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Bernanke: Nothing Is Working And We Have Run Out Of Ideas
From The Daily Capitalist:
Chairman Bernanke reaffirmed again the Fed's commitment to low interest rates because the U.S. economy is still weak. Bernanke also said that the federal government's fiscal situation "looks dark" and that he is worried about the ability of the Treasury to sell debt:
“Interest rates might rise because of a lack of confidence by creditors in the long-term fiscal stability of the government,” and “high interest rates tend to slow the economy,” he said.
Today's auction of paper by the Treasury saw rates creep up. Not a good sign for them.
Bernanke ticked off the latest positive signs in the economy, but was cautious about the sustainability of the perceived recovery. In his written testimony before Congress today, he said:
At its meeting last week, the FOMC maintained its target range for the federal funds rate at 0 to 1/4 percent and indicated that it continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
Let me translate:
Business is still lousy, credit has dried up and we can't shake it loose, and unemployment remains a huge problem for us. We keep trying to inflate but nothing works. So, we'll just keep doing what we've been doing. We can't think of what else to do right now.
The rest of his testimony dealt with the issue of how to drain the money pond once recovery starts to kick in. When you have no new ideas on how to spur the economy or free us from the "liquidity trap,*" you talk about exit strategy.
As I've said before, their exit strategy is a big gamble for the Fed. If banks decide they want to lend, they will because they need to service their customers and make money. Getting interest on their deposits with the Fed might not be sufficient to overcome their business requirement to generate loans.
Watch for a hasty retreat from any tightening in Q3 or Q4 when the numbers go south.
* I believe that the so called liquidity trap is something the Fed and Treasury created with the bailouts, TARP, TALF, mark-to-make-believe, and extend and pretend. Credit will remain stuck until banks rid their balance sheets of bad debt, which now is mostly CRE related.
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If you read some of Ben's (and othe Fed personnel) writings on the subject you might gain some insight into why fuggetaboutit and others are closer to the truth than others. For example, http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf
Essentially, he, and others at the Fed, thinks most of us are idiots, and of primary importance are our 'expectations', especially about future inflation. For example, the short rate being stuck around zero ("ZIRP") is no problem for the largest staff of Ph.D. economists on the planet. If they just keep telling you they will tighten and clean up their balance sheet you will act as if they will tighten and clean up their balance sheet (and hold hands and think real hard). Fool you once, twice, three times, ... No matter, you will debate and agree that they are 'smart' and you are not so smart, and inflation can never happen with the economy in the dumper. I mean, how could such a staff of geniuses be such boneheads and blow up the financial markets and economy at the same time? Anyway, read some of their relevant stuff, and decide for yourselves. For me, I read it, listen to what they announce, and just keep thinking that "stupid is as stupid does". Run Ben, run.
Here's an idea: oh, never mind, they're already doing it.
http://arstechnica.com/tech-policy/news/2010/03/280000-pro-china-astrotu...
280,000 pro-China astroturfers are running amok online By Nate Anderson | Last updated about 4 hours agoIf you thought corporate "astroturfing" (fake grassroots activity) was a problem at sites like Yelp and Amazon that feature user reviews of products, imagine how much worse it would be if the US government employed a couple hundred thousand people to "shape the debate" among online political forums. Crazy, right? What government would ever attempt it?
According to noted China researcher Rebecca MacKinnon, the answer is China, which allegedly employs 280,000 people to troll the Internet and make the government look good.
MacKinnon's discussion of Chinese astroturfing measures turns up in testimony that she prepared from a Congressional hearing this month. When that hearing was eventually rescheduled, MacKinnon was no longer on the witness list, so she released her prepared remarks (PDF) anyway.
and in the US, it's called the 'fitty cent party' and is headquarted in a secret location only accessible through a trapdoor underneath david axelrod's desk.
I don't think Old Ben can choke his middle class as long as China can choke its poor laborers.
US = AA?
http://online.wsj.com/article_email/SB1000142405274870331250457514211271...
Prime example of someone sucking at their job.
Daniel Hannan being awesome as per usual re: EU Monetary Union:
http://www.youtube.com/watch?v=ti3UcQG0lP4&feature=sub
Nothing is working and we never had an idea.
