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More Lies From Bernanke
By Tyler Durden and Geoffrey Batt
These days catching the Fed chairman telling the truth as opposed to a b(a)ld faced lie is in itself a six sigma event. Sadly this post will continue with hugging the median. Some observations on the most recent fabrications by the chief money printer himself, which go to show just how willing Bernanke is willing to bend reality and/or his perception of it as the occasion suits.
A week ago Zimbabwe Ben wrote an op-ed in Washington Post last week in which he said:
"Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation."
Recovery without inflation is another way of articulating the Fed's quixotic dual mandate. Of course, everyone knows the Fed does not care about inflation, or, it seems, the economy, unless of course Goldman Sachs recently changed its name to Inflation Economy, Inc. But what's striking about this sentence (the last sentence, no less, of a decidedly political op-ed), is that it directly contradicts what he says about QE in two papers in 2004.
In the May 2004 edition of The American Economic Review, Bernanke and Reinhart published "Conducting Monetary Policy at Very Low Short-Term Interest Rates." ZH cited this paper before as evidence that Bernanke considered monetizing equities viable in a debt deflation. This time, however, it's useful because he claims aggressive QE may "have expansionary fiscal effects."
Furthermore:
"So long as market participants expect a positive short-term interest rate at some date in the future, the existence of government debt implies a current or future tax liability for the public. In expanding its balance sheet by open-market purchases, the central bank replaces public holdings of interest-bearing government debt with non-interest-bearing currency or reserves. If the increase in the monetary base is expected to persist, then the expected interest costs of the government and, hence, the public's expected tax burden decline. (Effectively, this process replaces a direct tax, say on labor, with the inflation tax.)"
Then in the Fed Minutes from Nov 4th we get:
"Participants noted that the recent fall in the foreign exchange value of the dollar had been orderly and appeared to reflect an unwinding of safe-haven demand in light of the recovery in financial market conditions this year, but that any tendency for dollar depreciation to intensify or to put significant upward pressure on inflation would bear close watching."
An odd remark considering what Bernanke et al said in Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment Author(s): Ben S. Bernanke, Vincent R. Reinhart, Brian P. Sack Source: Brookings Papers on Economic Activity, Vol. 2004, No. 2 (2004), pp. 1-78. More specifically:
...quantitative easing may work through a signaling channel if its implementation marks a general willingness of the central bank to break from the cautious and conventional policies of the past. A historical episode that may illustrate this channel at work (although the policymaker in question was the executive rather than the central bank) was the period following Franklin D. Roosevelt's inauguration as U.S. president in 1933. During 1933 and 1934 the extreme deflation seen earlier in the decade suddenly reversed, stock prices jumped, and the economy grew rapidly.Christina Romer has argued persuasively that this surprisingly sharp recovery was closely associated with the rapid growth in the money supply that arose from Roosevelt's devaluation of the dollar, capital inflows from an increasingly unstable Europe, and other factors. Because short-term interest rates remained near zero throughout the period, the episode is reasonably characterized as a successful application of quantitative easing.
It appears despite Bernanke (and Geithner's) repeated appearances, admonitions and Fed Minute posturings to the contrary, Bernanke is fully aware of what his actions will do to both inflation and the dollar, and that the devaluation of the greenback is critical to the success of his campaign of bailing out CREs laden bank balance sheets. Yet in the meantime on every TV and congressional appearance the Chairman will eagerly lie and prevaricate, hoping his listeners have short memories, and have not bought a Kindle yet (difficult to imagine judging by Amazon's 1,000,000,000,000,000 (non)inflation adjusted P/E) to have read his own scribblings on the matter of impending dollar devaluation. America deserves all it gets if it allows its Senators to reconfirm this human being for the most important post in the world.
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Vote to not confirm, Vote to not raise the debt ceiling. End it.
Maybe in four years. When senator Schiff is drafted to run for president. 2016.
By far his biggest lie is his cry for independence, while at the same time enabling the Administration to avoid making a decision on Fannie/Freddie, a lie that continues to this day.
He wants independence from the "evil populists" in Congress, but not from his fellow Fascists in the Administration.
Independence when convenient to keep the People at bay, but he will do the Administration's bidding.
The administration has nothing to do with this,other than being the front for The Tribe. The vaunted independence of the FED is solidly intact you couldn't break it with nukular bomb.
He answers to no one but the dozen members of The Tribe including Greenspan, Rubin, Feinberg, Blankfein, Greenberg, Weinstein, and lesser lights from the same MBTC.
A quick peek at Marla's poll and it's clear.
