Results 1 to 11 of 11

Thread: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    this thread is liable to run all weekend as the Jackson Hole international central bankers' meeting unfolds. But for starters ...



    (snip)" Aug. 27 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet, who united to fight the worst global recession in six decades, may be diverging over the outlook for their economies.

    The Bernanke-led Fed, while saying U.S. growth would be slower than anticipated, announced on Aug. 10 it will buy Treasuries to set a $2.05 trillion floor on its balance sheet and keep interest rates from rising. Trichet said Aug. 5 that the euro-area economy was surpassing forecasts, which may pave the way for the ECB to look at phasing out its emergency lending measures.

    Any transatlantic divide may be on display when the two central bankers address the Fed’s annual symposium in Jackson Hole, Wyoming. Their attitudes contrast with the second quarter, when the European fiscal crisis forced Trichet to buy government bonds for the first time and Bernanke discussed how and when to cut the Fed’s balance sheet.

    Now the ECB is “actually looking to the timing of an exit policy, whereas the Fed has obviously put that on the back burner,” Mickey Levy, chief economist at Bank of America Corp. and a Jackson Hole regular, said in a Bloomberg Radio interview with Tom Keene. “The U.S. economy right now is in a soft patch and feels fragile, while in the aggregate the European economies have seemingly weathered the storm much better than people expected.”

    Trichet’s optimism and Bernanke’s caution could strengthen the euro against the dollar, said Julian Callow, chief European economist at Barclays Capital in London. The dollar slid 0.5 percent yesterday in New York to $1.2719 per euro.

    ‘Inflation Entrenched’

    “The ECB instinctively wants to anticipate a normalization of inflation, whereas the Fed would rather see inflation entrenched before normalizing policy,” said Callow, a former Bank of England economist. “The ECB seems to be viewing the world more optimistically and the Fed more pessimistically.”

    The Kansas City Fed brings monetary policy makers and economists from more than 40 nations to the Jackson Lake Lodge for debates and hikes in the shadow of the Teton mountains. Bernanke will have his first public chance to defend the Aug. 10 decision and discuss his outlook when he speaks at 10 a.m. New York time. After a morning of presentations and discussions on economic issues, Trichet follows with a speech over lunch at 2:50 p.m.

    Bernanke is likely to elaborate on how much Fed officials or staff economists have reduced their forecast for 2011 growth and provide “some degree of clarity” on possible plans for injecting more monetary stimulus, Paul McCulley, managing director at Pacific Investment Management Co., said in a Bloomberg Radio interview.

    “The equity market may make a very loud noise in the negative direction” if Bernanke fails to deliver a clear message, McCulley said."(snip)

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    this latest analysis / forecast from J-Hole seems to present a very realistic historically based projection ...



    (snip)" Now Reinhart, 54, is using a paper studying 15 economic crises since World War II to warn Federal Reserve Chairman Ben S. Bernanke and fellow policy makers that sluggish growth and high unemployment in the U.S. might persist through 2017 or longer.

    “Whether one looks at advanced economies or a whole sample that includes emerging markets, the picture is one of lower growth during the decade that follows the crisis,” she said in an interview from Washington this week. “We are already three years into this post-crisis window. The clock starts ticking in the summer of 2007.”

    Reinhart’s work has made her the female economist most frequently cited by other economists. Her latest paper, “After the Fall,” co-written with husband Vincent Reinhart, is being presented today at the Fed’s annual symposium in Jackson Hole, Wyoming.

    An unemployment rate of 8 or 9 percent over the next seven years is not “outside of the experience that we have documented,” she said. Her studies of crises in Finland, Japan, Norway, Spain and Sweden that started between 1977 and 1992 show median per-capita economic growth declined by 1 percentage point in the decade following the shock. "(snip)

    (snip)"Carmen Reinhart, who once studied fashion merchandising, says her “mistrust” of financial-market exuberance dates back to the 1980s, when she began work as an economist at Bear Stearns. At the time, the U.S. was experiencing recession and rapid disinflation, while Latin America got swept into a debt crisis.

    Her almost decade-long collaboration with Rogoff began after he hired her to become a deputy director at the IMF, the agency created at the end of World War II to help maintain global financial stability. Rogoff recalls thinking her study of the links between banking and currency crises “seemed like a breath of fresh air compared to the more introspective papers everyone else was writing.”

