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Quantitative Easing Is Like "Treating Cancer With Aspirin"
Submitted by Tim Price via Sovereign Man blog,
Shortly before leaving the Fed this year, Ben Bernanke rather pompously declared that Quantitative Easing “works in practice, but it doesn’t work in theory.”
There is, of course, no counter-factual.
We’ll never know what might have happened if the world’s central banks had not thrown trillions of dollars at the banking system, and instead let the free market work its magic on an overleveraged financial system.
But to suggest credibly that QE has worked, we first have to agree on a definition of what “work” means, and on what problem QE was meant to solve.
If the objective of QE was to drive down longer term interest rates, given that short term rates were already at zero, then we would have to concede that in this somewhat narrow context, QE has “worked”.
But we doubt whether that objective was front and centre for those people – we could variously call them “savers”, “investors”, or “honest workers”.
As James Grant recently observed, it’s quite remarkable how, thus far, savers in particular have largely suffered in silence.
So while QE has “succeeded” in driving down interest rates, the problem isn’t that interest rates were / are too high.
Quite the reverse: interest rates are clearly too low – at least for savers.
All the way out to 3-year maturities, investors in German government bonds, for example, are now faced with negative interest rates. And still they’re buying.
This isn’t monetary policy success; this is madness.
We think the QE debate should be reframed: has QE done anything to reform an economic and monetary system urgently in need of restructuring?
We think the answer, self-evidently, is “No”.
The answer is also “No” to the question: “Can you solve a crisis of too much indebtedness by increasing debt and suppressing interest rates?”
The toxic combination of more credit creation and global financial repression will merely make the ultimate endgame that much more spectacular.
To Jim Rickards, simply printing money and gifting it to the banks through the somewhat magical money creation process of QE is like treating cancer with aspirin: the supposed “solution” does nothing to address the root cause of the problem.
The West is trapped in a secular depression, and “normal” cyclical solutions such as monetary policy measures, are not just inappropriate, but damnably expensive for the rest of us.
Only widespread economic restructuring will do. And that involves hard decisions on the part of politicians.
Thus far, politicians have shown themselves predictably not up to the task. Or in the words of Jean-Claude Juncker, “We all know what to do; we just don’t know how to get re-elected after we’ve done it.”
And let’s not forget that other notable Junckerism, “When it becomes serious, you have to lie.”
So, back to the debate:
1. Yes, QE has driven down long-term interest rates.
2. But the problem wasn’t the cost of capital. The problem was, and remains, an oversupply of debt, and the risk, now fast becoming realized, of widespread debt deflation.
To put it another way, the world appears to be turning Japanese after all, despite the best efforts of central bankers and despite the non-efforts of politicians.
3. The solution is fundamental economic restructuring. Government spending cuts will not be optional, although tax cuts might be. The expansion of credit must end – or it will end in an entirely involuntary market-driven process that will be extraordinarily messy.
This is where we start to view the world, once again, through the prism of investments – not least since we’re not policy makers.
Markets have become that much more volatile recently (and not just stocks – see the recent wild trading in the US 10 year government bond).
Moreover, inflation (other than in financial asset prices) seems weirdly dormant in certain parts of the world.
Understanding these phenomenon is best explained by both Jim Rickards and by the good folks at Incrementum through the pertinent metaphor of tug of war.
The blue team represents the markets. The markets want deflation, and they want the world’s unsustainable debt pile to be reduced.
There are three ways to reduce the debt pile.
- One is to engineer sufficient economic growth (no longer feasible, in our view) to service the debt.
- The second is to default (which, in a debt-based monetary system, amounts to Armageddon).
- The third brings us over to the red team: explicit, state-sanctioned inflationism, and financial repression.
The reason why markets have become so volatile is that from day to day, the blue and red teams of deflationary and inflationary forces duke it out, and neither side has yet been convincingly victorious.
Who ultimately wins? We think we know the answer, but the outcome will likely be a function of politics as much as markets.
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In theory, there's little difference between theory and practice.
