”It is not obvious to me that there are any misalignments in the US financial system”.
This
comment has already gotten the attention of the media. Two years from
now the blogs will be quoting it along with other notable words from
the Chairman. Remember the following? Mr. Bernanke regrets having said
this.
“We (the Fed) do not
expect significant spillovers from the subprime market to the rest of
the economy or to the financial system.”
When
Mr. Bernanke made those comments back in May of 2007 he was either
misrepresenting the facts or he simply could not see the implications
of the facts that were in front of him. I don’t think he was fibbing to
us then. He called it as he saw it. He simply had no clue what the
pieces meant. I am concerned that he is equally out of touch today.
How could Mr. Bernanke not see that zero interest rates are a misalignment?
Mr.
Bernanke is a student of economic history. He knows that during the
30’s T Bill rates went negative. I am sure that he remembers the panic
of 2008 when again Bill yields fell below zero. But those were panic
situations. There is no panic today. But bill rates are at zero.
I
am sure that Mr. Bernanke is smiling ear to ear as he sees the evidence
that his plans are working. Zero interest rates were his objective. He
has succeeded and even exceeded his goals.
What Mr. Bernanke has
accomplished is making fiat money useless. It now costs you to own the
stuff unless you want to gamble with it. Our whole system is based on
the notion that money has value. The Fed has established that it has
none.
I assume that Mr. Bernanke is acutely aware of day-to-day
market movements. He knows that the comments by St. Louis Fed Governor
James Bullard that “Maybe we should extend the Agency POMO buys”
quickly resulted in a $20 pop in the gold price. You can’t ask for a
better example of the market’s attitude towards America’s monetary
stance. It is starting to get downright hostile.
It would be a
kick in the pants to the entire financial system if the price of gold
started to have a meaningful impact on monetary policy. I think that is
exactly what is going to happen. It is just going to take a while.
Bernanke continues to believe that nothing is misaligned. We are going
to wake up and find out that things are horribly misaligned.
Post from December 2008 Hanky: War's over, man. You dropped the big one.Benny: Over? Did you say "over"? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!
Bush: Germans?
Cheney: Forget it, he's rolling.
Benny: And it ain't over now. 'Cause when the goin' gets tough...
[thinks hard]
Benny: the tough get goin'! Who's with me? Let's go!
[runs out, alone; then returns]
Benny: What the f%&@ happened to the U.S.A I used to know? Where's the spirit? Where's the guts, huh? This could be the greatest night of our lives, but you're gonna let it be the worst. "Ooh, we're afraid to go with you Benny, we might get in trouble." Well just kiss my a$% from now on! Not me! I'm not gonna take this. Waggoner, he's a dead man! Mullaly, dead! Nardelli...
Cheney: Dead! Benny's right. Psychotic, but absolutely right. We gotta take these bastards. Now we could do it with conventional weapons that could take years and cost millions of lives. No, I think we have to go all out. I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part.
Benny: We're just the guys to do it.
Hanky: Let's do it.
Benny: *Let’s do it*!
From Citizen King
Fed funds traded at zero late last night. We have screamed for months that the official or 'target' Fed Funds rate was irrelevant because the effective funds rate was much lower, and near zero. Now funds are trading at zero.
Yet there will be pundits and experts that will assert that the Fed might cut its target funds rate this week to 50bps or even 25bps - even though the cut in the target rate is meaningless.
Now that the Fed is paying interest to banks, why did the Fed allow funds to trade at zero? Yep, they are terrified by something.
To claim that Bernanke is too clueless to understand what is happening is to absolve him of the economic destruction he and the Fed are wreaking on this country.
There is no benefit for Bernanke to be talking about it openly. It may cause yet another crisis. S it is best to focus on managing it, rather than talking about it.
admin
http://invetrics.com
The Federal Reserve is ground zero for the restoration of American liberty.