We do what our handlers tell us to.
Love the translation of BB's ramblings. They expected this big liquidity pump to pump up the housing so they could dump their crap off the books well this didn't work. Housing is worse off and the liquidity hasn't trickled down to the consumer. Corporations tightened and mitigated their damages by layoffs and inventory reduction, also the if thats not enough to squeeze the consumer, consumer goods are being sold in the same packages but with smaller amounts in the packages. Looks like liquidity got stuck in the TBTF and they are taking full advantage.
Sorry for the off-topic, but that "T-boning" out of the blue =/
Markets still stable as of this post
http://www.msnbc.msn.com/id/36052055/ns/world_news-asiapacific
'Markets stable' is the prognosis? OK! ;)
BTW, looks to me like its 30 minutes to another bond tank to me.
I certainly agree, the ONLY game the FED now has is to kick the can further down the road, try to play extend and pretend for 1 more day, until the can gets kicked off a cliff.
I certainly agree, the ONLY game the FED now has is to kick the can further down the road, try to play extend and pretend for 1 more day, until the can gets kicked off a cliff.
Folks, short sellers are getting creamed in these markets. Liquidity tsunami is going into third gear, wait till it hits fourth and fith gear! Solars melting up today. Greece is over. Dubai is over. Fear mongering on sovereign debt defaults was all bullshit so big hedgies could accumulate more shares. Pension money feeling heat - underperforming, they will chase stocks higher. Stay long and strong on solars, networking, semis, software, energy, medical devices, biotech...will share some ideas later today. If you want to search your own ideas, go see my post on hot hedge fund trades for 2010.
Cheers.
Some weeks ago, when the trend was down, you were afraid of deflation and not sure where the market would go. Now it is going up since some time, you are back in the 'liquidity will drive it higher and higher' camp again. So your mood flows where the market goes. Up = positive. Down = 'don't know'. I am quite sure when the next debt problem appears and the markets will react accordingly, your mood will turn again. Let's wait and see.
What short sellers, Leo? I dont see the volume anywhere. I think that whole line CNBC spews all day 'squeezing the shorts' is to give cover for the FED lever pullers behind the curtain.'Greece is over, Dubai is over?' How so? You can certainly go ahead and 'invest' in solar and the rest, do whatever you want, but I wouldnt touch any of this dot.com 2.0 bubble nonsense 'long and strong', I say one of these Monday mornings when all the longs are calm as Hindu cows, the FED QE boys will get T-boned out of the blue by something which of course 'no one could have predicted' as CNBC anchors sit wide eyed and jaws dropped.
Just my opinion, frankly looking at this whole market makes my bile duct enraged.
There *may* (noticed I used a very indefinite term here), may be a good Lithium play here. That depends upon our Congress passing Cap and Trade. That would force-feed demand into a commodity that PRC is aggressively cornering. That's the ONLY recco in "green Energy" that would be worth a monkey's butt-wipe.
VERY interesting thought, SheepDog-One. I'd LOVE to hear what Charles Biderman @Trimtabs has to say about fund flows right now. Anyone got any links for his latest research?
I certainly agree, the ONLY game the FED now has is to kick the can further down the road, try to play extend and pretend for 1 more day, until the can gets kicked off a cliff.
Hopefully with their foot inextricably stuck inside the can.
Desperate times call for desperate measures. If the economy collapses, no one will be interested in another war for profit and I think we need to get the ball rolling now. All we need is someone who can help us out with a false flag assist.
Keep an eye out for a change in posting volume and content from the professional trolls on sights you visit. That will be the first clue. "it was quiet... too quiet"
Wow, that was quick. http://www.msnbc.msn.com/id/36052055/ns/world_news-asiapacific/
nice one padre. i see your floggings have helped tune your precognitive abilities.
They have no other arrows in their quiver. They are hoping the banks at least spend on 'stuff' (services, technology) to trickle dollars out. But what is realy happening is all that liquidity went to the traders, bankers and executives, who are churning it through the system and extracting every penny they can to protect themselves before the inevitable withdrawal and next plunge.
I think this means we rally another 10% from here...
