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Guest Post: QE Forever And Ever?

Tyler Durden's picture




 

Submitted by Pater Tanebrarum of Acting Man blog,

The Extraordinary Becomes Normal

The lunatics are running the asylum. This is the only conclusion one can come to when considering the nonchalance with which what was once considered an extraordinary policy with a firm 'exit' in mind is now propagated as a perfectly normal 'tool' to be employed at the drop of a hat.

We refer of course to so-called 'quantitative easing' (QE), which really is a euphemism for money printing – even if not necessarily all of the central bank credit created ends up as part of the money supply. In fact, the experience of the Bank of Japan and the Bank of England with 'QE' was and is that it simply increases excess reserves and depresses already low interest rates a little further. Such excess reserves may be regarded as the tinder for an inflationary expansion of the money supply, but as long as no new credit is pyramided atop them, they may as well not exist.

 

However, the Fed has been quite successful in boosting the money supply with the two iterations of 'QE' it has implemented thus far, in spite of both private sector lenders and private sector borrowers not prepared to add to the existing debt pile. We believe this is due to two factors: for one thing, the Fed also buys securities from non-banks. This not only increases bank reserves, it also increases deposit money directly. For another thing, commercial banks seem eager to increase their holdings of treasury bonds and are thus helping to finance a government that seems perfectly willing to engage in deficit spending on an astronomical scale. The banks have not only replaced the bonds they sold to the Fed during 'QE', they have expanded their holdings of treasury securities at an unprecedented pace.

For a rigorous explanation of the mechanics of 'QE', we refer readers to an earlier article on the topic which discusses them in detail: 'QE Explained' (we have written this as a reference article, as we thought at the time that many of the explanations that were forwarded elsewhere were not satisfactory).

 


 

Treasury and agency (GSE) securities held by commercial banks. Since agency bonds are these days issued by state-owned entities under 'conservatorship' they are effectively liabilities of the US treasury – perhaps not de iure, but de facto. Big expansions of bank holdings of treasuries usually tend to go hand in hand with recessionary periods and heavy deficit spending by the government – click chart for better resolution.

 


 

By contrast, the commercial banks have cut back on their holdings of 'other securities' since the 2008 'GFC'. The last time this happened was after the property bust of the late 1980's and the S&L crisis that followed in its wake – click chart for better resolution.

 


 

We have little doubt that if the Fed were to start 'QE3', it would once again succeed in boosting the rate of money supply growth. We also have little doubt that 'QE' will be tried again, even if the timing remains uncertain. One reason to expect more of the same is that in recent months, a slowdown in US true money supply growth has taken place. Not as rapid a slowdown as we thought we would see when 'QE2' ended, but that can probably be ascribed to dollars fleeing the euro area. A recent example is provided by Royal Dutch Shell's decision to remove its money from euro area banks and deposit it with US banks instead.

To put numbers on this, over the past quarter growth in 'narrow' money TMS-1 has slowed to 5.9% annualized and growth in the 'broad' money measure TMS-2 has slowed to 6.6% annualized. This may strike many people as plenty of inflation, but consider that the year-on-year growth of these two money supply measures stood at 11.9% and 13.4% respectively as of June 30 (even the year-on-year growth rates, although still hefty, represent a marked slowdown from the peak).

An economy that has become addicted to constant injections of new money is likely to falter very quickly once the money supply growth rate slows down. Although it is not knowable in advance what rate of money supply expansion is the new threshold for upsetting the economic apple-cart, it is probably higher than it used to be during the credit expansion of the pre-GFC boom period.

At the time, the year-on-year growth of TMS-2 slowed to low single digits (slightly above 2%) before an economic crisis struck – see the chart below.

What this chart also shows is that 'QE2' was preceded by a quick slowdown in money supply growth after the conclusion of 'QE1'. At the time, the ECRI WLI fell to territory that indicated an imminent relapse into recession was likely. The Fed quickly resumed its printing duties.

 


 

The year-on-year growth rates of TMS-1, TMS-2 and M2, via Michael Pollaro – a slowdown is underway ever since the Fed's 'QE2' program ended, but has been mitigated by money fleeing the euro area – click chart for better resolution.

 


 

Fed credit outstanding and the 12 month change in Fed credit – as can be seen, the Fed is no longer actively inflating – click chart for better resolution.

 


 

'Open-Ended QE'

On Tuesday, Boston Fed president Eric Rosengren, a noted 'dove', made waves by arguing in favor of an open-ended asset purchase program by the Fed, a kind of QE of undetermined size and without an expiration date, only limited by the attainment of certain macro-economic goals. This method is to be preferred to a 'fixed limit' QE operation according to Rosengren, as it would end the 'market's fixation with when the program will end'.

