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Guest Post: When Quantitative Easing Finally Fails

Tyler Durden's picture


Submitted by Gregor MacDonald of Peak Prosperity,

While markets await details on the next round of quantitative easing (QE) -- whether refreshed bond buying from the Fed or sovereign debt buying from the European Central Bank (ECB) -- it's important to ask, What can we expect from further heroic attempts to reflate the OECD economies?

The 2009 and 2010 QE programs from the Fed, and the 2011 operations from the ECB, were intended as shock treatment to hopefully set economies on a more typical, post-recession, recovery pathway. Here in 2012, QE was supposed to be well behind us. Instead, parts of Southern Europe are in outright depression, the United Kingdom is in double-dip recession, and the US is sweltering through its weakest “recovery” since the Great Depression.

It wasn’t supposed to be this way.

Recently-released data from all these regions now confirm that previous QE, at best, merely bought time against even more grueling outcomes. Spain's unemployment, for example, has just hit a new post-Franco high of 24.6%, and the forecast for this crucially important EU economy remains negative. Recently revised US figures on GDP show that the post-2009 recovery was even weaker than previously estimated, with the first year post-crisis crisis clocking in at 2.5% vs. the expected 3.3%.

Plodding, slow growth in the aftermath of a global financial crisis is a recipe for stagnation. The inability of the US economy to work off its surplus of labor appears to have finally stirred OECD policymakers into action. This is, of course, a great and humbling disappointment to the recoverists, who keep mistaking various economic oscillations around a bottom for the start of a typical post-war, V-shaped recovery. Housing, autos, jobs, Internet IPOs, state tax revenues, and train traffic have all been called upon by optimists to sound the clarion call for a broad economic recovery. Yet the US economy still is only able to produce sector-specific or selected regional strength that never adds up to quite enough to restore national growth.

When we look at national GDP, at 1.5% in the most recent quarter, it is not clear the US economy has enough forward speed to statistically distinguish between slow growth and no growth. Large states like California, for example, are already seeing the return of declining state revenues. Meanwhile, national poverty -- one of the best measures of aggregate economic health -- continues to soar.

There is no doubt that any new round of QE -- especially a double shot from both the Fed and the ECB -- will have psychological impact. For Europe, QE would once again allay systemic risk. And for the US, QE will surely find its way to the stock market; which is not an insignificant outcome as America increasingly relies on the stock market to produce retirement income. However, the question arises, What series of radical measures policy makers will turn to after the next round of QE wears off?

Before we answer that question, let’s review the poor economic conditions leading to the next (and final) round of QE.


House prices in the US have done an excellent job of adjusting downward over the past 5 years to reflect the stagnation in US wages, the overhang of private debt, structural unemployment, and the rising cost of energy.

But there has been a recent media celebration of sorts over this story, as it now appears that housing is bottoming. To be sure, certain housing markets like Miami and Las Vegas continue to recover from completely bombed-out levels. Additionally, construction of new homes, especially multi-family homes, is off the bottom. For now.

The problem is that housing is a result, not a cause, of economic expansion. And unless housing is to work in tandem with wage and job growth, housing alone cannot power the US economy. Did the US not already learn that lesson already over the past decade?

Let’s take a look at fifteen years of home prices, from the US Census Bureau:


The unsustainable peak in 2006, when single-family homes reached a median sales price of $222,000, marked a near-doubling of price over the ten-year period from 1995. But as we now understand, not only were wages (in real terms) not rising during this period, but a new bull market in commodities was getting underway, robbing Americans of discretionary income.

The result is that house prices were able to keep up with the loss of purchasing power until slightly past mid-decade. Then they collapsed. Worse, the phase transition in rising energy prices kept going (and continues through today), which had an outsized impact because the topography of US housing, largely dependent on roads and highways, is quite exposed to transportation costs.

We can think of housing as facing several key constraints that will be sustained for at least another five years:

  • First, there is the tremendous overhang of personal debt in the US. Much of this is still carried within the mortgage market itself. (Additionally, student loan debt has also emerged as an enormous barrier to home buying.)
  • Second, there is the lack of wage growth and the problem of structural unemployment. The surplus of labor prevents the broad, marginal pressure needed to force national house prices upward.
  • Third, the constraint of oil prices will not ease. This means that urban real estate may do well on a relative basis, but the majority of US homes will continue to adjust downward to reflect the permanent repricing of oil (and hence gasoline).
  • Finally, the notion that real estate prices have bottomed with mortgage rates near all-time lows seems a very risky call. Is it more prudent to presume that a new advance in national real estate prices will be carried on the back of rates going even lower -- or higher? Which is it? The view that real estate has bottomed appears to assert that no matter where interest rates go from here, real estate is going higher. That is the mark of hope and belief; not analysis.

It seems very unlikely only five years into such enormous, structural shifts in the US economy that the repricing process is over in housing.

At minimum, I expect the median price of single-family existing homes to revert to the 2000 level of $147,000, with the strong possibility of an overshoot to the $125,000 level. This process will take several more years.


As early as 2009, many of us understood that this was not a normal economic decline and therefore would not be followed by a normal economic recovery. Here's the lead paragraph to a New York Times piece, covering the latest GDP data:

U.S. Growth Falls to 1.5%; a Recovery Seems Mired

The United States economy has lost the momentum it appeared to be building earlier this year, as the latest government statistics showed that it expanded by a mere 1.5 percent annual rate in the second quarter.

This is precisely the kind of news flow that the business press can expect to report for years to come.

Sure, the stock market may advance from points of low valuation. Certain regions of the country, especially those tied to exports, may thrive for a while. But nationally, a long secular contraction is now in place that will combine stagnant wages, contraction in government payrolls, flat tax revenues, and the shift to a cultural preference for much lower consumption. In addition to the fact that young people will not buy cars, will not buy houses, and in general will not secure high-paying jobs (if they can secure jobs at all), the nature of work in the US has entered a degrading period. Low wages, part-time work, poor benefits, and higher health-care costs all serve to further squeeze consumption.

Let’s take a look at the structural shift from full-time to part-time work in the US.