~ 10% approval rating for Mr. Bernanke.
Most of the comments tell me that the approval votes were given because he is the best of the worst. Scraped off the bottom of the waste barrel.
We all hope for change.
http://www.zerohedge.com/content/reappoint-ben-shalom-bernanke
Are you saying that Ben Bernokio knows his nose grows?
Bernokio!!!
Bernoccio - AWESOME!
Somebody send that to Jon Stewart on the Daily Show so he can get the entire country using it until Benny voluntarily steps down. Let's not rely on the senate to remove him for us.
Very nice piece Tyler and Geoffrey...kudos for digging through the archives and bringing up these germane matters. Thank you.
Bernanke is a clear and present danger to the United States of America.
kudos for making me google 'germane' =)
Somebody has to ask Bernanke about the President's Working Group on Financial Markets and whether they have been purchasing equities during the past couple of years. Get him on the record.
he lies... but it's for our own good.
looks like the ZH conclusion is dead-on-balls accurate. the fed and our politicians feel that inflation is the best "solution".
This talk of independence tires me, we should be talking about FED INDEPENDENCE FROM THE BANKS - why in testimony doesn't someone ask BB who owns the Fed, who the shareholders are?
+10000
such a simple and basic concept yet virtually nobody in America understands this.
I'll bet over 95% of the American populace thinks it is a government agency.
Excellent point AN
In fact Ben said that in his testimony under questioning today - he said 'The Fed is an agent of the government' or something really close to that.
Did you hear him studder when he said we were in
re-re-re-recovery?
Yeah, he wasn't real keen on committing to the 'recovery' statement...he tried to wriggle away with the term 'growing economy'. (Which in and of itself was a lie.)
such was the plan from jekyll island 100 years ago
On the other hand the USA could pull a Dubai without lying: Fed(DP World) is a separate entity, I've nothing to do with its debt...
What do you think the plan is for Fannie/Freddie?
Day's gonna come when we walk away from that debt.
This was published in the 70's...
http://www.save-a-patriot.org/files/view/whofed.html
Is there a more explicit, understandable version of that? It's hard to make sense of a bunch of corporation names connected by lines. I mean, the implication is that there are a few families and corporate interests that own controlling shares in the NY Fed and Boston Fed, but that set of charts isn't much more than a vague insinuation of conspiracy...I guess I'm asking, isn't it possible to find a simple list of the owners of the various Fed banks, and what their connection is to the main Federal Reserve Bank?
Time to hit Google...
"Of course, everyone knows the Fed does not care about inflation"
Au contraire, he/they care very much about it. The Fed needs it, like vampires need blood to survive. It's no surprise to see Goldman shilling for high commodity prices - as this helps inflate the tide to hopefully float the Titanics on the banks' sheets.
All to serve the masters - the private owners of the Fed. On the backs of American citizens/slaves.
If he had honor, he should withdraw from reconfirmation.
Human being is limit for both of the ability and the fairness. Let the market run itself and it is the only best way of running. Keneise theory is right but ideal just like communist. It needs superman to run, but there is no such superman.
It is wrong to give Fed so much power. The Fed is needed to be get rid off or audited.
Am still believing these miscreants are destroying the dollar under the incredibly ignaorant assumption that jobs and investment will flow back to the US once the US dollar is approximately cut in half. The problem with that theory is worldwide demand isn't there to support any significant uptick in US manufacturing.
Due to the inflationary effects of their policies, eventually Treasury rates will rise and equity markets will again plummet.
War is the next logical result after the collapse.
have nice day.
I listened to most of the testimony and I must admit he managed to sound like a calm, rational person. He either has balls of steel or no clue what his actions mean for American future. Timmy should take acting lessons from him either way.
He sounded calm except for the times where he sounded like he was about to crack. I doubt he meant to come across as nervous as he did.
lol, I love the constant digs against Amazon and their ridiculous P/E.
As for Bernanke; Isn't it all another dog and pony show? Even if he were not renominated (unlikely). Who would we get instead, Summers? Oof.
Regardless of all this other stuff, I would totally patronize a business named Inflation Economy, Inc.
Meanwhile, they've been busy..
The latest balance sheet release explained AIA Aurora LLC and ALICO Holdings LLC.
"In conjunction with the restructuring of the government's assistance to American International Group, Inc. (AIG) announced March 2, 2009, the outstanding balance and amount available of revolving credit provided to AIG by the FRBNY has been reduced in exchange for preferred interests in two special purpose vehicles, AIA Aurora LLC and ALICO Holdings LLC. These two limited liability companies were created to directly or indirectly hold all of the outstanding common stock of American International Assurance Company Ltd. (AIA) and American Life Insurance Company (ALICO), two life insurance subsidiaries of AIG. AIG will retain control of AIA Aurora LLC and ALICO Holdings LLC, and the FRBNY will have certain consent, disposition, and conversion rights with respect to its preferred interests."
