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How Far Will Stocks Fall This Time When The Fed Decides To Slow Down Quantitative Easing?

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Bear Market - Photo by Appalachian EncountersWhen QE1 ended there was a substantial stock market correction, and when QE2 ended there was a substantial stock market correction.  And if you will remember, the financial markets threw a massive hissy fit a few months ago when Federal Reserve Chairman Ben Bernanke suggested that the Fed may soon start tapering QE3.  Clearly Wall Street does not like it when their supply of monetary heroin is interrupted.  The Federal Reserve has tricked the American people into supporting quantitative easing by insisting that it is about “stimulating the economy”, but that has turned out to be a massive hoax.  In fact, I just wrote an article that contained 37 statistics that prove that things just keep getting even worse for ordinary Americans.  But quantitative easing has been exceptionally good for Wall Street.  During QE1, the S&P 500 rose by about 300 points.  During QE2, the S&P 500 rose by about 200 points.  And during QE3, the S&P 500 has risen by about 400 points.  The S&P 500 is now in unprecedented territory, and stock prices have become completely and totally divorced from reality.  In essence, we are in the midst of the largest financial bubble this nation has ever seen.  So what is going to happen when the Fed starts pulling back the monetary crack and the bubble bursts?

A lot of people out there are claiming that the Federal Reserve will never end this round of quantitative easing.  They are suggesting that the Fed may hint at tapering from time to time, but that when push comes to shove they will just keep printing more money.

There is just one big problem with that theory.

The rest of the world is watching, and they are very troubled by quantitative easing.  Therefore the Fed must end it at some point because they desperately need the rest of the world to keep playing our game.

Our current economic prosperity greatly depends upon the rest of the planet using our dollars as the reserve currency of the world and lending trillions of dollars to us at ultra-low interest rates.  If the rest of the world decides to stop going along with the program, the system would come crashing down very rapidly.

That is why it was so alarming when China recently announced that they are going to quit stockpiling more U.S. dollars.  For a long time China has been warning us to quit recklessly printing money, and now China is starting to make moves that will make them more independent of us financially.

If the Fed does not bring quantitative easing to an end soon, other nations may start doing the same thing.

So the Fed knows that they are on borrowed time.  Faith in the U.S. financial system is declining very fast.

But the Fed also knows that ending QE3 is going to be very tricky for the financial markets.  The other times that the Fed has ended quantitative easing, it has turned out to be very painful for Wall Street.

So this time, the Fed seems to be trying to do what it can to use the media to mentally prepare investors ahead of time.  For example, the following is what Jon Hilsenrath of the Wall Street Journal wrote just a few days ago

Markets are positioned more to the Fed’s liking today than they were in September, when it put off reducing, or “tapering,” the monthly bond purchases. Most notably, the Fed’s message is sinking in that a wind down of the program won’t mean it’s in a hurry to raise short-term interest rates. Futures markets place a very low probability on Fed rate increases before 2015, in contrast to September, when fed funds futures markets indicated rate increases were expected by the end of 2014. The Fed has been trying to drive home the idea that “tapering is not tightening” for months and is likely to feel comforted that investors believe it as a pullback gets serious consideration.

In case you missed the subtle messages contained in that paragraph, here is a rough translation…

“Don’t worry.  The Federal Reserve is your friend and they say that everything is going to be okay.  Investors believe what the Fed says and you should too.  Pay no attention to the man behind the curtain.  Tapering is not tightening, and when the Federal Reserve does decide to taper the financial markets are going to take it very calmly.”

The Fed (and their messengers) very much want to avoid a repeat of what has happened before.  As you can see from the chart posted below, every round of quantitative easing has driven the S&P 500 much higher.  And when each round has ended, there has been a substantial stock market correction.  The following chart was originally produced by

Chart By DayOnBay

And of course the chart above is incomplete.  As you can see below, the S&P 500 is now sitting at about 1,800…

S&P 500

So let’s recap.

From the time that QE1 was announced to the time that it ended, the S&P 500 rose from about 900 to about 1,200.

When QE1 ended, the S&P 500 fell back below 1,100.

In a panic, the Federal Reserve first hinted at QE2 and then finally formally announced it.  That round of QE drove the S&P 500 up to a bit above the 1,300 mark.

Once QE2 ended, there was another market correction.  The S&P 500 fell all the way down to 1,123 at one point.

In another panic, the Federal Reserve first announced “Operation Twist” and then later added QE3.  Since that time, the S&P 500 has been on an unprecedented tear.  At this point, the S&P is sitting at about 1,800.

And of course those massively inflated stock prices have absolutely no relation to what is going on in the U.S. economy as a whole.  In fact, the truth is that economic conditions for most of the country are steadily getting worse.  Just today we found out that for the week ending November 30th, U.S. rail traffic was down 16.3 percent from the same week one year earlier.  That is a hugely negative sign.  It means that the flow of goods is slowing down substantially.

So the Federal Reserve has created this massive financial bubble that is totally disconnected from reality.  The only way that the Federal Reserve can keep this bubble going is to keep printing lots more money, but they also know that they cannot do that indefinitely because the rest of the world is watching.

In essence, the Federal Reserve is caught between a rock and a hard place.

