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The QE End-Game Decision Tree: Not "If" But "When" Central Banks Lose Control
Make no mistake, the writing has been on the wall for quite some time and we haven't been shy about pointing it out.
Central banks are losing control.
Trillions upon trillions in post-crisis asset purchases haven’t given the global economy the defibrillator shock the world’s central planners were depending on to bring about a sustained and robust recovery.
Indeed, the opposite appears to have materialized.
Subdued demand and trade looks to have become structural and endemic rather than cyclical and rather than create "healthy inflation", seven years of accommodative monetary policy has only served to bury the world in a global deflationary supply glut. And that’s just the big picture. The more granular we get, the more apparent it is that central banks are no longer in the driver's seat.
Inflation expectations across the eurozone have collapsed despite Mario Draghi’s best efforts to assure the public that PSPP has been an overwhelming success and similarly, inflation expectations have tumbled in the US ahead of a expected rate hike which looks less likely by the day. Meanwhile, in Sweden, the Riksbank has sucked so much high quality collateral from the system that QE has actually reversed itself, giving the world its first look at what happens when QE demonstrably fails. And let’s not forget Japan, where the world’s most hilariously absurd example of central bankers gone stark raving mad has done exactly nothing to pull the country out of the deflationary doldrums.
And so here we stand, on the precipice of crisis with central banks having run out of both ammunition and credibility. In short, it’s time to ask if central banks have officially lost control. For the answer, and for the "QE end-game decision tree", we go to BNP.
Note that if CB's do lose it, the likely scenario is: "deflation, vicious cycle... economic depression".
* * *
From BNP
Not "IF" but "WHEN central banks lose control?"
The global financial repression pushed investors to invest cash in risky assets, such as property and equity. The scale of global policy interventions is trumping all fundamental factors for now. Investors should keep in mind that the road is never straight and next month should be full of potentially disruptive events impacting sharply overcrowded assets and trades. History shows that such misallocation of resources creates bubbles that can last before fully blowing; the question is not if, but when.
Risk assets and risk parameters would be massively affected in the event central banks lose control; in the meantime, EDS Asia believes that central bank maturities that use forward guidance matter more than the QE process itself. The Fed and the ECB have been providing guidance which partly explains the low short-term volatility. The BoJ is moving toward this behaviour, managing the news flow: therefore there is a case for the NKY index going up slowly with a lower upfront volatility and a term structure closer to the US one: in that sense, we have started to observe an "SPX-isation of the NKY Index" in the past few months before this summer’s risk-off, as short dated volatility was trading lower. In China, the PBoC intervention learning curve is steep; this is the reason we believe the next equity leg up will be accompanied by an elevated volatility regime.
The quantitative easing started in the US more than six years ago and the SPX index, as well as selective risky assets, are now hovering at the high end of their valuation histories. Recent price actions are testimony of the fragility of imbalances built over the years. Investors may recall the Japan easing experience in 2005 and 2006; an early exit, together with a global financial crisis, caused a Japanese equities meltdown (between mid-2007 and late-2008).
In the decision tree, EDS Asia addresses the potential "QE end-game scenarios" [attempting to] answer the question "Are central banks losing control?" and providing a time horizon and probabilities affecting each path, which should allow investors to get a clearer overview.
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Quantitative alternative reality Easing...eat fiction....sleep the american dream...drink happiness.....zzz http://www.philiacband.com/propaganda.html
Taleb would get a good laugh from this abuse of statistics. I think its rather funny too.
[Trillions upon trillions in post-crisis asset purchases haven’t given the global economy the defibrillator shock the world’s central planners were depending on to bring about a sustained and robust recovery.]
I think this whole QE thang was just a scam from the git go. I think the central bank planners know full well that the economy was the walking dead and would never recover. I suspect that this whole ploy was to buy time to prepare for civil unrest. To gear up the goon defenders of the barbaric status quo and it's elite directors. The sickening wealth transfers are just a nice by product.
Pure and simple, we've been had...
;-D
I do believe you nailed it sir!
Let's examine it at a very simple level, because there really is no need to look for complicated answers.
Dental banks created money and used that new money to purchase real assets. It is nothing but full daylight robbery.
