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New Budget Committee Chairman Will Push For One-Mandate Fed, Bernanke Couldn't Care Less

Tyler Durden's picture





 

Either the republicans have fully adopted a role as the "charade" party, or they are actually serious about believing that by limiting Bernanke to controlling just inflation, the Chairman will actually start acting on behalf of the peasants (note: he won't - he will just ignore the fact that food prices are at an all time record, and focus instead on the ongoing collapse in home prices, which simply means that middle class has less equity and is paying more for staples). Either way, they are not wasting any time. Reuters reports that representative Paul Ryan, the new chairman of the House of Representatives' budget committee, said he will push
for legislation paring back the Federal Reserve's mandate to focus
solely on controlling inflation, not ensuring full employment. Well, the problem there is that Bernanke will say that instead of doing QE in perpetuity, or until the unemployment rate goes back to 5% (whichever comes first), he will simply print money (pardon, feed primary dealers with infinite 1s and 0s, which in no was have an impact on cotton prices now trading at unheard of levels). More from Reuters: "
Republicans have made no secret of their desire
to impose more limits on the U.S. central bank and have been critical of
it on a number of scores, including its plan to buy an additional $600
billion in government bonds to try to speed up a sluggish economic
recovery." As if the same republicans don't realize that the only reason the Fed is buying said additional $600 billion is to monetize their own damn deficit created when they passed the tax cut extension for the rich, now that China's holding of Treasuries have basically not budged in the past year. Well, someone has to monetize all that debt. And as Zero Hedge has been screaming since September, the only reason for QE2 (and QE3 next) is to fund the $3 trillion in budget deficits over the next two years, as nobody else wants it any more.

More trom Reuters:

Opponents of that action, including a number of Republican lawmakers, say the program risks weakening the U.S. dollar and sowing the seeds of inflation without doing much to lift economic growth and lower unemployment.

The Fed currently has a dual mandate -- keeping inflation curbed and promoting full employment -- but Republicans in both the U.S. House of Representatives and the Senate have pledged that they will try to change that.

Representative Mike Pence of Indiana has said that he intends to introduce legislation in the House to narrow the Fed's mandate to keeping inflation at bay. Sen. Bob Corker, an influential Republican on the Senate Banking Committee, has also backed the shift.

When Pence and Corker announced their support for changing the mandate last year, a Fed spokeswoman said the central bank was not seeking a change and that the dual mandate was appropriate.

So much for the Kool Aid - all who think that a dodecatuple (or zero mandate) will stop the private and very much unaccountable bank that is the Fed, from running the world, should consider lowering their recommended daily allowance of hopium.

 


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Thu, 01/06/2011 - 18:04 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

Funny, my last post on a different article applies to this article too:

OK, found an interesting inverse correlation between Hanes and FAS.  Seems Bernanke takes off mainstreet's underwear with QE2 so that wallstreet can give an easy ass fuck:

 

http://finance.yahoo.com/q/bc?t=6m&s=HBI&l=on&z=l&q=l&c=FAS

Fri, 01/07/2011 - 04:51 | Link to Comment All Risk No Reward
All Risk No Reward's picture

hello, people...  the fed already has a single mandate.

that's right, they DO NOT have a "dual mandate" - that's orwellian deceit. 

read the mandate for yourself straight from the fed's website...

http://www.federalreserve.gov/aboutthefed/section2a.htm

for those who can't click, the mandate is as follows...

