Guest Post: The Fed Has Failed, Failed, Failed

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

The Fed Has Failed, Failed, Failed

Bernanke knows QE3 will fail to revive the real economy, but he doesn't care; his real job is to protect the Fed's political power and the banking sector's wealth.

The unleashing of QE3--unlimited money-printing in support of the financial Status Quo-- is proof the Fed has failed, failed, failed. If anything the Fed has done in the past four years had actually had a positive consequence in the real economy, Bernanke would have identifed that policy and expanded it in a measured response.

Instead he went all-in, emptying the Fed's toolbox in one big dump: unlimited money-printing, unlimited propping of the mortgage market, unlimited support of low Treasury rates and three more years of zero-interest rate policy (ZIRP). Here is the translation of the Fed Chairman's public comments: whatever. Did you see any of his testimony? It was painfully obvious that either 1) he was sky-high on Ibogaine or 2) he was just going through the motions, duly enunciating PR "cover" that he finds tiresome to repeat and impossible to say with any sincerity or conviction.

His body language and delivery said: "You think I believe this canned shuck and jive? Get real, chumps."

Here is the key quote from his remarks:

"If people feel that their financial situation is better because their 401(k) looks better for whatever reason, or their house is worth more, they are more willing to go out and provide the demand."

The key phrase here is "for whatever reason." In other words, it doesn't matter how artificial or phantom the increase in their assets may be, any increase is presumed to be good enough to trigger a "wealth effect" euphoria that generates a pressing urge to borrow and spend money.

It is clear Bernanke's policies have failed to spark a "wealth effect," even though the stock market has more than doubled from its March 2009 low.

The reason for this is self-evident: 93% of all stocks and bonds are owned by the top 10%. The bottom 90% feel little if any wealth effect from a new bubble in equities.

The other factor is the legitimacy of the rise in asset valuation. People have been burned twice in one decade by Fed-blown asset bubbles, and they can now discern the difference between an organic expansion of assets based on a healthy increase in demand driven by higher wages and productivity and a central-planning bubble based on shadow intervention and massive money-printing.

Are the Fed governors really so intellectually incontinent that they can't recognize that the jig is up, and people now understand the difference between central planning manipulation and a legitmate Bull market? No, of course not.

Bernanke knows QE3 will fail, but he doesn't really care. His job is to protect the Fed's political power and the banking sector's wealth. He is doing an excellent job at his "real" job while failing catastrophically at his PR job of reviving the real economy and employment.

It's no secret that the Federal Reserve exists for one purpose--to protect the wealth and power of the banks. This can be illustrated by one question: does the Fed loan funds at 0% to households or communities? No. It loans "free money" at 0% to the banks so they can loan money to students at 7%.

When the banks get in trouble, the Fed rushes to loan them $29 trillion. When a student gets in financial trouble, he is hounded for the rest of his life by rapacious debt collectors.

Despite the transparency of its raison d'etre support of a neofeudal financial Aristocracy, the Fed presides in a nominal democracy and thus faces increasing political pressure as its public PR goals--maintaining stable prices, i.e. moderate inflation, and full employment--are clearly not being met.

The Fed thus needs to "manage perceptions" to maintain its facade of omnipotence and competence.

Thus Bernanke's "all-in" bet has a political propaganda angle. As a student of the Great Depression, Bernanke is keenly aware of the conventional criticism (mostly wrong, it turns out) that the Fed "didn't do enough" in the Depression.

Since it is clear that the economy is sliding into recession, Bernanke is going all-in now as a pre-emptive strike against any critics who might later claim he "didin't do enough." He knows that QE3 won't boost incomes or jobs, but he launched it as a form of defensive policy against the inevitable criticism in 2013 that the Fed "didn't do enough."

Thanks to his defensive launch of QE3, he can shrug and sigh, "We did everything possible." The blame will fall elsewhere, and the Fed will have a free hand to continue its real purpose, the defense of bank wealth.

