Guest Post: Is QE A Victimless Crime?

Tyler Durden's picture

Submitted by Peter Tchir of TF Market Advisors,

QE a Victimless Crime?

If that title can’t make you want to read this piece on such a dull day, then nothing will.

Tomorrow we prepare for a “new” Fed.  It looks a lot like the old Fed, but one can hope.

There are some that hope to test the new Fed.  There are some that believe the new Fed might throw a monkey wrench into the rally.  There are others that believe the recent bout of weaker than expected data will let the new Fed turn the spigot back on to full.

I have heard all of the above, and heard it from people that are “plugged” in, so at least we know that confusion about how the Fed will behave is something we will have to deal with and that we should get some clarity on tomorrow.

In the meantime I wonder if QE is worth it?  Does it do what it is “supposed” to do?  No.  I don’t think it has done much for jobs or inflation or housing.  I look at the pre QE data and the post QE data and I am underwhelmed (I will admit that it is difficult to call something pre QE since it does seem that we have been under one form or another of Federal Reserve support since 2007).

But what real evidence is there that QE is helping the economy?  Would we be the same without it?  Better even?  I am told no, but I am told a lot of things that turn out not to be true.  If it was clear that QE was really helping the economy, I wouldn’t be wondering why we do it.

But is there any harm to QE?  That is the other side of the coin.  Who cares if it doesn’t help the economy if it isn’t hurting anyone?

Ask any person from an Emerging Market whether QE is harmful and you will likely get a very different answer than the one Ben has given.  Maybe they will just use QE as a scapegoat for their own internal problems, but it doesn’t make the tensions any less real.

Maybe higher stock prices are good?  Maybe artificially created stock prices (the Fed has told us to go buy stocks) create misallocations of resources and motivations that are not actually helpful in the long run.  We have no idea whether we would have more jobs by now or fewer if there was no QE.  We have no idea whether businesses would have been more aggressive if they couldn’t rely so much on financial engineering.

I think QE is running out of steam as a policy tool.  They cannot abandon it quickly as it has been pitched hard for a year and no amount of spin can change that, but I think we will see some interesting trial balloons floated by this new Fed.  Some might work better, but I think the market’s initial reaction will be one of skepticism.  We know how QE works – it makes stocks go higher – so anything else might just not have the same appeal.

So here is why we question the ongoing pursuit of QE and have to believe that Beer Goggles Fisher sees some of the same things and gets to ask his colleagues behind closed doors about them.

Non-Farm Payroll

Where is the QE impact?

If this was a before and after picture trying to flog weight loss treatments or hair restoration, it wouldn’t even be worth buying add time on late night TV.

Mortgage Applications for Purchases

Where is the QE impact?

Here at least there seems to have been an uptick with the onset of QE.  Though, it seemed to be a continuation of a trend.  Lately it has declined and is back to levels that seem to the naked eye to be lower than pre QE levels.

Emerging Markets

Where is the QE impact?

EM is volatile enough that it might be a stretch to make some causation arguments, but it looks like you could make the case that QE initially helped EM as capital was (mis)allocated but that the threat of Tapering is making problems worse than they might otherwise be.  I admit it is probably a stretch, but one that I am willing to bet a lot of locals would be happy to make.

U.S. Stock Market

We all know that stocks are higher, but why?

The big impact seems to be a willingness to pay more for a given level of earnings rather than real earnings growth (which has played a role).

It seems like you could make the argument that QE created a lot of money that had to chase something, so it chased stocks.  Maybe that is good, though the wealth effect argument seems bogus to me.  Most people see their assets go up in value, but see their job security steady at best and future benefits declining, probably at a faster rate than the wealth effect.

I think it is a game and the Fed has demonstrated without a doubt that they can cause inflation in paper assets.


Asset price inflation, yes, but real inflation?

