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My read on the speech
I went to play golf this morning rather than listen to the Bernankster. After all, I knew what he was going to say. I read about the speech in the Wall Street Journal a day before.
I (and many others) have made note of the fact that the WSJ’s crack reporter, Jon Hilsenrath, is the mouthpiece for Big Ben. This is what Jon said had to say last night. Do you think he talked to Bernanke before he wrote this? (15 hours before speech time)
Federal Reserve Chairman Ben Bernanke isn’t likely to break much new monetary-policy ground in his Jackson Hole speech Friday
To be sure, a number of others who have a public view on Fed policy also commented that the speech from the Chairman would bring nothing new. But the consistency of Hilsenrath’s words and Bernanke's actions is no coincidence.
If you believe that Hilsenrath gets the whisper from Ben, then you might want to consider what Jon had to say after the speech was delivered:
Fed policy makers will be discussing their options at a September policy meeting which has been expanded to two days instead of one to explore whether the Fed should do more.
Jon then quotes from the speech:
“The committee is prepared to employ its tools as appropriate to promote a stronger economic recovery.”
Then Jon tips Bernanke’s next move:
it is worth remembering, when the Fed has said it is prepared to act during this long-running economic crisis, it generally has acted.
Bernanke is tipping his hand (via Jon) in order to prepare the market for what is to come in a few weeks. This is a heads up to the insiders that more monetary gas is in the works. The stock market’s first reaction to today’s non-event was to sell off hard. But after the word got around that this was just a delay (and a short one at that) stocks caught a bid. Basically, the plan by Bernanke to leak his intentions worked.
I think there are two reasons that Bernanke chose not to announce policy changes at Jackson Hole:
I) He wants it to look to the world (and a few Republican politicians) as if the Fed’s actions are being done only after deep deliberation and discussion. That is why the next meeting has been changed to a two-day format.
There will be a two-day circus of Fed Governors looking very serious. But that is just for the TV audience. This is Ben’s show. He has the votes. He is steering the ship. The decisions have already been made. Ben’s going to do something on 9/21.
II) Ben had to put off announcing more monetary oomph today because there is something that has to happen first. There has to be something that comes out of the EU before Bernanke makes his next move.
I’m not sure what happens next in Europe. I’m of the opinion that something needs to be done, and it needs to be done quickly.
There are a number of things that the ECB could do. They could (1) significantly expand their effort at QE (the number starts at E 1 trillion). They could (2) drop official lending rates close to zero. They could (3) agree to issue E bonds.
Some combination of those actions would buy some more time. The problem is that all of those steps have been discussed and pretty much firmly rejected. There is a fourth option. The strong hands in the EU could give in to the markets and let some of the PIIGS (starting with Greece) float on their own. This option has also been previously rejected.
I think it is time for serious consideration for this. I can’t think of a single person who has a voice in these matters that actually believes that Greece can be saved with more debt. We shall see, possibly as soon as Sunday night.
Yet another option is to get the US Fed into the picture with dramatic draw-downs on existing USD swap lines (Starts with $500 Billion). This is another possibility for this weekend or next.
My last point is one that I have made many times before, but feel obligated to repeat.
I flat out hate that this Fed is conducting monetary policy through leaks, a wink and a nod and innuendo.
There is far too much at stake to make a circus out of the process. It feels like we should just put up a tent, because a three-ring circus is what we are getting non-stop. And Bernanke is the strong man in the middle ring.
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Bruce Krasting:
I don´t understand why it should be impossible to let ECB print money, lend it to the PIIGS countries at near zero interest rate and thereby solve the debt crisis. If the ECB charter has to be changed, why not do that?
If the Federal Reserve can print money in the US, why can´t ECB do the same on a smaller scale?
I agree that there may be a problem if the PIIGS countries think that the ECB can bail them out over and over again. But why not force them to go back to their old currencies in return for huge zero interest loans? If the interest in any case will be near zero it doesn´t matter if their currencies will depreciate compared to the euro. Furthermore, it should be possible to remit debt that consists of printed money in the future.
I can also agree that the banks need to be taught a lesson for their irresponsible lending. I suspect that the best solution would be default for one or more of the PIIGS countries and that at least one bank that has lent money to these countries goes bankrupt. Otherwise, the stockholders of the banks will allow the bank executives to do the same over and over again. If ECB and the EU countries are prepared to immediately take over banks that go bankrupt, I think that this strategy shouldn´t involve substantial risks. At glance, I think that this stands out as an attractive strategy compared to subsidizing irresponsible risk taking forever. I really wonder who coined the expression “to big to fail”. Some bank owner or some bank subsidizer?
