As The US CapEx Boom Ends, Is The Fed Now Truly Out Of Ammo?

Tyler Durden's picture




 

For the past six months we have extensively discussed the topics of asset depletion, aging and encumbrance in Europe - a theme that has become quite poignant in recent days, culminating with the ECB once again been "forced" to expand the universe of eligible collateral confirming that credible, money-good European assets have all but run out. We have also argued that a key culprit for this asset quality deterioration has been none other than central banks, whose ruinous ZIRP policies have forced companies to hoard cash, but not to reinvest in their businesses and renew their asset bases, in the form of CapEx spending, but merely to have dry powder to hand out as dividends in order to retain shareholders who now demand substantial dividend sweeteners in a time when stocks are the new "fixed income." Yet while historically we have focused on Europe whose plight is more than anything a result of dwindling cash inflows from declining assets even as cash outflow producing liabilities stay the same or increase, the "asset" problem is starting to shift to the US. And as everyone who has taken finance knows, when CapEx goes, revenues promptly follow. Needless to say, at a time when still near record corporate revenues and profit margins are all that is supporting the US stock market from joining its global brethren in tumbling, this will soon be a very popular point of discussion in the mainstream media... in about 3-6 months.

As a reminder of just this tension, and following today's weaker than expected durable goods report, Goldman released minutes ago a report titled "What Happened to CapEx" in which, as the name implies, Goldman provides several observations on what may be the biggest threat to corporate earnings of all: declining capital investment.

After a strong start to the recovery, business capital spending has slowed. Growth in real non-residential fixed investment averaged 10.4% (annualized) from Q1 2010 through Q3 2011, reversing about two thirds of the decline during the recession. However, in Q4 2011 and Q1 2012, growth in non-residential investment slowed to an average of just 3.6%, and we estimate growth of just 2% for the current quarter. A similar downshift can be seen in the main monthly measure of capital goods demand: orders for non-defense capital goods excluding aircraft from the monthly durable goods report—also known as “core” durable goods orders. As shown in the exhibit below, growth in core durable goods stalled over the last eleven months. The level of orders in May 2012 was just 0.4% above the level in June 2011. 

 

Exhibit 1: Little Growth in Core Durable Goods Orders

Among the reasons for the decline in spending Goldman lists less favorable financial conditions, a limited "accelerator effect", and more importantly, reduced pent up demand and diminished policy support.

Specifically, for the last three , Goldman notes:

1. Reduced pent-up demand. During the 2008-09 recession, US firms dramatically cut capital spending, such that the level of investment for equipment and software was running below the rate of depreciation. The most striking example was business investment in transportation equipment, which declined by almost 70% from peak-to-trough. The level of investment for this type of capital good was running so far below deprecation rates that the stock of capital declined by about 8% in 2009 (Exhibit 2)

 

Exhibit 2: Sharp Pull-back in Investment During Recession

 

The low level of investment spending was clearly unsustainable, and was bound to recover once the economy stabilized. This “pent-up demand” was probably a major factor behind the strength in capital spending in the early stages of the recovery. Business investment in transportation equipment, for example, has increased 160% since its trough in Q1 2009. There is an analogy to Chairman Bernanke’s explanation for the decline in the unemployment rate earlier this year: firms may have cut too aggressively during the recession, and have been catching up more recently.

 

Although probably important over the last two years, pent-up demand should provide less support for business investment going forward. Investment spending rebounded strongly, and the capital stock is now growing. Investment in equipment and software is running at 7.5-8.0% of GDP, similar to levels seen in the last expansion. There could be a case for pent-up demand in the commercial real estate sector, where investment spending is still near record lows at about 2% of GDP (commercial real estate defined and business investment in structures less mining-related items). But other factors appear to be holding back spending in this area.

 

Limited “accelerator” effect. A closely related concept is that of the “accelerator” effect: when economic activity is picking up, firms will tend to increase investment because they expect to produce higher levels of output in the future. This framework for thinking about investment spending works well empirically: most models of investment spending incorporate lags of GDP growth (or a closely related measure).

