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The Bailout Gravy Train is Over
As I’ve noted in previous articles, Bernanke is finished as Fed Chairman and will be stepping down within 18 months.
The reason is simple: he’s become politically toxic (even Obama won’t be backing him) and will be facing legal troubles in the future.
Regarding the legal troubles, as the Great Crisis gets underway, the lawsuits are going to come fast and furious. We’ve already seen Goldman Sach’s CEO hire a defense attorney. A lot more of the big shots on Wall Street will be doing the same. And when push comes to shove in the courtroom, they’re going to pin their crimes (the ones committed during the 2008 collapse) on Bernanke with a “the Fed pressured me into doing it,” defense.
We’ve already seen one round of this with Ken Lewis of Bank of America. The only reason Bernanke got away on that one was because the political and social landscape still viewed him as the savior of capitalism and the economy.
This time around, the Fed is fast becoming politically toxic (see recent GOP presidential candidate’s comments on the Fed), QE 2 caused inflation in the US, and we’re learning that the Fed secretly funneled trillions to Wall Street during the 2008 Crisis.
Put another way, the political and social climate are increasingly anti-Fed and Bernanke. So any lawsuit he might face will be far more difficult for him to navigate (also, remember the REAL power at the Fed is the primary dealers like Goldman Sachs, NOT the academics on the Fed’s board).
So Bernanke’s going to be in big trouble going forward. And the chances of another QE or major policy being enacted without a systemic collapse grow slimmer by the day. The days of the Fed acting simply for the sake of it are over. Going forward the Fed will only be reacting to Crisis.
Regarding QE, the markets largely rallied/held up over the last few months on the notion that the Fed will enact QE 3 OR that the EU will expand its bailout of Greece and other bankrupt European nations.
Neither of these will happen. QE 3 hasn’t been likely for months (at least since July). The Operation Twist move was symbolic and little else. This is why Gold and Silver and other items have collapsed in the last week: they had gotten WAY overbought on hopes for QE 3 hitting.
Regarding Europe… Germany is no longer backing up the bailouts. Forget any BS rumor being spread by CNBC, what Germany says is the deal. No German backstop, no bailouts, no EU, end of story.
My primary point with all of this is that the bailout/ intervention gravy train has come to an end. Indeed, while the lemmings pile into stocks believing in this nonsense, smart investors are already preparing for the next leg down in the markets. The reason is simple: last week’s sell off is JUST the beginning of what's coming.
This is no mere correction nor is it just a brief hiccup for the financial markets. This is the GREAT COLLAPSE and the markets will be going to new lows (below the March 2009 lows) in the coming months.
We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.
Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What's coming is going to make 2008 look like a joke.
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It pisses me off too, but you have to be careful with a distinction between what is illegal/criminal and what is legal but unethical or against the will of the people. The federal reserve has every legal right to secretly print money to give to foreign banks, manipulate gold, silver, and other commodities markets, etc. This is not what we want in America, but congress has given the federal reserve the legal right to do those things.
There is no chance in he'll Bernanke will ever be convicted of a crime. Talking about the possibility is just a useless wet dream. Instead we need to prepare for the eventuality that they will print, print, print just like in 2008. The bailouts will continue. They always have since the Roman Empire. Debasing the currency to bailout other poor decisions is not a new idea.
This is BS. The fed is well within their legal rights to do all they have done. Look it up yourself. It might appear counterintuitive, but they can print all the money they please and do with it as they please.
And I'm amazed at all this talk about how the fed is somehow just going to step aside and stop managing the supply of US dollars. No chance in hell. The adjusted monetary base and M2 continue their ballistic trajectory with no sign of letting up.
The fed is not going to allow deflation for any extended time period. Your gold and silver are still safer bets than the dollar. Even Graham Summers has apparently been spooked by the last fed announcement and sudden drop in metal prices! This must be the sign of a freaking bottom in PMs.
So I loaded up the truck with more just now.
I have to agree. This article is fantasy.
I think that some of the actions that Bernanke has taken such as purchasing risky private debt and foreign securities may have been illegal and could be prosecuted under an anti-FED administration. Its not that far-fetched.
Quote from John P. Hussman, Phd:
"It should be obvious that the Maiden Lane arrangements didn't represent "discount" transactions under any reasonable interpretation of the Federal Reserve Act. Instead, the Fed created shell companies to stash long-term securities of questionable credit quality, bought them outright, and still holds them more than two years later. This is simply illegal."
http://seekingalpha.com/article/238376-john-hussman-the-case-against-the...
Bernanke isn't stepping down. Will he get sued? No, pure idiocy.
We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.
So, you think anti-QE sentiment will remain in this projected environment? Why?
And even if it does remain... you think TPTB are going to heed it? When it's against their interests? Again, WHY?
You're saying that as unemployment increases and government revenues decline, the government will prefer to decommission itself rather than print? WHY?
When, in all of history, has a government ever willingly meaningfully decreased in size or power? History is just one long sequence of increasingly top heavy regimes doing all they can to stay in power until they are overwhelmed by circumstances and topple. And the history of all fiat currencies is to be diluted to the point of oblivion. Why not this time?
Or do I have to sign up to your exclusive 18-point plan to get the answers to these questions?
When, in all of history, has a government ever willingly meaningfully decreased in size or power?
What ended the 1920 Depression?
Take a look at the following data. Government spending fell like a brick from 1919 to 1922, yet real GDP rose. Look at the 1916 to 1919 data too. Does it look like federal spending has positive multipliers on private spending?
From 1920 to 1923, federal spending fell from $52.77 billion to $34.91 billion. GDP rose from $687.7 billion to $802.6 billion.
Change the data to total spending. Essentially zero real growth in government spending from 1920-1923, and yet the recovery was rapid.
http://voices.washingtonpost.com/ezra-klein/2011/03/what_do_john_taylor_...
Silent Cal did it.
- Ned
We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.
What, no zombies?
I thought that was what this pump was all about, sell what you got high and get the f out of town.
...face unpleasant realities...
http://www.entendance.com/forums/viewtopic.php?f=9&t=222&p=19534#p19534
No Pasaran!
it's about time
http://expose2.wordpress.com
your url slipped through
This domain name expired on 09/27/2011 and is pending renewal or deletion
That was refreshing.. :D
and.. "Bernanke is finished as Fed Chairman and will be stepping down within 18 months" - gee, that's hardly enough time to finish wrecking the once greatest economy in the world.