Rosengren has no vote at the FOMC this year, but he is still regarded as an influential member (he is slated to rotate into a voting slot next year). In fact, all the 'doves' should be considered influential considering who helms the Fed's governing board in Washington, namely Ben Bernanke and Janet Yellen (we have briefly discussed Mrs. Yellen's views yesterday).

Rosengren also argued that the Fed should not shy away from more easing just because it is an election year – a sign that the political implications of Fed action this year have been a topic of discussion at the central bank. His remark on that particular point is not without irony as can be seen below:

As reported by Bloomberg:

 

Federal Reserve Bank of Boston President Eric Rosengren said the central bank should pursue an “open-ended” quantitative easing program of “substantial magnitude” to boost growth and hiring amid a global slowdown.

The Fed should set its guidance based on the economic outcomes it seeks and focus on buying more mortgage-backed securities, Rosengren said today in a CNBC interview. Without new stimulus, the jobless rate would rise to 8.4 percent at the end of this year and economic growth wouldn’t exceed its 1.75 percent average in the first half of the year, he said.

“What I would argue for actually is to have it open-ended, that we focus on economic outcomes,” Rosengren said. “It would be setting a quantity that you’re going to continue to buy until you get the economic outcomes that you want.”

[…]

“We’ve found that the economy has not grown as fast as we’d hoped and as a result I think it is an appropriate time to take stronger action,” Rosengren said. “A nonpartisan Federal Reserve should not be worried about the political cycle, it should be worried about the business cycle.”

 

(emphasis added)

This latter remark is ironic because the Fed's actions are the root cause of the business cycle – its suppression of interest rates after the bursting of the tech mania in 2000 was what set the stage for the housing boom and its aftermath.

What makes it all the more astonishing to hear Rosengren articulate this latest idea of 'monetary inflation without limit' is that it is so utterly bare of introspection regarding what has happened up to the current juncture.

It seems to us that it should be glaringly obvious that when the Fed boosted money growth last time around to help battle a recession, it set in motion the very boom that has cost us so dearly. And now the 'dovish' faction wants to continue doing it all over again, only on a much bigger scale?

Apart from his sole focus on short term outcomes, an important point that seems not be considered by Rosengren is the question of what should happen if the 'open-ended' QE policy were to fail to achieve its stated goals. He seems to assume that it will succeed in lowering unemployment and creating 'economic growth' as a matter of course. No other outcome is apparently conceivable. However, the effects of monetary easing on the economy are circumscribed by the state of the pool of real funding.

It goes without saying that money printing cannot create a single molecule of real wealth. If it could, then Zimbabwe wouldn't be a basket case, but a Utopia of riches. However, money printing does have both short and long term effects. In the short term, it can divert resources into bubble activities – all those economic activities that would not be considered profitable in the absence of monetary pumping. These activities of course create demand for factors of production, including labor, and tend to prettify the 'economic data' for a while – just as the housing bubble was widely regarded as an example of smooth 'non-inflationary' economic growth until it burst.

As it were,  monetary pumping can not always be expected to produce even such short term improvements in the vaunted 'data'. If the economy's pool of real funding is stagnating or shrinking, there will simply be no wealth available that can be diverted into bubble activities. All currently existing economic activity is already funded – and it is important to realize that what funds it is not 'money', but real goods. Money is merely the medium of exchange that enables both economic calculation and the smooth functioning of the market.

To describe with a simple example what we mean, consider a very primitive island economy. Say that there are three fishermen who want to build a new boat to improve their productivity and hence increase their wealth. Building the boat takes time, during which they can no longer catch fish. They must therefore have enough food stored to see them through the boat building period – otherwise they will simply begin to starve and never be able to finish the project. If they hire additional helpers and pay them with money, then these helpers will also require food, shelter and so forth during the time it takes to build the boat. Unless someone else produces food in sufficient quantity to sell it to them, or they have a big enough store available, the project will come to grief. In other words, an adequate pool of real funding is a sine qua non if such an investment project is to succeed. It would obviously not help at all if these men increased the size of the money supply. 

It is not different in a modern complex market economy – all economic activities require real funding in the end. The allocation of these inputs will only be rational when money is sound – any interference with the money supply and interest rates by a central planning agency will by necessity falsify prices and paint a false picture of the savings and consumption schedules of consumers and the size of the pool of real savings available for investment purposes.

It will therefore set bubble activities into motion – activities that fail to generate wealth, because they only appear to be profitable. If no wealth can be diverted into such activities because the pool of real funding is exhausted, then all that will happen is that additional money will raise prices, but it won't be possible to conjure even a short term mirage of an improving economy.

Of course the market economy is highly flexible and new wealth is created all the time, in spite of all the obstacles the economy faces. It is conceivable though that a point in time will come when the Fed pumps and there is no longer an effect that would fit its conception of economic recovery.

