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Ben Lied
Over the years a good number of speeches by our leaders have been marked by history. Abe said, “Four score…”, Jack said, Ask not…”, George said, “Mission accomplished…” I
think we got more of those memorable worlds today from Bernanke. His
comments will be remembered like George’s. They will stick in our minds and
thoughts for decades. And like George’s words, history will prove them
to be a lie. Ben’s lies will cost us trillions, and quite possibly our
way of life. His lie:
I am confident
that the FOMC will be able to tighten monetary conditions when
warranted, even if the balance sheet remains considerably larger than
normal at that time.
How could he possibly be “confident” that this can be done? It has never
been done before. No sane man can make such a promise when there is no
history to guide us. Bernanke is sane, therefore I conclude that he is
lying to us on this critical fact.
What economic environment would exist when “conditions warrant
tightening”? That’s simple to forecast. If inflation goes above 4% in
any 12 month period or averages above 3% in 24 months they would have to
tighten. Bernanke thinks he can sell a few trillion in Bonds in that
environment? Not a chance in hell. If the Fed said, “From now on we will be selling 100b a month”
the bond market would fold. Long-term interest rates would pass 5% in
months. 6% mortgages and competition for credit from the private sector
would collapse the economy.
Bernanke is an academic who studied the Great Depression. He has never
sat on a bond desk. He has no idea what it is like when the holders of
your paper say, “No mas”. He thinks that because there is an
insatiable demand for fixed income today the same conditions will exist
when tightening is required. He says he is confident of that. Not
possible.
For me the Grand Experiment of QE rests on the issue, “Can we get out this?”
If that is in doubt (as I strongly believe) then the policy can only be
viewed as a reckless gamble. Before Bernanke pulls the trigger he needs
to convince me and many others that his confidence is justified.
I want to hear some thoughts from others on this issue. I want to hear
from Brian Sack at the NY Fed. It is he who will have to execute what
Bernanke is so confident about. He would never soft sell that risk. He
knows full well that it can’t be done without the possibility of a
spectacular blowup. He would never use the word “confident”.
I want to hear from the primary dealers and the likes of PIMCO. Put them
on a stand in D.C. and ask if they are confident that this can be
accomplished. Not one would. Get some former Treasury Secretaries to
opine. I would like to hear from Greenspan. NO ONE would say they are
confident on the outcome. I want to see just one credible source chime
in with Bernanke on this. Just one.
Bernanke put his reputation on the line with his “confident” remark. How can anyone be so certain about an uncertain future?
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We are all confident they can expand the money supply and on that side, no question they can expand indefinitely.
No how Ben B has confidence in tightening...that is a mystery (or more truthfully as you say, an utter, unabashed LIE).
@Bruce,
What's the Fed's burn rate towards the Federal Debt ceiling? What happens if Congress has lots of new critters who refuse to raise the debt ceiling? The debt ceiling puts a cap on what Treasury can sell to the Fed, correct? What happens if Ben throws out a number on Nov. 3rd that takes the Treasury past the limit?
I'm guessing at that point they'll just move into other vehicles to expand their balance sheet, such as other bonds (I'm sure most states would love the fed to buy their junk bonds) or securitized instruments (like the 1.2 trillion in MBS already on their books). Long dated, of course, wouldn't want the feces to see the light of day anytime soon.
YEAH, from a practical point of view, Bernanke serves at the President's pleasure, and must testify in front of Congress, but as long as the stock market is going higher - and let met me ask you this, suppose Bush had succeeded in handing Social Security over the stock market, there's your COLA for the year- but aside from the political expediency, there is also the Prechter-esque idea that the FED merely follows the market which implies- the credit market is in a deflationary spiral, and the FED is following it- can you say Deflation Target? Sure you can
I tend to believe the BP view of things, and I would believe the former when I see it, and my idea for the 2012 Presidential campaign bumper sticker is Bernanke/Obama 2012 "Get Thee Behind Me Satan.."
Love the bumper sticker, but I'd like to see a social security fund invested in something rather than nothing. The trust fund is a complete fraud. The money is spent as soon as it comes in. The real deficit this year is:
30 Billion admitted + 120 Billion (bogus accounting trick)= 150 Billion
Come on now. I just called my Congressman and he assured me that there is $14,613,994,876,225 sitting in a bank account used solely for Social Security payments. Thank God we didn't do something risky with it.
"Thank God we didn't do something risky with it."
Heh. Yeah, like store it in dollars. Oh, wait...
the money is in Al Gore's lock box.
(Gore being just another corrupt politician, who took money from the Buddhists. They thought they could buy World Peace or something. Thank goodness the right guy won that election. It's been all roses since)
Yeah, it doesn't really matter whether Al or George was watching the lock box, does it?
What do say about a lockbox minus the lock and minus the box?
Colonel Cooper, in the Congressman's office, with a shotgun.
Did I win?
Dick Cheney, with the shotgun, in his personal security closet.
> "Dick Cheney, with the shotgun, in his personal security closet."
Bernanke, with Bubba, in a prison cell.
Bubba says to Bernanke,"we'z gonna play us a little game of house, who do yous wants to be the husband or da wife?". Ben is to smart so he quickly says," I'll be the husband." To which Bubba slowly replies,"Good, now why don't you come on over here and suck you wife's dick." LOL
LOL
Surprise.
The Dick Cheney "accidental shooting" was much more severe than we were told at the time. Of course, it was hushed up and buried for 5 years. Mission accomplished.
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/13/AR2010101307173.html?sid=ST2010101307297
Heh Heh, A little incentive for a bigger contribution.
Go fish!
I never agree with anything Leo says, but in this case he is half right. They can do whatever they want without answering to anyone. Bernanke is truly unaccountable to anyone except the banks and they like what he is doing.
Leo is wrong if he is saying they can get the results they want. But then again, the means is the end to the banks. They want the money, the more the better. Everything else is someone else's problem. Isn't that what Congress is for, they say.
It's a done deal.
leo is right in the immediate, but bruce has a much better view of the long-term - and you can make both bets work for you.
i believe doing "whatever they want" *will* come back to haunt them/us - it's just so friggin hard to comprehend a system this big that moves this slowly. i'm too ADD to act rationally on it, but my gut has no doubt that trouble lies ahead.
They can certainly do whatever they want. They can also control the outcome ALMOST all the time. But that one time, the outcome is out of their control, look out below.. SHTF
ZH'rs vindicated..
Says it all perfectly.
judging by this weeks' treasury auctions and the activity this morning in the bond markets, his confidence would appear to be ... misplaced.
They lost control of the situatuation quite a while ago. Early 2009.
Exactly
And once the government is "IN" a new market to save it... they can NEVER leave or it will collapse. Imagine ending corn subsidies? HA!