At an inflection point in a normal recovery, US workers would quickly be hired back to full-time jobs. But a full-time job with benefits is a cost that US corporations no longer wish to bear. This is partly why US corporate earnings and their accumulation of cash has been so robust. Sited in the US but acquiring labor abroad, US corporations are having their finest hour as they sell products to non-OECD markets that benefit from wave after wave of stimulus from the OECD, while the economy and labor force in their home countries languish.

Here in the US, we have effectively stripped out an entire tranche of the full-time US workforce, with no plausible scenario currently in place for adding it back. America used to have nearly five full-time jobs for every part-time job. Now we have four. Meanwhile, Washington, characterized by professional normalcy bias, has finally started figure this out. More importantly, this is why the economy will veer continually towards recession absent some form of stimulus in the years to come.

While the jobs market is surely the primary reason why QE 3 will be attempted, it’s also the reason why more radical measures are likely thereafter, as opposed to QE 4. Many of the prognostications for QE’s impact on the labor market, especially from the Fed and Fed-connected economists, simply never came true. That will become even clearer after QE 3 fails.


After leveling off in late 2011 and early 2012, the number of persons taking Food Stamps (Supplemental Nutrition Assistance Program, or SNAP) in the US is starting to push higher again. Given that food prices are set to make their next move higher as well, it’s reasonable to expect SNAP participation to reflect that pressure on household budgets. The annual cost of the program, which rose in the three years 2009-2011 from $50 billion to $64 billion and then to $71 billion, is quickly becoming a significant budget item. For comparison, should SNAP program costs reach $75 billion this current fiscal year, this amount is almost exactly equal to the most recent Department of Transportation Budget, at $74 billion.

While SNAP tracks the growth of poverty well, it's not the only measure. And the breadth and scale of US poverty continues to grow. This autumn, the Census Bureau is expected to release its latest figures on the growth in US poverty:

Poverty rate nears worst mark since 1965

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and a fraying government safety net. Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections. The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965. Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out.

The Diminishing Marginal Utility of Quantitative Easing

QE is a poor transmission mechanism for creating jobs.

While there has certainly been a recovery of sorts in US jobs since the deep lows of 2009, in which total employment has risen from 139 million to 142 million jobs, this has been insufficient to keep up with population growth. Accordingly, if the US job market cannot aggregate the number of new workers into its system, then it cannot work off the structural labor surplus. Indeed, the rather narrow targets that QE aims for are exactly the reason why the US and the OECD are fated to try more unconventional solutions once the next round of QE fails.

In Part II: What Radical Measures to Expect in the Post-QE Era, we forecast that policies to revive stagnant Western economies (and the US, in particular) will swing sharply away from central banks towards elective bodies. Such programs will involve various forms of debt jubilee and massive infrastructure programs. More unconventional is that some of these programs may be initiated using new forms of government scrip, equity participation, or other methods that allow the government to “spend” without incurring new debt.

Contrary to the deflationist view, which holds that governments will eventually turn to austerity, the examples of such failed efforts in the United Kingdom (which has entered a double dip recession) suggest that austerity will be nothing more than a brief, economic dalliance of Western policy makers -- recall that the Works Progress Administration (WPA) of the 1930’s was considered radical in its time.

We should expect no less this time around, as governments decide to pursue WPA 2.0.

Click here to access Part II of this report (free executive summary; paid enrollment required for full access).


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Wed, 08/01/2012 - 16:54 | 2670220 LawsofPhysics
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When it fails?  So long as the criminals are in charge, the capital and resource misallocation and malinvestment will continue.

Wed, 08/01/2012 - 17:00 | 2670247 Ned Zeppelin
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Wed, 08/01/2012 - 17:10 | 2670281 AldousHuxley
AldousHuxley's picture

neoliberalism failed but in denial we live on.


watch out, after denial comes ANGER then DEPRESSION


soon everyone will come to accept our failure to get rid of bad policies and politicians.

Wed, 08/01/2012 - 17:17 | 2670303 Michael
Michael's picture

I'm glad the privately owned Federal Reserve Corporation already has it's rafters and warehouses stuffed with its member bank toxic fecal matter.

When the Fed banking cartel blows sky high, all that worthless private debt blows up on their own private consortium, and the tax payer will not bail out the Fed.

Wed, 08/01/2012 - 17:36 | 2670385 cougar_w
cougar_w's picture

"and the tax payer will not bail out the Fed."

I think they named it the Federal Reserve for a reason. It was always, from the beginning of the world, going to be our bill to pay and the hook that tears out our heart.

I don't know how they will do it. Maybe the Federal Government will "step in" and "nationalize for domestic security" the Federal Reserve. Congress could vote tomorrow to unwind the Fed and place all its assets and liabilities on the public books.

What do people think will happen if we "end the Fed?" That the nation's banks will divide up all that toxic crap among themselves? Does anyone seriously think that will happen?

Wed, 08/01/2012 - 18:21 | 2670481 risk-reward
risk-reward's picture

"It was always, from the beginning of the world, going to be our bill to pay and the hook that tears out our heart."


Well said, cougar...I wish you were not right but, sadly, you are.

Wed, 08/01/2012 - 18:28 | 2670498 john39
john39's picture

new world digital currency and world wide bank system...  don't worry, everything fixed. /sarc

Wed, 08/01/2012 - 18:36 | 2670514 DaveyJones
DaveyJones's picture

"Finally"   ?

Wed, 08/01/2012 - 20:40 | 2670755 PiratePawpaw
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This cannot and will not end well. "On a long enough timeline..." everything reverts to mean, in this case ZERO. Those who hold the bad debts will do everything in their power to forestall it. In the end they will try to drag us down with them. Our best and only chance is to decouple as much as possible.

Stop feeding the beast.

Wed, 08/01/2012 - 18:34 | 2670468 TWSceptic
TWSceptic's picture

A proper understanding and implementation of (classical) neoliberalism would constitute a completely different system from the one we've had during most of the 20th and 21st century. To blame (classical) neoliberalism for the current economic problems is either intellectually dishonest or evidence of one's ignorance and/or stupidity. Since I'm inclined to think that you are a honest person, it will have to be the latter.

