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Guest Post: Bernanke’s ‘Cash For Spelunkers’
Submitted by Jed Graham of Investor's Business Daily
Bernanke’s ‘Cash For Spelunkers’
Like “cash for clunkers,” the housing tax credit and other attempts
to provide short-term fuel, the Federal Reserve’s second round of
quantitative easing can only buy a little time to fix what ails the
economy.
Unfortunately, in the prior instances, the short-term fuel led to
short-term complacency about the economic trajectory, leading
policymakers to let down their guard. In the end, all that resulted
was a letdown for the economy.
What’s different about quantitative easing — an effort to lower
market interest rates by bidding up Treasury debt — is that the Fed
has no ability to direct its fire. What’s likely is that much of the
investment capital freed up by Fed purchases of Treasury debt will
overshoot its target — the U.S. economy — and flow to emerging markets
and especially into commodities that serve as a hedge against a
falling dollar.
Hence the “cash for spelunkers” label: The only thing certain to be
stimulated by quantitative easing is mining and, perhaps, other
underground exploration. Already precious metals have seen a big
run-up in prices in advance of further Fed easing, as have industrial
metals, crude oil and agricultural inputs — anything that can hold
value as the Fed prints money.
The downside is that the squeeze from higher commodities prices, both
on businesses facing higher input prices and households seeing little
income growth, is likely to dampen the positive impact of
quantitative easing.
And if the net impact is quite small, then the Fed’s success in inflating asset prices will prove fleeting.
The reason that the Fed is expected to move aggressively is because
Congress is letting its stimulus spending gradually begin to wind
down, even as the economy grows too slowly to keep the jobless rate
from rising further.
But the Fed’s ability to move independently from the political
sphere, even when there’s gridlock in Congress, is a mixed blessing.
The risk is that Fed intervention will take pressure off of the
incoming divided Congress to reach difficult agreements that will
address some of the underlying ills that could sap the recovery.
Not least, of course, is the need to agree on a difficult but
carefully mapped out path back to fiscal sustainability as the
recovery strengthens. Without such a path, Fed money printing could
undermine confidence in the dollar and Congress may hit the fiscal
brakes too abruptly.
It’s no coincidence that the economy began to slow in the spring as
the Fed ended its first round of asset purchases and federal stimulus
hit a peak from which it began to descend. Hopefully we are not
headed for an eventual second round of QE-letdown.
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The Fed has no real power, it's job is to convince all the Lemmings that the helicopters are coming. All the little helicopters(Lemmings) crashed and burned in 2007. All the Fed can do is try and bring the system to it's max capacity before it collapses and liquidates.
"I have suggestion... learn to swim"
The equation always wins the war even though it loses countless battles along the way.... there is no long-term victory against the Truth.
"Federal Reserve’s second round of quantitative easing can only buy a little time to fix what ails the economy."
Correct, all the Fed can do is effect the rate of decline. The collapse and liquidation are still going to occur. The Fed can't make 1+1=3, the Truth always wins... the Lemmings always lose when the final conclusion of the equation comes into view.
math bitchez
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There's the first one.
There's the right one.
And there's the one that got away.
But something tells me that if i stalk this one a little more, i'll get to use my handcuffs.
To whom ever junked me. I apologize if i have offended anyone. I was just making an edgy joke.
Frank, this is fight club. A junking is just a bitch slap to get you going. Take the bait and punch back.
Thanks Goldsaver.
Let the Games Begin.
hard to punch back when in was a stealth junk. Man up to it someone!
Take it as a compliment...
Someday it'll end up with Zimbabwe "Gold For Bread".
dateline: JEKYLL ISLAND, GA
Fed Central Banker Calls For Humility
you can't make this shit up
http://online.wsj.com/article/BT-CO-20101105-713661.html
That's a good thing except "Jumbo Shrimp" comes to mind.
