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Is The Fed Losing Faith... In Itself?

Tyler Durden's picture





 

The cracks in the Fed's narcissism started to show at Jackson Hole, where Bernanke's speech did nothing for the market; and as the FT points out, the biggest worry on display was whether these bureaucrats, sitting at the heart of every mature economy, still have the power to influence demand. Lurking behind many debates was this question: if central bank policies are so omnipotent effective, why is the global economy not growing faster? Everyone's favorite honest-dwarf Fed Governor, James Bullard, summarized perfectly:

"I am a little – maybe more than a little bit – worried about the future of central banking. We've constantly felt that there would be light at the end of the tunnel and there'd be an opportunity to normalize but it’s not really happening so far."

 

"What I’m worried about is this creeping politicization."

With monetary financing of governments on the increase (unconditionally by the Fed and conditionally by the ECB), it is clear that more radical options are increasingly mainstream as the textbook is not providing the answers.

 

Via The FT: Not So Different This Time

...

 

There are a few possible reasons why repeated rounds of central bank communication and quantitative easing, as the policy of buying long-dated assets in an effort to drive down long-term interest rates is known, have not brought about a strong recovery.

 

One is that something structural has changed to hold back growth. Speaking from the floor in Wyoming, Donald Kohn, another former Fed vice-chair now at the Brookings Institution, raised the possibility of “something deeper going on”, perhaps related to savings behaviour or the changed distribution of income between labour and capital.

 

Another is that the tools work, even if current conditions blunt their effect. If there are new headwinds, then the answer is to use them more aggressively. That is the mainstream view among central bankers.

 

“A balanced reading of the evidence supports the conclusion that central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks,” said Ben Bernanke, the Fed chairman, in his remarks at Jackson Hole.

 

A third possibility is perhaps the most alarming for central bankers such as Mr Bernanke, who have staked their reputations on successive rounds of quantitative easing: that it simply does not work.

 

In his presentation at Jackson Hole, Columbia University professor Michael Woodford presented evidence that, to the extent asset purchases have lowered long-term interest rates in the US, their effect was indirect. People saw the purchases as a signal that short-term interest rates will stay lower for longer, he argued.

 

That paper gave the assembled central bankers some food for thought, but will have little bearing on their immediate policy choices.

Woodford's paper (page 83-86 of most note):

mw

 

If the Fed itself is admitting it is becoming irrelevant and obsolete, then perhaps regimes are changing.

 


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Sun, 09/09/2012 - 22:12 | Link to Comment vast-dom
vast-dom's picture

"If the Fed itself is admitting it is becoming irrelevant and obsolete, then perhaps regimes are changing." WTF? The Fed admits exactly what as QE is raging on (as both constant FLOW and Sheeple Ponzi St grand annoucements) and NIRP is full steam ahead and yield curves are fucked every which way????

Sun, 09/09/2012 - 22:23 | Link to Comment ghengis86
ghengis86's picture

Can the Fed create more debt that even it can't monetize?

Mon, 09/10/2012 - 02:40 | Link to Comment Popo
Popo's picture

The Fed can create infinite amounts of debt.

The issue is that the Fed cannot create consumer demand because demand is a function of both wealth and asset prices, and at 0% rates the Fed is actively destroying wealth -- while driving raw materials, assets, food and energy higher. The Fed itself is killing demand over the long term.

The simplest analysis is this: The Fed is creating margin-compression. (ie: Higher input costs & lower spending power).

0% rates and new debt issuance simply drive the input costs (raw materials) higher, and do nothing for spending power. This is a terminal curve and will mathematically *always* ultimately result in collapse because input costs hit the "ceiling" of consumer capacity. At which point nobody can consume and nobody does -- and output capacity starts to get destroyed.

The only thing the Fed could do to stimulate demand would be to stimulate spending at the grass-roots consumer level through *actual* printing. (ie: The "helicopter" strategy). But this "answer" would simply be the beginning of the terminal blow off, as asset prices soar and currency values collapse. It also exacerbates the problem of the overhang in productive capacity.

Oil prices would ultimately bring that party to an end relatively quickly.

Will they go there? Maybe. But not casually. Bernanke is a religious zealot when it comes to his theories, but he's not a jackass. He knows how to read a chart and he knows where his magical liquidity river flows. The Fed is caught between it's current policy of wealth-destruction/margin-compression and the temptation to stimulate spending through more direct (and economically fatal) measures.

One thing is for certain: The next move is a big one, whatever they decide. And they know it. And for that reason they *won't* move until there is a dramatic market event that allows them to make excuses.

The biggest wrinkle in this entire mess is Iran. One false move and oil prices shoot the moon. If anyone thinks Bernanke's hands are tied now -- just imagine oil at 200% it's current PPB.

Then the Fed is well and truly fucked.

Mon, 09/10/2012 - 02:53 | Link to Comment prains
prains's picture

The(n) the fed is well and truly fucked

all is needed is drop the N and that sir is spot fucking on

other than the whole system is run by a bunch of cock sucking donkey fucking weasely shit heads who collectively 

could never get laid on their god given abilities so have resorted to cash hoarding for vag. this was their end game

and we will ALL have to pay dearly for it. 

Mon, 09/10/2012 - 06:08 | Link to Comment AldousHuxley
AldousHuxley's picture

END OF THE FUTURE by Peter Thiel

 

Modern Western civilization stands on the twin plinths of science and technology. Taken together, these two interrelated domains reassure us that the 19th-century story of never-ending progress remains intact. Without them, the arguments that we are undergoing cultural decay—ranging from the collapse of art and literature after 1945 to the soft totalitarianism of political correctness in media and academia to the sordid worlds of reality television and popular enter tain ment—would gather far more force.

Liberals often assert that science and technology remain essentially healthy; conservatives sometimes counter that these are false utopias; but the two sides of the culture wars silently agree that the accelerating development and application of the natural sciences continues apace. Yet during the Great Recession, which began in 2008 and has no end in sight, these great expectations have been supplemented by a desperate necessity.

  1. We need high-paying jobs
    to avoid thinking about how to compete with China and India for low-paying jobs.
  2. We need rapid growth to meet the wishful expectations of our retirement plans and our runaway welfare states.
  3. We need science and technology to dig us out of
    our deep economic and financial hole, even though most of us cannot separate science from superstition or technology from magic.

In our hearts and minds, we know that desperate optimism will not save us. Progress is neither automatic nor
mechanistic; it is rare. Indeed, the unique history of the West proves the exception to the rule that most human beings through the millennia have existed in a naturally brutal, unchanging, and impoverished state. But there is no law that the exceptional rise of the West must continue. So we could do worse than to inquire into the widely held opinion that America is on the wrong track (and has been for some time), to wonder whether Progress is not doing as well as advertised, and perhaps to take exceptional measures to arrest and reverse any decline.

The state of true science is the key to knowing whether something is truly rotten in the United States. But any such assessment encounters an immediate and almost insuperable challenge. Who can speak about the true health of the everexpanding universe of human knowledge, given how complex, esoteric, and specialized the many scientific and technological fields have become? When any given field takes half a lifetime of study to master, who can compare and contrast and properly weight the rate of progress in nanotechnology and cryptography and superstring theory and 610 other disciplines? Indeed, how do we even know whether the so-called scientists are not just lawmakers and politicians in disguise, as some
conservatives suspect in fields as disparate as climate change, evolutionary biology, and embryonic-stem-cell research, and as I have come to suspect in almost all fields? For now, let us acknowledge this measurement problem—I will return to it later—but not let it stop our inquiry into modernity before it
has even begun.

ii.

When tracked against the admittedly lofty hopes of the 1950s
and 1960s, technological progress has fallen short in many
domains. Consider the most literal instance of non-acceleration:
We are no longer moving faster. The centuries-long acceleration of travel speeds—from ever-faster sailing ships in the 16th
through 18th centuries, to the advent of ever-faster railroads in
the 19th century, and ever-faster cars and airplanes in the 20th
century—reversed with the decommissioning of the Concorde
in 2003, to say nothing of the nightmarish delays caused by
strikingly low-tech post-9/11 airport-security systems. Today’s
advocates of space jets, lunar vacations, and the manned
exploration of the solar system appear to hail from another
planet. A faded 1964 Pop­u­lar­Science cover story—“Who’ll
Fly You at 2,000 m.p.h.?”—barely recalls the dreams of a
bygone age.


The official explanation for the slowdown in travel centers
on the high cost of fuel, which points to the much larger failure in energy innovation. Real oil prices today exceed those of
the Carter catastrophe of 1979–80. Nixon’s 1974 call for full
energy independence by 1980 has given way to Obama’s 2011
call for one-third oil independence by 2020. Even before
Fukushima, the nuclear industry and its 1954 promise of “elec
trical energy too cheap to meter” had long since been defeated
by environmentalism and nuclear-proliferation concerns. One
cannot in good conscience encourage an undergraduate in
2011 to study nuclear engineering as a career. “Clean tech” has
become a euphemism for “energy too expensive to afford,” and
in Silicon Valley it has also become an increasingly toxic term
for near-certain ways to lose money. Without dramatic breakthroughs, the alternative to more-expensive oil may turn out to
be not cleaner and much-more-expensive wind, algae, or solar,
but rather less-expensive and dirtier coal.