Not so much.  The CRB index rallied into the announcement of QE (along with Draghi’s “whatever it takes” message).  Since then, it has done little.  You would think that if the economy was really chugging along that somehow we would see some commodity inflation, but we aren’t (though I am not sure why creating inflation is such a good thing for those who eat, drink, and travel, but then I am not a prize winning economist, but I guess if you just give more food stamps it wouldn’t matter anyways).

Financial Engineering versus Engineering

I haven’t been able to pull the data up myself, but I suspect that we are seeing high levels of stock buybacks and that a lot of debt is being issued to fund that.  The CLO market is on fire.  The number of new ETF’s is almost mindboggling.  So it is clear that Financial Engineering is alive and well (I still think synthetic CDO’s will make a comeback this year).

Where is the real growth in “engineering”?  A lot of the big companies still seem to be laying people off.  There are jobs but it doesn’t seem to match the pace of growth that we see in stock markets.

Maybe, not only does QE not directly impact engineering, it may be detrimental.  If managers don’t believe in the growth they are unlikely to launch new businesses (especially when returns from financial engineering are so much easier).  In fact, as asset prices grow due to multiple expansion, without the commensurate pick up in real growth maybe they are less likely to commit capital?

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Silver Garbage Man's picture

When my stash finally finds its true value, it WILL be worth it.

AlaricBalth's picture

I think the people of Turkey have something to say as to whether or not the Feds QE is a victimless crime. QE has had unintended consequences on a global scale.

It doesn't take an MIT economist to realize its effects here in the US (new asset bubbles, a more severely bifurcated economy, etc.). History will show that the policy of QE was an failed experiment which exported rabid inflation to EM countries and distorted currency markets, which has caused the most extreme capital misallocation of any era.

Son of Captain Nemo's picture

I think the people of Turkey have something to say as to whether or not the Feds QE is a victimless crime

Well put.

Should be interesting to see the streets of Ankara tomorrow morning.  Guess the riot police will be finding out first hand how victimless the crowds they may be controlling are feeling!


PT's picture

Ans =

No.  QE is a victimful crime. 

acetinker's picture

Yeah, never mind Turkey, never mind Ukraine, the fed is without fault, right?

unrulian's picture

Yes, like punching someone in the dark

Nelson Muntz

Oracle 911's picture

In "victimless crime" everybody is a victim.

LMAOLORI's picture



I think the middle class in America (whats left of them) would also weigh in and say NO NO NO. According to Pew research this so called recovery favors the affluent because 53% of Americans don't own stocks, not even in their retirement portfolios anymore.

Ask the savers and the elderly who aren't earning crap on their savings or retirement. And that joke about no inflation gas has doubled in price, propane is over $5 a gallon, food packages have shrunk, electric bills have increased, we have plenty of inflation in all the things you really need to live.



acetinker's picture

I've never been in a position like this before.  The world hates me.  Personally, I've never purposefully done anything to hurt anybody.  The Jackass that's about to give a SOTU, clueless as he is, is the enemy of the world.  The fucktard radicals, can't discern between me and him.

Oh well.

OC Sure's picture

Do we have to wait for History to show what we can see right now? To discern whether or not QE is a success or failure is a ruse to obfuscate its purpose. The litmus test is to follow the money and to ask exactly what is the purpose of QE. The undisclosed purpose of QE is to inflate the currency and thereby enable those who receive the hot money first to steal from those who are left cold.

Remember: Inflation favors the thief, deflation favors the honest.

acetinker's picture

OC, you've been here less than 5 weeks.  Maybe you just discovered this place, or maybe you don't belong here.  Time will tell.  We're watching.

The Vineyard's picture

Let's be honest.  Without QE, the entire globe would be up Shit Creek.  The banks would collapse.  The stock market would collapse.  Housing would collapse.  The price of commodities--including gold--would collapse.  We're talking an all out shit storm.  There's a reason interest rates are being held at zero.  Even just a slight bump upwards, the entire house of cards collapses.  Scary stuff. 

skipjack's picture

Your comment is the precise reason why we will not recover until we have a solid currency. Let's deconstruct your comment, shall we ?

 The banks would collapse. 

