Bernanke thinks Fed's commitment to having a flexible policy of adjusting the bond purchase as needs arise should be a good enough signal to the financial markets. The markets don't seem to agree.
10-year bond yield:
There was a reporter from Japan's Nikkei Shinbun, who asked Chairman Bernanke, "What do you think of Bank of Japan under Kuroda? Do you support Kuroda?"
I was embarrassed for him.
(UPDATE 2) Nikkei ended down 843 to 12,445. Chief Cabinet Secretary Yoshihide Suga says, "I will not comment on the stock market's moves, but Japanese economy is steadily growing."
Uh.. Mr. Suga, it doesn't matter. The investors who have been buying Nikkei and shorting yen are "macro" investors (and algo bots) who responds to monetary and fiscal policies of the government and the central bank. When those spectacularly disappoint (like PM Abe did by talking trivial "growth strategies", and Mr. Kuroda did by doing nothing), these investors (and algo bots) sell. Economy on the main street? Who cares.
(UPDATE) Nikkei is now down 760 points, after the news that Prime Minister Shinzo Abe and BOJ's Kuroda met over lunch and talked about financial markets. According to Reuters Japan, Kuroda said to Abe,
「日本経済は順調に回復傾向をたどっており、足取りは次第に力強いものになっている」
"Japan's economy is on a steady path of recovery and it will gradually gather strength" (Reuters English's translation)
「強い決意を持って質的・量的緩和を進め、日本経済を支える」
"With firm resolve, I will execute quantitative and qualitative easing, and support the Japanese economy."
「市場も次第に落ち着いてくる」
"Markets will calm down gradually."
Talk is cheap, Mr. Kuroda.
Between Ben Bernanke and Haruhiko Kuroda, they have managed to wipe out 2.5 trillion dollars of value from the world equity markets since May 22, according to Bloomberg.
==================================
Bank of Japan's non-action (or Klueless Kuroda, if I may) on Tuesday continues to reverberate, as Nikkei tanked nearly 900 points in the morning session, taking the rest of Asia with it. Nikkei is now solidly in a bear market. In the afternoon session, it recovered somewhat, as yen has halted (for now) its steep melt-up against US dollar to 94 yen.
(One of the idiosyncracies of Japan, the numbers in green means they are negative.)
Trigger? It is assumed to be the report by World Bank that withdrawal of monetary stimuli by the world's biggest central banks (the US Federal Reserve, Bank of Japan, among others) may crush the economies in the developing nations by 12%.
The report is being used by traders and bots to exit the stock markets around the world.
A cluster of Hindenburg Omen in the past few weeks has not been for nothing after all, it seems.
From Reuters (6/12/2013; emphasis is mine):
Emerging markets at risk when loose policies end -World Bank
(Reuters) - The World Bank said eventual monetary tightening in advanced economies could crimp growth in emerging markets as interest rates rise, lowering the nations' potential output by as much as 12 percent.
That long-term risk is likely greater than the short-term impact from volatility in emerging market currency and bond markets, as traders try to position themselves for when the U.S. Federal Reserve begins its exit from ultra-loose monetary policies, said Kaushik Basu, the World Bank's chief economist.
Basu was speaking ahead of the launch of the bank's twice-yearly Global Economic Prospects report on Wednesday.
The report argued that the euro area and fiscal uncertainty in the United States are receding as major risks to the global economy. Instead, developing nations have to be on guard against side effects from aggressive monetary expansion in advanced nations.
Japan launched a massive bond-buying program in April to prod the economy out of decades of stagnation, raising fears Japanese investors would flood into emerging markets in search of higher yields and cause overheating.
At the same time, global markets were battered this week as traders tried to read the tea leaves of when the U.S. central bank will decide to start winding down its own stimulus measures.
(Full article at the link)
Bloomberg News (6/12/2013; emphasis is mine) quotes a financial strategist in New Zealand who talks about markets wanting stability and unlimited stimulus at the same time. With BOJ's Kuroda seen not committed to expanding his program after the Tuesday's announcement, all eyes are on the US Fed:
...The global economy will expand 2.2 percent in 2013, the World Bank said yesterday, paring a January forecast of 2.4 percent. The Federal Open Market Committee meets next week after the Bank of Japan this week left its lending program unchanged. Global stocks have plunged 5.2 percent from their May 21 peak this year on speculation the Fed may ease stimulus.
“People are still trying to assess the prospects, likelihood, and timing of tapering from the Federal Reserve,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd., a brokerage and wealth management firm, said. “Markets want stability in the economy but they also want unlimited stimulus. The two can’t continue to exist together.”
(Full article at the link)
Hear that, Japanese politicians? You're behind the curve again. Instead of voting each time to issue another batch of bills, notes and bonds for further deficit spending like you just did, you could simply get rid of the restrictions to issue debt.