Warren Buffett massively capitalized on both of these trends
with his $44 billion investment, most made in late 2009, in
BNSF Railway—making it the largest non-financial company
in the Berkshire Hathaway portfolio. Under stand ably, the
Oracle of Omaha proclaimed “an all-in wager on the economic future of the United States” and downplayed any doubts he
might have harbored. For present purposes, it suffices to note
that 40 percent of railroad freight involves the transport of
coal, and that railroads will do especially well if the travel and
energy consumption patterns of the 21st century involve a
regression to the past.


In the past decade, the unresolved energy challenges of the
1970s have broadened into a more general commodity shock,
which has been greater in magnitude than the price spikes of
the two world wars and has undone the price improvements of
the previous century. In the case of agriculture, at least, technological famine may lead to real old-fashioned famine. The
fading of the true Green Revolution—which increased grain
yields by 126 percent from 1950 to 1980, but has improved
them by only 47 percent in the years since, barely keeping pace
with global population growth—has encouraged another, more
highly publicized “green revolution” of a more political and
less certain character. We may embellish the 2011 Arab Spring
as the hopeful by-product of the information age, but we
should not downplay the primary role of runaway food prices
and of the many desperate people who became more hungry
than scared.
While innovation in medicine and biotechnology has not
stalled completely, here too signs of slowed progress and
reduced expectations abound. In 1970, Congress promised victory over cancer in six years’ time; four decades later, we may
be 41 years closer, but victory remains elusive and appears
much farther away. Today’s politicians would find it much
harder to persuade a more skeptical public to start a comparably serious war on Alzheimer’s disease—even though nearly
a third of America’s 85-year-olds suffer from some form of
dementia. The cruder measure of U.S. life expectancy continues to rise, but with some deceleration, from 67.1 years for
men in 1970 to 71.8 years in 1990 to 75.6 years in 2010.
Looking forward, we see far fewer blockbuster drugs in the
pipeline—perhaps because of the intransigence of the FDA,
perhaps because of the fecklessness of today’s biological scientists, and perhaps because of the incredible complexity of
human biology. In the next three years, the large pharmaceu -
tical companies will lose approximately one-third of their current revenue stream as patents expire, so, in a perverse yet
understandable response, they have begun the wholesale liquidation of the research departments that have borne so little fruit
in the last decade and a half.

iii.
By default, computers have become the single great hope for
the technological future. The speedup in information technology contrasts dramatically with the slowdown everywhere
else. Moore’s Law, which predicted a doubling of the number
of transistors that can be packed onto a computer chip every 18
to 24 months, has remained broadly true for much longer than
anyone (including Moore) would have imagined back in 1965.
We have moved without rest from mainframes to home computers to the Internet. Cellphones in 2011 contain more computing power than the entire Apollo space program in 1969.
From the perspective of Palo Alto, a return to the party year
of 1999 appears almost within reach. All that glitters seems to
be golden. Thousands of new Internet startups launch each
year, and valuations of Web 2.0 businesses have surged; and
not entirely without reason, as maybe two to six per year of
these newly minted ventures will break into the billion-dollarplus valuation zone within five years of their founding. In tandem with this new life for the new economy, Google has led a
parallel move towards a near-doubling of wages for the most
talented computer engineers, all in just the last three years.
Beyond the dollars, one must look no farther than The Social
Network to see the ways in which Face book and its 750 million
users have captured the new zeitgeist.
The economic decoupling of computers from everything
else leads to more questions than answers, and barely hints at
the strange future where today’s trends simply continue.
Would supercomputers become powerful engines for the mi ra -
c u lous creation of wholly new forms of economic value, or
would they simply become powerful weapons for reshuffling
existing structures—for Nature, red in tooth and claw? More
simply, how does one measure the difference between prog ress
and mere change? How much is there of each?

iv.
Let us now try to tackle this very thorny measurement problem
from a very different angle. If meaningful scientific and technological progress occurs, then we reasonably would expect
greater economic prosperity (though this may be offset by
other factors). And also in reverse: If economic gains, as measured by certain key indicators, have been limited or non -
existent, then perhaps so has scientific and technological
progress. Therefore, to the extent that economic growth is
ea si er to quantify than scientific or technological progress,
economic numbers will contain indirect but important clues to
our larger investigation.


The single most important economic development in recent
times has been the broad stagnation of real wages and incomes
since 1973, the year when oil prices quadrupled. To a first
approximation, the progress in computers and the failure in
energy appear to have roughly canceled each other out. Like
Alice in the Red Queen’s race, we (and our computers) have
been forced to run faster and faster to stay in the same place.
Taken at face value, the economic numbers suggest that the
notion of breathtaking and across-the-board progress is far
from the mark. If one believes the economic data, then one
must reject the optimism of the scientific establishment. In -
deed, if one shares the widely held view that the U.S. government may have understated the true rate of inflation—perhaps
by ignoring the runaway inflation in government itself, notably
in education and health care (where much higher spending has
yielded no improvement in the former and only modest im -
provement in the latter)—then one may be inclined to take
gold prices seriously and conclude that real incomes have
fared even worse than the official data indicate.

This dismal and straightforward conclusion tends to be
obscured by a range of secondary issues, which are important
but do not really change the larger point about trends since
1973:
? Mean incomes outperformed median incomes (inflationadjusted in both cases), and there was a trend towards greater
inequality. Median incomes rose by only 10 percent. Mean
incomes rose by 29 percent, which works out to a glacial pace
of only about 0.7 percent per year—much slower than in the
preceding four decades.
? Non-wage benefits, mostly health care, increased by about
$2,600 per worker, for an additional 0.2 percent per year since
1973. So if the U.S. government has underestimated inflation
by only 0.9 percentage points per year, then mean wages and
benefits have been completely stagnant.
? Corporate profits increased from 9 percent to 12 percent of
GDP—again, a significant but easily exaggerated shift.
? Women were hired in the 1980s and men were fired in the
2000s.
? College graduates did better, and high-school graduates
did worse. But both became worse off in the years after 2000,
especially when one includes the rapidly escalating costs of
college.
? The era of globalization improved living standards by
making labor and goods cheaper, but also hurt living standards
through increased competition for limited resources. Freetrade advocates tend to think that the first effect dominates the
second.

? Economic progress may lag behind scientific and technological achievement, but 38 years seems like an awfully long
time.


The economic future looked very different in the 1960s. In
his 1967 bestseller  The American Challenge, Jean-Jacques
Servan-Schreiber argued that accelerating technological prog -
ress would widen the gap between the United States and the
rest of the world, and that by 2000, “the post-industrial societies will be, in this order: the United States, Japan, Can a da,
Sweden. That is all.” According to Servan-Schreiber, the difference between the United States and the rest of Europe
would grow from a difference of degree into a difference of
kind, comparable to the difference between Europe and Egypt
or Nigeria. As a result of this steady divergence, Americans
would face less pressure to compete:
In 30 years America will be a post-industrial society. . . . There
will be only four work days a week of seven hours per day. The
year will be comprised of 39 work weeks and 13 weeks of
vacation. With weekends and holidays this makes 147 work
days a year and 218 free days a year. All this within a single
generation.
We need to resist the temptation to dismiss ServanSchreiber’s space-age optimism so that we can better under stand how the consensus he represented could have been so
terribly wrong—and how, instead, for many Americans, the
Fourth Commandment (“Remember the Sabbath day, and keep
it holy”) has been effectively forgotten.


V.
Like technology, credit also makes claims on the future. “I will
gladly pay you a dollar on Tuesday for a hamburger to day”
works only if a dollar gets earned by Tuesday. A credit crisis
happens when earnings disappoint and the present does not
live up to past expectations of the future.
The current crisis of housing and financial leverage contains
many hidden links to broader questions concerning long-term
progress in science and technology. On one hand, the lack of
easy progress makes leverage more dangerous, because when
something goes wrong, macroeconomic growth cannot offer a
salve; time will not cure liquidity or solvency problems in a
world where little grows or improves with time. On the other
hand, the lack of easy progress also makes leverage far more
tempting, as unleveraged real returns fall below the expectations of pension funds and other investors.
This analysis suggests an explanation for the strange way
the technology bubble of the 1990s gave rise to the real-estate
bubble of the 2000s. After betting heavily on technology
growth that did not materialize, investors tried to achieve the
needed double-digit returns through massive leverage in
seemingly safe real-estate investments. This did not work
either, because a major reason for the bubble in real estate
turned out to be the same as the reason for the bubble in technology: a mistaken but nearly universal background assumption about easy progress.

Without fundamental gains in
productivity (presumably driven by technology), real-estate
values could not go up forever. Leverage is not a substitute for
scientific progress.

 
VI.
The technology slowdown threatens not just our financial markets, but the entire modern political order, which is predicated
on easy and relentless growth. The give-and-take of Western
democracies depends on the idea that we can craft political
solutions that enable most people to win most of the time. But
in a world without growth, we can expect a loser for every winner. Many will suspect that the winners are involved in some
sort of racket, so we can expect an increasingly nasty edge to
our politics. We may be witnessing the beginnings of such a
zero-sum system in politics in the U.S. and Western Europe, as
the risks shift from winning less to losing more, and as our
leaders desperately cast about for macroeconomic solutions to
problems that have not been primarily about economics for a
long time.


