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The Chart That Shows QE3 Failed Before It Even Started

Tyler Durden's picture


While it is all too clear that a year from today, right about the time QE4 is gearing up for deployment, QE3 will have had absolutely no impact on the economy (in the upside case; the downside case would imply millions in job losses primarily in the financial sector courtesy of record low 2s10s and even lower Net Interest Margins, aka Carry Trades), just as QE2 ended up doing nothing not only for the US economy but for the stock market as well, what is somewhat disturbing is that the only primary purpose of Operation Twist, namely the lowering of 10 Year bond yields in order to make consumers "weathier" through cheaper refis, has already failed. Presenting Evidence A: 10 Year Treasury Yields (inverted axis where lower yields are plotted higher) and the MBA Refi Index, which today dropped by 6.3%, the third week in a row, sending the Refi index to 3169.4 from 3915.5 in the beginning of August. As the chart makes all too obvious, the correlation between the two series has been as close to 1 as possible... at least until talk of QE3 via Operation Twist not only picked up but was made virtual fact through Wall Street's wholehearted acceptance of more monetary easing. What has happened recently is a substantial break between dropping yields and increasing refinancings. It thus begs the question: if an ever flatter 2s10s curve, the explicit objective of Op Twist which has gotten priced in in the past several weeks, has no impact on the housing market currently languishing in a historic depression, then just why is the Fed focusing on lowering long bond yields even more?

And while one can attempt to attribute this drop to "transitory" factors such as hurricanes and summer vacations, the reality is that every single time the Fed commences another monetary easing episode, mortgage refi rates plunge, in the process undoing everything that the Fed tries to accomplish by forcing mortgage-holders to refinance into a cheaper loan.

This also means that the only other reason for QE is and continues to be the funneling of zero cost money to banks via excess reserves which can then be used for all sorts of asset levitating fungible purposes. It also has some unpleasant side-effects: such as sending gas to $5/gallon (for consumers) and gold to over $2000 (for central bankers).

And while none of this is likely to change any of the course that the Fed will embark on after its next FOMC meeting, the population at least deserves to know just why it is being fleeced over and over.

And tangentially, the most dramatic confirmation of just how much of a failure not only monetary but fiscal stimulus have been (and will be) is the following snapshot of major headlines on Gallup's economy page.


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Wed, 09/07/2011 - 14:58 | 1643153 BaBaBouy
BaBaBouy's picture

Keynesian GOLD Kill Is On AGAIN Today...

Its their Primary Weapon, Keeps them in Power,
and the rest of the sheeple as their slaves...

Wed, 09/07/2011 - 15:05 | 1643172 Azannoth
Azannoth's picture

They can only short paper gold, they can't (yet) come into your house and sell your gold for you, so who cares just buy more

I am personaly freeking out a bit at how expensive gold has become and I almost can't afford it anymore, last year I was buying with both hands now I am forced to wait for drops like this so a price breather like this suits me just fine

Wed, 09/07/2011 - 15:08 | 1643187 nope-1004
nope-1004's picture


then just why is the Fed focusing on lowering long bond yields even more?


There is no other "policy" left in the Keynesian textbook.  Benocide is running on fumes in an attempt to keep banks afloat.

 Better to look good than to be good, I guess.


Wed, 09/07/2011 - 15:10 | 1643208 BaBaBouy
BaBaBouy's picture

Of course... They Will Fail... Eventually...


Meanwhile, back at the Ranch...

Wed, 09/07/2011 - 15:12 | 1643221 Popo
Popo's picture

there is still war. And we should not forget that it was war that made Keynes look correct the first time around.

Wed, 09/07/2011 - 15:48 | 1643365 Leopold B. Scotch
Leopold B. Scotch's picture

Look correct?  For moron believers in the broken window fallacy, at least.

Wed, 09/07/2011 - 15:53 | 1643376 B9K9
B9K9's picture

I still chuckle upon recollection of the old hippies plaintive cries that "war is not the answer". Jeez, on the contrary, war is always the answer. It's been that way since the first proto-humans realized it's much easier, and a lot more satisfying to boot, to murder some other tribe, steal their crops, and screw their wives & daughters.

This time around, the war aims won't necessarily be directed towards asset acquisition (we already control the ME oil), and/or destruction of competing productive capacity (see WWII). No, this time around, the war objectives will be focused on a two domestic fronts: destroy all pensions/savings (mostly the elderly & retired) and destroy all entitlement programs.

Under the ruse & fog of war, the various allies can usher in hyper-inflation in which to make the huge, unpayable debt overhang magically disappear. With a few EOs and other associated war powers acts, we can have price controls, anti-blackmarket regulations (eg barter), confiscate gold, and allocate resource (um, food, gas, etc) aka "rationing", all wrapped up with nice, 20 year sentences for violations.

If the war could continue for another 10 years, just think how many oldsters might die off, making the problem of anyone with a living memory of 'how things used to be' that much easier to manage. And with a new underclass comprised of illegals, the entitlement cut-off could be achieved with nary a whimper of complaint.

