"Saturation Point" for QE Nonsense; Fiscal Cliff Comparisons

Via email, the chief economist for Saxo Bank in Denmark, Steen Jakobsen, discusses the "Saturation Point" for QE and the "Fiscal Cliff" in the US.

Steen writes ...

Fiscal Cliff Comparisons

  • A lot of people are starting to compare 2012 with 1987. Yes, it's scary.
  • Other people compare the fiscal cliff to 1937 Roosevelt where stock market tanked 50%.
  • Few people seems to realize that part of the "fiscal cliff" involved higher taxes on financial transactions, meaning it's prudent to take your profit and pay the tax in 2012.
  • Greece is doomed. A headline today read : Soros to invest substantial amount in Greece - He did the same in Russia in 1998 - just before they defaulted.
  • All EU solutions on the table: banking union regulation probably needs treaty changes - we are at the end of line.

Saturation Point for QE Nonsense Reached

  1. We are reaching "saturation points" for QE, Macro nonsense, politics, low interest rates, intervention in markets and the concept of extend-and-pretend.
  2. The laws of the market have been abandoned and replaced by "asset manipulation". We can discuss forever on the impact of QE, but everyone will and need to agree it distorts relative prices: It makes money cheaper and everything else expensive. QE also leads to subdued volatility between two equilibriums: The managed prices instituted by macro policy makers, and the real market price. The market then swings like a pendulum from "greed" to "fear" creating artificial volatility curves, [most often towards greed] which the market then misread as an indication of no trouble on the horizon. Meanwhile back in Reality-City the systemic risk is massive and expanding.
  3. We have paradigm shift in energy which will provide positive input to growth and reshoring of jobs to US and Europe.
  4. QE stopped having an impact on the [real] economy two years ago. Now we have reached the saturation point of QE on assets. Sure FED will print another 1 trillion, but the trend and talk even among policy makers (notably the Bank of England) is that QE impact is now limited after three year of zero interest rates.
  5. A crisis creates the foundation for a mandate for change.
  6. Social tension is rising everywhere.
  7. The EU does not work. Either they go to mini-max: Fiscal compact and the already [in place] supervision or they risk a treaty change which will take years and tear Europe apart. Greece will leave EURO inside next six month, but in a "managed fashion".
  8. Merkel's re-election means she needs to be more EU skeptical to create opposition for the all in SPD.
  9. A new one: Africa is the future. In 2013 investing in Africa post Q1 turmoil could be "safest bet" as Foreign Direct Investment is increasing (China has committed to in excess of 20 billion US Dollars over three years). The GDP's are so small that "any" positive change will create exponential growth. The GDP of South Africa is 400 billion USD, slightly bigger than Denmark’s 330 billion US Dollars, but with 45 million more people and resource en masse.


We will have volatile end to the year with people looking to take profit for tax reason in the US - combined with a best compromise on the fiscal cliff likely to be a drag on growth by 1.5% (- 150 S&P points).

The manipulation will continue for rest of 2012, but if we are right about the "saturation point" above then we are in for a big dose of reality which will have to be used to reset our portfolio towards upside - rather than downside - as the micro-economy is better than ever and the macro policies are bloated to such an extent it is difficult to continue.

Mish Thoughts and Notes

I cleaned up a few typos and added a couple of subtitles in bold and a few clarifications in braces.

I am in general agreement with at least 90% of what Steen wrote while noting that I had not thought much about Africa until now.

I too suspect we will see some sort of Fiscal Cliff compromise, without making my own guess as to size. Steen's guess of 1.5% seems as good a guess as any, and it will tip the US into recession (assuming the US is not in recession now, which I still think it is).

I also expect QE is at the end of the line, and it never did anything for the "real" economy, ever. If QE has less effect on the "unreal" economy (asset manipulation and financials), then the downside will likely be greater than what Steen thinks. 

The macro picture: demographics, China, Europe, student debt, part-time employment, under-funded pension plans, etc., is bleak.

My primary disagreement with Steen is on the "micro-economy". I suggest it only looks good because of distortions caused by fiscal and monetary stimulus.

Thanks Steen!

