Fed Governor Admits Truth About QE: "Can't Go From Wild Turkey To Cold Turkey Overnight"

Tyler Durden's picture

Submitted by Jim Quinn via The Burning Platform blog,

“I was not for this program, popularly known as QE3, to begin with. I doubted its efficacy and was convinced that the financial system already had sufficient liquidity to finance recovery without providing tinder for future inflation. But I lost that argument in the fall of 2012, and I am just happy that we will be rid of the program soon enough. “I am often asked why I do not support a more rapid deceleration of our purchases, given my agnosticism about their effectiveness and my concern that they might well be leading to froth in certain segments of the financial markets. The answer is an admission of reality: We juiced the trading and risk markets so extensively that they became somewhat addicted to our accommodation of their needs… you can’t go from Wild Turkey to cold turkey overnight.


So despite having argued against spiking the punchbowl to the degree we did, I have accepted that the prudent course of action and the best way to prevent the onset of market seizures and delirium tremens is to gradually reduce and eventually eliminate the flow of excess liquidity we have been supplying… one would be hard pressed to say that ending our asset purchases, which the depository institutions from which we buy them deposit back with us as excess reserves, would deny the economy needed liquidity. The focus of our discussions now is when and how to ‘normalize’ monetary policy.”


- Fed Governor Richard Fisher

Talk about speaking the truth!!!

He admits that QE was designed to benefit Wall Street banks, hedge funds, HFT and the rest of the parasites on the ass of America. It was designed by the few for the few. It benefited Wall Street, not Main Street. The .01% saw their riches expand exponentially. The 1% benefited modestly as their 401k’s rebounded. The 99% got higher food and energy prices, along with declining real wages.

I know that John Hussman’s weekly letter is too deep in the weeds for many people, but I learn stuff every week that helps me understand the truth about our financial system and our manipulated, bubble markets. The Federal Reserve is primarily responsible for the two bubbles that have already burst since 2000. They are single-handedly responsible for the bubble that will burst in the near future. The Fed will have withdrawn the $85 billion per month punchbowl by October of this year. Hussman explains what happens next:

That sucking sound you hear is the Federal Reserve exiting from the most reckless policy experiment in its history. Unfortunately, that policy experiment has been the primary driver of speculation in recent years. One can’t rule out some stall in the tapering timeline, but even QEternity appears to have an expiration date. Despite present complacency, this transition is likely to be painful for the market, as one does not normalize valuations that are 100% above historical norms without pain – typically concentrated in a handful of steep but short-lived free-falls. That said, there was no evidence years ago that boosting the market to speculative highs would do much good for the economy (consumers spend from their view of “permanent income,” not from temporary fluctuations in volatile assets).

Make no mistake about it, valuations today are more extreme than they were in March 2000. Think about that for a few moments. Are you mentally and financially prepared for a third 50% plunge in the stock market in the last fourteen years? Well, are you punk?

With advisory sentiment running at 56% bulls and fewer than 20% bears, with most historically reliable valuation metrics about twice their pre-bubble norms (and presently associated with negative expected S&P 500 nominal total returns on every horizon of 7 years and less), with capitalization-weighted indices near record highs but smaller stocks and speculative momentum stocks diverging badly, and with a Federal Reserve clearly intent on winding down the policy of quantitative easing that has brought these distortions about, we continue to view the present market environment as among the most dangerous instances in history.


Major market peaks, even those like 2000 and 2007 that were followed by 50% losses, have never felt dangerous at the time. That’s why they were associated with exuberant price extremes. Sure, investors had a sense that prices had advanced a great deal, but endless reasons could be found to justify the advance. Avoiding major losses required an intimate familiarity with market history, and enough discipline and patience to maintain what Galbraith called a “durable sense of doom” about observable conditions. The general rule is that you don’t observe the “catalyst” in advance, only the stack of dynamite.


Make no mistake, reliable valuation measures for the median stock are actually more extreme today than in 2000. On a capitalization-weighted basis, valuations are beyond every pre-bubble point in history except for a few months in 1929. In the bubble that ended in 2000, final valuations were higher owing to the extremes in large-capitalization technology stocks at that peak. Many observers seem to believe that valuations are of no concern unless they match that singular extreme. Good luck on that. The novelty, imagination, and extrapolation born of the late-1990’s internet and technology revolution is unlikely to be matched by an economy that can’t post growth beyond the threshold between expansion and recession despite the largest monetary intervention in history. The Fed is already retreating from that intervention, and for good reason, because while the Fed’s extraordinary actions are not actually linked to real economic outcomes, they encourage very risky speculative side-effects.