When the Fed does ultimately decide to taper (whether it be December, January, February, etc.), the consequences are likely to be quite dramatic for the financial markets.  The following is a brief excerpt from a recent article by Howard Kunstler

But even in a world of seemingly no consequence, things happen. One pretty sure thing is rising interest rates, especially when, at the same time as a head-fake taper, foreigners send a torrent of US Treasury paper back to the redemption window. This paper is what other nations, especially in Asia, have been trading to hose up hard assets, including gold and real estate, around the world, and the traders of last resort — the chumps who took US T bonds for boatloads of copper ore or cocoa pods — now have nowhere else to go. China alone announced very loudly last month that US Treasury debt paper was giving them a migraine and they were done buying anymore of it. Japan is in a financial psychotic delirium scarfing up its own debt paper to infinity. Who’s left out there? Burkina Faso and the Kyrgystan Cobblers’ Union Pension Fund?

The interest rate on the US 10-year bond is close to bumping up on the ominous 3.0 percent level again. Apart from the effect on car and house loans, readers have pointed out to dim-little-me that the real action will be around the interest rate swaps. Last time this happened, in late summer, the too-big-to-fail banks wobbled from their losses on these bets, providing a glimpse into the aperture of a black hole compressive deflation where cascading chains of unmet promises blow financial systems past the event horizon of universal default and paralysis where money stops moving anywhere and people must seriously reevaluate what money actually is.

What Kunstler is talking about is something that I have written about previously many times.  When QE3 slows down (or ends), that is likely going to cause the yield on 10 year U.S. Treasuries to rise substantially, and that would have a whole host of negative consequences for the U.S. economy.

Most notably, it would threaten to blow up the quadrillion dollar derivatives casino that Wall Street usually manages to keep so delicately balanced.

The truth is that we are going to have massive problems no matter what the Federal Reserve does now.

If the Federal Reserve keeps wildly printing money, our financial system will become a massive joke to the rest of the planet and other nations will stop using our dollars and will stop lending us money.

That would be absolutely disastrous.

If the Federal Reserve stops wildly printing money, the massive financial bubble that Wall Street is enjoying right now will burst and we could have a financial crisis even greater than what we experienced back in 2008.

That would also be absolutely disastrous.

So does anyone out there see an easy way out of this under the current system?  If you think that you have such a plan, please feel free to share it below…

  • wombobobo

    gary, the clueless wonder, he makes me laugh

    • Guest

      If Gary were smart, he would use the coming correction in the stock markets to make money by shorting.

      • 2Gary2

        I wish I had the money to be in the stock market. That is mainly a game for the rich. I would like a financial transaction tax to fund a big increase in monthly social security payments to the elderly.

        • davidmpark

          Try getting the administration or a Soros group will pay you for cut-and-paste attacks. 🙂

      • davidmpark

        Gary likes his welfare. He won’t do anything to put it in danger. Heck, I bet he can’t go nite-nite unless an Administration intern burps him…

    • 2Gary2

      you sure your not looking in the mirror that is making you laugh???

  • djc

    Have a paid off home in a smallish town but be within 60-70 miles of a metro area for top-flight medical care.

    Be completely out of debt.

    Have a dependable vehicle.

    Have enough food and meds to get thru a month or so of supply disruptions.

    Know your neighbors and make it a point to cultivate friendships.

    Don’t flaunt your preparedness to others.

    Get in shape physically, mentally AND spiritually.

    There’s nothing an individual can do to avert the coming crisis. The best you can do is to protect your family and be safe.

    • Richard

      “There’s nothing an individual can do to avert the coming crisis.”
      Correct. The best you can do is to protect your family and LEAVE!

      • djc

        Where is there to go?

        • Richard

          Plenty of places : South America, Asia, Australia/NZ. I don’t remember hearing about people who wanted to leave Europe in the 18th & 19th centuries saying, “Where is there to go”?

          • Rob W

            When are you leaving for SA? I hear Argentina is nice…

          • Richard

            Already live in Singapore!

          • djc

            Thats a good point Richard.

          • Nicnak

            South east Asia is nice…. Plenty of food, nice people…. And no need to struggle.

    • Vlad Lenin

      Had top flight medical care… sorry to bust your bubble. A collapse and Obamacare should pretty much eliminate access to good care.

    • MichaelfromTheEconomicCollapse

      Those are great pieces of advice.


    • Elele

      Very good advice if one actually does it.

    • garand555

      Good thing I have no debt, no credit cards, 275-300lbs of elk hanging at 39f-40f in my garage, and a very large amount of seed, much of which is stuff that comes from plants that survived long enough to go to seed in my garden. starting spring, I am going to have absolutely massive amounts of produce. I am actively learning how to produce, process and preserve my own food.

  • Tim

    “Therefore the Fed must end it [quantitative easing] at some point because they desperately need the rest of the world to keep playing our game.”

    Rarely do I disagree with you, but I do here. The Fed may reduce its monthly purchases, i.e. taper, but they will never stop easing completely, in my opinion. Tapering is not termination. Money printing is what’s keeping the Too Big Too Fail banks afloat, and the Fed cannot risk having one or more them implode.

