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Rosie On The Fed's Intent To Get Everyone Onboard Its All-In Bet On Stocks
Just in case there is someone living in a cave who still doesn't understand that the Fed's one and only mandate (forget that crap about inflation and jobs) is to give everyone one last shove into the all in ponzi before the diarrhea hits the HVAC, here is David Rosenberg explaining, for the cheap seats, what the Fed's terminal intent is.
The Fed’s intent is not to create consumer inflation, but rather asset inflation — primarily in the equity market. By pulling longer-term bond yields lower, the Fed hopes that this will alter how investors value equities relative to the fixed-income market. Moreover, the Fed will be actively pushing up the value of bonds that exist in investor portfolios, and as such the intent is to induce these investors to rebalance their asset mix towards equities in order to maintain their current allocation. The Fed is also trying to incentivize fund flows into the equity market. This in turn would theoretically boost household wealth and as such make consumers, who now feel richer, to go out and spend more. So the theory goes — we shall see how it works in practice.
The Fed’s intent is also to lower both the debt and equity cost of capital so that companies will, at the margin, compare that to expected returns on newly invested capital and begin to spend more on new plant and equipment. The hope here is that the investment spending multiplier will kick in and that stepped-up job creation would occur in tandem with the renewed capex growth.
In essence, the Fed wants to avoid what happened in Japan over the last two decades — have a look at Japan Goes from Dynamic to Disheartened on the front page of the Sunday NYT. The comment in the article to the effect that back in 1991, the consensus was looking for the Japanese economy to begin surpassing the U.S. economy in size by 2010. Nice call. Instead, Japan’s economy has not expanded at all since that time whereas the U.S. economy, despite all its problems, has grown 65%.
That said, the U.S. has already experienced a lost decade in many respects, especially as it pertains to the labour market, while Japan has lost two decades. Also have a look at How to Erase the Lost Decade on page 5 of the Sunday NYT business section — Bob Farrell’s Rule #1 on mean reversion comes to life, and that is what this cycle is all about. To wit: “…instead of waiting for stock performance to return to the mean, investors would do better to pay attention to whether price-to-earnings ratios are reverting to long-term averages.” It’s not just the markets — it’s also about the economy.
The era of betting big with the mortgage and credit card in the prior decade is over and is giving way towards an era where “getting small” will be the norm. This theme rankles many growth bulls but all you have to do is take the blinders off, grab a copy of the Sunday NYT magazine, and open it up to page 58 and have a read of The Elusive Small-House Utopia. The 6,000 square foot McMansion has become the modern-day version of the 1973 Lincoln Continental — the 1,700 square foot bungalow is far less offensive and has become “the home for a new economy.” A precipitous trajectory of mean reversion and that is the deflationary risk that is keeping Bernanke up at night.
Now back to the Fed and the macro picture. The U.S. economy is caught in a classic liquidity trap. With additional fiscal stimulus no longer a viable political option, even though the government is better equipped to deal with many of the structural hurdles to growth than monetary policy, Mr. Bernanke clearly feels that the Fed is the only game in town. Although, the White House does seem set to push, yet again, for a $250 bonus to the country’s 58 million Social Security recipients. Mr. Bernanke so eloquently outlined the risks associated with QE2 last Friday, but he obviously believes that the cost of doing nothing outweighs the risks. But he also knows that there is a chance that QE2 will only be met with limited success — monetary policy, even in a non-conventional form, is a very blunt tool to use to reverse a secular uptrend in the savings rate, re-dress chronic unemployment or induce people to spend rather than correct their debt-laden balance sheets.
At the same time, the Fed’s actions are also going to have global consequences, and the money printing to the buy the bonds will inevitably trigger more dollar depreciation. But there are a host of other countries that do not want their currencies to become overvalued — especially in emerging markets and in Japan (see Japan Turns Up Currency Rhetoric on page 3 of the weekend FT). Indeed, the weekend FT editorial (page 8) was dedicated to this very topic — global currency tensions (The New Threat to the Global Economy).
Also see What Bernanke Didn't Say on page A16 of the weekend WSJ (hint: in a 4,000-word speech, nada a mention of the dollar, even though it has clearly been a huge casualty). Precious metals would seem to be the best hedger, or perhaps even Canadian bonds, which will trade in lockstep with Treasuries but denominated in a currency that isn’t about to become debased.
