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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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Sometimes I think this isn't about driving the stock market higher. For all his ivory tower biases he has better data coming in than anyone else. He sees the crunch coming and wants the system flush with liquidity when the crisis hits. He knows he can't stop it but enough cash to lube the bearings may keep the wheels from coming off. Impact time is soon.
Hey Fred - if Bernanke has "better data" then how did the credit crunch come about in 2007 ? Please don't even suggest these pos have "special insight". They are self serving psychopaths
I am sure that the Fed has MOAR data but because they are left wing, neo Kenynesians they think that they know MOAR than private business people. They are feeble thinkers, and immoral men (and women).
No Chairman in US histyory has been as corrupted by the banks as Benank has been. QE infinity is unconstitutional and indeed immoral, as theft has been identified as such in the past.
The TBTF banks control Bernank. they were going to have to undertake a controlled bankruptcy in 2007. Equity to zero, bonds severe haircuts, management out. Close Friday - open Monday with new management.
Of course this didn't happen. US taxpayers were forced to bail and then bail some more, and then finally just print 85B / mth.
Janet Yellen next Chariperson of Fed? Fauxcahontas Warren as Sec of Treasury? The US will be the equivalent of Zimbabwe.
There is too much Bernanke bashing in these comments and on this website.
What we are witnessing is a failure of economic globalization. Economic globalization, an idea that you can homogenize world economy in a matter of few decades on western market economy terms, was always a non-starter if one was willing to apply fourth grade math to resource supply-demand equation. The failure of globalization manifests itself differently in "developed economies" (financial crises brought about by an attempt to offset the impact of cheap labor by issuance of debt) and "developing economies" (emergence of angry proletariat, now separated from land, social polarization, barriers to further growth to remedy these ills). Bernanke is a cog in this failing machine.
Technological transformation is needed to achieve true globalization, but this takes time. What will happen now will be a fallback towards more local solutions. Wars are a possibility.
Ok fatman51. Here is the DEAL. If Bernanke turns himself in and provides the State Evidence as to Who&Who ( Prospero&Gamble) is double dicking him and by his actions shafting Us then We will wave the Death Penalty and just Award a Life Sentence! We will allow him to draft his Memoirs in a 4X4 concrete pad with no windows. For every Mafia Member he Rats on We will deduct 1 month from his sentence ( anticipating a lengthy list ). For a Congressman and Above We will Add a window bar.
On a thourough examination of the books We establish Who Got What and the Hanging Commences. Happy Days!!
Bernanke knows he has fixed nothing and withdrawing his 'emergency' measures would reveal that. Normalize interest rates and , poof, there goes his housing recovery and all the other Potemkin 'gains' he cites as proof his policies work. Not for nothing did he hang his exit criterion on a BLS data point that can be adjusted and gamed as needs require.
Bruce,
A good rant, but let's think about the facts.
You listed all the good stuff regarding the current economic situation in the US. Do you remember what is was in 2007? Do you remember what the Fed did back then in terms of monetary policy? Do you rembember where it all went? Can you imagine in your wildest dream they would risk any chance of repeating it again?
You may agrue it is different this time. I would agree but only regarding the type of bubble currently blowing. Let's be honest, all the good stuff we see now is the result of the current combination of monetary and fiscal policies. These are huge unsustainable budget deficits combined with monetary supprestion, which lead to interest on savings confiscaton and newly printed government money directed to maintain the current "recovery". QE is absolutely integral part of it. Yes, it can be stopped for a while, but it cannot be meaningfully reversed.
This is the reality, and i think the fed understands it better than you an I. And all the blabbing emitting from different fed mouths is just noise directed to support the current policies.
Use federal reserve notes and incur an Irrecusable obligation. The puzzle is complete!!! A Banksters defeatism (realization of defeat) nightmare, Being forced to Return to Real Money=United States Note=Lawful Money, Use the Remedy within the Federal Reserve Act. Redeemed 12USC411, Refusal Penalty 12USC501a http://savingtosuitorsclub.net Stop being a Slave!!!!!! This is Tax Free Money!!!!!! http://stormthunder.com/ Convincing Congress to Abolish the Fed http://www.silverbearcafe.com/private/convincing.html Irrecusable obligation, which according to 'Bouvier's Law Dictionary' (1914 ed.), is "a term used to indicate a certain class of contractual obligations recognized by the law which are imposed upon a person without his consent and without regard to any act of his own." This is distinguished from a recusable obligation, which according to Bouvier, arises from a voluntary act by which one incurs the obligation imposed by the operation of law. The Income Tax succinctly described is an irrecusable obligation. The obligation to make a return of income for using private credit is recognized in law as an irrecusable obligation. The voluntary use of private credit is the condition precedent, which imposes the irrecusable obligation to file a tax return. If private credit is not used or rejected, then the operation of law, which imposes the irrecusable obligation lies dormant and cannot apply.
