Putting The Fallacy Of QE Into Perspective

Tyler Durden's picture

Submitted by Mark St.Cyr,

You can’t turn on a financial news program without being bombarded by panelists as well as the hosts ready-at-the-draw to pounce on anyone with an opposing view as to the “effectiveness” of the Federal Reserve’s quantitative easing program (QE).

Once again this played out just the other day on CNBC™ where this time it was Peter Schiff who found himself in the cross hairs of today’s version of “ambush the guest.”

You can agree or disagree with anyone’s viewpoint and I even encourage people to question mine if they see fit. However, you don’t have to be a rocket scientist to watch many of these anchors to witness for yourself what now has turned into all the appearances of – an ambush.

And the recurring foil used to defend their attack? (paraphrasing but it’s the gist) “You’ve been wrong about monetary policy for if you were invested in this market, you would be making money. And those who have listened to you have missed out. So won’t you now admit you were wrong?!”

Schiff wasn’t the first nor will he be the last and can defend his own calls and does so. But no one on these shows cares. And this is clearly visible for all to see in these exchanges.

You hear calls of “Admit it!, Admit it!” over and over again as someone is trying to clarify a position. Clarify in the real sense of the word. Not obfuscate it as the hosts or other “guests” are trying to imply by shouting over them.

It’s now gone from amusing to watch, to down right pitiful. Many times I’m left watching these hosts channeling that old quote, “Do you have no shame?”

I believe this shoe now fits a few too many feet today. And many of them can’t get the boot quick enough in my opinion.

So let’s put a little perspective on this whole thing we now know as QE and shed some light on the “brilliance” and the “understanding” of monetary policy that many of these so-called financial show hosts state they know so much about.

First: What great economic reason would they give that stopped the Dow 30K narrative in its tracks to then watch it plummet wiping out all the gains of 2014 – to then reverse and edge back towards the “Never before seen in the history of mankind highs?”

There was only one: Federal Reserve Bank of St. Louis president James Bullard. Period.

All one has to do is look at a chart for proof. Chart Courtesy of ZH from the article: Chart of the day: Bullard Bull#*t


What more about monetary policy gone wrong does one need to know than to look at that one chart and see for oneself. Proof, that the policies we once knew as “monetary” have been so adulterated that the charts are now the equivalent of pornographic pictures.

Maybe what we really need is for all these charts to be bound in some magazine with an “adult advisory label” affixed to it. At least it would be more of a true descriptor than what we are told it is: “The picture of a real economic recovery.”

But in reality it goes a lot deeper than this. It is absolutely lost on nearly everyone exactly just how much money the Fed has really injected into the system with nearly nothing to show for but a stock market so fragile: a non voting FOMC member can shake its foundation sending it tumbling wiping out a years worth of gains in days. Then, just by reversing that statement reinstate it back to its lofty highs.

And the statement? (paraphrasing) “QE should end” “QE should continue.”

Sorry things like that don’t happen in a market based on true economic principles and activity. That only happens when you have a sham of a market.

Remember, the Fed has injected into the market nearly 4 Trillion dollars. That’s $4,000,000,000,000.00

To put this into perspective I wrote back in December of 2013 an article that brings into focus exactly what we’re talking about here.

Imagine if for the same amount of money we had done the following.
(Just to be clear – this is not an endorsement. It was only an exercise as a thought experiment for you need “big things” to really appreciate just how “big” these numbers truly are.)

From the article in December 2013: Perspective Is Needed More Than Just Numbers

“In just 3 years the Federal Reserve has pushed into the financial markets via the QE programs the equivalent in dollar amounts to have purchased 510 B-2 Stealth Bombers, 72 Nimitz Class Air Craft Carriers, 120 Ohio Class Submarines. and I still have nearly 2 more years of money to appropriate where ever or for what ever I desire. i.e., Two TRILLION is still in my pocket left to spend. QE and its equivalents are now nearing 5 years.


I still have plenty left to buy the aircraft, to man them or, the missiles to outfit them. Heck, that’s just if I stop here. So far there is no indication the Fed. is going to stop and there’s also talk that the new Chairperson might be inclined to spend more!


Maybe we should add a few M1 Abrams tanks just for the fun of it. They’re about $7 Million a piece so we can get Oh let’s say TWELVE  THOUSAND a month. Yes that’s 12,000 per month or One Hundred Forty Four Thousand (let that number sink in – 144,000) in a year. Sounds like a bargain when I state it that way doesn’t it? And I would still have a Trillion left if they stopped printing today.