Wed, 08/01/2012 - 17:14 | 2670293 Precious
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Criminals at the front of the line are the teacher's unions.  Mis-education in USA is the cause of poverty.

Wed, 08/01/2012 - 17:18 | 2670307 Michael
Michael's picture

Agenda 21.

Thu, 08/02/2012 - 09:25 | 2671816 jimod
jimod's picture

Actually they're no good in North Carolina, or any of the other right to work states either.

Worse, really.

Sat, 08/04/2012 - 14:56 | 2678328 Precious
Precious's picture


RTW laws have nothing to do with it.  RTW itself is a misnomer.  

Dues payment or not, has zero impact on the monopoly of the union administrators upon the design and delivery of US education.

Wed, 08/01/2012 - 17:03 | 2670255 hedgeless_horseman
hedgeless_horseman's picture



"Fail?  Fail?  QE is a giant-fucking success!" said Tim Geithner, the person responsible for somehow funding the debt-addicted vote-buying US Congress.


Wed, 08/01/2012 - 20:02 | 2670674 BigDuke6
BigDuke6's picture


QE3 to infinity and beyond WONT FAIL to inflate my gold and silver.

Selfish? A bit but the writing has been on the wall.

And i've bored enough people telling them about gold and ZH.

Wed, 08/01/2012 - 17:04 | 2670265 Dr Benway
Dr Benway's picture

Ah, they can always fail harder than they are currently failing.

Wed, 08/01/2012 - 16:54 | 2670224 Snakeeyes
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Today was a good indicator. Markets realized that the Fed is out of ammo and yields rose. As more and more realize it, the higher rates go.

Wed, 08/01/2012 - 16:56 | 2670231 LawsofPhysics
LawsofPhysics's picture

Okay, I'll bite.  How long until the debt of the western world can no longer be serviced and default occurs?  Please do tell. 

Wed, 08/01/2012 - 17:01 | 2670251 CCanuck
CCanuck's picture

Check Japan for possible answers?

Wed, 08/01/2012 - 17:06 | 2670262 LawsofPhysics
LawsofPhysics's picture

Riiiiiiiiggggghhhhht.  Goodbye reserve currency then.  Don't think the Fed would like that.  Besides, despite corporate debt (read debt of the 1%) decreasing, total debt is now growing exponentially.  there can only be one japan I am afraid.

Wed, 08/01/2012 - 17:18 | 2670308 AldousHuxley
AldousHuxley's picture


new global reserve currency mechanism: SDR

Wed, 08/01/2012 - 19:50 | 2670500 LawsofPhysics
LawsofPhysics's picture

I will be impressed when the SDR is put into circulation.

Thu, 08/02/2012 - 02:16 | 2671238 Handyman
Handyman's picture

More fiat.

Wed, 08/01/2012 - 17:01 | 2670253 Ned Zeppelin
Ned Zeppelin's picture

We can pay the US debt by simply printing it. The recipients of such payments will be none too pleased.  But rest easy knowing timely payment in full is but an Epson catridge away should things get dicey.

Wed, 08/01/2012 - 17:05 | 2670267 LawsofPhysics
LawsofPhysics's picture

You forgot you < sarc > tag.  I certainly hope you are right though.  My commodities will love it.

Wed, 08/01/2012 - 17:54 | 2670425 BurningFuld
BurningFuld's picture

And it gets even better. After paying you can refuse to sell any companys to the creditor...nah nah.

Wed, 08/01/2012 - 16:56 | 2670232 agent default
agent default's picture

How about this for unconventional: Cut taxes, stop pretending that government spending contributes anything to the economy, do away with overregulation and stop bailing out the idiots.

Wed, 08/01/2012 - 17:00 | 2670248 LawsofPhysics
LawsofPhysics's picture

So shut down all government operations then?  Sounds good to me, now about those two unfunded wars...

Overregulation?!  Is this the same "overregulation" that allows financial houses to co-mingle client accounts or "rehypothicate" (i.e. steal) their money and other hard assets?

You got the "bailing out idiots" part right anyway.  Same "idiots" own you and your representation (i.e. CONgress).  Now just what are you going to do about it?

Wed, 08/01/2012 - 18:08 | 2670454 AldousHuxley
AldousHuxley's picture

you can't shut down government.

governance and power distribution will always exist like taxes in one way or another.


it just depends who is running it.

you don't want civil war where foreign powers fill the power vacuum with their own puppets.

you want gradual change amongst the population but that requires turning off the TV and people educating themselves.


I'd like to see American private enterprise compete against Russia state owned energy companies, Chinese state owned companies who can use military to hack into your computers who don't mind using their governement powers to crush your little private enterprise. It is no longer corporation versus corporation. it is fascism vs fascism and it has always been.









Wed, 08/01/2012 - 18:27 | 2670495 LawsofPhysics
LawsofPhysics's picture

You are a coward and an idiot for missing simple sarcasm.

Wed, 08/01/2012 - 17:02 | 2670257 Ned Zeppelin
Ned Zeppelin's picture

Same as below - "overregulation" seems a code word for "let the banksters roam free."

What else, exactly, is "over regulated?"

Wed, 08/01/2012 - 17:12 | 2670292 skipjack
skipjack's picture

Peasants ie debt serfs, are over-regulated.

Wed, 08/01/2012 - 18:42 | 2670528 DaveyJones
DaveyJones's picture

well said ned.  criminal law is "regulation" 

Wed, 08/01/2012 - 17:04 | 2670263 cougar_w
cougar_w's picture

Reagan was wrong. His friends got rich. The middle-class disappeared. You are fighting the last war.

Wed, 08/01/2012 - 18:11 | 2670464 terryfuckwit
terryfuckwit's picture

listen agent nob cheese no tax means hanging out of a tree in jungle and dying of dysentry... get real mr ...we have taught the 1% to believe they need not contribute like GE constantly paying no tax...Yes government needs a good shrinking and their role needs to be hugely reduced...30 trillion sat offshore is theft...and all you rocky balboa types get up the rockies plenty room up their for the real men to make it on their own....