"That is the consequence of Ben's policy - More wealth transfer."
Ding, ding, ding we got a winner. It only took you three quarters of the article to get to real economic policy, trickle up economics aka socialism. The policies are ultimately designed with the express purpose to benefit those that design them. That is an absolute. You only prosper if there is mutual benefice.
Can't any of you tell when Helicopter Ben is joking? There is no exit. Anyone can manage it equally well.
If the Fed shrinks its balance sheet yields go up, and it's not Fed but Treasury that's on the hook for that loss. At the end of the year, the Fed remits interest less expenses (including mark-to-market losses) back to Treasury.
Since all of this is basically needed because Congress shows no prospect of being able to get its current-year budget in order, never mind planning for the huge hits coming from Medicare and Social Security, I see absolutely no way the Fed can exit. Indeed they'll need to ramp QE up in order to cover the increased drain on Treasury as these expenses balloon.
Don't think that the people who are doing this don't understand the price of failure. They do. That's why they're doing it.
Yeah, well; I could "manage it"; for that matter; but there's no guarantee that you're gonna like it. I can understand how to fix the problem; just renege on the promise to pay on all serial number treasury documents, included herein; list follows; these will include everything owned by China Inc. They don';t like it; tough. that's what the military is really for. and that's what real empires do. What these feather weight do-do brains are going to try, I have no idea. With regard to my "plan" to cut off China cold turkey; I'd like to quote Mike Tyson, "Everybody has a plan untili they get punched in the face". Empires punch first and hardest. "Female" societies roll over and whimper.
End the FED. Arrest Bernanke. Put Jamie Dimon in shackles.
QE does help a lot. Many homes previously underwater now have equity. That definitely helps consumption.
It helps consumption, until it doesn't. just wait till the corporate HY bond bubble blows.
Any chance the next article on BB contains a railroad car tagged with F U Ben?
I used this one once before. Always liked it.
I've seen graffiti that's more artistic, but not more accurate.
Nice. LOL
What sort of black magic skull fuckery delusion does it require to not 'see' that these beast have no 'exit' as would be defined by sane and rational persons in mind at all?
Bernanke condoned the ECB stealing Cypriot depositor's money yesterday at his press conference.
Bernanke was asked twice directly if it was fair to steal (levy) depositor savings, and if he would do it in the U.S.
He condoned what the ECB did, did not say it was wrong or unfair, and did not say he would not do it in the U.S.
I hope everyone in the U.S. was paying attention, as a 10% "stability levy" on all deposits in the U.S. is one of the Chairman's exit tools.
As long as there's anything left to steal Ben will be on the job. Savings, 401 K's, Social Security--all of these will become tributaries of the great river of purloined wealth flowing into the offshore accounts of the super-wealthy.
The folks in Cyprus will get IOUs, but they will also get a free stake in the country's gas reserves. A chance at recovery.
When Ben takes the money you will get some shares in the Federal Reserve Bank - more bad paper - no chance for recovery.
Maybe we should demand a share in our Gas Reserves; Pemex is the National Oil Company of Mexico that drills and refines petro. product that belongs to the Mexican People and distributes it. Maybe our Gas doesn't really belong to these Corporations who have "deeds" for drilling rights. Sometimes it's interesting to get back to basic realities.
Bruce has a strange definition of "free".
As in, first we steal all your money, then we give you a free toaster.
Just be still while we place it in your bath tub.
"...but they will also get a free stake in the country's gas reserves."
I thought there was some dispute as to ownership of those reserves. Doesn't Turkey feel partial to those reserves as well?
if 16B ratio'd to 16T rough numers of course/.
our problem is 1000 times greater than what is going on in that tiny country way over on the east of euro land.
just sayin...
debt is a bitch!
the bitch hath fury...
There will be no exit. Ben can't even stop the INFLOW for Christ's sake!
