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The Fed Should Hire A Mechanic

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors,

 

The “Transmission Mechanism” Is Broken.

 

As the Fed debates what form of QE to launch on the world and whatever new communication strategies they are going to employ, maybe they should sit back and figure out why their policies seem to be doing so little.

 

The Fed is clearly trying to stimulate the economy.  As much as I disagree with many of their policies, I do believe their intentions were to boost the economy and not just help banks make easy money.  In spite of their intentions, they have failed and I think it is because they are clinging to two flawed assumptions.

 

The Wealth Effect

 

The Fed seems to have an unwavering belief in the wealth effect.  They believe that if they can just increase stock prices, people will feel better and spend more.  This may have been the case at one time, but there are several reasons why it isn’t working.  The most obvious flaw (which has been reported on www.zerohedge.com) is that the wealth is now far too concentrated to benefit the economy as a whole.  Relatively few people own most of the shares.  The benefit of an increasing stock market just goes to too few people.  We are just off record highs of food stamp recipients, but the number is shocking.  Somewhere around 45 million people are getting food stamps.  It doesn’t take a PhD in economics to figure out that people using food stamps to survive are unlikely to get too excited about stocks being up 15% or even 30%.

 

So the poor don’t care about the wealth effect.

What about the middle class?  Maybe in 2000 people would have been impressed by the wealth effect and spent more, but things have changed.  The middle class is worried about their homes.  They are not comfortable that they have much equity (if any) in their homes and that has created risk aversion that will outweigh any wealth effect.  But the wealth effect is further eroded since much of the “savings” and stock investments are held in IRA’s.  The middle class remains concerned not only about their jobs, but also about what they will be forced to pay for in the future.  Even those people lucky enough to have defined benefit plans are concerned that those pensions and benefits will be cut back.  The likelihood of receiving significant support from governments in the future (state, local, or federal) is being questioned.  So the gains in IRA are offset by fears that other promises will be broken.  The wealth effect may allow the middle class to consume at a reasonable level, but there are too many other concerns for this wealth effect to have much of an impact.

What about the rich?  Certainly at the extreme end, going from 100 million to 110 million probably doesn’t do much for your ability or willingness to consume.  Even at a lower wealth level, the change may not be enough to offset future earnings concerns – especially if you work on Wall Street.  The “rich” have a lot of their wealth in restricted shares of their companies.  That value will have increased, but the willingness to spend money based on an increased valuation of restricted shares is greatly diminished.  Enron was treated as an isolated case, but since 2007, people are being much more careful treating “restricted shares or options” as true savings.

 

Then there is the psychology of the rich.  Many of the rich got rich because they were smart or hard working or figure out what someone needed.  They made money because they found opportunities and took advantage of those opportunities.  They are smart enough to see that this “wealth effect” is being created by artificial stimulus and not real true demand.  The Fed is creating demand for “risk assets” but not for products.  The rich will find ways to accumulate and sell “risk assets” because that is where the Fed has been able to stimulate demand.  That doesn’t generate longer term growth for the economy, but why would the rich spend money to build factories or create new products when the actual demand for products hasn’t changed?  They won’t.  The fact that the rich know QE just creates demand for risk assets is one of the biggest (and least discussed) reasons for the failure of QE programs to generate growth in the real economy.

 

At least the Fed does seem to be trying to target housing now.  They must realize that attempting to generate “wealth effect” growth via the stock market is hopeless.

 

Low Rates for Banks means Low Rates for Banks’ Customers

 

Somehow the Fed believes that providing low cost funds for banks will translate into low cost funds for the clients of the banks.  It just isn’t happening.  Liquidity remains a key concern of banks.  They are willing to sacrifice margin for liquidity and perceived safety.  Why lend to a consumer when you can buy corporate bonds or treasuries.  Those have much greater liquidity and require much less effort to accumulate a large portfolio then making loans a few hundred thousand dollars at a time.