Never forget that all organizations reach the point of self-awareness and the survival instinct. At this point in time, the federal gov't bears absolutely no bearing on some fantasy concept of representing citizens, but is rather in full blown survival mode. The outline above achieves all the important requirements of ensuring COG, which is why they will be implemented.

Wed, 09/07/2011 - 16:10 | 1643437 Leopold B. Scotch
Leopold B. Scotch's picture

Parasites should be careful not to kill the host...

Wed, 09/07/2011 - 16:43 | 1643563 Raymond Reason
Raymond Reason's picture

Son of a motherless goat!  Ok B9K9, you have my respect.  A very succinct reckoning.  "Never forget all organizations reach the point of self-awareness and survival instict".  Never heard it put that way, but its what i've been thinking for years.  God, i hope you're wrong about where this is going though. 

There has to be a point where the govt simply doesn't have the resources to wage war abroad, and micro-control every little thing domestically.  Maybe the police state will be transitory. 

Wed, 09/07/2011 - 17:04 | 1643620 New_Meat
New_Meat's picture


"There has to be a point where the govt simply doesn't have the resources to wage war abroad, and micro-control every little thing domestically."

Well, that point is South of 1940 in the U.S.

We're a long-long-long way above that "starting point."

- Ned

Wed, 09/07/2011 - 23:31 | 1644761 Raymond Reason
Raymond Reason's picture

So your point is the govt is already leveraged as hell, a paper tiger essentially?  Agreed. 

Wed, 09/07/2011 - 18:07 | 1643779 RockyRacoon
RockyRacoon's picture

I still chuckle upon recollection of the old hippies plaintive cries that "war is not the answer".

What was the question that war was supposed to answer?   Was it the same then as now?   During the marches of the 1960s I was in high school in a sleepy little town, and then into the Air Force until the early 1970s.   I missed the street movement but got to see it from the bleacher seats.   What a hoot!   I'd love to participate this time around.

Wed, 09/07/2011 - 20:26 | 1644133 BlackholeDivestment
BlackholeDivestment's picture

B9K9, ...mark of the beast?

Wed, 09/07/2011 - 15:19 | 1643244 hambone
hambone's picture

Hmmm...could the "why" of pushing rates have as much or even more to do w/ CRE and ability of banks to roll non-performing loans to ever lower interest rates???  Extend / pretend / one look at IYR should say it all.

Wed, 09/07/2011 - 17:06 | 1643624 Thomas
Thomas's picture

A colleague, just this morning, told me that he got a 15 year fixed rate refi at 3.5%. I wished him well but could not help but suspect that I was somehow subsidizing his loan with my tax dollars and debased savings. The free market would demand a greater return. I am feeling very Orwellian of late.

Wed, 09/07/2011 - 15:55 | 1643386 Clorox Cowboy
Clorox Cowboy's picture

It all becomes perfectly clear once you have a PhD.  Univ of Pheonix just created an online 12 week Doctor of Money Science degree...I suggest you go rack up some student loan debt ASAP!

Wed, 09/07/2011 - 18:37 | 1643892 sun tzu
sun tzu's picture

Lower long rates and allow everyone to refi for a flat $1500 fee to 4%. Free up hundreds of billions for the economy. The only way it would work is if the refi'd mortgages are recourse. Money for mortgage brokers and homedebtors.

Wed, 09/07/2011 - 18:44 | 1643912 sun tzu
sun tzu's picture

Lower long rates and allow everyone to refi for a flat $1500 fee to 4%. Free up hundreds of billions for the economy. The only way it would work is if the refi'd mortgages are recourse so the taxpayers won't get fucked too royally. Money for mortgage brokers and homedebtors.

Wed, 09/07/2011 - 15:17 | 1643239 Quinvarius
Quinvarius's picture

You can't afford not to buy it.  I own a few half ounces and quarter ounces from times when i didn't have much money for savings.  I have no problems going to grams if it comes to that.

Wed, 09/07/2011 - 16:42 | 1643552 Manthong
Manthong's picture

Ten years or less from now people will be commonly transacting in milligrams.

Wed, 09/07/2011 - 18:45 | 1643916 sun tzu
sun tzu's picture

In that case, I think silver would be a better choice

Wed, 09/07/2011 - 23:40 | 1644793 StychoKiller
StychoKiller's picture

Gold can still be bought in fractions of an oz and in grams...

Wed, 09/07/2011 - 15:14 | 1643226 samsara
samsara's picture

Don't think of the $100 swings in Au and $5 swings in Ag as 'Volatility',

Think of them as convulsions.  

Wed, 09/07/2011 - 15:32 | 1643302 Bendromeda Strain
Bendromeda Strain's picture

No. Birthing pains...

Wed, 09/07/2011 - 17:08 | 1643627 Thomas
Thomas's picture

Side effects of Bongo.

Wed, 09/07/2011 - 15:49 | 1643366 Nascent_Variable
Nascent_Variable's picture

I can't shake the feeling that the war on gold hasn't even started in earnest.  I still think there will be a major plunge in the next year or so.  But in the end, the central planners won't be able to contain it, no matter how hard they try.