Who cares ?  We need banks, but we don't need these lying, thieving, scamming, crony banks. Let them fail. Depositors beware.

The stock market would collapse. 

So what ? Paper burns. You should know that there is no profit until it is in your hands. The stock market has become a joke; it's not a real market; it's totally manipulated.

Housing would collapse. 

Again, so what ? Default on your mortgage, declare bankruptcy, in a few years buy your same house at pennies on the dollar. Why is buying a house for $300k better than buying the same house for 50k ? The 66% of us who own our houses without a mortgage would love housing proces to collapse. Can you say "reduced property taxes" ? I knew you could.

The price of commodities--including gold--would collapse. 

Good. They collapsed for a while during every depression we've ever had. Again, it's bad for whom ? Those who own it now (the banks and crony corporatists) and good for the rest of us.

We're talking an all out shit storm. 

Read up on the 1920's depression. A round trip from 70% down to a solid economy in 18 months. So buy enough food to last you 18 months, prep for life with few expenditures, and hang on. The ride will be rough but short. The best part is being able to watch the bankers falling out skyscraper windows like confetti.

There's a reason interest rates are being held at zero.  Even just a slight bump upwards, the entire house of cards collapses. 


Good. Let it collapse, clear out the debris, build a better foundation. How you can stand the continual fraud, lying, scamming and outright lawlwssness by the banks, government and corporations is way beyond my understanding.

acetinker's picture

I don't know what you mean by "solid currency", but otherwise I'm all good with your words.  In fact, the only thing that has ever had value is a firm handshake and a solemn look in the eye.

kaiserhoff's picture

No. It is not a victimless crime.

Full page ad from a local credit union.

"Paying a full 1.00 in interest on 11 month CD.  Get it while you can!"

I make that a negative 4% real rate.

Fuck the Fed, BenYellen et al.



seek's picture

Exactly, not even remotely is it victimless.

Everyone on fixed incomes in retirement has been fucked by this, wiping out their base. Even if rates return to normal they'll be living with the consequences for the rest of their lives.

Millions of people have been priced out of home ownership as well, since the misallocated QE capital landed on real assets.

Pension funds across the world pushed into maximum risk investments in order to break even. The list goes on and on. And we all know, it doesn't end well.

New World Chaos's picture

Hmmm, let's see... There world is secretly run by a satanic cult that wants to sacrifice 80-90% of us and enslave the rest.  To pull it off, they need trillions of dollars for bribes, wars, prisons and assorted black-bag jobs.  Should we give this cult a license to steal from savers?  Engineer bubbles?  Reward sociopaths?  These consequences of QE are mainly "consensual", after all.  No victims if there's a bailout, right?

PT's picture

Effects of QE :

Allow incompetent banksters to keep their jobs.
Allow insolvent banks to keep running.
Allow unethical banksters to lend money to idiots.
Allow idiots to bid up prices so high that sensible people are priced out of the market.  A few smarter people may try to game the system, but the continuation of their success is at the whim of the Feds.
Allow banksters to repossess real assets from idiots once they go bankrupt.
Allow banksters to hold assets off market and inflate prices that way.
Allow ethical bankers to underperform relative to banksters so they are passed over for promotion or sacked.
Allow Ponzi finance to continue for a little while longer.
Allow artificially high real estate and equity prices.  And if those prices aren't backed by dividends, rent or real growth then they are Ponzis.
Allow idiots to have jobs that should have been given to mathematicians.  (Debateable as some of the problems were caused by mathematicians, but I would argue that this statement nets out as true. )
Allow transfer of wealth from producers to rent-seekers.
Allow poorest producers to be homeless while new homes are empty.
Allow tradies to avoid unemployment by producing houses that no-one can afford to buy = a bizarre but more profitable kind of "work for the dole" scheme.

PT's picture

Official propaganda reason for QE ( correct me if I am wrong ) :  Make it easier for people to borrow money so they can buy stuff, including starting their own business which leads to real growth.

