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Does QE Really Work? The Evidence To Date

Tyler Durden's picture


The market's hopes and dreams for the next LSAP remain high. As gold inches higher, tail-risks priced out (expectations for extreme FX moves are considerably lower than sentiment would suggest), and US equity vol expectations (and put skews) are crushed; the equity market clearly remains 'at a premium' in its notional indices given what is sheer lunacy in earnings expectations going forward. The question every investor should be asking is not when QE or even if QE, but so-what-QE? As Credit Suisse notes, given the deterioration in US economic activity (and the extension of Operation Twist) the FOMC will probably wait until its September meeting (and remember the trigger for further pure QE is a long way off for now). The most critical question remains, will additional QE work? After all, few would argue that US interest rates are too high or that banks in the US need still more excess reserves. Two things stand out in their analysis of how QE is supposed to work (transmission mechanisms) and its results to date: QE1 was more effective than QE2, and it's easier to find QE's effect on Treasury yields than on real economic performance. Perhaps more concerning is that the potential negative effects of such unconventional monetary policy has received little attention (aside from at fringe blogs here and here).


Credit Suisse: Does QE Really Work? The Evidence to Date

Less than four weeks ago, the Federal Open Market Committee voted to continue its maturity extension program (Operation Twist) for another six months. But the sluggishness of US economic activity has the key decision-makers on the FOMC considering a more aggressive easing move.

In our view, another round of large-scale asset purchases (“QE3”) is looking increasingly likely before Election Day in November. While an announcement is possible as soon as the July 31-August 1 meeting, the FOMC probably will choose to wait until its September 12-13 meeting.

Having forecast that the FOMC will buy more assets, we address the next natural question: Will additional QE work? After all, few would argue that US interest rates are too high or that banks in the US need still more excess reserves.

To find the answer, we consulted empirical studies within and without the Federal Reserve system on the effectiveness of the previous two rounds of QE and the balance sheet neutral Operation Twist program. There are many complications that arise in the evaluation of the programs’ results, and opinions differ among economists even within the Fed.

However, a review of the empirical literature yields some common themes:

  1. QE1 was more effective than QE2.
  2. It is easier to find and quantify QE’s effect on Treasury yields than to identify and measure QE’s effect on real economic performance.
  3. QE also lowered nominal interest rates on agencies, MBS, and corporate bonds, with magnitudes differing across bond types and maturities.

Results of the studies we reviewed were less uniform on QE effects on equities, the dollar, and commodity prices.

How is QE supposed to work?

QE1 was the expansion of the Fed’s balance sheet achieved mostly through large-scale asset purchases of agency debt and mortgage-backed securities. To a considerable extent, that program was aimed at rehabilitating a particular financial market that was functioning poorly at the time. From that perspective, the report card reads favorably. Lingering issues in the mortgage market (e.g., the foreclosure confusion) are not related to the original malfunction the Fed sought to cure.

In QE1 (Nov 2008-Mar 2010), the expansion of the Fed balance sheet, and especially the provision of a large amount of bank reserves, was incidental.

QE2 (Nov 2010-Jun 2011) was not about a poorly functioning piece of the financial system. The Treasury market had been functioning just fine. QE2 was about the Fed doing large-scale asset purchases to boost aggregate demand and eventually create more jobs.

How do we get from expanded central bank balance sheets to real economic performance? There are four broad policy transmission paths economists have theorized about over the years as follows:

  • A money supply effect, which one might identify with old-fashioned (although perhaps again more timely) monetarism.
  • An interest rate effect, which one might identify with a Keynesian marginal efficiency of investment analysis.
  • A portfolio or credit channel or collateral value effect, which one might identify with the scholarly contributions of “Professor Bernanke” himself, among others.
  • A foreign exchange effect that, in current circumstances, may be more a matter of “forcibly enrich thy neighbor” global capital flows than “beggar thy neighbor” competitive devaluation.

QE Transmission Mechanisms

The Results to Date

Interest Rates – Generally speaking, the empirical evidence suggests that both rounds of QE and Operation Twist were effective at reducing interest rates on long-term Treasury securities. The estimates of reduction in the 10-year Treasury yield ranges between 20 and 110 basis points, with most estimates in the lower two-thirds of this range. Both theory and empirical evidence suggest that the reductions in interest rates primarily reflect lower risk premiums and lower expectations of future short-term interest rates.

The evidence also suggests that LSAP lowered nominal interest rates on agencies, MBS, and corporate bonds, with magnitudes differing across bond types and maturities. Since QE1 included significant purchases of MBS (totaling $1.25 trillion), it was seen, naturally, as being more effective in lowering the rates on those mortgage-related assets.

In addition, QE1 provided liquidity support to a largely dysfunctional market, and therefore its impact was probably larger than that of QE2 and Operation Twist, which were conducted in more normal environments.

Macroeconomic Effects – Research dedicated to the effects of LSAP on GDP and employment is limited, but they do generally find these programs to be effective at promoting GDP growth, though to different extents. One study (Fuhrer and Olivei, 2011) found that $600bn Treasury purchases would increase real GDP by about 40-120bps while another study (Chen et al., 2011) suggested that the effects on GDP growth are not very likely to exceed 50bps. By using Okun’s law, the Fuhrer and Olivei study also theorized that the unemployment rate would drop by 30-45bps.

It should be noted that the estimated (as opposed to observed) effects on GDP and the unemployment rate are more gradual, usually taking place over the course of about two years.