Meanwhile, an average, run-of-the-mill bear market would wipe out the entire advance in the S&P 500 Index since April 2010. Even on a total return basis, I doubt that any of the market’s gains from that point will actually be retained by investors by the completion of the present cycle. We currently estimate S&P 500 nominal total returns averaging about 2.4% annually over the coming decade.

Understand that nominal means before inflation. Therefore, you will be getting a big fat ZERO real return from the stock market over the next ten years. Considering the Fourth Turning has approximately fifteen years to go, this makes sense as we enter the war zone. I’m sure all seven of these valuation methods are wrong this time.


Just ask a CNBC bimbo or Wall Street economist shyster.

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nope-1004's picture

Stupid is as stupid does, Dick.  I love the admission of cluelessness, however late.  Can't wait until the next massive market implosion where all the Fed asshats will say "we didn't anticipate this".  Morons.


McMolotov's picture

"It is all well and good for children and acid freaks to still believe in Santa Claus — but it is still a profoundly morbid day for us working professionals. It is unsettling to know that one out of every twenty people you meet on Xmas will be dead this time next year... Some people can accept this, and some can't. That is why God made whiskey, and also why Wild Turkey comes in $300 shaped canisters during most of the Christmas season."

—Hunter S. Thompson

NoDebt's picture

Well, let's see here.... when QE4EVA started they went from $0 to $85 Billion a month of purchases overnight.  Didn't seem too concerned about shocking the markets then, did they?

If our economy is that fragile, it deserves to burn.  Of course, it's not.  Only the banks are.

Squid-puppets a-go-go's picture

well I for one beleive that with each successive bubble pop, the metastasising cancer of the Fed has wrapped its tentacles further around the digital apparatus that sets prices.

There will be no crash from the stock market

The crisis therefore will only come (if it comes from the financial sphere as opposed to military or geological) from the Bond market vigilantes

SMAUG! Wake the fuck up!!!!!!

MisterMousePotato's picture

I don't know what Mr. Thompson was smoking (well, none of us do, actually), but it's more like 1 in 119. That is a distinction with a difference.

NihilistZero's picture

The answer is an admission of reality: We juiced the trading and risk markets so extensively that they became somewhat addicted to our accommodation of their needs… you can’t go from Wild Turkey to cold turkey overnight.

I've never known anybody to be "somewhat addicted" to anything.

Damn right they're asshats nope-1004.  Even the ones who are slightly on our side ahve no fucking clue as to how things work in the real world.

knukles's picture

QE should never stop and I shoulda been drafted in the first round

nuclearsquid's picture

What a colorful and accurate analogy we have been provided.  Wild Turkey.

Thank God we have such benevolent and intelligent economist overlords willing to take a few moments to dumb it down for us.


max2205's picture

That's Dick Fisher to you

ebworthen's picture

Cramer going to interview Tim Geithner tonight on CNBC at 7:00 p.m. Eastern, to be streamed live on CNBC.com.

I anticipate streaming bullshit.

ebworthen's picture

A deluge of diarrheaic donkey dung.

Jack Sheet's picture

So who believes that QE is now only $45B per mth with Treasury rates still near 30y lows and several hundred trillion $ of interest rate swaps floating around?

nope-1004's picture

Bernocchio and Mr. Yellen, because if your very existence relies on every sentence spoken being a lie, you begin to believe it.


buzzsaw99's picture

...even QEternity appears to have an expiration date.

I find your lack of faith disturbing. [/Darth Vader]

MisterMousePotato's picture

Actually, it's "I find your lack of faith ... disturbing." (More ominous that way.)

Stoploss's picture

Does it count if you drink wild turkey and die the next day?

They all say they will never quit, then one day they do.


Cold Turkey style...

Dr. Engali's picture

I'll file Fisher's statement in my "no fucking shit captain obvious" file.

NoDebt's picture

I love the Captain Obvious commercials.  Especially the one where the hot chick gives him the look from the other side of the bar, he books a room and then she walks right past him to her boyfriend standing behind him.  

