Psychopaths?

In "Podcast: The Fed's Days Are Numbered," I discussed the Fed's failure to achieve its stated objectives on both a long and short-term basis, and questioned why Bernanke & Co. continue to press forward with policies that have not worked and have failed in other settings (e.g., Japan).

Their behavior calls to mind Albert Einstein's (in)famous quip that the definition of insanity is doing the same thing over and over again and expecting different results.

And yet, even though it is apparent that quantitative easing is not working and that it is actually causing all sorts of collateral damage, you still have the so-called "experts" arguing that the Fed will need to continue heading down this path in the period ahead, as ValueWalk.com reports in "QEIII Won’t Work, QE4 Coming this Year: Morgan Stanley Bombshell":

Below are some highlights from Morgan Stanley (NYSE:MS):

QE3 will likely be insufficient to significantly boost equity markets and we wouldn’t be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end, particularly if economic and corporate news continue to deteriorate as they have over the past few weeks. While the Fed’s ultimate aim is stable pricing and full employment, key near-term feedback from equity markets could prove disappointing.

...

Deutsche Bank also has some comments on QE4 and QEF (forever) in a report issued this morning. They state:

We think yields are gravitating higher and have raised our year-end target for 10s to 2 percent. Fundamental drivers include a better global growth momentum picture for 2013 as well as our view that the worst of the fiscal cliff is already priced. QEF (‘F’ for forever) raises some interesting issues in terms of how to frame the outlook for yields if the Fed is
apparently willing to commit to unlimited purchases subject to (economic) conditions. The ability to influence yields comes down to the play off between depressing real yields directly versus the risk of elevating inflation expectations.

We have a revised nominal yield model for the post crisis period. If the Fed doesn’t deliver on QE4, yields could easily rise towards 2 ½.

Of course, this raises an interesting philosophical question: if the Fed is engaging in insane behavior, what do you call those who seek to enable this behavior?

Psychopaths?

Comments

[Financial repression]

The Fed Is Systematically Destroying Social Security And The Retirement Plans Of Millions

Right now, approximately 56 million Americans are collecting Social Security benefits. By 2035, that number is projected to grow to a whopping 91 million. By law, the Social Security trust fund must be invested in U.S. government securities. But thanks to the low interest rate policies of the Federal Reserve, the average interest rate on those securities just keeps dropping and dropping.

The trustees of the Social Security system had projected that the Social Security trust fund would be completely gone by 2033, but because of the Fed policy of keeping interest rates exceptionally low for the foreseeable future it is now being projected by some analysts that Social Security will be bankrupt by 2023. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. Yes, you read that correctly. The collapse of Social Security is inevitable, and the foolish policies of the Federal Reserve are going to make that collapse happen much more rapidly.

http://www.zerohedge.com/contributed/2012-09-24/fed-systematically-destroying-social-security-and-retirement-plans-millions?

[Tom]

The short answer is "yes" - because corporate America and the 1% are psychopathic in their business models, unrealistic expectations, and disregard of the environment. The environmental degradation, including climate change, will prove to be humanity's undoing all by itself in about a generation or less. If we add in the global financial mess, resource depletion (including potable water and arable land), and the increasing instability of the world political scene, humanity's run may end much sooner. There is no fixing the intertwined problem we've created.

[Rocky]

Financial repression: When Canada had its financial crisis in the mid-1990's, it means tested its old age pension benefits. Don't be surprised if the US slashes SS benefits for higher income Americans in the coming decade or two. It won't be the end of the world. Higher income retirees already pay more for Medicare insurance. But it is a good reason to file for benefits at age 62 rather than waiting to 66 or longer if you are already out of the labor force. As I have noted on many occasions in the past, the butcher's bill has come due.

[tj & the bear]

Anyone that makes the statement...

"Fundamental drivers include a better global growth momentum picture for 2013 as well as our view that the worst of the fiscal cliff is already priced in"

...is certifiable. The only momentum building is downward, and nobody expects the cliff will actually materialize.

[roger]

Psychopaths or minds frozen in concrete?
For minds frozen solid in the past, letting go of the Golden area is to horrible to contemplate. Failure has been banished from the American language, and yet, failure is part
of being human,nothing to be ashamed of, persisting in policy's that no longer work- that
is insanity! but it is often done in order to preserves one privileges.
Really, it is has simple as the old dying and being replaced by the new.