The most common name for a misplaced emphasis on
macroeconomic policy is “Keynesianism.” Despite his brilliance, John Maynard Keynes was always a bit of a fraud, and
there is always a bit of clever trickery in massive fiscal stimulus and the related printing of paper money. But we must
acknowledge that this fraud strangely seemed to work for
many decades. (The great scientific and technological tailwind
of the 20th century powered many economically delusional
ideas.) Even during the Great Depression of the 1930s, innovation expanded new and emerging fields as divergent as
radio, movies, aeronautics, household appliances, polymer
chemistry, and secondary oil recovery. In spite of their many
mistakes, the New Dealers pushed technological innovation
very hard.
The New Deal deficits, however misguided, were easily
repaid by the growth of subsequent decades. During the Great
Recession of the 2010s, by contrast, our policy leaders narrowly debate fiscal and monetary questions with much great er
erudition, but have adopted a cargo-cult mentality with respect
to the question of future innovation. As the years pass and the
cargo fails to arrive, we eventually may doubt whe ther it will
ever return. The age of monetary bubbles naturally ends in real
austerity.
On the political right, we are seeing a quiet shift from the
optimism of Jack Kemp to the pessimism of Ron Paul, from
supply-side economics to the Tea Party, and from the idea that
we can combine tax cuts with more spending to the idea that
money is either hard or fake. A mischievous person might even
ask whether “supply-side economics” really was just a sort
of code word for “Keynesianism.” For now it suffices to
acknowledge that lower marginal tax rates might not happen
and would not substitute for the much-needed construction of
hundreds of new nuclear reactors.


VII.
We have seen that even the simple question of whether a technology slowdown has occurred is far from straightforward.
The critical question of why such a slowdown seems to have
occurred is harder still, and we do not have the space to tackle
it fully here. Let us end with the related question of what can
now be done. Most narrowly, can our government restart the
stalled innovation engine?
The state can successfully push science; there is no sense
denying it. The Manhattan Project and the Apollo program
remind us of this possibility.

>>>>>> Free markets may not fund as much basic research as needed. <<<<<<

On the day after Hiroshima,
the New York Times could with some reason pontificate about
the superiority of centralized planning in matters scientific:
“End result: An invention [the nuclear bomb] was given to the
world in three years which it would have taken perhaps half a
century to develop if we had to rely on prima donna research
scientists who work alone.”
But in practice, we all sense that such gloating belongs to a
very different time. Most of our political leaders are not engineers or scientists and do not listen to engineers or scientists.


Today a letter from Einstein would get lost in the White House
mail room, and the Manhattan Project would not even get started; it certainly could never be completed in three years. I am
not aware of a single political leader in the U.S., either
Democrat or Republican, who would cut health-care spending
in order to free up money for biotechnology research—or,
more generally, who would make serious cuts to the welfare
state in order to free up serious money for major engineering
projects.

Robert Moses, the great builder of new York City in
the 1950s and 1960s, or Oscar niemeyer, the great architect of
Brasilia, belong to a past when people still had concrete ideas
about the future. Voters today prefer Vic tor i an houses. Science
fiction has collapsed as a literary genre. Men reached the moon
in July 1969, and Woodstock be gan three weeks later. With the
benefit of hindsight, we can see that this was when the hippies
took over the country, and when the true cultural war over
Progress was lost.
Today’s aged hippies no longer understand that there is a
difference between the election of a black president and the
creation of cheap solar energy; in their minds, the movement
towards greater civil rights parallels general progress everywhere. Because of these ideological conflations and commitments, the 1960s Progressive Left cannot ask whether things
actually might be getting worse. I wonder whether the endless fake cultural wars around identity politics are the main
reason we have been able to ignore the tech slowdown for so
long.
However that may be, after 40 years of wandering, it is not
easy to find a path back to the future. If there is to be a future,
we would do well to reflect about it more. The first and the
hardest step is to see that we now find ourselves in a desert, and
not in an enchanted forest."

Mon, 09/10/2012 - 06:45 | Link to Comment economics9698
economics9698's picture

Do you have any original thoughts?  Fuck the cut and paste.  If you want to bring attention to a author you really like cut and paste a paragraph or two and then give a link to the rest of the article.  When you cut and paste a fucking novel it fucks up my enjoyment of reading ORIGINAL post by thinking people with high IQs involved in finance, academic life, bond markets, and rare people of talent and intellect.

Stop fucking up this message board and think for yourself.

Mon, 09/10/2012 - 08:09 | Link to Comment AnAnonymous
AnAnonymous's picture

Very 'American' article. The rise of the 'american' world is as shown today the result of the incredible theft streak 'Americans' have been performing.

Science and technology will keep progressing but the failure in analysis by ascribing to science and technology the success of the 'american' world will remain.

Science and technology wont deliver because they are not the root cause of the 'American' success.

The root of the success of the 'American' world is theft.

Can science and technology help theft? Yep.

Can science and technology make up for the lack of opportunity to thieve? Nope.

Tue, 09/11/2012 - 01:05 | Link to Comment akak
akak's picture

Go murder a Tibetan monk for Mao --- it is, after all, the Chinese Citizenism thing to do.

Mon, 09/10/2012 - 04:39 | Link to Comment OldPossum
OldPossum's picture

That is exactly what our OCCUPY movement predicted a year ago. Nobody took notice.

OCCUPY the Fed!

Mon, 09/10/2012 - 06:56 | Link to Comment dexter bland
dexter bland's picture

"The issue is that the Fed cannot create consumer demand because demand is a function of both wealth and asset prices"

Consumer demand is a function of people feeling relaxed and comfortable about spending in the knowledge you won't lose your job or be unable to find a new one and that spending is within your means. QE has managed to increase wealth and asset prices (for those who have wealth and assets), but hasn't made typical (POV) consumers feel relaxed or comfortable about spending or their employment situation.

Quite the opposite. Consumers now have a sense that the economy is teetering on the brink of depression, dependent on Fed monetary infusions, and that they are just one disagreement with the boss away from unemployment with little hope of ever returning to the workforce. QE can do nothing about this.

If Bernanke did actually drop hundred dollar bills from a helicopter then its likely people would just stash them under their mattress or use them to pay down debt rather than go on a wild economy-boosting spending spree. That's why he is able to feel comfortable about inflation, but also why it will never work.

Mon, 09/10/2012 - 07:04 | Link to Comment Sandmann
Sandmann's picture

Nicely put. We are probably seeing the end of our economic system and society. Ever since the Club of Rome spouted off about resource scarcity in 1969 and we were told that resources were increasingly finite we have had Governments create Credit on an infinite basis. So those who were taught to turn off lights and conserve energy in 1973 now watch another generation drive ever bigger SUVs and burn lights and fossil fuels like they are suddenly infinite simply because Credit is.

It is the Collateral Problem. There is too much debt for the physical assets on the planet and simply not enough raw materials to keep China on its current path unless the rest of the world wants a precipitous decline in living standards. Western Mercantilism was a pretty sound way of keeping Westerners in economic well-being whereas open markets fuelled by infinite credit may not long-term be the way to buy all manufactured and agricultural produce from China. It is simply a variant on the old Coolie Policy of importing Chinamen to build railroads - now we buy the turnkey railroad from China and they install.

Jardines had nothing to seel the Chinese that they wanted so the trade surplus had to be eroded through opium. Now it is simply selling off Western factories rather like English aristocrats used to seel their libraries to fund their gambling debts, or find rich American heiresses in need of a title to keep the show on the road

 

Mon, 09/10/2012 - 09:50 | Link to Comment khakuda
khakuda's picture

Yes, nicely put.  It's incredible that the Fed can't see what seems obvious.

I was thinking about it another way, too.  If I have $100,000, I have earned zero in 2009, 2010, 2011 and 2012 and am going to be guaranteed zero for at least for more years at this rate, if not more.  If I had received even 4% a year, that would be $32,000 I could have spent over 8 years to boost the economy and it could continue indefinitely, each and every year for my life.  In fact, the inflation of my costs has made me want (and able) to spend even less.

Savings and investment is a source of sustainable wealth creation, debt based consumption is not.  The Fed misses this key point.

They also miss that purposefully debasing currency to create inflation can't work if WAGES don't keep up.  In a global labor market, with a still huge differential between US and Chinese rates, they are only inflicting pain.

Mon, 09/10/2012 - 12:15 | Link to Comment Turin Turambar
Turin Turambar's picture

In an oversimplified respect ZIRP and free money robs future demand for today.  Think of cash for clunkers.  Once everybody has purchased future desires today due to cheap money, what's left to buy other than necessities moving forward?  The smart muppets are simplifiying lives, cutting overhead, and reducing/eliminating debt.  You know, those things that lead to fiscal stability.

Sun, 09/09/2012 - 22:26 | Link to Comment Aziz
Aziz's picture

There will always be another excuse for the lack of recovery. Never a mea culpa.

"Oh! It is the zero bound! THAT is why QE is not producing recovery"

See Woodford's paper on Wallace Neutrality and nominal GDP targeting working via the expectations channel. 

http://marketmonetarist.com/2012/08/31/michael-woodford-endorses-ngdp-le...