Wed, 08/01/2012 - 16:56 | 2670234 GMan_
GMan_'s picture

I don't see any problems here. Let's keep printing money so that Goldmanites can buy more mansions in the hamptons. HAHA

Wed, 08/01/2012 - 16:57 | 2670237 kito
kito's picture

gregor is absolutely correct............the next lsap sometime after elections, likely after the u.s. is downgraded....will be the last...........its the last rabbit in bens hat..very precious....not to be wasted...after that, ben will make sure the world understands that its the job of congress to fix the mess............bens job is to save his currency.....his currency.....ben is fully aware that he cannot fix the structural problems that this country has...........he is done with employment mandates, done with housing mandates, he will hold on trying to plug the hole as long as possible, but wont go down with the ship......................

Wed, 08/01/2012 - 17:44 | 2670407 chubbar
chubbar's picture

He very well may do what you say Kito but that won't save the currency. The economy will come to a complete stop if gov't expenditures are cut in half (which would only stop the bleeding, not pay down the deficit). Can you imagine what will happen to tax revenues at that point? They'll be forced to default and that will not keep the FRN as reserve currency, to say nothing of what happens to the bond market. They are completely boxed in and my guess is they are working up a scenario to blame the collapse on something other than their complete incompetence.

Wed, 08/01/2012 - 18:25 | 2670489 kito
kito's picture

you may be right...however a default doesnt mean the end of the currency....a default would wipe away quite a bit of the excess electronic dollars floating around....thats why i have been advocating for the preservation of physical cash on hand...not in their hands....

Wed, 08/01/2012 - 22:40 | 2670504 Muppet Pimp
Muppet Pimp's picture


Wed, 08/01/2012 - 18:59 | 2670505 Muppet Pimp
Muppet Pimp's picture

Must have hit post twice....In this case I offer the following:

Completely OT:

Does todays Chick Fil A activity prove that having an opinion that is counter to what the MSM is selling is actually ok after all?  Will we see a new movement towards the libertarian ideals of have all the opinions (or actions) your little hearts desire, just leave every one else the hell alone to do as they see fit?  Sure seems we might be moving in the direction of sanity after all.  I like their chicken sandwiches, could care less if we hold the same beliefs. Give me a good value and a tasty sandwich and I really don't care what CT thinks about gays or any other matter.  The whole PC thing has gone too far, and it is nice to see someone say enough with all that.  We will hopefully never all agree on everything that is prescribed my our media and others.  They have a name for places like that and it ain't America btw.


Wed, 08/01/2012 - 16:59 | 2670243 Squid Vicious
Squid Vicious's picture

More bullish news after the bell from Abercrombie (-15%) and Weight Watchers (-12%)... two of Robo's faves no doubt.

Wed, 08/01/2012 - 16:59 | 2670244 Gringo Viejo
Gringo Viejo's picture

Drudge Headline: 60 Bills before The House to name Post Offices. 0 Bills to fix the Post Office. Your tax dollars at work.

Wed, 08/01/2012 - 17:01 | 2670252 cougar_w
cougar_w's picture

Or maybe it means the Postal System cannot be fixed, and everyone knows it.

It's not always about government waste. It is just as often about the end of the fucking world.

Wed, 08/01/2012 - 19:35 | 2670611 TheFourthStooge-ing
TheFourthStooge-ing's picture

The postal system wouldn't need to be fixed if congress didn't require it to fully fund the postal pension system 70 years into the future.

I'm sure congress is taking good care of that funding, too. It's probably all safe in a lock box, like social security.

End of the world, at least as it currently is? Probably so. The parasite of congress (which itself has countless parasites clinging to it) has become bigger than the host it is draining dry.

Wed, 08/01/2012 - 17:25 | 2670327 LouisDega
LouisDega's picture

What..No Larry Flynt? I have to drag my lazy ass to the Te-amo cigar shop?

Wed, 08/01/2012 - 17:00 | 2670246 cougar_w
cougar_w's picture

Somewhat related to the original post:

"...the unspoken subtext behind the financial crises of recent years is precisely that the real economy of goods and services is no longer growing enough to support the immense financial economy that parasitizes it. The current crisis in Europe is a case in point. Since the crisis dawned in 2008, EU policy has demanded that every other sector of the economy be thrown under the bus in order to prop up the tottering mass of unpayable debt that Europe’s financial economy has become."

The rest and really good here:

Wed, 08/01/2012 - 17:10 | 2670282 Caviar Emptor
Caviar Emptor's picture

The paper economy triumphed over the real economy. That's the outcome of 40 years of unfettered money printing and capital concentration

Wed, 08/01/2012 - 17:17 | 2670302 cougar_w
cougar_w's picture

My dark suspicion is that even the "real economy" was being juiced ... on fossil energy.

I don't think anything has been "real" ... meaning sustainable via conventional means ... for 200 years. If that's the case then the paper economy wasn't just a parasite, it was a parasite on a host that was in turn a parasite.

We are in some serious deep shit now.

Wed, 08/01/2012 - 17:21 | 2670324 Caviar Emptor
Caviar Emptor's picture

Agree. The paper economy masks the darkest fear: that capitalism has quietly been replaced by the corporate welfare state. We went to sleep and woke up to find out we are owned.

Wed, 08/01/2012 - 17:25 | 2670341 AnAnonymous
AnAnonymous's picture

That is quite a connection.

From unsustainability of US citizen economics to a change in the system.

Yet no change.

What is going on right now is the same thing that started 236 years ago, going by the name of 'Americanism'

Wed, 08/01/2012 - 18:37 | 2670520 akak
akak's picture

That is quite a connection.

From unsustainability of Chinese citizen economics and world resource blobbing-up to a change in the system.

Yet no change.

What is going on right now is the same thing that started 2236 years ago, going by the name of 'The Mandate of Heaven'.

Wed, 08/01/2012 - 19:12 | 2670574 kito
kito's picture

+1 to akak for understanding the convoluted messages of   anusnonomyous............................

