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Goodbye Operation Twist, Hello QE X+1

Tyler Durden's picture


Remember when the Chairman did a quick drive by with the much price in Operation Twist, and the market came, saw, and plunged? That was a week ago? Two? Well, as we have been predicting since December 2010, that was merely the appetizer, or as we phrased it the same as last year's July QE Lite to last year's August QE 2. Confirming both our speculation, and the realization that Bernanke knows only how to print more money and nothing else, were his first public remarks since the launch of Op. Twist, at a Cleveland Fed forum last night in which he said that "the central bank might need to ease monetary policy further if inflation or inflation expectations fall significantly... Bernanke indicated a willingness to push deeper into the realm of unconventional policy if economic growth remains anemic. ""If inflation falls too low or inflation expectations fall too low, that would be something we have to respond to because we do not want deflation," Bernanke said. The comment was made in response to a question about a recent decline in market-based inflation expectations, which policymakers see as a good gauge of future inflation trends." And since the key "deflationary" metric that he looks at, as wrong as it may be, is the stock market, looks for stocks to resume trading with schizophrenic abandon, surging ever higher on increasingly bad economic data. Of which we will have a lot.

More from Reuters:

It is something that we're going to be watching very carefully,"
Bernanke said in response to questions from the audience at a forum
sponsored by the Cleveland Fed.


In an effort to stanch the deepest recession in generations and help the recovery, the Fed not only slashed benchmark interest rates to effectively zero, but also more than tripled its balance sheet to around $2.9 trillion.


Despite these measures, growth has remained quite soft, averaging less than 1 percent on an annual basis in the first half of the year. Bernanke signaled he remains concerned about risks to the economy, which the Fed described as "significant" in its September policy statement.


"We have a lot of problems both in terms of recovery and in terms of longer-term growth," he said.

Essentially the Chairman has just acknowledged that a few short days after Op Twist was launched it has already been a failure, just as Zero Hedge predicted well in advance of its formal launch, as consumers are now merely awaiting even lower interest rates before they refinance. After all if Bernanke is dead set on demonstrating he is insane (in an Einsteinian sense), mortgage borrowers will be more than happy to wait him out on his latest move to make the 30 Year mortgage negative.


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Thu, 09/29/2011 - 04:51 | 1721099 jomama
jomama's picture

capitulation, bitchez.

Thu, 09/29/2011 - 05:17 | 1721116 Michael
Michael's picture

We don't make children's toys in this country.


I said this in a previous thread and got some perrty interesting comments;


Ben Bernanke better get that fucking QE3 going soon.

I need to see the destruction of the world economy maximized for my amusement.

Thu, 09/29/2011 - 02:55 | bid the soldier...

Did you want that in 2D, 3D or IMax? Thu, 09/29/2011 - 03:08 | toto

For the first time ever it is going to be in 4D.

Better than expected...........

............or worse?

Thu, 09/29/2011 - 03:28 | bid the soldier...


Gimme a hint.

Is the 4th D a time thingy or a space thingy?

Thu, 09/29/2011 - 05:32 | 1721128 GetZeeGold
GetZeeGold's picture


QE to's the only way.


How much do you need?


Thu, 09/29/2011 - 07:36 | 1721341 DormRoom
DormRoom's picture

more printing will only push the world into global stagflation. It won't solve unemployment, and likely cause price instability.  The USD reserve currency will be undermined.  USD-YEN implosiong will cause Japan to go into a serious recession.  CDS wolfpack will attack her.  Then we will talk about Japan, like we did the Eurozone, this year.


  Only direct job fiscal stimulus can save the US.

Thu, 09/29/2011 - 07:58 | 1721392 Schmuck Raker
Schmuck Raker's picture

Just say no to stimulus.

