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Bernanke's Policy = Reckless Endangerment
Reckless endangerment: A culpable disregard of foreseeable consequences to others from the act or omission involved.
Bernanke made an interesting comment yesterday about his future as the boss of the Fed:
"I don't think that I'm the only person in the world who can manage the exit"
Bernanke could have said the same thing using different words:
I know that I can manage the exit, I'm pretty sure someone else could as well.
How can Bernanke be so sure of the outcome? What knowledge does Ben have that the naysayers don't? The answer is clear. No one, including Bernanke, has a clue what will happen when the exit door is opened. That is an indisputable fact. How can Bernanke claim that a Fed exit from QE will have no consequences? It's never been done before. Not by the Fed. Not by any Central Bank. To think that such a daunting task can be accomplished without negative consequences is foolish.
Given that there is no road map to look at when pondering what happens when the Fed starts to off-load a few Trillion of bonds, Bernanke is either bluffing or he's lying. Either way, Reckless Endangerment is a valid accusation.
Bernanke describes his monetary policy as "Highly Accommodative". That's a bullshit. I wish he had a better description of the realities of his policies. If there was a rating system of 1 to 10 for "accomodative" the current Fed policy would be a 9.5. A better description for Ben's policy would be "Maximum Accommodation"; or better still "Emergency Level Accommodation".
Is Emergency Accommodation appropriate in March of 2013? I don't think so.
- Stocks are at record levels.
- The credit market is in good shape - spreads are very low.
- There is no top 20 bank that is in an jeopardy today.
- The US will sell 16m cars this year. There can't be a recession with that level of sales.
- The real estate market has more than stabilized.
A) Housing starts are up 34% YoY.
B) Permits for new construction are above the 2008 levels.
C) Currently, there is the lowest level of supply on the market since 1999.
D) Real estate prices are rising at double digit rates again. Bidding wars are back in many areas of the country.
E) Things have turned around so much that Fannie and Freddie have turned profitable and are repaying the government what was lost in 2008.
- GDP is growing at 2.5%. Yeah, that is a bit stinko, but the reality is that this IS the new normal. The US can't have a high growth economy and at the same time have a rapidly aging population. QE will not move the needle.
- Yes unemployment is high, but by what standard? Looking at what the economy produced in terms of jobs in 1990 is irrelevant to 2013. Bernanke is trying push a string.
- Total payrolls today are ~140m, while unemployment is 7.8%. To get to 6.5% unemployment means that about 2m jobs are needed. While I'm sympathetic to those not employed, there is another side to Bernanke's obsession with achieving a 6.5% rate.
A) Social Security, the Military Retirement Fund and the Civilian Retirement fund are being bled dry with low Treasury rates
B) Every State and private pension fund is also being bled dry. Why are aren't the costs of destroying savings included in the Fed's calculations?
C) Zero interest rates and QE makes it easy for DC to borrow to oblivion without apparent cost. Congress has sat on its ass for four years, Bernanke is facilitating that. We have idiots like Senator Chuck Schumer (D-NY) publicly pushing Bernanke to print more as Congress and the Administration can't agree on a thing. And Bernanke responds, "No problem Chuck! I'll print your way our of trouble." I find that disgusting.
D) Every private saver is getting clipped. Bernanke responds. "Just buy stocks!" Bernanke is desperately trying to create another bubble. Why would he do that? Every bit of evidence shows that bubbles end badly.
E) The #1 lesson of 2008 was systemic risk. Does the size of the Fed's balance sheet constitute a systemic risk? I think so. Bernanke disagrees. Fine Mr. Bernanke, but if the current balance sheet of $3.1T (headed to $4t) is not a systemic risk, then what is? Is it $5T? 10T? Are there no bounds to this? The universe maybe boundless - monetary policy is not.