Wrong, Bubble Ben's plan is working as risk assets keep getting bid up. Now, if he can only revive the real PIG - the US securitization market!
Gideon Gono's plan to boost risk assets worked pretty well too. His stock marekt outperformed Ben's.
Liquidity or not, it just ain't sustainable to rally at 45 degrees year after year after year. All of nature is cyclical, this is a "bull cycle" of a larger "bear cycle", that will too turn.
I can't be bothered betting against it however, I can't time it and don't need the stress.
Leo again I ask you, what is the evidence you have that this is "working"?
Presidential approval rating is at its low (note how S&P 500 diverged from Bush approval rating in 2007)
7 out of 10 Americans (as per bberg artcile i posted) say they havent benefited at all from the rally in asset prices
Consumer confidence is consistent with deep recession and we are two years into this whole thing and as per below consumer confidence got a lot worse this month as stocks went straight up
Your view that this is A) some sort of well orchestrated plan and B) that assuming A is correct, it is "working" lacks any semblance of fact
If flooding the system with money "fixed" problems such as ours, why isnt Zimbabwe a global economic powerhouse? Asset prices are moving higher, yes, something the average 9 year old can tell you. If you are comforted somehow by the fact that pension funds want to lever up and throw money at assets indiscrimintately because "they are going up", I have no clue why.
We are on our third iteration of the same plan (something bad happens, throw money in the system - 1998, 2002, 2008) and each time the benefit has been less and the payback has been harsher. But dont worry coast is clear because THIS time the Fed wants asset prices to go up so pile in there and watch the magic happen??
PRINCETON, N.J., March 23 (UPI) -- Researchers at Gallup said Tuesday its Economic Confidence Index fell to minus 31 in the week ending March 21, the lowest point since November.
Consumer confidence, while remaining negative, rose in December, January and much of February. In the last week of February, however, confidence dropped sharply, Gallup said. The figures have stayed low since then.
The most recent weekly poll, based on 2,976 telephone interviews with adults, asked consumers about current and future economic conditions. "Both measures are in negative territory -- meaning more Americans express negative than positive sentiments on each dimension -- and have since January 2008," Gallup said.
The survey includes a margin of error of 2 percentage points, Gallup said.
Old news bro, old news...start looking FORWARD and get out of your depressed state of mind.
That was 3 days ago! You might have a 3-day attention span, but a household facing a wall of unpaid debts and massive job insecurity sure doesn't.
Nice first rate analysis leo i wish this site existed 10 years ago so you could have explained the productivity miracle to everyone, reminding us that when 401k dollars starting getting allocated to the equity market dow 36,000 was the next stop
Hmm...
DOW @ 36,000 and gold $22,500 (the amount gold would be worth if we went back on the gold standard) gives us a DOW:GOLD ratio of 1.6:1.
Sounds about right, and would indicate a good time to switch to equities.
Assuming it all doesn't blow up before we get there (fat chance).
I repeat my call that we will institute a brand new monetary system by 2012.
Truthiness. (off)
And in the meantime while mainstreet suffers even more, wall street are wallpapering their offices with more free dollars
"When" recovery sets in?
Is this guy fkin clueless? Oh yeah, like I've been saying, the economists think interest rate regimes "cause" economic activity.
They fail to understand that their product is SUBJECT to supply and demand, rather than some kind of axiomatic lever to pull that creates it.
They can't make Cantarell pump more oil this year than last...and they can't lend to those unwilling to borrow, and they can't lend at 5% if the aggregate economicalness of the rate zone is 3%.
Their solution will be to take rates more negative.
If the USG can't roll paper, do you think they will listen to the CB saying "well, that's your problem"?
Travis, you know Ben and the power elite crew aren't clueless. On the contrary, they well knew the eventual outcome of the credit-money system at the beginning of the last cycle (1947-2007).
This is all just theater to entertain the morts. It's sort of like hanging out at your little children's birthday party and pretending to listen/play with their friends. In the meantime, you're watching the clock and planning on when to crack open your first beer.
You know, I know and they sure as hell damn know there's only two ways out:
Since we can be pretty darn sure numero dos ain't gonna occur (except in Ben's wet dreams), everyone who knows anything is busily preparing to survive the fallout from option one.