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Bernanke Claims That Contrary To Consensus, He Is Not Spawn Of Satan, Deflects Fed Blame To China

Tyler Durden's picture





 

Futures are currently experiencing a stunning moment of weakness, something not seen unless the entire Liberty 33 trading crew is at Scores. The culprit according to the three sober traders we could track down is the recently unembargoed speech to be delivered by the Bernank tomorrow in Frankfurt. In it, not too surprisingly, the inkmaster considers revealing details of his most recent DNA sequencing result to prove once and for all, that he is not the antichrist. More relevantly, what Bernanke has done to defend his reputation is to claim that QE will work, and that everything is really mercantilist China's fault, and the Fed is just woefully misunderstood. In other words nothing that has not been said before many times, just another overture which will likely precipitate a prompt round of Chinese retaliation in the form of accelerating trade wars, to be followed by further commodity price inflation in the US, leading to another ramp in Chinese inflation, etc. China now will have no choice but to either hike rates (which will pretty much end of the tech bubble), remove even more excess liquidity (real estate bubble burst) or merely export another $20 billion of crap to the US each month, pretending nothing happened (leading to more QE in the US). As Albert Edwards summarized so well earlier, the global game of chicken will continue until either China's or America's population decides it has had enough of being treated like a experimental gerbil in the endgame of failed economic chess.

Some choice quotes from Bernanke's speech:

On how the US's slower growth rate is threatening America compared to the rest of the world:

Since the second quarter of this year, GDP growth has moderated to
around 2 percent at an annual rate, less than the Federal Reserve's
estimates of U.S. potential growth and insufficient to meaningfully
reduce unemployment. And indeed, as figure 4
shows, the U.S. unemployment rate (the solid black line) has stagnated
for about eighteen months near 10 percent of the labor force, up from
about 5 percent before the crisis; the increase of 5 percentage points
in the U.S. unemployment rate is roughly double that seen in the euro
area, the United Kingdom, Japan, or Canada.

Of particular concern is the substantial increase in the share of
unemployed workers who have been without work for six months or more
(the dashed red line in figure 4). Long-term unemployment not only
imposes extreme hardship on jobless people and their families, but, by
eroding these workers' skills and weakening their attachment to the
labor force, it may also convert what might otherwise be temporary
cyclical unemployment into much more intractable long-term structural
unemployment. In addition, persistently high unemployment, through its
adverse effects on household income and confidence, could threaten the
strength and sustainability of the recovery.

On the USD exchange rate:

The foreign exchange value of the dollar has fluctuated considerably
during the course of the crisis, driven by a range of factors. A
significant portion of these fluctuations has reflected changes in
investor risk aversion, with the dollar tending to appreciate when risk
aversion is high. In particular, much of the decline over the summer in
the foreign exchange value of the dollar reflected an unwinding of the
increase in the dollar's value in the spring associated with the
European sovereign debt crisis. The dollar's role as a safe haven during
periods of market stress stems in no small part from the underlying
strength and stability that the U.S. economy has exhibited over the
years.

On Bernanke's view that despite hopes for decoupling, the US is still the most critical driving force and should be allowed to get whatever it desires. If that means an export-led boost (and a low USD) so be it.

Fully aware of the important role that the dollar plays in the
international monetary and financial system, the Committee believes that
the best way to continue to deliver the strong economic fundamentals
that underpin the value of the dollar, as well as to support the global
recovery, is through policies that lead to a resumption of robust growth
in a context of price stability in the United States.

Bernanke's direct attack on China:

Given these advantages of a system of market-determined exchange rates,
why have officials in many emerging markets leaned against appreciation
of their currencies toward levels more consistent with market
fundamentals? The principal answer is that currency undervaluation on
the part of some countries has been part of a long-term export-led
strategy for growth and development
. This strategy, which allows a
country's producers to operate at a greater scale and to produce a more
diverse set of products than domestic demand alone might sustain, has
been viewed as promoting economic growth and, more broadly, as making an
important contribution to the development of a number of countries.
However, increasingly over time, the strategy of currency undervaluation
has demonstrated important drawbacks, both for the world system and for
the countries using that strategy.

On Bernanke's virtuoso performance on the the world's smallest violin:

The current system leads to uneven burdens of adjustment among
countries, with those countries that allow substantial flexibility in
their exchange rates bearing the greatest burden (for example, in having
to make potentially large and rapid adjustments in the scale of
export-oriented industries) and those that resist appreciation bearing
the least.

And a direct confirmation of Edwards' assumption that by allowing commodity price super inflation, Bernanke is in essence forcing China to revalue as the chairman knows that while the US may be expericing surging food prices, China is getting that too, and then some.

Third, countries that maintain undervalued currencies may themselves
face important costs at the national level, including a reduced ability
to use independent monetary policies to stabilize their economies and
the risks associated with excessive or volatile capital inflows. The
latter can be managed to some extent with a variety of tools, including
various forms of capital controls, but such approaches can be difficult
to implement or lead to microeconomic distortions. The high levels of
reserves associated with currency undervaluation may also imply
significant fiscal costs if the liabilities issued to sterilize reserves
bear interest rates that exceed those on the reserve assets themselves.
Perhaps most important, the ultimate purpose of economic growth is to
deliver higher living standards at home; thus, eventually, the benefits
of shifting productive resources to satisfying domestic needs must
outweigh the development benefits of continued reliance on export-led
growth. 

