"Subprime Is Contained" (& Other Evidence That "They Really Don't Know What They're Doing")

Authored by Jeffrey Snider via Alhambra Investment Partners,

Ben Bernanke, then Chairman of the Federal Reserve, told Congress in March 2007 that subprime was contained. He will rightfully be remembered in infamy for that, but that wasn’t the most egregious example of being wrong. Even putting it in those terms risks understating the problem and why it stubbornly lingers. Being really wrong is claiming that IOER will establish a floor for money market rates, and then finding out it actually doesn’t.

No, what policymakers did especially in the early crisis period was altogether worse; they demonstrated conclusively that though they shared this world with the rest of us, they inhabited and continue to inhabit a totally different planet.

Given the anniversary date and our human affinity for round numbers (ten years or a lost decade), there is a desire to revisit some of the worst of the list which happened just before August 9, 2007.

My favorite has always been Bill Dudley, as I recounted last at the ninth anniversary of nothing being done:

As far as the issue of material nonpublic information that shows worse problems than are in the newspapers, I’m not sure exactly how to characterize that because I guess I wouldn’t know how to characterize how bad the newspapers think these problems are. [Laughter] We’ve done quite a bit of work trying to identify some of the funding questions surrounding Bear Stearns, Countrywide, and some of the commercial paper programs. There is some strain, but so far it looks as though nothing is really imminent in those areas.” [emphasis added]

He spoke those words, recorded for posterity, on August 7, 2007, at the regular FOMC policy meeting. As noted earlier today, both Countrywide and the whole commercial paper market would be decimated really within hours from his “inspiring” confidence.

What really stands out is for Dudley to have been the one who said them, because as head of the Open Market Desk he had to be technically proficient in a way that the others could avoid (and why so often in its history policy discussions especially about these great things would often flow through whomever was the Open Market Desk chief at that moment in time). He proved still to be an empty suit like the rest, but he was always that much less of one. So if the best the Fed had to offer was so thoroughly unaware, is it any wonder what happened then and continues to happen now?

One day after Dudley’s private embarrassment, one Bank of England governor and future chief perhaps joined his level in the Hall of Fame of Famous Last Words. Meryn King remarked on August 8, 2007:

So far what we have seen is not a threat to the financial system. It’s not an international financial crisis.

He said these words at the behest of the ECB in front of the assembled press ostensibly to impart calm. Also noted earlier today, it was the European Central Bank that made the first crisis move the very next day in a record liquidity injection.

If officials didn’t realize what was happening monetarily, and they didn’t, there was obviously no way for them to predict what would happen economically. One follows the other, so if you think the monetary system is infected only with raw, mistaken emotion to be easily cleaned up by genius and effective policy intervention, then you will likewise believe the consequences to the real economy quite small and completely manageable.

In its bland policy statement that accompanied the August 7, 2007, policy meeting, the FOMC voted affirmatively (and quite purposefully) for this language:

Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy. [emphasis added]

I could go on and on with these examples, but you get the point; the main of which is to paraphrase one religious sentiment. No Money, No Economy; Know Money, Know Economy.

 

These last ten years have proved beyond any doubt in gross empirical fashion policymakers and economists (redundant) don’t get either money or economy.

Comments

Philo Beddoe Bad Goy Thu, 08/10/2017 - 13:10 Permalink

Owning this economy with plenty of slave labor.That said, I think there is a bit of an oversupply in the labor department. Pretty sure that can be jimmied with as well.What confuses me is why they keep supporting all the deadwood with free shit. Again, might be an oversite or they have a plan for that as well.Anyhow, should be fun!

In reply to by Bad Goy

eclectic syncretist DjangoCat Thu, 08/10/2017 - 13:32 Permalink

Another good one is when one of the banksters claims that the fed members have to "jawbone" or lie about economic conditions because part of their job is to inspire confidence in the economy. Well, thanks to them the economy is based on a foundation of illusions, namely that the "dollar" (or any fiat currency or "debt note") has intrinsic or fundamental value to daily life, so that because of them we are stuck in a system predicated on a lie, which is the real, underlying problem, and which they have demonstrated the intention to continue to lie, cheat, implicate, and murder in order to perpetuate.

In reply to by DjangoCat

All Risk No Reward eclectic syncretist Thu, 08/10/2017 - 14:03 Permalink

OK, where to start? The dis/misinformation is piled so thickly.

"Pretend inferiority."
~Sun Tzu, Art of WAR

This author is either a shill for the Debt-Money Monopolist or he is their cognitive B*. Either way, it doesn't matter, he's a tool of his cognitive Debt-Money Masters.

>>Well, thanks to them the economy is based on a foundation of illusions, namely that the "dollar" (or any fiat currency or "debt note") has intrinsic or fundamental value to daily life, so that because of them we are stuck in a system predicated on a lie,<<

You are right in principle, BUT COMPLETELY WRONG IN DETAILS.

Is the ability to pay mortgages valuable? Then debt-money receipts have VALUE.

Is the ability to pay loans of all types valuable? Then debt-money receipts have VALUE.