    Contrast With Geithner

    The pessimistic outlook in her paper presented at Jackson Hole contrasts with the view of Treasury Secretary Timothy F. Geithner, who said this month that the U.S. economy is “gradually healing.”

    The nation has more than a 50 percent chance of experiencing a lost decade like Japan, when a collapse in land and stock-market prices gave way to economic stagnation and deflation starting in the 1990s, according to Reinhart. To avoid that outcome, policy makers should immediately announce a plan to increase taxes and cut spending in about a year, she said, adding her husband generally shares the same position.

    “We have the pretty clear view that you want to not necessarily implement austerity right now, but you certainly want to announce it right now, with plans to deal with the deficit and debt in a realistic time frame,” she says.

    ‘Japan-like Scenario’

    “Our recovery still leaves a great deal to be desired,” Carmen Reinhart said. “My concern is that because the U.S. is the world’s reserve currency, we can still borrow in bad times, and that a more Japan-like scenario lies in store. A lot of the forces are already in place.” (snip)

  3. #3
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    and then there was ( yawn ) Ben Bernanke ... made a bit more palatable via a highly entertaining but painfully accurate unofficial 'translation' available at

    (snip)"PREVIEWS OF COMING ATTRACTIONS

    Concerted government efforts to restore confidence in the financial system, including the aggressive provision of liquidity by central banks, were essential in achieving that outcome. Monetary policies in many countries had been eased aggressively.

    Translation: Confidence had failed in the financial system that the government has regulated for decades. The system needed an infusion of counterfeit money to restore confidence – lots and lots of counterfeit money. This was essential.


    Fiscal policy – including stimulus packages, expansions of the social safety net, and the countercyclical spending and tax policies known collectively as automatic stabilizers – also helped to arrest the global decline.

    Translation: Also required were budget deficits larger than anything seen since World War II.


    Expansionary fiscal policies and a powerful inventory cycle, helped by a recovery in international trade and improved financial conditions, fueled a significant pickup in growth.

    Translation: "Significant" means "we didn't lose the sucker."


    At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily. For a sustained expansion to take hold, growth in private final demand – notably, consumer spending and business fixed investment – must ultimately take the lead. On the whole, in the United States, that critical handoff appears to be under way. However, although private final demand, output, and employment have indeed been growing for more than a year, the pace of that growth recently appears somewhat less vigorous than we expected.

    Translation: "Somewhat less vigorous" means "the Democrats will surely lose the House in November."


    Importantly, the painfully slow recovery in the labor market has restrained growth in labor income, raised uncertainty about job security and prospects, and damped confidence.

    Translation: The Democrats may even lose the Senate.


    The prospects for household spending depend to a significant extent on how the jobs situation evolves. But the pace of spending will also depend on the progress that households make in repairing their financial positions.

    Translation: We don't know what the pace of spending will be. We don't know when the job market will recover.


    Among the most notable results to emerge from the recent revision of the U.S. national income data is that, in recent quarters, household saving has been higher than we thought – averaging near 6 percent of disposable income rather than 4 percent, as the earlier data showed. On the one hand, this finding suggests that households, collectively, are even more cautious about the economic outlook and their own prospects than we previously believed.

    Translation: Federal Reserve economists looked at the statistics, compared them with their income and job tenure, and concluded that things were not too bad. The public was not equally secured from reality.


    Household finances and attitudes also bear heavily on the housing market, which has generally remained depressed. In particular, home sales dropped sharply following the recent expiration of the homebuyers' tax credit.

    Translation: We could lose this sucker.


    Going forward, improved affordability – the result of lower house prices and record-low mortgage rates – should boost the demand for housing. However, the overhang of foreclosed-upon and vacant housing and the difficulties of many households in obtaining mortgage financing are likely to continue to weigh on the pace of residential investment for some time yet.

    Translation: It's a buyer's market in housing. The smart buyer waits for a short sale. The really smart buyer waits for a foreclosure.


    In the business sector, real investment in equipment and software rose at an annual rate of more than 20 percent over the first half of the year. Some of these gains no doubt reflected spending that had been deferred during the crisis, including investments to replace or update existing equipment.

    Translation: Stuff was wearing out.


    In contrast, outside of a few areas such as drilling and mining, business investment in structures has continued to contract, although the rate of contraction appears to be slowing.