Bernanke's conclusion for how to spank China:

it would be desirable for the global community, over time, to devise an
international monetary system that more consistently aligns the
interests of individual countries with the interests of the global
economy as a whole. In particular, such a system would provide more
effective checks on the tendency for countries to run large and
persistent external imbalances, whether surpluses or deficits. Changes
to accomplish these goals will take considerable time, effort, and
coordination to implement. In the meantime, without such a system in
place, the countries of the world must recognize their collective
responsibility for bringing about the rebalancing required to preserve
global economic stability and prosperity. I hope that policymakers in
all countries can work together cooperatively to achieve a stronger,
more sustainable, and more balanced global economy.

And by global economy, Bernanke of course means banker interests. Also, where he talks about other stuff, all Bernanke really means is that China should unpeg already goddamit, so that the $5 trillion in debt that has to be rolled in 2 years can start getting inflated already, cause we are cutting it close, and only China is staying in the way. Next up: China's response. Might be time to stock up on Rare Earth Minerals again.

Full Bernank speech.

 


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Fri, 11/19/2010 - 01:04 | Link to Comment Fraud-Esq
Fraud-Esq's picture

How much you think the top six banks will score on a 10% RMB appreciation? 

E-fucking-normous arbitrage. 

Fri, 11/19/2010 - 01:22 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Fraud, you asked in another thread earlier about total value of the world's physical silver.

3 billion oz * $25 / oz (COMEX price now) = $75 billion.

If silver goes to $100 (quite possible) than that takes us to $300 billion.

And that does not count the gold!  Which would be many, many trillions.

(All above rough calculations are non-inflated 2010 dollars)

 

Fri, 11/19/2010 - 03:30 | Link to Comment Fraud-Esq
Fraud-Esq's picture

Thanks DoChen, interesting! 

Fri, 11/19/2010 - 08:55 | Link to Comment blindfaith
blindfaith's picture

yes, and the scanners being installed at all the airports are specifically tuned to detect gold and silver regardless of where you stick it.

Fri, 11/19/2010 - 10:34 | Link to Comment trav7777
trav7777's picture

um...no.

gold has different x-ray reflectivity than most other materials.  You take lead or platinum, it will show up pretty much the same

Fri, 11/19/2010 - 01:10 | Link to Comment NOTW777
NOTW777's picture

when does he get to the part of the speech where he told the public for the last year there was an ongoing recovery and cheerled obamas summer of recovery?

is he allowed in germany?

Fri, 11/19/2010 - 04:19 | Link to Comment Popo
Popo's picture

Exactly.

Did he blame the housing boom on China too?  How about when he predicted housing prices would stabilize at a high plateau, just before they went off the cliff?   Was that China's fault also?

Or when he completely failed to regulate the banking industry, allowing leverage to wildly exceed any boundaries of safety?   Was that China's fault?

Or when he allowed banks to indulge in the creation of exotic financial products which spelled certain doom for those that invested in them -- including pension funds and municipalities?  Was that also China's fault?

Or when he gave trillions of taxpayer dollars to the private banking system, which led to the biggest banker bonuses in history ... all the while claiming that the greatest transfer of public-to-private wealth in history would help unemployment?  Was that also China's fault?

Bernanke is an asshat.  He has followed a very precise formula since day-one.  A formula which pretends that our banking system is in essence, a "public work" -- a part of our national infrastructure which benefits us all uniformly.  He has utterly failed to comprehend that the banking system is not only self-interested, but extra-national:  They have *zero* allegiance to the health of the nation -- and they have demonstrated countless times that they do not respect our laws, constitution or free-markets.   And like his Randian predecessor he clings to the now-disproven theory that the banking system's self-interest will somehow manifest itself as responsible, self-preservation:  Completely failing to understand that the carrot of short-term profits dangerously outweighs all goals of sustainability.  Does anyone believe for one second that the individuals who ran Lehman into the ground are wallowing in guilt, or sitting at home and licking their wounds?   He has generously rewarded those who have not only failed as viable business entities, but failed the nation.

To his private, non-aligned, self-interested cabal of oligarchs, Bernanke freely gave the greatest amount of wealth ever transferred.  He has presided over the destruction of our markets, the destruction of our laws,  the trashing of our currency and the trampling of our rights.  He is now attempting to blame his magnificent series of policy disasters on China.

He should be burned at the stake for his treason.  History will be brutal to this utter failure of a central planner.

 

 

Fri, 11/19/2010 - 08:24 | Link to Comment taraxias
taraxias's picture

nominated entry for post of the year

Fri, 11/19/2010 - 08:40 | Link to Comment Lets Hang Parliament
Lets Hang Parliament's picture

seconded

Fri, 11/19/2010 - 08:47 | Link to Comment Itsalie
Itsalie's picture

Strongly second that.

People should recognize Ben's tactics by diverting attention away from the attacks on QE to foreign axis of evil (remember that? remember iraq and afghan and Sep 11?). 99% of Americans who do not understand QE and their constantly being ripped off the last 20 years will certainly buy the china-bashing. Soon enough some finely calibrated polls will find overwhleming negative public views against the new axis of evil (aka all exporters and china). Then the politicians who are now targeting the Fed, will then latch on to the new bogeyman. And the Fed will be free to implement Goldman's QE3 and 4.

Think about it, when did China first make anything anyone wanted to buy? The answer is when Greenspan started his first term at the Fed, when his employers (aka the banksters) re-educated and initiated him to the wonders of money printing and cheap credit. And bernanke, well he was the banksters chosen one specially prepared thru all the speeches of money dropping etc. Nothing was ever purely coincidental in america the last 20 years, and nothing will ever be again.

Fri, 11/19/2010 - 12:27 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Decided.

Fri, 11/19/2010 - 08:28 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

flag as excellent (1)

Fri, 11/19/2010 - 08:43 | Link to Comment duo
duo's picture

What about one out of every seven dollars in M0 being paid out in banker bonuses this year?  Talk about financialization!

