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Bill Gross To Ben Bernanke: "It's Your Policies That Are Now Part Of The Problem Rather Than The Solution"

Tyler Durden's picture




 

On practically every day of the past four years, we have said that it was the Fed's own policies that are causing the ever-deeper systemic weakness in the US (and now global with all central banks going "all in") economy, which in turn forces the Fed to intervene even more aggressively in an attempt to counteract, in turn generating ever more economic weakness, leading to even more intervention, which is why every incremental episode of QE is larger and longer, and why the economic baseline is ever lower in the most perverse feedback loop of the New Normal. Now, it is once again Bill Gross to catch up to Zero Hedge and conclude just this in his latest monthly letter: "It’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%. Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution." Which is why there simply is no way out as long as Bernanke stays in.

From Bill Gross of PIMCO

Wounded Heart

Joseph Schumpeter, the originator of the phrase “creative destruction,” authored a less well-known corollary at some point in the 1930s. “Profit,” he wrote, “is temporary by nature: It will vanish in the subsequent process of competition and adaptation.” And so it has, certainly at the micro level for which his remark was obviously intended. Once proud, seemingly indestructible capitalistic giants have seen their profits fall short of “everlasting” and exhibited a far more ephemeral character. Kodak, Sears, Barnes & Noble, AOL and countless others have been “competed” to near oblivion by advancing technology, more focused management, or evolving business models that had better ideas more “adaptable” to a new age.
 
Yet capitalism at a macro level must inherently be different than the micro individual businesses which comprise it. Profits in total cannot be temporary or competed away if capitalism as we know it is to survive. Granted, the profit share of annual GDP can increase or decrease over time in its ongoing battle with labor and government for market share. But capitalism without profits is like a beating heart without blood. Not only is it profit’s role to stimulate and rationally distribute new investment (blood) to the economic body, but the profit heart in turn must be fed in order to survive.
 
And just as profits are critical to the longevity of our capitalistic real economy so too is return or “carry” critical to our financial markets. Without the assumption of “carry,” or return over and above the fixed, if mercurial, yield on an economy’s policy rate (fed funds), then investors would be unwilling to risk financial capital and a capitalistic economy would die for lack of oxygen. The carry or return I speak to is most commonly assumed to be a credit or an equity risk “premium” involving some potential amount of gain or loss to an investor’s principal. Corporate and high yield bonds, stocks, private equity and emerging market investments are financial assets that immediately come to mind. If the “carry” or potential return on these asset classes were no more than the 25 basis points offered by today’s fed funds rate, then who would take the chance? Additionally, however, “carry” on an investor’s bond portfolio can be earned by extending duration and holding longer maturities. It can be collected by selling volatility via an asset’s optionality, or it can be earned by sacrificing liquidity and earning what is known as a liquidity premium. There are numerous ways then to earn “carry,” the combination of which for an entire market of investable assets constitutes a good portion of its “beta” or return relative to the “risk free” rate, all of which may be at risk due to artificial pricing.
 
This “carry” constitutes the beating heart of our financial markets and ultimately our real economy as well, since profits on paper assets are inextricably linked to profits in the real economy, which are inextricably linked to investment and employment. Without these, the wounded heart dies and shortly thereafter the body. But there comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts. Our global financial system at the zero-bound is beginning to resemble a leukemia patient with New Age chemotherapy, desperately attempting to cure an economy that requires structural as opposed to monetary solutions. Let me shift from the metaphorical to the specific to make my case.
 
If “carry” is the oxygen that feeds financial assets then it is clear to all – even to central banks with historical models – that there is a lot less of it now than there used to be. In the bond market – interest rates, risk spreads, volatility and liquidity premiums are all significantly less than they were five years ago during the financial crisis and, in many cases, less than they have ever been in history. Before 2009, the U.S. had never had a policy rate so low, and in the U.K. short-term rates at 50 basis points are now nearly 2% lower than they have ever been, which is a long, long time. Throughout periodic depressions, the Bank of England in the 20th, 19th and even 18th century never dropped short rates below 2%. Add to that of course the New Age chemotherapy called Quantitative Easing (QE) being employed everywhere (and now in double doses at the Bank of Japan,) and you have an “all in”, “whatever it takes” mentality that has successfully lowered longer-term interest rates, risk spreads, volatility and risk premiums to similar extremes. Granted, the astute observer might counter that corporate and high yield risk “spreads” have historically been lower – and they were in 2006/2007 – but never have corporate and high yield bond “yields” been lower. Never has your average B/BB company been able to issue debt at well below 5% and never – which is my point – never have investors received less for the risk they are taking. “Never (as I tweeted recently) have investors reached so high in price for so low a return. Never have investors stooped so low for so much risk.”
 
In the process of reaching and stooping, prices on financial assets have soared and central banks have temporarily averted a debt deflation reminiscent of the Great Depression. Their near-zero-based interest rates and QEs that have lowered carry and risk premiums have stabilized real economies, but not returned them to old normal growth rates. History will likely record that these policies were necessary oxygen generators. But the misunderstood after effects of this chemotherapy may also one day find their way into economic annals or even accepted economic theory. Central banks – including today’s superquant, Kuroda, leading the Bank of Japan – seem to believe that higher and higher asset prices produced necessarily by more and more QE check writing will inevitably stimulate real economic growth via the spillover wealth effect into consumption and real investment. That theory requires challenge if only because it doesn’t seem to be working very well.
 
Why it might not be working is fairly clear at least to your author. Once yields, risk spreads, volatility or liquidity premiums get so low, there is less and less incentive to take risk. Granted, some investors may switch from fixed income assets to higher “yielding” stocks, or from domestic to global alternatives, but much of the investment universe is segmented by accounting, demographic or personal risk preferences and only marginal amounts of money appear to shift into what seem to most are slam dunk comparisons, such as Apple stock with a 3% dividend vs. Apple bonds at 1-2% yield levels. Because of historical and demographic asset market segmentation, then, the Fed and other central banks operative model is highly inefficient. Blood is being transfused into the system, but it lacks necessary oxygen.
 
