, Money as Debt...http://www.youtube.com/watch?v=jqvKjsIxT_8

Do both with him. That should be plenty to get you started.

Good luck.

Sat, 06/22/2013 - 19:28 | 3682674 SWCroaker
SWCroaker's picture

MsC, hopefully you have looked into the CDS monster behind the sub-prime lending.  It answers the question *why* BAC was so interested in buying out Countrywide Financial, whom they knew was a "troubled sub-prime lender" at the time of the acquisition, as well as what was so freaking profitable about lending to deadbeats and corpses.

This article, from back in 2008, puts the grisly facts in a comprehensible scene, well worth reading, and re-reading: http://news.goldseek.com/GoldSeek/1208412360.php

Regards to any and all who endeavor to teach truth.  The entirity of the mortgage market is somewhere in the single digit trillions; the amount printed and distributed by the Fed (and other CBs) would have been more than enough to flat out pay off every mortgage in existence, if mortgages failing were indeed the problem.  The real issue is the 100x larger CDS contract spaghetti bowl of essentially fraudulent "risk sharing", and printing that quantity of new money would have crashed the system in an entirely different way.

 

Sat, 06/22/2013 - 20:29 | 3682770 MsCreant
MsCreant's picture

Thanks for the link, I will look into it. I go through the bundling, the selling, how the MBS are then assets that act as collateral for all kinds of deals, and the "Insurance" that gets taken out on it and how that too becomes "collateral." I talk about the margin call from hell that can unravel the world. If I have not lost the audience by then I go into how the MBSs are often empty and why. I am armed to the teeth, depending on my audience and their interest and resilience. This past year I had several students out of 174 who were actually filling in the blanks, answering questions, and even contributed history to the discussion that I had not included. More people are becoming aware.

Sun, 06/23/2013 - 09:28 | 3683543 Herd Redirectio...
Herd Redirection Committee's picture

And VERY few go 'back to sleep'.  Which is why we win the Information War, eventually.

Sat, 06/22/2013 - 22:14 | 3682920 Tinky
Tinky's picture

Thanks for linking to that exceptional article. It was the clearest exposition of that complex topic that I have ever read.

Sat, 06/22/2013 - 18:19 | 3682539 worbsid
worbsid's picture

Take his computer and cell phone away for a few weeks.  If he survives, tell him, "Thats what it will be like. You won't have much." 

BTW: I'm old enough to remember the real depression.  We're not anywhere near there yet as a nation, but we will get there soon enough.  One nice thing though; Why spy on anyone who is as poor as a church mouse ... in fact a church mouse may be better off than most of us in the future.

Sun, 06/23/2013 - 07:54 | 3683370 Moe Howard
Moe Howard's picture

A hobo is richer than most Americans. His balance sheet says zero or plus whatever he panhandles. Most Americans are negative.

Sat, 06/22/2013 - 18:26 | 3682557 NoDebt
NoDebt's picture

"My kid graduated high school this week. Where does one begin to explain."

Well, there's two problems I see from where I'm sitting.  After high school is too late.  Gotta start sooner than that.

Also, as you have noticed, our wonderful education system conveniently omits ANY financial education.  They don't even teach what we used to call "Home Economics" like balancing a check book and such basic blocking and tackling any more to my knowlege.  Why would anyone need to understand even the most basic concepts of money?  Not like they're going to need to understand it later in life, right?

Sat, 06/22/2013 - 18:28 | 3682559 reload
reload's picture

Encourage him to read 'The creature from Jekyle Island' & ' Confessions of an economic hit man'

For a good intrintrduction get a copy of the film 'Four horsemen'  on DVD at amazon.

 

Sat, 06/22/2013 - 18:54 | 3682621 noless
noless's picture

The catty Bitches that ruled in high school rule today. Get in a job where they can't attack your character because it doesn't matter, work hard and work smart and fuck the rest.

They want to fire you over petty bullshit? Go ahead, I'm worth it to hire.

Nothing else matters, find a woman that wants to live right by you.

That's my advice to males.

Females, find a man that actually respects.

Sat, 06/22/2013 - 18:09 | 3682508 Tinky
Tinky's picture

Good post, Detlev. Though he could throw a football, it's too bad your brother Art didn't inherit your cautious economic impulses.