Then there is what he did say, and page B1 of the Saturday NYT nailed it on the head (Bernanke Weights Risks of New Action):
“The likely impact would ripple far beyond American shores. The new actions could contribute to the weakening of the dollar and complicate a festering currency dispute that threatens to disrupt global trade relations.” This is happening at a time when globalization is heading into reverse — see the always-reliable Floyd Norris on page B3 of the Saturday NYT —World Trade, Once Rising, Is Starting to Sag Again. The article added “...the Fed hopes that by making credit even cheaper it will encourage businesses and consumers to borrow and spend...” Yikes! This is what got us into trouble to begin with — excessively cheap credit that fuelled an unsustainable spending binge. Also see Japan Turns Up Currency Rhetoric. We have an unstable foreign exchange market backdrop on our hands and history shows that this is where major financial spasms generally get started.
All this begs the question: is a gallon of gas at $3 cheaper than a gallon of gas at $300.
Another question, and this will get much more prominent in a few months, is whether Ben Batmanke be able to save the day and pull out just in time instead of drowning the world in trillion dollar bank notes?
More, as always, at the source.
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"before the diarrhea hits the HVAC"
An instant classic.
Isn't it comforting to know, however, that even the cheap seats are hooked up to HVAC?
Takes out the need to get out of your seat and miss something...
I concluded the same long ago, the FED's only plan is 'get every retail sucker long stocks'...its not working just the opposite is happening so how long can the timeline on this huge FED *fail* really be? Election day at the longest?
Agree, as the equities market is pushed up by the FED's POMO, the "retail" investor is bailing out. They are shifting into fixed income and precious metals. It's is sort of a "women and children first" event. My only hope is that the HFT firms are the bagholders that go down with the ship, at least some of them will be caught in limit down flash crashes that will come in the near future.
I was also amused this morning when one of the guest cheerleaders on CNBS suggested giving up on American consumers to push up earnings, and one must place their chips on companies selling to the new middle class of India and China to be a successful investor going forward. Fortunes will be made on the sales of Happy Meals from Hong Kong to Mumbai. So as our middle class curls up and dies, the invisible hand will be pulling the rest of the world out of the muck and into the world of two ply toilet paper once reserved only for the West. Welcome your future. Is that government cheese I smell?
at least some of them will be caught in limit down flash crashes that will come in the near future.
Nooooo problem. SEC will cancel or DK trades...
We're gonna need a bigger HVAC.
Not to mention, more cow bell.
we're all in the cheap seats now.
wait...you guys have seats?
Isn't it comforting to know, however, that even the cheap seats are hooked up to HVAC?
Another sobering instant classic.
Maybe living in a real cave iz the answer?
Isn't it comforting to know, however, that even the cheap seats are hooked up to HVAC?
Another sobering instant classic.
Maybe living in a real cave iz the answer?
Turd.. hope that's one of them fancy wet/dry HVACs..
:p
The problem for us in betting on QE2 is knowing just when to pull out before we lose our load. Being risk averse, I tend to pull out a bit early, I might not make as big a pool as I could, but the visuals more than make up for it.
One of the first rules for investing that made sense to me:
Always leave the guy who bought from you, a little room for profit.
Always leave the guy who bought from you, a little room for profit.
http://www.cnbc.com/id/39710609
Big Ben, the Rag and Bone Man of the New World Order.
'Bring out your dead (bonds)....bring out your dead (bonds)....'
As the world goes dark
'For want of a title, a trust was lost
For want of a trust, an MBS was lost,
For want of an MBS.....'
I other words, DIG IN BOYS!! ( And girls ). Help your self to some nice tasty bloated High Pe overvalued stocks. Theres lots to choose from. The Feds got you covered. Its 1999. Aol to $600. Yhoo to $500, Qcom to $750. Remember those days?
That where my first trading days... I remember I bought 20.000 euro worth of Enron stock when it was plunging down below 1$ and thought about retiring at 25 years old...
Money I got from my parents to buy a cool first car...
After that, I drove a piece a shit car with steering controls like a tank...
And I'm still working...
I remember in 1999 buying a company called CMGI before i went to work. The price was around 300. When i came home, It was $395. It was glorious. Better than Sex. I bought Qcom at $425. when i came home, It was $575. It was beautiful.
You couldnt lose. But like gambling, You have to remember not to be too greedy. When the stock went up enough, I sold and didnt look back. Qcom was the the big Daddy at that time. CDMA Technology, remember that?