 

The Fed has not only underestimated how much value the banks place on liquidity, they have encouraged it, as capital rules benefit banks with more liquid assets.  Lending to small companies and individuals requires lots of work (costs) and results in relatively illiquid assets.  The banks are placing a high value on liquidity and are extremely cost conscious, so the cheap money they get is not making it down to the lower levels of the economy. Microsoft, on the other hand, can add to their cash stash with one quick call to the syndicate desk at any big bank.

 

Not only have the regulations encouraged banks to concentrate on liquid assets, the Fed has given them extra reasons to focus on the lowest risk products.  By becoming a bid of last resort (as far as I know there have been no details on the prices paid by the Fed for its POMO purchases) the Fed was able to help banks generate easy profits (notice how almost no bank lost money on any day when QE2 was active).  Banks focused on the assets where they know there is always a bid, and not exactly the most price sensitive bid.  Operation twist has failed to help get cheap mortgages into the average consumer, but it did manage to teach banks that they should continue to stick to assets where there was easy money to be made and where positions could be closed quickly.

 

These extremely cheap loans were like free money.  Somehow the Fed thought bankers would stand in line, take the cheap money and then do something constructive for the economy with it.  Instead, the banks take the free money and then do what any intelligent human being would do, they go to the back of the line to get more free money.

 

When a theory doesn’t work, it is often because the assumptions are flawed.  The Fed should be going back and figuring out how to address the failure of the stock market wealth effect and of the bottleneck of the banks.  Maybe the Fed should just make mortgage loans directly to individuals?  Probably a stupid idea, but at least it would impact homes which is where the wealth effect would really be felt across the board, and it would ensure the cheap money was making it to the people the Fed wants to see getting cheap money.

 

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Tue, 01/24/2012 - 14:41 | 2093242 frosty zoom
frosty zoom's picture

naw, not that funny...

 

Tue, 01/24/2012 - 14:42 | 2093306 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

All of this has happened before, and all of this will happen again.

Tue, 01/24/2012 - 14:44 | 2093320 The Big Ching-aso
The Big Ching-aso's picture

 

 

I think the Fed has been gripping the neck of the bottle fully and will continue to chug chug chug along until it passes out.

 

Tue, 01/24/2012 - 19:16 | 2094453 economics1996
economics1996's picture

It is not complex.  The Federal Reserve should set interest rates 3% higher than the inflation (Paul Volker) rate.  This would cause a massive liquidation of the bad investments.  After 6 to 18 months of deflation prices would stimulate demand.   End of depression.

Tue, 01/24/2012 - 20:23 | 2094619 WhiteNight123129
WhiteNight123129's picture

I will stop hoarding once we have recoinage, unfortunately, it might take a war first.

 

Tue, 01/24/2012 - 15:09 | 2093451 slaughterer
slaughterer's picture

<== QE3 tomorrow

<== no QE3 tomorrow

Wed, 01/25/2012 - 05:45 | 2095709 Dress Fashion
Dress Fashion's picture

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Dress Fashion

Tue, 01/24/2012 - 14:27 | 2093243 tony bonn
tony bonn's picture

"I do believe their intentions were to boost the economy and not just help banks make easy money......"

bbwwwahahahahahahhhhaaaahahhahahhahahah!!

good one ben

Tue, 01/24/2012 - 14:34 | 2093274 Herd Redirectio...
Herd Redirection Committee's picture

Very difficult to win back your audience after a ridiculous statement like that.  What, does that belief help them cling on to their day-to-day reality?  Does it give them purpose or hope?  Basically, it sounds to me like making excuses for why we shouldn't get rid of the Fed!  Because their intentions were good, honest!

 

Ridiculous.  It is a cartel, and they care only to maintain or increase their power and control, so as to benefit and perpetuate the cartel.  Media, banking, military industrial, + Federal gov't, these are not seperate entities as we might wish to believe, they have all been co-opted and are working for the same masters, and for the same collective purpose, to bring back feudalism and debt slavery.

Tue, 01/24/2012 - 14:45 | 2093327 JR
JR's picture

The hardboiled, steel-trap, unvarnished truth!

