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Bernanke: Tap Lightly
Jon Hilsenrath at the WSJ has been THE mouthpiece for Bernanke for the
past few months. Bernanke has been telling him what is on his mind and
Jon prints it. That the debate on monetary policy is being conducted
like this has been one of the big mistakes at the Fed this fall. Today
Hilsenrath has leaked more of the maestro’s thinking. This time it is a
big shocker to me. Bernanke has apparently heard all of the opposition
to his mega QE-2 plan, and he has changed the scope of QE-2 as a result.
From the Journal today:
The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months.
A few hundred billion? What happened to the $2 trillion that Goldman
thinks might be the result? To prove that Bernanke is having second
thoughts on a major expansion of QE he gave this quote to the WSJ:
Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter.
A putter? Does Mr. Bernanke think this is a game he is playing? He is
saying that he has never putted before, has no clue how to do it, so it
it is best to tap lightly? What kind of monetary policy is that? "Learn
as you go", does not make me feel that there is much hope.
I warned
of a possible QE-2 Mini recently. The opposition to a broader program
from other Fed members and the huge public outcry against currency
manipulation (QE is currency manipulation) has forced Ben to back off.
The market will be very disappointed should we get a QE Mini. A program that says, “We’re going to buy 200b in two months and then see”, will do nothing favorable to the markets. I would argue that the markets could be sadly disappointed by this.
The Fed has tried to manipulate both markets and public sentiment with
its leaks of strategy. They got the world to believe that something
massive was coming and now we will learn that it’s a “No big deal”.
They Fed should shut up. They should not leak more disinformation.
They set us up for a monetary program that would have tipped the scales.
Now they have to back up because they realize the scales would not be
tipped, but broken. The consequence is going to be for a bursting of
expectations. Risk Off.
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absolutely agree. this Congress is the most corrupt in American history...and that's saying something! Bernanke is only now realizing "gee, I'm the only one wading into the Swamp, here." Well...welcome to DC Mr. Chairman! Having declared yourself "Mr. Fix-it!" now prepare to be "the Whipping Boy." Will there even be a Fed when this one is over? I'm sensing a "bi-partisan angst" on this one.
Exactly what Ive been thinking Bruce, the world expects $4 trillion as GS said the other day, or $7 trillion QE as the IMF said...the FED has built up and manipulated people and expectations of something huge while running markets up 300 DOW points, and $200 billion in boring bond bubble purchases arent it.
Im 100% convinced this will be a huge faceplant on Nov 3 leaving everyone scratching their heads and the markets duly removing about 15% quick.
Brian Sack said QE2 would be different on Oct 4, so this is no surprise. However, with QE Lite at $30 B/mo., another $50-$100 B/mo. from QE2 is more than enough to get the risk markets cranking again later in the month.
Bruce, some of us on this site including my brother-in-arms SheepDog, have been screaming our lungs out for weeks now about this, no disrespect to your QEII mini article which came rather late.
It was jawboning, a head fake, nothing more. These people are criminal but they are not stupid. The nuclear button will not be pushed UNLESS the system is on the verge of collapse anyways and there is nothing they can do to stop it. We're not there yet. Yet, being the key word there.
Brilliant Ben Bernanke.
Led by the insane-but-not-stupid into condition of Temporarily Insane-but-not-stupid.
After so many years of investment as a True Believer, it is likely too steep a gradient to come to his senses.
A toast to the best there is in Mankind.
If indeed it plays out this way, can be changed at any time.
Sometimes it is better to crow after sunrise.
I think Bruce's intention is this is another possibility rather
than being etched in stone,
Taraxis yep! At every bad bit of news, the story was 'Dont panic! Massive QE trillions are comin shortly'! Now people think $200 billion in boring bond bubble purchases will level everything out right about here as Goldilocks 'ust about right'? I dont see this AT ALL when the expectations were a Ferrari cake to be delivered to Satans SuperSweet 16 party and they wheel in a Yugo made of mashed together twinkies?
All those who have deduced that everyone can have their cake and eat it too are dreamin!
Impossible, how should Hilsenrath live?
Bernanke's failure is a "slam-dunk".
Juice the market up with whispers of trillions, and watch a slight correction, and then resumption of upward course as much more "reasonable" mere hundreds of billions is announced. No shock and awe, merely accretion of territory over time, aka boiling the frog.
No surprise.
juice it up, announce too little QE, crash it on election, blame repubs, they buy up assets, and get QE/bailout again to shore up foreclosuregate in the panic.
gold at $1320..
come to me my precious....at $1276...or thereabouts
Yeah, they juiced the market with b.s., now the announcement will be such not to spook either the bond or equity markets.
Problem is that the jackass is liable to screw the pooch.
Good analogy
The leaders have looked into the abyss, and the abyss has looked back.......too fucked up. Sorry for the language. It was all I had.
Bruce, if your interpretation of the Hilsenwrath article is correct then this will be very difficult to explain post Nov 3.
Explain to who?
Long then short, then long, then short...to infinity.
If you share an intercom system with the Fed, you know which way to play, and mint profits & bonuses.
Goldman is Ratcheting Up Off Balance Sheet Risk to Record Levels!!! More So Than the Top of the Bubble! Many Thought the Enronesque Days of Off Balance Sheet “Hide the Sausage” Accounting Games Were Over You might want to tighten those stops a little more.Couple hundred billion in bond purchases? Thats what all this Q/E2 market pumping hype for 2 months was built on? I knew they couldnt deliver their multi trillion QE that everyone was convinced would happen.
300 billion every 2 months till he feels inflation grabbing hold. That is 1.8 trillion dollars
One of the first things Bernanke said was that he would'nt be opaque like GreenspanSpeak and be very clear to mkts. He is now the most frontrun prostitute in history. Moral Suasion is limited in its effect. Now he does'nt want the mkt to crash next week so he backpeddles better than Deion Sanders.
The masses got hung up on his words, the rest of us watched the coin -- which never changed.
Heads banks win, tails anyone not incorporated loses.
The only thing Bernanke is putting with is a golden parachute.
The rule of law is dead, perhaps he should start there.
You da man dog, er, Sheep....