Gold Explodes After Bernanke Gives QE2 Green Light: "Sees Case For Further Action" (Full Gospel Included)

More broken gospel from the Central Bank of faith and hope, as gold surges, despite what anti-gold bugs out there preach day in and out:

• Fed's Bernanke says sees case for further action with too low inflation
• Fed's Bernanke says Fed could buy assets, alter statement
• Fed's Bernanke says hard to determine pace, size of any purchases, must weigh costs, benefits in deciding how aggressive to be
• Fed's Bernanke says Fed has tools to ease when rates near zero, earlier bond-buying was successful in lowering long-term rates
• Fed's Bernanke says risk deflation is higher than desirable, unemployment clearly too high
• Fed's Bernanke says at current rates of inflation, short-term real interest rates are too high
• Fed's Bernanke says unemployment to decline slowly, prolonged high unemployment would pose risk to sustainability of recovery

Full speech:

Chairman Ben S. Bernanke

At the Revisiting Monetary Policy in a
Low-Inflation Environment Conference, Federal Reserve Bank of Boston,
Boston, Massachusetts

October 15, 2010

Monetary Policy Objectives and Tools in a Low-Inflation Environment

The topic of this conference--the formulation and conduct of
monetary policy in a low-inflation environment--is timely indeed. From
the late 1960s until a decade or so ago, bringing inflation under
control was viewed as the greatest challenge facing central banks around
the world. Through the application of improved policy frameworks,
involving both greater transparency and increased independence from
short-term political influences, as well as through continued focus and
persistence, central banks have largely achieved that goal. In turn, the
progress against inflation increased the stability and predictability
of the economic environment and thus contributed significantly to
improvements in economic performance, not least in many emerging market
nations that in previous eras had suffered bouts of very high inflation.
Moreover, success greatly enhanced the credibility of central banks'
commitment to price stability, and that credibility further supported
stability and confidence. Retaining that credibility is of utmost
importance.

Although the attainment of price stability after a period of
higher inflation was a landmark achievement, monetary policymaking in an
era of low inflation has not proved to be entirely straightforward. In
the 1980s and 1990s, few ever questioned the desired direction for
inflation; lower was always better. During those years, the key
questions related to tactics: How quickly should inflation be reduced?
Should the central bank be proactive or "opportunistic" in reducing
inflation? As average inflation levels declined, however, the issues
became more complex. The statement of the Federal Open Market Committee
(FOMC) following its May 2003 meeting was something of a watershed, in
that it noted that, in the Committee's view, further disinflation would
be "unwelcome." In other words, the risks to price stability had become
two-sided: With inflation close to levels consistent with price
stability, central banks, for the first time in many decades, had to
take seriously the possibility that inflation can be too low as well as
too high.

A second complication for policymaking created by low inflation
arises from the fact that low inflation generally implies low nominal
interest rates, which increase the potential relevance for policymaking
of the zero lower bound on interest rates. Because the short-term policy
interest rate cannot be reduced below zero, the Federal Reserve and
central banks in other countries have employed nonstandard policies and
approaches that do not rely on reductions in the short-term interest
rate. We are still learning about the efficacy and appropriate
management of these alternative tools.

In the remainder of my remarks I will discuss these issues in the
context of current economic and policy developments. I will comment on
the near-term outlook for economic activity and inflation. I will then
compare that outlook to some quantitative measures of the Federal
Reserve's objectives, namely, the longer-run outcomes that FOMC
participants judge to be most consistent with its dual mandate of
maximum employment and price stability. Finally, I will observe that, in
a world in which the policy interest rate is close to zero, the
Committee must consider the costs and risks associated with the use of
nonconventional tools when it assesses whether additional policy
accommodation is likely to be beneficial on net.

The Outlook for Growth and Employment
The arbiters across the river in Cambridge, the business cycle
dating committee of the National Bureau of Economic Research, recently
made their determination: An economic recovery began in the United
States in July 2009, following a series of forceful actions by central
banks and other policymakers around the world that helped stabilize the
financial system and restore more-normal functioning to key financial
markets. The initial upturn in activity, which was reasonably strong,
reflected a number of factors, including efforts by firms to better
align their inventories with their sales, expansionary monetary and
fiscal policies, improved financial conditions, and a pickup in export
growth. However, factors such as fiscal policy and the inventory cycle
can provide only a temporary impetus to recovery. Sustained expansion
must ultimately be driven by growth in private final demand, including
consumer spending, business and residential investment, and net exports.
That handoff is currently under way. However, with growth in private
final demand having so far proved relatively modest, overall economic
growth has been proceeding at a pace that is less vigorous than we would
like.

In particular, consumer spending has been inhibited by the
painfully slow recovery in the labor market, which has restrained growth
in wage income and has raised uncertainty about job security and
employment prospects. Since June, private-sector employers have added,
on net, an average of only about 85,000 workers per month--not enough to
bring the unemployment rate down significantly.

Consumer spending in the quarters ahead will depend importantly
on the pace of job creation but also on households' ability to repair
their financial positions. Some progress is being made on this front.
Saving rates are up noticeably from pre-crisis levels, and household
assets have risen, on net, over recent quarters, while debt and debt
service payments have declined markedly relative to income.¹ Together
with expected further easing in credit terms and conditions offered by
lenders, stronger balance sheets should eventually provide households
the confidence and the wherewithal to increase their pace of spending.
That said, progress has been and is likely to be uneven, as the process
of balance sheet repair remains impeded to some extent by elevated
unemployment, lower home values, and limited ability to refinance
existing mortgages.

Household finances and attitudes also have an important influence
on the housing market, which has remained depressed, notwithstanding
reduced house prices and record-low mortgage rates. The overhang of
foreclosed properties and vacant homes remains a significant drag on
house prices and residential investment.

