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Bring on the Conspiracy Theories!
There is a wonderful conspiracy theory propagated by Tea Partiers that has been making the rounds in the financial markets for the past several months. In a desperate attempt to salvage the November election, president Obama has ordered Fed governor Ben Bernanke to flood the system with $2 trillion of liquidity. This is the QEII you have been hearing so much about. The move will give the economy a much needed shot in the arm that will enable the Democrats to retain control of both houses of Congress. Two more years of Obamanomics will then follow.
The only problem with this theory is that it is complete hogwash. For a start, Ben Bernanke is a Republican originally appointed by President Bush. Then there is Fed independence to consider. The board of governors is well stocked with enough conservatives, like Richard Fisher (click here for my chat with him at http://www.madhedgefundtrader.com/june_25__2008.html ), to make such a politically inspired maneuver impossible. If the Fed weren’t set up this way, it would become a political football kicked back and forth with every election. Congress would order the stimulus machine to be stuck permanently in the “ON” position.
You also have to ask the question of whether QEII will make any difference at all to the economy. With banks desperately seeking to deleverage and unwilling to lend, the level of interest rates today is truly irrelevant. The 35 million homeowners with negative equity, about 25% of the total, certainly aren’t going to be refinancing anytime soon. Much of the drag on the economy springs from the sorry state of the real estate market (click here for “Years of Pain to Come In Residential Real Estate” at http://www.madhedgefundtrader.com/september-14-2010-2.html ), so there is little the Fed can do, unless it starts buying millions of houses and burning them down.
Personally, I think the American central bank is out of bullets, and that any such gestures would amount to pushing on a string. Believe me, I have been watching the Japanese do this for 20 years, to no effect. There is one thing the Fed does understand, and that is that any QEII implemented now would be highly inflationary down the road. This fits nicely with my (TBT) recommendations.
But hey, as I learned in my journalism days, never let the truth get in the way of a good story. My late editor at The Economist, the brilliant Peter Martin, taught me that belief will trump fact every time. Facts change, opinions don’t. That totally works for me, because this theory on the true motivations of the Fed is driving cash into hard assets at an unprecedented rate, commodities and companies that I have been pounding the table about for the past 18 months. I made that call because it dovetailed nicely with global macroeconomic trends which I see continuing for another decade. Most people get invited to dinners. I get invited to mines.
If the market wants to run the prices of my assets up for the wrong reasons, I say bring it on! The dollars I am making as a result are just as good at the bar.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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stop spamming your pathetic racist blog on here moron
When you make statements like this:
"There is a wonderful conspiracy theory propagated by Tea Partiers . . . In a desperate attempt to salvage the November election, president Obama has ordered Fed governor Ben Bernanke to flood the system with $2 trillion of liquidity."
You . . . well how do i say this politely . . . Obliterate the credibility of everything that comes after.
There was, early in the spring, the notion that the Summer of Recovery would be funded by a mass of stimulus hitting the markets. However, summer is gone and we are 30 days out from the election. Even if they wanted to "inject" $2 Trillion, the logisticcs of putting that into the hands of consumers within 30 days is virtually impossible to accomplish in a way that would meaningfully impact the elections.
So in a way your prediction is no prediction at all - it is 20/20 hindsight.
So I am left wondering "what the heck is your point (aside from garnering new subscribers)?"
When I read the article, you say "the fed is out of bullets" and then you say "if they want to engage in QEII bring it on". So which is it?
The FED has announced it's intent.
The Congress has announced it's intent (Deemed as passed, CR, Budget)
The President has announced his intent (budget)
Predicting the events of the next 90 days is almost academic.
July 2 - $1.1 Trillion dollar budget is deemed as passed
September 30 - Continuing Resolution will be passed.
October 1 - Spending will commence at Oct 1 2009 Levels
November 2 - Before election results are in Fed will begin monetization $2 Trillion
December 2 - 2011 Budget will be passed - biggest budget of all time - Red States will be be punished
December 3 - 2011 Tax burden will be finalized - tax increases - rich & middle class will be pillaged
January 2 - New congress is seated and must figure out how to overcome the veto
$2 trillion 'injected' would be like a junkie shooting up 2 ounces of pure Hartz Mountain checho. I know this has been Glenn Becks 'theory' but its ridiculous it would blow apart an already rice paper thin dollar and cause nothing but chaos. The FED is up against the wall and BTW we're not as stupid as they in Gooberment wish we all were.
Like a pop in the market means dems stay? Theyve tacked on 800 DOW points just this month and its only made people all the angrier with Obamas approval teetering at 40%, which no doubt holds 5 points of padding under it at least. This conspiracy theory holds no water.
