Friday, August 10, 2012

Comfortably Numb

You don't Say...(Bernanke on the long-term effects of Quantitative Easing):
"One disadvantage of asset purchases relative to conventional monetary policy is that we have much less experience in judging the economic effects of this policy instrument, which makes it challenging to determine the appropriate quantity and pace of purchases and to communicate this policy response to the public."- Ben Bernanke [October 2010]
"Operation Twist" will Unwind Violently: There is No Free Lunch
I stopped questioning whether my overall thesis was right (or wrong) some time ago - after the events of 2008.  Watching this comfort-seeking society desperately running away from reality, each 'solution' of shorter and shorter duration, has convinced me.  Back in the day, while in the airborne infantry, our parachute instructors snickeringly told us - never climb the risers.  The risers are the canvas lines that attach your harness to the parachute.  I thought they were joking.  Then on my second jump, at 200 feet off the deck I saw a buddy of mine - big guy, about 50 meters away, his legs flailing like crazy and his arms desperately clawing up the risers.  He was vainly trying to avoid the ground rushing towards him, and of course he landed like a sack of shit - definitely not in the tuck and roll position.  With respect to the economy and all other aspects of reality, this pampered society is now climbing the risers.  Therefore, it's merely a question of timing, and as you can tell, I am not overly concerned about whether or not I am accurate down to the specific month, week and day i.e.  this blog doesn't cater to options traders.  That said, from my perspective, each passing day that the point of recognition does not occur, just means that we are one day closer to the event.  Time is not a friend to fantasy and delusion.

Speaking of fantasy and delusion, I believe that the above quote from Ben Bernanke on the long-term impacts of quantitative easing, holds the key to the disconnect between the dire ramblings of this blog (and others) v.s. the general mass complacency gripping society.  Because in theory, we don't know even at this late juncture what will be the long-term effects of QE.  Although, if anyone had told us just 10 years ago that the Fed would be intervening in the markets to the tune of $3 trillion+ we would have envisioned all manner of hypinflationary "dislocations".  Yet for the most, the QE-era of the past 3 years has been a sea of tranquility (granted, punctuated by moments of sheer terror).  And why wouldn't it be tranquil, given that the entire point of monetary stimulus is to medicate the markets long enough for the underlying economy to repair itself and become self sustaining.  Unfortunately, in a fully outsourced economy where individual companies scrimp for the last dime of profit at the expense of the overall economy, that day of self-sustaining growth will never come.  We are waiting for Godot.

If you don't know, now you know
I submit therefore, that in broadly claiming to still "not know" the negative side effects of massive debt monetization, that we have stumbled upon the largest unintended consequence of quantitative easing which is to engender mass complacency in the face of economic annihilation.  Because for all of the fist pounding and dire warnings of this blog and many others, unlike in the period leading up to the  Lehman event of 2008, the markets and society at large remain generally sanguine - frogs in boiling water.  So either "we" are wrong and people like myself are just making this all up, or thanks to the QE-sponsored anaesthetization of the media, markets, and public, the next 'event' will come like a bolt of lightning out of the clear blue sky.