Wed, 08/01/2012 - 19:20 | 2670588 akak
akak's picture

Kneejerk prejudice and blind hatred are not actually all that hard to understand (or at least to recognize).

Wed, 08/01/2012 - 20:13 | 2670694 Kayman
Kayman's picture


Why don't you start up your own China counterpoint ZH site, based on criticizing China's slave wage policy, unfettered pollution of the earth policy, and the biggest one of all- pretending to be Marxists while actually supporting the financial rape of your working  class- just like the Mandarins of old.

Let me know how it goes for you.  You seem to know sooo... fucking much about America and fuck all about the shit in your own hut.

Erudite non-conformists, like yourself, will be welcomed by your Chicom handlers, no... ? 

Wed, 08/01/2012 - 18:59 | 2670554 DaveyJones
DaveyJones's picture

great posts cougar   it is like two mirrors facing each other    and modern economic concepts are just that    people think it's the paper world that destroyed the brick and mortar   it may be the reverse   once we started making both with oil   paper only became the criminal monster to cover and attempt to compensate for the larger collapse 

Wed, 08/01/2012 - 17:14 | 2670298 JohnKozac
JohnKozac's picture

cougar, good article...thanks!

Wed, 08/01/2012 - 17:18 | 2670305 cougar_w
cougar_w's picture

Isn't it though? I was like "oh my god he's right" at just about every paragraph.

People: Read it.

Wed, 08/01/2012 - 17:01 | 2670250 AldousHuxley
AldousHuxley's picture

we haven't recovered since 1980s.

Neoliberalism is an ideology based on the advocacy of economic liberalizations, free trade, and open markets.[1] Neoliberalism supports privatization of state-owned enterprises, deregulation of markets, and promotion of the private sector's role in society.[1] In the 1980s, much of neoliberal theory was incorporated into mainstream economics.

Wed, 08/01/2012 - 17:08 | 2670275 Caviar Emptor
Caviar Emptor's picture

1980s : A critical decision was reached to attack "wage inflation". It was demonized as the real cause of inflation since it caused increased demand. But this was in reality a political decision to favor capital accumulation over wages. The solution for attacking wage inflation was offshoring of jobs and industries and combatting collective bargaining. As a result we've had 40 years of wage stagnation and jobs charts that clearly show that we are not replacing the jobs lost during recessions anymore.

Wed, 08/01/2012 - 17:09 | 2670278 LawsofPhysics
LawsofPhysics's picture

Correct.  This is the same "free market" that prevents real consequences for bad behavior.  Bailouts for the right people, paid for by the taxpayer - FAIL.

Wed, 08/01/2012 - 17:22 | 2670325 GCT
GCT's picture

Law of Physics the "free market" that prevents real consequences for bad behavior for the big corporations and donors to politicians.  None of the QE came to the small people that hire the most people in this country.  I know alot of you predict QE, but it will not help the taxpayers at all.  We need to pay down our personal debt and then I think why should we!  the Fed is thinking about bailing out those that do not pay.  I feel so stupid for being debt free right now!!!

Wed, 08/01/2012 - 18:25 | 2670490 LawsofPhysics
LawsofPhysics's picture

Remember, corporations are people now. By the way, as a debt free corporation, I intend to have a limited liability for my actions henceforth.

Wed, 08/01/2012 - 17:52 | 2670420 crawldaddy
crawldaddy's picture

so reagan and his gang were neoliberals  LOL,, man o man you are an idiot dude

Wed, 08/01/2012 - 18:31 | 2670502 TWSceptic
TWSceptic's picture

Revisionist propaganda at its best. Please do some more studying, then think about your simple assessments again before you spew them out in public.

Wed, 08/01/2012 - 17:03 | 2670258 JohnKozac
JohnKozac's picture

Unemployment may reach 10% by November elecetions depending on how many they drop from the rolls.

Wed, 08/01/2012 - 17:04 | 2670261 Caviar Emptor
Caviar Emptor's picture

QE is the ultimate Biflationary WMD. Because it relates the paper economy and creates a situation of too much fiat chasing too few targets. It bypasses wealth creation through productive work And savings and goes straight to lottery winnings on a grand scale.

Wed, 08/01/2012 - 17:13 | 2670276 cougar_w
cougar_w's picture

I think most of the QE so far has gone into replacing money that has been evaporated, and little more. There is a $5-10T hole blown in the side of the US economy, that is the hole they need to fill somehow. QE to now has not even come close, and there has been too little growth to do it.

This ship is going down. Period. Until $10T is written off this ship sits on the bottom of the economic Mariana Trench.

"That’s the ultimate secret of the financial crisis, the thing that nobody anywhere wants to talk about: if a country gets into a credit crisis, defaulting on its debts is the one option that consistently leads to recovery."


Read it!

Wed, 08/01/2012 - 17:14 | 2670297 Caviar Emptor
Caviar Emptor's picture

The trouble is that QE can't reflate end-demand for goods and services via jobs and wage growth. It can only reflate the paper economy which was the original intent. Of course collateral damage is incipient, gradual inflation for raw materials and essentials since QE trickles up to holders of paper assets, foreign and domestic

Wed, 08/01/2012 - 17:22 | 2670333 cougar_w
cougar_w's picture

QE as it has been applied can only reflate the banks and shadow money, since it was given to them to play with. A different kind of focus might have promoted smaller businesses with real services and employees, rather than simply injected more blood into the financial industrial vampire squid.

Not that QE applied differently is then better, just that the outcome would have been different.

All we've done for 4 years is keep our parasite alive, so we can try to kill it later by other means. Yay us.

Wed, 08/01/2012 - 17:27 | 2670357 Caviar Emptor
Caviar Emptor's picture

@cougar : agree. QE was meant to keep The Corporate Welfare State alive aka Crony Capitalism. The banks weren't the only beneficiaries: all major corporates got a windfall ("sitting on piles of cash") through new debt and equity issuance, reflation of their market cap and a chance to cut costs further to make up for plunging demand

Wed, 08/01/2012 - 17:41 | 2670400 Hype Alert
Hype Alert's picture

QE went to the banks and to fund entitlements.  It completely bypassed our employment structure, thus no jobs. 

