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

Tyler Durden's picture

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) Leaving the Board," 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) Leaving the Board." 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? Leaving the Board" 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) Leaving the Board," working paper. San Diego: University of California, San Diego, August (revised October).

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

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

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John McCloy's picture

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 mighty maximiza's picture

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

scatterbrains's picture

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's picture

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

bada boom's picture

Ben is acting in his shareholders best interest.

Cognitive Dissonance's picture

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's picture

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

LowProfile's picture

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

OK, here you go:

Buy gold.  Lots of it.

dlmaniac's picture

"Too low inflation."

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

Cognitive Dissonance's picture

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's picture

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's picture

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's picture

“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's picture

 

I wish someone would throw a shoe at him.

still kicking's picture

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's picture

Do they make Kosher shoes?

potatomafia's picture

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

stollcri's picture

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's picture

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's picture

F&cking madman needs to be arrested for treason

SteveNYC's picture

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's picture

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's picture

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

eigenvalue's picture

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 counting's picture

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

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

 

Sudden Debt's picture

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

Catullus's picture

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's picture

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

Catullus's picture

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's picture

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's picture

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

Jake Green's picture

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's picture

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's picture

Shiny Yellow Stuuf, Female Dogs.

akak's picture

Element #79, Females of loose morals!

Spartan's picture

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

Dapper Dan's picture

Chart caption: Good morning Woody!

Cognitive Dissonance's picture

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's picture

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

So much for the gold/eur explosion

GoinFawr's picture

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

Cognitive Dissonance's picture

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

Hansel's picture

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's picture

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's picture

Sampled the first 13.  

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

The rest, not so much.

jbc77's picture

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

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

 

Sudden Debt's picture

Benny B. takes the dice...

AND THROWS LADIES AND GENTLEMEN!!!

 

SNAKE EYES!!!

eigenvalue's picture

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