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The Problem Explained In 110 Words
It took the Fed 7 years, countless white papers, Congressional testimonies, economist reports, and goalseeked narratives explaining why QE should work, before the St. Louis Fed finally realized and admitted one month ago that QE, in fact, does not work (which is almost as ironic as the Davos World Economic folks explaining "Why we shouldn’t borrow money from the future"... which is great if only it hadn't come some $200 trillion too late). It took the Fed only $4.5 trillion in balance sheet assets, and making the rich richer beyond their wildest dreams, to admit what we said all along.
And yet, there are still those who say keep kicking the can: if QE3 didn't work and a rate hike is now off the table, just do QE4, or NIRP, or both, or even better: just paradrop the money in - someone has to inflate the above mentioned $200 trillion in debt. Surely that will work, even if it means the beginning of the end of the "status quo" financial system and the cargo cult of neo-Keynesian economics.
Well, here is the biggest problem - or the central bankers' paradox if one wishes to call it that - and it is explained so simply even a 5 year old, aka the intellectual equivalent of a tenured economist, will get it.
... the challenge is that ongoing flow of QEs prevents rationalization of excess capacity (in turn created through the process of preceding three decades of leveraging) whilst also precluding acceleration of demand (both household and corporate), as private sector visibility declines. Hence declining velocity of money requires an ever rising level of monetary stimulus, which further depresses velocity of money, and requiring even further QEs. Also as countries compete in a diminishing pool by discounting currencies, global demand compresses, as current account surpluses in these countries rise not because of exports growing faster than imports but because imports decline faster than exports. This implies less demand for the global economy.
Incidentally, Yellen now gets it, and the moment her epiphany struck is shown on the photo below.
Source: Macquarie Research: "Equities – irrational exuberance"
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'Barack Obama' is two words.
So is 'Janet Yellen.'
And 'Ben Bernanke.'
And 'George Soros.'
So is 'Etc. Etc.'
It’s about time there was some justice! Busted bankster! David Drumm arrested in Massachusetts.
“Bailing out the failed bank that Drumm ran cost taxpayers around €30bn, close to one-fifth of Ireland’s annual output. It was seen as the heart of a banking crisis that forced Ireland itself into a 2010 international bailout. In July an Irish court sentenced three former employees of Anglo Irish Bank to between 18 and 36 months in prison, the first bankers to be jailed since the country’s financial crash.”
http://www.theguardian.com/business/2015/oct/11/banker-david-drumm-former-anglo-irish-boss-held-in-us-custody-and-faces-extradition
Now if we could only put away Jamie Dimon
it's explained much better here:
http://fofoa.blogspot.com/2014/12/global-stagnation.html
Obama will not finish his second term! Current Events Linked to Ancient Biblical Prophecy!
http://motivationdose.com/is-america-babylon/
Actually it can be said better and more intelligently and more to the point with less words:
QE would work if banks were not incented by the FED to hoard QE monies by giving them FUCKING INTEREST on it....
22 words...
one word.............FUCK USURY
Chris(tine) is always one of the boys!
I think Yellen's realization is the fact that the boys like Umpa Lumpas and not frumpy old hags.
LOL !!
that would be TWO words....
you must be an ekonomist.... hahahahahahahaha
This FRED chart I have posted will show exactly what a daunting problem the the US and the Federal Reserve is being forced to deal with. I have overlaid the Labor Force Participation Rate with M2 Velocity of Money, each beginning in 1960. M2 velocity refers to how fast money passes from one holder to the next. The labor force participation rate is a measure of the share of Americans at least 16 years old who are either employed or actively looking for work. If money demand was high, which it is not, it would be a sign of a robust economy, with the usual corresponding inflationary pressure.
As you can see, each peaked around 1997-98 and have been in slow decline ever since. Unless the Fed has a plan to increase the LFPR, people are not going to be spending money they just do not have. Demographically, this is not going to happen. Baby boomers will still be retiring at a rate of 10,000 per day and manufacturing is never coming back to the US until we are a third world country with a cheap labor force.
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1Vst
Great comment and chart.
It really is the worst of all worlds because inflation is not low. Not the bogus lowball gov't numbers anyway. Pretty sure that inflation has run at least 6-8% a year since 2009, if not higher. That has a significant impact on consumer spending.
How does that go .....Inflation on things you need ,deflation on things you already have ......
In far fewer than 110 words: "It is not wealth that is trickling down."
… Ergo, it will be blood which is trickling down.
