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After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake
As you’re no doubt aware, the Fed is fond of using the research departments at its various branches to validate policy and analyze away bad economic outcomes. For instance, earlier this year, the San Francisco Fed came up with an academic justification for the now infamous double seasonally adjusted GDP print - they call it "residual seasonality." Then there’s the NY Fed, where researchers recently took to the bank’s blog to explain why, despite all evidence to the contrary, Treasury liquidity is "fairly favorable."
Be that as it may, someone will occasionally say something really inconvenient - like when, back in April, the St. Louis Fed warned that the American Middle Class was "under more pressure than you think," a situation the bank blamed on the diverging fortunes (literally) of the haves and the have nots in the post-crisis world. The implication - made clear in the accompanying graphics - was that QE was effectively eliminating the Middle Class.
Now, the very same St. Louis Fed (this time in the form of a white paper by the bank’s vice president Stephen D. Williamson), is out questioning the efficacy of QE when it comes to stoking inflation and boosting economic activity.
Williamson says the theory behind QE is "not well-developed", and calls the evidence in support of Ben Bernanke’s views on the transmission mechanisms whereby asset purchases affect outcomes "mixed at best."
"All of [the] research is problematic," Williamson continues, as "there is no way to determine whether asset prices move in response to a QE announcement simply because of a signalling effect, whereby QE matters not because of the direct effects of the asset swaps, but because it provides information about future central bank actions with respect to the policy interest rate." In other words, it could be that the market is just reading QE as a signal that rates will stay lower for longer and that read is what drives market behavior, not the actual bond purchases.
But the most damning critique of Bernanke’s response to the crisis is this:
There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation. For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target. Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation or deflation.
And then there’s this:
A Taylor-rule central banker may be convinced that lowering the central bank's nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP. With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the worldís central banks.
And this:
Thus, the Fed's forward guidance experiments after the Great Recession would seem to have done more to sow confusion than to clarify the Fed's policy rule.
So in sum, the vice President of the St. Louis Fed has taken a look around and discovered that in fact, not only have trillions in asset purchases not worked when it comes to creating "healthy" inflation and boosting growth in the US, these asset purchases haven't worked anywhere they've been tried. Furthermore, he's noticed that central bankers that adhere, in a perpetual state of Einsteinian insanity, to the Taylor principle, will never be able to raise rates and finally, he thinks that the more the Fed talks, the more confused the public gets about what it is the central bank intends to do.
We would agree on all accounts here, although when it comes to forward guidance and discerning what the Fed's goal is, actions, as they say, speak far louder than words and with the S&P 500 having levitated some 200% since March of 2009, we don't think anyone is truly "confused."
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Thanks for your germane material contribution to the article.
After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake
Well, when you "put something in there" to "gauge" (to judge), it gets "trampled underfoot," does it not? Don't come back to defend yourself or your post or you look like a fool - you should know better. Did you not expect to get some down votes (clearly you did)? You were instructed to "kick the dust off your sandles" and move on. Be a little more prudent and pray for more wisdom about these things.
Look dude. Im christian. The type that hates being fucking lectured by bullshit holier-than-thou evangelists. So fuck off
Now that they've enriched themselves they complain...Nice system we've got here.
As we all stated... backed into a corner and no where to go... Sic.
No more soup for you!
Ok, for one last time:
$179 trillion in world debt Vs. about $85 trillion in currency.
Print, print, print!
Now can we kill Bernanke publicly?
BECAUSE THE TAYLOR RULE IS COMPLETE FUCKING BULLSHIT.
"All of [the] research is problematic," Williamson continues, as "there is no way to determine whether asset prices move in response to a QE announcement simply because of a signalling effect, whereby QE matters not because of the direct effects of the asset swaps, but because it provides information about future central bank actions with respect to the policy interest rate."
Let me give you hint: if you announce you're going to buy $800bn of treasuries, treasuries go up in price. You become the largest bid in the market. You're not a bid in every other asset market though. Just the ones you're going to buy in.
Oh, RIGHT! Inflation is good? WTF? Decreasing the value of my money is laudable? So, in addition to offering a miniscule amount of interest on my savings, you're shooting to devalue by money by at least 2%? What am I supposed to do, nod in agreement and clap my hands? Woo Hoo, my money is now even worth less, thank you! thank you! You're a bunch of ASSHOLES!....
Sure, but your quality of life just went up with that new i-phone purchase, so it's all good and evens out in the short run.
inflation in housing and equities prices = good
inflation in other areas = bad
that's what we've 'always' been taught anyway...
This was a mistake? But pushing for the repeal of Glass-Steagal and ignoring Brookslyn Born not sooo much... All planned and executed perfectly!
You made a 4.5 Trillion dollar mistake, you go to prison for the rest of your life Bernanke. This was no mistake, this was an intentional transfer of money from the middle class to your friends!
Bernie went to jail so the traders could sail.
It is now time to hunt down every member of the FED and hang their sorry asses!! I'll buy the rope!!
I'll buy the judge out, all we need now are the gallows and the federals.
What would have happened if there was no QE.
The rich would not have gotten richer, and the poor would not have gotten anything.
GoldmanSachs would have had to file bankruptcy and sell off it's largest business the federal government.