F) The #2 lesson of 2008 is TBTF. I think the Fed has already reached the point where too much risk has been concentrated. The Fed's own economists, as well as Fed governors have pointed to the potential for large losses at the Fed. Bernanke dismisses this by pointing to the fact that the Fed can have book losses without consequence. I disagree. What happens when we get these headlines:
Bond Market Falls Again - Dollar in Free Fall - Stocks in Global Drop
Losses on Fed's Book Now Exceeds 1/2 Trillion
Chinese to Abandon Dollar Peg - Vows to Reduce US Holdings
S&P Lowers US Rating Again
- Bernanke has not provided any evidence that QE 3 is doing a damn thing other than putting a temporary bid under the stock market. Hot stocks may make the millions who have a 401Ks feel a bit better, but it doesn't change consumption by much. Meanwhile, the top 5% are getting richer by the hour. That is the consequence of Ben's policy - More wealth transfer. Is that really what most Americans want? Is that what Congress wants?
- Ben has failed to demonstrate that QE3 has any incremental value. He has acknowledged that the efficacy has worn off. But he persists.
Me? I think Bernanke is telling the greatest lie ever told. He says that his successor can unwind the mess he has created without consequence. That's a joke. Can you imagine Janet Yellen trying to accomplish an exit? Not a chance. She knows nothing of markets - she would fail miserably.
Mr. Bernanke - I'm accusing you of reckless endangerment. You have no right to drive "your" car at 100 MPH on a public road. The emergency of 2008 is over, emergency monetary measures are no longer appropriate. As head of the Fed, you are insulated from any legal liability arising from your choices. Lucky for you. Reckless Endangerment is a Felony rap.
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Pure Evil well that's just pure evil!
In my humble opinion if BB was not head of the Fed he could have played Any lead man in any of the Shakespeare plays. He has all the charateristics associated with the character of macbeth ; dillusion and grandeur stand out.
"I don't think that I'm the only person in the world who can manage the exit."
Translation: "I'm sure the next Fed Chairman can unwet the bed. And if he messes up, it is your fault for choosing the wrong guy."
Bruce, you don't seem to understand the purpose of QE presently.
It started out as a means to save the commercial Wall Street banks and investment houses. Now it exists primarily to pick up the slack for Uncle Sam who can not find enough international lenders. The Fed are buyers of debt that no one else will take on in sufficient quantity to keep Uncle Sam living in the style to which he has become accustomed.
Keeping rates low certainly certainly benefits other actors in this great and terrible drama besides Uncle Sam, but do not confuse that aspect with QE's ultimate purpose. When you accept who QE is really for, you will understand why it hasn't, and won't, stop until exogenous forces act to put an end to it.
There is no exit from this end, the exit will be imposed by the world outside U.S. borders.
Ahem, your lengthy list of points - how many of them will still hold true if the Bernank only lowers the "Emergency Accommodation" from ludicrous speed back to ridiculous speed?
Hola paisanos! Hoy es un grande dia for us to add some zeros to our pesos. Y tambien, we need to make sure that all our workers (at the popcorn stand next to the ring) do not get their pay raise. Comprende...stale wages is a nuther way to, uh, I think you call it 'hyper-inflate' our issued fake currency.
Me n you amigo, we got pesos fallin' out of our chonies... no way we gonna let most the audience declare bankruptcy.
Ahora, we gotta hold on a while longer, to keep the ponzi from collapsing just yet. We got more hard assets to buy from our freshly printed tokens. Si? We'll get it right, and let it fall just at the right time, OK? Oh, and ya know what else? Don't worry about the war we're gonna create... me and you will sit in the VIP booth as the audience is slaughtered. Viva el Luchador!
www.askchumba.com
"The problem of the use of statistical tools and theorems comes from the people that try to domesticate the randomness within certain events and variables by the use of certain assumptions that would be difficult to satisfy. Thus, the results obtained while using a model without data that satisfies the assumptions are, naturally, wrong. Models do not grant protection against randomness or the consequences of a black swan event." Carlos Castro Correa
BK, Jesse, and ZH are my first reads of the day and today the unit of 3 gave me this information-- Above, It is a little long winded but does give a look at our leadership problems. To reduce the words---Theorems do not always do the job needed doing. And, right now we are in a stiuation that needs some doing.
