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More Fed Speak - Oil to Break Out?

Bruce Krasting's picture




 

Jon Hilsenrath (WSJ) has yet another article on
Fed propaganda to ease the way to QE-2. Today it was Chicago Fed boss
Charles Evans doing the talking. He is in love with the Fed stuffing its
balance sheet further.

He favors "much more [monetary] accommodation than we've put in place."

It’s hard to imaging being more accommodative than the Fed is today. We
have ZIRP. We have nearly daily POMO. Rates have never been this low.
Ever. We have broken some golden rules on monetization. And Evans thinks
we need “much more”?

The Fed might aim to overshoot its informal 2% target for a time to make up for lost ground, Mr. Evans said. "That is a potentially useful policy tool at this point and I definitely think we should study it more,".

All the Fed heads are talking about the need for more inflation. This is nuts. The Fed is in a tiny box and saying, “Deflation is BAD”. If that is true then the opposite, “Inflation is GOOD” must be true. That logic is going to backfire.

There is possible bright side to this. Judging how quickly markets
adjust I think there is a possibility that in a relatively short period
of time, say the next four months, we have a shake out in oil. It would
not take much. All the pieces are there. There is economic growth
globally and the dollar is being trashed by the Fed on a daily basis.

I don’t think the average American gives a damn about the dollar. But
they care very much about the cost of gas. If we get a price break and
the pump says $4.00 and heating oil is $3.00 there will be a backlash.
On a broad basis people will be angry. The economy will suffer. Our
trade balance and current account will deteriorate. GDP will decline.

At that point the MSM will look for answers. They won’t have far to look.
They can blame Mr. Evans or Mr. Bernanke. $120 oil and $4 gas will be
brought to you by the Fed. From Hilsenrath’s article, the
understatement of the year:

It
could be a challenge for the Fed to explain such a strategy, and to
convince the public that it wouldn't allow inflation to get completely
out of hand.

I can’t wait for Fed officials to explain to Congress and the American
people why trashing the dollar and raising the price of energy is good
policy. They won’t be able to.

 

 

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Wed, 10/06/2010 - 00:04 | 628273 rapier
rapier's picture

I think it is probable that the appropriate parties, including the Saudis, will be able to manage the oil price so it does not spike like 08.  They learned their lesson there. The oil spike in 08 was not the crucial factor which sent things spinning out of control but it was highly destabilizing.

Until proven otherwise it's best to think of oil being maintained around a point, in constant dollar terms of roughly  $75bbl @ DX80.  Now if the dollar would go right off the rails all bets are off.

Wed, 10/06/2010 - 00:40 | 628338 chopper read
chopper read's picture

as we continue to print fiat, the arabs will be asking a higher price for oil, immediately converting their paid fiat to gold in the open markets, or (most likely) a bit of both. 

Wed, 10/06/2010 - 00:03 | 628272 palmereldritch
palmereldritch's picture

Currency hyper-liquidity spillage?

U$D Denominated Oil!

The Quicker Picker Upper

http://www.youtube.com/watch?v=OerV0L-HjAQ&NR=1

Tue, 10/05/2010 - 23:53 | 628259 NorthenSoul
NorthenSoul's picture

"It could be a challenge for the Fed to explain such a strategy"

IT would be a challenge for the Fed to explain why Congress should restrain themselves from performing a total audit from Hell...this time!

 

Even Obummer wouldn't have the balls to veto such a bill with gasoline > 4$ a gallon. It would be political death wish.

Tue, 10/05/2010 - 22:49 | 628113 essence
essence's picture

There has always been this fausian bargain between the US Gov and the Fed.
As part of it's franchise the Fed tacitly supports the excess spending
of politicians. It does this by inflating the money supply.
All this is very basic and there should be to need to reiterate it.
Fed=inflation. Fact of life.

All the protestations boil down to the fact that in order to swing our:
1) endless wars & imperialism
2) social welfare programs
3) government bureaucrats
4) crony capitalism
oh.. and I won't even bother to list points 5,6,7etc

it is necessary to undertake this hidden tax that inflating the money supply constitues.Yep, government doesn't just violate you from the front, it also
does so from the rear. Because you'll (whether you realize or not) ask for it.