For the love of God
For the love of Country
For the love of Family
For the love of Truth
For the love of Liberty
For the love of Man
Let Free Banking rein again in the land of the free and the home of the brave! Let Freedom Ring! Let Freedom Ring! End The Fed! End the Fed!
Innovative Chinese solution to malfeasance...
http://www.msnbc.msn.com/id/34127010/ns/world_news-asiapacific/
For the love of all that is sane, why in the name of the universe are we collectively as a nation even listening to Ben Bernanke? This phuck should have been forced to resign years ago.
Let's hope the turning tide in sentiment will lead to Obama yanking the reappointment.
Yet another great article by you, Bruce; thank you very much for your efforts and your continued willingness to share your insights. It is greatly appreciated!
As a large holder of gold, I am smiling ear to ear.
Firt Ben is a lying sack of shit. second he is owned by the banking industry, and is in effect its prime lobbyst. He doesn't care about what you are talking about. his goal is to kill the dollr and cause inflation it has always been his policy, and it is in effect the policy of bankers. whay do you think the fed hates deflation. Because it hurst over exposed creditors. there is nothing wrong with deflation at all.
the goal of the banking industry is pure and simple. with the stimulus they are all making huge bonus. they don't not acre if the system gets better or worse. the goal is to extend cheap credit for ass long as they can. they know that if it doesn't work they will have millions of bounus money to buy collapsed assets of the rest of us.
get in line folks, if you haven't see this you aren't too bright.
At the same time Ben was sying things were going to be fine, he was meeting with officials to paln for the future collapse. this is when geitner stated we should make sure all bank debt is backed 100 percent by the government. this is documented fact.
You have to start to wake up and realize. we do not have democracy. we have control of money, media, and policy by the smae set of big wigs. they distort the information flow. WE ARE LIVING IN A VERSION OPF THE OLD SOVIET UNION. MOST OF WHAT YOU SEE IN THE MEDIA IS THEATER FOR THE MASSES TO KEEP THEM FROM RIOTING. THIS IS 1984 WHERE THE TRUTH IS MADEINTO FICTION, REALITY IS BRUSHED ASIDE, AND FICTION BECOMES TRUTH.
the bankers do not acre if they bankrupt the county getting bailed out. they just want to ensure they get it all before it collapses and bernanke is their tool.
I have already said this would be the never ending stimulus, what would happen and what will be the result in many postings around the internet. yesterday the ft talked about sovreign default. they are way behind the curve, people talk about stagflation, but we are already in it. Because of na couple months of date distorts the figures. in fact we have entered a stgflation recession since the price of oil skyrocked.
Yup..coming to the conclusion that everything said is either a lie or incompetence. Hard to tell in the moment which one it is while the air is thick with hopium.
Divided Debt Slaves of America has a certain ring to it...
i think some of you are just angry because his unquestionable success in stabilizing the markets has ahem, destroyed your shorts... and left you swimming naked :-)
As to the ones who want to restart the american revolution, you clearly are hopeless cases...
Negative interest rates on Treasuries is not the first thing that comes to mind when I think of a "stable" market. What Bernanke & Geithner did is the equivalent of an anti-fever drug in a seriously ill patient. It is a good thing to knock down the fever, but unless you find and fight the cause for it, the patient will still be sick when the drug wears off. They won a battle, but the prospects for the war are poor at best.
Ben Bernanke is a 'scholar' in economics. He is the kind of guy who has studied the 1929 Depression in (probably excruciating) details. But he has never held a job on the trading floor, or, probably, any kind of job that require you to bring results, quantifiable results, back to a boss. His only job experience is in academia.
The result is, of course, that he is fighting the last war instead of the current war. Without realising that what could be done in the 30s cannot be done today. QE, "New Deals" and increasing the federal gov deficit are all fine and good... provided you start with a positive balance sheet.
FDR had this luxury of a mostly positive balance, and his policies were mostly successful (WWII, of course, was the ultimate in governement intervention in the economy).