 

Accelerator effects have turned less supportive since earlier in the recovery. Year-over-year growth in real GDP has slowed from 3.5% in mid-2011 to 2.0% as of Q1. Growth in real GDI (Gross Domestic Income) slowed from 4.3% to 2.0% over the same period, and industrial production from 7.2% to 4.3%. We can also see evidence of slowing in analysts’ expectations for corporate earnings growth. The chart below—which comes from our equity strategy team—shows changes in 12-month ahead analyst earnings expectations for S&P 500 companies (for background on earnings as a cyclical indicator see our earlier article). While still mildly positive, earnings expectations have increased at a significantly slower pace over the last 3-6 months. If firms' own internal earnings expectations are similarly downbeat, this could be another factor holding back business investment.

 

Limited “accelerator” effect. A closely related concept is that of the “accelerator” effect: when economic activity is picking up, firms will tend to increase investment because they expect to produce higher levels of output in the future. This framework for thinking about investment spending works well empirically: most models of investment spending incorporate lags of GDP growth (or a closely related measure).

 

Accelerator effects have turned less supportive since earlier in the recovery. Year-over-year growth in real GDP has slowed from 3.5% in mid-2011 to 2.0% as of Q1. Growth in real GDI (Gross Domestic Income) slowed from 4.3% to 2.0% over the same period, and industrial production from 7.2% to 4.3%. We can also see evidence of slowing in analysts’ expectations for corporate earnings growth. The chart below—which comes from our equity strategy team—shows changes in 12-month ahead analyst earnings expectations for S&P 500 companies (for background on earnings as a cyclical indicator see our earlier article). While still mildly positive, earnings expectations have increased at a significantly slower pace over the last 3-6 months. If firms' own internal earnings expectations are similarly downbeat, this could be another factor holding back business investment.

 

Diminished policy support. Finally, we see some evidence that reduced policy support may have played a role. First, EPA engine regulations implemented at the start of this year may have temporarily boosted demand for certain types of capital equipment in 2011 (see here for more background). Second, the federal bonus depreciation allowance may have lifted spending by a small amount in Q4, which then faded in Q1. The accelerated depreciation provision allowed firms to write off the full amount of qualified investments put into service before the end of 2011. The provision was allowed to expire, and for 2012 only 50% of qualified investment may be written off in the first year of their service life.

 

We previously argued that the bonus depreciation allowance was not a major factor for strong investment growth in 2011. In particular, investment growth was strongest for short-lived capital goods, which benefit the least from the provision, and weakest for long-lived capital goods, which should benefit the most. This seemed correct through Q3 of last year, but the pattern reversed in Q4: investment in long-lived capital goods (defined as those with a service life of seven years or greater) increased sharply. Spending for these types of capital goods then fell back in Q1. This pattern suggests some investment spending may have been brought forward into Q4, when the depreciation allowance was still in place.

At the end of the day, regardless which, if any, of the above conditions is true, one thing is certain: absent a rapid renewal of America's aging asset base, American corps are certain to suffer the same fate as not only Japan but Europe, as the chart below of various average asset ages by geography, shows:

The other thing that is also certain, is that without fresh capital investment, corporate top lines will promptly decline as well. And with margins already maxed out, any decline in revenue will result in a magnified decline in corporate bottom lines.

Which brings us to the second point of the night, that from ConvergEx' Nicholas Colas, who looks precisely at what the Wall Street consensus for corporate revenue is.

Our monthly review of Wall Street analysts’ revenue expectations for large multinational companies shows increasing concern that top line growth will diminish considerably over the next few quarters.  For Q2 2012, for example, the average analyst expectation for the Dow 30 Industrials is now just 4% overall and 2.1% for non-financials.  These are the lowest percentage change estimates in the year we’ve been tracking the Street’s financial models for this quarter, and less than half of where they were a year ago.  The third quarter of 2012 skates as close to zero expected growth as we’ve seen since the recession, at just 2-3% expected revenue growth.  Analysts seem to be pushing their top line estimates into Q4 2012 in order to maintain their annual targets, for they still print a rebound to 5% growth in this period despite dramatically reducing their Q2 and Q3 2012 expectations.  Bottom line – earnings season will likely provide analysts the data needed to cut their Q4 2012 numbers. 