Geithner's Debt 4Eva will go together wonderfully with Ben "Blackhawk" Bernanke's Quantitative Easing 4Eva.
From Bloomberg News on Friday (11/16/2012; part):
...Geithner said in the interview the debt ceiling should be eliminated, and “the sooner the better.” Without an increase in the ceiling, the government may not be able to pay all of its bills and risks defaulting on its debt. Congress and the Obama administration debated the limit for months last year before reaching an 11th-hour agreement in August 2011.
On the so-called "fiscal cliff", he wholeheartedly agrees with the CEO of one of the largest retailers in the world, Wal-Mart:
Geithner said he agreed with Michael Duke, chief executive officer of Wal-Mart Stores Inc. (WMT), that consumers need a quick agreement on the fiscal cliff.
“The uncertainty right now about whether this will be resolved on sensible terms, whether our middle-class families will see their taxes go up, already is having an effect on consumer confidence and the economy,” he said.
Let's see, the government's so-called solution to "solving" the fiscal cliff is mostly about which consumer group to tax further and by how much. According to Geithner and the Wal-Mart CEO, as soon as the consumers know for sure they will be taxed heavily, they will start spending. Makes sense.
Meanwhile, one of the past Nobel Prize winners in economics is promoting his wonderful idea of bringing back 91% tax rate. Move over, Monsieur Hollande (whose proposal is to tax the "rich" at 75%).
People like Dr. Krugman or Mr. Warren Buffet (who also begs the government to tax him) have an option to contribute to reducing the government debt without involving others. They could simply contribute their money to the Treasury Department. The Treasury Department says you can even use your credit card, and do it online at Pay.gov.
You get to incur further personal debt in order to save the federal government. Makes sense.
So, this is a Harvard- and MIT-trained economist, declaring his QE-for-a-foreseeable-future is to make people feel happy from rising asset price (stock market and housing price) so that they are inclined to spend more, and to create jobs for Wall Street.
From the press conference Q&A, between Ben Bernanke and Reuters' Pedro da Costa, as related by Zero Hedge (9/13/2012):
"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. ..."
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.
So much for the "independence" of the Federal Reserve.
Helicopter Bazooka Ben (aka Chairsatan at Zero Hedge) thinks buying up MBS (mortgage-backed securities, which by the way are probably made the same way as before - i.e. without properly (legally) transferring mortgages into trusts in order to securitize) at a furious pace will improve the employment situation in the US.
Huh?
From Bloomberg News (9/13/2012):
Fed Undertakes QE3 With $40 Billion MBS Purchases Per Month
The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.
“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate,” the Federal Open Market Committee said today in a statement at the end of a two-day meeting in Washington.
The FOMC said it would probably hold the federal funds rate near zero “at least through mid-2015.” Since January, the Fed had said the rate was likely to stay low at least through late 2014. The Fed said “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
Chairman Ben S. Bernanke is enlarging his supply of unconventional tools to attack unemployment stuck above 8 percent since February 2009, a situation he has called a “grave concern.” The decision provoked a renewed backlash from Republicans, including Senator Bob Corker of Tennessee, who said Bernanke’s policies damage the Fed’s credibility while doing little to spur the economy.
Stocks soared after the Fed’s statement. The Standard & Poor’s 500 Index jumped 1.6 percent to 1,459.92 at 2:24 p.m. in New York. The yield on the 10-year Treasury note rose to 1.78 percent from as low as 1.71 percent.
“This is definitely a significant shift in FOMC policy,” said Julia Coronado, chief economist for North America at BNP Paribas in New York and a former Fed economist. “This is a very aggressive commitment to success on its mandates.”
The central bank released its economic forecasts for growth, inflation, unemployment and interest rates over the next three years. Twelve of the Fed’s 19 policy makers said interest rates should rise for the first time in 2015.
The Fed now expects the job-market outlook to improve more swiftly by 2014, with unemployment forecast to fall to 6.7 percent to 7.3 percent, compared with 7 percent to 7.7 percent in their June projections. In 2015, unemployment will fall to 6 percent to 6.8 percent.
Growth will improve to as much as 3 percent next year and as much as 3.8 percent in 2014, up from upper estimates of 2.8 percent and 3.5 percent in their previous forecasts. The so- called central tendency forecasts exclude the three highest and three lowest of 19 estimates.
(Full article at the link)
In the press conference, Mr. Bernanke emphasized the importance of keeping the mortgage rate low so that people can buy houses or refinance. Never mind that people need good-paying job to afford a house, regardless of the mortgage rate. By endlessly pumping money into the financial market by purchasing mortgage securities and selling short-term Treasuries and buying up long-term Treasuries (Operation Twist), what is he going to achieve, other than an extremely artificially inflated stock (risk) market?
Oh I forgot. For Mr. Bernanke, the stock market is the economy.