Biflation... supply & demand working exactly as it should
But using the Hedonic yardstick of our government overlords, when you get one bowl of cornflakes out of a box that used to contain 10 bowls, you will damn well appreciate it more. Ergo, deflation not inflation.
If only the Weimar Germans had the tools available in the 1920's that our criminal overlords have today.
Using the gubment's own methods prior to voodoo economics, price inflation has been averaging around 8% since the dot-com bubble.
http://www.shadowstats.com/alternate_data/inflation-charts
Of course, the old school definition of inflation is more useful.
https://mises.org/library/what-you-should-know-about-inflation
https://wiki.mises.org/wiki/Inflation
The LFPR hasnt finished going down - women entered primarily in the mid 70's into the labor force so it went from 61 to 67 at a time when unions were at their peak (1974) and therefore manufacturing the strongest and needed new supply and office work changed to computer heavy focus - with TPP in place the white collar will be dramatically affected as H-1b restrictions are reduced, local rules are changed under the Tribunals and manufacturing continues it downward trajectory
velocity fo money today is not the same as in the 60 - By early 80's LBO's came on big - and garnered increasing allocation of bank financing - accelerated in the 90's - before 1982 the average Fortune 500 leverage was much less than 30%. Loans went for real tangible investment rather than financing intangible goodwill consolidations
so the velocity ratios today are much lower than they appear as applied to tangibles - i dont think they can get the velocity higher even with NIRP
The future will be very difficult
Very astute comment, but USA manufacturing has to be brought back whether anyone likes it or not. We are on the precipice of World War Three and the good old US of A is woefully unprepared in terms of their manufacturing base. Instead of helicopter drops of cash into the lowest level of the populous we should invest wholesale into major manufacturing installations in all US states, and CANADA too. There is literally no other way to proceed in order to infuse a floundering regional economy with the needed infrastructure to maintain some semblance of middle class economic fundamentals. Honest banking, full employment, no usury, or we will all perish slowly but surely. In brief, end the FED, and end TBTF.
Just how will we bring manufacturing back to this country? We can't force companies to build/manufacture in this country. If we get to the point where we can, we won't like the country we're living in.
Incentivise through taxation breaks to manufacturers that build within America. Disallow stock buybacks and force manufacturers to invest in re-tooling, infrastructure, and labour. In brief, rebuild from the ground up all over again, that's how.
Hitler would approve of your plan.
it's explained much better here:
http://fofoa.blogspot.com/2014/12/global-stagnation.html
A little longer than 110 words, too.
well duh, I said "explained much better". OF course there's more words. I'd recomend that those who dont like logic, many words, common sense, and a lack of conspiratard stuff stay away.
Calm down; I was just offering a 'heads up'.
Oh, and btw... Occam's razor.
Buckaroo Banzai wins.
I read until he started quoting Summers, Greenspan and Krugman. Thanks, but I've had enough of their bullshit economic theories and pathetic explanations on topics like interest rates, employment and inflation.
who's un calm?
Ahh...unable to read something you don't like...the hallmark of an open mind and a student searching for answers as opposed to a mind already made up.
What are you talking about? I've read hundreds and maybe even thousands of quotes from those worthless fuckers.
Open mind? How about seperating the lies, deception and bullshit those guys spew from the actual truth?
Who are "those guys"??
wtf are you talking about?
Fofoa is one person.
Summers, Greenspan and Krugman's logic got us to where we are. I do not blame BoP for being skeptical. At least Greenspan knew the value of gold at one point. Otherwise, those folks enabled the rape of the world.
110 words?? How about four words:
Race.
To.
The.
Bottom.
I grow potatos, you catch fish. We trade our excess product and both eat chowder. Bankers starve.
Nice. I will peel and scale, happily, if you decide it is worth your while to include me in on the chowder. I also grow lots of herbs and some veg which would be good in the stew and would love to compost the remains of the fish and peels for my garden if you are not using it for your garden.
I would gladly sit and supervise. Why, my elucidatory elocution and pontification has caused many a long tedious day to pass with frivolous rapidity.
You would be fun to have to dinner, just because...some folks really are that good as company!
XOXOX smooch XOXOX
Looks like Yellen is suffering penis envy... vis a vis Lagarde. Or maybe it's just another stroke.
he said penis... ehe hehe ehehe hehehehe
yeah, ehehe... and stroke... ehe hehehe hehehehehe.
Psst...not the kind of stroke you want for your penis.
It's nothing to do with QE she just let one rip thinking it would be silent but alas no, the thunderous boom for her arse sent the others into fits of laughter.
Farting. Is that how she gets ready to print?
