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Stop The Presses: Nobel-Prize Winning Economist Slams QE
Whether it is due to pervasive groupthink, a chronic lack of vision, the perpetuation of failed ideas, or just because the alternative casts grave doubts about the value of their very existence, conventional economists and their media lackeys have almost without exception been supportive of the Fed's "recovery" efforts, be it ZIRP or QE. After all, neoclassical economics demands it, and if the Fed is wrong about its response to the second great depression, then the value of every single economist likewise goes out the window.
Still, in the relentless rising tide of ever louder voices against central planning by the world's monetary authorities, and its destructive consequences, mostly originated by people who engage in actual work as opposed to tenured academics who live in ivory towers where they conduct (failed) thought experiments,it was only a matter of time before at least one prominent economist took the other side of the argument that according to the likes of Paul Krugman has only failed (so far) because not enough of it has been tried (leave it to an economist to completely fail to anticipate the collateral collapse resulting from relentless central bank debt monetization which Zero Hedge forecast as long ago as 2012).
That time has come, and over the weekend, none other than Nobel-prize winning economist Robert Merton (of expanded Black-Scholes fame) with Arun Muralidhar as co-author, released an Op-Ed in Pensions and Investments magazine titled "Monetary policy: It's all relative", in which they slammed not only the current monetary policy response to economic ills (as observed through the prism of pension math and the adverse impact of low rates), but question if instead of leading to an improvement, QE isn't in fact making the situation even worse.
Here are the key excerpts from the op-ed:
... while QE has increased absolute wealth, it has simultaneously lowered relative wealth for a large class of investors. This could lead to the opposite of the desired effect for this group of investors. Lower relative wealth means investors need to save more to improve their funded status, especially where regulations are strict, and it results in less consumption and investment, and may not remove the deflationary overhang.
...
An alternate, more sophisticated approach to explaining why QE may not work to stimulate aggregate consumption is, perhaps, because the demographic mix of the U.S. (and most parts of the developed world) has shifted toward older people. Unlike 30 or 40 years ago, the enormous baby boomer generation, and even retirees, are much wealthier (including human capital) than in the past, and they are wealthier than current generations earlier in their life cycle. So the wealth effect does not lead to an increase in consumption and, potentially, has the opposite outcome.
When baby boomers were in the sweet spot for housing needs, expenditures on children and cars, etc. 30 to 40 years ago, the effect the central banks were expecting from QE might have worked better, as they expected it would, but that need not be a reliable prediction under the changed current demographic and wealth distribution.
...
We believe it is imperative for central banks and academia to examine this perspective immediately and develop a new monetary policy toolkit, because it would be tragic if the central banks' attempts to improve economic security with the current orthodoxy leads, instead, to less consumption, less investment and greater retirement insecurity.
And the punchline:
A recent study by the Center for American Progress shows that millions of Americans (as high as 50% of households) are in danger of retiring with insufficient money to maintain the standard of living to which they are accustomed, and the problem is getting progressively worse. Your previous editorial argues that QE by the central bank may impose unintended costs on pensions, at both the institutional and retail level. This suggests more research needs to be conducted to examine how monetary policy affects relative wealth, not just absolute wealth, and whether traditional approaches are outdated given the current retirement landscape. This may call for central banks to use a different set of policy tools than manipulating long-term rates, and may even argue for the Fed to actually raise long-term rates faster than what is recommended by traditional monetary policy.
Alas, with central banks now proudly owning $22 trillion in "assets", it is far too late. The best one can hope for is that the social collapse the results after QE's failure is finally accepted by all, and that includes all other economists, will be somewhat contained.
Needless to say, all it would take for the Fed to "lose credibility" (if only among its "very serious" peers; it has long since lost all credibility across the broader population) is for a few more economists to have a comparable epiphany and declare that the money-printing emperor is naked, and then all bets - at least for the current failed economic and monetary regime - are off.
As for the immediate response to this article from the Keynesian canon, here is a preview of what to expect.
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"No Shit!"
-Knukles
Does that get me a Nobel Prize?
PS Fuck Paul Krugman. He should be donated up as an offering to the appeasement of the Greek peasantry that they might legally take their collective anger out upon him.
A sacrifice of Biblical Proportions in the Plaka or up Acropolis way
"Does that get me a Nobel Prize?" You may have Obama's. He's not using it.
~"Stop The Presses: Nobel-Prize Winning Economist Slams QE"~
Shut the fuck up!
No, I mean shut him the fuck up!
Anyone have a nailgun?
Yes, I have a nail gun. You can borrow it at any time. Just wash the blood off before you give it back.