Even if there is a severe drop soon, it is still the safest long term bet available.

Wed, 09/07/2011 - 16:33 | 1643520 Ruffcut
Ruffcut's picture

Who in the fuck knows what QE we are really on. THe friends of Ben are his masters, at the same time.

They might be printing and giving to such a degree that would make your head explode, back out of your ass.

I still feel the market could go north to uncharted waters. Do people really give a shit even when you know its ponzi, as long as your wallet gets fatter?

I thought not.

Wed, 09/07/2011 - 15:01 | 1643167 CvlDobd
CvlDobd's picture

Surely TNX, TYX, and the DAX are wrong and the 500 is right.

Wed, 09/07/2011 - 19:00 | 1643961 sun tzu
sun tzu's picture

Could it be that the market thinks sovereign debt is more risky than corporate debt and equities? When the Third Reich fell, German industry survived. The same happened with the Japanese Empire. 

Wed, 09/07/2011 - 15:02 | 1643169 youngman
youngman's picture

Because they really don´t know what to do....they can´t just bail out the banks all the time...they do..but they have to look like they are doing something for the little guy

Wed, 09/07/2011 - 15:03 | 1643175 Belarus
Belarus's picture

I think the next major move will be.....

Silver. It will take out $50 ounce. I think Faber is right on the market; bulls and bears are going to be disappointed. 

Wed, 09/07/2011 - 15:31 | 1643296 SumSUN
SumSUN's picture

Gold will pass tha torch to silva.

Wed, 09/07/2011 - 16:10 | 1643433 Josh Randall
Josh Randall's picture

That stock to Silver price spread has got to be killing The Morgue!

Wed, 09/07/2011 - 15:13 | 1643186 hedgeless_horseman
hedgeless_horseman's picture





...why is the Fed focusing on lowering long bond yields even more?


...the only other reason for QE is and continues to be the funneling of zero cost money to banks via excess reserves which can then be used for all sorts of asset levitating fungible purposes.

The Fed is of the banks, by the banks, and for the banks. Higher rates would spell disaster for the banks that are marking assets to myth and still razor thin on actual reserves.

Not too hard to figure out, folks.

Wed, 09/07/2011 - 15:20 | 1643250 WeekendTrader
WeekendTrader's picture


The Federal Reserve is neither Federal nor does it have Reserves.

Details, details.....


Wed, 09/07/2011 - 15:30 | 1643286 Seer
Seer's picture

No reserves?  Is that like the EU, which recently stated that banks will be required to have less reserves?  Isn't this a good thing?  Have less of what's worthless?  Maybe they're coming to their senses? </sarc>

Wed, 09/07/2011 - 16:13 | 1643451 fishface
fishface's picture

lots of paper and ink


You don't call that reserves  ;-)

Wed, 09/07/2011 - 16:13 | 1643455 Leopold B. Scotch
Leopold B. Scotch's picture

My currency is backed by loans paid in my currency mostly paid with freshly minted units of my currency!

Who could possible want more?

Wed, 09/07/2011 - 15:25 | 1643267 Seer
Seer's picture

But, but... wouldn't it be much simpler to just do, as the EU has done, reduce the reserves that banks have to have?  If you don't have enough money then don't make money a requirement- there! poof! "problem" "solved!"  Could there be a greater farce (complete defiance of logic)?

Next thing they'll be trying to tell us that gravity doesn't exist... Oh, wait!  They already did do this- 9/11!

Or, do like here in the US, pump more inflated dollars into the self-digging hole.


Wed, 09/07/2011 - 15:06 | 1643189 Romanzo
Romanzo's picture

Market saying to Bernanke:I m giving you your QE3, just fix the jobs! 


Wed, 09/07/2011 - 15:07 | 1643193 PaperBear
PaperBear's picture

QE3 won’t fail to put a giant rocket under gold/silver.

Wed, 09/07/2011 - 15:09 | 1643199 baby_BLYTHE
baby_BLYTHE's picture

...nevermind we are only some $45-50 billion away from hitting the debt ceiling yet again! Who wants to bet we won't hear dick about this in the MSM media?

Wed, 09/07/2011 - 15:23 | 1643255 Ahmeexnal
Ahmeexnal's picture

Baby, that's why Ogolfer will lie and claim that the money needed is not for compound interest debt payment but for job creation. At least 300bill is the figure being handled.

Wed, 09/07/2011 - 15:42 | 1643341 NotApplicable
NotApplicable's picture

Don't they just have to do a ceremonial dance in order to invoke the next level? Or was it a goat sacrifice? Stuff changes so fast these days, it's hard to keep up.

Wed, 09/07/2011 - 16:38 | 1643536 Seer
Seer's picture

Hey!  Let's not drag goats into this discussion!  Goats are honorable (and have utility)!