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production...

that's it.  that's the mandate.  so, why do they LIE about their singular mandate?

simply because they don't want to follow their TRUE mandate and haven't for at least 25 years!

http://market-ticker.denninger.net/uploads/2010/Jun/debt-to-gdp1.png

the green is the long run potential of the economy and the orange/red is the credit bubble PURPOSEFULLY AND ILLEGALLY created by the fed.

so where does the "dual mandate" LIE come from?

very simply, low unemployment and STABLE (not inflating, but STABLE!) prices will result IF THE FED KEEPS CREDIT IN LINE WITH LONG RUN GDP.

for you programmer types, it is essentially an "if... then..." statement.  IF you keep credit in line with long run GDP, THEN unemployment will stay low and prices will remaind stable.

in order to BREAK THE LAW and avoid their MANDATE altogether, the fed's owners and the media's owners palmed off the results of the mandate as the mandate itself!

and almost everyone has fallen for the deceit - including the ZeroHedge crowd!

why is this important?

it gives us clues.  whomever is controlling the fed and lying about the mandate also has the power to keep the media, the congress and the president playing along with their criminal activity.

the fed is clearly criminal.  their mandate and the chart proves it beyond ANY DOUBT, reasonable or otherwise.

"nobody saw it coming" is absurd - a 5th grader who took exponential math would know parabolic credit to GDP would blow up and so did the criminal banking cabal.  that's why they redid the bankruptcy laws and hold government by the neck.

Thu, 01/06/2011 - 18:05 | Link to Comment Dr. No
Dr. No's picture

Classic case of they should just enforce the laws on the books.  Rather than drop the mandate, why not enforce it?  With unemplyment at 9.5% (official), arrest the Bernank for breaking the law.  Would be better in the long run.

Fri, 01/07/2011 - 06:45 | Link to Comment 4xaddict
4xaddict's picture

why is it they don't redefine inflation to include all the truly meaningful areas, surely the single mandate then becomes more difficult for the Bernank to manipulate?

Thu, 01/06/2011 - 18:07 | Link to Comment bigdumbnugly
bigdumbnugly's picture

repubs only have control of the house now, won't get thru the other.

bernanke gets his way for now.

Thu, 01/06/2011 - 18:06 | Link to Comment Sean7k
Sean7k's picture

So, their only important mandate will be jettisoned and we let them have power over inflation only? 

Inflation is the only thing bankers know how to do! At least now, they can be successful in their whole job. 

Thu, 01/06/2011 - 18:10 | Link to Comment Dr. No
Dr. No's picture

Apparently 95% loss in purchasing power since the FED's inception is not a cause for concern.

Thu, 01/06/2011 - 18:23 | Link to Comment Misean
Misean's picture

Really that stat is meaningless.  It's lost 88% since Nixon closed the gold window.

Thu, 01/06/2011 - 18:25 | Link to Comment Misean
Misean's picture

Oh, yeah, and a big chunk of the loss prior to Nixon, was F*cking Dictator Roosevelts vociferously sworn against action of devaluing the dollar from $20/oz to 35/oz after stealing the gold of the middle class.  The rich new he was lying during the camapaign and vacationed in Switzerland with their gold...natch.

Thu, 01/06/2011 - 18:09 | Link to Comment Ragnarok
Ragnarok's picture

At least the FOMC statements will contain less BS with just one mandate to ignore.

Thu, 01/06/2011 - 18:15 | Link to Comment Amish Hacker
Amish Hacker's picture

I assume that the Republicans are offering a one-mandate "reformed" Fed in hopes of avoiding a Fed audit by Ron Paul & co.

Only a congressman could fail to see the absurdity of putting the Fed in charge of inflation, now that the Fed have already inflated away 98% of the dollar's value.

Thu, 01/06/2011 - 18:21 | Link to Comment 6 String
6 String's picture

And as Zero Hedge has been screaming since September, the only reason for QE2 (and QE3 next) is to fund the $3 trillion in budget deficits over the next two years, as nobody else wants it any more.

And basic math and even Richard Fisher from the Dallas Federal Bank of Reserve agrees.....

Which is why I don't know why a single soul will be shocked when another round gets underway.....shortly after the debt ceiling is raised promptly, to 17 trillion or so.

