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On Ben and Tampa

Bruce Krasting's picture




 

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Ben Speaks

 

House Oversight Committee Chairman Darrell Issa (R-Calif.) wrote a letter to Ben Bernanke and Ben wrote back. The WSJ’s Jon Hilsenrath covered the story (Link). Not surprisingly, Hilsenrath spins the exchange of letters as a triumph for Big Ben.

 

Bernanke defends the Fed’s efforts as well as he can. But in the absence of definitive information on the success of QE, ZIRP and Twist, the best Ben can do is argue, “it coulda been worse”:

 

“the Fed's bond-buying of recent years has helped to promote a stronger recovery than otherwise would have occurred”

 

Really Ben? In the darkest days of 2008 and 2009 the Fed took actions that helped avoid a complete collapse. But there is very little evidence (if any) to support Bernanke’s claim since then.

 

There is one section in Bernanke’s letter that got to me. Issa asked if it were premature to consider additional monetary moves, Bernanke responded:

 

the Fed must make policy in light of a forecast of the future performance of the economy

 

Come on Ben, your economic crystal ball is cloudy. Want proof?

 

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Issa questioned the risks the country faces when the Fed is ultimately forced to reverse its policies and begin to reduce the size of its balance sheet. Bernanke blows off those concerns with:

 

The Fed will normalize the size of its balance sheet through gradual pre-announced sales in order to ensure that markets have an appropriate amount of time to make adjustments.

 

This statement is a lie.

 

Bernanke has no idea what will happen to the credit markets once the Fed starts selling the trillions of bonds it has bought. The Fed has never done this before in history. How can Bernanke be so confident of something when there is no road map? To believe that it will be just as easy to sell bonds, as it has been to buy them, is just ridiculous. When the Fed does start selling, the capital markets (and the economy) will shudder. Bernanke knows this is true.

 

Bernanke is not going to be the head of the Fed when the selling of those bonds starts to happen. His term will run out before the pendulum shifts. He is setting this up so that the “next guy” has to clean up the mess.

And Ben is going to do more. From the 8/22 letter:

 

"There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery"

 

This talk means that Ben is going to up the stakes once again. He will undertake more emergency monetary measures. The “buck” that he is passing to the “next guy” is going to get bigger. Bernanke will be retired at Del Boca Vista when this blows up.

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Republicans in Hot Water

 

Who was it in the Republican party that chose to have a convention at a seaport in Florida at the peak of the hurricane season? What were they thinking of?

 

The Tampa Bay Times Forum is where the Republicans are supposed to be spending Tuesday. Think of an auditorium filled will delegates wearing silly hats and waving state flags. This picture shows the location of this well-chosen venue. It’s right on the water, and yes, that’s an ocean liner parked nearby.

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The good news for the Republicans (and the rest of the folks in Tampa) is that Issac appears to be drifting away from a direct hit. The bad news is that Isaac is going to strengthen quite a bit before it passes by.

The hottest ocean water at any location in American waters today just happens to be in Tampa Bay (89 degrees). The area from the Florida Keys north, is also very hot relative to the rest of the Gulf of Mexico.There's plenty of fuel to make this storm grow.

 

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If you're left wondering why the deep thinkers in the Republican Party chose Tampa, consider this opinion piece in the local paper today. Have fun Republicans!

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Sun, 08/26/2012 - 14:14 | 2738823 ejhickey
ejhickey's picture

When I saw my doctor the other day he lectured me about not eating right and not exercising.  i said "sure Doc I hear what you are saying, but if I had been exercising more I might have been tempted to run a marathon or at least 5K races.  then I would have had knee problems and needed a knee replacement and maybe suffered a heart attack while running .  In other words I could have made things worse."  I dont think he wants to see me any more.

Sun, 08/26/2012 - 12:51 | 2738667 booboo
booboo's picture

"Who was it in the Republican party that chose to have a convention at a seaport in Florida at the peak of the hurricane season? What were they thinking of?"

Not defending the Retardlicans buuuut did you ever take the time to consider the date and location of the Dumbocrates convention this year?