 

Sun, 09/09/2012 - 22:27 | Link to Comment saturn
saturn's picture

End the FED on its 100th jubilee, lol! Send Bernanke to apply for real work, megalol!

Mon, 09/10/2012 - 06:48 | Link to Comment economics9698
economics9698's picture

I second that.

Sun, 09/09/2012 - 22:30 | Link to Comment knukles
knukles's picture

Jesus people...

The only thing going on is a Liquidity Trap.

When in one, the CB can print to the fucking high heavens and there simply is no response...
To wit: Over simplified but nonetheless reasonable.
Reason #1:  As MV=PT, while M is increased by Cb injections of high powered money into the banking system, V simply declines as there is no incentive to borrow to finance activities whilst in the middle of a de-leveraging cycle.
Simple
Reason #2:  The reason for the Liquidity Trap is the Credibility Trap within which we reside.  The system cannot move forward as long as it remain held within the fraudulent relationship between financial enablers and the formal power structure in which laws are applied inequitably in favor of the wealthy, the system is methodically looted at the expense of those otherwise responsible for consumption (individuals) and prospects for cogent policies remain aloof within which fear of economic failure overwhelms any portent of optimistic outcomes.  The system has been capture by a very few in control of creation and enforcement of laws with impunity... Grand Theft Country

 

Sun, 09/09/2012 - 22:37 | Link to Comment saturn
saturn's picture

Do you think they know or care that it is because the system canot be trusted anymore? I think the people in power are ready to deploy very extreme measures to try to keep the system alive at all cost as long as possible. It has always been this way in history. Only bloodshed made old system crumble and a new, more fraudulent (but longer lasting) emerge. I wonder what level of fraudulency humankind achieves after this turns into a fullblown revolution, can't wait, lol!

Sun, 09/09/2012 - 23:40 | Link to Comment Michael
Michael's picture

Since the last time The Supreme Court of the United States of America ruled on the legality of the 16th Amendment, we have not had a ruling on it since then.

We should bring to todays SCOTUS the question, "Is the 16th Amendment Law of the Land, and can you show us a copy of the law?"

Especially since all the members of SCOTUS who had previously reviewed it are dead?

 

Mon, 09/10/2012 - 00:01 | Link to Comment Michael
Michael's picture

What our dear leader President Obama gave to us is ming boggling.

It's also in Korean language subtitles.

Now I know why he got the Nobel Peace Prize.

Thanks for showing us it President Obama.

PROPAGANDA | FULL ENGLISH VERSION (2012)

http://www.youtube.com/watch?v=6NMr2VrhmFI&oref=http%3A%2F%2Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Dpropaganda%2520north%2520korea%2520documentary%26source%3Dweb%26cd%3D2%26ved%3D0CCYQFjAB%26url%3Dhttp%253A%252F%252Fwww.youtube.com%252Fwatch%253Fv%253D6NMr2VrhmFI%26ei%3Dc1BNUObRK4-68wTfn4H4CA%26usg%3DAFQjCNEO9kvD9fOiiYR7gbzTHN_9dVVn1w

Mon, 09/10/2012 - 01:15 | Link to Comment Michael
Michael's picture

Since corporations are now people, we should tax them like people paying the (AMT) Alternative Minimum Tax.

Mon, 09/10/2012 - 02:32 | Link to Comment Michael
Michael's picture

I hope LynnyB is doing OK?

Mon, 09/10/2012 - 03:09 | Link to Comment Michael
Michael's picture

Why, in Relationship with Human Nature, do we Request a Gold Standard?

Mon, 09/10/2012 - 03:20 | Link to Comment Michael
Michael's picture

We have to get our government and FCC to break up the monopoly of the MSM.

We all know the truth, Who owns Reuters and AP, the Rothschild's.

We all know who owns the 6 big news networks if you've seen this, especially the last 10 minutes of it;

PROPAGANDA | FULL ENGLISH VERSION (2012) Notice their censoring it now?

http://www.youtube.com/watch?v=6NMr2VrhmFI&oref=http%3A%2F%2Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Dpropaganda%2520north%2520korea%2520documentary%26source%3Dweb%26cd%3D2%26ved%3D0CCYQFjAB%26url%3Dhttp%253A%252F%252Fwww.youtube.com%252Fwatch%253Fv%253D6NMr2VrhmFI%26ei%3Dc1BNUObRK4-68wTfn4H4CA%26usg%3DAFQjCNEO9kvD9fOiiYR7gbzTHN_9dVVn1w

And further who owns them;

Media Military Complex- Same 6 owners for Media & Defense Ron Paul coverage investigative journ pt 2

http://www.youtube.com/watch?v=fz_bjew709I&feature=my_liked_videos&list=LLdSnTNA6aMtwMSA6x2vyTYw

And I just got done skewering the previous ZH thread from the WSJ after ten minutes of research with Google, that should tell you something is wrong.

Maybe this will help;

Matchbox Twenty - Back 2 Good (Video) 

http://www.youtube.com/watch?v=Rg93Lac49-Y 

Mon, 09/10/2012 - 03:56 | Link to Comment Michael
Michael's picture

We'll what do you think we should do now Michael?

Michael: I think we should should take repossession of our fucking country. I think we should make Washington D.C. buildings our Management HQ, and employees work at doing the work the people authorize ONLY!

Or you're fired.

Mon, 09/10/2012 - 05:18 | Link to Comment sharky2003
sharky2003's picture

dude...are you really having a conversation with yourself??

Mon, 09/10/2012 - 06:39 | Link to Comment Papasmurf
Papasmurf's picture

That can reduce arguements. 

Mon, 09/10/2012 - 15:26 | Link to Comment Michael
Michael's picture

I told you already, their free talking points memos for all media to use tomorrow.

Mon, 09/10/2012 - 00:23 | Link to Comment bigkahuna
bigkahuna's picture

Grand Theft Country indeed. People are arming themselves to the teeth though. I do not believe it has gone completely undetected. I hope that the shooting never starts/it never comes to that--but after we see the ginormous and repetitive frauds over the last 12-13 years (with rare exception - ebbers, madeoff, etc) how can that inspire confidence in civilian law enforcement (aka just-us?)

Sun, 09/09/2012 - 23:48 | Link to Comment FreedomGuy
FreedomGuy's picture

I don't think the Fed will admit it is irrelevant. It is relevant but there are limits to its power. I think there is a bigger issue in the U.S. economy and maybe the world in general. It is the fact that government itself is the problem the Fed cannot solve. It is governments, not just central banks and the Fed running serious short, mid and long term debts. The U.S. through Obamacare and never ending always expanding regulations is strangling it's own economy. The Fed cannot fix all those things. The Fed cannot find the next Jobs, Gates, Starbuck's, etc. However, government can constrain, crush and prevent all of them.

You put unfunded national entitilements, bankrupt government at city, state and Federal levels and regulations that hinder and strangle and the Fed can only do so much.

Having said that, I still think their policy prescriptions are wrong and in fact, make things worse, but central banks cannot fix bad government in economic terms. Put another way, no central bank policies of any sort could have fixed the Soviet Union.

Mon, 09/10/2012 - 00:32 | Link to Comment bigkahuna
bigkahuna's picture

It would be interesting if they just got up and walked out telling reporters "we're irrelevant" though.

 

I wonder if that would be bullish?  

--oh yeah, f'ing sarcasm--

Mon, 09/10/2012 - 15:12 | Link to Comment FreedomGuy
FreedomGuy's picture

That won't happen but I could see them walking out and saying something like, "We're outta here. We've done all we can. The rest is up to you."

Mon, 09/10/2012 - 02:28 | Link to Comment ABG LINE
ABG LINE's picture

Bunch of PhD. faggots.

Sun, 09/09/2012 - 22:07 | Link to Comment killallthefiat
killallthefiat's picture

This has been in the cards.  The TPTB have wanted a gold standard for a long time and it only locks out central bankers, but not the ones with the gold. 

You had better have some, and not just a  few ounces, ZHers

Mon, 09/10/2012 - 00:23 | Link to Comment Jungle Jim
Jungle Jim's picture

How many ounces had we better have, then? Are we talking about tens, or hundreds, or thousands?

Mon, 09/10/2012 - 01:29 | Link to Comment Likstane
Likstane's picture

How big is your boat?

Mon, 09/10/2012 - 01:40 | Link to Comment Oh regional Indian
Oh regional Indian's picture

There is however a slight possibility that only gold in CB vaults, marked just so, will be 'marked to market" and  "free to trade".

Given all the hoopla around Au/Ag and the general metals complex, to imagine there isn't a giant trick up their sleeve would be foolish at best.

ori

Mon, 09/10/2012 - 06:36 | Link to Comment Ace Ventura
Ace Ventura's picture

Indeed. To imagine they will simply "allow" the peasantry to benefit from a general gold standard, without some form of caveat that effectively nullifies their ability to participate......is wishful thinking.

EXPECT them to pull a fast one when the time comes. And expect them to enforce it with extreme prejudice. Unfortunately, nothing will get fixed until the vampires perched at the top of the global financial pyramid, along with their familiars in government (at all levels)....are physically removed from the picture.