The unconventional measures were generally seen as effective in preventing deflation at the zero lower bound through the signaling effect. However, economists do have contrasting opinions on the magnitude of QE’s price impact.

One study (Krishnamurthy and Vissing-Jorgensen, 2011) found that QE1 increased 10-year expected inflation by 96-146bps and that QE2 raised it by 5-16bps. On the flip side, one study (Chen et al., 2011) concluded that the inflationary consequences of QE1 and QE2 were less than 50bps. The Federal Reserve Bank of New York noted that inflation actually trended lower over the period when QE1 was in progress, though it probably fell less than it would have done without the asset purchases.

Pros And Cons

Empirical studies of the effects of the Fed's balance sheet operations suggest that QE designed to address general economic malaise is less potent than a program targeted at a specific market dysfunction. Even QE proponents on the FOMC stress that asset purchases are not the silver bullet that will cure all that ails the US economy.

Meanwhile, the drawbacks of additional easing may be rising. In his press conference on June 20, Chairman Bernanke explained that unconventional policy has costs and should not be used without serious consideration. Among the costs he cited were (1) potentially making the Fed’s exit strategy more difficult, (2) potentially creating negative implications for market functioning, and (3) financial stability issues (about which he was very vague). The minutes of the June 19-20 FOMC meeting suggested that other Fed officials are also considering the potential limits and drawbacks of large-scale asset purchases:

“A few members observed that it would be helpful to have a better understanding of how large the Federal Reserve’s asset purchases would have to be to cause a meaningful deterioration in securities market functioning, and of the potential costs of such deterioration for the economy as a whole.”

Paraphrasing comments from San Francisco Fed President John Williams, the negative effects of unconventional monetary policy have received scant attention in the research literature and are not well understood.

Future studies should weigh these costs against the value of asset purchases for macroeconomic stabilization. In the meantime, in the face of decidedly inadequate job growth and low inflation, Fed policymakers are likely to conclude that QE3 will do more good than harm.


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Sun, 07/15/2012 - 22:47 | 2619198 CURWAR2012
CURWAR2012's picture

Put some fucking QE on that market!

Sun, 07/15/2012 - 23:39 | 2619283 The They
The They's picture

"They" always say that interest is the "price of money"... FALLACY! The price of money is whatever that money will buy. People can, theoretically, live without money (like our hunter gatherer ancestors). What they can't live without is TIME. Interest, in the market place (from which it derives its existence and reality), is the price of TIME. Time is the ESSENCE of human experience! To devalue time is to devalue humanity! CENTRAL BANKERS and CENTRAL PLANNERS are CRIMINALS for devaluing the human experience and history will judge them for their insolence!

Mon, 07/16/2012 - 01:03 | 2619410 Western
Western's picture

Basel III will be the bazooka coming after QE3.


Somebody rather intelligent (link) said "We have $1.42 trillion of excess reserves.  We are now going to be told that there will be no capital reserve requirements on owning sovereign debt.  You will have commercial banks flooding the market with the purchase of sovereign debt.  Not just US debt, Portuguese debt, Spanish debt, Greek debt, all of that debt will have zero capital requirements.”


Looking like it will add $15trn to the money supply.

Mon, 07/16/2012 - 01:49 | 2619440 Richard Chesler
Richard Chesler's picture

Most cockroach bankers are still alive ergo it works.

Suck it up muppets.

Mon, 07/16/2012 - 05:23 | 2619545 RECISION
RECISION's picture

Does it work...?


It does something.

Just a pity we have no real idea what - beyond some wild arsed guesses, and some expedient short term looting.

Mon, 07/16/2012 - 06:30 | 2619577 economics9698
economics9698's picture

It’s amazing the different ways bankers come up with excuses to print.  This blog gives four of them.  All four create wealth for the Federal Reserve by stealing it from people who worked for that wealth.  It’s the same game over and over.  Print, give to friends, get assets at old price level, inflation, assets appreciate at the expense of the general public aka Muppets, peasants, the unwashed, and other derogatory names.

Quantitative easing is stealing from the public, legalized theft by elites.  It’s the bankers’ job to package it in a way that will sell the theft to the public.  Pretty fucking good work if you can get it

Mon, 07/16/2012 - 06:32 | 2619578 economics9698
economics9698's picture

And speaking of fucking inflation my favorite peanuts at Wal-Mart have gone up 32% in the last fucking year.



Mon, 07/16/2012 - 03:05 | 2619480 Davalicious
Davalicious's picture

>Looking like it will add $15trn to the money supply.

Looks like happy days coming this bonus season.

Mon, 07/16/2012 - 04:56 | 2619530 andrewp111
andrewp111's picture

All sovereign debt is not equal. Spanish and Portugese debt is equivalent to US State debt. It would be laughable to suggest there should be no reserve requirements for munis.

Mon, 07/16/2012 - 06:58 | 2619590 Withdrawn Sanction
Withdrawn Sanction's picture

Looking like it will add $15trn to the money supply.

Well maybe.  Depends critically on whether banks lend those bond sale proceeds.  Moreover, if banks flood the mkt w/sovereign bonds, bond prices fall, and interest rates rise.  That makes borrowing less attractive at the margin.  Second, and perhaps more importantly, banksters are scared and dont want to lend to average Janes and Joes.  They know there's still a crapload of bad debt in the system that remains to be cleared AND a steaming pile of derivatives larded on top of it.  Throwing good money after bad only makes the problem worse (not that they wont do it, it's just not likely).

So while it's possible for excess reserves to divert into the money supply, as long as the lending channel remains clogged, that outcome is unlikely.

