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Bernanke’s Losing Control Again

Phoenix Capital Research's picture




 

Bernanke has
a real problem on his hands. QE 2 spent $600 billion and got him at best a few
months’ worth of upticks in well-massaged economic data. In the process it blew
up food and energy prices and made the Fed look even stupider than usual (Bill
Dudley’s iPad comment comes to mind).

 

However, the
US economy clearly took a nosedive starting in February of this year and we now
have a confirmed double dip in housing. So Bernanke’s little brain is whirring
with the prospect of printing even more money because… well, that’s all he
does.

 

So, what can
he do? He can’t just go and announced QE 3 without risking his own neck… but at
the same time, he can’t just have stocks crater overnight by turning the
printer off.

 

Solution: he
continues to funnel money into Wall Street via less publicly offensive policies
such as QE lite (see the story below):

 

While the $600 billion purchase
program, known as QE2, winds down, the Fed said June 22 that it will continue
to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as
$300 billion of government debt over the next 12 months without adding money to
the financial system.

 

http://www.bloomberg.com/news/2011-06-27/fed-seen-buying-25-billion-a-month-in-treasuries-after-qe2-comes-to-end.html

 

The only
question is whether this will be enough juice for the markets until the
inevitable QE 3 or some such additional liquidity measure is announced (Bill
Gross has hinted it will be unveiled at the Fed’s August FOMC).

 

The Fed a
similar stunt in 2010 when QE 1 ended. However, at that time the game consisted
of pumping the system during options expiration weeks to the tune of $20-30
billion tops. This time around, the Fed could be funneling as much as $300
BILLION… and somehow the Fed’s in control of things?

 

I’ve said it
before and I will say it again: Bernake is slowly losing control of the system.
In 2007, he was putting $30 billion into the system here and there. In
2008-2010, he upped the ante to $50 billion PER MONTH. QE 2 pushed the amount
up to $100 Billion per month. And here he is, hinting at giving ANOTHER $300
BILLION when QE 2 ends!?!?

 

Folks, there
is a name for a financial game that requires larger and larger sums of money to
continue. It’s called a Ponzi Scheme and the longer it lasts the more
disastrous the collapse will be.

 

So if you’ve
not taken steps to prepare for the coming Crisis, you can download my FREE
report devoted to showing in painstaking detail how to protect yourself and
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Good
Investing!

 

Graham
Summers

 

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Thu, 06/30/2011 - 09:33 | 1415174 PulauHantu29
PulauHantu29's picture

The Bernank has to pump in enough to avoid civil unrest in our country. The point is to limit the mega bonuses on Wall Street which are disproportionate to the other 99% of the nation. Obviously, some of the public pension benefits are also outrageous and have to be trimmed to reality.

Thu, 06/30/2011 - 08:32 | 1414954 dmger14
dmger14's picture

This article isn't completely accurate.  That $300 billion is over one year.  the $30 or $50 billion were per month.  I agree with the conclusion 100%, but QE lite equates to less than $30 billion per month.  It will be the stealth QE3, or policy of targeting interest rates with a blank check that is the "larger and larger" meat of the ponzi scheme.

Thu, 06/30/2011 - 06:26 | 1414806 DavidC
DavidC's picture

OK, I'm confused.

The article states;
1 - "...purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system".
2 - "...in 2010...the game consisted of pumping the system...during expiration weeks to the tune of $20-30 billion".
3 - "...In 2007...$30 billion into the system here and there. In 2008-2010...$50 billion PER MONTH. QE 2 ...$100 Billion per month. And here he is, hinting at giving ANOTHER $300 BILLION when QE 2 ends!?!?"

So, which is it? $300bn per month or $300bn over the next 12 months? Mixing the occasional, weekly and monthly figures like that is misleading.

$30bn per week is the equivalent of $1,560bn per year.
$50bn per month is the equivalent of $600bn per year.
$100bn per month is $1,200bn per year.