Reality:  People work a job, acquire some savings, borrow from rich parents and uncles to start their business, and THEN, when they have a bit of confidence about what they are doing, they start borrowing for growth.  Without that initial seed of savings and experimentation, nothing takes off.  (I could be wrong here.  Let us know if you were different.)

Reality:  When 99% of your anticipated earnings will go into over-inflated real estate prices, it kinda puts a damper on your enthusiasm.  Especially when the entity that "repossesses" your land does so with funny money.

Reality:  Borrow and inflate is easier than real production.  Guess who wins.  Guess who loses. 

acetinker's picture

Borrow and inflate is absolutely easier than than real production.  I may not know much, but I know about production.

JohnG's picture



" pre QE since it does seem that we have been under one form or another of Federal Reserve support since 2007"

It's not support, Peter, it's REPRESSION.

kaiserhoff's picture

and it goes back to 2001 in the States, when Greenspan panicked after 9/11 and cut short rates to 1%.

Back to 89 in Japan, giving rise to the carry trade and a big part of the .com bubble.

OC Sure's picture

...psst, it goes back further than that. /wink


OC Sure's picture

"Is QE A Victimless Crime?"


If an action does not have a recepient who has been wronged (a victim), then how can it be a crime?

(hint: victimless crime = oxymoron)

adr's picture

Everything i buy has gone up in price, most things have doubled. I am making the same amount of money.

So QE has in effect destroyed my ability to make a living along with millions of others.

Without QE I may have seen a few formerly rich sociopaths begging for scraps or showing up in obituaries after committing suicide. Seeing that would make me happy every day.

Instead we got massive inflation so some connected fucks could make back what they lost plus a lot more. QE is a crime against humanity and those responsible for it should be punished in the worst way possible. Like North Korean punishment.

Hedgetard55's picture

Yes, death by starving dog pack.

Obama_4_Dictator's picture

Fed's Answer - yes

Correct Answer - no

Seasmoke's picture

If it finally causes enough pain , to cause a bloody revolution, and I do mean bloody , it will have been worth it.

RaceToTheBottom's picture

As long as we find out whether WS scum actually can bleed....

q99x2's picture

The FED are butchers of pregnant mothers. They need to be replaced with open source software before they destroy the planet..

Stinko da Munk's picture

Right now, some folks think QE is the cat's ass. Ask them again when it ends. 

Hedgetard55's picture

I'm a victim of QE. 5 years of interest income stolen, purchasing power debased. Ben is no better than a common thief, so I expect him to rot in the lake of fire for eternity.

i_call_you_my_base's picture

QE makes rich people richer. Forget the mechanics and look at the outcome. It's just trickle-down policy through another vehicle.

Papasmurf's picture

By you theory, counterfeiting makes everyone richer.  Explain how that works.

You put in 40 hours to earn $xx.yy dollars in a productive activity.  Now along comes the fed who creates additional dollars for free without producing anything.  How did that enhance your wealth?

LMAOLORI's picture



QE is supposed to be trickle down - it's based on the theory of Reflexivity and it's a Socialist theory go figure it isn't trickling down.

mayhem_korner's picture



QE is neutering our children, grandchildren and their descendants.  That alone is worth keeping the Remington well oiled.

I Write Code's picture

What others have said, QE is a constant feeding of riskless profits to the banksters, and that's a bad thing.  OTOH it's not quite as bad as it looks, because unnoticed by most the banking system was nationalized back around 1980, when the money market funds first disintermediated the S&L.  Well OK it *is* as bad as it looks, but it's not new.

The real questions are what would happen without, and did Bernanke have any choice?  I don't really know, and maybe even Bernanke cannot really know.  My SWAG is that it could have been a LOT smaller and still done whatever good it was going to do.  Of course that might have required that about 1,000 top banksters be arrested, stripped of assets, and jailed for twenty years.

Playtime's Over's picture

Well gosh, Obama sez it's all good and I hate to rock the boat. So, yeah, it's just fine.  Look in the mirror and say positive things.........