We must infer from Rosengren's idea of implementing open-ended QE until  certain benchmarks in terms of unemployment and 'growth' are achieved, that in case they remain elusive, extraordinary rates of money printing would simply continue until the underlying monetary system breaks down.

Perhaps he should be cheered on to shorten the waiting time.

 


 

Boston Fed president Eric Rosengren: in favor of money printing without a fixed limit.

(Photo credit: Wendy Maeda)

 

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Wed, 08/08/2012 - 18:00 | 2689160 SwingForce
SwingForce's picture

Disgusting how these banksterz help each other and no one else. 

CREATURE FROM JEKYLL ISLAND, 5th Edition, by G. Edward Griffin. Its the best book I have ever read. It changed my life- now I just look at these bozos and laugh at how stupid the people are who let them get away with it.

 

Wed, 08/08/2012 - 18:11 | 2689201 Stackers
Stackers's picture

This is called Nominal GDP Targeting. You just spend until you get the GDP print you are looking for. Once again Jim Rickards hit the nail on the head months ago on predicting this language coming from the Fed next.

Wed, 08/08/2012 - 18:18 | 2689210 Muppet Pimp
Muppet Pimp's picture

So long as all the cash hits the PD's first and they are able to front run it, I am all for this plan.  Anything to get bonuses back up is ok by me.

BTW, anybody know how the country got into the hands of a bunch of jerks who never had real jobs before...in their entire stinking lives?  This could be the problem me thinks.

Wed, 08/08/2012 - 19:44 | 2689407 Muppet Pimp
Muppet Pimp's picture

FWIW, it seems worth noting that the China has been granted PD status as well now.  It only makes sense that to get the economy going again over here stateside that any printed monies be dispersed to China first, so they can front run along with our TBTF's.  To quote GWB, 'Your doing a heck of a job Brownie"  Central Planning and corruption FTW. 

Wed, 08/08/2012 - 20:10 | 2689443 El Oregonian
El Oregonian's picture

Eric "Buzz Lightyear" Rosengren "TO INFINITY AND BEYOND!!!

Wed, 08/08/2012 - 20:25 | 2689469 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

It is just more debt collection. Debt upon debt upon more debt. Delaying the inevitable deflationary black hole which will suck everyone's pocket's dry.

Thu, 08/09/2012 - 07:15 | 2690336 GetZeeGold
GetZeeGold's picture

 

 

 

Excuse me sir......how are we going to pay for all this free crap again?

 

Thu, 08/09/2012 - 07:47 | 2690373 Money 4 Nothing
Money 4 Nothing's picture

That's not your concern Muppet, were printing money off your Social Security WHFIT accounts now. Go watch the Olympics and leave this in our capible hands.

-Eric Rosengren

Wed, 08/08/2012 - 20:49 | 2689513 AldousHuxley
AldousHuxley's picture

problem is with internet and mobile phones, even retarded arabian oil princes can come to conclude that US is bankrupted despite all of the window dressing on a pool somewhere.

 

no more American mass media propaganda. any blogger can state his case as well as any pre-selected buffon on CNBC.

 

 In Addition, unlike TV, where predictions and analysis are easily forgotten, internet keeps track of history. Easy to prove someone has failed despite status quo credentials.

 

So.....PEOPLE now know the truth....

 

 

but with QE, they are forced to risk their money, so they do. only to the extent of QE. and we end up with a dependency cycle: no QE, no investments.

 

Japan tried QE for 5 years....from 2001 to 2006

http://www.marketoracle.co.uk/images/2012/Jul/Lending-Japan.png

Nikkei index during that time shows "growth" until 2007, just a year after end of QE .

http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosetti...

 

overlap

http://yelnick.typepad.com/.a/6a00d8341c563953ef0147e09956da970b-popup

 

Truth is, US market is pretty efficient. outsized profits are not to be had unless some significant tech breakthrough (risky startups) or cheating (banksters). Austerity push is to rob labor of the productivity gains to force profit into investors by enslaving labor (make them more like chinese factory slaves).

 

 

 

 

Wed, 08/08/2012 - 22:16 | 2689740 SwingForce
SwingForce's picture

You spew too much, internet has no memory only instant pulses...  to remember is to think, and you do not. 

  1. Profits are an accountants' daydream
  2. MSM talking heads are brain-dead animatronics from Disney/ABC
  3. QE is spent 1 time, is disappears into the banks
  4. WELFARE & FOOD STAMPS get spent in their entirety every month, into The Economy.

Big A, you over-think too much. Wipe up your vomit & open your eyez.......

AND read the book. 3rd ed. here: Keep saying yes, download anyway...https://docs.google.com/file/d/0B3-C4NLkRQu7MTUwYzUxM2QtYjU1NS00N2UyLWJhYzgtZWM2MTgzMTdhZjcw/edit

Wed, 08/08/2012 - 22:22 | 2689777 SwingForce
SwingForce's picture

MP- Your comments reference MY comment exactly HOW?