Wed, 08/01/2012 - 17:09 | 2670277 williambanzai7
williambanzai7's picture

Cesium seaweed crackers anyone?

Wed, 08/01/2012 - 17:22 | 2670331 RSloane
RSloane's picture

I'll take mine with a dollop of Cheez Whiz made in superb, quality-controlled Chinese factories and an old dried out Greek olive on top.

Wed, 08/01/2012 - 17:26 | 2670344 Getting Old Sucks
Getting Old Sucks's picture

Tuna anyone?  Better start shorting cruise lines.  They make sea water, ships water.  Know whats being poured over the exposed fuel at Fukashima?  Sea water, in and out millions of tons (forget gallons).  The Pacific Ocean will become a nuclear waste pool in just a few years. 

Wed, 08/01/2012 - 17:11 | 2670284 Gloomy
Gloomy's picture


Missile Defense Staff Warned to Stop Surfing Porn Sites
Thu, 08/02/2012 - 03:04 | 2671275 StychoKiller
StychoKiller's picture

Lt. General:  "Whodya think you are, SEC employees?" :>D

Wed, 08/01/2012 - 17:13 | 2670290 larz
larz's picture

How in the world can you tell its failing without an accredited PhD's model?! charlatans!

Wed, 08/01/2012 - 17:15 | 2670296 HardAssets
HardAssets's picture

Ben's job is to do whatever is necessary to protect the bankers he works for. What happens in the overall economy is of secondary importance.

Wed, 08/01/2012 - 17:23 | 2670335 skipjack
skipjack's picture

Uh huh - right up and until the real economy finally, completely dies and the banksters are left with nothing but the debts.  Remember, the bankster's assets are someone else's debt.


Kill a bankster - defaut on your debt.

Wed, 08/01/2012 - 17:19 | 2670309 SwingForce
SwingForce's picture

Without QE3, what will the banks do for 4Q earnings?

Wed, 08/01/2012 - 17:32 | 2670374 kito
kito's picture

raise credit card interest rates to 69.99% apr........................

Wed, 08/01/2012 - 17:54 | 2670422 crawldaddy
crawldaddy's picture

at some point they will. Look at rates in mexico the last few decades.

Wed, 08/01/2012 - 17:21 | 2670323 skipjack
skipjack's picture


Contrary to the deflationist view, which holds that governments will eventually turn to austerity, the examples of such failed efforts in the United Kingdom (which has entered a double dip recession) suggest that austerity will be nothing more than a brief, economic dalliance of Western policy makers -- recall that the Works Progress Administration (WPA) of the 1930’s was considered radical in its time.

We should expect no less this time around, as governments decide to pursue WPA 2.0."


OK, this guy is a dope, or he's smoking some.  We as a country are drowning in debt and those who have jobs have little to show after necessities.  The unemployed will be running out of savings soon, or already have, and are on gov't assistance or are living in their cars.  If the Fed prints to fund WPA 2.0, who THE FUCK thinks any of us will be able to afford food, let alone a house, expensive cars, iAnyDevice etc ?  What you will see is another and bigger crash, as all those who have held on by their fingertips finally just can't make it anymore ?  If you think spending is depressed now, wait 'til they start printing...the discretionary economy, which includes mortgage and car payments, will die.


They can't print...for very long, anyhow.  Until and unless we default the debt and get back to real production instead of this financialized shell of an economy, there will continue to be a series of lower lows until there is no more.

Wed, 08/01/2012 - 17:22 | 2670329 eclecticskeptic
eclecticskeptic's picture

There's a school of thought (to which I adhere) that says if it CAN'T happen, it WONT happen.

Can Greece pay its debts? France? Italy? US? Any nation?

I submit that if anyone had any idea of what to do, they'd have done it a long time ago.


"More than at any other time in history mankind faces a crossroads. One path leads to despair and utter hopelessness. The other to total extinction. Let us pray that we have the wisdom to choose correctly".....Woody Allen

Wed, 08/01/2012 - 17:25 | 2670337 q99x2
q99x2's picture

It wasn't susposed to be this way unless you are a bankster family with a long time-line horizon that would allow you the opportunity to set up the DHS, drones and rescind the constitution of the US and replace it with UN agendas as well as take over control of the EU and put into place technocrats that would further the process of moving all worldly power and wealth from the citizens of soveriegn nations into your families stash--bankster mother fuckers.

Wed, 08/01/2012 - 17:24 | 2670338 eclectic syncretist
eclectic syncretist's picture

OT - Anyone notice that two hurricanes are about to buzzsaw Shanghai simultaneously!

Given that the city is so low-lying it could easily flood, and flood big-time.

Luckily we can depend on the media and local authorities to plan ahead so that no one gets hurt (sarc).

This could be a big story.  I'm just wondering why it hasn't been picked up on yet, especially given the fairly unique nature of the situation. 

Wed, 08/01/2012 - 17:39 | 2670392 sabra1
sabra1's picture

it wasn't picked up 'cause in that part of the world they're called typhoons, maybe?

Wed, 08/01/2012 - 21:13 | 2670813 Apostate2
Apostate2's picture

Typhoon season. Vincente hit Hong Kong, and Saola will hit near Fuzhou well south of Shanghai. Damrey tracking still up for interpretation.

Wed, 08/01/2012 - 17:27 | 2670353 Westcoastliberal
Westcoastliberal's picture

Blindly giving away money to those who need it least (Banksters) does nothing for the economy and only makes the Banksters richer.  Why do we need to go through another round of this horse-hockey to see this?  I'm all for a debt jubilee and massive infrastructure building/replacement.  That way the money flows to real people (who will spend thus boosting the economy) and the remaining infrastructure gives us lasting value (as we still enjoy much of the infrastructure left over from WPA).

This is neither a conservative/liberal, GOP/DEM argument. Why can't we use occams razor in solving any problems in the U.S.?  Our entire system needs a good flushing.