Fri, 11/19/2010 - 09:50 | Link to Comment kornholio
kornholio's picture

popo that was awesome. here here

Fri, 11/19/2010 - 11:05 | Link to Comment Calculated_Risk
Calculated_Risk's picture

So your saying he messed up? ;P

Great post..

Fri, 11/19/2010 - 11:50 | Link to Comment Sean7k
Sean7k's picture

Perfect. Where is the NY Times when you need them? Front page baby!

Fri, 11/19/2010 - 01:18 | Link to Comment Zapinho
Zapinho's picture

 

Uncle Ben Sale !!!

GM brand new Chevy Volt, CAR OF THE YEAR on sale "ONLY" to emerging economies , long term rebate will be on the mail....BUY NOW !!

Fri, 11/19/2010 - 12:29 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Volt - an electrical & electronics measurement term applied to a hybrid vehicle.  More marketing geniuses.

Fri, 11/19/2010 - 01:18 | Link to Comment Cleanclog
Cleanclog's picture

Pretty soon we'll be rolling over our debt every couple months.  Look at California's problems yesterday and today.  You don't think that'll be contagious to the rest of the US?

China, ha!  The US CHOSE debt debt debt, fueled by our leaders and the devotion to consumption and capitalism's golden goose.  Silly goose.

Fri, 11/19/2010 - 01:19 | Link to Comment Douglasnew
Douglasnew's picture

MUST WATCH THE BERNANKE CARTOON.

http://www.youtube.com/watch?v=PTUY16CkS-k

Fri, 11/19/2010 - 01:21 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

can't get enough of that video........"priceless", to coin a term

Fri, 11/19/2010 - 10:13 | Link to Comment CD
CD's picture

It's quite funny how apologists for the Fed and our wonderful financial system have already posted a counterattack:

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

The interesting part is the viewership ratio: 1.84M : 21K

Fri, 11/19/2010 - 01:20 | Link to Comment alien-IQ
alien-IQ's picture

I gotta say...the opening to this piece, the writing is just...delicious.

great stuff.

Fri, 11/19/2010 - 01:39 | Link to Comment lizzy36
lizzy36's picture

The man does have a way with words.

Fri, 11/19/2010 - 06:34 | Link to Comment Miles Kendig
Miles Kendig's picture

Can't call Tyler Slim and that's a fact

Fri, 11/19/2010 - 01:22 | Link to Comment The Rogue Trader
The Rogue Trader's picture

Green Shoots!

Fri, 11/19/2010 - 02:08 | Link to Comment snowball777
snowball777's picture

Green Scores!

Fri, 11/19/2010 - 03:06 | Link to Comment cbxer55
cbxer55's picture

Green Poop!

Fri, 11/19/2010 - 05:33 | Link to Comment StychoKiller
StychoKiller's picture

What a BRIC!

Fri, 11/19/2010 - 01:23 | Link to Comment Cookie
Cookie's picture

Might be time to stock up on Rare Earth Minerals again.

+1

Fri, 11/19/2010 - 02:09 | Link to Comment snowball777
snowball777's picture

Nah, them shits keep makin' my hair fall out. Stupid yellow cake.

Fri, 11/19/2010 - 09:03 | Link to Comment blindfaith
blindfaith's picture

THAT would make California VERY happy.  The USA has a lot of "rare earth" mines (which are not rare, just dirty and expensive to mine which is why they have been closed for a decade).  The mountains are not just a pile of granite and shale.  There is gold in them their hills.

Fri, 11/19/2010 - 01:37 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I am confident that Bernanke is merely the puppet for the cabal, but even with that considered -

- Fuck him.

Even hitmen can't claim they were just doing the jobs they were paid to by the bosses, as a means of deflecting or mitigating moral culpability.

Bernanke, you deserve a severe ass beating, followed by a stiff prison sentence, accompanied by nightly anal rape and morning beard plucking.

Fri, 11/19/2010 - 01:45 | Link to Comment eatthebanksters
eatthebanksters's picture

Forget the beard plucking...leave it alone so his face will look like a pussy to a jailhouse gangsta!

Fri, 11/19/2010 - 01:29 | Link to Comment Zapinho
Zapinho's picture
What is Ben´s proposal?

Some shift of demand from surplus to deficit countries,

Buy American Products, we need to export our excess inventories

which could be compensated for if necessary by actions to strengthen domestic demand in the surplus countries,

 We will help you with technology, marketing, know how...just buy

BUY NOW ! call now 1-800-buy-american

would accomplish two objectives. First, it would be a down payment toward... global rebalancing of trade and current accounts, an essential outcome for long-run economic and financial stability.

This is your down payment for a future  American consumer rehabilitation that SOON will buy MORE of YOUR products !

Second, improving the trade balances of slow-growing countries would help them grow more quickly, perhaps reducing the need for accommodative policies in those countries while enhancing the sustainability of the global recovery?

We will stop QE´íng oooops sorry, open market operations and will increase interest rate in the future 

Deal ??

Fri, 11/19/2010 - 02:11 | Link to Comment snowball777
snowball777's picture

Oh, they'll be "buying American" alright...one company at a time.

Fri, 11/19/2010 - 01:36 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

More relevantly, what Bernanke has done to defend his reputation is to claim that QE will work, and that everything is really mercantilist China's fault, and the Fed is just woefully misunderstood.

Fri, 11/19/2010 - 01:42 | Link to Comment Zapinho
Zapinho's picture

Ben does not show any autocritic at all, and puts all the "blame" on countries with no flexible market driven currency markets, but what I am trying to "translate" in my post is his "proposal" , not very likely to be well accepted...

 

 

 

Fri, 11/19/2010 - 02:15 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It is past the point of acceptance, it is how far will he go, and he will go all the way.  China too.  Look how they sacrifice equities just for another go aorund woth precious metals.