Or the main story?  

DoucheMuppetTroll.


Wed, 08/08/2012 - 19:45 | 2689412 Hype Alert
Hype Alert's picture

What I'm wondering is why we spent all that time over all those years worrying about credit ratings?  I mean, this really does point out how meaningless they are.

 

Somewhat like the old "Discount Window".  Now, there's a relic.

Wed, 08/08/2012 - 18:34 | 2689257 dmger14
dmger14's picture

Yes, and his prediction of Currency Wars is coming true as well.  Next will be his true prediction of gold going to $3,500 to $5,000 within 2 to 3 years.

 

 

Wed, 08/08/2012 - 18:25 | 2689205 Precious
Precious's picture

Rosengren.  Some fucking career bureaucrat that should be running a deli in Jersey.  Never did one fucking notable thing.  Wrote 100 academic papers you could use to wipe your ass. 

Wed, 08/08/2012 - 18:22 | 2689233 Hedgetard55
Hedgetard55's picture

“What I would argue for actually is to have it open-ended, that we focus on economic outcomes,” Rosengren said. “It would be setting a quantity that you’re going to continue to buy until you get the economic outcomes that you want.”

This is the statement of either an insane man or a complete and utter douchebag with shit for brains.

Wed, 08/08/2012 - 18:33 | 2689253 Precious
Precious's picture

This is a statement from someone who has never produced a single unit of production other than his daily bowel movement.

Wed, 08/08/2012 - 19:22 | 2689370 Thorny Xi
Thorny Xi's picture

Actually, pooping is a net loss deal, considering the guy burns 100W per hour for 24 hours just to work it up.

Wed, 08/08/2012 - 19:30 | 2689382 Snidley Whipsnae
Snidley Whipsnae's picture

"extraordinary rates of money printing would simply continue until the underlying monetary system breaks down."

How long has it been since you heard the Fed use the term 'exit plan'?

I long ago assumed that all the grown ups here understood that there is no 'exit plan'...

The printing will continue till it doesn't.

Wed, 08/08/2012 - 22:55 | 2689859 Slightly Insane
Slightly Insane's picture

"The printing will continue till it doesn't"

I would add "The printing will continue till it doesn't MATTER"!

When your only tool is a Hammer, every problem looks like a nail.

Wed, 08/08/2012 - 19:34 | 2689387 vast-dom
vast-dom's picture

PONZI EASING PLUS ZIRP 

 

Wed, 08/08/2012 - 17:57 | 2689162 YesWeKahn
YesWeKahn's picture

Fuck Rosengren. I prefer hyperinflation so that the worth is redistributed after revolts and wars.

Wed, 08/08/2012 - 17:58 | 2689166 Motley Fool
Motley Fool's picture

Printing Rah Rah Rah!

>.>

Wed, 08/08/2012 - 18:20 | 2689229 bank guy in Brussels
bank guy in Brussels's picture

Great new piece from Ambrose Evans-Pritchard ...

Germans printed money and bought their own bonds in 1975 when they were desperate ...

Ambrose Evans-Pritchard is absolutely, totally nailing it in his journalism on the EU situation

ZH has been pretty weak recently by comparison, stuck in a narrow rut

Evans-Pritchard's articles should get a standard lead-in on ZeroHedge as much as anyone

AEP's latest 'German money printing' -

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100019387/ge...

Wed, 08/08/2012 - 18:23 | 2689235 Hedgetard55
Hedgetard55's picture

please... Ambrose is a complete douche that hasn't been right about anything in ten years.

Wed, 08/08/2012 - 23:08 | 2689906 Totentänzerlied
Totentänzerlied's picture

So, let them do it again. See what happens.

Wed, 08/08/2012 - 18:03 | 2689177 q99x2
q99x2's picture

Bring it on. I haven't got Arithmophobia. They are only binary representations of a philosophical concept. Probably can't even withstand a solar flare. In the old days you could wipe your ass with them so they had some actual value. Not today.

Wed, 08/08/2012 - 18:06 | 2689182 buzzsaw99
buzzsaw99's picture

Rosengren knows damn well QE doesn't create jobs. QE creates banker bonuses and that is all it does.

Wed, 08/08/2012 - 18:57 | 2689308 Papasmurf
Papasmurf's picture

Wouldn't that be his reason to promote QE?

Wed, 08/08/2012 - 19:54 | 2689420 rufusbird
rufusbird's picture

As I read this thread I keep getting images of characters from Stephen King novels...Lol!

(of course I have drank a couple of glasses of homemade Apple cider [fermented of course] by now.)

Wed, 08/08/2012 - 19:35 | 2689391 lotsoffun
lotsoffun's picture

and it preserves more banker jobs, so they can trickle down as you skim their pool and mow the lawn.