$300bn per month is $3,600bn per year.
$300bn per year is $25bn per month/$5.8bn per week.

I'm not arguing the size of the problem, merely the misleading nature of the figures presented. And, as Species8472 states above, the 300B is not new money, it just maintains the size of the Feds balance sheet.

DavidC

Thu, 06/30/2011 - 08:33 | 1414958 dmger14
dmger14's picture

You beat me to it!

Thu, 06/30/2011 - 08:33 | 1414957 dmger14
dmger14's picture

You beat me to it!

Thu, 06/30/2011 - 01:42 | 1414624 tony bonn
tony bonn's picture

"He can’t just go and announced QE 3 without risking his own neck… but at the same time, he can’t just have stocks crater overnight by turning the printer off."

and that's precisely the problem....why can't he let stocks crater? there is absolutely no good reason why he can't do so except for the hypnotic assertion that he can't do so....the sooner he allows it the sooner recovery commences....

Wed, 06/29/2011 - 23:24 | 1414434 RichyRoo
RichyRoo's picture

Just to clarify, The Bernank isnt saying he is going to pump 300bn immediately, this is just a continuation of QE Lite. Thats 300bn over 12 months, 25bn per month. But as reported on ZH, prepayments are trickling to a stop and a lot of those MBS will go to 0, so its likely less than 25bn per month.

Still a nice chunk of change, but not quite the exponential increase on QE2 the author claims. Also the shilling for his newsletter is annoying.

Wed, 06/29/2011 - 23:07 | 1414410 zorba THE GREEK
zorba THE GREEK's picture

 If you are waiting for and/or betting on all this s**t to explode and bring down the

 house of cards, don't hold your breath or hedge your bets to a point where you can

 lose it all on a margin call. Any problem that arrises that could upset the world

 Ponzi sceme, will be met with printed money, whether it be dollars, Euros, Yen

 or yuan, world leaders will keep this farce going for a long time. Who is going to

 blow the whistle on this scam? All the major players have too much to lose and

 will extend and pretend for as long as they can. Put yourself in the world leaders

 place. You have almost unlimited power. You have the ability to print money at

 will. There is a major financial crisis which could cause you to be voted out of

 office. What would you do? Case closed. When does it stop? Probably not until

 long after it should and only when hyperinflation renders all fiat currencies

 worthless. Then and only then will we go back to a gold backed currency.

 

 

 

 

Wed, 06/29/2011 - 23:26 | 1414445 Poor Grogman
Poor Grogman's picture

They can't even keep the ALGO's under control.

They are juggling too many balls at the same time.

And trying to take on still more.

Such is the curse of the terminal stages of central planning.

Drop just one ball and poof, the whole lot could go with surprising speed.

USSR anyone?

 

Wed, 06/29/2011 - 23:03 | 1414377 SirIssacNewton
SirIssacNewton's picture

With the Fed rolling over its treasuries and other balance sheet securities as they mature, that only brings in approximately $30 billion a month over 12 months.  The minimum nut per month the government needs to keep everything pumped up is over $100 billion per month to fund the deficit (does not include any repayment of the exisiting debt).  Each month Timmy will needs to find $70 billion from any sucker willing to believe in "Hope and Change" when the debt ceiling is raised.  This gets real interesting when they raise the ceiling (which they will to keep their gravy train rolling a little while longer) to see exactly who will be buying these farcical pieces of paper.  You can almost smell the bacon frying....

Wed, 06/29/2011 - 22:52 | 1414371 Coldfire
Coldfire's picture

Central "planning" in finance is working out so well.

Wed, 06/29/2011 - 22:48 | 1414370 Poor Grogman
Poor Grogman's picture

What about a new political party caled the PPP (Pro Ponzi Party)

I reckon they will get lots of votes once the welfare cheques start to bounce.

Fun in ponzi land for everyone.

Every vote would get a complimentary FRN

No more political donations ever again.

I just cant see any downside....

