Thursday, November 22, 2012




I live not too far from a 100 year-old dam that’s part of NYC’s water supply. There’s a roadway that runs over the top. For years, the locals used the dam as the quick-way to town.


That ended a few days after 911 when some SWAT guys showed up. The thinking was that maybe the terrorists would hit the water supply next. That lasted a few months; then the SWAT guys left, and were replaced with NYS prison guards (a nasty lot).  The guard guys hung out in a hut, smoked cigarettes and talked on cell phones.


Two years of guard duty (and a ton of OT) went by with no attack, so the Home Land Security folks brought in a few big rocks, and a heavy cable to keep things safe, sort of.


Things stayed like that for another five years, all the time people complaining that they had to drive miles out of the way, and the kids were stuck on buses for hours and it wasn’t safe as fire, police and ambulance had to go up the side road.


So finally push came to shove, and there was a big meeting, and the folks at the DHLS worked out a deal with the County. The dam roadway would be reopened; but only after the national threat alert went to green.






American won’t see a “Green” alert level for another fifty years. What kind of answer is that? It’s a lie.


I thought of this story after reading the comments from the Swiss National Bank’s Vice-Chair, Danthine. He set a time frame for how long the SNB would maintain the 1.2000 peg against the Euro. His words:


SNB can keep 1.20 cap as long as needed


As long as needed? That’s about as open-ended as it can get. This language could be interpreted as meaning 1-2 years, it could just as easily mean ten-years (forever). Danthine is describing an inflexible policy that has no defined ending. I think of this as “Evergreen” monetary policy.


Evergreen policies are evident in all of the big CBs today. The ECB’s Mario Draghi has used the word “Unlimited” when describing the scope of his willingness to intervene in the capital markets. He has also used the word “Forever” when describing the duration of the fixed exchange rate regime in the EU.


Forever + Unlimited = Evergreen


Japan has been Evergreen for years. Is it ten rounds of QE that the BOJ has done so far? And today, in what I find to be an extraordinary development, there is a promise that Evergreen will be taken to the next level. In less than a month, Japan will have an election, the outcome will mark the end of the concept of an “Independent Central Bank”. The leading candidate, Abe, has promised that if elected, he will force the BOJ to conduct money printing monetary policies that would have no bounds.

I think of this as if the government was handing out cyanide pills. The markets disagree. The Nikkei has been on a tear ever since the national elections were called:



Why is it that the promise of more printing always brings with it a ramp up in equity prices? After ten failed attempts, one would think that investors finally “get it”. QE does not work, it just distorts.



The Mother of all Central Banks is, of course, the Federal Reserve. Ben Bernanke, his cohorts at the Fed and the usual suspects in the press have been preparing the markets for the coming QE4.

Janet Yellen spoke a week ago, she talked Evergreen:


The three elements of forward guidance that were adopted by the FOMC in September 2012 would have been unthinkable in 1992 and greatly surprising in 2002, but they have, in my view, become a centerpiece of appropriate monetary policy.


Right. What was, not so long ago, “unthinkable”, is now the “centerpiece”. These people are actually proud of this “accomplishment”.


Then Bernanke spoke, Evergreen was his message too:


we expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.


In other words, there is no scenario for an end to printing.


And finally, today, the WSJ’s ace reporter, Jon Hilsenrath has an interview with Federal Reserve President John Williams. The message? More Evergreen talk.


Conceptually you could imagine some upper limit to this but I don’t think we’re getting anywhere near it.


On whether the Fed could stop monetizing any time soon?


Stopping or scaling back would be “counterproductive” for the economy.


The US is at a tipping point on monetary policy. Operation Twist ends in December. The mind numbing reality is that if the Fed were to allow Twist to just end, it would be contractionary.

Traditionally, monetary policy could be either Restrictive, Accommodative, or Neutral. In 2012, Neutral is equal to Contraction. There is no longer a middle ground. Either the Fed adds more to the system every month for eternity, or else.

And that is exactly what will happen in December. The Fed will do QE#4, it will result in an additional $40+B per month of Fed buys. Along with QE#3, that means the Fed will be monetizing debt to the tune of $85B a month ($2mm a minute, 24/7). When QE#3 and #4 is ending, we will have QE#s 5 and 6.