 

Wed, 08/08/2012 - 18:06 | 2689186 wdmitch666
wdmitch666's picture

the fed was created to manipulate currency. it is now tasked with doing so until inflation and employment stand at certain levels. the 'tools' for promoting one hurt the other - goals enacted by a federal government that (along with state and local) restricts economic activity. we are turing to open-ended currency manipulation in an effort to appease voters who want it both ways. this cannot end well.

i would love to see some 20-year projections of the money supply, and its effect on inflation, assuming QE continues as it has .

Wed, 08/08/2012 - 19:35 | 2689392 dark pools of soros
dark pools of soros's picture

That's easy. You won't see any of that money, but feel all of that inflation.

Wed, 08/08/2012 - 18:06 | 2689187 The Monkey
The Monkey's picture

If the Fed is going to pursue these policies, they need to let the markets correct before hitting the next trigger. If they don't let the bears come in and hit the markets from time to time, they will be putting prices so far out of kilter to cause a large crash - if they aren't already there.

Rosengren is apparently totally unaware of how dangerous it is to have an ever growing layer of speculation in prices. Producers overproduce. Inventories grow. Yeah, it looks good for jobs (for a while) until the slack is so large that it unwinds on it's own and mass layoffs come in spades.

Suppressing natural market volatility is dangerous stuff.

Wed, 08/08/2012 - 18:08 | 2689190 Meesohaawnee
Meesohaawnee's picture

and "stimulus" is a euphemism for "ripping the public off"

Wed, 08/08/2012 - 18:08 | 2689191 TeMpTeK
TeMpTeK's picture

Eric Rosengren...Great for my portfolio

Wed, 08/08/2012 - 18:08 | 2689192 Pants McPants
Pants McPants's picture

While I grok articles like this completely, I can't help but feel empathy for those poor (no pun) souls who, though no 'crime' other than economic illeteracy, are crushed when policies like this are implemented.

Rosengren and his ilk represent sociopathy in its most primitive form.

Wed, 08/08/2012 - 18:08 | 2689194 govttrader
govttrader's picture

I said it before, and I'll say it again.   Most of you posters seem to miss the major point...a politicians "job" is to keep his job.

A central bankers "job" is to stay a central banker long enough that his actions create such wealth for his "friends" that when he leaves his post, he has a vault of gold bars and other rare earth elements waiting for him in his basement.

Under these auspices...we are no-where close to the end.  Central bankers will LTRO and QE (and make statements to that effect) until it doesn't work.  It hasn't stopped working yet.  In trading, to be early, is to be WRONG.  I am a trader.

There won't be hyper-inflastion until the printed money makes its way into the hands of the regular joe.  That hasn't happened yet.  The minor inflation in food we are seeing is nothing close to hyper-inflation.

http://govttrader.blogspot.com/

Wed, 08/08/2012 - 18:26 | 2689237 Hedgetard55
Hedgetard55's picture

You don't need "hyper inflation" to destroy an economy. $8 a gallon gas will do it.

Wed, 08/08/2012 - 19:16 | 2689358 Motley Fool
Motley Fool's picture

Printing is the effect of Hyperinflation, not the cause.

Wed, 08/08/2012 - 19:18 | 2689363 Dr. Engali
Dr. Engali's picture

$5.00 gas will do the trick.

Wed, 08/08/2012 - 23:13 | 2689920 Totentänzerlied
Totentänzerlied's picture

The deafening roar of "Who could ever have predicted this!!! Save us, government!!!" will that day use more energy than all the cars in America.

Wed, 08/08/2012 - 18:09 | 2689197 LMAOLORI
LMAOLORI's picture

 

 

Perhaps he should be cheered on to shorten the waiting time.

 

Ben is doing just fine in that regard heck yesterday he channeled Marx

Wed, 08/08/2012 - 18:12 | 2689203 ian807
ian807's picture

But the money is just bits and its flow is hidden. I think this changes things. You can keep the scam going for longer. How long? I guess we'll find out.

Wed, 08/08/2012 - 18:16 | 2689208 benbushiii
benbushiii's picture

A nonpartisan Federal Reserve what a joke.  They represent the interests of the bankers.  Period!!!!  What if the American people were told that the Federal Reserve was raising taxes on the 99% in order to allow the bankers to collect bonuses and perpetuate the extraction of the interest rate spread on their loans.  Perhaps we should understand that most of the revolutions of the past 1000 years have occurred when the common man realized he was being suppressed by the ruling class.  Did the Revolutionary War not start because of the citizens desiring to leave the shackles of the Crown / Bank of England?  The Federal Reserve through their QEs is effectively taxing the people without representation!

