Bernanke's Dilemma: How US Corporations Became Addicted To Endless QE

Tyler Durden's picture

While many argue that corporate profitability in the US knows no bounds as cost-cutting amid 'slow' growth will fill the gap, we offer this quite compellingly nerve-jangling chart of the increasing dependence of S&P non-financial operating profits and the weakness of the US Dollar. The negative correlation between macro-level EPS and the U.S. dollar is both theoretically and empirically clear. As Citi points out, profits earned abroad are reported in depreciating or appreciating terms, boosting or reducing profits; and as the negative correlation between the USD and global growth can result in 'double counting' of earnings influences  - this leads to too much hope at 'turning points'.

What is more critical is the trend higher in the USD - whether due to EUR break-up fears and safe-haven flows OR courtesy of Draghi's EUR weakening QE/LTRO promises - is tending to push Bernanke's hand to act to weaken the USD (do NEW QE) to 'strengthen' corporate profits and the economy. However, with inflation-expectations now high and macro data stabilizing, his justification is far from clear - no matter how high the hopes and dreams have become.

Without the Fed's NEW QE, the Q4 hockey-stick of hope in earnings is finished thanks to implicit USD strength. The irony us that time inflation is supply constrained - due to food limitations (global warming notwithstanding) - and adding QE 'demand' to that fire will only have potentialy violent repurcussions.


US corporate profitability has become increasingly dependent on USD weakness (implied by the Fed's QE actions)...


and as US macro surprises remain weak but have tended to stabilize/improve recently...


It seems like a much tougher call from the Fed to plunk down another $500billion at this time.

Source: Citi

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glenlloyd's picture

but at some point 'plunk it down' they must....but when!

slewie the pi-rat's picture

when dodd/frank gets repealed;  till then the FED is charged with stabilizing the financial and credit sytem

and keeping the checks in the mail

so that is what they are doing and it doesn't take too much QE at this point

repubs may adopt the slewiePlankTM  so Yay!

Legalize Competing Currencies
By: Dr. Ron Paul, U.S. Congressman

:> They should be free to use gold, silver, or other currencies with no legal restrictions or punitive taxation standing in the way. Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.  <:

LMAOLORI's picture



"slewie the pi-rat when dodd/frank gets repealed;  till then the FED is charged with stabilizing the financial and credit sytem

and keeping the checks in the mail"


and keeping obama in office romney said he would get rid of ben


The Rising Stock Market Could Get Obama Reelected

Romney Opposes New Stimulus Measures

Romney looks to give Bernanke the boot

kridkrid's picture

It's all just theatrics. None of it is real.

slewie the pi-rat's picture

mittens has to win the election first, i believe...

put theGoogle on:>  FED's new responsibilities under dodd/frank

this has been the bankstering law for 2 years

wake up
smell coffee

mittens is a neoCon and wants to revert to the daze of hankyPanky;  the R's don't like the chairsatan b/c he isn't stimulating enough (imo)

lQ^Qk at the "earnings"!  daBoyz want moMoneyHoney

i am simple stating the FED's current job description onder dodd/frank:

  1. systemic stability (many new regulatory powers to FED)
  2. funding the Treasuries' needs (the checks are in the mail)

this is so fuking simple even even republicans can understand it!  even tyler!  (who is certainly not partisan but needZ money from aliens if he can get it...)  L0L!!!

HedgeHammer's picture

You know Bernakle is going to do it either way.


HD's picture

QE is already priced in. Ben needs to print just to hold this level let alone advance the ball. Not that it will matter - he can't print jobs or create demand. All TPTB can hope is consumers lose their minds and go on a wild debt spree.

Good luck with that.

donsluck's picture

But debt is not forthcoming to those without stellar credit, who are repulsed by debt. Winter is coming.

sbenard's picture

When Bubbles Bernanke declared in his WSJ op ed that he considered asset bubbles to be good by creating a "wealth effect", he tipped his hand. He has since created an environment in which no risk is recognized. He has created an entire CULTURE of ignoring risk in the financial markets. All it really does is create an environment in which, when risk suddenly comes back to center stage like an elephant on a rampage, the sell-off and the impact will be breathtakingly destructive! Imagine the counter-party risk when that moment arrives!

But isn't there a term that describes an asset that continues to go higher and higher without regard for news, data, fundamentals, technicals, analysis, or reality? Ah yes, we call that a bubble! And has there ever been a bubble that didn't eventually pop with catastrophic consequences?

We have a modern-day Tulipmania, hand created by no other than the Chairsatan himself, Bubbles Bernanke. It's STOCKMANIA! It's Wall St having a Pollyanna Party! It's the very definition of a bubble!

Bernanke is the Bubble creator. He even boasts about it! I say pop HIS bubble and fire him!

LMAOLORI's picture



"sbenard When Bubbles Bernanke declared in his WSJ op ed that he considered asset bubbles to be good by creating a "wealth effect", he tipped his hand."