    Translation: Commercial real estate is going down. Everyone knows it. There will be deals galore.


    Although most firms faced problems obtaining credit during the depths of the crisis, over the past year or so a divide has opened between large firms that are able to tap public securities markets and small firms that largely depend on banks. Generally speaking, large firms in good financial condition can obtain credit easily and on favorable terms; moreover, many large firms are holding exceptionally large amounts of cash on their balance sheets. For these firms, willingness to expand – and, in particular, to add permanent employees – depends primarily on expected increases in demand for their products, not on financing costs.

    Translation: The FED and the government took action to bail out the fat cats, as they always have. But large firms are still scared to death. They are sitting on top of short-term deposits because they know that we could lose this sucker.


    Bank-dependent smaller firms, by contrast, have faced significantly greater problems obtaining credit, according to surveys and anecdotes.

    Translation: There will be distressed sales for the larger firms to buy at real bargains. The ones with cash will get the best deals.


    The Federal Reserve, together with other regulators, has been engaged in significant efforts to improve the credit environment for small businesses. For example, through the provision of specific guidance and extensive examiner training, we are working to help banks strike a good balance between appropriate prudence and reasonable willingness to make loans to creditworthy borrowers. We have also engaged in extensive outreach efforts to banks and small businesses.

    Translation: The FED and the government are pushing banks to lend. The banks have not responded. Other than this, nothing is happening.


    There is some hopeful news on this front: For the most part, bank lending terms and conditions appear to be stabilizing and are even beginning to ease in some cases, and banks reportedly have become more proactive in seeking out creditworthy borrowers.

    Translation: The statistics still show that bank lending is falling like a stone, like nothing since the Great Depression. "Some cases" means "in a handful of cases in communities where at least one local bank stayed out of commercial real estate." "Reportedly" means "a secretary at the Kansas City FED heard a rumor."


    Incoming data on the labor market have remained disappointing. Private-sector employment has grown only sluggishly, the small decline in the unemployment rate is attributable more to reduced labor force participation than to job creation, and initial claims for unemployment insurance remain high.

    Translation: Nancy Pelosi will not be the Speaker of the House next January.


    Firms are reluctant to add permanent employees, citing slow growth of sales and elevated economic and regulatory uncertainty.

    Translation: The government will reduce this uncertainty by getting new regulations into The Federal Register much faster. There needs to be far more detailed regulation.


    Like others, we were surprised by the sharp deterioration in the U.S. trade balance in the second quarter. However, that deterioration seems to have reflected a number of temporary and special factors.

    Translation: The balance of trade is in the crapper again, just as it was from 1990 to 2009, and there is no end in sight. But that secretary at the Kansas City FED thinks it's temporary.


    Generally, the arithmetic contribution of net exports to growth in the gross domestic product tends to be much closer to zero, and that is likely to be the case in coming quarters.

    Translation: Since the country has not had any net exports in two decades, the deficit will cut GDP. Why good deals from Asian producers increase American consumers' satisfaction but reduce GDP is a problem for the statisticians to answer. It's a Keynesian thing.


    Overall, the incoming data suggest that the recovery of output and employment in the United States has slowed in recent months, to a pace somewhat weaker than most FOMC participants projected earlier this year. Much of the unexpected slowing is attributable to the household sector, where consumer spending and the demand for housing have both grown less quickly than was anticipated.

    Translation: The high-paid economists at the FOMC did not see what was coming. Consumers are scared, so they are saving. This is bad for the economy, according to Keynes.


    Consumer spending may continue to grow relatively slowly in the near term as households focus on repairing their balance sheets. I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace.

    Translation: The economists at the FOMC who did not see what was coming have decided that consumer spending will expand. "At a relatively modest pace" means "something above zero,"


    Despite the weaker data seen recently, the preconditions for a pickup in growth in 2011 appear to remain in place. Monetary policy remains very accommodative, and financial conditions have become more supportive of growth, in part because a concerted effort by policymakers in Europe has reduced fears related to sovereign debts and the banking system there.

    Translation: Monetary policy has been contracting since last March, but nobody in the press ever looks at the charts, so the media will not notice. Meanwhile, the Greek crisis has been delayed by the bailout that the German government paid for, against the widespread objections of German voters.