Thu, 09/29/2011 - 08:56 | 1721570 Weisbrot
Weisbrot's picture




Calvin Coolidge had it right - cut Government spending by 40%

get the Government out of the way and

within 1 many be 2 years and things will be moving in the right direction



Thu, 09/29/2011 - 07:55 | 1721383 covert
covert's picture

never cave in


Thu, 09/29/2011 - 04:52 | 1721100 eazyas
eazyas's picture

what do i short ?

Thu, 09/29/2011 - 05:51 | 1721129 GetZeeGold
GetZeeGold's picture


Short anything but gold.


Thu, 09/29/2011 - 05:42 | 1721139 zhandax
zhandax's picture

VIX  (personally, I would wait until next Friday.  Good chances of some rockin news since this pronouncement arrived a week early)

Thu, 09/29/2011 - 09:12 | 1721635 Mike2756
Mike2756's picture

Bull flag in the vix, market is still going to sell off, maybe won't go very far. 1000 spx?

Thu, 09/29/2011 - 04:57 | 1721103 spdrdr
spdrdr's picture

This has gotta be bullish for stocks! 

QE3 guaranteed, plus a bonus bail-out of failing (flailing) European banks.

Waiter!  More pop-corn all around!


Thu, 09/29/2011 - 05:28 | 1721138 DaBernank
DaBernank's picture

Whoo-hooo! and a side order of CRM out-of-the-money calls, please.

Thu, 09/29/2011 - 04:59 | 1721104 yabs
yabs's picture

oh god i want to see this stock market tank, not currencie4s

st5ill good for gold and silver

Thu, 09/29/2011 - 05:01 | 1721106 Hman
Hman's picture


QE X+1 (X to infinity)

Thu, 09/29/2011 - 05:08 | 1721115 swissaustrian
swissaustrian's picture

It should be QE(x+1) as the amount of money printed has to rise exponentially

Thu, 09/29/2011 - 05:59 | 1721165 Wakanda
Wakanda's picture

QE(x+1) = F*U*C*K + ed

Thu, 09/29/2011 - 06:11 | 1721176 RemiG2010
RemiG2010's picture


Thu, 09/29/2011 - 06:26 | 1721209 GetZeeGold
GetZeeGold's picture



QE(x+1) .......there outta be a derivative for that.

Thu, 09/29/2011 - 08:15 | 1721435 The Grifter
The Grifter's picture


Thu, 09/29/2011 - 08:41 | 1721508 GetZeeGold
GetZeeGold's picture


Ahhh....well done!


Thu, 09/29/2011 - 09:53 | 1721764 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

OK Mr. "I know calculus and how to use the rich text editor" now apply some continuously compounding leverage to that  and make a discontinuity below zero to factor in bail-outs.

Thu, 09/29/2011 - 05:01 | 1721107 wee-weed up
wee-weed up's picture

So, the BerMonkey is going to start flinging his feces yet again!

Thu, 09/29/2011 - 05:07 | 1721111 lunaticfringe
lunaticfringe's picture

The market cratered because Ben had alluded to something more significant than Operation Twist. When that extra something didn't materialize, markets went... Mr. Softy.

The deflation is here. China has all but screwed the pooch, and when the Chinese balloon officially pops, I think Ben goes apeshit. The fucker is like a junkyard dog on a bum's ass. He just doesn't quit.

Thu, 09/29/2011 - 05:07 | 1721113 Mr_Wonderful
Mr_Wonderful's picture

Well, last Monday the number of October Put Option Contracts against the S&P 500 was over 7 million. It´s probably up to ten million by now.

Usually the monthly number is 10-20,000.

Thu, 09/29/2011 - 05:33 | 1721143 Motley Fool
Motley Fool's picture

When everyone is on that side of the boat....Bernanke fires up the printers. :P

Thu, 09/29/2011 - 06:00 | 1721166 Mr_Wonderful
Mr_Wonderful's picture

The ducks are being lined up.

Apparently it´ll be Tank Tuesday the eighteenth unless the terriers blow up a U.S. or European city before that.