Fri, 11/19/2010 - 02:23 | Link to Comment Things that go bump
Things that go bump's picture

I propose a very long session strapped into the Vogon Poetry Appreciation Chair.  http://www.youtube.com/watch?v=mQ-ivGJNRe8

Death really is to good for him.  

Fri, 11/19/2010 - 03:00 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Watch out, Bernanke might enjoy the Vogan's poetry.

Fri, 11/19/2010 - 01:36 | Link to Comment gwar5
gwar5's picture

I can't wait for Ron Paul to get Bernanke in front of him. 

We'll find out if Bernanke has a horn and a tail.

 

 

Fri, 11/19/2010 - 01:42 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Don't get your hopes up.

I have a sneaking suspicion that the Republican Establishment will find an excuse to thwart Ron Paul, again.

After all, we all know that the thieving Banksters own BOTH (cough, cough) political parties in our (alleged) democracy.

Fri, 11/19/2010 - 02:48 | Link to Comment single digit
single digit's picture

Left Nut Right Nut  Same sack

Fri, 11/19/2010 - 09:54 | Link to Comment blindfaith
blindfaith's picture

gotta agree...been saying for some months that Obama is the best Democrat the Rupublicans ever put in office.

You wait and see just how many 'in the national interests' "hands off" laws will be shelved to "fix" America.

Get ready for strip mining, oil drilling off Florida, roll backs on environmental laws, roll backs on personal liberties (especially anyone without a visa or green card), decrease in wages, lower school funding, (seniors better learn how to cook leaves, sticks and park pigeons and get some crazy glue for those cuts), big cuts in government jobs, and ....a brand spanking new "war" effort.  All temporary, of course, to get America back on her legs.

Something smells in the near east, middle east and now the far east, and central and South America ain't too crazy about us either.  Add to that Europe, and parts of Africa, and maybe the GRAND idea is that the the USA become Isolationists for the next 30 years (just imagine what pulling home all military forces from 130 bases around the world along with all those dollars would do to the world economy...hey South Korea, Japan, France, China, Russia, and the rest of you...ya listening?). 

Bernanke is simply showing the world that a Black Bear painted into a corner is prepared to die along with you.  Stupid...yes, but we have had many stupid leaders.

Plan "B" anyone?

Fri, 11/19/2010 - 10:13 | Link to Comment blindfaith
blindfaith's picture

gotta agree...been saying for some months that Obama is the best Democrat the Rupublicans ever put in office.

You wait and see just how many 'in the national interests' "hands off" laws will be shelved to "fix" America.

Get ready for strip mining, oil drilling off Florida, roll backs on environmental laws, roll backs on personal liberties (especially anyone without a visa or green card), decrease in wages, lower school funding, (seniors better learn how to cook leaves, sticks and park pigeons and get some crazy glue for those cuts), big cuts in government jobs, and ....a brand spanking new "war" effort.  All temporary, of course, to get America back on her legs.

Something smells in the near east, middle east and now the far east, and central and South America ain't too crazy about us either.  Add to that Europe, and parts of Africa, and maybe the GRAND idea is that the the USA become Isolationists for the next 30 years (just imagine what pulling home all military forces from 130 bases around the world along with all those dollars would do to the world economy...hey South Korea, Japan, France, China, Russia, and the rest of you...ya listening?). 

Bernanke is simply showing the world that a Black Bear painted into a corner is prepared to die along with you.  Stupid...yes, but we have had many stupid leaders.

Plan "B" anyone?

Fri, 11/19/2010 - 01:39 | Link to Comment Miles Kendig
Miles Kendig's picture

...and the Fed is just woefully misunderstood.

Yep.  Misunderstood it is since it is those evil Chinese that boxed him up.  ROFLMAO

http://www.youtube.com/watch?v=Q0Lg_ISGGW4

Fri, 11/19/2010 - 03:05 | Link to Comment Miles Kendig
Miles Kendig's picture

Yep.  It's time some broken paradigms get their day of sunlight disinfecting .. and thank goodness there is precious little personality from the folks at the top, most especially the Ber..nank who has none what so ever.  Can't blame Chef Ben for tryin' tho, shit soup sandwich peddlin' slim sack that he is

http://www.youtube.com/watch?v=7xxgRUyzgs0

Fri, 11/19/2010 - 04:38 | Link to Comment Miles Kendig
Miles Kendig's picture

Thank goodness Ben never learned how

http://www.youtube.com/watch?v=KV8dJIglTyI

Fri, 11/19/2010 - 01:43 | Link to Comment eatthebanksters
eatthebanksters's picture

When did the Fed start dictating our foreign policy?

Fri, 11/19/2010 - 01:50 | Link to Comment trav7777
trav7777's picture

Congress doesn't have the balls nor the inclination.

Everything at every level has been abdicated.  The Bernank appears to be the only rational adult in the room.

Look, I know this inflation sucks and the dollar devaluation will be painful; the readjustment most of us will go through as the facade of our bogus prosperity is shattered will certainly be painful.

But I argued this over and over on TF; there is NO WAY for the math to work without printing money, for a variety of reasons.  The Bernank appears to be one of the few, myself included, who has accepted the truth of the matter.

The rest are still in De Nile about just being able to make a few tweaks, prosecute a few people, pass a couple of laws, and everything will be hunkie dory again.

Look, either we can print or we can suffer catastrophic deflationary implosion and total divestiture of our country to banks.  Basically we're looking at an Argentina or USSR type of outcome.

Fri, 11/19/2010 - 02:35 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A defeatist view though, however right you are about what Bernanke must do.  Must do to what?  Hide the debt?  The debt is in plain view.

