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Bernanke Talks His Book
Bernanke Talks His Book
Bernanke’s testimony to the House last week and to the Senate yesterday held no surprises. Ben has promised to maintain monetary policy at DEFCON 4 levels for as far into the future as we can see.
The prepared remarks were identical for both presentations. I reviewed Bernanke's 10/4/2011 testimony before the Congressional Joint Economic Committee (Link). There is something missing in the 2012 reports to Congress that was included in Ben's statement just a few months ago. Here’s what he said in October 2011 about inflation:
Longer-term inflation expectations have remained stable according to the five-year-forward measure of inflation compensation derived from yields on nominal and inflation-protected Treasury securities suggests that inflation expectations among investors may have moved lower recently.
So last October, Ben was touting up the TIPS/Bond spread as a confirmation that the broad expectation for inflation was very tame. In fact, when Ben made those comments in October he was right.
The five-year TIPs/Bond spread was at 1.60%, a very low rate of expected inflation. That's no longer true.
In his testimony to the Senate this week, Ben did not bother to mention that the TIPS spread has blown out since October. He eliminated any reference to the TIPS spread altogether. The reason? Simple, the TIPS spread is no longer telling Bernanke what he wants to hear, so he ignores it.
The following are some charts on the TIPS spreads. First the five-year:
Now the Ten-year:
At this juncture, I’m absolutely convinced that Bernanke is making a biblical mistake. Yes. it will cost Ben his job (and the Fed’s credibility) at some point. But the real consequence will be to Americans in general, and also a few billion people outside the borders.
There is zero evidence today that the US economy is in a crisis and that emergency monetary policies are justified. But Ben tells us differently. He omits critical information that would argue against his policies. I think his omission of the inflation information contained in the TIPs data is equivalent to lying, and he knows it. His disinformation makes all of his words to legislators (and the public) very suspect.
My conclusion is that Bernanke is prepared to manipulate data (and any other damn thing he can lie about) in an effort to make people believe he is doing the “right thing.” He’s not doing what is right for the country any longer. He's in the process of ruining it.
Ultimately, Bernanke will be proven wrong. The longer Bernanke’s emergency measures are sustained, the harder it will be to unwind the mess he has created. Another two years of ZIRP, Twist and QE will bring long-term economic problems to America. The history books will not look kindly on Bernanke and his speeches the past week. I expect they will say:
“The first weeks of February 2012 were the last chance the Federal Reserve Bank had to alter its stance. As of this date, the die was cast; the Fed committed to irreversible steps. The only variable left was time. Twenty-four months later the US economy lost its footings. And when it fell, it took a decade to find a bottom.”
Some say Bernanke is a hero, that he saved the global economy from collapse in 2009. I say that he is a goat, one that will bring us a generation’s worth of trouble. That he ignored ample evidence in 2012 that the economy had long since passed the Emergency Stage will be Ben’s undoing. He's so pregnant with his monetary policy that he can’t see (or just chooses to ignore) that the fire is out, the emergency is over, and his monetary policy should be in the process of normalization. That failure, will cost everyone, big time.
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http://www.businessinsider.com/david-stockman-its-true-the-bls-data-is-m...
did anyone give you kudos for this article by Stockman about BLS data?
No. Not a word.
Stockman sent me the email, and I thought it was nice of him. I was not aware that it had been been published by Wall Street Insider. It was from there that it went to BI and ultimately to a bunch of other places in different forms.
Me? I got Dick's hatband from it all.
Once you've scrolled down a ZH thread you feel like the Pope; you know all and you've even been to Hell, where Kyle Bass said you would end up if you introduced the Indulgence. As the margins were terrific you did, and then came a HF zealot called Martin Luther, pile driver, and knocked out your bile and your golden mile.
You went bankrupt and ended up like Kyle said you would.
All that for free, ZH is the third Testament.
Oh wait, but a year ago it was 30% higher... Picking the low point in October is convenient to your story, but might not be accurate when one backs up and has a longer point of view... One could be just as critical of you cherry picking your datapoints.