Wed, 09/07/2011 - 15:10 | 1643206 Belarus
Belarus's picture

Every time you see these hail marys, the market skyrocketing in unison with Gold and Silver dropping only tells you the scumsuckers have lost control. Therefore, of course, Gold and silver are set to go higher. All these are is "sucker" rallies...nothing more or less. 

Wed, 09/07/2011 - 15:20 | 1643247 Quinvarius
Quinvarius's picture

Indeed.  Stocks up with gold down always means buy gold.  Stocks are only rising for the same reason as gold, but from a far weaker fundamental base.  It is only money creation moving both markets.

Wed, 09/07/2011 - 17:29 | 1643680 Alpha Monkey
Alpha Monkey's picture

Except, people are buying gold.

Wed, 09/07/2011 - 16:42 | 1643554 kito
kito's picture















when all of these phrases are replaced with the word "dollar" or 'fiat" i will sell my gold. until then remember:

make new friends but keep the old, one being silver, the other being GOLD!!

GOLD BITCHEZ!!!!!!!!!!!!!!!!!!!!!!!!!!!!



Wed, 09/07/2011 - 15:10 | 1643209 samsara
samsara's picture

All those bullet points add up to one thing.

A BIG False Flag somewhere and WAR WITH IRAN

Wed, 09/07/2011 - 15:47 | 1643361 NotApplicable
NotApplicable's picture

I swear, every story I read today has me thinking that. As I mentioned elsewhere, this failure of "leadership" looks exactly the same as it did 10 years ago this week. If they aren't airing out the dirty laundry in advance of the next memory-hole event, things are going to get ugly in the US, quick.

Wed, 09/07/2011 - 18:14 | 1643819 samsara
samsara's picture

Speaking about this week's aniversary....


Amazing testimony of ex CIA Asset Susan Lindauer. 5 years of legal troubles, 1 year in prison for daring to tell the truth. During the Bush era the top controllers of the governmental mechanics of Defense and national Security wanted to have a war with Iraq. They got their wish and anyone who got in the way were dealt with severely no matter if they violated a law or not. Not brought to trial she was jailed under the "Patriot Act" which amounted to summary punishment outside a Verdict in a court of law. She was punished in jail without a Trial at all This is part of her story that is just unfolding now. She has waited 10 years to tell this story. 
Wed, 09/07/2011 - 15:10 | 1643210 centerline
centerline's picture

More and more people are upside down.  Dont qualify for a refi, even if they wanted it.  Also, word is probably getting around about how the banks fucked people over and continue to do so.  Sort of takes the shine off the idea of going into a bank for a refi for a couple of percentage points.  I am guessing that this group of people figure it is best to sit still for a moment and see where things go before reacting.



Wed, 09/07/2011 - 15:11 | 1643214 GenX Investor
GenX Investor's picture

You need to bid it up before you can sell it down!!!!

Wed, 09/07/2011 - 15:29 | 1643285 LawsofPhysics
LawsofPhysics's picture

exactly, easy to do in the robot controlled vapor trading we see now.  Look at volume and the average time a stock is held.  This is fucking stupid, why isn't gold at $5,000 already? People still like paper I guess. 

Wed, 09/07/2011 - 17:03 | 1643615 Hugh_Jorgan
Hugh_Jorgan's picture

This month that will change when anarchists occupy wall street Look for it on 9/17. Then again in DC on 10/11 they are going to try to shut down the Government by occupying Freedom Plaza (ala, Tarir Square).

When the smart money starts feeling physically threatened, they will want physical gold. At that point you gold prices going to the moon, but not before an un-pegging of paper to physical pricing. I think that ludicrous premiums for physical could eventually force the pricing to fall apart, separating the two and crashing the paper gold market.

Wed, 09/07/2011 - 15:11 | 1643215 HedgeAccordingly
HedgeAccordingly's picture

for sure it has failed.. the new solution.. the front running bot which is all over the SPOOZ today... have HF front run the fed buying futures.. genius. 

Wed, 09/07/2011 - 15:12 | 1643220 Belarus
Belarus's picture

BTW, you can't refi currently underwater mortgages at low rates unless you put down a substatial amount of money. That is a poor use of capital....if they print more, basic necessites go up, housing will continue to go down. It's better to use capital to buy precious metals. 

Wed, 09/07/2011 - 15:31 | 1643290 ZeroPower
ZeroPower's picture

Best use of any spare capital is to pay off any debts.

Wed, 09/07/2011 - 15:45 | 1643355 Dumpster Fire
Dumpster Fire's picture

Not anymore.  We had hope and change.  Next up is forgiveness.  We should be seeding debt fence row to fence row in anticipation of 2012.

Wed, 09/07/2011 - 16:30 | 1643513 silvertrain
silvertrain's picture

I fuckin hate to say this but I think your right sir..Forgiveness will come in some form..What form it will be In and what it will include or not include I dont know, but I feel it comming..
I am seriously thinking about a 40 acre patch of land..Half of it is open and half is mature hardwood timber.. I have had my eye on for a bit..To go into debt for it or not is the question...

