No Wonder the Outlook for the Economy is "Unusually Uncertain" ... the Fed is Killing It

George Washington's picture

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Econophile's picture

George:

Interesting post. The only thing I would disagree with is the state run banks. Any government in control of a bank is THE problem not the solution. The answer is, of course, to allow market-based banking, end or limit fractional reserve banking, and go to the gold standard. A gold standard would reduce the cost of money, end these crazy business cycles, and eliminate inflation. The state bank idea is part of "Modern Monetary Theory," a dusting off of the old Chartalists and the John Law schemes. And, never listen to Michael Moore.

Thanks.

Greyzone's picture

Yesterday in Congress, Bernanke said "The best approach, in my view, is to maintain some fiscal support for the economy in the near term, but to combine that with serious attention to addressing what are very significant fiscal issues for the United States in the medium term. I don't think it's either/or. I think you need to really do both. If the ... See Moredebt continues to accumulate and becomes unsustainable … then the only way that can end is through a crisis or some other very bad outcome."

Note also that Bernanke doesn't think the last 30 months are a "very bad outcome" so try to grasp what he's implying there, even if your elected officials cannot. And once you grasp that, check your ammo, water, and canned good storage.

PhD's picture

BP photoshping official pictures from GoM!

 

http://gizmodo.com/5592836/bp-photoshops-another-official-image-again-terribly

 

They seriously think we are retarted

wyosteven's picture

Two words:  CORPORATE WELFARE. 

 

kaiserhoff's picture

Too late for an audit.  Where is the special prosecutor for Baldly Ben & Co.  Sovereign immunity won't hold for five minutes when the truth starts to leak.

wyosteven's picture

Where is justice?

Bend over and I'll show you.

Wait, I keep getting justice confused with fudgepacker Frank.

Cindy_Dies_In_The_End's picture

Um George, when don't u think they know all of this? Of course they do. In their minds the alternative of non existence as a sovereign nation is far worse. Things are a lot worse than they seem and have been for years. That is the reality.

 

When you see this as a Threat to National Security, the extraordinary measures taken all make more sense, oh and BTW, everything they have done is perfectly legal under that guise.

Cognitive Dissonance's picture

You should visit GW's blog. He's discussed the NS issue you brought up quite thoroughly over the years. He's very aware of the "National Security" twist behind the insanity and has beaten the drum of disclosure over the lies, corruption and out right thieving conducted under cover of NS.

AC_Doctor's picture

All the so-called rich bankers will be wiping their asses with all their worthless dollars in a few years.  They should have invested in bandages, beans, bullets and bullion...

AC

Miles Kendig's picture

Hella break from writing there Geo... :)

MarketTruth's picture

Bernanke also admitted the Fed knows that Fred/Fan ARE NOT guaranteed by the US government. Due to that fact alone, the Fed is breaking the law as they can only purchase full faith by US government backed items. Obviously, and admitted by Bernanke today, Fred and Fan does not meet this criteria yet the Fed owns nearly $1.25 trillion of such paper.

Nikki's picture

Fabulous dude. Simply fabulous.

+14 trillion fiat $$..

The beard stroker is facing a conundrum and a collapse.

Time's man of the year, indeed.

RoRoTrader's picture

B Krasting wrote; The two simplest measures will be to (1) stop paying interest on bank reserves, encouraging banks to lend the money out instead, or to (2) start reinvesting capital repayments from the Fed’s portfolio of mortgage-backed securities.

 

Anyone have a number for the amounts refered to in (1)?.........and views on what impact eliminating the 0.25% risk free rate for banks may have in the context of that money actually being redeployed from risk free deposits into, ie., access to loans for small business which has so far been mostly shut out from credit.

The following is a view which I do not necessarily subscribe too, especially in the context of the current environment, but it is a view which may reflect or partly reflect the BB gambit to float it at the Senate hearing this afternoon (it may be as simple as bs baffles brains)

Eliminating the 0.25% interest for bank reserves may increase the the supply of dollars as the banks no longer recieve risk free return. With the increase of supply the dollar price begins to fall.........in other words a repeat of the 2009 illusion; print money, devalue the dollar, spark a commodity and equity rally and hope that the public common denominator contimues to remain it is not important what you are that matters but what people think you are that matters.

For what it is worth my take is that this is not 2009 and the 'fool me once' angle is probably off the table as trust is in the competency of the institution is probably collapasing........or at least in serious question.

blindman's picture

"Securitization was intended as a way to transfer credit risk to those better able to absorb losses,.."