But here’s the real crux of this argument and why I stated it as such. Sure it’s a little hyperbole and the math is not exact. We would never do now nor would anyone ever approve of such a plan. However, think of where GDP and the economic output as to where it would be today as to employ the talent needed to build those marvels. The engineers, the skilled labor, the steel, the copper, the mechanized equipment, the hotels, restaurants, and more to feed those that just supply the day labor, never mind the industrial backbone of supply that would be needed and more.”

As far as what we have to show for all this spending at the end of QE this month? Who knows, but I do know – we didn’t even get a lousy T-shirt.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
pelican's picture

I have not seen a dime of it. What the fuck do I care?

Groundhog Day's picture

500 desalination plants, 500 solar power facitlites throughout the country,  2 new tunnels into manhattan, a new bridge into manhattan, 500 wind farms, and 3 trillion left over

Anusocracy's picture

Four trillion dollars just bought tens of trillions in debt payments for future generations.

TeethVillage88s's picture

This is ekm1's war between bankers & military.

Smart ones in the Military have known the system will have to collapse.

JR's picture

It’s difficult for one to wrap himself around the concept that the Pentagon is leveraging the central banks of the West and Japan as ekm1 would have you believe. He puts the cart before the horse.

It makes no sense that the military sets interest rates, buys equities, creates the bubbles and the busts, finds the money somewhere to buy politicians, support Israel… Where does the military get the money for Tomahawk missiles at $1.4 million each? Where does the money come from to pay for endless war around the globe: the carrier groups, the airpower, the bribes to allies to join in the wars?

This kind of money does not come from the U.S. taxpayer.  To believe so is to distract attention from  the real tyrant.

Bottom line: wars are fought with money and the money comes from the financial inventions of the Federal Reserve.

The kings of the 17th century could not fight wars until they gathered together enough gold; and the Pentagon cannot fight wars until the Fed gives it the money, i.e., the power.

It is the existence of the Federal Reserve that provides the U.S. capacity for endless war. 

“It comes down to this.  If you hate war, oppose the Fed. If you hate violations of your liberties, oppose the Fed. If you want to restrain despotism, restrain the Fed. If you want to secure freedom for yourself and your descendants, abolish the Fed.” Lew Rockwell, “War and Inflation”


FredFlintstone's picture

I don't want to speak for EKM1, but I think his thesis would be that the warrior class does not have to gather up gold anymore. It is just digits on a computer and that NSA is involved with manipulation perhaps. I don't think he is saying that the FED is not a tyrant, but instead that they have gone too far and have pissed off the guys with the guns.


gold-is-not-dead's picture

The warrior class stopped hoarding in the 60's and introduced floating price. Because there was no gold left.

commander gruze?'s picture

I sincerely hope that was a joke. Otherwise this Frank Zappa's song not only is prophetic but also an allegory to enslavement of a common man and his sporadic "fights" and joy from small victories, as well as passive opposition.

TheRideNeverEnds's picture

You get an Abrams! And you get an Abrams! 


EVERYBODY gets an Abrams!

CapnJackDaniel's picture

They shuoulda given Gene Ray a research grant - do just as much good :) http://www.timecube.com/ 

Freedumb's picture

I have to disagree, the prototype and construction of whatever he would have built to prove Timecube would have surely created thousands of jobs.

saints51's picture

That guy is totally insane.

Lets Buy The Dip's picture

the nasdaq chart look nice. check it here => http://bit.ly/1fMcakI


retailers do not realise the next QE is this 


1) big balance sheet 


2)balance sheet guidance. 


3) interest rate guidance.  


the FED right now are NOT going COLD TURKEY. my explanation 

is that as BOND MATURE the fed goes back into the market, and 

replaces those bonds. To keep the balance sheets level.  


So this SCAM and CONJOB they are running will continue.


TuPhat's picture

Mark is right but it would be mostly chinese industry that would benefit.

NoDebt's picture

"the equivalent in dollar amounts to have purchased 510 B-2 Stealth Bombers, 72 Nimitz Class Air Craft Carriers, 120 Ohio Class Submarines. and I still have nearly 2 more years of money to appropriate where ever or for what ever I desire."

Or 100 Million people on government bennies to the tune of $20K a year and still be $2 Trillion in the hole after 3 years.

A trillion here, a trillion there, pretty soon it adds up to real money.

i_call_you_my_base's picture

I used to use the example at the height of QE that you could pay 10 million people $100K per year at that rate.

TeethVillage88s's picture

There is another problem with DoD Spending as it goes up every year and some DoD systems need to be updated like every 3-5 years, brand new...