Thu, 01/06/2011 - 18:21 | Link to Comment buzzsaw99
buzzsaw99's picture

JPM now has the treasury sec'y, the wh chief of staff, the prez, the CONgrift. the fed, the sec, the doj, they own the system basically. Nothing matters anymore.

Thu, 01/06/2011 - 18:24 | Link to Comment cougar_w
cougar_w's picture

"One neck to choke"

Feel better?

Thu, 01/06/2011 - 18:41 | Link to Comment buzzsaw99
buzzsaw99's picture

Thank you.

Anger is more useful than despair.

[/terminator 3]

Thu, 01/06/2011 - 18:22 | Link to Comment cougar_w
cougar_w's picture

Translation of the GOP strategy: "Fighting inflation and fighting unemployment trends are at cross-purposes. Now, 20% unemployment is baked into the cake for the next 20 years but the working poor were always effing doomed and they don't vote anyway. However inflation will slaughter manufacturers so we gotta do something about that or they won't contribute to our 2012 campaign coffers. As a bonus, high unemployment results in wage deflation due to competition for jobs so we're double-plus in the black. The Whitehouse is ours."

Thu, 01/06/2011 - 18:31 | Link to Comment Shameful
Shameful's picture

Have to disagree.  The only strategy is the illusion of action.  We all know the Fed couldn't give a damn about employment or price stability.  They have failed miserably at both.  Their only job is to keep profits to the big banks high.  So this is to give the appearance of reform without actually doing any sort of reform.  Sure the reds want the white house back, they want to be the ones in the oligarchs favor and reaping the rewards.  The only real point of dispute between the reds and the blues is who gets to be at the primary feeding trough.

This has nothing to do with employment, it's the GOP putting on their dancing shoes.  They can't deliver spending cuts, or really any promises made, so they have to make it look like they are trying.

So the real strategy is:

"God I hope the voters are as stupid as we think and will accept this half hearted and totally ineffective measure as reform.  Man I would love to get some more of my gang in hear and really get my pillage on."

Thu, 01/06/2011 - 18:46 | Link to Comment SWRichmond
SWRichmond's picture

The only strategy is the illusion of action.

I am also thinking this.  The illusion of action to control the deficit, and in this case to control printing, in order to allow the fiat USD game to go on for longer.  And it is perfectly positioned now, with the GOP in the House and Dems in the Senate, they can boith posture while nothing really changes.  Perfection.

Thu, 01/06/2011 - 19:05 | Link to Comment cougar_w
cougar_w's picture

You are both correct; dazzle with footwork.

My point was a bit more reaching. The bloodbath in the run up to 2012 will not be in unemployment, but a combination of staggering deflation in asset prices combined with insane hyperinflation of commodities and important goods. Nobody will be talking unemployment any more except to note that it is still being under-reported in the MSM.

Everything trotted out from now until Nov 2012 will be about the elections. Every word, every deed, every fable, every scandal, every hobby horse, every threat. Every. Thing. Because there is a slim but non-zero chance that the next election cycle with be the last, and for a very long time.

Right now and until Nov 2012, it's all about the history books.

Thu, 01/06/2011 - 18:24 | Link to Comment Misean
Misean's picture

The fox only ever wanted to guard the hen house.  This should provide the banksters less distraction.  'Course the reason for the dual mandate was to confuse the hens...still, hens are stoopider these days.

Thu, 01/06/2011 - 18:24 | Link to Comment Shameful
Shameful's picture

Totally meaningless.  It's just a move to try to show they are doing something.  If they really wanted to do something they would audit then abolish the Fed.  Of course should the world gave into the abyss that is their real books they would move out of the dollar at near light speed.

Just more rearranging deck chairs on the titanic.  Anything to try to keep some more confidence in the system to keep the party going a while longer.  Though will be funny when they have rocketing prices when their only mandate is price stability.  Though expect Tyler to be right and Zimbabwe Ben to point at homes and mutter about deflation.