Nationalize the Fed, then break it up, charter State Banks, and redistribute Fort Knox's "gold".  Issue new currentsea, charge off the debt.  Tell China we are sorry.  I know that the BRICs will be pissed off, but what did they expect when they bought into the ponzi?  I feel the same way about Madoff victems.  People should know what an IOU is, and what it isn't.  It is a promise, it is nothing more.  Promises are not real, until actualized.  One should not expect anything in life to ever be realized unless it is acted upon.  If one expects nothing, good.  Slide, let go, and carry on.

Fri, 11/19/2010 - 02:37 | Link to Comment nufio
nufio's picture

thats the way i see it too.

consumption in the US is too high. only inflation can bring that down and make imports more expensive. since nothing else seems to work QE is the way to go. Of course it destroys savers but then they should have seen that the american people are overconsuming and should hedged accordingly.

from a global perspective the system is mostly unfair to the chinese population because they are the ones who worked and didnt get paid the fair market value because of the currency peg. Mostly everyone in the US benefited from it so far. With QE standard of living in the US will go down as it must. It is a very wasteful culture here, even among the average citizen.

i fully support QE2 and more :)

Fri, 11/19/2010 - 05:30 | Link to Comment Hedge Jobs
Hedge Jobs's picture

whats happened to you trav? you are siding with the bernank! good god man have you lost your mind!

if you are looking at worst case scenarios (deflation or hyperinflation) the deflation is the better outcome and this is why the bernank is desperate not to let it happen. smart people can prepare for the deflation, survive it and prosper afterwards. the overleveraged fools and the corrupt banks get wiped out. The hyperinflation wipes everyone out. this why the bernank prefers this outcome as it maintians the banks but inflicts maximum damage on the civilian population

Fri, 11/19/2010 - 10:43 | Link to Comment trav7777
trav7777's picture

look...do you play chess?

At some point in the game you are forced into moves you do not like by virtue of being in a bad position.  They are not good moves, they are the ONLY moves.

The Bernank has no choice.  As far as deflation being the better outcome, do not be a fool...you will wake up one day to the bankers having clear title to the ground under your feet.

Deflation is liquidation, my friend, plain and simple.

If I were in the Bernank's position, I would be forced as a matter of rational deduction to perform the same actions.  The math is inescapable.

Fri, 11/19/2010 - 12:07 | Link to Comment Fraud-Esq
Fraud-Esq's picture

Exactly. 

Too many people conflate 08 bailout with Treasury buys too. If I were handed the Fed after the 08 bailouts, Treasury buys might not be the only thing MINUS a Congress compliant or creative (Labor bills, etc), but the best thing for the public at large. Coming after the decisions they married in 08-09. But 2010 is a change of course. Hence, the ABA attacks NOT 08 bail, only 2010 T-buys. 

The Bernank would score much higher in my book if he joined the Fed in 2010. His baggage favors the ABA's recent attacks which is mendacious as you get, because they were salivating for the 08-09 direct bailouts.

Fri, 11/19/2010 - 12:19 | Link to Comment Sean7k
Sean7k's picture

Deflation is the best option available to us. The banks own your homes now, you are merely dickering over price. If you own your home, the banks mean nothing. 

You own your savings, if everything deflates, your savings will increase in value and be protected and make income from interest.

If there is deflation, your labor and production will retain their value and buying power- whereas inflation allows for the transfer of wealth as the banks and corporations are at the front of the line and can spend the money before it loses it's value. This makes food, rent, clothing and gasoline cheaper.

The only liquidation would be in malinvestment. Hmmm, who is stacked to the ceiling with malinvestment? Banks, the FED and Treasury via Fannie and Freddie. So, they would take the fall? Wow, that would be terrible!

It could lead to default. Ah bummer. We might need a new monetary system- one without a central bank. Awww, too bad!

Deflation will happen whether we want it to or not. The banks just want a little more time and opportunity to transfer what wealth they can before it is bottoms up. That wealth will be stashed off shore and out of reach.

Playing chess requires you be able to see the endgame. I think you might want to look a few moves ahead.

Fri, 11/19/2010 - 21:23 | Link to Comment chindit13
chindit13's picture

There are two moves.  I'll take deflation.  Bring it on.

I have lots of cash.  I have no debt.  Ben has been punishing me for a few years, and Tim has been making me pay for everyone else's mistakes.

You say the bankers win in a deflation scenario, because they'll own everything.  We have already seen that the bankers win under an inflation scenario, so what's the difference?  One difference I can see is that under inflation, the bankers share the win with the profligate and irresponsible, and the responsible foot the bill.  Fuck that.

Then there is the un-viruous cycle of deflation, where the prospect of falling prices force people to hold off on buying decisions, which leads to increased unemployment, which leads to more deflation.  Well, if all of your statements regarding peak resources are correct---and I do not doubt for a second you are right---growth is impossible regardless.  Thus, we are left with choosing a path that rewards the profligate, incompetent and corrupt, or savers and those free of debt.

Yes, I'm talking my own book.  I cannot help but believe, however, that I am also talking fair.

Fri, 11/19/2010 - 02:09 | Link to Comment Milton Waddams
Milton Waddams's picture

When did the Fed start dictating our foreign policy?

It depends on the definition of "our".

Fri, 11/19/2010 - 02:20 | Link to Comment taraxias
taraxias's picture

awesome post

Fri, 11/19/2010 - 01:45 | Link to Comment trav7777
trav7777's picture

The Bernank is now admitting that what I said he was doing was true all along.

Trade flows MUST normalize; the center can no longer hold.

China will accept our inflation or they will break the peg.

Fri, 11/19/2010 - 02:44 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

China will accept our inflation or they will break the peg.