You don't like it?
Then who among you forgoes their government nookie?

Tax exemptions/loop holes, pensions, benefits, medical, education, unemployment, food stamps, military spending, all the gov employees who would have to scramble to make it in private industry. ETC,ETC ETC.

Ending the fed means providing for yourself in its entirety. Now of course,
having used up its credit, the US, and in fact the world... is shortly about to
experience what pay as you go means.

Talk about shocks.

 

 

 

 

 

 

 

 

 

 

 

Wed, 10/06/2010 - 00:38 | 628329 SheHunter
SheHunter's picture

Very well said.  But try taking any of the retired tea party-er's SS benefits and Medicare.  You want to see the whites of their eyes?  Now THAT would do it.  Same goes for a number of the ranchers around here.  They bemoan government intervention AFTER cashing their farm subsidy check.  Yeah, the gov still pays a rancher for each calf/lamb grazing public lands that is killed by "predators".   So excuse me if I look at the tea party fiesta with an expression of bemusement.

Wed, 10/06/2010 - 09:21 | 628829 chopper read
chopper read's picture

its a fair point.  time tea partiers (who i support) practice what they preach.  this baby boomer generation wants it all and their grandchildren's, too.  Its been 'mob rules' democracy with Big Bruvva government and tax cuts, too!  Is there anything else you would like, Boomers?  Government-issued pillows for your feet?

 

I've got one particular farmer friend who I always tease about these subsidies.  he smiles and winks and says, "Yep, we'll probably stay in business one more year."  Of course, he says it every year and he is one of the richest farmers in Central Illinois.  how is that for FarmAid? 

 

on another topic, i do believe it is a tragedy when a family farm dwindles in size because land must be sold to pay an inheritence tax.  This just allows the big corporate farms to scoopy, scoopy because corporations do not pay inheritence tax; the monsters never die!

 

 

Wed, 10/06/2010 - 00:37 | 628327 chopper read
chopper read's picture

one anomaly: Volcker did not equal inflation.  when push came to shove, he protected the brand name and postponed the demise of fiat.  

The American people have been sucking on the hind teet of lower and lower interest rates ever since, with an unprecedented credit line that is being recalled with a vengeance. 

time to pay the piper, ya'll. 

 

Tue, 10/05/2010 - 22:49 | 628104 chirobliss
chirobliss's picture

He's trying the Greenspan playbook but he ain't no Greenspan.  Doesn't have the intellectual heft, doesn't have the balls.

To pull this off you've gotta have the devil's poker face, otherwise the people you are ripping are going to come at you big time. Greenspan had the ability to make people wilt-that meant, congress, the big banks, the Europeans and the Chinese. Listen to BB, his single refrain is "I know about the depression." He sounds like Jay Leno and looks like a f@#%ing oompa loompa. Greenspan was dead wrong but everyone was too shit scared of him not to follow the playbook. 

Wed, 10/06/2010 - 00:29 | 628313 chopper read
chopper read's picture

clever observation.  Greenspan did have a poker face, and Bernanke just looks as though he is in over his head.  is there a trader on the globe that cannot smell blood in the water?

Tue, 10/05/2010 - 22:41 | 628071 RoRoTrader
RoRoTrader's picture

BK, "Is there anything that can stop the Fed? Maybe."

Nuclear war.

A tragic plane crash carrying the Chm and all Govs et al

A sudden Ice Age triggered by eruption of Iceland's volcanoes........

Other than that the only hope for humanity may fall to wb7 and Zero Hedge tag teaming the FED fuckers on live WWF televised worldwide and much bigger than the WWF.

Prophet Muhammed, Jesus, Budda, Ghandi,........Orion or Joubert

A last resort masy be common fucking sense and nice cases of Springbank slathered with a 'fuck you' attitude......

Tue, 10/05/2010 - 22:25 | 628040 Edwardo
Edwardo's picture

Hello Bruce,

"Letting the dollar go" would seem to me to be risking a lot more than high oil prices. It would seem to be risking a dislocation in the bond market. The thinking is as follows, no foreign enitity will park any money, at today's rates, with such massive currency risk staring them right in the face.  At some point the kind of monetization that would need to take place would be of the sort that would cause a complete, runaway collapse in the dollar. 