What has it done in the last three months??
I'm sure that we can look at the history of this and find lots of things to point to that would would support one side or the other.
I think that is irrelevant. The issue is, "what are we looking at today".
I believe that Bernanke is ignoring the most useful information he has. What is going on currently is all that counts. The past is the past.
bk
#
There is zero evidence today that the US economy is in a crisis and that emergency monetary policies are justified. But Ben tells us differently. He omits critical information that would argue against his policies
#
sorry pal, again you striked out,.
REPEAT AFTER ME ,,REPEAT AFTER ME ,,REPEAT AFTER ME ,,
for last 4 years USA FEDERAL printed /spent 8-10% of GDP in additional budget spending..
here's kicker: during GREAT DEPRESSION deficit never excessed 5% of GDP...
so lets cut at least 5% of GDP and we will see how GREAT USA ECONOMY IS..
alx
ps
and another fact: 45+ mln is on food stamps and this amount is growing.
so why is it ?
Keynsianism......its like a religion.....a very bad religion
http://www.youtube.com/watch?v=KNsyKwBGMVg
When is this crap all going to end? If & only if the Austrians replace the Keynesians.
If the Austrians took over, everyone would take a crap at once, then climb out of it, then bury it. As it is, we are up to our neck in it and making waves. Ben is setting us up for a Tsunami.
Ben Bernanke is part of a terrorist organization.is he not...?
Bruce, this article makes you sound stupid and gullible as GW (and Leo), which I know isn't the case.
Bernokio couldn't care less about the economy. Any discussion of Fed trying to help the economy recover is bullshit.
You quibble about 1.75% vs 2.1% inflation, when real inflation is running 10% - 12%. Get your head out of the sand man.
You say Fed should stop easing because the economic crisis is over.
Bullshit. Easing never was about the economy. It was about stealing boatloads of wealth from the American people, giving it to banks and the government.
That looting isn't gonna stop regardless of how the economy is doing. Bernokio will find whatever justification he needs to keep printing and giving people's wealth to banks and government. If it isn't QE it's currency swaps or something else.
History will record that Bernanke presided over the collapse of the US dollar, because that's where all this is headed.
You're as deterministic on economic matters as legal ones; I'd hate to question you on poetry. You might just say its prose!
Although I agree on a lot of what you say. Like religion.
Like : Zero evidence that US economy is in pain?
If you forget debt mountain and believe in print to infinity!
But they are those who say : "Our money your problem" is still the world rule as long as oil-dollar hegemony holds. (I don't argue with that). And, those who say, "if push comes to shove , we have nuclear stick, so USD stays king of the world, debt mountain or no debt mountain, deficit or no deficit, we can go to 25-30 T government debt at 15/17 GDP ! "
And, there are those who think the WS FIRE MARKET IS THE REAL ECONOMY for a long time more!....Just saying!
...Now that is shooting high up ahead, like Billy the kid or Wyatt Earp! US second half time a block buster!
...Unless you think the world can bring down USD hegemony!
They will one day. But when is the question...
Bernanke is facilitating debt creation. He has made it so there is next to no cost for more government debt. Without a cost, we just borrow more because it looks like we are getting it for free.
Raise the cost of money by 1% and the debt creation will slow down. It's all I want for now.
Ben is indeed a senior professor of monetery engineering.
I am reminded of the movie, The Sting............
http://www.youtube.com/watch?v=MgUSUfDB_KE
He has been a liar from the start. I called him out on it when the Times Magazine did a puff piece about him years ago. Not only is he going to cause disaster going forward, he didn't save the world from anything in 2008-9. All he did was give a bunch of bankers a bunch of our money. He didn't prevent a depression, he facilitated one.
There is no viable alternative. The world labor glut continues to drive wages lower, (Foxconn $25.day w/o benefits living in 20 person prison cells). So everyone pretends this is not USA/EU future by funding trillion dollar entitlement/pension programs. This will work for the super nuke powers who back their central bankers. Its going to be hell for all other countries. Via nukes and world $ reserve system. The alternative is essentially slave labor. Tea Party, Ron Paul ideas will never work with the billions who are willing to work for $5/day.