Yes except the dotcom bubble looks tiny compared to this $5 billion daily pump job to get retail USA poverty class long bubble stocks. I dont care what anyone says, this is going to end very badly in early November or sooner.
Hell, The Great Depression looks like a tiny bubble compared to counterparty risk now. $1.4 Quadrillion in non-transparent, non-regulated derivative securities held by insolvent institutions simply stuns. There is no precedent; there is only propaganda, global spin, and lifeboats for the rich.
The "Great" Depression will have to be renamed in the history books. It will be described as an economic slowdown between WW1 and WW2.
Here in Luxembourg most people I talk to think I am some kind of weirdo when I tell them to buy gold and take delivery. Most of these people have always lived in a paradise - when the SHTF there will be many little boys and girls crying.
And buying gold in Luxembourg couldn't be easier.
I went into a bank, said "I have money give me gold". They said "Sure thing Sir, but have you an account with us".
I said "No, kind Sir, but I will open one tomorrow."
They gave me my gold, I gave them their cash. Never darkened their door again..
But it is expensive. Average price over spot is about 7% at most banks.
The problem is a dysfunctional economy which was allowed to develop for far too long through excessively low interest rates. If you aren't willing to let the system normalize and purge the bad debts, you will end in a hyper inflationary collapse. Obviously, the banks will survive and I suppose this is the true objective of the Fed.
I too am a believer of the need to acknowledge the default, kill the insolvent banks, including JPM, C and BAC and then restart with newly capitalized banks.
Three problems:
1. It does not fix an underlying problem, which is the drain of money out of the US and so we are not dealing with either a balanced or close system.
2. The US government apparently has no clue or any personal or societal self restraint. It is bloated and would screw it all up.
3. Why would they ever bother to re-start, recapitalize with "the dollar"? It would be an ideal time to recapitalize with a global currency to satisfy their globalist wet-dreams ... and what exactly does that do to holders of the dollar (the savers)?
However ... I do agree that the growth paradigm needs to be killed in the US. I think we need efficiency instead of growth.... and that includes efficiently employing everyone who wants a job.
that statement gave me a visual. I saw Strom Thurmond & John Conyers.
The more they pump, the more retail RUNS away from the markets! When will ONE person step in and yell 'ENOUGH"!!!
I dont believe it will happen, we will see the 'maximum pain' event because there is no way out for the FED.
The sad part of this whole story is that the Fed could have made this asset inflation strategy face a greater degree of success... if they hadn't intervened and bailed out the TBTF financial sector to start with.
Why should the public participate when banks are getting a rolling windfall under ZIRP???
Again, there is no real incentive to save and invest in things that create real economic value. The capital formation process as it existed in the past is terribly broken-- and the Fed is making the problem even worse by endorsing and perpetuating asset distortions. Does AAPL and GOOG really need more money? How about JNJ? Is it better for a primary dealer to buy high beta common stock, or pad their cash balances for gloomy days ahead.
These are interesting times... just not the "good" interesting.
Unfortunetly Yes, there are pleanty. I tend to find in my daily conversations that, sadly, people don't have a fucking clue. Or, is it they don't care?
For a long time I saw it that way too. I thought that everybody had their head in the sand. But now I have more had more people asking me "what in the hell are they thinking"? So I take that as a good sign.
people that I talk to are in a couple of camps.
One - they are clueless living the life of blissfull ignorance...about this and many other issues associated with our government.
two - aware, but in denial about the magnitude of the issue or not very fully educated about the issue.
I say buy gold, silver, oil...and I get a blank look like I am crazy. The TV tells them to buy stocks, dollar cost average, follow a freaking green line to happiness ever lasting.
Notice that Batman had Catwoman, and James Bond had Pussy Galore.
Like peas and carrots...PB and jelly...
POMO seems to be losing its effect. It can't seem to keep things erect much past 11:05.
Last 2 POMO days Friday being one of them resulted in market down days. Imagine if the $5 billion daily market prop-jobs were cut off!
Caution:
POMO and Viagra may cause blindness requiring hospitalization for an erection beyond four hours...
Yea and 10$ gas, 10$ Lb meat and no way to earn more than a couple % on a CD...nice, brilliant ....
I only have one problem here.
All currencies have been massively debased already. None are about to begin to be debased.
While I understand that Rosie is talking about the future of the Canadian currency here, this myopic view that we do or don't begin with the debasement "today" is very dangerous because it sweeps away what has been done in the past. Subliminally it says to the reader "things have been pretty good up to now" when this is hardly the case.
