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Bernanke Knows He’s Powerless This Time Around
During Round 1 of the Great Crisis, the US tried to combat the collapse of the private banking sector (especially the TBTFs) by shifting debt onto the public’s balance sheet and printing money to buy Treasuries so we could maintain a massive deficit (north of $1 trillion).
Put another way, the powers that be attempted to solve a MASSIVE debt implosion by issuing more debt. Aside from the fact this is outright insane, the problem with this is that we’re at a point of debt saturation in the system.
Kyle Bass of Hayman Advisors notes that from 1917 to 1952 each new Dollar of US debt brought on roughly $4 worth of GDP. From 2000-2010, you got seven cents of GDP growth for every $1 in new debt issued.
Put another way, each new $1 in debt issued today is producing less and less returns. By some estimates we’ve even reached the point at which new debt issuance is actually a net drag on the economy as interest payments eat into growth.
Ben Bernanke knows this, and has started to hint at it in his recent speeches and Q&A sessions with the public. Indeed, if you read between the lines of his statements starting in May, it’s clear that he has realized he cannot solve the US’s debt problems and that QE has failed.
Q. Since both housing and unemployment have not recovered sufficiently, why are you not instantly embarking on QE3? — Michael A. Kamperman, Waco, Tex.
Mr. Bernanke: “Going forward, we’ll have to continue to make judgments about whether additional steps are warranted, but as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate…
“The trade-offs are getting — are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It’s not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we’re going to have success in creating a long-run, sustainable recovery with lots of job growth, we’ve got to keep inflation under control. So we’ve got to look at both of those — both parts of the mandate as we — as we choose policy”
http://economix.blogs.nytimes.com/2011/04/28/how-bernanke-answered-your-questions/
Pessimistic Bernanke Fed Admits QE Has Failed In FOMC Statement
In its latest FOMC statement, the Bernanke Fed has admitted the economy continues to remain depressed, essentially admitting that both programs of long-term asset purchases, or quantitative easing, have failed to prop up output after what has been the worst recession since the Great Depression.
“Monetary policy can do a lot, but monetary policy is not a panacea.” -- Ben Bernanke 9/29/11
U.S. "close to faltering," Fed ready to act: Bernanke
Asked whether another round of bond purchases, known as quantitative easing, was in store, Bernanke was noncommittal.
"We never take anything off the table because we don't know where the economy is going to go. We have no immediate plans to do anything like that," he said.
http://www.reuters.com/article/2011/10/04/us-usa-fed-bernanke-idUSTRE79337C20111004
Central banks may need to burst bubbles: Bernanke
Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense.
http://www.reuters.com/article/2011/10/18/us-usa-fed-bernanke-idUSTRE79H5IR20111018
Look at the progression there. As far back as May 2011, Bernanke admitted the benefits of QE were less attractive. Now he’s not only admitting that asset bubbles exist (something Greenspan never admitted) but that Central Banks may even need to “burst” them!?!?
In plain terms, the Fed will NOT be launching another round of QE or major policy changes until the next round of the Great Crisis hits in full force. And by that time it will be pointless anyway as once the defaults begin, the leverage in the global banking system will implode rapidly.
It is no longer a matter of “if” for defaults, it’s a matter of “when.” And we are going to be seeing defaults in the individual, corporate, banking, and sovereign space. This is going to be the Great Debt Reset: the time when the market calls out the global debt bubble and we enter a period of severe economic contraction accompanied by soaring interest rates.
In a best-case scenario, here’s how things will play out:
1) Greek default/ European default contagion will start before the end of 2011.
2) Japan and other major developed countries begin to face debt issues and default risks mid- to late-2012
3) US debt default/ systemic failure (2012-2013)
The worst-case scenario is that everything comes to a head in the next six months. Remember, the slow motion train wreck that is Greece has been playing out since the end of 2009. The market is already pricing in a Greek default. And Germany has even alluded to the fact that it’s preparing for a Greek default that will feature at least a 60% haircut. Heck, France has even announced plans to nationalize 2-3 banks “just in case.”