Bernanke has said many times that all of his efforts are just temporary. That the big balance sheet of the Fed can be reduced with no problems at all when ever it might be needed. Ben’s lying. He’s fibbing in the same way as suggesting my roadway might reopen someday soon. America is never going to have a Green Terror Alert status again. The answer to the question, “When’s the shortcut gonna open again?” is, “Never”. The Fed is no different. They are committed to an Evergreen approach. They have no other alternative.

The major economies of the world are faced with Print or Die. So print it will be.  I do wish the monetary overlords would acknowledge that what is being done is irreversible, and that the consequences will be felt for years. What was once unthinkable, is now permanent.








  1. What were once vices are now habits

  2. But What Do I Know? says:

    How long will it take for people to realize that Bernanke’s “temporary” measures are not temporary–or, as you put it, evergreen? I mean, realize its implications and act upon them–i.e., get leveraged to the hilt and start buying cashflow? Or is there something inherent in ZIRP which prevents a recovery which we’re not seeing?

  3. Now that we have sixteen trillion in debt and growing, zero rates and printing are of course here until the whole thing implodes.

    The burden is now on the people who thinks this will result in anything other than complete financial chaos.

  4. Dearly beloved / We are gathered here today / 2 get through this thing called life / Electric word, “life” / It means forever and that’s a mighty long time / But I’m here 2 tell u / There’s something else / The afterlife…

  5. Your damn bridge is symbolic of our nation as a whole. That bridge belongs to the community. Why don’t they demand the bridge be reopened? If the “authorities” refuse, why not go out there and open it yourselves? Answer is because we are a nation of pussies. And this is why QE-forever until the end is our future.

  6. I have always liked math, because I was good at it, and because it provides powerful tools for looking at the world and the future. But, it is easy to go wrong, and all results from math models, like all models, have to be checked carefully against reality.

    I am amazed how powerful bad math has become. Central banks are controlled by political masters, who order those banks to print money to be spent first by the politicians. The heads of the central banks carry out their orders, but they need an excuse for the eventual results.

    I am amazed that their excuse is to point to mathematical equations and models, untested and irrelevant in the real world, and say, blinking, that they aren’t wrong, they are following the math. They announce that the model is “in fact” correct, regardless of any inconvenient evidence from reality.

    For example, employment is going down as a percentage of the population, but government economists run their equations and announce that, no matter what you might think, the current policy of spend-it-all has produced millions of jobs, and things would be worse without their policy. One asks “How is this?” They answer that the equations say so.

    So, who knew the power of an equation? After the collapse, Bernanke and the other central bankers will avoid jail by pointing at an equation or a lap-top computer model, and say that they had no choice but to lead the world into disaster. The math model made them do it. A simple error. Don’t blame us.

    Christina Romer is Theoretically Correct

    The President’s Council Of Economic Advisers in May 2009 [edited]:
    === ===
    To estimate the likely impact of the fiscal stimulus on real GDP, we used multipliers that we feel represent a consensus of a broad range of economists and professional forecasters.

    The final step is to take the effect on GDP and translate it into job creation. Not all of the increased output reflects increased employment: some comes from increases in hours of work among employed workers and some comes from higher productivity.

    We therefore use the relatively conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs, or about three-quarters of a percent. This has been the rough correspondence over history and matches the Federal Reserve Bank model reasonably well.
    === ===

    The increased GDP they are talking about is government spending, regardless on what, regardless of what is actually built or accomplished. Idiots.

  7. It’s funny, but I always thought The Bitter End was the name of a nightclub in NYC. Turns out it’s really just a monetary easing program concocted by Bernanke and his manager, Tim Geithner. Somebody please break the news to Tommy James & The Shondells.


    • “Oh, Lord, you know there’s got to be a better way
      And the old masquerade is a no soul parade
      Marchin’ through the ruins of time.
      To save us, He gave us sweet cherry wine, so very fine.
      Drink it right down, pass it all around; So stimulating, so intoxicating;
      Sweet cherry wine. (Open your mind)
      Lord Everybody’s gonna feel so fine drinking sweet cherry wine.