Just because you get a haircut every month or so doesn't mean your hair hasn't grown 6 feet by the time you hit thirty years of age. This is what I talk about when I use the term "subliminal" without linking it to the more common understanding of the term, such as hidden messages in TV programs or commercials.
The way a sentence is structured presumes so much of the reader. Often it plants a meme or thought seed that may not be intended by the author, but it grows none-the-less. This fine subtlety is used against us all the time as a method of psyops. Often we can't help but repeat it without thinking. Thus we must constantly question what we think we know, why we think we know it and what we are saying.
This is exactly how the control system works, in incremental steps and in very subtle ways. It is ingrained and nearly impossible to see without carefully looking for it.
You beat me by a minute! See below.
Maxwell Smart: "Missed it by that much."
"Did you get that Max?"
"Some of it Chief"
"What part did you miss?"
"The part after 'Listen carefully, Max'"
DR perhaps talking his Canadian book?
My wife, who has been calling my a nutjob ever since 2008 when I started to see what was happening, finally saw exactly the subliminal bullshit you refer to. We were watching the idiot box last night and a commercial came on for some basic consumer good, toilet paper or something, but I cannot recall what item it was. Anyway, the commercial was trying to say that only the smartest people use their product and guess how this company identified the "smart consumer"? The smart consumer decided he was going to "fully invest in his 401K".
My wife nearly did a spit take from her Merlot. She looked at me and said, "What does that product have to do with 401K's?" My retort was, "What smart person invests in a 401K? Now show me your tits.”
It’s not so subliminal when you have your eyes open. Come to think of it, we could probably make a drinking game out of spotting the subliminal on the idiot box.
One simply cannot see the Matrix, the control system, from within the control system. Since it's nearly impossible to physically remove ourselves from the control system, we must do so either philosophically, mentally or emotionally. Preferably all three at all times.
The good news is that once you begin the process, it becomes easier and easier until one day you find yourself sitting all alone somewhere wondering how you never saw what has suddenly become so blantantly obvious.
Step one. Unplug from TV, movies, Internet and radio for a week. Then jump back into the pool. It will amaze you when you open your eyes to see what shit you've been swimming in.
Exactly, once upon a time, I spent three months in the African bush, no TV, no radio, no electric, nothing but the Bongo's echo at night, and the topless young ladies trying to impress. I became totally immersed.
When the time came to return home, my first stop was a 2 week layover in Amsterdam...and my first contact with "the media", in three months. This is when my eyes were opened to the psyops. It was astonishing to say the least.
Like Lindsay Lohan's first couple of lines of coke after getting out of rehab, just blows your mind.
I was there for a couple weeks before she left.
"Step one. Unplug from TV, movies, Internet and radio for a week. Then jump back into the pool."
Why jump back in when you know it's going to be shitty? "Dont believe anything you read in newspapers." How many times have you heard that but as CD says it's the subliminal stuff that gets you so dont read it in the first place if you can wean yourself off the drug that is media...
I gots to be gettin' me some o dese waaay cooool glasses.
www.youtube.com/watch?v=7Lwlx3GnLGs
Cheese :)
http://cheez-it.com/
"This is exactly how the control system works, in incremental steps and in very subtle ways. It is ingrained and nearly impossible to see without carefully looking for it."
I'm giving up. It's too hard to fight it at this point. I don't want O'brien torturing me anymore.
War is Peace.
Freedom is Slavery.
Ignorance is Strength.
I completely get your point.
However, the really ugly realization is that there is no "O'Brien" torturing us. We, you and I and they and them and he and she and us are the control system. It continues to exist because "we" perpetuate it. We are all "O'Brien" as well as the victims of "O'Brien".
Kinda like this?
www.youtube.com/watch?v=jnijdyflxTw
blurf.
And can you remember/imagine linking sex with smoking cigarettes?
No offense to you personally but you brought up psyops. I think this blog and many of the commenters are using around the same proportion of psyops as TPTB. Usually it comes like this -- "some huge crash is coming, and I'm in the know, but it's too obvious for me to explain it". In your own case it takes the form, "everyone is in denial, but I can't tell you why or how, or give specifics, because (insert BS reason)".
Again, no offense intended, but when I hear this my response is what is he/she trying to sell me. Or he/she wants to sound smart and get attention, but really knows little that is useful.