In the business sector, indicators such as new orders and
business sentiment suggest that growth in spending on equipment and
software has slowed relative to its rapid pace earlier this year.
Investment in nonresidential structures continues to contract,
reflecting stringent financing conditions and high vacancy rates for
commercial real estate. The availability of credit to finance investment
and expand business operations remains quite uneven: Generally
speaking, large firms in good financial condition can obtain credit in
capital markets easily and on favorable terms. Larger firms also hold
considerable amounts of cash on their balance sheets. By contrast,
surveys and anecdotes indicate that bank-dependent smaller firms
continue to face significantly greater problems in obtaining credit,
reflecting in part weaker balance sheets and income prospects that limit
their ability to qualify for loans as well as tight lending standards
and terms on the part of banks. The Federal Reserve and other banking
regulators have been making significant efforts to improve the credit
environment for small businesses, and we have seen some positive signs.
In particular, banks are no longer tightening lending standards and
terms and are reportedly becoming more proactive in seeking out
creditworthy borrowers.

Although the pace of recovery has slowed in recent months and is
likely to continue to be fairly modest in the near term, the
preconditions for a pickup in growth next year remain in place. Stronger
household finances, a further easing of credit conditions, and pent-up
demand for consumer durable goods should all contribute to a somewhat
faster pace of household spending. Similarly, business investment in
equipment and software should grow at a reasonably rapid pace next year,
driven by rising sales, an ongoing need to replace obsolete or worn-out
equipment, strong corporate balance sheets, and low financing costs. In
the public sector, the tax receipts of state and local governments have
started to recover, which should allow their spending to stabilize
gradually. The contribution of federal fiscal stimulus to overall growth
is expected to decline steadily over coming quarters but not so quickly
as to derail the recovery. Continued solid expansion among the
economies of our trading partners should also help to support foreign
sales and growth in the United States.

Although output growth should be somewhat stronger in 2011 than
it has been recently, growth next year seems unlikely to be much above
its longer-term trend. If so, then net job creation may not exceed by
much the increase in the size of the labor force, implying that the
unemployment rate will decline only slowly. That prospect is of central
concern to economic policymakers, because high rates of
unemployment--especially longer-term unemployment--impose a very heavy
burden on the unemployed and their families. More broadly, prolonged
high unemployment would pose a risk to consumer spending and hence to
the sustainability of the recovery.

The Outlook for Inflation
Let me turn now to the outlook for inflation. Generally speaking,
measures of underlying inflation have been trending downward. For
example, so-called core PCE price inflation (which is based on the
broad-based price index for personal consumption expenditures and
excludes the volatile food and energy components of the overall index)
has declined from approximately 2.5 percent at an annual rate in the
early stages of the recession to an annual rate of about 1.1 percent
over the first eight months of this year. The overall PCE price
inflation rate, which includes food and energy prices, has been highly
volatile in the past few years, in large part because of sharp
fluctuations in oil prices. However, so far this year the overall
inflation rate has been about the same as the core inflation rate.

The significant moderation in price increases has been widespread
across many categories of spending, as is evident from various measures
that exclude the most extreme price movements in each period. For
example, the so-called trimmed mean consumer price index (CPI) has risen
by only 0.9 percent over the past 12 months, and a related measure, the
median CPI, has increased by only 0.5 percent over the same period.² 

The decline in underlying inflation importantly reflects the
extent to which cost pressures have been restrained by substantial slack
in the utilization of productive resources. Notably, the unemployment
rate remains fairly close to last fall's peak and is currently about 5
percentage points above the rates that prevailed just before the onset
of the financial crisis.

In gauging the magnitude of prevailing resource slack and the
associated restraint on price and wage increases, it is essential to
consider the extent to which structural factors may be contributing to
elevated rates of unemployment. For example, the continuing high level
of permanent job losers may be a sign that structural impediments--such
as barriers to worker mobility or mismatches between the skills that
workers have and the ones that employers require--are hindering
unemployed individuals from finding new jobs. The recent behavior of
unemployment and job vacancies--somewhat more vacancies are reported
than would usually be the case given the number of people looking for
work--is also suggestive of some increase in the level of structural
unemployment. On the other hand, we see little evidence that the
reallocation of workers across industries and regions is particularly
pronounced relative to other periods of recession, suggesting that the
pace of structural change is not greater than normal. Moreover, previous
post-World-War-II recessions do not seem to have resulted in higher
structural unemployment, which many economists attribute to the relative
flexibility of the U.S. labor market. Overall, my assessment is that
the bulk of the increase in unemployment since the recession began is
attributable to the sharp contraction in economic activity that occurred
in the wake of the financial crisis and the continuing shortfall of
aggregate demand since then, rather than to structural factors.³ 

The public's expectations for inflation also importantly
influence inflation dynamics. Indicators of longer-term inflation
expectations have generally been stable in the wake of the financial
crisis. For example, in the Federal Reserve Bank of Philadelphia's
Survey of Professional Forecasters, the median projection for the annual
average inflation rate for personal consumption expenditures over the
next 10 years has remained close to 2 percent. Surveys of households
likewise show that longer-term inflation expectations have been
relatively stable. In the financial markets, measures of inflation
compensation at longer horizons (computed from the spread between yields
on nominal and inflation-indexed Treasury securities) have moved down,
on net, this year but remain within their historical ranges. With
long-run inflation expectations stable and with substantial resource
slack continuing to restrain cost pressures, it seems likely that
inflation trends will remain subdued for some time.

The Objectives of Monetary Policy
To evaluate policy alternatives and explain policy choices to the
public, it is essential not only to forecast the economy, but to
compare that forecast to the objectives of policy. Clear communication
about the longer-run objectives of monetary policy is beneficial at all
times but is particularly important in a time of low inflation and
uncertain economic prospects such as the present. Improving the public's
understanding of the central bank's policy strategy reduces economic
and financial uncertainty and helps households and firms make
more-informed decisions. Moreover, clarity about goals and strategies
can help anchor the public's longer-term inflation expectations more
firmly and thereby bolsters the central bank's ability to respond
forcefully to adverse shocks.⁴ 

The Federal Reserve has a statutory mandate to foster maximum
employment and price stability, and explaining how we are working toward
those goals plays a crucial role in our monetary policy strategy. It is
evident that neither of our dual objectives can be taken in isolation:
On the one hand, a central bank that aimed to achieve the highest
possible level of employment in the short run, without regard to other
considerations, might well generate unacceptable levels of inflation
without any permanent benefits in terms of employment. On the other
hand, a single-minded focus by the central bank on price stability, with
no attention at all to other factors, could lead to more frequent and
deeper slumps in economic activity and employment with little benefit in
terms of long-run inflation performance.