Dude,
You project yourself as 100% sincere. I'm buying that. I suggest that you are missing the forest for the trees. The game is not as simple as you portray. What is happening NOW IS ABOUT GLOBALIZATION ( yes, I shouted that, sorry).
These monsters are endeavoring to enslave all of us into one big fat prison/slave camp. I sound like an extremist?
So be it.
Consider the nature of power and the tendencies of those who have it. Now chart that alongside human history and answer why this time is different?
It is not different.
Open your mind just a bit further my friend.
All this speculation regarding why they are postponing the next round boils down to timing. So the obvious is that conditions have not yet been met. What is clear is that some panic must be established. I'm inclined to believe that panic will be in the form of a 'systemic threat' coming from Europe. In the name of preventing 'the collapse of the international banking system', Ben will unleash hell. There will of course be 'unprecedented' global coordination. The friendly folks from the IMF will play a significant role. Legarde was installed for essentially the same reason obommer was: absolute ethical vacancy and a willingness to follow the plan.
No, this Fed is conducting policy through a nudge, a knowing wink, a nod, and a grin.
"Does your Interest Rate Go? Nudge, Nudge, knowing wink, nod and a grin."
Mr. Krasting,
I think you're positively correct, at least up to a point.
to all but spell out the terms of the coming QE is one thing, but to telegraph a tacit confession that, yes, the following QE will dwarf anything you've seen yet; and there is no clearer indication of this confession than in multiplying the number of days attended by a bunch of stuffed suits who, come september, will be nodding enthusiastically to any and all measures -- kind of symbolic, no? 'you thought QEs I & II and secret liquidity arrangements were something? well we're gonna fucking double down.' I suspect he knows europe is about to fall; everything will have to be redone afterward anyway, give it a few more weeks, throw in a few direct stimulus measures as bones to sundry left-leaning constituencies with sore feelings, pretend like this is IT...last time, ever -- pinky swear! no more printing...ever (at least not for nine more months -- hopefully).
i think this is just an aknowledgement that doing anything now, on the eve of european implosion, would be futile even for ben. let one event trigger a staccato of big dips deep down below ten thousand, an absolute clusterfuck in euro CDS, bond market, equites, the euro itself, and absolutely NO liquidity. let all this sink in, and then set to work on crashing japan, then china, before we allow bankers to finally canniballize centuries worth of accumulated wealth like the demon sucubus they are. or will they?
I predict huge market crash starting with big chunks falling starting right after labor day. i'm settin up my pretend model for just such a scenario.
as always, i enjoy and appreciate your work
I think the reason for no action is to leave dry powder for if/when the next shoe drops in Europe. If Greece goes and/or EU starts QE, FED will a)not have shot its wad and b)have more political cover to shoot it.
In the scheme of systemic risks, US economy is now # 3 (#2 is banks in Europe and #1 is Europe itself)
looks like we were thinkin along the same lines at about the same time -- i'd accuse you of theft had you not beaten me to it.
and i realize that it appear i'm the thief; but, really, all that delay between your post and mine says is that i'm a slow-witted dolt. and when taking the long view in life, it's typically preferable to dim than duplicitious.
hmmm that or, he knows a big storm is about to hit, and the cover excuse is...the weather.
Due to the weather GDP estimates to be cut, consumers...didn't.
QEX is now non-political.
The Bernank: "I take no responsibility for this action. An act of god -force majeure - makes me do this".
Europe can't resolve the quagmire of its politics. Banks blow, corrupted ISDA doesn't make appropriate credit event calls, risk pops up where not expected, chain-reaction of implosions, spreads worldwide, eurodollar shortage, strong dollar, wide-spread selloffs (possibly effecting PMs too).
September rolls around. Fed-ECB swaps already heavily drawn upon but ECB lacks legal basis, flexibility and sufficient resolution to deliver liquidity relief where needed. Fed rides in with QE3 to complement swaps, drops at least 1T into asset swaps with eurodollar banks and other agents exposed to Europe. Injects required liquidity in exchange for expanded definition of allowable "assets". Said assets will include toxic sovereign debt (PIIGS).
Aftermath will be complicated and messy. Added liquidity will be impossible to withdraw, creating a global financial sector juiced up like a toddler on red cordial. Rampant speculation will ensue leading to concentrated pockets of very high inflation that will flow over and punish a real economy that remains in deflation. Obvious example being commodity prices juicing back up in the aftermath of liquidity-induced "stability", decimating purchasing power in a collapsing real economy. The non-financial component of GDP goes negative, civil wars in less stable nations, riots on the streets, "terrorism", nationalism, major headwinds for European "unity". Eurozone is likely to shrink as some nations leave, Euro as we know it definitely dead. Eurozone sovereign rates continue to be allowed to float (no eurobonds).
