Santelli On Liquidity And More Central Bank 'Counterfeiting'

Tyler Durden's picture

In a little under two-and-a-half minutes, CNBC's Rick Santelli surveys the landscape of just what exactly is Quantitative Easing, why more debt does not solve the problem of too much debt, and why these actions (as even Frau Merkel has ascribed concern) are nothing but counterfeiting. He rhetorically questions how the printing of more money is the way to solve our 'problems', adding via Rick Rule, that "there's been no shortage of cash in the system; but one wonders [given] this economy seems based on liquidity, whether building an economy on what is, in fact, counterfeiting is very good for the economy in the long term?"

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TimmyB's picture

Santelli's a fucking idiot who attracts the highly valued "fucking idiot" viewer demographic that advertisers crave.  Santelli helps sell crap to fucking idiots, so he stays on the air. 



TimmyB's picture

double post


neidermeyer's picture

 CNBC? Why is anybody watching this crap?

Because they won't let you watch Skinemax when you're cold calling from your cube.

Brazillionaire's picture

This market needs more money on the sideline.

MillionDollarBoner_'s picture

This is what we in the UK call an "arse-covering exercise".

CNBC spouts 24/7 propaganda. At some point they will be called to account.

Rick's articles will then be evidence for the defence.

socalbeach's picture

Only thing I would take issue with is his statement that QE is "printing more debt" and "creating debt to solve a debt problem".

QE, as long as it's not undone, neutralizes debt since it takes Treasuries (debt) out of circulation, and the Fed sends most of the interest it receives back to the Treasury.  If you loan me a million dollars and I never have to pay you back and don't have to pay interest, that's a gift, not a loan.

LawsofPhysics's picture

It gets worse, several bonds now with negative yields.  What happens when retirees have to pay to loan the treasury a billion dollars?

TrustWho's picture

Don't worry, as FDR collected gold to support the currency, US will tax wealth to pay for the debt. Hell, economist already discussing wealth tax.

Disenchanted's picture



"and the Fed sends most of the interest it receives back to the Treasury."


According to who...the liars club?


And TARP made us(taxpayers) a profit. Yeah, right.

LMAOLORI's picture

socalbeach "Only thing I would take issue with is his statement that QE is "printing more debt" and "creating debt to solve a debt problem".

QE, as long as it's not undone, neutralizes debt since it takes Treasuries (debt) out of circulation, and the Fed sends most of the interest it receives back to the Treasury.  If you loan me a million dollars and I never have to pay you back and don't have to pay interest, that's a gift, not a loan"


Actually the Member Bank's get to keep the interest they make on IOER we are paying them interest to borrow and hold it's a GIFT.


How Bernanke Can Get Banks Lending Again If the Fed reduces the reward for holding excess reserves, banks will have to find something else to do with their money, like making loans or putting it in the capital markets.



"The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?

But suppose it doesn't work. Suppose the Fed cuts the IOER from 25 basis points to minus 25 basis points, and banks don't lend one penny more. In that case, the Fed stops paying banks almost $4 billion a year in interest and, instead, starts collecting roughly equal fees from banks. That would be almost an $8 billion swing from banks to taxpayers. There are worse things."

in full





" Bruce Bartlett, writing in the Fiscal Times in July 2010, observed:

Economists are divided on why banks are not lending, but increasingly are focusing on a Fed policy of paying interest on reserves — a policy that began, interestingly enough, on October 9, 2008, at almost exactly the moment when the financial crisis became acute. . .   

Historically, the Fed paid banks nothing on required reserves. This was like a tax equivalent to the interest rate banks could have earned if they had been allowed to lend such funds. But in 2006, the Fed requested permission to pay interest on reserves because it believes that it would help control the money supply should inflation reappear. 

. . . [M]any economists believe that the Fed has unwittingly encouraged banks to sit on their cash and not lend it by paying interest on reserves.

