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Bernanke - 'The Fed never makes mistakes'

Bruce Krasting's picture




 

Everyone makes mistakes. The best thing one can do is face up to the facts and acknowledge the error; fix the problem to the extent possible and do what is necessary to avoid repeating the mistake. Ben Bernanke's inability to admit his (and his predecessor's) mistakes condemns the Fed to repeat the sins of the past.

In this week's lecture tour at George Washington U, Bernanke spoke to the students about the causes of the economic collapse of 2008. In his presentation, he identified most of the bad actors and the mistakes that those institutions made. He pointed his finger at:

-Fannie Mae and Freddie Mac

-The big banks and Wall Street wire houses

-Mortgage brokers -AIG

He blamed:

-Sub Prime mortgages

-Excessive leverage

-Banks’ failure to adequately monitor and manage risks

-Excessive reliance on short?term funding

-Increased use of exotic financial instruments that concentrated risk

Bernanke never acknowledged that the Fed contributed to the mess of 2008. If Ben wasn't flat out  lying, his head is buried very deeply in the sand. In response to the recession of 2001 the Fed allowed money supply to increase by 30% in 4 years:

 

 

The Fed also manipulated interest rates. It drove short-tem rates (Federal Funds) to 1% in 2004.

 

When Greenspan tried to normalize interest rates in 2005 he was forced to raise the Fed Funds rate 13 times. This sharp increase was a significant factor in blowing the top off of the real estate market. Greenspan’s Fed contributed to the housing bubble. The Fed's tightening brought on the bust that it helped create. So where are we today on the critical issues that brought about the collapse of 2008? Money supply is zooming:

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Inflation is chugging along:

 

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Interest rates are pegged at zero:

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The Fed’s balance sheet is bloated:

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The government is still making junk mortgages; FHFA is guaranteeing loans at 97.5% of value.

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Consumers are borrowing more. Debt has grown 6% in the past year, three times the rate of growth in the economy.

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Student loan balances have been exploding. They passed the Trillion mark this week:

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The savings rate is the lowest it’s been since the crisis. Who would want to save money when the return on savings is negative?

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Junk bonds (and other forms of exotic debt) are back in style, and investors are lapping up the swill up:

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Funny money credit is back. This outfit is lending money to all comers. I love it when the lady says, “Yes it is expensive”.  (11 second video)

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It’s not just expensive money, It’s crazy. Consider this chart of pricing:

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If you want $10,000, the cost will be $52,343 in interest. If you only need a quick $500, these nice folks will give to you, but the cost will be $1800 or 340%%.

For the Chairman of the Fed to stand before all those GWU students and avoid accepting a share of the responsibility for what happened in 2008 is a gross re-write of history. That he does not see that he is making the same mistakes that the Fed made in every prior economic cycle is sad. The audience should have booed him. I am.

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Sat, 03/31/2012 - 13:05 | 2306444 ekm
ekm's picture

I don't exclude it at all that he might be trying that at the Federal Reserve swimming pool.

I confess I don't know the results of those trials but I do know very well that the monetary equivalent trials that they call COCAINATED EASING, have fucked up all retirees by making zero their fixed income from savings, so they are forced to dig into the principal.

Sat, 03/31/2012 - 13:56 | 2306514 Yen Cross
Yen Cross's picture

 A good person ! You are a good person!

  Vetting a person is tough!  

Sat, 03/31/2012 - 14:17 | 2306542 ekm
ekm's picture

Thx a lot sir. I think you are a very good person also. Everybody is very good by default but most of us make the decision to fuck up our lives. Happiness is a choice, misery is a choice too.

I choose to love my life and I hope you love your life also.

Sat, 03/31/2012 - 15:20 | 2306659 Yen Cross
Yen Cross's picture

R/U that fantastic   (usd/cad) trader?  I think so?

