Deviant Investor | December 24 2012
Dollar bills glide effortlessly to the ground, dropped from the giant QE machine in the sky. All is quiet, all is calm. There is peace on earth, well, at least in Washington D.C. and on Wall Street. And then with a horrible crash, another Mortgage Backed Security (MBS) explodes and collateral damage spreads far and wide.
Cut to three am in the Big Ben bedroom. A ghost appears amid the sound of Hope and Chains and carries the sleeping Head of The Fed to a land far away. The Head of the Fed wakes to the sound of his own voice saying, “The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” and “we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”
The ghost says, “I am the ghost of QE past. That is what you said. Where has all the prosperity gone?”
And the Head of The Fed says, “I’ll get back to you on that” and promptly falls into a deep sleep dreaming of Keynesian sugarplum trees and simple delusions.