In addition, there are several other important coagulants that seem to block the financial system’s arteries at zero-bound interest rates and unacceptably narrow “carry” spreads:
  1. Zero-bound yields deprive savers of their ability to generate income which in turn limits consumption and economic growth.
  2. Reduced carry via duration extension or spread actually destroys business models and real economic growth. If banks, insurance and investment management companies can no longer generate sufficient “carry” to support employment infrastructures, then personnel layoffs quickly follow. With banks, net interest margins (NIM) are lowered because of “carry” compression, and then nationwide retail branches previously serving as depository magnets are closed one by one. In the U.K. for instance, Britain’s four biggest banks will have eliminated 189,000 jobs by the end of this year compared to peak staffing levels, reports Bloomberg News. Investment banking, insurance, indeed the entire financial industry is now similarly threatened, which is leading to layoffs and the obsolescence of real estate office structures as well which housed a surfeit of employees.
  3. Zombie corporations are allowed to survive. Reminiscent of the zero-bound carry-less Japanese economy over the past few decades, low interest rates, compressed risk spreads, historically low volatility and ultra-liquidity allow marginal corporations to keep on living. Schumpeter would be shocked at this perversion of capitalism, which is allowing profits to be more than “temporary” at zombie institutions. Real growth is stunted in the process.
  4. When ROIs or carry in the real economy are too low, corporations resort to financial engineering as opposed to R&D and productive investment. This idea is far too complicated for an Investment Outlook footnote – it deserves expansion in future editions – but in the meantime, look at it this way: Apple has hundreds of billions of cash that is not being invested in future production, but returned via dividends and stock buybacks. Apple is not unique as shown in Chart 1. Western corporations seem focused more on returning capital as opposed to investing it. Low ROIs fostered by central bank policies in financial markets seem to have increasingly negative influences on investment and real growth.
     
     
  5. Credit expansion in the private economy is restricted by an expanding Fed balance sheet and the limits on Treasury “repo.” Again, too complicated for a sidebar Investment Outlook discussion, but the ability of private credit markets to deliver oxygen to the real economy is being hampered because most new Treasuries wind up in the dungeon of the Fed’s balance sheet where they cannot be expanded, lent out and rehypothecated to foster private credit growth. I have previously suggested that the Fed (and other central banks) are where bad bonds go to die. Low yielding Treasuries fit that description and once there, they expire, being no longer available for credit expansion in the private economy.

Well, there is my still incomplete thesis which when summed up would be this: Low yields, low carry, future low expected returns have increasingly negative effects on the real economy. Granted, Chairman Bernanke has frequently admitted as much but cites the hopeful conclusion that once real growth has been restored to “old normal”, then the financial markets can return to those historical levels of yields, carry, volatility and liquidity premiums that investors yearn for. Sacrifice now, he lectures investors, in order to prosper later. Well it’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%. Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution. Perhaps when yields, carry and expected returns on financial and real assets become so low, then risk-taking investors turn inward and more conservative as opposed to outward and more risk seeking. Perhaps financial markets and real economic growth are more at risk than your calm demeanor would convey.

Wounded heart you cannot save … you from yourself. More and more debt cannot cure a debt crisis unless it generates real growth. Your beating heart is now arrhythmic and pumping deoxygenated blood. Investors should look for a pacemaker to follow a less risky, lower returning, but more life sustaining path.

The Wounded Heart Speed Read

1) Financial markets require “carry” to pump oxygen to the real economy.

2) Carry is compressed – yields, spreads and volatility are near or at
historical lows.

3) The Fed’s QE plan assumes higher asset prices will revigorate growth.

4) It doesn’t seem to be working.

5) Reduce risk/carry related assets.

 

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Tue, 06/04/2013 - 06:43 | 3622881 Debtonation
Debtonation's picture

Gross says that alot, but is he actually "hedging Bernanke" or speculating on him?

Tue, 06/04/2013 - 06:57 | 3622894 francis_sawyer
francis_sawyer's picture

I must have missed something... When were his "policies" ever part of the "solution"?...

Tue, 06/04/2013 - 07:15 | 3622905 GetZeeGold
GetZeeGold's picture

 

 

Poor Ben Shalom.....from hero.....to zero.

 

Maybe we could bring back Andrea Mitchell's husband.

Tue, 06/04/2013 - 07:28 | 3622928 BigJim
BigJim's picture

 Which is why there simply is no way out as long as Bernanke stays in.

Ben does as he's told. As will his replacement.

Tue, 06/04/2013 - 07:39 | 3622961 Richard Chesler
Richard Chesler's picture

Ben is a hero, to a handful of crooks in TBTF boardrooms.

Tue, 06/04/2013 - 07:49 | 3622978 GetZeeGold
GetZeeGold's picture

 

 

They control him with their private government email accounts.

TOP OBAMA APPOINTEES USE SECRET GOV'T EMAIL ACCOUNTS

Tue, 06/04/2013 - 07:59 | 3623003 kaiserhoff
kaiserhoff's picture

So where are the  treason trials?

Let the games begin.

Tue, 06/04/2013 - 08:05 | 3623016 King_of_simpletons
King_of_simpletons's picture

Look, the guy (Bernanke) is going to pretend he doesn't hear all these rational arguments. He knows he has fucked up the economy and wants to get the fuck out as soon as possible even if it has caused irreparable damage. He doesn't want to displease the DC Mafia in anyway before his exit. He knows that the Media will turn against him if the DC Mafia is ticked off.

Tue, 06/04/2013 - 08:12 | 3623039 lakecity55
lakecity55's picture

Bennie will be OK.

