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More Fed Speak - Oil to Break Out?
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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not sure why the chinese have not done so already...but i'm sure they will start buying up US real assets much sooner than later.
the obvious buys would be mining assets. I don't think you'll see them buying golf courses and trophy RE like the japanese.
Political power grows out of the barrel of a gun - Mao
They can put them on commemorative plates, but it won't change the liquidity of the bills and would have the same effect as if they attempted to sell en masse (since the petro state accepting them would do the same).
China could get rid of them in the US by trading them directly for privately owned US assets, directly with the owners. They could buy banks, farms, hotels and maybe even Pebble Beach (lol).
I'm sure they couldn't sell them all at once or even close but it can't be the case that there is both a massive bull market in U.S. government bonds and no one wants to buy them in any size.
Also, the bond buyer and the oil seller doesn't have to be the same party.
The Inflation vs. Deflation debate. It's an easy choice for TPTB because it comes down to which policy helps the rich vs. which policy helps lower and middle classes.
Inflation benefits existing (leveraged) asset holders = the wealthy though it's crushing (often stealthly) to the poor.
Deflation benefits basic consumers = the middle class though it's crushing to the existing holders of assets.
The Fed playbook should not be a surprise to anybody.
Don't know about you, but you can only get it up so many times before the ol'noodle just lies there, with no blood pressure! All the financial viagra in the Fed's arsenal ain't doing much this time!
Bernanke has a terrible poker face.
the working taxpayer would be crushed if forced to pay back government deficits with stronger USDs worth more in purchasing power. say goodbye to increased cheap exports. This is why Japan, with debt at 200% of GDP, is scrambling to devalue.
too bad there is no balanced budget amendment at the Federal level; we may not be so royally screwed. then, again, too bad there is a Federal Reserve Bank; we may not have artificially prolonged booms followed by overly severe busts.
what? Hey, the Bears are playing the Vikings!!!
It's not, it's the only option and had to be the default. Deflation is too hard to tax while Inflation makes it easieer to tax and confiscate.
The amount of QE is an indication of their fear of inability to create inflation for themselves.
Good call Bruce, I am with you. BS Bernanke has no idea what he is doing, or he is sadistic. Take your pick. How can this prima donna not understand that he is raising the prices on critical assets out of the stratasphere, this while less and less becomes recoverable. Same with PMs by the way.
Most likely, the Fed and the other oilgarchs are creating yet another problem, where they hope to institute a solution. History shows that their solutions are more "government" control and more wars. This time it is sure to fail; how can the US armed forces manage a war if we fight those who supply the oil? It is a plan destined to fail.
to hell with the elderly and poor, The Fed has some mortgage-backed securities on their balance sheet that they need to re-inflate. let them eat cake.
>>How can this prima donna not understand that he is raising the prices on critical assets out of the stratasphere, this while less and less becomes recoverable.<<
Maybe that's the plan - artificially slow down oil consumption, gain accomodation, avoid social chaos.
A bit of an aside in the context of your point Mr LH, to which I agree, however as for OIL specifically; it may be headed much higher regardless of debasing of the USD since the cost to the consumer is really heavily subsidized at the expense of the environment - only need to point to the GOM BP disaster and the recent media attention directed at the massive clearcut and polution of a major Artic watershed as part of the development of the Alberta Tar Sands which as Sen Lindsay Graham from SC knows is to be amalgamated as a protectorate in the interrests of US national security.
The days of cheap OIL are probably over for a number of reasons........back to your point about the FED being mad/insane/sadistic.......did I mentioned sociopathic or perverted?........dogmatic?........if you discover the answer/reason/rationale then please please tell since I am at fucking loss to explain why the FED wants the price of essential commodities spiraling into price netherworlds, although if one trades as we all trade in some fashion or another then we must trade the right side of price no matter the dogma of the moment.
Lol ... first one must understand for whom the Fed works and the goals of the Fed's owners. The Fed works for Anglo-American globalist interests and the goal is a global government run by them. Bernanke is doing exactly what he needs to do to acoomplish that goal. Do you really think he wants more Americans employed? That would be naive. He wants a dependent and compliant people who will sacrifice themselves in wars chosen by the masters, or commit other atrocities, because they have no other choices.
I remember when things were good everyone was crying about $3/gallon prices. Now, when things are supposedly even worse, folks won't rebel until we are back to $4/gallon prices. i just don't get it.
someday Bernanke will explain to us why The Fed is so good for our lives, but I still may not ever fully understand. what? Hey, the Bears are playing the Vikings!!
Accomodation - its part and parcel of the psychological game.
Conditioning might be a better term.
It's funny too, because here in Texas, trucks and SUVs are still the top sellers. Bubba would rather drive his F-350, w/4 wheel drive and big tires, than pay the rent.
American entitlement is going to die a slow, painful death.
My 4X4 3/4T dodge truck is my work rig, my office and sometimes camp for me, the airedale and the buckskin. The day an electric or solar truck is built with that can travel 300 miles in between chargings and has enough HP to pull the trailer I'll be OK paying a little more to buy one. Until then back off with the GOB cliches. Many of us drive these things because we work/live out in the sticks and need something with torque, ground clearance and room to hold 4 days worth of work and living. You city folk have everything at your fingertips. Which is fine by me. Stay there. Keeps it quieter out where I live. But stop the tirades about how I want to drive a guzzler and would skip rent in order to own a big-tire-huh-mobile.
Sorry Shehunter, I should have noted that I meant no offense to Bubbas that actually use their trucks for work. My post was directed to urban Bubbas that drive pristine rigs and have never towed a trailer.
I don't care how anyone spends their money. I just don't want to hear the bitching and whining when fuel eventually hits $4.00 again.
Bruce i could not have said it better the fundamentals for oil are still crap but the fed is hell bent on inflation fundamentals be damned, at least its good for my clients who are glad to eat their losses from being short the futures to sell physical product at these out of wack prices!
That SOB, I hate him with a passion. I want him to go away in any manner.
but if he stays on this course all of us who hold gold will become the new ruling elite, so we've got that going for us, which is nice.
http://www.youtube.com/watch?v=C65oaIHsdYM
They should haul Greedscam & Bernokio before a military tribunal, charge them both with economic treason, convict them, and execute them both by firing squad.
Within 24 hours, sanity would be restored to US monetary policy.
Who is there to arrest them? They are working on behalf of our owners. We are slaves who work for them. They want us to come to that relalization and give up because our situation is hopeless.
“If monetary debasement can truly create economic recovery, why did our Founding Fathers establish, in the US Coinage Act of 1792, that any persons discovered to be deliberately debasing US money ‘shall be guilty of felony and shall be punished by death’?”
zerohedge.com/article/open-challenge-paul-krugman-were-america%E2%80%99s-founding-fathers-wrong-advocating-death-qe-measur