[Financial repression]

Richard Russell

“Thus, the Fed will accomplish a few things -- the banks will be rendered more liquid, and the Dow and mortgage-backed securities will probably be lifted. But what happens when the banks are cleared of all their mortgage-backed securities? Maybe the Fed will buy straight mortgages, I don't know, and I'm not sure that the Fed knows. Maybe the Fed just wants to sneak by the election, and later they'll address the problems.

Meanwhile, the Fed will continue to talk up the economy. But I believe it's the Transports that are telling us the real story regarding the US economy -- and to put it politely, the Transport have been crashing. Question -- could the real story about the US economy be that the US economy has been crashing too?

We depend to a large extent on the government and the Fed to tell us what is happening, and government statistics can lie (as, for instance, the government's phony statistics on inflation). With the banks ‘relieved’ of their mortgage-backed securities and loaded with fiat currency, the banks will be in a stronger position, and the Fed will own tons of mortgage-backed securities.

What will the Fed do with billions of dollars worth of mortgage-backed securities? Maybe hold them until maturity and then hide the losses in their books. So the net result will be that the banks will be in better shape, and the Fed's balance sheet will be in worse shape.

What happens in 2013 when we face the next trillion dollar deficit?

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/9/25_Richard_Russell_-_A_Crashing_Sector,_Gold_%26_The_Fiscal_Cliff.html

[jer]

Watch the movie - I Am Fishead.

http://topdocumentaryfilms.com/i-am-fishead-are-corporate-leaders-psychopaths/

Psychopaths indeed. We are so screwed :-(

[sharonsj]

The other financial sites I read cannot explain how QEIII is supposed to affect the unemployment rate, so I have to assume it won't or can't. As everyone says, the effect is to help the insolvent banks and keep Wall St. afloat, but none of that helps Main St. and at some point this mad juggling to maintain the illusion has to fail.

Yup, been reading about the transports tanking but it's not a surprise. The Baltic Dry Index remains terrible. Yet they are reporting an upsurge in positive consumer feelings. Could someone explain why folks are suddenly happy?

[Legalized Plunder]

“Legalized Plunder – Why we have all been had, fooled and deceived…. and the surprising reason we keep asking for more of the same bad medicine”

Griffin: I think there is. I think that Einstein's E=mc2 was the epicenter of all his theories. I think in our case the epicenter was the realization that the Federal Reserve system is a cartel, and not an agency of the federal government. That single fact alone is, when you think about it, so shocking to most people – or it should be, because we have been raised to think that it's the government, that they're looking after us. To think that it's no different than an oil cartel or a banana cartel – it simply happens to be a banking cartel and that we have given them the monopoly to create the money of the United States, and that they can create it out of nothing and charge interest on nothing – all these pieces start falling into place.

People realize that this is not in the best interest of the American people, was never designed to be from the get-go, and it has been a means of legalized plunder of the American people.

That all stems from the realization that the Federal Reserve is a cartel and not a government agency. I think that's it.

L: It's egregious for somebody to lose so much money and then get a government bailout and then get a bonus for that, but who gave them the bailout? The government.

Griffin: We're back to the realization that the Fed is a cartel; but it's more than a cartel. It's a cartel in partnership with the federal government. We really have kind of a duopoly here. The bankers and the politicians have formed this partnership that works very well for both of them.

L: The famous revolving door.
http://www.caseyresearch.com/articles/legalized-plunder

[Don Levit]

Financial repression:
The interest earned on the bonds simply makes the numbers look smaller or bigger.
It either lengthens or shortens the date for trust exhaustion.
Since 2008, the interest has been redeemed to make up for the cash shortfall.
This has been accomplished by new general revenues redeeming the interest, the same way we pay for all pay-as-you-go expenses, like Medicaid.
The excess payroll taxes (and "interest") have been loaned to the Treasury over the years to pay for expenses.
From a cash perspective, the trust fund will not be exhausted in 20 years.
It is exhausted today.
Don Levit

[Benny Bonanza]

QE3 Another Fed Give Away to the Banks

Michael Hudson: Shoveling money to the banks not meant to create jobs, it’s a way to give banks even more speculative capital and prepare them for another meltdown

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=8853&updaterx=2012-09-25+08%3A31%3A56

[Alex Gold Goldman]

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[Fed plays favorites]

United States House of Representatives
Committee on Financial Services
Subcommittee on Domestic Monetary Policy
Hearing on
“The Price of Money: Consequences of the Federal Reserve’s Zero Interest Rate Policy”
September 21, 2012

http://youtu.be/ZXSExanbY0Q

[Fosamax]

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