So, the "sell in May buy in October" macro-guess that I went with back in May (when I went almost 100% to cash) is looking pretty good right now! Might have to extend the October component though...
FEAR NOT! I have discovered a CURE!
http://www.youtube.com/watch?v=e1tdfucQfCo&feature=player_detailpage
still. it does appear challenges await....
He will get his reason to print after the August negative NFP coming in 2 weeks, like you said, he needs a reason to crank up the printers and that will be reason enough, as that will confirm a double dip is here for the masses!
So what happens if Obama does anounce some kind of mortgage restructuring? Will it be only mortgages held by Fannie and Freddie or will it be all.
I don't have a bought and sold mortgage and there is no way I will pay if millions get a rate drop and Iam forced to pay 5.25%.
THE SCREWING OF THE RESPONSIBLE MUST BE STOPPED I CAN'T TAKE ANYMORE...
the screwing of the responsible will continue. please disregard all messages to the contrary.
Only the responsible have enough left to be worth screwing, how can it be otherwise? The leveraged to the hilt, hand to mouth class have nothing left to grasp and the squid will continually seek more assets to consume.
Exactly. Lots of big talk in America, but no walk. The sheep know their place. Good little slaves they are.
Anybody protesting the government? Nope. Anybody bringing down the Federal Reserve? Nope. The only people causing any ruckus are black teenagers with their flash mobs. And if that becomes more popular, all these tough white Bug Out Bag doomsters will pack their family into the grocery getter and head back to Europe in a heartbeat. The USSA has been raped, pilaged, and plundered while the pussified citizens sit on their fat slob asses cheering at the boob tube.
Congratulations America, you are a failure.
Since you bought up the topic of gold...what happens Sunday at 6:15 PM if there is no one in NY (due to Irene) to control (stop the continuation of) the pretty upward trend of the final 6 hours of todays gold move? What if the Market in the East pumps it up to an embarassing level and the take down team has to just watch from their shelters....sorry...pleasant dream...just dreaming...
Thanks Bruce, great insight as always.
Bruce I think you called it pretty good a week ago
http://www.zerohedge.com/contributed/eu-banks-solvency-or-liquidity-or-both
with that out of the way, what say you of the Hurricane?
A dud. Lots of rain, but all this pant shitting will prove unwarranted.
i figured it was a dud. i could tell when it started weakening. this boy could have been bad. sometimes it is a pain in the ass when the authorities overreact so to speak. but like a broken clock, every once in a while they get it right. take rita in houston in 2005. it was a category 6 and they said it was headed straight for galveston bay and then to houston. the mayor of houston ordered an evacuation of houston. for two days the freeways out of town were clogged like you would not believe. people were running out of gas on the freeways and there were fist fights at service stations along the feeders. it was mayheim. i have never seen anything like it. food supplies deliveries to the city were haulted and the store shelves were empty. i remember on monday morning when i went to the store and seeing this. it was a weird feeling to see empty shelves. i thought, hmmm. if this is what its like when there is no problem, what will it be like when there really is. this is when i made a tactical withdrawal from houston texas. the blacks and mexicans were hoping there would be a calamity so they could go crazy burning and stealing, but alas their plans came to null. the catefory 6 storm weakened considerably by the time it reached the texas coast. it came ashore in east texas and went into louisianna, where it caused major damage in the lafayette area etc. i think i got maybe two drops of rain. i and a few others were the only ones left in my area. everyone else (like idiots) had boarded up their houses and left. i told them. stay here. why are you doing this stupid stuff. they were all full of fear because the major news media had hyped up the storm so much. i have lived through many of them and they can be a real major pain in the ass, but no reason to overreact. today the authorities , under the auspices of homeland insecurity , always use some situation like this to game and prepare for the time when they are actually needed during some trumped up , made up, false flag event in the future. problem ,reaction, solution. that is what they are all about these days, not necessarily caring about helping people but playing some kind of war games where you and I are the enemy and the terrorist. this is the way it is today in this country. today this writer looks at the authorities with distrust and scorn because i know too well the score and what is coming and when the time comes, yes, they will be my enemy. they , will be the pebble in my shoe sent out by the controllers to try and put the yoke of bondage on us, but not me. homie don't play that....