Recognizing the interactions between the two parts of our
mandate, the FOMC has found it useful to frame our dual mandate in terms
of the longer-run sustainable rate of unemployment and the mandate-consistent inflation rate.
The longer-run sustainable rate of unemployment is the rate of
unemployment that the economy can maintain without generating upward or
downward pressure on inflation. Because a healthy economy must allow for
the destruction and creation of jobs, as well as for movements of
workers between jobs and in and out of the labor force, the longer-run
sustainable rate of unemployment is greater than zero. Similarly, the
mandate-consistent inflation rate--the inflation rate that best promotes
our dual objectives in the long run--is not necessarily zero; indeed,
Committee participants have generally judged that a modestly positive
inflation rate over the longer run is most consistent with the dual
mandate. (The view that policy should aim for an inflation rate modestly
above zero is shared by virtually all central banks around the world.)
Several rationales can be provided for this judgment, including upward
biases in the measurement of inflation. A rationale that is particularly
relevant today is that maintaining an "inflation buffer" (that is, an
average inflation rate greater than zero) allows for a somewhat higher
average level of nominal interest rates, which in turn gives the Federal
Reserve greater latitude to reduce the target federal funds rate when
needed to stimulate increased economic activity and employment. A
modestly positive inflation rate also reduces the probability that the
economy could fall into deflation, which under some circumstances can
lead to significant economic problems.

Although attaining the long-run sustainable rate of unemployment
and achieving the mandate-consistent rate of inflation are both key
objectives of monetary policy, the two objectives are somewhat different
in nature. Most importantly, whereas monetary policymakers clearly have
the ability to determine the inflation rate in the long run, they have
little or no control over the longer-run sustainable unemployment rate,
which is primarily determined by demographic and structural factors, not
by monetary policy. Thus, while central bankers can choose the value of
inflation they wish to target, the sustainable unemployment rate can
only be estimated, and is subject to substantial uncertainty. Moreover,
the sustainable rate of unemployment typically evolves over time as its
fundamental determinants change, whereas keeping inflation expectations
firmly anchored generally implies that the inflation objective should
remain constant unless there are compelling technical reasons for
changing it, such as changes in the methods used to measure inflation.

In recent years, the Federal Reserve has taken important steps to
more clearly communicate its outlook and longer-run objectives. Since
the fall of 2007, the Federal Reserve has been publishing the "Summary
of Economic Projections" (SEP) four times a year in conjunction with the
FOMC minutes. The SEP provides summary statistics and an accompanying
narrative regarding the projections of FOMC participants--that is, the
Board members and the Reserve Bank presidents--for the growth rate of
real gross domestic product (GDP), the unemployment rate, core
inflation, and headline inflation over the next several calendar years.
Since early 2009, the SEP has also included information about FOMC
participants' longer-run projections for the rates of economic growth,
unemployment, and inflation to which the economy is expected to converge
over time, in the absence of further shocks and under appropriate
monetary policy. Because appropriate monetary policy, by definition, is
aimed at achieving the Federal Reserve's objectives in the longer run,
FOMC participants' longer-run projections for economic growth,
unemployment, and inflation may be interpreted, respectively, as
estimates of the economy's longer-run potential growth rate, the
longer-run sustainable rate of unemployment, and the mandate-consistent
rate of inflation.

The most recent release of the SEP was in June, and I will refer
to those projections here, noting that new projections will be released
with the minutes of the next FOMC meeting, in early November.

The longer-run inflation projections in the SEP indicate that
FOMC participants generally judge the mandate-consistent inflation rate
to be about 2 percent or a bit below. In contrast, as I noted earlier,
recent readings on underlying inflation have been approximately 1
percent. Thus, in effect, inflation is running at rates that are too low
relative to the levels that the Committee judges to be most consistent
with the Federal Reserve's dual mandate in the longer run. In
particular, at current rates of inflation, the constraint imposed by the
zero lower bound on nominal interest rates is too tight (the short-term
real interest rate is too high, given the state of the economy), and
the risk of deflation is higher than desirable. Given that monetary
policy works with a lag, the more relevant question is whether this
situation is forecast to continue. In light of the recent decline in
inflation, the degree of slack in the economy, and the relative
stability of inflation expectations, it is reasonable to forecast that
underlying inflation--setting aside the inevitable short-run
volatility--will be less than the mandate-consistent inflation rate for
some time. Of course, forecasts of inflation, as of other key economic
variables, are uncertain and must be regularly updated with the arrival
of new information.

As of June, the longer-run unemployment projections in the SEP
had a central tendency of about 5 to 5-1/4 percent--about 1/4 percentage
point higher than a year earlier--and a couple of participants'
projections were even higher at around 6 to 6-1/4 percent. The evolution
of these projections and the diversity of views reflect the
characteristics that I noted earlier: The sustainable rate of
unemployment may vary over time, and estimates of its value are subject
to considerable uncertainty. Nonetheless, with an actual unemployment
rate of nearly 10 percent, unemployment is clearly too high
relative to estimates of its sustainable rate. Moreover, with output
growth over the next year expected to be only modestly above its
longer-term trend, high unemployment is currently forecast to persist
for some time.