Sun, 07/15/2012 - 22:48 | 2619201 New_Meat
New_Meat's picture

"Does QE really work?"

Why, that's a negatory, "Big Ben"

- Ned

{pun intended}


Sun, 07/15/2012 - 23:52 | 2619326 RockyRacoon
RockyRacoon's picture

"...four broad policy transmission paths economists have theorized about over the years..."

Not having many years left for the economists to work out the kinks and all, I think we should dump the economists and hire some auto mechanics to run this thing.   Not much theory involved in an internal combustion engine.

Mon, 07/16/2012 - 04:43 | 2619523 jeff montanye
jeff montanye's picture

as yogi noted, in theory there is no difference between theory and practice.  in practice, there is.

Sun, 07/15/2012 - 22:49 | 2619206 Capitalist
Capitalist's picture

Creating inflation never works.

Sun, 07/15/2012 - 23:33 | 2619296 LowProfile
LowProfile's picture

If your intent is to screw the savers in that currency (and all the other knock on effects, e.g. wealth iniquity, government expansion, etc. etc.), then it works famously.


Sun, 07/15/2012 - 23:40 | 2619310 cranky-old-geezer
cranky-old-geezer's picture



Does QE really work?

Yea, it works great for JPM, GS, BAC, and lots of other banks on the receiving end of it.

Sun, 07/15/2012 - 23:55 | 2619329 vast-dom
vast-dom's picture

Agreed. QE works swimingly to strip savers. It works to destroy yield curves. It works to game markets. It works. It really does.

Mon, 07/16/2012 - 04:58 | 2619533 andrewp111
andrewp111's picture

Yes. QE removes risk-free interest bearing assets from the private sector permanently. QE makes stocks, corporates, and real estate go up in price. That is what it is intended to do.

Mon, 07/16/2012 - 08:31 | 2619635 Voluntary Exchange
Voluntary Exchange's picture

Theft, fraud, and criminal force "work" from the standpoint of a criminal as long as the criminal can evade restitution for his crimes.  The state created limited liability scam  is the foundation upon which the most successful criminals continue to build.


If you combine that with legal tender laws, now you have entered the world class of criminality: the banksters.


End limited liability. End legal tender laws. End monopoly state mandated and criminal force sustained justice and human "law" systems that are crafted and exist so as to violate the higher natural laws: the higher natural laws that hold the primacy of life, liberty, and property of every individual. Then we may seek true justice and full restitution from any who would dare to practice theft, fraud, or criminal force.  


Such "higher laws" could be described as natural laws of humanity because, to so empower every individual equally to defend against theft, fraud, and criminal force is to promote the fruits of genuine voluntary exchange:  peace, prosperity, and happiness. Conversely, to violate these higher laws through false man-made laws is to empower involuntary exchange which promotes death, scarcity, and misery. 


Quoting from Frederic Bastiat and his 1850 essay "The Law" (


What, then, is law? It is the collective organization of the individual right to lawful defense. ...


If every person has the right to defend---even by force--his person, his liberty, and his property, then it follows that a group  of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right---its reason for existing, its lawfulness--is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force for the same reason---cannot lawfully be used to destroy the person, liberty, or property of individuals or groups. (emphasis mine)


If you are able to grasp these truths as presented by Bastiat, then maybe you can deduce that the words of the United States Constitution in article 1, sec 8: "The Congress shall have Power To lay and collect Taxes, Duities, Imposts, and Excises..."   would fail this test of lawfulness in that it violates individual property rights.  No individual has the "right" to take other people's property without their consent. It thus follows that no group of individuals (such as "Congress") would collectively have such a right. If you think that there must be taxes because there must be a state to provide security or an agreed to body of laws, I would urge you to study up on free market solutions to such questions that only involve voluntary exchange

Here are some more links:


"The Story of Your Enslavement" - 


"Democracy- The Joke's on You!" - By Larken Rose


"Let's Make a Deal" - By Larken Rose


"I'm Allowed to rob you!" - By Larken Rose


"A Stupid Idea" - By Larken Rose




"State or Private Law Society" -


“Chaos Theory: Two Essays on Market Anarchy“ -


"No Treason, No. 1"


"Disproving the State" - 


"A Virus of the Mind" -


"The Story of Our Unenslavement" - 


"The Law" - by Frederic Bastiat


"The Myth of the Rule of Law" -


"The Handbook of Human Ownership - A Manual for New Tax Farmers" 


For those who can tollerate the vulgar metaphores:

"The American Dream" - By George Carlin


Sun, 07/15/2012 - 22:54 | 2619213 runlevel
runlevel's picture

Anyone else notice the Silver chart?

Triple bottom with double bottom confirmation PLUS falling wedge?


i know TA "doesnt work" but ...

Sun, 07/15/2012 - 23:28 | 2619284 sablya
sablya's picture

I would say that the more often silver touches the support line, the more likely it is to fall through.  The same basic chart holds for gold as well.  People holding physical don't need to worry but in my view the paper value of PMs is going to suffer a major decline before it stages an enormous rally.  

Mon, 07/16/2012 - 00:51 | 2619399 HungrySeagull
HungrySeagull's picture

What is Volume on the Silver Chart? Is it people wanting to BUY? Or Sell?

Silver has been difficult this year.

Now for those who own Physical such as myself, I keep wanting lower prices so I can buy cheaply.

Those playing with Paper Silver are going to get burned. I hate to say it that should come sometime august.

A way out will be to sell the imaginary paper and buy actual physical and pick it up at the Post Office.