One funny thing about the US Fed - it wins admiration from the Japanese who firmly believe it's the duty of the central bank to print and inflate at all costs, and that Japan's 2 decades of doldrums are the result of Bank of Japan doing hardly anything. Never mind that just about the only thing BOJ is not buying at this point is gold.
(These days, OT - other topic - means anything other than Fukushima... But this blog WAS once a financial blog..)
Gold jumped to a record high near $1,590 as the Federal Reserve chairman Ben "Black Hawk Helicopter" Bernanke indicated a further stimulus (digital printing of the Federal Reserve notes, fiat money) to create more inflation. (Remember, to him and the like-minded Fed economists who despise anyone without a PhD in (Keynesian) economics, inflation is growth, and a rising stock market is the economy.)
From Reuters (7/13/2011):
(Reuters) - Gold surged to a record near $1,590 an ounce on Wednesday as the possibility of more Federal Reserve stimulus coupled with Europe's deepening debt crisis fueled bullion's longest winning streak in five years.
Bullion's gains accelerated after Federal Reserve Chairman Ben Bernanke said the Fed is ready to ease monetary policy further if economic growth and inflation slow much more. Silver rallied nearly 6 percent, moving in tandem with commodities, U.S. stock markets and risk assets.
....Gold option volatility rose sharply on Wednesday, as bullion investors bet that underlying future contract prices could extend a record rally on signs of more Federal Reserve stimulus coupled with Europe's worsening debt crisis.
COMEX gold options floor trader Jonathan Jossen said one investor sold a huge position in $1,600 December call options and then bought twice as much in $1,750 December calls. Heavy call purchases suggest buyers expect underlying gold futures to rise further.
That option strategy is called "call backspread". Someone's expecting a very big and volatile move and wants to profit very handsomely.
In the meantime, the Fed chairman was put in a very uncomfortable position trying to deny gold is money but say totally fiat Treasury bills are financial assets.
From Forbes blog (Agustino Fontevecchia, 7/13/2011):
Chairman Ben Bernanke faced-off with Fed-hating Representative Ron Paul during his monetary policy report to Congress on Wednesday. The head of the Fed was forced to respond to accusations of enriching already rich corporations while failing to help Main Street, while he was pushed on his views on gold. When asked whether gold is money, Bernanke flatly responded “No.”
...As Bernanke began to sermon Rep. Paul on the history of the Fed (“we are here to provide liquidity [in abnormal situations],” the Chairman said), he was interrupted.
“When you wake up in the morning, do you think about the price of gold,” Rep. Paul asked. After pausing for a second, Bernanke responded, clearly uncomfortable. that he paid much attention to the price of gold, only to be interrupted once again.
“Gold’s at about $1,580 [an ounce] this morning, what do you think of the price of gold?” asked Rep. Paul. A stern-faced Bernanke responded people bought it for protection and was once again cut-off, with Ron Paul once again on the offensive.
“Is gold money?” he asked. Clearly bothered, Bernanke told the representative, “No. It’s a precious metal.”
After Paul interrupted him to note the long history of gold being used as money, Bernanke continued,”It’s an asset. Would you say Treasury bills are money? I don’t think they’re money either but they’re a financial asset.”
...The interesting exchange served as one of the few times Bernanke has been publicly pushed off his comfort zone by an elected official. Rep. Ron Paul brought up the issues that he’s famous for, namely, a sort of allegiance between the Fed and the nation’s most powerful institutions, the illusion of fiat money, and the gold standard. Bernanke, angered and bothered, had no option but to respond.
So?
I'd suggest he use the very first one to announce his resignation, the second to announce self-destruction of the Federal Reserve before the Supreme Court deems he and his Federal Reserve are "domestic terrorists" for counterfeiting.
From AP (3/24/2011):
Let's see.. The Federal Reserve hired a lobbyist who lobbied for Enron. Who does it have for PR spinmeister?WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke will begin holding news conferences four times a year to explain the Federal Reserve's interest rate decisions and its views on the economy.
The decision announced Thursday comes after the Fed held an unusual videoconference last fall in large part to discuss the need to improve its communications strategy. A Fed committee also had been studying whether to begin holding periodic news conferences.
Bernanke's first news conference will take place after the Fed's April 27 meeting. That will augment the current communications strategy: a brief statement released after each of the Fed's eight policy-making meetings with no officials available to answer questions.
Desired Skills & ExperienceWhat a deal! You don't even need a PhD in economics!
