Art Cashin Explains QE2 Using Bernanke As Chief Horticulturalist

Tyler Durden's picture Submitted by Tyler Durden on 10/12/2010 10:40 -0500

Art CashinBen BernankeJapan

Art Cashin is in his element today, using vivid allegorical imagery to explain QE2, assuming there is still anyone confused about why the Fed’s latest all-in attempt will be a total catastrophe, and why the squirrels will be pissed. To wit: “Our friend, Rich Yamarone, over at Bloomberg had a terrific analogy in his column today. Here’s how it began:

Every year as it begins to get cold in the northeast, oak trees drop acorns. The annual bounty helps countless squirrels, chipmunks, rabbits and other rodents endure the bitter winter months.

Let’s say oak trees dropped 1.3 trillion acorns last winter and that an industrious squirrel hunted and gathered far more nuts than he needed. He sought to loan some to others, but the neighboring chipmunks and deer already had plenty. The Nuts, Acorns, and Seeds Administration, surveying the landscape, found the level of acorns unchanged at 1.3 trillion. Worried about another tough winter, it recommends that trees drop another 2 trillion acorns.

That analogy perfectly sums up the Fed’s predicament at this point. They have made an ample amount of funds available but there is little demand for them. That is why many folks see QE 2 as a potential victim of the law of diminishing returns. Does it matter if you push the string with two fingers instead of one?”

And this being Art, here is the required daily bit of historical trivia:

On this day in 1492, Christopher Columbus landed at the Bahamas, believing that he had landed in the islands off Japan. And so history is indebted to a man with a flawed theory who set out on a venture where he didn’t know where he was going, suffered sharp losses on the way and didn’t know where he was when he got there. And he did it all on borrowed money.

But if Columbus had things confused, folklore has really muddled what happened. Back in August of 1492 Columbus had set sail from the port of “Palos de Frontera” on the west coast of Spain with a squadron of three ships to seek the riches of the East.

Error #1 – Columbus headed for a new land. (Actually, he thought he was sailing to China or Japan.) Error #2 – he was a mighty sailor. (In two earlier launches some of the ships he selected leaked so badly they had to rush back to port and were replaced.)
Anyway, as we all know, the advisors to Ferdinand and Isabella warned their collective royalness that Columbus would sail off the edge of the earth. That’s error #3 – actually, they thought Columbus had underestimated the size of the globe and thus would run out of fresh water before he could reach China. Perversely, today’s computers indicate the negative advisors were very accurate while Columbus was off by many thousands of miles. Luckily, the unexpected “New World” and its fresh water stood in the way.

So! You say – “So what! Mr. Smarty Pants!” Even if he was not who he seemed to be, nor was much of a sailor, landed in the wrong place and miscalculated much of the way – the great drama was that he did it – and on borrowed money at that. (Op. Cit. Queen’s necklace fable.)

Well, despite what your version of Sister Herman Joseph told you that’s error #4 – the Queen never hit the hock-shop with the jewels. What had really delayed the trip for nine month’s was greed – Columbus’.

In his employment contract he demanded: 10% of whatever he found, a Knighthood, an Admiral’s title and a Viceroy’s title (both to be hereditary) and 10% of the profits on all naval imports thereafter.

When F and I turned him down, he then tried for the same deal at various palaces around Europe. Finally, an advisor convinced Isabella that actuarially Columbus had a good shot of dying on this or some subsequent voyages, so the Queen signed the deal.

To celebrate make note of some valuable discovery you’ve recently made. Then drop a hefty employment contract on the boss’s desk – but don’t insist on an Admiralcy – you’ll look greedy.

Traders did have a tough time navigating the markets yesterday. And, as hard as they tried they could not find a compass nor a landmark to steer by.

Stay nimble people.

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by Zero Debt
on Tue, 10/12/2010 – 10:44

The answer is QE, what is your question?

Zero Hedge now 2nd rated business blog…with same score as #1 Technorati.

Login or register to post comments by sweet ebony diamond
on Tue, 10/12/2010 – 11:01

Crap analogy by Mr. Yamarone.

It should read “Some of the neighboring chipmunks and deer don’t have enough and they don’t want to borrow and some of the neighboring chipmunks and deer will pig out with no intention of ever paying back”.

“Industrious squirrel will not ever say exactly how many acorns he has even though he is required by law to do so.”

“Industrious squirrel should check his neck.”

Login or register to post comments by FEDbuster
on Tue, 10/12/2010 – 11:10

42 million squirrels (food stamps recipents) are getting acorns on the first of each month, millions more on extended unemployment are getting their acorns each week, states are lining up for their acorns ….  There is plenty demand for “free” acorns, not so much for acorns that need to be paid back. 

Want some inflation?  Send everyone with a social security number a check for $1K, $10K or $100K most will spend it, some will reduce debt and a few may invest it, but it will get into the system.