Colas goes on:

Looking forward it is revenue growth that will have to keep the U.S. stock market looking healthy.  Every month we take a survey of what Wall Street analysts have baked into the top of their financial models for large multinational companies.  We look at the 30 companies of the Dow Jones Industrial Average for these purposes.  This top-down approach lets us dovetail their estimates with a perspective on the macroeconomic environment, as well as measure their relative levels of optimism about future sales growth. 

 

Our findings from the most recent cut at the data, based on what the Street is printing right now for Q2-Q4 2012 as well as 2012 and 2014, is pretty cautious.  A few points here:

  • Revenue estimates for Q2 2012 are down to 4.0% from 5.1% for the 30 companies of the Dow, and just 2.1% from 3.0% for the non-financial companies.  Several charts we’ve included following this note highlight that this is the slowest expected revenue growth since Q4 2009, and that analysts have had to cut their expectations for this quarter by over 50% in the past year. 
  • The news from Q3 2012 estimates is equally downbeat.  Analysts expect just 2.1% revenue growth from prior year actuals for the 30 companies, and 2.8% for the non-financial names.  Again, these would be smallest “comps” since the U.S. stock market bottomed in March 2009.  And just as it was with Q2 2012, analysts have had to cut their sales estimates by +40% over the last few months.
  • Wall Street analysts aren’t giving up on 2012 just yet, and they are holding out hope that Q4 2012 will save the year.  They have not yet taken down the final quarter of the year, and an average of their expectations currently comes in at 4.8-5.0% for the total and non-financial names respectively.
  • For next year, analysts have trimmed their models to show an average of 4.5% top line growth for the Dow companies.  That’s not as high as the +5% they were showing their buyside clients back in February, but still solidly in mid-single-digit territory.
  • For 2014, our first amalgamation of the data shows that analysts have a 3.3-3.8% revenue growth rate as a “Placeholder” in their financial models.

A regression between Dow Jones Industrial Average revenue growth and U.S. GDP growth (chart and equation attached) shows a reasonable 46% R-squared over the past four years.  The ratio between sales and GDP growth is essentially 2:1 (2.0932, to be precise).  This means that 2% revenue growth, such as what the analysts expect in Q3 2012, implies just 1% GDP growth.  Obviously, these companies almost all have global businesses so the analysis is imprecise.  But the statistical relationship is good enough that it bears a mention, especially since capital markets are increasingly concerned about a U.S. economic slowdown in the back half of the year.

 

 

How you read this data will likely be colored by your view on the market.  Expectations have certainly come in over the past six months, and the U.S. stock market has still managed to rally.  Good news, that.  At the same time, we’d like to see analysts adopt a more conservative posture on Q4 2012 revenue growth before we pronounced the patient entirely healthy.

What does all of this mean? Nothing more than what we have been saying for the past 3 years: the seeds of the central planners' own destruction are sown by none other than the central planners. Recall that earlier today we discussed how it was the ECB's own LTRO that caused the oldest Italian Bank Monte Paschi to demand a bail out for the simple reason that it held too many Italian bonds: something the ECB implicitly ordered demanded it to do!

The CapEx squeeze is merely the other, just as important, side of capital allocation distortion provided by central planners.

