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Bernanke and the CBO – Bad Numbers
The numbers of late have been horrendous. Today a pile of more bad news.
Yesterday we got this from the Fed Minutes:
Participants
generally anticipated that it would take some time for the economy to
converge fully to its longerrun path; most expected the convergence
process to take no more than five to six years.
No more than five or six years? Where did that come from? I thought we
were doing fine.
The long-term aspect of this problem we are facing probably will take us
six years to work through. For the Fed to put this out there was not
done without significant consideration. There were quite a few folks who
were hoping for the turnaround to take hold later this year. Now they
have to wait a half decade. This is not good for confidence. But I give
the Fed an “A” for saying it. It is the most probable outcome. The Fed’s
words were chosen as a warning of QE 2's arrival later this year. Maybe
sooner. What might a six-year slow down look like? We have no clue. All
the long-term projections that are being bandied about today are
assuming a decade of steady growth
Here is the GDP forecast from the Fed. There is no slowdown in this. The
low estimate is 2.8% for far into the future. Bernanke can neither
justify or sell QE 2 with these numbers as a backdrop. The long term
trend would be about 3%. That is maximum sustainable growth without
inflation. Either the Fed's forecast is off the mark, or they have no
excuse for a QE party.
We get the same muck from
the CBO. Here is their numbers:
Soon we will get the annual report from the SS Trust Fund. Their rosy
outlook will also be achieved as result of an economic forecast that has
no chance of being realized.
The Fed has put a long-term low/no growth possibility on the table. They
have done it in effort to support a launch of the QE 2. I would like to
see some economic forecasts from the CBO that reflected the
consequences of a six-year GDP that averaged 1%. The numbers that come
from that analysis for total debt, debt to GDP, State finances, all
private pension funds, Social Security/Medicare and unemployment would
be a big eye opener. It looks like an implosion to me.
If the Fed wants to sell the next round of monetary insanity it will
have to do it with a budget that shows what happens to us if we don’t
grow. Mr. Elmendorf (CBO) and Mr. Goss (SSTF) should do the same. If
you want to scare the populace into accepting another QE then at least
we should get a look at what we are supposed to be afraid of. The bad
news is that if we did see the future under the lens of 1% long-term GDP
growth it would scare us to death. And therefore justify Mr. Bernanke’s
plans.
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Atta boy Bruce! I do not post much but I really enjoy reading your stuff. I consider myself an expert on everything so let me give you a little TV appearance advice - you want to tell the truth, the talking heads want ratings, so next time blast out of your chair with "WTF is wrong with this administration, we are dying down here (james carville) we need to get people back to work and this works!" Give them a rant they will remember...just like Howard Beale. You have a great idea, keep promoting it. You got a few seconds for a soundbite to get your message out, now give em' hell!
print spend , spend print,no more jobs,print spend,who care's anymore.talk,talk.the land of pussy's.it's time to start over.
If the Fed is saying 6 years, I say 8 -10 yrs. You can't believe what they say anyway. 2.8% seems like a stretch. I'm thinking more like 2 or lower for a couple of years. It's bad now and going to get worse. The Fed, Treasury, White House & Congress screwed things up in the worst way. It's going to take a long time to fix.
"Mad Mad Woman"
As opposed to what?
Bruce, if anyone comes out with a dire economic forecast, doesn't that make our beloved President and our bumbling vice president look like liars for telling us how great things are?
Bruce, Nice trick with Wendy. Use the admin's method, only with cash, not tax credits.
Whats going to happen is they are going to devalue the dollar overnight or should i say revalue gold. Think monetary inflation and asset deflation. The gold price will be priced so high your head will spin. Its 1932 all over again except once the stock market bottoms around 8000 you will get a hyperinflation effect to 15000 hence the new taxes next year. They will take any profits. The big guys have all the money and all the gold already. Once gold is revalued they will buy the bridges and highways and charge you the states will then be fine especially after they settle with bond holders for 30 cents on the dollar. Meanwhile the other countries will require oil to be paid with gold backing. What is coming is Argentina circa 1999-2005. We need our producing jobs back from steel to clothes and that includes lower pay and a better exchange rate. We were sold out in the 80's and they took it all. If we don't get some manufacturing back soon say good bye to organized society..........I don't care I'll pay 200 for my sneakers as long as americans are making them.......After the gold revaluation say hello to the chevy volt and our new green econonomy the next bubble......shortages of everything coming
Bruce, you should notice by now the FED has no clue as to what is going to happen to the economy. They will know 6 months after it happens.
The FED's primarily interested is member banks profits, meaning take any teeth out financial reform.
For example;
The bill should have split the banks up between, investment and commercial. Basically, abolish the concept of the FED's Bank Holding Company. We got a consumer provision instead.