It is unfortunate that most people in the U.S. don't understand that the REAL purpose of the Federal Reserve System and its stepchild I.R.S. is to enrich the owners of the Central Bank - that's all.
This guy better stay away from nailguns, electric cars, wifi equipped cars, planes and late night walks alone for awhile.....
He could commit "suicide" by two shotgun blasts to the head.
They'll probably berating themselves now for forgetting to "make an accident" or "help commit suicide" for this non-teamplayer.
Two obvious questions:
1. Why would the Fed even think that there is a positive link between inflation and economic activity? (it makes no sense to me that there would be)
2. Does the Fed really think that there is a link or is just another goal-seek lie whereby if they say something that sounds plausible they get cover for doing what they intended all along for the benefit of the Fed's owners?
It seems obvious to me that the Fed is just one greedy, dirt-bag lying organization that only cares about the banks that own it and the banks' owners' interests. The Fed is the center of corruption.
We proved it and they STILL don't care.
Ben Bernanke couldn't give a rats ass about what happens to the markets now. He has served his term. Balls are in Yellens court now. It's a game of tossing the "hand-grenade". The person that gets caught with the blow is the one sitting with the responsibility, regardless of Greenspans and Bernankes easy-money-policy.
Here's a Taylor quote:
"And once you cross over into that world, no matter how strong you are, you have to pay the price."
LT did have a set of rules to quantitatively ease the opposition:
Keynes never said, "print a bunch of money and give it to the banks". What happened had nothing to do with any economic theory to stimulate the economy.
For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target.
Funny thing is I seem to be experiencing considerably more than 2% inflation. I must be buying the wrong stuff - like food and housing.
If we drank oil and ate computers things would be great!
FUCK YOU Bernanke1
Guillotine will be the only solution: cut the cancer from the sick body.
Right, they were really trying to help the middle class, but it just didn't work. No way they knew what they were doing and were intentionally trying to detroy the middle class. No way.
What was that quote, "something something homeless on the continent their fathers conquered"?
/s
http://albainternazionale.blogspot.it/2015/08/attacco-bangkok-sospettato...
Bangkok bombing false flag ?
Just because QE doesn't work, doesn't mean they won't keep doing it....
When your only tool is a hammer; every problem begins to look like a nail.
The sneaky elites thought that they could pull one over on the masses - "We'll tax them through voluntary income tax channels like the IRS, and at the fuel pump, then we'll tax their savings by debasing the currency... "
"Wait, what? You mean they are working less, driving less, and paying less taxes ? Ok, we better ramp up the stealth inflation tax machine pronto.."
"Wait, what? You mean they are spending less, too, and the velocity of the currency moving through the system is declining, as well? - "
"Shit. What are we going to do now...?"
Maybe they can explain how toxic MBS can be called assets? We stlll fall for the nonsense that the Fed is supposed to care about the middle class and poor. If they did, they would have simply given us the $4.5 trillion. This would have accomplished the goal of increasing economic activity. But QE is just another way of stuffing cash into rich people's pockets. We all know trickle down economics doesn't work, but that won't stop them from trying it again. Fuck them.
The idea of just paying off/taking over the bad mortgages was kicked around, at least online. Theoretically the government agency could have bought the notes and then modified the terms to maximize return/minimize foreclosures.
But the "not fair" whiners would come out in droves crying that is wasn't fair for these lucky "homeowners" to benefit because they were renters/paying their mortgage/already owned their house etc. Like the crabs pulling down that other crab that is trying to escape the bucket.
It would have been less expensive, probably more effective as a stimulus to the economy, but the beneficiares would have been imprudent little people instead of parasitic banking interests. Couldn't have that.
Life isn't fair. Never has been. Stupid reason to choose a less effective response.
QE wasn't meant to help the wealthy, Hillary wiped her hard drive with a cloth, and I'll just stick the end of it in. The death of the middle class and the resultant demand in goods and services playing in the media is just fodder for the talking heads. They could care less in actuality. ANYTHING else done by the fed will have the same effect of further squeezing the class that had worked hard a lifetime to gain some assets in order to live comfortable. That's the game now and it will be to the end.
Rob a liquor store in America and they put you away for a long time. Steal 4.5 trillion from the American people and what will he get? Any ideas? Nothing involving long time incarceration for sure.
raising rates with trillions on the balance sheet puts the fed in bankruptcy... maybe that's why china is selling tbills and buying gold...
They ought to offer 5% on savings accounts. But they don't want us to keep our money there. It's harder to steal.
QE and ZIRP is a robbery against the people, in progress. Justice will eventually come from the people. When the gov stops sending out checks to their beloved police state, all bets will be off. We the people have a 100 million firearms and decades of Gov oppression stored up as fuel and energy. The revenge on these politicians and bankers will be epic. They and their families will be erased from the earth and condemned to the history books with the all the other despots.
QE worked exactly as it was supposed to, the question is cui bono?
Or better yet, who the fuck stole 4.5 Trillion from the people?
OT / but a consequence of the QE/ZIRP'ed Economy.
THEY say that the Greek crisis has generated more that 100 billion/ year of reduced interest payments for German bonds as EU's saviour economy. Indirect consequences of huge value for Mutti's UBER Germany.