Tue, 01/24/2012 - 15:03 | 2093413 GeneMarchbanks
GeneMarchbanks's picture

No audience to begin with anyway. Pete is worth skimming not reading. This is now kind of expected from him. Too close to the Life Stream to be brutally honest but on occasion he tries.

Tue, 01/24/2012 - 15:15 | 2093472 gabeh73
gabeh73's picture

"I do believe their intentions were to boost the economy and not just help banks make easy money.  In spite of their intentions, they have failed and I think it is because they are clinging to two flawed assumptions."

 

You seem to be lying to yourself Peter. Do you also think Donald Rumsfeld went over to give Sadam chemical weapons and billions of dollars and shook his hand with a shit eating grin because he thought that would be a good way to spread freedom, peace and economic prosperity for future generations?

Do you also think that Al Gore and Obama want to put a carbon tax in place because they are so worried about how we might have warmer weather over the next 100 years and if we would jsut increase taxes it would benefit all of us?

Do you also think Warren Buffet wants higher taxes because he is so worried about my child's economic future and he thinks him supporting more taxes will help out?

Tue, 01/24/2012 - 23:26 | 2095216 Problem Is
Problem Is's picture

Where's the +5 Button?

Excellent analysis and examples, gabeh...

Tue, 01/24/2012 - 16:03 | 2093698 Corn1945
Corn1945's picture

Agreed. This clown just totally descredited himself.

Tue, 01/24/2012 - 14:36 | 2093276 Buckaroo Banzai
Buckaroo Banzai's picture

Yeah let's check our assumptions here. What if the Fed was simply trying to (a) devalue the dollar in order to devalue the debt [At a 20% real inflation rate, the real value of the federal debt can be chopped roughly in half over 3.5 years] and (b) transfer real wealth from savers to the insolvent [aka banks] via a siphon that has a 20% inflation rate on one side of the hose, and a 0% savings account interest rate and 1% bond interest rate on the other side of the hose, and (c) transfer wealth from the working poor to the insolvent [aka banks] via a 30% credit card interest rate.

Seems like their plan is working just fine to me.

Tue, 01/24/2012 - 14:45 | 2093321 pods
pods's picture

Funny how they accidentally did this while trying so hard to help the economy?

pods 

Tue, 01/24/2012 - 14:45 | 2093315 JR
JR's picture

How long, oh Lord, must we toil in the vineyard of a Fed with “good intentions”?

By now, those individuals who decline to identify the private central bankers’ intentions to spearhead policies to enrich themselves are part of our problem.

Those who exist in an occupied country fight either on our side or on the other. “Inaction and neutral thoughts fight for the other side.”  Count the facts and avoid imagination.

 Conclusion: the Fed is just another gang of tyrants.

Tue, 01/24/2012 - 14:51 | 2093347 The Big Ching-aso
The Big Ching-aso's picture

 

 

Ben looks honest therefore I believe him.   Hey, when does American Addle come on?

Tue, 01/24/2012 - 23:29 | 2095221 Problem Is
Problem Is's picture

The Bernank looks like Corzine's cue-bald brother...

Now, that's honest looking...

Wed, 01/25/2012 - 00:53 | 2095434 StychoKiller
StychoKiller's picture

Raise the discount rate to 2+% AND slam the window shut on the Banksters fingers...

Tue, 01/24/2012 - 14:29 | 2093250 EZYJET PILOT
EZYJET PILOT's picture

All due respect Mr Tchir, but the Fed couldn't give a flying f@@k about anyone apart from somebody with access to the odd billion or two. Give it up, they are not here for our benefit. They are indeed for the banks and owned by the banks, end of story, no amount of clever analysis will change this, you cannot over analysis the damn right obvious!

Tue, 01/24/2012 - 14:29 | 2093251 The Axe
The Axe's picture

you must have read john Taylors new book.....ha ha     I wish they would listen.....