  • Randy Townsend

    1) Get out of debt (as much as you can). Absolutely NO credit card debt!!!!!;
    2) Buy actual gold (not gold stocks, or gold certificates);
    3) Buy non-perishable food (dried beans, rice, dried pasta, etc), learn to cook it, and teach your family how to do the same;
    4) Arm your self, plenty of ammo, and learn how to use the weapons, clean them, and have spare parts for when things break;
    5) Pray – should have listed that one first. God will deal with the US very harshly in the next few years because of our sin.

    • Richard

      “5) Pray – should have listed that one first”. Interesting. You COULD have listed that one first by a simple process of deleting and replacing the first comment with the fifth. But you didn’t. Hmmm. Could your comment in 5) above have just been posturing for effect?

    • pizzedoff

      1) Get out of debt (as much as you can). Absolutely NO credit card debt!!!!!;

      Well that excluded 90% of us that was making more money in 1978 than we are today and have refinanced our house 3 times and are in credit card debt up to our azzes just to keep our heads above water thats what playing buy the rules got me after being the the system 42 years and working my azz i am 60 years old and can’t get a job because i don’t fit the company goals

      • Ken

        Nailed it. I fully 2nd that emotion.

      • Richard O. Mann

        Feel your pain dude. It totally sucks to be 60 and out of work, or working a job way below what you have been trained over the years to do. My only hope is that I am a Son of God by faith through Christ Jesus, and that one day, either by rapture or death, I’m getting out of this mess.

      • Ralfine

        You must have been able to save quite a lot of money since 1978, when you earned more than today, but with much lower prices.

        • pizzedoff

          lol sure.i was making 150.00 a week had a nice apartment a snowsled, motorcycle and a nice used car..who saves when they are 25 years old?

          • Ralfine

            Well, i started saving in school, but always spent it on vacation. except when i was in the army, when i wasnt allowed to leave the country, but then i went to university afterwards.

            I was lucky enough to have been on welfare right after university, which taught me a frugal life style. Continueing that life style after getting my first job, and later on gave ke enough cash to buy a house for my parents with that cash. Still went travelling every year. But only had a car when I actually needed it, e.g. when crossing Canada from east to west.

    • JailBanksters

      Actually, you should tear up the Credit Cards. Some people this could take 1/2 an hour.

      • Richard O. Mann

        My wife had so many at one time, if her wallet had caught on fire, the EPA would have issued her fines for air pollution. HA! But, I had a few my self. We had to go chapter 13 after she retired, and I was laid off from my job at the time. It was fun while it lasted.

    • Simplified: Pray as if God is in control, and act as if you are in control.

    • Marco

      Heard Lindsey Williams state that there will be a currency reevaluation( where all currencies will be within 5% of each other)within the next 90days. If this is true, then the fed tapering makes sense, since the market will start to implode as soon as they announce tapering. Now when I think about this, this is actually a devaluation of the dollar but it wont seem like it for a while. Why not get the other countries to reevaluate their currencies and keep the bond debt at the same time? Just another can kicking down the road while hiding the derivatives market from the losses going public. We ( who are educating ourselves) will feel the brunt of this by the spring. The others by the summer. If anyone does not have a clue by the fall, then I am truly sorry for them because they will get the tail of this mega storm.

      • pizzedoff

        hes a fruitburger

    • MichaelfromTheEconomicCollapse

      Very good tips Randy. 🙂


    • bertinanth764

      my Aunty Scarlett just
      got Acura RL by working online at home. he said B­i­g­2­9­.­ℂ­o­m

  • Rodster

    I wonder if The Fed will throw China under the bus by exposing their massive $15 Trillion QE program?

    • davidmpark


  • K

    Nope, no easy and painless way out. They are addicted to easy money, just like a drug addict is addicted to drugs. Withdrawal is never painless or easy. For the rest of us, live as remote as you are comfortable with. Get out of debt, prep, and most important Pray.

    • Richard

      Pray? May I remind you that the deity of your choice was logically responsible for the ‘drugs’ in the first place. So if the current situation was “His” intention, which it obviously was, what good is “praying” going to do you?

      Also, do you realize that living “as remote as you are comfortable with” is incredibly dangerous advice. Those who would do you harm will use your geographical isolation to do you in at their leisure, knowing that even if they’re kind enough to leave you alive to call the police, they can make a nice, leisurely getaway because it will be hours before the police arrive – if they ever do. Ugly thought, huh?

      • K

        I find prayer quite helpful. Often it helps me find the best path through a situation. Second, anyone wishing to do me harm on my home turf. May find that a much harder task than they imagined. Since the police are always a long response time away, you learn not to rely on them.

        • Pamela Hankins

          Luke 21:33-36, “Heaven and earth shall pass away: but my words shall not pass away.
          And take heed to yourselves, lest at any time your hearts be overcharged with surfeiting, and drunkenness, and cares of this life, and so that day come upon you unawares.
          For as a snare shall it come on all them that dwell on the face of the whole earth.
          Watch ye therefore, and pray always, that ye may be accounted worthy to escape all these things that shall come to pass, and to stand before the Son of man.”

          • K

            Yes during these times it is easy to get distracted. I admit the cares of this life, can get blown out of proportion. Thank-you for the post.