Sat, 06/22/2013 - 19:05 | 3682637 Dadburnitpa
Dadburnitpa's picture

Ha! Yeah, the original "Straight Arrow".  Another fraud.

Sat, 06/22/2013 - 18:09 | 3682510 debtor of last ...
debtor of last resort's picture

They're all Yellen for moar. But the papers are burning. Be quick and you can read the headline.

Sat, 06/22/2013 - 18:10 | 3682512 MsCreant
MsCreant's picture

Escape velocity. The Fed is gonna let go. Centrifigual force. Got it. 

Sat, 06/22/2013 - 18:11 | 3682514 ebworthen
ebworthen's picture

Several generations of economic alchemists weaned on the public teat and completely disconnected from the reality of "if you don't plant you don't eat" run amok - using debt on the backs of those who produce - to live out their intellectual fantasies.

They are PARASITES.

Sat, 06/22/2013 - 18:13 | 3682523 LetThemEatRand
LetThemEatRand's picture

The alchemists are not calling the show.  They are the useful idiots for the masters.  To them, we are all parasites.

Sat, 06/22/2013 - 18:36 | 3682581 ebworthen
ebworthen's picture

So you're saying they're like the saliva a Mosquito puts on our skin to deaden the nerves before it inserts its' proboscis to suck our blood?

Sat, 06/22/2013 - 18:42 | 3682596 LetThemEatRand
LetThemEatRand's picture

Good simile.  Smile ebworthen, we're on candid NSA camera!  

Sun, 06/23/2013 - 10:19 | 3683677 hootowl
hootowl's picture

If you know this, why do you tolerate it?  You have been choked into submission.

You have been duped into believing you need what they have (fiat and debt) in order to survive.  You have been intellectually and emotionally ensnared by their lies and deceptions.

Multiple millions of us have gone off the grid.  I cannot tell you how good it feels to keep the fruits of my own labor and the products I create and build and sell and license all over the world.

STARVE THE BEAST!!!

Sat, 06/22/2013 - 18:11 | 3682515 Atlantis Consigliore
Atlantis Consigliore's picture

Did I destroy that??? http://youtu.be/ClnSMCdw6E8

 

Jerko Berflunky go teach...

Sat, 06/22/2013 - 18:12 | 3682518 starman
starman's picture

the US aint gonna make it till 2015!

Sat, 06/22/2013 - 18:12 | 3682519 Joebloinvestor
Joebloinvestor's picture

Ben is the financial equivalent of a alley way drug dealer.

Get them hooked real good and then you can get away with anything.

 

Sat, 06/22/2013 - 18:13 | 3682520 g'kar
g'kar's picture

I just love the picture of the baby screaming "Moar!", freaking hilarious.

Sat, 06/22/2013 - 18:12 | 3682521 Dre4dwolf
Dre4dwolf's picture

At the end of the day.

Congress is elected (hired) by people.

Congress hired the Federal Reserve to print money (our money)

The Federal Reserve and its Member banks printed money out of thin air to lend to us (its employer).

(so - far the employer (public) has hired the employee (federal reserver) to print money and lend it out into circulation) 

 

So at the end of the day.

People owe money to themselves.

 

Just cancel the whole thing out and start over.

Problem solved.

Sat, 06/22/2013 - 18:16 | 3682528 LetThemEatRand
LetThemEatRand's picture

The Fed owns us.  They printed IOU's that we (the slaves) get to pay back and if we don't like it there's a drone/heat cannon/armored police vehicle/rubber bullet/federal prison/FEMA camp with our name on it.  The Fed doesn't work for us.  We work for them.  Literally.  

Sat, 06/22/2013 - 18:28 | 3682564 Troll King
Troll King's picture

I don't work for the Fed.

Sat, 06/22/2013 - 18:35 | 3682579 LetThemEatRand
LetThemEatRand's picture

"You can say that your name is Kunta Kinte all day long.  But it's Toby.  Boy."  -- Master Ben.

Sun, 06/23/2013 - 10:09 | 3683645 hootowl
hootowl's picture

"The Fed doesn't work for us.  We work for them.  Literally."

