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Macro Commentary: The Damned If We Do, Damned If We Don’t Global Economy

Tyler Durden's picture




 

From Brian Rogers of Fator Securities

Macro Commentary:  The damned if we do, damned if we don’t global economy

QE2 is dead.  Long live QE3!  Markets rebounded yesterday when Ben Bernanke’s BFF at the WSJ Jon Hilsenrath published an article that quoted senior officials at the Fed as saying that they would give “very serious consideration” to a new round of bond purchases, aka QE3.  Not to toot my own horn or anything, but I published a note back on February 2nd called Go All In On Bernanke’s Weak QE3 Hand where I said, “The problem the Fed and Chairman Bernanke now face is that the so-called wealth effect of the rising stock market has been dependent on the existence of QE2 and removing that punch bowl could cause the party to end and reverse the gains, both economic and market, that we have seen in the last 5 months.”  At the time, you’ll recall, the market was solidly convinced that QE2 would be the last and final round of QE from the Fed.  I disagreed.  Unfortunately, it’s starting to look like I was right.  However, as a long-time buyer of gold and silver, I have to admit that these never ending rounds QE are a gift from the (finance) Gods.  But why should the market get excited about a policy that’s essentially failed, twice, to do anything except temporarily juice stocks higher?  I think it’s very simple, the Fed cannot afford to be seen as helpless, they must do something, anything.  Otherwise, why have them as Ron Paul might ask?  And besides, at this point in the game, what else can they do?  Lower rates?  Nope, zero-bound already.  Lower reserve requirements?  Not likely, our TBTF banks are already scraping by with mark-to-model accounting on real estate assets that are currently worth less than they were in 2008 yet still somehow are marked at or close to par.  Lowering reserve requirements would likely cause the banking panic currently growing in Europe to quickly jump the pond and land on our shores.  Which leaves us with QE3/asset purchases. 

So what size would make a difference this time?  How about $300bn or half of QE2?  Probably will never fly.  Markets will be underwhelmed and it’s doubtful the Bernank would get the wealth effect he so desperately desires.  How about the same size as QE2 or $600bn?  Could be, but why waste time?  Just get it over with.  Billions with a “b” are so 2008, let’s move this thing forward with the gusto that only the masters of the universe at the Fed can muster and get to the trillions.  If the Bernank is convinced that the Great Depression was caused by a lack of liquidity then climb in that helicopter and start dropping real money.  As a gold/silver owner, I am completely on board with this QE3 thinking as my portfolio will do great.  As for inflation, the USD, commodity prices and global stability, well those things will probably suffer but again, the Fed must do something, anything.  Other countries, however,  won’t like this policy at all.

Which brings us to the next phase of the global debt crisis which will eventually lead to the Great Reset, currency wars.  Switzerland and Japan both intervened in their currency markets yesterday.  Both currencies temporarily sold off and are now rallying again as the massive currency market simply overwhelms the actions of lesser central banks.  Could capital controls be the next phase of the battle?  Banco Fator’s chief economist, Jose Goncalves, has argued since the beginning of 2011 that capital controls could very likely be put in place by one of the countries suffering from a stronger currency.  Countries like Brazil, Chile, South Korea, Switzerland or Japan that are facing shrinking exports will become a first-mover into currency controls, however, rather than being ostracized by the rest of the world, instead they will be quickly followed by the others.  Yes, global trade will suffer as a result.  But what option do these countries have?  Force industries to become more competitive, efficient and learn how to compete?  That’s a great answer for the long-run, but governments always operate in the short-run.  So at some point, especially if QE3 is officially announced, capital controls and protective tariffs will come back.  Welcome back Smoot-Hawley, we hardly missed you!

This leads us to the current state of economic affairs which I like to call, “Damned if you do, damned if you don’t.”  The US is weakening economically, so we “must” do QE3.  But this could create inflation and evidence from the previous rounds show little if any benefits to the underlying economy.  The US also has to become more fiscally austere and raise more revenue.  But this will act as a drag on GDP and will likely be deflationary.  In Germany, the country must bear the brunt of the costs for bailing out the periphery which will ultimately cause higher taxes and debt levels there which will slow GDP.  If they don’t, the periphery could break out of the EUR, the remaining relatively stronger northern European countries would make the new EUR a much stronger currency and Germany will see its exports collapse.  China must continually build bridges, bullet trains and malls to nowhere to keep their GDP growing.  Yet the inflation created, particularly in real estate, risks destabilizing their banking system and could spark social unrest.  Brazil must fight the strengthening BRL, yet the strong BRL is helping offset domestic inflation which continues to run above the central banks’ upper targeting band.  And the examples go on and on.  So is QE3 really that bad?  In the end, it won’t matter much, we’re damned if we do, damned if we don’t.  So go ahead Chairman Bernanke, bow out your chest and push QE3 into the trillions.  Gold and silver investors will thank you. 