Augustine's Law I think.

By the year 2054, the Pentagon' Entire Budget will only be able to by one Air Plane... which would then have to be shared by all of the US Military Services and Spy Agencies...

The Entire DoD Budget will fail under current Weapons Inflation and Proliferation of Weapons Acquisition.

Epic Fail - DoD, US Banking, US Employment & Corporate System, & US Government.

lotsoffun's picture

or you could pay 100 million people 10K per year.  or  - more like reality - you could take the US population of 320,000,000 and take from them, man, women and child, working, or not, retired or not $3,600 per year that they will owe in the future.  and do that over 4 years.


venturen's picture

or more lioke 100,000 wall streeters $10,000,000...sorry your name isn't on the list!

Batukhan's picture

please, Tyler, not Peter Schiff again. He is a douchebag gold pushing millionaire who just happens to say the right things now and then but ultimately would love nothing less than returning to the good ol days of early stages of industrial revolution when the proletariat worked for hunger wages. Because of him and people like him so many simple minded Americans bought gold and silver at the top of the bubble and lost so much money. All this libertarian crap is just getting dull. 

Herodotus's picture

Henry Ford paid his workers .2419 troy ounce of gold for a day's work in 1914 (a $5 Indian Half Eagle).  That is $293.12 today.  This was in "the early stages of industrial revolution."

That was with no UAW, no union dues, and no minimum wage law.

How much is the Democratic Party and their community and union organizers getting for the industrial workers today?

Plus, no taxes, federal, state, or local were deducted from the workers paychecks.



TeethVillage88s's picture

And we won't even be able to leave the country once they convert us to a 2nd currency or to SDR IMF Money.

We will have debt most of us, plus the Fiat we have will be worth only half of what it does today.

Even the Pentagon will have to shut off procurement and go back to simple weapon systems with simple communications gear... basic plane, basic jeep, basic tank, basic ships.

McMansions will become vacant or get filled with Squatters... if the bankers number enough and have enough money they can chase the squatters with rent a cops who will work for $20 a day...

USA will be filled with workers who will do anything for $20 a day.

Mexican Peso will Rise from $8 USD per Peso... to at least $2 USD per Peso.

Squid Viscous's picture

theyz dint have theyz babees paid fo'.. big dif yo

Squid Viscous's picture

agree, i prefer to watch Charles Payne and Ben Stein who said to buy Bear Stearns, and Merrill Lynch etc in 2007...

and somehow still on the joo-tube instead of being lynched ... amazing

Batukhan's picture

If you invested in the SPY in 2007 what would be your portfolio worth now? and if you bought Gold in 2011, how much would you have made by holding it by now? Or are you waiting for the apocalypsis? In the post nuclear world Gold willl probably be of no use anyways. It is as speculative as any other metal, although less useful than, say, alluminium, or platinum.

BringOnTheAsteroid's picture

Tell me, how do you lose money when you buy gold? The entire premise of buying gold is to replace your fiat with precious metals. So run that by me again, lose money by buying gold, I, I, I don't quite get what you're saying. You replace your fiat with gold in the hope of getting back more fiat down the track. I don't think you quite understand. If you buy gold now for $1000.00 and then sell it is a few years time for $5000.00 you have it ass backwards because you are getting rid of the PM's when fiat is screaming in your face that it is becoming worthless. 


PT's picture

Those who bought at $1900 are still losing. Sure they only lose if they sell now.  But a million snake-oil brokers say the same thing about shares and real estate.  You can grow your own food on real estate.

I'm happy recognizing gold for what it is.  Yes it has a place in your portfolio, whether at $900, $1400 or $1900.  I'm equally happy recognizing that if you wanted to liquidate your three year old holdings now then you're screwed.  If you want to look better than a snake-oil salesman, put up a better argument that a snake-oil salesman.

zerohedgejjxxzz12's picture

 On Oct 5, 2007 is when the DJI started to fall, Gold was $760 /Oz .Today Gold is $1205 

Had you been invested in gold at that time you would have gained 60% 

 The DJI in the same time frame has increased 16% 

The DJI crashed after that, and Gold went to $1783 

 I would still pick GOLD!


PT's picture

Fact remains that those who bought at $1900 are still screwed.  For now.  If they sell now.  Fact remains that no-one here warned them of the up-coming screwing, even if it is only a temporary screwing.

Actually, no.  There were some who said that gold was going down.  They were ridiculed for saying so.  I do not remember their arguments so I cannot say whether they were geniuses or trolls.  But perhaps, just perhaps, one or two of them knew something.