On a similar note here is a comment on Illegal aliens economic impact as per the xenophobia that was spewed out yesterday on ZH subsequent Pat Buchanan's post and Trump's illegal alien Crusader rampage :
5. The Social Security Fund would take a hitUndocumented workers contributed $13 billion in payroll taxes to old age, survivor and disability insurance in 2010, a Social Security Administration study from 2013 found. They accessed about $1 billion in benefits, so that nets to a $12 billion contribution that wouldn't exist if you deported them.
The bottom line is : The Oligarchy NEEDS these cheap deniers to pick their fruit and mow their lawns; knowning full well they live in the urban ghettos which is Middle and Low America's problem! Not theirs.
The divide in the West today is not about ethnicity or religion, its about "haves" and "have-nots". And that divide is widening between the unwashed 99% young Millenium generation facing this economic regression and the 1% sons of Oligarchy scions living in walled, gentrified and protected compounds.
You have to know where you are heading and which side you are on...never mix issues of citizenship and economic consequence with issues of ethical morality, the bedrock of the Constitution.
Yes to this.
If it benefitted the haves we would have a secure border. You left out that the expanded labor pool helps keep down wages. My understanding is that the border of Mexico is more secure than ours, IOW harder to get into.
So you're solution is ... more illegals! Got it. Look, the Social Security is a Ponzi scheme. Those who insist on advocating that we need more illegals to "save the system" today are of the same ilk as those from the past who were responsible for birthing Social Security in the first place.
I didn't say that. I said it was a CHOICE that has already been made!
It is WHAT IT IS...and it was made by the people in power back then 40 years ago.
All I'm saying is don't blame the poor peons who work the system BLAME those in POWER who made it and don't repeat those errors of making Latin America US OLigarchy's "no holds barred" playground.
COs then you invite the unwashed to cross the border as their economy does not cater to them but to the CARTELS !
How much less is it worth today?
Uncle Ben, you are half right. Yes, correct about inflation but wrong about real economic activity. You, Sir, are truly having your "what's under my pillow" moment. Even ZH gets it. Uncle Ben (FED Reserve), raise the interest rates and I will elaborate on what is on my mind. You just attempted to make God irrelevant and a simple sorry won't be enough.
http://just-a-thought-from-thinair.blogspot.com
http://just-a-thought-from-thinair.blogspot.com/2015/05/whats-under-my-p...
It IS refreshing when you get some truth from Fed peeps - especially at this level. Back in February when I discovered the GDP Now from the Atlanta Staff ( and brought to Tylers attention), I was amazed. Here was something from the Fed that looked more real than 90 % of the blathering bullshit spewed by the mouths of most Fed spokespeeps. The best thing is that the GDP Now is spot on versus the garbage generated by the Blue Chip (nay Blue Shit) consensus.
Now they tell us. Paging Paul Krugman and Richard Koo.
QE has done exactly what it set out to do .... of course the objectives were completely different than what was offered up for public consumption..... an obvious recipe for decimation of the middle class ..... and huge plus for the big banks ......oh yeah, and who owns the FED?
So who is going to pay me back for 6 years of lost interest income that I have had to give to the "too big to fail" banks for free?
That used to be a few extra thousand dollars per month in my pocket, much of which I spent.
But that money is gone forever and the banksters are richer than ever.
The system is broken. The FED is a criminal enterprise owned by whom? We don't know.
How far Amerika has fallen.
If the Fed raises rates now - it will ENHANCE Trump's chances of winning!
He will go all "It's the Economy STUPID" The Irony will be palpable.
Japan ignited a bubble in real estate when BOJ changed policy. This policy change was at behest of BIS and an attempt to convert Japanese economy from one of directed credit to one of finance credit.
See the movie, “princes of yen” to understand how credit directed at land, then pushes land prices. This is unwanted positive feedback that ultimately led Japan to be priced higher than the entire north American continent.
The movie is long, but worth your time:
https://www.youtube.com/watch?v=p5Ac7ap_MAY
A credit bubble relates to FIRE, or finance insurance and real estate. What happened to Japan in the 80’s was purposefully igniting a FIRE bubble to overturn industrial Capitalism and replace it with Finance Capitalism.
The Bubble lead directly to high levels of PERSONAL DEBT. It also lead directly to high land and building prices, as they were pushed as debt instruments were created against this asset class.
Debts of this type require futurity to pay for the folly of today. These personal debts must be paid, or banks will enter into harvest and foreclosure phase.
Richard Koo of Japan was the first to identify what is now known as a BALANCE SHEET RECESSION.
Balance sheet is an euphemism for double entry ledgers. Double entry is used to hypothecate new credit.
http://www.paecon.net/PAEReview/issue58/Koo58.pdf
The U.S. ignited a FIRE bubble a decade after Japan in the 90’s, starting with purposeful moves such as Graham Leach Blily act, anti-redlining provisions in CRA, creation of SPV vehicles at TBTF banks in order to make Mortgage Backed Securities.
The U.S. fire bubble pushed land prices and increased personal debts. This then caused a BALANCE SHEET RECESSION (BSR).
The best way to get out of a BSR is to scrap the money system that caused it. Private Bank Credit was fraud from the beginning. Note that this article never mentions BSR. How can one fix a problem if they cannot identify it?