Tue, 01/24/2012 - 14:28 | 2093252 SDRII
SDRII's picture

Why not just decree a special dividend and give everyone a raise. Welcome to wonderland

Tue, 01/24/2012 - 19:26 | 2094479 W10321303
W10321303's picture

Increase interest rates or 'give everyone a big raise' c/o 'Mad' Max Keiser

Tue, 01/24/2012 - 14:31 | 2093264 BLOTTO
BLOTTO's picture

I'll tell you what is bro/ken - the whole system. 

You want to know what the plan is... *looks*around* 'Their is no plan - thats the plan'

Life is a big fat lie... and we let it happen.

Reality is their illusion

Their fiction is the reality.

Tue, 01/24/2012 - 14:32 | 2093266 Conrad Murray
Conrad Murray's picture

The Fed should be burnt to the ground with everyone still inside.

Tue, 01/24/2012 - 14:39 | 2093292 francis_sawyer
francis_sawyer's picture

wait!... is there still time to round up a few others & stuff 'em in there before we light the match?

Wed, 01/25/2012 - 00:55 | 2095440 StychoKiller
StychoKiller's picture

Tell the 535 in Clowngress that JPM is giving away free bribes (oops, I meant "campaign contributions") at the Fed building(s)...

Tue, 01/24/2012 - 14:56 | 2093380 resurger
resurger's picture

2013 will mark the 100th anniversary of World Wide Sodomy by the Private Corporation "The Federal Reserve"

Hope it will be the last one...

Tue, 01/24/2012 - 14:40 | 2093298 The Fonz...befo...
The Fonz...before shark jump's picture

the road to hell is paved with good intentions

 

and brother...believe you me the fed is bringing hell to the world

Tue, 01/24/2012 - 14:40 | 2093299 kurzdump
kurzdump's picture

I thought Bernanke already told us what he is going to do back in 2002. Buy bonds with both hands, all over the world and devaluate the dollar. In other words he's going to bail out the whole world (not iran of course). Sounds great, doesnt it? Bernanke has to print way faster than other countries can to resurrect the american economy. 

Tue, 01/24/2012 - 14:41 | 2093305 pods
pods's picture

Speaking of assumptions, this whole article is based upon the thought that the FED is looking out for our best interests.

pods

Tue, 01/24/2012 - 14:42 | 2093307 moroots
moroots's picture


Reasons for abolishing the Federal Reserve:

1) It is incapable of accomplishing its stated objectives.
2) It is a cartel operating against the public interest.
3) It is the supreme instrument of usury.
4) It generates our most unfair tax.
5) It encourages war.
6) It destabilizes the economy.
7) It is an instrument of totalitarianism.

(from "The Creature from Jekyll Island" by G. Edward Griffin)

Tue, 01/24/2012 - 14:47 | 2093336 Dr. Engali
Dr. Engali's picture

Good book.

Tue, 01/24/2012 - 14:53 | 2093358 resurger
resurger's picture

hmm. need to check that book +1

Tue, 01/24/2012 - 14:45 | 2093309 Dr. Engali
Dr. Engali's picture

Does anybody really believe that the Fed is trying to stimulate the economy? It's more like the fed is trying to mask over the economic problems by artificially boosting stock prices, at the same time transferring wealth to the banks via debasing the currency. The only mechanic that needs to be hired is Ron Paul to dismantle it.

Tue, 01/24/2012 - 14:47 | 2093332 kurzdump
kurzdump's picture

The Fed can manipulate stock prices, bonds, statistics, however they cant manipulate the reality. I dont think this will work for more than half a year anymore. I'd definately go short reality.

Tue, 01/24/2012 - 15:24 | 2093525 The Deleuzian
The Deleuzian's picture

The wealth effect via stock market performance is a fading phenomenon at best...It will continue to fade as more 'boomers' sell their equity for retirement...I don't know too many Xer's that want $ in stocks and I don't know any 'millennials' that own stocks at all!!!

Tue, 01/24/2012 - 14:53 | 2093362 JR
JR's picture

Yes, a mechanic along with a detonation expert!

Tue, 01/24/2012 - 14:46 | 2093335 debtor of last ...
debtor of last resort's picture

I'm middle class. And i agree. 2 maple leafs instead of 1 jeans made in China. F*ck.