Sat, 03/31/2012 - 12:14 | 2306327 honestann
honestann's picture

No, no, no!  Wake up!  Understand this.  A con man running a con knows full well he is a scam artists and full of crap.  All the predators-that-be and predator-class are fully aware they are baldface liars.  Like any predators, they are fully, clearly aware they are stalking prey.  In one way, they are almost error-proof.  They bet human beings are dumber than rocks and will do anything to identify the core truth of mankind.  What is that?  The the world is dominated by:

predators DBA government
predators DBA corporations
predators DBA central banks

Until human being wake up and understand that the entire artifice constructed by predators over the centuries is exactly that --- pure fiction and artifice --- humans are screwed.  The predators know exactly what they're doing, and virtually the entire species plays three blind monkeys 24 hours per day, 7 days per week.  All mankind needs to do to become happy and free is wake up and be honest with self.  But that would require becoming sane, and the vast majority of humans steadfastly refuse to be sane.

But make no mistake, the predators know exactly what they're doing, and are quite aware how insanely STUPID and FOOLISH and SELF-DESTRUCTIVE regular people are.  That is, perhaps, one reason they have such complete lack of respect for the regular people they prey upon.

Sat, 03/31/2012 - 13:11 | 2306455 aerial view
aerial view's picture

agree-our leaders are simply superb actors pretending to be sincere, honest and empathetic people representing the masses; but they are nothing more the egomaniacal self-serving lying pyschopaths who lust only for money and power at the expense of everything else!

Sat, 03/31/2012 - 13:10 | 2306451 Atomizer
Atomizer's picture

Well said, however you forgot one element.. That being, desires and shaping lemming conformance amongst the masses to compete with acquiring more obsolesce products than the other broke peon.  Here is an example.

The Sun TV Ad - iPhone parody-2009

Sat, 03/31/2012 - 12:53 | 2306345 ekm
ekm's picture

Sir

I FULLY AND TOTALLY AGREE WITH YOU.

I just forgot to make clear that PSYCHOPATHY IS A CHOICE. Bernanke chooses to take over a psycopathic inducing position and is fully aware of it.

He clearly knew that the POSITION IS PREDATORY and he went ahead and took over the position.

The solution to the problem: ELIMINATE THE POSITION.

Sat, 03/31/2012 - 18:22 | 2306888 Jena
Jena's picture

Sharks are born swimming, so I'm not so sure that psychopathy is a choice.  I think that it's very much who they are.

But I do agree with your solution.

Sat, 03/31/2012 - 18:41 | 2306905 ekm
ekm's picture

Thx for commenting.

Sharks do not have FREE WILL, humans do.

Sat, 03/31/2012 - 18:54 | 2306911 Jena
Jena's picture

I believe in free will, too.  And I think that the people we label financial psychopaths freely make every choice that along the way.  Some people simply feel entitled to screw over other people more readily and on a larger scale than others do.  

 

Sat, 03/31/2012 - 19:05 | 2306923 ekm
ekm's picture

I have challenged myself with a hypothetical scenario:

 - I work in finance at JPM

 

 - Fed prints money

 

 - I get this money first. I did nothing to gain it, it was just given to me by Benny Bernanke by simply entering a number in a computer.

 

 Question: What would I do? Would I become a predator?

 

What do you think if you were to be in that position?

Sun, 04/01/2012 - 01:03 | 2307268 honestann
honestann's picture

Yes, to work for JPM is to be a predator, for the reasons you mention.  I suppose there may be a few people working at JPM who are not consciously aware they are a predator, but none in high positions.

You raise an important point.  To be honest, ethical and moral, individuals must pay attention to the consequences of their actions.  This most certainly includes accepting jobs and taking actions at work.  This also includes voting, and even accepting, sanctioning, encouraging and advocating actions to be taken by predators DBA governments, predators DBA central banks, predators DBA corporations and predators DBA organizations, and predators acting individually.

Therefore, an honest individual most not advocate ANY law, act, statute or regulation.  Why?  Because those are fictional categories of fictional organizations.  To accept that ANY individual has ANY authority over ANY other individual - is evil.  Depending on how you prefer to describe this issue, one could say that a person has the "authority" to insist others who made voluntary agreements and contracts with him follow through on those agreements.  And in extreme cases, one could say that a person has the "authority" to enforce those contracts if necessary.  However, calling that "authority" is a poor choice of terms.