Only if you submit to it.  They have defeated you with your own fear.

 

Climb out of the box.  Get out of their cage.

STARVE THE BEAST!!! 

Sat, 06/22/2013 - 18:37 | 3682577 Meat Hammer
Meat Hammer's picture

Just cancel the whole thing out and start over.

That seems brilliantly simple.  If all of the debt is in FRNs, issue a new currency backed by gold and silver; let the people trade in FRNs for said new currency; pay The Fed back its worthless paper and end its charter.  

Since it's so logical it will never happen.  Plus there is no gold in Ft. Knox.

Man, we're so fucked.

Sat, 06/22/2013 - 19:16 | 3682655 the grateful un...
the grateful unemployed's picture

and the AMERO is the perfect escape mechanism, because Canada and Mexico have the gold to back the new currency. orphan out those old dollars (many in the hands of foreigners, drug dealers), and make everyone show receipts and so forth. (Cash becomes a crime: offical Fed policy) about 1T dollars went offshore during W Bush, which is why the economy failed, the thieves took 1T out of circulation, and Bernanke decided to punish the widows and orphans by printing another 1T so the thieves could steal it all over again. 

Sun, 06/23/2013 - 07:56 | 3683373 Moe Howard
Moe Howard's picture

Another Bush did it.

What part of they are all sock puppets you don't get?

Sun, 06/23/2013 - 10:05 | 3683631 hootowl
hootowl's picture

Just one thing you overlooked. The FED isn't owned by "The people".  It is a private scambank owned by, you guessed it,  The Rothschilds and their satellite minions.

So we don't just owe the money to ourselves.  It is owed to the faux-Hebrew/Khazarian/Babylonian banksters and their Father of Lies.

 

STARVE THE BEAST!!!

Sat, 06/22/2013 - 18:13 | 3682522 Ribeye
Ribeye's picture

We are totally fckd in Europe, it's gone too far, it's full on 1984 here, especially if you're in one of the PIIGS, which I am,

If the US goes, it's all over baby,

If you guys don't stand, we're all fckd,

Welcome to tyranny,

Welcome to a 50kg weight on yer back,

And OC spray in yer eyes,

Stand, for fck sake stand,

We lost the battle, you still have a chance,

We have no Ron Paul,

Nobody even close,

Sat, 06/22/2013 - 18:21 | 3682546 knukles
knukles's picture

Thank you.....

Sat, 06/22/2013 - 18:39 | 3682591 falak pema
falak pema's picture

 

...If you guys don't stand, we're all fckd,...

What the hell is this? 

You're fucked 'cos YOU don't stand. Don't look for crutches. This continent of Europa has seen deeper shit before and risen. 

So get ready to accept what is and/or what will be; or revolt, as that also is a EZ tradition. 

Nothing new under the sun. Don't just be a PIIG who sleeps, snort! 

As for Ron Paul, leave him to the US, he is like popcorn.

 

Sat, 06/22/2013 - 19:05 | 3682636 Ribeye
Ribeye's picture

I think we're on the same side, so I restrain my anger at that post,

You think I like having to ask others for help?

You think that appeals to my sense of individualism?

If I could come to the States and do it myself I would,

But I can't, because the scum put me on the no entry list because of Iraq,

So forgive me mate, I don't have a proper constitution that I can use use as a shield,

I take it from your post that you've never lived in a socialist country,

Well I fckn do, and even worse, it's being run by the fckn IMF, and the scum Commie EU, and I have the fckn scars to prove it,

So cop on, and understand that until there's a colony on Mars, the US is the last fckn hope,

If we lose the US, there's no way back,

Read a fckn history book or two,

And yes, I do love Ron Paul,

He's the bravest man alive.

Sat, 06/22/2013 - 18:51 | 3682604 reload
reload's picture

I was in Madrid for sub 24 hours last week on business. Seemed normal enough on the surface. I asked several people 'how are things here? We don't get very accurate news in the UK'

And then the facade crumbles. Everybody I asked, from a banker to the airport hotel check out lady said similar things....running on empty,angry,very worried. They all have family with serious difficulties and they all hate what unemployment is doing to the young.

Spain has a strong tradition of civil war and uprising, might not be long to the next one.