Wed, 09/07/2011 - 16:21 | 1643486 Id fight Gandhi
Id fight Gandhi's picture

Fuck why? I got my credit card limIt cut and my interest rate hiked for paying on time, having a high credit score and not spending.

Fuck them all

Wed, 09/07/2011 - 15:26 | 1643273 Piranhanoia
Piranhanoia's picture

The globomaticclysm has been unleashed. it would require a faith in paper and hyperbabble unseen since the last election to contain it for even a moment.    The moment passed

Wed, 09/07/2011 - 15:27 | 1643276 1835jackson
1835jackson's picture

What a fucking disaster luke skywalker what after

Wed, 09/07/2011 - 15:32 | 1643301 lizzy36
lizzy36's picture

At some point the medicine that is being prescribed to cure the disease in and of itself becomes the killer.

Have we reached the equilibrium point? Where the unintended consequences of further monetary policy intervention, in and of itself, becomes the killer of the economy?

I don't believe the real US economy can grow on $100/boe. This is a phenomena of the last 5 years. So if the unintended consequences of further easing is $5 a gallon gas, is the Federal Reserve not guaranteeing sub 1% GDP growth if not outright recession?

Wed, 09/07/2011 - 16:06 | 1643423 Mediocritas
Mediocritas's picture

Bingo, we have a winner.

Any "benefit" from QE will be more than destroyed by the economic cost of QE causing higher oil. Invading would-be sources of higher oil production (Libya) won't help either because, as Iraq demonstrates, invasions lower production rapidly before taking a long time to fail to reach pre-invasion levels.

Wed, 09/07/2011 - 15:34 | 1643313 buzzsaw99
buzzsaw99's picture



Wed, 09/07/2011 - 15:40 | 1643332 Gringo Viejo
Gringo Viejo's picture

Interesting that as hard as gold is being slammed, silver's holding up VERY well.

Is $40 the new floor?

Wed, 09/07/2011 - 15:57 | 1643397 SaveTheGreenback
SaveTheGreenback's picture

There's a lot of support at $40, technically.  

Wed, 09/07/2011 - 16:15 | 1643461 razorthin
razorthin's picture

38.5 is bedrock support.

Wed, 09/07/2011 - 16:05 | 1643338 plocequ1
plocequ1's picture

Operation twist..  Now thats a fucking good one. You know, I said that I would see you because I had heard that you were a serious man, to be treated with respect. But I must say no to you and let me give you my reasons.

Wed, 09/07/2011 - 15:43 | 1643346 bob_dabolina
bob_dabolina's picture

Started my first blog, experimenting with the idea. 

P/L + Positions.

Wed, 09/07/2011 - 17:10 | 1643634 slewie the pi-rat
slewie the pi-rat's picture

hey, bob_d!

would you lie to us?

you said you shorted gold a few days ago.  how did that "trade" work out?  did you get stopped out by the spike when the SNB announced?  of were you "kidding" about your "trade" with others who were just here "fooling around and having a little fun"?  that's a Y/N question, bob_d.  please answer it, ok?  yes, you made the trade(s) and the shorts you said you were making on gold @ 1900$+ m/l, OR no, you didn't; it was just "funnin" 

speaking of self-referencing trolls, have you noticed swami salami's latest gimmick?  he's putting links to his "work" but not showing tham as such, and renaming them, [as well as others' work, perhaps] so the site isn't evident before you click on it, as in this "edit" (paste):  Edit: we just passed the anniversary of Mossadegh's overthrow by the CIA and the en-thronign of Reza Pehalvi. Strong echoes of history. Mossadegh's blunder was nationalization, just like Allende of Chile 20 years later.


hopefully, tyler will deal with him, with extreme prejudice, too!  some of the ad-trolls  to whom i have spent literally days here objecting, are no longer around for some reason;  i hope tyler (and others) realize that ORI has posted many thousandz of ads for his website here on zH while saying almost nothing of any real substance in terms of the pieces and articles on which he has "commented".  the last time i challeged swami salami, his respose wasn't even rational (do you consider his above to be, as a response to someone penning the radical /s/thought that "war is Big Business" on the iran/UN string?) and at the same time, falak penis just "happened to" appear & start calling me out as "torquemada" and would not stop the ad hominems for hours, on a string where others had some real interest.    sad, but true.  (where were these guys with their "germany won WWII" thesis after today's court ruling, huh? or isn't that true, now, if the EU doesn't fall apart, so that germany would "obviously" end up w/ the nth reich?)

be careful, here, bob_d, zeroHedge isn't just about "good trading & calls" or "proving how right you are" in telling the "future" of prices;  why didn't you ask tyler for permission to post "@ the top of the page" here if you want to start a "this is bob_d's trading" blog?  too busy?  or did you? 

why don't you mind your own business, bob_d, and allow others to do the same, here, on zH?  or just limit yourself to telling us that you turned $100K (after taxes?) into $2 mil (after taxes?) in "one of your "trading accounts" while not getting "sucked into" buying PMs and tying up all your precious $100K?  and, why don't you post all your "trading accounts"?  afraid we'd all die from envy? 

listen, i value you  as a zeroHead, and if you want to start a blog abt yourself as trader, go ahead!  just  don't advertiZe it here, ok? if you want new "friends, like ORI seems to, also, why don't you guys just stick to facefuck, ok? 