But if he put it that way I would expect Hulk Hogan to run into the ring with him.  BS Bernanke ain't cool enough to be macho, he cowers behind his printing press while slinging Neo Keynesian mud pies.  Your line sounds like something W would say.  Bernanke and Co. are trying to appease liberals, not neo cons.  Velvet glove Fed.

Fri, 11/19/2010 - 10:48 | Link to Comment trav7777
trav7777's picture

yeah, see you are still floating on De Nile.

MOST of you are.

You refuse to accept the obvious:  the game is over.  Growth has stopped.  The way of life as we KNEW it is finished.

You'd be wise to fuckin sit down, splash some water on your face, have a stiff drink, and accept reality as it is.

There's no combination of "prosecutions" and bank shutdowns, and "honest money" and all of this bullshit that can fix the underlying problems.  Blaming the Bernank as if he created the situation is foolish.  His actions are a rational reaction to the mathematics of the system, which has an inherent flaw in that it cannot coexist with a climate of aggregate contraction.

All your bullshit character assassination crap about W or these neocon or liberal tags, aimed at me...are really so silly that they're childish.

Fri, 11/19/2010 - 12:27 | Link to Comment Sean7k
Sean7k's picture

Blaming Bernank is foolish.He is merely carry out orders. They do not prosecute their spawn. 

Rational actions? Debasing currency is rational? The reason it cannot coexist in a climate of contraction, is because bankers cannot transfer wealth without inflation. 

Mathematics has nothing to do with it. Common sense does. If you spend more than you make and never save you become impoverished. Therefore you encourage savings. How? Through higher interest rates. Through a lack of inflation that only encourages people to spend as fast as they can to beat the future price increases. Through deflation, that makes things cheaper and provides more opportunities for savings. 

Fri, 11/19/2010 - 14:21 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

We are dealing with one large fantasy.  I do not disagree that Bernank is doing what is "mathematically correct" but he is doing it inside his flawed system.  There in lies the problem.  He fails to see that the system he is using, a system where growth is unlimited, is flawed.  Or maybe he is a sadist, a demagogue, and only wishes to fulfill his orders.  But if he is not evil, he is stupid, and stupidity is common amongst us, so we should not be surprised by his naivete.  You have said yourself, many people do not understand growth for what it is (or the lack of it) in terms of energy and credit.  It is stupid to think one can create growth by unleashing easy money, especially when that money chases real goods.  Is he up a creek without a paddle?  Yes.  Did Greenspan leave him out to dry the same way that Bush left Obama holding the bag?  Yes.  But that is the name of the game,   and Bernanke took the job, and has said over and over he knows what to do.  Over and over he has told us he knows best.  But he has no idea what to do.  He is like a child playing with dolls; unfortunately, his fairyland laws run parallel to the real, and he is fuckin' up the monie, and we don't want our monie to be fucked wit.

Fri, 11/19/2010 - 09:01 | Link to Comment zhandax
zhandax's picture

China will accept our inflation or they will break the peg.

Which do you think is more likely?  I am guessing (ultimately) accepting our inflation.  They will flail and make a few headline interest rate hikes, but they are probably as much in love with the ponzi as the rest of the world and in its current state, it may be in their best interest.

Fri, 11/19/2010 - 09:31 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Uncle Ben cooks a mean pot of instant rice ...

In Sun Tzu fashion : 

An American consumes 3000 calories a day on average. Let's say the recommended caloric intake is 2200 calories. And let's say the intake in China is 2100 calories ... Americans are eating too much to be healthy. The Chinese, just right, a little lite.

The average American spends less than 10% of disposable income on food. The average Chinese spends roughly 30% ...

The American could quite easily reduce their caloric intake by 30% with no harm and actually create a whole host of beneficial consequences lowering healthcare costs by lowering risks of obesity like diabetes, heart disease etc.

If the Chinese reduced caloric intake by the same 30% they would be going to sleep hungry. And probably waking up angry. If they chose to spend an equvialent sum on maintaining intake, their share of disposable income spent on food would rise uncomfortably.

American fat trumps Chinese labor arb?

Fri, 11/19/2010 - 01:51 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

cue video of Chinese students laughing at Timmah.........

Fri, 11/19/2010 - 01:55 | Link to Comment Oh regional Indian
Oh regional Indian's picture

While not quite in GreenSpam's class, Brrrrrrnaked's speechwriter is clearly well versed in double-speak through forked tongue!

As an example: 

as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States.

 

Hilarious. Damn liar.

ORI

http://aadivaahan.wordpress.com

Fri, 11/19/2010 - 02:08 | Link to Comment ugg kensington
ugg kensington's picture
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Fri, 11/19/2010 - 02:45 | Link to Comment SpeakerFTD
SpeakerFTD's picture

Another example of massive over-reaction from the conspiracy crowd.   It amazes me how quick people are to paint Bernanke as some kind of villain, but before you Ron Paul types go apeshit about the speech, try reading those passages one more time.   Bernanke is simply claiming for himself the right to declare economic war on China, create a global financial architecture that supercedes state sovereignty, and make "collective" economic decisions that, while they may injure the U.S., will somehow promote overall global economic harmony.  What's traitorous about any of that?

Fri, 11/19/2010 - 03:51 | Link to Comment merehuman
merehuman's picture

I did not junk you. Surely  the junker missed your sarcasm.

Got rope?

Fri, 11/19/2010 - 08:42 | Link to Comment Pants McPants
Pants McPants's picture

What's traitorous about any of that?

 

Well there's that whole subjugation of the US to the betterment of the world part for starters.  And the fact that we don't know where the Bernank's true allegiance lies.

Fri, 11/19/2010 - 10:54 | Link to Comment trav7777
trav7777's picture

China has been at economic war with us for decades.