      Oh, sweet cherry wine, so very fine Drink it right down, pass it all around;
      So stimulating, so intoxicating; Sweet cherry wine.
      C’mon drink it with your brother, trust in one another,
      Yeah, yeah, we need each other. Sweet cherry wine. Drink it right down, pass it all around
      People don’t you know the cup is running over?”

      The Fed keeps serving up another round of Sweet Cherry Wine. With a bartender like Bernanke, it’s sure to be “so stimulating, so intoxicating”…

  8. I agree with the numbers you mentioned. What no one discusses is that the FED has to print more because they are the primary buyers of the $1T/year debt of the gov and they must dominate the treasury auctions to keep interest rates suppressed. As long as congress doesn’t fix the budget problem, there will be a QE program because there is no where else the money can come from to buy the US debt. Japan? China? Europe? The world is broke, the FED will be the buyer of last resort for a long time.

    I also strongly believe their strategy is to get as much of the $11T outstanding (forget the $5+T that different gov entities owe each other, they will one day just say “poof” to that) on the FEDs balance sheet so that they can just say “poof” to it also.

    So, while the presses are running, the bankers continue to get bailed out with QE3, the country keeps deficit spending and gets bailed out with QE4, and primary dealers have the cash flow to pump the stock market up while the politicians make theater out of cutting $125B/year and the FED’s muppets spew all kinds of bullshit to make you think they are smart and they know what they are doing.

  9. Looks like interest rates must never be allowed to rise.

    Total interest on US debt paid in fiscal year 2012: $359,796,008,919.49

    In the year 2000, interest on our debt was $361,997,734,302.36 on total debt of 5,674,178,209,886.86.

    So we paid interest on our debt at a rate of about 6 percent in year 2000.

    What if interest rate go back to 6 percent?

    If rates went back to 6 percent, interest paid on a total 2012 debt of $16,278,932,378,520.93 would be:

    ($16,045,678,692,730.63x.06) =
    $976,735,942 billion U.S. dollars

    These figures are all approximate, of course. Interest on US debt is paid monthly and interest rates vary during the year. But could we afford paying close to one trillion dollars just in interest expense each year?

    How could they ever let interest rates rise?

    We are Japan from now until…?

    The last time interest rates in Japan were 6 percent was in 1992. Starting in 1996 interest rates sunk down below 1 percent. They are now zero.

    • its about accounting rules and the question becomes who writes the accounting rules? Just saying that all this talk about debt can go on and on and on, at some point the issues that are more critical for the society as a whole come down to basics such as food, shelter,heat, jobs,health care.

  10. A dam.
    A roadway over the dam.
    A government blockade.
    Damming the roadway
    Over the dam.
    And on the other side of the roadway,
    A dam to the dam.
    Dam double dammed.

  11. If you want QE to infiniti/evergreen, just look at the BOE here in the UK. In the month of September I believe it was, they purchased 32 billion of the 34 billion Pounds of debt issued by the Treasury. Now that is evergreen!

  12. EverGreen = In the fear of Terrorists = In the fear of Economy / Stock-market = In the name of GOD
    Funny equalities now. God = Terrorists = Economy = Evergreen

  13. Central bankers own half the world, now they want to own the rest of it. They have US Congress in their pockets. They are eliminating independent economies wherever they can, (Libya, possibly Iran). On an individual basis in the United States or elsewhere, this is called predatory lending. Loosen credit (by all my standards, I wouldn’t loan money to the U.S.), make big loans, let the borrower pay interest as long as possible, then call in the loan when the borrower eventually defaults. Grab all the collateral and line up another sap. Basic business model of fractional reserve banking shows the fed can’t stay in business without inflation. Governments come and go, but properly managed, wealth is inter-generational.

  14. The author and I (and any other person with an eye on the topic) knows this result has always been necessary and the only variable was “when”. We have arrived at what was baked into the very design of our monetary system from day one. No need to feign disappointment, it is what it is. Now… the question that remains? Can the US, Europe, Asia and indeed ‘the world” do this currency debasement in a coordinated and synchronized fashion or will there be war over the massive debt defaults?

  15. Great article – will forward this to the friends – makes me want to keep accumulating gold and silver on pullbacks (the only real money these days). Not that I’m selling my stocks – this kind of printing should do wonders for stock prices…