Recall that the highest returning capital allocation for corporates is and has always been CapEx, followed by M&A, and finally dividends, as we showed back in April:

And yet, companies now focus almost exclusively on the lowest returning capital investment option. Why? To generate the fastest possible return for shareholders, of course - just another artifact of central planner intervention. Again from April:

What the Fed has done by crushing returns on interest-bearing instruments, is to force companies to pay ever greater dividends (hence push equity investors into the dividend bubble), because companies too realize that for US baby boomer investors/consumers to make up lost purchasing power shortfall, they need to get the cash from somewhere. And since the fascination with capital appreciation is now gone, the only option is dividend return. Recall these two charts from a recent report by David Rosenberg:

 

Personal Interest Income:

 

 

Personal Dividend Income:

 

 

All this simply shows merely the most insidious way in which the Fed's ZIRP policy is now bleeding not only the middle class dry, but is forcing companies to reallocate cash in ways that benefit corporate shareholders at the present, at the expense of investing prudently for growth 2 or 3 years down the road.

 

Then again, with the US debt/GDP expected to hit 120% in 3 years, does anyone even care anymore. The name of the game is right here, right now. Especially with everything now being high frequency this and that. 

 

Anything that happens even in the medium-term future is no longer anyone's concern. And why should it be: the Fed itself is telegraphing to go and enjoy yourself today, because very soon, everything is becoming unglued.

Ditto. In other words, in addition to the stock market no longer rallying on even promises of easing, the Fed's rate policies in the corporate world are not only no longer benefitting companies, but are starting to backfire.

Intuitively this makes sense: Bernanke and company bought 3 years of time in which companies were supposed to use the cash for the right things: CapEx investment and growth, and the occasional merger or acquisition... Instead they squandered it all on short-term gains.

Which is also understandable: free money comes easy, and goes just as easy. Without having to work hard for the new 'cash', companies never felt compelled to invest it properly and allocate it efficiently. They also expected that the party would continue indefinitely and the free cash would keep coming. Sadly, the party is now ending. And the only thing left is the massive hangover from years of central planning irrational exuberance.

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Wed, 06/27/2012 - 22:36 | 2567189 The trend is yo...
The trend is your friend's picture

no bullets left bitchez

Wed, 06/27/2012 - 22:39 | 2567194 ACP
ACP's picture

They still have ammo. It's just that Madman Bernanke is starting to realize that there are a lot of angry people out there with ammo too.

Wed, 06/27/2012 - 22:40 | 2567197 SilverTree
SilverTree's picture

"Rednecks White Socks and Blue Ribbon Beer"

 

http://youtu.be/4N3iVHxP8FQ

Wed, 06/27/2012 - 22:49 | 2567212 knukles
knukles's picture

Hey, listen.
I got some great non-recourse, unsecured, personal paper that I could tender and I'll personally guarantee that I can spend every single last dime ensuring that somewhere along the food chain, some economic activity is sparked.  I mean the kind that's buying real (useless shit I don't need or want) stuff and thingamajigs and if they take enough paper from me, I can ensure that the economy Will Get Moving Again, Without Question.

Hah!

Wed, 06/27/2012 - 23:24 | 2567277 economics9698
economics9698's picture

I think Bernanke is taking a calculated gamble that lower commodity prices, gas, will be more favorably perceived by the public this fall.  I do not think it is a secret Romney would fire the guy and Bernanke’s best hope is a Obama re-election.  So he has to decide does $4 dollar gas win the election or $2.75 gas?

A big gamble because when the printing dies down so does all the smoke created by the printing presses.  Gas will cost less but the true damage to the economy will become more visible to the public.

Another scenario is to do QE III in August and bump the stock market up for the election. 

Any other scenarios? 

Wed, 06/27/2012 - 23:43 | 2567311 HungrySeagull
HungrySeagull's picture

I don't give a shit about the gas. Let it go to 14 dollars a gallon, we are all unemployed anyway.

Is war material classed as Durable goods?

Thu, 06/28/2012 - 06:51 | 2567631 disabledvet
disabledvet's picture

Not if the war material is you...

Thu, 06/28/2012 - 07:01 | 2567640 markmotive
markmotive's picture

Save us Sarah Palin!

Wed, 06/27/2012 - 23:52 | 2567324 Dr. Engali
Dr. Engali's picture

If he waits too long to print he will have to print at least double if not triple the amount needed now in order to catch a falling knife. He will print and Europe will provide the cover. Gas needs to drop another 25 cents or so.