- A minimum of 10 years of experience in a high-profile role involving transformative, communications management
- Demonstrated experience serving as a senior spokesperson in time-sensitive, critical situations
- Established contacts and relationships in the media/press community
- Deep knowledge of the financial services industry including the ability to write clear, concise communications on complex finance, market, and regulatory issues would be an advantage
- Familiarity with the Federal Reserve’s activities and the impact on key stakeholders at the local, regional, and national levels
- Proven ability to provide strategic, innovative leadership; extensive experience planning and executing broad communications efforts
- Bachelor’s degree or higher in public relations, communications, business, economics, political science, or related field
- Social media knowledge/experience a plus
- Must thrive in fast-paced, rapid-turnaround environment and be able to successfully handle multiple tasks on complex topics
Some irreverent, choice works by williambanzai7, at Zero Hedge... (More at the link.)
"The US government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. Dollars as it wishes at no cost."
Ben Bernanke, November 21, 2002
"One myth that's out there is that what we're doing is printing money. We're not printing money."
Ben Bernanke, December 6 2010
Fiat Origines 1:3-2:4 (Holey Book of Ben Shalom, ©2011)
3 And Lord Ben said, “Let there be cash,” and there was cash. 4 Ben saw that the cash was greed, and he separated the cash from the gold. 5 Ben called the cash “POMO,” and the gold he called “barbaric.” And there were treasury bonds, and there trading for — the first fiat Federal Reserve Note.
6 And Ben said, “Let there be a vault between the people to separate gold from money.” 7 So Ben made the vault and separated the gold under the vault from the money above it. And it was so. 8 Ben called the vault “Federal Reserve Bank of New York.” And there were treasury bonds, and there was trading — Quantitative Easing.
9 And Ben said, “Let the gold under the sky be gathered to one place, and let free money appear.” And it was so. 10 Ben called the free money “liquidity,” and the growing bubble he called “prosperity.” And Ben saw that it was greed.
11 Then Ben said, “Let the land produce houses: extra bathroom-bearing wings and 3-car garages on the land that bear extra stainless steel appliances with Chinese dishes in then, according to their various kinds.” And it was so. 12 The land produced houses: extra bathroom-bearing wings and garages according to their many cars and extra stainless steel appliances with Chinese dishes in then, according to their various kinds. And Ben saw that it was greed. 13 And there were treasury bonds, and there was trading — Quantitative Easing 2.14 And Ben said, “Let there be gold in the vault of the Federal Reserve Bank of New York to separate the gold from the money, and let them serve as signs to mark ridiculously farcical times, and days and years, 15 and let them be gold bars in the vault of the Federal Reserve Bank of New York to give green paper on the earth.” And it was so. 16 Ben made two great liquidity events—the greater quantities of paper to print in the day and the lesser the value of paper overnight. He also made the loans. 17 Ben set them in the accounts of the Too Big To Fails to give fiat money to insider cronies, 18 to print in the day and devalue overnight, and to separate gold from money. And Ben saw that it was greed. 19 And there were treasury bonds, and there was trading—Quantitative Easing 2.5.
20 And Ben said, “Let the Too Big To Fails scheme with thieving creatures, and let green paper fly above the earth from the helicopters in the sky.” 21 So Ben created the thieving creatures of the Too Big To Fails and every thieving thing with which the To Big To Fails scheme and that moves about in it, according to their kinds, and every loan officer according to its kind. And Ben saw that it was greed. 22 Ben POMO’d them and said, “Be deceitful and increase in number and fill the brothels in NYC, and let the loans increase on the earth.” 23 And there were treasury bonds, and there was trading—Quantitative Easing 3.
24 And Ben said, “Let the Congress produce thieving creatures according to their kinds: the CFR Members, the creatures that move along the ground, and the wild interns, each according to its kind.” And it was so. 25 Ben paid the wild interns according to their kinds, the CFR Members according to their kinds, and all the creatures that move along the ground according to their kinds. And Ben saw that it was greed.
26 Then Ben said, “Let us make ganster banksters in our image, in our likeness, so that they may rule over the Too Big To Fails and the thieving creatures, over the CFR Members and all the wild interns,[a] and over all the creatures that move along the ground.”27 So Ben created gangster banksters in his own image,
in the image of Ben he created them;
male and female he created them.28 Ben paid them and said to them, “Be deceitful and increase in number; fill the earth and subdue it. Rule over the Too Big To Fails and the thieving creatures, over the CFR Members and all the wild interns,[a] and over all the creatures that move along the ground.”
29 Then Ben said, “I give you every house on the face of the whole earth and every extra bathroom, stainless steel appliance with Chinese dishes in it. They will be yours for inventory. 30 And to all the people of the earth and all the helicopters in the sky and all the creatures that move along the ground—everything that has the pump of liquidity in it—I give every green paper and cotton fiber for funny munny.” And it was so.
31 Ben saw all that he had made, and it was very greedy. And there were treasury bonds, and there was trading— QE to Infinity.
Move over "Extend and Pretend"; we're about to past that merry stage, says Kliguy38, fellow ex-SKFer, on his post yesterday. He says we're about to enter a new stage of....