That said, HOLDING FIRE PRICES HIGH with QE is insanity. FIRE was already driven high by the bank CREDIT mechanism. Japan was driven high in the 80’s and the U.S. high starting in the 90’s. FIRE/CREDIT is how banks make their usury. Get it. Banks create credit to make the usury; this is their business model. Private Banks want the world in debt to them. Banks also want their debts made good if their bets go bad.
QE is yet more balance sheet action, where financial paper is traded for FED keyboard money. This paper already resides within finance Casino. Remember banks hold the debt instruments, a gift to them upon hypothecation. QE buys Treasuries, MBS, Bonds etc. out of the Casino, usually from Banks and Shadow Banks.
QE money then does NOT CHANNEL toward PRIVATE DEBTS. Ok? QE transmission mechanism does not decrease bubbled FIRE prices, but instead supports them. High land prices, high housing prices, and high personal debts vector money away from the wallet of labor, so that labor is permanently under drain pressure. Labor is not buying evenly from labor, but instead his earnings are vectored away in debt payments, and also higher taxes. (Government has been duped into taxing labor, and untaxing capital gains.)
If humanity must keep their dumb-ass fraudulent private banking system as its control mechanism, then at least maneuver the levers of the machine properly.
Private Debts need to be written down to their real price – which means no longer supporting FIRE with QE.
Injections of new money into production and consuming needs to happen at the base of the population, not directed at Finance Casino; ideally the injections are debt free money. QE money channels in ways that are damaging to labor but friendly to Capital. The U.S. can inject using new Greenbacks, the coinage clause is still in the constitution.
The U.S. could also inject with QE aimed at muni bonds. Municipalities just create new 100 year bonds with almost zero interest …maybe .25, which is what banks get, and then FED makes keyboard money as a swap. Double entry mechanics are satisfied with the swap of new paper for new keyboard money.
Municipalities then spend on the Commons. This new money then vectors into labor while the commons are improved as a bonus. Labor then pays off personal debts. The mechanism is thus somewhat similar to that of War Time, where treasury spends and ultimately personal debts are paid down. When the new money enters private bank debts upon loan paydown, the money disappears from existence, thus keeping inflation suppressed. Fed balance sheet grows, but personal debts decline. Eventually the debt instrument is ripped up as it is paid off, it too disappears from existence.
Banks and FIRE are an enemy of paying off personal debts – the Fox is guarding the hen house.
Plaza and Louvre accords imposed by Reagan on Japan started that shift from MITI finance to FIRE finance by imposing a monetary straight jacket on YEN/$ exchange to inhibit Jap exports that fueled up the likes of Mitsubishi and Sony.
Reaganomics extracted a HUGE price from its surrogates. "We give you nuclear umbrella now you pay us back."
An offer you can't refuse!
And today it goes on and on; currently the US $ kisses Erdogan and Brazil's Dilma via currency wars...same old shit.
"Plaza and Louvre accords imposed by Reagan on Japan started that shift from MITI finance to FIRE finance by imposing a monetary straight jacket on YEN/$ exchange to inhibit Jap exports that fueled up the likes of Mitsubishi and Sony.
Reaganomics extracted a HUGE price from its surrogates."
===
Yes, Plaza and Louvre were part of the mix, as Japan was kicking the worlds ass. Directed credit shows just how efficient humans plus machines can be, a small island nation flooding the world with industrial goods.
This also means that a proper money system would idle about half the population. If they are idled though, they cannot go to screwing and overpopulating. Hence, a proper money system should direct into households to prevent burgeoning population.
Within the paradigm of Private Credit as money, Reagan did deficit spend. This is a form of treasury money in that the new TBills are monetized by FED and interest is rebated. Treasury money then can be seen as exogneous to the banking system, and that new money was on-spent into creating demand. Reagan also increased depreciation, allowing industry to start an investment cycle. So, industry now had savings via deficit spending, and it had incentive to invest.
Margaret Thatcher was more likely than Reagan to privatize the commons. There is no alternative TINA, was her mantra.
Both Reagan and Thatcher spread the disinformation that Government is the enemy. In actuality, government is the lowest cost producer in inelastic markets. In other markets they are high cost. This sort of finesse was beyond the imaginings of both Thatcher and Reagan.
U.S. finance capitalism became threated by Japan's success in the 80's, a success which was seen as a Template for the TIGER economies of Asia.
I think I'm turning Japanesa song perfectly captures the era...
https://www.youtube.com/watch?v=IWWwM2wwMww
It is no coincidence that Asian currency crises followed BIS/Plaza/Louvre overturning of MITI industrial credit.
Fiannce Capital was at war with Napoleon, with Tsar Nicholas, with Kaiser's Germany, it was at war with Nazi Gemany, it was at war with the American System (prior to 1912).
Finance Capital has a long string of success.
About MAggie, TINA and her economic mentor HAYEK; here is a very amusing and chilling story well worth the read.
A page out of the UK of the 60s to 80s...fascinating!
http://www.bbc.co.uk/blogs/adamcurtis/2011/09/the_curse_of_tina.html
BTW / This post by Curtis has the best description of what Hayek's economic thinking really was!
"In actuality, government is the lowest cost producer in inelastic markets."
Like schools? Shut up please
Sounds like a setup to me. QE didn't work so we need to increase rates and try that.
Next thing they'll be telling us is that bloodletting doesn't work.
Who knew!
Sha, Nooo, whaaa
The only mistake is the Public found out aboud it.