Sat, 06/22/2013 - 19:08 | 3682640 Ribeye
Ribeye's picture

Madrid is a beautiful city,

But it is to Spain, as Washington is to the US.

Sun, 06/23/2013 - 00:39 | 3683060 Non Passaran
Non Passaran's picture

Unfortunately it is fascists or socialists who win there.

Sat, 06/22/2013 - 18:13 | 3682524 earleflorida
earleflorida's picture

http://www.youtube.com/watch?v=GnDtxiNwDS8

'No Love Loss... None Given... Only Memories, Grave Memories'

Sat, 06/22/2013 - 18:27 | 3682561 Troll King
Troll King's picture

The markets did escape volacity - and now we have a new normal, where the dollar buys half of what it did.

This is an inflated economy due to a debasement of its currency; and the reason they "escaped" was because none of you noticed.

Sat, 06/22/2013 - 18:28 | 3682562 vincent
vincent's picture

 Seems to me our (US) plan is to blow everybody else up and remain the last one standing. Worked during the Cold War.

This is the reason  (IMO) that we spend a gazillion on our military and related entities.

If you consider US military a financial asset it all makes complete sense.

 

Sun, 06/23/2013 - 07:58 | 3683377 Moe Howard
Moe Howard's picture

Every loan shark needs an enforcer.

Sat, 06/22/2013 - 18:32 | 3682574 falak pema
falak pema's picture

once you are in this spiral you cannot let go; you go with it. 

Sat, 06/22/2013 - 18:51 | 3682611 Waterfallsparkles
Waterfallsparkles's picture

Does it even matter?

Bernanke printed Trillions of Dollars and gave it to the 1% and the banks. 

He left the average American to pay for all of those tillions plus interest thru their Income Taxes, the devaluation of their dollar and purchasing power.

That is success?

Sat, 06/22/2013 - 18:59 | 3682624 Waterfallsparkles
Waterfallsparkles's picture

The Federal Reserve literly raped the United States and all of its citizens.

The Fed printed Trillions of dollars and gave that money to the 1% and the Bankers.  They have left the Nation with a huge debt for their generosity to the Bankers and the 1%.  As the people of this once great nation will have to pay for this debt plus all interest accrued.

The US has been stripped by the Federal Reserve for its own gain and the gain of the Bankers and the 1%.  All Americans are left to pay the debt and pick up the pieces, if there are any left.

Sun, 06/23/2013 - 09:55 | 3683589 hootowl
hootowl's picture

The FED debt and national liabilities and obligations cannot and will not be paid by the American people.  It is not mathematically possible.

 

Hyperinflation by the banksters will be tried first, but even that won't work because it won't satiate the bankster greed.  The world banksters will fight among themselves for the scraps from the fiat/derivative dumpster.  Repudiation through the exhaustion or awakening of world citizen producers, or repudiation through wars, threats of wars, and confiscatory international resource exploitation and invasions will be the most efficacious means of ending this throttling of humanity.

The quicker and more extreme the financial/economic collapse, the less painful for the vast majority of world citizenry.  Once the burden of the banksters and their puppet governments is removed from the citizen producers, the reset and recovery can be swift and strong.  Neither seed nor remnant of the bankster fiat, fractional reserve scam, can remain to resurface through corrupt politicians and dictators or the involutional economic spiral will begin all over again.  Any attempt to resurrect his evil should be met with death of the scammers.

Let's get on with it.  This lingering death of the Babylonian scam is eating human life and energy.  The voracious maw of the banksters can never be filled.  Death to the bankster parasites.

 

I am old and tired and I have had enough of this great evil.

 

STARVE THE BEAST!!!

Sat, 06/22/2013 - 19:12 | 3682646 q99x2
q99x2's picture

Fucking "UNCLE" My mind declared uncle when it read, "The Fed believes it has healed an economy that was sick from easy money with more easy money" It could not read on. The FED is a criminal cartel of conspiring bankers. Those kinds of things you mention in your article have nothing to do with the FED, the FEDs purpose or its intentions.

 

Sat, 06/22/2013 - 19:17 | 3682657 the grateful un...
the grateful unemployed's picture

the Fed can buy any and all assets, they don't need QE for that, er wait a minute, that is QE isn't it?