Also, the CBO is brain dead when it comes to forecasts. The SS negative surplus projection was originally 2018, when so far it is 2010. Then we have the CBO director coming out with dire statements, but they are not reflected in the numbers (probably should show negative GDP), nor are the numbers modified in real-time.
We will not get to the 5 year mark from today without a sovereign debt crisis given the President's budget for the next 10 years.
Mark Beck
Mark Beck
I have always found your comments to be of very high quality. Sometime ago, someone asked how to be one of the submitters (articles at the top of the ZG page). Cheeky Bastard later responded that he himself did not know the Tylers (etc.) and yet he was able to write some high quality columns.
You sir, should consider the same (writing ZH articles), although I do not know what your main knowledge base is. Your observations are very good, if you specialize in anything, the ZH community would likely benefit from your knowledge.
+ $1209
I don't believe that the FED can just implement QE2 without warming (or shocking) the public into supporting the idea. What signs do we need to watch to know when the fed is about to print? Will there be deflation, war, ???
Right now I see lots of big signs, but they're not visible enough to sway the public. What is it that will happen that changes public opinion?
QE2 is a foregone conclusion. It is also a foregone failure. What's next?
Nothing unless the answer includes stepping away from business as usual. QE2 - 3 - 4 - 36 aren't going to employ anyone other than bond traders.
The first stepping away part must be renouncing the fantasy that the Fed can 'fix' anything. The can fix alright, like a bookie can fix a race ...
Bruce,
I think just showing the projections would not be enough for QE2. They will need leading/coincidence indicators really down plus one or two actual Q GDPs below 1%, or, better, in negative territory. This might take 3-6 months to unfold. And, before election, the threshold for the QE might be especially high. Thus, barring real near-term collapse, I think QE2 will happen after elections.
I wonder if waiting until next year is not too late. If you want to avoid a double dip you have to stimulate before the double dip starts. Once it starts it will be difficult to stop. So I say the Fed moves before the election. We shall see.
Since when does the "populace" have a say in whether or not QE 2 occurs? Did they have a say in QE.v 1.0? No. The answer is that QE is impotent - all it does is kick up some selected asset values, and enrich the direct recipients of the cash. It's like the plutocrats' great idea is to vote themselves some more money, and maybe some will trickle down. Brilliant.
Jobs, wages and wage growth, middle America. This is what will renew us. Big banks: FAIL.
...and little pink houses for you and me.
"I would like to see some economic forecasts from the CBO that reflected the consequences of a six-year GDP that averaged 1%. The numbers that come from that analysis for total debt, debt to GDP, State finances, all private pension funds, Social Security/Medicare and unemployment would be a big eye opener. It looks like an implosion to me."
That's the money quote. There can be no "new normal". A 1% growth rate will not provide the escape velocity to get us past the debt burdens, mal-investment, and over-leverage. The system will collapse on itself in a wave of deflationary defaults. Even a minus number for year 1 or 2 would be sufficient, as the order of returns can have a significant impact.
Personally, I don't think we make it through the end of the year...
Nice call Bruce. It is never easy to read tea leaves of the Fed. Glad you have the talent and the stomach for it.
None of this will surprise the ZH crowd. It will take at least 5-6 years for the real estate to clear, and the carnage to small and regional banks is massive. Where is the money for that bailout going to come from?
What sickens me is that there is no evidence that Ben and fellow travellers have learned anything from two years of costly failure. QE II will almost certainly involve more pushing on a string, more easy money and bonuses for the biggest and most corrupt banks. Am I missing something, or have we seen this movie before, for the last two years, and for 21 years and counting in Japan Inc?
He actually made sure the markets will crash before Q3. Now he said that it will take 5 to 6 years?!
Every company will put a brake on spending and investments!
Bruce, today, have the courage of a warrior; you are the best, the greatest-all capable and all knowing. This but you are everyman, we are all such.
I want you to know this, because you are leading the charge; our charge. And this is war, but a metaphysical one. One where souls are searching, reaching, gathering, wondering, and wanting. It is almost done now; finishing touches coming. Hold the light/Be the light.
"Desire, the fire that ignites the torch to burn
This is not rocket science
This easy to learn
My mic's the gavel
When I talk courts adjourned
Respect, even if you were ashes you couldn't earn
I embody antibiotics
You are infected with germs
Rap's fatally ill, please stick to the serum
Players, pick turns to play, get burned
I color commentate the game like chick perms
This is the moment of truth for my opponents and liars
PHAROAHE MONCH "DESIRE":Talk is alone invoke the emotion of black choirs
Fire, you don't wanna get burned like Rich Pryor
Move back, who's that, there, the live wire
You will feel me
You will admire
(My) Struggle
(My) Hustle
(My) Soul, Desir"
http://www.youtube.com/watch?v=2FoPZ0PZ32w
When will the American People realize that they lie now, and then lie later, to continuously enslave us? Lie, lie, then lie some more.