In practice, there is.
Yes indeed. My Feeder Cattle futures for April /15 are up $6000 and they have a long ways to go. My British Pound Short is up about $8700; and I'll roll it over next month; as it's a Dec.'14 contract now. The idea is if you get in okay; stay in and let the trend develop. A lot of markets track and trend and chart read a lot better than the stock market;and they all pay out the same thing; $. Which is no longer ideal; but I"ve understood that since 1979. If you're interested in this subject, a guy named Jim Williams wrote a book with Michele Noseworthy, an impossible name to forget, called "Windows in Time"; and the subject was futures contracts that trended in certain directions over certain months, or seasons, of the year. The book iitself is hopelessly out of date; but it gives you the idea. He became wealthy from the futures market. Feeder Cattle have a strong seasonal trending pattern; and once you get on the train, so to speak, you can just sit back and enjoy the ride. The opposite of capturing a trend by accident, which is what I try to do, is day trading; which is a very complitcated and labor intensive way to go broke. This idea of capturing a trend by accident is explained in a one hour, or so, video on U-tube that was converted from film; it's quite dated. it's also 100% correct. The idea is the opposite of what every book will tell you; to try to trend follow; the idea is to try to pick tops and bottoms; then you either get stopped out, or you just hang around and let the market surprise you; over a period of months. Tops and Bottoms are detectable; they represent exhaustion of buyers, or sellers.
Are pumpkin futures in November a good idea?
Only if it's real, dark outside.
Aspirin works pretty well fighting cancer actually.
"Aspirin is an antioxidant that protects against lipid peroxidation, but it also stimulates mitochondrial respiration. It can inhibit abnormal cell division, but promote normal cell division. It can facilitate learning, while preventing excitotoxic nerve injury. It reduces clotting, but it can decrease excessive menstrual bleeding. These, and many other strangely beneficial effects of aspirin, strongly suggest that it is acting on very basic biological processes, in a coherent way.
In explaining aspirin's effects, as in explaining those of estrogen and progesterone, or polyunsaturated fats and vitamin E, I think we need concepts of a very broad sort, such as "stability and instability."'
Ray Peat, pHD
http://raypeat.com/articles/aging/aspirin-brain-cancer.shtml
I'll take 0% and a mattress Alex
The standard joke is that we should have a November Turkeys contract; except that Turkeys don't have any future in November. I guess it's a traders joke.
given the humour in the title, there is some irony to it...a persual of pubmed with curcumin for cancer, a multitude of forms, you discover that much of the newest research includes curcumin or a component part, msm and asprin...because curcumin, asprin and msm are beyond patent and by renaming the various parts of curcumin and the combination of msm and asprin researchers have a new drug ready to be patented. the best spin on this i can find is that many cancer patients will not try alternative choices and relie upon their doctors and clinics and that at least this way they will get some form of chemo that actually attacks cancer cells and helps the body's immune rebuild their healthy cells. yes, big pharma will make a fortune...but the game is rigged in their favour. the hard bit for me is how few people i've known with lethal forms of cancer have been willing to try curcumin but would rather take chemo, knowing it will not prolong their life and make the few remaining months wretched beyond words.
Again, if you are wondering why you think the treatment is not working, you have to re-evaluate why they are doing it in the first place.
pods
The core thesis of the article (and many articles) is wrong. He almost got there by asking what is meant by "it worked". It worked freaking fantastic. Just WHO it's supposed to "work" for is the definitional disconnect.
Nobody is trying to "fix" anything for the middle class. The middle class was a 20th century anomaly that the elites almost lost control of. Imagine tens of millions of people who decide their own course of action and have the financial resources to execute on those decisions. It's fucking anarchy to the elites.
A mistake they will never allow to happen again in the future.
Exactly correct. I posted this on the other QE thread, but I think it is just as valid for this one.