And, just FYI, I am an economist by training (but I'm feeling much better now). I never throught QE was a good idea and have stated bluntly many times why I always thought QE was a bad idea, sounding somewhat similar to the points made in this article. But, sadly, with no PhD, nobody gives a crap what I think. Fortunately, I never ran a well known financial company up on the rocks 20 years ago, either.
NOT ALL ECONOMISTS THINK ENDLESS MONEY PRINTING IS GOING TO SOLVE ANYTHING OR EVEN "WORK" IN ANY MEANINGFUL WAY. Dissenting opinions are regularly filtered out of the discussion by the media, much like climate change 'deniers' opinions are filtered out in discussions of the environment, or the way no 'environmentalist' ever mentions anything bad about radiation leaking from Fukushima. I could go on and on, but the basic point is, not every economist is a clueless moron worshipping at the altar of stimulating aggregate demand.
~"Just wash the blood off before you give it back."~
Handy Nailgun Tips:
Place your nailgun, (a borrowed one is better), inside a plastic grocery bag, (not an option in loony LA), before using. Once you've finished "nailing" your "project", simply remove nailgun from the bag and dispose of the bag. No muss, no fuss. Oh, and return the nailgun to its owner. Lastly, don't forget to wipe those pesky doorknobs!
Of course no consequences need to be paid because nobody was at fault, like no fault insurance, we just keep driving and making new rules. Well guess what people, ignorance and denial is no excuse to carry on, which is why I say, Timer Bitches!
Let me tell you, I was not surprised when I found out that he wasn't a tribe member.
***There is no Nobel Prize for Economics.***
There is a prize, with an endowment given by rich banks, to be administered by the Nobel foundation (the same one founded by the guy who invented dynamite) which is now erroneously called a Nobel Prize.
Nailguns don't kill people.
They just release Nails who want to go to their rightfull owners. Go home Mr Nail, Go Home!!!
Did anybody read Up and Down Wall Street in Barron's this weekend? The theme of having to save more because you're not earning interest and is hurting the economy is catching on. Hmmm
It amazes me that those fuckers never fail to tell us how smart they are, but they are always the last ones to catch on to anything.
Or Krugman's. He didn't earn that.
Somebody should write a book about this stuff...oh, er...somebody did and all major publishers rejected it??? Shocker...
http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-1-advanced.html
http://econimica.blogspot.com/2015/02/fundamentally-flawed-outline-how-us-eu.html
"If youve got a Nobel Prize, you didnt earn that!" -Obummer
I guess common sense is not appreciated until a Nobel Prize winner states it.
What little wisdom our species has ever had has been lost.
Nobel Prize is just one of the ZOGs political tools (and not the Nobel Prize for 'Peace" only, e.g GPS chief engineers ridiculed the S/G Relativity Theory long ago). Humanitarian "Sciences" are total B/S, too -- especially "E-Cohen-omics" and History/"His Torah" which are ZOG's indoctrination tools as well.
QEs have nothing to do with "economics" and have been a pre-step before the Endgame. The point of QE is to let the chosen ones buy up world's remaining assests, with a controlled hyperinflation to follow -- and once the the USD loses 75-80% of its value within 1-2 months, the scum ("elites") will take over the world and establish an eternal totalitarian state/prison/labour camp for the goyim nations.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
Let me guess; both his parents were thrown under the bus by Bernanke.
why come price go up? durhhhhhh... my kredit kard already maxed out! where do i get me some more credit? dear leader said econumy fixed, why come college degree gets me no job? durhhhhh maybe critics racist, back to videogames in my mom's basement
obviously slept through his under-graduate course in trickle-down-economy-101.
Yes, he is right. This is economic fraud!
I see nail guns
The Oligarchs running the show want to strip the wealth of as many people as possible. Obozo care is designed to strip wealth from retiring baby boomers and healthy 20 or 30 somethings. This is intentional and driven by demographics. In the end, it won't make much difference, the laws of mathematics tells us that things will implode. Greece is a firecracker.
Whose oligarchs?
https://www.youtube.com/watch?v=q90kmUbEv7c
Yes the same Long Term Capital Management Merton
Why is anyone listening to this guy? He blew his credibility back in the 90s.
"Members of LTCM's board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences for a "new method to determine the value of derivatives".[3] Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and 41% in the third year, in 1998 it lost $4.6 billion in less than four months following the 1997 Asian financial crisis and 1998 Russian financial crisis requiring financial intervention by the Federal Reserve, with the fund liquidating and dissolving in early 2000."
http://en.wikipedia.org/wiki/Long-Term_Capital_Management
nice .. + 1
His credentials make him an expert on failed debt-dynamics policy.
It's hard to lose even more money in a year playing a flawed game than the likes of Larry Summers and Jon Corzine.