'Wealth transfer' - exactly Bruce. It is a wrong way transfer. The Fed is reverse Robin Hood.
We need to get rid of this idiot at the helm of the Fed. The problem is that the Idiot-In-Waiting (Yellen) is even worse.
Please remind me - why we need the Fed? I think we could do better and deserve better.
Bernanke: "OK, I totally didn't see the housing collapse coming, but I was able to convince Congress to enact TARP in order to protect Goldman Sachs from suffering any losses. And I've quadrupled the money supply and used it to buy every long term Treasury that wasn't nailed down. I've truly lived up to my nickname: Helicopter Ben. And I coined the term 'fiscal cliff' in order to scare Congress away from any kind of spending restraint. I've presided over 'The Recession that Never Ended' without getting blamed for it. So now I'll say 'Ta, Ta'. Ciao. My work here is done. It's been fun. I'm sure my successor can clean up any small problems that might be left over from my reign."
Bruce-
What if Fed doesn't, unwind balance sheet, but just lets it run off?
That's the sell signal for the bond vigilantes.
They can maintain just enough buying to keep the market in check, occasionally blasting them away if necessary. IMO the Fed can control everything except inflation, that's their achilles heel.
'..."I don't think that I'm the only person in the world who can manage the exit"...'
there are 2 ways to interpret this remark.....the first is that bernanke cannot exit - it is simply impossible.....he has bought so much of the market - vast tracts of it pure crap - that there is no way to redeem it....the second interpretation is that bernanke is toast.....
the arrogant and pompous french version of the equally incompetent janet yellin is christine lagarde who has made a collossal blunder around which bernanke cannot or will not work.....the eurocrats are always to be counted on for overplaying their hand but the imf is an american rockefeller nazi institution through and through.....that ridiculous raid on her apartment came from nazi central.....she should seek asylum some place because her life is in danger and she needs to hide.
jim sinclair, who seems to be a bernanke supporter, but who is still nontheless worth listening to, sees the imf debacle as one of biblical proportions, but it effectively finishes bernanke either by his own volition or someone else's...
all of that happy crap talk about a strong economy noted in your essay is completely contradicted by the insolvency of the banking system here and abroad which compels bernanke to pour trillions - most of which americans simply do not see - into the black hole known as western banking....
the jig is almost up.....mrs o'leary kicked the lamp....
Sounds like Bernanke is making plans to get out of Dodge while the getting is good. Remember when Alan Greenspan left and the economy tanked shortly thereafter? I've always had the feeling that old Alan had some idea of what was coming and left before the economic storm hit so that he wouldn't be blamed for it.
Now Bernanke is planning to leave? I wonder what he knows.
No Shit Jack. Greenspan knew that a total shitstorm was coming, and he got out of Dodge with his hot new wife to enjoy his retirement. He dumped it all on the Bernank's lap, and now the Bernank is leaving at the beginning of 2014. That is a very bad omen for what is coming. When the Bernank vacates his post to Janet Yellen, sell your stocks.
Sell your corporate bonds then too. The Bernanke Bubble has boosted the prices of HY crap to absurd levels. And the corporate bond market is much more liquid than real estate. When the selling begins, it will end quickly. Very quickly.
The correct name of "Big Ben" is the Parliment house clock; the work of Lord Grimthorpe, an "amateur" horologist. You wonder what he knws? He knows what Bruce Krasting knows and what is public knowledge; he's squatting on an enormous pile of paper "assets" that will one day have to be sold into the market; to whom? and for what? for what "price" in what "currency". This is what Bruce means by saying that there is no road map, the quantity of this "stuff" much of which is stuff that's going to start smelling soon; is un-precendented. There isn't enough "money" in the world to buy it. That's what he knows.
Bruce says:
No one, including Bernanke, has a clue what will happen when the exit door is opened.
