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Quantitative Easing Is A Squalid Little Lie That Appeals To Economists With No Grasp Of History

Tyler Durden's picture




 

Submitted by Tim Price via Sovereign Man blog,

There is one thing riskier than investing in a free market: investing in a rigged market when you think the central bank has your back.

At some point, the free market returns with a vengeance, like a coiled spring made out of pure risk. That time may be coming soon.

Last week, German government 10-year bond yields suddenly spiked from just 8 basis points to 37 basis points.

Now, a 29 basis point (0.29%) jump may not seem like much, but with yields so slender, a move of that magnitude is easily enough to put a few leveraged funds out of business.

Bonds have never been more expensive in human history, and yet their supply has never been higher.

10-year US Treasuries yield just 2.1%. 10-year UK Gilts yield 1.84%. 10-year German government bonds now yield 0.37%. And that bug-in-search-of-a-windshield 10-year Japanese bonds yield 0.32%.

Bloomberg’s William Pesek highlights the tortured logic plaguing Bank of Japan Governor Haruhiko Kuroda as he attempts to escape from the corner of the bond market he has painted himself into:

“[Japan] defies the basic tenets of economics for the nation with the largest total debt, largest ratio of geriatrics and low rates of immigration to have lower bond yields than countries like Singapore, Sweden or Switzerland.”

When one of the world’s government bond markets finally blows up (Japan still looks like the primary candidate, but stranger things have happened), economists will scratch their heads and wonder where it all went wrong.

Wiser souls will wonder how economists could ever have thought that money printing was the answer to anything.

In the introduction Schuettinger and Butler’s outstanding book Forty Centuries of Wage and Price Controls,” David Meiselman writes:

“Despite the clear lessons of history, many governments and public officials still hold the erroneous belief that price controls can and do control inflation. They thereby pursue monetary and fiscal policies that cause inflation, convinced that the inevitable cannot happen.

 

“When the inevitable does happen, public policy fails and hopes are dashed. Blunders mount, and faith in governments and government officials whose policies caused the mess declines. Political and economic freedoms are impaired and general civility suffers.”

Quantitative easing is a squalid little lie. It appeals to economists with no grasp of history. It pretends that too much debt can be simply resolved through futile attempts at price controls and money printing.

The practical outcome of QE is that it turns the bond market into a no-go area for any rational investor.

We are now in the terminal stages of QE, during which the practical limitations of this fatuous and discredited policy are being revealed.

When you devalue money and distort the supposed risk-free rate, you devalue every aspect of the capital structure, and of society itself.

 

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Tue, 05/05/2015 - 16:42 | 6063196 HonkyShogun
HonkyShogun's picture

When does Krugman get a pay cut?

Tue, 05/05/2015 - 16:49 | 6063228 i_call_you_my_base
i_call_you_my_base's picture

When does Krugman get a throat cut?

Tue, 05/05/2015 - 16:52 | 6063238 HonkyShogun
HonkyShogun's picture

I like your version better.

Tue, 05/05/2015 - 17:06 | 6063298 MonetaryApostate
MonetaryApostate's picture

But what would Buffet say?

Tue, 05/05/2015 - 17:13 | 6063320 back to basics
back to basics's picture

That time may be coming soon

When? Unless you stick your neck out and take a position on the when, it's all gibberish.

 

Tue, 05/05/2015 - 17:17 | 6063333 koncaswatch
koncaswatch's picture

Buffet says: (paraphrasing here) that a company with an economist on staff has one too many employees. He doesn't need Keynes, Stiglitz or Mises. He has his investments in the highest ROI employees: lobbyists.

Tue, 05/05/2015 - 16:56 | 6063260 Groundhog Day
Groundhog Day's picture

Hogwash i_call_you_my_Base...what do you know these guys have PHD's...they must be smart.  If you want any credibility change your name to 

i_call_you_my_base PHD (sarc)

Tue, 05/05/2015 - 16:43 | 6063201 Seasmoke
Seasmoke's picture

QE = Theft by kick the can.