Well it's not the banks only, it was primarily the fed. Money printing never actually solves anything, just creates boom and bust cycles. QE is just a form of money printing in which we did not see the mechanism of biting back on our ass for a while. With helicopter money, money printing the mechanism is simple. More money chases the same amount of goods causing an inflation. The QE mechanism of money printing where money printed is distributed only to the very wealthy causing inflation in the assets being chased (art, financial products, most importantly BONDS) has a different effect. By having all this free to borrow money, investors do not need to invest into actual business to get wealthier. You just need to buy more stocks for your personnal wealth effect to occur. The real bussines through which the money should be created dies. This causes greater inequality in income and wealth and causes the bottom not to be able to buy many things they used to. This leads to lower demand causing a deflation. Deflation causes the stocks earnings to fall. And this is where we have a hole boom and bust cycle end with another bust of overpriced stocks and depressed economy.
Each Fed QE is larger.
By QE7 maybe $500 billion/month?
Debt goes infinite.
Look at the chart.
Run away debt and a currency failure.
Risky assets, such as property.
B.S.
Muh head is a coin.
Are there any alternative economic models that ZH advocates? A lot of people believe we need to go back to the gold standard, but it doesn't appear there's enough physical gold to support the size of the global economy. There is Modern Monetary Theory (MMT), which capitalises on the fiat system in a way that removes 'private' central banking and the selling of government debt so that sovereign nations just create what stimulus they need and direct it to essential social and other services. Do you guys push any solutions to this banking tyranny?
Do NOT up arrow your own comment on a new thread. It is too obvious. You are new here, so I won't be too hard on your moronic comment about gold. Know this - there is plenty of gold, it is merely the price that has to adjust. Simple. Think about it.
Not enought gold" Fuck me come up with something new for fucks sake.
if a human is involved. he or she would fuck it up(game it for wealth advantage)anyways.
it is hopeless. enjoy your fiat flame out, soon to be replaced by what? another cb scheme to fuck the masses. gold or fractions of gold could anchor a legitimate money system, but it will never happen. and if it did ,theyd fuck with the ratios when they overspend to placate the freeloaders.
fucking hopeless without a purge and reset of the mindset and billions less useless eaters, ha lol...
I'm just asking questions with a genuine interest in hearing other points of view. I do hear you, but what evidence is there that this is the way to evolve our social systems? Seems to me a lot of people have financial investment in gold, hence obstructing their vision.
Seems to me a lot of people have financial investment in paper, hence obstructing their vision.
Seems to me a lot of people... talk their book. And their dreams
Some people assemble their "book" in a way that it winds up as an expression of their ethics. Then they can talk their book, avoiding contradictions.
You must be new here. How about a free market for money? People can use Gold and/or Bitcoin, or any other freely chosen unit.
"A lot of people believe we need to go back to the gold standard, but it doesn't appear there's enough physical gold to support the size of the global economy."
There is always enough Gold, at the right price. You've been brainwashed. We don't need a perpetually expanding currency system. It's a myth. Guess who benefits from pushing this old myth?
Always enough PM's. Just need to value them properly, I.e. $2000/gram vs. $2000/ounce.
What is "the fucking banksters", Alex?
I like the sound of that. Return to sustainable models and practices, not just for huamnity's health, but the earth too. In terms of the free market though, it didn't work the first time, so what makes you think it'll work the next time round? People will always organise to consolidate power if we have a system that allows it. For the record too, we've all been brainwashed ;)
"In terms of the free market though, it didn't work the first time, so what makes you think it'll work the next time round?"
Johnny Bravo? Is that you?
The pretend free market didn't work. It wasn't supposed to.
No it's just me, wheres the solutions. Thats my point WS, the whole concept of a free market is an illusion. It will always manifest in ways that it has now, so to me it makes sense to remove the opportunity for the system to be manipulated and corrupted in the first place.
We've been had. Its a bot.
WOW 3 days and 16 hours on ZH and you are making these kinds of statements. Hummmmmmm I wonder which side of the tracks you are from?
I do so love it, how the newbiez are ... well ... jejeune but also have "hours" on their longevity.
I just have a genuine interest in what the general position is at ZH. I've been reading for a while, but haven't come across any revolutionary ideas on how to move forward for humanity. The way we economise our society is so integral to our future, which is why I thought I'd open the floor to hear what you guys have to say. So far though, I'm a little disappointed in not just the lack of vision, but also the unnecessary attacks. We're adults, not children.