Go ahead and dismiss me as a shill if it makes it easier for you. I'm just a guy looking for information but finding it a frustrating waste of time, with neither side really elucidating to a useful degree.
The Fed’s intent is not to create consumer inflation, but rather asset inflation
So fart, with used cars up +12.9% after cash clunkers for debt, +11.8% fuel oil and +84% wheat the last year, room for improvement.
http://www.bls.gov/news.release/pdf/cpi.pdf
Looks like Debt Death to Equities redux at higher real interest rates due to asset finance default deflation:
http://www.businessweek.com/investor/content/mar2009/pi20090310_263462_p...
PS Stick a fork in Gold...
"PS Stick a fork in Gold..."
I think it's been often pointed out here that 'you can't eat gold'.
"PS Stick a fork in Gold..."
I think it's been often pointed out here that 'you can't eat gold'.
You can't eat paper either but you can wipe your ass with it.
Uses for paper money:
Kinda lumpy but you can stuff a matress with it as well.
I hear the FRN is so toxic, mattresses stuffed with FRNs will defeat bedbug infestations.
paper beats rock
In your elitist and sadistic dreams, Lord Keynes!
Now back to your buggering .....
Good idea in theory, but when capacity utilization is at 74.7%, I just don't see it happening.
Supply-side logic is always good for a laugh.
Do people really ramp capacity in the face of zero demand for years to come in their world?
depends on the product. in the form of "wheat or corn" the answer we all know has been a resounding yes.
especially with central planning politburo subsidies
I just can't see how making a stock market blatantly manipulated gives people an incentive to put their money into it. There is the trust factor and trust of the governments, banks and stock markets is at what seems to be an all-time low.
And, while it has been widely alluded that the main policy thrust is one of "behavioral economics", just understanding what that entails makes one look at every word put out by Bernanke or the "official" govrnment with a more critical eye and to question the real motive of any statement. My guess is that when people understand they are being manipulated, they are less easy to manipulate, so the behavioral response is to stay away from the stock market.
I also have a problem with the fact that far too many common shares are not actually investment vehicles that provide a dependable dividend and an actual ownership stake in the company, but are instead casino chips. Bernanke is trying to make casino chips worth more and not increasing the return to INVESTORS.
Bond holders (debt holders) are the actual owners of a company. Common knowledge that tells us otherwise has lied to us. Debt holders get a guarateed return with much less risk than common share holders. The mortgage crisis is another example of this principle. In the end it is not the equity holder (home resident), but the debt holder that is the real owner of the property.
And share holders aren't really share holders anyway! Title remains with Cede & Co, a.k.a. the DTCC, so you are never more than a holder of a piece of paper at the end of the day!
with unenforced naked shorts and ETF creators there are no proper shareholders anymore
The only piece of paper I'm interested in holding says;
Receipt for purchase: 5,000 rds 7.62x39 ball, megabox, Yugoslavian military.
because "the Fed isn't manipulating the equity markets." They are "monetizing the debt, debasing the currency and creating havoc with our trading partners." Meanies. Once I'm done berating them I might have to buy them all a steak dinner.
I thought the illusion of prosperity got us into all these bubble/bust messes in the first place and parked us firmly in the netherworld of unsustainable debt.
This is all madness.
well, "you thought wrong." and so did I...and France...and Greece...and China...
over $6b in POMO money sloshing around and the dow is only up 35 points? we're about to multiply that by a factor of ten OR the powers that be are selling right into it.
POMO is heroin. Pretty soon you need a bigger hit just to get back to feeling "normal" or "functional". Next step is feeling "less shitty".
About 12 hours ago silver was down 54 cents on the Asian market. Gold was down about $13. Go, POMO, go.
About to become debased? I have some news for you, Rosie.
http://s3.hubimg.com/u/401250_f520.jpg
It seems that most every day consumables cost more in Canada than the US.
This chart deserves to be posted if for no other reason than as a reminder of the damage done to date, though Rosie was talking about the Canadian currency not being debased. Every currency has been debased to date compared to where it was 10, 25, 50, 100 years ago.
Great chart! It would be nice to put a corresponding graph line on the price of gold over the same period. We know about what that would look like.
Anyone notice the relationship of wars to debasement?
the high cost of the warfare welfare leviathon
Thought it was almost a map of Normandy 1944 at first.
EDIT: Operation "Overlord" anyone?