Tue, 01/24/2012 - 14:56 | 2093375 wcvarones
wcvarones's picture

Exactly!

How about a Fed-printing-financed tax rebate?

 

http://www.wcvarones.com/2010/07/devaluation-is-only-way-out.html

 

Tue, 01/24/2012 - 15:14 | 2093469 Sandmann
Sandmann's picture

They should have abolished FICA and simply credited ther payments to the Fund instead of bailing out Wall Street bonuses and prohibited foreclosures. But it is all Top Down because the Politician Payment Dollars flow in at the top level.....how many lobbyists does JP Morgan maintain at 601 Penn Ave in DC ?

Tue, 01/24/2012 - 14:57 | 2093388 London Banker
London Banker's picture

Securitisation broke the transmission.  Once banks had loans off their books, they stopped having a direct interest in credit performance.  In the past, as rates fell, banks would be motivated to pass the lower rates on to their customers in refinancings so that the customers would be more likely to perform on their loans and not default. As the customer's ability to service the debt improved, they could borrow more, and the bank would grow its loan book.  Lower interest payments were like permanent increases in income to customers, so they could spend them and grow the economy.

With securitisations a refinancing is a prepayment that diminishes the value of the MBS/ABS security.  As banks hold these securities as investments and capital, they don't want prepayments - and they don't want lower yields either.  As a result, banks discouraged as both lenders and investors from passing lower rates to customers. 

Also, before the repeal of the McFaddden Act (prohibiting interstate branching), banks were much more local businesses with a continuing relationship with a customer.  Now with mortgages and credit cards concentrated in a few mega banks, the banks have no personal interest in their customers. 

Tue, 01/24/2012 - 16:03 | 2093691 JR
JR's picture

As usual, Londn Banker, that explains it all, If you're listening, Tyler, do your best to enlist London Banker as a contributor!

Tue, 01/24/2012 - 16:06 | 2093706 oogs66
oogs66's picture

They should be making it easier to get banking licenses not harder. Community banking will return - the big banks have failed

Tue, 01/24/2012 - 16:57 | 2093885 JR
JR's picture

Exactly right. On a leftwing “progressive” radio program today, a caller suggested that Obama use his executive order power to charter 10 new banks that would provide loans to small businesses and be limited to that service. Neither the host nor myself knows whether this is possible, but the caller suggested that FDR managed the Congress in the direction that he wanted his financial policies to go.

Tue, 01/24/2012 - 14:57 | 2093389 HD
HD's picture

The wants to fix the economy from the top down...while the base crumbles.

Tue, 01/24/2012 - 14:57 | 2093391 flow5
flow5's picture

The FED doesn't even know what the monetary transmission mechanism is.  They destroyed the money market with IOeRs.

Tue, 01/24/2012 - 15:36 | 2093417 zrussell
zrussell's picture

The Global Bankers (FED) have found themselves way ahead of schedule in that they totally underestimated the unbridled corruption and greed of the people they are manipulating. I believe they are actually shocked by their current success and are desperately trying to prevent world economic collapse, which is not the end-game of their agenda. They need more time before they pull the walls of the current structure down and reveal the new ones. The MSM and market/interest rate manipulation are their main tools to buy them time.

Agenda:

- Globalize world economic, political, social, and religious systems,

- Consolidate the usury banking system,

- Repossess property from the public,

- implement unilateral socialism.

Tue, 01/24/2012 - 15:05 | 2093422 Everybodys All ...
Everybodys All American's picture

Brian Sack is already buying the IWM ... What else can you need?

Tue, 01/24/2012 - 15:06 | 2093424 ekm
ekm's picture

No need for mechanic. They have the Plunge Protection Team that is buying out all the market. Wait until 3.15.

Tue, 01/24/2012 - 15:06 | 2093435 SmoothCoolSmoke
SmoothCoolSmoke's picture

Meanwhile, back at the ranch, grandma is BTFD.  Unreal.