Wed, 09/07/2011 - 15:43 | 1643347 monopoly
monopoly's picture

Agree, 0 debt when possible, no credit cards. All you do is perpetuate the fraud with squids if you carry debt or deal with a dead zombie bank, and one cave. That is all we need.

Miners coming back nicely at the close. Sell my gold. You have got to be very strange to think that way.

Wed, 09/07/2011 - 15:55 | 1643382 NotApplicable
NotApplicable's picture

Problem is, stealing wealth from a bank (err... I mean MBS these days) is by far and away one of the easiest methods to accumulate it, assuming one can successfully service the debt. While it's difficult to do with credit cards (other than buying PMs), anyone with a reasonable 30 yr. mortgage will come out far ahead in the end.

I expect that my last mortgage payment in 2040 may cover the cost of taking the family out to dinner. The only danger I see is the potential property tax monster consuming all of the gains.

Wed, 09/07/2011 - 16:17 | 1643468 MachoMan
MachoMan's picture

or a deflationary collapse between now and then...

Wed, 09/07/2011 - 15:50 | 1643351 TruthInSunshine
TruthInSunshine's picture

<-- A receding ocean lowers all ships

<-- A rising tide lifts all boats


Apparently, the plan is to get all workers, across the planet (who will still be employed; whether that's a majority or mere plurality of people age 18 to 56 remains to be seen), to wage parity.

A receding ocean lowers salariers of employees in developed nations, and in many cases, dramatically so -or- A rising tide lifts salaries of all employees in emerging economies.

Wed, 09/07/2011 - 15:49 | 1643368 razorthin
razorthin's picture

There can be no more real economic growth from this day forward until:

  • Housing prices drop such that at least 25% of the population can (and do) pay cash.
  • College tuition drops such that at least 25% of the population can (and do) pay cash.
  • 6 month CD rates remain above 5% - permanently.
  • Consumer credit cards are no more
Wed, 09/07/2011 - 16:58 | 1643606 Seer
Seer's picture

Seriously, should "economics" and "real" even be in the same sentence?

How does one reconcile the fact that expecting things to be cut and then "grow" again just leads to the same thing that we have now?  There's no longer the ability to extract physical resources out of the planet at any rate of growth, and any increase will only ever eventually fail because... well, you figure it out (finite planet).

Thu, 09/08/2011 - 00:51 | 1644955 StychoKiller
StychoKiller's picture

Annnd... what should your conclusion be?  (Hint:  The surface of a planet is NOT the correct place for an expanding technological civilization!)

Wed, 09/07/2011 - 15:50 | 1643369 r101958
r101958's picture

....Now that oil has gone up today (as it really should), it will be taken down tomorrow or the next and gold will be allowed to go up again....only to be taken down again...all to levitate the market.

I posted this yesterday regarding earlier posts (not gloating...just tired of the bs):

Tue, 09/06/2011 - 12:30

I posted this yesterday and something similar last Friday:

Mon, 09/05/2011 - 12:52
I don't like it but watch out for TPTB selling paper gold to prop up market tomorrow. Another paper gold -100 day. Just like before.

Fri, 09/02/2011 - 09:59
I don't like it but, as I said elsewhere, the TBTF's will sell their paper PM's near the near term top and then prop up the market with the proceeds next week (maybe sooner).

Wed, 09/07/2011 - 15:52 | 1643372 orangedrinkandchips
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Dewey Oxburger....."I've got a weight problem..."

The Stripes Company......"NO....NO!!!!".....


QE3 failed before it started....

"NO!....NO!!!!???!" for yourselves...



Wed, 09/07/2011 - 15:54 | 1643380 slewie the pi-rat
slewie the pi-rat's picture

just why is the Fed focusing on lowering long bond yields even more?

slewie's answer:  go the goobermint can increase the national debt (for now) cheaply, without bankrupting itself before the next election

Wed, 09/07/2011 - 15:57 | 1643396 orangedrinkandchips
orangedrinkandchips's picture

slewy.....can you possibly imagine if just Repo rates, for STIFs(aka money markets) or short term rates were 4-5%???? NOT 4-5 BPS.....I use to work at a bank that did STIFs and repos are now single digit bps.....


Can you imagine if short term rates were 4%??? GAME OVER FOR TIMMY ET. AL.


GAME OVER. SOL is what my Mother use to say...SHIT OUT OF LUCK.....



Wed, 09/07/2011 - 18:52 | 1643940 RockyRacoon
RockyRacoon's picture

Pick me!  I know!   So Rick Perry can say he inherited this shitty economy.   How'd I do?

Wed, 09/07/2011 - 15:55 | 1643385 monopoly
monopoly's picture

My goodness, check out this pop for us. Was Tyler just on Bloomberg? I know he would not lower himself and chat on the idiot channel. And lets just see how long that "double top" in gold that all the chart experts are talking about lasts.