Solved problems do not require revolutionary solutions. Fiat was the revolutionary solution to the problem of how to bribe a populace with their own money while imperceptibly stealing most of it - an important political problem, to be sure.
That said, the fundamental problem here is that every system of governance is corrupted by the entrusted humans. Blockchain technology solves that on a technical level, even better than Gold, which is governed by physics and engineering.
The even more fundamental problem is governmental, and results from branching factor. How many effective machines do you know that have more than a million joins at a single interface? Or even more than 10? Christmas lights are the only thing I can think of at present. But millions or hundreds of millions of voters can be simply pooled together to form effective governance? Nonsense!
For such a compound decision, every piece must have a relevant local action. Picking your preferred party of two is neither relevant in selecting which party (my vote doesn't really matter) nor relevant even if the party is swapped (they’re both the same). Solutions should now be obvious.
Thanks for your (decent) comment Lamarth. So Bitcoin and local governance? Not sure if that will deal with rogue groups who form with advanced technology to insitute their own tyranny though.
Well, welcome to fight club kid. Embrace the down arrows as you learn.
First of all, there are no solutions. We've opened the box, and Schrodingers cat is dead. The stock market is finished. There's so much innate corruption in the system, trying to fix it is like going on a vegan diet instead of getting a triple coronary bypass.
In short, just read my name. Cut out the heart of the current system, one way or another (stop paying taxes, go Galt, kill the fuckers, etc). It's not a solution, but it does get rid of the problem.
lol thanks WOAR. To be honest though, down arrows and childsplay doesn't bother me. I am just here for exactly that, to learn.
Well, revolution might work well if people could get theiur shot together already and organise it, but replace it with what? Personally, I feel that removing money altogether and implementing a resource-based economy, or something to that effect, appears as the best long-term solution. That's why I'm interested in what's going on here, as we need some interim solutions too. As mentioned in my original comment, MMT seems a good way to remove the banksters and ensure essential social services are met, but I'm certainly open to suggestions.
A centrally planned, resource-based economy maintained by a strong (probably authoritarian) central government is basically the opposite of what most people here believe is the best long-term solution. I mean.. we might end up there but it's definitely nothing we should be striving for. What you don't take into account is at the heart of men of great power is not the same as what's in your young, naive heart, because that's not how you get powerful. Therefore, the only acceptable solution is a complete decentralization of power, as decentralized as is absolutely possible, so that no man or group of men is able to conspire against the rest of us because of their relative positions among us.
Put down the hash pipe and turn off the Beatles 1st album.
" so that sovereign nations just create what stimulus they need and direct it to essential social and other services."
This is what the neo Bolsheviks have done for the past 25 years. Hopw does the $18 trillion of unsustainable debt sound to you? Like a fuckin' solution ?!
You stoopid fuck. MMT is simply Alinsky translated into a Fed Gov't centric ponzi scheme.
So STFU and read more.
Why so hostile? So many of you appear to be angry, bitter people. How's that working for you? I'm just asking questions. In terms of debt, why can't it be written off so that debt is no longer part of the equation? Why can't community based central banks generate what's needed depending on their lcoal circumstances?
One man's debt is another man's collateral. You can't just "write off debt" without causing a domino effect of asset destruction. The minute you do that, the system collapses. Either the government (the FED, in reality) starts printing money to cover the destruction of the assets (creating hyperinflation), or the assets are allowed to depreciate, causing a deflationary collapse (goods become super cheap, and it's suddenly not worth it to make a product...so businesses that depend on the FLOW of an economy go out of business - steel production, motors, tools, anything with actual value).
The reason people are bitter here is because we see these two paths, and realize that they are the only logical ends to our economy. So we drink, smack talk, and get depressed together like an old biker gang, full of old farts that are to old to ever actually do anything, but smart enough to know what should be done.
Fucking let the system fail. The faster the fall, the sooner the recovery.
Nailed it. The two things I'm not sure of though. First, what about QE for the People? Steve Keen has developed a good model. The other one is if the system fails, doesn't that just consolidate more power for the empire? Seems we'd be proper fucked then.