I'm not so sure. I suspect Bernanke might have some fairly specific ideas on what is going to happen. And he may also have some ideas on the timing of when it is going to happen.
He will make damm sure it unwinds after he leaves office. And if he quits his post on the Board Of Governors in addition to the expired Chairmanship in Jan 2014, you know a total shitstorm is coming, and coming fast.
how do you unwind derivatives?
Also, has any one considered what would happen with Obama-hating crowd if Fed tried another bailout/TARP and his Treasury Secretary Lew got down on his knees to Repub Congress like Paulson did to Pelosi and Dem controlled Congress. No way such legisltion would pass AND we'd have peace in the land. It was okay when W and Pauslon did, but Obama haters would come unglued if he did it, or at least ,if FED did it on his watch.
Well done Bruce and spot on.
Given that there is no road map.
No one, including Bernanke, has a clue what will happen
What knowledge does Ben have?
no consequences?
That is an indisputable fact.
My "guess" is that we are not looking correctly at the end-game and the path deisgned to get there. Typically this means that we have to reexamine the assumptions. What are the things that are important to Berstinkie and its bosses?
1. Maintaining and increasing control and power for the core control group
2. Globalizing the financial system because the financial system is the control mechanism
If this is the case, then there must be a path or plan to get there. How would you do it? Can you have independent countries, governments, currencies or people? Ultimately no. So, to get to the desired final state there must be a weakening or destruction of everything that allows independence. Under those assumptions Berstinkie is exactly following the plan and the transition is not to exit the QE, but to have the Fed default and fail and transition to the global system. In the process, the banks will have used the old fiat (trash paper) currencies to purchase all significant assets, set the price for all hard assets at peanuts in the "new" global currency and make all of those not in the core group equally poor and slaves.
The plan is rolling along nicely. A few more wars to subjugate those who do not depend on the global central banks and to break those who will not otherwise submit and we will be there. GL trying to figure it out based on what Bertwinkie is spewing from his mouth or from the current paradigm. The actions seem more clear than the words.
Given a new set of assumptions, anyone can handle the exit because Bernanke or its replacement will not be the central figure.
Agree (other than the bullish economic case). But the fundamental problem is the idea that 13 people should control the economy. Command economies don't work. It didn't work for the Politburo. It won't in the US. It is the height of arrogance to believe that any 13 people have the right (much less the ability) to control the actions and wealth of 300 million people.
The fundamental problem is the existence of the Fed. QE is a symptom of the disease
The point of 2% inflation target was to force people to make their savings do some work, to incentivies them just enough not to stuff them dollars under the mattress.
Zirp is the same tactic by other means. Problem is, you can't fund future debts with no interest accruing.
So he pumps the stock market. What a fool.
All these accountant and economists think money and wealth is abstract and you can magic up results with sleight of hand. It isn't, and you can't.
All you can do with that plan, is hide the theft.
Why don't they ask him blunt questions when he comes out of his burrow every so often? Even the blessed Ron Paul could hardly shut up lecturing enough to ask a question.
Bruce,
Nice article but....this has been a clear and present danegr ever since Bernanke started QE.
Just now, with USD now sloshing around in TBTF accounts, we are producing this article?
C'mon - lets be forward thinking, why hasn't Senate or House challenged the QE assumptions?
Is QE constitutional or not? What criteria should be used to determoine whether or not Bernanke should face fraud charges?
Let's be proactive rather than hashing over old news while gnashing teeth.
I guess the correlation between record fed purchases and a screaming 2.5% (bwaahahahaha) growth rate is lost of The Bruce. The fed is the market, no they cannot exit without severe contraction unless we have a magic pony to replace the skittle shitting Hebrew.
Sorry, magic ponies are temporarily out of stock.
why spend so many words...QE will only end when "THEY" have enough
This is correct. And it is also true that with the dollar on top of this big stinking pile of donkey doo "first you get mounted by the Mule and next the Elephant."