.

no, it was intended as a way to fuck the working poor, some with savings,

predicated on trust in the government, out of their intended savings instruments, ie .

dollars, pensions and other retirement investments.  then to transfer the value

of their labor to confidence men, hailed as geniuses of finance.  pure and simple,

financial rape.  oh goody, just like t.v..

.

but i speak openly.

ps.  another great post by g.w..

my opinion,  the fed must die as it has destroyed the federal government. 

we must regress in deflation,  it will happen regardless.  "physics", he said.

.

move on, nothing to see here.........

Thoreau's picture

The Beast is almost backed into the corner; a very dangerous situation for the general populace. Good article, GW.

Cognitive Dissonance's picture

You know GW, it just doesn't seem like one of your posts since the oil and gas trolls aren't hanging around. What gives with these people? I mean they only comment about oil and gas but don't care about health care or financial regulation?

I wonder why they're so narrowly focused on only oil and gas? I suppose this will just be another mystery like the Pyramids and 9/11.

Can I yell at you so that it feels like the old days, meaning yesterday? :>)

RichardP's picture

... they only comment about oil and gas ...

Cog - they weren't commenting about oil and gas.  They were commenting about the wild speculation that couldn't possibly happen because it violated the known laws of math and physics and other sciences.  The violations were pretty obvious and specific.  None of that type of speculation that violates known laws of math and physics is happening in this post, or any other finance post.  Finance does not lend itself to known laws of math and science that cannot be violated.  Seriously - is there any statement that could be made in finance where one could legitimately respond that's physically impossible?

But I think you already knew what I just said.

Cognitive Dissonance's picture

I understand your point of view and it makes sense if they shared it.

At one point or another over the past 2 weeks, I've asked each of them why they don't comment on any other threads on ZH other than the BP/oil & gas threads. And each time I was told that they don't know enough about and/or they don't care enough about financial matters to comment.

I countered that they could learn, that many articles aren't strictly about financial matters and that many commenter's veer off topic to spout stuff that might be of interest to them. Thus they might have something to offer and learn on the other threads. I was either ignored or I was told it didn't matter, they weren't interested.

So their interest is extremely narrow not just for the reasons you give. In fact, they didn't mention your reasons when talking to me about staying only on the BP threads, though they have at other times. And while you're correct that there's wild speculation in the BP threads, there's wild speculation that violates science/math in the threads I've seen about global warming, Israel/Iran conflicts present and future and so on. And there's plenty of off topic discussions that meet this criteria in the financial threads.

If these people only wished to refute bad mathematical and scientific thinking on ZH, there is a Gold mine (pun intended) outside of the BP threads. The fact that most of them ONLY swim in the BP oil refutes the basis of your argument. They are deliberately remaining narrowly focused on the BP threads. You on the other hand do spend time on nearly all the ZH threads and so I would accept your argument if you applied it to yourself.

They are as narrowly focused on BP as the Megaphone rallied commenters are focused on Israel.

http://en.wikipedia.org/wiki/Megaphone_desktop_tool

 

Jim_Rockford's picture

At one point or another over the past 2 weeks, I've asked each of them why they don't comment on any other threads on ZH other than the BP/oil & gas threads. And each time I was told that they don't know enough about and/or they don't care enough about financial matters to comment.

You never asked me, so please retract.

My posting history is clearly available to anyone with a sufficient "control issue" that would care to look.  Unlike you, I do not feel the need to impart birthday greetings to other posters or inform other posters of "key terms" or use other methods to stoke my ego.

For the most part, I read and learn from the financial articles, even though they usually contain a large component of logical speculation and hypothetical.  Unfortunately I cannot say the same in regards to the "oil and gas" articles.  Most of the factual details regarding those issues have either been supplied by theoildrum.com or by the commenters.

You on the other hand do spend time on nearly all the ZH threads and so I would accept your argument if you applied it to yourself.

So how do you know where I spend my time?  Are you omnicient?  The quoted paragraph above is evidence not only of your delusional state, but also of complete and utter ignorance.

RichardP's picture

In one of the recent BP threads by G.W., someone named a group of 5 folks who were probably oil-industry shills, if not BP shills.  Jim was one of those named.  He could easily have thought you were referring to this group with your post, which would mean that you were indirectly referring to him.  In this context, he did not self-identify himself.

Cognitive Dissonance's picture

Are you stalking me Jimbo? Are you lonely or something? No GW post on BP in over 24 hours must be driving you mad.

"You never asked me, so please retract."

No I never did because it's obvious you have been at ZH for a year. I gave you a girl's birthday cake, remember? I was not referring to you. But now it appears that you're self identifying yourself as a Zero Hedge BP/oil and gas troll. Thank you for the confirmation. This thread is a keeper, don't you think?