I think he alluded to needing more to be done by .gov and is taking a wait and see approach until after the 9/5 Obummer "game changer" speech and will take the market reaction to that into consideration. I think Ben wants to take the training wheels asap off but is scared. I think he will continue to parrot that he has more tools but will not use them absent market chaos. I do not see LSAP happening. Yields are so low there is no need. The EU is the center of attention for the forseeable future, and what happens there will have a profound effect on MP for the forseeable future. The US is now positioning to lead the world out of this quagmire. I am optimistic. It is time to get back to the fundamentals instead of a market driven primarily by central planning. My 2.
Wall Street knows that Benny and the Injets are planning QE for the rest of the world and needs as many retail investors as possible to stay IN THE MARKET before the big CRASH.
BB is waiting to pull the trigger during the Euro-zone crisis, not before, otherwise he's wasted the ammo.
As for pushing additional stimulus back on fiscal policy, BB has always stated that when rates are at zero, fiscal stimulus will be required. Congress and Obama are on cue to act, and hopefully we'll see something productive come out of that three-ring circus.
Exactly what I was thinking, a high stakes game of chicken.. basicaly. Who can print faster?
The Bad Guy.
My reading of the tea leafs says a war is coming, this time a serious one. Not a little nation building, or a Taliban chase, or a Qaddafi quest. Obama needs to lift his peagent score for the 2012 run and Dr. BS Bernanke needs a credible reason to open the spigot.
The likely hot spots are Iran (Thugs of Ahmadinejad) or Syria (Bashar Bashing), probably with Israel playing the false flag lead violin. The Wizard of O does not have the cojones to do this during Ramadan (end of Ramadan holiday is next Monday and Tuesday), hence the delay. Opening day for the drama could be as late as 9/11 but that might be a bit too obvious.
Observing the goings on from my little corner of tropical paradise, it feels like the wohole script was written by Lewis Carroll and we have begun our descent down the rabbit hole. Nothing is as it seems and our "leaders" have no clue about where they are leading us.
NOT just ur reading .. big war has been predicted by Charles nenner ... Marc faber, Gerald celente.. and many others... Black flag ... Biachezzz..
we had a draft in peace time. worse thing Nixon did was get rid of it. Now we see a nation devoid of itself. If we're staring at Black Monday then I would argue the draft is such that we can still have a nation at all and not the result of some "foreign thing." As i was told by a great marine "son, when the Chinese crossed the Yalu it was every man for himself." And this time will be no different.
No one left to fight for the US we are spread too thin and we have an aging population. Also, people are very discusted with this country and will never go to war to protect Isreal. I can speak for myself and I woulld go to Mexico and live rather than fight a war in the middle east.
All true. Please consider (1) the military follows orders, it matters not what the grunts want and (2) the next war will be fought by remote control and not ground troops.
In the event you are still wondering what Bernanke is waiting on, it is the decision from the German High Court on September 15th that will most likely declare that the German politicians can no longer bailout the PIIGS, it is in direct violation of the EU charter and the German politians authority.
Please Read: http://www.321gold.com/editorials/browne/browne082611.html
Thank you. that was very informative.
From Bernanke's 2002 speech: http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm
"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt"
Ben Dandy to the rescue!!!!
Buy the debt with what? an expansion of the balance sheet? Buying debt with debt is very, very bullish for gold.
He gives them the treasury bonds he just bought and takes their PIIG bonds. The balance sheet doesn't change as long as he doesn't mark to market.
He even suggested in his 2003 speech to the Japanese that they could just cancel the bonds between their Treasury and Fed. His point was since "they owed it to themselves", it could fund a massive tax cut without causing a political uproar since it didn't increase the national debt.
He can do anything he wants as long as all we see is the totals on the balance sheet and not the specifics.
Ben Dandy Bernanke is leaking his next move, via the WSJ, that he will buy foreign bonds to "help" Europe.
"according to people familiar with the matter."
"said the people familiar with the matter say"
"said a senior executive at a major European bank who has participated in the talks"
"a senior bank executive said"
http://online.wsj.com/article/SB10001424053111904070604576514431203667092.html?mod=WSJ_hp_LEFTTopStories
From the article:
"Until recently, that hasn't been a problem. Thanks partly to the Federal Reserve's so-called quantitative-easing program, huge amounts of dollars have been sloshing around the financial system, and much of it has landed at international banks, according to weekly Fed reports on bank balance sheets.
This spring, foreign banks were able to build up ample cash cushions, thanks largely to quantitative easing
The latest Fed data "could be telltale signs that foreign banks are in need of dollars again"
So the foreign banks just "park" those worthless Italian and Greek bonds with the Fed, and Ben loans them money at face value.