As Dr. Marc Faber said, "It took the Federal Reserve almost 100 years to devalue the dollar 97%, the next 97% won't take as long."
Cog, great chart.
And if the dollar value for the decade preceding the Spanish American War could be shown, it would remove the impression that the dollar was devaluing before the Fed’s establishment in 1913.
As The Trumpet.com wrote in 2006: “Between 1783 and 1913, the U.S. dollar was a real store of wealth. Except during war-time periods, inflation within the U.S. was essentially zero…
“But then in 1913 something changed, and the U.S. dollar started down a long, steady road of dollar devaluations. Using the U.S. government’s own figures, to obtain the same amount of purchasing power of $100 in 1913, you would need $2,038.38 today [2006]. “
http://www.thetrumpet.com/index.php?q=3037.1530.0.0
CD,
Thanks for the graphic post!
During my time, the only arrow I see missing is the removal of Silver from US coinage.
Great chart.
It was crowded out by the Vietnam war.
By the way, isn't it nice to see those Vietnamese "finally" becoming good little consumer capitalists after we spent so much time teaching them the facts of life via carpet bombing and agent orange?
God bless the American Empire. We really do kill them in order to save their souls.
I've seen this chart upteen times... but what does it actually mean?
My co-worker discovered this yesterday and asked me to explain. I lived thru the Plaza devaluation, and I had to admit it had no effect on my life. It really went by un-noticed. Since the 80's my rent has barely changed (in real terms, not inflation adjusted!) while my income has more than tripled. Food/gas up of course, but for all but the poorest of the poor it's really a small expense if you budget reasonably. (The poor have always had their basic living expenses handed to them anyway). Health care is the big one of course. Only the wealthy can afford that without insurance.
I should mention I am a saver. I believe another devaluation is inevitable. I do not believe it will be some tragedy let alone even hurt savers in USD assets who live on USD expenses.
Bernanke's silver bullets do work, but, only for a handful of his Wall Street buddies. His biggest challenge is to convince everyone else that it will work for them too (even though he knows it won't), just long enough for his Wall Street buddies to get out of their jam.
John Q got off the bus with TARP.
They picked up pitchforks with 0Care.
QEII throwing gasoline on the pyre...
I've begun spelling (and speaking) TARP using a different letter sequence.
TRAP
Very good. I like it. Maybe when writing, "TRAP, oops I mean TARP" for those of us less sophisticated but nonetheless enjoy phonetic misdirection.
What a bummer CD!
I wont be fooled by your subtelty anymore; now you've spelled it out!
I've used it several times and each time I'm told it was a Freudian slip. :>)
This is how Ben Bernanke is awoken at Mariner Eccles by 33 Liberty at 4.AM when the futures are down significantly like this morning.
http://www.youtube.com/watch?v=9TpC-k9vm34
It's hard to believe that Ben's game theory amounts to some sort of "trickle-down" economic card trick. Something for nothing.
Or the theory that all of this makes small business suddnely decide to seek returns by investing in their businesses when it is clear they will not do so without comfort that a market exists.
So neither theory makes sense, and yet this is offered as the rationale. Anyone else asking what the real motive behind QE2.0 is?
Repo man.
http://www.youtube.com/watch?v=jl9Nvg4yuus 2:31
(Cotton up +197% last year, but no CPI here, move on)...
I like to think Benron will look like the man in the top hat sitting in the chair in the stairway:
http://www.youtube.com/watch?v=L3XcDAo842I&feature=related
Although this clip is more appropriate:
http://www.youtube.com/watch?v=2vp--AlWBrU&NR=1
The idea seems to be, extend and pretend, lie and deny, while the taxpayers buy all the rotten assets the big boys are selling.
Once the big boys are in the clear with all the profits, and all the rotten paper belongs to the taxpayers, it will be time to step back and let the whole economy blow up.
But that won't happen until they have stripped every asset out of the economy and left us holding the bag.
With falling IRS revenues the last two years seems more likely Fed banks and Wall Street may be standing when the music dies
Ned - I have attached a link to Bernake's most important speech on this topic. To understand him even a little, one must read this speech.
He clearly wants to support housing prices and lower corporate capital costs. He believes in this "Financial Accelerator" theory.
Of course, as you and others correctly point out, destroying confidence doesn't achieve his aim.
http://www.federalreserve.gov/newsevents/speech/bernanke20070615a.htm
financial alchemy a fail
http://www.auburn.edu/~garriro/ppsus.htm
the graphical analytics demonstrate the inevitability--but not the timing--of the subsequent bust.