Login or register to post comments by blunderdog
on Tue, 10/12/2010 – 12:38

Send everyone with a social security number a check for $1K, $10K or $100K most will spend it, some will reduce debt and a few may invest it, but it will get into the system.

How is that inflation?

I thought we call that “economic growth” in this country.

Inflation is bad.  Economic growth is GOOD.

Login or register to post comments by MrVincent
on Tue, 10/12/2010 – 10:54

When will someone at the Fed walk into Bernankes office and step up onto his thrown and slap him in the face? Doing this while saying “Do you realize that what we are doing is just making things worse?”.


Login or register to post comments by idea_hamster
on Tue, 10/12/2010 – 10:54

“Does it matter if you push the string with two fingers instead of one?”

No — it matters which finger you use, and who the recipient of that finger is.

Login or register to post comments by Eureka Springs
on Tue, 10/12/2010 – 10:58

I thought congressional Democrats killed ACORN?


Login or register to post comments by BobWatNorCal
on Tue, 10/12/2010 – 11:11

It’s baaaaaack…..

Login or register to post comments by NOTW777
on Tue, 10/12/2010 – 11:27

you have to repost that after 4ish when all the obama zombies come on to junk things;  might have captured a pic of some of them

Login or register to post comments by NotApplicable
on Tue, 10/12/2010 – 11:03

Well, we’re obviously gonna need some bigger squirrels in order to boost aggregate demand!

Login or register to post comments by 99er
on Tue, 10/12/2010 – 11:05

Squirrel Catapault

Login or register to post comments by the rookie cynic
on Tue, 10/12/2010 – 11:07

“Protect your nuts.”

Login or register to post comments by His Dudeness
on Tue, 10/12/2010 – 11:17

[Bullwinkle is going for a walk in the woods]
Rocky: But Bullwinkle, there aren’t any more woods.
Bullwinkle: You don’t have to tell me, I’m the Chairman for the Frostbite Falls Society of Wildlife Conversation.
Rocky: You mean “wildlife conSERVation.”
Bullwinkle: What’d I say?
Rocky: You said “wildlife conVERSation.”
Bullwinkle: Well, somebody’s gonna have to start talking about these things.


Karen: Boris Badenov. I’ve seen you on TV. You’re a crooked, creepy, no-good rotten worm.
Boris: Oh, thank you.
Karen: You’re slimy, sneaky, sleazy…
Boris: Please. You’ll turn my pretty head.
Karen: You’re a sadistic spy and a really bad person
Boris: Stop. You’re embarrassing me.


Boris: We don’t need computer weapon to kill moose and squirrel. We’ve been trying to kill moose and squirrel for 35 years.
Natasha: And we’ve never even come close.
Boris: Exactly.


Fearless Leader: How many times in the past have they stood between me and my dreams of glory? How many times have they foiled my plans with their bungling interference?
Boris: Er… 28?
Fearless Leader: Quiet, idiot!


[in the White House]
Cappy: Bullwinkle, allow me to be frank.
Bullwinkle: Okay, Frank. Allow me to be Bullwinkle.
Cappy: [putting out hand] I’m Cappy Von Trapment, FBI.
Bullwinkle: I thought you said your name was Frank.
Bullwinkle: Okay, Frank.

Login or register to post comments by TradingJoe
on Tue, 10/12/2010 – 11:21

Shoot the Suckers, FED’s that is!

Login or register to post comments by packman
on Tue, 10/12/2010 – 11:35

Hmm – seems to me there’s one squirrel that’s actually consuming nuts – and thus needs re-supply – at a furious pace, is there not?


And since when did banks actually have to lend the money they receive?  Are they not instead using it to buy stuff (i.e. speculate) – like commodity futures for instance?  Thus the price of these going through the roof currently?

Login or register to post comments by cougar_w
on Tue, 10/12/2010 – 12:12

QE2 will happen because of the elections, not because it will aid the economy.

It will accomplish nothing other than ensure some key Democrats retain their seats. That alone is sufficient reason for QE2.

There is nothing that will aid this economy. This economy has been a swindle for years and the new money isn’t holding up the old money. Everyone knows this. The ones still playing are just making an extra buck on the churn while they can, before the wheels come off.

The danger in propping all this up via QE1/2 and all the bailouts is that when it drops, it will drop like a stone. This is of no concern to anyone living in the top 2% of the wealth tree. The rest of us however will have the fight of our lives.

I give it 9 more months. Q2-11 will likely close out on the threshold of a creeping, incipient nightmare.


Login or register to post comments by Djirk
on Tue, 10/12/2010 – 14:23

Krusty the Klown (Bernanke) should listen to this Peter Sellers clip which pretty muchs sums up the current situation and the effectiveness of adding more stimulus.

“We are upset by the seasons of our economy”

Login or register to post comments by tip e. canoe
on Tue, 10/12/2010 – 14:48

bundle up kiddees, it’s starting to get a bit nippy out there.

just remember there will be growth in spring.

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