  • Hurricane Hugo Fact: Lowest pressure: 918 millibars / 27.11 inches
  • Hurricane Hugo Fact: Pressure and sustained wind at landfall: 934 millibars / 140 mph
  • Hurricane Hugo Fact: Maximum sustained winds at peak: 160 mph - category 5 on the Saffir - Simpson scale
  • Hurricane Hugo Fact: Strongest wind gust in Charleston: 108 mph
  • Hurricane Hugo Fact: Fatalities: 50 total, 21 mainland U.S.
  • Hurricane Hugo Fact: U.S. Damage: $7 billion
  • Hurricane Hugo Fact: Caribbean Damage: $3 billion
  • Hurricane Hugo Fact: Maximum storm surge height: 20 feet, Bulls Bay, SC
  • Hurricane Hugo Fact: Most intense tropical cyclone to strike the Atlantic coast north of Florida
  • Hurricane Hugo Fact: USDA Forest Service estimated damage of $100 million to timber north of Charleston

 

Sun, 08/26/2012 - 11:26 | 2738513 papaswamp
papaswamp's picture

It will come close to following Karinas track... No worries

Sun, 08/26/2012 - 11:26 | 2738512 papaswamp
papaswamp's picture

It will come close to following Karinas track... No worries

Sun, 08/26/2012 - 06:19 | 2738184 tok1
tok1's picture

If the govt ever could produce budget surplus
Fed can just let the bonds roll off over time . I suspect in long term
future ( 2-5ys) the fed /ECB / BOJ / BOE will be forced
to have some sort of public sector write off in conjunction
with balanced budget regulations ( extreme measure)
This would be inflationary to a degree but only possible resolution.

At the moment central banks (BOJ / fed / BOE give their Interest
revenue from bond holdings back to govt so central. bank buying
is just interest free loan to govt .. and really just an expansion of money supply. It carries the same risk as any money supply expansion.

The reality is the US had a lot of real assets ( good land / natural resources/ educated population / reasonable infrastructure ( some have better but most have worse) so they can and will over come this down turn .

Main problem I see is Obsma is possible the worst macro economic manager ( and his team) the US had had for years ( regardless of his family history or background ) he has no creative policies and is poor and putting good people in the right spots. It's that simple get rid of him and prob things could improve quickly ..
Romney might have been excessively profit motivated but at least he made a profit and understands how things work ..

The end

Sun, 08/26/2012 - 14:01 | 2738790 Kayman
Kayman's picture

"The reality is the US had a lot of real assets".  If you really meant "had", then your argument does not follow.

If you meant  "has" a lot of real assets, I would suggest that you point out real earning assets, and leave out flipping paper and inflating nominal prices.

 

Sun, 08/26/2012 - 01:52 | 2738051 knukles
knukles's picture

Lads, this will date me and be completely foreign to most of you youngins out there, but way back in the Good Olde Days, one of the most dreaded comments ever in the El Bondito Market was "Fed in selling all coupons."
And that was when they weren't trying to downsize the asset base.

They're never, ever gonna be able to sell all them bonds wholesale.

However.... if they do want to have a similar effect, they can with an unchanged balance sheet, raise reserve requirements.
(LOL, you evil fuck, Knukles)

Sun, 08/26/2012 - 07:56 | 2738249 disabledvet
disabledvet's picture

The Fed will start by not engaging in any of the weirdness to begin with. An audit of the Fed would be truly fascinating actually...just to see what they have on their books. More than likely Ben would spend the rest of life in prison if that happened...but still...the Twist is interesting one. Is it Ben's fault if Wall Street suddenly discovered how to lose a trillion front running the Fed? I say no..."but how is one to know whether a financial anarchy isn't in fact the greatest...

Sun, 08/26/2012 - 12:48 | 2738664 El
El's picture

Do you really think so? Jon Corzine isn't spending even one day of his life in prison, nor is Jamie Dimon or any of the rest of those sick puppies. We could go right down the list and not one of them will spend a day in prison. They aren't prosecuting anyone these days.

Sun, 08/26/2012 - 01:20 | 2738024 gwar5
gwar5's picture

Dems getting ready for strip bars in Charlotte, too, trust me. Diamond club is giving itself a makeover for the occasion.

 

Charlotte prostitutes are reportedly getting timely and creative tattoos right above her pussies.

Examples:

I Built This! 

Pay as you enter

Birther Canal

Redistribute This!

Bill Clinton was here

Hillary was here

Occupy Me

Foxhole for War on Women

In Over Your Head


 

 

Sun, 08/26/2012 - 11:35 | 2738525 synsolve
synsolve's picture

beautiful

Sun, 08/26/2012 - 01:41 | 2738040 TBT or not TBT
TBT or not TBT's picture

Um, prostitutes are MOBILE.    No need for any to be in place year round where a convention will be held.   They'll go if there is a market.    Democrat conventions are little more dangerous though, because those folks have more disease risk, much more.

Sun, 08/26/2012 - 03:38 | 2738108 gwar5
gwar5's picture

Of course they are. They go 'round the world.

Sun, 08/26/2012 - 01:53 | 2738053 knukles
knukles's picture

Pray tell (seriously) why the Dumbocraps have greater disease risk?

Sun, 08/26/2012 - 03:23 | 2738104 TPTB_r_TBTF
TPTB_r_TBTF's picture

.

Pray tell (seriously) why the Dumbocraps have greater disease risk?

 

because Dumbocraps are bisexual.