Bernanke is an incredibly tough guy. In spite of blithering criticism from ZH he continues to steal trillions from the Treasury and hand it out to his billionaire buddies.
"Yes. it will cost Ben his job (and the Fed’s credibility) at some point. But the real consequence will be to Americans in general, and also a few billion people outside the borders."
Keynesian's still have credibility? ;-)
Just kidding BK...another fine post.
Careful Bruce, you are beginning to sound a lot like a terrorist.
Well, I'm terrified. But not a terrorist.
Bruce,It is not for you to decide if you are a terrorist or not,thats big daddys job.../Sarc.
That appears to be a morphing definition that all ZH'rs may eventually be fit into.
The FED at NO time has acted in the best interests of the US or anyone else. They always act in the best interest of their shareholders. Once you understand that, then it all makes perfect sense.
It all makes perfect sense.
Expressed in dollars and cents, pounds, shillings and pence.
Can't you see?
It all makes perfect sense.
R.W.
Well stated sir!!
up here it's called "the food shed." you buy the pig when he's a little piglet...who grows into a bigger pigger--farmer guy does all the work for ya---including the chopping up part--and then you go and pick him up. it's really not that complicated. literally a "food bank." now if in the interim the price of a 100 acre slab of Minnesta real estate goes up 100 fold--eh, who cares! if "the bailout tycoons" of Wall Street need some way to actually be something other than totally useless they can take DOT foods public and aid in the transportation and storage of said "food banks." (oh, and...cash only please! no more government AT ALL!)
To steal a line from John Edwards(D) with two thangs goin on (one with cancer) there are two americas there are two economies.
one economy has cancer and ben still needs to help BAC, C, JPM, etc they are going to die from cancer but the fire isn't out there. when they die the fire will finally be out.
in the other economy the little guy is recovering the small business is recovering. they never got any handouts and have had to do the restructurings. they don't need anything from ben other than for him TO STOP.
Ben - a BAC collapse now will not be the same as a BAC collapse in 2007/8. Its OK now, really. Take off the fire helmet - you did "break the back of this thing". now you need to cut your losses and not keep trying to save what cannot be saved.
FITCH RATINGS US Money Fund Exposure to European Banks
http://www.scribd.com/doc/80708149/FITCH-RATINGS-U-S-Money-Fund-Exposure...
PP
The bernank/helicopter ben is not making mistakes, he is executing on the plan he laid out early on. He is doing so ruthlessly, with self promotion and an eye on career advancement.
At one point in my former incarnation, I was profoundly enlightened by a former superior and master of corporate management perception. When one particular potentially eyebrow raisingly expensive phoo-pah blossomed to its full stench (a direct result of his own ineptitude and misplaced arrogance), I inquired of him if he intended to tell the executives 'The Truth'? His answer, while glib, was more than just educational, it was goddamn Ivy League insightful. His response was 'Which Truth'.
Those words and his poor hygiene ring in my ears and nose to this day. I have never met a more unqualified individual, nor one that was promoted more quickly despite his proximity revealing BO. BO only explained by his personal pride in his european linage originating in a large country associated in the news of late with germany.
I walked away from his office knowing how unqualified, gullible and deluded I truly was with my simple BS from an southern university and the belief that success comes with hard work and honesty. Corporate careers are not metered out for competence and ability inside major institutions. No, upward career mobility is bestowed based upon enrichment of superiors, relentless self promotion, and gleeful undermining of rivals. Expect the same of the officials managing this, whatever this mess is that has befallen the western middle class.
Calculate how much interest the government would be paying if interest rates were at historically normal levels, then get back to me about your ridiculous "no crisis" assertion.
I respectfully second this reasonable request.