He is not going to prison, and he and Corzine have a bunker stocked with hookers and blow in the South Pacific with Dish Network and a generator.

Tue, 06/04/2013 - 08:52 | 3623137 NoDebt
NoDebt's picture

Bill isn't talking to Ben Bernanke.  He's talking to Ben Bernanke's replacement at the end of this year.

Benny boy will go down in history as the world's greatest counterfeiter.  An unblemished record from start to finish of never letting the printing presses cool down.  He said a long time ago he was going to go hammer-down for as long as it took and leave the mess for the next guy to clean up.  We should take him at his word on that statement at least.

Tue, 06/04/2013 - 09:00 | 3623155 Enslavethechild...
EnslavethechildrenforBen's picture

Bernanke not the first military leader to counterfeit to pay for his war expeditions.

Tue, 06/04/2013 - 09:12 | 3623163 Manthong
Manthong's picture

Obviously, Mr. Gross does not understand..

The Fed’s Policies are working quite well.

Once you understand that the goals are to reduce the power and strength of the United Sates in order facilitate a single global currency (and ultimately global governance),  redistribute the wealth the of a (temporarily) free middle class until it no longer exists, make the uber-rich even uber-richer and create a global totalitarian state and economy that is  centrally controlled by enlightened elite and their technocrat and bureaucrat vassals, you have to admit that the Fed’s policy is solving the elite’s societal liberty and free market problem very effectively.

Tue, 06/04/2013 - 09:26 | 3623227 Big Slick
Big Slick's picture

… and thus the greatest transfer of wealth in human history.

MANTHONG IS CORRECT.  EVERYTHING IS PROCEEDING AS THE OVERLORDS HAVE FORESEEN…”

 

http://www.youtube.com/watch?v=LAf0QnLFS7Q  (only 10 seconds)

Tue, 06/04/2013 - 20:35 | 3625011 Mrmojorisin515
Mrmojorisin515's picture

Bens hands are tied.  If they had let the market sort out the debt they would have revolution on their hands.  A few years back while pondering the japenese situation, and reading older reports of their crisis it struck me that the Americans were telling them to liquidate and blah blah blah.  Then we have the same problem and we do the exact same thing, then it struck me, if japan had let the debt liquidate the government would have fallen and so much more.  The US was just making noise, prob really telling the japanese to ease to keep their best ally in the east from falling out of the fold.  The same applies to the US now, without this program of life support for many major corps and the government, they would fall.  Power would be up for grabs, and those in power never ever want that.

Tue, 06/04/2013 - 07:36 | 3622950 Stoploss
Stoploss's picture

"Throughout periodic depressions, the Bank of England in the 20th, 19th and even 18th century never dropped short rates below 2%."

 

When you allow a small biz to make this shitty little 2 %, in an adverse environment, their chance of survival increases by 50%.

 

Oh well America, you don't have small business to kick around anymore..

Tue, 06/04/2013 - 07:42 | 3622966 BeetleBailey
BeetleBailey's picture

That's Andrea Twitchell...she of the pocked marked liberal wing of the douchebag MSM....

Imagine sleeping with the prune.

The Prune and Scarface...

Tue, 06/04/2013 - 09:33 | 3623243 Big Slick
Big Slick's picture

I just threw up in my mouth a little bit

Tue, 06/04/2013 - 09:38 | 3623258 Disenchanted
Disenchanted's picture

Just be thankful they never produced any little Scarred Prunes...

Tue, 06/04/2013 - 09:24 | 3623220 caconhma
caconhma's picture

Let us be honest. The FED, ECB, and BOE policy is very simple. Their purpose is to save, protect, and strengthen the Zionist Banking Mafia who owns them regardless of everything else.

If the USA has to be thrown “under a bus” then let it be. America is not even Turkey where people are expressing themselves politically. Americans are just brainwashed parasites looking for government giveaways.

Tue, 06/04/2013 - 09:40 | 3623266 PiltdownMan
PiltdownMan's picture

Gross does both for his clients.

Don't think he likes what happened to Agency MBS the last month. 

http://confoundedinterest.wordpress.com/2013/06/03/grumpy-ben-increasing-risk-for-ginnie-mae-investors-fed-rising-rates-spreads-and-duration/

Tue, 06/04/2013 - 06:47 | 3622884 Rory_Breaker
Rory_Breaker's picture

The Bernank is not trying to solve anything. Just doing what he is paid to do while Bankstas make a killing by fleecing unwitting muppets.

Tue, 06/04/2013 - 06:47 | 3622885 GoatHerder
GoatHerder's picture

There is something the Bernank can do and thats find the tallest building he can find and jump.

Tue, 06/04/2013 - 06:52 | 3622888 i-dog
i-dog's picture

 

"Which is why there simply is no way out as long as Bernanke stays in."

Bernanke is just a place holder...a front man to be childishly villified. Does anyone on here with a functioning brain think that Larry Summers, or Janet Yellen, or whomever is next, would be doing any different? FFS!!!

Anyone who thinks he is doing other than what he is told to do by the [private] owners of the Fed is not fit to comment on here...or anywhere else.

Tue, 06/04/2013 - 07:01 | 3622901 LawsofPhysics
LawsofPhysics's picture

Correct, and so long as it takes a lot of clownbux to get elected, those same owners will own your "representation".

Tue, 06/04/2013 - 07:02 | 3622902 Global Hunter
Global Hunter's picture

i-dog agree that he is just a yes man, but the Bernank is deserved of the ridicule due to the fact that he knowlingly accepted a position as a snake oil salesman/conman in return for fame and adulation of his peers and sheeple.  Give him hell.