A single ounce of gold could support the world economy because it's divisible down to the molecular level. At present, Hugo Salinas Price points out that one US dollar isn't worth more than a flyspeck of gold.
QE Flow Chart.
http://ciovaccocapital.com/videos/qe/quantativeeasingflowchart.html
"healthy inflation"
As if there is such a thing. The idea that constant inflation is a good thing is what's wrong. And, the bankers don't want inflation - they want this deflation to occur so they can get MORE assets at pennies on the dollar.
Inflation is friend of the debtor, enemy of the saver. And note everyone pulling the levers is a debtor; deflation takes away sovereign 'policy tools' (read: scams) to slither from liabilities.
It is why the Keynesian clowns love their inflation circuses; their fatal conceit not understanding that supply and demand applies to everything - including their precious fiat trinkets.
dat true, but, well, dat not d'Zeitgeist.
Dupe
One more chart.
Presenting Never-Ending QE In One EasyFlowchart | Retirement ...
QE to infinity is the Federal Reserve's only plan now.
It's larger QEs each time until the US dollar crashes.
There's a 100% certainty of QE 4.
QE4 will be much larger than QE3.
And....US and Europe will need more non white refugees...because "its for the children" ... and also for the Banksters and their lackey politicians...
over run by rats, fucking rats. shit holes for eyes and fucked up stupid is what iv'e encountered (and i'm putting it mild). sub human fucks speading there beliefs, having moar childern than they can afford and back to the caveman era of thinking. fucking culdron boiling over the top,;its gonna get interesting real soon...
and i see so many people putting up with this shit, ya know the politically correct crap.
just observing, just saying...
plez, darwin, come to our resue, ha lol...
So, if QE4 happens, what does China do? QE drives up the price of Treasuries, and China desperately needs cash. Will China sell more at the artificially high price? All that selling puts upwards pressure on yields. Do the two balance each other out? Does that mean that QE4 just helps us run in place? The Fed buys but cannot sell...until selling must be done. Sounds like the perfect buy high/sell low strategy to me. Way to go bankers. Y'all smaat.
the real war is the feds balance stmnt...
At some point, QE will not "drive up" the price of treasuries.
I wish we could wait for a while.
Step 1. Steal underpants.
Step 2. ( etc... )
Control will probably be lost when of of the larger central banks completely loses market confidence. (Japan)This is why I'm so worried about the global shadow banking system.
It will start a cascade event, where short term credit will be un-obtainable or extremely expensive. The swaps markets will seize-up.
The cash market spreads will widen so, s/t cove-lite, money market, HYG will get hammered.
Does anyone have any insight as to why spot gold in Venezuelan Bolivars is not increasing with the hyperinflation?
Gold in the Brazillian Real is surging, but in Venezuela at 800% inflation Gold is limp-dick.
I am a "gold bug" by the way... This is creepy shit. Am I missing something??
Look at the chart:
https://www.goldbroker.com/charts/gold-price/vef
Papi:
Do you have any indication that this is a functioning market? Or is it totally shut down.
Since the market in physical toilet paper is shut down in Venz, I have my suspicions. ;-)
- Ned
Spot is digital paper, right? You can't even wipe your ass with it. I get that, but there are daily and nano-second fluctuations to the spot price there. It's "functioning" but makes no fucking sense...
Any ideas?
premiums are your best indicator of real actual supply...
No one in their right mind is going to give you gold for that crap. Why bother putting a price on it.
Maybe because Venezuelan's are more concerned about acquiring food, water, and toilet paper at the moment? If/when their economy stabilizes gold prices will probably be unreachable in whatever currency they adopt... unless of course that currency were actually money (ie; gold/silver).
What your saying is true for the poor there, but what about the wealthy? How are they preserving their wealth during the hyperinflation?
All Venezuelans own stacks of gold. Don't you remember Chavez parading the "countries" hoard through the streets of Caracas? Yea they'll be fine down there
Bitcoin on localbitcoin site for Caracas is bid at 123 with funds to be paid through the national bank if I understand the site correctly.
I did not see any asks.
If one can smuggle some cash into Venz one could double it with ease.
The reason I looked is because I met a fugitive Monday night. He comes froma wealthy family, and was kidnapped twice by the police for ransom.
He would like to get some money from his parents stash, but does not know how.