I would never accept ANY position in ANY government, because that would inherently be unethical.  Even if I did not directly violate individual rights as part of my job, it is unavoidable that I am stealing from those who pay the taxes that pay my salary.  Furthermore, I would never accept ANY position in ANY corporation that involved unethical behavior.  And "unethical behavior" here includes taking advantage of special treatment granted or enforced by government.  Therefore ALL jobs at ALL banks are inherently corrupt in the world today.  In a world or country that is on the gold standard AND has no fractional reserve practices of any kind, then banking could be an ethical endeavor.  Because governments are so corrupt today, everyone employed by government is - without any doubt - a predator.

Sat, 03/31/2012 - 19:13 | 2306928 Jena
Jena's picture

Pretty outside the scope of my reality.  Not trying to dodge the hypothetical but I can't really appreciate the ease with which it could happen without an understanding of the situation, and at this point in life, I just don't.

Assuming it's like coming across a bag of money in the desert?  I would get away from it as quickly as possible and hope that no one saw me anywhere near it.  Nothing good is gonna come from that scenario.

Does that begin to answer it?

Sat, 03/31/2012 - 19:17 | 2306931 ekm
ekm's picture

Thx for the feedback.

I'd say that with the mentality I have now (I am 39 yrs young) I would have said no, I quit.

I am an engineer, but if I was ever given a chance to work at JPM when I was let's say 20 yrs old, I don't know, I could have ended up a predator.

Sat, 03/31/2012 - 21:49 | 2307100 TheFourthStooge-ing
TheFourthStooge-ing's picture

ekm said:

I'd say that with the mentality I have now (I am 39 yrs young) I would have said no, I quit.

Well there you go, then. You've answered your own hypothetical question.

I am an engineer, but if I was ever given a chance to work at JPM when I was let's say 20 yrs old, I don't know, I could have ended up a predator.

I don't think you would have. You might have tried to go along with it for a little while, but you'd have quit or been forced out in your early twenties for the very same reason that you would say no today: you understand the difference between right and wrong.

This is what Jena was pointing out. Most people have at least a rudimentary sense of what's right and what's wrong. It doesn't necessarily keep them from doing bad things or engaging in criminal acts, but they still know when what they've done is wrong.

On the other hand, when a sociopath/psychopath decides on a course of action, what's right and what's wrong are never considered because those are foreign concepts. The choices of a sociopath are based solely on what he (or she) perceives as being in his short term best interest.

The sociopath has the same regard for human beings that you or I have for shopping carts or plastic utensils: they're all pretty much the same, and if it suits your purpose you'll use one until it's of no use to you, promptly discard it, and never give it another thought. That's why sociopaths succeed in finance and politics. It's not so much that they're evil as it is that they just don't care about anyone.

 

Sat, 03/31/2012 - 22:01 | 2307113 ekm
ekm's picture

I have nothing to disagree with.

Sat, 03/31/2012 - 19:26 | 2306939 Jena
Jena's picture

I guess it's probably just as well that we weren't faced with too much temptation when we were younger and more malleable.  (Thanks to having four older siblings, I grew up just knowing that if I did something wrong I'd get caught so I behaved well as a matter of habit.)  

 

Nice talking with you, ekm.   It's good to live life so there are as few regrets as possible, I think.

Sat, 03/31/2012 - 19:45 | 2306963 ekm
ekm's picture

Likewise.

Sat, 03/31/2012 - 12:01 | 2306283 alien-IQ
alien-IQ's picture

This is Bullish...for the back alley loan shark business. By comparison...they're cheep.

Sat, 03/31/2012 - 11:55 | 2306276 Seasmoke
Seasmoke's picture

i hardly watch TV and i never watch commercials BUT one night recently i did manage to see the money lending commercial in passing and i heard yes its expensive line and i said there is no way i just heard what i thought i heard ........WTF IS HAPPENING !!!!!