Wed, 08/01/2012 - 17:47 | 2670411 Spaceman Spiff
Spaceman Spiff's picture

Hilsenrath really has egg on his face this time.  Got'em again Bernanke.   Market rally no full release.

Wed, 08/01/2012 - 17:48 | 2670413 Peter Pan
Peter Pan's picture

QE and all its cousins in Europe as well as all its half brothers who go by the name of bailout, ZIRP, subsidies etc will not fail. They will in fact succeed in blowing the system up and this in turn will require debt write offs, massive restructuring, prioritization, sustainable funding solutions for pensions as well as some level of fiscal and trade balancing. So the bigger the bust that QE and the other tricks cause, the bigger the adjustment.

The great danger lies in the period between the system blowing up and the period when sustinable traction starts to assert itself. In this grey period one is left wondering what kind of anarchy will assert itself and whether it will be so bad or prolonged that a reset becomes either impossible or just a distant dream.

Wed, 08/01/2012 - 19:51 | 2670633 ZeroAvatar
ZeroAvatar's picture

I'm sure the FEMA camps and Martial Law will make the transition smoother. 


With the internet shut down no one will be able to organize so much as a flea market.


The incoming nukes should reduce the population to a more 'manageable' size.


RESET?  Distant dream at that point.    'The One' will be the new 'Freejack'.


Puppies Rainbows Love Unicorns Flowers Blue Skies Happiness Contentment Meditation Peace Subservience Bow All Hail The King Booyah Rah Rah Shishkoombah Grand Poobah Winnie the Pooh Gilligans Island Happy Days Praise the Powers that Be Bless the Beasts and The Children Who's you're Daddy Oh No We Won't Go.....

Wed, 08/01/2012 - 17:51 | 2670419 slewie the pi-rat
slewie the pi-rat's picture
The Diminishing Marginal Utility of Quantitative Easing

this was being discussed on zH over ayear ago, especially when a dollar of new public US QE'd debt made the GDP go up by less than a dollar and perhaps even not at all;  or DOWN!

a year ago! 


Wed, 08/01/2012 - 18:01 | 2670443 q99x2
q99x2's picture

I'm shocked.

Wed, 08/01/2012 - 18:21 | 2670486 Racer
Racer's picture

A COMPLETE wasting of money by giving it to the non productive gambler banksters....

Wed, 08/01/2012 - 18:43 | 2670529 davey
davey's picture


Wed, 08/01/2012 - 19:33 | 2670604 penexpers
penexpers's picture

Citizens with some economic sense are really going to have to strategically position themsevles to gain power when this system finally collapses or some sickly fascist regime (openly fascist, not stealthy fascist as it is now) comprised of radicalized statists are going to exploit the misery of average Americans (who have been dehumanized and zombified) to instutute a viciously totalitarian system that'll make the Nazis look like the Falun Gong.

A global depression and delvereging leaves the U.S. in a prime position to rebuild itself as a manufacturing powerhouse.

Fuck the U.N, WTO, IMF, and WB.


Wed, 08/01/2012 - 20:12 | 2670691 toomanyfakecons...
toomanyfakeconservatives's picture

Dude, you are ignoring the 8 trillion pound gorilla in the room... tens of millions of American gun owners, patriots, active-duty military, veterans, reservists, police, federal marshalls, and so on, who swore an oath to protect the Constitution. If you think they are going to just stand idle forever, you have another thing coming. Don't believe the fear-bot keyboard jockeys would have you believe they are inconsequential, and in the case of the military and the police, on the side of the illegitimate federal government. They are not. Yeah, they may draw a government paycheck, but the vast majority of them hate the government and the vast majority of them are overall good guys.

The major players at the FED, Obama, most of Congress, and hundreds of other key traitors are about to be handcuffed, dressed in orange jumpsuits, and paraded in front of the cameras for the world to see...

Whenever a politician and bankster commits a bad act, there are hundreds, thousands, or even millions of good men observing, taking note, and preparing to pull the carpet out from under them when the time is right. The fact of the matter is, the FED, our illegitimate government, and the NWO has lost control over just about everything but the media. They are circling the drain, desperate beyond belief (NDAA, SOPA, QE2, QE3, etc), and they about to be flushed down the toilet for good.

Wed, 08/01/2012 - 21:11 | 2670810 HellFish
HellFish's picture

From your keyboard to God's ears.

Wed, 08/01/2012 - 21:27 | 2670827 honestann
honestann's picture

Nice dream.

Pure fantasy.

Human beings are insane.

Human beings are corrupt.

Human beings are delusional.

The predators have created... raised and "educated" a very large hoard of enforcer thugs whose survival depends upon destroying everyone and everything honest, ethical, rational and productive.  For example, picture ~100 thousand odd TSA agents.  These cretins will do whatever they are told, and will take DELIGHT in every threat, offense and assault they take against good people.  They are not counting the number of crimes taken by their bosses, they are counting the number of ways they can screw you and veryone else not wearing a "brownshirt" like them.

If honest, honorable human beings were going to take actions, they would have taken them long ago.  The fact is, virtually everyone we meet today justifies the actions taken by the predators and their paid thugs.  If humans beings were going to do something about the corruption, they would have done so when it was relatively easy.  They didn't.

Now that taking action is dangerous as hell, and even complaining about the rampant criminality is becoming dangerous, you think all these chickens are going to stand up and do something?  Yeah, right.  We wish.  Not gonna happen.

Hell, less than 1% of people will convert their fiat, fake, fraud, fiction, fractional-reserve debt toilet paper and manipulated stocks and bonds into real, physical gold --- even when gold has been the best investment for a whole decade.  And you say people will fight the predator-bansters and predator-politicians.  Yeah, right.  Evidence for that == zero.

Human beings are finished.

Thu, 08/02/2012 - 04:52 | 2671311 toomanyfakecons...
toomanyfakeconservatives's picture

Step aside with the women and children while the real men do the dirty work. Less than 5% of the colonists sent the British Empire packing, and it will take far less than 1% of Americans to send the traitors to the Constitution to the FEMA camps they once dreamed of using on you and me.