Monetary Policy Tools: Benefits and Costs
Given the Committee's objectives, there would appear--all else
being equal--to be a case for further action. However, as I indicated
earlier, one of the implications of a low-inflation environment is that
policy is more likely to be constrained by the fact that nominal
interest rates cannot be reduced below zero. Indeed, the Federal Reserve
reduced its target for the federal funds rate to a range of 0 to 25
basis points almost two years ago, in December 2008. Further policy
accommodation is certainly possible even with the overnight interest
rate at zero, but nonconventional policies have costs and limitations
that must be taken into account in judging whether and how aggressively
they should be used.

For example, a means of providing additional monetary stimulus,
if warranted, would be to expand the Federal Reserve's holdings of
longer-term securities.⁵ Empirical
evidence suggests that our previous program of securities purchases was
successful in bringing down longer-term interest rates and thereby
supporting the economic recovery.⁶ A similar program conducted by the Bank of England also appears to have had benefits.

However, possible costs must be weighed against the potential
benefits of nonconventional policies. One disadvantage of asset
purchases relative to conventional monetary policy is that we have much
less experience in judging the economic effects of this policy
instrument, which makes it challenging to determine the appropriate
quantity and pace of purchases and to communicate this policy response
to the public. These factors have dictated that the FOMC proceed with
some caution in deciding whether to engage in further purchases of
longer-term securities.

Another concern associated with additional securities purchases
is that substantial further expansion of the balance sheet could reduce
public confidence in the Fed's ability to execute a smooth exit from its
accommodative policies at the appropriate time. Even if unjustified,
such a reduction in confidence might lead to an undesired increase in
inflation expectations, to a level above the Committee's inflation
objective. To address such concerns and to ensure that it can withdraw
monetary accommodation smoothly at the appropriate time, the Federal
Reserve has developed an array of new tools.⁷ With
these tools in hand, I am confident that the FOMC will be able to
tighten monetary conditions when warranted, even if the balance sheet
remains considerably larger than normal at that time.

Central bank communication provides additional means of
increasing the degree of policy accommodation when short-term nominal
interest rates are near zero. For example, FOMC postmeeting statements
have included forward policy guidance since December 2008, and the most
recent statements have reflected the FOMC's anticipation that
exceptionally low levels of the federal funds rate are likely to be
warranted "for an extended period," contingent on economic conditions. A
step the Committee could consider, if conditions called for it, would
be to modify the language of the statement in some way that indicates
that the Committee expects to keep the target for the federal funds rate
low for longer than markets expect. Such a change would presumably
lower longer-term rates by an amount related to the revision in policy
expectations. A potential drawback of using the FOMC's statement in this
way is that, at least without a more comprehensive framework in place,
it may be difficult to convey the Committee's policy intentions with
sufficient precision and conditionality. The Committee will continue to
actively review its communications strategy with the goal of providing
as much clarity as possible about its outlook, policy objectives, and
policy strategies.

Conclusion
In short, there are clearly many challenges in communicating and
conducting monetary policy in a low-inflation environment, including the
uncertainties associated with the use of nonconventional policy tools.
Despite these challenges, the Federal Reserve remains committed to
pursuing policies that promote our dual objectives of maximum employment
and price stability. In particular, the FOMC is prepared to provide
additional accommodation if needed to support the economic recovery and
to return inflation over time to levels consistent with our mandate. Of
course, in considering possible further actions, the FOMC will take
account of the potential costs and risks of nonconventional policies,
and, as always, the Committee's actions are contingent on incoming
information about the economic outlook and financial conditions.

References
Barnichon, Regis, and Andrew Figura (2010). "What Drives Movements in the Unemployment Rate? A Decomposition of the Beveridge Curve," Finance and Economics Discussion Series 2010-48. Washington: Board of Governors of the Federal Reserve System, August.

Bernanke, Ben (2007). "Federal Reserve Communications," speech delivered at the Cato Institute 25th Annual Monetary Conference, Washington, November 14.

Bernanke, Ben (2010a). "The Economic Outlook and Monetary Policy,"
speech delivered at "Macroeconomic Challenges: The Decade Ahead," a
symposium sponsored by the Federal Reserve Bank of Kansas City, held in
Jackson Hole, Wyo., August 26-28.

Bernanke, Ben (2010b). "Monetary Policy Report to the Congress," statement before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, July 21.

D'Amico, Stefania, and Thomas B. King (2010). "Flow and Stock Effects of Large-Scale Treasury Purchases," Finance and Economics Discussion Series 2010-52. Washington: Board of Governors of the Federal Reserve System, September.

Dickens, William T. (2009). "A New Method for Estimating Time
Variation in the NAIRU," in Jeff Fuhrer, Jane S. Little, Yolanda K.
Kodrzycki, and Giovanni P. Olivei, eds., Understanding Inflation and the Implications for Monetary Policy: A Phillips Curve Retrospective. Cambridge, Mass.: MIT Press, pp. 205-28.

Dowling, Thomas, Marcello Estevão, and Evridiki Tsounta (2010). "The Great Recession and Structural Unemployment (1.3 MB PDF) ," in International Monetary Fund Country Report, 10-248. Washington: IMF, July, pp. 4-13.

Fleischman, Charles, and John M. Roberts (2010). "A Multivariate
Estimate of Trends and Cycles," unpublished paper, Board of Governors of
the Federal Reserve System, Division of Research and Statistics, May.

Fujita, Shigeru (forthcoming). "Economic Effects of the Unemployment Insurance Benefit (196 KB PDF) ." Federal Reserve Bank of Philadelphia, Business Review.

Gagnon, Joseph, Matthew Raskin, Julie Remache, and Brian Sack (2010). "Large-Scale Asset Purchases by the Federal Reserve: Did They Work? " Staff Report No. 441. New York: Federal Reserve Bank of New York, March.

Hamilton, James D., and Jing (Cynthia) Wu (2010). "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment (615 KB PDF) ," working paper. San Diego: University of California, San Diego, August (revised October).

Kuang, Katherine, and Rob Valletta (2010). "Extended Unemployment and UI Benefits ," Federal Reserve Bank of San Francisco, FRBSF Economic Letter, 2010-10, April 19.