He sure did that's Marx's Theory of Reflexivity that's why he and obama get along so well banana ben's been channeling Marx a lot lately like the Happiness Hopium

"Federal Reserve Chief Ben Bernanke believes that by pulling up stocks, the masses will feel richer and spend more on consumer goods, thus lifting up the economy. This is based on Karl Marx's reflexivity theory (George Soros essentially paraphrased Marx) that states by turning the small wheel (stocks), you can turn the big wheel (economy), which in turn will come back and turn up the small wheel (stocks). Bernanke subscribes to such a theory, and he wants QE to lift up the small wheel (stocks), which he hopes will lift up the big wheel (the economy)."

Bernanke to Economists: More Philosophy, Please


adr's picture

Conversation about economics:

Sales are down but profits are up?



How does that work?

We sold less but when the dollar drops in value we can record higher profits on foreign sales.


But a devalued dollar means Americans have to pay more for everything.

That is a problem how? We record higher profits during a period of declining sales, so our stock goes up. Market Cap is all that matters.

LMAOLORI's picture



adr That doesn't matter to the elites they don't even count the INFLATION on things you really need to live like FOOD and Gas/Heating Fuel, etc.


Obama’s economy hits the dinner table


 There’s been a nearly 15 percent increase since Mr. Obama took office.

Gas prices rise nationwide, following Michigan's lead

bigwavedave's picture

Wait a minute Tyler. Your saying the Fed is going to DELIBERATLEY weaken the US Dollar? Hahaha LolLolLol. That is the most crazy thing ever! Only down 94% since 1913.

HD's picture

There is no such thing as down. It went out with moral hazard and the right to privacy*.


*A big hello to everyone at the Utah domestic spying data center!

kridkrid's picture

I think this article makes it more complicated than it needs to be. The entire Ponzi scheme that is our monetary system is teetering on a daisy chain collapse ledge. If not for central bank intervention, this collapse would have happened long ago. Of course it's a mess created by design in a system based on credit/debt money, usury and fractional reserve banking, i.e. collapse is inevitable. Anything that keeps the beast alive, well, it keeps the beast alive.

theTribster's picture

"Of course it's a mess created by design..."

That's right, exactly - created by design.

theTribster's picture

Dilemma my ass. Everything in the markets is exactly as it should be - via central planning. To think there isn't a plan behind each and every move made is a little naive, they've been doing this long enough to know exactly what outcome they will get. Wait until they (CBs) start pulling the cash in and allowing banks to take creditors assets, isn't that the end-game, own the world? I think yes, it is.

The largest financial institutions in the world control the markets completely. Whatever happens is because they want it to happen, this is where we are in society - controlled by the banksters! Will it blow up? I doubt it because at that point everyone will be worried about wars - as is usual for this situation. Then the system resets and starts over with maybe a slightly different model to convince everyone things are different, better. Then, eventually and slowly, the corruption is unveiled.

We are at the end of the biggest cycle of wealth transfer in the history of the world, this is because they didn't know what they were doing right? We'll have a system reset but not before a crash and another world war. Sometimes the authors here are incredibly naive. Keep believing their stupid and see where it gets you....

donsluck's picture

I think you may have fallen for the conspiracy/stupidity enigma. It is very hard to accept that rich and powerful people can simply make mistakes, but my experience has been that all humans are, in fact, human. There may be plans, but plans go awry, and EVERYONE makes mistakes. The difference, of course, is that the powerful make BIG mistakes. I am just a little fish, trying and succeeding in finding my niche, and getting out of the way when that big pike comes swimming by.

Blopper's picture

The Fed may still not want to do any QE.

Quinvarius's picture

I think the point here is that trickle down economics still doesn't work.  The economy grows from the bottom up, not the top down.

shovelhead's picture

Must ...ugh...push...gasp... market ...urgg...HIGHER...

Saving the Messiah is a lot of work.

Let The Wurlitzer Play's picture

The reality is that stock (and debt) price valuations are way overpriced based on future revenue and earnings.  Any government "fix" is simply a gimmick at best.  There is now way to avoid the coming US re-valuation that has already started in other world markets. The US will catch up (or down) with those markets its just a matter of timing.


vote_libertarian_party's picture

Everybody seems to forget the QE isn't to 'goose' the economy.  It is to buy up the new Treasury bonds being issued that have no buyers.


Bond sale failures = 30% interest rates.

Dareconomics's picture

Once you start along the path of intervention, you can't stop until the system crashes. The Fed will keep printing money, because the whole ecoomy is dependent on it. I addressed this in a post last week:

yogibear's picture

He realizes this now. That's why Benny Bernanke and the Fed do infinite QE.

Hey Dudley, Yellen and Bernanke ,

Your on the Argentina and Zimbabwe financial plan.  When the dollar crashes you won't and can't defend it. Get ready to print those billion dollar bills.

Bernanke can fulfill his long time academic plan of printing the current debt away. Your son's huge school debt will be easy to pay once you decrease the dollar's value by several hundred percent.