    Banks are improving their balance sheets and appear more willing to lend. Consumers are reducing their debt and building savings, returning household wealth-to-income ratios near to longer-term historical norms. Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year.

    Translation: Rising thrift caused a slowdown in spending, which is why growth has been slower than the FOMC forecasted earlier this year. However, rising incomes above zero, when coupled with easing credit conditions, which FED statistics say are not happening, will persuade consumers that they have saved enough. They will spend. The FOMC economists are sure of this.


    Businesses' investment in equipment and software should continue to grow at a healthy pace in the coming year, driven by rising demand for products and services, the continuing need to replace or update existing equipment, strong corporate balance sheets, and the low cost of financing, at least for those firms with access to public capital markets.

    Translation: Fat cats will get fatter.


    Rising sales and increased business confidence should also lead firms to expand payrolls. However, investment in structures will likely remain weak.

    Translation: The commercial real estate market will still be in the tank.


    On the fiscal front, state and local governments continue to be under pressure; but with tax receipts showing signs of recovery, their spending should decline less rapidly than it has in the past few years.

    Translation: Kiss state pension funds goodbye.


    Federal fiscal stimulus seems set to continue to fade but likely not so quickly as to derail growth in coming quarters.

    Translation: With the Republicans in control of Congress, they will play spoilers. Obama will get no more big spending bills into law.


    Although output growth should be stronger next year, resource slack and unemployment seem likely to decline only slowly. The prospect of high unemployment for a long period of time remains a central concern of policy.

    Translation: The job market will be a disaster for years. "A central concern for policy" means nobody knows what to do about it; nothing has worked.


    Not only does high unemployment, particularly long-term unemployment, impose heavy costs on the unemployed and their families and on society, but it also poses risks to the sustainability of the recovery itself through its effects on households' incomes and confidence.

    Translation: Anyone who believed my previous puffery about the recovery has the IQ of something really funny that Dave Barry would come up with.


    Maintaining price stability is also a central concern of policy. Recently, inflation has declined to a level that is slightly below that which FOMC participants view as most conducive to a healthy economy in the long run.

    Translation: "Price stability" means rising prices. Prices have been almost flat for a year, which is unacceptable to Keynesians, which senior FED economists are.


    With inflation expectations reasonably stable and the economy growing, inflation should remain near current readings for some time before rising slowly toward levels more consistent with the Committee's objectives.

    Translation: Get ready for quantitative easing.


    part two of Bernanke's speech's 'unofficial translation' will be available tomorrow !

    ~
    Last edited by Melonie; 08-28-2010 at 04:55 PM.

  4. #4
    God/dess Zofia's Avatar
    Joined
    Apr 2002
    Location
    Durham, North Carolina
    Posts
    2,417
    Thanks
    2,964
    Thanked 2,370 Times in 934 Posts

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    The real news, as opposed to the news that fits the mod's view came about two thirds of the way through Chairman Bernanke's speech to the Federal Reserve Bank of Kansas City Symposium at Jackson Hole Wyoming. There Chairman Bernanke said: "Notwithstanding the fact that the policy rate is near its zero lower bound, the Federal Reserve retains a number of tools and strategies for providing additional stimulus. ... and (3) reducing the interest paid on excess reserves." This is important because America's banks have substantial excess reserves parked at the various Federal Reserve Banks that could be lent to businesses that are both profitable and able to create jobs with adequate debt financing.

    Rather than rely on commentators who have an agenda, it pays to read, or even better listen to the remarks of the policy makers.

    HTH
    Z

  5. The Following User Says Thank You to Zofia For This Useful Post:


  6. #5
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    personally I prefer the entertaining translation ... part 2

    (snip) Thus, our purchases of Treasury, agency debt, and agency MBS likely both reduced the yields on those securities and also pushed investors into holding other assets with similar characteristics, such as credit risk and duration. For example, some investors who sold MBS to the Fed may have replaced them in their portfolios with longer-term, high-quality corporate bonds, depressing the yields on those assets as well.