Thu, 06/28/2012 - 00:01 | 2567347 El Oregonian
El Oregonian's picture

Molotov's become cheaper...

Thu, 06/28/2012 - 03:59 | 2567539 cynicalskeptic
cynicalskeptic's picture

They're counting on insurrection being too expensive for the average prole.

Thu, 06/28/2012 - 01:04 | 2567425 The Monkey
The Monkey's picture

They have a higher bar for QE3 as each round of open ended monetary stimulus defers any impetus for fiscal authorities to act, angers many of our global neighbors, and, has proven to increase nominal rates (QE1 & 2).

Great ZH article. Post-bubble capex is an interesting issue - more from a productivity and bottom line standpoint than top line IMO.

Thu, 06/28/2012 - 01:05 | 2567427 DanDaley
DanDaley's picture

Any other scenarios? 

 

Yeah, the Democrats are doing a rope-a-dope on the Republicans because they  (dems) don't want to win because they know that the next 4 years are going to be hell-on-earth (it's baked in the cake), and if the world survives, then Billary or some other Dem waltzes back in and voila, a two termer at least.  It's enough to make you sick.  Oh, and 90% chance Obamacare gets upheld tomorrow.  Get (more) used to tyranny.

Thu, 06/28/2012 - 03:59 | 2567538 Michael
Michael's picture

What happens when we get to Peek Debt Saturation?

Thu, 06/28/2012 - 07:00 | 2567639 Withdrawn Sanction
Withdrawn Sanction's picture

People, firms, and govts choke on any new debt.  Instead, they begin liquidating current holdings to pay down debt or default outright.  Sound familiar?

BTW, though we've reached saturation levels already, a debt-based society does not need debt to stop growing for trouble to begin.  The rate of debt accumulation need merely slow and the house of cards begins to collapse as the plans predicated on sustained debt growth fail to pan out.

Thu, 06/28/2012 - 09:58 | 2568151 post turtle saver
post turtle saver's picture

Velocity Of Credit(tm)

Thu, 06/28/2012 - 07:31 | 2567700 prodigious_idea
prodigious_idea's picture

"Any other scenarios?"

War

Wed, 06/27/2012 - 23:06 | 2567242 dolce vita
dolce vita's picture

americas new secret weapon...the hillbilly patriot

 

footnote ; cog dis circa 2011

Thu, 06/28/2012 - 04:58 | 2567493 Daily Bail
Daily Bail's picture

Meanwhile in Washington...

 

HR 459 - Ron Paul's 'Audit The Fed' Bill Is Back

 

Ron Paul to Bernank: "This isn't a clown bill, bro..."

 

Thu, 06/28/2012 - 09:42 | 2568090 vast-dom
vast-dom's picture

"All this simply shows merely the most insidious way in which the Fed's ZIRP policy is now bleeding not only the middle class dry, but is forcing companies to reallocate cash in ways that benefit corporate shareholders at the present, at the expense of investing prudently for growth 2 or 3 years down the road."

EXACTLY!  And yet.......markets are up, up and away. SP over 800 at this stage is fake and bullish.

Wed, 06/27/2012 - 23:02 | 2567237 dolce vita
dolce vita's picture

did they just say..."at the end of the day"? you are hereby banned to linguistic vernacular purgatory.

 

yes, i have several pounds of broken concrete blocks i'd like to use for collateral......yes, 400 billion ought to be enough....for now.

 

Wed, 06/27/2012 - 23:57 | 2567339 El Oregonian
El Oregonian's picture

Yes, they still have ammo but, they broke the weapon that fires it...

Thu, 06/28/2012 - 00:57 | 2567416 salvadordaly
salvadordaly's picture

Agreed!!!!!!!!!!!

Thu, 06/28/2012 - 01:10 | 2567434 Poor Grogman
Poor Grogman's picture

Ammo is free
Just press ctrl p
Now watch and you will see
More sound money flee...