Thu, 09/29/2011 - 05:07 | 1721114 Racer
Racer's picture

Oh great, the rich get richer and the poor get to starve

and then the ChairSatan will fall

Vive la Revolution

Thu, 09/29/2011 - 05:10 | 1721117 Outlaw Of The W...
Outlaw Of The Wasteland's picture

zimbabwe ben may go down as they greatest traitor in the history of our failed country.

Thu, 09/29/2011 - 05:15 | 1721118 BlackholeDivestment
BlackholeDivestment's picture

...OK, I have the personal credablility (As the (a) victim of the moral hazard) to arrest Chairsatan and the 911 Jets, but... The Truth is ( no defense) overcome by the new world order social ''democracy''. The Republic of the United States is dead! ...I'm dead!

Thu, 09/29/2011 - 05:15 | 1721120 Lmo Mutton
Lmo Mutton's picture


Thu, 09/29/2011 - 05:29 | 1721130 BlackholeDivestment
BlackholeDivestment's picture

Mutton, lol, you ask ''whut''. Yeah bud, I can bare witness and win that case, can't you?

Thu, 09/29/2011 - 05:16 | 1721121 Mr_Wonderful
Mr_Wonderful's picture

The Bernank can´t do jack####.

The FED is already leveraged 60-1 against its capital.

A relatively small rise in interest rates, resulting in a fall of the value of its portfolio, would quickly render it technically insolvent - forcing it to sell bonds, that is contract the money supply.

Thu, 09/29/2011 - 05:27 | 1721135 GetZeeGold
GetZeeGold's picture


Paper to gold is 100:1

The FED is slacking off.........print baby print.


Thu, 09/29/2011 - 05:39 | 1721148 Snidley Whipsnae
Snidley Whipsnae's picture

" forcing it to sell bonds, that is contract the money supply."

Perhaps some other soverign will decide to sell bonds? ... Stranger things have happend, and the first out the door will avoid being trampled by the herd.

Thu, 09/29/2011 - 05:49 | 1721159 Mr_Wonderful
Mr_Wonderful's picture

I doubt it.

All hell would break loose and the world financial system is precarious enough as it is.

Thu, 09/29/2011 - 12:01 | 1722161 Bicycle Repairman
Bicycle Repairman's picture

"the first out the door will avoid being trampled by the herd"

Anyone who tried to be first out the door got "shock and awe".  Try "the door" at your peril.

Thu, 09/29/2011 - 05:57 | 1721162 BigJim
BigJim's picture

The FED is already leveraged 60-1 against its capital.

A relatively small rise in interest rates, resulting in a fall of the value of its portfolio, would quickly render it technically insolvent

You think the Fed is bound by normal accounting rules? LOL. I keep hearing this: the Fed can go bankrupt here, the Fed can go bankrupt there.

Ask yourself this: Under what circumstances can a counterfeiter ever go bankrupt? Seems to me: only when you take away his printer. Has that happened to the Fed yet?

Thu, 09/29/2011 - 06:15 | 1721170 Mr_Wonderful
Mr_Wonderful's picture

Yeah, you´re right.

I forgot the accounting change the FED snuck in last January.

The change allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury (that would be you the taxpayer) rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

Clever isn´t it.

Of course the Tylers covered it at the time:


Thu, 09/29/2011 - 08:57 | 1721581 BrocilyBeef
BrocilyBeef's picture

60-1. I had no idea it was that bad. What that hell is that "1" though? Paper dinosaurs?

Thu, 09/29/2011 - 05:26 | 1721133 maxcody
maxcody's picture

Bring the market down to S&P 1008 then gold down to 1325 correction so I can

load up on gold.  Thank You uncle Ben.  My mother's brother was a waco double

Doctorate at Prinction. 

Thu, 09/29/2011 - 08:56 | 1721575 BrocilyBeef
BrocilyBeef's picture

slap that silver to gold ratio so that I can get silver to get gold...

Thu, 09/29/2011 - 06:08 | 1721172 JPL
JPL's picture

Remember me where is heading inflation in the US ?