Jim_Rockford's picture

As far as "stalking", you are the only one I am aware of who is intimately familiar with when we each became members and which articles where we spend our time.

Delusional state confirmed.  Seek help.  Take meds.

Bartanist's picture

Don't know about 9/11 (other than Silverstein torched building 7 and collected on the insurance after the gold was looted and to destroy all of the records) but maybe a little brush up on Zecharia Sitchen will help with the pyramids.

Don't you get the feeling that there has to be more to the story? Supposedly rational people doing seemingly irrational things for mere greed ... selling out their government, country, people... species?

I find it odd that the BIS is in this case taking the position of rationality and the US and other central banks, that of petulent spoiled children.

Escapeclaws's picture

 It seems obvious that the Fed has aided and abetted Enron style accounting shenanigans for the big banks. Why not believe in a conspiracy? Enron was a conspiracy. If the Fed deliberately turns a blind eye toward the timely and express warnings of the mortgage insurers, it can only mean that it was engineering the present mess.  What better way to transfer all the remaining wealth of the middle class to the elite?

Buck Johnson's picture

We are screwed, and the govt. and the fed knows it.  That phrase he muttered "Unusually Uncertain" is a middle finger to everybody and he knows it.  He essentially said the same thing within both words and also phrase it in such a way that one persons meaning is different than anothers, it's called ambiguity and obfuscation.  He did but didn't say anything, he's a con man and he knows it.  You have to wonder why so many federal central bank managers and others are getting out of the Fed.  It's because everything they have been taught and even taught others over the decades in regard to economies they are saying it's not wrong as long as the US does it.  They know that eventually we will have to take our fiscal medicine and the Fed and Administration is doing everything they can to delay it into the future.

Every state and person is in debt and can't service the debt that they have including the Federal govt..  We keep giving out unemployment over two years know, but still jobs aren't being found.  We will soon be in a Stagflationary Depression.  No country in the world has ever been able to control the beast of Stagflation and Deflation without suffering the consequences.  And thats because the cure for one is the posion for the other and vice-versa.  Threading that line is almost impossible and it hasn't been done yet without paying the consequences.

In America, what I see happening is States and Federal govt. laying off people (making promises that they will be back with back pay, knowing that it will never happen), rampant inflation and the start of hyperinflation, the collapse of the dollar, shortages of everything, demands from the govt. that will go unanswered or obfuscated, the rise of criminality and massive corruption to the point that local govt. leaders will act as if the area is their own fiefdom.  And eventually the breaking up of the US into 5 to 6 areas to be their own "territories" but in reality their own country.

 

 

Cognitive Dissonance's picture

"That phrase he muttered "Unusually Uncertain" is a middle finger to everybody and he knows it." 

Just amazing, isn't it? I mean, since he said this ("unusually uncertain") there must be a "usual uncertain(ty)" and of course a "usual certain(ty)". Like working one of those word puzzles in my local newspaper, I'm going to follow all of Ben's speeches from now on to see if he ever utters the other two examples of the verbal middle finger.

Amish Hacker's picture

Thanks, GW. Nice job of wrapping up the whole sordid mess into one article, and what a mess it is! As I was reading, I was thinking that it's going to be a long time before we truly understand how the greed of a few led to the impoverishment of so many. And by then it will be too late to do anything about it.

MichiganMilitiaMan's picture

I don't get it.  Individual States "Central Banks" are a solution.  One of our govenor candidates is currently recommending this.  I realize that North Dakota is doing well but are not centralized solutions part of the problem?

nevadan's picture

Read up on the Bank of North Dakota.  They pay interest on public debt to themselves instead of New York banks.  In a macro view the state bank can be considered local not "centralized"

masterinchancery's picture

What Fed observers have not yet admitted, but is absolute truth, is that the Fed USUALLY gets it wrong, assuming that the welfare of the american public is the objective.

eccitante's picture

"the economy will not recover until trust is restored"

Indeed...and it will not be restored any time soon.  Bernanke has no credibility, the Fed has no credibility, Geithner, Obama, the gov't in general has no credibility...the qualitative aspects are important, and difficult to restore with this framework in place.

Hedge Jobs's picture

Correct ecci's. The last hope the elitist FED had of getting out of the mess they are in was through the propanda and lies of the MSM machine. But even this has now failed as even a five year old now knows there is no recovery despite the MSM reports to the contrary to try to restore confidence in a broken system.

The FED doesnt have a policy lever for confidence so it is now out of their hands. I think Ben Shalom was as truthful as a compulsive liar could be today. my reading of Shalom's speach today is that they (FED) have lost control of the economy and they are starting to realise it.