    Translation: We loaded up on junk debt, since we answer to nobody – or Congress, which is the same thing. We bought this crap at face value, thereby transferring newly counterfeited money to the investors who unloaded the crap on us, and who then bought corporate bonds with the money we handed over to them. We have subsidized the corporate bond market. That's our job. We never forget this. Congress has yet to figure it out. Neither have the media. (snip)


    (snip) The Federal Reserve did not hold the size of its securities portfolio precisely constant after it ended its agency purchase program earlier this year. Instead, consistent with the Committee's goal of ultimately returning the portfolio to one consisting primarily of Treasury securities, we adopted a policy of re-investing maturing Treasuries in similar securities while allowing agency securities to run off as payments of principal were received. To date, we have realized about $140 billion of repayments of principal on our holdings of agency debt and MBS, most of it prior to the end of the purchase program. Continued repayments at this pace, together with the policy of not re-investing the proceeds, were expected to lead to a slight reduction in policy accommodation over time.

    Translation: We substituted T-bonds for F/F debt, both of which are forms of government debt. The press thought this was significant. So, who are we to say it's all accounting book entries? The press said this pointed to quantitative easing. So, we started selling off assets, meaning we started deflating. Except for futures traders, nobody noticed. Boy, are the media dumb!


    However, more recently, as the pace of economic growth has slowed somewhat, longer-term interest rates have fallen and mortgage refinancing activity has picked up. Increased refinancing has in turn led the Fed's holding of agency MBS to run off more quickly than previously anticipated. Although mortgage prepayment rates are difficult to predict, under the assumption that mortgage rates remain near current levels, we estimated that an additional $400 billion or so of MBS and agency debt currently in the Fed's portfolio could be repaid by the end of 2011.

    Translation: As investors try to get a return on their money above the Federal Funds rate, they are lending to home buyers again. So, home sellers get out of the older mortgages, which were issued through F&F. That depletes our portfolio. We are unloading this risk onto investors. When we finally inflate, they will be ruined: 30-year credit at 4%. Mortgage rates will go to 20% once we crank up the digital presses. The market value of 30-year loans will collapse. So, if you can lock in a 30-year mortgage at 4%, do it.


    At their most recent meeting, FOMC participants observed that allowing the Federal Reserve's balance sheet to shrink in this way at a time when the outlook had weakened somewhat was inconsistent with the Committee's intention to provide the monetary accommodation necessary to support the recovery.

    Translation: We're deflating. No one notices, except futures speculators.


    Moreover, a bad dynamic could come into at play: Any further weakening of the economy that resulted in lower longer-term interest rates and a still-faster pace of mortgage refinancing would likely lead in turn to an even more-rapid runoff of MBS from the Fed's balance sheet. Thus, a weakening of the economy might act indirectly to increase the pace of passive policy tightening – a perverse outcome.

    Translation: We're Keynesians here. We don't deflate for very long. So, we will buy T-bonds to replace the paid-off MBS.


    In response to these concerns, the FOMC agreed to stabilize the quantity of securities held by the Federal Reserve by re-investing payments of principal on agency securities into longer-term Treasury securities. We decided to reinvest in Treasury securities rather than agency securities because the Federal Reserve already owns a very large share of available agency securities, suggesting that reinvestment in Treasury securities might be more effective in reducing longer-term interest rates and improving financial conditions with less chance of adverse effects on market functioning.

    Translation: When we buy T-bonds, this lowers long-term rates, including mortgage rates. This subsidizes housing. So, falling mortgage rates will tempt lenders to buy Fannie and Freddie debt while rates are still at a high 4%. We will unload the rest of our MBS at face value. We will get out of this market in time.


    Also, as I already noted, reinvestment in Treasury securities is more consistent with the Committee's longer-term objective of a portfolio made up principally of Treasury securities. We do not rule out changing the reinvestment strategy if circumstances warrant, however.

    Translation: If big banks get into trouble again – if!!!! – we will bail them out. That's our job. We do it well. (snip)


    (snip) Another concern associated with additional securities purchases is that substantial further expansions of the balance sheet could reduce public confidence in the Fed's ability to execute a smooth exit from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might lead to an undesired increase in inflation expectations.

    Translation: The public may finally catch on to the fact that the only tool the FED really can trust is mass inflation. We're going to inflate. That's our job. It has been our job ever since 1914. We do it well: 95% reduction in purchasing power, if you believe the Bureau of Labor Statistics' Inflation Calculator.


    To mitigate this concern, the Federal Reserve has expended considerable effort in developing a suite of tools to ensure that the exit from highly accommodative policies can be smoothly accomplished when appropriate, and FOMC participants have spoken publicly about these tools on numerous occasions.