Wed, 09/07/2011 - 15:56 | 1643389 Big Ben
Big Ben's picture

If QE had 'worked' it would have put money into the hands of borrowers, while taking money away from savers. So the net effect on the economy as a whole would have been zero. And QE has certainly reduced the income of retirees and other savers! No question about that. But lots of homeowners have been unable to refinance, so they aren't seeing any benefit from QE. So who is pocketing the money which QE 'stole' from savers? It has got to be the banks. I think they are quietly using it to offset subprime losses and not reporting it as profits. (But they are paying large bonuses to their executives).

Wed, 09/07/2011 - 16:00 | 1643400 TruthInSunshine
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You're doing a heckuva' job, Bubbles&BananasBernank, CONgress & ObaZed:


One in 3 Falling Out of Middle Class - New study shows


Many Americans Falling Out of the Middle Class 

Wed, 09/07/2011 - 16:10 | 1643403 SheepDog-One
SheepDog-One's picture

What QE3?

As FED members sit shaking in fear and withdrawal symptoms crying and begging for another few $trillion, DOW easily rises +260 and equities are within 10% of all time highs...wheres ANY need for QE?

Never have things been more surreal than today, not even near no matter what times you look at.

Wed, 09/07/2011 - 16:04 | 1643419 cbaba
cbaba's picture

the last paragraph of the Gallup paper " Americans choose Gold as the best long term investment" says it all.

Wed, 09/07/2011 - 16:12 | 1643443 Idiot Savant
Idiot Savant's picture

Off topic, but received a notice from BBVA Compass that free checking is ending. You must now carry a minimum balance of 5K or you'll be charged $20.00 per month. Minimum balance isn't an issue for me, but since +50% of Americans live paycheck to paycheck, it'll hurt a lot of people. I'm curious if American banks are ditching free checking too. I know they miss the billions in revenue from overdraft charges now that customers can opt out.

Wed, 09/07/2011 - 16:29 | 1643477 razorthin
razorthin's picture

While we are on the subject of cabalonomics, you can pick up GS here for a nice 30% score.  And just about anything else for at least 10%.

Wed, 09/07/2011 - 16:21 | 1643480 Almost Silent W...
Almost Silent Witness's picture

We're beyond the point of pushing down the rate on Treasuries in order to increase mortgage refinancing.  While that's all well and good, the primary point of pushing down Treasury yields is to allow the Treasury to continue to borrow / refinance cheaply.  Thus the government can continue on its merry spending way and so continue to "stimulate the economy" / keep the plebs from revolting.

The "making mortgage refinancing affordable" line is just marketing.  Hey, and if it works, the banks get the fee stream, too!

Wed, 09/07/2011 - 16:34 | 1643521 catladdy
catladdy's picture

Following implementation of QE2 last September, 10-30 treasuries went UP in yield. We may be close to printing a low quarterly yield further out the curve this month that will prove to be a major kondratief cycle low.

Over the next year I expect that we will begin to reflate as the Fed sells bills-raising the short end as the market place raises yields out duration.




Wed, 09/07/2011 - 16:45 | 1643559 RobotTrader
RobotTrader's picture



QE1, QE2, and QE3 were resounding successes.

They will be talking about his cycle for the next 50 years in future economic textbooks.

- Never before in world history have stock market corrections been so shallow when the news flow has been the worst.

- Never before in world history has a country racked up $15 Trillion in deficits and have 10-yr. yields fall to 50-year lows.

- Never before in world history has a broke government piled up $211 Trillion in unfunded liabilities and now enjoys the luxury of near zero funding costs from 2-weeks all the way out to 12 month maturities.

- Never before has there ever been a bigger wealth building phase where retail stocks like AAPL and PCLN have gone up 600% in record time, making schlubs like William Shatner billionaires.

- Never before in world history have you seen such fantastic gains like the XRT advancing from $15 to $49 during persistent and chronic 9% unemployment and millions upon millions on food stamps.

- Never before have so many little guys who invested a paltry sum in gold and silver made out like bandits in just 6 - 7 years

The QE programs hands down will be looked upon with slack-jawed amazement for years and years to come.

If not for QE, the Dow would be sitting at 4,000 right now and we would be in the midst of the Dark Ages in a massive depression.  Instead, people are out living it up, spending money like mad, and pretty much going about their normal lives, without a care in the world about what is happening on Wall Street.

Wed, 09/07/2011 - 16:47 | 1643571 tmosley
tmosley's picture

They keep going this way, there won't BE any history books.

Also, you have a sick and twisted world perspective.  Which is probably why you are wrong so damn often.

Wed, 09/07/2011 - 16:58 | 1643607 Withdrawn Sanction
Withdrawn Sanction's picture

The QE programs hands down will be looked upon with slack-jawed amazement for years and years to come.

True.  We will look back slack jawed at how incredibly stupid policymakers can be, how we conflated money with value, and how traders have no perspective beyond the next tick of the tape.