Tue, 05/05/2015 - 16:47 | 6063220 LawsofPhysics
LawsofPhysics's picture

QE= creating paper/digital claims on real goods and services with NO COLLATERAL OR REAL WORK.

It isn't actually theft until the producer of a REAL good or service WORKS to deliver that good or service.

Fuck fiat, stop accepting it.  Nothing changes otherwise.

Tue, 05/05/2015 - 17:08 | 6063304 MonetaryApostate
MonetaryApostate's picture

Give that man a cigar!  Well, what does he win Pat?

Step right up, don't be shy, get your Biometric RFID ID Cards America!

http://www.blacklistednews.com/DHS_is_working_on_an_RFID_biometric_ID_ba...

Wed, 05/06/2015 - 13:18 | 6066275 Luc X. Ifer
Luc X. Ifer's picture

I remember at the beginning of the '90 in the Eastern Europe when governments tried to do the same all the West jumped onto their heads yelling 'Crazy! It is a no-brainer that only inflationary bubble & economical collapse is to result from this decision' so the societies where dumped into economic chaos and poverty due to forced debt injection - see Putin's uprising as a result. Now that crazy abnormality is the new normality as the benefit will be collected by the ones executing the crazy move. See, it just takes a little bit of environmental awareness and history knowledge to grasp the reality - but hey, the bisonian was dumbed down on purpose and with such a degree of success that it makes the former Eastern European Block cattle owners highly jealous of the achievements of the former enemies. 

Wed, 05/06/2015 - 13:18 | 6066277 Luc X. Ifer
Luc X. Ifer's picture

I remember at the beginning of the '90 in the Eastern Europe when governments tried to do the same all the West jumped onto their heads yelling 'Crazy! It is a no-brainer that only inflationary bubble & economical collapse is to result from this decision' so the societies where dumped into economic chaos and poverty due to forced debt injection - see Putin's uprising as a result. Now that crazy abnormality is the new normality as the benefit will be collected by the ones executing the crazy move. See, it just takes a little bit of environmental awareness and history knowledge to grasp the reality - but hey, the bisonian was dumbed down on purpose and with such a degree of success that it makes the former Eastern European Block cattle owners highly jealous of the achievements of the former enemies. 

Tue, 05/05/2015 - 16:49 | 6063226 i_call_you_my_base
i_call_you_my_base's picture

"Money printing" is too simplistic of a phrase to describe what's happened. Money printing and giving it to the poors to spend is one matter. Money printing and giving it to the wealthy with the expectation of trickle down is entirely another. I'm not endorsing either, just saying the outcome is different, although the destructive nature is probably the same in the end.

Tue, 05/05/2015 - 16:50 | 6063233 localizer
localizer's picture

QE = BS. How can you fix the economy by cheap money?! Even an idiot can understand it cannot work! I think they know too well that this is BS, they are just buying time trying to obfuscate the facts and confuse people in order to prolong the Big Ponzi.

Tue, 05/05/2015 - 16:56 | 6063257 FreeShitter
FreeShitter's picture

"They" are buying time and land to bug out when this motherfucker burns.

Tue, 05/05/2015 - 18:00 | 6063486 Usurious
Usurious's picture

 

 

 06/25/2010 - 09:51 | 433476 trav7777

''Maybe I need a louder avatar to get people to pay attention.

They have to QE the entire credit base.  Otherwise, the math says that the compound interest function will consume the money supply in a cascading sequence of defaults.

They have no choice, as a matter of math, but to print the interest at least.  The marginal utility of debt has gone to 0.''

http://www.zerohedge.com/article/evans-pritchard-announces-fed-contemplating-5-trillion-qe-expansion#comment-433476

Tue, 05/05/2015 - 21:05 | 6064090 LooseLee
LooseLee's picture

NONE of them are safe...