"A hotel room.  I don't need it right now."


nosoeawe's picture

does anyone really believe the feds can end qe? come on, belgium is now the holder of 350 million bonds, in less than how many months? what did they trade us, chocolate and waffles?

we all know, once the feds intervene in anything, they never leave. just like stink and shit. 

so looking into the future, every president from here on out will use the market as a political tool.

moral of the story, dont be a douche

TIMBO Anti-Castro's picture

The FED sucks alright.  But preaching class warfare crap about the 1% is pretty silly.  We should be cussing the cronyist pansies because an awful lot of smart and honest money makers make up the top earners.   

Remember that people blame wars on the events that happen right before the worst attorcities.  They never blame the political policies enacted 10 years before. 

ArkansasAngie's picture

How about you go ahead and vet them for us.  Which ones are insolvent and which ones aren't.  That's all there is too it. 

BTW -- might want to think in terms of some claw backs from pure d criminals

Seasmoke's picture

Chop the fucking Turkey's neck. 

Schmuck Raker's picture

To end his speech Fisher says,

"Now, in the best tradition of central banking, I would be happy to avoid answering any questions you have."


ebworthen's picture

"Sure, we're fucking people over, but it pays pretty well and I get to sit on my ass and write ditty's."

Bastiat's picture

There's no Cold Turkey when the Belgium buyer's got your back.

Kirk2NCC1701's picture

+1.  TPTB figure that they can crush all opposition if they keep the SDR to its present CB members (Fed, ECB, BOE, BOJ).  In EFFECT, they are already acting as though they have the SDR.

Problem is, these bankrupt and aging Bums & Boomers would first have to crush the BRICS.  Easier said than done, even though they have Plans to do just that.

Atomizer's picture

Our US Government could never pull this off. New reforms, immigration inflows, and raising the debt ceiling to white wash ACA programmer invoice would be the calamity.

Took Red Pill's picture

Speaking of evil bankers, my 16 year old daughter was shown this animated film in school by her teacher. I think its pretty cool of them to educate kids about how the banking system really works.



JR's picture

This turkey has been stimulated so long that it’s long past going cold turkey. I think this turkey economy is now so old it’s closer to being stone dead.

Bernanke began QE1 in November 2008 to stimulate the economy, but before that as a Fed governor he had long had QE on his mind. That was in 2002, nearly 12 years ago, and already he and Greenspan were creating bubbles and planning more bubbles to come.  

In short, Bernanke came into office determined to quantitative ease, i.e., devalue the purchasing power of the dollar. QE and bubbles go together like wealth transfer and oligarchs.

Listen to these quotes from Governor Ben S. Bernanke November 21, 2002, before the National Economists Club, Washington, D.C.

 “Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

And, this, from the same speech:

“The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt>”

And, later, this:

Certainly derivatives instruments pose challenges to risk managers and to supervisors, but these risks are manageable and thus far have been managed quite well.”  In fact, Bernanke said that derivatives are good for the economy, making the U.S. economy resilient to risk.

Yet never once did Bernanke monitor derivatives trading.

In short, Bernanke was and is a serial bubble blower and printer, as will be Yellen. End the Fed!

Welcome back! Jim. Great post.

Tulpa's picture

"As God is my witness, I thought turkeys could fly."

AdvancingTime's picture

"Bernanke was and is a serial bubble blower and printer, as will be Yellen." This is why so many of us have been wrong as to when this would end. As noted the biggest central banks in the world have joined in this program. Still sooner or later it will end, and the end will be ugly.

 Janet Yellen has been head of the Federal Reserve bank long enough that we no longer need to speculate as to her job performance. As we begin to critique her ability to perform we must remember perception is often just as important as reality. Another issue that comes into play is how you stack up or compare to the person who held the position previously, this often extends to style as much as it does to substance.

As expected it appears Janet Yellen has chosen to take us down the same the rabbit hole as Bernanke on a journey to prove that if we just continue doing what is not working, all will turn out fine. More on Yellen as the head of the Federal reserve in the article below.


free_lunch's picture

Vikings would be jealous of all this raid and plunder. The modern methods are upgraded to a level that vikings could never imagine, the people hanging on their lips and respect them while being raped and plundered.  Damn they are good!!!

CPL's picture

What's done today is just theft.  Pure, undiluted theft with no justification or scenario that puts anyone in a reasonable light to anyone, in any way, associated with the mess.