Lindner, John, and Murat Tasci (2010). "Has the Beveridge Curve Shifted? " Federal Reserve Bank of Cleveland, Economic Trends, August 10.

Comments

[John McCloy]

Ben QE 2 is nonsense. Are you really going to transfer more wealth to thieves?

You want inflation then just  send each family a check for 100k.

[the not so migh...]

BINGO!!!!!!!!  Its not that complicated to create inflation.

[scatterbrains]

Would someone with chart posting privledges mind posting and interpreting the gold chart in the link below for me ?

thanks my peepols

http://ttheory.typepad.com/files/sanjeevltgold-adjusted.pdf

[caconhma]

Ben is an incompetent idiot. He is about to destabilize US political environment and social stability. The consequences? Only God knows.

[bada boom]

Ben is acting in his shareholders best interest.

[Cognitive Dissonance]

It is sometimes more comforting to think of someone as incompetent than to ackonwledge that their actions are malicious and deliberate, thus infinitely more dangerous to you and your worldview.

[bada boom]

Sometimes it is best to pick a fool to do your nasty deeds.

[LowProfile]

Do you really need someone else to interpret that for you?

OK, here you go:

Buy gold.  Lots of it.

[dlmaniac]

"Too low inflation."

Translate: Too frustrated that I'm not able to steal your money fast enough.

[Cognitive Dissonance]

Translate: Too frustrated that I'm not able to steal your money fast enough.

Or maybe too frustrated that they might not be able to keep the Ponzi going long enough to steal all that we own. Remember, it's not the "money" they want to steal, but what our money has "bought" that they wish to (re)posses.

Money can be printed, tangible assets can not.

[Sudden Debt]

only a 100K?

Why not 880K? Or only if you have 9 kids?

better take out that old black book and make some calls, you knever know if you have more offspring walking arround without knowing :)

[CulturalEngineer]

The Fed and QEII specifically are welfare for the rich... that'll do nothing for everyone else except further destroy what's was left of the rule of law and faith in government...

All to protect an unsustainable Wall Street centric status-quo...

The only defense they can assert... and its a fair one... is that "all we have is a hammer so we use it!"...

And we have that situation because the political class has long abandoned any concern for responsible law and regulation in favor of campaign contributors who are reaping the fruits of their corruption... THIS is the BIG welfare that's been going on for the last few decades.

What's truly sad is that Authoritarianism has a long history and the theft and corruption of good self-government by those entrusted with leadership imperils the slow gains made by the common man since the birth of the Enlightenment

Personal Democracy: Disruption as an Enlightenment Essential

http://culturalengineer.blogspot.com/2010/06/personal-democracy-disrupti...

[JR]

“The Fed and QEII specifically are welfare for the rich...that'll do nothing for everyone else except further destroy what was left of the rule of law and faith in government...” - CulturalEngineer

“The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again.” –  Sir Josiah Stamp (1880-1941) President of the Bank of England in the 1920's, the second richest man in Britain

“If two parties, instead of being a bank and an individual, were an individual and an individual, they could not inflate the circulating medium by a loan transaction, for the simple reason that the lender could not lend what he didn’t have, as banks can do…

“Only commercial banks and trust companies can lend money that they manufacture by lending it.” – Professor Irving Fisher, 100% Money (1935)

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.” – John Kenneth Galbraith, Money, Whence It Came, Where It Went – 1975, p15

[Apophis]

I wish someone would throw a shoe at him.

[still kicking]

maybe if that shoe was the size of a small grapefruit and came with a metal pin you pulled out before you tossed it and it went boom when it landed.

[oddjob]

Do they make Kosher shoes?

[potatomafia]

Yes, but that would mean that each family is not enslaved to the 100K in debt... 

[stollcri]

He can't really do that can he? The legislature would be the ones to do that sort of thing, right?

Fiscal policy might be a better tool than monetary policy, but unfortunately fiscal policy is in the hands of the politicians. The politicians would rather shout at the Fed for screwing things up than actually doing anything for fear of not getting reelected.

I give Dr. Bernanke credit. The ship is sinking and no one wants to do anything for fear of being blamed; he steps up and does what he can, even if he knows there are others who would be more suited to the task at hand.

[Troublehoff]

You want inflation then just  send each family a check for 100k.

But he wants stagflation. Mortal people's standard of living must fall for all of this to work and their pensions and paycheques  must make nominal gains so everything looks tickety-boo :)

[HelluvaEngineer]

F&cking madman needs to be arrested for treason

[SteveNYC]

Agreed, this guy just has no fuckin clue. When/if people actually catch on to the fact that all QE2 is is merely a wealth transfer mechanism from the many to the few, than it's all over the for Fed and EVERY politician that has endorsed this lunacy.

Printing money to get the slaves back to work....for less. Change you can believe in.

[Assetman]

Steve... I very much agree on the weath transfer sentiment.  We are all essentially being taxed in order for the benefit of adding reserves to the banking system, and of course, provide a way for his friend Timmy to cheaply monetize Federal debt.

But don't think for a minute that Bernanke has lost a clue.  He knows exactly what he's doing and why he's doing it-- he probably even knows in the long run it isn't going to work.  Stealing from the masses to provide artificially low rates is really good for the segment of the population Bernanke serves.  You may not like it.  I may not like it.  But, we elected professional politicians that approved his re-nomination.

[Jake Green]

I concur. Ben has just condemned billions of people to hardship and despair.

[eigenvalue]

No, Bennie is a good man. Without him, you will never have life opportunity in precious metals and agriculture products.

Hail, Bennie the Magnificent!!!

[101 years and c...]

Inflation is too fucking low?  What a worthless piece of shit.

PPI was .4% in Aug and .4% in Sept.

[Sudden Debt]

he means that inflation isn't up to 10.000% yet.