Thu, 09/29/2011 - 06:15 | 1721184 I think I need ...
I think I need to buy a gun's picture

How can this small group of fuckin people dictate everything in this country......the people still haven't woken up....we all have to bow down to what bernanke is going to say every month.......

Thu, 09/29/2011 - 06:15 | 1721185 BlackholeDivestment
BlackholeDivestment's picture

...and the German Parliament sells out labor. Son of a ...

Thu, 09/29/2011 - 12:04 | 1722177 Bicycle Repairman
Bicycle Repairman's picture

I said they'd "back door" the Germans. 


SLAM DUNK RIGHT IN YO' GRILL!!!!!!!!!!!!!!!!!!


Thu, 09/29/2011 - 06:18 | 1721189 Mr.Sono
Mr.Sono's picture

come on guys have even thought that he might be out of ink and need to put in a new cartridge? With Obama in the office and no qe3. yeah like thats going to happen.

Thu, 09/29/2011 - 08:55 | 1721574 BrocilyBeef
BrocilyBeef's picture

You don't think he has a store room of ink cartridges? This is the Bernank's hoard, son.

Thu, 09/29/2011 - 06:20 | 1721196 TradingJoe
TradingJoe's picture

Benjie can't do shit without a political "approval" and that ain't coming anytime soon!

Thu, 09/29/2011 - 06:33 | 1721229 ZeroPower
ZeroPower's picture

To be fair, i keep reading different views from ZH on what is next.

The 100% sure thing known as QE3 was supposed to be right after. Not sure what the Tylers' consensus is on now.

Thu, 09/29/2011 - 07:25 | 1721331 I am a Man I am...
I am a Man I am Forty's picture

you are not imagining this, Tyler always says he's right even when he is wrong, one flaw of his

he needs to recap on his muni bond call as well, crickets chirping very loudly

TD is right about a ton of stuff and this is the best site on the net, but his QE3 call has been wrong so far, but for some reason has trouble admitting it

Tyler, it's ok to be wrong sometimes, i promise, not everyone is going to up and leave your site if you make a bad call, at least you have the balls to make predictions

Thu, 09/29/2011 - 08:54 | 1721569 BrocilyBeef
BrocilyBeef's picture

Micro over Macro.

Thu, 09/29/2011 - 06:34 | 1721233 HD
HD's picture

I doubt it will matter.  Printing is less effective every time. The best Ben can hope for is to put a floor on the S&P above 900...

Thu, 09/29/2011 - 08:53 | 1721566 BrocilyBeef
BrocilyBeef's picture

Bernanke is going to throw a flash bang at us soon. Mark my words. We just need to "clearly" see the terrorists in the room so that SuperBernank can save our "retirement."

Thu, 09/29/2011 - 06:41 | 1721243 Mr_Wonderful
Mr_Wonderful's picture

Attention goldbugs and doomsayers.

Uploaded Bob Chapman´s International Forecaster, Sep. 28

to piratebay

Thu, 09/29/2011 - 06:58 | 1721274 Esso
Esso's picture

I think we're gonna need a bigger wheelbarrow.

Thu, 09/29/2011 - 08:52 | 1721560 BrocilyBeef
BrocilyBeef's picture

You think there's still dirt being moved?

Thu, 09/29/2011 - 07:41 | 1721354 minsky4ever
minsky4ever's picture

Does that mean I get a Social Security COLA after almost three years of increased food and fuel costs? C/mon, throw me a bone, something I can make soup with.

Thu, 09/29/2011 - 07:46 | 1721362 Chrikus van der...
Chrikus van der Rockhuizen's picture

lucky i have some krugerrands!

Thu, 09/29/2011 - 08:50 | 1721555 BrocilyBeef
BrocilyBeef's picture

Sorry, I take USD only... Ohh, is that real?