The udder mistake was the Public found the Federal Reserve is Private and not Federal
4.5 Trillion = 9 Million jobs each paying 50K/year for the next 10 years. Just saying. Bernanke are you listening?
I'm sorry, what are you suggesting? That Bernanke hire more people? That's not within his stated powers. Obama and the Democrats have for years been pushing for higher deficit and government spending financed through QE that would accomplish what you say, but they haven't been able to get it through Congress.
I was merely putting a headcount on the colossal waste. While it is obviously not within Fed's powers to hire people en masse, if the number of jobs created in private sector (plus the gains in GDP) due to QE do not add up to the top line, then QE was ineffective as a means of helping out the american main street. But then QE was never intended to help out the main street.
Perhaps "trickle up" would have been better than "trickle down".
Too late now, this ship is going down. At this point there are no policies, financial accommodation, political, social, regulatory or legislative changes which will bring anything other than a short term illusion of prosperity.
Our future is a deep prolonged depression, another default, and unfortunately more war as “Just Us” and their minions try to blame our failures on everyone else to save their own skins.
The good news is that in a few years we will not be able to afford to buy even the cheapest imports and will have no choice but to manufacture and repair items locally.
Then perhaps after most the .gov dependent majority becomes hungry, cold, homeless and assuming we are not an occupied country for decades of war crimes; we will reinstate Glass - Steagall, remove approximately 5/6 of the Alphabet Soup in DC, break up the TBTF, prosecute the TBTJ, repeal a few million pages of regulations and crony protectionist laws, etc…
been better.... for whom?
what they did was better for the croneys, and that was their only concern
what they did is/was for the government to keep spending at zero nominal costs... period.
Oh and lets not forget this little tidbit shall we!
https://m.youtube.com/watch?v=oAK5xzEYq7I
For the record i tried!
The main aim of central bankers was never to revive the global economy, it was purely to protect the banks from going under at taxpayers expense. Taxpayers are on the hook to bail out bad lending decisions of the banks through capital infusion.
http://www.marketoracle.co.uk/UserInfo-Akhil_Khanna.html
I think it would be so appropriate if the US economy were to enter it's next official depression just in time for the release of Bernanke's book in October.
How dare they besmeach the policies of 2009 Times Man of The Year! - Bernake. MOAAAAR! MOOAAAAAR! PRIIIIIIIIINT!
>There is no work, to my knowledge, that establishes a link
>from QE to the ultimate goals of the Fed inflation and
>real economic activity. Indeed, casual evidence
>suggests that QE has been ineffective in increasing inflation.
This is not all news, Bernanke publicly acknowledged that they were not getting planned inflation before 2009 was out. And that is not all bad, it's just that Bernanke's model predicted inflation.
The "good" news is that perhaps this will go on forever, printing without (sic) inflation. Of course the "no inflation" is itself a lie, but at least we have not gone Zimbabwe yet, which a rational person might have feared.
On the general economic front, the only tiny, little thing they overlooked was - China! The employment problems are "structural", eg all the jobs went to China, for many more reasons than the cost of capital. Bernanke said he could fix this by creeping up the exchange rate. So far that hasn't worked, either. But I can't believe Bernanke was ever so dim as to believe it would.
AND YET, there are other excuses for QE and ZIRP, simply being bandages for the other problems of 2008. Maybe QE and ZIRP were good thing for a year or two. But since about 2010 they have just been ongoing theft, corruption, stupidity, fear, and addiction to monetary crack.
"The "good" news is that perhaps this will go on forever"
Probably has as much chance of success as "reaching a premanently high plateau". Don't think forever is a viable option.
Well "forever" is a long time, but it's already gone on about eight years longer without inflation than Bernanke thought.
Agree with much longer than thought, however the pervasive forever mentality that's going on is what will make this next crash as big or bigger than 2008.
Nobel laureate Joseph Stiglitz said as much five or more years ago. You'd think that the left would listen to their economists. They made this bed, at one minute to midnight it's about time to sleep in it.
I still don't really know what the point is. Economists on the left have been arguing for looser fiscal and monetary policy, and since Republicans in Congress have been adamantly against looser fiscal policy, monetary policy has been bearing the load. In addition the paper doesn't clarify 1) the real costs of no QE / tighter monetary policy 2) The costs of QE beyond failing to spur inflation.
They Bernanke'd some folks! I'm sad to say I used to live in his hometown for a few years of my life (Augusta, GA) Beautiful golf course been to the Masters practice rounds a few time. Right across the street from the Masters? Ghettos everywhere. BB probably growing up in Jewish one I presume
The analysis of the paper seems flawed. QE definitely creates financial assets and wealth, so it should spur some inflation eventually. Obviously the real world results have been lacking. On the other hand, I don't understand the counterpoint of QE and Taylor Rule central banking. When Japan raised interest rates, immediately the financial sector experienced distress and they reverted to ZIRP. Are you suggesting that we must ignore the distress and increase rates anyway? How much? How much deflation should be tolerated? I'll acknowledge that ZIRP and QE have largely failed to spur a healthy normal economic recovery (central bankers have frequently blamed a lack of fiscal policy for this failure). However to imply that they are bad and should be ended doesn't take into account the real costs of the opposite position.
How about just ending central banking all together and let the market price risk? But wait, we are well past that being a reality until after the collapse and counter-revolution.