[Catullus]

Added Bernanke: "We simply are not seeing the results in the numbers we plug into our models that we're robbing the middle class at an acceptable rate as determined by my fellow Keynesian navel gazers."

[cossack55]

"we plug into our models".  Road to Roota?

[Catullus]

If they saw a greater increase in their models, then social security might have given a cola increase.

Nope now it "not enough inflation to give cola" and "we're committed to higher inflation". So maybe my above statement was wrong. It's nor just middle class, it's pensioneers and people on the dole.

[Dr. No]

COLA doesnt matter.  Pelosi is introducing a bill to give SS receipients a $250 check to make up for COLA.  The government is imploding; they dont even trust themselves anymore.

[cossack55]

Gonna get a bottle of Dom just for this assholes air dance party. Yippee. 

[Jake Green]

Yeah, the hookers and blow dealers are celebrating as we speak - the bankers just had their 2011 bonuses guaranteed by the bald one.

[I need more cowbell]

No bigger gold bug than I, purely defensive play to defend some semblence of value, but your headline should read gold explodes relative to dollar. Other non -dollar pegged fiats, not so much.

[Troublehoff]

Shiny Yellow Stuuf, Female Dogs.

[Pituary Retard]

Spell Check: "Doggz"

[akak]

Element #79, Females of loose morals!

[Spartan]

The Fed should just buy Oil futures directly that would get inflation moving....

[hedgeless_horseman]

That is a bingo!

[Troublehoff]

I'm pretty sure they are

[Dapper Dan]

Chart caption: Good morning Woody!

[Cognitive Dissonance]

And just as quickly the price of Gold hits prior resistance and immediately goes flaccid, then drops further.

I suspect all those stealth disavowed Gold sell programs were primed in anticipation of this speech. Can't have Gold going parabolic when Bernanke is blessing QE 2 thru 10.

[Abiggs]

C:\Documents and Settings\bloomberg\Local Settings\Temp\Bloomberg\Temp\bfm394.gif

So much for the gold/eur explosion

[GoinFawr]

I think you may be lacking image posting privileges there Abiggs...

[Cognitive Dissonance]

Yeah, but now we know where he keeps all the good stuff on his computer. Begin operation "hack Abiggs".

[Hansel]

Hooray for dumbasses with an econ phd.  Now people just need to stop selling him assets for his made-from-thin-air digital chits.

[Steak]

Hansel, forgive me for jumping on your space here.  If you object I will accept the challenge of a walk-off :D

i have a feeling that something appealing to mainstream tastes will not be terribly appealing to folks here.  well this is the chance to put that to the test: a playlist inspired from my little sister's itunes.  i present a grab bag of jam bands, hipster rock, sad songs, old songs and rap.

coisas da irmã (a playlist): http://www.youtube.com/view_play_list?p=B66475A34C59B734

[MsCreant]

Sampled the first 13.  

passion pit-sleepy head. Me likes. Trippy. Listened to the whole song.

The rest, not so much.

[jbc77]

Golds not explodding....it's down isn't it?

Dollar doesn't seem to be plunging.....yet.

[Sudden Debt]

Benny B. takes the dice...

AND THROWS LADIES AND GENTLEMEN!!!

SNAKE EYES!!!

[eigenvalue]

Gold and silver are down and hit the intraday low!!

[SamuelMaverick]

This statement lost all credibility when it stated that inflation was calculated excluding food and energy components.  This is fucking laughable.  Food and energy commodities are shooting to the moon and are soon to crush the middle class and fixed income earners ( retired and welfare ).  Ben is equating credit destruction with deflation, and showed who he truly serves, TPTB.  Their policies will crush the average Americans purchasing power, but will keep their 401K's looking healthy in inflated dollars. These guys are criminals.   Yours, Maverick 

[GoinFawr]

Indeud.

BB over dinner:

"Inflation? There's no inflation, M3 is shrinking (well, it was anyway) dontcha know. Oh, you mean price inflation... whatever, it's irrelevant because we don't talk publicly about M3 anymore (first few rules of Trite Club and all that); go ask Mish, he'll tell you all we want you to know.

Ahhh, another glass of that XEOXEOXXOO Cognac if you please, LLoyd. Hahahaha! Look how the Canadians are making ol' Carney dance, poor sod! Give 'em hell Markus..."

Regards

[TheGreatPonzi]

What's the point of gold spikes if JPM comes to crush them seconds after?

[MsCreant]

Explodus interuptus.

[Cognitive Dissonance]

I suspect in a few months time this....um....softness will be viewed as premature explodus interuptus because the blood rush into Gold will continue with little thought to this momentary.....er....problem of flaccidity.

[MsCreant]

Not too flaccid in the big picture, Cog Dis. I say it is performing quite well. 

[akak]

No real flacidity showing today at all --- just slightly less turgidity.

[Sudden Debt]

Cancelling all sell orders :)

Let's ride EVERYTHING up BITCHEZ!!!!

R A L L Y !!!!!!!!

[eigenvalue]

Rally? You mean dollar rally?

By and by, do you sell options on you? I suddenly have the impulse to short you...

[Sudden Debt]

:)

You'd lose that bet my friend :)

[Minion]

Lol.  Consider him a contrary indicator.  :D

[Cvillian]

Temporary sell on news. While bullish on gold longer term, this move is admittedly due for a pause if not pullback.

[unum mountaineer]

dip?

[unum mountaineer]

dip?

[schoolsout]

kerplunk

[underh20]

When does it stop and when do we get "sell the news"?

[Cdad]

Today, I think.  The FX market has turned.

[bada boom]

Turned, which way?

[Minion]

Corrected, yes, but higher highs and higher lows only on the 5 minute DX chart.  We'll see.  ;)

[nmewn]

9:31 Eastern.

[nmewn]

Ok...I was an hour off...LOL.

[lbrecken]

This man should be taken away with a straight jacket.  PPI is running over 4% already yet that rigged CPI is almost flat so either margins are getting creamed or CPI is a fraud cause commodity prices which the govt has no control over are rising double digits for sure.