Our Congress sold out to them and to every fucking corporation that had money to bribe them with.

There is rot at ALL LEVELS.  We have been living in a fucking DELUSION, got it?  A Potemkin Society.  Like fish in a goddamned tank.

The Bernank is using the reserve currency to avoid monetary collapse.  The system MUST grow...he's buying the bonds of OUR government in order to accomplish this.

What stuns me is how so many of you REFUSE to accept that the USA really ISN'T #1 at bestness and that somehow if we'd just go on the fucking gold standard, we can continue to CONSUME at this level of apparent prosperity.  You're basically all saying that there is NOTHING at all wrong with the status quo, somehow if we just put a few people in jail, we can continue to consume 25% of the world's oil supply to drive our SUVs across the freaking street!

The Bernank is paving the road to an inevitable future of LESS, far less.  But we are going there anyway.

Fri, 11/19/2010 - 02:53 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

Bernanke shaved his hair behind his ear and cried when he found the marking...

667

(Neighbor of the Beast)

Fri, 11/19/2010 - 03:16 | Link to Comment DisparityFlux
DisparityFlux's picture

One cannot avoid his rational sincerity for we may as well do it my (Fed's) way because it's a win-win proposition versus lose-lose.

The question remains, does China see a win-lose scenario?

In any case, history has shown a substantial portion of humanity will probably be lost.

Fri, 11/19/2010 - 03:42 | Link to Comment ebworthen
ebworthen's picture

Holy Hell.

Anyone who works for a living may as well BEND OVER NOW for the elites of the world.

That...or load the pistol and rifle and other supplies.

It really is coming to that, or flight to a shady hamlet with tears for the forgotten person and nation.

Too bad we haven't seen any banksters or fraudsters or crooked politicians swing from the rope; instead we sacrifice everything our ancestors fought and scraped the ground to gain for a golden toilet and a bonus check.

Fri, 11/19/2010 - 09:22 | Link to Comment Ace Ventura
Ace Ventura's picture

+1  Effin' ayyy.

If you're wondering how it could come to this, just go to your local WalMart and look around at what many of America's salt-of-the-earth citizens have become. Sugar-scarfing blubberbots drooling over the next iPod or video game console.

I honestly think these people will trade away every bit of liberty that still remains, if only to be able to watch TV and eat.

Fri, 11/19/2010 - 10:54 | Link to Comment trav7777
trav7777's picture

BINGO.

EVERYTHING has been ABDICATED at all levels.

Fri, 11/19/2010 - 12:38 | Link to Comment Sean7k
Sean7k's picture

At my Walmart, the people are sensibly buying essentials. Are many of the overweight? Yes. That is a function of the food they are provided by corporate America. However, they still work, save and live without lots of debt. They understand the value of investing. They seek the best prices on the goods they can afford. 

As the situation changes, they will make adjustments. The people that specialize in behavior modification have been working diligently for over 100 years. If you are able to remove the veil, please be nice enough to lift those of your neighbors. Because being stuck on an island of liberty in a sea of slavery is just tilting at windmills.

Fri, 11/19/2010 - 14:17 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"[T]hey live without lots of debt."

They are burdened by a huge public debt, and as to them being without private debt, on average, I don't think so.  The average 'Mercan has almost a dozen credit cards, they own cars, houses; most people are drowning in debt.

Fri, 11/19/2010 - 16:45 | Link to Comment Sean7k
Sean7k's picture

Not in the midwest where I live. Public debt yes, but that will never be collected in the way you're talking about it. Which was my point, not all Americans have played fast and loose. The ones that have are screwed, the rest? not so much.

Fri, 11/19/2010 - 04:00 | Link to Comment merehuman
merehuman's picture

All the monetary issues aside, what has me feeling most powerless and angry is being lied to and sprayed form the sky. Barium, aluminum and more is poured  on us world wide. Its the air we breathe and few take note, as if it didnt matter.    The air YOU breathe too! Look up sometime, or on the utube or google it. Or ignore it and die  fool but slowly.

I apologize for sounding so challenging but it appears we are much to complacent. Unless we change there will be rectal exams at airports and busstops. Lol . Yeah, theres some truth to that.

Fri, 11/19/2010 - 05:34 | Link to Comment Green Leader
Green Leader's picture

From my Alma Mater:

"We have PhD opportunities for earth system science modeling, especially for mineral aerosol interactions with biogeochemistry and climate for current, past and future."

They don't hide it anymore.

Check out Ephesians 2:2

"You used to live just like the rest of the world, full of sin, obeying Satan, the mighty prince of the power of the air. He is the spirit at work in the hearts of those who refuse to obey God."

Hazatan is using the atmosphere to attack us.

Take lemon juice, mineral water and keep a watchful eye on your dogs, if you have any. Activated charcoal brings them back pretty fast.

Fri, 11/19/2010 - 07:55 | Link to Comment rapacious rachel wants to know (not verified)
Fri, 11/19/2010 - 06:09 | Link to Comment buzzsaw99
buzzsaw99's picture

The fed is trying to force innocent Americans back into the cesspool of corruption that is the stock market via monetary policy. They have admitted as much publicly. Bernanke is a diabolical monster.

Fri, 11/19/2010 - 06:28 | Link to Comment shortus cynicus
shortus cynicus's picture

What Ben says, is irrelevant. Hi is working for some elite, so the only relevant story is to understand what they want.

I thought, the rich sitting on piles of cash would love deflation and next depression to seize all real equities. But they try do inflate. Why? Probably, because they are sure that they already own all the assets, or that stagflation is more effective than deflation.

One next well known goal is to introduce global currency and global government. But China stay in a way. So what is the next big move? Is it what one last article mentioned: to starve China, trigger unrests, regime change so that global corporations with their production facilities in China could take on power ?

