The Punchline In His Own Words: Bernanke Advocates Blowing Asset Bubbles As The Antidote To Depression

Tyler Durden's picture

If there was one absolutely must see moment exposing everything that is broken with the Fed's brand new policy of QE-nfinity, it was this exchange between Reuters' Pedro da Costa and the Chairman. It explains, beyond a reasonable doubt, that the only goal the Fed now has is to reflate the stock market bubble to previously unseen levels, to focus on generating jobs although not for everyone but only for Wall Street, consequences be damned, because by the time the consequences arrive, and they will (just recall that subprime is contained) they will be some other Fed chairman's problem. Bernake's term mercifully runs out in January 2014.

From the official transcript:

QUESTION: My question is -- I want to go back to the  transmission mechanism, because speaking to people on the sidelines of the Jackson Hole conference, that seemed to be the concern about the remarks that you made, is that they could clearly see the effect on rates and they could see the effect on the stock market, but they couldn't see how that had helped the economy.

 

So I think there's a fear that over time this has been a policy that's helping Wall Street, but not doing that much for Main Street. So could you describe in some detail, how does it really different -- differ from trickle-down economics, where you just pump money into the banks and hope that they lend?

 

BERNANKE: Well, we are -- this is a Main Street policy, because what we're about here is trying to get jobs going. We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective. Our tools involve -- I mean, the tools we have involve affecting financial asset prices, and that's -- those are the tools of monetary policy.

 

There are a number of different channels -- mortgage rates, I mentioned other interest rates, corporate bond rates, but also the prices of various assets, like, for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they'll feel more -- more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they'll, you know, make a better return on that purchase. So house prices is one vehicle.

 

Stock prices -- many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend.

 

One of the main concerns that firms have is there's not enough demand. There are not enough people coming and demanding their products. And if people feel that their financial situation is better because their 401(k) looks better or for whatever reason -- their house is worth more -- they're more willing to go out and spend, and that's going to provide the demand that firms need in order to be willing  to hire and to invest.

And there you have it. 



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Bertie Bear's picture

What a cock Bernanke is. Can't he be posted to the vacant Libyan ambassador vacancy?

Pladizow's picture

Dealer Ben has made the crack head, AKA Mr. Market, happy again!

But the quest for that virgin high will never again be attained!

Michael's picture

I 100% guaranteed QE3 to all my clients so they could get filthy rich too, or they could put a bullet in my head should I fail.

Thank the Creator I'm off the hook now.

Bernanke's Royal Mess!

http://www.youtube.com/watch?v=8DsSmMBWBdE

Quantitative Easing Explained

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=fvwrel

This is my fucking Plan!

To have the Federal Reserve Corporation stuffed to its fucking rafters with mountains of stinking toxic waste fecal matter, that it destroys itself from within and blows itself up.

It's a very complicated plan. I've been working on this plan for a very long time.

Now just go along with it and shut the fuck up about it.

Dr. Richard Head's picture

My close friends call me Bubbles, so Ben can blow me. 

economics9698's picture

Fuck everything the Fed does is a mother fucking bubble.  What else can they do?  Its not like it’s a legitimate organization, it’s the fucking mafia with a printing press.  McKinley was killed so these motherfuckers could print.

Boris Alatovkrap's picture

Is 77 km/h or mph? Is not so fast for drag race, no!?

Michael's picture

Tony Blair Appointed Senior Advisor to JPMorgan Chase

Tony Blair Confronted At Leveson Inquiry

http://www.youtube.com/watch?v=hmKHUjYDqCI&feature=relmfu

blunderdog's picture

Another sheep is awoken to life in a totalitarian police state. 

Can't say she didn't have it coming.

NotApplicable's picture

Meanwhile, Fortunata has broken Gensler's ribs just in time to prevent the prevention of the next MFG PFG.

http://dealbook.nytimes.com/2012/09/10/with-gensler-in-hospital-agency-s...

Seer's picture

As the PNAC document stated, you cannot make any big changes unless there's a BIG KABOOM somewhere.

I have ALWAYS felt that the Fed was going to act as the black hole and swallow all the SHIT up, and that, because it's actually NOT part of the US govt, it IS a big element of govt deniability.

We'll eventually get the part of our wish that asks for the Fed to go away.  The thing is, however, that that which replaces it will wield the power of a drone (exempt from legal parameters, commandable by the Executive- don't like what they tell you to buy? suck on this you terrorist! back to work on those Volts, China has an order coming...).

iDealMeat's picture

I'm curious if this whole QE-nfinity thing has more to do more with China then anything else..

 

Where is Xi? 

NotApplicable's picture

More like TINA.

Without QuEnfinity the ZIRP regime blows up quick like.

This way, they still have time to steal everything they don't control (before it blows up anyway).

sickofthepunx's picture

since the congress will do absolutely nothing to address the situation:  the bernank has no choice but to pull out the bazooka.