Then there is a another part of me that will buy silver at any price all the way to 50.

Bids would have a orgasm over that. however my Asks is low and always lower.

Buy low, sell high. But in this environment, dont sell. Just stack.

Sun, 07/15/2012 - 23:04 | 2619236 BlackGoldTexasTea
BlackGoldTexasTea's picture

It works insofar as the financial and banking system and US government hasn't completely collapsed yet.  The US government is still able to prop up GDP through deficit spending financed by debt monetization and has avoided a Greek-like debt spiral.

You know, a liquidity trap, while an absurd Keynesian concept, wouldn't really be all that bad.  Japan has a very high standard of living.  But, their currency crisis is coming too.  Their savings rate is now comparable to that of the United States, and they have recently flirted with trade deficits.

Sun, 07/15/2012 - 23:04 | 2619240 tmosley
tmosley's picture

It clearly doesn't, but evidence never stopped a Keynesian before.

Sun, 07/15/2012 - 23:10 | 2619252 Skateboarder
Skateboarder's picture

Even breaking their hands and legs won't. "Off with their heads" is the only option...

Mon, 07/16/2012 - 03:13 | 2619484 ebworthen
ebworthen's picture


You mean that stuff that is not being used to jail Mozillo, Corzine, and the LIEbor crooks?

The SEC, the "Justice" Department, and the rest of law enfarcement are lubing up the public with it rather than using it to ease cuffs onto the criminals in Wall Street and Washington.

Bend over everyone, they're just getting started.

Sun, 07/15/2012 - 23:14 | 2619260 disabledvet
disabledvet's picture
and "we ain't talkin' corn here" folks. this is actual...and "mere" This is not to say the mission of the Fed has been a failure. I have always been unclear of the goal (is it to get interest rates down or be non-inflationary?)--what I do know is that the Chairman's consistent goal has been throughout to maximize employment as part of the Fed's dual mandate. Clearly the "marginal utility" of lower interest rates relative to creating full employment has run its course. In order for the Program to attain higher degrees of effectiveness a...ahem...RUTHLESS application of the FORCE of law must be yielded such the any corruption of the Government monies is rooted out and the target of said monies both reaches its intended target and just as importantly achieves its intended result.

Sun, 07/15/2012 - 23:23 | 2619270 Solon the Destroyer
Solon the Destroyer's picture

QE and QE II were supposed to work in only one way: provide a bid in the bond market for non-yielding Treasury Paper. From that pov, it has been a resounding success.

Even the extension of Twist has been a success. After all we're getting record lows for said Treasury Paper. If front-running the Fed disappears, then the bond market disappears, ending the Fiat Con.

So yeah, gotta say the QEs have served the purposes for which they were actually intended. Which had nothing to do with Main Street or the Real Economy.

Sun, 07/15/2012 - 23:45 | 2619316 disabledvet
disabledvet's picture

not true. if you're in the midwest Ag space this guy has been the greatest boon ever. in fact the real problems are coming from state and municipal governments which have made incredible promises to its work force that would have required market returns beyond belief and going on ten years now in order to pay out. "the chickens really are coming home to roost" on that one. which makes to goal to "get employment moving" more than merely "laudable." for most of the USA if the labor market doesn't turn around "con gusto" then the bulk of government in the USA could find itself in Dire Straits indeed.

Mon, 07/16/2012 - 00:37 | 2619382 Solon the Destroyer
Solon the Destroyer's picture

Everyone thinks the Bernanke put is in the equity markets. That's an absolute head fake. The only market that really matters to Bernanke, the one Central Bankers depend on, is the Treasury Market. That's where the Bernanke put really is. The fucking with the equity market is there to distract the public from the extensive open market operations in the bond market. And what that means to bond speculators.

Not the Tylers, though. They're all over it.

Sun, 07/15/2012 - 23:26 | 2619273 Monedas
Monedas's picture

Monedas has been banned for life from the Kitco Forums !   His last suspension, one year, was reviewed by the higher ups and was upgraded to the exclusive life sentence .... kind of like a BLS revision ?  It's an exclusive club that only a few have earned their memberships to ! His money is still good at the bar (Kitco Store) !          Monedas        1929          Thanks Tyler for your open forum !   

Sun, 07/15/2012 - 23:31 | 2619291 LowProfile
LowProfile's picture

Post that shit here, love to read what got you booted!

Sun, 07/15/2012 - 23:40 | 2619309 Monedas
Monedas's picture

It was basically the same shit I post here !   SEG/ON      Banning and deleting is so Socialist !  They are a corporation .... so the tolerance for off beat stuff is less !  There's plenty of good people over there .... thank God Tyler has the brains and balls to let us get away with murder over here !

Mon, 07/16/2012 - 01:10 | 2619415 Beam Me Up
Beam Me Up's picture

Don't spend much time at Kitco anymore.  Any company that would pay

that idiot Nadler to write doesn't rate my time.


Sun, 07/15/2012 - 23:36 | 2619303 Colonel
Colonel's picture

Don't worry Kitco will be going out of business courtesy of TPTB.

Sun, 07/15/2012 - 23:56 | 2619317 Monedas
Monedas's picture

I want a Libertarian republic where corporations can be bold, daring, inventive, fearless .... like in the good old days cerca 1890 !  After all: "A corporation is just a partnership that got so big they had to pass out numbers !"....Monedas

Mon, 07/16/2012 - 00:13 | 2619358 The They
The They's picture

"where corporations can be bold, daring, inventive, fearless"

don't forget the most important part: "not helped by government"

Mon, 07/16/2012 - 02:09 | 2619444 zhandax
zhandax's picture

I want a Libertarian republic where corporations can be bold, daring, inventive, fearless ....

