I thought might be direct toward the likes of Zero Hedge and many of
their contributors (including myself). Sack spoke about the dramatic
rise in long-term yields since the inception of QE2: From the speech:
The rise in yields does not appear to be driven by the concerns expressed by some
that the asset purchase program would unleash a considerable rise in
U.S. inflation and inflation expectations to levels well above those
consistent with the Federal Reserve's mandate.
Sack dismisses the rate rise and basically calls it “a good thing”.
The upward movement in longer-term interest rates in large part reflects the greater optimism among investors about the outlook for economic growth and the gains do not signal greater worry about inflation.
Well it would appear that I have it all wrong. I am convinced that what Brian is doing is a monetary “unnatural act”. These guys are manipulating the bond market three times a week. They are doing this manipulation in biblical amounts.
They have maintained ZIRP for three years. In my way of thinking this
much liquidity pumped into the system has to create steam in the boiler
and that steam has to come out. Yes some of it is coming out in the
bubbling stock market. But where is the fairness in that policy? Some
of the steam also has to come out in the form of higher commodities
prices. To me this is textbook Economics 101. I guess I should get a new
textbook.
Actually I don’t think I am wrong. Mr. Sack can say as he wishes. To me
his credibility just goes out the door when he attempts to sell this
drivel. There are only a few possible conclusions that I can reach.
-Mr. Sack actually believes what he is saying. That there is NO
connection between monetary policy and inflation. This would imply that
he is ignorant as to the basic laws of economics. I doubt this very
much. Sack is no dummy. I would dismiss this one.
-Mr. Sack is doing what he is told to do by his boss. Bernanke used
almost the exact words when he spoke before Congress. So this was just a
setup for the media. Sort of a double dose of “Don’t worry, we have this completely under control”. This is not Fed “spin”. It is propaganda. And a well organized effort at that.
I don’t believe that Sack or Bernanke go to bed at night believing in
the fairy tales that are trying to sell to the American public. At this
point I think they are functionally lying. They are too smart to believe
what they are saying. They are too informed to ignore the mountain of
evidence that proves they are igniting a fire that could end up starving
people.
I think the problem is they are too stubborn to admit that they made a
mistake. Eight months ago Bernanke misjudged what was happening in the
economy. He thought he could be the savior and rescue an economy that
was headed into a double dip. But he was wrong. The economy was just
giving a head fakes. The recovery we are seeing today is not born from
QE. It is born from the fact that 300mm people have to buy cars sooner
or later. They can’t put off needed repairs or even a holiday. Sure
there is a ton of people out of work. There is also 130mm people who are
working. Yes real estate sucks, but a large number of companies are
making very big profits and sitting on mountains of cash.
QE is an emergency tool. There was no emergency in the fall of 2010.
There is none today. If there is an emergency in 2011 it will be that
inflation gets out of control and the Fed has to do a 180 on monetary
policy. That will almost surely bring us another big recession. Should that happen the fault will lie squarely on the Fed’s shoulders.
I hope Mr. Sack does read Zero Hedge and I hope he reads this. If so I have a message for him:
I have been investing money for 40 years. I watch markets every day. I
am scared to death of what you are doing. I vote with my feet. I will
not buy your manipulated yield curve. (I can’t for the life of me
understand why anyone would). You have already raped savers for years.
Now you are going after our food supply. What you are doing will ruin this country.
When that happens those that invented and implemented these polices
will be disgraced. Your only option is to man up and admit that you have
erred. End this madness. Do it now or suffer the consequences of your
actions.
Depends entirely upon how you read controlling inflation..........prism of the looking glass or managing perceptions in other words.
OIL is going MUCH higher.
On a second note for what it is worth I think there is a paradigm socio/economic shift underway and the probability is that it is VERY global in its context.
VERY global, for sure.As the ECB steps up their bond buying to manipulate the prices and fight the forces of nature, they lose more control of everything else. Why else do markets exist if they can be "directed" whatever way those in power fell it should go? No volume in markets indicates, no sane investor is buying their BS. Vote by not playing their game.
Great post Bruce and RoRo.
Here's my version of Sack speak, or whatever; OIL is going a LOT higher.
It's "evaporflation"
http://seekingalpha.com/article/127149-evaporflation-vaporflation-and-condenflation
http://www.bbc.co.uk/news/world-africa-12412488
http://www.businessweek.com/news/2011-02-09/bernanke-s-worst-nightmare-i...
"expressed by some" is not exactly naming Zero Hedge, nor Bruce Krasting. I am thinking this is more in line with a "My side vs their side" type of elementary school description like you would see on The Simpsons.
Your point does not change anything in the article