Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: "Bernanke Plan A Disaster"

Tyler Durden's picture

By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke's feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke's case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America's by its economist overlords. Which brings us back to the amusement part. Here are Farrell's always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.

From Paul Farrell's latest: Sell bonds now, Fed's QE2 is doomed to fail.

Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.

The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”

Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.

“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.

And Warren Buffett agrees, warning that anyone buying bonds now is “making a mistake.” Don’t buy. Sell.

Here’s how Bloomberg News reported Faber’s warning: “Global markets are heading for an ‘important turning point’ with interest rates beginning to rise within about three months and the U.S. dollar gaining strength … Instead of interest rates going down, they could start to go up. Instead of the dollar being weak, it could strengthen.”

Is Faber reliable? You bet: One week before Black Monday 1987 Faber warned investors to dump stocks. Then in early 2006 he warned of a “correction coming.” Again in mid-2007 Faber said U.S. stocks were “entering a bear market.” After that, Wall Street lost over half of America’s retirement money in its subprime disaster …and Wall Street’s about to do it again. So when Faber says sell bonds, buy stocks, please listen.

Just who is this Ben Shalom Bernanke?

Lately Bernanke’s acting like an egomaniacal politician, a savior trying to manipulate the economy in the wake of the failures of Congress, Obama and the GOP Tea Party of No-No to get results. That’s not the Fed’s job, and still Bernanke’s pulling out all the stops, repurchasing government bonds, printing too much money, flooding the currency markets. Fed zombies hungry for quantitative easing.

The egomaniacal politician is trying and succeeding in creating the greatest asset bubble ever, dwarfing anything created by his even more demented predecessor.

All so predictable: This has been building since said he wanted to buy back more bonds. The Wall Street Journal’s Jason Zweig warned earlier this month of a “Bond Bubble,” noting that while many are blaming “small investors for taking big bets,” the truths is, “it isn’t Joe Schmoe, it’s Uncle Sam.”

Nobel economist Stiglitz predicts it will fail: “Easy money won’t work … the Fed risks fueling a destructive bubble.”

It’s an old game: Since the 2008 meltdown the Fed has been Wall Street’s secret conspirator, stealing from Main Street (by keeping money market interest rates low) and giving that cheap money to a failing Wall Street (so their quant-speculators can keep gambling on derivatives, to justify paying themselves mega-bonuses).

Warning, this is all part of the Fed’s ongoing Ponzi scheme to bail Wall Street out of the destructive subprime decisions that sank the economy in 2008. Bernanke’s latest Ponzi scheme will soon backfire, this time bringing down the economy again, further reducing the retirement savings of America’s 95 million investors.

How Bernanke hypnotized the president:

When Obama reappointed Bernanke, “Black Swan” author Nassim Nicholas Taleb was “stunned” by Obama’s failure to “change” the direction of America’s misguided monetary policies. I called Bernanke’s reappointment “Obama’s biggest domestic policy blunder … Obama’s black swan.”

Unfortunately Bernanke is just one of Obama’s many capitulations to the failed Reaganomics of the past generation.

So here we are on Election Day stuck with the failures of the Bush-Paulson team, aggravated by the failing of their replacements, Obama, Summers, Geithner and Bernanke. Two failed teams that set the stage for the GOP’s lethal return and the creation of the Tea Party, a new team high on hollow rhetoric with no interest in compromising.

Warning, “gridlock” is the sole policy-making rule in Washington for the next two years.

The bigger problem will arrieve in 2012, when Obama is most certainly replaced with someone who actually respects Bernanke.

And beyond: Because odds are Obama will be replaced by an ultra-conservative president whose brain will be driven by the discredited ideologies of Milton Friedman, Ayn Rand and Reaganomics … a political scenario guaranteed to trigger another, bigger economic meltdown that will push America into a long Japan-style recession.

Gross and Grantham's take on the biggest ponzi scheme ever created.

Today we have two of America’s most respected investment managers angry and worried about Bernanke’s irrational behavior: One of them is Bill Gross, founder and director at bond powerhouse Pimco, managers of $1.2 trillion of assets. His warnings about Bernanke’s dangerous meddling were shared by Jeremy Grantham GMO chief investment strategist, managers of $95 billion in retirement assets.