Wed, 06/29/2011 - 22:26 | 1414342 Species8472
Species8472's picture

The 300B is not new money, it just maintains the size of the Feds balance sheet.

 

Wed, 06/29/2011 - 22:42 | 1414360 billwilson
billwilson's picture

Exactly. The Treasury will still be issuing a net $125 billion a month of new debt. The Fed will just make sure that it isn't $150 billion a month.

Thu, 06/30/2011 - 09:02 | 1414303 ebworthen
ebworthen's picture

 

Ben, Ben

You've bent your pen.

You've printed too much money now, and then.

Keynesian sixes, thirty-to-one,

Roll those dice, no harm done.

No harm to banksters bottom line,

No harm to politicians corpses lime.

Pop the champagne and pass the dice,

Generations savings skate loaded dice,

"To hell with retiree's" say you slavers,

"We must save our masters, and milk the savers."

 

Wed, 06/29/2011 - 21:59 | 1414293 I am Jobe
I am Jobe's picture

Summers Joins Andreessen VC Firm as Adviser

 

 

http://www.bloomberg.com/news/2011-06-29/lawrence-summers-joins-andreess...

Thu, 06/30/2011 - 08:46 | 1414985 narapoiddyslexia
narapoiddyslexia's picture

The banks have captured the regulators. Listen to Rickards here -

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/25_Jim_Rickards.html

Wed, 06/29/2011 - 22:02 | 1414291 I am Jobe
I am Jobe's picture

Time to fuck the systems since the system has fucked all of us. Screw the FEDS

Thu, 06/30/2011 - 00:26 | 1414541 medicalstudent
medicalstudent's picture

the price we pay for system continuity is an expanding police state.

 

z backscatter vans soon to be on a road near you.

 

take this fucker down already!

Wed, 06/29/2011 - 21:57 | 1414286 mayhem_korner
mayhem_korner's picture

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

Not a bad yield for recycling one's feces as fertilizer...

Wed, 06/29/2011 - 21:37 | 1414228 spanish inquisition
spanish inquisition's picture

One of the main things I have thought Ben is doing (in addition to the ramp job) is keeping the Yen, Dollar and Euro range bound. Up until now, he has been able to direct two to adjust the third. Now all 3 are printing at once and I would say it is going to get more volitile out there in FX land.

Wed, 06/29/2011 - 21:32 | 1414216 Traianus Augustus
Traianus Augustus's picture

1. All fed policies are offensive.

2. Since they are making the money out of thin air, what does it matter if 30 million or 300 million or 3 trillion is used to prop up the market? 

As the people of Greece are finding out about now...protest all you want, the bankers/pols couldn't give a shit.  They need to be held accountable in all ways possible.

Wed, 06/29/2011 - 22:40 | 1414213 cranky-old-geezer
cranky-old-geezer's picture

Losing control?

Not hardly.  Things are going as planned.

You just have to understand the plan.  The real plan, to steal all of America's wealth the easy way, via currency printing and debasement.

Contrary to popular belief, Bernokio wants to print and print and print till the dollar is worthless.  The more he prints, the happier he is. The more he debases the dollar, the happier he is.

He just needs reasons to print.  Legit sounding reasons.  Like keeping the government going.  Like re-capitalizing important banks.   Like re-capitalizing important foreign banks too.  Like pumping up the stock market.

Also contrary to popular belief, Bernokio doesn't care about the two so-called "Fed mandates", stable prices and full employment.  He couldn't care less about either one. He doesn't care about the economy period.

His job is print money and debase the dollar to nothing.  

Why?  Because that's how he steals all the wealth in America and gives it to his banker masters, his true mandate, his real job.

And he's doing quite well.  Better than any previous Fed chairman.  He's printing far more currency and giving it to his banker cronies than any previous Fed chairman.  He's stealing far more wealth fron the American people and giving it to his banker masters than ANY previous Fed chairman.