We all know what it will take in order for that to happen, and it won't be pretty or clean.

Mon, 09/10/2012 - 08:36 | Link to Comment spentCartridge
spentCartridge's picture

Pb

Sun, 09/09/2012 - 22:09 | Link to Comment Heroic Couplet
Heroic Couplet's picture

Ben Ber. and the Fed and the IMF do not hold elective office. Argentina and Iceland told the bankers to take a flying leap.

Sun, 09/09/2012 - 22:09 | Link to Comment SafelyGraze
SafelyGraze's picture

"Woodford's paper (page 83-86)"

you made it to page 86?

Sun, 09/09/2012 - 22:09 | Link to Comment max2205
max2205's picture

Counter psyc ops in motion

Sun, 09/09/2012 - 22:10 | Link to Comment S474NtheD3v1L
S474NtheD3v1L's picture

now that's change i can believe in

Sun, 09/09/2012 - 22:10 | Link to Comment PSEUDOLOGOI
PSEUDOLOGOI's picture

sounds like they want one world currency only. except they have that China and Russia problem, at the moment...

Sun, 09/09/2012 - 22:10 | Link to Comment francis_sawyer
francis_sawyer's picture

For sure I'm gonna get junked for saying this...

But FED exasperation, in my eyes, is following IN LOCK STEP with Jew exasperation... (vis-a-vis 'Iran/Israel' rhetoric, elections, AIPAC meddling, NWO, NDAA, etc.)...

Just saying... Look back a few months/years from now & you'll probably be able to chart it on a graph...

Sun, 09/09/2012 - 22:32 | Link to Comment dolph9
dolph9's picture

The Jews don't control the spread of information on the internet, that's another key point.  The most they can do is keep the goys entertained with some porn.

The holohoax and israel propaganda industries don't pass muster on the internet.

Sun, 09/09/2012 - 23:17 | Link to Comment Non Passaran
Non Passaran's picture

Adolph, the fact that you and your friend Sawyer find the Internet entertaining is not a proof of Zionist conspiracy.

Sun, 09/09/2012 - 23:26 | Link to Comment otto skorzeny
otto skorzeny's picture

"Adolph"- ha-we could be so lucky. ahhh-but to dream. plus it is spelled A-d-o-l-f you dumbass

Mon, 09/10/2012 - 03:11 | Link to Comment TwoShortPlanks
TwoShortPlanks's picture

LOL +100

Sun, 09/09/2012 - 22:10 | Link to Comment A Lunatic
A Lunatic's picture

We're out of levers to leverage our leverages.

Sun, 09/09/2012 - 22:32 | Link to Comment Slightly Insane
Slightly Insane's picture

When your only tool is a hammer, every problem looks like a nail.

Sun, 09/09/2012 - 23:42 | Link to Comment Yen Cross
Yen Cross's picture

 When your only tool is a "plug", every problem looks like a "hole"! good post.

Sun, 09/09/2012 - 22:13 | Link to Comment lolmao500
lolmao500's picture

"I am a little – maybe more than a little bit – worried about the future of central banking.

Yeah the world would really miss you evil fucks...

Mon, 09/10/2012 - 01:13 | Link to Comment Incubus
Incubus's picture

sheep are too dumb to ever be free.

 

So they create a world war.  billions die off and then they finance the next 50-60 years before WWIV.

Fractional Reserve banking is about control.  You manipulate people into paying you money that you never had, and you hold them accountable for it.

 

This is control, and these stupid fucks will never see that.   They'll finance our next stupid consumerist bullshit dream, too.  Keep dreaming, everyone.

Sun, 09/09/2012 - 22:15 | Link to Comment Nadaclue
Nadaclue's picture

This is the end result of Government controlled largesse. Roman history is the primary example of what we are experiencing. Same deal with the outcome.

All one can do is to prepare for the outcome as one best can. Kinda like the market, you bet on a result with the hopes that your bet will cover that which you did not expect.

Sun, 09/09/2012 - 22:22 | Link to Comment A Lunatic
A Lunatic's picture

I'm betting on being dead at some point within my lifetime. That's about all I expect anymore.

Sun, 09/09/2012 - 22:16 | Link to Comment Squid Vicious
Squid Vicious's picture

If they announce another round of QE this week, with gas and food prices where they are, it can only be seen as a big middle finger to the middle class...

Sun, 09/09/2012 - 22:26 | Link to Comment Meesohaawnee
Meesohaawnee's picture

+10

Sun, 09/09/2012 - 23:04 | Link to Comment nope-1004
nope-1004's picture

So they haven't given the middle class the finger, yet?  Not once in the last 98 years?

The FED is the middle finger to the middle class.  By its very nature, the middle class is screwed.  QE is happening, but they have a problem:  If they come clean and announce all the shit going on behind the scenes, confidence in ALL banking systems is shot, bank runs ensue, PM's rocket up, oil rockets up, civil unrest, on and on.

This so-called 'economy' is nothing but a big movie, constantly edited to control your perceptions and emotions.

 

Mon, 09/10/2012 - 07:02 | Link to Comment Ima anal sphincter
Ima anal sphincter's picture

+1004

Sun, 09/09/2012 - 22:34 | Link to Comment 20-20 Hindsight
20-20 Hindsight's picture

Absolutely, and this will mean yet ANOTHER big middle finger to the middle class.   They've been giving us the finger repeatedly since at least since 2008.  You just can't kill the beast.  It's like a video game in which the evil bastards have infinite lives.  You kill one, and two more pop up on your screen... on and on (not that I play video games anymore... I got saturated many years ago in the early glory days of Nintendo. :-)

Sun, 09/09/2012 - 22:17 | Link to Comment booboo
booboo's picture

they will never relinquish the power to lay ink on cotton.

Sun, 09/09/2012 - 22:20 | Link to Comment caimen garou
caimen garou's picture

they are seeing the light,now if they only open the other eye!

Sun, 09/09/2012 - 22:20 | Link to Comment SafelyGraze
SafelyGraze's picture

ok. I'll try to play along. page 84:

"while central banks .. have been willing to expand the size of their balance sheets rather dramatically in response to the recent crisis, they have often preferred to do this by purchasing extremely safe Treasury securities (the only kind of purchases undertaken under the FOMC’s most recent two asset purchase programs .." [jftr, we central bankers *hate* expanding our balance sheets and buying up shit.]

here's a translation. 

while professional athletes have been willing to increase the number of actresses and models they date, they have often preferred to do this by choosing extremely safe ones who have appeared in Glee or Sports Illustrated.

thank you, athletes and central bankers, for Taking One For The Team.

Sun, 09/09/2012 - 22:21 | Link to Comment Whatta
Whatta's picture

What I’m worried about is this creeping politicization."

 

Say what? You guys shove policy up our ass at our expense, and at the enrichment of criminal cartels and you are worried about it FINALLY, via Ron Paul, getting politicized?

Well, excuuuuuuuuuuuuuse us.

Sun, 09/09/2012 - 22:35 | Link to Comment Bay of Pigs
Bay of Pigs's picture

There isnt one honest person at the FED. They all talk in circles or just bullshit about the economy the best they can.

In other words, they make it up on the fly, and have no idea whats going on.

 

Mon, 09/10/2012 - 00:24 | Link to Comment Poor Grogman
Poor Grogman's picture

They are well paid for doing the job they were hired to do therefore they have SOME honesty.

Mon, 09/10/2012 - 00:39 | Link to Comment r3phl0x
r3phl0x's picture

If lying for money is honesty - fucking for money is chastity.

Mon, 09/10/2012 - 02:08 | Link to Comment Poor Grogman
Poor Grogman's picture

That about sums it up..

Sun, 09/09/2012 - 22:21 | Link to Comment JR
JR's picture

Here’s how the big banks acquire and control big corporations, from James Mann’s The Economic Rape of America, Chapter 3, The Federal Reserve Bankers.

“In addition to the vast wealth drawn to them through this almost unlimited usury, the bankers who control the currency are able to approve or disapprove large loans to big and successful corporations. Bankers can refuse a loan, thereby depressing the price of a corporation's shares on the stock exchange. This enables the bankers' agents to buy large blocks of the shares at depressed prices. Then they can approve a multi-million dollar loan to the corporation, resulting in its share price rising, allowing the bankers' agents to sell the shares, sometimes making huge profits. In this manner billions of dollars are made to buy even more shares.

Using this method since 1913, the bankers and their agents have purchased secret or open control of almost every large corporation in America.”

http://www.buildfreedom.com/tl/rape3.shtml

 

Sun, 09/09/2012 - 22:51 | Link to Comment All Risk No Reward
All Risk No Reward's picture

Nice link - thanks.

The Fed controlelrs are criminals.  They stack lies upon lies that the gullible then repeat.  ZeroHedge is not immune.

For example, how many times have I heard about the "dual mandate" on ZH?  All the time.

Folks, IT DOESN'T EXIST.  That's right, there is no dual mandate.  It is singular. 

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

Hint - the bolded and underlined text is the singular mandate.  Maximum and stable prices are the expected results OF FOLLOWING THE SINGULAR MANDATE.

They even lie about stable prices...  ever inflating prices are not "stable prices."