Sun, 08/26/2012 - 13:32 | 2738736 WmMcK
WmMcK's picture

That means they have twice the chance of getting a date on Friday -- W. Allen

Sun, 08/26/2012 - 03:12 | 2738096 gwar5
gwar5's picture

More examples from Tony the DNC tattoo pussy artist:


Barney was here -- really a boy

Spitzer barebacks R extra

Free The Gerbels!

Alluah Ahkbar

NAMBLA Unfair to Women

Pubic union dues go here

Fast and Furious!

Pretend it's Arugula

Need ride back to school

Tested we much!

 

Sun, 08/26/2012 - 06:19 | 2738185 NoClueSneaker
NoClueSneaker's picture

One I'm missing: 

Quantitative Squeezing

Sun, 08/26/2012 - 00:03 | 2737989 q99x2
q99x2's picture

'Del Boca Vista' The revolutionaries will track him down there too. He won't stay in the country.

Sat, 08/25/2012 - 22:50 | 2737941 lamont cranston
lamont cranston's picture

Screw Tampa. Let's all go to Ted Peters' in St. Pete Beach and chow down on mullet & tater salad with a Miller. Yum. 

I run my biz in Charlotte from 93 miles away at 3600' above sea level and come down 2-3 days/week to do what needs to be done. No way IN HELL I am anywhere near town later this week and the week after this when the Fool Button is pressed. 

Sun, 08/26/2012 - 13:21 | 2738711 mvsjcl
mvsjcl's picture

Well, Charlotte County, Florida is about 90 miles to Tampa, but I can't think of one place in the county that's above 20 meters above sea level. Must be some other Charlotte you're speaking of.

Edit: Oh, you must be referring to that other convention.

Sat, 08/25/2012 - 23:45 | 2737976 Buck Johnson
Buck Johnson's picture

That place is going to get flooded out and they must know it.  It doesn't have to take a hit, they are on the Leeward side of the storm and with the winds and the good potential of it increasing it will push the water up into the flood plains of Tampa and that bay.  So guess what, they are done.  Also the article is correct, Bernanke is going to be gone when it's time to sell those trilions in bonds.  My question is to who?  Once the fed starts to sell it will be katie bar the door, everyone will be running to get out of that market and others.

Sat, 08/25/2012 - 22:48 | 2737940 Cosimo de Medici
Cosimo de Medici's picture

Bernanke probably thinks he can fine tune the trimming of the BS through a combination of maturities and bond selling.  Obviously there will be more of the former than the latter.  Imbedded in this belief seems to be a realization that the current crisis will continue for the tenure of Bernanke's portfolio duration.

Can he pull it off?  Two years ago I would have put the odds at a percent just north of current Swiss 2-years, but now I frankly do not know.  The road down which the can is being kicked---in the US, Japan, China and Europe---is like the old Route 66:  it simply doesn't ever seem to end.

Sat, 08/25/2012 - 22:48 | 2737939 steve from virginia
steve from virginia's picture

 

Krasting is worried about the Fed turning loose of 'inventory'. Why?

Why not worry about another nuclear meltdown somewhere. That will take place before the Fed trims its balance sheet.

Rather the Fed will make unsecured loans out of desperation and be seen for what it is: another insolvent giant bank that is broke because it makes unsecured loans ... just like all the other banks.

QE3 might just trigger the Mother Of All Bank Runs. With no solvent entities anywhere there is no guarantor of funds, no lender of last resort.

More likely to accelerate the ongoing runs out of euros is ECB giving a banking license to ESM. Again, systemic insolvency and no real lender of last resort.

End of the game is almost here, children ...

Sun, 08/26/2012 - 14:46 | 2738870 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Probably right. The Germans kept paying on their WW I bonds until 2010, when they paid the last one off.

Sat, 08/25/2012 - 21:21 | 2737870 Ned Zeppelin
Ned Zeppelin's picture

The Fed's most remote worry is how to downsize its balance sheet.  The Fed does not care how big it is.  The problem is how to grow it further - infinite QE -  without destabilizing everything.

Sat, 08/25/2012 - 19:52 | 2737772 ZackAttack
ZackAttack's picture

I keep waiting for the Mayor of Crazyville, Pat Robertson, to proclaim that the storm is evidence of God's displeasure with the Republican party for turning on Akin.

Sun, 08/26/2012 - 02:44 | 2738088 cynicalskeptic
cynicalskeptic's picture

Mother Nature is fed up with getting treated like hell by Repubs......     they definitely have a problem with females.

Sun, 08/26/2012 - 01:43 | 2738041 TBT or not TBT
TBT or not TBT's picture

Awesome.  Please put ZackAttack in charge of Democrat messaging.

Sat, 08/25/2012 - 19:36 | 2737754 HungrySeagull
HungrySeagull's picture

They are being all wet.