Merton slept with this far younger than him cute blonde while he was in London not so long ago on business. Not sure why she went for him, probably something to do with a nobel prize ...
So you're saying he's got a big.... trophy?
A big heart, trophys are for wives.
Dup
overconsumption has never been a positive economic condition. only assholes would argue otherwise.
Hmm, so a nobel prize in economics a valid credential or not?
Except the American public unlike the Japanese seem to be buying stocks hand over fist. Why is that?
"They lie even when they are telling the truth." Hence this scumbag's statement.
My belief is that they are preparing to kill off the dollar, which is why it is "up." As part of the setup they need to prepare a fall-guy, and that is to be the FedRes.
Of course, part of the plan is to not allow their fiat-dollar debts to evaporate, but be converted to SDRs--"Pay us now in gold or euros." (Remember, they own the courts.)
Liberty is a demand. Tyranny is submission.
Is the dollar up on "exit," or "strength?"
My belief is that they are preparing to kill off the dollar, which is why it is "up." As part of the setup they need to prepare a fall-guy, and that is to be the FedRes.
Push it up before you go full retard with QE. A monster QE4.
I personally think that instead of another QE, which they may still do, the goal is to assure those so connected and the Amongst be permitted a golden exit to the euro, shekel, or other. They will then "pull it" and lay it all at the feet of the FedRes so as to prepare the sheeple for their worldwide central bank and SDRs.
Fits in with the Saudis price war collaboration as well. As a reward for their cooperation, they can be permitted the ability to reapportion their assets while their Zionist friends prop the "markets" up and the "exit" open, and be spared when they "pull it."
We shall see. At any rate, the dollar is doomed.
Liberty is a demand. Tyranny is submission.
"When did daylight get a train whistle?"
No golden exit means you are eating romanian noodles for the next 6 months, I prefer steak and corn on the cob myself.
Oops!
Space available for lease. Will build to suit.
Liberty is a demand. Tyranny is submission.
My mother-in-law makes...just kidding.
We don't need more mathematical models. We need to embrace common sense.
It was excessive borrowing and casual accounting standards that caused the problem. QE didn't counter-act those situations -- it embraced them. The only question left to ask is "when will this experiment arrive at the inflection point of impact?"
QE (and ZIRP) really pushed this retirement couple out of the US. Gosh - I remember years(as savers) when we were making more money on the interest from our savings than our actual earnings. Personally - I think monetary policy in the US today is all about trying to maximize the tax base. The longer ZIRP continues the fewer retiree aged people can walk away from their jobs, the more tax revenues coming in.
Speaking of aging boomers, the public pension funds are going insolvent.
http://nypost.com/2015/04/19/jerseys-junk-finances/
Yes Federal Pension Guarantee Fund is in the Red each year for like $6 Billion extra. It ain't working. It's Broke.
- And in the News:
- Rural counties are fastest growing in USA...
- DC-area growth slows, VA burbs lose population...
Broken states to match a broken country where illegals are welcomed in to collect welfare,get an Obama phone and live many times better than the hole in the ground they originated from.
All they need to do is vote for the scumbag that allowed for them to vote and collect welfare.
CD yields (what the WW2 generation counted on) at near zero is an effective 90% tax on the interest income of senior citizens. But let's ignore that and SPEND!
In Mexico - we are getting right around 3.6% for a year CD. They tax it - and then the US taxes it as well. At this point we have maybe 1/3 of our savings outside the US.
Better rates and cheaper living.
The Federal Reserve is on a tear to dethrone the peso having a lesser value.
"Nobel Prize Winning" makes me shudder almost as much as "Economist". Put the two together and its just one giant shit-storm.
Finally, some one gets it, but it is too late.
We work for the 1% and the 1% prints money.
About time. Raw sienna been on this rant for years. Relative savings and distribution of savings is what matters when trying to stimulate economy thru wealth effects !! what is even funnier is how idiots like Krugman fail to see this is the biggest failed trickle down bet ever. At least Reagans tax cuts worked to some extent.
Beware The American Curse >>> http://wp.me/p4OZ4v-3z
Keen had forecast debt deflation prior to 2008. Hudson also knew it was coming.
http://www.debtdeflation.com/blogs/#PIX&kdntuid=1&p=52041&s=undefined&a=undefined
MMT theorists have analyzed the problem ad-infinitum.
It takes a Nobel prize winner, when others have been yelling the answers from the rooftops for 7 years?
It is simple, those that are in the back pocket of banking will always promulgate banker solutions. For example, QE swapping fresh FED keyboard money for debt instruments. All this does is change composition of the money supply from less debt to more money, and the money in turn channels into finance or gets caught up in banker reserve loops. If in finance, it finances yet more debt. This particular type of financialized debt has no connection to the real economy other than being extractive. QE money in banker reserve channels gets stuck because cash reserves now get FED interest, to then prevent rate collapse to zero on overnight market. You heard right, cash - which is not a debt instrument - gets paid interest and thus it gets stuck, with banks enjoying being fully capitalized.