That's the plan, but the Fed is failing here, too. Tasked by the financial Aristocracy to stave off any political rebellion that might threaten their chokehold on the U.S. economy and machinery of governance, the Fed is fanning the flames of just such an insurrection by ramping up inflation even as median household incomes plummet.

Income, Poverty and Health Insurance Coverage in the United States: 2011 According to the Census Bureau, "In 2011, real median household income was 8.1 percent lower than in 2007."

Meanwhile, back in the real world of debt-serfs and neofeudal Fed financial repression, the velocity of all that money the Fed is printing is falling to historic lows. Courtesy of our Chartist Friend from Pittsburgh, here is a chart from his knockout entry Forget The Fed And Follow The Money:

Courtesy of frequent contributor B.C., here is a chart correlating the cost of oil with the expansion of the monetary base. Surprise, surprise--the more money you print, the higher the price of oil and gasoline.

If there is one thing we can safely predict, it's the stall speed of the U.S. economy is highly correlated to the price of oil in U.S. dollars. Push the price of oil much above $100/barrel and you will push the U.S. economy into a recession that will not respond to the feeble "wealth effect" felt by a dwindling share of U.S. households.

Did anyone on the Fed Board notice that retail investors have been fleeing the rigged U.S. stock market in droves? The number of people who actually believe their stock market "wealth" is not the ephemera of Fed fumes and proxy intervention is dwindling fast. The 3-card monte game is fooling fewer and fewer serfs.

If protecting bank wealth and power means jacking up inflation, pushing down wages and flying the U.S. into the box canyon of deep recession and higher unemployment, what do Ben and his Merry Band of Reverse Robin Hoods think the consequence will be politically and socially? You know my thinking on the matter of neofeudal dominance and financial repression: Resistance, nonviolent Revolution, Liberation.

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vmromk's picture


Sudden Debt's picture

so... I guess your wife had a "not tonight honey" weekend he?


hedgeless_horseman's picture


"The Fed will spend $40 billion a month in money created out of thin air to buy non-performing mortgages from banks eager to dump them and interest rates on new mortgages will fall to record low levels. This will supposedly "stimulate" the housing market.



Pladizow's picture

Ben "The Bankers Bitch" Bernanke!

MillionDollarBonus_'s picture


The Federal Reserve Bank of the United States has two mandates:

1. Maximum Employment - By providing credit to selected Primary Dealer banks, the Federal Reserve is able to ensure that capital is allocated according to the preferences of some of the smartest and most qualified financial professionals. Naturally this produces an optimal estimate of supply and demand and helps to allocate capital for optimal prosperity. 

2. Price Stability - By adjusting interest rates and monetizing assets, the Federal Reserve is able to prevent the wild price swings and booms and busts created by the free market. In addition, the prices of assets owned by hard working Americans and financial professionals are maintained at reasonable values in the face of prevailing irrational market forces. 

With smart financial planners at the Federal Reserve, every American is a winner.


malikai's picture

Maximum employment, this must be by including the unemployed as employed.

Stable decline in the U$D is their goal.

economics9698's picture

"smartest and most qualified financial professionals."  ROLMAO  This guy is killing me.

Michael's picture

Complete and Total Worldwide Economic Collapse Bitches!

I'll accept nothing less.

"Under normal circumstances I’d say I told you so. But, as I have told so with such vehemence and frequency already the phrase has lost all meaning. Therefore, I will be replacing it with the phrase, I have informed you thusly."
— Sheldon, 4x09 The Justice League Recombination

BandGap's picture

You are a true American, sir, and God Bless.

Landotfree's picture


The Fed has not failed, they have been very successful in their mission, and it looks like they will continue the mission until someone turns out the lights.

What is the their mission.

Convince Sheeple that helicopters are coming dump cash on them to save the day, looks like sheeple think the cash is coming.   The Fed's mission is simple, expand the system as far and long as possible then watch the collapse with everyone else.   The Fed's job has never been to postpone the collapse forever as that is impossible.  The truth is the collapse was a given, nothing the Fed can do to stop it, it is only the Fed's job to postpone the given as long as possible.  The Fed has not been a failure at all, very successful, matter of fact I expect the liquidation the number of unfunded liabilities to be many times the amount of liquidated last time which was 100+ million... my guess 1-3 billion.  I would say they have been very successful in their goal.