The Bernank is just hanging on for January, 2014.
At that point he can get on the private sector pay back gravy train.
He knows we are fucked and the only question now is who will be the fall guy (girl).
Yellen, Dudley, someone else.
By early 2014 the economy will be cooking, inflation too, but that will not be Ben's problem.
He is going to bag the next Chairman the way Greenscam bagged him.
the exit happens when the Fed gives all the bad paper back to the Treasury. the Fed is just the middle man in all this, between the TBTF banks and the forever reelection campaign of the politicians who depend on the Feds economy juicing action. Bernanke's knows the money he drops from the helicopter isn't making it to earth. (therefore its easy to exit, the wealthy have padded their accounts, the former middle class has been exterminated, game over) now he hands the bill for all that money back to the taxpayers?? oooh baby, there might be some blowback on that one.
AND, that might just be why DHS now owns all the ammo production of the country and is stockpiling 40s&w hollow-points like there is no tomorrow!
Something is going on and it really doesn't take a rocket scientist to figure out what, based upon their actions, no matter what they claim or their stooges in the media say.
Non-Stop lies 24/7/365 but no matter, many have figured out that the actually enemy the government is fighting and targeting is their own people! The media know but they pretend not to and lie to your face without even blinking.
They know what is coming. When the EuroZone goes down, the DHS will need to use those bullets, as very few banks will survive the "transition".
the new COLD WAR is between USG and its' citizens. The more of THEM they throw under the bus, [think Iran] the more we start to look like THEM.
"As head of the Fed, you are insulated from any legal liability arising from your choices. Lucky for you. Reckless Endangerment is a Felony rap."
Yes Bernanke and the other thieves have escaped the arm of the "law" but what is insulating him and the others from this? http://www.custermen.com/ItalyWW2/ILDUCE/Mussolini.htm
Hopefully the line to the gallows will look like the the lines at Cyprus ATM's.
Of course the fed doesn't have a "marketable" exit plan to unload their balance sheet. But, they may have a regulatory induced plan to unload it. Did they float the idea of a new national retirement plan for nothing? Or was it to condition the markets about the very real possibility of a new plan?
Organize a new retirement plan, maybe roll it in with social security, and stuff it full of all the low interest bearing treasury bonds the fed and banks have loaded up on in the past 5 years or so, at the high prices they were purchased. That would probably take some kind of market holiday for a while to ensure a "safe transition" of assets. But in the new normal this sort of command and control would be expected by the public at large.
Ben knows that one day he, or anyone else with his job, can just say "poof" all the treasuries the fed owns are gone. Think about it, newly created (printed) $ bought them, the treasury pays the interest on them to the fed, and the fed gives it profits back to the treasury after expenses. Its the biggest circle jerk on the planet. I truely believe that is why the Krugmans say "the amount of US debt doesn't matter". The feds strategy---keep printing and buy as much of the treasury market they can then just say "poof" --- the ones they own no longer exist.
Of course the downside of this is that all those new $ will be in the system creating inflation. But since they tell you how much inflation there is, they will just say there is none (like they are today). Look at shadowstats.com. Real inflation rate avg 5% over last 7 years, while we earn 0% on savings. We don't need a Cyprus event, we have already been robbed of much more than 10% of our savings.
@ Krasting:
Asset price bubbles are fuel price hedges, so is out-sourcing, schengens/the euro ... so is automation. Right this minute, all of these hedges are failing.
So it goes ... trying the same experiment over and over and hoping for a different result.
Brent crude is $107.96/barrel. Gulf coast refiners port of entry pay a similar price on the physical market. Even midwest refiners have to pay $90/barrel. We need the 'wealth effect'. After paying for fuel our economy has no real wealth.
We've squandered our nation's wealth driving hundreds of millions of useless cars aimlessly in circles. Instead of curtailing the driving we are in the process of bankrupting every living thing within reach. We'll kill ourselves and our future in order to keep driving, if that is what it takes.
Is that a good choice?