I want a Libertarian republic where S&P 500 corporations are castrated and broken up into smaller businesses.

Mon, 07/16/2012 - 06:39 | 2619583 LowProfile
LowProfile's picture


I want a Libertarian republic where S&P 500 corporations are castrated by the market and replaced by smaller businesses.

Fixed it.

Mon, 07/16/2012 - 07:16 | 2619611 Ghordius
Ghordius's picture

LowProfile, we know that this does not work. "The Market" is not a mythical creature with many invisible hands as Adam Smith is often misunderstood to have meant.


The truth is there are many, many markets with many different characteristics, and they work best when they are properly understood by all partecipants - which then often leads to common understood principles and restrictions for the greater good - taken up by all partecipants. In fact, the "best" working markets resembles cartels where no partecipant is shut out of the cartel. And markets function imperfectly. They are not perfect, just the best we have achieved, so far.

Example: who said that a 24/7/365 market is better than a market that opens for one day in the week only? Who said that a continuos open bid/call is better than let's say a Dutch Auction? The answer is: it depends. Have a look at fresh fish markets around the world, and you'll find many, many adaptations of various themes.


Fact is, small business has few friends in most countries. Big Biz has many friends, even on the left, thanks to the massive political power this phrase has: "if you are against our business, you emperil the livehood of our thousands of employees". Big Biz has automatically the better financing, too, except if you have the banks structured in a way that does not hurt small biz too much.


I know, some US libertarians argue that monopolies do not happen without the State helping. Though I differ on this a bit, the fact is that we do have monopolies in form of trusts and cartels. And roughly every second/third generation finds out that too much is too much. But until now every time it was some Government restricting (Emperor Augustus' edicts on corporations) or cutting to pieces (the US gov's Standard Oil or Bell restructuring) or fining (the EU and then the US fines on Microsoft) the monopolists. I am not aware of any instance in history of "the market" ever getting rid of a successful trust alone. Note that I'm not talking about a near monopoly of a product that is getting obsolete and where new companies make a new product better and cheaper, I'm talking about a trust: some partecipants capturing a market and squeezing it.

Mon, 07/16/2012 - 08:39 | 2619720 i-dog
i-dog's picture


"The truth is there are many, many markets with many different characteristics, and they work best when they are properly understood by all partecipants - which then often leads to common understood principles and restrictions for the greater good - taken up by all partecipants."

With all due respect, Ghordie, that is absolute gibberish!! The market is the market (irrespective of what the meaning of "is" is).

"we do have monopolies in form of trusts and cartels"

Like monopolies, these can't exist without government.

1. Trusts are merely a form of tax and liability avoidance that would have no meaning without government tax farming. Direct contracting cannot escape liability.

2. Cartels can only be formed when government simultaneously erects barriers to entry against "outsiders".

Mon, 07/16/2012 - 09:47 | 2619965 Ghordius
Ghordius's picture

I think I know a bit of this stuff
1. Trusts: old word for cartel or MegaCorporation, as used in the 19th Century. See wiki: - - the Sherman Act of 1890, also known as Sherman's antitrust law
2. Cartels can exist without government intervention or without government altogether. This is totally irrelevant for the point I'm trying to make (I wrote: "I know, some US libertarians argue that monopolies do not happen without the State helping. Though I differ on this a bit, the fact is that we do have monopolies..."). I'm completely indifferent to this, the US Libertarian POV can stay as dogma as much as you like. My interest is in how to get rid of trusts, a word I prefer to monopolies and cartels because the legislation against it already exists - even though of course the word is steadily losing the old meaning (ding, ding, why?).
Cases of cartels without government intervention: the slave markets of the sub-saharan zone for hundreds of years had several private cartels fighting wars against each other. The beer markets of several northern european countries had several times cartels, as the vodka markets of the old Russian Empire. The grain markets of ancient Rome had three times cartels, lastly legislated away by Augustus. I could argue that the buccaneers of the Caribbean formed several cartels during their age. But the best example are the guilds of the european Middle Ages, which were something like a hybrid out of a profession's cartel and a trade union, becoming so powerful that they became the government.
In fact, the Liberal Revolutions of 1848 were first against restrictions on trade, commerce and production (i.e. everybody should be allowed to produce beer, barrels, whatever) and second about political representation. Liberal as a word started this way, denoting universal freedom of trade (a word that at that time meant production and profession, too).

Mon, 07/16/2012 - 11:11 | 2620230 i-dog
i-dog's picture

A. I'm not a "libertarian".

B. One man's "dogma" is another man's "principle".

C. As long as you rely on "legislation" to solve problems, you are running around in circles. Cronyism, lobbying, arbitrage, legalese, loopholes, vested interest, selective enforcement, interpretation and jurisdiction will always defeat what you are honestly trying to achieve.

D. The instantly interconnected, well-armed and fully settled world of the 21st century is not the world of the Romans or of the 17th century buccaneers - when "government" was by kings, nobles and priests until nation state governments [partially] replaced them.

E. Your definition of a cartel is simply a group of actors acting in concert against another group of actors. In none of your examples did any one group not have competition, and thus each was in turn driven out of business by newer competition. That's exactly the way it should be: Innovation stops cartels in their tracks very quickly and sees the capital reallocated more productively.

F. I'm fully aware of what liberalism means. It's you who always reverts to "labels" rather than principles. Are you not able to expound a principle? For example, the non-aggression principle?