All this QE bullshit is just the S&L crisis from the 90's all over agan. Only this time, it's the FR that is the Bad Bank that is taking all the toxic loan shit from the troubled banks. The FR only has 2 choices to handle all this toxic shit. Their first choice was to inflate it away using QE to monetize the debt. All that has acheived is a stagnant economy, with falling incomes, and higher cost of living metrics that equals an economic death sprial like Japan. The only difference is the FR has blown the next bubble, US Stocks. So now the FR is setting up their second choice. Pop that equity bubble (just like they pop every bubble they have blown since 1913), and use the panic to force congress to grant them more "special powers" to clean up their own engineered disaster. After the crash, it will be a swap of traditional equity and bond holdings into a new Govt Retirement Mechanism (MyRA anyone?) that will roll up SS too.
When the next crash comes, the talking heads will all lament how the FR is really out of bullets this time, so the paniced sheeple will be so terrified at their stock market losses, and subsequent threat to their pension funds, Money Market Funds, IRAs, 401s and Social Security, that it will be easy to push them towards what the elites want, which is one central govt. controlled and banker financed retirement program (Serf City, Here We Come!) The end result is the FR will finally be able to clear some of this toxic shit from their books and the sheeple will end up owning the toxic shit that originally came from the banks going back decades. A complete redistribution of assets and wealth from the masses to the elites in exchange for bad debt. A bankers utopia.
So.....BTFD?
Well, you don't have to re-evaluate; you can do what 90% of the people do; which is make excuses and keep doing what doesn't work.
People on aspirin for 10 years have something like a 30% lower incidence of colon and esophageal cancer. So, yes, aspirin does treat cancer!
So what you're saying is it's more like treating cancer with a cigarette?
It's more like treating cancer with cancer.
QE is debt.
Debt issued as a "bail out"
Go suck on the debt cock all you want.
Enjoy your servitude to the bankster shitbags you idiots.
In this current system you either produce or you skim. Enjoy the rollercoater ride to hell shitbags.
By all means continue to trade your heartbeats on your rented planet for FRN's you jerks.
85 Billion dollars a month on someone else's credit card - that's a lot of fucking asprin!
DOOP!
QE has made only bankers whole again, everything they stole is still gone.
Well, see - it did work.
Yeah; exactly. you have to understand what it's intended to treat; before you can decide on it's success. Changing your brake pads might not fix your cold idle problem, but it;ll do wonders for your ability to stop.
While there is a fair bit of envy over banker bonuses, we should remember that most of the money they play with belongs to someone else. It is the pension funds and private savings of the many that give them the ability to demand support (such as QE). The average guy would rather see his retirement funded than see the bankers hang.
Due to self interest the masses will continue to support the actions of the fed even though they see the rich getting way richer.
Envy only works when the party doing the envy has no other skin in the game. Only then will he fully vent.
this war will indeed pit young vs old, as is usually the case with revolutions.
i dont get the hangup with QE. $55T of the $60T in credit was printed directly by commercial banks, not the FED. the anger should be directed at fractional reserve banking, which will be destroyed permanently when growth ends and the ponzi scheme collapses.
Every time I think about QE, I think of Pac-Man (banks), gobbling up the dots (free money), with a Blinky, Inky, Dinky and Clyde (the masses) in hot pursuit. Eventually, Pac-Man gets caught, withers and dies....making that sound.....eeeerrrrruuump.
Bad analogy - more and more research confirming that a daily dose of baby aspirin protects humans from many forms of cancer, including bowel, throat, skin cancer etc.
Shortly before leaving the Fed this year, Ben Bernanke rather pompously declared that Quantitative Easing "works in practice, but it doesn’t work in theory."
QE doesn't work in theory or practice. A record 92.6 million people were not working last month.
funny how the markets rise despite....
"The Financial Select Sector SPDR (XLF), an exchange-traded fund targeting banks and investment firms, had the biggest withdrawal last week since 2009 amid concern low interest rates and market gyrations will hurt profits.