"Macquarie" - isn't that a liqueur?
no, i think it's a stupid yuppie dance.
Anybody seen this yet?
The Mujahedeen e-Khalq (MEK): The US Prepares to Back a New Terrorist Army in Iran, Prelude to a Wider War?
http://www.globalresearch.ca/the-mujahedeen-e-khalq-mek-the-us-prepares-...
My jaw is getting tired of dropping.
Jack Lew serving as US Treasury Sec. is an absolute embarrassment. He's a career political operative.
And JL is not brown or female... so how the hell did he become BO's Treasury Sec.? I thought Biden was the token whitey..., so maybe JB is the token WASP and JL is the token Jew? I guess that make sense in Obama's bizarro world...
http://www.nytimes.com/2015/10/11/opinion/sunday/the-unlucky-millions-pa...
Yes we can!
Let's check out the global consumer:
1) The once wealthy Western consumer has had all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.
2) Japanese consumers have been living in a stagnant economy for decades.
3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.
4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.
5) South American and African consumers are busy struggling with economies that are disintegrating fast.
No wonder demand is collapsing.i bet if she showed a little more cleavage .......................no................who the fuck am i kidding with this one
https://thinkpatriot.wordpress.com/2015/10/11/the-wrong-question-as-usual/
Human thought as a guide to action does not seem to me a reliable tool, economics is an example. AI will not help, contrary to hopes and fears.
"...declining velocity of money requires an ever rising level of monetary stimulus, which further depresses velocity of money, and requiring even further QEs.
Here, i give you shorter version:
1. You print fiat money. Which doesn't have collateral.
2. Without collaterals + continues printing, the normal family wages go down, and inflation up.
3. This decrease family puchase power.
4. That creates less demands.
5. Which makes factories cuts jobs.
6. That's even lessen purchasing power more.
7. Govt panic. And their solution? Prints even more fiat money.
8. Go to point 1.
Read & Learns...
Oddly enough, for those of us who listen to "Mad Max" aka Max Keiser on his various shows over time, we have been treated since well before 2008 to a front row seat at financial fraud across the globe. To say that before 2008 Max had figured out what was going on is an understatement. He called bullshit on financial engineering, the housing bubbles and all the rest.
As time goes by, Max is being proven right when he long ago said QE would cause defaltion. The more QE the more deflationary pressure. Monetary Policy, as Max says, can not fix broken corrupt economies who have been stripped of productive enterprise, and been replaced with "Toll Booth" economics.
Every jack ass in the world is looking for a way to set up a "toll booth" on some thing or other in order to skim the economic wealth of others. Banks, Big Trading Houses, Hedge Funds, and the smaller players, they all believe in "Toll Booth" economics. That is what HFT is, nothing but a set of electronic fucking "Toll Booths"! You can not be a market participant without going through the HFT boy's "Toll Booths".
In Ireland, a "Toll Booth" was set up on water! This model is spreading like wildfire. "Skimming" wealth is attracting the greatest minds in science and economic to combine to "Skim" the world's wealth, and hold markets hostage to their math formulas.
There are greedy, useless cunts. Their economics produces no wealth. It only skims it, transfers it, and makes ordinary people pay more for everything they need or want.
Uber is ultimate reflection of rents as business model -
the APP could just as easy be owned by coop of drivers and ratherthan 30-35% going to Uber as their share could be transaction fee of $1.50 and all the rest go to the drivers and equipment owners.
there is virtually NO cost change / overhead as volume changes once a market is established - all automated
it is the biggest rip off in history - you could run the entire market with less than 100 people
Dr. Paul Craig Roberts,the former Assistant US Treasury Secretary under The Reagan Administration gives an interview to King World News.Many of the leaders today in Washington's vassals or puppet states are NeoConservatives which are a direct threat to peace and world order.He has a new book out on the subject.As we all know,NeoConservative-ism is the small step above NeoNazism.The threats posed to the world order is through partnership with its vassal states headed by Washington NEOCONS following the US Wolfowitz Doctrine for the US to be the global hegemony cop on the beat in order to create endless war.
http://kingworldnews.com/dr-paul-craig-roberts-broadcast-interview-avail...
I just read above about the MEK. The next US proxy terrorist army to use in Iran.
I would think that admitting such plans before Congress would be seen as a conspiracy to commit crimes against humanity. Oh I forgot, it's the U.S. Never mind.
printing money to give to the .1% doesn't float all boats. giving money to the bottom 50% is bad freeloading so that is off the table even though it would work using the same model.