Santelli Stunned As Nobel Winner Fama Explains Fed Unwind "Is No Big Deal"

Tyler Durden's picture


If ever there was a few minutes of television to confirm the deep-seated disconnect between reality and the ivory-tower academics pulling the levers behind the curtain, CNBC's Rick Santelli just exposed it. For once, simple questions were enough to allow none other than Nobel-Prize-winning economist Eugene Fama to show Santelli (who did his best not to explode in incredulity) that the "smartest people in the room" just don't get it (just as they didn't get it in 2007). Santelli was gracious and polite as he asked what the great professor's thoughts were on QE... (and the entire brief clip is worth watching in its entirety) but his conclusion is perhaps the most stunning (and left Santelli almost silent)... when asked the impact of the Fed 'Tapering' or even selling down its $4 trillion in assets, Fama calmly says "it's basically a neutral event... It's No Big Deal!" Indeed, professor, that is so clear...


"What the Fed is doing now... is kind of a nothing activity."



Or the Hollywood version...

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Tue, 10/29/2013 - 12:54 | 4101836 redpill
redpill's picture

If it's no big deal why do they keep doing it?

Tue, 10/29/2013 - 12:55 | 4101842 kralizec
kralizec's picture

Habit, ignorance, laziness...all of the above!

Tue, 10/29/2013 - 12:58 | 4101862 TruthInSunshine
TruthInSunshine's picture

If it's "no big deal," go BIG-ER or go HOME!

Turn that 4 trillion USD Fed "balance sheet" into 40 trillion USD...


Tue, 10/29/2013 - 12:59 | 4101868 kralizec
kralizec's picture

It's easy!

Here, hold my beer...

Tue, 10/29/2013 - 13:05 | 4101906 SafelyGraze
SafelyGraze's picture

one small step toward unwinding our balance sheet is simply selling the MBS we now own

the dollars come back to us and are retired

so if you were thinking about MBS as xmas presents or whatever, you can Help The Fed Unwind (HTFU) by grabbing these hot items before they're gone



Tue, 10/29/2013 - 13:07 | 4101915 kaiserhoff
kaiserhoff's picture

What an idiot.

More proof, as if it were needed, that macro-economics is a lunatic asylum.

Tue, 10/29/2013 - 13:16 | 4101953 NotApplicable
NotApplicable's picture

At least he isn't a total psychopath (as evidenced by his inability to NOT stare directly into the camera while blatantly lying, instead, staring at his feet in shame).

Fucking clown shows!

Tue, 10/29/2013 - 13:19 | 4101965 redpill
redpill's picture

The thing is these cocksuckers know they are wrong.  If they really thought they were right and that we can bring the economy back with funny money bullshit, they WOULD triple it.  Otherwise how fucking evil are you sitting there and not doing more if you think it's going to work?  The answer is they KNOW it's not going to work, they are using loose money policy to obfuscate the situation, avoid blame, and ensure the financial oligarchy remains in full control.  Assholes.

Tue, 10/29/2013 - 13:22 | 4101980 Pinto Currency
Pinto Currency's picture


The banks receive ~ $80 billion in interest payments from the 'excess reserves' held by the Fed as part of QE.

Tell them that taking away the $80 billion of walking around money they receive every year is no big deal

Tue, 10/29/2013 - 13:36 | 4102046 quintago
quintago's picture

Buy long-term debt and issue short-term debt. Yeah, the ARM worked out so well for all those homeowners when it went mark-to-market.

Tue, 10/29/2013 - 15:06 | 4102420 macholatte
macholatte's picture


He's from Chicago

Nuff said.

Tue, 10/29/2013 - 15:40 | 4102551 Indian_Goldsmith
Indian_Goldsmith's picture

I feel the Professor's right. I feel it yo! The dud'e getin the noobel or some such bigass prize!

Tue, 10/29/2013 - 17:03 | 4102776 TwoShortPlanks
TwoShortPlanks's picture

Tow-the-line motherfucker.....otherwise that grant they promised you will evaporate, and that position you hold, you won't.

This Cat knows a Shell Game when it sees it, Baldy here doesn't.