What's his duration on the portfolio now? Eight years? Nine years?
This stuff will all be held to maturity, with the mortgage paper paying only $0.80 on the dollar.
We are Japan.
Perhaps one only needs to look as far as Bernie Madoff. How well did his exit work? Is there really any difference in Bernanke's Fed and a Madoff's Ponzi scheme? Both needed new money to entice others to commit to further manipulation. Bernie snared new investors, Bernanke prints and manipulates price to gather followers.
Outcome should be the same.
As far as I can see this is exactly the case. The present operation of Federal Financing follows exactly the text book definition of a Ponzi Scheme; I wish that were not the case; but it appears that it is. The denouement arrives when there are no more new money investors to take "advantage" of the deal. Such a Deal! Oi Vey, that it should have come to this.
The thought of Bernie and Bennie as roomies... :)
You are right about it being a ponzi. Too bad ben and his cronies will not get jail time like all of the other notable ponzi schemers.
This "balance sheet" of theirs, who takes the hit for any losses incurred? Do I remember something a couple of years back, here on ZH, about some form of legilative policy being confirmed that transfers the losses to the public ? I mean, The Fed is a PRIVATE bank is it not? Why would the public be on the hook for the losses....yes, I know, "because that's how THEY want it" !
Please Bruce. The core structural problem the earth is facing is a lack of true price discovery as stuffed fucking shirts around the world try to maintain power and control through counterfeiting and other fraudulent activities. Admittedly, you provide some useful insight as we watch you struggle with your cognative dissonance from years of paper-pushing for the system, so by no means stop doing what you are doing.
Well said. +1
if Bruce would stop trying to do the math on how to make SS work and just admit that it will be gone in 10 years along with how we look at pretty much anything in the govt handout system
10 years? It's more like 2 years at the rate that health-care costs are rising.
Correct. Everyone is catastrophically underestimating the cash burn rate of the US Treasury once Obamascare kicks in all the way, and the ship is already listing heavily.
Economic growth stuck at 1.5% max (sorry, Bruce, Obamascare & Doddering-Frankenstein are enormous economic drags), falling tax revs, and very possibly the end of the Euro spell doom for any entitlements as large as SS, Mediscam, etc.
This could, and likely will, go south in a hurry. Socialist Insecurity will be toast.
Paperbugz and word merchants are tied at the hip. Imagine their dilema......bite the hand that feeds you or get eaten.
Interesting concept.
Confidence games require confidence artists and Bubbles Bernanke is playing his role. Given that asset price inflation is the primary objective of his zero bound policy, that he would risk roiling markets by letting even a tiny amount of truthiness slip through the facade of green shoots, summer of recovery, countless other propaganda intended solely to instill confidence, etc. is naive thinking.
Who's getting richer? Those 401s will drop like a rock some day soon!
http://www.forbes.com/sites/edwardsiedle/2011/08/12/bipartisan-support-in-washington-for-401k-skimming/
The rail car is a good symbol. Bernanke is clearly playing on the railroad tracks and a train is barreling toward him. I think the most disgusting thing about Ben is his utter arrogance that he can control all things. Such a fool but then 95% of the intelligentsia is from the same mold. I weep for this country
I see that rail car as our new mode of transport to designated FEMA camps/re-edumacation centers.
I think he knows what he is doing because, afterall, "Dissembler" is his top job qualification.
Seems to me that the current situation of an improving economy is being driven almost exclusively by the continuing corporate consolidations. Small businesses are disappearing. Corporate buyouts produce good short term results. (Note the word Short Term).
Housing is improving largely due to Hedge Funds like BlackRock buying big chunks of houses. This is creating an artificial "housing boom" that is really nothing more than more consolidation. The big guys are doing most of the buying.
The continuing trend is TBTF and TBTJ. Now the objective of Fortune 500 companies is to get on that bandwagon.
This trend is just one more central planning adjunct.
As far as the US citizen is concerned, this means slavery. Freedom is the result of diversity in all things. Small, local produces freedom. Centralization produces control and monoculture.
All according to plan Linda. All according to plan.
The Fed has already failed. And if the Fed isn't TBTF, no one is really.
Who are the Fed owners, board of directors, etc and where do they reside? Anybody know?
Depravation of Constitutional Rights under color of law. (The taking of property with-out due process)
Now if we all filed suit to have BB held to account personally.........