I figure that bit coin is not the way to go for his non tech parents.
Safest way would be for him to pair with someone who wants to send money in. They could give the money to him, while on the other end his parents give money to the recipients, while the transaction is observed by skype.
There would not be 30MM illeagals in the US or the ilegal problem in Europe without ZIRP and QE policies and $18Trillon in debt.
So... who was behind those policies and flaunting of the standinh illegal immigration laws ?
clown, your question answers itself. Have another hit.
No I didn't. You did. Thanks.
As the Central Banks create a larger divide between those with a direct mainline hit from the Central Banks, driving up their portfolios, the other 99% are encouraged to borrow more from the bankers in order to chase assets or at the very least afford a place to live. The situation has morphed over the last 40 years by bringing everything into a myopic immediate gratification / numbed society that has found the debt they took on is now due and there is no ability to move it forward, pay it down, or print money (the bankers and their brethern get to do this) to pay it off. The future of paying off debt and not having the ability to do so is here and now. All of the derivatives in the world are a bet on the future being brought forward through leverage. We are now at the point where there are no more options without exposing the Ponzi scheme for what it has been. The Central Bankers have played the game well, but what happens when the 99% want their money?
War.
Get right with God. John 3:16
Which of the 7 billion self-projected, self-delusional, fearful, angry, jealous, tribal, genocidal, ecocidal, desert sky gods might that be?
BTW, J_ws' tribal desert sky god is not the so-called "Christians'" sky god. In fact, J_ws are contemptuous of your peasant, anti-imperial, anti-establishment, rabble-rousing rabbi; he's not their Moshiach, who will take the throne at The Temple in Jerusalem (or is it Wall St. and The City, the New Jerusalem) and rule by Halakhah over non-J_ws in the Olam Ha-Ba.
"The basis of J_d_ism is self-interest, practical need. The religion of J_ws is huckstering. The god of the J_ws is money."
-- Karl Marx "The J_w_sh Question" (1843)
Which god?
One can only consider the banksters "losing control" if they cannot profit on the way down as they did on the way up.
I.e. the game now afoot is the re-engineering of their schemes and grifts so as to profit on the way down as they have on the way up.
Plan accordingly.
Zion is a scheme, not an ethnicity.
The current system "$USD" must perpetually expand or it will collapse. This is a design feature of money per the FED document "Modern Monetary Mechanics. The system was well geared to a reality of ever expanding energy and resources per person (Whites Law) C=ET.
The reality is changing, Energy and other necessary human life support resources cannot expand at the same rate as the expansion of the monetery system due to physical limits.
This is the bubble that is bursting, It is not speculative such as tulip mania, though there is a bit of that going about. It is reality.
As for the When, I predict it will be recorded in future history as Monday 09/21/2015.
9/21/2015? Fuck me! I gotta goouu...
There is absolutely no substitute for "the consumer". duh
On a long enough time line, there is no substitute for the producer.
There fixed it for you.
Where have I heard that phrase before? Its not if but when....I think I have heard it a thousand times for the last several decades...
The Fed has never been in control, wal*street is in control.
The Fed figured that they would bump up the economy by bumping up the markets but wal*street stole all the money.
Now when the Fed even hints about interest, wal*street simply moves the money around and crashes the markets little guys which scares the hell out of the Fed and around and arouns we go.
It's ok with me though cause I'm luvin the free money too.
It's just too funny sitting on a fence and watching the parade of fools still dreaming about getting loans and buying stupid shit.
"Watching the parade of fools still dreaming about getting loans and buying stupid shit."
Nice summary, + 1 from me.
The Fed is Wall Street.
I understand trying to strategize moves through optic placement, and grids/charts.
The assclowns at bank and insurance companiess that draw scenarios on charts are overthinking themselves.
JFC that schematic "decision tree 2" looks like some retarded rendition of how a bunch of "Middle Schoolers",
might complain about Obama lunches to their mothers working 3 part time jobs at [fast food joints] to support their " baby dady" family!
I'm retarded... Tyler just posted how to have a family of (4) on .gov .
Daddy buys cheap house, and Mama daddy stands in weflare line for Zero Phone, Zero Care, Section 8, Snaps ect...