Tue, 06/04/2013 - 07:40 | 3622960 i-dog
i-dog's picture

 

"fame and adulation of his peers and sheeple"

That "fame and adulation" is purely because of brain-washing of the sheeple by both the mainstream media and the captive "alternative" media (like this stupid article!). Otherwise, nobody would have heard of him ... and they certainly wouldn't be laying all the blame on him, but rather on those for whom he acts.

We'll never solve "the problem" while the puppet masters keep the audience boo-ing at Punch and Judy.

It's a fucking joke ...and the joke's on us!

Tue, 06/04/2013 - 07:41 | 3622965 dark pools of soros
dark pools of soros's picture

He doesn't give a fuck about your kabuki theater...flame away

Tue, 06/04/2013 - 09:17 | 3623195 tip e. canoe
tip e. canoe's picture

pay no attention...

(someone needs to watch the wizard of oz again)

Tue, 06/04/2013 - 07:43 | 3622969 BeetleBailey
BeetleBailey's picture

+100 idog

Tue, 06/04/2013 - 06:54 | 3622891 A82EBA
A82EBA's picture

If Congress said stop printing, they'd stop printing.

Tue, 06/04/2013 - 08:59 | 3623152 NoDebt
NoDebt's picture

Fortunately, Congress will never say that since they are the primary beneficiaries of that printing.  At 0% interest, debts really don't matter because they don't cost you anything to service.  Congress and the administration are overjoyed at the current state of monetary affairs.  From their point of view, things are just fine.  Sure, they argue about the debt and deficits now and then, but it's just a dog-and-pony-show.  Neither side has any real reason or desire to take action, so they don't.

Tue, 06/04/2013 - 06:55 | 3622893 Mongo
Mongo's picture

Ben Bernanke - The Distributor of Pain

Tue, 06/04/2013 - 08:00 | 3622919 GetZeeGold
GetZeeGold's picture

 

 

He's not what you'd call a glamorous man.

 

He's the one they call Dr. Feelgood.

http://www.youtube.com/watch?v=1XHcPYorSJw

Tue, 06/04/2013 - 06:59 | 3622895 LawsofPhysics
LawsofPhysics's picture

Let me be clear, that which cannot be sustained, won't be (no matter how many clownbux you create).

I remain long black markets and sharecropping.