Mike "Mish" Shedlock

"Wine Country" Economic Conference Hosted By Mish
Click on Image to Learn More


News for factory,Allied Cash Advance,Photography,Beach Water Park,Educational Leadership,Vacation And Travel,Wedding Dress,Family Vacation Packages,Casino and Gambling,Health Insurance,Best Auto Insurance ( BAF ),Web Hosting Professional,Home Design And Remodeling,Information Property For Home,Wireless TV Networking,Business Plan Guide,Educational Guide,Custom Essay Writing Service,Plumber Service And Repair,Property House,Architectural House Plans,Car Auto Services,Computer service and repair,Computer Networking,Business Planning Strategies,Womens Giving,Healthcare and Medical Jobs,Retail Inkjet Solutions,Online Casino Games,Alcohol Drug Treatment,Web Designers,Apollo Amatuer Night,Public School Performance,Kanza Museum,Cap Inter Entereprises Emploi,Culinary Tourism,Business Traveller,Bridal Expo,Container Atlas Architecture,Culinary Tours - Packages and Travel,Dancing Ink Productions,Defend Automotive Group,Real Finance Group,Business Consulting Services,Home Design Audio,Health Projects International,Health Resources,Health Effects of Alcohol,History of education,Vietnam travel guide,Westland Foundation,Lighting Business,Networking Business Professionals,Housing Decoration,Future Business,Health and Beauty Tips,Hotel Cafe and Restaurant,Enhancing Education,Home Improvement Projects,Political Philosophy,Healthy Grieving Process ,Unique Weddings in New Orleans,Art Plus Science ,Advantage Business Media,Mutual Financial Services,Adventure Travel and Holidays,Alternative Medicine Treatments,Web Design and Marketing,Electronic Payment Solutions,Life Success in Business,Devium Car Interiors,Easy Divers Academy,Water Treatment Process,Software Development Company,MSDS Translation Language,Orion International Technologies,Refreshing Summer Wine Guide,Learn Technical Writing,Health Spa and Resort,Creative Book Publishing,Positive Business Mentality,Charter Healthcare,Discount Hotel Rates,United Industries,Warrior Insurance,County Tourism and Vacations,Wedding Ring Jewelry,Studio Design Decorative,Journalism Careers,Gaming Accessories Computing,Business Strategy Consultant,Cefori Technologies Information,Physics and Astronomy,News Fashion,Business Online,Michigan Apartments,Legal Information Institute,Guide Fashion Shipping,Home Insurance Quotes,Web Design Trends,Musical Instruments and Gear,Travel and Leisure,Importance of Education,Auto Financing Loans,Contractor Business Systems,Business Travel,Importance of Sex Education,Education Classroom,Creative Idea Laboratory,Luxury Paradise Vacations,Healthiest Alcoholic Drinks,Sports Betting,Business Environment,Business Directory,Internet Services,Top Styles,Architecture and Design,Discovery Travel and Tourism,Drug Abuse Treatment,Cheap Auto Financing,Business and Technology,Online Trading,Casino Gambling,Easy Online Shopping,Education Games,Social Media Networks,Online Dating,Luxury Honeymoons,Media and Entertainment,Home Decorating Ideas,Insurance Services,Payday Loans Online,Beechwood Travel Guide,Paradise Garden,Business Trends Consulting,Expert School Consulting,Latest Fashion Trends,Alternative Health Care,Technology Trends In Society,Health Technologies Resources,Island Wedding Services,Network Society,Gambling Experts,Medical Insurance Expert,Home Repair and Remodeling,Sexual Health Services,Education Resources,Automotive Solutions,Michigan Trade Associations,Luxury Fashion and Accessories,Theoretical Physics,Financial Advice,Adult Online Dating (Escorts),Pets Health Insurance,Better Homes and Gardens,Avastone Technologies,Discover Student Loans,Sports Authority,Vitamins and Supplements,Business Systems Online,Food Network Recipes,Business and Government,Smart Legal Strategy,Occupational Health Care,Music Education,Online Dating Tips (Expert),Online Marketing Lexikon,Citizens Council Network,Economics and Finance,Fashion Entertainment News,Luxury Travel Destinations,Online Auto Insurance,Home Improvement Loans,Building Business Foundation,Human Resource Consulting,Educational Media pay day loans
life insurance quotes
Credit Loans (finance)
Foreign Auto Parts
Health and Fitness
Drug abuse effects