And when is deflation ever a bad thing? You mean I get to pay less for a product or service AND save the tax savings on it as well! It sounds a whole lot better than the Fed's targeted 2% that will drain one fifth of my buying power in just one decade.
The opposite position you're referring to is called the market economy. You might have forgotten that there are winners and losers in the market economy. The ones who make poor decisions should be in the soup line, not collecting huge bonuses. The ones who are prudent should not be punished by having their savings eroded. The government should not be the one to decide.
This is a simple matter of perspective right? QE works for the top 1% doesn't it? The 99% not so much, I guess Steph Williamson didn't have the balls to write this when Bernanke was running the show, nothing like a FED monday morning QB, lets all remember who the FED works for and then we can assess its success rate accurately, I mean who are we kidding...
I'd give you ten greens ones if I could.
Scanned the paper. This is about as profound as it seems to get - from page 14 in the "Conclusions" : ( http://research.stlouisfed.org/wp/2015/2015-015.pdf )
"So, if this is the essence of postmodernism, as Eichengreen asserts, then we should embrace it. Whether economic historians realize it or not, all of their work in economic history incorporates economic theory. History indeed cannot be economic history without economic theory. But economic theory is not used well if we are not explicit about it if we do not give the theory enough respect to write it down in formal mathematical terms, or to ground our arguments in formal economic theory that is worked out elsewhere."
Wow. Was that deep, or what...
You really don't need much in the way of equations to know that anything divided by zero equals infinity. So with Zero Interest as the Rate you can have infinite debt but still make that all important MONTHLY PAYMENT.
Got that? That is ALL the Economic Theory you need, and in fact it isn't theory, it is about as basic math as you can get.
The PROBLEM, that was somehow missed in this paper, is that with ZIRP the politicians, fraudsters, and elites (here I am a bit redundant) all took advantage of ZIRP to load up with infinite USD based debt. Note that the OFFSHORE USD debt is "just" $10 Trillion. Compare that to the $18 Trillion US Debt (see the Debt Clock). And that is just what the BIS can find and Zulauf can estimate.
So basically ZIRP and QE pushed the USD Way Way down and now it is pushing up like a soccer ball held underwater. And all those bubbles you see rising alongside? They are blown by the Fed policy and are expanding like the nice little bubbles of nitrogen in the bloodstream of a diver who is ascending just a BIT TOO FAST. Bends are next! Good luck all.
This is what their meetings sound like:
Board Member: With interest rates at 0, all we can do is print money or not print money.
Other Board Member: Hmm... so then what shall we do to make people think we are doing something?
Board Member: Print moar money? All in favor?
Other Board Members: Aye.
Board Member: All opposed?
Other Board Members: *crickets*
Board Member: Motion passes unanimously. Fire up the presses!
when you clean the village out with your shell game, you clear out before you get strung up
when the district has gotten wind of the con, a new con appears, rince, repeat
they can't keep instigating new rounds of QE when it doesn't benefit the economy but only the cronies, so a new game will be brought in to continue the fleece
they know what they are doing, they are fleecing, whatever they can get away with, they get more brazen the more they get away with it (too big to fail showed the level of corruption (100%) in Government to allow it to happen)
Socialism is always a mistake!
The Fed spends 80% of their time on their message. Their new slogan, after trillions of debauched currency: "Oooops!"
The Large Print Giveth...and the SMALL Print taketh Away...
T. Waits
Dear Private Federal Reserve Corporation...
Thank you for admitting your incompetence... Now... How about paying back to the US Treasury the interest money profit (billions) you received for your... ahem... NON Financial services to America for the last 100+ years... and... also... Cough up an incompetence fee as a penalty clawback for failing your fiduciary responsibilities to the USA.
Then... Resign... En Masse... All Board Members Please... All Employees... and... Let the US Government print its own coin and money as the US Constitution allows and proscribes.
With No Debt Attached To It...
Then we might have some lasting peace in the world… Some real prosperity… and… Some overdue justice.
Edgey...
"now admit ??"
These sociopath pieces of shit are a private banking cabal, and they act for the benefit of their tribe.
They knew exactly what they were doing.
Quote: After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake
A mistake? That shouldn't be on the same scale as the old TV commercial of the young lady who kicks the car tire and sets off the car alarm. The owner comes along and forgives her because it was a "mistake".
All I'm saying is don't blame the poor peons who work the system BLAME those in POWER who made it and don't repeat those errors of making Latin America US OLigarchy's "no holds barred" playground.
COs then you invite the unwashed to cross the border as their economy does not cater to them but to the CARTELS
---------------
This is a another true statement. Mexico has been busted out with three Peso devaluations since the 70's. In all cases it further entrenched land ownership of the dollar emitting and holding oligarchy.
The mechanism is new Credit loans from Finance, usually created by/on Wall Street. These dollar loans ask to be paid out of the future, and when the future cannot pay, then Peso's must be devalued to acqire dollars. Enter bear raiders who can then short currencies. Bear raiders can borrow dollar credits in Wall Street to take short positions against the Peso, thus the exchange rate comes under pressure in positive feedback.
In other words, more pressure means more loans means more pressure means more shorting loans. The short positions are all taken in advance in the bear raid multi step dance. Those leading Oligarchs in Mexico and other countries are advised to shelter their assets and money in advance, and after the devaluation then to rush back in and buy up the country cheap.