It's very tough being a banker
Especially when you're also a wanker
You have all the tools
To fool all the fools
But the sheeple just never say thank you

Thu, 06/28/2012 - 05:33 | 2567556 Daily Bail
Daily Bail's picture

Looks like we're getting closer to Tyler's worst-case scenario for JPM's loss:

 

BREAKING NEWS - NYT Reports JPMorgan Prop Trading Loss May Reach $9 Billion

 

#SucksToBeJamie

 

Wed, 06/27/2012 - 22:44 | 2567204 BarreraNorman70
Wed, 06/27/2012 - 23:55 | 2567335 Rich Bagg
Rich Bagg's picture

They can send every household in America a check for $1,000,000 tomorrow.  They have unlimited ammo.

 

 

Thu, 06/28/2012 - 05:13 | 2567577 reader2010
reader2010's picture

Before Bernanke does that, he will need to send each 0.001% household at least a few trillion dollars first. 

Thu, 06/28/2012 - 05:24 | 2567580 icanhasbailout
icanhasbailout's picture

IIRC, the last guy who had a bazooka in his pocket, blew his own balls off

Thu, 06/28/2012 - 06:57 | 2567635 gatorengineer
gatorengineer's picture

Infinite bullets left bitchez..... Fed can print to infinity, and crush whats left of the middle class.....  Poor will still get their guberment Iphones, and the rich will ride the equity wave.....  Middle class and retirees game over.

Wed, 06/27/2012 - 22:39 | 2567195 Rastadamus
Rastadamus's picture

run!

Wed, 06/27/2012 - 22:41 | 2567198 Tsar Pointless
Tsar Pointless's picture

Bullets!

Er, bullish!

No, seriously - we're a-screw-ed!

Wed, 06/27/2012 - 22:42 | 2567201 fonzannoon
fonzannoon's picture

as long as they keep rates low and going lower those two charts continue. until something pricks the treasury bubble fundamentals don't matter and dividendsanity goes on.

Wed, 06/27/2012 - 22:51 | 2567216 Tyler Durden
Tyler Durden's picture

What this article says is that the Asset Depreciation/Aging/CapEx cycle, which leads to unsustainable capital misallocation and to asset exhaustion, will be the natural brake that can and will stop the party before any of the complacent vigilantes even wake up. 

Just as the stock market has become conditioned to expect the Fed to bail it out any time there is a 1% downtick, so do companies not feel at all compelled to reinvest cash into replenishing their assets and pursuing proper long-term capital allocation decisions (CapEx and M&A) instead of seeking to reward their shareholders with quick and easy dividend-based gains.

Wed, 06/27/2012 - 22:57 | 2567224 Abraxas
Abraxas's picture

What they have done is too stupid to be stupid.

Thu, 06/28/2012 - 00:12 | 2567359 AlaricBalth
AlaricBalth's picture

From Fitch's Capital Expenditure Survey
http://rawfinance.files.wordpress.com/2011/12/fitch-ratings-2011-capex-r...

Spending Slows in 2012: Fitch forecasts that for this U.S. corporate issuer sample, capital expenditures will decline 2.2% in 2012 compared to 2011. Additionally, capital intensity will retreat to 5.9%. Again, these results are greatly influenced by the energy sector. If the aggregates are recalculated without the energy sector, 2012 capital expenditure growth will slow to 5.9%. These forecasts reflect a continued slow revenue growth environment for companies and careful spending patterns without increased confidence for material demand growth.

2013 Goes Negative: Fitch forecasts that for this issuer sample, capital expenditures will decline 1.3% in 2013 compared to 2012, with spending intensity falling to 5.6%. Additionally, removing the energy sector from the aggregates results in the forecast showing capital expenditures fall 1% in 2013 versus 2012. Again, this forecast reflects a slow growth and careful spending environment for companies.