TSP a bull shit sandwich without a crust is still a bull shit sandwich

Tue, 10/29/2013 - 23:09 | 4103702 eatthebanksters
eatthebanksters's picture

Quick...pull my finger!

Tue, 10/29/2013 - 23:15 | 4103713 markmotive
markmotive's picture

Why do CNBC hosts never let their guests finish a sentence?

Wed, 10/30/2013 - 00:02 | 4103785 diesheepledie
diesheepledie's picture

Because Santelli was ranting the usual ludite rant and doesn't understand modern economics. The Fed is in uncharted territory and Fama is one of the few people who truly understands it. He is right. These are nothing events. 

Wed, 10/30/2013 - 04:28 | 4103977 Squid-puppets a...
Squid-puppets a-go-go's picture

Ohhhh, but you do. Well, la-di-da

Its really easy to 'look' like you're more clever than the rest of us. But I note you're as tight lipped as the Fed Reserve 'architects' as to just why the laws of economic gravity, common sense, and mathematics itself no longer apply

Wed, 10/30/2013 - 06:20 | 4104014 NidStyles
NidStyles's picture

Yes, because the past 5 years of those "Modern Economics" have certainly shown how efficient and accurate their controls and manipulations have been... We can just ignore every missed called and the delusion that the economy recovered while that funny money is still being created out of thin air, right?


Fucking shills..

Wed, 10/30/2013 - 00:02 | 4103786 diesheepledie
diesheepledie's picture


Wed, 10/30/2013 - 07:07 | 4104065 Truthseeker2
Truthseeker2's picture

! ! ! They do it because they know the --->
"Global Financial Architecture and Economic Systems is on the Verge of Collapse" . . . and there's no way they can stop it!


Wed, 10/30/2013 - 07:25 | 4104094 HulkHogan
HulkHogan's picture

@ macholatte


They're both from Chicago.

Tue, 10/29/2013 - 15:07 | 4102424 smlbizman
smlbizman's picture

paul krugmen may have just lost his championship belt....he doesnt appear to be the dumbest motherfucker on the planet anymore...

Tue, 10/29/2013 - 15:33 | 4102525 King_of_simpletons
King_of_simpletons's picture

This guy has won the Nobel Prize for Economics for the next whole decade. In economics, Nobel is given to dumbest of all assholes.

Tue, 10/29/2013 - 15:57 | 4102616 Sandmann
Sandmann's picture

Yes because he is the antithesis of Hyman Minsky

Tue, 10/29/2013 - 19:12 | 4103093 Oldwood
Oldwood's picture

Its pretty obvious what direction the Nobel board is pushing for. Fuck these assholes. They study and confer amongst themselves upon a solution to a problem they cannot fully imagine and then jamb this shit down our throats because we are obviously too ignorant to know what is in our best interest. Yes, they get the prize all right! These mushrooms would likely shrivel and blow away in the light of day (common sense).

Wed, 10/30/2013 - 07:05 | 4104013 fockewulf190
fockewulf190's picture


" If they really thought they were right and that we can bring the economy back with funny money bullshit, they WOULD triple it."

When the Fed had heaped up $1 trillion on the books, that is exactly what they did....they tripled it to 3!! Onward to $9 trillion!!

Wed, 10/30/2013 - 06:22 | 4104016 NidStyles
NidStyles's picture

It's not the Nobel committee. It a bunch of Swiss bankers. Look it up, see who sponsored and backs the fake Nobel Prize in economics.

Wed, 10/30/2013 - 21:47 | 4107297 PT
PT's picture

Economics is not a science.  It is not even a pseudo-science.  It is now just the propaganda arm for the elite.  Gone is the "divine right of the aristocracy".  Now is the "scientific proof" of the "economists" ... that bankers need to be rich and everyone else needs to be poor - how convenient.  Yes, things are going to get better ... any minute now ... trust me, you just have to wait a little longer ...

Guess what!  
1.  You lose your life one day at a time. 
2.  Every day the sheeple quietly suffer, the elite party and the top propagandist "economist" has done his job.  His job isn't to fix the economy.  His job is to assure the sheeple that everything will be alright.