[Cognitive Dissonance]

When you can't control the item, control how that item is viewed or perceived.

Que the Bureau of Lies and Statistics.

Psyops/Propaganda 101

[jbc77]

Looks like gold & silvy are trying to scrape off the morning lows. Meeting some resistence though. One would have assumed after Ben opened his mouth they would have went on a moonshot.

[JLee2027]

Buy on rumor, sell on news. QE2 was already priced in. When Ben announced it in his speech - time to sell.

However, the Bull is so strong when POMO hits later today it may reverse again.

[Cognitive Dissonance]

And don't forget POMO next Monday, Wednesday and Friday. They aren't letting go of this stock/bond/kitchen sink pump without a fight.

[wiskeyrunner]

Gold now down. All this excitement has caused everyone to overlook poor ole GE. Good thing they did because there earnings were weak. Ever notice how the Fed always does something on options exp day.

[MrMorden]

Is he just smoking crack to talk about inflation being down?  Fuel up ~15%...food up 15-40%....about the only thing down is housing, and that was overvalued anyway.  Oh well, I guess my gold & silver will keep pace with whatever BS Ben can peddle.

[underh20]

Maybe if they would push some of the RMBS back on the banks, let them take the hit, we could move on and restore confidence in the system.

[razorthin]

asset inflation doesn't seem to count, eventhough it's the most dangerous

even greenspan understood that - of course to give it lip service only.

[Cdad]

Housing/real estate is EXACTLY the deflation he is concerned about.  As well, and as someone else already mentioned this morning, real estate is exactly the point of transfer of wealth the FED is involved in.

[razorthin]

housing still 20% overvalued + currency debasement + wage deflation = fokked

negative interest rates wouldn't change that equation

[reading]

The problem with his view is that housing isn't experiencing deflation it is experiencing reality.  But as they continue to jack the costs of everything else -- as the dumbass from Boston Fed said yesterday they won't be happy til they see inflation in wages (ummm, with a gazillion unemployed people do you really think those that get jobs will get paid more?) -- they will completely annihilate any chance for a recovery to ever take hold.

[Dagny Taggart]

He's still yapping. This is surreal. I feel like I need to shower again. Fiat porn.

[razorthin]

Hyperstagflation.  Nice.  Got my pitchfork polished and guillotine oiled up.

[Goldenballs]

Paper sell in progress.

[espirit]

Too cool to be able to read the speech ahead of Bennie as I am doing now.

ZH is the place to be - Thanks Tyler.

[bada boom]

It was released intentionally to feel out the market.  I bet if there were severe (yes more severe reactions) in the market place they would of claimed that it was the wrong version and given a different scenario later in the day.  Its all a scam.

Or, they release it early so the big boys get first crack at it via ES, currency markets, and other futures.  Either way, its still a scam.

[lbrecken]

Further helecopter Ben (aka bubble ben) is in the tank with this administration as I dont see why the panic unless he is looking at the OBAMA pole numbers.

[Gargamel]

Just so happens the day ben speaks we have low inflation and gold drops(after spiking massively). Buy time.

[dryam]

Does it matter what he says?  He's a lying mother fucker.

[nontaxpayer]

Why are we complaining here, doesn't it play into our hands, we DO have our gold positions, right?

[Sudden Debt]

There are still a lot of crybabies here that didn't step in and waited for a pullback to 900$ to step in :)

The first time I said I was buying gold, I was junked dozens of times.

[Cdad]

Yes, but I think we are complaining because of the massive unintended consequences heading directly towards us.  Watching my gold rise is nice, but it does not bode well for the world my kids are going to have to grow up in.

[magis00]

This. 

[Vergeltung]

yep, that.

[NotApplicable]

Sure, we might have our positions in gold, but we are surrounded by the multitude that doesn't. So, we have to have outlooks larger than ourselves, as we are one of the few with eyes.

[Sudden Debt]

Unless you also take into account the McDonals academy of flipping bugers...

[John McCloy]

Ben is using the " keep them fearing the madman Nixon approach"
The belief by the USSR that that Nixon was a maniac itching to go to war with the communist nations ala his Alger Hess pursuit.

So that is Ben's approach. Any QE would be more symbolic than nuclear. He wants everyone to believe he is a madman.

[Dr. Engali]

I agree with what you say. At some point in time the market is has to call his bluff.

[RobotTrader]

Gold down, not up.

And GOOG is up $57?  AAPL at $305?

When was the last time a gold stock was up $57?

Never.

Any chance of a gold stock price reaching $200?  How about $300?

I doubt it, the Fed will simply not allow it.

[Sudden Debt]

gold is up to 1383.5$/oz +5.9$

[schoolsout]

GOOG is up how many %

I'm sure we could find a gold stock up similar or more %

Are you serious?

[MsCreant]

Desperate.

[Cognitive Dissonance]

Robo has saved her/his most vicious derision for Gold and those who believe Gold will act as a hedge to the insanity.

Strangely, we don't see that ski jump cartoon around here any more. I'm sure when Gold corrects, and it most certainly will, s/he will pull that picture out, dust the cob webs off and post it once again.

[GoinFawr]

And J Bravo will enjoy some short-lived gloating  beneath it.

At least Robo still has had the minerals to stick around and take the gears, I'll give 'er that.

[Internet Tough Guy]

Fed won't allow it? As if the Fed controls things. Short it, robotroll.

[lizzy36]

I hate to be a bitch so early, but you are smarter than this statement:

I doubt it the Fed will simply not allow it.

It is precisely because the Fed will not be able to stop it, because they will have lost control of the situation, that guarantees we will see gold stocks at $500. Given the Feds track record over the last 25 years, why would this time be any different?

Gold is a repudiation of fiat currency and the USD currency in particular.  Does anyone really know what the fallout will be from the repudiation of the worlds reserve currency?

[MayIMommaDogFac...]

When was the last time a gold stock was up $57?