Tue, 10/05/2010 - 22:18 | 628016 VWbug
VWbug's picture

about a month ago i would have said they can keep the charade going for a couple of years more, at the very least.

but for some reason they seem to be wanting to push this to the limit (and beyond by the sounds of that Evans moron)

I think BB might be starting to sweat now, as he sees there will be a downside to the helicopter drops.

and it looks like we will test that downside in a matter of 1 or 2 months, IMHO.

 

Tue, 10/05/2010 - 21:57 | 627959 jharry
jharry's picture

It is ironic that when the shtf, Bernanke and his Feds will be standing in front of the fan throwing more into it.

Tue, 10/05/2010 - 21:33 | 627921 99er
99er's picture

Chart: USD/JPY

Keeping Ben up at night....

http://99ercharts.blogspot.com/2010/10/usdjpy_8695.html

Tue, 10/05/2010 - 20:31 | 627806 Shameful
Shameful's picture

Ben come now I think we know the MSM better then that.  If/when gas goes to $4 a gallon it will be these points.

1. The economy is growing!  Demand is back so that is why it's $4!

2. It's those damn Chinese/Indians/Space Aliens they took our oil!

3. We need to get the SUVs off the road, they are taking to much gas.  Green cars for all!

To expect an ounce of truth or journalistic integrity from the MSM is the same as expecting truth from Soviet era Pravda.

Wed, 10/06/2010 - 00:19 | 628291 chopper read
chopper read's picture

...makes it quite easy to stay ahead of the herd, anyway.  

Tue, 10/05/2010 - 19:09 | 627638 straightershooter
straightershooter's picture

I believe there is a unanimous consent in this board that Ben'dover should be punished. I also believe that there is a sense of profound helpless in this board that they have no meaningful means to punish Ben'dover here or there, or anywhere.

Fear not, says one wise man, the world is round: what comes around goes around. Now, ask yourself: who approved Ben'dover's appointment: Well, none other than the senate. What happens to the senate this coming November? Well, up to 34 senators are up for re-election.

Revenge, sweet revenge. folks, take your revenge by voting each and every one of them out of office. Yes, VOTE ALL INCUMBENTS OUT!

Do that or quit complaining here. Vote all incumbents out or you deserve to be screwed up by none other than Ben'dover.

 

 

 

Wed, 10/06/2010 - 00:12 | 628286 chopper read
chopper read's picture

do not forget your guns for insurance, and your gold as a protest against central money planning and fractional reserve lending!!!

Tue, 10/05/2010 - 23:32 | 628224 RockyRacoon
RockyRacoon's picture

It is my intention to do exactly that.  Who it is/was does not matter.

Just vote against anyone who already had a gubmint job.

Tue, 10/05/2010 - 18:56 | 627597 Shiznit Diggity
Shiznit Diggity's picture

You have erroneously assumed that Ben gives a damn about the public. He doesn't. He cares only about his constituency, which does not include the little people.

Tue, 10/05/2010 - 18:55 | 627595 DosZap
DosZap's picture

Bruce,

"I don’t think the average American gives a damn about the dollar".

15 Million of them sure do,(and the millions more, that are womdering if they are going to get another paycheck in 2 weeks, or 30days) if you don't have any dollars, how do you pay for that $4.00 gas?.

Wed, 10/06/2010 - 00:08 | 628280 chopper read
chopper read's picture

they'll give a damn about the USD when they're milk cost $20 a jug.  

most Americans do not give a damn until they feel the pain.

Tue, 10/05/2010 - 18:55 | 627592 Arkadaba
Arkadaba's picture

On a somewhat humorous note, I find lately that every time I hear or read "Bernanke", I think of this theme song from a quirky cartoon I watched growing up - "Tales of the Wizard of Oz". The short episode below seemed most apropos - The Bubble Champ:

http://www.youtube.com/watch?v=RzgHutIcKe0

Worth watching just for the theme song.