Destination hotels and resorts
Professional Financial Marketing
Personal Finance
Computers and Technology
Auto Insurance
Real Estate Property
Computer Graphics Technology
Home Improvement
Arts music schools
Online Education Classes
Hotel and Travel
Security development program
Business auto loans
Medical And Public Health Organizations
Land and Homes
Better Health Kids
Engineered Heating
Trade Finance Services
Switzerland Tourism
Casa Travel
Clothing Accessories
University of Technology
Best Law Schools
Marketing Technology
Vacation Tour and Travel
Insurance Agents and Insurance Brokers
Construction Engineering
Healthy Home Economist
Masters Home Improvement
Michigan Web Design
Personal Online Banking
Health Education Foundation
Travel Pack
Real Estate and Home Ideas
Museum Vacations Travel
Free Statistical Software
Blog Free Statistical
Buying and Selling Real Estate
Educational Play
Big Top Business
Alternative Health
smooth skin
Products and Services
Construction Project Management
Northside Car Service
Online Essay Writing
France Health
Europe Program Modernization
European Travel Destinations
Science and Technology Project
Online Store Marketing
Law Society Consulting
Business Networking Company
Motivation to Study
Metropolitan Hotel
Technological Innovation
EAP Business
Travel Guide and Virtual Tours
The Business Partnership
Accessible Accommodation
Entertainment News
Medicines Agency
Carpet Cleaning
International House
VIP Shop
Online Clothing Shop
Institute Education Religion
Ford Escort Team
Shop Engine Part
Computer Hardware
Medical Career
Paris Construction
Professional Translation
Streaming Wizard
Alcoholism and Drug
Medical Laboratory
Commerce Business
Educational Kids Play
Space Education
Home Repair Volunteer
Fashion Talent
Health and Safety Executive
Play Web Games
Travel and Surfing
Property and Estate Agents
Technology Group Solutions
Student Service Center
Construction Industry
Media Center Computer
Teny Fashion
Home Remodeling Services
Inspector Network
Car Rentals
Leader Dogs
Rise Health Systems
Business Strategy Consultant
Personal Life Coaching
Company Business Coaching
Entertainment News
Physics and Astronomy
Science and Technology
Cheap Vacation Packages
World Business Academy
Planets Project
Travel and Leisure
Prevent Drug Abuse
Education Certified
Play Kids Games
Legal Defense Fund
Real Estate Strategies
Isolation Globale
Insurance Coverage Law
Rock Hotel and Resorts
Medical Insurance
Healthy Mind and Body
Marjahaan Autokatsastus
Free Sports Authority
Auto Insurance Coverage
Global Technics
Advitium Manufacturing
Professional Core Education
Special Finance Services
Bergen County Contractors
Great Children's Art
Health Supply Company
Social Media Power
Texas House Restaurant
Carbon Consultant
Carbon Expert
Low Carbon
Reset Carbon
Healthcare Commissioning
Virtual Job Tryouts
Ethos Academy (Education)
Intrinsic Schools
Attorney General
Technology Software
Business Plans
Digital Media
High School Resources
Adult Resources
Gamblers Anonymous
Ecuador Real Estate
Software Development
Festival Fashion
Drugs And Alcohol
Business Intelligence
Food Network Recipes
Journal Human Resources
Games and Technology
Technology Development
Web Resources Express
Payday Loans Bad Credit
Art and Craft
Business and Finance News
Ecological Sciences
Education Resources
Web Design
Music Education
World Resources Institute
Business Health Guide
azplanningforwildlife.com m2tvchannel.com bapedaldaprovjambi.com kreis-dl.net news-1212.com landratsamt-doebeln.net landkreis-doebeln.net canadiangoldreserves.net chicagohearse.com tattooremovalessex.com braziltrade-uae.com 333asia.com calliemacdesigns.com gemdoc.net simplefoodjuiceplus.com postabortionstresssyndrome.com descendingpath.com casadopinhole.net myspeechandlanguage.net sezambook.com rerecognition.info bebetsy.info carsoncitybraces.info summitcardiology.info sanfojiangsi.info trailheadgeararchery.info immigrationconnect.info nhhomeless.info tundradialogues.info ibexretail.com kreis-dl.com agiles-eam.com bestbcgolfcourse.com niittyneito.com yenikapimevlevihanesi.com hnr100.com eplogin.com richard-wagner-festival.com landratsamt-doebeln.com lra-doebeln.com terrecatalane.com thesmarterhybrids.com