Thu, 01/06/2011 - 18:54 | Link to Comment hambone
hambone's picture

Shameful,

you remind me of a mental debate I was having regarding inflation...inflation is a rise in the general level of prices of goods and services in an economy over a period of time.  But Bernank is good at picking where the prices are selected from to "miss" the rising prices.

Bernank is hiding behind semantics.  What we have is stagflation (rising input costs, flat wages, falling prices of assets owned, rising prices of basics needed, and high unemployment).  This is the worst condition for 95% of Americans but as so many noted, good for the .10%.

However, what Bernank wants is true inflation in the US because with full(er) employment, wage hikes, and asset hikes all together.  Bernank wants inflation with rising wages, tight employment, and ability for Americans to lever up and take on greater debt.  I just don't think it's possible to get to true inflation w/ global labor arbotrage, etc. via this route and only hyperinflation could be acheived?

 

Thu, 01/06/2011 - 21:04 | Link to Comment Shameful
Shameful's picture

My definition of inflation is expansion of the money supply, which has ballooned. We don't have M3 officially but they turned M2 positive and M1 is already sky high. M1 is currently sitting back at the Fed drawing interest, it won't sit there forever. Eventually it will be lent out or used to speculate with.

Prices can go up without inflation of the money supply, and prices can decrease without deflation of the money supply. Likewise prices can decrease even while the money supply ins increase, look at computers over the past decade.

The problem is with the business cycle. After an inflationary boom there is a deflationary bust. This bust clears the malinvestment. The Fed for decades has refused to to let the market do this and simply papers over the deflation, and the market does not clear the malinvestment. There will reach a point where something gives way either total economic collapse because of malinvestment and poor direction in the economy or the inability to keep prices down because of the money supply increases, or both.

Hyper inflation is possible. Do a thought experiment, what would happen if Bernanke came out and announced that he would fund ALL US debt on all levels? Well naturally there is likely to be some inflationary expectations. Well Ben announced an open ended QE with a start of 600 billion. Now that he is in the market he can never leave without a massive rise in rates which murders the Fed's balance sheet. Other investors and nations are smart, they know this to. They are just playing the game of trying to exit without causing a panic and losing their asses.

The idea that there is people in Africa that make $2 a day is not going to keep people from fleeing the dollar when Ben papers over the planet. What is largely ignored is wages follow inflation usually not lead it, this is true in inflation and hyper inflation. So assuming we get no wage increases that does not stop the inflation from occurring. A dedicated man with a printing press can always cause inflation.

Fri, 01/07/2011 - 02:37 | Link to Comment hambone
hambone's picture

Shameful - thanks for your insight...agree BB has got into something that there really isn't an exit from, just a delaying tactic.

Fri, 01/07/2011 - 04:50 | Link to Comment LudwigVon
LudwigVon's picture

inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

That is price inflation, asset price inflation is not uniform. There is no general level.

Price inflation is caused by inflation, the increase in the supply of money, which has been going on for quite some time now. $2.3T was authorized for "creation" in 2010.

The reason we have had limited asset price inflation is because the "new money" is still tied up in the bond market, which is experiencing "price inflation." As rates rise money will move unevenly through other asset classes exacerbating what has already begun.

Thu, 01/06/2011 - 18:32 | Link to Comment onlymyopinion
onlymyopinion's picture

Jim Rodgers quote on The Bernanke "he'll keep printing until there's no more trees!" was a classic.  Last time I checked he's got plenty of cuttin' to do so I'll continue staying in the market.  LOL

Thu, 01/06/2011 - 18:35 | Link to Comment espirit
espirit's picture

But commodities are dropping like used underwear, wait until the subsidies cease and then the farmers give it up as unprofitable.

HooRah! Bring it on.

Thu, 01/06/2011 - 18:38 | Link to Comment Threeggg
Threeggg's picture

Looks like Public debt is the ugly stepchild today!!