So there you go, govt can claim that its cash loan to AIG has gone down a few bill, meanwhile more toxic assets directly on the balance sheet to 'back' yet more money printing! wheee!
He's like a Dirt Devil. One side sucks and the other side blows. Uncle Tom O'Mama for Czar in 2012. Hope Recalibrated.
whatever he's a douche bag
Let's cut to the chase. This is the road to war.
My son will go to war for these fucking banksters over my dead body.
Bottom Dollar (in need of avitar help and a good photo)
Bernanke should be confined to Sesame Street, not Wall Street. He stands a greater chance of raising his credibility there than where he is now.
Big Bird Bernanke, and his imaginary friend the Recoveruffluppagus.
Really, why would Ben want to remain in his job? Ben is the captain of the Titanic with the Iceberg dead ahead.
So what does Ben know that we don't? Please explain his big plan to me. OK, not even his big plan, how about his 2010 plan.
Lets just look at one aspect.
Funding our debt through Treasury auctions in 2010.
Well, what will be the final deficit in 2010? After health care, and troop build up, and dismal tax receipts, perhaps about another $1.8T. + scrub 40% of existing (best case 8T), and pay 400B in interest (if rates stay low). I know these are just rough estimates, but lets continue. 1 Trillion = 1 x 10^12. = $1,000,000,000,000.00 (Please check my math).
$1.8T + $3.2T + 0.4T = $5.4T
Do they really have to sell this amount of Treasuries in 2010? Is this a good estimate?
Lets continue, and if you have small children, please have them leave the room, this is only for grownups.
So there are 261 business days in 2010.
$5.4T divided by 261 = $20.6896B per business day. Every single business day in 2010 we have to sell $20.6896B of our debt. Every business day.
For the moment lets put aside other FED liabilities and off balance sheet obligations, which we know we will also eventually have to pay for.
Lets call the above analysis plan A.
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From Ben's standpoint obviously there's a plan B. Well what is it?
By now, Ben will all of the facts about 2010 Treasury auctions and know the net revenue projections. Also, he knows the FED has yet to complete the MBS buy.
So what magic dust does this guy have, he must have a strategy for 2010 by now.
The grim realization is that Ben's fall back plan, which is the only viable plan, is to initiate another long term Treasury buy program. Now, most every body surmises that Ben has build in some T buy slack. But at some point this will run out, perhaps beginning of Q2.
To initiate another T buy program will be catastrophic, potentially exasperating a flee from the USD. Also, it could trigger a cascade exit if the world economy is precarious.
So what is Ben's plan?
Or is he just delusional, playing out "extend and pretend" on a national scale?
Eventually, the reality of the situation will impose its own discipline, in a very rude and nasty way.
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OK, you can let the kids back into the room now. Thanks for your attention.
Mark Beck
But, but, but...he's a scholar! You just haven't studied this stuff like he has. He's got it all sorted, don't worry about it.
All Ponzi's children are delirious. For one, we already hit the Titanic; Ponzi's custies are waiting for their Daddy to fix the tear in the hull. Ben's plan is same as the old plan: print money because it has alway worked before and if it doesn't we'll go for the Kool-Aid, n'est-ce pas?
Dead banks need to be cashing in their charters and signing up to play real banking 10:1 max leverage as US National Banks with fresh money. As an example of the idiocy, some are thinking of what and how to spend the unused TARP money as if it ever existed or could ever cover the holes of HELOCs tied to Firsts more than 20% under water.
There are no Trillions that can be made in a post-manufacturing and untrusted Financial Services business. It's shine box time. Get real and get busy; no time for old paradigms. Fix the hole where the rain comes in.
Aren't the payments on the interest already included in the caculation that came up with the deficit number? I think you're double counting the interest on the debt.
here's a vid mash-up of Bernanke being denounced by both
Marc Faber and Javier Bardem and a monkey!
http://www.youtube.com/watch?v=1aLnDrHBob0
"America deserves all it gets if it allows its Senators to reconfirm this human being for the most important post in the world"
human being my ass....he is a lying piece of shit financial terrorist....
If Zimbabwe Ben is to prosperity, then Turbo Timmy is the equivalent of a complete and honest tax return. This oaf should be set up in a stockade and poked with Timmy's ever-elongating nose.