QE49er's picture

“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance.”  - James Madison


QQQBall's picture

at 5.5% for 6 years the yield is 38%. That is $380,000 per $1MM. 

Spungo's picture

Pushing millions of baby boomers into a stock market bubble due to low interest rates then crashing the stock market by ending QE? What could possibly go wrong?

Spungo's picture

Reality: Discretionary spending drops like a rock when your food and energy bills rise much faster than your income.
Reality part 2: Anyone not tied to food and energy is at risk of losing their job. Not too many people can afford to go to the spa, work out with a personal trainer, or buy new clothes.

Loophole's picture

QE is nothing but wealth redistribution accomplished in principle the same way a counterfeiter steals. Someone gets the newly created money or the benefit of it, and everyone with money holdings loses because of the inflation it causes sooner or later.

Why should stealing wealth from productive people and using it to subsidize politicians and their constituents be expected to have any beneficial effect?

Future generations will look back at the money printers as crooks and at those who took them seriously as fools.

kchrisc's picture

The FedRes is an Unconstitutional cabal that steals the labor and product from nearly every human being on the planet. Part of the theft is used to fund destruction and murder round the world by the US military and friends.

I would say that there are a lot of victims. And they will be victimized again when the petrodollar ponzi finally collapses.


"Use the guillotine Luke."

Global Observer's picture

QE never increased the total money supply. In fact the Fed cannot increase the total money supply, only the chartered banks through credit expansion and the government through deficit financing can increase the total money supply. QE only converted one kind of bank assets (MBSs and treasuries) into another (reserves). It does not even significantly affect the reserve requirements because banks falling below the required reserve levels can borrow reserves from the Fed at a prohibitively high rate of 0.25%/0.5%. Since the CRR (cash reserves ratio) is 10% it would reduce the banks arbitrage by a whopping 0.025-0.05 pecentage points assuming they have no reserves save what they borrowed from the Fed.

So what was the real purpose of QE? It keeps the banks solvent. The Fed by purchasing some of the treasuries is pushing the valuation of the rest up and hence the mark-to-market value of the unsold treasuries up. This helps the banks stay solvent while the other toxic assets, the MBSs they are holding continue to drop in market value.

So how come QE seems to be having such an effect as it does on asset prices like stocks? Perception. Everyone from those supporting the QE to those opposing the "Fed money printing" have created a perception that a huge volume of money is entering the economy, giving it a boost. So those who still had some money saved or were willing to leverage existing assets (essentially most middle class who are not goldbugs or doomsdayers) used the savings/leverage to invest.

So it is really not QE itself that created the bull market in stocks or instability in EMs but the analysts who manipulated the public perceptions by a completely meaningless commentary on QE.

TheCosmicTaco's picture

QE is Jamie Dimon sucking Ben Bernanke's dick.

Toolshed's picture

"QE is Jamie Dimon sucking Ben Bernanke's dick."

I am pretty sure you have that backward.

Winston Smith 2009's picture

Any harm to QE?  Ask Japan.

Loophole's picture

When the Fed buys Treasuries via commercial banks and the govt spends the money it borrows (29% of its budget), does that money not enter into circulation thereby increasing the money supply?

When the Fed offers to lend money to banks for almost nothing with money it creates and puts in the reserve accounts of those banks, does that not act to keep interest rates at almost nothing, thereby forcing savers to invest in, say, stocks instead of bonds and acting to subsidize the stock market?

Why aren't we having more inflation than the govt is reporting? Probably we are, judging by what I spend at the super market. And even if we aren't, it's because govt intervention in the market is so vast and pervasive, it's depressing economic activity and therefore prices.

If the good times ever return, see what happens to prices then.

And if the Fed stops printing money, will the good times ever return? Look at what the stock market is doing right now with the Fed's tiny tapers?

If the Fed keeps printing money, will it (has it) bring prosperity?

The fact is that the Fed will not be able to permanently stop printing money because the stock market, the housing market, the bond market, and the entitlement state are so dependent on it?

Until the dollar collapses, that is.