Wed, 08/08/2012 - 18:19 | 2689213 The Count
The Count's picture

It's mass lunacy my friends. I have noticed this starting about 15 years ago and now it has reached mind bogling levels (at least for those that somehow elude the effect). Most folks do not even realize that plain old common sense has evaporated, now replaced by 'values' reflected by brain dead reality shows. Case in point....Family Guy...a totally vulgar cartoon inappropriate for anybody under at least 14, aired during the day as if it was bugs bunny.

Wed, 08/08/2012 - 19:01 | 2689327 Snake
Snake's picture

IMO Family Guy, like South Park, use hyper irony and satire to become some of the most profound post 9-11 forums for socio-political discourse and commentary, not always easy to stomach ....  

Wed, 08/08/2012 - 19:32 | 2689386 lotsoffun
lotsoffun's picture

it all still panders to the lowest common denominator possible. (south park, etc.)  and honestly - it's not something i would care for my kids to watch, or myself as a child.  infact - as a child, i usually found something better to do every day then watch t.v.  and, in fact, as an adult, i usually find something better to do than watch t.v. - and infact - i'm reducing my zh time, because in the end, it's the same thing over and over again, and i don't do anything for myself productive.  because, if we are all honest withourselves here - we lost, big banks won, and over the next year or so - you won't see anything except more dimons and diamonds and corzines with their pants down and hands in the till and nothing done about it.  including holder and obama and fast and furious fcking of the american people.  and we all know it.  so get one withit and do something with your time.  because - it's limited, and unless you are lucky - so will soon be any of your disposable worth.  and if you claim that anybody is going to 'do something about it'.  yeah right.  'i'm gonna hit you so hard, yo mama gonna feel it in philadelphia'.  a lot of talk.

Wed, 08/08/2012 - 18:17 | 2689216 SheepDog-One
SheepDog-One's picture

There was never any QE at all, its just an excuse to monetize the debt, thats all.

Wed, 08/08/2012 - 18:28 | 2689243 SemperFord
SemperFord's picture

I always thought of QE/TARP as a "legal" way to give banks free cash while making it look legit to the masses.

Wed, 08/08/2012 - 18:28 | 2689245 Meesohaawnee
Meesohaawnee's picture

totally sheep dog. Ive never bought into the the cry that QE was about interest rates. maybe indirect. My view, via the mechanism you state is just an excuse to grease da boyz wheels. Nothing else.

Wed, 08/08/2012 - 18:18 | 2689218 benkei54
benkei54's picture

It is inconceivable that Rosengren is "unaware" of the dangers of these policies....these people are not idiots. They either have deluded themselves into believing that propping up the TBTF is necessary to maintain the "system", or they are cynically doing so in hopes of perpetuating it long enough so that they can suck out their protion of wealth before it collapses.  Not sure which one is worse....

Wed, 08/08/2012 - 18:35 | 2689259 buzzsaw99
buzzsaw99's picture

the latter

Wed, 08/08/2012 - 18:51 | 2689297 Zap Powerz
Zap Powerz's picture

Will future generations say the US collapse was due to incompetence or maliciousness?  Or malicious incompetence?  Im inclined to believe this shit is all being done on purpose.  If history is any indicator then the collapse isn't going to be an accident.  Imagine 300 million (I say 300 mil because I think there are probably about 10mil that wont fall into this category) people, incapable of taking care of themselves suddenly without food, booze, water, Xbox and internet porn to keep them distracted......I just remembered I need to stop off at the sporting goods store for more PM.

Wed, 08/08/2012 - 19:24 | 2689377 XitSam
XitSam's picture

History is written by the victors.

Wait, a sporting goods store has PMs?!  Oh, right.

Wed, 08/08/2012 - 18:21 | 2689223 Monedas
Monedas's picture

Holy shit, Batman !  Kreepin' Keynesianism !        No problem until everyone decides to liquidate their fantasy portfolios and buy something .... like gold, for instance !          Monedas      1929         Comedy Jihad Zap, Bonk, Pow, Kaboom

Wed, 08/08/2012 - 18:19 | 2689225 CunnyFunt
CunnyFunt's picture

Eternal QE will not happen on account of the second law of thermodynamics.

Wed, 08/08/2012 - 18:43 | 2689274 realtick
realtick's picture

Keep in mind - that kind of logical thinking is going to bring out all the Fed subsidized trolls who are paid to convince us that QE is good and more QE is inevitable and any clearly thought out opinion to the contrary is junk.

Can you believe that people get paid to junk blog comments? Pathetic.

Wed, 08/08/2012 - 20:03 | 2689376 CunnyFunt
CunnyFunt's picture

apologies for my retardedness

Wed, 08/08/2012 - 18:30 | 2689250 Monedas
Monedas's picture

In a crowded dinner theater .... always ask the waiter for a table near the emergency exit !  