This is not about cute little charts and graphs and data points; it is about behavioral economics. The Fed is 100% successful if the masses just believe in them. If their omnipotence illusion can be maintained the Dow would likely hit 20K on a QE4 announcement. It is their worry that the lemmings are losing faith that is causing them to talk about some phony 25bps hike. "Everything must be great if the Fed is raising rates!" Now they are really backed into a corner, they cannot change their minds and suddenly announce no hike and QE4 instead. Sure, there would be a big pop for about an hour, then a plunge. It would be a total admission their forecasts are wrong and we are in big trouble. It would be admitting there is nothing without perpetual intervention (ala Japan).
It appears we are already there…no way back and no way out. Once the panic selling starts, more QE will not stop it. China has warned Janet any rate hikes will just accelerate the final collapse and cause riots in China. The entire world’s economies have been dependent upon U.S. consumers and their debt. We convinced China more than two decades ago to embrace a free market economy, only we forgot to mention the downside. All they ever saw was up and up. Reality bites…
"It don't go down..."
"No it do go down!!!"
https://vid.me/e/InaK
How can they lose control? Hello? Explain please
Margin Call - Fire sale
https://www.youtube.com/watch?v=v4P4cS5jKmQ
https://www.youtube.com/watch?v=3nlQWRjBzcE = Done. Gone. Margin Call
I went long a gold ETF because I see yesterday's drop as a bear trap for the upcoming BS finale of the bull rally, fueled by "someone important" hinting via Twitter they have come to a vague realization that another round of QE is not completely removed from the deck.... these Twitter words will create the retail-investor rally and sucker them into a potential retest of the highs.
70 trillion in derivatives acording to BIS. Banks own the fed(?) system is rigged, companies worthing 700 billion, yields below zero, nowhere to put the money, so it goes to stocks, the masons and others, ufffff
Copper is more appealing to buy. Go long on it
OMG....we are so fucked! Let the Sheeple sleep peacefully.
Oh Jesus Christ. They are not losing control. We could have a 50% or worse shakeout in the market... fuck, it could drop to ZERO, and the same pack of douchebags are going to be running the show. The deep state is undefeatable at this moment in history.
Oh Jesus Christ. They are not losing control. We could have a 50% or worse shakeout in the market... fuck, it could drop to ZERO, and the same pack of douchebags are going to be running the show. The deep state is undefeatable at this moment in history.
QE to infinity baby!
Each ever-larger QEs.
QE4, QE5, QE6 ........ QE dollar is crushed.
Blah blah blah blah blah... crash... blah blah... so WHEN. WHEN. 6 years going on about this. Make us all instant billionaires and stop rehashing the obvious and just say WHEN.
SMH.
In 2006 there were many warnings that the system was overextended and eventually one small bank would fail and all hell would break loose. Then Bear Stearns collapsed and here we are. The new warning for the (not so distant) future should be: The system is overextended and eventually a small country Central Bank will implode and all hell will break loose.
Listen
The last President before DHS Martial law is put into effect will be King. The last example of this is Putin; he is in effect King.
Obama may very well be "King"; he has said as much. There is a struggle between Obama and the Clinton's and remember the Bush & Clinton families are very close.
The financial collapse is orchestrated by Obama via huge debt burdens; he tears down our allies (Egypt, Syria & Libya) and builds up our friends (Iran, Cuba) and cause division among the people and among authorities (i.e. police). He names a Naval vessel after Caesar Chavez (Google it) and renames Mt McKinley (one who opposed sound money) and renames it Denali (the Great One), Ego?. We are in the 9th inning and when the collapse occurs; it will be either preceded of directly after a major catastrophe that will make 9/11 & Katrina combined look small. Why open relation with Cuba, they can have "boots on the ground" within hours and they won't care about murdering US Citizens; meanwhile our Military is spread all over the world.
This is what is likely to come, but the Clinton's want that as well...this is bad for all of U.S..
Anyone who believes Central Bank economic forecasts is a bear of very little brain, whose opinion is too loosely based to have any coherent direction.
Anyone who realizes Central Bank forecasts are nothing but a collective faith activity, or a fraud if you will, realizes that the Central Banks were never truly in control, and hence cannot have lost it.
No. The function of Central Banks is to clip coins for some lucky recipient, whether banker or government, or both.