"Delay and Pray" (3/9/2011) [Emphasis is mine]:
Well, the slamming of commodities seems to have already started. Precious metals, base metals, oil are all down significantly, partly due to US dollar's sudden strength on bad economic numbers (unemployment up, trade deficit up). Commercial net long positions of US dollar futures have been increasing since February 2011 (speculators flipped to net long in October 2010, and after a jump flipped briefly to net short in November 2010 - see this chart from Breakpoint Trades guys).We have Extend and Pretend....but we are about to enter into another phase of the "Bernank Experiment"...Delay and Pray. This will be another marvel of financial engineering that will amaze you. It will occur when QE 2 ends. There are warning shots from several Fed Govenors that have indicated there will be an abrupt cessation of QE. If this occurs then the hope is the economy will have enough momentum by June to begin to carry itself. That employment by then will be growing at over 250K month over month. Of course longer term rates will nose higher slightly but this will hardly be felt by the housing industry and consumer. Now who will be buying those bonds......you know....ANYTHING over a year or two in maturity. I know I just can't wait with all of that money sloshing around that we've shoved into the system. Just waiting to wash back on top of us like a giant tsunami.
Are you starting to get the picture? We will still have a damaged and fragile economy in June and withdrawing QE is going to have very predictable consequences and Ben knows it. So the question posed is really how is he going to implement QE 3 in the face of an increasingly "tough" Republican congress led by the stalwart fiscal money manager John Boehner. How could anyone face odds like this and expect to be successful with getting a money printing scheme like QE 3 through?
Let me think....I believe I shall go to my Rolodex and look under "mass sucker play" and WALA! I found it........FEAR!....It says very clearly on my card that the sheep shall line up for anything if we bring in this little product. So there you have it. It is a self fulfilling game here. Stop QE and guess what is going to happen. Of course you will have some predict this economy will fly on its own as we draw near but it cannot and will not. If you also thing that the barometer of the economy "the market" is going to drop off a cliff then THINK AGAIN. They cannot let it. So you will see an engineered market drop just like last years pull back, but this one will need to have a little more volatility and FEAR in it so expect some better fireworks. NOT to mention they need to knock down some commodity prices with the temporary "withdrawal of liquidity". Hehehehe. Of course bonds will magically show money flowing into them as the dollar strengthens and gold and especially silver take hits. A caveate here....gold may not actually take much of a hit though so your core will survive. AGAIN...this will be managed as they let the sheep baaa for help. Ben will calmly and confidently reinstitue QE 3 and proclaim that just as QE 2 was successful so will 3. Saaaaved!!!!!
We can return to American Idol and I can find out who the next Idol is. Just remember little devil children.......nothing is for free.
So I predict you get to play in the Casino awhile longer just don't sit at the table too long. I have given you the plan. I cannot promise you they will keep the market up all the way through May....but then who knows.
This is the nastiest market you will ever trade and everything you hear on CNBS is intended to obfuscate and move you in a desired direction. Just learn how to interpret it. BTW gold will see 1650 before June and silver will see over 40.
From Lew Rockwell at LRC Blog:
Writes a friend:
CNBC didn’t run any commercials during Bernanke’s testimony this morning, until Ron Paul began to speak. They came back live after his questioning, choosing to resume with Maxine Waters. State-controlled media indeed.
Ben Bernank was in the House Financial Services Committee this morning, prevaricating as usual.
Ben "Bernank" Bernanke will appear in the Senate Banking Committee on Tuesday 3/1/2011 and in the House Financial Services Committee on Wednesday 3/2/2011 (starting at 10:00AM EST on both days); it is his semi-annual policy report to Congress.
Bloomberg columnist Caroline Baum has 5 questions for Bernank, in her effort to help out the Senators and Congressmen in the committees who may not be as astute as her in economic and financial matters, has come up with 5 questions she would ask Bernank. As she says, "To expect our elected representatives to have a good grasp on quantitative easing when Fed chief Ben Bernanke says the term is a misnomer is too much to ask."
(Can we expect them to have a good grasp on anything? I mean, other than on taxpayers' money?)
You can read about her 5 questions here, which I thought were not that much above what our elected representatives would be capable of asking. (Why QE2 is $600 billion, when are you going to raise short-term rates....etc.)
I have my own questions to Bernank:
Where is gold that is supposed to belong to the US government?
How much gold is there, at Fort Knox? At the Federal Reserve Bank of New York?
If gold is not there, where did it go, how did it go, and who is responsible?
Has the Fed participated in any way in gold/silver price manipulation?
You said the Federal Reserve did not, and would not monetize Treasury debt. QE2 is de facto monetization, as you purchase Treasuries from the Primary Dealers that they got at the Treasury auctions only a few weeks before. Did you lie?
How much loss has been sustained on the Fed's balance sheet since the start of QE2, as the rates on Treasury notes and bonds have been going up and the prices falling?