"Investors pulled $913.4 million from the $17.5 billion ETF, whose top holdings include Berkshire Hathaway Inc. (BRK/B), Wells Fargo & Co. and JPMorgan Chase & Co. (JPM), a shift that turned its flow of funds negative for the year. About 143 million shares of the ETF have been borrowed and sold to speculate on declines, the most since June 2012, according to exchange data compiled by Bloomberg.
Banks have waited for years for higher rates and more robust trading to boost revenue from lending and market-making. Weaker-than-expected global growth could prompt the U.S. central bank to slow the pace of eventual interest-rate increases, Federal Reserve Vice Chairman Stanley Fischer said Oct. 11. The severity of market swings this month also boosts the risk that banks will incur losses while facilitating client bets, and it may slow mergers and acquisitions."
http://www.bloomberg.com/news/2014-10-27/u-s-banks-see-worst-outflow-of-...
"The second is to default (which, in a debt-based monetary system, amounts to Armageddon)."
I am doing my best to be a mouthpiece here for some ideas from Michael Hudson and Steve Keen, and others.
The above conflation of debt forgiveness/defaults with 'Armageddon' serves the interests of our parasitic FIRE sector, by claiming that "if banking and finance go under, we all go under". This was the rationale for the 2008 bailouts, and supposedly for QE as well.
Bankers can point to catastrophic losses in the stock market, crashing asset prices in Real Estate, and all manner of other things which would happen as a result of FIRE sector insolvency. But the fact is, in my view and that of some others as well, a parasitic and hugely overgrown FIRE sector is the original root of our problem. Our problem is, at its core, financialization, and the rise of a new 'landlord'/'aristocrat' class in the persons of those who hold the levers of credit creation, and skim 90%+ of the returns on wealth.
It's their insolvency which QE exists to avoid, since they are massively overleveraged and produce nothing of value anyway. Inflating asset prices and compound interest payments are their bread and butter, and they are all so indebted to each other at this point, that any slow in the flow of payment will bring their houses down individually, and then as a whole. And paradoxically, these are the same people we are all in debt to, as they are the originators of the mortgage, auto and student loans which have each person reduced to neo-feudalistic serfdom, running on the treadmill to keep up with the monthly bill payments.
Its my sincere belief that if we do not comprehend the need for this parasitic sector to be swept away, but instead keep nurturing it and feeding it trillions of stimulus dollars, then we are clutching to our neck the same vampire squid which is sucking our blood and filling us with poison. "Armageddon" is a scary term. Whatever carnage comes from the downfall of the banks, it is preferable to continuing to run backwards and on FIRE (/pun) with private debt and real estate prices eating up every individual person's disposable income.
When 1% of people have captured the political process and rigged every game in their favor, its disingenuous to speak in terms of market forces and economic principles. These forces adn principles are crowded out by the sheer power of those who control the levers of debt-creation, as we're seeing in the errant behavior of all these markets.
Please pardon my ignorance, and correct me if you feel inclined. I'm still learning about the subject matter.
a modified and gradual debt default is the only answer; this will allow for those holding our T's to at least get some of their money back without the need for war to extract it.
If you are still learning about the subject matter, the first thing you need to do is stop reading Michael Hudson. He's a neo-Marxist.
Try reading some Von Mises, Hayek, and Rothbard instead.
How about "try reading some Von Mises, Hayek, and Rothbard too." Nothing wrong with getting different, competing points of view. Unless you wish to be purely ideological in your approach to the world and assume that there is one correct answer that fits all problems.
Thanks for reminding me about Hayek. I read Mises and Rothbard already. Perhaps will come back to them again.
I disagree with your characterization of Hudson as neo-marxist. Hudson seems to think that Marx contributed useful ideas, particularly about how the excesses of industry could have a negative impact on labor.
Its my view that the allergic reaction to Marxism - e.g. excluding Marxist thought from economic discourse entirely - is a remant of McCarthyism, which was the 1%-funded witchhunt against left-leaning people in politics, hollywood and academia. Certainly that movement was one of the cornerstones of what eventually became American Fascism or American Empire. So I think reading Marx is important, even if only for the ideological independence from our cultural mainstream that it signifies.