You say that like you're not convinced.
http://www.youtube.com/watch?v=D7ErpFBO7RI
Mako - always enjoy your posts. In your discussions, who are the "lemmings"? Is it the banks, the sheeple, the people, the unprepared, everyone?
Everyone who thinks they can live past next Thursday.
what's up with next thursday?
Actually, it's the 14th I think.
How about this email from Indonesia?
So I guess this is how "spread the wealth" works?
Well da.....more dollars flow to commodities and emerging markets.....that's where I'm invested. I'll enjoy the ride til the whole house of cards fall and hope that I'm out before it does.
Well da
Are you agreeing in Russian, or did you misspell duh?
Just misspelled it, just like I would have misspelled 'misspelled' if you hadn't. I would have dropped the second 's'. Thank God for zerohedge and underground grammarians.
I apologize. Tongue firmly in cheek, just being lighthearted. Mispelled, though? really?
Ya'll made me spit my beer...LMAO
'mispelled' - really, public school education, what can I say? No offense taken, it's Friday and we just pigged out on Indian food - Happy Diwali!
God bless you sir, and enjoy your weekend!
But the Indians are master spellers!?! Or is that racist?
Glenn Beck is on with his hypothetical 15-day countdown.
1. Wednesday: China says no more bonds.
2. Thursday: Markets are spooked.
3. Friday: More of the same, but rumours begin to emerge.
4. Saturday: You take your kids to soccer practise.
5. Sunday: Asian markets open in freefall, Dollar down 10%.
6. Monday: NYSE shuts down in 20 minutes, DJIA down 900 points. European interest rates go up.
7. Markets don't open. Emergency fed meetings.
8. Wednesday. Bulls buy everything in sight.
9. Thursday: Stable.
10. Friday: Dollar plunges 10-15%.
11. Saturday: Interest rates are raised.
12. (didn't catch this one)
13. Monday: Global meltdown - DJIA down 3,000 points.
14. Tuesday: IMF meet, total restructure of global debt.
15. Wednesday: Panic. ATMs out of cash, new global order. Food becomes scarce, trouble for the public begins.
12. Ben screams "all is well!" I repeat "stay calm!" up and down the hallways of the Fed.
13. The French run madly about with hands in air attempting to surrender to one another.
14. The Greek populace having burnt down, bombed or closed everything, in abject boredom invent another interesting sexual act.
http://www.youtube.com/watch?v=zDAmPlq29ro
Allow me to throw my two cents in: Based on a 2 week event.
Saturday: You take your kids to soccer practice. Banks hold secret meeting to discuss their insovency. Preplanned BK/unwinding of derivatives. EU holds meeting on defaulting of Greece/Ireland.
Sunday: Asian markets open in freefall, Dollar up 10%, EU bond yields rise sharply.
Monday: NYSE shuts down in 20 minutes, DJIA down 1000 points. European interest rates go up, Greece defaults. Ireland rumored next. Spanish 10 yr yield reaches 13%, Portugal, 15%. Riots.
Tuesday: Markets don't open. Emergency Fed meetings. False flags/suspicious packages discovered in US/UK, from Yemen. A 9.7 earthquake hits China.
8. Wednesday. Israel attacks Iran with nuclear weapons. Syria strikes Israel with bio/chem weapons. US/NATO forces steps in.
9. Thursday: Arab League takes action. Attacks US/French aircraft carriers. US strikes back with nuclear power. Leaves certain "oily" places untouched, devastates 75% of all other parts. UN meeting called. Decision that no religious groups to meet, holidays banned. The Vatican is overthrown. All valuables ($970 BILLION worth) taken.
Friday: World thrown into chaos: Dollar, Gold, Silver rises 35%, 500% and 700% respectively. Euro down 50%. The EU disintegrates. Riots/chaos/anarchy across Europe.
Saturday: Paris Hilton plans lavish birthday party for Linsdey Lohan. Discovered she has AIDS. Obama says, everyone should "chill out" and watch Dancing with the Stars reruns.
