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Why Bernanke Would LOVE Another Crash
Having
pumped the financial system with liquidity for over two years, Ben Bernanke has
now decided to take his foot off the pedal temporarily. Indeed, the Fed is not
only NOT launching QE 3 soon, but is going to let QE 2 end.
Why is this?
It’s really
quite simple. QE 2 primarily did two things:
1) Push
the stock market higher
2) Gun
oil and commodity prices through the roof
The Fed
wants #1. The only problem is that #2 is making its money pumps even MORE
unpopular with the US populace. Even mainstream financial media outlets like
the Wall Street Journal have begun criticizing if not slamming the Fed’s
policies.
So before
the Fed can continue to bail out its buddies on Wall Street, it needs some
serious justification for more QE. And what better than a market Crash?
After all,
the Euro crisis and market collapse in May 2010 was what laid the groundwork
for the Fed’s QE lite and QE 2 programs. A similar drop in stocks today would
give the Fed a clear “see what happens when there’s no Fed help?” angle to take
when it begins discussing QE 3.
Indeed, if
stocks were to drop off a cliff, they’d drag commodities down with them. This
would take some of the inflationary heat off of consumers, which would allow
the Fed to continue its BS “inflation is transitory” mantra and pave the way
for QE 3.
Understand, I
am absolutely certain we’ll see QE 3 in the future. But the Fed first needs
justification for it. And a market collapse would be perfect.
Again a
collapse in stocks would:
1) Let
the Fed claim that QE is needed to keep stocks up.
2) Take
down commodity prices thereby letting the Fed claim inflation is falling
3) Give
the Fed justification for QE 3 from an economic and asset price standpoint
We may in
fact be seeing the first hint of a drop in stocks today with the precious
metals sector getting slammed and the US Dollar rallying. This is precisely
what happened before the stock collapses of 2008 and 2010.
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Hmmm...
Any bets that the next "crisis" will be a false flag attack here in the US?
And, that the perpetrators will be found to be members of a "white militia group", aka "domestic terrorists"?
Cash rewards paid to tipsters finding those who might support these "domestic terrorists"...people who might have extra guns, precious metals, food, etc.?
Justifying shutdown of certain "inflammatory" and "subversive" websites?
Or is my medication just wearing off?
Oops...this was supposed to be a reply to Mr. Clown, above.
Same reply I gave to LauraB.
Fairness doctrine, net neutrality, obamacare.....power and control.
A market crash would also give them the justification that they need to implement the "guaranteed retirement accounts" whereby they would confiscate everyone's 401(k)'s and IRAs. Never let a good crisis go to waste.
I never thought so - but now I do. They'll go after PM's, pensions - um, Turbo already has...., Ireland is currently - no riots, WTF? Power and Control. Republican/Demo whatever. Power and Control.
Bonus: which movie "Fluff and fold, baby. When I make it big, I'm going fluff and fold".
It becomes an interesting chicken-egg game. The Fed desirous of a calamity to justify QE3. The market is aware of this and thus not prepared to sell majorly due to anticipation of a Fed QE. Outcome: stalemate. Which is exactly the mood/price action in markets right now. We are already playing this game :Sell (50%-61.8%) corrective rallies and buy the Fibonacci impulse dips remain the theme. It has worked a treat since the Osama high. It will see the market (I believe) drift lower over the next 2-3 months but I do not see major moves on the downside for the foregoing expounded rationale.
As a slight bear (in terms of market action/reaction...big bear macroeconomically but that is irrelevant in a centrally regulated marketplace...until it isn't), I see a move down from here (in steps) to 'only' about 1250ish (still inside long term trend channel from 09 lows).
Under such scenario, I expect ...not alot!!
Maybe you're right, but I don't think so. When this thing breaks loose they're no shorts to cover, funds have no cash for redemptions, volume w/out HFT churn is a joke, etc, etc. I expect QE3 but after it burns white hot. What happens when these bloodsuckers race to get in front of one another on the way down? My buddy is the manager of a grain elavator - when wheat hit about 21 it did exactly as he predicted. It went "no bid". Just whose gonna be there to buy in that volume? (too much for Ben).
I said most of this three months ago.
Now if I can just stay three months ahead of consensus I should continue to do ok.
I disagree with one aspect, Ben wanting a crash. Ben wants a miracle and for there to be no further need of extraordinary monetary policy.
However he does have to wait until he sees the whites of deflations eyes before he could contemplate qe3. It will be a long lag.
I agree and me too on the "Heres whats gonna happen"!
But I can't help but wonder what better way to vaporize trillions as well. Not to mention the predictability of such Fed inaction for those "connected" versus wondering when the angry mobs pissed about inflation will show up at their gated community.
Ah, Dude. The metals and grains were both up today along with the stock market and the dollar continues to act like shit after failing to even touch 76350 and acting anemic ever since. Indicators for the stock index's seem to have bottomed out and both gold and silver, whose indicators have been in the sewer would have a tough time going any lower, and if you look at the daily silver chart the sharp downtrend line from the highs was broken to the upside today.
Now I'm not saying it can't all go to shit in a second, but your observations on market action dated 5.18.11 are beyond distorted and your kind a full of shit, which really puts a damper on your arguments. And like I said, I don't necessarily disagree with what your saying, but your back up is clearly in the realm of pure unadulterated bullshit, and it reflects poorly upon you.