          • MichaelfromTheEconomicCollapse

            I will give that a thumbs up. 🙂


        • Richard

          1. “I find prayer quite helpful”.
          I know. I sympathize. Taking pain killers really does alleviate the pain, doesn’t it? Trouble is, they don’t cure the disease.
          2. “You learn not to rely on them [the police]”
          Is that how you really want to live: relying on your own power of self-defense if you are attacked? Do you really even want to live in a country where you are forced to think like that? Ugh! So it’s 3 p.m. and you’re in the garden picking your cabbages for dinner and the thief arrives with his gun. Trouble is you left yours on the kitchen table and now the guy wants all your money. Houston, we have a problem…

          • Eric Quintero

            If you have eyes and ears and you live in a remote area, then you will likely SEE and HEAR any target well in advance of its arrival.

            If your eyes and ears fail you, then your perimeter security system will act as a redundant measure and alert you.

            In either scenario you should have enough time to get back inside and prepare to engage the target.

            You really don’t understand our mindset, do you?

            Learn to stand up for yourself, mate.

          • Richard

            Good lord, man! Is that REALLY how you want us to live??? Assuming that any and every moving creature is a potential threat? (“you will likely see and hear any target well in advance of its arrival”) I don’t think so.

          • K

            I will stick with the prayer. As to the rest. Private gated road into my place, so they will be afoot. Because of the number of bear and mountain lion in the area, when I am working around my place I wear a sidearm. Lastly, yes I have far more confidence in my abilities than the local police, I suspect many are related to Barney Fife.

          • Richard

            Quite simply, I do not wish to live in a country where I have to “wear a sidearm when I am working around my place”. Do you even realize how crazy that sounds? Are you so obsessed with the extraordinary exceptionalism of the great-and-wonderful UNITED STATES OF AMERIKAHHHHH that you are prepared to forgive-and-forget and live like that without a second’s thought?

          • K

            To me a sidearm is just another tool, so wearing one does not seem crazy at all. A truly independent lifestyle, does seem to be beyond your comprehension. All I can tell you is, I am far more comfortable living this way. Then I ever was living in the city. If I had young children, I would leave the U.S. But since nowadays it is just me, I will take a stand here.

        • MichaelfromTheEconomicCollapse


          Yes, prayer definitely changes things. The prayers of the righteous are powerful and effective.


      • TN gal

        You really do not understand the mindset or preparedness of those of us who have chosen to love remotely if this is what you believe.

        • RealityBetraysUs

          “love remotely” is that not what traveling salesman do?

      • Mondobeyondo

        I’d rather pray to a nonexistent deity that saves my soul from eternal punishment,., than to some entity that may or may not exist, but I know won’t help me in any way.

        • Richard

          “A nonexistent deity that saves my soul…” Forgive me, isn’t that a contradiction?

          • Drud

            Actually, it’s not, no matter what you believe. If you don’t believe in either a “non-existent deity” or your “soul” then it is a logically null statement and you should disregard.

      • Bruce

        your statement has merit however, when TSHTF I doubt we will ven have police. To do so would be a suicide mission. Poice will be a sitting duck. They will resign or go awol to stay and protect their own families. Can you blame them?

    • Mondobeyondo

      The only way out is through.

  • Jimbo

    I don’t think the Fed will taper. I understand the argument that to continue QE will destroy the dollar by alerting creditors that debt is being monetized, but the Fed are covering that by continually hinting at a taper. The taper has been “just around the corner” for 6 months now. Every time “taper day” comes around, an excuse is made to delay it just a bit longer. The argument “If we taper now we risk damaging the fragile recovery” is aimed at creditors. Creditors are also stuck between a rock and a hard place. If a taper happens when things aren’t great, the economy comes undone and their dollars lose value. If QE continues their dollars lose value.
    The Fed is cornered. I believe it is their intention to carry on playing poker with a very bad hand just so they can stay at the table.

    • Jim Davis

      I too find it hard to believe that the Fed is going to end this QE nonsense. They have backed themselves into a corner. Well not themselves…the rest of us!

    • k

      I feel the same…….but since they cant do indefinitely they might begin to taper next year, when everybody concerned (or those whom the fed wants prepared ) is fully prepared.

    • grumpyhillbilly

      i was under the impression that Yellen was picked just so QE would continue. Then again we might gearing up for the Wall Street insiders to short the stock market big time. Either way it can’t keep QE going on forever.

    • MichaelfromTheEconomicCollapse

      But can they really bluff indefinitely?


      • Jimbo

        That is the 85 billion dollar question. Either way (taper or bluff) I can see no way that this will end well.

      • Drud

        Indefinitely is inherently vague. Obviously, they can bluff a long time or the whole house of cards would have come down already. I think the key thing that often gets overlooked is energy, or more precisely net energy. You can fudge numbers in ledgers, you can manipulate currencies, and with computers you can do both on a remarkable scale. But you can fake energy and you can’t fudge the laws of thermodynamics.

  • 2Gary2

    We need to take out the TRASH (Traditional Republican Anti-scientific Scripturalist Homophobes) to the curb where they belongs.

    • davidmpark

      Speak correctly, sir. You are polluting the king’s English!

    • Alasha

      me want cookie!! lol. sorry 2Gary2…..its all i can thk of when i c ur moniker regardless of vwat u say….. smile

      • Eric Quintero

        This isn’t reddit. Keep your pointless comments off the board. The adults are talking.

        • ericplop

          This isn’t reddit. Please keep your pointless comments off the board. The adults are talking 🙂

        • Alasha

          lighten up.