Sunday: Asian Market open down 80%.
Monday: Global meltdown - DJIA down 6,000 points.
Tuesday: IMF meet, decide to throw in the towel. "What's the purpose?"
Wednesday: Panic. Chaos. ATMs out of cash, new global order. Food becomes scarce, trouble for the public begins. Electrical power outages. Internet down. Gov't fall.
Thrusday: Paris Hilton wakes from 4 day druken orgy. Realizes her bank account is gone.
Friday: Russia and China join forces. Launch nuclear EMP over USA. All electronics malfunction.
Saturday: China moves forces into US, take over DC.
Sunday: Hu orders "Dancing With the Stars" to be replaced with reruns of Baywatch. Only other channel is China news. Orders everyone learn to speak Chinese.
No offense but Glen Beck is a very seriously unstable man. He thinks this will happen next week? Wow.
Unstable man for unstable times?
No, it was a hypothetical situation thought up by some guy from Capital 9 Partners, deemed entirely possible. It wasn't meant to be considered to happen 'next week' or any other specific week, although China pretty much already have ceased buying US Treasuries.
Oh Christ, I know this has gotten out of control if I am rooting for Glenn Beck. While I realize how disastrous the immediate impact would seem -- finally building a go forward plan on something other than ink and linen paper seems as if it would have a much better outcome.
And this just out...
WASHINGTON (MarketWatch) -- Federal Reserve board chairman Ben Bernanke downplayed the risk to the economy from the recent spike in commodity prices on Friday. In a question-and-answer session with college students at an event sponsored by Jacksonville University, Bernanke said with so much slack, or excess supply, in the economy, it is "very difficult" for producers to pass those higher costs to consumers. Bernanke said the price hikes in globally traded commodities stemmed from strong demand from emerging markets. While households will have to pay a higher price for gasoline, lower labor costs will help keep overall inflation low, he said. Asked about foreign concern with the Fed's new $600 billion bond buying program, Bernanke said the global economy would benefit from a pick-up in the U.S. economy
So, if it is difficult for producers to pass thoes higher costs to consumers, does that mean they will go out of business? Price hikes in Commodities from stong demand from emerging markets? How about the Weak Dollar? How about everyone putting their investment dollars overseas?
Lower labor costs and higher gasoline? So, Americans will earn less and pay more for Gas?
Do you not love that he said that all of the $600. Billion will benefit the Global Economy. So, why are American Taxpayers trying to stimulate the Global Economy with their Tax Dollars without stimulating Americas economy? We are to tax 5 Generations of Americans to help stimulate other Economys and not our own?
Well, to his credit, he is right on this from a macro economic theory. Whether or not it works is the question. I'm an optimist and more in line with thinking this will work. I know people here don't like Dr. Bernanke but he is a brilliant economist.
Brilliant economist.
Military Intelligence.
Chaste Hooker.
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Goody, love playing this game... next!
I think the blue hair dye has gotten to you.
Hahah. You cause me laugh uncontrollably. Berni save s the world! Lol
Its Friday afternoon so it more Free $$$ to Fannie
The government-sponsored company said it would need $2.5 billion from Treasury to cover a $2.4 billion net worth deficit. More than 85 percent of that shortfall was dividend payments back to Treasury, it said in a statement.
http://www.reuters.com/article/idUSN0510438020101105
True bureaucratic math. Dad, can I have $2.5 B to cover the $2.4 B hole; no, please don't ask, Ben says he knows where to send it. Honest in-jun.
Buncha Fucktards
Tyler, You hit the nail on the head. The only thing that QE does it to fuel investment overseas. Plus, it pumps the economy's that produce Oil, Copper, and other Commodities. It really does nothing for America as we do not produce that much Oil, almost zilch Copper or Steel. It does help Arab Nations, South America, Chili, Africa but not America. Plus, so many people are now investing the pumped Dollars into Foreign Nations because their economy's are growing.