Spoon boy: Do not try and bend the spoon. That's impossible. Instead... only try to realize the truth. 
Neo: What truth? 
Spoon boy: There is no spoon. 
Neo: There is no spoon? 
Spoon boy: Then you'll see, that it is not the spoon that bends, it is only yourself. 



Darth Rayne's picture

I agree.

I believe their mission was to get us to believe that fiat currency was worth something.

To lend as much of it as possible.

Delay the crash for as long as possible.

Own as many 'toxic' assets as possible.

When the dollar crashes to zero the assets are still assets.


Banks are not what I thought they were.

jayman21's picture

MDB - are you Jon Stewart?  The hits keep on coming.  Love the free entertainment.


WhiteNight123129's picture

Million dollar bonus you are both correct and incorrect at the same time. This is the definition of financial markets, utterly circular. I guess your real name should be billion dollar bonus, am I wrong?

TNTARG's picture


The United Nations has four purposes:

  1. To maintain international peace and security, and to that end: to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace;
  2. To develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, and to take other appropriate measures to strengthen universal peace;
  3. To achieve international co-operation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion; and
  4. To be a centre for harmonizing the actions of nations in the attainment of these common ends.

(Charter of the United Nations).

My God! They had all figured out! It was supposed to be a Perfect World! Shit. What went wrong?


"Self determination"! AH AH AH!
"Maximun employment"! AH AH AH!

"Price stability"! AH AH AH!

Let's send them all to the outerspace.

vmromk's picture

Actually, it was your sister I was trying to slip the meat to.

Sudden Debt's picture

oh.... single and frustrated he? :)

Anglo Hondo's picture

I wouldn't let him anywhere near mine.  He would just try to inflate it to no purpose.


JoBob's picture

Good Lord, VMROMK, what an intellectual comment!

larz's picture

he has had us all bent over this whole time vmromk - why would he do that?

common_sense's picture

He already is doing it with bankers... so, very rich people, that dont need the economy going right, just they need more QE for inflating the economy til the infinite...

Politician and bankers, same same same...shit!!!

What about middle class???? Need a put Bernanke ans Obama in Virgin Islands with their family and enjoy all their QE's!!! Like all that bankers putting Qe's in safe heavens... Rich people are very sensitive, oh yes, really sensitive to QE (++++money). they dont care at all about real economy, they only need MONEY AND SLAVES, SO THE BERNANKE AND OBAMA JOB, IS VERY APPROPRIATE FOR BANKERS. OH YES!!!


WhiteNight123129's picture

Bernanke just did the biggest bluff in the history of central banking...Well done Bernanke, never thought I would have said that, utterly completly superbely masterful, I wonder if he did that on purpose though. I guess no a lot of people are getting it.... CHeck the 30 years, Bernanke has just uncorked the genie of stagflation, he will stop printing in 6-9 months, Gold will sell-off in Knee Jerk, Equities will rally in Knee Jerk,(one will think that no printing = bad for Gold, and no printing = good for equities)

Then people realize Bernanke stopped the printing because the salving stagflation has arrived enabling workers to repay mortgage and credit card debts  with more confettis they will get at work, so debt shrinks.

The printing per se never augments the quantity of circulation (inflation), it is the fear of inflation which make people with money spend their money in fiat system. With Gold you can never scare them (hence necessary confiscation in 1933)

The printing is there to avoid collapse of the banking system, this last printing is a ruse to force corporation to spend their cash by making them believe he is crazy, but even if they figure that out, the prisoner dilemma will force them to spend because, if Corpation A does not do it and Corporation B does it, then B will create stagflation so you better join the corporate spending waste, because if you do not join you are worse off...Corporate Keynesianism...