Tue, 01/24/2012 - 15:31 | 2093557 Solon the Destroyer
Solon the Destroyer's picture

The fraudulent accounting treatment of government securities on the books of banks is another reason why the Fed is pushing on a rope.

Why would the banks lend when they can front run the Fed's bond purchases, or, in the worst case scenario, hold them on their books at par even if the bond has lost value? No other business can get away with this accounting fraud.

In the end, the Fed will have to continue to promise bond speculators that bond prices will continue to rise and that the Fed will provide a bid of last resort. In this way the Fed actually works against its goal of getting the prices of discretionary goods to rise (falling yields destroy both productive capital and future business sentiment), this is a vicious spiral ensuring the coming deflationary collapse (although it might take quite some time as bond yields can be halved indefinitely). In other words, the Fed is the engineer of its own failure, quite unintentionally.

Tue, 01/24/2012 - 15:38 | 2093575 Questan1913
Questan1913's picture

Dream on Peter.  Enjoy the comfort of your self delusion.  Reinforce the delusions of others.  When reality is too frightening and shattering to accept it is shunned, as plague would be.  Better to exist in the warm comforting cocoon of establishment soothesaying than contemplate that which is........too horrifying.  Totally understandable.

Tue, 01/24/2012 - 15:37 | 2093583 dcb
dcb's picture

Ok,  what you state (the Op is a given), if we assume the idiots at the fed aren't stupid, they realize it as well. since they aren't addrrssing what you describe, it means they don't want to. therefore, any anyalsis worth a damn has to include an analysis of what the real motivatio9ns of the federal reserve are. avoid what is said, and only look at policy, and who benefits.

1) the vast majority of the feds polices are designed to cover up their faiures in the crisis, so making sure we don't realize the banks are insolvent, and getting them money under the table so they stay solvent, this cqn happen many ways. So, you look at how the policy hlps the banksters, and follow the money.

 

the fed was against lowering credit card rates based on the fed funds rate, plus we still have a very high debit card transaction fee. Lets add the fed has done everything inntheir power (despite whqat they say) to keep the public blind to what they are doing behind the scenes. no real audits, no audit on a regular basis.

 

the fed knows what's going on, tey don't give a fuck about mainstreet, only getting the banksters money. I have written multiple times to the nytimes (krugman) talking about hwot eh problem is in transmission and it doesn't matter if loose money conditions are in effect if transmission mechanisms are broken. it's something krugamn refuses to acknowledge. so you have to ask who benefits from the broken transmission mechanism.

 

they don't cling to the wealth effect, and I don't think they are stupid enough to believe it. it may happen in the circles they fly in 9the very welthy), but it's a talking point. it's a rational to get money to the bankerrs, banker frends, etc. remember these companies own many assets. keeping them high is good for the banks, good for bonus, etc.

 

it's all about the banks, bankers suckers!!!

that's the analysis. do that analysis on a regular basis and you will discover lots. it's called a black box analysis. ignore th rhetoric, pay attention to imputs, outputs, assumed it done on a rational matter, determine what the real story is.

Tue, 01/24/2012 - 15:40 | 2093588 W10321303
W10321303's picture

Enforce the anti-trust laws. No need to re-invent the wheel. Make banks public utilities. Classify 'investment' banks as licensed casinos under racketeering laws. No rocket science here.

Tue, 01/24/2012 - 19:24 | 2094473 W10321303
W10321303's picture

Charter 10 new banks to introduce some capitalism....c/o 'Mad' Max Keiser

Tue, 01/24/2012 - 15:57 | 2093667 Bunga Bunga
Bunga Bunga's picture

I got mail from my American credit card company yesterday. The letter said I had been selected as a very valued customer after many years for a 18% APR. WTF?

Tue, 01/24/2012 - 17:00 | 2093674 ebworthen
ebworthen's picture

Sounds like the FED needs to soak their string with carpenter's glue.

Tue, 01/24/2012 - 16:02 | 2093677 sbenard
sbenard's picture

I would add to this article two additional points that also support the author's conclusions

1) Low interest rates also rob savers, and especially seniors, of an honest return on their dollars. Thus, with fewer dollars to spend, saver-seniors spend less in the economy, including gift-giving.