-Brian

This material was not prepared by Fator Securities LLC.. U.S. Persons seeking further information must contact Fator Securities LLC in New York at (646) 205-1160. This material shall not constitute an offer to sell or the solicitation of any offer to buy (may only be made at the time qualified participants are in receipt of the requisite documentation, e.g., confidential private offering memorandum describing the offering, related subscription agreement, etc.). Securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful or until all applicable regulatory or legal requirements of such jurisdictions have been satisfied. This material is not intended for general public use or distribution and is intended for distribution only to appropriate investors. The opinions contained herein are based on personal judgments and estimates and are, therefore, subject to revision. Past performances are not indicative of future results.

 

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Thu, 08/04/2011 - 14:54 | 1524355 Doyle Hargraves
Doyle Hargraves's picture

QE3-gold goes up quickly

No QE3-gold still goes up because of "tradition"

Who cares bitchez?!

Thu, 08/04/2011 - 15:03 | 1524386 BaBaBouy
BaBaBouy's picture

 

Just a reminder, this is mostly a FIAT and liquidity driven crisis.

GOLD is actually way up Right now in the OTHER major fiats :::

 

Australian Dollar  +30.25

British Pound  +6.24

Canadian Dollar  +23.51

Euro  +13.19

Thu, 08/04/2011 - 19:19 | 1525016 trav7777
trav7777's picture

yeah, basically the BOJ just crashed everyone's markets

Thu, 08/04/2011 - 14:55 | 1524361 kevinearick
kevinearick's picture

OK, so, get married, without registering, have kids, and build your community. Those that survive this tsunami will form the tertiary demand curve, the middle class in the next system.

Thu, 08/04/2011 - 14:56 | 1524363 rufusbird
rufusbird's picture

Yeah, the bond market really needs support...

Thu, 08/04/2011 - 14:57 | 1524365 Jonas Parker
Jonas Parker's picture

Reality can be a real bitch sometimes...

Thu, 08/04/2011 - 14:59 | 1524374 Josh Randall
Josh Randall's picture

New slogan: "QE3: overheating a BRIC economy near you soon!"

Thu, 08/04/2011 - 15:03 | 1524384 treemagnet
treemagnet's picture

Its like a fireworks show, oooohhhh aaahhhhh - look at the green one with white star bursts!, wwwooooowwwwwww - blue and white together! and on, and on.  Meahwhile that bernanke fuck is ready to light the red, white and blue at the same time.

Thu, 08/04/2011 - 15:03 | 1524388 r101958
r101958's picture

Look, TPTB are playing economic chess and they have the king in check. It is not checkmate yet but they know that the only possible move that the King can make is to engage in further easing. Soon, however, the King will be checkmated because further easing will only lead to another check, more easing and another check, etc.

Thu, 08/04/2011 - 15:11 | 1524414 GoinFawr
GoinFawr's picture

Heh, I bet the next move Benny is contemplating these days is "Cheque pls."

Thu, 08/04/2011 - 22:10 | 1525383 StychoKiller
StychoKiller's picture

How many cyber-trees will The Bernank have to cut down in order to create $1Trillion?

Fri, 08/05/2011 - 11:08 | 1526857 GoinFawr
GoinFawr's picture

Ah yes, the age old question: If Benny fells a quadrillion cyber trees to conjure up fiat and nobody is there, does he have to make a sound?

Thu, 08/04/2011 - 15:06 | 1524394 Darth Hayek
Darth Hayek's picture

OK, quick side question: Does anyone have any info on Turkish investments in Germany?

Because I've got this very, very nasty gut feeling right now...

Thu, 08/04/2011 - 15:08 | 1524401 Dr. Engali
Dr. Engali's picture

Damn what a day for the server to blow up. It is hard getting real news any place else.