How much are you paying to the Primary Dealers? How many extra billions are you giving to the PD by buying Treasuries from them, instead of buying directly through TreasuryDirect, for example?
How do you respond to the accusations that your QE2 has unleashed the powerful price inflation around the world that in turn has triggered popular uprising against the rulers? Guide us through your logic that monetary inflation (QE2) does not cause price inflation. And don't give us the crap that there is no price inflation in core CPI, which excludes two of the items that matter most to people around the world who try to earn a decent living: food and energy.
Is QE3 coming? Your Fed governors are saying yes (you and Bullard, for example) and no (Plosser, for one). When will we know? (And please stop this "good Fed, bad Fed" routine; it's getting tired.)
And what was the reasoning behind QE2, again? QE1 was to help out Wall Street banks who are the Fed member banks. QE2, did you say it was to help out the US federal government? How do you think it has helped, other than the levitating stock market and soaring commodity market?
Since when has the Fed had the third mandate of raising the stock market? Why do you think the stock market is the reflection of the economy?
The Fed chairman Ben Shalom "Bernank" is on Capitol Hill for his first meeting with the lawmakers this year, in the GOP-majority House. The House Budget Committee has Ben to talk about inflation, and Ron Paul's subcommittee discusses the Fed's role in job disappearance and rising unemployment.
PDs dutifully taking down the US stock indices to create angst among bullish pundits and analysts so that they start screaming "Don't harm the Fed! Ben's been doing the exemplary job!" Dow is currently (3PM EST) down whopping ... 32 points.
That's big, you know. The 1st down day in the last 8 days...
Speaking of Ben's job creation skills, here's a chart from Zero Hedge. He sure created part-time workers...
From Zero Hedge:
For over a year now, Zero Hedge has been predicting that in its foolhardy attempt of "inflation or bust", the Fed's actions would sooner or later lead to mass rioting and possible revolutions as a result of surging and out of control food prices (which are just the peak of the alternative investment pyramid - yes, stunningly free money can go into other things besides stocks). There have been those who have claimed that deflation is still a far greater force, despite that the all important shadow banking system made a positive inflection point in ending deleveraging in Q3 (and on March 10 we will know whether the Q3 strength persisted into Q4) as was discussed previously, and today's first time in over two years increase in revolving credit merely confirms this view. Alas, to all who believe that deflation or deleveraging is a greater threat: you have our sympathies, as fundamentally your are correct, and were the business cycle have the benefit of playing out in normal course, all the world's banks would become insolvent and yes, deflation would be rampaging. The problem is that these same people do not realize that to Bernanke (whom we have referred Genocide Ben for precisely this reason) there is no other alternative, and inflation must be achieved no matter how terrible the social cost, or the damage to the monetary system. Regardless, the actions in North Africa are just the start. Commodities will run up far higher, and discontent will sooner or later reach to Asia, and possibly to countries which have nuclear arsenals at their disposal. What happens then is anyone guess. Yet for anyone who is still confused about the ultimate Fed agenda, Dylan Ratigan and Bill Fleckenstein sat down late last week to make it so clear that virtually anyone and everyone can understand what the Bernanke endgame is.
Visit msnbc.com for breaking news, world news, and news about the economy
So what is Ben's endgame? Look at Ben's face in the very beginning of the video when he had to answer a question of whether the Fed had created the condition for Tunisian and Egyptian uprising by printing the extraordinary amount of money.
And don't think that this consequence is "unintended". Just look at his face.
That will be on Wednesday, February 9, 2011 at 10AM, in Room 2128 of the Rayburn House Office Building.
From Lewrockwell.com:
You Are Invited (Llewellyn H. Rockwell, Jr., 2/7/2011)
The historic first hearing of Chairman Ron Paul's monetary policy committee, to expose the Fed as the prime creator of unemployment and so much human suffering, will take place at: 10:00AM on Wednesday, February 9, 2011, in Room 2128 of the Rayburn House Office Building, the main hearing room of the Financial Services Committee. The witnesses include the eloquent Austro-free-market stars Thomas DiLorenzo of Loyola College and Richard Vedder of Ohio University.
The Fed itself, and at least three big banks, lobbied against Ron's chairmanship. Republicans who share their fear of the truth worked with Paul Ryan, chairman of the "Budget" Committee, to schedule hearings with Bernanke at the exact same time as Ron's, to try to diminish the significance of Ron's. Ryan, btw, is the fair-haired boy of the Republican leadership who gave the boring response to Obama's boring State of the Empire Address. Like the Republican leadership, Ryan talks about cutting spending, but that is only a ruse. Ryan is a big-government neocon, and so naturally supported TARP, Bush's prescription drug welfare, his wars, and the empire.