The Fed’s plan to “buy government bonds, intending to lower interest rates and stimulate demand won’t work, Gross and Grantham say in letters to investors: They actually make things worse.”

Gross says Bernanke’s plan is a “brazen Ponzi scheme.” Instead of a rational plan to pay for “maturing debt with receipts from financial sector creditors, the Fed” is acting as a speculator, a high-risk gambler.“The government will be its own investor, feeding its own Ponzi machine.” Bernanke’s extreme “meddling” is a disaster waiting to happen. QE2 a Ponzi scheme, says Pimco's Gross.

Grantham’s hostility toward Bernanke is oozing from in his Halloween letter to investors. In “Night of the Living Fed,” he warns that Bernanke’s plan is just a short-lived “adrenaline injection” that will backfire: “If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation … force it to swear off manipulating asset prices through artificially low rates and asymmetric promises of help in tough times. ... It would be a better, simpler, and less dangerous world.” Send in the vampires!

Who's to blame for having a madman in charge? Why, you are, America...

Gross’s outrage also oozed like the bloody bite of a vampire: “I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time … It is not a Bernanke scheme … It is a Sammy scheme. You and I and the politicians that we elect every two years ... deserve all the blame.”

Yes, you and I are to blame, not “them” … we voted for Reagan, Clinton, Bush, then Obama … we let them pick the Paulsons, Cheneys, Geithners and Summers, addicts who believe in living high on borrowed money … we created China to replace us as the world’s next superpower … we created the Tea Party ... we are to blame for appointing a Supreme Court that’s unleashed billions destroying democracy, from within … we are to blame for an insatiable Wall Street that stole trillions from the Treasury in 2008 and keeps stealing in Wall Street’s derivatives casino ... and in these midterm elections, we’ll vote to make things even worse … then we’ll do it again in 2012.

Yes, we will … you and me … we will keep doing it … setting up the mother-of-all-meltdowns. And like all addicts, we just don’t get it, can’t stop our self-destructive behavior

Gross is right, don’t blame “them.” We’re to blame for what’s happening … we are responsible … you and me, we’re doing this to ourselves … we are killing the golden goose.

Yet the good old partisan bickering will never end: so predictable is human stupidity and the attraction of the "us against them" model. Which is why the only good trade these days is going long unrestricted one way tickets to a place warm and sunny (preferably in the one carrier that doesn't have more than 5x adjusted debt/EBITDAR). As for America, the vampires have, unfortunately, taken over.


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Cortez's picture

My local Burger King franchise went out of business as of yesterday.  A sign of the "recovery"?  Of course, QE2 will save America.

Internet Tough Guy's picture

More likely a sign of falling cardiac arrest deaths in your town. Which came first, the Whopper or the angioplasty?

Cortez's picture

1. Whopper consumption

2. unemployment

3. improvement in health from Whopper affordability issues and starting a vegetable garden.

4. Angio not needed.

Temporalist's picture

Just wait until they tax your garden or forbid you to grow one without a license and arrest you if you don't have one. 

I'm waiting for them to prohibit herb gardens on windowsills.

Legislating morality is a huge problem.  Who cares if someone wants to be obese and kill themselves with food?  Making bad choices about your health should not be illegal any more than choosing to eat fugu or take prescription meds or not.  I know way more people on "legal" meds that use their "problem" as a way out; a pity party poor me cop-out.  Some people prefer to jog, some sit. 

What if you are a horizontal person in a vertical world?   Is that so wrong?

Don't tell me what to eat and I won't tell you to mind your own business.  I don't suck off the system and I take responsibility for myself so why should anyone give a shit about what I do.  I want to enjoy my short life and I don't need advice about how to spend my is my time afterall.

Minion's picture

Tell me about it.  I've been thinking of starting up a company that shows farmers how to grow and process their own Biodiesel.  I can only imagine the Gman's response to giving the little guy a way to bypass his fuel racket......  but if they're serious about carbon credits, that could balance it out. 

Temporalist's picture

At least one person I've heard about was contacted by the IRS for tax evasion for not declaring his use of biodiesel (svo).  Imagine the govt. actually allowing innovation, new technology, even welcoming something like alternative fuel (which they essentially spent billions on for the DoE) and yet they threaten citizens with jail for using their own alternative fuel source.