Obama and Bernanke, on the other hand, have to deal with crushing levels of debt, an industrial capacity that has been throroughly destroyed by years of Wal-Mart importation of cheap chinese goods, and not just one, but several financial bubbles (derivatives, CDS, subprimes, etc) that have been going on for 20+ years. On top of that, all the lessons so painfully learned during the 30s (Glass-Steagall, anyone?) have been swiftly forgotten and banished once speculation became popular again in the 80s. And yet, the good doctor Bernanke is blindly applying what almost did not work in the last crisis to this one.
This is a recipe for disaster. It is unfolding before our very eyes right now.
Re-read "The Black Swan", by Nicholas Taleb, to see many more examples of this folly. Bookworms like Bernanke, with zero experience in the real world, should never be put in charge of running an economy. Period. Their only value is to provide post-hoc analysis after (a long time after) the crisis is past.
(And don't get me started on Greenspan, OK?)
It doesn't matter who you are, what you've read, nor how many simultaneous processes your brain can fire up. Nobody is ever smart enough to run an economy. There are too many variables for anyone to ever even possibly conceive of beginning to approach the idea of how ridiculously massive and unmanageable of a scale a task like that lives on. The idea of unintended consequences isn't attributable to something random happens to mess up their otherwise perfect plans. Nor is it always a function of corruption. It happens because nobody can make that detailed of a plan and follow it through. It's just too much. Allocating resources via a market, where people vote with their dollars, though it will still have many crash and burn cycles is still much more efficient (though admittedly not perfect,) than one, or even 500 guys planning it out 'in our best interest.'
Bingo.
"It is completely in accord with the statist thinking prevalent everywhere today to consider a theory to be finally disposed of merely because the authorities who control appointments to academic positions, want to know nothing of it, and to see the criterion of truth in the approval of a government office."
Ludwig von Mises
We are living in a country where 95% of the populace holds in their mind a framework of history obtained solely through the lens of their 8th grade "Social Studies" textbook.
Just think about that for a second.
Just think about the damage that has been done and the amount of time it would take to undo the decades of miseducation that has occurred.
I simply don't believe it can be done.
When world empires struck agains Greece It held firm. When every idiot began publishing books promoted by the same publishing system we have right now that is attempting to turn every book store into a 30 minute snapshot of idiot of the month with every good book out of print, greece crumbled like a butterless pie crust.
You guys are giving Benny a break? Seriously? His only job is to calm the fears of the financially illiterate public - he knows exactly what is going on: maintain the status quo of bankster enrichment!
End the Fed!
I would be hard pressed to call Ben an expert on the causes of the GD. Hell IIRC he is in the camp that says that Hoover was a laissez-faire capitalist who did nothing in response to the crash. To bad reams of historical evidence point counter to that, hell initially FDR ran his campaign on the basis that Hoover's interventionist policies worsen the Depression. Don't you just hate it when facts get in the way of how you want to view history?
Now I'm pretty sure Ben knows the real scoop, but he's just a fraudster and puppet. After all being Fed Chairman beats the hell out of having a real job. If they really wanted to fix the problem they would take a page out of Warren G. Hardings book and how he dealt with the Depression of 1920. Cut spending and don't run the printing press.
+100
You can't teach common sense. He can't perceive that you can't print money to infinity without consquences. You can't have a prosperous shell economy!
Bingo.
That one solitary fact is what this whole tragic folly revolves around;
The idea that "wealth" or "money" can be conjured into existence without effort or labor, and that when done, leads to no untoward consequences.
What hath FED wrought?
As it will be in the future, it was at the birth of Man —
There are only four things certain since Social Progress began: —
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
Bruce,
the interest for the ten-year bond and the price of gold divided by 50 were tracking each other from 1987 until 2000. Then gold started to go up while the interest still went down.
Since 2000 the real interest rate on 10 year bonds is negative when the CPI without lies is used, see
http://www.nowandfutures.com/treasuries.html on the bottom of the page the green curve in the "Real" Interest rates-chart.