"We'll kill ourselves and our future in order to keep driving, if that is what it takes.
Is that a good choice?"
Only if it's powered by a vintage Alfa 3.0 liter V6 coupled with an Ansa exhaust, or something similar.
The exit is under Black Friar's Bridge.
I'm calling BS Bruce, Ben is 100% right. Anyone could manage the "exit". You are just simply using different definitions of the word "exit". By "exit" he means full bore balls to the wall printing till the currency is dead and replaced with new color/name fun bux, hell anyone can do that. We have many living examples of central bankers right now having done it, and more often then not staying central banker of the new fiat or coming back to central banker after brief hiatus.
Yep. this is factually true. Many, many, many examples. They anounce it on a Sunday; and presto, on Monday morning your bank account is denominated in "new dollars"; I doubt they'll give up on the name as it has a lot of market recognition. The Mexican Govn. anounced a "new Peso"; I was there when it happened. It went down alright. Everybody was resigned to living in a depression anyway; one more calamity hardly mattered.
"E) The #1 lesson of 2008 was systemic risk. Does the size of the Fed's balance sheet constitute a systemic risk? I think so. Bernanke disagrees.
Bernanke doesn't disagree, Bernanke is lying. As Jean Claud Junker said, when it is serious, you have to lie. Bernanke told congreee he would not monetize. Bernanke is monetizing.
"I don't think that I'm the only person in the world who can manage the exit."
What exit?
Heli-Ben would be the 2013 winner for "World's Biggest Liar", but they don't take politicians, lawyers, and douche bags!
OK, the douche bags was my addition...
http://en.wikipedia.org/wiki/World%27s_Biggest_Liar
Us peons don't understand what Ben means when he says "exit". When he says that word, most of us think this refers to the Fed being able to stop it's ZIRP, QE, and other easy-money policies. When in actuality the only exit he and his buddies care about is being able to get all their money out of whatever markets they are going to crash, and getting it into a safe harbor before the rest of the world catches on.
Secretly Bennybucks is shitting in his pants at the thought of having to unwind the pile of shit on his books. The reality is that he will be long gone and hiding under the same rock the Banksters and Academic types like Paul Krugman will be hiding under on some far off Mediterranean island when the shit implodes. The Fed either continues to print or the Stock market implodes and goes zero bid. Just like the bond market will. So, just who is going to buy this toxic Treasury shit Ben? The dealers? Why would they buy your crap unless they had some dupe to flip it to? Who are they going to flip it to for a proffit when inflation is rapidly rising and interest rates are following suit? That's like trying to catch falling knives. The man is deluded and a fucking maniac!!!! Like so many of his bretheren in ACADEMIA....The only thing these idiots can do now is hold on to it and use the run off to service their banker buddies by paying them higer rates of interest on excess reserves to control the amount of money being lent into the economy, a boon to the Bankers for doing God's work and all....... This will require a loss to the Treasury, but by that time I'm sure we will have an appropriate fiscal policy and increased revenues to the Treasury from a booming economy to more than compensate for the loss to Treasury from the FED. Think of all the revenue that will pour into the Treasury from the taxation side with all the Bankers using their interest from parking excess reserves from their sugar daddy Benny to buy 300 ft Yachts to have lavish Coke and Hooker Soirees every night of the week.... Sarc/off
Don't worry bulls, the door to Benny's secret chambers inadvertently blew open and all his charts became inverted. Once he re-orients his graphs to the right position, he will begin channeling funds into the markets. That's all the hope we have remaining.
Ben Shalom has his own personal exit strategy.
The rest of us will be stuck with the consequences of his crimes.
"Chinese to Abandon Dollar Peg - Vows to Reduce US Holdings"
"We have a winner! Tell 'im what he won, Don..."
I've tried to get people to consider that this was the reason for QE and the response has been zilch. Sinclair, for example, is focused on the War Against the Euro and Gold.
SuperPower Politics and Markets be damned.