 

 

NotApplicable's picture

Bernanke as Marvin the Martain? Perfect!

"Where is the big kaboom? There's supposed to be a big kaboom! You are making me very, very angry!"

Just Ice's picture

 

 

So far treasury bond prices aren't too happy with the Fed's renewed dollar debasement or the commodity bubble it's reinflating.  Guess we'll see whether they've  succeeded in creating an echo "kaboom" in the bond market...as yet another unintended consequence. 

asteroids's picture

This is a bank bailout of almost $2T,  $40B*12*4. Buy MBS securities, that are worthless on the open market at par from the banks and bails them out. The FED will in effect become the worlds largest slum lord. The debt to be transfered to the US citizen, at par! What an outrage.

Michael's picture

The debt accumulated by The Federal Reserve Corporation doesn't belong to the American people.

It belongs to the share holders of the privately owned Federal Reserve Corporation.

cougar_w's picture

Yes, and it would take just one MOU to transfer all that debt to the US Treasury, perhaps via one of Fanny/Freddy. Failing that, the US Congress could "get religion" and "abolish the Fed" as so many seem to want -- and in the runup to elections there might be incentives -- and with 100% certainy Congress will then create a bad bank run by the Treasury to liquidate those surrendered assets at mark-to-market.

There is no way around the conclusion that The Fed will one day off-load this toxic crap at par onto the unwary American public, all in the name of "accountability".

Captain Benny's picture

You're correct, however the depreciation of the "dollar" or Federal Reserve note is in fact a tax upon any holder of that debt.  Thanks to the Federal government mandating the use of Federal Reserve notes for pretty much every transaction, the citizens are left holding the bag.  So yes -- Its all Americans and people overseas holding dollars that end up feeling worse off.

NotApplicable's picture

Yep.

Their "liability," our problem.

catacl1sm's picture

Of course with the FED being the UST buyer of last resort, and largest hold of said UST's, it has a lot of sway over the Treasury and Congress to ensure that it gets what it wants.

20-20 Hindsight's picture

Of course, we are all furious and preaching among our (converted) selves.  But what I'd like to know is the hell is happening at the political level in the U.S.?  Is Bernanke getting away with this completely?  If so, I find this equally outrageous, as this means that the entire political system is corrupt  -- which I actually suspect is the case...

samcontrol's picture

OT not really..

Raul
paul. live on bloomberg ROCKING. , justperfect...

If i remember correctly , he was way sloooooooower in the debates. , i reckon he was druged , garanteed!!!

not politics i'm frenchi living in patagonia , don,t take sides but i like HIM.

1% of media minutes are not BS.

marriedgeordie's picture

A truly elaborate punishment for a jew, indeed

redpill's picture

Q: Why is the central banker's playbook only a single sheet of paper?

 

A: To save paper for printing money!

Dalago's picture

My name is Ben Bernanke and if you don't want to spend we'll try to coerce you into spending.

redpill's picture

Kind of like a fat guy stuck on a deserted island is coerced to go on a diet.

Dr Benway's picture

"We will artificially inflate the price of an asset you have a loan against, so you will feel richer and spend money you do not actually have." Brilliant, can't go wrong.

knukles's picture

"Au contraire" (get it Au, snigger) to merely further inflate the stock bubble.

Dr. Knukies thinks it's much more nefarious and dangerous than that...
Knuks thinks it's a complete and undercover surrender to targeting NOMINAL GDP.

Meaning to hell with the 2% implicit inflation target, the whole world is going to hell in a handbag, everybody knows it full well, nobody's that stupid, we're all caught in one hell of a Liquidity Trap(due to the Credibility Trap)so the default is to reflate in hopes that both nominal and real GDP accelerate since where we be the Immediate Risk is Deflation.

Just sayin' that's what they's believes and is consistent with such a policy undertaken just before an election......

Oh down the road when V picks up, it's gonna end really fucking bad.
Gonna make the '70's that Volcker dealt with look like kid's make believe Lego Land shit.

What MORE could go wrong?

 

 

knukles's picture

Essentially.
The only way out is to simply let the De-leveraging process take it's full course.  While everything being done's the opposite, trying to vainly prop up real and nominal economic activity, asset prices, anything and everything.
In the near term, it's deflation being the enemy (or else they'd not do what they're doing, a QED.)
But once for whatever reason, the Velocity of money rebounds it's gonna be Katie Bar The Door, all ya'll gonna wanna own are real assets.

But that ain't tomorrow... V must rebound before the Big RepricingTM

Yes, we're miserably, irrevocably, damnably and forever, trapped, fucked, sucking the 1%er's cock.... since all the high powered money once again flows in to insured depository institutions which will take tons of risk to produce exceedingly large bonus pools and campaign contributions while Playing Grand Theft Country, with Impunity.

Assetman's picture

Dr. Knukies thinks it's much more nefarious and dangerous than that...
Knuks thinks it's a complete and undercover surrender to targeting NOMINAL GDP.