We must focus on the next move, and it is already planned years ahead so we must only understand the agenda.

Fri, 11/19/2010 - 09:01 | Link to Comment mnzcme
mnzcme's picture

Bernanke says growth at the end of last year was due to gov't stimulus, and the economy faded as stimulus expired.  The underlying theme is that gov't, either the Admin or the Fed, must solve all problems.  And if it looks like the gov't will fail, then blame someone else: China in Bernanke's case, Bush in Obama's case.  What about unleashing the power and ingenuity of less regulated capitalism?  www.chartpoint.com

 

Fri, 11/19/2010 - 09:07 | Link to Comment dcb
dcb's picture

what did Obama expect when he reappointed someone who fauiled miswerabley at every turn except waitig until the last minute to throw our money at the bakers. the man lost all of his credability. But thre only thing that matters is how much he lets the banks rip us off. that is how he got the job in the first place.

 

It works like this. the bankers get the president to appoint the person stpid and gullible enought to believe what they say and the stupidity of the no deflation ever school. that rigs the game for them and makes sure3 we loose each and every time. Now he is just making sure it happens again.

 

the man mnust be put away for the good of the world. I think much of what ios going on is because of that cartoon. it shows how stupid the fed is in clear common sense things that everyone understands

Fri, 11/19/2010 - 09:09 | Link to Comment Winisk
Winisk's picture

When did independant, self sustaining nations who traded between themselves for mutual benefit become interdependant unsustainable nations that loathe eachother?

Fri, 11/19/2010 - 09:24 | Link to Comment keep the bastar...
keep the bastards honest's picture

Tyler Durden you are a champ! great post! really funny.

popo: my vote for comment of the year

Fri, 11/19/2010 - 09:28 | Link to Comment keep the bastar...
keep the bastards honest's picture

Tyler Durden you are a champ! great post!

funniest ever1

Fri, 11/19/2010 - 09:59 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Only idiots believe that a currency adjustment will curb Chinese trade surpluses.  Mercantilist countries always have trade surpluses.  They enslave their workers, throw up thousands of trade barriers and subsidize their exports to continue trade surpluses.  The Japanese Yen gained 100% over a few years and it made no change in their trade surplus.  If the U.S. wishes to trade with the mercantilists it will have to become one. 

Fri, 11/19/2010 - 10:03 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

I just read through the full text of the Bernank's speech.

Translation : The Truth? You can't handle the Truth!

Fri, 11/19/2010 - 11:01 | Link to Comment trav7777
trav7777's picture

Yep.  There is denial and willful abdication at all levels.

We can't just prosecute a few criminals and then the good times will roll again.

Only those who accept the oil peak seem to be able to understand what is occurring and see how it should be rationally expected to occur as a foreseeable consequence.

The rest seem to bleat around as if somehow there is a legislative solution to this or if we go on the gold standard that everything will MAGICALLY revert to where we can consume 1/4 of world oil supply daily and buy all the HDTVs we feel we're entitled to.

Maybe we can unleash the power within America, which is being #1 at bestness, and just....well, something.  But we'll do it because we are AMERICA goddammit. 

Maybe it's time to sit down and accept that we are a lot poorer than we thought we were and that the past 10 or 20 years were not a natural way of being.  The real bills of overconsumption and overproduction are coming due.

Fri, 11/19/2010 - 16:32 | Link to Comment Ace Ventura
Ace Ventura's picture

Legislative solutions are a pipe dream, for sure. Until someone can convince me otherwise, I believe we're at the stage where the only thing that will achieve any sort of result is a full-blown 'Fight-Club-style' reset of the system.

I don't think returning to the gold/silver standard will enable any greater consumption, but I DO believe it's necessary as a means to restore sound money. The excess consumption you mention was enabled by the insane fiat systems made possible by the very absence of a gold/silver standard.

As for peak oil, I'm not sure what to believe. Have you heard about the abiotic theory of oil deposit formation? As I understand what we've been led to believe for decades, oil deposits are the result of decaying animal and plant life over the course of millenia, correct? If the world's consumption of oil has been running at the ever increasing levels we've been told it has....would we not have already exhausted such deposits long ago? In other words, shouldn't the planet be totally 'oil-dry' by now?

This bit of a quandary seems to lend more credence to the abiotic theory, where unless I'm misinterpreting it, oil deposits are formed as a natural reaction within the earth's layers, as opposed to requiring decaying organic material as a source.

Fri, 11/19/2010 - 12:29 | Link to Comment sschu
sschu's picture

Bennie and the Feds are fundamentally opportunists and herein they see a great opportunity to enhance their power and make some money.  This is the money quote:

The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development.

In no way should the central bank model be defended, abolish the Fed I say!  However, at issue is why our Federal Government is delegating power to this private entity?  Shouldn't trade policy, exchange rates, foreign policy and economic direction be handled by the State and Treasury Departments under the leadership of the President?  After all, we elect this guy and he chooses his Secretaries and the Congress must confirm. 

This post is not to slam Bam, however deserving his behavior has been.  But how does the electorate change policy direction given the fact that the policy makers are not really elected?  We should be confronting our Federal government apparatus and asking why they have transferred these uber-important policy decisions to the Fed? 

Yes, maybe the Fed has usurped the politicians and is doing this for their own selfish reasons.  More likely our politicians have decided to shirk their responsibilities and the Fed has gladly taken them on to achieve their narrow self interests which is enriching the banks.

Our decision to let the central bankers be all powerful is one we can undo, however difficult.  We are so screwed up, we have the power, but not sure we have the will to make the necessary fixes.

Where is our Andrew Jackson?

sschu    

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