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David's Macro Blog

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Tag: Goldman Sachs

If you ever wondered about Quantitative Easing, how it works, and how it affects us, just watch this 7-minute video: Quantitative Easing Explained in under 7 minutes in a way anyone can understand.

My favorite quotes:

“Why do they call it quantitative easing, why don’t they just call it printing money?”
“Because printing money is the last refuge of failed economic empires and Banana Republics, and the Fed doesn’t want to admit this is their only idea.”

“Because they say we have the deflation and the deflation is very bad.”
“What is the deflation?”
“The deflation is when prices of the things we buy go down.”
“Isn’t that good. Doesn’t it mean people can buy more of the stuff?”
“Yes, but the Fed said this is bad!”

“The only thing that I can see that is deflating is the Fed’s credibility.”
“Did they have a lot of credibility to start with?”
“No…”
“Because the Fed has been wrong about every major economic development in the past 20 years.”

“So the Goldman Sachs can front run the Fed and give them the worst possible price on the Treasury Bonds?”
“Yes!”

Humor only works when there is truth embedded within it.  This works because while it is humorous, the truth is evident.

“You want the truth? You can’t handle the truth. Son, we live in a country with an investment gap. And that gap needs to be filled by men with money. Who’s gonna do it? You? You, Middle Class Consumer? Goldman Sachs has a greater responsibility than you can possibly fathom. You weep for Lehman and you curse derivatives. You have that luxury. You have the luxury of not knowing what we know: that Lehman’s death, while tragic, probably saved the financial system. And that Goldman’s existence, while grotesque and incomprehensible to you, saves pension funds. You don’t want the truth. Because deep down, in places you don’t talk about at parties, you want us to fill that investment gap. You need us to fill that gap.

We use words like credit default swaps, collateralized debt obligation, and securitization? We use these words as the backbone of a life spent investing in something. You use ’em as a punchline. We have neither the time nor the inclination to explain ourselves to a commoner who rises and sleeps under the blanket of the very credit we provide, and then questions the manner in which we provide it! We’d rather you just said thank you and paid your taxes on time. Otherwise, we suggest you get an account and start trading. Either way, we don’t give a damn what you think you’re entitled to!”

Source: StatsGuy – Baseline Scenario.