Tue, 10/05/2010 - 18:20 | 627505 doolittlegeorge
doolittlegeorge's picture

it's a question of leadership for me.  if the United States wants the advantages of dollar based commodities we have to act like we do.  Empirically the Fed has not and may not ever be "punished" (through the bond "vigilantes" who have appeared at Party QE dressed in drag for all i can tell) so...okay.  I'm not going to fight this and indeed at a certain level I will embrace it.  Still..."it's not what the world's most powerful economy does."  Besides my ability to "language" this thing is getting hard.  We're moving beyond mere bipolar to downright ethereal and "space based" in both body and mind.  Now where's that Leggy one?

Tue, 10/05/2010 - 23:59 | 628265 chopper read
chopper read's picture

in essence, our brand-name IS the USD, and we're trashing it.  The emperor has no clothes, and now we are just like everyone else.  worse, in fact, as a net borrowing nation.  

...not very becoming of "the world reserve currency" now, is it?  by the looks of gold prices, the world agrees.  

Tue, 10/05/2010 - 23:58 | 628262 chopper read
chopper read's picture

in essence, our brand-name IS the USD, and we're trashing it.  The emperor has no clothes, and now we are just like everyone else.  worse, in fact, as a net borrowing nation.  

...not very becoming of "the world reserve currency" now, is it?  by the looks of gold prices, the world agrees.  

Tue, 10/05/2010 - 18:23 | 627503 no life
no life's picture

They are also gambling that the price of oil doesn't go up for some other reason, like a terrorist attack, at the same time they are pushing it up with their dollar debasement.  I know they don't care about anyone other than the big banking institutions, but they would eventually kill the economy by killing the consumer (once again).  This time the economy is so much weaker that the 'sucker could go down'.. permanently.  And by now, even the most naive Americans are familiar with who is the Fed and how they cause inflation.. so it could get a little ugly for them, and not just a fake grilling on capital hill..

Tue, 10/05/2010 - 23:29 | 628214 RockyRacoon
RockyRacoon's picture

And by now, even the most naive Americans are familiar with who is the Fed and how they cause inflation..

Right.  I know both of them.

Tue, 10/05/2010 - 23:51 | 628254 chopper read
chopper read's picture

jesus, joseph, and mary; if that were only true.  wow.  most people have no idea what 'money' is.  

 

...wait, what is 'money'?

Tue, 10/05/2010 - 18:19 | 627502 NotApplicable
NotApplicable's picture

Always remember that somebody has to spew this conventional ignorance, otherwise it would never become conventional wisdom to be repeated ad infinitum by the masses.

Frankly, I never expected to hear so many completely unknowledgeable people go on about how TARP saved the world. Yet, by the time it destroys the world, TPTB will already lined up another scapegoat, and Super TARP will be unveiled.

TADA!

Tue, 10/05/2010 - 18:17 | 627496 Ripped Chunk
Ripped Chunk's picture

I'm sure oil demand is surging right now world wide........................................

Tue, 10/05/2010 - 18:16 | 627474 RoRoTrader
RoRoTrader's picture

BK ,"I can’t wait for Fed officials to explain to Congress and the American people why trashing the dollar and raising the price of energy is good policy. They won’t be able to."

Excellent question, kind Sir......appears that is the fly in the FED QE to infinity ointment.........the price of essential commodities........price discovery as defined by the Federal Reserve has become price illusion and delusion.

Tue, 10/05/2010 - 20:03 | 627739 Kayman
Kayman's picture

Senator Butthumper: So, Chairman Bernanke, why did you F**K all those hard-working, desperate, God-fearing Middle Class families ?

Chairman Bernanke: Well, Senator, because they let us. 

Tue, 10/05/2010 - 23:28 | 628211 RockyRacoon
RockyRacoon's picture

Nah, he'll have to believe that we were asking for it.

Tue, 10/05/2010 - 18:24 | 627518 NotApplicable
NotApplicable's picture

Oh, c'mon now, this trick isn't that hard to figure out. They won't have to explain anything, as they will place the blame elsewhere, like on President I'm-a-dinner-jacket of Iran.

All they know how to do is to deny, deny, and deny. So you've got "facts?" Big whoop, they got 24/7 MSM to carry their water. Facts don't stand a chance.