The real interest rate defined as ten year yield minus "Pre-Clinton-CPI" from Shadowstats is negative since 1996. That timing aligns with Greenspans "Irrational exuberance" speech and might be the reason for the high valuation of stocks.
The misalignment is way worse then your pictures show.
I was thinking of selling some of my gold bullion coins for a nice profit. Then thought,why when I have afraid to invest paper in the bank earning a whopping 1.8%.
I'll stand pat for the W thats coming. I did ok on oil from 12/08. Too bad no more DXO.
there isn't a more conceited, arrogant, pompous, retarded dildo in the usa than benhole....he is evil but he is also a complete imbecile....
his utterances are not be ignored and he is not to be believed....those who follow his idiotic words are more to be pitied than he....
bernanke is not struggling with anything, but his public image. he's doing what he's told to do, and he knows he will be taken care of later, maybe in tel aviv, or argentina. that bastard phil gramm is still in the game, although he had to move to switzerland. do we have an extradition treaty with them?
Most likely BB will be taken care of later in Hyannis Port or Newport. If they had that much power in Tel Aviv, do you think they'd be sucking all that dick just to take care of a teeny little power generator in Iran?
Did Bernake really say that? I can't believe him and a cabal of secretive bankers are in control of US monetary supply and policy. Its like living in the twilight zone. ZIRP, TBTF, monetization of debt, CFC, an alphabet soup of support programs, debt ceiling being breached as we talk, mark to myth accounting, P/E of >100 on the S&P, deficits approaching 10% of GDP, etc, etc.
”It is not obvious to me that there are any alignments in the US financial system”. Is a much saner analysis.
I have been giving him the benefit of the doubt thinking he knew the seriousness of the situation, but was forced to indulge in hubris and crazy policies to try and save the situation as best as he can.
But there is no bluff, he really is a buffoon, completely captivated by the mass delusion which is the US ponzi finance scheme. God help us all.
Bernanke knows exactly what he's doing, just as Greenspan did. What they say is meant to confuse and obfuscate. They say things to hide what they're doing. What they're doing is continually shoveling money into the banks' vaults and their own pockets. They are criminals. Traitors. Anti-Americans. They're mugging us, day in and day out.
Bubble Ben is a concern, I can't call him stupid or TTT Geithner, do they think we are?
Wow... excellent post. Thanks Bruce!
Bernanke stands there with a straight face, and the Flounders* of the press dutifully regurgitate his blather about the need to hold interest rates near zero for the foreseeable future- the truth is:
1. The banks that own the Fed would like nothing more than to pay no interest to savers not just for the foreseeable future, but forever, even as they have just raised interest rates to credit card holders to 30%, as well as higher fees and late charges (this goes right over the heads of the Flounders who pretend not to understand the concept of usury)
2. If Gericide(programmed killing of senior citizens) were a war crime(as indeed it was deemed during the Nuremberg Trials), Bernanke and Geithner deserve not praise, but seats in the docket at the Hague.
3.The people of this country, infantilized at every turn, believe that the pretty golden fringe on the flags that their politicians drape themselves in 24/7 is merely decorative trim, and do not realize it means that in time of war, they have sacrificed essential civil liberties, even as they remain clueless that massive deficits associated with war-time profiteering are a major source of civilian industry unemployment
(*From The Urban Dictionary)
FLOUNDERS: Reporters with two perfectly good eyes, both apparently on the same side of their heads, which provides a plausible excuse for not seeing what is happening on the bottom. ("Core inflation remained tame," the Flounder reported, as gas prices spiked above $4/gallon.)
Spot on Bruce. He is truly clueless. Niall Ferguson is an an economic historian who could do a much better job than BB. That's because he still has the powers of observation of current events as opposed to believing that one's theories of how the great depression could have been averted are ironclad. That's the problems with hypotheses and theories--they are only that.