Tue, 06/04/2013 - 07:40 | 3622909 francis_sawyer
francis_sawyer's picture

"Clownbux"...

~~~

Ha! Ha!... That's a good one... I get it... As if to represent that in the realm of money printing... The shareholder families of the [non]Federal [non] Reserve share the commonality that they are descendent from a long lineage of 'clowns'...

Kind of makes you feel 'better' to say it that way doesn't it?... Very civic minded & all... It's all fun & games until the 'CLOWN ANTI-DEFAMATION LEAGUE' comes after your antics...

But always keep in mind... They're NOT clowns!... Instead ~ They're [insert disambiguation du jour here]...

Tue, 06/04/2013 - 09:02 | 3623162 dick cheneys ghost
dick cheneys ghost's picture

so good to see you francis_sawyer...............

 

Tue, 06/04/2013 - 09:07 | 3623171 Antifederalist
Antifederalist's picture

Excellent moniker.

Lighten up Francis. Best line ever...

Tue, 06/04/2013 - 07:00 | 3622898 robochess
robochess's picture

Hard to know who to hate more, the U.S. congress or the Fed. Fiscal Policy vs. monetary policy. The oligarchy wins no matter what. But wait, isn't this country led by lawyers? Then isn't that where the problem lies? the first thing we'll do after the Evolution is........

Tue, 06/04/2013 - 07:07 | 3622906 A82EBA
A82EBA's picture

Congress has the power to stop the Fed and alter monetary policy. They dont feel pressure cause the anger is directed at the bankers.

Tue, 06/04/2013 - 07:36 | 3622952 BigJim
BigJim's picture

And the Fed has power to stop Congress by buying their votes via commercial banks' campaign contributions.

Quite a thorny problem, no? For us, at least. 

Tue, 06/04/2013 - 08:07 | 3623025 lakecity55
lakecity55's picture

Reminds me of Biddle vs Jackson.

Tue, 06/04/2013 - 08:09 | 3623033 LawsofPhysics
LawsofPhysics's picture

"Quite a thorny problem, no? For us, at least. "  - not really, I know many who have the tools to drop a congressman or banker several hundred yards out, without them hearing/seeing a thing.

Tue, 06/04/2013 - 09:00 | 3623154 BigJim
BigJim's picture

Ah, an Alexandrian approach to this era's Ghordian Knot.

Just wake me up when someone starts actually doing it.

Tue, 06/04/2013 - 11:18 | 3623574 JimBowie1958
JimBowie1958's picture

Problem is getting the info in time to set up the 'dropping' of whomever.

Also, with the ubiquitousness of security cameras, there is a good chance that you will be videoed and not know it.

I can get 1" groups at 100 meters, and I am no sniper. there are thousands of people in this country who are in the ignorant happiness zone for now, but when the proverbial fodder hits the fan, a great number of them will be willing to go to prison if they can just take out one or two of the people they think responnsible for their impoverishment.

I dont know how many that would be, but I can promise you its a hell of a lot more than 1000.

Tue, 06/04/2013 - 07:01 | 3622900 toadold
toadold's picture

The administration has proposed a new solution for the lack of jobs. 
"It puts the lotion on its skin." 

Tue, 06/04/2013 - 09:19 | 3623203 NoDebt
NoDebt's picture

..... or else it gets the QE hose again.

Tue, 06/04/2013 - 07:07 | 3622907 pcrs
pcrs's picture

If you think that any other white house appointed puppet at the FED will do anything else than print money for the spenders to aquander, you might need to get your head checked. His purpose is to come up with excuses to give the rulers money to spend. To tax the next generation of unborn.

Tue, 06/04/2013 - 07:11 | 3622911 A82EBA
A82EBA's picture

and congress is ok with all of it

Tue, 06/04/2013 - 07:34 | 3622922 GetZeeGold
GetZeeGold's picture

 

 

Congress is pretty irrelevant at this point.....heard much talk of the debt ceiling lately?

Tue, 06/04/2013 - 08:06 | 3623024 lakecity55
lakecity55's picture

I thought Dick O had outlawed Congress last year.

I know it's in one of those hundreds of EOs he signed.

 

Tue, 06/04/2013 - 09:37 | 3623252 machineh
machineh's picture

How would anyone be able to tell?

Tue, 06/04/2013 - 09:20 | 3623204 negative rates
negative rates's picture

The sequester trumped it, and they moved on to bigger and better things.

Tue, 06/04/2013 - 09:38 | 3623260 machineh
machineh's picture

Must you refer to the interns' breasts in such crass terms? ;-)

Tue, 06/04/2013 - 09:22 | 3623211 NoDebt
NoDebt's picture

Agreed Congress is irrelevant.  The funny part is they still think they are.  All the hearings and back-biting is very entertaining, but ultimately maningless- nothing will come from it.  They're the Greatest Circus on Earth.  Or perhaps just mixing the Red ants and the Blue ants and watching them fight eachother.

Tue, 06/04/2013 - 07:09 | 3622910 GoldIsMoney
GoldIsMoney's picture

I wrote against it since Paulsson wanted the blank checkque over 750 Mrd, otherweise the world would come to an end. Well since then more than 3 Billions of new debts were added, the world still turns and stumbles around. It's the insanity to believe to solve the problems with too much debts whith even more debts. Can not work ever!

Tue, 06/04/2013 - 07:14 | 3622915 pcrs
pcrs's picture

They are not trying to solve our problems. They do things that benefit them, they are not insane, just evil people living of the plunder of the productive. And they are very good at it.

Tue, 06/04/2013 - 07:29 | 3622932 Poor Grogman
Poor Grogman's picture

Somehow each civilization in turn ends up being seized and controlled by a small group of power hungry sociopaths. Each time there is a different excuse and a different method used. This time it is money.

"give us control of everything as well as all your wealth and future labour or there will be tanks in the streets"

Will the end of this latest scheme be the last one or will some new group think up yet a new system of repression?

Tue, 06/04/2013 - 07:37 | 3622918 Monedas
Monedas's picture

I'm not saying Ben isn't a bag of shit .... exactly .... but, the problem .... of believing in socialist fantasia .... has been around along time !  The only tough love solution .... there is .... or ever was .... is the gift of Capitalism .... a gift which does keep on giving .... we have strayed so far .... and look at what we've reaped .... SOCIALISM ON CRACK .... there's plenty of blame to go around !

Tue, 06/04/2013 - 07:22 | 3622920 gatorengineer
gatorengineer's picture

Ben has done his job incredibly well..........  Break it so badly that it cant be fixed.  That was his purpose and his mission, he has an admiralable job.  The MRAPs and Ammo are in place. The german people have likewise been conditioned, tests in Cyprus have been done...  Cue the Second Act.....................

Tue, 06/04/2013 - 07:28 | 3622929 Its_the_economy...
Its_the_economy_stupid's picture

maybe it's time for the Fed to instruct it's co-dependent (JPM) to sell paper oil. After all, if it works for gold,why not oil?