But, bankers don't really own monetary policy, even though as a parasite they have usurped money creation, to then loan their credit into existence, Bankers certainly don't own fiscal (taxation) policy. For them to give up their pretender control over monetary policy, they wll have to admit that money is actually law, and not private credit.
To admit that, their entire market theory of credit money will have to be shoved into history's trash bin, and they will also lose their easy rentier lifestyles. Better to keep peddling lies and keep humanity hypnotized.
Like Tyler's often say, 12T of QE money already spent, would have paid off all mortgages in U.S. If 12T had been SPENT into existence and channeled into mortgages, debt depression most certainly would be over. Effectively, mortgage debt instruments would have been erased, especially as the new money would have vanished into ledger as it bought down principle.
People's future labor (which is now) would then have had extra wallet money to buy from their producing neighbors, rather than having their output vector to credit destruction on banker ledger. This action would have created a wealth cycle as people work with each other to create and produce. Debt depression also pays banker usury, thus further draining credit money supply. Finance has an upper loop where they trade debt instruments and do financial games, and real economy has a lower loop that is in constant drain.
A land tax via fiscal policy would have been required to prevent a new debt bubble against land though -so had we paid off mortages, it would have had to come with new fiscal stipulations.
Did Obama ever hear this from Geithner, Bernanke or any other members of the tribe and their sayanim fraternity? Its highly doubtful; parasitism runs deep when money creation power is so lucrative and ordained by God. It is especially good to be self chosen and have operative control methods on humanity.
Owning and holding debts on the people, to then gain usury and do Magick swaps, is the parasites control method.
"12T of QE money already spent, would have paid off all mortgages in U.S. If 12T had been SPENT into existence and channeled into mortgages, debt depression most certainly would be over. Effectively, mortgage debt instruments would have been erased, especially as the new money would have vanished into ledger as it bought down principle.
People's future labor (which is now) would then have had extra wallet money to buy from their producing neighbors, rather than having their output vector to credit destruction on banker ledger. This action would have created a wealth cycle as people work with each other to create and produce. "
EXACTLY.
Excellent post.
Show the histories that are kept out of sight!!!
"Stop whoring for Wall Street"
http://www.showrealhist.com/yTRIAL.html
http://patrick.net/?p=1223928
Long Term Capital Implosion. Merton himself knows how to royally f*ck some shit up
Having robbed the future we now rob the present which only leads to a tomorrow which will rob the past; the core baby boomer generation THAT OPTED OUT AND SURRENDERED TO EASY, SLEAZY REAGANOMICS...
The Bushes, the Clintons, the Blairs, the Muttis the Sarkos and the Browns...They should have fought the legacy of Dear Henry and the Cold War CiA/MIC scam that had gotten us into Nam and had shown its corruption in Watergate et al. No, they just bought into it and screwed the welfare productive state!
What a sell out of western values. Now its multiplied and this new millenium generation cannot tell an Apple from a Google big data scam.
Its all Facebook to them !
That's a lot of robs, are you robin roberts?
how about rob-in-hood and his merry men?
Are they still strutting their stuff? I have yet to see him ride a horse.
This guy is as dumb as Krugman. He's basically saying that QE should be good but might not be because of the weather - or rather that people are a bit older. He doesnt understand economics either. QE fails because the system is debt saturated. The economy is like a sponge, when debt free it quickly absords the extra money but as it gets soaked it becomes less effective until the economy / sponge just oozes and fails. The problem that all these braindead morons dont understand is that the economy is soaked with too much debt.
Never found an economist who understood reality -but then i trained as an Economic Historian. Economists dont read history therefore they are doomed to repeat past failures. Just like statisticians - another voodoo outfit.
In theory, an economist should be able to get it right. I think some austrian economists are proof of this statement.
the Fascist State of America is li'l different than any place where they've traded personal responsibility and freedom for false promises and free stuff...we're screwed.
unlimited gov't comes with crooked crony economics and crooked crony markets
When politicians talk about reducing the debt do they understand what they are saying? I say they have no clue. Do they realize money is actually debt? If they reduce the debt they reduce the currency in circulation. So the only way to keep the economy growing is to create more debt.
It is even more simple than that. Deep down, real people do not like debt because it is a form of slavery ... irregardless of how small the payments are. Only bankers and their cronies like debt because they use it to enslave others.
Go long Retirement Flop Houses. No doubt GS will be there packaging them for IPO