If he had done that from the beginning it was crack-up boom, now it will lead to stagflation, and capital owners (bonds and stocks) fucked in the ass, commodities and Gold owner fine, beware of the sell-off in Gold when he stops, and double down because Bernanke stopping means stagflation starting....



Dactuck's picture

Agreed.  Why are we, as a nation entertaining, this conconction of lies?  In one interview, he posited that low interest rates, will help employment growth.  With smug contradiction, he also posited, that monetary growth has limited effects on employment. Pick a lie, Chairman.  He knows that low interest rates increase the relative value of stocks, but when did the S&P, become his mandate to act?  Was that Congressionally mandated?  When did the U.S, central banker, become a realtor, selling homes for a commission, telling prospective buyers to buy NOW, because you might not be able to afford it a year from now?  Is this a joke?  The chief money/credit creator is trying to create another HOUSING BUBBLE, to save US from recession.  Nice.  Didn't we JUST see how that movie played out?  

Sudden Debt's picture

Damn... It worked in SimCity2000...

what went wrong....

Cognitive Dissonance's picture

I heard that's where Bernanke did his post (grade school) graduate work. :)

Nothing To See Here's picture

Well he actually failed his SimCity exam, but his teacher accepted his excuse of not having enough computer power to make things work as he wanted...

jeff314's picture

goddam jew....

InconvenientCounterParty's picture

goddam external locus of control

jayman21's picture

This is exactly what Burns would want us to say.  It is classic divide and conquer.  Excellent Smitters, the slaves are fighting amongst themselves.


Bernack is part of the morally flexible elite.  That is the only label that should be used.  He is also useful to the centers of power who think of themselves as privileged.  If you do not think there are people who want to win at all costs and are morally flexible, you are not paying attention.  This is how they keep us down, weak, and slaves.  They start fights within the middle class by saying stupid things like this.  We choose to let this happen.  Start with personal responsibility and choose not to hate.

Darth Rayne's picture

Good point and well made.

But, Bernanke is a Slave too. He is  most certainly not one of the Elite. No Americans are. The Elite of today have been the Elite for centuries.

I am concerend that the USA never really did gain independance. I am so sorry to have such un-American thoughts.

Cazzi amari's picture

Tylers, if Bernanke was on ibogaine, he would have made a much wiser decision... maybe you meant crack?

Racer's picture

Well he uses enough botox to hide any emotion apart from the quivering lips of course and that really gives it away, time to use more botox but on his mouth this time

DaveyJones's picture

nothing 2 million IPhones can't solve

vinayjha's picture

Ben got nervous of losing job and in pressure announced all in. Common man will pay at gas station.


uno's picture

just buys time to finalize the police state

Cognitive Dissonance's picture

Plenty of thieving left to be done.

Inthemix96's picture

The fed has failed failed failed?

No fucking shit sherlock?  The mind is fucking boggling here folks?????

malikai's picture

Remember, these may be preaching to the choir here. But when written like this it can serve to help initiate the uninitiated.

Inthemix96's picture

Oh my Lulz,

God forbid some fucker does wake up????

What then????                 :-)

Shizzmoney's picture

Money is going to be harder to obtain as each round of QE is implemented for every prole in America.  How the fcuk does anyone think this is bullish?

Bernanke: "I will not monetize the debt"

Bernanke: "Americans should just go on living their lives"

Bernanke: "I shop for my own groceries"

All lies.

Although considering his son is studyign to bea doctor, and his QE will help the cost of healthcare skyrocket, it's a greta move for him, personally.

Vlad Tepid's picture

If dear old dad is smart and teaches his son behind closed doors what's really coming, his son will be training to surgically remove and harvest organs for sale and transplant.  Growth industry there.'s picture

succeeding at failing is succeeding...

TitusDuksas's picture

I tell you what succeeds, a beakless parrot.

'Proctologist' - priceless comment.

apberusdisvet's picture

The picture in my mind is Conan holding a bloody sword in one hand and Bernanke's severed head in the other.