Tue, 06/04/2013 - 07:33 | 3622943 verum quod lies
verum quod lies's picture

O.K. let's paraphrase and simply another insider: "blah, blah, blah ... it's all about the 'carry' blah, blah, blah ... the world ends without the 'carry' blah, blah, blah ..." In short, the solution to too much debt isn't less debt, it's the need to jack up the rate I get on my 'carry' trades; which, BTW, is what 'the king of bonds' has always been about, and not market timing. Instead of going on about 'carry' he should have just left it at: "More and more debt cannot cure a debt crisis unless it generates real growth." I suspect he will soon get his 'carry' and it will crush the economy. One more time, the solution to too much debt is not more debt, it is less debt; and it would be nice that bond prices and their associated yields actually served a pricing function as opposed to the wishes of elite a__holes who don't care about the average American.

Tue, 06/04/2013 - 08:03 | 3623015 ArkansasAngie
ArkansasAngie's picture

If you ain't going to pay me for my capital I ain't going to give it to you.

The problem is that Bernanke's "capital" is imaginary aka fiat,devaluing ones and zeros in his excel sheet in ths sky is sound and fury signafying nothing

Tue, 06/04/2013 - 08:25 | 3623066 Hannibal
Hannibal's picture

Arkansa: "The problem is that Bernanke's "capital" is imaginary aka fiat,..."

Nailed it brother!

Tue, 06/04/2013 - 07:35 | 3622948 buzzsaw99
buzzsaw99's picture

Capitalism. LMFAO!

Tue, 06/04/2013 - 07:40 | 3622962 Monedas
Monedas's picture

The joke's on you !  

Tue, 06/04/2013 - 08:21 | 3623041 buzzsaw99
buzzsaw99's picture

There is no capitalism. Fascism or socialism. The maggots get the benefit from both, the poor get one but not the other. The middle class get the knife edge of both. Capitalism is a myth and always has been.

 

Oh, and the very poor get grinding poverty at the point of a gun. Capitalism? Don't make me laugh.

Tue, 06/04/2013 - 08:51 | 3623135 Lebensphilosoph
Lebensphilosoph's picture

No, Buzzsaw - this is Capitalism with a capital C. This socialism business is in the interests of profiteering Capitalists to sate their lust for money and power. What it ISN'T is a FREE MARKET of FREE MEN. And nobody ever said Capitalism has to be. Anarchy ends in the tyranny of the powerful; Liberty needs to be defended from the powerful at the point of a gun.

Tue, 06/04/2013 - 08:59 | 3623150 buzzsaw99
buzzsaw99's picture

So the oil wars are all part of the capitalist system? The war on terra? Don't think so. It is naked fascism and always has been.

Tue, 06/04/2013 - 09:11 | 3623175 Lebensphilosoph
Lebensphilosoph's picture

Just how stupid to you have to be not to comprehend what I just wrote? Or to understand the distinction between 'Capitalism' and the free market? The warmongers have lined their pockets with the bloodshed they have instigated. There is no 'capitalist system' as opposed to some political ideology like socialism or 'Fascism'. Capitalism is a social state in which the rich and powerful make use of whatever means are perceived by the rich and powerful to be most propitious themselves. If socialism serves the interests of Capitalists, then Capitalists will be socialists. That is what you are seeing. That is the nature of maximising profits. That is the nature of dog-eats-dog. That is the nature of a society that sees life as a means to an economic end.

Tue, 06/04/2013 - 12:57 | 3623854 falak pema
falak pema's picture

now you are sounding like a marxist; it makes a change from being a rabid anglo supremacist.

Those of us who are neither attracted to statist monopoly, racist/religious or secular, nor to capitalist oligarchy + imperial exploitation of world resources; to the detriment of people and planet; have to find a balance between these two extremes.

We have not attained the potential that the Enlightenment released as social philosophy based on a holistic model of society; liberty/justice/social rights all integrated thru balanced compromise; into political practice; working institutions that attain this complex balance over time without inciting global conflicts with others outside nation state.

The two countries that epitomised this enlightenment age thru revolutionary renewal both failed : France in "absolutist nation statism" cum colonial imperial sway and the USA in this combination of Big Business Oligarchy cum Big State security mantra, now combined with colonial world imperialism built on guns, oil and monetary control. Explosive elitist minded paranoia that is ultimately self destructive as history proves time and again as it loses the people confined to ghetto living. The Brits, a middle road construct between all out capitalism à la City/ROthschild strain and restrained elitist statism à la constitutional monarchy, didn't achieve any better. 

We only learn in dire psychodrama time and again;  cathartic paroxysm. 

Man has to evolve bigtime once again as the enlightenment dies. 

 

Tue, 06/04/2013 - 07:39 | 3622958 TimmyM
TimmyM's picture

Mr. Bill talks a lot about the price of credit. But he misses the big picture of what meddling has done to the supply of credit. There is a market bassed optimal supply of credit. And there is an optimal market based financial sector size. But why would the king manager of financialization not see that?

Tue, 06/04/2013 - 07:42 | 3622968 loonyleft
loonyleft's picture

"It’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%.

It's hard to take an article seriously when it presupposes 'growth' of 2.5% when that 'growth' is achieved by borrowing a trillion dollars, or about 6% of GDP.

CARRY = LEECH and Gross is just complaining that he can't leech as much as he is used to or wants to. 

He doesn't want a real solution, just one that works better....for him.

Tue, 06/04/2013 - 08:12 | 3623037 LawsofPhysics
LawsofPhysics's picture

enough with the "growth" meme.  You need expendible energy to do anything, more importantantly the energy available also needs to grow.  Sorry, this finite world does not work like that.  This is about maintaining power and control over resources, period.

Tue, 06/04/2013 - 08:19 | 3623052 buzzsaw99
buzzsaw99's picture

Gross is just complaining that he can't leech as much as he is used to or wants to.

 

You got that right!

Tue, 06/04/2013 - 07:47 | 3622976 Monedas
Monedas's picture

About 15% of the world's population .... are an idle, evil cancer of socialist bureaucrats .... bone marrow cancer .... sucking life at it's source .... well protected in it's bone pleasure dome !

Tue, 06/04/2013 - 07:49 | 3622979 ArkansasAngie
ArkansasAngie's picture

Sometimes ... believe it or not ... you don't need more stuff.

Supply exceeding demand happens.

 

Tue, 06/04/2013 - 08:14 | 3623042 LawsofPhysics