Get rid of the Keynesian Demand Constraint.
The problem with all the Fed and similarly minded monetary guru's is that they control only one factor to get to their desired end result. You can have money for free, 0% interest rate and I still will not buy a house at this point or even any other major purchase. I was laid off almost two years ago. I found another job but at a 30% discount. My entire family has been unemployed or had their incomes go down, except for the retired members. I believe this is the bigger story behind the unemployment numbers. Even the employed are working for less or fewer hours. Income destruction is enormous, even for the employed.
After one year, my new employer did layoffs. I survived. I expect this to be the norm for the next ten years or longer...perhaps till I retire. I was recently offered a small promotion, not just because I had a good record but because they knew I was renting and could relocate inexpensively. My company cannot bail out people who are severly underwater on their mortgages. Therefore, promotions go unfilled at times. Now, the foreclosure crisis is preventing the proper pricing and accounting for property. Can the Fed fix the legal mess? No. Therefore, they have a limited ability to reflate home/asset prices.
When I got laid off I had to sell a home at a significant discount after six months. Thank goodness I had not leveraged it like so many. I do not plan to buy again till retirement because of long term employment and income uncertainty. Then I plan to pay cash and have beefed up my 401k accordingly. These are things the Fed cannot really fix. In fact, they are the ones who helped cause the problem.
Last, when I got my severance the government helped themselves to a very very healthy portion of it in taxes. It was a windfall profit for the government. Little guys, individuals lke me get no bailout or even tax break for being self sufficient. There is no income averaging any more. I had friends who were unemployed for two years then took a much lower pay, partly out of necessity as their severance money ran out...earlier thanks to the government that's here to help us. Will the Fed fix tax policy, too? If ObamaCare, financial reform and perhaps a cap and trade bill kill the economy can the Fed fix that, too? Those are deflationary in that they suppress or kill business...especially business outside the preferred friends of the government.
The Fed's job is not to run the entire economy or even government. It is to provide a sound currency...the very thing it is not doing in the name of trying to do other things it is not supposed to do. So, as it avoids doing what it is supposed to do and tries to do what it is NOT supposed to do it will break BOTH the currency and the economy with high if not hyperinflation.
Fortunately for the Fed, most of the rest of the central bankers of the world believe the same economic (false) religion and work together to make the house of cards stand. However, proper economics is like physics. You cannot change its laws and it will have its accounting. In the meantime, buy commodities and replace currencies...virtually all of them with real things. You can trade or resell real things at any time in any market or currency condition.
and nothing more be said. this is it. All is "on the Fed" according to DC and Ben has "accepted this." He's never said a bad thing about DC, has he? And so "they pile more and more on his back" and he does not question his institution's ability to handle any of it, let alone "one item of it." In Vietnam they called it "mission creep" and Ben Bernanke has "it" and beyond. In short "it's not the Fed that's out of bullets but the Federal Government."
Excellent analogy! Wish I'd thought of it, lol. If Bernanke is going to take it on then he has to start issuing orders to Congress. Of course, then the whole incestous thing would be too obvious.
My entire family has been unemployed or had their incomes go down, except for the retired members.
And retired members hit by 8% real CPI defined as 1.1% to prevent COLAs.
None dare call it debt default deflation.
Let BSB buy all Treasuries.
Like Afghanistan, Iraq, Korea, Pakistan and Vietnam, what is the win plan for withdrawal?
Tip for FG.
Pay particular attention to the moves currently underway for the seizure (THEY say conversion) of 401Ks to UST annuities. I feel distinct possibility may happen in lame duck, Nov-Dec time frame. Watch your 6.
I'm in the same situation. I took a huge cut (>50%) going from Independent Contractor to salary employee. Meanwhile, contract rates have fallen off a cliff. My neighbor was a salary banker who took a 30% hit after getting laid off and being unemployed for 1 year. We both feel fortunate just to have a job.
IMHO, there is no way the FED will be able to stop the process of de-leveraging. Between higher energy prices, calls for fiscal constraint and pressure from foreign central banks, the FED will cry uncle on their QE. Sure, there will be more QE, but not enough to stop deflation.
When will these economists FIGURE IT OUT.
Global oil consumption is NOT SLOWING. Global oil production is below 2006.