    • MichaelfromTheEconomicCollapse

      And precisely how will that help things Gary?


      • 2Gary2

        No more conservatism more equal wealth and income. I include the corporate dems as conservatives.

        Merry Christmas Michael–even though we disagree on some things I do appreciate your work.

  • Rufus T Firefly

    There is nothing to worry about.

  • Goldfinger


    Great RR traffic stat. They can’t lie about boxcar loads!


  • Richard

    A really superb article, Michael. I don’t know whether you ever read my comments but it seems that over the years the idiosyncrasies to which I have drawn attention have all-but gone and we are left with fine information expressed in a really meaningful and sincere way. For which, many thanks. Keep up the good work!

    • MichaelfromTheEconomicCollapse

      Thank you Richard. We should all be seeking to constantly improve what we are doing.


  • davidmpark

    I shared my ideas on how to fix this last article – I wanna hear everyone else’s ideas for a change.

  • dallas19

    What this article doesn’t discuss is central banks around the world are coordinating this. The European central bank, bank of England and bank of Japan (forget the name of their central bank) are all in on this quantitative easing and running a global slush fund. This has never happened in world history. There is a huge ocean of cash out there. It is great for 1) the banks and 2) people close to the bank. I think marc Faber made a prediction the fed will make a “cosmetic taper” maybe reducing purchases $10billion a month. But, the quantitative easing will continue until our exports are profitable and the dollar is significantly weaker. .. . ..

    • davidmpark

      That’s a good point! How much are all the central banks indebted? That’s probably a very frightening number.

    • k

      Interesting can you elaborate…i always wanted to know the complete story behind the QE.

      Michaal, can you get deeper into this? Can you do an article about why the fed is continuing QE

    • Drud

      I have heard this idea a number of times. I find it hard to believe that a large number of extremely wealthy and powerful megalomaniacs are able to work together for decades to coordinate something so massive. I find it much easier to believe that a bunch of extremely wealthy and powerful megalomaniacs have build up a huge tower of cards over a period of decades and now are trying anything and everything to keep it from toppling. I think the important thing to realize is what is real and what is only perceived to be real. This is the important distinction. You speak of “oceans of cash” but in what form: printed money (of no intrinsic value) or is it numbers dancing across various computer screens (less intrinsic value, can’t even be burned for warmth). Is it in gold (historically a great store of value, but of no use in a true social collapse). I think it is all about a priority structure: food, water, shelter are the most basic level, then energy (often overlooked) then security (IMO at the same level as energy) then wealth preservation (best bet is still physical gold and silver). One more thing that is almost always left out of people envisioning the collapse is the power grid. This is where the true line is drawn: if the grid functions (even though power will be expensive) then we simply slip into a financial collapse (depression) if the power grid fails (cascading collapse is VERY possible if it becomes TOO expensive to operate or if there are massive supply chain failures) then, well we fall farther into collapse, perhaps to the point of true, bloody, brutal anarchy.

      • Bruce

        it has been said that 13% reduction in electricity subscribers would collapse the utilities. I’d imagine the numbers being shut out of the gid for non payment will be MUCH hgher than 13% once the collapse ball starts rolling. Way too many are unemployed or underemployed presently. Just look at the unemployment numbers once things start really going downhill. In short rest assured the lights will go off.

  • pizzedoff

    It will be ok..just go on with your lives and eat your cream puffs and swill that 2 litre bottle of sugar..Our leaders will figure it all out

  • Tom

    Great job as usual Michael ! I think that we may very well see some form of tapering in early 2014 if the new “budget agreement” that was disclosed yesterday occurs. Extended unemployment benefits would be cut. As a result 800,000-1 million will fall off the rolls. That will “lower” the unemployment rate as our government counts things. The Fed will say that the economy is stronger as the number of “unemployed” has dropped and they will start to taper. Of course the headlines will scream out to us how well the economy is doing as the rate “plummets”, the Fed will point this out prior to tapering

    • MichaelfromTheEconomicCollapse

      Thanks Tom.

      And you are right – when extended unemployment benefits are cut suddenly another huge chunk of unemployed workers will be deemed to have “left the labor force”.


  • Frank Bell

    WRONG question!

    Don’t ask how far they will fall, ask how far they will rise WHEN the Fed steps in again!

    If YOU don’t know the answer, rest assured that Buffett, Soros, Corzine and so on DO KNOW the answer!!!

  • Kent Harris

    Get back in the House of the Lord.

    • Richard

      …with your “sidearm”, presumably…

  • Pamela Hankins

    Many have said to pray, but the Scripture tells us exactly HOW to pray during this time in History…
    Luke 21:33-36, “Heaven and earth shall pass away: but my words shall not pass away.And take heed to yourselves, lest at any time your hearts be overcharged with surfeiting, and drunkenness, and cares of this life, and so that day come upon you unawares.
    For as a snare shall it come on all them that dwell on the face of the whole earth.
    Watch ye therefore, and pray always, that ye may be accounted worthy to escape all these things that shall come to pass, and to stand before the Son of man.”

  • agglebert

    QE isn’t going to end for a while. they aren’t ready for WWIII yet…or i should say russia isn’t ready yet.

  • andyprigge

    So what if the market collapses. Since it does not reflect reality or benefit the blue collar worker, and the only beneficiaries are the brokers and foolish investors, let it fall. There’s no jobs anyway!