Thu, 08/04/2011 - 15:13 | 1524423 DosZap
DosZap's picture

Dr.Engali,

I have not even been able to get on ZERO-H in over 2 hours........................

Thu, 08/04/2011 - 15:16 | 1524434 topcallingtroll
topcallingtroll's picture

Noooooooooooooooo!!!!!

Thu, 08/04/2011 - 15:22 | 1524459 hunglow
hunglow's picture

Sperminator to little black girl: Where am I?

Little black girl to Sperminator: EARTH, welcome!

Thu, 08/04/2011 - 15:08 | 1524402 FreedomGuy
FreedomGuy's picture

We are pretty much backed into the corner that has long been predicted in many articles here on ZH. As this article says there's nowhere to go on interest rates or monetary stimulus. Look at the headlines that are littered with competitive devaluations from Japan to Brazil to Switzerland as everyone tries to win the export game by trashing their own currencies. Keynesianism will die a slow excrutiatingly painful death and it has begun.

The Republicans in the U.S. Congress are impotent. Idealogically most outside of the Ron Paul-libertarian wing don't know what to do. They just signed a stupid deal which adds $8trill. to the national debt without cutting a single solitary program. The demand for money worldwide is about to black hole strong as half of Europe defaults. The U.S. will default, too but it will take longer. So, for today we will benefit somewhat in a stronger dollar and lower borrowing costs.

2012 might just be the end of the world...economically speaking.

Thu, 08/04/2011 - 15:36 | 1524513 illyia
illyia's picture

2012 might be the end of the world, financial-instrumentally speaking.

People will still need, make and trade things. They just will realize that they do not need the financial services industry pimps to take a few cents out of every trade, create fictious "investment" vehicles or use the people's first attempt at true democracy since Rome fell to enforce the rights of criminals to rig the system.

By the way, Jim Sinclair has been predicting this since the early 2000s. He's game on for the fall through 2015-16 and has backed Martin's call for gold 12K by then.

Now that's a wild ride.

http://www.jsmineset.com/

Fri, 08/05/2011 - 01:30 | 1525790 FreedomGuy
FreedomGuy's picture

Well, he's not alone in those predictions. The thing that is most bullish for gold/PM's is the competitive currency devaluations. This will be followed by numerous national QE's around the world. They are all prescribing the economic leeches of the failed Keynsian theories.

Your point about financial service pimps is on the mark. I have read other articles and the theory is that in political centrally planned economies you make more money off money than by making things, real things. I would say that has been true for several decades in the West. I was reading how Ferrari has record sales this year, especially in NY. So, how do you get record sales of a luxury product while we are experiencing record unemployment, food stamp use and income reduction in the middle class? Financial services are still scooping up the money as they play the money game. Bernanke throws them money with his QE and bond manipulation. Our socialist government throws them money, as well. Money, interest rates, money supply, etc. have all become divorced from the "real" economy of goods and services as well as normal supply and demand. It will all crash eventually.

It will be a wild ride and all of us will get hurt.

Thu, 08/04/2011 - 15:08 | 1524404 kaiten
kaiten's picture

Excellent summary of the present situation. Couldnt say it better.

Thu, 08/04/2011 - 15:10 | 1524416 el Gallinazo
el Gallinazo's picture

Your not the only one who realizes that QE3 means global hot money currency controls.  The rest of the world is getting fed up with the Giant Parasite.   I am not so sure that the Boyz who pull BB's strings want that now.  They just may hold pat for a deflationary collapse and, nationalize the pension funds, IRA's, and 401-k's for a little pocket change.

Thu, 08/04/2011 - 15:20 | 1524451 topcallingtroll
topcallingtroll's picture

Giant parasite?

I would say the parasites are those mercantilist countries who intentionally suppress their currencies to gain an unfair trade advantage. They arent happy that the usa is fed up with their gaming the system

Thu, 08/04/2011 - 22:18 | 1525395 StychoKiller
StychoKiller's picture

"From my point of view, the Jedi are evil!" -- Anakin Skywalker

Thu, 08/04/2011 - 15:21 | 1524453 topcallingtroll
topcallingtroll's picture

.

Thu, 08/04/2011 - 15:22 | 1524458 karzai_luver
karzai_luver's picture

notice the tents in the streets in the holy land? hmmmmmmmmmmmm.

 

was/is the socialist rig about to collapse there due to bernank the mighty?