It doesn't need congressional approval since Ben doesn't mark to market.
The stock market will rally while the value of our Dollar drops causing food and gas prices to SOAR
Too bad that it only helps the top 1%.
I think you nailed it Bruce. Good thoughtful reasoning.
"I have confidence that our European colleagues fully appreciate what is at stake in the difficult issues they are now confronting and that, over time, they will take all necessary and appropriate steps to address those issues effectively and comprehensively."
This sentence from his speech was curious to me. It sounded like a threat aimed at Europe.
i flat out hate that we as a country are held hostage by a small group of bankers who do whatever it is they want and leave us holding the bag. no where in the constitution does it say anything about a central bank being used in our financial matters, yet it has been since 1913. it really doesn't matter what we think. they are going to do what they are going to do. these bastards will not let go until you make them let go. there is only one thing they understand. only one thing.
Their only aim in life is power & world dominance. That is the only thing they understand.
Remember, humans have evolved from pack animals and the alpha has always ruled over the others by injecting fear and promise of "protection". The only difference between man & monkey is that the alpha monkey will actually stand up and protect its pack when a threat arises, whereas a alpha man will not think twice before sacrificing the pack in order to protect his own ass.
The evil banksters should all move to the recently discovered planet made of diamonds. Greedy bastards!
"The movement of all goods & capital in the world is controlled by a handful of very powerful people - maybe 12 or 13." - J. Rockeffeler during an interview with Bill Moyers.
Interesting take.
Thanks, Bruce!
In Dune speak,
Ron Paul would be Count Fenring, Biden would be Beast Rabban, Bernanke would be Piter DeVries, and Obama would be ....... golfing.
Obama caught in the infinite sand trap while the plot goes on around him
Count Fenring...I like it - the guy who almost was. But then who fills the shoes of Duncan Idaho, Stilgar and Gurney Halleck? I nominate Rahm Emanuel to be Feyd-Rautha.
Breaking News: Bernanke hospitalized last night, almost misses speech.
Jackson Hole: On the eve of his much anticipated speech, Fed Chairman Ben Bernanke was rushed to the Jackson Hole hospital at 6:08 pm suffering from a bowel obstruction. After two hours of intensive surgery, a hospital spokesperson announced the Fed Chairman is in the recovery room and is as comfortable as one can expect after removal of the anal obstruction: Steve Liesman's nose.
Chief Surgeon Dr. Noh Fee Noh See said he tried many conventional and unconventional surgical procedures but could not dislodge Liesman's nose from the Chairman's ass. His team of surgeons could not pry Leisman's nose, face, arms, and legs wrapped around Ben like an octopus. The solution arrived by a Tweet from Larry Kudlow telling Liesman that Treasury Secretary Geithner wanted Leisman as soon as possible for an important interview, something about a bank holiday. Immediately, Leisman's nose popped out of Ben's ass like a champagne cork.
The surgeons still had a hard time getting Leisman to leave, as he insisted on several glassfuls of Ben's "champagne". When Leisman left, Ben perked up and asked the hospital staff "Wake me at 7am for my earth-shaking bowel movement, er, no, earth-shaking speech...sorry i'm a little groggy from the quantitaive easing, er, no, from the anesthetic"
UPDATE - 2 am MST: A nurse on a smoke break outside Ben's hospital room says she heard Ben on his cellphone saying: "Look Steve, no hard feelings. You are a friend and a useful idiot. But sometimes you can be a pain in the ass. When I get back to D.C. I'll invite you to lunch at the Marriner Eccles cafeteria."
It was a HORRIBLE FISHING ACCIDENT i tell you. Just HORRIBLE!
why doesn't roubini jump on lies man? i mean, heck how is he qualifed to discuss financial matters, since he only has a journalism degree. how can he understand baron john maynard keynes' theoretical constructs? he is just a journalist? the professor, my ass.....
When things do not make sense then most likely our assumptions are wrong. IMO, there are some very simple explanations for everything. It is just that we have been trained to not believe the obvious.... because the herd mentality says otherwise.
Moooo
just an odd question- somebody commented earlier on the impending arrival of QE3 that "the spice must flow". which got me to thinking in terms of herberts dune universe- bernanke would be the emperor shaddam, wall street banksters would be the spacing guild and the us military would be the sardukaar-who would Obama be? also any thoughts any the baron valdmir harkonen , putin maybe?
Obama is one of those big spineless worms. I nominate Amenadinajacket for the Baron.
I'm Stilgar. Who's Mu'ad Dib though? Tyler I think.