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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Fraud-Esq's picture

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

E-fucking-normous arbitrage. 

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)

 

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.

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

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?

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.

 

 

taraxias's picture

nominated entry for post of the year

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.

duo's picture

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

kornholio's picture

popo that was awesome. here here

Calculated_Risk's picture

So your saying he messed up? ;P

Great post..

Sean7k's picture

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

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 !!

Ripped Chunk's picture

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

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.

cosmictrainwreck's picture

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

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

alien-IQ's picture

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

great stuff.

lizzy36's picture

The man does have a way with words.

Miles Kendig's picture

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

Cookie's picture

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

+1

snowball777's picture

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

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.

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.

eatthebanksters's picture

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

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 ??

snowball777's picture

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

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.

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...

 

 

 

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.

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.  

Mr Lennon Hendrix's picture

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

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.

 

 

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.

single digit's picture

Left Nut Right Nut  Same sack

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?

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?

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

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