 

Thu, 08/04/2011 - 15:13 | 1524421 Henry Chinaski
Henry Chinaski's picture

QE  and QE2 were dismal failures.  They will conclude that they didn't do it hard enough.  Third times a charm.  Or something.

Thu, 08/04/2011 - 15:26 | 1524480 walküre
walküre's picture

Put a cool million Dollars into every American's bank account overnight.

Ssshhh.. don't tell anyone. Take it as a one time gift, ok?

Sorry, gold is sold out but Iphads and Lulu pads are available!

Thu, 08/04/2011 - 15:14 | 1524422 buzzsaw99
buzzsaw99's picture

swear to jebus someone on cnbc called him "the bernank" just now.

Thu, 08/04/2011 - 15:19 | 1524438 Dr. Engali
Dr. Engali's picture

I hope Tyler picked that up. That would be funny to see. Maybe Banzai will post it.

Thu, 08/04/2011 - 22:19 | 1525397 StychoKiller
StychoKiller's picture

The Berrrrrnnnaannkkk!  If he can't save us no one can!  :>D

Thu, 08/04/2011 - 15:16 | 1524432 tip e. canoe
tip e. canoe's picture

QE3 and the world lights up like the ME.

Thu, 08/04/2011 - 15:25 | 1524471 marcusfenix
marcusfenix's picture

well...tomorrow ought to be fun...

Thu, 08/04/2011 - 15:26 | 1524479 DavosSherman
DavosSherman's picture

Hooocoodanode? QE2 pumped in 4 billion a day, from Bennie's ink jet to the banksters HFT servers and moved the market up 30% from 8-2010 until 7-2011.

Now its gone and the market is DOWN? 

 

Hoocoodanode that would happen?

QE3 is a must, you can't raise the debt ceiling more if you couldn't already borrow the difference between what we took in and what we spent.

Uncle Buck IS TOAST.

Thu, 08/04/2011 - 15:36 | 1524512 WonderDawg
WonderDawg's picture

I don't think QEAnything will save the market now.

Thu, 08/04/2011 - 16:17 | 1524623 jmc8888
jmc8888's picture

And so it goes on, idiot market commentary cheering for trillions of stimulus because of his portfolio.

Damn if it costs 25 bucks for a 'cheap' package of Ramen. 

Damn if it kills a billion people with food inflation worldwide.*if lucky

It will do good for my portfolio.

 

This guy is an asshat.  There is no saving this monetary fucktard of a system.

Glass-Steagall and wipe the fraud.  Not kill the people with hyperinflation...because my portfolio will do nicely.  What we got here is an edjikaded man.

 

As I said, and many others have as well, in the end the banksters best friends will be gold owners.  They always side with whoever has money.  They become their new bitch.  (not to mention they'll be fully invested in it by the time it hits. 

Anyone think the world can sustain the hyperinflated prices because a few people have gold in their portfolio? I don't think so. There is no trickle down.  This isn't the 70's, the fiat hoover dam has been constructed.  Prices go up, and nothing cushions that rise.

It would be utter destruction.  If gold is at 10,000 (within a certain time frame of course), then the world will implode. 

Only a few tenths of a percent can survive in that environment, which funny enough, is almost the goal of some of these assholes.

You know you're a complete douchebag, when you know it won't work, you know it will destroy the world economy, the real physical economy, but you root for it, because of your portfolio.  What's the difference between that guy and Helicopter Ben himself? Not much.  At least some of those fucktards actually believe in the ponzi.  This asshole doesn't, yet says print away, destroy the world, make me money, and everyone else needs austerity.

Glass-Steagall, not blood money.

It isn't damned if you do, or damned if you don't.  That's the thinking of a complete moron.  Because you see, that is a fake dichotomy.

We CHOOSE to be put into that situation, because we won't call fraud....FRAUD.

We continue to legitimize fraud and LET IT DESTROY THE WORLD.  WE ARE LETTING IT.

Wipe the fraud, and there is no 'damned if you do, damned if you don't'...SOPHISTRY.  Thus it is REALLY  "dammed if we choose this idiot way, damned if we choose that idiot way, but Glass-Steagall will end the insanity"

Hey no one is against protecting oneself.  Buy gold and silver to do so.   But to actively cheer on the destruction takes a sick, sick person. 