Sat, 03/31/2012 - 12:57 | 2306422 Kayman
Kayman's picture

"........WTF IS HAPPENING !!!!! "

It is a sign of how desperate things have become, for everyone, except for Ben's masters who can continue to borrow at zero percent, and can sell their bad loans at par to the Fed.

Sat, 03/31/2012 - 11:48 | 2306262 apberusdisvet
apberusdisvet's picture

Let's recap Ben's accomplishments:

l.  Daily woodie for Lloyd and Jamie

2.  First prize as the most powerful WMD of the world's economy

3.  winner of the "fiat is the only true money" essay contest

4.  Rothschild "employee of the year" award (4 straight years).

Sat, 03/31/2012 - 11:45 | 2306258 eatthebanksters
eatthebanksters's picture

Manipulating th markets is like trying to stop a high storm tide on a full moon...eventually it will overcome any effort to redirect it. The housing bubble popped and so the Bernank pumps trillions into large, inneffeciient and insolvent institutions to prop up the equities market and the keep the derivatives game in play.  He recoginizes that the casino game of derivatives is the only real growth industry in America.  At some point this manipulation will lose its effectiveness and the natural laws, which control all things, will take over again.  When that happens, it's game over.  In the Fed's vain attempt to support markets artificially, they have created the most volatile conditions imaginable.  Only jobs and growth can slowly get us out of this mess...the Fed's interventions have done nothing to help createthe fertile conditions for more jobs and have actually created conditions which in many ways detract from job creation.  

In the end, how do you take an academic who has never created a job in the private sector and expect him to do so as the head of the Fed?  How do you take a President who has never created a job in the private sector but who has learned how easy it is to go to the well of the taxpayer for more money, even after going millions over budget in a community organizing effort?  How do you expect a congress which talks about budget cuts, tax code revisions, and blanced budget ammendments to ever get the job done when they can't even agree on a budget?

If this country started over again, would our forefathers, knowing then what we know now, have added new rules to our constitution? I'll let the readers decide yes or no and if yes, what would have been added. I'd enjoy hearing those ideas.

Sat, 03/31/2012 - 21:27 | 2307085 StychoKiller
StychoKiller's picture

"Congress shall make no law abridging the freedom of production and trade." -- Atlas Shrugged

Sat, 03/31/2012 - 13:02 | 2306437 Conax
Conax's picture

'would our forefathers, knowing then what we know now, have added new rules to our constitution?'

They needed to write in a PENALTY for lawmakers that pass laws knowing they are un-constitutional. Like booting them from their office, for instance. Without teeth, what good is it? They laugh and carry on because they can.

 

Sat, 03/31/2012 - 11:42 | 2306251 the grateful un...
the grateful unemployed's picture

Bernanke should be in the loan sharking business, rather he should be buying consumer assets for cash which is one of the tools of Fed policy. the problem has been for some years, that he believes in trickle down, if the USG gives money to corporations they will give consumers jobs and affordable products. (in the meantime he made the Chinese communist party bosses rich, while AAPL workers have to kill themselves to get a day off) if only the trillions they borrowed went directly into the pockets of consumers, not for wars, or TBTF, or political campaigns, (hence Caribbean island banks) the helicopter idea ( giving money to consumers) is a sound idea, but the pigs at the trough got there first, resulting in the biggest wealth income disparity in history. i just think Ben lost his nerve, when the helicopter flies over my house and the bills come floating down I'll know he has done the right thing!

Sat, 03/31/2012 - 11:34 | 2306242 oak
oak's picture

Why did Dr. Bernanke has the desire to give a lecture tour at this time?


Sat, 03/31/2012 - 11:49 | 2306265 Hansel
Hansel's picture

Because the Fed recognizes they are losing the propaganda battles.  The internet, people talking amongst themselves, is killing them.  It started last year with the quarterly press conferences.  No one watched though.  Then they joined twitter.  No they are trying to brainwash college students.  They are fighting to stay alive.

Sat, 03/31/2012 - 20:23 | 2307009 ViewfromUnderth...
ViewfromUndertheBridge's picture

from Bberg...