    • Drud

      There are moments when I believe this as well, but EVERYONE will suffer, except for perhaps a few of the handful of elite bankers, CEO’s and politicians that caused it, and even they will suffer eventually. I still say “Let it Fall,” but for a subtly different reason: it is doomed to fall soon, may as well get it over with so we can begin to rebuild.

  • jack donaldson

    If conservatives gain any control in the 2014 elections, watch the Government cut loose and let it all fail as punishment, else it will go on unimpeded until 2017 then, as they say “WHAT DIFFERENCE DOES IT MAKE”

    • Drud

      The 2-party system is so silly and destructive. Who cares who “wins” rigged elections, WE THE PEOPLE lose every time. We need people to start ignoring politics, ignoring Washington, I would even like for people to begin disobeying these ridiculous clowns we have in office, a simple grass roots campaign of getting everyone to simultaneously increase there tax deductions would be an extremely effective protest and an entirely legal one. Not gonna happen, but I can dream. The point is, arguing about the 2016 elections is like arguing your favorite USSR Politburo member in 1989. I do not believe this system will exist by 2020.

  • squashpants

    Mike, I check in on the 10 yr Treasury Bond interest rate, and, yes, it goes up and down between about 2.25 and 3.0 percent. But every time the rate trends toward the dreaded 3% level, it backs off. Either from natural processes, or intervention by TPTB, that level is approached but not exceeded. I do not understand what puts upward pressure on the rate, but those forces are apparently being managed, and I don’t know what could cause that to reel out of control. Perhaps I should go back and read more carefully.

    Just sayin’…


      Intervention! Massive intervention! Another round of falling house prices is not conducive to electoral success.

    • MichaelfromTheEconomicCollapse

      The rate has been hovering around 2.8 percent recently. I think that “the taper” could cause it to rise above 3 percent.

      We shall see…


      • Jimbo

        Taper may cause a rotation into bonds (the fed would like that) and the yields would drop. Or maybe the taper could cause a rotation into other harder assets (I would like that).

        • Gene Baugh BBA

          Tapering will cause yields to go up, not down, and the higher yields will cause money to rotate back into bonds. The more the Fed tapers the higher interest rates will go. People buying bonds now are going to have capital losses. Losses which will grow every time the Fed tapers and long rates respond by going up.

          If the ten year eventually goes to 6%, which is not unreasonable without any QE, the 35 trillion dollar bond market capitalization could be cut in half.

      • James

        No, it won’t. The FED controls the interest rates all along the term structure – both long and short. However, they do allow for some fluctuations between the IOR rate and the discount rate.

        Operationally, the FED can control the term structure of risk free rates through simply cementing any side of the curve.

        By the way, when the FED buys Treasuries, it’s the functional equivalent of not having issued them in the first place. That’s the end result of QE/tapering.

        QE involves the FED buying bonds – or bank assets – and swapping them out for deposits made by the FED in the banking system, which boils down to crediting bank accounts. The whole idea being this would create excessive reserves
        which would in turn be loaned at a positive rate of return. The FED swaps out low-interest assets (reserve balances) for higher yielding, long terms assets, such as US Treasuries.

        QE is simply balance sheet accounting. The commercial banks get new deposits (Federal Reserve money) and they decrease their asset holdings.

        This isn’t “printing money” which people equate with inflationary
        expansion. We’re dealing with accounting tweaks through asset swaps. QE changes the composition of government liabilities and the overall term structure.There isn’t an increase non-government net financial assets.

        • Gene Baugh BBA

          Yes, long term interest rates will rise if the Fed tapers.
          QE is the mechanism by which they are controlling long rates and keeping them artificially low.

          • James

            QE all boils down to sending signals. The FED has come to the conclusion that would send a message that they’re OK with increased rates, including the higher mortgage rates.They don’t want to send the signal, so they’ve delayed any taper.

            The FED is concerned about the fiscal drag. Again, this all boils down to signals, and how they want to telegraph their control of term structure of rates. As it stands, the dollar is down a little, and the rates in question have come down.

            Operationally, the FED can DIRECTLY control the term structure of risk free rates by creating cementing the market on any side of the curve.

            The FED buying US Treasuries is the same as not having them issued them to being with. The results of QE/tapering would be the functional equivalent of not having issued Treasuries. The policy toolbox, operationally, are Treasuries being issued at pre-determined maturities/rates, along with maturity swaps, etc.

  • Hammerstrike

    They will just continue printing until everyone stops buying dollars.


    There will be no tapering. Obama Care is going to place a massive strain on the economy. The Democrats already facing massive electoral pressures can not tolerate yet another recession at this point. Tapering will continue until 2015.

  • rawiron1

    They won’t fall. O’s last chance at a legacy will be to cancel student debt and run the NYSE up to 18K and the NASDAQ up to 2K. I’d be worried after this point.

  • jt4

    There is no solution but to let it collapse and start over.

  • garand555

    The way out of this is a world wide debt jubilee, a serious reduction in the number of laws on the books, ending the fed and fractional reserve banking, a return to sound money and letting nature take its course. All of that would be very, very painful, but nothing compared to what we are going to feel given our present course. I can see tapering happening, but I also suspect that the Fed will panic when it sees what that brings about and a reverse of the taper is what I expect.

