Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Ben Bernanke's Ghost of QE Past, Present, and Future

Interest-Rates / Quantitative Easing Dec 24, 2012 - 04:29 PM GMT

By: DeviantInvestor

Interest-Rates

It was the best of times; it might be the worst of times.

Dollar bills glide effortlessly to the ground, dropped from the giant QE machine in the sky. All is quiet, all is calm. There is peace on earth, well, at least in Washington D.C. and on Wall Street. And then with a horrible crash, another Mortgage Backed Security (MBS) explodes and collateral damage spreads far and wide.


Cut to three am in the Big Ben bedroom. A ghost appears amid the sound of Hope and Chains and carries the sleeping Head of The Fed to a land far away. The Head of the Fed wakes to the sound of his own voice saying , "The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained." and "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

The ghost says, "I am the ghost of QE past. That is what you said. Where has all the prosperity gone?"

And the Head of The Fed says, "I'll get back to you on that" and promptly falls into a deep sleep dreaming of Keynesian sugarplum trees and simple delusions.

But his dream turns into a nightmare as the Keynesian sugarplum tree dissolves into a money printing press which has been running so long and so fast that it overheats and burns to the ground. The Head of the Fed screams in anguish, "What will we do without a printing press?" The ghost of QE Present enters and says with a deep voice, "Tell everyone that all is quiet, all is calm, and quickly order a faster printing press with overnight delivery. Give this a code name to make it sound important - call it QE4. Tell the people it is for their own good. Most people still listen to you and will believe a faster printing press will solve all their problems."

The Head of the Fed smiles contentedly and falls asleep dreaming of helicopter drops and fewer critics.

But that dream also turns into a nightmare as the helicopter collides in mid-air with a gigantic black swan. Both crash and burn. The Head of the Fed wakes with a start, grabs a blue pill, and chants "Inflate or Die" over and over. On the 13th repetition, a third ghost arrives and derisively states, "Kinda hard to plan for a black swan in your econometric models, isn't it?"

The Head of the Fed looks in horror at the third ghost and fears for his printing press and helicopter. But attempting to regain control he states, "Of course I can't model a black swan event. No one can."

The ghost sighs disgustedly and says, "I am the ghost of QE Future, and I am here to show you the probable future. Look out that window. Do you see the long lines of unemployed workers desperately seeking jobs? Do you see the gasoline price - yes - $8.99 per gallon? Do you see the cost of food for a family of four - outrageous? On the bright side, banker bonuses are up 10% this year. But, for most people, things got worse, much worse, instead of better, after you implemented QE4. So you decide, QE4, QE5, QE6 and more, or another plan?"

The Head of the Fed was quiet for a long time. He finally said, "I'll get back to you on that," popped another blue pill, and fell asleep dreaming of even bigger and faster printing presses, larger helicopters, and the absence of black swans.

The ghost of QE future dejectedly stated, "We tried. Now it is up to someone else." And he faded from this world with a sad and cynical smile.

What goes around, comes around. Train wrecks do occur! It might be the worst of times.

GE Christenson
aka Deviant Investor

If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2012 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in