Wed, 08/08/2012 - 18:35 | 2689260 Piranha
Piranha's picture

moneyprinting is such a revolutionary idea that only the brightest people would suggest, not the common man on the street

Wed, 08/08/2012 - 18:42 | 2689270 kito
kito's picture

the fed would do much better on mars, where gravity is 62 percent lower........deflationary forces would be much less challenging to them..........imagine, it would only take one qe on mars to have inflation soar to the sun................................very little resistance from the laws of physics...........................

Wed, 08/08/2012 - 18:43 | 2689273 Haager
Haager's picture

Is it confirmed that RDS moves into the dollar? I mean if I take a look on NOK today I would think that the moneyflow is somewhat different.

Wed, 08/08/2012 - 18:49 | 2689275 lolmao500
lolmao500's picture

In other news...

Wed, 08/08/2012 - 18:55 | 2689301 JR
JR's picture

The observable facts are these: the economy is suffering, the large investment banks are profiting, the large investment banks make the rules.

Who can draw any other conclusions from these facts except that the bankers are transferring the production of wealth from the people to their pockets?  And the reason they are doing that is the reason they created the Federal Reserve - so they could take the money.

What moron believes that the people who created and run the Federal Reserve are civic-minded principled patriot Americans? They aren’t; they care nothing about America and her people and it’s obvious.

These fundamental facts are inescapable, indisputable. They make the rules, they profit and we lose. It seems pretty clear to me.

Socializing losses and privatizing gains for the Fed cartel is not free market capitalism.  It is financial piracy on a grand scale, pumping real wealth out of the economy back into the hands of the banker elites.

The Federal Reserve was conceived as a strategy by a concentration of wealthy bankers to protect its members from competition and to shift the inevitable losses from the owners of those banks to the taxpayers.

When the international bankers took control of America’s money supply in 1913, Americans not only lost the body of laws that ruled and bound them together as Americans, they lost their economic system and freedom.

America’s economic miracle is the target of this London-Wall Street combine whose global government is designed upon the principles of fascist socialism. Bernanke is not a capitalist; he is a conspirator, deliberately exhausting the American economy with a rescue package waiting in the wings – a world currency under global control.

Wed, 08/08/2012 - 18:54 | 2689303 Dr. Engali
Dr. Engali's picture

Money printing Rudolph van Havenstein style. Maybe if he gets his way there will be an end to this madness. Hopefully I can pay off my house with a gold piece.

Wed, 08/08/2012 - 19:01 | 2689322 diogeneslaertius
diogeneslaertius's picture

#NWO #EconomicDeathstar, they decoupled the real economy long ago and created a hologram running across a virtual shell - this weapon is now powerful enough to destroy entire nation's GDP in a single shot

 

the ED may as well be thought of as a hyper computer in the basement of Goldman Sachs running a simulation of the economy - one no longer needs to actually manipulate reality, one can simply manipulate the algorithm flow, a few new classes here, an array there and viola 

 

 

Wed, 08/08/2012 - 19:01 | 2689324 diogeneslaertius
diogeneslaertius's picture

#Infinimoney

Wed, 08/08/2012 - 19:12 | 2689350 lotsoffun
lotsoffun's picture

that's funny.  i don't follow much msm - but the dude looks like sandusky.  really does.

 

Wed, 08/08/2012 - 19:10 | 2689341 XitSam
XitSam's picture

But Graham Summers said there would be no QE. And he gave reasons. "GW" style: here, here and here

Wed, 08/08/2012 - 19:15 | 2689356 Mentaliusanything
Mentaliusanything's picture

Damn you to Hell Nixon .. removal of the gold standard set this frightening thing free.

QE should only be used when money has been vaporised, that is when the assumed value disappears into the ether. That only occurs when Bubbles burst as a replacement for the credit loss and that in turn creates another bubble.

The stockmarket is clearly in a new bubble as money seeking best return bids up prices that do not reflect the true state of the World.

and so it goes.... until someone stops out the printer and re-pegs, we are all staring at a huge money Bomb that has a short lit fuse.

Hell even I will buy hard gold if these fuckers continue with this insanity

Wed, 08/08/2012 - 19:30 | 2689383 XitSam
XitSam's picture

Listen to Nixon's speech. He only removed the convertability into gold "temporarily."

Wed, 08/08/2012 - 19:33 | 2689385 Papasmurf
Papasmurf's picture

Bullshit.  Money doesn't vaporize and when it's lost through malinvestment, the loss should remain with the mal-investor.

Wed, 08/08/2012 - 19:37 | 2689378 cristo
cristo's picture

QE3 is already here .Over 800 million in reverse repos today alone

At its meeting in June 2012, the FOMC amended the Authorization for Domestic Open Market Operations to authorize the New York Fed to undertake certain open market transactions—outright purchase and sale of securities, and repos, in addition to reverse repos—for the purpose of testing operational readiness.