We will see Dow 4000 soon enough, QE notwithstanding.

Wed, 09/07/2011 - 18:00 | 1643754 lizzy36
lizzy36's picture

Never before has the stock market reflected so poorly the real economy.

This disconnect noted here will only lead to one end. And nobody will care that Captian Kirk is a millionaire:

Wed, 09/07/2011 - 18:11 | 1643797 Ned Zeppelin
Ned Zeppelin's picture

Fantastic chart Lizzy!

Wed, 09/07/2011 - 19:10 | 1643978 razorthin
razorthin's picture

gee, what the fukk could have changed in the early 70's...anyone? satan?

Nixon's remains should be exhumed and ground for me bread.

Wed, 09/07/2011 - 18:12 | 1643808 Ned Zeppelin
Ned Zeppelin's picture

RobotTrader is being sarcastic, I think, for those who may have missed it.

Wed, 09/07/2011 - 18:26 | 1643859 lieutenantjohnchard
lieutenantjohnchard's picture

ned, i'm not so sure about that. the 'tard has posted quite a few posts almost exactly like this over the months. i think he really believes it.

Wed, 09/07/2011 - 18:24 | 1643853 lieutenantjohnchard
lieutenantjohnchard's picture

must be a slow day on the 1099 desk at "my bank/our bank".

i like the part where the part time, contract 1099 processor can see into the future, and tell us what will be, and what would have been.

equally, i like the part where the 1099 processor tells us about the misery of 9% u3 with "millions upon millions on food stamps" living it up, spending money like mad etc etc ...

robottrader: still wondering why so few understand his brilliance.

Wed, 09/07/2011 - 16:44 | 1643566 csmith
csmith's picture

The credit transmission mechanism is broken. Banks can't refi because collateral values have deflated too far beneath existing nominal mortgage values. The ONLY solution is for the banks and the GSEs to take the necessary writeoffs and move on. This is the New-New Deal we need to reset the system. Some will win; some will lose, but GET ON WITH IT!

Wed, 09/07/2011 - 16:48 | 1643577 catladdy
catladdy's picture

The mortgage refi string can't be pushed much more even at a zero rate. A myriad of problems exist: (1) Loan values exceed appraised value, (2) employment doesn't exist to support a new qualifying note.

What will occur with the Twist is further consolidation of banksters from thin margins, reduced credit for small businesses.

As Malpass stated in an earlier Op ed, higher rates are needed, not lower.

Rather than a balding wizard puppet behind a curtain whose strings are controlled by the bankster oligarchs, let the free market decide the rate.  


Wed, 09/07/2011 - 18:03 | 1643705 LongOfTooth
LongOfTooth's picture

Imo if you want to know why the Fed is so intent on lowering interest rates then you need to take a look at the paper written by Carmen Reinhart and others titled “The Liquidation of Government Debt”.  In the paper they go into great detail describing a subtle type of debt restructuring called “financial repression”. 

And yes, that's an IMF webpage.

Better yet, do a Google search on financial repression.  That's what they have in mind for us and the world.

Wed, 09/07/2011 - 18:09 | 1643790 Ned Zeppelin
Ned Zeppelin's picture

Except for the fact that very few can actually refi, and I have no idea where this continuing crowd of refi-ers come from, or if they are even real, which I truly question, this is interesting information.

Wed, 09/07/2011 - 19:39 | 1644043 Miles Kendig
Miles Kendig's picture

Driving the 10 below 2 has been a smashing success in the re-fi space. This is what success looks like. Everyone that can re-fi has.

Wed, 09/07/2011 - 20:03 | 1644091 cocoablini
cocoablini's picture

Amazing how interventionists never see how the realrates plunge below adminstered rates in the short end and nobody cares.
You cannot give the money away- nobody wants the debt and nobkdy wants homes. Homes are shitty because:
- the mortgages are a lot, even at 3%
- people prefer the cash flow to ownership
- people do not want debt
- homes have costs like maintenance
- governments keep going to the homeowner trough to collect more taxes, even as it causes more defaultz
- so, yeah your mortgage is less but it's still a costly non-investment since home prices will not budge for a decade or so. Theres NO RUSH to buy

Wed, 09/07/2011 - 22:11 | 1644532 ThirdCoastSurfer
ThirdCoastSurfer's picture

Usury, of course, is a word for the damage caused by the misuse of lending on one end of the curve, but we have no term for the other. If manipulating something one way is wrong, how can it be that the opposite is not true? 

If you read Adam Smith's take on the destructive effects on usury, it's easy to see how the universality of the principal applies to the other direction as well, it's just that even Adam could never envision a scenario where it would be possible. 

If insanity is doing the same thing repeatedly and expecting a different result, then bring on the 50 year bond. 


Wed, 09/07/2011 - 22:55 | 1644667 holdbuysell
holdbuysell's picture

Well, on refis we're already holding the 3-4 handle with zero expense out of pocket. Yes zero. Basically, only the time and hassle factor investments result in rolling to a lowered rate.

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