The One Big Problem With QE To Infinity

Tyler Durden's picture

There is one big problem with the Fed's announcement of Open-Ended QE moments ago: it effectively removes all future suspense from FOMC announcements. Why? Because the Fed has as of this moment exposed its cards for all to see from here until the moment it has to start tightening the money supply (which may or may not happen; frankly we don't think the Fed tightens until hyperinflation sets in at which point what the Fed does is meaningless). It means easing is now effectively priced into infinity. Now rewind back to that one certain paper by the New York Fed, which laid it out clear for all to see, that if it wasn't for the expectation of easing in the 24 hour period ahead of the FOMC meeting, the market would be 50% or lower than where it is now, and would have been effectively in negative territory in the aftermath of the Lehman collapse. What Bernanke did is take away this key drive to stock upside over the past 18 years, because going forward there is no surprise factor to any and all future FOMC decisions, as easing the default assumption. It also means that Bernanke may have well fired his last bullet, and it, sadly, is all downhill from here, as soaring input costs crush margins, regardless of what revenues do, and send corporate cash flow to zero. Unfortunately, not even in the New Normal can companies operate without cash flow.

This is the chart.

Than you Fed for telling us what comes next.

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WhiteNight123129's picture

Please Tyler, Bernanke is scaring the shit out of Corporations to spend their cash on useless corporate projects. They will do it pronto, they will get scared and spend their idle cash.... (Transfer to wagers).

 

Ungaro's picture

"Open-ended", OK then, QE indefinitely, in perpetuity. But is it "UNLIMITED"? Maybe that is Dr. BS Bernake's last bullet, no?

Pareto's picture

Tyler nailed it.  Input costs will soar as money seeks a store of value.  This will have the undesirable effect of killing margins, because last I checked, consumer demand is still the shits.  So firms have no pricing power, and now they have no control/flexibility over input costs with a sinking currency.  Its fucking assinine.  Wonder what the nutjob Kudlow is thinking now about the Bernanke's indefinite printing agenda.  How's that King dollar working fer ya now Larry (the guy that talks shit out of both sides of his mouth and at the same time).  Strong dollar (currency) contrary to Krugman, creates unbelievable flexibility in production as far as choice/selection of inputs.  Exporters who bitch about strong dollar policy are pissy whining lazy fucktards that have no business being in business.  There are two sides to a profit/loss statement - income and expense.  If your currency rises, the price of your output has to fall, all else equal, but, the benefit is that the cost of your production inputs fall as a result of the exchange rate gain.  Besides, if nobody is buying your exports, sell more domestically, change your business model, get creative and start actually trying to solve people's problems with value, rather than relying on a cheap currency to pay for your debt and your lazy shitty business and lifestyle.

America deserves the government it gets though I wish no hardships on anyone.  But the question that must be asked and will be asked is, "at what point did it ever become obvious that the only path to wealth and prosperity was through the macinations of a printing press?" 1913?  Its apparent now I guess.  As somebody said earlier, while I might feel richer, there is with this feeling, an attendant sensation of unease, and with that the thought of imiseration coming for many people I know that have miscalcualted, misappropriated, and misdirected their networth, and while I recognize that it was nobody but themselves that signed on the dotted line, it was Bernanke that pulled the fucking trigger.  RP 2012.

RiskAverseAlertBlog's picture

You are spot on per "[it] is all downhill from here, as soaring input costs crush margins, regardless of what revenues do, and send corporate cash flow to zero." Excess capacity the fascist Bernanke has been fond of citing as basis likely keeping inflation in check in fact is but further fed by the Fed's hyperinflatinary policy, thus making a mockery of any attempt this policy claims to venture per the Fed's full employment mandate, this on account of accelerated shutdown of businesses whose margins are crushed. We have the oil refining business most recently a case in point (whose effect is screwing every chamber maid with a masters degree otherwise unable to find decent work). Bernanke should be hanged, right after Greenspan.

radicall's picture

You are "misunderestimating" Bernanke... he can double the purchase amount every FOMC and also increse the type of securities he buys. Pretty soon there will be no debt left in America that is not owned by the Fed

Bottom line.. Borrow money, it will be worth a lot less when you have to pay it back

GreatUncle's picture

Everone raves on about gold well my take on gold is this.

The one thing going for gold over currency is ...

A lump of gold buys "x" loaves of bread today and in like 10 years it will still buy "x" loaves or close to that amount.

Gold enables people to break out of the fiat money system and all this printing because you can't print lumps of gold.

"Make sure you get the real stuff though" not gold certificates as gold certificates can be printed.