Our fear of 'socialism' in this country is surely one of the core beliefs that the oligarchs in the US have used to consolidate power. Whats interesting about Zero Hedge is that the hardcore "free-marketeers" seem to have a blindspot towards the arising of monopolies, and the "free lunch" available via rents and interest. The government isn't the only force strong enough to quell the invisible hand, but private "free market" monopolies are much, much more powerful. In many ways we live in a free market system already, with the inevitable consequences that the market-makers have captured the political system.
The story of America post-1980 is the story of increasing de-regulation of markets, industry and institutions. Mostly as a result of our lobbyist-driven political machinery, the freedom of corporations and financial institutions has greatly, greatly increased in the last two decades. According to a purely free market hypothesis, this increased freedom would lead to increased productivity and competition fostering better products -- but in point of fact, increased freedom has given corporations and financial institutions carte blanche to tilt their jousting staffs against the public good at each possible opportunity.
And because the government won't regulate them, they eventually grow strong enough to the point where they regulate the government. Which is in effect what happened with TARP, QE, etc. So we actually have socialism for the rich brought about *via* free market capitalism and the financialization of the economy. Its important to realize that the free market brought us here, is the point of what I'm saying.
Maybe not so much de-regulation, but ignoring technology and the regulations that would need to be implemented to match old regulations given the new technologies corps, individuals, non-profits, et al, etc, eg, ie, blah blah may use.
Read Stockman's book The Great Deformation. You are on the right track. The only catastrophe looming in September 2008 was the destruction of Wall Streeters, nothing else. But when you have a Great American Traitor like Hank Paulson planted in the Treasury Secretary slot, all manner of financial sodomy ensues. A coup d'etat.
QE is causing the largest wealth disparity between rich and poor in my lifetime. Middle class career jobs have become scarce and the compensation has shriveled. To top it off what we get from above is what I call "trickle on government". The government itself has become so bureaucratic that to get anything done the government appoints a czar over their own bureaucratic agencies instead of using the incompetent agency employee. So now nearly everything is centrally planned and granted from a government czar. Whether it's EBT(food stamps), Obamacare, border control, amnesty, Ebola, IRS, etc. the government tells you what the outcome is going to be and you have no vote or say in it whatsoever. It's trickle on government and that's not rain btw.
The middle class jobs became scarce because of globalization, ie; selling America to China; ie; "off-shore manufacturing"; not because of QE.
No argument with the off-shoring of jobs argument but that's only a small part of it lately.
What I'm talking about is since QE was implemented. There is a direct correlation and there are many graphs that point this out including the labor participation rate.
The disappearance of the middle class job was caused by what I stated above; the shock wave from the beginning of the process built to a kind of tsunami co-incident with the Wall St. Bank / AIG fiasco; which was also caused by the Federal government, and particularly by the fact that it was lobbied, or bought, out of the regulation business. QE is not capable of causing the closure of a steel mill or a textile factory; or a shoe and garment industry, etc. etc. The insane growth in Soviet like; Soviet style, government regulation of individuals and small businesses, and the capitulation to large corporations has also contributed to business failures. The secret of wealthy nations with high standards of living is manufacturing and export; see Germany, and S. Korea, and formerly Japan, for striking examples of this; and the before that, before post war Germany, the United States itself; which built it's industrial base behind a wall of tariffs, called "the American System"; and completely dethroned the English from their role of manufacturers and exporters to the world. All these truths are now reviled and discredited in economics almost universally. Nevertheless the amazing modern wealth and lifestyle of the industrially productive working class is proof positive of the reality of this fact; and only the purchase of the Federal Government by "Capitalists are us", to allow and encourage "trade" with China; which gave them their dream result; manufacture with slaves and sell into the dollar economy; without the dollar citizens, the us citizens, getting any significant piece of the pie, made the currrent ongoing downscaling of private citizens buying power possible. The American worker was getting too much of the money that was wanted by the head offices of the corporations, and they fixed the problem. Apple I phones could be made in America but there'd be less money left over for the corporate entity; because you'd have to pay the workers.
get your kids an h1b visa somehow - and suddenly there are lots of jobs. good ones too! pays 30% less than americans expect - but on top of that - nobody expects you to do anything except show up for a few hours, replace americans and not try to move up and replace the current managers.