It's possible the dollar may collapse to zero during Bernokio's watch, the Fed's ultimate goal. Bernokio might well be enshrined in the banker hall of fame.

And you stupid sheeple out there leaving your wealth in dollars or dollar-based assets DESERVE having it all stolen from you.

It's not Bernokio's fault, it's YOUR fault you stupid dumbasses.

And NO, it's NOT government's job to protect you from your own fucking STUPIDITY.

Yes, what Bernokio's doing is unconstitutional.

So what?  It's the way it is.  It's REALITY. 

Accept REALITY folks.  Live in the REAL world.  

Forget the constitution.  It's DEAD.  GONE.

America is run by banker criminals now.  Pirates.  Looting everything they can any way they can.  That's reality.

You can whine and bitch about it or you can protect your wealth from being looted and stolen.  It's your choice.

Thu, 06/30/2011 - 09:41 | 1415181 Kayman
Kayman's picture

cranky-old-geezer

Bernanke and his masters cannot be all that smart, for without the host, the parasites are dead.

Thu, 06/30/2011 - 01:54 | 1414632 Hook Line and S...
Hook Line and Sphincter's picture

The geez gets it! I owe you my orthopaedic shoes and walker next time we hook up.

Wed, 06/29/2011 - 23:54 | 1414496 mr. mirbach
mr. mirbach's picture

Agenda 21!

Wed, 06/29/2011 - 23:16 | 1414412 Hacked Economy
Hacked Economy's picture

@ Cranky,

Well, you certainly have a COF (Cranky Old Fart) way of putting things that isn't really what I would say, but you did throw out a few nuggets of truth:

***************

"...you stupid sheeple out there leaving your wealth in dollars or dollar-based assets DESERVE having it all stolen from you."

Don't leave your money in their hands, plain and simple.  Sure, we all need to have SOME skin in the game and maintain a bank account for everyday living, but make it minimal.  I have my paycheck direct-deposited into my bank so that I can qualify for the "free" checking, but every week I stop by the 'ol ATM and yank out nearly all the money in cash so it's then in my hands.  Plus...paying in cash at your gas station or grocery store is nice and anonymous.

 

"...it's NOT government's job to protect you from your own f**king STUPIDITY."

The government's only job is to protect our borders from illegal entry (federal) or the public from criminals (local).  Stupid people are on their own and should suffer the consequences of their own actions.

"Yes, what Bernokio's doing is unconstitutional."

Yup.

"Accept REALITY folks.  Live in the REAL world."

Get out of your dreamland of cookies and freebies.

"America is run by banker criminals now.  Pirates.  Looting everything they can any way they can.  That's reality."

True.  Next big thing on YouTube will be mob looting by bankers in suits.

"You can whine and bitch about it or you can protect your wealth from being looted and stolen.  It's your choice."

Exactly.  Keep as much money out of the banks and in your own hands as cash or PMs.  Stop buying worthless crap and BY ALL MEANS stop buying stuff on credit loans whenever possible.  Accept reality and use banks if necessary, but only as necessary, and only at a minimum.

.

Thu, 06/30/2011 - 08:00 | 1414915 Cthonic
Cthonic's picture

"...it's NOT government's job to protect you from your own f**king STUPIDITY."

The government's only job is to protect ... the public from criminals (local). 

 

You might wish to look into Deshaney vs. Winnebago County and Warren vs. District of Columbia.

Thu, 06/30/2011 - 08:33 | 1414955 narapoiddyslexia
narapoiddyslexia's picture

More specifically, from Deshaney, ". . . nothing in the language of the Due Process Clause itself requires the State to protect the life, liberty, and property of its citizens against invasion by private actors. The Clause is phrased as a limitation on the State's power to act, not as a guarantee of certain minimal levels of safety and security. It forbids the State itself to deprive individuals of life, liberty, or property without “due process of law,” but its language cannot fairly be extended to impose an affirmative obligation on the State to ensure that those interests do not come to harm through other means. Nor does history support such an expansive reading of the constitutional text. Like its counterpart in the Fifth Amendment, the Due Process Clause of the Fourteenth Amendment was intended to prevent government “from abusing [its] power, or employing it as an instrument of oppression,” . . .  and “to prevent governmental power from being ‘used for purposes of oppression’ ”. . .  Its purpose was to protect the people from the State, not to ensure that the State protected them from each other. The Framers were content to leave the extent of governmental obligation in the latter area to the democratic political processes.