FUNDAMENTAL VALUE. Without debt-money receipts, 100 MILLION PEOPLE WOULD LOSE THEIR HOMES AND SOCIETY WOULD CRUMBLE, JUST AS IT DID, TO WHAT WILL BE DETERMINED A LESSER EXTENT, IN THE GREAT DEPRESSION.

Debt-Money systems are ECONOMIC ZERO-SUM GAMES... where the debt-money debts = the debt-money receipts (what you think of just as "money").

Poverty isn't a bug in our debt-money Trojan Horse system, IT IS A FEATURE. My guess is that 9 out of 10 Zerohedge readers won't comprehend what I just stated, or are so out of touch with reality they can't have a rational reaction to the Veritas I just shared.

The idea that our money system is like the money in a Monopoly game IS A FALSE PSY-OP DESIGNED TO DECEIVE PEOPLE.

Elevate your game:

Resources:

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton

"Power corrupts. Absolute power corrupts absolutely."
~Lord Acton

How To Be a Crook
https://www.youtube.com/watch?v=2oHbwdNcHbc

Poverty - Debt Is Not a Choice
https://www.youtube.com/watch?v=t7BTTB4tiEU

Renaissance 2.0 The Rise of [Debt-Money Monopolist] Financial Empire
https://www.youtube.com/watch?v=96c2wXcNA7A

Debunking Money
https://www.youtube.com/watch?v=5iBSBVew-3Y

Krugman (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.

Krugman to Lietaer: "Never touch the money system!"
https://www.youtube.com/watch?v=Q6nL9elK0EY

And don't think Steve Keen is any better. He was called to the carpet for not admitting the system is a fraud when it was explained EXACTLY HOW THAT FRAUD WORKED... and he tucked tail and ran away PRETENDING he was responsive...

The Principal And Interest On Debt Myth (technically correct, but practically reveals inherent fraud as exposed CLEARLY in the comments section)
https://www.forbes.com/sites/stevekeen/2015/03/30/the-principal-and-int…

Bottom line - Steve Keen won't "touch the money system" either. He learned well from his Debt-Money Monopolist Overlords.

30 sheckels of silver over THE TRUTH.

"The best way to control the opposition is to lead it and/or finance it."
~Yours truly, based upon Vladimir Lenin's quote

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
by: Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

In reply to by eclectic syncretist

GUS100CORRINA Peacefulwarrior Thu, 08/10/2017 - 13:52 Permalink

"Subprime Is Contained" (& Other Evidence That "They Really Don't Know What They're Doing")My response: We are getting VERY close to the END GAME! The financial GENIE of DESTRUCTION is OUT OF THE BOTTLE. The illuminati (via Rothchilds) and JESUITS are in control in preparation for the ONE WORLD ORDER (FABIAN WINDOW) under a very evil ruler.All the soldiers are in place which include the CENTRAL BANKS and the FAANG+M companies. All that is needed now is a TRIGGER MECHANISM to set it all in motion.Sorry about the above, but it is the way I see it based on the information I have seen to date and what the Bible says about prophecy.The DEBT PICTURE paints a very GRIM REALITY that points to a GLOBAL RESET because the DEBT situation can never be resolved.I REALLY DON'T KNOW HOW THESE CENTRAL BANKERS and BANKERS IN GENERAL CAN SLEEP AT NIGHT KNOWING DAMN WELL WHAT THEY HAVE DONE!!!!

In reply to by Peacefulwarrior

All Risk No Reward Putrid_Scum Thu, 08/10/2017 - 14:06 Permalink

>>It's what Yellen fears.<<

You are clueless.

Yellen is an employee of the Debt-Money Monopolists that orchestrated the debt-money system, the various debt-money bubbles, and the various debt-money bubble busts.

The debt-money bubble bust that looms ahead is the biggest bubble in human history AND YELLEN'S OVERLORDS WILL EFFECTIVELY CONTROL THE WORLD AS NEVER BEFORE ONCE THE BUST HAS WIPED OUT THE WEALTH OF ALMOST ALL ORDINARY PEOPLE ACROSS THE PLANET EARTH.

You need to reject your psy-op programming and search for the truth...

Resources:

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton

"Power corrupts. Absolute power corrupts absolutely."
~Lord Acton

How To Be a Crook
https://www.youtube.com/watch?v=2oHbwdNcHbc

Poverty - Debt Is Not a Choice
https://www.youtube.com/watch?v=t7BTTB4tiEU

Renaissance 2.0 The Rise of [Debt-Money Monopolist] Financial Empire
https://www.youtube.com/watch?v=96c2wXcNA7A

Debunking Money
https://www.youtube.com/watch?v=5iBSBVew-3Y

Krugman (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.

Krugman to Lietaer: "Never touch the money system!"
https://www.youtube.com/watch?v=Q6nL9elK0EY

And don't think Steve Keen is any better. He was called to the carpet for not admitting the system is a fraud when it was explained EXACTLY HOW THAT FRAUD WORKED... and he tucked tail and ran away PRETENDING he was responsive...