It's getting easy to spot people who have never shouldered a rifle and taken the oath to defend the Constitution. Stop wallowing in fear and stop resigning yourself to a dark future. Every time a bad man commits a bad act, hundreds or thousands of good men silently observe, take note, and plot against them. If you cannot see that FED, the NWO, our illegitimate leaders, and other top bad guys are not CORNERED, DESPERATE, and CIRCLING THE DRAIN you cannot be helped. Again... step aside.

Thu, 08/02/2012 - 21:22 | 2674534 honestann
honestann's picture

If thousands of good men silently observe, take note, and plot against the predators who take destructive actions, then there must be endless barren wastelands where forests used to stand to hold all those "notes taken".  I mean... really!  For my entire life, I have spoken against --- and made perfectly clear the nature of --- the predators DBA government, the predators DBA central banks, and the predators DBA large [lobbyist-funding] corporations.  Where are these good people you talk about?  Even those who pretend to promote honesty, ethics, liberty and productivity defend the predators, and they have my entire life.  Modern humans are a flat-out pile of panty-wastes --- period.

I am not wallowing in fear.  But I do resign myself to YOU having a dark future.  Meanwhile, I will have a moderately tolerable future.  Not nearly as great as it would have been if even a small fraction of "regular folks" practiced even a teenie, tiny bit of honesty about the nature of predators DBA government/corporations/banks.  I cannot and will not depend on you, or those phantom people you conjure up in your imagination.

I have been taking actions my whole life, and will continue to take actions --- but not suicidal actions (like you and your note-taking zombies).  I finally abandoned the USSA over 2 years ago, and have been making a self-sufficient place in the extreme boonies where no predator has any interest whatsoever.  I will not risk my ass to attempt to save endless losers like you who simply wait for others to take actions... someday... manana.  It is always and forever "manana"... and "manana" is always "manana".  Which in my dictionary translates to "never".

If a thousand people took even trivial actions for each predator who "violated his oath to defend the constitution", the predators would already be defeated.  All good people had to do is convert their liquid wealth into real, physical gold, silver, platinum, farmland, seeds, equipment and other durable, valuable and/or productive goods... and the predators would have been defeated decades ago.  The "good people" you imagine DO NOT EXIST.  To be sure, there are a few complainers, but that's all they are and do... moan, groan, complain... and then hand endless wealth to the predators, so those predators can hire endless millions of jack-booted thugs to abuse them and us all.

With allies like that, who needs enemies?  Not me.

I'll tell you what is circling the drain.  Human beings.

Thu, 08/02/2012 - 05:39 | 2671324 Laura S.
Laura S.'s picture

I co-sign this
it is so sad that we haven´t learned from our past. We still follow the liars and we loose our potential in everyday battles with the headless monster of state power. That is what Tilly is pointing out in his article War Making and State Making as an Organized Crime.

I have personally experienced this state inefficiency in many ways, one of them would be the problems I used to have with my tenants who refused to pay anything and literally barricaded themselves in my property. But when it came to police bullying me for forgetting to pay my parking fines, the system worked perfectly as two police officers summoned at my door one day after the deadline.

I think anyone can name similar story from his experience, which points out to the fact we are constantly being threatened by state.

Wed, 08/01/2012 - 23:23 | 2671089 Dr Benway
Dr Benway's picture

I hope you are not serious, so stupid and naive is this post.


In EVERY fascist country since the dawn of time the police have been only too happy to serve the state, torturing and kidnapping.


You are delusional if you think cops have some sort of moral compass that will stop them if laws become even more inhumane and unjust than they are now.


The cops and guns won't protect you, they will be turned against you. The ones MOST likely to enjoy repressing you are cops.

Thu, 08/02/2012 - 04:36 | 2671306 toomanyfakecons...
toomanyfakeconservatives's picture

In the limited history of modern police states, none of them have had to deal with the aforementioned 8 trillion pound gorilla or a bright and shining beacon of truth like ours, the Constitution of the United States. In the limited history of modern police states, private gun ownership always was/is a tiny fraction of what is it is in America. Funny how you kind of ignored this issue.

Contrary to what you may believe America is not a sad, defeated, shit-and-piss country like those police states you are referring to. The cops can be a nuisance, but they are no threat to the populace at large or to freedom at large. They follow orders, yes, often grossly unconstitutional ones, from the top.

I seriously doubt you have ever shouldered a rifle and taken the oath. The 8 trillion pound gorilla can huff and puff and blow any house down. Comparing America to previous police states is silly. We live in unprecedented times and unprecidented actions and events are on the immediate horizon... mostly good ones.

Thu, 08/02/2012 - 21:11 | 2674543 honestann
honestann's picture

EVERY SINGLE ONE of the predators destroying the world today TOOK THE OATH.

If you imagine "taking an oath" has ANY effect whatsoever, you are delusional beyond limit.

Wed, 08/01/2012 - 19:41 | 2670628 Hedgetard55
Hedgetard55's picture

It's gonna be like in "A Canticle For Leibowitz".

Wed, 08/01/2012 - 22:38 | 2671009 earleflorida
earleflorida's picture

Qex+1= Inverse of Moore's Law


just that simple? there are no... more laws' that apply to modern neanderthal economist. one more reason i don't attest too darwin's subjective? approach of isolationism on an island?,... any island!

Thu, 08/02/2012 - 00:31 | 2671161 3rivers
3rivers's picture

What is it with all of these QE stories?  It only gets kicked off when there are definite signs of impending deflation, and so far... it has worked 100% as it was intended.  As for all of this crap about housing and jobs..... ask an economist and they will tell you.  The next 20 or 30 years is going to be an awful slog for all of the high income countries... because their high incomes were supported, since the late 1970's, by public sector debt and public sector spending that set them all up for structural issues that will take at least two generations to "weed out". 

Thu, 08/02/2012 - 00:34 | 2671169 3rivers
3rivers's picture

and my understanding is that the best single indicator is USGG5Y5Y:IND.  for those who must keep everythign simple, for which there seems to be quite a few of us.  if it drops below 2pct, get ready for QE.  it's not there now.

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