End of boring conversation.

Mon, 07/16/2012 - 11:59 | 2620428 Ghordius
Ghordius's picture

LOL - if we continue this way we'll have accusation of sockpuppeting


A. the reference about "libertarian" started in LowProfile's post

B. I repeat, I'm indifferent to this "dogma" (as I call it)

C. I am not "relying" on "legislation" - just pointing out that for this, legislation is often the efficient way - historically. My interest is in getting rid of them.

D. Yup, history has a few "low-or-no-government" examples - which I thought would be of interest for voluntaryists. My mistake. Though I picked them only up as examples. Do you prefer contemporary black markets?

E. That's why I prefer the word "trust" and no, it's about keeping competition out and squeezing the max out of the market. Are you mixing up the cases? Can't follow you on this.

F. eh? I was making the point that antitrust was more important than representation to the 1848 revolutionaries, why is this again a "label war"?


i-dog, whenever we have a discussion I have to remind myself that English is still my weakest language - my whole way to put arguments seems to make you irate (irateDog?). you often see a strawman where I don't (I had to look up the term) and we meander into sidepoints.

My original point is that there is no such thing as an "omnipotent" market. There are many, many forms of markets, which depend on many things to achieve some positive qualities, for example they have to be organized and structured by the partecipants to achieve transparency.

Mon, 07/16/2012 - 05:06 | 2619538 Skateboarder
Skateboarder's picture

I want a world without corporations at all.

Mon, 07/16/2012 - 06:40 | 2619584 LowProfile
LowProfile's picture

I see what you did there.

Mon, 07/16/2012 - 06:20 | 2619568 negative rates
negative rates's picture


Mon, 07/16/2012 - 00:07 | 2619280 alfred b.
alfred b.'s picture


   It won't work if it's too small; but it will buy some time if it's massive...and most likely free the price of PM's as well as other commodities.   And for sure it will be painful for those on fixed income...not that this will bother the fed much.

   Before doing QE2, the fed asked for broker input.  Goldman, at that time proposed 4 trillion; but the fed opted for only 600 B.  ...not enough for the trickle down effect they were hoping for:  so, of course it was a flop.

    Buy physical gold and silver.



Sun, 07/15/2012 - 23:31 | 2619293 Gromit
Gromit's picture

The alternative is too dire to be considered.....

Sun, 07/15/2012 - 23:34 | 2619298 LowProfile
LowProfile's picture

...For who?

Sun, 07/15/2012 - 23:36 | 2619302 Gromit
Gromit's picture

they who decide

Mon, 07/16/2012 - 02:08 | 2619452 LowProfile
LowProfile's picture

They are pretty much fucked either way.

Mon, 07/16/2012 - 07:25 | 2619621 Gromit
Gromit's picture

works until it doesn't.....

Sun, 07/15/2012 - 23:34 | 2619299 JohnG
JohnG's picture

QE will not work by fiat.

Gold is the wall the can will bounce from.

Mon, 07/16/2012 - 05:05 | 2619537 andrewp111
andrewp111's picture

Maybe QE3 will be coordinated central bank purchases of gold, worldwide.  If they want to dump lots of cash into the private sector, that is one sure way to do it. And central banks will hold their gold forever, so what do they care what it costs?

Sun, 07/15/2012 - 23:34 | 2619300 Spitzer
Spitzer's picture

As long as there is a US bond bubble, it seems to at least kick the can down the road.

Sun, 07/15/2012 - 23:44 | 2619314 Let The Wurlitz...
Let The Wurlitzer Play's picture

Does QE work???  Has unemployment inproved???  Just to review ...

Money supply effect?  Just how was the FED front running treasury bonds adding to money supply??  It did not increase the treasuries budget - that was already set by congress.  What was the transmission vehicle of this "Money" to the people???

Interest reate effect? - Yes, treasury rates are lower so congress could expand the budget with less short term pain but the long term pain will be much worse for average Americans.  Oh yeah, if you still have a decent job and were not upside down on your house you could refi with a lower rate (not that these people needed to refi).

Protfolio/credit channell/collateral value effect - Berry and Bernankes New York investestment buddies made a ton of money chasing a major bond and presious metals momentum trade.

Foreign Exchange effect - Bull shit, the dollar has been rising since mid 2008, please check the chart dumbass!!!!!


Sun, 07/15/2012 - 23:52 | 2619325 babylon15
babylon15's picture

Wouldn't a drug addict declare cocaine a success in the first 20 minutes also?  Is that evidence that cocaine is good and we should all do it?  The reality is cocaine and QE have very long term consequences that are obvious but often ignored.

Sun, 07/15/2012 - 23:57 | 2619334 chump666
chump666's picture

The Fed will send us to war

Mon, 07/16/2012 - 00:01 | 2619340 ItsDanger
ItsDanger's picture

QE3 will have the least impact for obvious reasons.  QE treats the effect not the cause.  The powers that be have other objectives than fixing the economy.

Mon, 07/16/2012 - 00:05 | 2619345 DarkChicago
DarkChicago's picture

If QE works in a bad economy then we should always do it! In the late '90's market we had 3+% unemployment, had we QE'd then we would have all been millionaires! Right? Or, in reality, the CRA and super govt benefit scams would have collapsed sooner.

Gents, let's face the facts. We've been lied to and victimised by economically savvy statists since The New Deal!

Only a generation of Reagan Republicans and libertarians could bring us back to a truly free nation. THAT WILL NOT HAPPEN. All that's left to us is to worry about our selves and in so doing help our family, friends and our nation.