At one time, banks collected deposits from their own customers and stored them for their own liquidity needs, using them to back loans and clear outgoing checks.  But today banks typically borrow (or “buy”) liquidity, either from other banks, from the money market, or from the commercial paper market.  The Fed’s payment of interest on reserves competes with all of these markets for ready-access short-term funds, creating a shortage of the liquidity that banks need to make loans. 

By inhibiting interbank lending, the Fed appears to be creating a silent “liquidity squeeze” -- the same sort of thing that brought on the banking crisis of September 2008. "

in full

and also this





Keeping interest rates low is considered the first line of defense for central banks bent on easing the credit crisis and getting banks to lend again. The Federal Reserve’s target for the federal funds rate -- the overnight interest rate that banks charge each other – has been kept at a rock-bottom 0% to 0.25% ever since December 2008. A growing number of economists now think it could stay there well into 2011 or even 2012, prompted by fears that a spreading debt crisis in Europe could hurt a budding U.S. recovery.

Dirk van Dijk, writing for the investor website, explains what a good deal this is for the banks:

“Keeping short-term rates low . . . is particularly helpful to the big banks like Bank of America (BAC) and JPMorgan (JPM)Their raw material is short-term money, which is effectively free right now. They can borrow at 0.25% or less, and then turn around and invest those funds in, say, a 5-year T-note at 2.50%, locking in an almost risk-free profit of 2.25%. On big enough sums of money, this can be very profitable, and will help to recapitalize the banking system (provided they don’t drain capital by paying it out in dividends or frittering it away in outrageous bonuses to their top executives).”

This can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get the banks to lend again. Instead, they are investing this virtually interest-free money in risk-free government bonds, on which we the taxpayers are paying 2.5% interest

in full



Brother Sebastian's picture

Someday, someone is going to make Santelli an offer he can't refuse.

Debt-Is-Not-Money's picture

"Someday, someone is going to make Santelli an offer he can't refuse."

Could it be that he's already done that in reverse and maybe that's why he's still on the air? If so, I hope he has a doomsday weapon!

(He IS Italian isn't he?)

diogeneslaertius's picture

you Can build an economy on counterfeiting; However, the monetary unit of exchange must be Constitutional (i wont bother to explain the logistics)and backed by something (even if, as i have elsewhere suggested, it were backed by a Basket of Commodities weighted "at run time" [jit] via primary exports)


you cant have all of the free trade amalgam either


you cant have treaties


you must have (at first incremental of course but then ramping up as per live effect data) tariffs

diogeneslaertius's picture

the root of evil is the FRS and the NWO central banking cartel

even fractional reserve lending is okay within certain contexts but not otherwise!


we might need to shut down the securities exchanges though and force a different methodology for capex generation, it seems impossible but we need the same tacit, discrete logistics but ... the design has to be perfect, we need to make it so the players cant rig the game


again game design

again Organic Life as Elementary Game Theory (fuck RAND)

tahoebumsmith's picture

QE has become the new synthetic drug of choice. All the addicts on Wall St. just wait for their next fix. Remember what happened when the previous drug of choice, Synthetic MBS AND CDO dried up and all the addicts went into withdrawls? Soon the same will happen when QE is no longer an option. This time they have created the perfect storm for depression, Just imagine what will happen if the interest rates go up just a mere 2% and the free money starts costing something? If the financial system can't correct itself thus far with all the help from QE, ZIRP,LTRO, HAMP,TALF, TWIST and all the other gimmicks it is pretty obvious this isn't going to end well. Then again we have relied on a person that didn't even see the housing crisis staring him in the face. When the dominos start falling this time, there will be no drugs left to feed the junkies and the whole system will become one big drugless crack house... Nothing more then a bunch of washed up has-BENS!

Jlmadyson's picture

Soft that was good times.

Someone needs to put together a chart with names and all the key BS phrases that have been pushed in the last 5 years. Then we need a chart with all the programs and costs associated with all the free money floated in the last 5 years.

Altogether it has got us nothing more than mountains if more debt at the end of the day.