I think QE is more like treating obesity with large doses of chocolate ice cream.
The reason so few complain is that, to the average person inflation is like the weather...why complain, it is a natural force that no one can control.
Few realize that it is more like a pizza. It can be made to order...your choice of toppings.
I would just say that we export inflation to China and let it go at that; the problem ever since 1971 when Nixon decided to remove the dollar from the gold standard remains the same. there are so many over-seas dollars, that if they start coming home again we'll really see some inflation/devaluation; which is the same thing. Our most important product is inflation; we just hope it doesn't come home again.
Ron Paul was our last hope.
When all the evil entities described (kinda) in the article and more forthrightly in the comments:
Wall St - Media - Oligarchy - Entrenched Red/Blue team career politicians
Conspired not only to keep him out of the dialogue but to trivialize the man and his ideas it was game over. He was the right man at the right time.
Every single person with a working brain that I tried to pitch had the exact same rebuttal. It was almost hive minded in it's singularity "Well I really like Ron Paul's domestic policy but his foreign policy is WACKO"
99% of Americans are so brainwashed to this day by 9/11 and the fear of Islamofascism and now Russia that they truly believe through careful brainwashing and propaganda that our foreign policy is true and just and that our military is nothing but heroic and fighting for our freedoms everyday.
Right now we are all just riding it out but there is no more fix from a conventional standpoint.
Well said. There is no fix. There may be some kind of massive collapse from a black swan type event that the owners can't stop, but I tend to think that will not happen. Or even if it does, the owners are so powerful now that they will just brush off and use the collapse to further gain control over what's left of our shell of a free society. Or even more likely, they will cause a collapse, blame it on a black swan, and further enrich/entrench themselves by design.
"give me control of a nation's currency and I care not who makes her laws" (a rough paraphrass of A. Rothschild, 16??). What people don't get is this means that the bankers don't have the upper hand. Laws = congress and/or executive order. If the collapse threathens the congress, who are paid off by the PTB, the congress will revolt and save themselves. The US always has the option of issuing it's own currency without the Federal Reserve. If that happens, the need for taxes is vastly reduced, leading to a restructing of the ecomomy and the world (without the US at it's center). This scares the PTB that rely on the US military might to maintain their power structure. Kind of a "out there" explanation!
What is QE intended to cure? well, there are several elements to it, aren't there. Buying MBS, mortgage backed securities, and ultimately MAE and MAC obviously prevents the housing bubble from collapsing in a huge shit storm that would eat the US Banking System like a snack. Also, it re-capitalizes the American Banks; which is necessary unless you really want to have huge shit storm of trouble; as is frequently noted, the Euorpean Banks have not been re-capitalized, and ours have; this is very signifcant. As far as inflation goes, it's not surprising that it's relatively mild, as the QE process has been described as trying to fill a swimming pool with a garden hose. the worst news is that none of the big banks has been properly brought under control; or broken up into manageable chunks; and they'll probably create another credit system crisis/ intra bank; like the last one.
Government inflation numbers are a joke because they simply ignore food and other items that are extremely inflationary. If inflation numbers were taken as they used to be prior to Clinton we would be looking at severe inflation right now. That's a problem for SSI and other government programs so they choose to play games with the number. Banks have gotten much bigger and even more in the way of too big to fail. Lastly, Dodd Frank developed by the same fools who were every bit responsible for the crisis to begin with solved nothing.
There are three ways to reduce the debt pile.
"The third brings us over to the red team: explicit, state-sanctioned inflationism, and financial repression."
ZIRP and QE have increased the debt pile. There is more debt now than there was before ZIRP/QE. Can't reduce a debt pile by creating more of it.