Foreign Investors are salavating on what American Assets they can buy with the increase in the price of their Commodities at the expense of American Taxpayers thru Ben Bernankie.
It appears to me that this is trying to level the playing field from America to the Weaker Countrys. It also appears that they are trying to ship our Wealth Overseas thru QE which is a Tax on Americans to help other Nations buy our Country and our Companies piece by peace. Just look at the Foreign Nations buying our Real Estate and our Farm Land.
I do not understand why our own FED is trying to undermined our own Country and its Citizens.
I bet on the Hang Seng and agree, but that's not ALL it does. It's a missile of war headed right toward these economies. They're scared and talking about taxing foreign investment of the QE2 yield chasers. This could rattle and tip boats from China to the EU. It keeps interest rates down so people can refi. That obviously helps people in debt in THIS country.
I'm not saying I like it and it's worth the cost of command economy to get there, but you an't deny a few of Ben's goals have US debtors in mind. We have to tell the whole story so our conclusions are sound.
But you argument is incomplete. Yes, you might save 2% by refinancing your mortgage. But you loose 15% on inflation.
Is like getting a 25% sale on 75% overpriced goods. At the end you still get fucked.
Its not so much our Fed, as we are the Feds asset of liability depending on our value.
They dont care about us or this country. Berni and the fed are tools, the dollar is a tool to harvest our energy for our unseen masters. We have been blinded by ignorance and the fullfilment of low desires and lost our way. We are coerced to accept green papers for our labor and goods. Fools as much as the first indians who accepted alcohol for pelts
IF I were a conspiracy theorist, I would say Ben is Obama's tool to redistribute America's wealth via weak dollars pumping up the poor emerging markets and commodities to boot. If you loved America and hated Americans, and you were the Pres., wouldn't you?
Nah, artificially lowering interest payments while stimulating inflation clearly helps the American DEBTOR. Why do you think all the big money boys are suddenly angry with the Fed in a way they were NOT angry in 2008?
At what cost to the debtor to help the debtor is another broad question...
But the biggest debtor is the Federal Government. Yes, they save on interest rates by taxing your savings and purchasing power indirectly thru inflation. You are still getting fooked.
My brother is underwater in his house a little. He was offered a great two-point REFI which would cut his costs greatly, stimulating him and the economy.
But - he was later denied because of BAD CREDIT REPORTS from late payments after 2008. This factor completely obliterates any gain from the Fed's actions. Therefore, it's useless until strings are attached like....if there are late payments on a mortgage post-2008, that can't be a factor in denial of a REFI.
And the banker says to the first regulator: "See we been trying to help all those poor bastards just like you asked us to." And to the other regulator: "See, keeping the quality of the loan portfolio as high as we can, borrowing at zero, buying treasuries, hypothecating them at the Fed, buying some more treasuries, helping out the country."
And the regulators say: "Well done, restart the dividends, and BTW, you deserve a nice fat bonus. How about lunch at The Palm?"
For Real
Fuck true, isn't it.
If this is truly the goal, they have to step in on these loans. There must be millions just like that. 3 late payments in 10 years, none 60 day, all post 2008, employed, and has more equity in his IRA than the house is worth. Claims late payments were an automated payment mistake.
No RIFI. Too risky.
And Wall Street banks will skim their cut off it coming and going as it all must flow through them for at least three cycles. Let's never forget that the primary goal of all this is to save the banks at all costs.
We'd destroy the banks to save the rich in a second. We just have to figure out who's who so we can get them out of their investments before it blows!
The rich are what we protect, not banks. Banks are diseased parasites roaming the earth doing the pimp work of the rich. Look at Goldman Sachs and John Paulson. Who did the pimp work, lied, got caught and got sued? The bank. Who made the 1B, John Paulson!
Banks are transistors.
http://img560.imageshack.us/img560/7063/drbernanke.jpg
Bernanke’s ‘Cash For Spelunkers’
Seriously that made me ROLF. I mean, the corner of my mouth went up a fraction of an inch. Normally, I am like Tonto.