Today, Bernanke, a scholar of the Great Depression, received a gift from the students: a framed front page of the April 20, 1933, edition of The New York Times, with a four- column headline that said: “Gold Standard Dropped Temporarily to Aid Prices and Our World Position; Bill Ready for Controlled Inflation.” 

http://www.bloomberg.com/news/2012-03-29/bernanke-says-central-banks-should-defuse-financial-threats.html last paragraph. The kids get it.

Just as interest rates (plus gasoline) spiked and brought the fraud induced RE ponzi down so will interest rates again... In Japan a 1% rise in rates will absorb the balance of tax collected...each 1% rise in the effective rate paid by UST costs the Gov't close to $100 Bln, ergo rates must not rise. Irresistible force, meet immoveable object.

Central Bankers are extremely dangerous when cornered...(I was looking for a link to Hjalmar Schacht & MeFo bonds and look where I found it!)

http://www.zerohedge.com/news/2012-12-23/hjalmar-schacht-german-pre-war-re-armament-and-%E2%80%9Cnational-defense-resources-preparedn

In brief...

http://en.wikipedia.org/wiki/Mefo_bills

Sat, 03/31/2012 - 11:37 | 2306249 AN0NYM0US
AN0NYM0US's picture

precisely, the medium is the message

Sat, 03/31/2012 - 11:23 | 2306232 malikai
malikai's picture

Benocide did not make any mistakes. He also is not burying his head in the sand. The assumption that he is actually trying to fix things is misplaced and you know it. The premise that he tries to present is clearly false. Ben works for the PDs and none other. He is, in fact, doing a good job. The only problem is that his job is to keep the necronomy going at all costs and milk all the suckers for every last bit of value in the currency before the big <ctrl><alt><delete>. In this light, he is doing a fantastic job.

Sat, 03/31/2012 - 15:26 | 2306670 Freegolder
Freegolder's picture

Is Bernanke the only one with his head in the sand?

The US has got the central bank it needs at this stage of its decline. Bernanke is prolonging the US's unaffordable lifestyle for a few years longer, until the dollar collapses in a heap.

If he did the right thing now in allowing the market to set the price/rates of Treasuries then America would be finished in a week.

America will have to face its reality eventually, as will the UK and Japan and China, but for now these guys are doing the only thing they can do to sustain the governments and the social programmes and the way of life. I'd say if you asked the man in the street 'do you want Greek-style austerity right now, or shall we keep it going just as long as possible?', 99% of them would say 'keep it going please Ben'.

Sadly the savers will get wiped out with this approach, unless they are switched on enough to have some physical gold. That's the only downside to prolonging the system.

 

Sat, 03/31/2012 - 14:01 | 2306522 Kayman
Kayman's picture

Ben did not make any mistakes.

Yeah. Giving Goldman $5 billion, while backdooring $13 billion through AIG and into Goldman's hands wasn't a mistake.

Perhaps this was a Freudian slip; one which he may yet live to regret. How many rotten derivative bets can Ben cover and still keep his head ?

Sat, 03/31/2012 - 12:50 | 2306402 Kayman
Kayman's picture

Ben is right.  He has taken all the junk paper off the hands of the Wall Street criminals, and placed it squarely onto the backs of the American people.

So, you have no money to invest and will never be able to save for the future, but his masters can live large at the margin, as Ben constantly tops them up with liquidity.

He might have studied the Great Depression, but he should have read the history of the Austrian princess that married the French King.

I take it as a sign that someone is getting worried when "justification" is in vogue at the Fed.

Sat, 03/31/2012 - 12:34 | 2306373 akak
akak's picture

+1000 for "necronomy"!

Sat, 03/31/2012 - 11:52 | 2306266 Eireann go Brach
Eireann go Brach's picture

Apparently Ben was using Obama's teleprompter during his speech, so no wonder he was spewing a pile of crap and lying out his teeth! One day the tide shall go out soon and we will see who will be standing there being exposed for all they are, and history will prove not to be kind to these 2 bastards!