Vikings however are a different matter.  The rationale wasn't any different for a viking chieftain 2000 years ago than what causes a Somalian pirate king today to raid and pillage.  It was a choice between starvation or robbery.

Examining the timeline of incidents of the "pillage phase" of Norse culture only happened when Rome sacked and burned the fields of the people they traded wheat with in Europe during Roman expansion until around 50AD.  This further worsened with the early Holy Roman Empire's expansion via Constantinople (Istanbul), because Rome had a religion to lead people around by the nose with. 

Until the schism and the branch split to Roman Catholic and the Orthodox Church, then everything settled down for a little while until the Catholic Church was broke and learned about Islam.  Mainly by sword point by a man on horse back by the name of Saladin.  Who kicked the fucking tar out of the European invaders and settled what was what and who's was who's.  The situation also forced Europe to stabilize and start watching what they spent after getting bitch slapped because they spent all their gold on steel/horses/men.

Anycase...the White rider Saladin is another interesting piece of history for another time...The Viking raids; they stopped nearly as soon as the hard line approach of the early Roman church disappeared regarding trade and more formal trade practices were accepted.  Because the trade practice stabilized in Europe; a fish monger could sell fish, a farmer could sell wheat, a tinker could tinker and a hunter could hunt.  Instead of dying in yet another crusade.

WMM II's picture

"Can't Go From Wild Turkey To Cold Turkey Overnight"



my first wife did.




rsnoble's picture

And for the peons it won't be cold turkey it will be NO turkey.  Just like the 2 chickens in every pot bullshit.

Don't worry, you can trust us!!!

Tulpa's picture

Markets are about near-term expectations.  If the markets think you're going down to $0 in monthly purchases in the near future they're going to react the same as if you go down to $0 right now.  So you may as well do it right now.

scaleindependent's picture

What do you call a _ _ _ cruising for a f@ck?


Answer:  A Dick Fisher

moneybots's picture

"Fed Governor Admits Truth About QE: "Can't Go From Wild Turkey To Cold Turkey Overnight"


Greenspan raised rates 1/4 point per meeting after dumping it to 1%, to facilitate his housing bubble.  It took forever to reach 5.5%.

moneybots's picture

"He admits that QE was designed to benefit Wall Street banks, hedge funds, HFT and the rest of the parasites on the ass of America. It was designed by the few for the few."

That sucking sound you hear is the Federal Reserve exiting from the most reckless policy experiment in its history. Unfortunately, that policy experiment has been the primary driver of speculation in recent years."


If it was designed to benefit Wall Street banks, what makes him think it was an experiment? it did what it was desingned to do.

robnume's picture

Memo to Richard Fisher: ABOLISH THE FED!!

sparkydoodle's picture

So tell me where I'm going wrong here. 

FED tapers, on the way to zero.

The market starts to stall, then tank.

Then the FED:

a) sits on its hands watching everything that they did for the last 5 years fall apart

b) goes right back to "emergency" pre-taper printing with a vengence


Its okay, you can say it.  You know the answer.

Then we all cry that the market didn't crash and write nasty things here about the FED.


AdvancingTime's picture

This sums up the conundrum we face. May I suggest a third option, at some point the whole thing comes apart because people lose faith in the system. In this case the Fed simply become powerless. By the way, I did give your comment a thumbs up.

AdvancingTime's picture

Yes we need off the drug known as QE and it won't be easy. Most people do not  have at their disposal many of the investment options those fully engaged in the markets have developed. The learning curve to investing is both long and hard even though we are often lead to believe shortcuts exist. Simply reading a book, taking an investment course, learning a new charting or technical system is no guarantee you will make money.

Most investors only learn after a series of mistakes and errors how difficult this learning curve really is. A lack of investment options means that many people are left unable to react if and when a trend dramatically shifts. This leaves the bulk of society extremely vulnerably when a shift does occur. More on this subject in the article below. 


AdvancingTime's picture

The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system.

Paul Wilmott from Oxford University estimates the derivatives market at $1.2 quadrillion, to put that in perspective it is about 20 times the size of the world economy. The point of the article below is to call attention to the insanity of derivatives as an instrument or tool to add stability to our financial system. By stacking risk upon risk and transferring it off to another party who may not be able to preform you do not increase stability.