Can you overlay equities (maybe the Dow) over the 5yr, QE causes a rise in yields as money goes to stocks.

QE is essentially a Bernankes penis pump for asset prices other than treasuries. Once he stops pumping he gets flaccid before he jumps into bed.

Facts be damned Karl, you know they will do it anyway. Their entire ideology is logically bankrupt.

The Bernank needs a few more data points to corroborate his thesis.

The Bernanke needs a punch in the nose or a kick in the ass. Whichever you see first.

They'll print. Why not ? There 's nothing to lose. So what if Obama fails; Romney will suck bankster dick just as fervently. Meanwhile, printing will ensure that the banksters get their bonuses and CONgress gets re-elected on the back of bogus promises.

What's the common man going to do ? Vote ? Not vote ? It doesn't seem to make a difference to these murderers, remember ?

When the banks implode and the FDIC has to cover 2 trillion in deposits, what do you think is going to happen?

If the Fed doesn't do it, Congress can just bypass and do it itself.

I don't think Congress can stand up to the Free **** Army, 10 million strong, marching on Washington (and those are just the number in the Atlantic coast area).

The Fed talks one way, then does the opposite. It likes to be unpredictable so it can "talk" the market up or down without actually doing anything.

I'll take "Print" for $700 Billion Alex.

Bozo, the California branch of the FSA won't just stand down either on this. They might not get to Washington DC (because that takes money to buy gas and you can't have money if the bank steals all your deposits) but they will find some alternate to make their voices heard. And frankly I think that if any group in America deserves some protection its "depositors" as it is their money and they sure aren't earning much on that money. The paper trail that deposits is creating so the "we need to spend 27% of GDP" crowd can go after it is far more costly IMO than the ROI that depositors are seeing at present savings account APRs.

Widgeon, you misspelled "trillion" ;)

Eagle - yeah - that's the point -- meh...

They will print what? QE is a cheap substitute for the credibility of the banking system and nothing else. There were no reserves in the banking system when all this blew and the credit of the banks was no longer any good. When this game blew, there was $5 trillion a year in new debt coming on line. The Fed is merely another bank holding treasuries.

Lost in all the QE talk is the massive false economy and bubble blown in China. China bankers would make all the rest blush and they have gotten away with it so far, because even the nonsense accounting used in the US is strict compared to theirs. It is China, not the US that is swallowing all the high priced commodities. How much of this demand is trade dollars and how much is foreign investment? We are about to find out and if the rest of the world starts wanting their money out, will they get it? We might then find out the appetite for treasuries. A depressed world economy will hit them hard and thus hit demand for all commodities. There is a limit to development in China.

Karl mentioned it the other day. That is, where is the other $2 trillion in losses we know are there in the banks? The dead bodies eventually float to the surface.

http://libertarianpapers.org/2010/43-boy....

Read this paper. The capacity of banks to lend is constrained by capital, not reserves. When the **** rots again, there won't be much the government or the Fed can do about it. TARP was merely a scheme to let the dust settle, get a little capital in the banks and cook the books. Money people owns is all tied up in paper assets, collateralized by good faith, property and credit. Nothing is going to make this paper good and in a lot of cases, we are merely looking at unrecognized losses. What then about the fine pension plans that can't be paid? That is an imaginary asset that is just one more dud bond. Then we have the $150,000 a year cops in California that it seems Obama is so intent on paying and the $80,000 a year Frisco subway ticket takers. And the Cadillac healthcare system that at best will survive on 2 levels, one for the rich and one for the rest of the people? Top of the line can't be paid, so it won't be paid.

QE is nothing but a security blanket for a few bankers and a con for the rest of us. Think they are really making record profits in a sustainable manner in corporate America? If you do, you have sucker on your forehead. This is all being done by rearranging bad debt. They can't pay Americans Indian wages and keep making this kind of money.

There is only one way to recapitalize the banks, with the liabilities of the banks. This is how you reset an economy. Otherwise, those that buy in keep buying into an insolvent system. They learned this in Spain with Bankia.

