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Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: "Bernanke Plan A Disaster"
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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That is fuckin awesome!
I couldn't agree with you more. Good stuff.
Futher QE is to fund government. No need for economic theory at this point. It really does not matter who is chairman of the FED. The end game is the only play. Monetize the debt. Control enough of the buy to set rates.
The conversion for FY2011 for MBS is around $300B (additional QE beyond principle). Add to this another $700B QE2 (my guess), and we will add another $1T to the FED balance sheet.
Some talk about QE programs in the $5T range, but if the FED balance sheet ever reached $5T + how would they tighten without destroying rates? QE just buys more time in funding huge deficits. At this point it is not about reduction of rates, it is controlled destruction of the currency. But really, given our money system, this is why the FED exists.
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Mal-investment and squandering of future growth through debt is a cruel legacy placed on the US taxpayer and the country. Only politicians could incure such a loss and somehow justify their existance. The political elite are feeble in representing the people, and their blatant greed has pawned a once prosperous nation.
The one's holding the purse strings are financially corrupt.
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The actions are remarkable in their premise. That somehow incurring debt will increase growth. The very word growth, in this context, is in of itself, corrupt. Growth through debasement of the currency is not real growth.
The motivation is to hide loss from the people who pay for it.
What is acceptable at times is unbelievable.
To endorse the concept of debt to GDP in perpetuity, in the context of paying interest, is an endorsement of debt peonage as a national goal. The only real acceptable level of debt to GDP is zero. Why is this politically unacceptable?
Mark Beck
-- RANDOLPH BOURNE 1918
We are no more responsible for the Fed's reckless policies than the people in Thailand were responsible for the tsunami. The idea that you're beholden to a system that you were born into is nonsense. They can say whatever they want but each person is responsible for themselves and nothing more.
And that is why the Neocons and globalists feel that it is their inate right to change things for the rest of us, just to suit their own greed and sociopathic tendencies. They feel they owe us nothing: no life, liberty or pursuit of happiness.
"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. "
Paulie does understand that Zimbabwe Ben himself is heavily influenced by Friedman, yes? That on Friedman's 90th birthday, Bennie thanked him for (incorrectly) identifying the cause of the Great Depression (failure of the Fed to expand the money supply adequately), and stated "thanks to you, we won't do it again".
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm
And refresh my memory on what Rand has to do with any of this? Or how, exactly, would being on a gold standard (something Rand would have actually supported, another "discredited ideology" Paulie?) be any worse than our current predicament? Forget Japan-style recession, someone wake me when we've gotten out of the Depression 2.0.
More than likely THAT is the plan. Obama was given his 15 minutes to be an actor on the world stage, party hardy, send his wife on trips all over the world on the taxpayer expense and to piddle with pet projects... but with the understanding, just like his predecessor that he was to hire the people he was told to hire and not to mess with the adults in the next room.
This year's election may be signs of very bad things to come ... but most people seemingly just sleep on, believing as they have been brainwashed to believe in the two party system given to them by the rulers. We are in worse shape than Russia or China has ever been... save possibly when they were "purging".
The more Money they print the more Money they make. The FED is made up of private Banks.
So, what if I could print a Tillion Dollars from 0. I then would be due 1 Trillion from the People plus the accumulating interest. The Law would also give me the ability that if you did not pay your share (income tax) to put you in Jail and confiscate all of your property. Yet, you would not have a say in how much Money I printed or what interest I charged because the Law would protect me. In this case I would print as much Money as I could. I would print Money and give it to all of my Friends as It would cost someone else, not me or my friends. I would become extreemly wealthy as I created capital without any cost to me and would be entitled to the return of the capatal created plus interest and others that do not have a say would be subject to the cost and the interest.
That is the problem with the Fed. They continue to spend other peoples Money to give to their Friends and charge someone else with the bill.
TALK ABOUT MORAL HAZARD.
Defecit: 1.5 trillion.
QE2: 1.5 trillion.
It's no more complicated than that. The Fed has replaced Treasury as the gov'ts fiscal agent.
"...the Tea Party, a new team high on hollow rhetoric with no interest in compromising."
That's an interesting statement, but not on the Tea Party: Does the writer imply we are in this mess because we compromised too little?
"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.”
Who is this *hole and what planet is he from? Is the the only person in the world who doesn't know that Bush STOLE the 2000 election, against the will of the people? That the wars in Iran and Iraq were bullsh*t? That in 2008 the Democrats could have run a stuffed dummy and won, just because the voters hated Bush and Republicans so bad? That Obama then continued the failed policies the electorate just voted AGAINST, even keeping the same people in key positions? Has the forgotten the public protests, and the flood of letters, phone calls and Emails opposing TARP and the bailouts by 100 to 300:1? Has he forgotten the opposition to Obamacare? Does he not know that the Tea Party movement started as a legitimate protest movement, before it was hijacked by Republican hacks?
THE PUBLIC HAS BEEN SOLIDLY AGAINST THE GOVERNMENT AND THEIR POLICIES FOR AT LEAST 10 YEARS.
If you want to know why the politicians don't care, and how they keep getting elected, ask the guy with the keys to the voting machines.
For Bill Gross to come out and say what he did tells me that at some point Bernanke and him parted ways. He's the defacto bond man for the govt., when they need a bond sale to go through or not fail him or others are required to buy it and then the Treasury buy it off of them. For him to say what he did and to put out the ponzi saying on it, points to a schism that formed and Bernanke is going one way and he wanted to go another. We are so screwed, but as you said and I agree we did it to ourselves.
When a bunch of old white guys with lots of dollars are angry, be afraid. Be very afraid.
I've read Paul Farrell's rants for years. I don't disagree with what he says is coming. I think he right about that. BUT...
Farrell never says what he thinks SHOULD be done! NEVER! What is he FOR? I don't know, after reading dozens of his editorials. He never says. He just blames, blames, and blames some more. He especially loves to blame Reagan for our CURRENT problems!
I didn't vote for Bush. I object to Obama's relentless "we inherited this mess" blame game. But REAGAN? Come on, Farrell!
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