Tue, 05/05/2015 - 16:59 | 6063273 kchrisc
kchrisc's picture

"QE" is not their crimes. "QE" is the cover lie for their crimes.

In other words, is the fact that I robbed your house the crime, or that I lied about it?!

Liberty is a demand. Tyranny is submission.

 

"Tell it to the guillotine!"

Tue, 05/05/2015 - 17:09 | 6063307 MonetaryApostate
MonetaryApostate's picture

Correct, it's to bring down the house of cards.. (Read Banks)

To usher in the new One World Bank...

Where theft will happen on a global scale, without your vote...

 

Tue, 05/05/2015 - 17:06 | 6063297 q99x2
q99x2's picture

Dollars are variable on top of everything else. Don't use that bankster crap.

Tue, 05/05/2015 - 17:06 | 6063301 teslaberry
teslaberry's picture

We are now in the terminal stages of QE.

it occurs to me the writer of this article has no grasp on history. we are no where NEAR the limits of QE. I think venezuela and ukraine are near the limits. until we have no more supplies of food and weapons and depend on others for them ---like the above 2 mentioned countries---then we ourselves are no where near the limits of qe.

the limits of qe are the boundaries of social revolution, civil war, and external war.

Tue, 05/05/2015 - 17:07 | 6063303 wmbz
wmbz's picture

"Quantitative easing is a squalid little lie".

 

QE is total fraud as I see it, except it not unlawful. Of course when the own the "lawmakers" it will be what you decide it will be.

All of the sons of bitches at the helm of this destruction should be hung. They will instead enjoy a very comfortable life!

While the serfs at some point try to figure out how they where screwed and ended up with nothing and holding the bag!

Tue, 05/05/2015 - 17:27 | 6063386 negative rates
negative rates's picture

Politicians control everything, but know nothing. they keep the promises of the past they like, and like the bush tax cuts, erase the promises that were due that they don't like, it's a big bowl of hypocrisy. 

Tue, 05/05/2015 - 17:08 | 6063305 juggalo1
juggalo1's picture

Neither Japan US or other countries engaging in QE engage in price controls.  We are targeting a general level of inflation, but this is the one thing that QE or money printing should be able to reliably deliver: higher inflation.  The jump in German bond yields is a good sign in that context.

Tue, 05/05/2015 - 17:11 | 6063314 i_call_you_my_base
i_call_you_my_base's picture

So buying $40 bln in MBSs per month didn't affect housing prices? The fed and government doesn't push up asset prices for the absolutely STATED goal of the wealth effect?

Tue, 05/05/2015 - 17:29 | 6063397 back to basics
back to basics's picture

briliant response +1000

Tue, 05/05/2015 - 17:10 | 6063312 Seal
Seal's picture

Insanity is doing the same thing over and over expecting the same result

Tue, 05/05/2015 - 17:13 | 6063315 SillySalesmanQu...
SillySalesmanQuestion's picture

After having stolen everything that wasn't nailed down, ponziomics, creative derivatives, hypothecation, rehypothecating and flat out embezzlement, the only thing left to steal was from the savers...you know, pensioners, pension funds, retirees, responsible investors, IRA's and anywhere else cash might be parked. And behold, the greatest magic trick ever created...printing money out of thin air.
A very sad thing to watch over time, the destruction of real capital, businesses and savers...just... by...printing...money. As easily as I have printed these words.

Tue, 05/05/2015 - 17:18 | 6063340 kchrisc
kchrisc's picture

Orwell spends an inordinate amount of time discussing language in his prophetic warning "1984." He even wrote at least one essay about politics and language.

That is because language is both the first step in power's quest to control us, and a benchmark of the level of their success in that regard.

If they call their grift "QE," and you do so as well, they are halfway home in controlling how you think and respond to not only the FedRes' malfeasances, but also the tyranny of their violence-puppets, government.

Let me say it again, if you adopt their language, they are halfway home in controlling how you think and respond to their crimes. Use your own language to describe what they are doing, and free yourself from their control of the dialog.

