Much ink has been spilled, including by myself, in the immediate aftermath of Bernanke's idiocy with "QE3".

But we should all remind ourselves of two ugly and inescapable facts:

1. QE is allegedly about "creating jobs"; this is the part of Bernanke's mandate that he claims is falling short.  (Note that he completely ignores "moderate long term interest rates"; an under 2% 10 year is anything but moderate)

2. There have been no jobs created, net of working-age population increases, since QE-anything began.

We can prattle on about this, that and the other thing, but we cannot escape this reality.  The only thing that matters when it comes to employment is the percentage of working-age people that have jobs.  That's it.  It's all there is from a standpoint of economic progress and it's also all there is from a standpoint of fiscal sustainability as only the employed pay taxes.

QE has been an abject and objective failure.

Period.

The real reason for QE is that the banks are still ridiculously levered compared to both historical norms and sustainable levels.

This has expressed itself in housing -- and still does, despite what you hear on CNBS:

That latter chart, incidentally, implies a further 50% decrease in the price of houses -- or a doubling of GDP -- is somewhere in the offing.  (Or, of course, some combination of the two.)  Since a doubling of GDP will take literal decades at a 1% growth rate the obvious answer to that riddle is found in home prices.

Preventing this correction in the banking system, which is inherently tied to home prices, is what QE is about.  The Fed and Federal Government are walking hand-in-hand in this regard, as the Federal Government is handing out money like seawater at oceanside to everyone under the sun in ever-increasing numbers -- food stamps, Medicaid, student loans, you name it -- all in a puerile and ultimately futile attempt to protect a financial system that got too full of itself and then turned to fraud and scam in an attempt to keep the "money train" rolling.

But without capital formation the economy cannot recover.

Capital formation requires a positive rate of return on lent capital.

ZIRP and QE destroy that positive rate of return on lent capital.

Oh sure, in the short run the stock market loves "more liquidity" -- much like a drug addict loves his meth and a drunk loves his booze.  But the drug addict eventually rots his teeth and his brain turns to mush, while the drunk winds up with liver cancer. 

Both must either stop the stupid or die.

So must we.

Much of the misery and rage we see around the world is tied to high commodity prices.  And those are also tied to currency debasement and speculation fueled by excess liquidity.

We have a toxic witches' brew created by an evil, deranged and delusional wizard and his minions, and if that wizard is not caged and his minions put out to pasture it will not be long before the damage becomes so great that the system folds back on itself and collapses.

There are solutions to this mess but there are no easy solutions.  There are no solutions that do not involve admitting what we've done and shutting off the "free money" spigot along with the exponential expansion of credit.

We have already hit that wall.  Everything since 2008 has been nothing more than an attempt to restart exponential credit creation and the attempt has failed, as total systemic debt has only grown 1.85% since 2008.

This is very important to understand -- QE began at the end of 2008 and its intention was to "spur lending" -- that is, restart the exponential credit cycle.

It has objectively and factually failed.

The market may well take a while to suss this out and come to the inevitable conclusion about what this means for solvency of financial institutions and households, along with asset prices.

But the market will figure it out.

It always does.

Bernanke has fired his last round, but all of them since the first QE have objectively been a clean miss, and there's no evidence available that this will be any different.

Consider that financial leverage chart and its implications -- and be prepared.