Thu, 06/28/2012 - 07:01 | 2567641 disabledvet
disabledvet's picture

Why would I as CEO...is it moderate?...cap ex when there is a disinflation going on? I should invest more should I not since "I have confidence in the soundness of my money" and "I'm killing the competition." Spending less "on the future" strikes me as counter productive.

Wed, 06/27/2012 - 23:14 | 2567253 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I have come to the conclusion what is driving politics in the US is plain simply the productive vs non-productive elements in society. The Repugicrats are out to destroy anything that resembles production not under their control. Disgusts me to no end!!!!

Thu, 06/28/2012 - 06:58 | 2567637 gatorengineer
gatorengineer's picture

cant believe you got down voted, you nailed it.

Thu, 06/28/2012 - 00:01 | 2567349 ghostfaceinvestah
ghostfaceinvestah's picture

Don't forget stock buybacks, lots of those too.

Misallocation of capital, sponsored by the Fed since 1913.

Thu, 06/28/2012 - 06:56 | 2567634 disabledvet
disabledvet's picture

Well at least now we know why you got fired at Goldman. "spy vs spy" is not a business plan Tylers' Durden.

Thu, 06/28/2012 - 05:32 | 2567524 Daily Bail
Daily Bail's picture

Pretty solid timing on the leak from JPM insiders, as this story will soon to be buried by headlines on Obamacare and Fast and Furious as the House votes on Eric Holder and SCOTUS rules at 10 am EST.


 

Wed, 06/27/2012 - 22:43 | 2567202 yogibear
yogibear's picture

Bernanke is a money printer. He will help Wall Street and the Banksters by running his balance sheet up. 

He knows he can print to infinity. Just how long the rest of world puts up with a US dollar that keeps devaluing is the question. At some point his printing should cause massive inflation. So much for food stamps because it won't buy much when he's finished trashing the dollar.

Bernanke serves Wall Street and the bankers, not the other 90%.

Wed, 06/27/2012 - 22:44 | 2567205 SilverTree
SilverTree's picture

Right-on, right-on.

Wed, 06/27/2012 - 23:43 | 2567315 HungrySeagull
HungrySeagull's picture

Infinity to the limits of the computer servers.

When that cannot allocate anymore resources to the binary traffic, it's all over.

Oh wait... they cannot withstand the stealing that is going on as we speak.

Thu, 06/28/2012 - 01:53 | 2567450 Solon the Destroyer
Solon the Destroyer's picture

He knows he can print to infinity.

Actually Bernanke knows this is exactly what he cannot do.

Hyperinflation destroys the wealthy, the banks, and the banking system. it puts them on the same footing as the common man: penniless.

When it gets to crunch time, Bernanke, the rich and the banks will choose to crush the poor and the middle class. They will choose deflation. The corporate socialists are making the decisions here, not the labor socialists.

They will print as much as they can in the name of slowing the deflation and softening the landing, when really they are just transferring wealth and power to the elite. Once the common man's debt serfdom can bear no bigger of a yoke, and we are completely squeezed dry... Wham-O! Soul-wrenching deflation. That way they can play the game all over again, slowly inflating for the next 100 years.

No way they ever kill the game by hyperinflating. They want this to go on for perpetuity.

Wed, 06/27/2012 - 22:44 | 2567203 Jam Akin
Jam Akin's picture

Capex shmapex, buy all of your crap while your $ still gets you something and there are going concerns able to produce it at a reasonable price, my friends.

Wed, 06/27/2012 - 22:48 | 2567209 Abraxas
Abraxas's picture

Why can't they just jump to QE of monstruous size right away and speed up through the inevitable agony?

Wed, 06/27/2012 - 22:50 | 2567214 Tsar Pointless
Tsar Pointless's picture

Oh, I think that's a given.

This pointless individual won't be shocked to see a $5-10 trillion QE before all is said and done.

Then, since all will have been said and done, it will be time for bombs and bullets.

Wed, 06/27/2012 - 22:52 | 2567218 Abraxas
Abraxas's picture

I'm having a deja vu.

Do NOT follow this link or you will be banned from the site!