Mon, 07/16/2012 - 00:19 | 2619368 RobotTrader
RobotTrader's picture

If Krugman was in charge, we would not be in a recession, the Dow would be over 15,000, the Euro Crisis would have never happened, and the gold bugs would be happy with the price well over $2,000.

Mon, 07/16/2012 - 00:21 | 2619369 chump666
chump666's picture

you missed out one thing:


Mon, 07/16/2012 - 00:56 | 2619405 Fecklesslackey
Fecklesslackey's picture

And Oh ... the national debt would be 25 trillion, the FED balance sheet would be 6 trillion, and we would have seen the end of the petro dollar. For every upside there is a downside.

Mon, 07/16/2012 - 01:26 | 2619426 Poetic injustice
Poetic injustice's picture

You really underestimate Krugman. Gold only 2000? And Eurocrisis would happen anyway. we got our own Bernanke. But European policy on average IS more prudent, at least in northern countries.

Mon, 07/16/2012 - 01:46 | 2619435 BlackGoldTexasTea
BlackGoldTexasTea's picture

Krugman would never take a job where he had any actual power to implement his policies or had any responsibilty for the policies being implemented.  He's either lying or delusional and actually believes what he says now.

He just wants to sell his books to his cult-like followers and worshipers.  He's in the business of telling people what they want to hear.

If a Republican were in the White House, his tune would be much different.

Mon, 07/16/2012 - 02:15 | 2619457 LowProfile
LowProfile's picture


If Krugman was in charge, we would not be in a recession, the Dow would be over 15,000, the Euro Crisis would have never happened, and the gold bugs would be happy with the price well over $2,000.

No, the DOW wold be over 15,000, gold would be slightly above the DOW in USD terms, oil would be at $300+, the USD would be conversely and equally lower, the EUR would be devalued but stable (15% gold MTM does wonders for a currency), the military would be in all major US cities, bankers, financiers and their toadies (Krudman included) would be fleeing the country, etc. etc.

...You really don't understand the macro picture, do you?

Mon, 07/16/2012 - 00:36 | 2619379 Son of Loki
Son of Loki's picture

It's a matter of perspective. The QEs have been very successful from the bankers view. Lets look at why.

The Fed "does" QE. The Fed is owned by bankers. The Fed's primary mandate is to serve its owners. Each QE resulted in record bonuses for bank CEOs and executives. Remember, the average bonus at GS alone in 2010 was over $800,000. That's the AVERAGE and does not include their steep salaries for that year. Same for JPM, BAC, an dso on .

You get the picture.

Mon, 07/16/2012 - 00:40 | 2619386 gwar5
gwar5's picture

I think the diminishing effects of Stimulus spending and QE haave the central banks freaked out -- "It wasn't supposed to be like this!!" 


They're too predictable. I suppose they'll jawbone it as long as they can to save their powder. But, when they do QE next time it may be for keeps with a rumored big wad number of $20-100 Trillion. Surprising everybody with timing and size of QE, giving Krugman a happy ending, is their only hope. Lord help us, every one. 

Mon, 07/16/2012 - 00:41 | 2619388 yogibear
yogibear's picture

With the drought and QE3 and QE4  commodity prices will go up significantly!

Benny Bernanke and the Fed can shoot for $200/barrel oil this time around. The Middle  east is getting smarter, their cutting oil production to boost prices. Save what you have.

The only thing Bernanke and the Fed have left is to trash the US dollar and print.



Mon, 07/16/2012 - 00:53 | 2619402 Fecklesslackey
Fecklesslackey's picture

Cut production unless buyer pays in gold and then they can have all they want.  When Saudi Arabia decides to accept gold only for oil .... that initiates the Black Swan End Game.

Mon, 07/16/2012 - 05:11 | 2619541 andrewp111
andrewp111's picture

Nah. Saudi Arabia is too dependent on the US military for regime survival. A nuclear weaponized Iran will demand gold for oil, and insist that OPEC do the same. I have long expected this.

Mon, 07/16/2012 - 00:48 | 2619397 Snakeeyes
Snakeeyes's picture

QE is like alcohol. Works at first, but the impact diminishes. I have written numerous times about extremely low m2 money velocity (GDP/money supply) which points to QE being ineffective.


Mon, 07/16/2012 - 00:56 | 2619404 HungrySeagull
HungrySeagull's picture

They are not doing it correctly.

If every Adult Citizen in the United States was issued a bank deposit of at least 75,000 dollars it will only be 1.125 trillion or so dollars in total.

However the Nation will certainly enjoy a "High" which should be made permanent by paying off credit card or student loans, mortgage etc.

What I am afraid of is a burst of buying which will make the Economy and People very happy but increase in debt. Then it's back to the Soup Kitchen Kettle and ask "More"?

Mon, 07/16/2012 - 01:04 | 2619411 VallejoVillain
VallejoVillain's picture

75k in the bank would seem like a million bucks. I could sleep a little better at night.

Mon, 07/16/2012 - 01:27 | 2619427 Poetic injustice
Poetic injustice's picture

Obama offered around 3,000 for each.

Mon, 07/16/2012 - 04:23 | 2619517 HungrySeagull
HungrySeagull's picture

I know exactly what will happen to that 3K.

Gold please and make that delivery fast.