Kondratieff Winter is deflationary.
Martin Armstrong: "The assumption of the hyperinflationists has been that governments will just print to meet their obligations. That theory is based upon revolutionary government who CANNOT SELL debt to anyone. In the case of the West, we issue debt and because of that, the first effort is to meet the demands of bond-holders. That is only deflationary as government seeks to extract greater and great amounts of money from the economy to pay the bond-holders."
T he market distortions and impossibility of collecting interest on one's savings are certainly big problems. Sooner or later the .gov bond bubble will pop; that'll be a big one. I guess you could say it's an un-sound financial policy that avoids some immediate disasters and causes serious problems, incluiding bubbles that will probably become serious problems in their own right. Buying Time? for what? Not for "recovery" , that's for sure.
QE fights against this and without it, we would be dead by now:
THE PERFECT STORM (see p. 59 onwards)
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
Stuctural poblem not a liquidity problem. Restructurings are required but too risky and painful for elites. Death watch continues and necronomy is fine. The death of the West will not even be a footnote from the English speaking MSM Bitchuaries.
It's not like aspirin... it's like speed. Eventually everything goes haywire and the patient dies of a heart attack.
Well, if we're going to hand out analogies, I reckon QE is like treating cancer with Ebola.
QE was never meant as a treatment, just a death sentence to the wider economy to cover up the corrupt cancer of government with economic mumbo jumbo to save the 1%.
I decided to risk 1% on GLD and SLV puts in March and April ahead of the Fed. If the market closes lower on Fed day I don't want to chase a whole position, so I'll add to this starter one. If the market spikes up, I'll be looking to complete the position from higher prices in a few weeks and will have plenty of time for it to work. Meaning, I think the metals are going way lower, but if I knew the exact top of every retracement, I'd own an island with an amusement park, a dozen Playboy models, an Italian grandma who makes great sauce, and a chimp named Coco. I probably took that too far - the chimp is totaly unnecessary.
Not touching equities until I see the reaction to the Fed this week. I expect the Fed to end QE and pinky swear promise that rates are set to rise, but not until your grandchildren's grandchildren have grandchildren, so keep buying stocks.
I wonder if Grandma Yellen makes great sauce. And if she does make great sauce, I wonder if I would eat it. These are the deep thoughts going through my mind at the moment.
And didn't the banks REGIFT that money to the stock market (Dow stocks in particular)?
QE had an 'equal but opposite' effect on the economy. It kept interest rates low while at the same time it sent the stock market into LEO. And Mutual Funds and 401(k)s, etc, etc,
I don't know whether large doses of aspirin cures cancer, but we all witnessed large injections of QE cash defeat the probable liquidity trap which didn't occur after double, maybe triple, digit trillions of dollars of MBS and CDOs were lost in 2008.
You may not like the distribution of the QE cash, but if there had been no QE cash at all, we'd all be dining a la dumpster.
Dumpsters - are you kidding me? The only ones who would be eating from Dumpsters would be hopelessly broke Wall Street guys. QE enriched them, to the detriment of most. You are dreaming if you think the common folks 401ks won't take another bath in the near future.
I agree.
This was the bubble bath that didn't bark. The next event will be the Black Swan who couldn't quit pirouetting.
It ends with the military billeted at Wall and Broad and the issuance of military scrip.
A recession is the true restructuring of the economy. Of course QE doesn't restructure nothing. Never was meant to. It's the keep the imbalances imbalanced. Low investments in capital goods to helps support productivity which in the process creates jobs, and supply. Hindsight has shown QE does none of this. Problem with the Federal Reserve, IMF, well almost everybody is, they are ignorant, or disregard Austrian economics and think they can goose the market by central planning. That somehow economy can have a 100% service economy, while neglecting maintenance of productive capital. A phoney economy is one based on gambling on higher prices. A real economy is about investing for future productivity. Of course US recovery is the longest recovery in history, because very little productive investment is created in the US. Same problem with Europeans. It's a structural problem, not a cyclical problem. Cyclical notion is really made up anyways simply by correlation by economist. They honestly think they can predict recessions or non-recessions based on past patterns as if economies operate on patterns. Ridiculous.