Thu, 09/29/2011 - 08:12 | 1721426 dcb
dcb's picture

Each nith I pray to God that Bernanke goes to sleep and never wakes up in the morning. I will also state that if violence erupts in this country I hope he is the first the mob goes after. He needs to be tried for economic treason, for selling out the people for wall street. I mean this is the joke, the hft banks know that buy pusing the markets down beyond a certain point he will give them what tehy want, DUH, it's some kinda joke. they push down treasry yeilds beyond where they shoud be, bernanke responds like the lap dog he is. My anger is so etreme at this man I really can't put it into words.

Thu, 09/29/2011 - 08:50 | 1721551 BrocilyBeef
BrocilyBeef's picture

You should try putting it into words. I don't really wish death upon Bernanke as much as I wish he were to suddenly come to his senses and live the rest of his days in reality.

Thu, 09/29/2011 - 08:21 | 1721443 kito
kito's picture

actually, if one looks at the overall theme of bernankes words, id say hes a different bernanke, one whos "printing prowess" has been humbled by this experience. he goes to great lengths to reinforce the point that "monetary policy is not a panacea". he has repeated his theme of late, deferring to congressional powers to fix the fiscal mess. there will be no qe3, and those who bank on it will be taken for a loss.

Thu, 09/29/2011 - 08:49 | 1721546 BrocilyBeef
BrocilyBeef's picture

Has Bernanke learned anything? Time will tell. Unfortunately, I think he understands that he needs to print but that he needs to surprise us.

Thu, 09/29/2011 - 08:41 | 1721506 Hayabusa
Hayabusa's picture

During WWI and WWII, people in Europe and Germany sold their gold/silver... silverware, jewelry, etc., for food when things got bad.  If purchasing PMs makes you feel insulated from what's about to hit, think again.  The world economy is one big Ponzi mess and is being artificially propped up... meanwhile back at the ranch your $$ are being devalued, your tax dollars being "used up"... your futures, your children's, and grandchildren's futures are being transferred to the uber-rich banksters et al.  Fix this mess?  Stop being idiots.  U.S. jobs, manufacturing, etc., have been offshored/outsource/relocated, our borders opened to illegal aliens who provide cheap labor (which puts us more and more on par with cheap labor around the world)... so unemployment climbs and climbs, 47 million Americans are on food stamps (and climbing) and everyone's futures are being mortgaged while being told things will get better or Washington will fix things... I've got news for you, Washington is bought and paid for by corporate America and their special interests.  Get past the pipe dreams some of you and realize the people running our country are less bright, less capable, and more destructive to your futures than most imagined was possible.  Keep smoking that gold and silver some of you... if it helps you sleep at night.

Thu, 09/29/2011 - 08:47 | 1721527 BrocilyBeef
BrocilyBeef's picture

Ironically, you need to hoard Silver, Gold and *PHYSICAL* U.S. Dollar paper money. back the truck up to the ATM.


In addition, we can fix this. Unfortunately, we've got quite a dump to clean up.

Thu, 09/29/2011 - 10:25 | 1721833 nope-1004
nope-1004's picture

WW1 and WW2 never had this level of fake derivative exposure we have today.  Debt was no where near where it stands today.

Only question is:  Will the gov't sit by and let the TBTF banks fail under this extraordinary debt burden?  Or will they print to ease the pain to their buddies?

You seem to illude to "$$ being devalued", which means more printing.  Which means owning gold and silver.  So all in all, you don't make alot of sense.


Thu, 09/29/2011 - 11:03 | 1721949 nah
nah's picture

wish he would just say he wants to destroy savings


or enshrine banking over labor


you know act like hes a man and not some dog whisperer that can see into the eyes of your greatest afections

Thu, 03/01/2012 - 04:36 | 2211638 kathyink
kathyink's picture

It is very hard to make changes to policies in time just because of a few people's predictions. There is so much that goes behind the decision making process that it cannot be pin pointed to a single person. This debt crisis and the resulting weakening of the economy has resulted in many people being afraid to spend, and taking the wait and see attitude towards investments.

Kathy -

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