Wed, 06/29/2011 - 23:02 | 1414381 Coldfire
Coldfire's picture

Stark, but true.

Wed, 06/29/2011 - 21:17 | 1414176 Herbert_guthrie
Herbert_guthrie's picture

Losing control, not quite.

Actually gaining more control through the "debt for assets program."

Bernanke's boss could not be more pleased.

Thu, 06/30/2011 - 00:25 | 1414538 medicalstudent
medicalstudent's picture

thought it was the "fake free stuff for real valuable stuff" program.

 

they changed the name?

Wed, 06/29/2011 - 21:11 | 1414159 HungrySeagull
HungrySeagull's picture

Investing is becoming a bad word around here.

Wed, 06/29/2011 - 21:44 | 1414251 Freddie
Freddie's picture

How can you "invest" when everything is totally rigged and totally corrupt like the old USSR.  I ask you Hope & Change comrade?  

 

The money could become worthless any day and it is devaluing faster than ever.   "Oh this stock has good valuation..."

Wed, 06/29/2011 - 21:09 | 1414154 rlouis
rlouis's picture

There are two points which cannot be stressed enough: first, it seems certain that we shall not stop the drift toward more and more state control unless we stop the inflationary trend; and, second, any continued rise in prices is dangerous because, once we begin to rely on its stimulating effect, we shall be committed to a course that will leave us no choice but that between more inflation, on the one hand,  and paying for our mistake  by a recession or depression, on the other. Even a very moderate degree of inflation is dangerous because it ties the hands of those responsible for policy by creating a situation in which, every time a problem arises, a little more inflation seems the only easy way out.

pg 109 - A TigerBy The Tail (compilation of FA von Hayek)

Wed, 06/29/2011 - 20:59 | 1414136 optimator
optimator's picture

Binny, remember, If you don't succeed at first - STOP!  Why make a fool out of yourself twice in a row.  Or should I say, thrice!  In actuality WE are the fools for letting him drain our wealth through inflationary printing.

Wed, 06/29/2011 - 20:54 | 1414122 Hugh G Rection
Hugh G Rection's picture

QE is losing its luster.  Time to roll out the choppers!

 

Ben looks good in makeup

http://www.youtube.com/watch?v=fvCQ8XgfMvM

Thu, 06/30/2011 - 09:54 | 1415264 Professor CSI
Professor CSI's picture

Rickards had said the Fed has enough for 750 billion reinvestment back in March.  I ran the numbers and with really aggressive MBS paydowns I was only abel to get to 514 billion.

Without MBS paydowns (fed schedule says there will be 0 within 1 year), as of June 23, in one year the fed will have around 169 billion from just maturing T's, loans, and agencies to reinvest.  That's 15.7 billion a month.

Even $300 Billion over a year is only 25 Billion a month.  That won't hold up to previous floods of 50 & 100 billion a month.  Like an addict we need more than last time to keep up the high.  It's just cover to keep people in the market.

Thu, 06/30/2011 - 02:47 | 1414681 hannah
hannah's picture

qe1 /1.5 /2 have been one of the biggest success stories in financial history. trillions have been moved to the pockets of the rich ruling class. i just dont see hw anyone can say ben was a failure....he didnt fail the rich bosses.....

Wed, 06/29/2011 - 23:07 | 1414401 Spaceman Spiff
Spaceman Spiff's picture

Bernankalypse Now!

Do NOT follow this link or you will be banned from the site!