Thus far we've had QE1, QE2, Operation Twist, LTRO1, LTRO2, and a number of other smaller liquidity injections to literally save the day, and, by extension, prop the markets. Yet, the debt moles keep popping and, as the game progresses, the moles will start to pop at a faster rate, while the player - read Fed and ECB - can't strike all the exposed moles, leading to the eventual and dreadful "Game Over" message. To inject some humor into the subject, I shall point out that Inventor Tim Hunkin created "Whack a Banker."
But that is where the entertainment ends, and the macro question begins: "What has been fixed?" While the expanded Fed balance sheet has not stimulated lending and growth only because there are no takers, The Wall Street Journal pointed out the largely ignored fact that the solid foundation created by the LTROs is cracking again.
The ECB's two LTROs were supposed to provide enough liquidity to the European banking sector for three years. Yet in less than four months the pot of funding pressure is beginning to boil again.
Then the IMF, an organization that was largely unknown to most people until the world started to financially sink, provided an eye opening statement, according to Bloomberg.
European banks could be forced to sell as much as $3.8 trillion in assets through 2013 and curb lending if governments fall short of their pledges to stem the sovereign debt crisis or face a shock their firewall can't contain, the International Monetary Fund said.
To put the $3.8 trillion in perspective, that is $500 billion more than Germany's GDP, almost three times the size of the Spanish economy, and close to 30% of the eurozone's GDP. And where are the buyers for the assets?
Meanwhile we're exposed to eloquent speeches by a variety of experts and bureaucrats, and endure the presentation of esoteric schemes, and less than plausible logic, on how the financial ailments are contained and will be solved. Yet, and resorting to the simplicity of first grade arithmetic, the numbers don't add up.
Last week I read the statements of several Federal Reserve members, and while Janet Yellen and William Dudley appeared to leave the door open for additional Fed intervention, one article by Reuters summarized the conflicting messages.
However, that message was not unanimous. While Yellen defended the Fed's guidance that it would likely leave rates near zero until late 2014, Philadelphia Fed President Charles Plosser on Thursday said the central bank should move away from the approach of suggesting a specific calendar date for the start of rate hikes.
Fed Gov. Sarah Bloom Raskin also added her two cents by pointing out that "the national economic recovery 'clearly has a long way to go,'" as reported by MarketWatch. In addition, Ben Bernanke skipped any hint of further easing, as reported by the Reuters article "Fed's Bernanke does not comment on economy, policy." In short, and considering the amount of time spent at this game, they don't have a clue as to whether their policies have helped at all, while still portraying a sense of being in charge of something.
Thus, the stock market continues to look for hints of additional money printing, be it from the Fed or ECB, because corporate earnings have been less than stellar. According to Standard & Poor's, the S&P 500 (SPY) "operating earnings" and "as reported earnings" for the fourth quarter of 2011 saw a decrease from the previous quarter, even with Apple in the mix. But at some point the market must operate the bike without training wheels.
But let's go back to Europe, where Jens Weidmann, an European Central Bank policymaker and head of the Bundesbank, does not feel that Spain's problems are the responsibility of the ECB, according to Reuters.
In a wide-ranging interview, Weidmann, who turns 44 on Friday, also said he saw no reason to discuss a third LTRO, the funding instrument with which the ECB has pumped over 1 trillion euros into financial markets since late last year.
But maybe if there's another mole in need of a good "Whac" he'll change his mind, and The Telegraph provided us with yet another euro member that has been out of sight and safely tucked in his burrow thus far.
The warning comes as Dutch property tips into a deeper slump, with the inventory of unsold homes nearing South European levels. Household debt is the eurozone's highest at 249% of income, compared with 202% in Ireland, 149% in the U.K., 124% in Spain, 90% in Germany, 78% in France and 66% in Italy - according to Eurostat data from 2010.
The Netherlands is caught in a "negative feedback-loop" as recession and house price falls feed on each other. Building permits have dropped 9% from a year ago, the lowest since 1953. "The housing market is in a coma," said the Volkskrant newspaper.
Sometimes one does not know whether to laugh or cry, but humor does indeed lift the spirit. In August of last year, holier-than-thou Dutch Finance Minister Jan Kees de Jager stated that "the troubled countries in the eurozone should give priority to implementing structural reforms and making their debt sustainable," according to WSJ. Is Holland one of them? Then in November, Dutch central bank President Klaas Knot showed his firmness, according to Reuters.
"We have gone pretty far in what we can do but there is not much more that can be expected from us," Knot told the Dutch parliament. "It is now up to the governments ... to make sure the doubts about sustainability, about repayment of individual government debt are removed as quickly as possible."
And now here we are, holding tulips for sale like it was 1637. Considering the global financial state of affairs, the expectation that everything will fall apart in short order is logically correct, but one cannot underestimate the willingness of the central banks to provide plenty of overtime so the game will last well beyond regulation. And the markets' addiction to any monetary easing of any kind will continue until there's no more to be had. Ultimately, and especially in Europe, plenty of banks will have to be nationalized and stockholders along with bondholders will be saddled with losses, and in five years will be here talking about the same thing.