The Principal And Interest On Debt Myth (technically correct, but practically reveals inherent fraud as exposed CLEARLY in the comments section)
https://www.forbes.com/sites/stevekeen/2015/03/30/the-principal-and-int…

Bottom line - Steve Keen won't "touch the money system" either. He learned well from his Debt-Money Monopolist Overlords.

30 sheckels of silver over THE TRUTH.

"The best way to control the opposition is to lead it and/or finance it."
~Yours truly, based upon Vladimir Lenin's quote

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
by: Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

In reply to by Putrid_Scum

A. Boaty Philo Beddoe Thu, 08/10/2017 - 13:43 Permalink

You fail to take into account the real black swan for them, i.e., they could not have known that Dr. Michael Burry would invent the credit default swap on subprime mortgage bonds. Read the "Big Short" by Michael Lewis and you will realize that no way did they want it to turn out like this. That explains their desperate, ineffectual efforts to restore the status quo ante Aug. 2007. They expected the usual pump and dump cycle with real-estate, and got something much bigger than anticipated.

TPTB messed up big time, and now they can just barely keep a fingernail grip on stability.

In reply to by Philo Beddoe

All Risk No Reward A. Boaty Thu, 08/10/2017 - 14:08 Permalink

Really? You believe that nonsense on the eve of the Debt-Money Monopolists bankrupting every nation (that they aren't bombing into debt-money central bankism) and almost ordinary people within those nations?

Study how the DEBT-MONEY OLIGARCHS GAINED INCREDIBLE WEALTH AND POWER DURING THE GREAT DEPRESSION, WHILE YOUR ANCESTORS SUFFERED HORRIBLY.

Ordinary people are such irrational parroters.

In reply to by A. Boaty

Robert Trip Thu, 08/10/2017 - 13:03 Permalink

There never was a financial crisis.It is nothing more than a carefully engineered total fuckover of the American people by the Shylock's under the cover of blaming everyone else but themselves for this disaster.Look who ended up with all of the dough?Was it you or me?No, it was the fucking Shylock's.A tip of the hat to the planners and perpetrators of one of the greatest scams in history.And we, the biggest suckers in history, still hang on Yellen's every word.

The Cooler King (not verified) Thu, 08/10/2017 - 13:09 Permalink

Who could ever imagined thinking (even if for just one second), that they miss the 'GOOD OL DAYS' of Mr. Magoo totin his magic briefcase into a Humphrey Hawkins meeting (even if, as it turns, out, those GOOD OL DAYS, in reality, just turned out to to be a fresh coat of paint on rotting wood?). RIP Mark Haines

coast1 Thu, 08/10/2017 - 13:16 Permalink

speaking of which, its interesting if one has time to go back many months on youtube and listn to videos, not only of interviews of central banker supporters, main stream media, but also alternative media...Time is the only truthteller, ..I was listening to an interview with clif high today from four months ago, and his prediction was not very accurate.  Janet Yellen interviews are interesting, along with alan greenspan etc...Its also obvious the MSM is owned..I was watching a movie, where th police were actually somewhat good guys trying to catch a really really bad guy..The top guy in charge told the media what to say, to hlp catch th guy...It truly showed how the media is used...Altho the movie was the good guys vs. the bad guys, it made me realize, thd bad guys in control can use the media for their agenda also..clif high says that someone could steal your silver, so go with crypto...But at the same time, cannot someone hack your crypto account?  At least with silver, I also have my gun...but if I was hacked, what could I do?  I still say "silver, food, water, guns and ammo, and its best to be out of big cities"

Batman11 Thu, 08/10/2017 - 13:25 Permalink

Neoclassical economics was rolled out globally.In the 1920s, neoclassical economics lead to the roaring 20s.It roared with debt based consumption and debt based speculation, eventually it tipped over into the Great Depression.https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png1929 and 2008 stick out like sore thumbs; bank credit going into financial speculation and stocks (1929) or real estate (2008).Leveraged financial speculation with bank credit.The 1920s neoclassical economics and today’s neoclassical economics both have the same private debt blind spot.How stupid can you get?

Batman11 Batman11 Thu, 08/10/2017 - 13:29 Permalink

“Stocks have reached what looks like a permanently high plateau.”Irving Fisher 1929.Irving Fisher looked into his mistakes and in the 1930s came up with a theory of “debt deflation”. Hyman Minsky carried on with his work and came up with the “Financial Instability Hypothesis” in 1974. Steve Keen carried on with their work and spotted 2008 coming in 2005.They've even worked out what's wrong with it.No one told the FED.Ben Bernanke just blamed things on "Black Swans".Irving Fisher worked out what was going on. 

In reply to by Batman11

1936ryer Thu, 08/10/2017 - 13:27 Permalink

The corporate and banking elites have destroyed America and now that they have stolen everything it is time to move on to their global agenda.  A one world financial system and government that can never hold them accountable to their crimes (because these motherfuckers are in charge).  By the time the sheeple wake up everything they own will be worthless (like their over priced houses and college educations).  People are morons always have been and they always will be -- HOLD GOLD - it is the only financial assest that will stand the test of time and protect your future.