Folks, what happened in 2008 was literally just the warm up. The REAL DEAL is coming in the next 14 months. And it’s going to involve corporate, financial, and sovereign defaults.
On that note, if you’re looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.
Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).
Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.
Good Investing!
Graham Summers
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what EXACTLY is a "dollar"?
I understand it to be jew debt.
in the 16th century, count hieronymus schlick of bohemia began minting coins known as Joachimsthalers (from german thal, or nowadays usually tal, "valley", cognate with "dale" in English), named for joachimsthal, the valley where the silver was mined (st. joachim's valley, now jáchymov; then part of the holy roman empire, now part of the czech republic.)
joachimstaler was later shortened to taler, a word that eventually found its way into norwegian, danish and swedish as daler, czech as tolar, polish as talar, dutch as daalder, ethiopian as talari, hungarian as tallér, italian as tallero, greek as taliro (??????), flemish as daelder, and english as dollar "the joachimsthalers weighed 451 troy grains of silver.
so successful were these coins that similar thalers were minted in burgundy, holland, and france; most successful of these was the maria theresa thaler, which began being minted in 1751 and formed a considerable portion of american currency after that date." english speakers began to apply the word "dollar" to the spanish peso or "piece of eight" by 1581.
...a dollar used to be a quantity of silver
dollar
"Bernanke knows he's powerless"
Not only is he not powerless, God are you stupid. He may not succeed, you know that and he knows that but do you suppose for an instant that this will keep him from trying? With all his might I may add. You are sooooo blind in some ways.
So Bernack finally can hear the voice of the fat lady and he has to realize the show is over and well it been real and it has been swell but hey maybe China needs some good advice about their economy...There has to be somewhere where Keynes hasn't failed YET maybe Nimbibia
My name is Graham and I cut and paste all my shit and I predict the end of the world in every article Summers!
Is not the point to inflate the debt away? Only problem is, much more scrutiny is on him now and so he has to come up with more creative ways to do it.
Just today Bernanke said inflation isn't a problem.
http://www.bloomberg.com/news/2011-11-10/bernanke-says-central-bank-focu...
Why didn't you link that article?
Not that I disagree with your piece...he does realize QE3 won't work, but it also looks as if he's prepping us for more nonetheless. Why would he mention low inflation otherwise?
He has to have balls of steal to say there's low inflation by the way. The man is a sociopath.
Deleted.
Kyle Bass of Hayman Advisors notes that from 1917 to 1952 each new Dollar of US debt brought on roughly $4 worth of GDP. From 2000-2010, you got seven cents of GDP growth for every $1 in new debt issued.
The devolution of economic potency within all fiat currencies should be well-recognized by now, but perhaps those who advocate such money substitutes never learn. You cannot expect a money substitute currency, which is based on a double liability system of debt being organized into an exchange currency to maintain its economic viability over a long period of time, it is simply not possible.
The effects of a hyper-inflationary depression will involve several things, many seemingly contradictory in nature in respects to commonly accepted economic principles, but in terms of a system, such as the one we have been subjected to over the decades, there will be types of economic and monetary dislocations that have never been seen before in the history of the world. The inner-connectivity of both the economic and monetary systems under a fiat currency will prove to be a disaster on the global economic and social stage.
Economies built upon total fiat monetary systems always suffer from the effects of inflation because such economies must have more and more fiat currency pumped into the system to maintain a degree of economic growth, due in large part to the fact that as monetary inflation takes place, the economic potency of each unit is diminished. Thus, the only way for such an economic system is to be maintained is through a constant increase in the supply of fiat money, if it ever stopped the entire system collapses, but if it continues the entire system collapses. In other words, there is no way out under such a system for it to be maintained, it will eventually implode or explode.
Kyle Bass of Hayman Advisors notes that from 1917 to 1952 each new Dollar of US debt brought on roughly $4 worth of GDP. From 2000-2010, you got seven cents of GDP growth for every $1 in new debt issued.