I clearly remember the loud "Buy gold" signals broadcast everywhere by MSM.  I can't remember the year but I do remember MSM telling us about a heap of Reserve Banks in the world selling their gold.  To me that was a screaming buy.  Unfortunately I had no money at the time.

You can blabber all you like:  "It is safe to go sailing.  On average the ocean has historically been flat."
Some of us prefer to seek shelter from the tsunami and wait for the storm clouds to disappear.  Just admit it.  Those who bought at 1900 have had a couple of bad years.  They want more information.  Why don't you?  Oh, you bought earlier and didn't get wiped out so you don't care.  15 years ago I thought house prices couldn't possibly go higher.  I was wrong.  How long can you be wrong?

disabledvet's picture

We have Space X and a 100,000 dollar all electric car too!

Seriously...the interest on the debt is still being monetized.

QE has not ended.

tenpanhandle's picture

If all that dough went into baking bread (tangible assets) then inflation would cause production to be only a fraction of Schiffs list.  That is why it all went to creating and propping paper.  After all, that's what is is anyway. 

trader1's picture

something tells me that the FED would have done better to distribute the $4 trillion to every joe and jane six pack with a bank account.

and the BIS absolve all debts.



Stained Class's picture

If $1 Trillion goes from Earth to the Moon, there would be 1,000 steps on the ladder. Each is $1 Billion. 

How many steps in the Statue of Liberty?

Racer's picture

How much free healthcare at true cost, not hyperinflated monopoly cost would that money buy?

How many free university places would that buy instead of saddling the young with debt that cannot be written off no matter how poor or destitute you are?

Money instead spent to keep the criminal rich in the super rich lifestyles they do not want anyone else to have

trader1's picture


all that money went to the firms that played the "winning hands" in the OTC derivatives markets during the great recession, that without QE, would have never been paid out.

the ba$tard$ have ab$olutely no $hame.



max2205's picture

PFE makes about 1 billion in profits PER MONTH

Healthcare is toooooooo high

NoDebt's picture

Well, unfortunatly, we'll never find out.

JamesBond's picture

If CNBC hosts think the economy is doing so well, then they should have no problem with paying back their share of the national debt.  Open the wallet and fork over your ~$58,000, NOW or STFU




oddjob's picture

4 tril barely keeps the doors open, gives us the real number.

credo's picture

or 100 ghost cities .... oh wait ... 

AKrandy's picture

I invested my money on hookers, coke and weed, unfortunately, I just blew the rest....

Words of wisdom, if it flies, floats or fucks, rent it.

kchrisc's picture

"Remember, the Fed has injected into the market nearly 4 Trillion dollars. That’s $4,000,000,000,000.00"

A counterfeiter prints money and then spends it on goods and services; in effect stealing those goods and serves.

The FedRes "printed" $4,000,000,000,000, and gave it to their friends who spent it on goods and services.

In effect, they stole $4,000,000,000,000 from each of us and our children, and their children, and their children...

"Printing" is theft. "QE" is just a fancy name for it.

An American, not US subject.


"Quantitatively Ease the Fed of their heads!"

TeethVillage88s's picture

Guess it is one of these?

St. Louis Adjusted Monetary Base
2014-09: 4,072.016 Billions of Dollars
Monthly, Seasonally Adjusted, AMBSL, Updated: 2014-10-10

All Federal Reserve Banks - Total Assets, Eliminations from Consolidation
2014-10-22: 4,481,616 Millions of Dollars
Weekly, As of Wednesday, Not Seasonally Adjusted, WALCL, Updated: 2014-10-23

Reserve Bank Credit
2014-10-22: 4,436.686 Billions of Dollars
Weekly, Ending Wednesday, Not Seasonally Adjusted, WRESCRT, Updated: 2014-10-24

PT's picture

Enemies:  Terrorists, Rebels.  Friends:  Freedom Fighters.
Enemies:  Dictatorship.  Friends:  Kingdom.
Enemies:  Rebels.  Friends:  Freedom Fighters.

Our enemies Hyperinflate.  Our friends QE.

ramacers's picture

i would settle for a river of .1% blood.

buzzsaw99's picture

the tribe did all that and yet hopey still won't return izrayhole's calls. lulz

Squid Viscous's picture

when their blood spills, as it must, will only be .002% - but maybe the rest of us can get back to some semblance of an ethical/moral society...

Miss Expectations's picture

3 Trillion in "marvels" ... what f#&king death planet are you from?

 Not even one plowshare?