I don't believe this insider trick will work against Ron, because his support comes not from the regime or the Republican leadership, but from the grassroots. I think the Paulians will pack Ron's hearings, and not only to show their support for him against the power elite. These hearings will have huge significance in the fight against the Fed, the fractional-reserve banksters, and other destroyers of our prosperity and freedom. It will also be a lot of fun!
Let's see... The Fed and TBTF Wall Street banks were lobbying against Ron Paul becoming the chairman of this subcommittee, along with mainstream Republicans. What can they do now to make the day miserable?
How about Ben Bernank instructing JP Morgue to sell sell sell those S&P500 mini futures? Let's blame Ron Paul for the resulting flash crash, and for dare asking the questions!
If you want to see a corrupt, dictatorial government in action, you don't need to sit glued to Al Jazeera's Live Feed on Egypt. It's right here in the US, and the government just gets away with breaking the law and ignoring the sub-humans (anyone who doesn't work for the government or the TBTF banks) each and every single instance.
This is just one of those, as recounted by Zero Hedge. It is about how Hank Paulson and Ben "Bernank" Bernanke illegally forced Ken Lewis, then-CEO of Bank of America, to go through with the purchase of Merrill Lynch without Ken Lewis invoking the MAC clause - that is, "Material Adverse Change" clause - and reneging on the deal.
Part from Zero Hedge:
Mr. Corngold: Before we do that, did you have an understanding of what powers the Treasury Department had to remove the board and/or the management of the bank?
The Witness: It was my understanding he said – that’s why I said I think he said government. I think – my impression is that was the language of the Fed used to use in Texas, basically saying, Don’t do something.
Mr. Corngold: You had an understanding that the Fed could remove the board and/or the management of a bank that it regulated if it found certain things.
A: Yes
Q: Do you know what it has to find?
A: They had been so strong about the fact that they strongly advised use not to do it and that it would cause harm to the bank and the system and they system wouldn’t be good for us, either – that it would damage the system. That’s kind of how it was being portrayed.
Q: Was this the first you heard about the government – to use your term – was considering that threat.
A: Yes
Q: Did you ask him, “By the way, what do you mean by that” – I’m sorry, the comment about the removal?
A: No. It was pretty clear.
Q: And at the time, did you sort of have that preexisting understanding of the Texas Fed way of communicating.
A: I had heard that at some point. I don’t know why that’s in my mind, but I’ve heard of that before that’s a way of telling you not to do something.
Q: Have you heard any kind of communication like that from a federal official to you before?
A: No
A: This was about just a shear magnitude of loss, and either you do it or you don’t. Behavioral changes, or whatever, wouldn’t fill that hole that we thought was $12 billion, which turned out to be $15 billion.
The bottom line, however, is that Ken Lewis wanted to hang on to the CEO job at Bank of America. He could have called their bluff and disclosed everything out in the open. That might have blown up the financial markets, but I doubt it. Merrill didn't have the kind of extensive reach that Lehman had. Even if that triggered the blowup, it might have been far better than what we have now - a market that has stopped pricing in anything meaningful, whether it is an on-going crisis in Egypt, dismal job numbers, housing market that keeps on collapsing, sovereign debt crisis, "non-core" inflation, skyrocketing commodities prices .... etc...etc... In other words, the market is dead.
Read the whole deposition at the link, and wonder aloud why isn't any of them, Hank, Ben, or Ken, in jail or permanent exile.
They will use the job number for January to ramp up the market anyway, whether it is good or bad. If the number is good, they will ramp up the market because, really, the economy is growing rapidly! If the number is bad, they will ramp it up because Ben and the Inkjets at the Fed will surely embark on QE3 to further benefit Primary Dealers. Since PDs are the market and the market is the economy, why we will have an economic miracle this year!
Never mind that cotton is on a tear since August, gas at the pump here is over $3.50, and ...
Anyway, here's the preview from AP:
WASHINGTON (AP) -- Economic growth is gaining momentum, with factories busy and service firms expanding, but one critical area still lags: job creation.
The Labor Department will issue its January jobs report Friday, and economists are forecasting that it will show only modest hiring. Employers are expected to add a net total of 146,000 new jobs. That's barely enough to keep up with population growth. The unemployment rate is likely to tick up to 9.5 percent from 9.4 percent in December.
Some analysts are more optimistic and think the job gains could be larger, after several positive economic reports were released Thursday. The service sector, which employs nearly 90 percent of the work force, expanded at the fastest pace in five years last month, retail sales increased, and factory orders grew in December.
"Activity across the broader economy is picking up," said Neil Dutta, an economist at Bank of America Merrill Lynch. "Momentum is improving."
Whatever. It doesn't matter any more. Have you noticed that the stock market does not respond to the FOMC announcements like it used to do? These days, the FOMC is a non-event. Job numbers are non-events. GDP numbers are non-events. Behind all these numbers is Ben Bernank printing merrily on high. Ben has long broken the market.