Sat, 06/22/2013 - 19:20 | 3682660 Lmo Mutton
Lmo Mutton's picture

fu nsabernankebatshitcrazyweasels

Sat, 06/22/2013 - 19:32 | 3682682 Meremortal
Meremortal's picture

I've noticed a change here over the last 4 years. 4 years ago, there were many comments insisting that hyperinflation was imminent, only weeks or months away at most.

Now, there is less talk of hyperinflation, and very few talk of it being imminent. In fact, almost nothing is said regarding when hyperinflation will strike. Many are now saying deflation first, hyperinflation later.

Perhaps the most dangerous time will come when no one here is talking about hyperinflation anymore.

Sat, 06/22/2013 - 20:23 | 3682761 Nue
Nue's picture

Look around the world and you will see very high REAL INFLATION (not the fake CPI numbers) It's the reason why Brazil is ready to burn the place down ditto for Turkey. It's the reason for the Arab spring movements. The truth is that the U.S is creating money and spreading it on a GLOBAL scale. It can do this thanks to its Reserve Currency status. Of course this is wrecking havoc around the globe. When the world dethrones the dollar then you will see hyperinflation as the only thing the FED knows how to do is press the print button.

Sun, 06/23/2013 - 08:01 | 3683382 Moe Howard
Moe Howard's picture

Exactly. The US is exporting the inflation. Most hurt? Those who live on a few dollars a day. Any increase in price means less food, shelter, clothing.

Inflation in the US means less plastic shit from China and iPads / smartphones.

It will come home last, not first.

Sun, 06/23/2013 - 11:33 | 3683845 Solarman
Solarman's picture

The other side of that coin is the mercantilist elites in their country won't share the wealth and rather have their people make less and less in order for them to make their ROI on a depreciating currency.  We are evil, but evil is pervasive.

 

Edit:  They can kill inflation in a minute by letting their currenct float.

Sat, 06/22/2013 - 19:50 | 3682708 fijisailor
fijisailor's picture

One of the primary sicknesses in the economy was and still is corruption.  At least a diligent effort in this area is required for economic reform and recovery.  Many including this author avoid this important issue.  No recovery without confidence and honesty.

Sat, 06/22/2013 - 20:01 | 3682733 monopoly
monopoly's picture

Could not agree more with this article. I have been screaming that here for years. YES! We are F_____d!, Big Time.

Sat, 06/22/2013 - 20:37 | 3682785 gatorengineer
gatorengineer's picture

The bond market has thrown a hissy fit, not stocks... 6% is NOT a hissy fit... 60% maybe....

Sat, 06/22/2013 - 21:27 | 3682847 Downtoolong
Downtoolong's picture

I would be foolish to take on the Fed on this point. The Fed has a staff of 200-plus economists, most of them, I assume, from America’s finest universities.

After what we’ve been through the last five years I will contend this for the rest of my life:

The best part of being a central banker or macro economist isn’t the few rare occasions you appear to have been right. The best part is that you can never be proven wrong.

Sun, 06/23/2013 - 04:07 | 3683176 NidStyles
NidStyles's picture

Can't proven them wrong because they use the simple parable, "all things being equal". Which means they can extrapolate fault and blame on anyone they choose.

Sat, 06/22/2013 - 22:52 | 3682965 Whiner
Whiner's picture

What does it take? The federal government is increasing its power to police state. Seemingly decent men are elected to congress and are immediately vaccinated by the power system to increase the power, the borrowing the taxes, the security apparatus. The elections are monitized by oligarch banker- buddy-internationals. There will be no change through the ballot box. The bankers own it and the currency. Do we have to wait for the currency's failure, the loss of our last dime and freedom? We are not nearly ready for an armed revolution. What short of that? Occupy WSt? Pfffft! How about a national tax revolt? Just file but don't pay, all at once one April 15. I can't think of any other way to stop the oligarchs. Pots and pans in the street? What? Help me out here

Sun, 06/23/2013 - 01:06 | 3683090 Harry Dong
Harry Dong's picture

I hear you. I DON'T advocate a tax revote. There's is serious corruption and it needs to be cancelled. The debts written need to be cancelled. Those that wrote the debts and those that took the debts need to be Piunnesed (punished, think jar jar binks). 