Liberty is a demand. Tyranny is submission.

 

If it's their words, it's their ball.

Tue, 05/05/2015 - 22:56 | 6064397 Bemused Observer
Bemused Observer's picture

Newspeak was the only language that was getting smaller. Why, soon it would become impossible to even express a negative or unorthodox  opinion, because we will lack the words necessary to express them...

Pretty scary stuff.  We use words to pass our thoughts on to each other.  What happens when the words no longer do that effectively, or at all?

Tue, 05/05/2015 - 17:28 | 6063387 NoWayJose
NoWayJose's picture

There is no better investment today than to have a dozen Mega packs of toilet paper sitting in your garage or basement!

Tue, 05/05/2015 - 17:54 | 6063428 PrimalScream
PrimalScream's picture

TWO COMMENTS.

 

First, if you had told any of the major Central Banks (The West) twenty years ago that they would be buying their own debt (from their own country) - they would have rolled their eyes and ridiculed you.  Twenty years ago central bankers still had some standards for responsible banking.  LOOK HOW FAR WE HAVE SUNK ... in a short time.  Now "QE" is a catch phrase that barely captures any attention in the media. 

The UGLY TRUTH is that the entire Western Banking System is insolvent. 

And yet major derivatives deals go on daily with our largest banks, and collateral requirements are hopelessly meager.  WHY?  Because everyone assumes that these derivatives deals will NET OUT, with no harm done.  But this in turn assumes a stable market with fair pricing, and enough players who can cover their losses.  And those are the exact conditions that have been REMOVED by the current market regulation policies.

CENTRAL BANK INTERVENTION IS NOT A SUBSTITUTE FOR PROPER MARKET REGULATION

Second, do you really think that financial arm of the US Government is going to allow the bond market to crash?  Really?  Yeah, right.  If they do decide to allow yields to go higher, it will be a very controlled move. German bonds, or US bonds, will only CRASH is there is a major global selloff.  So before you pitch that argument, you need to explain which nation out there will begin dumping US debt in huge amounts.  That's the trigger for a crash.  Not here yet.  When it does come, kiss the US financial system goodbye.

Tue, 05/05/2015 - 17:58 | 6063475 rwe2late
rwe2late's picture

  No sense of history is the problem?

Poppycock.

Instead, consider who benefits from the QE and bailout policies. Consider the recent upward concentration of wealth. Consider the petrodollar extortion racket and the profitable financing of militarization and related activities.

There are many economists who strongly disagree with the TBTF bailouts and the way QE is purportedly used to "stimulate" the general economy.

But they are not the vetted "economists' chosen to formulate policy and to head financial organizations such as  the US Fed and IMF.  The preference, no the requirement, is that they be attuned to the 'needs' of (or actually linked to) Goldman Sachs, Chase, Citi, etc.

Get real. It's not about mistaken (but 'mistaken' to whom?) policies chosen by economists with a "poor sense of history".

 

Tue, 05/05/2015 - 20:17 | 6063938 Pancho de Villa
Pancho de Villa's picture

Es obvious they never heard of any Australian Economists, no?

Tue, 05/05/2015 - 20:33 | 6063983 squid
squid's picture

Oh brother....

 

QE is a lie? QE is a banker bailout, full stop end. This QE is no different from the first QE in 1933 with FDR.

If you believe something else then it is YOU aho are deluded. QE had ZERO to do with employment, the economy, etc.... it had to do with the FED bailing out its owners. If people would just admit that we could despence with any more articles like this one.

 

Squid

Tue, 05/05/2015 - 21:01 | 6064083 LooseLee
LooseLee's picture

I'll fix it for 'ya:

Quantitative Easing Is A Squalid Little Lie That Appeals To Economists With No Grasp Of REALITY....

Wed, 05/06/2015 - 23:11 | 6068011 phoenixdark
phoenixdark's picture

japan year 25 of qe  usa year 6  we got a long way to go baby.  AWESOME

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