Tue, 10/29/2013 - 14:07 | 4102172 csmith
csmith's picture

If the rate paid on excess reserves is 0.50%, seems to me the annual income to the banks would be more like $20 billion, not $80 billion, given that reserve bank credit is today just under $4 trillion.

Tue, 10/29/2013 - 14:19 | 4102239 dontgoforit
dontgoforit's picture

Invasion of the Body Snatchers.  Google barges indeed.  1.3 billion hollow points and a billion mini-drones to carry them.  300 million FEMA coffins all ready to use.  America Usurped.  Attack at will.  What defense?  A tennis racket or an EMP producer is about all you got.  All these lies; all this stuff.  C'mon, man!  What do you think is gonna happen?  Nothing?  Do you not believe it feasible that America could be taken by such a plot?  Hope I'm wrong.  Sure seems like a ton of czars appointed by the prez and the prez doesn't know shit about anything, just ask him, or Jay Carney, or Hillary or Pelosi.  There's a rat in the woodpile.

Tue, 10/29/2013 - 14:28 | 4102278 Pinto Currency
Pinto Currency's picture


Good call csmith - my mistake.

The Fed has only paid the banks ~$17 billion in interest on excess reserves.

The $80 billion was a Fed projection of annual interest payments if interest rates normalized to 4.5% with reserves remaining at April 2013 levels.

There is an additional unstated subsidy in the value that the bonds that the banks held having been driven up by QE.  This is an additional freebee but only if the banks sell these bonds before interest rates rise.

Tue, 10/29/2013 - 14:53 | 4102307 MillionDollarBogus_
MillionDollarBogus_'s picture

The New Yorker's John Cassidy asked Fama about the credit bubble that led to the housing bubble and ultimate bust, the famed professor said:

"I don't even know what that means. People who get credit have to get it from somewhere. Does a credit bubble mean that people save too much during that period? I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning."

Tue, 10/29/2013 - 15:01 | 4102404 Bay of Pigs
Bay of Pigs's picture

In other words, Fama is just another FED and Central Bank drone/apologist who should be dismissed as a crackpot entirely.

Tue, 10/29/2013 - 16:20 | 4102670 object_orient
object_orient's picture

Another gem:

Are you saying that bubbles can’t exist?

They have to be predictable phenomena. I don’t think any of this was particularly predictable.

Wed, 10/30/2013 - 08:54 | 4104284 Ranger4564
Ranger4564's picture

This guy is going to be FAMAOUS. He will be the new and improved Greenspan. The scariest thing is, even when Greenspan was lying, it was fucking obvious, but a lot of people accepted it. This guy is blowing smoke up everyone's ass, but the above statement isn't an indictment.

He's saying, in order for a bubble to be classified a bubble, someone needs to be aware pricing is in excess of valuation to an exaggerated extent. The deception is that there are people who are warning of this, but he dismisses them by previously stating there are always fearmongers / ralliers, and you have to ignore them. So basically, catch 22, you lose.

Hang him now, save humanity later.

Tue, 10/29/2013 - 14:40 | 4102327 Herd Redirectio...
Herd Redirection Committee's picture

Mini drones?   Can they navigate through forest?  Not convinced, but please, continue.

Tue, 10/29/2013 - 13:25 | 4101995 NoDebt
NoDebt's picture

Has to be.  When you have newly minted Nobel prize winning economists telling you everything is fine, nothing to see here, the end must be nigh.  

Maybe I was too hard on Headbanger yesterday.

Tue, 10/29/2013 - 14:13 | 4102209 PT
PT's picture

Bank-issued prize winning economist =
Fox issued prize winning chicken coop designer =
Goebbels issued prize for journalism 

Tue, 10/29/2013 - 13:31 | 4102017 GernB
GernB's picture

He admitted he was wrong. He said he expected short term interest rates to go up but they went down. Translation: this isnt working as expected, our models must be wrong, we don't know what the effects of what the Fed is doing will be.

Tue, 10/29/2013 - 13:44 | 4102082 insanelysane
insanelysane's picture

They believe the models are correct but reality is wrong.

Tue, 10/29/2013 - 17:48 | 4102888 jimmytorpedo
jimmytorpedo's picture


Resources are finite.

Desire is infinite and unpredictable.

All the rest is bullshit to justify sitting in your ivory tower.