But why can't people understand tat the economy rests upon job growth and savings for investment, not stock market prices and spending? I feel like I am watching a disaster in slow motion on the internet, except I am right inthe middle of it!
Bernake is saving his banks. He is decoupling the US economy from the world. Job growth and savings in the US won't happen until after that is completed. All the US companies with massive amount of dollars outside the US are in danger of taking a painful haircut.
Splunking actually happens to be one of my favorite pasttime hobbies. Do I get any money? Equipment is not cheap.
Tyler, what you've described is part of my biflation theory.
The Fed has been successful on 2 fronts: they're stoking up inflation in input costs, AND they've locked in a deflationary spiral in end demand.
The inflation part I think we all understand. Those who trade see it every minute of every day in a direct cause/effect relationship with Fed policy. Ben would like us to believe it's all because of "rising foreign demand". He's right but it's a small and gradual cause. But abrupt changes without abject shortages happen when economies devalue their currency. Simple.
The deflation part is and will be a direct result of capital flight from US shores. Not just the free money from QE2. But the trickle has become a stream that can fast turn to a raging torrent in the current global environment. Nobody will want to have cash sitting around in the dysfunctional US domestic economy. Watch as it gets converted to emerging market bonds, stocks, real estate, sweat shops, exploration projects, office towers, hotels, fast food outlets, escort services or anything but the dead money that it will become here in the US. So double whammy on the dollar. Jobs will follow the capital flight. And hence US final demand for goods and services will plummet despite rising cost inputs, killing margins and of course decimating the middle class. And yes Gold and other PMs will be the perfect hedge for devaluation, a crumbling economy and the risk of currency wars or a new reserve currency.
So there you have it, the biflationary manifesto. I been saying so for a while.
I too have been suggesting the biflation concept as arrived for months.
Another aspect to the deflation side will be the ongoing reduction in actual value of dollars and thus, assets held in dollars that aren't very liquid - like homes, autos and art. Meanwhile, the inflating prices of commodities turn into increased costs for food and gas and utilities, necessities, in the less and less of value dollars.
Not a pretty prognosis, but it is developing and starting to really show up now.
It's definitely past "coming out" and progressed to "blossoming". What's funny is that for nearly 2 years the debate has been between inflationista/deflationista camps, with nobody agreeing. The reason was that both were right...and wrong. The New Monstrosity which we call the economy contains the worst elements of both. At first it was more subtle, but it's clear now that you don't need a dramatic dose of either one when they're working together to cause economic turmoil and disaster for many.
And hence US final demand for goods and services will plummet despite rising cost inputs, killing margins and decimating the middle class.
Why "despite"? Seems to me, when prices rise (especially in a terrible economy with pegged credit lines), people cannot buy as many goods.
The whole bi-flation idea should be at least 2 decades old. After all, what else are "bubbles" anyway, except unequal rise in costs of some goods versus others? Plus, any measure in "dollars" (rather than gold or other real-value standard) is bogus anyway, on its face.
These QE programs are nothing more than attempts to re-create the disaster that was the NASDAQ bubble. That's pretty awful, when the intention is to create something imbalanced and destructive... just to gain a few more months of semi-normality --- at best.
The entire plan of the banksters and predators-that-be is to enrich themselves (first-buyers of bubble assets with free money) while turning everyone else (producers) into lifelong debt-slaves. That's exactly what QE is designed to do, and exactly what QE will do... unless the entire system of predators-that-be are overthrown.
While all the QE certainly effects the economy and the markets it also is a defensive move against Asian dumping of treasuries - once the fed holds more treasuries than China and Japan combined it will be a case of anything you can sell we can sell faster.
The US and UK have teamed up again in this regard and are making sure that no one can cause a more destabilizing event than they can.
Big Ben Bitchez!
The phrase "Mutually Assured Destruction" has been flashing repeatedly in my mind. - Ned
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