Juan Wild's picture

The Feds only mandate is to devalue the dollar. One dollar in 1913 is worth only a nickel today! HAPPY FUCKIN' 100th BIRTHDAY YOU FUCKIN' DEN OF THEIVES!!!!!


mickeyman's picture

I like the bold caption "QE has a new name."

TrustWho's picture

Today's market....Who refuses to allow this market to fall? biased Algos? PPT/Fed?

The market gaps up and stays for a period of time. The market gaps down and bang; 5 minutes and market has recovered from  the gap down. 

TrustWho's picture

With the low volume, they can easily have the S&P close green, even if only .00000001. What a comedy!

We will see if I am wrong

LouisDega's picture

So does this mean im ok Spider or im not ok Spider?

savagegoose's picture

hey guys, i dont where to say this, there is no topic yet about the fact banks and the BIS FED have allowed gold as  tier 1 capital reserve.

i see this as a go ahead for banks to re accumulate gold, and then drive up the price as high as possible. thus giving them a  real reserve base.


it was pointed out to me with this chart, that for since ww2, gold sat at $35. then in the 80-90 after the unloading it avg $350 for 2 decades!

now with the massive liquidity injection another 10x the price is at hand, and banks will be implicit in getting it there and keeping it there.



Juan Wild's picture

Ron Paul is in a class by himself. He is the only man in the house. He is the only threat to the status quo. He is the only threat to the money lenders.
And to the the money lenders, Obama, Romney, Bush, Clinton, and all previous Presidents, and all the clowns in the House and Senate (with notable exceptions) are but groveling, sniveling, spineless, easily-bought scum. And dear said scum, know this: the money lenders know Ron Paul is the only MAN in the house. And they know he can NOT be BOUGHT like you common scum. That's why his voice is squelched and you scum are free to talk your clown asses off anytime you want. FUCKIN MUPPETS!

Seasmoke's picture

dont count Andrew Jackson on your list

indio007's picture

If it wasn't for the SS counterfieting would be good for my personal economy too.

MrBoompi's picture

What Santelli doesnt say is that the central banks don't try to "solve the problem of too much debt" they just make sure the interest payments are made and the debt continues to increase.

“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

Same story, different day.  People are inherently stupid.  In the past 15 years or so, Greenspan and Bernanke, with the explicit authority from each and every member of both houses of congress, and our idiot Presidents, looted this country to the point of no return.  And very few people seem to actually give a fuck! Shame on us when we and our hopelss descendants are slaves to the Walton family. Credit Rick Santelli for at least shouting into the wind, hoping some moron awakens to his warnings.

grid-b-gone's picture

Every Ponzi needs new recruits to be sustained, which is why federal jobs keep expanding in each administration.

People are reluctant to vote themselves out of a job, even knowing their children will somehow pay for the overspending.

Greece made it to 14% of working-age people employed by the government before collapse. 

The U.S. is at 8%. 

cranky-old-geezer's picture



Is it counterfeiting when a company issues more stock?

No, of course not.  

When a company issues more stock, it dilutes the value of all shares, but no one calls it counterfeiting.

Printing more currency is like the stock analogy.  It dilutes the value of the currency, but it's not counterfeiting.

In the last 4 years M2 has grown 300% ($2.5 trillion in 2008, $10 trillion today).  

What would happen to someone's shares of stock in company A if they issued 300% more stock, going from 100 million shares outstanding to 400 million shares for example?

Wouldn't it dilute the value of each share?  Wouldn't each share be worth 25% of its original value?

Count your blessings.  US dollar is still worth 50% of its 2008 value.

But it's not counterfeiting. 

Counterfeiting is illegal printing, like if you or I started printing FRNs.

But that $7.5 trillion of Fed printing is legal.

Actually it's more like $30 trillion.   Most of it is "off balance sheet".





Winston Churchill's picture

One estimate from a commentator ( an ex FedRes guy) I sometime follow is;

$32 tn off balance sheet plus the $7.5tn M2 growth.