Tue, 10/05/2010 - 18:42 | 627561 RoRoTrader
RoRoTrader's picture

2 excellent distinctions seperating facts from logistics NA......."deny, deny, and deny" and [the FED] "got 24/7 MSM to carry their water"

It still comes back to the question; what the fuck is the point?..... Buys time?

Tue, 10/05/2010 - 18:02 | 627455 Bernard Marx
Bernard Marx's picture

The other issue that the equity bulls seem to miss is that commodity inflation brought on by a weak dollar policy - not economic growth - will absolutely crush margins.  How is anyone going to raise prices with credit falling and incomes (absent transfers) stagnant.

 

Oh well - enough with reason.  Gotta go buy some consumer discretionary stocks.

Wed, 10/06/2010 - 09:11 | 628808 chopper read
chopper read's picture

...i'm going to buy a few pallets of sugar that i can flip to neighbors off the back of a truck for 100% profit by February.  Is this how you wanted me to spend, spend, spend, Benny?  sheesh. 

Tue, 10/05/2010 - 18:12 | 627488 snowball777
snowball777's picture

You're not just buying an iPad...you're buying the last iPad.

Tue, 10/05/2010 - 17:58 | 627443 goodrich4bk
goodrich4bk's picture

Bernancke is twice f***ing Joe Sixpack.  First, by dramatically lowering interest rates, he cuts the income of prudent Americans who saved for the rainy day that is now here.  Second, by printing money via QE1 and QE2, he is debasing the value of Joe's principal.  In short, our government is robbing us no less than if the Fed entered our houses, took all of our belongings and drove off with our cars.

And all this to help lenders avoid taking losses on loans they should have never made.  Where are the goddam pitchforks? (and don't tell me the Tea Party is carrying them because not a single one of their candidates proposes anything other than the usual Monetarist claptrap.

Tue, 10/05/2010 - 23:46 | 628250 chopper read
chopper read's picture

moral of the story: take overly excessive risks and get rewarded every time.

 

sincerely,

Benny "Moral Hazard" Bernanke

Tue, 10/05/2010 - 22:12 | 628005 VWbug
VWbug's picture

i have a feeling i wouldn't agree with you on most things (i could be wrong), but on this you are absolutely dead right.

Tue, 10/05/2010 - 21:47 | 627943 Ned Zeppelin
Ned Zeppelin's picture

Who's junking goodrich who speaks the truth? Kudos, friend. 

Tue, 10/05/2010 - 22:32 | 628055 Idiot Savant
Idiot Savant's picture

Perhaps a tea-partier that's too lazy to grab a pitchfork?

Tue, 10/05/2010 - 19:07 | 627628 stev3e
stev3e's picture

The Tea Party is simply another diversion.

Tue, 10/05/2010 - 18:11 | 627486 snowball777
snowball777's picture

Third, he is aiding and abetting massive tax increases upon poor Joe in the future.

Tue, 10/05/2010 - 17:51 | 627407 Mercury
Mercury's picture

I was just asking in the comments section here: http://www.zerohedge.com/article/china-has-lost-over-100-billion-dollar-...

-what happens if China decides they'd like to explore swapping their stream of US$T coupons oil?

Tue, 10/05/2010 - 18:24 | 627516 DosZap
DosZap's picture

"-what happens if China decides they'd like to explore swapping their stream of US$T coupons oil?"

Or, ANYTHING.

If I were them,hell bent on payback, Iwould come here, and buy up American land,properties,esp land.

For dimes on the dollar...........talk about a Double screwing.

They have all the OIL they need stored YEARS worth, and they have ALL the sources for more nailed down( strategic partnerships), when the time comes they may need it.

Besides, face it, there is NO country except us,and that would entail (MAD), is capable to stop them from taking, or doing anything they want.

Anything,by force.

The world HAS to know this.

I am semi literate, and I know it.

Tue, 10/05/2010 - 23:44 | 628240 chopper read
chopper read's picture

we should have let the Chinese buy General Motors for pennies on the dollar and instead bought for any laid off workers 3 lobster dinners per day for the rest of their lives with a fraction of the 'bailout' money.   

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