This brings us to the straw that will break the camels back, a big or even not so big Euro bank going broke and left to drift like Lehman was. They can't bail them all out. They could close it, haircut the liabilities and open back up, but it seems everyone wants their cake and to eat it too. They could have done this with Greece, 50% haircut and go on. Instead they come up with this nonsense that Greece follows this plan and has 120% of GDP in debt by 2020. There isn't any difference between 120% GDP debt and 240% GDP debt, save for the losses the creditors are going to take.

In the meantime, the American government is searching for hemoroids. They are looking hard, as **** is hitting the fan. The absolute bull**** you hear on CNBS about fixing Europe, when they can't fix the mortgage problem in the US. They could fix it, but then someone would have to take a loss. Like everyone. Some would just lose more than others. Instead, we let the sledge hammer dangle over our heads. Of course, we would rather face the hammer than take the loss and have our imaginations destroyed. Sweet dreams will turn to nightmares..

Why would the banksters want naked printing when it deflates the value their so-called assets?

Benny Boy will continue to think that he can waltz around the table like Goldilocks, and find the bowl of porridge that is "just right." Right up until Papa Bear comes in and grabs him by his sling swivel and pours the entire batch that's boiling over on the stove straight down his throat.

JStanley,

They rather get there money back even if deflated rather than take a haircut. Inflated dollars hits the whole population (wealth or standing doesn't change compared to the next guy). A haircut is a loss relative to someone else.

Crzy: In a deflation it is goods and services that lose nominal value, making money worth more, including the nominal dollars in which assets are denominated. The problem being, the assets one holds have to survive. In an inflation things are worth more nominally and money is worth less, including those nominal dollars of paper assets.

And yes inflation hits everyone, and everyone will know exactly who to blame too. Benny Boy, who may just be pulling liquidity even as we speak -- again.

Do you really think he's going to make himself and his institution the bag holders? And do you really think the limp dicks in CONgress have the balls to jerk the wheel out of his hands if he refuses? I seriously doubt that any of them want to die before their time that badly.

Mannfm11, the bodies stay down if you give them concrete shoes. Just sayin.

Quote:

The absolute bull**** you hear on CNBS about fixing Europe, when they can't fix the mortgage problem in the US. They could fix it, but then someone would have to take a loss. Like everyone.

More specifically ... everyone who is collecting a cash flow from their investments would have to take a loss.

Yet everybody wants a central bank to set the price of money, and give their cronies a leg up over every other competitor in the market...

To my mind, the only one who's gained in this arrangement is government, which can sell bonds almost at will funding whatever crackpot scheme enters their collectively vapid heads.

The one thing they won't do is allow a free market, because instead of being the Honorable and esteemed Mr. Obama and Mr. Bernanke, these men become just "those two nitwits who live down the street and think they know better how to run my life..."

The problem, Pete, is that they're all about to find out that a central bank can't set the "price of money."

They can control the quantity but even that's a futile gesture in the end, because everything is a balance sheet. If you debase then someone either starves or their requirements have to be made up by someone else (e.g. you must redistribute to them); this is in fact a negative sum game.

Bernanke knows this as he's a smart man. The problem he has is that he's trapped -- if he tells the truth the resulting credit revulsion will collapse asset prices to 1/10th of what they are now and everyone who holds an alleged "asset" that is really someone else's obligation loses their shirt instantly.

And most of the "rich" don't hold "wealth" -- they hold someone else's obligation.

The "skittle factory" is in fact not a unicorn and those aren't skittles.

Karl,

My question is whether Bernanke will admit his wrong or bring the system down.

In his 2002 speech where he laid out his plan on stopping Deflation he has done everything so far but directly devalue the dollar. Bernanke was on the fence if it was the Fed or Treasury's job to do it. So instead of another QE3 that everyone is looking for will it be a direct devalue?


Here is the part of the speech




"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.16

I need to tread carefully here. Because the economy is a complex and interconnected system, Fed purchases of the liabilities of foreign governments have the potential to affect a number of financial markets, including the market for foreign exchange. In the United States, the Department of the Treasury, not the Federal Reserve, is the lead agency for making international economic policy, including policy toward the dollar; and the Secretary of the Treasury has expressed the view that the determination of the value of the U.S. dollar should be left to free market forces. Moreover, since the United States is a large, relatively closed economy, manipulating the exchange value of the dollar would not be a particularly desirable way to fight domestic deflation, particularly given the range of other options available. Thus, I want to be absolutely clear that I am today neither forecasting nor recommending any attempt by U.S. policymakers to target the international value of the dollar.

Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

Great point Karl and Mannfm11
At this point QE is going to work like this-
The drunk passed out on the sidewalk face covered is his own vomit- you see him and say- what that guy needs is a drink- so you get him a bottle and proceed to tilt his head back after cleaning his face with rag- pour and that you find has about as much effect as continuing to pull the starter and give your lawn mower gas when it is already flooded:
QE this time will take more money out of economy that it puts in- what a corner they've painted themselves into- this can't end well- the Mexican standoff is about to end with too many ichy trigger fingers

May 31, 2008 to May 31, 2012: We've seen the public debt grow from 9.389 trillion to 15.771 trillion or 68% growth. In the meantime annual GDP as of 1Q 2008 was 14.274 trillion and grew in 4 years as of 1Q 2012 to 15.454 trillion or 8.3% growth. Thus the ratio of debt:GDP has grown from 68.1% to 102.1%. At this rate of ratio growth we'll see 158% in 2016, 246% in 2020, 381% in 2024, 591% in 2028, 917% in 2032, and 1423% in 2036. That's an annual fed-debt:GDP growth rate of 11.6%.

Right now the average annual interest rate paid on the national debt is 2.732% for April 2012. 11 years before that it was 6.426%.

I turn 65 in 2036 and let's suppose that the same interest rates we had when I turned 30 are in effect then. This will mean that the government will be spending 6.426% of 1423% of GDP (i.e. 91.4% of GDP) on interest alone. The other 8.6% of GDP will go towards federal spending, local/state gov spending, and the private sector. Due to a 11.6% growth assumption that remaining 8.6% for non-interest purposes will be overtaken where the entire GDP will be interest on the national debt in 2037 .... i.e. my first full year of retirement. That certainly gives me something to look forward to having ;)

I wonder what Krugman would have to say about an economy that's headed towards being entirely "interest on the national debt" and the potential problems that could come along the way which will force some changes that none of us want or expect.

Presently we pay 2.789% GDP for federal interest. Just 97.211% to go.

sources: http://www.treasurydirect.gov/NP/BPDLogi.... http://www.bea.gov/national/

By the time my 15 year old son reaches age 65 at this trend growth of debt rising 13.8% per annum and GDP growing 2.0% of annum the national debt will be 24792% of GDP so any interest rate over 0.4033% APR will mean the government is spending all of GDP on federal interest. Suppose the interest rate is 4.033% APR then the government will be spending 10x GDP on interest. Anyone think that any investor (other than Ben's inflationary printing press) would loan money to the federal government at 4.033% knowing that the interest alone is 10x GDP?

The whole financial system is an interconnected network of contingencies that builds upon itself. If you want to see how modern man can waste extraordinary effort to create an opaque complex system based upon no firm foundation, this is it. And a lot of average folks are in on the game, and have 401ks, pensions, assets, whose value is at the mercy of this system.

In addition to transferring wealth to his parasitic banking colleagues, Geithner's motives for the bailouts were to keep the network from imploding. As long as there is upward momentum, the network expands and functions as the giant Ponzi that it is.

When is the end game? After you and I get out with our winnings, is the operating directive.

Rd wrote..

...and by the way, 1934 was one of the best years of the century for the stock market...

Mmm, if this chart is correct that would be 1933. And it also shows that after a historic bullgasm -- perhaps connected to devaluation -- by the beginning of the war the Dow had collapsed back more than 50%, to below its highs of '33-'34. And it didn't reach its 1929 high again until 9 years after the most destructive war the planet has ever seen. One that just so happened to spare the capital stock of the U.S., and just about no one else.

Benny Boy is a longhorned bull in the china shop, flailing away madly while he bellows. First he ****s with the bond market "to save" the stock market -- a strategy that he made explicit when he announced QE 2. And now he's going to **** with the currency market "to save" the bond market?

Somebody better fire that ****er before he brings down the whole building on our hapless heads.

chart...