Bruce,
In what form do you anticipate QE2?
The first step will be a very subtle, but very significant change in the language the Fed uses to describe its monetary policy.
Current:
Interest rates will remain low for an extended period of time.
That is ZIRP. The new supercharged ZIRP language:
Interest rates will remain at current levels for not less than 24 months.
That means money is free if you are a bank. It means you get nothing on your savings for a long time to come. It may inflate stocks. But that will not last.I think it is one of the reasons for the recent bid in stocks. Bernanke has been leaking these thoughts to Jon Hilsenrath at the WSJ.
Ben is going to fill that bunch bowl one more time and we will all get sick drunk on it.
Great stuff.
It seems BenB has himself in a tough spot. He cannot get political cover for QE II unless the economy tanks. This implies a stock market "adjustment" which is against Fed desires. What to do, what to do ....
schu
nothing significant there
fed is talking about balancing budget would take 5-6 years instead of 3 as predicted earlier
Move on
News flash:
Bruce,
Sorry I won't be able to catch you on DR's show this afternoon. Hopefully, a link will be posted here so I can view it later.
Well, 2 possibilities:
1. We are finally seeing some truth in government.
2. It's a quotable moment for the current administration to explain failure.
There could be other reasons for the Fed's comments but I'm not socially, economically, nor politically savvy enough to figure it out.
I do like to rummage in trash cans, however.
Can I rummage around in whatever trashcan you put your gold coins into Rocky? :)
One of your better posts, Bruce. Technically you can't prove that there is NO chance of achieving the projections the SSTF makes, etc., but the point is clear. Thanks for tying the Fed's 5-6 year comment into the budgetary projections.
One of the early lessons I learned in my time in public company-land is always to keep something in reserve--underpromise and overdeliver. Our government needs to do the same.
Because TPTB won't get with that mindset, thus the need for you, ZH and other reality-based parts of the blogosphere.
"The populace" doesn't know what "quantitative easing" means, doesn't know that the Fed has a balance sheet, and could care less what's on it. Much of the blogosphere devoted to economics and finance distrusts the Fed, and will not be persuaded by any projection that it offers to justify its future radical interventions. The Fed is in a lose/lose situation; Benny will be the last chairman of the Federal Reserve as it is presently constituted.
By Populace, they mean the ones that vote. By the onces that vote, they mean baby boomers. By baby boomers they mean the ones who will be getting SS and medicare. This very targeted market will be sold on the need for QE2 to support these entitlements. They will hire wiz kid karl rove and his data banks to focus on these specific targets.
$8 trillion in ten years is even worse.
Are we back to "Hope for change", er, I mean "Hope and change"?
Love the artwork here........literally and figuratively.
Did Evans Pritchard Ambrose or Evan Ambrose Pritcard or...... whatever,...... did it call you for a date yet?
Why the junk? It was only a joke, but do like the artwork and the writing.
+1
LET THE BIG BANKS FAIL, FREE UP CAPITAL TO ALLOW BUSINESSES TO HIRE PRODUCTIVE TAXPAYERS, GIVE THE BANKERS UNEMPLOYMENT BENEFITS OF $300/WEEK AND TELL THEM TO "GET A JOB"!!!
AMEN!
why do we need any banks at all? why not everyone guard thier own money? why not use platinum as money?
http://covert2.wordpress.com
People used to pay banks to safeguard their money for them, and the banks didn't turn around and lend out, or gamble with, 90% of their deposits.
That would drive the price of second hand Ferrari's and Masarati's into the ground. We wouldn't want that!
Already happening as few year old Ferrari 360 are going for less than 50% msrp and modern Maseratis have always been worth less used (50% or less), though now are more worthless (and one of the worst cars you could buy imho for price and total cost of ownership).
sheer madness!
Here's Bruce's clip from the MSNBC interview. Thanks Bruce!
http://www.msnbc.msn.com/id/21134540/vp=37412412�
Thanks for this. It was planned to be 15 minutes. There was a talking skript and I was looking forward to it. I really, really was looking for a shot to say something that might have raised a few eybrows. Not much to work with in 30 seconds.
Maybe next time........
That looked like a Shanghai to me.
Nice interview Bruce, any idea of what's in Ratigan's coffee cup???
Acts like he's about to leave orbit...
Naaw, Bruce, I'm afraid the mainstream media have got wind you are one of those iconoclasts of ZH...They'll never give you 15 minutes.
Never mind, keep the good stuff coming...