I will explain this in just afew words:
The inefficiency of fiat money created "to stimulate the economy", is direct proportional with the size of the government, and the number of friends grabing the contracts.
Tie Bernanke and Summers together dick to mouth, and throw them off the pier. Problem solved. They float off into the sunset, breathing through their new snorkels.
"...the powers that be attempted to solve a MASSIVE debt implosion by issuing more debt":
After the banks, the authorities and congress have over the years painted the nation into a financial corner, and then announce a solution requiring only that the citizens go pay for and deliver to them more paint, it's time to roll up their tarps.
just speculating. but since the dollr is so dilluted it of course makes sense that each dollar would get less gdp bang (unit of production). but since gdp is also measured in dollars does this cancel each other out? can you say it's due to debt drag for sure?
don't get me wrong it makes sense as you have to divert money flow to pay off debt each unit of debt should have a decreased effect after a while, but how do we know it isn't dillutional.
How could Bernanke say QE failed to have a positive effect on his "dual mandate" when it wasn't designed to have a positive effect? This is like coloring a picture with a purple crayon then saying for some reason the picture didn't come out green.
You get price stability when you don't inflate the money supply. You get maximum employment by proper allocation of capital resources, a fair distribution of wealth and income, and protection of asset values. If your goal is simply to recapitalize insolvent banks at everyone else's expense, Bernanke did exactly what he set out to do! Maybe the US taxpayer pays Bernanke's salary. I don't know. But he certainly could care less about the American people.
Joe, those towels on their heads were stolen from a 5 star hotel.
Even though Bernanke is a current contributor to our off-the-rails economy, he is not the engineer who caused the engine to jump track. It was the U.S. electorate who kept sending irresponsible congressklowns back to D.C. for generations, and who still put up with their congresswhores who saddle the country with debt, debt, and more debt.
"End the Fed!" will do nothing to solve our own debt addiction. That $15 trillion won't vanish with Bernanke. It is up to our sorry asses to change our play now, pay later culture.
Deleted.
Well said Carl
and the 15 Trillion Dollar question is, how do you change national policy to pay off the debt?
...when nobody at the unelected, private monopoly bank, The Fed, listens. When neither the CONgress, the Senate or US President has any discilpline (they chalked it all up afterall). And the last 3 are now mothballed and redundent anyway... so will the Super Committee listen? ..Naaa
How to bring this festering bunch of retards to heal?
Simple. Stop paying your taxes. Starve the US Govt and all its parasite monopoly institutions (like the Fed) of civilian funding
Zero Tax = Zero Govt = Zero Debt
Are you still here Graham?
Blah blah the world is ending..blah blah buy my report to protect your loved ones
blah blah
blah blah buy some food.. blah blah i'll tell you what food to buy and where
Here's my commission free advise: McDonalds Drive-Thru will still be open
"McDonalds Drive-Thru will still be open" but it won't be food.
"We never take anything off the table because we don't know where the economy is going to go."
Ben Bernanke.
Nuff said.
Why does ZH put up with graham summers! Of course the federal reserve has more options. To conclude that the money supply will be tightened while allowing rolling defaults in the US is just ignorant of history. When has the US or any other country with a purely fiat currency ever done this? Even with our defacto gold standard we were on from 1933 to 1971 we aggressively expanded the money supply to avoid our debts.
Hold gold, not dollars. What moronic history books are these guys reading that lead them to the conclusion that central banks and governments will proctect the value of the dollar to the point of defaulting on their own debts?
They do more writing and spewing than reading. That's the problem.
My concern is not that the Fed will protect the dollar. It is that assets will fail faster than the Fed can print and that until the Fed catches up, we may experience deflation.