    • Drud

      This is certainly possible and it is all a guessing game, but my guess is actually the opposite: they will not taper, may in fact increase QE, until inflation gets out of hand and people begin to dump the dollar, then they panic and default and deflation take over. Either way the Fed panics and wreaks havoc on the economy. That much is guaranteed.

      • garand555

        I could also see tapering not happening. We’ve got Yellin coming in and she’ll want to fire up the nuclear powered printing presses. We also have another guy coming in who is supposedly hawkish, so we’ll see. Either way, they cannot taper and they cannot not taper. I could also see them tapering a bit just to watch the market throw a hissy fit, then using that as an excuse to increase QE. No matter how you slice it, I hate the Fed.

    • Mark Caldwell

      I also see a short lived taper and a claim that the FED reserves the right to change it’s mind at any time…..then later in 2014 the FED will roll out a temporary program of 150B per month, maybe 165B. And then it will be tapered again in 2015. Rinse, Repeat.

    • MichaelfromTheEconomicCollapse

      A debt jubilee would be great, but I am afraid that we will never see one under this current system.


      • garand555

        We will not get one without an actual shooting war to force the issue, or a complete economic collapse where our financial system no longer exists. Thomas Jefferson thought that banking institutions were more dangerous than standing armies, and we’re living through proof that he was correct. I want to remove the power that comes with the ability to create currency, and that ability rests in the banking system. It is a disgustingly corrupt system.

      • James

        Or we could simply stop issuing Treasuries, they’re no longer operationally needed. It’s a vestigial leftover from the gold standard.

        The point of bond sales for a currency issuer isn’t to finance expenditures, but more of a decision that the public should hold bonds as opposed to reserve balances earning interest.

        US public debt isn’t the same as household debt. It reflects the total net savings of the US economy – or the propensity of the private sector to save. It’s more of a national savings or equity than anything else. At the end of the day, Treasuries are basically dollar deposits at the FED, similar to a traditional savings account.

        Lastly, BANKS DO NOT LEND RESERVES. They’re simply used as a clearing mechanism. The quantity of the monetary base isn’t related to a banks ability to lend. An total net increase in reserves will not result in INCREASED LENDING. All this does is decrease the Fed funds rate. Central banks ultimately can’t control the money supply (they abandoned trying to do this is the 1980s). All central banks can so is control interest rates.


      • mar1950

        When the $ is gone all debts will be cancelled. Market forces will proclaim the Year of Jubilee.

  • Mondobeyondo

    The stock market is not representative of the true economy. If you really think it is, I have some bars of fool’s gold I’d like to sell ya.
    All that money sloshing up, down and around Wall Street is created paper/digital fiat money. There’s nothing backing it except the good faith and good graces of the American government and its lenders. When faith in the currency is lost, “thar she blows”.
    The reason the Dow is performing so well is – because it’s on drugs! Quantitative easing is the drug of choice, and it makes investors very giddy. It’s better than Prozac! Meanwhile, there is serious long term financial damage being done to this nation. It’s like termites. You don’t know your house is being eaten until the roof caves in one day…

    • MichaelfromTheEconomicCollapse

      Very well said Mondo.




      Rev 18:11 — And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more: 12 The merchandise of gold, and silver, and precious stones, and of pearls, and fine linen, and purple, and silk, and scarlet, and all thy wood, and all manner vessels of ivory, and all manner vessels of most precious wood, and of brass, and iron, and marble, 13 And cinnamon, and odours, and ointments, and frankincense, and wine, and oil, and fine flour, and wheat, and beasts, and sheep, and horses, and chariots, and slaves, and souls of men.

      For the ancient world, this list represents “every luxury the heart could desire” as the New American Commentary characterizes it. But when some look at this list of ancient luxuries they have trouble matching it up with modern American goods. You would be hard pressed to find a trade in “chariots” today anywhere, but you will find their modern equivalent of automobiles, airplanes, trains and even bicycles traded heavily in America. It seems reasonable to concede that the ancient prophets would have no concepts or words for such modern inventions and would be given the word chariots and horses to cover modern transportation goods.

      Often it is pointed to that certain products have nothing to do with America or are not made there. For example, America is not known for precious woodsas, say, Africa is. Many other goods on the list are not common today either. The point to remember here is that it does not say that the goods are made in Babylon, but rather that they are imported or traded by her. America is well known as the greatest importer and consumer of fine goods in the world. Through the New York Mercantile Exchange (NYMEX), Chicago Mercantile Exchange (CME), and other commodities, futures and stock exchanges, America is a leader in the trade and marketing of such goods. America does not have to produce the goods listed to fulfill the prophecy, she only has to trade them.

      But some will say that not all the goods listed there are traded. Although there were slaves in the past, that was abolished 150 years ago, so it does not describe end time America. Ivory trade is also banned by the US since 1990, so how could that fit America when she falls as Babylon? It can fit—if we leave behind our law-abiding mindset for a minute and consider the real world. America, like all nations, has modern day slavery. There is human trafficking for sexual exploitation and forced labor, despite the laws against it. If you follow the news regularly, you will occasionally read the tales of survivors or those who owned slaves. Similarly, ivory trade may be illegal, but there is the black market for this, too, in the US.

      Objection 5 — How Does America “Sit On Seven Mountains?”