Storm or no storm, the show will continue.

 

Where we are, we are looking forward to Issac breaking the drought.

Sat, 08/25/2012 - 18:24 | 2737672 Racer
Racer's picture

This is THE best place to hold a convention.....  shame it's drifting from a direct hit

Sat, 08/25/2012 - 16:57 | 2737577 titty sprinkles
titty sprinkles's picture

been lurking forever, just got my login from ZH, so greetings to all :)

Sun, 08/26/2012 - 01:24 | 2738027 gwar5
gwar5's picture

Avatar is approved!

Sat, 08/25/2012 - 20:55 | 2737840 titty sprinkles
titty sprinkles's picture

I don't take off my shoes

Sun, 08/26/2012 - 01:44 | 2738043 TBT or not TBT
TBT or not TBT's picture

Are you heading to Tampa with that approach?

Sun, 08/26/2012 - 02:00 | 2738054 titty sprinkles
titty sprinkles's picture

pfff... I have standards

 

Sat, 08/25/2012 - 21:25 | 2737874 Ned Zeppelin
Ned Zeppelin's picture

great avatar

Sat, 08/25/2012 - 18:49 | 2737708 XitSam
XitSam's picture

If this is your first night at fight club, you have to fight.

Sat, 08/25/2012 - 17:49 | 2737641 AlaricBalth
AlaricBalth's picture

Took you long enough. Where have you been?
:-)

Sat, 08/25/2012 - 16:38 | 2737546 blunderdog
blunderdog's picture

We already have free-market prostitution, don't we?  I don't see anyone enforcing regulation on politicians and lobbyists.

Sat, 08/25/2012 - 15:44 | 2737442 ISEEIT
ISEEIT's picture

"Free markets simply do not work"

HOW THE FUCK WOULD YOU KNOW THAT IDIOT?

Sun, 08/26/2012 - 02:09 | 2738061 gwar5
gwar5's picture

Free markets work fine. They always rule in the end. If they didn't there would be no distortions or bubbles or crashes.

 

Some people confuse massively corrupt, manipulated markets with free markets cuz that's all they've ever known. And because they've never known real communism, total manipulation.

I think BK is a Canadian and lives off of all those dirty rotten energy and mining resources causing AGW, and ruining the world, to pay for their social welfare state for a population of only CA. I guess racist Canadians just don't care about those little brown people around the world choking on bad air. A Free market to a Canuck Obama would be to shut down Canadian oil as penance for their market transgressions and to tell them dirt sandwiches are still free and won't be taxed.

Six million smug Norwegians do the same thing by handing out Nobel Peace prizes (Gore, Obama) to stop drilling oil in their own countries so the Norgs can be social welfare pigs off of their North Sea oil reserves. Tell Norgs to cap wells and they'll say STFU.

Sun, 08/26/2012 - 07:14 | 2738217 BidnessMan
BidnessMan's picture

Ugh - population of Norway is 5M - not 6M.  There are 5M more descendents in the US, including me. A lot like the Irish - one third of the population of Norway emigrated to the US between 1880 and 1925, including my mother's Father and Mother.

Norske is the name you should use - no one says Norg.  It is a socialist country, but everyone works and they now have a huge sovereign wealth fund.  Did not spend 150% of their oil money on bread and circuses.  We should be so lucky.

Sun, 08/26/2012 - 06:57 | 2738204 breezer1
breezer1's picture

The oil sands are only feasible because of cheap natural gas used for processing.

Sat, 08/25/2012 - 16:58 | 2737579 Republicae
Republicae's picture

We've not had a free market in this country since the 30's. What we have had is a system of mercantilism and government patronages that have so distorted markets and the monetary system that those, the pigs who get to the trough first, who are politically connected benefit most.

Sat, 08/25/2012 - 15:30 | 2737424 Cult_of_Reason
Cult_of_Reason's picture

Bernanke does not care about the exit mess because he will not have to deal with it. This will be the problem of the next guy/gal. The same applies to Obama and Geithner. They don't give a shit -- totally selfish and irresponsible.

Sat, 08/25/2012 - 19:56 | 2737775 Republicae
Republicae's picture

They should worry because when the shtf, they, like the majority of politicians, will have bounties on their heads.

Sat, 08/25/2012 - 22:34 | 2737926 gdogus erectus
gdogus erectus's picture

Careful. We'll make a bed up for you in the psych ward.

Sat, 08/25/2012 - 15:20 | 2737410 fonzannoon
fonzannoon's picture

does the fed have to sell those bonds? can they just hold em to maturity?

Sat, 08/25/2012 - 16:11 | 2737496 andrewp111
andrewp111's picture

Of course they can hold them to maturity. That is the advantage of having an infinite lifespan.

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