IMHO, the 'normalization' of Interest Rates towards anything approaching the historical levels of the last 20+ years will not merely destroy the Equities Markets and the Housing Market; but, the fatally over-indebted United States and U\.S. State Governments.
BUT, I am willing to hear You out, Bruce: exactly how can the Ben tighten and NOT blow up the whole System?
Another great post Bruce. You point out all too well that the Bernank ignores the TIPS spread when it is inconveinent for his "reasoning and logic" (hahahahaha)., and he is going to print away to infinity, in spite of the beginnings of real inflation.
Bernanke does have an ace in the hole and he knows it-
If the inevitable unwinding of the Fed balance sheet becomes extremely dollar adverse-he has this to rely on-
This was calculated in 09 and the size has increased a bunch since then-I'm too lazy to recalculate-but it is the total Fed balance sheet divided by the (supposed) total gold reserves and what the price of gold would have to be in order to unwind the debt and still have a viable paper currency and bond market-
http://www.acting-man.com/blog/media/2010/05/shadow-gold-price.png
If there's no economic crisis in the US..........then what the hell are the last 1,000 articles I've read on ZH about then?
There is a million things wrong that need attention. I, and others, try to write about them on a daily basis.
But compare where we are today with December 2008 through March of 2009. The is no imminent collapse of the nations banks. The car companies are not going bankrupt, they actually are doing pretty good right now.
Did you not notice that some of the stock averages are hitting all time highs? That inflation is on the rise. That deflation is not the risk (for now).
You're going to hate me for saying this, but, I think the Fed does have a counter cyclical role in the economy. I think they should adjust monetary policy to ongoing economic conditions.
I say again, the emergency of 2009 is over. We need to be very careful about extending the high octane gas that Bernake is pushing put.
That gas is going to catch on fire one day. When it does, it will be very hard to put out. The fire will spread around the world.
Bruce,
Let's cut to the economic chase. The economy of 2004 - 2008 was built upon three legs of a stool. Low unemployment (in spring of 2008 my global group had difficulty hiring people in Ahmdebad, India), relatively low defecit spending (remember when the Democrats could campaign on a $ 400 billion defecit as being obscene) and the ability to buy a house you could then use as an ATM. Where are we now:
Unemployment: After 3+ years, people now fight to get unpaid intern jobs to get their foot in the door. The youngest segment of the workforce has the worst unemployment stats. If you are over 50 and were laid off, you have 'retired' from the work force because nobody wants to deal with the 'demographic challenges'. If you are working, people are working longer hours for less pay. What part of unemployment looks fixed to you?
Defecit spending: the Democratic wave of legislaton excess after the 2006 election iniated the ramp up to a 400 billion dollar defecit for FY2008. BHO campaigned on getting things under control and the first piece of of that effort was $ 787 of additional defecit spending - 50% of that spending went to keep the public service unions at full staffing level though grants to the states. There were no 'shovel ready' infrastructure jobs and only a 10% increase in planned spending that was ridiculously accelerated into schedules that couldn't be met. Obamacare was the first priority of Obama and the Democrats. This increases costs and bends the cost curve award and will result in fewer family doctors (mine is looking to get out of it). There is no budget for the third straight year for tracking this mess. What part of goverment defecit spending looks fixed to you?
Housing: the Fraudclosure story is about to be swept under the rug. thens of thousands of white collar criminals will be forgiven multiple felonies and the banks that created MERS will be let of the hook for the billions in local land recording fees fraudulently bypassed. If they broke the chain of title - POOF! it's whole again. If they did illegally foreclose on someone, they are going to pay a $ 2,000 fine as settlement. All the foreclosed homes the government has are going to be bundled up into large investor purchasing opportunities with preference going to the original banks for purchasing to be re-sold or made into rentsal housing unit, The good news is that it will turn loose the foreclosure mills so they can clear out the backlog of two million homes. What part of housing looks fixed to you?