Sat, 03/31/2012 - 11:22 | 2306231 Curt W
Curt W's picture

I see those Western Sky commercials 10 times a day on TV. Holy crap,

How many people go for it.

Sat, 03/31/2012 - 11:29 | 2306240 Atomizer
Atomizer's picture

Commerical Revision:

 

At WesternSky, we know it’s expensive. Just don’t miss a payment or will bust your balls.

Sat, 03/31/2012 - 11:16 | 2306222 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Bruce,

Please, what a terrible student you are! Mr. BurroDonkey clearly stated in his final lecture that the FED is not printing money. He showed a horizontal line in a chart which showed currency in circulation. No change. Silly boy, the FED does not even own a printing press! And that's the Treasury anyway.

He also was quite clear that when the FED buys a bond from a primary dealer, the FED simply "credits" that dealer's reserve account. And then, the money just sits with the FED, it doesn't go anywhere.

I do say that I was a tad bit curious as to how this happens, since Mr. Hilsenrath clearly told us that the FED was considering a form of sterilized QE through a reverse repo mechanism, yet as Mr. BurroDonkey stated, this would not be required since the "credit" in the reserve account is not "cash" and does not go anywhere anyway. It is already sterilized.

At any rate, have more blind faith in your leaders, go out and buy something and stop fretting!

HeeHaw, heeHaw!

Sat, 03/31/2012 - 13:02 | 2306438 WestVillageIdiot
WestVillageIdiot's picture

Cough, cough, "money laundering", cough, cough, "bullshit", cough, cough. 

Yes, I know you are being sarcastic.  That is my response to Bonehead Bernanke, Princeton's court jester and most famous Professor.

Sat, 03/31/2012 - 11:12 | 2306219 tony bonn
tony bonn's picture

"Ben's selling the same old crap."

so ben is selling himself again...

Sat, 03/31/2012 - 14:26 | 2306563 Peter Pan
Peter Pan's picture

Ben has not made any mistakes. His mother and father did.

Sat, 03/31/2012 - 13:00 | 2306430 WestVillageIdiot
WestVillageIdiot's picture

163 pounds of shit in a 500 pound sack.  There is plenty of room for more shit.  Don't you worry. 

Sat, 03/31/2012 - 11:05 | 2306209 El
El's picture

Is that even legal? Didn't we have usury statutes at some point? WTH?

Sat, 03/31/2012 - 12:09 | 2306306 Pool Shark
Pool Shark's picture

 

 

Exactly what I was thinking.

"Yes it's expensive, but it's cheaper than a payday loan."

340% is cheaper than a payday loan???!!!

Who's making (legal) payday loans at over 340%?...

Sat, 03/31/2012 - 13:33 | 2306483 Moe Howard
Moe Howard's picture

Indian reservation. State laws do not apply. Scalping permitted.

Sat, 03/31/2012 - 13:51 | 2306510 Pool Shark
Pool Shark's picture

 

 

Careful there Moe: "Use a Pun, go to prison."  ;-)

Sat, 03/31/2012 - 19:03 | 2306874 akak
akak's picture

Merely for using the word "Indian", Moe would almost certainly already be in prison in hyper-PC Canadia on hate-crime charges against the "specially righted" "Aboriginal First Nations Peoples" (yes, believe it or not, "proper" Canadians actually DO routinely use those insultingly absurd and reprehensibly collectivist phrases).

Canadians and their ridiculous PC sensibilities --- what a hoot!  It is almost as amusing, in a sad and pathetic kind of way, as their perenially ham-handed, overwrought, insecure displays of Canadian nationalism --- "Red Leaf Uber Alles".

Sat, 03/31/2012 - 20:57 | 2307057 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Canadians and their ridiculous PC sensibilities --- what a hoot!  It is almost as amusing, in a sad and pathetic kind of way, as their perenially ham-handed, overwrought, insecure displays of Canadian nationalism --- "Red Leaf Uber Alles".

Well, now, hold on there, guy. There's no need to be goin' off like the Halifax Explosion, friend. What's this anger toward Canadia all aboot? Don't tell me you don't like Rush or Helix, eh.

 

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