People lie to cover up known bad deeds.  Why has the Fed lied about their true singular mandate?

BECAUSE THEY BROKE IT!

Denninger posts a good chart of this criminality from time to time.  His latest is here:

http://market-ticker.org/akcs-www?post=211254

These criminals purposefully took credit and monetary aggregates exponential to the economy's long run potential to increase production!  "Commensurate with" doesn't equal "exponential to," people.

So they lie about their mandate and hope the ignorati run with it without ever goign to the source document - Section 2A of the Federal Reserve Act.

Note the other key piece of information from Denninger's chart on the Fed Z1 and BEA data chart:

Government debt is expanding about as much as financial debt is receding.

Stop the arm waving, name calling, economic help claims...  this is all about a transfer of debt from the mega banks to the population as our nose can be stuck in their chit.

The banksters are the biggest threat to humanity.  Period.

Sun, 09/09/2012 - 22:22 | Link to Comment Whoa Dammit
Whoa Dammit's picture

Instead of "creeping politicization"of central banks Bullard should be worried about fast moving insolvency with all of the trash "assets" they have on their books.

Sun, 09/09/2012 - 22:28 | Link to Comment Nothing To See Here
Nothing To See Here's picture

"If the Fed itself is admitting it is becoming irrelevant and obsolete, then perhaps regimes are changing."

There's change I can believe in.

Sun, 09/09/2012 - 22:29 | Link to Comment Dr. Engali
Dr. Engali's picture

Okay. Let me state it as clearly as I can for you fed heads..... It's the debt stupid! We are at saturation level and the debt must be reconciled either by default or by being paid off. It can't be serviced because people don't make enough money to service it. Those that need debt can't get it and those that can get it don't want it. Fuck you guys are dumb.

Sun, 09/09/2012 - 22:58 | Link to Comment All Risk No Reward
All Risk No Reward's picture

Exactly - debt saturation.  Criminal debt saturation at that (the Fed broke their Section 2A mandate to take credit and monetary aggregates exponential to the economy's potential to increase production).

They can't fix debt saturation with more debt, mass delusion not withstanding.

Either the system changes and money becomes debt free (good luck with that!) or else we have a deflationary collapse as every screeches to a hault in a bankster debt money tyranny "shock and awe" moment.

Of course, that's what they want eventually - they want to spend the trillions they've looted to buy up the world's tangible assets for pennies on the dollar.

Then the bond market and debt backed money will break, banksters will balance their books as everyone else is impoverished and then they'll claim "capitalism failed" and that only they, the criminals who did this to us through fraudulent debt based money and a criminal debt bubble blowing operation, can save us from ourselves.

NDAA is there for anyone with an IQ larger than 50.  It is easy to be dumb now...  life isn't bad for many people.  But when the Big Kahuna b*tch slaps America's chumptocracy across the face, people will start paying attention.

Sun, 09/09/2012 - 22:30 | Link to Comment asteroids
asteroids's picture

QE is more debt. There is no way the public will accept it, especially with an election weeks away. They know is won't work very well and it would be suicide to try.

Sun, 09/09/2012 - 22:46 | Link to Comment 20-20 Hindsight
20-20 Hindsight's picture

But that's the tragedy of it all.  One would like to think that the public won't accept QE, but the reality is that they're so incredibly numb that they will accept it.  The general public is totally clueless.  They're just happy as long as they have their daily fix of bullshit "news" fabricated by the MSM, along with their favourite three "S": sports, soaps and sitcoms. -- not to mention a dose of pathetic talk shows and "reality" bullshit on the side. 

Sun, 09/09/2012 - 22:56 | Link to Comment Nadaclue
Nadaclue's picture

Friend, the majority of the public could not give too shits about debt. Hypnotized zombies of TV land who have better things to do than worry about government.

That's why they sent those people to Washington. To take care of this while they can concentrate on getting their snowflakes to (whatever) practice.

That's why we're screwed. The public is uninformed by choice, refuse to look at issues and want condensed bullet points to vote on. They'll believe anything the tube says.

You give the public too much credit.

Mon, 09/10/2012 - 07:57 | Link to Comment Papasmurf
Papasmurf's picture

The public was opposed to the bank bailouts too, and was very vocal.  That had no effect on the decisions.

Sun, 09/09/2012 - 22:42 | Link to Comment Element
Element's picture

 

 

There are a few possible reasons why repeated rounds of central bank communication and quantitative easing, as the policy of buying long-dated assets in an effort to drive down long-term interest rates is known, have not brought about a strong recovery.
 
 One is that something structural has changed to hold back growth. Speaking from the floor in Wyoming, Donald Kohn, another former Fed vice-chair now at the Brookings Institution, raised the possibility of “something deeper going on”, perhaps related to savings behaviour or the changed distribution of income between labour and capital.
 
 Another is that the tools work, even if current conditions blunt their effect. If there are new headwinds, then the answer is to use them more aggressively. That is the mainstream view among central bankers.

---

 

Are these guys comedians or retards, or what?

Maybe, "...something structural has changed..."

Ya think?

Decades of misallocation of investments in non-returning senseless bling, and the destruction of the mechanism of investment (that mechanism would be the stockmarket, if you were wondering der-banke, as it's not actually supposed to be a rigged casino ... you knew this right?), lead to the gutting of the whole viable basis for the economy, even as peak debt-loads rolled on, and credit demand evaporated, because no one could pay more, due to the fact that REAL wages keep falling ... halting further significant rises in aggregate demand.

Duh! 

Central bankster's best-and-brightest huh?

Sun, 09/09/2012 - 23:27 | Link to Comment intric8
intric8's picture

I'm frankly sick of hearing any analysis from these clowns. They are working the best interests of the wealthy, so it sucks to be us.

Sun, 09/09/2012 - 22:37 | Link to Comment digalert
digalert's picture

If these banksters running the FED had been reading ZH, they would of known long ago. The gig is up, lights out, parties over.

Sun, 09/09/2012 - 22:42 | Link to Comment nmewn
nmewn's picture

"What I’m worried about is this creeping politicization."

Lets see here, an agent of an institution, created by politicians, worried about this weird sorta creeping  politicization going on around here.

Yep, still living in the land of unicorns and cotton candy disguised as beef stew.

Sun, 09/09/2012 - 22:51 | Link to Comment HardAssets
HardAssets's picture

Its an institution created by bankers and passed into legal existence by their paid-off politicians. (Most who probably don't have a clue about what they are doing. It is said that pres Wilson later regretted creation of the Fed. Perhaps.)

'politicization' is Fed speak for "we're afraid the natives are figuring it out, and getting restless'

Mon, 09/10/2012 - 00:28 | Link to Comment Element
Element's picture

The 'politicisation' they are referring to is code for the act of the >99% waking up to what's been going on ... and what comes of it ... enough to put him off flying his USD-powered egg-beater.

Bit tough right now for derbanke mob gangsters to be effective as super-crooks, when everyone on earth is watching for the slight of hand.

While increasingly finding the usual lies don't wag the dog so well any more, but instead illicits direct and aggressive questioning.

Hence they want the right sort of 'politician' to depoliticise the situation, via digital censorship of free-speech and a few "executive orders".

Mon, 09/10/2012 - 02:23 | Link to Comment Reptil
Reptil's picture

Yup, I concurr; feeble attempt to divert attention away from a century of malfeasance.

Sun, 09/09/2012 - 22:42 | Link to Comment A Lunatic
A Lunatic's picture

Bernanke will say whatever he feels he needs to in order to stay employed. It's an election year and everything you hear from anyone in any position of power will be pure "cover your own ass" bullshit, and nothing more. The only core convictions any of these fuckers have is more, more, more for me, me, me..........

Sun, 09/09/2012 - 23:14 | Link to Comment andrewp111
andrewp111's picture

Bernanke already knows that Romney will not reappoint him. Therefore, he has to reelect Obama by any means necessary.

Sun, 09/09/2012 - 23:50 | Link to Comment SheHunter
SheHunter's picture

You really believe Spineless Romney would have the B***s to rid us of Bernie? Better do some reading on the truth behind the Kennedy assasination.

Sun, 09/09/2012 - 22:41 | Link to Comment newengland
newengland's picture

Humility is a sign of intelligence. Live and learn, prosper. The world is a contest of ideas, and there is no shame in admitting error. There is every shame in persisting with the error.

Sun, 09/09/2012 - 23:01 | Link to Comment All Risk No Reward
All Risk No Reward's picture

Very appropos quote to life that so many will never, ever understand.  I'll use it from time to time and quote you as the author.

Sun, 09/09/2012 - 22:43 | Link to Comment lolmaster
lolmaster's picture

TD misinterpreting Bull-$%@#-ard. he is concerned that the sheeple continue to grumble and grouse about their central masters... err bankers

Sun, 09/09/2012 - 22:44 | Link to Comment Pejorative Requiem
Pejorative Requiem's picture
But the contiuing tactic will still be to announce that CB's CAN stimulate a given economy just by the announcemet. Don't strat counting days untill a stim is promised, and no uptick is realized in the equities casinos. It hasn't happened yet.
Sun, 09/09/2012 - 22:51 | Link to Comment Stanley Lord
Stanley Lord's picture

This is what Dave Stockman has said in a recent interview with Doug Casey.