I just remember those hot hot summers that my 'friends' were LOL'd that their properties gained another 30K...and they only had to pay $550.00 for the mortgage.

So what do I advocate? Don't play. Pay cash. If you have an extra $20, buy an ounce of silver. And when the EBT's quit working....stand back.

You won't need to. It's all according to prophesy: 2 Chron 20:17 Ye shall not need to fight in this battle: set yourselves, stand ye still, and see the salvation of YHWH

Sat, 06/22/2013 - 23:04 | 3682979 WTFUD
WTFUD's picture

4 moar years, tears, beers
4 moar years of ben in the pen
talk is cheap let's all take a leap
off of the empire state mate
4 moar years, tears for souvenirs
lend me your ears folks

if at work you throw a hammer
it travels in a downward manner
so best step forward and take care
take my advice and never comb your hair
with a pitchfork sonny

a brick in the hand is worth 2 dum dumb bullets
unless your blessed with a surface to air
that's not fair we don't care
'ntil we do

4 moar years beers obummer
benron gonna pick up slack of enron
there's a thin line between prism and mob rule
just sayin' who sold me that gear?
give him a knighthood 'cause i feel fine

Sat, 06/22/2013 - 23:38 | 3683010 Harry Dong
Harry Dong's picture

just logging in to say I love the new title:

Printmaster General

genius. 

Sun, 06/23/2013 - 09:21 | 3683530 MrBoompi
MrBoompi's picture

No mention that the Fed is simply lying? "Escape velocity" could easily refer to the big banks escaping bankruptcy thanks to free money. But I would bet after all this QE which is actually more debt after all, these zombies are still pretty much insolvent and we have no jobs, higher wages, and threat of severe inflation to show for it.

Sun, 06/23/2013 - 10:18 | 3683591 e-recep
e-recep's picture

i spoke to two academics today, both in economy department. to my surprise they really believe that QE is ending. unfuckingbelievable!

Sun, 06/23/2013 - 11:45 | 3683883 Winston Smith 2009
Winston Smith 2009's picture

"maybe debt deflation is what is needed"

There is no maybe about it, that's exactly what was needed in 2007/8 but didn't happen and still is needed now!

 

Sun, 06/23/2013 - 13:11 | 3684093 the grateful un...
the grateful unemployed's picture

you're at least 100% wrong. the mispricing of debt is the problem. in my own naive analysis, i thought the Fed would raise interest rates in 2007/2008 in order to price risk correctly in the market. they made a huge mistake (in my estimation) by deflating debt in a CREDIT based economy, that's deflationary. they should have raised rates and let the mortgage market sort itself out (which hasn't happened, the mortgage market is even more distorted than it was) but wayne angell said it, you dont fight inflation by raising rates. ergo the policy of Bernanke; REINFLATION, is entirely consistent with his policy of ZIRP. we know there is some inflation, and ergo rates are going higher, and Bernanke will NEVER raise them will he?  it will be interesting to see what he will do this time if the stock market deflates. will he raise rates then?under what circumstances would he raise rates? i think only when he is certain that inflation is running ahead, and the rates would only be a reaction to higher CPI. the textbook on fed policy needs to be amended.

Sun, 06/23/2013 - 15:26 | 3684349 Winston Smith 2009
Winston Smith 2009's picture

I actually think we're both saying the same thing.  By debt deflation, I meant the elimination of debt via bankruptcy which is a massively deflationary process.  

Unless excessive debt is removed from the system via bankruptcy in recessions, the exponential debt curve is never reset to a manageable slope.  It became unmanageable in 2007/8.  Those who would have gone bankrupt then should have been allowed to do so and raising interest rates would have done that and made bailouts an even more stupid choice because higher rates would have been very effectively working against any such bailouts.  Malinvestment and stupidity/greed purging via the allowance of the Darwinian process of bankruptcy is something that the Fed has not allowed on a large scale for 30 years and it has a much more negative effect than simply creating a huge moral hazard.  See YouTube for "Money as Debt."

"Capitalism without bankruptcy is like Christianity without Hell."

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