The other thing about Bernanke is that oft cursed Chicago School of Monetarism. Look up Bernanke's speech at a dinner for Friedman where Bernanke stated, "Dr. Friedman, you were right."
What we got, however, was not Friedmanite Monetarism (See BITCOIN), but Keynesian Monetarism, a vicious Monster. Hillary could write the speech: "Let's not argue about how we got here, we're here and we've got to DO SOMETHING!" Ummm, yes it's the Fed's fault but let's move on.
SuperPower Politics and Markets be damned.
Sure, Friedman deserved better but we all deserved better.
One question for BK. How much of that Bernanke Bux Funny Money is actually out there in the Real World now? Bernanke would argue that his use of Reserves is quite normal ("Dr. Friedman, you were right.") and that he is actually the CONSERVATIVE Fed Chairman. He IS arging that his policies are empirically correct based on the data RIGHT NOW.
What gives?
CW
@ CW sez:
And to some degree he is correct, however he leaves out a lot. Creating reserves would happen even if the Fed had no policy and did nothing: excess reserves are a consequence of declining demand for credit.
Whether the banks hoard Fed credit or depositor loans it does not matter, neither does increasing the amounts of reserves. Bernanke can do a lot of things but not compel people to borrow ... particularly those who are insolvent.
On the surface, the US economy does not need more easy credit, as Mr. Krasting notes. What isn't noted is that all the positive indicators are mirages, nice paint on a condemned building. Our economic actors do not know how to build wealth or conserve capital, only how to destroy it. Economic 'health' is a measure of how successful we are at cannibalizing ourselves.
Bernanke fakes it. That is his job, to pretend and lead the class and allow the citizens to pretend ... hopefully until someone can invent a real solution.
Thank you, Steve from Virginia-
I want to expand on this a little.
The important part of BKs essay, to me, is the highlighted text. "China ends peg to US couterfeit paper". If China prints some amount of Yuan while holding some amount of $$$, they use the Reserve Currency as a cipher for Gold. As the mountain of $$$ builds, the US wants China to re-value. China sez that they will dump the whole load onto the market if DC goes all queer on them.
Scenario 1: Bernake states that if China wants to hold all of the $$$, he will devalue the dollar and make the Chinese suffer inflationary woes like they have never seen. This idea has played out in some (more hidden) manner on ZH for some time.
The Chinese say, "Go ahead. Do it." Hence, what I said above. SuperPower games and markets be damned. We get a delicate dance between threats on both sides while the world dies in a race to the bottom. This SHOULD be a Grand Historical Trend - End of (Roman type) Empires, End of Feudalism, End of Welfare State.
There is no end to the Welfare State at this time.
Scenario 2: Bernanke is ending the contraction that comes with collapse of the Fractional System. Reserves are Monstrous against the Threat of the Big Run on the Banx. He's KEEPING the expansion down, if he is to be believed (I know, I know...). You can be a Billionaire but if you are only allowed to spend $27.50 a week at Burger King, you aren't as rich as you appear. If you are Emperor but never allowed off of the estate, how much of an emperor are you? Every now and then you go over the allowed amount and Big Daddy Ben bails you out - but you now owe him Big Time.
Which leads to this: We've all been catterwauling about how the Fed is going to bring down the economy - and rightly so! WHEN? If this is a QE War with China, then this is all about time. "China will fall in time...No, the US will fall in time. China will inflate in time...No, the US will inflate in time..."
What frustrates me no end is that no one is looking at re-establishing markets and exchanges. That isn't even on the table. If it's the end of the Welfare State, the re-establishment of markets and exchanges needs to be sooner, not later, since the complete collapse of the social system will get worse the longer the delay.
Hey Ben!: You've replaced the decisions of millions with the decisions of a few. If the collapse of the China Peg takes time to end and the threat of deflationary collapse takes time to end, how'za 'bout giving us a timetable on when markets will be re-established?
I'll start holding my breath in 3 - 2 - 1 - <*mmmph..gggpp*>...
CW