The Egyptian Revolution is a non-event, the EU PIIGS debt crisis is a non-event, UFO over Jerusalem is a non-event, and ....
on his way to outdo Rudolf E. A. von Havenstein .
Bloomberg reports that Ben 'Bernank' is ready and willing to go beyond $600 billion:
Federal Reserve Chairman Ben S. Bernanke defended the Fed’s decision to purchase $600 billion in Treasury securities and didn’t rule out expanding the program, in an interview for CBS television’s “60 Minutes,” the network said.
“He explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more,” according to a press release today from CBS.
It is telling us about the abject failure of the government (Congress and the White House) to improve the US economy.
Suppose, just suppose that Ben Bernanke is doing QE2 out of goodness of his heart, that he is doing all he can in the only way he knows how, to support the economy from collapsing.
(Don't laugh.)
He is a central banker, an academic before that, and a Keynesian like all central bankers in the world. He doesn't know how the real world works, he doesn't know why Silicon Valley thrives by selling better products cheaper (deflation). As the Fed chief, he is in charge of monetary policies, as opposed to fiscal, which is the domain of the government. He has only one tool left to possibly stimulate the economy, and that is quantitative easing, as it is supposed to achieve the equivalent of the fed funds rate going into negative numbers. To him, seeing a healthy inflation is seeing a healthy economy.
So he has decided to do QE2, to do his best to see a healthy inflation/economy. What does that tell you about the fiscal policies of the government, when a banker feels such an urgent need for a drastic action over the state of economy, which should be the worry of the government?
It tells me that there has been an absolute lack of effective fiscal policies coming from the administration and Congress for two years. Bernanke felt he had to do something, as nothing was coming out of the admin and Congress. Nothing.
Sure, the health care "reform" bill passed. But it will only create further burdens on citizens and businesses. Ditto for the financial "reform" bill. As for the stimulus bill, what stimulus? It stimulated the Chinese economy, and it stimulated the public union employees.
Rumors say that Obama is very disinterested in actually doing the work as President of the United States. He's habitually late in coming to policy meetings, leaves in 10 minutes. He'd rather watch ESPN and play golf. All he cares about is speaking in front of the adoring crowd (as he's doing in India), reading the script off his teleprompters without which he is reportedly a rather dull, slow speaker. He can't be bothered to do the routine, daily work as the head of the state.
And clearly no one has bothered him.
With the new, Republican Congress and still defiant Democratic leaders comes a gridlock, with all the burdensome laws and regulations that somehow passed during the first two years of Obama presidency intact. The only person who could do something and do it quickly is Ben Bernanke.
I am not saying Ben should be doing QE2. He shouldn't, but I think I can understand why he is doing it. It is to make up for non-action by the Obama government to restore the confidence and trust, and thus improve the economy.
As a central banker, he doesn't have a judicial power to bring fraud perpetrators (like his Fed member banks) to justice and thus restore confidence. He doesn't have a fiscal power to improve the economy. His only monetary tool left seems to be the quantitative easing, but he can act now, instead of weeks and months of inaction by Congress and the White House.
Ben Bernanke's Fed is doing (or thinks it is doing) monetarily what the Obama government should be doing fiscally.
Thus the Op-Ed by Kevin Warsh on Wall Street Journal today. What struck me most is NOT his doubt about QE2 (he voted for it after all) but his push for more coherent and pro-growth fiscal, regulatory and trade policies by the government, which he currently sees missing. What the monetary policies alone can do is limited, according to him.
In the same vein is the speech by the Dallas Fed president Richard Fisher (link from Zero Hedge). Fisher says toward the end of the speech:
The Fed is doing its level best to deliver on the dual mandate it was given by the Congress. But monetary accommodation, by itself, is not the answer to our current woes. The Fed, as I see it, has taken a leap of faith that our political leaders will forge a sensible budgetary and regulatory path that incentivizes businesses to put to work the money the Fed is printing to invest in creating jobs for American workers...
We need for the Congress to move quickly, beginning in its lame-duck session. As Winston Churchill said, “We need action this day!”
Otherwise, the effect of quantitative easing will, in my view, simply result in financial speculation, further investment in more welcoming quarters abroad and, ultimately, in “super ordinary” inflation. The FOMC is taking a calculated risk. If the Congress and the Executive fail to deliver, I believe the FOMC will have to consider changing course.
Here is the message: The Fed is going out of its way to be a good citizen. It is time for the Congress to do the same.
Re-read the paragraph I quoted in the previous post. In describing a "virtuous circle" he is confident he can achieve, Ben said:
For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.Does he mention ANYTHING about EMPLOYMENT here?
Buy anything! Stocks, commodities, houses. Ben will make sure they will go up in price, as long as they are priced in the US dollar! (Just don't worry about the decline of the dollar.)
In the Op Ed for Thursday for Washington Post, Ben Shalom Bernanke writes:
The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.
This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
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