Oil's price is frigging $82. It was $25 in 2000. The dollar is not worth 30% of a year 2000 dollar. It's not dollar erosion.
It's supply erosion.
Growth is gone. The F word. FOREVER.
Most reading these words will not die of natural causes.
Never planned to. The whole "going out in a blaze of Glory" thing was never my goal, but I consider it a distinct possibility. The Glory is optional and depends on who is defining.
well bennie and the inkjets don't read anything other than their own bullshit. all of my family members have been out stocks since aug 2009. won't be buying back in unless and until the major correction happens {never?}, don't care, won't be back until there is a compelling cheapness to stocks. just one big ponzi scheme after another by the fed or obama and his idiot crew. none of my family members is spending any monies on anything but food and gasoline and other essentials. these jackasses can huff and puff all they want, but until the crooks are run out of dodge...we will not be playing...hell we would have better odds in vegas
+1
Sort of O/T mentioning the latest trend towards M&A's and something heard on CNBS that caught my ear.
M&A's occuring with the multinationals lead me to believe something (Wicked this way comes) is going on behind the scenes.
All of them hoarding cash, and insiders reducing their exposure to their own companies is getting downright NWOish.
The junkie is starting to take nearly lethal doses of the drug every other day and doesn't even get a buzz anymore.
Time to gather in some new junkies. Please direct me to the nearest elementary school kind sir.
On second thought, never mind. I'll just use the TV.
In my experience, it's always difficult to pull out in time ...
What a wonderful illustration.
If the fucking is expertly done in conjunction with liberal doses of indoctrination and fear mongering, both parties (the fucker and fuckee) will "enjoy" the experience. Or at least they will think they have.
1) Ben's number 1 job is to give money to the banking elite
2) QE 2.0 is for money to go in and buy inflated stocks from the elite
3) Collect premiums at the lowest possible taxes
4) Trash the American economy so we can't compete
5) Move to another undeveloped country and take advantage of America in shambles
Repeat...
don't agree with this article, the intent of the fed is to keep interest rates low on mortgages to permit refinancing to cover the cost of the foreclosure mess. Look for the increase in profits from refiancing to offset the mortgage foreclosure loss. The fed will continue to pump money into the the stagnant banks balance sheet until the banksters are ready to take profits on AAPL, than the banksters will unleash the stored up spring of cash into the markets and inflation will rear its ugly head via the money velocity increasing to drive up prices, viva la france!!
The feds intent is to save the banks, period.
Why would they want to save themselves? Not much valor in that if you ask me.
This is like deja vu all over again!
LOL. The Fed’s intent is not to create consumer inflation, but rather asset inflation…” Give me a break!
We all know by now that “Yikes” Rosenberg is hoping that whatever the Fed does will help equity markets.
Yikes wants it both ways, i.e., this is what the Fed is doing and what the Fed intends; by implication: this is what’s necessary and then, later, don’t blame me.
Rosenberg has become completely untrustworthty as an analyst, IMO, because he has totally discounted the sound money side-- demonstrated by two positions :
1) Let savers sink in order to hold the stock market up.
2) The constant repetition of the philosophy, “get small.”
“All this begs the question: is a gallon of gas at $3 cheaper than a gallon of gas at $300?”
You bet it is! When people’s wages are stagnant and their life savings are being depleted by negative interest earnings and their fixed income pensions and insurance inheritances are decreasing every day in purchasing power because of a Fed hyperinflation spending spree to reboot the bankers, you bet $3 gas is cheaper than $300 gas.
And if by inflation “the Fed hopes that by making credit even cheaper it will encourage businesses and consumers to borrow and spend...” and, thereby, create more jobs at McDonald’s, McDonald’s will have to increase the price of hamburgers in order to pay the wages.. The old saw “yet the consumer will feel richer and therefore spend more” doesn’t play out anymore.
Rosie is talking fast and complicated, hoping to make sense to the unawares.This Yikes! is a perfect description of the QE that got us into this mess. Bernanke prints and the bankers use the credit (instead of loaning) to buy stocks, buy companies, increase the number of estates they own… In addition, they hoard money and sell high waiting for a market collapse so they can go back in like Bernard Baruch after the ’29 Crash and buy back on the low.
More liquidity and looser cash to handle a debt problem? Isn't this like buying your drunk Uncle Mickey a bottle of whiskey to sober him up? Is there any sane universe in which this could possibly work?
1 Trillion = 1 Million X 1 Million...
just sayin....
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