It goes against corporate interest just like electrical cars have, and competing currency, and cross state insurance, and freedom.

xenophobe51's picture

Dude. It's desperate out there.

whatsinaname's picture shows plenty of folks shutting down

hambone's picture

Anybody know what the math looks like for this new QE2?

At present we have POMO's about 10 trading days a month for $25b ($2.5B each roughly 10x month). 

QE2 is proposing $100B'ish a month (20x's a month @ $5B each)

Total to maintain Fed balance sheet and put QE2 in effect $125B month? or $6.125B daily?


Janice's picture

QE2.....proof that size does matter....but velocity can be stimulating.

NOTW777's picture

I am not to blame.  I can tell the difference between right and wrong.

to continue to argue that all politics and politians are the same is worse than what bernanke is doing

Rasna's picture

to continue to argue that all politics and politians are the same is worse than what bernanke is doing

OK, a small concession... MOST politics and MOST politicians are the same... The ones who get it can be counted on 2 hands.

NOTW777's picture

i agree that many are corrupt and many on both sides are terrible but I'm not so lazy and depairing to, in sloppy fashion argue they are all identical and there is no difference.

Sean7k's picture

What a piece of flaming crapola. However, I digress. Let's look at what is being said in this delightful piece of propaganda:

1. Bernanke doesn't know what he's doing. This is Japan all over again. How about, Bernanke knows exactly what he's doing. Have you looked at what is happening to the middle class of Japan? Lower and lower wages. Wealth transfer. Wealth accumulation within the upper 1%. Politicians taking the blame while central bankers continue to gut the economy for their own benefit. The FED wants to gut America.

2. It isn't the FED, it's the politicians  fault because they won't reign in the bankers. How do you reign in someone who owns you lock, stock and barrel and who has paid you to be their fall guys? The politicians do not run the FED, it is the other way around. Who owns the gold in Ft Knox? The NYFRB. How is that audit coming or the request for information to Bloomberg? Who else can increase your taxes to the degree it is impossible to ever pay them without being subject to a vote by the people?

3. This is the kicker. It's our fault, because we did not pay attention and require good government. We voted them in, so it's our fault. In light that both parties are run by the same corporations and that party machinery dictates who gets to be a candidate- perhaps it is fair to say we were voting for tweedledumb and tweetlespree. Constantly gamed by propaganda, false flag operations, media mind games developed at the Aspen Institute and Rand. The average American cannot be expected to recognize this level of mind control- heck most experts are incapable. 

The people who manage our population are brilliant. They have resources beyond our understanding. They rarely make mistakes. They are so cavalier as to brag about it(see David Rockefeller, Henry Kissinger or Zbignew Bresinski's comments). They control every major corporation, government and media outlet in the world. 

We have only one thing in our favor: numbers. As it has always been, the eternal battle between ability to control versus numbers. 

Paul Farrel is a sycophant, Warren Buffet is a toady, Bill Gross is an actor. They all have a part to play in the desemination of propaganda. It is up to us to educate.


NOTW777's picture

dont you just love "experts" and gurus who expose their own faulty thinking and then conclude, collectively that is OUR fault

Sean7k's picture

+++++ it's a living I guess...

SheepDog-One's picture

Dyin' aint much of a livin, son.

RockyRacoon's picture

If Bill Gross says this is MY fault then it's a given that it's NOT my fault.   He is a very nice contrary indicator.  Makes things much simpler.

macholatte's picture


What a piece of flaming crapola. However, I digress. Let's look at what is being said in this delightful piece of propaganda:

 Thanks. I could agree more, but I won't. You were bordering on eloquent.


Democracy passes into despotism.

DaveyJones's picture

"It's our fault, because we did not pay attention and require good government. We voted them in, so it's our fault."

I know, I feel the same way about my date rapist. I mean, I'm the one who let him in the door.

Ferrari's picture

I completely agree with you. What are our options? Going anti-corporate, I voted for Nader in 2000. Do I feeel proud about that? Not really. If Obama proves one thing, it's that the whole system is bought. If anyone thinks that any other candidate in '08 would have given us Glass-Steagal, they're delusional.