For now, I can't go all in on gold.
the Fed is already falling short ...total money, cash + credit, is deflating despite Bennys manic printing
Benny has no control over deflation, it is a social event not a monetary one. Ben has no control whatsoever over what prices retailers set for their shelves. he has no control over what a businessman or consumer will pay for a property, a car, a TV, a work of Art or antique, a business asset, advertising campaign etc etc etc
Ben has kept afloat US Govt debt on the long end but this is the most fake and naive of Fed interventions. He is creating an unreality because he and his DC Masters don't like reality (the truth). Their delusions will hit reality hard very soon
The Bernank doesn't *need* to set prices. If he puts enough Benny-Buckstm into circulation then the people with *money* burning a hole in their pocket will simply bid up prices. Not like it really costs them anything... Net result? Deflation (if/when it arrives) will be temporary -- but will be a real bitch in the meantime if you're not liquid. Just my 2c.
He's a paying customer...............
+100 the fed will print even AFTER it has driven off the cliff. in my mind, they have already gone off the cliff when the started QE1. there isnt any pretty ending to printing of money.
the fed will print. the ECB will print....every central bank WILL PRINT...hahahaha...i cant believe people think the fed will do 'the right thing'.
fools.....
The one and only reason to keep Bernanke:
Next in line is Krugman.
End the federal reserve.
End the federal government.
End fiat and all fractional reserve practices.
OMG, not Krugman.
In other news, wasn't there a news tidbit where RP said something about James Grant for the Fed chair if he was elected? I have no source, but I thought I heard it somewhere ... anyone see that/have source?
Regards,
Cooter
Yes, I saw Ron Paul say that during an interview. Somebody asked him what kind of person might he appoint to the federal reserve, and he said "someone like Jim Grant". Not a terrible choice. Other names he might consider include Peter Schiff, Jim Rogers, and Marc Faber. I'm sure any of them would hasten the end of the fed by digging through the fed records... though I imagine if any of them was appointed there would be an "accidential fire" just before their first day.
It's been a couple days since i posted. I feel bile building up so let me relieve it.
FTB
Bank local, credit unions
STOP using credit.
Build a stash of PM, food stuffs
Ensure you have a source of water.
Get some of if not all your energy from self sustaining systems.
Build strong relations with your nieghbors and family.
Roger, Roger.
What's our vector Victor?
Regards,
Cooter
numbnutts is in el paso. i hope he gets tomaine poisoning eating a bad taco.....
I miss Mexican/Texmex food ...
Where is John Galt's Cantina dammit!
Regards,
Cooter
let me know when you're in austin...
Election year = more spending.
You can count on it.
This time around though all those election dollars will only buy half as much as they did last time.
Inflation + election = PO'ed contributors.
Strange how the national debt doubled in the US in four years and now everything costs twice as much.
The entire problem revolves around greed and a system of constant growth. We need to learn to stabilize the world economy and live within our means. I have done it for years, and funnily enough - have NO financial problems.
Read:
http://www.amazon.com/Simple-Wealth-Mr-Andrew-Costello/dp/1463523017/ref
Greed is good numbnuts, what do you thnk drives the world, sitting on your fat arse happy and contented?!!
the problem with greed is specific to parasites (unproductive jerk-offs) who have too much power gifted them by the monopoly institution of Govt
greed in productive people in a free competitive market is good.. they have to produce/perform. In a monopoly system they just take (cue bank bailots). Namely monopolists consume and destroy without productive output
There is also nothing wrong with "constant growth". There is no limit to growth. We have not stopped growing in 4,000 years and won't stop in the next 4,000.
You do not understand what you're talking about. You are a State educated zombie unable to think (for yourself) or past the low IQ idiotic leftie ideology you've swallowed blindly and unthinkingly
==> There is no limit to growth
Actually ... until we figure out how to get off this planet in a meaningful way, there absolutely is a limit to growth. Several of them.
The rest of it's OK. You got the greed part right.
Greed is the excess of thrift. Thrift is a virtue in and of itself - minimize your overall energy expenditure increases your ability to marshal those resources in time of need. Greed is what happens when thrift goes into overdrive, by attempting to acquire more energy (read money here) than is needed for long term survival.