Mon, 07/16/2012 - 01:37 | 2619430 Tom Green Swedish
Tom Green Swedish's picture

I do not need fancy charts or an analysis to confirm QE doesn't work.  Alan Greenspan is on the record saying it doesn't.  It hasn't worked for Japan.  The simple fact of the matter is the USA is getting killed by our own policies, it has nothing to do with the consumer or the economy.  The policies are broken.  We have not adapted to a changing world correctly.  Our only solution ever has been to create a War.  Well guess what, that strategy is not working now and it only worked a couple times, both under extreme circumstances. It doesn't work against enemies who are not competitive with us.  And it doesn't work when  you spend all your money on one, while the rest of the world is at peace. The government really needs to think differently.  When Obama said its time for Change he was right, unfortunately the change we need is not socialism or printing money or raising deficits and acting like Bush or Clinton.

Mon, 07/16/2012 - 05:19 | 2619543 andrewp111
andrewp111's picture

Of course QE worked. Bernanke himself told us "that asset prices are much higher than they otherwise would be".  Maintaining the value of collateral has kept the banks alive and the bonuses flowing. The question now is not whether QE worked in the past, but what would QE do today? The Fed already owns most of the long term Treasuries in existence. If they do QE3, it can't be the purchase of Treasuries. They could buy mortgages, corporate debt, or equities. They could also buy gold and simply store it forever.  I  bet QE3 will be mortgages and gold. Buying mortgages bails out Fannie and Freddie, and buying gold injects cash into the private sector.

Mon, 07/16/2012 - 03:06 | 2619481 ebworthen
ebworthen's picture

Does QE work?

Does masturbation produce children?

Mon, 07/16/2012 - 04:25 | 2619518 HungrySeagull
HungrySeagull's picture

It might if you and your lower is mutually doing that as part of the encounter.

It's about all I can say here without opening a can that cannot be reshut in today's screwed up world.

Mon, 07/16/2012 - 09:03 | 2619798 WmMcK
WmMcK's picture

That sounds like a setup to me;
No, but it is sex with someone you love.
-- W. Allen

Mon, 07/16/2012 - 03:17 | 2619483 Mediocritas
Mediocritas's picture

They've (Credit Suisse) got the wrong read on QE2.

ZH is one of the few sites that (eventually) got the read right: QE2 was a response to Greece going down, it was a Eurodollar bailout and had nothing to do with the US economy beyond preventing a domestic drain from funds flowing to Europe to plug a Eurodollar hole. In the end, $500 billion ended up over the pond as Eurodollars thanks to QE2. See:

Assessing QE2 from the perspective of the US economy is pointless because QE2 wasn't about the domestic economy, it was about the Eurodollar economy.

Here was ZH on the matter:

Mon, 07/16/2012 - 03:30 | 2619493 deebee
deebee's picture

QE does not work in a deleveraging.

Mon, 07/16/2012 - 04:41 | 2619521 zorba THE GREEK
zorba THE GREEK's picture

QE does work for who it is really intended, the very rich.

Mon, 07/16/2012 - 05:10 | 2619540 mrmic2027
mrmic2027's picture

after reading it seems to me none of the brain surgeons don't know if it works either

but let's do it anyway it's not our money

Mon, 07/16/2012 - 05:52 | 2619555 TWSceptic
TWSceptic's picture

QE works for the economy like heroin works for an unhappy person.

Mon, 07/16/2012 - 06:24 | 2619573 negative rates
negative rates's picture

Deserts spelled backward is stresed, works for me.

Mon, 07/16/2012 - 07:01 | 2619595 oldgasII
oldgasII's picture

Quantitative Easing: What a bear does in the woods after it has eaten to much bad squid.

Mon, 07/16/2012 - 07:13 | 2619607 blueridgeviews
blueridgeviews's picture

The genius' create the problem with too easy money. Now that everyone is up to their necks in debt. Local, state and federal governments spending like that easy money expansion would last forever we find ourselves at the end of the road. What do these genius' think? By creating more easy money they can keep this insanity going.

What we need is a change in thinking at the Fed.

Mon, 07/16/2012 - 08:19 | 2619688 negative rates
negative rates's picture

That just aint gonna happen, which is why we currently, and for the foreseeable future, will have negative real interest rates coming from the Fed.

Mon, 07/16/2012 - 08:01 | 2619655 orangegeek
orangegeek's picture

Since QE's entered the market, price action has limped up for extended periods and then collapsed in a very short period of time.


All in the name of getting re-elected.  What a mess.

Mon, 07/16/2012 - 08:03 | 2619657 Quinvarius
Quinvarius's picture

QE works if the goal is keeping zombie banks from dying.  It has been too targeted to trickle down into the economy.  The Fed would have to do public QE to get a public effect.  They would have to pay off half of everyone's mortgage or something like that if they wanted to help the economy or stabilize housing.  But, that has never really been their goal.  The Fed's concern is not the real economy.  They are so divorced from the real economy they don't even want full employment as part of their mandate anymore.  The only reason that full employment goal was in there was to keep them from arranging a market crash for bank profits.  It is much easier to destroy than build.  All the Fed wants to do now is support banks, support government spending, and protect their worthless paper monopoly.

Mon, 07/16/2012 - 09:02 | 2619791 marathonman
marathonman's picture

Did QE work?  Yes, it was remarkably effective at saving the TBTF banks, consolidating their power, taking out competitors and unleashing even more unaccountable power over the muppets.  QE works.  If you think it was aimed at helping the American people in general, then you deserve to have your money confiscated by the Obamaviks and transfered to the Federal Reserve Banking system.  Even if they don't outright take your money they will steal the value of it through the inflationary bomb they are riding like Slim Pickens in Dr. StrangeLove.

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