Nice metric.  (wtf)

[ZeroPower]

Word

[H. Perowne]

Sure, and gold was getting "blowtorched" a couple of days ago when it dipped to the 1320s. More shenanigans are ensuing, but I do love the fact that it makes it cheaper for me get my physical fix.

[reading]

You of all people know Gold stocks have easily rallied 10% at a sitting.  Please stop your stupid trolling.  No one cares anymore.  Rally, don't rally the point is what the outcome is not what happens in the next 5 minutes.

[DosZap]

RobotTrader

All I can say is congrats, and what ever you do  with your earnings off this INSANE market, pls make sure their usable.

Seriously scary shit........YOU know the market is held up like a puppet,a few stocks are doing well, and the Fed is doing the rest.We have 16 million Americans screwed, and we have a Banking/Mortgage tsunami par excellance, coming at us like a roller coaster......it will  AFFECT the WORLD..not just us.

Where, do you put your earnings to HOLD onto them, when the Good Ship Bernakelocks sends it over the Falls?.

Serious question...........?

[GoinFawr]

Spoke too soon yet again Robo?

[oh_bama]

Why you guys are so negative about Bernake?

He is a hero!!

• The recession is officially OVER!
• INFLATION was and still is WAY TOO LOW
• More Americans retired early than any other time in the ENTIRE HISTORY!! (According to the BLS)
• STOCKS are close to ALL TIME HIGH
• MORE Young American CHOOSE to go to graduate school after college than any other time in the entire history!! USA is still the most educated country!!

[Dixie Normous]

Crack for breakfast?

[GoinFawr]

Sugar-coated sarcasm flakes I think.

[Sudden Debt]

USA is still the most educated country!!

http://www.teacollection.com/images/GLOBAL-EDUCATION-LEVELS_thumb.jpg

ehe...

[sumo]

A classic ("is France a country?"):

http://www.youtube.com/watch?v=bgs5Ehq_D-I

[Goldenballs]

Graduate school because no jobs.

Retired early because had enough and no jobs.Forgot to mention make sure you retire early before the pension provider goes bankrupt.

Depression not Recession.

Stocks purchased by Government and agencies,nuclear attack on USA stock market still would not go down.

Whole generations have not seen real inflation to know.

You my son are a knob.Get your mental health checked out.

[MsCreant]

Performance artist, not knob.

[Kina]

The manipulators must have had prior news, sitting their waiting.

The CTFC with their pay off to turn the other way.

[razorthin]

sell da news parabolic blow-off?

[Oligarchs Gone Wild]

In honor of today's events, a song has been selected to accompany your reading pleasure.  May I suggest a right click open in new tab option so you can read and listen.  The multimedia experience indeed.

http://www.youtube.com/watch?v=zAlNrtcPCLw

[MsCreant]

Workin'

[trav7777]

gold is selling this "news"...vertical $10+ drop

[eigenvalue]

Gold and silver need to consolidate for a while at the current price. 

[Internet Tough Guy]

Lots of verticals on currencies.

[trav7777]

now an $18 drop...let's see where the support is

[MsCreant]

Come to mommie! Little sister Silver is NOT following.

[bernorange]

A whole lot of volatility going on.

[Siggy]

Every day, wake up, turn on the computer and see S&P futures +8. My shorts are capitulating today. I love Big Brother.

[Sudden Debt]

never go short against Gütenberg

[MayIMommaDogFac...]

Gutenborg...

[ydderf1950]

all he said was everything is fucked so crank up the helo and lets see if we can fuck it up some more

[Kina]

BB decided to blow the balloon up a bit tighter. All aboard, I'm sure you will exit quickly enough when the balloon blows.

[john_connor]

"Fed's Bernanke says Fed could buy assets, alter statement"

Jackson hole redux?  We have already heard this crap before. 

[virgilcaine]

Sell the news.

[Dagny Taggart]

Got it. Ben said "accommodating", Check. = QE2.

"...exploring the costs of alternative policies.." Check. = to infinity

All the rest... we'll be real careful while we do it (to you).

The Fed is the proverbial factory down the street that dumps its toxic sludge into the stream and gives everybody cancer. Ben's policies have given our dollar a malignent cancer, growing quickly as he willingly accelerates the growth of itself. The toxic sludge on the Fed's balance sheet will be passed to the taxpayer on multiple platforms. 

[kfresh]

Pants off parity party... Next stop AUD 1.10

[TheJudge2012]

They kept QE2 doubt alive and built investor open interest pain for GLD around strikes 133 & 134. However, if they drop down to strike 129, there's only 1% difference. 2% difference down to strike 125, 4% diff at strike 124, but max investor pain is at strikes 122 and 123, only 1% difference up from strikes 133 and 134. This is basis yesterday.

[spartan117]

Can't expect anything less from the cabal on a Friday.

[Kina]

Time for the world to institute tarfiffs on US exports. Dont think Japan Europe etc are just going take this too much longer.

[trav7777]

what exports?

[Bob]

Cheap "investment" dollars. 

[MsCreant]

Empty box MBS ponzi investment vehicles. Worthless as soon as you drive them off the lot.

[ZeroPower]

Intellectual capital.

I.E: Warsaw Bourse will have its offering soon, guess who the leads are: sacred combo of JPM, GS, C and UBS thrown in for fun. The co-managers include only 3 Polish banks out of 8 in all.

Well, who says the EU is closed off?

[DosZap]

Trav,

Beat me to it, what Exports, hell, outside of cheap beer, and hookers, white human slave trades, export?.

Been so long since we BUILT anything, I cannot even spell Exsmort any more.

[Real Estate Geek]

Export hookers?  I think not; definitely a balance of trade deficit. 

It's a situation similar to the auto manufacturers; the europeans and asians build the compact models better than we do. 

http://www.smilespedia.com/wp-content/uploads/2008/02/difference_europea...

[Minion]

We export fighter jets, missiles, chemicals, ag products, and AAPL...