Sean7k's picture

What are our options? This is the difficult question. It is easy to say revolution, unless you have a family to care for or live in an area that would be difficult to survive in(urban). This is not a question to be cavalier about. 

Still, to do nothing is not much of an option either. 

Since I do not claim to have this answer- I will suggest what I am doing.

I have taken myself out of the debt system. I own assets. I keep as little money in FRN's as possible. This includes PM's, foreign currency and foreign investments (yes, I recognize central banks are international in their organization, but I am subject to the rule of the dollar) I have a farm and the ability to grow my own food, supply my own water and stocks of materials. I have a library of volumes on every necessary subject I can think of- and I have read most of them. I have real skills. I know my neighbors and work to create a support community. I try to educate and expose the lies we are told. Like many on this site do tirelessly- Thank you Tyler and the many Contributors here. I am ready to defend America from her enemies, tragically, they are our rulers.

This will not work for everyone. I recognize my quality of life will be based on a new set of standards and those standards will not appeal to everyone. 

I would love my government, but all governments seek to subjugate their people. The problem is government at all. I do love the American people ( and foreign ones I have met in distant lands as well) and that will have to do. 

I think you have to find something that allows you to be at peace with yourself and your surroundings, recognizing that your surroundings may not always be at peace with you. While I am sure many here can tear my answer apart, so far, it is what has worked for me. I wish you all the best.

Apocalypse Now's picture

Nice articulation of the big picture.

I find it sad when people of inferior IQ go on about how so and so in banking, the fed, or big corporations is so stupid.  The fact that they have established monopolies and funded/bribed politicians to benefit those monopolies would indicate that those individuals are bright, not dumb individually.

Where we collectively fall down is when it becomes everyone for themselves to the point that jobs are exported or replaced with computers so that we gut the buying power of the consumer (70% of the economy).  Short term gains that benefit the corporations and executive bonuses, but over the long term this happens > higher unemployment > less credit and disposable income > less purchases & lower prices > more layoffs and job losses with less purchases and lower prices > and the cycle continues in a self-reinforcing loop.  This is called a death spiral and the question remains what can break us out of that loop?  Small businesses are where jobs have been added, but the system doesn't work for small business because they are not big enough to give campaign donations to fund politicians - so politicians don't work for them.  Nobody of significant power in government has been able to change tax and tariff strategies to stimulate the economy.  The CFR represents big corporations and it is too powerful, there is no balance because of corrupt megalomaniacs. 

All the fed money just goes into the big banks (their owners) and sits there, but we must consider intent and if this is intentional.  Most of the gains on the P&L's have been from reduced interest payments as corporations have 50/50 short term to long term debt typically and job cuts.  By stimulating inflation, input costs will go up but with no final demand increases (jobs, jobs, jobs, jobs, jobs, jobs, jobs) that will just cut margins.  What is even worse is that with zero interest, savers (CONSUMERS) have no yield with which to use to purchase or consume.  To make matters even worse, the free money at low interest is being used for M&A - that is a net loser for jobs, we could eventually have one diversified corporation in the end with 5 million workers and 300 million unemployed workers - ruthlessly efficient but not very stable structurally.

It's a takeover, how hard is it to understand that their interest(s) are not our interests.

Our problem is a crisis of confidence due to corruption.  Politicians will be squeezed between corporate interests (bribes and future campaigns) versus the majority of constituents ($$'s versus #'s).  I wonder what JFK meant by covet means?

Lucius Cornelius Sulla's picture

The sad thing is that the politicians are cheaper than a Thai hooker, relatively speaking of course.

hambone's picture

+ dirtier!

What does that say 'bout those who elect, re-elect these folks?

Lucius Cornelius Sulla's picture

No disrespect intended for Thai hookers.

DosZap's picture

Flashback,to our beginnings.

Do we get it WHY the Founders wanted NO FRIGGING Central BANK?,

But,we are so much more intelligent than they.

Ripped Chunk's picture

Not sure why you were junked. It's TROLL CITY here now though.

Many politicians do not have the background to understand what Bernanke is doing. But they have no problem acting as though they do. ALL politicians are sociopathic narcisists.  Ask any shrink and they will confirm.