What the Fed "has" is 3 trillion USD of debt and bad assets they can't sell - unless the bankers get the deal they want. If they don't, they'll hold the markets hostage. What part of the Fed policy isn't a complete sellout to the TBTF banks?
barliman
Bruce, I love you but there's a big difference between the Austrian explanation of the business cycle and the mainstream understanding of business cycles. You think the FED has a role to play? It's seems to me that's like saying we need the FED to play the role of arsonist; lighting indiscriminate fires and as they burn, we need them to rush in and play firefighter. Without the FED and a central bank, exponential credit creation resulting in volatility and unstable imbalances would not occur.
Bruce the emergeny of 2009 is simply being replaced by bubbles being blown up in other asset classes. Bernanke is not extending any high octane gas. He needs to do permenant QE from here on out to prevent interest rates from rising. If they rise it's game over. It's the reason he will be dong QE as soon as the twist ends.
As for inflation vs deflation as Kyle Bass put it "Everyday I see deflation in the things people have and inflation in the things people need".
True. I just don't buy into a recovery that is Fed induced. I'm very aware of what's going on market wise particularly the manipulation. I'm in the camp that I think the 2008 collapse was cut off short, heavily papered over and is being pushed down the road. Everything you mention has some sort of problem such as the auto companies. The same subprime lenders that crashed housing are now at it with autos. I'm sure you're probably aware of all this. It just seems to me that it "appears" to be a recovery like you say but in reality it's all false which is why the Fed's won't back off. The markets have tried to rollover time after time after time and someone keeps coming in to save the day. The low volume is especially easy for them to manipulate. The whole idea is to force a recovery and when that point is achieved to let off the gas pedal as you say and it will stand on it's own. Apparently they don't think it's there yet.
Fatal conceit.
Central planning is doomed to fail.
bring back mark to market then tell me every things just fine.
Terrible slowdown and structural unemployment, yes. Misallocation of capital towards war-making and domestic spying and away from innovation and infrastructure, yes. Evisceration of the middle class, yes. But "economic crisis", like it was in March 08 where MM funds were breaking the buck and all the world's ATMs were about to show all zeroes, no. But BenB has interest rates at DefCon4 levels. That's Bruce's point methinks.
All actions Bernacke proposes will result in one thing, he will continue to send enough money to the government to keep it running. If the market stops purchasing Treasuries....Ben will be there. Whether it is QEx or Twist or running the cash over there in wheelbarrows he will do that one thing....the Federal government will always be able keep their financial promises.........nominally.
This is the reason Ben exists and no other.
It has all ready cost us.big time. That jack ass should have been fired in his first term. Dub Ba Yah should have grown some in his second term and hung Hanky Panky Paulson, Timmay ! And Benny all from the same rope. Frickin jerks. Bailout my ass, it's theft. Wake up sheeples!
"He's in the process of ruining the country."
he is only following orders...
The numbers are proving Federal Reserve Chairman Ben S. Bernanke’s critics wrong.
More than a year after Republicans from House Speaker John Boehner of Ohio to presidential candidate Ron Paul of Texas warned that the Fed’s second round of asset purchases risked a sharp acceleration in prices, the surge has failed to materialize. The personal-consumption-expenditures price index rose 2.4 percent for the 12 months ending in December, near the central bank’s 2 percent target.
“The statements were politically motivated,” said John Lonski, chief economist at Moody’s Capital Markets Group in New York. With unemployment stalled above 8 percent for three years, “I don’t see how anybody in their right mind could form a strong argument for persistent, rapid inflation in the United States without the participation of the labor market.”
http://www.bloomberg.com/news/2012-02-08/bernanke-led-economy-proving-critics-clueless-about-federal-reserve-policy.html
The Bernank is a genius! The BLS stats prove it.
you are really dumb. If the goal was to allow the rich predator criminals to continue to loot America until they had the country impoverished and the mechanism in place to quell the rebellion (patriot Act, NDAA, etc. ) and prepare for the transfer to serfdom and tyranny -then he is a genius. A very evil one at that. One very deserving of rewards and praise from his truly Satanic masters.
the recipe for this disaster just needs a tad more....time....be patient