Its now blatantly obvious the end games is near, confidence and trust are in the gutter for good reason and therefore so is the economy. It looks like they are about to go from the gutter down the drain. I dont where this drain flows out to but im pretty sure it aint the hamptons.

Great post GW love your work.

Rogerwilco's picture

I think Bernanke knows the score, all too well. He makes public statements that seem ridiculous -- because he has to do it. Privately he is preparing the banking system for what he sees coming and is trying to make sure his little fiefdom is the last domino. What else can the man do?

AUD's picture

This must be why gold is down.

Muir's picture

SSShhhhh.

Do not disturb the "precious."

2.86 / 2.87 10y

oil down

 

blindman's picture

excuse me, but has anyone commented on the loveliness

regarding your tits?  i find it difficult to see past this particular

element. ?  gender predicated i suppose?

BoeingSpaceliner797's picture

I'm busy trying to figure out how you can see those tits/that avatar.

Cognitive Dissonance's picture

blindman moves into and out of blindness. No rhyme or reason. Maybe it's drugs or alcohol. Maybe it's whimsy. But I long ago stopped trying to understand the metaphor s/he's trying to promote because of it's inconsistency.

S/he also has a serious problem with capitalization, punctuation and spelling. But then again, we all have our moments. Just not all the time. But then again, s/he's blind, so what was I thinking?

Jim_Rockford's picture

So using your example above, if I were to make some dumbass comments about someone's writing style in a "financial article", I would somehow have more credibility with you.  Gee, sorry, I never got the memo.  Next time you self-appoint yourself as a blog's hall monitor, please communicate your expectations in advance.

By the way, what is Tim Geithner's home phone number?  Viniers?  Were you too busy being the pedantic rhetoritician emeritus to figure that one out, or were you mesmerized by the bouncing silicone bags?

Howard_Beale's picture

Loveliness? You must love your porn. I find that avatar totally ridiculous. I have never read one of his/her comments because of it. And I love to swear but I won't on this one. That avator takes away the integrity from what he/she has to say--and I am not alone in my thinking from other comments posted.

Rainman's picture

I won't defend the Fed for a minute for their actions. But they pulled out a LTCM/ RTC playbook and ran through the steps to cover cyclical meltdowns. The old tuck-it-away- and-settle-it-up-later routine. A grave error. And much of the error was due to lies, not accurate information.

The deck had more Jokers than they knew. The shitpaper is embedded into the pension funds and insurance companies and other deep pockets that have unbreakable commitments to the regular peeps, and that includes the NAV on MMs. Instead of TARP bailing the banks, they should have let the weakies fail, seized what's left of their assets and backed up the losses of U.S. institutional suckers who bought into the ponzi ( and prosecute, prosecute and prosecute and confiscate for fraud ). Then sort out the commercial survivors and try to rebuild a Glass-Steagall regulated banking system form the ashes. Foreign banks get hosed.

Painful ?? Absolutely.

Now the ammo is almost gone and the bad debt enemy keeps coming. The reflation dream is way dead.

I'm not wed to a conspiracy theory concerning the Fed for its original 2008 intent. They just did not properly guage depth and duration. And now they are certainly guilty of compounding the effects of their original errors .....and that is unforgiveable.

hbjork1's picture

Do you ever see a "tell" that scares you out of a situation because it reveals a high probability of a serious hidden flaw. 

Mine showed up reading about the LTCM affair and looking at the basis for the "mathmatical models" for the first time. 

NOBEL PRIZE WINNER MERTON (and others) DID NOT UNDERSTAND THAT YOU CANNOT RELIABLY USE STANDARD STATISTICS IN PREDICTING BEHAVIOR OF COMMUNICATING, HURDING ANIMALS LIKE MAN.

These guys that we waste our time discussing are FAKING IT.  They don't know.  "The king has no clothes."  The commanders of our ship are warm water sailers in a North Atlantic storm.

And the BP toxic disaster. What I have seen in corporate life more than once.

Group leader says: "Here is our project plan outline composed of steps A, B, C, D and E.

After the review, Mr. Big One  says; "Great plan, fine job Team."  "But the cost is straining our budget.  Could you put togther a plan that pulls E forward."  "Maybe C could be merged with D and E."  "Lets be optomistic and put together a plan for merges C, D and E.  I will be able to get back with you on Monday to see how it looks." 

Ever been there?

tom's picture

LTCM was a private takeover, not a public bailout. The Fed was merely involved in negotiations, and presumably used its powers to threaten/promise things to the private banks to prod them to get it done.

Magua's picture

Leverage - who would have thunk that it might have something to do with the plunge? But, we know they cannot handle the pain that it takes to unwind it. Ironic, no?