DosZap's picture

 ALL politicians are sociopathic narcisists


And what are the Banksters then?.

redpill's picture

The sad irony is that people think the elections today are going to change any of this.

Azannoth's picture

There are certain 'economic' indicators that no fool can ignore like i.e. an empty stomach

matt5hansen's picture

Einstein said, "An empty stomach is not a good political advisor".  If this is true, millions of Americans will make more poor decisions when they go to the polls.

chet's picture

I've just got a feeling the market ends up negative tomorrow.  Election and QE priced in.  Can't see what the big upside surprise would be.

SheepDog-One's picture

There sure has been a ton baked into this smelly cake based upon nothin!

NOTW777's picture

well farrel believes obama is the same as reagan

and he "respects" gross and buffet

I dont need to listen such advice

Uncle Remus's picture


It's a process.

TheGreatPonzi's picture

Banana Ben is just plain insane. He's a psychopath. Like Al Maestro Greenspan, Volcker, etc. These men should be put on trial for crimes against humanity.

janchup's picture

Volker is by no means a psychopath; he saved the damn country 30 years ago.

zaknick's picture

No, he just plays ball with the criminals. He saved the country? For what? Bankster heaven? He saved their system not the American people's economy.

Ripped Chunk's picture

The Volker period was just another installment in the great experiment the puppet masters like to run on us inferior beings. Still confusing as to why they have allowed such a liberal level of sales of firearms for the past 20 years. I guess they think they have a handle on the situation.......................

Cortez's picture

Can't buy a machinegun at Gander Mtn. but the gov't has them.

bank guy in Brussels's picture

Re: « why they have allowed such a liberal level of sales of firearms for the past 20 years »

Interesting bit of political psychology by the US rulers, that I observed there back in the 90s & early 00 decade. Seems to me they figured out two things:

(a) Tens of millions of working-class US white males, robbed of careers and livelihoods and assets and families, totally impoverished, would still imagine they were 'free' and support the bankster system, if they still had some guns and ammo; and

(b) Most people can be intimidated psychologically by the media, the legal system and cop swat-team 'shows of force', even if they personally own guns.

So the US rulers realised they could confiscate guns as the near-last thing they do, instead of the first ... they will probably confiscate the guns same time as the US dictators go around confiscating the gold again, as they wrap things up.

Minion's picture

I might be naive, but I'm sure they have weapons we don't even know about that make the gun ownership issue a non issue.  Active Denial, for example:

From someone who has spent a couple years at a "defense" contractor, I wouldn't rule out the possibility of other directed energy weapons we don't know about, already in existence.  You'd be amazed to see some of the experiments with EM radiation on the brain they did in the 50s.  Hearing voices is only the beginning..........

NOTW777's picture

is farrel at the polls today voting for every left wing politican and cause and then writing stuff like this when he gets back?

no different than gross or buffet - complain about whats wrong and then do the exact opposite

Bearster's picture

More angry left.  Bernanke is trying to fix the problems cause by the Tea Party??

Regardless of what you think of the Tea Party (I think they are a tiny, small, almost insignificant change in the right direction) there is one thing we all ought to be able to agree on:

  The Tea Party Is Not In Power Today

I asked on another thread, is this what passes for critical thinking on the angry left??

Tyler Durden's picture

"Yet the good old partisan bickering will never end: so predictable is
human stupidity and the attraction of the "us against them" model.

Thanks for proving the point

ZakuKommander's picture

Unbridled partisanship -- particularly on lightweight issues -- just plays into the hands of TPTB.  Divide and conquer/placate/distract the populace, and things remain the same at the top of the heap.

NOTW777's picture

tyler, what are you proving???? you are fervently partisan (IMO - in a good way.) is that bad?

the lazy argument that all politicans are the same is no different than arguing you and krugman are the same.  you believe in your position and expose financial corruption. the mere fact that there are those who are the polar opposite of you does not make them right.  could someone could review your debate and argue - they are all the same?

people complain about "partisan" politics but offer no real world alternative.

zaknick's picture

Dude, you're another one of them deep into the left-right bankster imposed koolaid. Get a grip!