Thats why the Fed is desperate to avoid a full audit.

Just imagine the gold price if that got out.

Strange that $32tn seems to match the money stashed in safe havens.

Sure its just coincidence.

cranky-old-geezer's picture



$32 tn off balance sheet plus the $7.5tn M2 growth.

Thats why the Fed is desperate to avoid a full audit.

Doesn't matter, when someone introduces a gold-backed currency, USD will collapse to zero, and that $32 trillion off-balance-sheet cash stashed away in safe havens will be worthless.

Of course everone else's US dollars will be worthless too.

James's picture

"Count your blessings.  US dollar is still worth 50% of its 2008 value."


Problemw/that my friend is the U.S. dollar was only worth,thru inflation,.five-cents

But you are right.

It is only worth HALF that.(pennies)


Antifaschistische's picture

Cranky Ole...

Yes, technically counterfeiting is an illegal fraudulent act and since the Fed's behavior is legal it's 'legally' not counterfeiting.

But it's also NOT like issuing new stock.  A company makes a decision between debt and equity.  Either way, they're looking for a return in excess of their cost of that capital.   Raising money via. stock sales, should be, to increase the wealth of all owners...NOT dilute the wealth of exiting owners.  Which is why new share issuance is not immediately met with a drop in the market value of that stock. 

The FED does NOT do this.  There is no ROI.  There is only dilution.  This is why it is 'like' counterfeiting.   The FED dilutes value.  The cost of capital for a counterfeiter is near zero so their only incentive is to keep counterfeiting.

kevinearick's picture

counterfeit people, robots, with counterfeit money, debt, paying one another to agree that they are humans, which they clearly are not.

Disenchanted's picture



shiny plastic people...

jharry's picture

Nice observation V.  They even counterfeit silver coins.  Ha ha ha ha ha, aha!

Antifaschistische's picture

Counterfeiting?  Could any of these guys read ZH?   FINALLY!!  After decades of this nonsense someone actually calls it counterfeiting.   Except if anyone else does it, it's fraud.


supermaxedout's picture
Goldman&Co: The First Bankers

In exchange for this gold, the depositors received a receipt: 'promissory notes'. These notes, the first bank notes, once their veracity was established, proved to be very popular with their recipients, as gold was heavy and cumbersome. Soon, these notes began to be used as currency, with everyone happy to accept that each was backed 100% by a deposit of gold.

Except that once the goldsmiths realised that few people actually wanted to redeem their notes, they began very secretly to issue more than they had gold to back them. This newly-created money was then lent out to people who wished to borrow it at a rate of interest. This was a practice of highly dubious legality, but its practice was never tested in court.

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The Bank of England

Then in 1694, this practice of creating money out of thin air was effectively legitimised with the founding of the Federal Reserve Bank an affiliate of the Bank of England. It was not the first bank to be founded (Coutts was founded in 1690), but the nature of its creation was central to the role that banks went on the play in the supply of money.

In 1694, England was still a predominantly rural country. Most people still grew their own food, built their own homes, collected their own firewood for fuel, drew their own water from wells and frequently made their own clothes. Money was not the necessity that it is today for most people, but it was still needed in large amounts when the nation went to wars.

The then King (William III) needed money to fight his war against the French. Both the King's capacity to tax and his authority was limited, so the quickest and easiest way to acquire his needs was to borrow.
A consortium of six London goldsmiths, lead by one William Paterson, were given royal authority to the create the first 'joint-stock' bank on the condition that they lent the King £1.2 million in gold at 8%. This was the start of the National Debt.

More importantly, however, they were given the authority to create £1.2 million in paper money for private lending. This paper money was theoretically backed by the gold, but as that had been lent to the King, it meant that the same sum of money was lent out twice over! The validity of this practice was never tested in a court of law, as it remained a matter that was hidden from the general public. Even today, the banks like to draw a veil over their activities.

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