2) The "wealth effect" also causes inflation, and this hurts everyone, but its hurts the poor and middle classes even more. Thus, the artificial stimulation is counter-productive. In other words, Bubbles Bernanke has shot himself in the foot!

Wealth effect? Hogwash! It's destroying us instead!

Tue, 01/24/2012 - 16:01 | 2093681 non_anon
non_anon's picture

guv motors is on it!

Tue, 01/24/2012 - 16:02 | 2093688 Corn1945
Corn1945's picture

Peter once again demonstrates that he is the worst guest poster on Zero Hedge. He is either spouting totally wrong bullshit (like this "article") or doing 100% rear-view mirror "analysis" like RobotTrader.

This is another poor quality post. Boot him off once and for all.

Tue, 01/24/2012 - 16:18 | 2093762 ekm
ekm's picture

IIIIIIIIIIIIIIIITS 3.15 PM

LETS WELCOME THE PLUNGE PROTECTION TEAM.

Tue, 01/24/2012 - 16:23 | 2093772 Bunga Bunga
Bunga Bunga's picture

We should better hire psychatrists for them. Their mechanics does never work in reality or has anyone ever seen a working ponzi machine except a nuclear bomb?

Tue, 01/24/2012 - 16:40 | 2093824 undercover brother
undercover brother's picture

at this point, only a full scale revolution will be enough to change the establishment.  electing ron paul won't solve this problem simply because it won't be in the best interests of anyone else in congress and their benefactors to go along with him.  just like nothing will happen with congessional term limits or congressional pensions, or congressional insider trading laws, or congressional campaign finance or anything that will reduce the power and scope of the establishment.   sorry folks, an election just won't get it done/

Tue, 01/24/2012 - 17:05 | 2093916 lesterbegood
lesterbegood's picture

The Fed should hire a mortician.

Tue, 01/24/2012 - 18:22 | 2094261 sasebo
sasebo's picture

Lets see ------

We've got some producing some GDP & consuming some---

We've got some helping to produce some GDP & consuming some ----

We've got some not producing some GDP & comsuming some ----

And what are those consuming more GDP than they produce or help produce or don't produce use to consume some GDP? Debt. Either money they borrow themselves or money the guvmunt borrows & gives them. And who owns this debt? The banks. And where do the banks get the money to loan the debt? From savers and/or the fed. And where do the savers get the money? They save it. And where does the fed get the money? They go to their computers & generate it out of thin air.

And when does this scheme of using debt & money created out of thin air to consume GDP end?  When there are too many people living on credit.

Tue, 01/24/2012 - 19:22 | 2094470 Stuck on Zero
Stuck on Zero's picture

Peter states (with reference to the Fed):

"... maybe they should sit back and figure out why their policies seem to be doing so little."

The Fed is thrilled with the results of their policies.  They have transferred trillions of dollars from the U.S. Treasury into the hands of their billionaire buddies.  How could you think their policies have done little?

Tue, 01/24/2012 - 20:43 | 2094660 Bansters-in-my-...
Bansters-in-my- feces's picture

The "FED" should "Fuck Off and Die"
Thats what the FED should do.

Tue, 01/24/2012 - 21:25 | 2094738 cristo
cristo's picture

Ben S. Bernanke
If faced with continuous depression
1. I'll lower interest rates to zero.
2. I'll buy the securities from the banks to expand feds balance sheets.
3. I'll increase the money supply
4. I'll buy our country's debt
5. I'll devalue the dollar 40% like FDR did.

needless to say that 1-4 has already been done. is #5 really on the horizon?

quote from the burnak

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

Deflation: Making Sure "It" Doesn't Happen Here

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation "

Wed, 01/25/2012 - 06:37 | 2095732 The Navigator
The Navigator's picture

Shit, I read the headline wrong - I thought it meant Mechanic like the Charlie Bronson movie The Mechanic - the Fed surely has money enough for these types of mechanics and I'm sure they've employed them in the past.

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