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On QE's Gross Misallocation Of Capital
Money put into the system would, in normal times multiply aggressively in use (e.g. Fed to bank, bank to business, business to consumer, consumer to restaurateur, restaurateur to farmer, farmer back to bank etc etc.) In reality, as Citi notes, there are often even more legs to this multiplier. However when QE puts artificial support under the Equity and Bond market you get misallocation of capital and no velocity of money. If ever there was a chart of the gross misallocation of capital caused by QE, this has got to be it...
Velocity of Money (M2) and Core PCE- A once in 50 years dynamic.
- The last time both were as low as this was 1965 (Nearly half a century ago)
- Core PCE stands at 1.23% having seen a range in the last 54 years of 0.95% to 10.25% (Inflation floor anybody???)
Inflation does not show up in the true economy but in paper asset prices instead. (that worked well in prior cycles)
One might even argue that as a consequence QE actually stifles economic growth, employment creation and inflation.
The trouble with that assessment (if correct) is that Ben does not believe that premise and neither does Janet.
(Quite the contrary) If the premise is potentially true that QE is actually a negative for the economy/savers etc. then more QE will not only not solve the problem, but exacerbate it. It therefore becomes a negative feedback loop that we cannot get out of until the Fed has the nerve to stop QE no matter what the economic backdrop. Under Janet Yellen that scenario is highly unlikely.
(Translation: It aint happening)
Source: Citi
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Qe could be considered a missallocation of capital. You could always call a redistributive mechanism of wealth from the poor to the rich. Kind of surprised Obama supports a policy with such gusto that harms his core constituency so badly. Whatever, buy stocks and thank obama/Bernanke for keeping homes unaffordable to our most vulnerable
The "poor" don't have any wealth to redistribute. It is coming from the middle class, which does.
"If ever there was a chart of the gross misallocation of capital caused by QE, this has got to be it..."
OblablaCare
Ob-la-di. Ob-la-da. Whatever.
@Hedgetard
'Did'
No Cash to pay your "fair share", No Problem.
Pimp Satan's House O' Credit will offer you credit cards, student loans, NINJA loans, and payday loans so you can put your "fair share" ass on lay-away and never even move on up to the middle class, much less that deluxe apartment you thought Obami was going to buy you...
Nominally, the amounts the smaller, but the financial and moral hole is in the same ballpark.
Hedgetard55: The middle class are the now the new "poor".
Don't forget this.
http://www.zerohedge.com/news/2013-10-10/biggest-banking-disconnect-lehm...
Who is his "core" constituency?
Barry is the Ultimate House Nigger- he gets to live in the big White House, and convince all the field niggers (aka debt serfs) to slave away for the benefit of Massa TBTF... and in that respect he's doing a half-way decent job... since only the "permanent" opposition (and pseudo-opposition) and the "lunatic fringe" of his "other" base will speak against the FRB wealth transfer con he is knowingly facilitating.
TSLA is down 5 percent today...so at least there is some sanity out there....not much...but some.
YTD this piece of shit is up over 400 percent! I still find this impossible to believe...but the numbers are the numbers.
The masses: "Sell TSLA, Buy PCLN"
I went to the grocery store today and Oscar Myer Shaved Turkey had a note on the label," This product contains 35% water added".
So they are depending on consumers to be too stupid to understand this rip-off. Inflation is everywhere. You just have to look more closely to see it. But its there.
+55
Lavazza Coffee is now 8 oz. per can, down from 16 oz. twenty years ago. Price is $7.49, up from $2.49.
With electronic "money" it's real easy to "fix" any liquidity problems. However, there will be no escape from the calorie crisis/shortage.
Hedge accordingly.
Well, velocity will always drop if you print money fast. The equation ends with dividing by the money supply. Every hit of QE should knock it down.
And the total increase in money supply looks like the Space Shuttle lifting off.
Yes Houston, we have a problem.
IDK...the velocity of money flying out of my wallet is ever increasing.
And they say the Chinese are the worse capital allocators
In a functioning "market" there are real fucking consequences for the mis-allocation and mal-investment of capital and resources. Yes, there was a time when companies actually went bankrupt. Now the wizards tell us that they can create "capital" out of nothing with the click of a button, I sure hop they can do that with the calories that are required to actually do anything of real fucking value. < sarc off >
Just the same, I think I will hedge accordingly and remain long sharecropping and black markets. As the most recent post on ZH shows, the "public market" is simply for show to make all the 401k sheep feel good...
A ray of hope for a troubled world: Marine Corp goes back to the 45 cal. pistol.
http://www.military.com/daily-news/2012/07/20/marines-pick-colt-for-new-pistol.html
Actually they never left, the only way old marines would give up their Colts were if they pried them out of their cold dead hands.
Compare the size of the 45 to pussy fart 9 mm in the photo below:
http://www.writeonnewjersey.com/wp-content/uploads/2009/11/45-Caliber.jpg
Perhaps we have finally passed peak stupid for the human race.
Awesome, love my 1911...
Funny how the negative feedback rationales emerge when there is unsustainable debt.
Why on earth would starving savers and bond holders of interest income for a decade they can actually spend AND purposefully not allowing prices to fall and correct excesses AND purposefully debasing the value of the dollar aggressively AND, consequently, pushing up stock, bond and real estate prices to levels where they would not be in a free market and cannot be sustained be helpful? Wouldn't the economy do better if the prices of assets dropped to clearing levels in an unmanipulated way where people realized they were real and decided to transact? Why would you buy a house or stock or bond if you know that its value will decline once the government stops manipulating rates?
QE is something conjured up by economists who believe they are smarter than the market in setting prices. The intellectual arrogance is stunning.
This is exactly the situation predicted by Thomas Jefferson.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson
"Single acts of tyranny may be ascribed to the accidental opinion of a day; but a series of oppressions, begun at a distinguished period and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematic plan of reducing [a people] to slavery."
~~ Thomas Jefferson
Your first quote is a common misconception, it was not made by Jfferson. Read more here: http://www.snopes.com/quotes/jefferson/banks.asp
The term "deflation" did not even exist during his lifetime.
What the fuck is Anonomous doing? The fed is creating $85 billion a month of conterfeit digital money -- with a COMPUTER.
And the banks are creating probably even more, with a COMPUTER.
A few billion trillion should do the job.
Article 1 Section 10 of the Constitution reads "No state shall ................ make anything but gold & silver coin
a tender in payment of debts ...................."
Can't the fucking fed read?
Don't worry, the central banks are indeed buying and holding PMs. Where, is the 800 trillion dollar question.
It's probably nothing.
QE is, of course, the greatest act of class warfare in US history (in terms of numbers).
Oh wait, didn't Calvin Trillin say that class warfare only goes up and not down?
Next step will be "trillion Dollar coins". It is destruction of market capitalism.
1/10 ounce American Gold Eagle may end up being the trillion dollar coin.
WRONG. Income velocity is a contrived figure.
Yellen annouce a Quadrillion printing program to ramp the market!