What the world central banks are doing is nothing new. This has been done before many times. We shouldn't expect anything different.
Who cares?.. I mean does anybody really give a shit?
There are people who could explain this stuff to the masses..bring it up in public forums to awaken the retards that care..but are too stupid to figure it out..
I wish I was a good public speaker. ..but im not.
I know..lets all just post here. .where almost nobody will read the shit.
Or..just post sarcastic comments.
Its over kids. Thanks for the help.
<”..While there is a fair bit of envy over banker bonuses, we should remember that most of the money they play with belongs to someone else. It is the pension funds and private savings of the many that give them the ability to demand support (such as QE). The average guy would rather see his retirement funded than see the bankers hang.
Due to self interest the masses will continue to support the actions of the fed even though they see the rich getting way richer…”>
Absolutely, 100% correct. the Fed is now worshipped as god-like and millions are thankful for them pushing the markets higher. Hardly the makings for a revolution. An I-Phone in every hand, an EBT card in every wallet, yields a peaceful society. The oligarchs are smiling all the way to the bank. Failure was not an option, 401K’s had to be pumped and pension funds could not be allowed to go under. In spite of the incoherent ramblings of many deranged ZHer’s, everyone with skin in the game loves the Fed and their money creation. All are certain Dow 20K comes soon, and earnings no longer matter. Buybacks, etc..the Fed is in full control. Get used to it.
In the war of deflation versus inflation, I think the ideas need refining. Growth enough to sustain the debt (impossible as it may be) would be inflationary. Defaulting on the debt (especially private debts) should also be inflationary, because the velocity of money would increase. Just figure it this way: Some poor slob bought into a $500,000 reverse amortization liar loan for a house with a $400,000 balloon payment after 50 years (and the house is only worth 250K to the bank!) So for awhile he slaves away to pay his 3000 rent payment on his 3200 in income, borrowing more on credit cards, eating ramon noodles, and generally living a miserable shitty existence to service this "debt." Then one day he lets it go. The dude suddenly has $3000 per month in new money to spend on all kinds of stuff! Talk about freeing...
Inflating the asset values is also likely deflationary, not inflationary. This one isn't so obvious but has to do with needs versus wants, and the supply of already existing shit in this universe. In short needs (i.e. oxygen, food, water, shelter) are not monetizable to the extent that TPTB would like them to be--food still grows out of the ground in a lot of places, you can generally find your own water if you want to go full survivalist, the banksters don't know how to monetize oxygen, and shelter is only valuable in a few tiny clusters of the planetary land mass (i.e. San Francisco, Hong Kong, Manhatten). They'll give you land for free in rural Kansas....so the monetizing of needs should create a backlash once the price becomes too inflated. In short people who see their water bill rise one too many times and who decide "I'm going to dig a well on my property!" or who see the price of shit food at the grocery store rise yet again and who starts finding useful edible gardening tips from their farmer's market, that sort of thing. America is most entrenched with the idea that water will come out of the faucet, food will be available at the grocery store 24/7, and that these idiots in charge will take care of these things. Well the beating will continue until morale improves, or you start to take it upon yourself to really take care of yourself. Other countries have much more leverage in this regard...they raise the price of garlic in Thailand? Grow more garlic in your garden, dudes...
So then in an attempt to raise the prices (Inflation) TPTB are left with wants. The price of paint made by American drug war prisoners and lampshades made by Bangladeshi slave children will go up, sure. But do you really need those things? Much less the fact that those things already have a huge built in momentum in the US--in short everyone has extra paint, or old lampshades lying around. Decades of excess led to an odd predicament. Check out a few yard sales on the weekend or shop online on Craigslist. People are giving away massive amounts of stuff for almost nothing.
Loved the article. But long story short deflation/default=inflation and inflation=deflation. Not so obvious, but that's my two cents.
Live well!