Santelli was speaking to a Nobel prize-winning economist here.
The whole conversation pretty much sums up the difference between the theoretical and the actual.
Of course Fama is technically correct when he says tapering is a non issue, there is 1 trillion on one side the balance sheet and there is 1 trillion on the other side.
When you unwind they cancel each other out, no problem.
And everyone knows Eugene Fama is 100% correct, he simply can not be argued with. At least technically.
And this is what Eugene Fama does not or can not understand.
That fact of the matter is that the figures on the Fed’s balance sheet are nonsense.
The valuations of the assets are complete and utter fantasy, there is no way the Fed’s assets are worth anywhere near what they claim they are worth.
So really what you have is one side of the balance sheet which says 1 trillion dollars in assets and the other side says 1 trillion dollars printed.
The problem is the assets are actually worth much less and this is why it is impossible for the genie to be put back in the bottle. Or for the Fed to taper to phrase it in the same way as the Ben Bernank.
I realise what I am saying here is extremely basic stuff but seeing as a Noble prize winning economist doesn’t grasp it I thought I would put it out there!