No offense mind you, its just hard to argue with the closing numbers.
Closing numbers for just a few days?
First Dominique-Strauss Kahn, now Hugo Salinas Price fearful something will happen to him next:
http://thesilvergoldhedge.blogspot.com/2011/05/billionaire-hugo-salinas-...
if I were a rapist and had taken undue risks with woman, I would likely tell people I feared a set up too, so when eventually I got caught, I could claim that...Spitzer likely got revealed for prostitution for poltical reasons, but he was buying sex...as far as DSK we'll see...
So what you are saying is that this would be a reliable market signal to frontrun GS? First on the short side and then on the long?
Sounds good to me.
I like the article but it seems a little "needy" too me...
So you bought oil at the top, and got stopped out of euro at the top.
Your hardly the one to be giving advice.
what top? did i say i bought oil or euro? No, Beer Goggles....
in 2006-7 the dollar was collapsing, while equities were topping for about 1 year and a half before a real crash began. When risk currencies like aud nzd eur get at these lofty levels, they correlate well with oil. Back in 08, oil didnt top out till july. All the while, equities had topped a whole year prior and were leading the sell-off. Now, equities are still in a strong bull run, and they haven't even really begun to top. So what does this say? oil, and risk currencies have a long way to the top. Short dollar....
once the market collapse happens, and happen it will due to LT interest rate spike when QE2 ends, the fed will be forced to QEx again to prevent deflation. Result: liquidity trap, uninflatable employment and housing due to neutrality of money in the medium run. Ok so a trillion had marginal effect on employment and no effect on housing, isn't it pretty obvious that additional excess liquidity is neutral?!
They baked the next one into the cake.
The Fed, through its various mouthpieces, has already stated it would start up the QE engine again if conditions warrant such action. And it's no coincidence the Fed, its owners and primary dealers can tank the markets whenever they wish.
As crazy as it sounds, more QE protects the Fed's Dollar ponzi short term more than stopping QE. It also serves the government's short term spending needs. Therefore it will continue. If the Fed stops buying Treasuries, we can't pay the interest, and we default on the debt that backs the Dollar or just print. That will devalue the dollar faster than the hidden and delayed mechanisms of QE. Ponzi maintenance is a short term day by day affair, not a long term plan. It is all about going one more day. The absolute best plan to maintain the status quo is to continue QE, but not publicize it.
Economic considerations as such as employment are a smokescreen. The Fed is not stupid enough to think jobs are coming back here. This is about what is best for banks and the government.
Completely agree. Geithner does as well. This from NewsMax.
Treasury Secretary Timothy Geithner threw a bomb at America’s financial future last night, saying he is “certain” another financial catastrophe is on the way and that there is no way of reaching agreement on the debt ceiling without increasing taxes on the wealthy.
And he blamed a combination of timid politicians and credit card-debt-ridden Americans, rather than Wall Street and the big banks, for the financial woes that have beset the country over the past three years.
Geithner was speaking at a New York screening of the HBO adaptation of Andrew Ross Sorkin’s book “Too Big to Fail.” It came on the day that Sen. Tom Coburn, R-Okla., pulled out of the “Gang of Six” trying to find a bi-partisan solution to the debt ceiling crisis.
Geithner said, “I’m certain we will” experience another crisis but not when or what kind.
The Treasury Department did not immediately respond to Newsmax’s request for comment on the Secretary’s remarks.
Geithner made his comment on taxes after The Daily Beast’s Lloyd Grove asked him if there was any solution to the debt ceiling crisis that did not involve raising taxes on the wealthy, despite Republicans’ fervent opposition.
“No,” he said, adding, “It might take them some time to come to that realization.”
“It will come again. There will be another storm. But it’s not going to come for a while.” When Sorkin tried to press him for details, he added, “You will not know. It’s not going to be possible for people to capture risk with perfect foresight and knowledge.”
Geithner defended the massive TARP program that rescued Wall Street’s financial institutions, comparing its final cost, which he put at “well under $100 billion,” to the savings and loan crisis of the 1980s which ate up “3 percent of GDP.”
But Geithner said TARP was nearly sabotaged by politicians, worried about the reaction of voters. “They thought ‘I can’t do that. They’re going to kill me if I do that, so I’m gonna sit here and wait.’ ”
He said Americans were shocked that it seemed that TARP was rewarding banks for the behavior that nearly brought them down, but, in reality, the average man in the street had to carry much of the blame.
“Americans as a group borrowed a huge amount of debt,” he said. ”There was indiscriminate pushing of credit into the fringes of the spectrum.”
When Sorkin asked him why no banker had gone to jail for their role in the meltdown, Geithner said it’s not over yet.
“That chapter’s not written. Don’t reach premature judgments on that,” but he added, “Taking too much risk and making stupid mistakes may not be a crime.”
Geithner said the crisis over the debt ceiling was bound to be resolved.
“Ultimately people know they can’t put in doubt the creditworthiness of the United States.”
“That chapter’s not written. Don’t reach premature judgments on that,” but he added, “Taking too much risk and making stupid mistakes may not be a crime.”
I wouldn't be surprised if all the little Credit Unions get knocked out of business...
clean the slate works...but only if you let haircuts happen, so I wouldn't put too much faith into the crash again theory