Tue, 10/29/2013 - 19:06 | 4103076 Notarocketscientist
Notarocketscientist's picture

'They believe the models are correct but reality is wrong.'


Quite possibly the most brilliant comment ever to grace the pages of ZH

Tue, 10/29/2013 - 19:20 | 4103116 Oldwood
Oldwood's picture

Yes! through our constantly changing meanings and uses of words I think now reality is simply but another possibility. Everything has become relative and you perception of reality and mine don't have to be the same. Its like what used to be a lie is now simply just an unfortunate repeated statement which could be construed to be untrue, like "if you like your existing healthcare and want to keep it, you can under ACA". We just have to learn to be more accomodating with our language. Its almost like going to grade school was a complete waste of time. Even math is relative now.

Tue, 10/29/2013 - 20:04 | 4103221 daveO
daveO's picture

Thanks to the dollar's Petro/Reserve status. Living in the Twilight Zone, until dollar collapse.

Wed, 10/30/2013 - 04:32 | 4103980 Squid-puppets a...
Squid-puppets a-go-go's picture


i nearly creamed my pants with glee last week when the Saudi's made noises that 'might' be interpreted as consideration of accepting alternatives to the $US for oil

Wed, 10/30/2013 - 07:17 | 4104082 fockewulf190
fockewulf190's picture

Need to give notarocketscientist an honorary degree in rocket scientry for that comment. Think I'm going to frame it.

Wed, 10/30/2013 - 09:01 | 4104308 Ranger4564
Ranger4564's picture

Insanelysane... as absurd as that statement might seem to you, it indicates quite clearly the extent to which the oligarchs fabricate the reality in which we live. I know a lot of people don't believe anyone is that smart, like Fama, I say it's easy to declare such things 2020 hindsight, but when Bernay's was manipulating the vast majority of the populace, few understood until it was far too late. In the same way, there are all sorts of cultural controls that drive people to do certain things they've been taught, at the behest of the oligarchs.

The true meaning of your statement is that they have to adjust some aspect of control because the objective is the results derived from their models. Whether that involves bombing China, buying your house, shutting down the small businesses, I don't know, but something is being adjusted to make sure the results align with their model. That's how they stay in power. They plan and modify and plan and modify. We plod along.

Wed, 10/30/2013 - 12:08 | 4104963 Raging Debate
Raging Debate's picture

Insanelysane - It is about about self preservation for all of us in the end. However, the second variable is short term vs. long term in how we as individuals succeed or fail, suffer or not and that takes learning from history and APPLYING it.

I could go deep write an article or post a long comment describing the cycles of evolution or tie in physics but I will merely say dance until the music stops to keep what your have, raise income through collaboration at the local level but suffice to say it is wise to have the 3 b's as Zerohedge users often proclaim: :
1) Beans
2) Bullion
3) Bullets

The last is for the increasing crime rate because with empires and human nature you let them rattle apart and keep your eye simple. God bless you all, may we look after one another during what inevitably must come next. By 2021 it will look better for mankind but the final world war will come first.

Tue, 10/29/2013 - 13:54 | 4102132 Son of Captain Nemo
Son of Captain Nemo's picture


And rest assured this won't stop as long as the politicians, professor(s) and bankers like this perfect asshole are allowed to continue with a voice on the MSM circuit telling the 99% that all is well with the systematic demolition of our monetary system, and oh yeah almost forgot that laws are kinda being broken in the process.

How is it that CNN, NBC and FOX can keep bringing back the likes of Dick Cheney and Richard Pearle on their programs when the majority out there know and understand after 12 years of this shit that they lied, stole and murdered to make their fortunes, and nobody has the guts on these networks to call them for what they are? More importantly no attorney with a spine out there who will prosecute them in a court of law?

What did Eric Holder say about prosecuting TBTF's several months back?  If the AG says is allowed to get away with statements like this, who will replace him in order to make it stop?

Tue, 10/29/2013 - 14:37 | 4102312 vxpatel
vxpatel's picture

The 'big problem' is that many of us on zerohedge feel as thought there is a problem, we don't get, or can't accept that fact, that things are just swell for those in power.

Do NOT follow this link or you will be banned from the site!