This then transfers ownership away from Mexican peasants and creates a land owning capital class.
The lack of ability to create wealth from the land, then creates an underclass that has to flee. The lack of NAFTA jobs and other agreements, mean that the peasants have to flee to El-Norte. Nafta was undermined also by Finance in the China Gambit.
El- Norte also like the labor, as it can take wage arbitrage. It's great to get a blow job from Maria, while Manuel mows the grass. Its great to be the king.
When one digs and scratches at the surface, it always comes back to the rents and private capital as money. The exchange rate mechanism is another huge perversion that needs to be done away with.
I've stated here at ZH many times that money should not trade for money. There should be a third accounting unit, the bancor that allows balanced trade and blanced economies.
All of the brown people of the world are still God's creatures. All of the white people are still God's creatures.
However, tribes are extended families. Nations are extended tribes. People are evolved to live amongst their own kind. Ergo, Nation States of like peoples are the normal default position for smooth low friction human relations.
It is private banking fiance and Oligarchy that is the enemy. Invasions of third worlders is a functional output of finance credit money system. Off shoring of jobs is a functional output of private finance calling the shots. Private finance is "international" and uses the dollar as its weapon.
The dollar has been weaponized and no longer is property of the U.S. people, so U.S. citizens can no longer trade their output fairly.
All systems predicate an output.
It is easy to blame third world immigrants, but they are victims too.
In other words, the Fed gave us a "purple NIRPle".
I wonder what Trump would say on his TV show?
Before the first QE rolled out I seem to recall 80% of America was against it in surveys.
Apparently a large portion of QE is either sitting unused...
http://www.washingtonsblog.com/2013/06/81-5-of-money-created-through-qua...
or possibly missing, diverted or sent offshore...
http://www.zerohedge.com/news/2015-08-14/us-military-uses-imf-world-bank...
https://www.sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf
http://www.zerohedge.com/news/2015-08-08/when-train-wreck-no-accident#co...
Regardless, it didn't work (Problem). I'm glad to see someone in the organization that contributed to creating the upcoming disaster, again, admit it(Reaction). Although it took you 7 years to do so. Now what are they going to do to take accountability immediately, influence your counterparts immediately and contribute to those that want to correct it very soon before it purposely implodes (Current Planned Solution)?
So in sum, the vice President of the St. Louis Fed has taken a look around and discovered that in fact, not only have trillions in asset purchases not worked when it comes to creating "healthy" inflation and boosting growth in the US, these asset purchases haven't worked anywhere they've been tried.
That's because the Phillips Curve inflation/unemployment tradeoff actually does not exist and has never existed to any statistical significance, depsite the Keynesian monetarists mantra. When the fuck are economists going to get it? Price x Quantity = quantity demanded. When price rises, all else equal. quantity falls. Accordingly, there is no reason to hire more people, and even less of a reason to buy ffs! Demand is a function of (VOLUME)! Price is a monetary phenomenon. True increases in demand occurs when quantity demanded (voulume) rises at ALL PRICE LEVELS - i.e a shift in demand.
QE (and debt driven economics) has done nothing but moved economic activity along the demand curve - and the increase in supply must necessitate a decrease in price for markets to clear. Since QE is FOREVER, supply actually moves - very quickly - the other way as firms adjust (scale back) inventory - and where only the rich can afford higher prices for reduced availability of "stuff". This decreaes the cost structure of the firm, and increases their margins. They lay people off and charge a higher price for what little they have in stock.
Thisi is where the evisceration of the middle class takes place. They get nothing for their savings and pay through the nose for stuff. There is no free lunch - which is what QE tries to be - an attempt at which always comes with a price.
Stop the insanity - END the fucking FED!
I haven't read this study. Why should I, or anyone else, bother with another red herring from the Fed? Audit the Fed. Then put a silver bullet in it.
Thanks. I'll sleep better tonight knowing there was an acknowledgement of a bad decision.
Arrest them.
150k to every nan woman and child would have worked far better
Where would we be without QE ? Housing, stock ,bonds, price half what it is today. The depression contineus.
Man, there is way, way, way! too much money out in the system these days. And nobody is working for it they're just sucking it up like a sponge.
Have you seen Tiger Woods Yacht?
https://ixquick-proxy.com/do/spg/show_picture.pl?l=english&rais=https%3A...
And his friggin Jet.
https://ixquick-proxy.com/do/spg/show_picture.pl?l=english&rais=https%3A...
WTF! The guy plays golf, man. He plays with a little white ball and a stick. WTF!
Whoever is running this world is financially retarded.
Buddy of mine told me, "I get a check for $8,000 every month. I asked him, "What do you do for it?"
He say's, I own a bunch of storage places."
Thats it? You own a bunch of storage places but dont do a fucking thing and get a check for $8 grand a month. WTF! For $2000 a week I would think that you would fucking, like fucking, do something?
The boneheads at the Fed should get it over with and go negative real interest rates.Charge you for keeping money in the bank and pay you a kickback every month on your mortgage with no interest.Add a government cheque in as well,send every man,women and child 10 grand.Let Helicopter Ben handle it.Below zirp or bust!
Get ready for negative rates
What would you do if your bank charges you 2% on your deposits.