Just because something doesn't work doesn't mean it wasn't MEANT to work.
How did someone's grade school paper make it on ZH?
MHFT, thanks for wasting 2mins of my life - your post was a joke and your long bias theme is exactly what most rational investors are talking about. Can you explain how or better yet, why the market rallies on continued poor economic data? The Fed buys treasuries all the time - why don't they buy equities as well? Well, they do and in this hft driven market, all they need to do is place buy orders and the hft's can run the market higher (like pushing a domino, not a string). No one believes in this market - all stock prices are just a number, so most are sitting on the sidelines waiting for the Fed to stop the manipulation before they start to sell. Obama knows the game well and will keep playing bc he knows more $$ made in the stock market means MORE votes. This is the easiest way for him to create a better living (for a select few) bc improving the domestic economy (creating jobs) will take too long and probably won't take effect until after the 2012 election. Just remember back in March 2009 when he said "buy" stocks, he was talking to Ben and Timmy.
Here's my theory: The Silver and Gold Paper Ponzi's Threaten Life as We Know It.
MUST WATCH: The Silver Perspective
http://www.youtube.com/watch?v=BKzNVrZ5Q_s
Interesting.
Adjusted for inflation back to 1980 dollars, today's spot gold of $1308 would be $473, about half it's 1980 high.
I can't imagine why the Fed is trembling over gold's rise. They have nothing to worry about. They're running presses 24/7, throwing boatloads of dollars in all directions before the ink even dries, and gold hasn't come anywhere near it's 1980 high when presses weren't running.
This is a non-story. Vapid, vaporous.
Tyler, I haven't read anything useful from MHFT in months, perhaps ever. His articles, if you are so gracious as to call them that, are little better than the tripe that Johnny Bravo was posting in comments. And they all seem to be pimping his blog. There are so many good articles on ZH, I would exercise some editorial discretion and send MHFT to the discussion forums for whatever he cares to post.
+1
I think you still get points though if you use "out of bullets" and "pushing on a string" in the same sentence.
what's the lowest vote an article has ever received, is this a record?
I haven't seen Johnny Bravo's work so I won't comment, but as for this, sadly: +1
Here here.
Love ya, Max, but I don't agree this time. Gotta let this shi-- stuff come through every once and awhile.
Gotta stay "fair." And "balanced."
Plus, it's just good, clean fun reading that sort of intellectual dishonesty.
Interesting. All your points here are based on your beliefs.
Exactly how ironic is that?
. If the fed was "ordered" to inject the system with cash they wouldn't wait until election day. The fed is doing what it does, protecting the banks and making debt servants out of the American public. I have heard nobody speak of this "conspiracy." What a waste of digital ink
What conspiracy, this is FACT Bubba! And "your truth" is simply being "changed" as needed!
Anything is possable.
Please tell me again why we have given our freedom over to the Central banks?!?!? It's so they can help us right!!!! (Sarcasm/OFF).
hey all I KNOW is that what is going on in the markets is fucking sickening
Epic Fail.
1) For a start, Ben Bernanke is a Republican originally appointed by President Bush.
There is no difference btwn the Dems and Repub establishment. They are both owned by the same corporate interests and int'l bankstas. The Fed Reserve IS the int'l bankstas.
2) Then there is Fed independence to consider.
ROTFLMAO. You REALLY think this? See #1.
3) You also have to ask the question of whether QEII will make any difference at all to the economy.
When has THAT ever stopped our government from engaging in the sand pounding practice of throwing more good money after bad?
4) With banks desperately seeking to deleverage and unwilling to lend, the level of interest rates today is truly irrelevant.
Banks are more than willing to lend. Businesses don't want the money. They're getting screwed in the bum and they don't know how much more worse its going to get with healthcare, cap and tax, regulations, etc.
Yorp.
Points solid, all. ++++++++++++++++
Moreover, the conspiracy of the Greenspan/Clinton easing was later verified as fact by senior FED BoG members after they'd departed the August Altruistic Body.
Public Record.
The FED is one of the absolute most political of political bodies, else would have no objections to a full and complete audit and ongoing transparent overview of every facet of their operations. Specifically, where from and to go major wire transfers......
Ah, the beauty of moving vast sums of digitally created funds witout question or oversight worldwide. I could do Wonders with that power!
"The FED is one of the absolute most political of political bodies, else would have no objections to a full and complete audit and ongoing transparent overview of every facet of their operations. Specifically, where from and to go major wire transfers......"