Here's some more priceless quotes that further elucidate just how clueless Bernanke is:
http://www.zerohedge.com/content/confidence-game-quotes
I must take issue with the entire notion that there is a "job" to be done here. No person or select group of people is smart enough to manage an economy of 300 million souls making independent decisions about their own best interests. No one but me is qualified, under any circumstances, to decide my best interests.
So the question is not whether bernanke is doing the right thing, or even who is the right man for the "job". The question is why do we tolerate the existence of such a position in the first place.
Either free will and private property matter, or they do not. Deciding someone else's "best interests" takes away their liberty, property rights, their right to reap the rewards and/or suffer the consequences of their own actions, and their right to learn from either or both. In other words, it robs them of their future.
The Federal Reserve is ground zero for the restoration of American liberty.
Most excellent. Agreed, agreed, agreed.
It's taken Mr. Paul almost 30 years to get this kind of sensical momentum - and it's at the very tip of the spearhead for Liberty.
Spot on! Totally agree that we shouldn't be asking who should be running the Fed, but why is there a Fed. To many people have accepted the basic premise that someone else should be deciding there future.
SWR,
Well put. The Fed is ground zero for the restoration of our liberty. Wilson realized this in retrospect and commented on it, once out of office (I wonder if each house of Congress even had a quorum to vote on the FRA in 1913.). I believe Representative Paul (of HR1207 fame) has (at least recently) stated that the Fed doesn't simply need an audit, it needs to be abolished.
Turd Ferguson could do a better job...
the truth is ... anything can happen....and that probability increases the more "unusual" times get. For example , you say , Im going fishing tonite. Two things can happen, i will catch fish or i will not.
Thats" usually" correct, however if times and circumstances change, alternative outcomes multiply to infinity.
Imagine its 12 months from now, you're going fishing,not for recreation , but to feed your family... already your outcomes have multiplied, from catch or not .. to eat or not and will your wife leave or not and will your youngest get sicker or not and will you be mugged for your fish or not and will you be robbed at the bait store or not and can you spare the gas or not and is it still safe to walk to the jetty or not and on and on exponentially .
Now in our current bad and fast getting worse WFC ... NOTHING ...is..."USUAL"...ANYMORE
Prepare for anything "can happen"
and probably will.
"mugged for a fish"; isn't that what the fiat money masters are really doing? Mugging the fish, the marks, the fizzleheads, the dweebs, the poor, huddling masses yearning to earn a crust of bread.
"ha,ha,ha,ha" it maliciously laughs as it tucks its fangs back to assume a non-sinister demeanor.
There is also the possibility you never make it to the fishing spot, never actually get to 'going fishing', never get any further than the exit ramp which is going to keep you stuck in traffic for 12 hours. Or you have an accident.
Or lighting strikes the fishing spot. The thousands of possibilities though, are not probabilities.
Basing decisions on black swan events is the current craze, but as they cannot be foreseen, you will be mostly stuck in a paralytic condition forever using one off events as a guide.
I followed that 'logic' in March and have regretted it ever since, missing the historic opportunity that oh so obvious at the time with many solid companies selling at 90% off, that have tripled or quadrupled since.
I've been waiting for another terrist attack on american soil for 8 years. Many have. The unrealized missed opportunities since then are incalculable.
And no one can prepare for anything to happen. We can delude ourselves in that way too. Gold, ammo, guns, survival rations, safe havens, the entire mentality that sees the possibility of the apocalypse as very real may make them feel more secure but is it really more so? Or just another illusion that lasts till it too shatters?
the discussion of what is and what is not a black swan reminds me of the african folktale of a trickster that walked through a village with the left side of his face painted black and the right side white. after he passed through, the villagers argued vehemently about what color the trickster was depending on which side of town they were on. when they noticed the man walking back into town, they agreed that this would settle the matter once & for all as he was walking in the opposite direction. however, as he walked past again, both sides saw the same color. it is said that after the trickster left, the villagers split into tribes and began to war with each other for many generations, only uniting to convict & execute the one villager who crossed the street and tried to explain to everyone that the trickster had repainted his face while they were busy arguing.