You want to have your money there, while CHEERING for it to go down, because if it did, you know not only do you survive, but you could make more WEALTH in a real economy long term, and not risk being strung up by the peasants storming your 'economic plantation'.

All of this is unnecessary, and could be changed overnight with Glass-Steagall.  Let the banksters burn with their fraud.  Let THEM pay it off.  If they can't, liquidate.

These assholes don't even deserve minimum wage, they are complete fools.  A janitor does 1000x more for society than these asshats.

The funny thing is, he thinks HIS INVESTMENTS, and investments in the ponzi, are of the highest significance.  Sorry, it's the opposite, that's why it's called INVESTING.  You win or lose.  This asshat thinks that a completely bankrupt system must be saved because HE and OTHERS foolishly invested in a worthless ponzi.  Sorry, you were the dumbfuck, who bought a handful of beans. 

The system is broke, broken, and anyone invested in the mirage known as just about anything is a fool.   It's worthless.  Oh you'll still get something if you sell, because everyone else is a bigger fool.  That does mean it has value.  It just means the strongest hopium around isn't invested in Obama, they are invested in the markets believing the system isn't completely fucked and worthless.  It is.  Cheering on 50 dollar gas (after it dips to whatever) isn't good investing.  It's committing suicide.  Everyone else drinks the purple kool-aid first, you just happened to be last.  But nevertheless, even gold holders have very little future in a destroyed worldwide economy. 

Are you better off with gold at 50,000, and a destroyed world economy with no running water, electricity, roads, toilet paper, food, etc? 

Or are you better off with gold at a reasonable level, Glass-Steagall enacted, TBTF's gone, fraudulent debt wiped away, real economy growing, mag-lev, fusion, machine tools, NAWAPA, desalinization, and all the necessities of life in reach?

There is no value in gold at 50,000...the world will be a cinder box worth nothing, and you, will be a marked man, unable to wipe your own ass because the toilet paper...not produced where you live, is not available for all the tea in china. 

Glass-Steagall or die.  Even if you have gold. 

Of course this will be a process, of ever increasing dumbassery in order to reach such a scenario.  But at this point, it is quite clear sanity has left the building.  The necessary path has been completely obvious for 3 years, if not 10, and yet we're still here, and people are calling for QE3...even if they know it doesn't work, because of their investments.  Talk about bizarro world. 

 

If there is no supply, your gold supply won't last.  Good luck with that.  Cheer on destruction, because 99 percent of gold owners will use up that gold for consumption in about 2.2 seconds.

The world would still be fucked.

So don't go down that road.  At gold 50,000 (and perhaps even 10,000), everyone is fucked.  All for fraudulent debt, that can be wiped away in a couple of days, rather than go down this idiot path.  Legitimizing the fraud...destroying the world (significantly) since 2008.

Glass-Steagall, and yes, if tens of millions demanded it, the cowards in congress would do it.  But until then, bankster donations are preferred, in the future, much more directed at the SuperCongress (now wall street just needs to bribe 12 of them...the rest...NO SOUP FOR YOU!)

Glass-Steagall, you are only damned if you listen to dumbass who limits your options by framing the debate wrong.  We choose to be here.  This guy knows nothing about the economy, he views the world through a free trade AND a monetarist lens. He thinks the debt is legitimate, wants bernanke to print because of his portfolio, damn the consequences to real people, except that people need more austerity, and completely forgets about Glass-Steagall.  What a dumbass.  I think this guy is as stupid as Bernanke.  His viewpoint is just as fraudulent.

Glass-Steagall, or if you accept this guy's viewpoint, you're just putting your own head in the guillotine, one way or another.

 

 

Thu, 08/04/2011 - 16:35 | 1524673 TheMerryPrankster
TheMerryPrankster's picture

By the way, do you support the reinstatement of Glass-Stegall Act?

Thu, 08/04/2011 - 17:37 | 1524820 fwchiro
fwchiro's picture

He keeps using that word. I do not think it means what he thinks it means.

Thu, 08/04/2011 - 22:57 | 1525490 Grand Supercycle
Grand Supercycle's picture

S&P500 head and shoulders target is 1,176 and further downside
expected.

As mentioned for some time - S&P500 monthly has been tracking sideways this year. This extensive distribution signified a bearish big picture and that a significant downtrend would follow.

http://stockmarket618.wordpress.com

Wed, 09/14/2011 - 04:49 | 1667408 chinawholesaler
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