As such, beginning Friday, August 3, the New York Fed intends to conduct a series of small-value repos using all eligible collateral types.  The repos will be conducted only with the primary dealers.  The New York Fed has not conducted a repo since December 30, 2008.

 http://www.newyorkfed.org/markets/opolicy/operating_policy_120802.html

keep track here .new release not in yet .http://www.federalreserve.gov/releases/h41/

Wed, 08/08/2012 - 21:12 | 2689597 rlouis
rlouis's picture

And they say "Like the earlier reverse repo operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve."

 

Wed, 08/08/2012 - 21:48 | 2689695 kornholio
kornholio's picture

bullish

Wed, 08/08/2012 - 22:11 | 2689749 cristo
cristo's picture

this is what happened the last time they did this in 2008

http://www.federalreserve.gov/monetarypolicy/bst_tranche.htm

Sat, 09/08/2012 - 23:50 | 2775618 MeelionDollerBogus
MeelionDollerBogus's picture

well how about that. Looking back from today Aug 3rd does demark a rather sharp rise up in gold. Mmm hmmm.

Wed, 08/08/2012 - 19:43 | 2689404 franzpick
franzpick's picture

Asinine, out-of-the-blue, off the wall suppositions, like Rosengren's open end QE, from totally unqualified people who are not otherwise insane, should be seen as trial balloons, and if concerned fed-o-phobes could make their voices heard, they should emit so much blow-back as to make the fed's next trial balloon launchee think twice about being 'volunteered' for duty.

Wed, 08/08/2012 - 20:11 | 2689444 Everybodys All ...
Everybodys All American's picture

The anti Keynesians need to stop calling this type of monetizing of debt in GDP as growth. With this amount of proposed and actual printing the "growth" is nothing more than inflation. In fact you will be less wealthy as this goes on and on. You just play into the Keynesian hands when you even refer to this as growth when in fact it is nothing more than inflation.

Wed, 08/08/2012 - 20:39 | 2689494 TrustWho
TrustWho's picture

Eric Rosengren is an arrogant academic technocrat. I understand the khmer Rouge plan that focused on killing intellectuals and eliminating them from society. UNBELIEVABLE!

Wed, 08/08/2012 - 21:47 | 2689691 kornholio
kornholio's picture

bullish

Thu, 08/09/2012 - 01:26 | 2690136 dcb
dcb's picture

I would like to give people like him a beat down, I do anotice that it ia actually accepted whathe beleives and unquestioned without evidence. these people need to be shipped out to see. why is it I recall the stagflation of the 70's. so I know endless printing doesn't do what they say, and in fact makes things worse. I just don't get the thinking of these people. I get it they are absolute chronic liars

Thu, 08/09/2012 - 08:23 | 2690435 thetruthseeker
thetruthseeker's picture

Rosengren,
Do humanity a favor and instead of trying to implement open-ended QE, why don't you do us all a service and implement seppuku personally.

Thu, 08/09/2012 - 09:11 | 2690583 toomanyfakecons...
toomanyfakeconservatives's picture

I always preferred the term Harakiri. In an event, let's ban and confiscate swords asap, so that when the MASS ARRESTS occur... and they are going to occur... the traitors to the Constitution cannot slice their guts out before they are dragged away in handcuffs kicking and screaming. http://tinyurl.com/cd5cyjo/ 

Thu, 08/09/2012 - 08:42 | 2690487 yogibear
yogibear's picture

Ben Bernanke boasted about using the printing press. 

We should be seeing a normal adjustment of higher and higher oil prices along with commodities. He's trying to trigger massive inflation.

Bernanke's own son has over a $400,000 student loan. Bet  Benanake plans to continue to quietlytrash the dollar.  

Look at what he's doing, not what he says. He will keep rates at near 0 while people see double digit real inflation. He cannot raise rates.

In the mean time the debt ceiling keep going skyward.

 

 

Thu, 08/09/2012 - 09:46 | 2690759 shovelhead
shovelhead's picture

S: How can I increase the speed of my computer?

ER: Hit it with a hammer.

S: Okay, but now it's making funny noises and is still slow.

ER: Keep hitting it.

S: Are you sure this will work?

ER: No, but it will keep you distracted from how slow you load.

S: You're a genius.

ER: Thanks. That's why I'm in charge.

Thu, 08/09/2012 - 11:49 | 2691314 Dareconomics
Dareconomics's picture

If the music is playing, then we have to get up and dance. What the Fed's actions have done is prop up the stock market and create a worldwide bubble in fixed income instruments.

The Fed cannot stop inflating the bubble, because that will result in a crash. Hence, the Fed will just keep up with monetary easing until disaster strikes.

Whenever its looks like monetary easing may cease, markets begin to fall, and the central banks begin to jawbone. We will continue to observe  jawboning and money printing from the world's major central banks, and this will continue until it becomes unsustainable. When that happens is anybody's guess. 

 

http://dareconomics.wordpress.com/

 

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