It's noteworthy that most civilizations that have collapsed in the last 12,000 years have done so because of greed. They exceeded their available energy "budget" as supplied by their environment, and were forced into a mode where they had to conquer others (fertile agricultural territory, slaves, iron, coal) in order to sustain that energy budget. As they grew larger, these civilizations went through a zenith where they were effectively living on borrowed energy, but they could only sustain that as long as they could continue to grow by conquest or innovation). Moreover, as supply chains became longer, costs to support those supply chains rose faster than the benefits derived from the conquered territories. Eventually, these costs translated into debasement of currency, government corruption, and falling standards of living. In time, the empire expanded out to a point where it cost more to conquer the lands than were returned from acquisition, and the empire collapsed inward, rapidly. With Rome, rapidly was about 100 years. By the time of the Soviet Union collapse in the 1980s, rapidly was about a decade. Today - perhaps five years.
The rise of the English empire was fueled by coal and the industrial revolution. The rise of the American empire was fueled by oil and the information revolution. It's noteworthy that the growth curves as measured by military presence follows closely that of coal and later oil deployment, typically with a lag of about 15-20 years. This means that the overall global slowdown that we are seeing now is likely due to oil growth slowing in 1995 or so. Oil production globally plateau'd in 2005, and has been steady at about 80 million barrels a day production for several years now. This means that we are seeing only the first real inklings of the changes that will occur over the next ten years as the global economy truly catches up with oil production, by which time, overall oil production will be globally in decline.
Wake up. History has not been one continuous period of growth, but in generally has seen "bubbles" of growth and periodic collapse amidst long term stasis and slow decline.
Thrift is rare, only 'trendy' amongst society in times of recession (like now). Saving is also quite rare with the honourable exceptions of Germans and Japanese who save even during periods of expansion (except, as always, for their rotten Govts).
Greed is more than thrift though as thrift doesn't often come with greed. Greed is a natural biological drive shared with all animals and organisms to achieve and acquire value such food, money, status etc.
Civilisations do not decline from greed, they do from over-spending. Civilisations grow because of greed (free market competition producing productivity). They decline through lack of productivity or destroying/consuming productivity.
The USSR and North Korea are examples of destroying productivity with the State taking over the productive capacity and driving it into the ground (politicians cannot make profit or organise productive processes).
Europe, America and Japan are examples of similar destruction of the free market through State intervention in free markets, the only mechanism for producing productive ends. Govt also consumes private productivity (stolen via taxation of profits) leading not only to an ever decreasing circle of productive capital in the hands of productive people to re-invest in further productive enterprise. But also the demotivation of the private sector.
Regards military and wars it is no coincidence taxation arrives to fund wars, the most destructive social and economic excapade of any 'civilisation'. We shouldn't ever pigeon hole peoples or countries by their elites dysfunctional and sociopathic behaviour patterns
Yes i agree all expansions see a contraction. Everything in the Universe has a life cycle. Civilisations in fact can 'unlearn' the knowledge that made them productive. England 'lost' the technology/knowlege of the Romans when they left and went backwards for Centuries before they exploded in knowledge (and the wealth that comes with it) during the Industrial Revolution
Sgt Sausage - there is no limit to growth here on planet Earth. The fact we are leaving the Earth in space exploration shows we are still growing.
The Greens and other goons argue the Earth is a "finite" resource. No it is not (otherwise we'd have already run out of water)
Earths resources are there in TIME. Namely they can be re-used (like water). Our resources are infinite as is mans knowledge (the source of our growth/productivity)
Yep... I read somewhere that everyone on the planet can fit in Texas.... Skies the limit! Infinite resources!
Dilution is the solution!
"The stars at night, are big and bright."
<clapclapclapclap>
One word: Fukushima. Shit like that changes everything. How you gonna recycle Japan in anything measured in less than centuries/millenia.
It is just possible that Ben knows he is the biggest failure since the Rosenbergs.
If so, he should resign and beg for mercy.
The last thing you're going to find Ben thinking or saying is that he's powerless. Sick as I am of Graham-spam, I couldn't help myself when I saw the title...