When the day comes that Wall Street can no longer trust the Fed they will sell everything, and quickly.

Sun, 09/09/2012 - 23:08 | Link to Comment ekm
ekm's picture

How many times do I have to say this people?

The Fed and any other central bank in the world, has never, nor is now will ever be independent.

The "creepy politicization" is INHERENT of central banking from the birth.

People, that's why it is called CENTRAL. It's central, pueblo, it's ceeeeeeeeeeeeentral.

 

Sun, 09/09/2012 - 23:22 | Link to Comment Everyman
Everyman's picture

If they "QE again" all those God Damn Fed Res Gov. Board need to commit suicide, and Benny as well.

Those filth do not deserve to live for all the damn damage they are doing, that has YET TO BE REALIZED.  These assholes will go down as the dumbest motherfucker puppets in history.  The bankers say "eat shit" and Benny and the inkjhets beautifully comply by takin another mouthful of feces. 

The "Middle Class" was always the target by these fucking pricks, we were the only ones that could have a chance in hell of "making money", meaning taking it away from their crooked criminal fucking hands.

We are on that cusp of a revolution, and these pricks KNOW IT, and they KNOW their heads will be separated from their bodies, and LOTS of CEO and CFO, Politicians, and financial people will be pulled out of their offices and shot outright.  Don't worry, not too much blood,... less than "one percent".

Tough times are a coming, and "gold" will not save you.  Capability, luck, guile, and honor, WILL save you,  You are worth your capability and character, money is not the most important thing in survival mode.

Mon, 09/10/2012 - 00:11 | Link to Comment 20-20 Hindsight
20-20 Hindsight's picture

You're making too much sense, Everyman.  Most people don't know what the hell is going on,and frankly they don't want to know.  They're too busy tweeting, texting and admiring each other's photos on Fakebook.  Take away their cell phones, iPods/Pads, PSPs and TVs, and then they might get really pissed off.    

Mon, 09/10/2012 - 00:33 | Link to Comment Element
Element's picture

no no no!  social media are the driving force in overturning unjust rulers ... just ask the jumpsuit-in-chief

Mon, 09/10/2012 - 00:45 | Link to Comment Everyman
Everyman's picture

All the "TECH" and the apple fad is all OPIATES FOR THE MASSES.

 

You are TOTALLY correct on that one and you deserve your moniker "20-20".  How 'boput we call you"Maddog"?

Sun, 09/09/2012 - 23:22 | Link to Comment Everyman
Everyman's picture

Goofy double post, sorry.

Sun, 09/09/2012 - 23:25 | Link to Comment q99x2
q99x2's picture

The FED is not going to clear its guilt by issuing such statements. Those fuckers know exactly what they are doing. You don't move trillions from the middle class to the banksters by accident. Indict them move their racketeering system to the military and let the people at DARPA and the open source community take it over like they did the Internet. Force the dinosaurs into extinction. Shut those crooked M'fers down.

Sun, 09/09/2012 - 23:39 | Link to Comment JR
JR's picture

The economic mirage of recovery, the current stock market bubble, is based on the extraction of other people’s property. And that’s only one of the reasons the Fed and the money vultures who control its corrupt practices are losing credibility.

Can anyone in America really believe that anything he possesses is really his anymore – his home or his home equity, his savings, his investments, job, IRA, 401(k), pension, Social Security returns, entitled Medicare, inheritance, business, educational value, his national identify…? His future? The Fed is asset stripping and redistributing the people's wealth at rapid speed, intermingling its booms and busts with massive fraud, under total impunity.

James Miller of the Ludwig von Mises Institute of Canada wrote in a ZH article recently, “The printing of money creates no new wealth… All government spending comes from resources siphoned away from the private sector. For every dollar spent by lawmakers or bureaucrats means one less dollar devoted toward productive efforts.”

 

Sun, 09/09/2012 - 23:27 | Link to Comment yogibear
yogibear's picture

The Fed is already politicized. Rather than getting rid of the rotten and unhealthy financials and companies through proper discharge they pushed debt and blew bubbles to pacify politicians. None of the financial/fraud criminals have been prosecuted.  Now the banksters, through the Fed has transferred all the debt from the member banks to the taxpayer,  they will print with many more QEs to devalue the debt. 

The only time the Federal Reserve banksters will be worried is when people are running after them with rope to hang them.

Their spew so much BS and disinformation. The clan, like Dudley think their so far superior intellectually they always know better (like the let them eat I-PODs speech).

They are well aware what the end-game entails.

Mon, 09/10/2012 - 00:27 | Link to Comment AynRandFan
AynRandFan's picture

One way to avoid politicizing the monetary system is to have a gold standard.  The other way is to create a dictatorial arm of the federal government and put it in charge of not only the monetary system but also the entire banking system.

Mon, 09/10/2012 - 08:13 | Link to Comment Papasmurf
Papasmurf's picture

How, pray tell, will you avoid regulatory capture of that?

Sun, 09/09/2012 - 23:28 | Link to Comment FischerBlack
FischerBlack's picture

Donald Kohn, another former Fed vice-chair now at the Brookings Institution, raised the possibility of “something deeper going on”, perhaps related to savings behaviour or the changed distribution of income between labour and capital.

Are they really that clueless? Well, yeah, Don, there is definitely something deeper going on. The shadow banking system is deleveraging and you guys are buying up all the good collateral.

Sun, 09/09/2012 - 23:34 | Link to Comment Colonel Klink
Colonel Klink's picture

How about we crush the skulls of all the central bankers between two textbooks.  Guaranteed then that the textbooks  will provide the answer!!!

FUCK the central banksters and the 4 horses they rode in on.

Sun, 09/09/2012 - 23:42 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Never underestimate your opponent. The Fed's controllers would gladly sacrifice millions of lives and financially destroy many more just to generate a little profit, if the whole system is at stake they will stop at nothing to prop it up.- a few measely trillion dollars of imaginary currency units is only the beginning. If you think they are admitting something incriminating, they aren't, if you think they are admitting fault, they aren't, if you think they have had an epiphany and seen the light, they haven't. At best this could be a signal that unconventional policy tools are being prepared, say a new mandate or scrapping some limits on what the Fed can buy or some other inconvenient formality that is standing in the way of further "action". Let's let the Fed buy mortgages, corporate debt, payday loans, car loans, student loans, momo stocks, and everything else - outright (and stick us with the bill + interest) so its balance sheet can expand to infinity and save the world.

"it is clear that more radical options are increasingly mainstream" Paul Krugman for next chairsatan?

Mon, 09/10/2012 - 01:41 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Paul Krugman for next chairsatan?

 

Mark that one Toten. It could be the worst case scenario prediction coming true.

*shudder*

ori

Sun, 09/09/2012 - 23:44 | Link to Comment Demogorgon
Demogorgon's picture

As ever, I'll ignore their words, and watch their actions. These are evil fucks we're dealing with after all.

Sun, 09/09/2012 - 23:48 | Link to Comment Arnold Ziffel
Arnold Ziffel's picture

 

Better buy your kimchi ... quick:

 

South Korea sets $5.2 billion stimulus package as economy falters

 

http://news.yahoo.com/south-korea-eyes-4-1-billion-stimulus-package-0150...

 

 

Sun, 09/09/2012 - 23:56 | Link to Comment michael_engineer
michael_engineer's picture

See my comment to this earlier article today, pasted below

http://www.zerohedge.com/news/five-years-great-financial-crisis-no-growt...

If growth isn't there even though all want it and it was there for almost everyone in the past, then the simplest explanation for that is something structural has changed and prevents it.

There's plenty of evidence that weakness in the resource base is the blocking mechanism. The bottom line is and always has been that the driving force of economic health for society has been resource flows. No resource flows, no economy. Debt and money both are derived from those resource flows.

So in a way, both debt and money are in fact derivatives. Weakness in debt and money issues would seem to indicate a possible weakness in the resource base itself.

Mon, 09/10/2012 - 00:18 | Link to Comment ekm
ekm's picture

Thank God, somebody understands it, and of course that somebody is an engineer.

That.........money and debt are derivatives of resources, that's a newer and more accurate way of expressing it.

You have a lot of brains.

Mon, 09/10/2012 - 00:24 | Link to Comment ekm
ekm's picture

I cannot express it how impressed I am with this comment.

Thx a lot.

Mon, 09/10/2012 - 00:49 | Link to Comment michael_engineer
michael_engineer's picture

By your comments, you may find these deeper insights a good read too :

http://www.zerohedge.com/news/observations-engineer

Mon, 09/10/2012 - 00:56 | Link to Comment Element
Element's picture

What makes a 'resource' an actual resource today is its exchange (dollar or whatever) value.

If no one will pay or exchange for it, then it isn't any longer a resource, in fact, it's then rendered economically un-extractable.

Which means all resources traded are actually ECONOMIC resources.  Otherwise it's just dirt.

 

Economic Geology 101

Tue, 09/11/2012 - 00:45 | Link to Comment honestann
honestann's picture

One cause of the problem is the simple fact that "money" cannot be a derivative and remain efficient.  The moment "money" isn't something real, physical, divisible and valuable... the effort of mankind is inherently misdirected towards inefficient and overtly destructive ends.