This one goes belly up soon and its a pinkie

pee-yoo !

http://finance.yahoo.com/q?s=MMAB.PK

Notice the volumes are lite but they are moving down 1% or better.............no buyers !

http://finance.yahoo.com/q?s=MXN

http://finance.yahoo.com/q?s=CMU

http://finance.yahoo.com/q?s=LEO

http://finance.yahoo.com/q?s=OIB

http://finance.yahoo.com/q?s=IQC

http://finance.yahoo.com/q?s=EVP

http://finance.yahoo.com/q?s=EIA

 

Thu, 01/06/2011 - 18:54 | Link to Comment -Michelle-
-Michelle-'s picture

As if the same republicans don't realize that the only reason the Fed is buying said additional $600 billion is to monetize their own damn deficit created when they passed the tax cut extension for the rich

If I am over budget for the month, it is not because I failed to go out and get another job.  It's because I overspent.  Permitting people to keep more of their own money does not cause deficits.  In my view, while keeping the tax rates set at their current levels should have been balanced by equivalent spending cuts, the rates themselves are not the problem.

Thu, 01/06/2011 - 19:14 | Link to Comment XitSam
XitSam's picture

The "tax cut extension" was passed in the lame duck session, so why do the Republicans take all the blame for it when both houses had Democrat majorities as was the president who signed it?  And if revenue is so critical, why is it just the extension "for the rich" that is whined about? Shouldn't the whole thing have failed?

Thu, 01/06/2011 - 20:27 | Link to Comment StychoKiller
StychoKiller's picture

What part of hypocritical is a foreign notion to you?

Fri, 01/07/2011 - 13:59 | Link to Comment XitSam
XitSam's picture

I'm glad that you agree with me that Obama and the Democrats are hypocritical.

Thu, 01/06/2011 - 19:42 | Link to Comment Quinvarius
Quinvarius's picture

These guys don't understand the employment mandate is a check on them creating depressions on purpose.  It is the other side of the coin from inflation.  It means balance.  It means take care not to destroy employment.

Thu, 01/06/2011 - 19:54 | Link to Comment Buttcathead
Buttcathead's picture

Bernank is an Asshole.

Thu, 01/06/2011 - 20:27 | Link to Comment TonyV
TonyV's picture

Intersting, Paul Ryan one of the main sponsors of TARP is oposing QE.

Thu, 01/06/2011 - 21:49 | Link to Comment trav7777
trav7777's picture

The Repugnicons are idiots.  They won't even entertain the notion of cutting their sacred cows of wars and the police state and all the trappings of "law enforcement" or the military.  Hell no...cut everything else to 0 but don't stop the drug war or the iraq or afghan campaigns or in any meaningful way reduce the DoD.

The GOP would have our government budget resemble North Korea's.  The democraps may spend like heroin addicts, but the repugnicons spend like crack addicts.

Thu, 01/06/2011 - 23:07 | Link to Comment MyKillK
MyKillK's picture

Best news I've heard in a while. The Fed relies on the "minimize unemployment" mandate all the time to enact its inflationary insanity.

Thu, 01/06/2011 - 23:19 | Link to Comment gwar5
gwar5's picture

Rickards sums up the FED (slightly paraphrased from my memory hole):

...The Federal Reserve is of the banks, by the banks, and for the banks. Their primary mission is to protect the banks and ensure their survival and well being. The notion that they are really there to keep unemployment and inflation low is a little misguided in that, yes, that's nice when that happens, but that's really just secondary to everything else they're doing. If people just understand that, then everything else they do might make a little more sense.

Rickards was just laying it out. He never even mentioned Rothschild once.  

 

Fri, 01/07/2011 - 01:01 | Link to Comment RockyRacoon
RockyRacoon's picture

Nothing changes until something changes -- ain't gonna happen until the dark, dank, piss-smelling end of the blind alley is reached.  Our Congressfolk will do nothing to rock a boat that is still serving caviar at the buffet.

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