      This verse about Babylon causes many to stumble in regards to America:

      Revelation 17:9 (KJV) — And here is the mind which hath wisdom. The seven heads are seven mountains, on which the woman sitteth.

      From this verse almost alone, people claim that Babylon is Rome because Rome is the “city on seven hills.” The problem with that is the Greek word for hill (buonos) is not used here, but the word commonly translated mountain (oros) is.

      The seven heads of the beast represent seven mountains and also seven kings (Rev. 17:9-10). The woman is Babylon (Rev. 17:5) The woman (Babylon) sits on the seven mountains or literally reigns over them. What are these mountains?

      In a macro sense, continents are mountains. The earth is full of mountains and canyons under the sea and only the large masses that push out of the water are continents. Importantly, there are seven continents to the earth (North and South America, Europe, Africa, Asia, Australia, and Antarctica). This mirrors how the woman sits on many waters/nations (Rev 17:1,15) and “reigns over the kings of the earth” (Rev 17:18) as the seven continents encompass the entire earth.

      America’s dominant military and financial power gives her a global hegemony or rule through influence and threat of force. The nations that dare defy or threaten America get unilaterally invaded or have their funding or resources cut off. The power exerted by the dollar is immeasurable. If you doubt America’s control of the world that Babylon is said to have, again, it’s important to think outside the box of the official stories and legal channels and consider what happens that the politicians cover-up. A good book to start with in this regard is Confessions of an Economic Hitman.

  • garyis ajoke

    gary wants all of your money

  • Duncan

    Gary will get my money from cold dead hands.

  • garyis ajoke

    why is gary such a communist dumbfuck?


    gary is filth, doo da, doo da


    gary wants to take 100 Billion from the richest people and give $5000 (one time) to each of the poorest 20 million. I think gary is a communist


    come back later as we play, “Gary is loser of the year”

  • Duncan

    Gary = Politics of envy

  • Tractor

    1. Make ALL derivatives illegal, [past, present & future right NOW).

    2. Make money backed by something gold, silver, platinum, land SOMETHING.


    4. Have Congress print our money like it says in our Constitution (Congress does NOT have the right or legal means to have anyone else print our money, making the Federal Reserve Illegal.

    5. Stop all speculation on energy or food products make the it markets NOT speculators who drive prices up or down.

    6. Put Silver back into our coins


    8. Have a new government elected by the people.

    9. Make Lobbying Illegal, a felony punishable by death.

    10. make any politician who accepts a bribe, kickback, favor, money etc. punishable by death.

    11. Anyone who runs for political office NOT have a net worth over $100,000 and NOT a professional politician or attorney.

    12. Any politician who knowingly places business, business interest ahead of peoples interest stand trial for treason.

    13. Make banking responsible to the customers and NOT their stockholders. STOP big banks at the state line. NO banks outside the state they are incorporated in (NO nationwide banks)

    14. make it illegal for big business, small business including any and all banks to get involved in politics NO donations from businesses for campaigns etc. That should stop all this IOU buddy buddy stuff.

    15. Make the federal government small and non-obtrusive and give POWER BACK TO STATES Where IT Belongs.

    16. rewrite the tax code making it NO MORE than 5 pages and simple. Then FIRE EVERY IRS Employee. and close the building.

    17. Fire the HUD and close the building.

    18. Fire the Interstate Commerce Commission and close the building.

    19. Fire FEMA and close the building.

    20. Fire the Education Dept. and close the building.

    21. Fire Home Land Security and close the building.

    22. Reduce the size of the federal government to 20% of it’s former size.

    23. STOP all payments to foreign governments.

    24. STOP all foreign wars bring our troops home now.

    25. FIRE the EPA and close the building.

    26. Stop all pay over $20,000 to the top politician (the president on down) to be a politician is a position of responsibility and NOT of entitlement.

    27. NO BORROWING of any funds that we live within our means for the Federal Government, states, counties and cities (or NOT pay the bill). (except in time of war).

    28. Put prayer back in schools

    I could go on for days and days.

  • Tony

    QE simply involves the FED purchasing bonds – or bank assets – in exchange for deposits made by the FED in the banking system, which means crediting bank accounts. The goal being to create excessive reserves which would be loaned for a postive rate of return. The FED swaps low-interest assets (think reserve balances) for higher yielding, long terms assets (US securities).

    QE is basically just balance sheet accounting. The commercial banks get new deposits (FED $$$$) and they decrease their asset holdings.

    We’re talking debits and credits to the Federal Reserve balance sheet. It’s that simple. As US bonds amoritize or mature, the FED’s balance
    sheet will shrink as do any corresponding reserve balances which are then debited.

    People ignorantly refer to this as “printing money” which they equate with inflationary expansion. If people understood how our money system
    works, they wouldn’t make such ridiculous statements. We’re dealing with accounting adjustments through asset swaps.

    The FED can continue QE for as long they deem necessary. Balance sheet expansion can continue with POMO and paying interest on the IOR.

  • Fannie

    I could use some new crap, come to think of it. I have the latest Gucci catalog and I’ve got to get presents picked for others than myself.

  • Cyber Revengeance

    FED will never taper. they will keep zero interest rate just like japan has done for a decade.

    if they decide to increase the interest rate. market will collapse. its that simple.

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