LawsofPhysics's picture

Applies to labor as well.  I see 7+ billion people all competing for a better quality of life.  How competitive are you?  Are you willing to sleep on the factory floor?  You're hired!

Tue, 06/04/2013 - 08:02 | 3623009 Monedas
Monedas's picture

"Profit is temporary ?" .... so is applause in a theatre .... so what .... is it any less real ?

Tue, 06/04/2013 - 08:06 | 3623023 ArkansasAngie
ArkansasAngie's picture

evolution

the only thing constant is change

dead ends exist

Tue, 06/04/2013 - 08:15 | 3623045 LawsofPhysics
LawsofPhysics's picture

You really shouldn't talk about the boomers like that.

Tue, 06/04/2013 - 08:05 | 3623019 Monedas
Monedas's picture

Profit isn't a dirty word .... poverty is !

Tue, 06/04/2013 - 08:14 | 3623043 Dr. Engali
Dr. Engali's picture

Bill I've searched high and low , but I can't find this "capitalism" that you speak of. I see plenty of fascism, but no capitalism.

Tue, 06/04/2013 - 08:17 | 3623047 BeetleBailey
BeetleBailey's picture

Sure Bill. Keep jaw-jacking. That'll help.

Tue, 06/04/2013 - 08:18 | 3623050 overmedicatedun...
overmedicatedundersexed's picture

The "federal reserve note" what a great idea, value from nothing, debt for free. jews like it , we are all jewish now.

Tue, 06/04/2013 - 08:21 | 3623058 Hannibal
Hannibal's picture

I am long veggie garden, ammo, gold and silver. Keep stacking.

Tue, 06/04/2013 - 08:26 | 3623071 bugs_
bugs_'s picture

Clearly this mean Ben has purchased Bill's last toxic asset.

Tue, 06/04/2013 - 08:33 | 3623090 lizzy36
lizzy36's picture

Exactly.

Gross did a fricking QE rain dance in Febuary of 2009.....by June of 2009 he gave his first and second born to Bernanke in thanks.

Now he gets religion over Bernankes policies. Color me highly skeptical.

Tue, 06/04/2013 - 08:33 | 3623088 blindman
blindman's picture

Dave Mason / Shouldn't Have Took More Than You Gave
http://www.youtube.com/watch?v=Xj2h0LSTY3U
.
Jeanette MacDonald - Ah, Sweet Mystery of Life (1950)
http://www.youtube.com/watch?v=ACuo2jxezIQ
.
Steve Winwood // Traffic - John Barleycorn (Must Die)
http://www.youtube.com/watch?v=t8878chOvfI
.
Watch "John Barleycorn (Must Die)" video
http://www.lyricsmania.com/john_barleycorn_must_die_lyrics_traffic.html
Lyrics to John Barleycorn (Must Die) :

There were three men came out of the west, their fortunes for to try
And these three men made a solemn oath
John Barleycorn must die
They've plowed, they've sown, they've harrowed him in
Threw clods upon his head
And these three men made a solemn oath
John Barleycorn was dead

They've let him lie for a very long time, 'til the rains from heaven did fall
And little Sir John sprung up his head and so amazed them all
They've let him stand 'til Midsummer's Day 'til he looked both pale and wan
And these three men made a solemn oath on poor John Barleycorn

They've hired men with their scythes so sharp to cut him off at the knee
They've rolled him and tied him by the waist, serving him most barbarously
They've hired men with their sharp pitchforks who've pricked him to the heart
And the loader he has served him worse than that
For he's bound him to the cart

They've wheeled him around and around a field 'til they came onto a barn
And there they made a solemn oath on poor John Barleycorn
They've hired men with their crabtree sticks to cut him skin from bone
And the miller he has served him worse than that
For he's ground him between two stones

And little Sir John and the nut brown bowl and his brandy in the glass
And little Sir John and the nut brown bowl proved the strongest man at last
The huntsman he can't hunt the fox nor so loudly to blow his horn
And the tinker he can't mend kettle nor pots, without a little barleycorn

Tue, 06/04/2013 - 13:07 | 3623894 SilverSavant
SilverSavant's picture

This song by this band is one of the very very best.  Six sigma at least. Thank you for sharing it. 

Tue, 06/04/2013 - 17:10 | 3624540 blindman
blindman's picture

it fulfills the potential of the art form,
brilliant and genius, I agree.
I search for these and post them when I find
them or remember them.
to say so much and on so many levels with
so little ....the creator
must be in the presence of the truth.
speakin' of sigma ..
Townes van Zandt - 04 No Place To Fall (A Private Concert)
http://www.youtube.com/watch?v=gywZfJ5BtHo
.
and here the lady in red gets it by the monkeys in black / authorities.
Meet lady in red who started ?stanbul protests

A decent-looking and brave Turkish woman in red. And a police officer spraying pepper directly on her face. This is how it all started.
http://www.todayszaman.com/columnistDetail_getNewsById.action?newsId=317117

Tue, 06/04/2013 - 08:36 | 3623101 Peter Pan
Peter Pan's picture

Success has for far too long been measured by what happens to those at the top end. It's about time success of economic policies was measured by how the bottom 10% have fared.

We now know that 90% of income gains have been flowing through to the top 10%, therefore general measures of increases in GDP are totally misleading and dangerous as GDP movements largely reflect the wealth accretions of those well up the food chain.

Tue, 06/04/2013 - 08:38 | 3623107 insanelysane
insanelysane's picture

It is too late for the Fed as the market and society are now conditioned that the markets only go up.  Any significant drop that isn't firewalled by Ctrl-P will truly cause panic and the whole thing goes to zero.  The Fed will continue until Ctrl-P infinity is unable to provide "confidence" and it all goes to zero.

Tue, 06/04/2013 - 08:47 | 3623121 overmedicatedun...
overmedicatedundersexed's picture

ain't worth the paper it's printed on, when that hits the people like a two x four, your wealth is gone. so believe believe in paper, in nothing. with eyes wide shut we march to the bankers flute ..

Tue, 06/04/2013 - 08:42 | 3623115 yogibear
yogibear's picture

LOL, Bubble Bernanke, Evans, Dudley and Yellen are trapped printing until the US dollar crashes. 

They will buy up everything in an effort to save their financialzation scheme. 

Inflation ramping will be covered up by cooked CPI numbers. 

Then it's on to SDRs 

 

Tue, 06/04/2013 - 08:44 | 3623117 MFLTucson
MFLTucson's picture

Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution."

 

Why are we reading this now, maybe because Gross lost 2.9% in his flagship fund last quarter?  Of course that is the reason.

Tue, 06/04/2013 - 13:37 | 3624018 SilverSavant
SilverSavant's picture

If Bill ran for the exits, it would be all over.   This man could use a little sympathy.   He stands right in the middle, right next to the bomb.  That he will even speak of it, is amazing to me.   I can see no profit for him, even though or mostly because, he is Mr. Bond, shaken and stirred in this time of chaos.  This ends so badly that it already hurts.  Here is a little sympathy for all of us.  Seeing how the new growth will be good in the long run, is no comfort in the short run while the old growth dies