...or something like that...
I don't agree on a couple of counts:
1. Most companies were nowhere near 90% off last spring. The ones that were are fundamentally bankrupt. They have manufactured profits through an accounting rule change (suspension of M2M). If you want to play that game, you're welcome to it. All I can do is make decisions on the data I have. From my perspective, this crash wasn't the black swan event.....the rally out of it is.
2. Gold, guns, ammo, etc. may be a horrible "investment" but so is an auto or life insurance policy. Maybe the people that are buying them are buying them for insurance value rather than as an investment. Maybe it is an illusion, but so what? When you buy a life insurance policy, you're betting you die and the insurance company is betting you live.
It's not my intent to pick on you, but what I get from your comment is that you have some regrets about missing the rally. For what it's worth, I missed it too. The difference is that I have no regrets whatsoever. Given the same data and another chance, I'd do the same thing I did this year.
My feelings exactly. I buy stocks based on both fundamentals and technicals. Citi at $1 was a bet that the taxpayers would make a big donation and the PTBs would allow the banks to lie as in Mark to model.
Investing in that environment is gambling. Sometimes one wins but in the end the house wins.
"Gold, guns, ammo, etc. may be a horrible "investment" but so is an auto or life insurance policy."
You forgot beans and band-aids.
It's funny that you point it out - gold, guns, and ammo all maintain their value together - and yes they are like insurance because they don't pay dividends - but they are tangibles. You would be silly not to invest in all of them, in quantity - the only problem is finding a secure place to store them.
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=290062 (my take on Glocks is efficiency of production)
And you know handguns are going to be quite the item once people start getting desperate. Go ahead, call the police when you need them. They're only minutes away when seconds count - and that's right now while the thin veneer of civilization is still, by perception, intact.
...and,BUTTER, lest us not forget.
GUNS and BUTTER!
Bernanke (et al) has proven himself a total asshat. And the Fed is obviously interested only in maximizing banker booty. And the Fed/JPM/et al control gold. you are kidding yourselves to think that gold's rally is troubling them. Gold is exactly where they want it. Right now they need people to be hysterical about inflation so as to maintain a fucking amazingly stupid bid in equities and other assets as inflation protection. To hell with all of them and their blood funnel casino of total systemic collapse. They are scum.
"Gold is exactly where they want it. Right now they need people to be hysterical about inflation"
er, no.
Gold golden shower is the tinkling, clinking sound of people opting out of the Casino....i bought a bunch (physical) myself a few weeks back and I'm agnostic on deflation/inflation....i'm more in the "fuckedNation" camp myself.
It makes NO sense for the Boyz to promote gold anyway. Where's the vigorish?
blood funnel casino of total systemic collapse
Nicely put - now go walk around Times Square and ask random people to say it 5 times fast for a prize.
Golden Jackass has an unusually early report this week:
http://news.goldseek.com/GoldenJackass/1259100000.php
"The foreign corporate chieftains sense a looming risk of martial law, growing social chaos, and widening grassroot movements in opposition to the government and bankers."
Hundred percent
Thanks for the post. I'm reminded of some excerpts from Mises where he talks about the natural rate of interest, and all of the malinvestments made by entrepreneurs when the price of money is held artificially low. Of course, there are only two possible outcomes of this condition. Either (1) the money rate of interest must eventually rise to match the natural rate of interest, in which case many of the entrepreneurs' investments must be liquidated (i.e. deflationary depression when things get as far as they have today) or (2) the banks (in this case the Fed) attempt to hold the money rate of interest below the natural rate of interest in perpetuity, which can only lead to hyperinflation and currrency crisis.
The unfortunate part of this, of course, is that the longer the banks wait to bring the money rate of interest back in line with the natural rate of interest, the worse the entrepreneurs mistakes become, and the worse the ultimate depression must be. Better to take your medicine early.
I have to wonder if Bernanke understands this, or if he is trapped in what will be remembered as the worst case of group-think myopia in American history.