PIMCO Names Former Fed Chairman Ben Bernanke To Serve As Senior Advisor
— PIMCO (@PIMCO) April 29, 2015
Honest price discovery is essential to capitalist prosperity since it is the miraculous mechanism by which capital is raised from savers and investors and efficiently allocated among producers, entrepreneurs and genuine market-rate borrowers. What the central banks have generated, instead, is a casino that is blindly impelled to churn the secondary capital markets and inflate the price of existing assets to higher and higher levels - until they ultimately roll-over under their own weight. The Easy Button addiction of our central bankers is thus not just another large public policy problem. It is the very economic and social scourge of our times.
"Whenever total federal tax receipts have exceeded 18% of GDP, the result has always been a recession for the U.S. economy."
In a recent blog post, Citadel's latest trader and part-time Brookings blogger, Ben Bernanke, asks "does the U.S. economy face secular stagnation? I am skeptical, and the sources of my skepticism go beyond the fact that the U.S. economy looks to be well on the way to full employment today."We, on the other hand are skeptical of Bernanke's skepticism, for one simple reason: reality.
Nothing is ever permanent with the QE’s because they were doomed from the start. The “dollar” system can never be refined and remade to its prior station because it was irrevocably broken on August 9, 2007. All that QE’s have done is to create reverberation within the downward channel which may, in the end, only exacerbate the degree of imbalance that weighs on the inevitable shift.
Here we are, just barely into our first earnings season without the incessantly added fuel provided by QE and the markets are stumbling. At times on Friday the indexes were hovering near the possibility of posting 2% losses going into the weekend. In today’s media mindset of “everything is awesome.” That’s near – unthinkable. No Fed speaker saved the day; no HFT-induced ramp came to the rescue... Maybe it’s because all ammo (and there has been no silver bullet more powerful of late than a Central Banker press conference) is being reserved for a much larger crisis looming on the horizon (i.e. Greece and all its tenuous implications calling for an “All hands on
printing presses deck, battle stations” response).
Having previously explained the 175,846,629,768 reasons why former Fed Chair Ben Bernanke would join Citadel - the most-levered hedge fund in the world and alleged conduit of fed put protection; we thought it intriguing to note what billionaire Citadel Ken Griffin had to say about Bernanke and his policies just 2 years ago...
The science of economics has taken a decidedly wrong turn sometime in the 1930s. In the field of monetary science specifically, sober analysis has given way to broad-based support of central economic planning, with both policy makers and their advisors seemingly trying to trump each other with ever more lunatic proposals.
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Lately the Greek finmin is far more in the media for things he doesn't say, or "allegedly says" (or which fingers he extends during his speeches), than for his official statements, however his statements are still relevant especially with the Greek endgame according to many having started. So feel free to watch him without any lost in translation moments as he speeks at the Brookings Institute, the place where Citadel's latest trader Ben Bernanke blogs out of, on the topic of "the Greek economy and its global partners." It may be a short speech.
It is almost too coincidental to be a coincidence: on the day Ben Bernanke, who until a year ago was the biggest fixed income portfolio manager in the world courtesy of the Fed's $4.5 trillion in assets, joins Citadel as an advisor, the massively levered "market-neutral" hedge fund which as we showed earlier has $176 billion in regulatory assets, "loses" its global head of fixed income, senior managing director Derek Kaufman. Well not exactly loses. The reason for his "voluntary" departure: according to Bloomberg Kaufman is leaving Citadel not because he is about to be replaced by the former Fed chairman but because last year he lost $1 billion "in a variety of trades."
Here is Bernanke's new job: to make sure that Citadel's 7.4x leverage only keeps rising, and that its "true" regulatory assets of $175.8 billion follow. Because if there is one thing Bernanke has experience with, it's lots and lots of leverage.
Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed - through a slightly more than arms-length arrangement - does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed's broker commission statement. In fact according to some, indirect Fed compensation to what is the world's most leveraged hedge fund has been in the billions over the past decade. Well, now it's payback time, and as the NYT reported overnight, the Brookings Institution favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor.
Einhorn Slams Bernanke's Blog, Says Fed Policy Is A "Destructive Force That Shouldn't Exist Outside Of Fiction"Submitted by Tyler Durden on 04/13/2015 14:58 -0400
"We have passed the point where Jelly Donut policy is merely slowing the recovery. Distortions are now adding risk to the banking and insurance markets and leading to poor incentives for the largest players in the financial system. Monetary policy and regulations have combined like a failed chemistry experiment to create a potentially destructive force that should not exist outside of fiction."
- David Einhorn