I think this will cause gold to go over $2000
You can't have negative rates without banning cash....
which they will try and fail at.
It will be a spectacle to watch the FEDs become irrelevant as they try and force everyone to use electronic money. The Black-market and Barter trade will skyrocket, state budgets will implode because no sales tax will be collected until the fuck heads at the treasury finally yell mother. Since all transactions will be off the books, no one has any income and the IRS receipts will plummet as well.
Gold fits in here somewhere but the important thing is how the FEDs actually believe that they are essential to people's lives.....they're NOT. And they will learn that the hard way.
Idiots.
End the FED.
Squid
There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation. For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target. Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation or deflation.
A Taylor-rule central banker may be convinced that lowering the central bank's nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP. With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the worldís central banks.
-----
Wow, this is amazing in its excessive stupidity-by-selective-blindness.
This dude totally fails to distinguish many crucial facts.
#1: The differences in consequences of super-low interest rates and QE when individuals, corporations and government have no debt or little debt versus super-saturated with debt. The difference is enormous in both quality, quantity and type of consequences.
#2: The differences in consequences of super-low interest rates and QE when creating enormous quantities of currency do not carry additional debt. In other words, the difference between "just printing currency that can be spent without ever being paid back" versus what happens now, where "every penny created is debt and must be paid back".
#3: The differences in consequences of super-low interest rates and QE when on a real, honest gold standard, where the stimulus is inherently real and inherently limited to savings previously accumulated by government or central bank.
#4: The differences in consequences of super-low interest rates and QE when the enormous quantities of currency created are handed to "regular folks" rather than the very bankster cronies who caused the crash and own the central bank.
#5: The differences in consequences of super-low interest rates and QE when the official measure of inflation isn't blatantly dishonest, and excludes stocks, bonds, real-estate, food, fuel and pretty much every item that would constitute "an inconvenient truth".
-----
Gads, I realize I could continue for quite a while like this. So I'll leave my rant as it stands now. But... good grief! How narrow are the blinders these disingenuous liars wear.
BTW, the fact these kinds of warnings are appearing from what pass as "mainstream authorities" is one of the most certain guarantees that the collapse is close at hand. They want to be able to say "we told you so", no matter how disingenuous such claims are (after 100 years of central banks destroying the nations that host and rely upon them).
"Down by the River" .... I shot my Banker Down.
https://www.youtube.com/watch?v=F0NjZrPX-l0
The point of Zero Interest rate imo was to increase inflation. provided that the Economic activity has real people spending. Lowering the rate should have ment also lower cost and thus more sales. By real people reaching into their wallet. Not the 1 or 2 percent of people playing in the stock market IE options. The Fed should not be in the business of saving big business if they do not know how to keep a business running. Idiots derve their fate. The lower rates hasn't lowered the prices of anything. More proof that QE was only meant to drive the stock markets. So business have absolutely no clue how to incorporate the interest rate reduction to their product line or service. IMO
All QE means is Quick and Easy for the financial sociopaths to escape paying bail, much less going to jail.
QE doesnt work? NO SHIT. You mean handing cash to all your friends each of whom have net worths in the hundreds of millions and billions of dollars does not result in economic demand and thus inflationary pressure on main street? your kidding. never would of guessed. maybe because i dont have a PhD in Economics. The fact that these thieves bother to continue trying to make it look good also surprises me. They are all common thieves and they all know it. And whats more, why do we so desparately need inflation? Thats cause the debt pyramid Ponzi scheme and the infinite budget for the pandering political class collapses without it. Shame. Nothing but shame for these common criminals.
QE was working until 2011 when the Fed did not have the guts to cut it off.
We could have had a different monetary policy and a different result.
http://michaelekelley.com/2015/03/27/the-kelley-monetary-policy-rule/
Part of the problem is the failed Fed inflation target.
http://michaelekelley.com/2015/02/11/fed-inflation-target-is-abnormal/
Here is why gold prices are so low:
http://michaelekelley.com/2015/07/20/dear-fed-plz-raise-gold-price/
http://www.zerohedge.com/news/2015-07-09/are-big-banks-using-derivatives-suppress-bullion-prices/
Here are some more signs of a coming recession.
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record...
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
http://www.zerohedge.com/news/2015-07-27/when-will-we-ever-learn/
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
A warm up for a big policy change.
We are going to negative interest rates - zero for the 30 year and minus for everything else.
This may sound stupid: But, I am about to prepay 5 years worth of real estate taxes and IRS taxes to get a credit on the taxes I will have to pay in the future. If the money stays in the bank, I will probably be levied negative interest.
This is how insane the financial world has become for people like me, who still bank surplus money and have no debt.
"This is a mistake done by the BlaackMan becuz BlaackMen always make mistakes, we cabals dont" (we only get rich, richer , richest even if we have to hijack the currency printing press)
NiggaScapegoat
Guest on Bloomberg said "economy was microwaved. It overheated and didn't taste good".
Nice anology!
...and subsequently caused cancer
re St Louis Fed Admits QE Was A mistake...
So, now that the thieves & plunderers - via the same Quanatitative Easing - have looted the store, including the fixtures & plumbing, the Fed wants to call the whole thing off - while the rest of us get to not only stare into an empty shell, but also get stuck with the mega-$trillion tab, eh?
Gee.. what's not to like about that deal?