Word.
My father worked at Treasury in the 1960s. He told me a few years ago that the Fed Chairman had to sign an undated resignation letter as a condition of appointment.
Awesome! I bet BS looks at that contract first thing every morning! "Bahamas here I come!" He says as he swigs his Malibu.
REN,
Sure, I can dig it, you don't play, OUR way, you go home.
knuk,
Always look forward to reading your stuff.
Agreed. Epic fail. I would have expected better from an ex-Economista, but perhaps that's why he's no longer there.
"Facts change, opinions don’t. That totally works for me" - apparently so
Blame it on Bush, belittle Palin, villianize the tea party. Sounds like Mr. madhedgefundtrader is in bed with the progressives.
(not supporting whether or not the Ben bailout theory is correct)
+1. What are the six junks for, calling MHFT a progressive ? Sounds pretty spot on accurate to me.
As he follows his New Deal progressives plan that he loves. Sounds like he is a republican alright. lol
You are right, anyone pinning the blame on any ONE person or ONE party, is a fool.
To say, however, that Bush is not partly culpable, is horribly incorrect. Palin, on the other hand, should not be anywhere NEAR the Presidency, EVER!
Dems, Repubs, Greenspan, Bernanke, the Rubins of the world etc.....it matters not, they've all put the country on a path not only to guaranteed insolvency and prolonged economic malaise, but have tarnished the reputation of the country throughout the world, in many cases irrepairably.
That is an understatement.
Correct Steve, it was not just Bush, it's all presidents. Bush wears more quilt only because Republicans do favor the rich. The poor Reps think their right because they will be rich one day too. Phil Graham did help to unleash the bankers to rob anybody they could. No doc mortgages, please. He said to stop whining, Munger said to suck it up. All tied to the banks and the power of the FED. Now here lies the real problem. They FED. They control the value of the dollar and how much it is or is not worth. They control who gets bailed out and not. This is where the real crime lies. No banks should have been bailed out. Goldman and AIG should have both went bankrupt. Without the FED, they were broke. They are Morally bankrupt. The FED only cares about the elite bankers. TBTF got bigger, go figure. The FED did that too. End the Puke FED
TBTF owns the Fed and is the Fed. Think of it as the Jewish mafia, it is easier to understand that way and won't make you feel like a bigot.
"Correct Steve, it was not just Bush, it's all presidents."
Sighhh...the problem is spending...NOT revenue. All spending bills start in the House.
"All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."
Article One, Section Seven...is civic's still taught in public schools?
http://www.usconstitution.net/xconst_A1Sec7.html
The President is the last line of defense against the pillaging of the taxpayer on spending...nothing more. He can sign it or veto it...nothing more. He can give press conferences and lie out his ass to everyone...but nothing more. He can say he'll crap buckets of multicolored skittles if Congress will just send him the damn bill...but nothing more.
There is a reason for this.
We ain't much on kings & dictators around here...at least we didn't use to be.
Xactly...and just what no one with any leverage wants to admit - assuming they are have the intellectual capacity to see it.
Steve,
Since your a New Yawker, I can see your malice.
But, can you honestly say you would prefer what we have, over Palin?.
At least she's not a frigging Marxist............loves her country. Is a Patriot.
If you can say yes to that, I have no hope left.
Palin is a war hawk neo-con. Ron Paul 2012
And she has had her on on Russia for some time...from her backyard! When government becomes the ULTIMATE REALITY TV SHOW -
even criminals have differing political views. well said.
I couldn't agree with you more. Well said.
MHFT, don't you recall how Greenspan was pushed towards an easing bias by the Clinton administration? I remember the discussions on CNBC and elsewhere during 1996 and 1998 where the election cycle was thought to be dependent on monetary policy 6-8 months before. There was a real sense that the supposedly independent Greenspan (nominal Republican) was influenced by Democrats looking to ramp the economy before those elections. I believe he did accomodate them by 0.25% a few times.
You might also recall what happened to interest rates in early '99 prior to the presidential elections, a la Mr. Greeespan's irrational exuberance.
I am a Tea Partier, I talk to a lot of Tea Partiers, and I have never heard this conspiracy theory.
Who are these "Tea Partiers" you speak of?
That's a little like saying there are lots of Republicans who dabbled in witchcraft and oppose masturbation.
Actually they masturbate using witchcraft and oppose dabbling.
rotflmao!
Never have I heard a more succinct description.
I knew you had to be a Closet Liberal.
Whack off........people who have no clue,and judge others motives, and hearts,especially when they really give a shit, is beyond the pale.