Tue, 06/04/2013 - 09:06 | 3623170 falak pema
falak pema's picture

when Ben slinks away from the FED helicopter of Qe he created, the Pax Americana reverses gear to go to higher interest rates; as does every other CB institution; and then the WS stock bubble comes crumbling down. We don't know how far as the contagion is unknown but should be around 30% lower; at least. Free fall without Qe will be that or its meaningless. It could be much worse.

Watch out then for peripheral fall out in higher resonance on the risky edges of world economy. As in the upcoming recession oil prices will unwind leaving a lot of oil rich countries stuck naked as the tide turns and their overinvested butts burn in the noon-day sun.

Mad dogs and englishmen wading in the illusory wages of sin gone fizzy frazzled in sterile shrinkage. A baloon that goes pssssst. 

Along with the Japs and all those other oligarchy chaps who ride the winds of labour arbitrage export model. A day of reckoning a beckoning.

Recession, attrition and WS blues...you can the spell the future according to your gut feeling, to decide where this financialised world then heads....

Tue, 06/04/2013 - 09:11 | 3623181 bvrulez
bvrulez's picture

invest in startups and u will get your "carry". or leave your money out of the real economy and in your financial world.

Tue, 06/04/2013 - 09:16 | 3623191 mess nonster
mess nonster's picture

We won't kick the smack. We will OD and die.

Tue, 06/04/2013 - 10:10 | 3623347 AynRandFan
AynRandFan's picture

Sums it up.  lol

Tue, 06/04/2013 - 09:16 | 3623193 orangegeek
orangegeek's picture

Dow up 10.  NASDAQ up 8.

 

Another fucked up day.

 

Ready?  Go!!!!

Tue, 06/04/2013 - 09:22 | 3623207 khakuda
khakuda's picture

And here we get to the heart of the problem.  Having a couple percent inflation is NOT what is important like Bernanke professes, at least from a real economy point of view.  What is important for the real economy is having a couple percent nominal interest rate which makes people feel like their savings have value, makes bond holders feel like they are earning something spendable and makes them more willing to invest some funds in equities and business startups if they feel they have some safety money that earns something.

But, I think Bernanke knows this.  Rates are at zero to prevent asset prices from deflating to save the levered fractional reserve financial system even though zero rates and QE actually have a negative cost to the real economy.

Tue, 06/04/2013 - 09:32 | 3623242 semperfi
semperfi's picture

"Which is why there simply is no way out as long as Bernanke stays in."

Fixed it:    Which is why there simply is no way out.

Tue, 06/04/2013 - 09:38 | 3623245 dolph9
dolph9's picture

It's not about saving the economy, it's about saving bankers.

Not that hard to understand, people.

Everybody goes around saying "Bernanke this, Bernanke that, Bernanke is destroying the economy, Bernanke is helping the economy, blah blah blah"

Bernanke's only role is to save the big banking institutions.  He is a banker!

Do not look for any central bank to ever, ever do anything other than save the big banks.  That's what they are designed to do.

Tue, 06/04/2013 - 09:38 | 3623257 proLiberty
proLiberty's picture

I see Gross on CNBC and he is such a conflicted Keynesian. Money-printing and credit expansion are fine with him, except when the consequences are too dire. So debasing the currency is fine as long as it is not too debased? Thus Keynesian Economics is shown to be morally corrupt for it is based on the fraud and theft that when government has the power to "regulate" the currency, that justifies the power to destroy the value of money in private hands. Even Gross gets a tinge of doubt, even if he is the "bond king".

Tue, 06/04/2013 - 09:44 | 3623272 semperfi
semperfi's picture

Gross is an idiot.

Tue, 06/04/2013 - 09:50 | 3623285 Toolshed
Toolshed's picture

"Gross is a self serving idiot."

Fixed it for you.

Tue, 06/04/2013 - 09:49 | 3623282 Toolshed
Toolshed's picture

Interesting article. I see one major flaw however. The author appears to be taking the position that Benny is attempting to save the US economy. Pretty funny actually. Benny is obviously primarily concerned with enabling the US government to continue borrowing money to fund itself. Hence the ZIRP policy. If rates rise the US goes bust. Therefore, Benny will do whatever he can to keep rates as low as possible.

Benny says: " Fuck the savers and the grandmothers they rode in on!"

Tue, 06/04/2013 - 10:08 | 3623338 AynRandFan
AynRandFan's picture

Quite ironic that the real economy, the one that produces things, is unwilling to take the risk bait by betting on expansion.  It is only the financial speculators who are chasing risk investments.  What we have is a two-track economy, where paper assets appreciate while goods and services languish.

Tue, 06/04/2013 - 10:17 | 3623377 alfbell
alfbell's picture

 

 

My understanding is that the government has usurped The Fed and have been using it for their own agenda for a very long time. The primary dealers and big banks are protected by the government and in turn they buy the bonds that keep the whole circular flow going.

Martin Armstrong wrote that the original Fed was only supposed to buy corporate bonds in times of severe economic downturns so that they could make payroll, keep unemployment down and allow US companies to get back on their feet again. They were never supposed to buy government bonds or anything else. Interesting.

Tue, 06/04/2013 - 12:17 | 3623723 Thisson
Thisson's picture

It is unlawful for the Federal Reserve to purchase bonds that are not backed by the full faith and credit of the U.S. Government, pursuant to sections 14(b) and 13(2) of the Federal Reserve Act.

Tue, 06/04/2013 - 10:19 | 3623386 max bucket
max bucket's picture

Dr Bernanke and his Frankenmarket

Tue, 06/04/2013 - 11:06 | 3623485 joego1
joego1's picture

Put enough monkeys in front of a printing press and eventually they print more.

Tue, 06/04/2013 - 12:29 | 3623767 MeelionDollerBogus
MeelionDollerBogus's picture

oh  boo hoo.

btfd Bill.

it's FOMO-sexual

Tue, 06/04/2013 - 12:43 | 3623809 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

They keep using that word, Capitalism, as if it actually describes the U.S. economic system.  In the end, I suppose that's why the left seems to care only about the narrative of things rather than reality.  They've successfully redefined capitalism to describe the essentially facist economic structure we have. 

Tue, 06/04/2013 - 21:33 | 3625148 Ned Zeppelin
Ned Zeppelin's picture

Ben's policies?

Ben is a tool.

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