Believe me, if the world was honest and ethical, we would all have an endless variety of resources to choose from.  Lacking honesty and ethics the world becomes a casino at best, one that always enhances the power of the casino owners (predators-DBA-banks, predators-DBA-government).

And THAT is the reason for the curves you draw, not anything about the "resource base" itself.

Mon, 09/10/2012 - 00:01 | Link to Comment honestann
honestann's picture

Of course central banking "works".  Central banking does precisely what central banking was designed to do, which is:

#1:  To enrich the most destructive human predators on earth.

#2:  To give ever-increasing power to the most destructive human predators on earth.

#3:  To convert all of humanity into overt slaves whose only purpose is to serve the most destructive human predators on earth.

#4:  To assure that the vast majority of humanity have no way to overthrow the predators that enslave them and suck them dry.

#5:  To utterly, totally, completely destroy the mental processes of human beings to assure that they never become clear enough about the nature of the predators to motivate them to do something about it.

And sure enough, central banking works quite well in achieving these goals.

As a matter of fact, ONLY a completely braindamaged individual could possibly fail to notice that central banking lending to predators-DBA-government is INHERENTLY corrupt, and INHERENTLY grows the size and aggressiveness of predators-DBA-government.  There is no other possibility, and there are zero exceptions to this necessary consequence [that last more than a few years].

What is also obvious to anyone with even a few functioning neurons is that EVERY society that is lured into debt (especially for purposes of consumption) has inherently gotten themselves into a position where they cannot grow effectively.  This is, in fact, a simple tautology --- payments on past debt inherently reduce what can be spent today and tomorrow.

The entire structure is so completely chock full of contradictions, self-contradictions, blantant stupidity and blatant corruption that LITERALLY only braindamaged individuals can fail to see the man behind the curtain at this point.  Which is why the predators had to convert the entirety of mankind into complete braindamaged morons.  They sure did a bang of job of that.

Mon, 09/10/2012 - 00:39 | Link to Comment Element
Element's picture

Crystal clear.

Mon, 09/10/2012 - 03:30 | Link to Comment Floodmaster
Floodmaster's picture

I bet you belong to the Generation Screwed.

Tue, 09/11/2012 - 00:38 | Link to Comment honestann
honestann's picture

Everyone alive belongs to generation screwed.

Mon, 09/10/2012 - 00:02 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

He should have just said: "Panic Motherfuckers!" The next Jackson Hole meeting He'll say: "Sorry guys. It's just not working and I can't lie any more.  Let's just go back to gold and forget this whole irredemible currency thing ever happened. No hard feelings I hope."

Mon, 09/10/2012 - 00:14 | Link to Comment AynRandFan
AynRandFan's picture

The reason massive monetization has not worked is because no one wants an illiquid asset for investment.  Duh.

There's a long line of people wanting to buy every liquid asset on the planet, and they are willing to pay exorbitant amounts for conservative fixed income assets that have negative real yield.  Why?  Because every bank on the planet just got stuck with a mountain of bad real estate investments.  You'd have to be crazy to rush back in, especially when you can buy liquid assets that have been appreciating in price as the monetary supply increases.

Mon, 09/10/2012 - 00:18 | Link to Comment luna_man
luna_man's picture

 

 

CRIMINALS!

Mon, 09/10/2012 - 00:18 | Link to Comment AynRandFan
AynRandFan's picture

When you think about it, what could be crazier than putting a secretive federal agency that is not subject to any control by "we the people" in charge of our entire monetary system?

Mon, 09/10/2012 - 00:29 | Link to Comment xtop23
xtop23's picture

"Something deeper going on."

 

Really? Well hello Capt. Obvious. These freakin' nimrods are about as useful as tits on a skateboard.

Mon, 09/10/2012 - 00:36 | Link to Comment dwdollar
dwdollar's picture

"But, but, but... our economic models say we should be in a roaring recovery right now. What could be the problem????????????????"

What a bunch of BS.

Why don't they just put trollface in their next FED statement?

Mon, 09/10/2012 - 01:40 | Link to Comment williambanzai7
williambanzai7's picture

They all conveniently gloss over the fact that the text books were written to support an agenda.

Mon, 09/10/2012 - 01:59 | Link to Comment AurorusBorealus
AurorusBorealus's picture

The entire university has become a political institution.  Even the so-called hard sciences are heavily political now.  Appointments are made for reasons of gender and race, not merit, research or teaching ability.  To be hired or published one must say, write, and research the right things.  Any free-thinking or critical thought has been completely stifled.  It is worse in the American university today than in the German universities under the Nazis (all one had to do was join the party, throw out the Jews, and proceed with one's research, whatever that research may have been). The radical American left have not actually began the mass-murder of engineers or others, but by running everyone who is not of "orthodox" political positions out the universities, they have effected the same type of environment as existed in Soviet academies.  It is that bad...

Mon, 09/10/2012 - 03:05 | Link to Comment ebworthen
ebworthen's picture

Aye, very true that.

I call it "Higher Affirmation" (versus Higher Education).

The Dream Factory.

Mon, 09/10/2012 - 01:59 | Link to Comment devo
devo's picture

Reprice gold to back every fiat, then pay off the debt.

The solution is that simple; much simpler than inflating, which means they want to inflate (and you can probably think of the reasons why).

 

 

Mon, 09/10/2012 - 03:06 | Link to Comment Urban Redneck
Urban Redneck's picture

That only works until the next round of Gov handouts need to be mailed or direct deposited.  The first step must be immediately and permanently balancing the budget.

Mon, 09/10/2012 - 02:06 | Link to Comment jonjon831983
jonjon831983's picture

Reuter's piece on the GM Volt:

 

http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-id...

 

Industry analysts estimate: "GM is still losing as much as $49,000 on each Volt it builds"

 

Your tax dollars at work.  Stimulus!!!!

Mon, 09/10/2012 - 03:01 | Link to Comment ebworthen
ebworthen's picture

If admitting failure were an option, there would be no FED to begin with.

Mon, 09/10/2012 - 06:51 | Link to Comment Floodmaster
Floodmaster's picture

Poor Ben, he will spend years trying to clean up the Greenspan mess, a 3 bed house worth no more than 120,000, not 400,000. Don't forget, the guy works for the banks. I never heard whining about Greenspan ...

Mon, 09/10/2012 - 03:21 | Link to Comment icanhasbailout
icanhasbailout's picture

Like an over-the-hill middle manager buying a Corvette to try and relieve his youth (in which he wasn't actually able to afford a Corvette), the Fed will continue to goose the stock market again in order to prove its own continued virility.

 

bullish!

Mon, 09/10/2012 - 04:12 | Link to Comment falak pema
falak pema's picture

FED : Two headed Janus, serving the new elites of the Oligarchy order; all the while OFFICIALLY bowing to public order and "general good".

Its becoming difficult to reconcile the hidden power agenda with the official republican brief as the economy morphs. But it has a job to do : ensure that the appearance of financial power is alive and well; especially in election year.

The truth is : First world is no longer de facto a nation state construct  that controls the destinies of people. Its a vast global Oligarchy that has maximised its own profits and made the nation states and its elected elites the resonance box of effete, sterile words to no purpose; as they be the guardians of huge national debts.

The rich nations states are now the source of recurrent structural debts and deficits to maintain the sheeple in consumerista mantra limbo ; and the banksters are now guardians of Oligarchy profits parked in Caymanista lands and invested in slave labour developping markets. 

AND ITS BEEN ENGINEERED TO STAY THAT WAY. By the owners of the very FED since NWO order days began!

So of course the FED squirms at Jackson Hole; where it wears its REpublican, "we the people" hat; not when it is at HOme and cavorts with its paymasters on a daily basis.

Seeing behind that sham curtain is now a necessity for mankind to understand its destiny, as this First World train hurtles along on debt tsunami trail. 

If it doesn't change from within it will change from without; that is history; and it will be a big bang of Sarajevo moment dimensions.

 

Mon, 09/10/2012 - 04:25 | Link to Comment dojufitz
dojufitz's picture

In the good old days they use to disembowel people who had done bad stuff......

the guy had a giant cork screw that was razor sharp and he heated it up until it was blue hot.....then he really earned his pay by shoving it up the ass of said criminal and he would turn this screw and pull out his guts.......apparently they stopped this because the public got really fed up with the smell of burning shit on the hot cork screw.....

 

I think this could be ripe for a comeback as simple form of justice....

Mon, 09/10/2012 - 06:27 | Link to Comment luckylongshot
luckylongshot's picture

As Ellen Brown says ,the problem is that the parasite is killing the dog...so the Fed seems to be starting to figure out that all it can offer in response to this problem is a larger parasite.

Mon, 09/10/2012 - 07:01 | Link to Comment Catullus
Catullus's picture

Not that the Fed cares about economic growth.  They're trying beyond all belief to have people believe that they're doing this money printing for some sort of economic reason.  They are not.  They do it to bailout the banks who are inherently bankrupt.  End of story.  The measure of success is whether the banks are a few hours away from disappearing.  Right now, they are not.  Success in the Fed's eyes. 

Everything is else is just misdirection. 

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