Unfortunately, I think you're right.

cougar_w's picture

Yup yup.

The only kicker is Euroland. And ChIndia. If things go absolutely ape-shit in the rest of the world then hot money might flow into the US as a flight to (relative) safety reinflating the banks and asset classes, meaning Ben could then withdraw QE.

I think QE3 this time is less a strategy and more a tactic, with a window of about 3 months to be effective. Ben is keeping a window of opportunity held open a little longer than he might have been able to without QE, and he's hoping it is just long enough to witness the total collapse of everything else in the universe.

In a race to the bottom, who arrives last is the winner.

Mentaliusanything's picture

I'm very confused! I must have a very low IQ because Ben's Plan appears to be to get home prices to rise so people will "FEEL" wealthier. But if home prices rise don't those who are buying need a larger deposit with saved money (not earning interest) If homes are more expensive won't you need a bigger loan to pay for them? Does this not punish the borrowers? I would have thought that lower home prices would mean less cash spent on renting from the bank and more available to spend on consumer goods.

I am confused as to why he would want to "Push on a string" because I know if all house prices rise, there is no advantage only larger debts to be repaid by the next owner of the debt. Higher stock prices mean nothing if you haven't sold them, perceived wealth does not exist until its realized in usable assets.

One thing for sure, Ben is following , to the exact letter, what he wrote about all the tools a Central Bank could use. Its His script and he is sticking by it. Pity it's Fiction and nothing to do with real economics. But its a good Theory that has failed over and over again throughout the History of Fiat money.

We and all we own belongs to the Bearded Bubble Blowing Retarded Narcissit who makes the "Greenspan Nightmare" seem like a childs dream.

When it blows up its going to spatter the entire World with a stench of burnt paper and broken dreams

Who could have thought that things are so bad that they would risk financial Armadagon to save a few lousy Banks for a while longer?

Time to build a deeper and wider Moat

slaughterer's picture

Question for Tyler: when does the S&P start going down DESPITE QE (like the Nikkei did)?

A Man without Qualities's picture

From now.  He's used his last bullet and and the wrong time.  The market is going to realize he's maxed out in terms of assets he can buy and none of this puts any of the money were it needs to be, nor will it create jobs.  

 

 

mmlevine's picture

The market won't ever go down cause the Fed will just buy stocks/futures/options.

cougar_w's picture

Maybe in some things.

But listen ... you hear that grinding, devouring, soul-stealing sound just around the corner? That is the death-spiral of massive global deflation.

Not much will endure once it is in the grip of deflation. Euroland is probably right on the event horizon. That entire complex could implode over night and not return to a civilized state for a generation. China -- who the hell really knows what is going on in China. Nobody is buying, so how long can they keep channel stuffing their way to 8% GDP growth? Not very long now.

Ben has seen the future, and it is a black pit of run-away collapse. He is going to re-flate like a mo'fo' now, damn the critics. If he has to mumble useless crap about jobs and Main Street, then fuck you he will. From where he's sitting, in a year or less everyone will be too busy scrambling to hold him or anyone else to account for what was said.

This whole episode is giving me the creeps. If Ben had wanted to telegraph to the world that our collective ass is grass, well he just did it.

walküre's picture

By kicking the can this far they effectively ran out of road.

Both ECB and FED pulling out all stops can mean only one thing.

WE ARE TRULY FUCKED BEYOND REPAIR

steve from virginia's picture

 

People are getting their underwear in a 'twist' about something that doesn't matter very much. Monetary policy solves nothing: at this point easing is fatal, so is not easing. There is nowhere left to turn ...

 

When the central bankers promise the children that they will save them, the children act accordingly even though the fact of the central banks having to make such promises speaks for itself. When the Fed and the rest are the last line of defense, there really is no last line of defense.

 

As usual, watch petroleum prices. Monetary policy either has diminishing effects ... or unintended consequences. It's likely the crude prices won't rise much if at all. Which means the central banks have run out of bullets and there are no means to end bank/currency runs which will in turn accelerate. 

 

That in turn means declining crude prices, shut in supply (permanently shut in supply) and shortages (permanent shortages).

 

THEN the shit will hit the fan.

cougar_w's picture

It might be different this time. The tell will be an unexplained drop in crude prices with increasing stocks, as demand for anything and everything simply falls off a cliff.

I have long held that humans will greedily devour every last drop of crude oil at any price, and that the price will in response go through the roof over time. But what if people simply give up? What if deflation steals their livelihood and then every liquid asset they have, leaving them nothing?

There is a reason why they call deflation a death-spiral.

Seer's picture

What, and deny US citizens the opportunity?

DoChenRollingBearing's picture

BLOW my gold asset bubble, bernanke!

Boston's picture

And don't forget our silver and platinum bubbles!

These three pm's are my biggest "investment" after Treasuries.  So keep it up Ben. You keep printing and I'll keep counting my metal gains.

Today was a VERY good day!