    Translation: We have them but we don't dare use them, because none of them can be implemented without creating depression, deflation, and a collapse of the major capital markets, including the Treasury market, since the government would go bust.


    A second policy option for the FOMC would be to ease financial conditions through its communication, for example, by modifying its post-meeting statement. As I noted, the statement currently reflects the FOMC's anticipation that exceptionally low rates will be warranted "for an extended period," contingent on economic conditions. A step the Committee could consider, if conditions called for it, would be to modify the language in the statement to communicate to investors that it anticipates keeping the target for the federal funds rate low for a longer period than is currently priced in markets. Such a change would presumably lower longer-term rates by an amount related to the revision in policy expectations.

    Translation: If necessary, we'll call in Greenspan to write our press releases. He owes us because of the mess he left behind.


    Cutting the IOER rate [rate paid on excess reserves] even to zero would be unlikely therefore to reduce the federal funds rate by more than 10 to 15 basis points.

    Translation: When I say we can cut it to zero, that's meaningless. I admit it. What I'm really saying is that we can start charging on excess reserves: negative rates. But I am not about to threaten this in public. Futures traders would understand what this means: the threat of mass inflation when banks start lending and fractional reserves begin to multiply the money supply.


    A rather different type of policy option, which has been proposed by a number of economists, would have the Committee increase its medium-term inflation goals above levels consistent with price stability.

    Translation: Since we already define "price stability" as "steady price increases," you know what result that would produce. Buy gold.


    Inflation expectations would also likely become significantly less stable, and risk premiums in asset markets – including inflation risk premiums – would rise.

    Translation: The bond bubble would pop.


    Each of the tools that the FOMC has available to provide further policy accommodation – including longer-term securities asset purchases, changes in communication, and reducing the IOER rate – has benefits and drawbacks, which must be appropriately balanced.

    Translation: None of the options will work. Every one of them will lead to mass inflation.


    Under what conditions would the FOMC make further use of these or related policy tools? At this juncture, the Committee has not agreed on specific criteria or triggers for further action, but I can make two general observations.

    Translation: This is why nobody up here knows what to do if we start to lose this sucker. But I'll fake it.


    Regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally.

    Translation: When push comes to shove, we are going to inflate.


    Although what I have just described is, I believe, the most plausible outcome, macroeconomic projections are inherently uncertain, and the economy remains vulnerable to unexpected developments.

    Translation: We don't know what's going to happen.


    The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools.

    Translation: We have not inflated since October 2008, but nobody notices, except futures speculators.


    Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost. However, the Committee will certainly use its tools as needed to maintain price stability – avoiding excessive inflation or further disinflation – and to promote the continuation of the economic recovery.

    Translation: When all else fails, we'll inflate.

    from

  7. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    and here's the rest of the world's wrap-up view of Jackson Hole ...

    (snip)"“Our review of the historical record, therefore, strongly supports the view that large, destabilizing economic events produce big changes in the long-term indicators, well after the upheaval of the crisis. [Up to now,” the authors warn, “we have been traversing the tracks of prior crises. But if we continue as others have before, the need to de-leverage will dampen employment and growth for some time to come.”]

    It was perhaps this scholarly warning that roused Shirakawa to action, with Ben Bernanke right behind. Neither wants to be known as the central banker who followed in the footsteps of losers. Urged on by sages and simpletons, they will print money. “It falls to the Fed to fuel recovery,” writes Clive Crook, one or the other, in The Financial Times. “Under the circumstances,” he writes, “better to print money and be damned.” At last week’s conference in Jackson Hole, Wyoming, the Americans promised to print more money, if needed. Shirakawa rushed home early so he could turn on the presses right away.

    We would have more faith in central bankers if they had not been responsible for causing the crisis in the first place. Shirakawa joined the Bank of Japan more than 30 years ago. Ben Bernanke, an expert on the Great Depression, joined the Fed in 2002; he was standing at Alan Greenspan’s right side, with a pin in his hand, years before the bubble reached a crisis level.

    “In a sense,” said Professor John Taylor, also at Jackson Hole, “the Fed caused the bubble.” That is, in the only sense that matters – they kept the key lending rate too low for too long. Now they are about to make another monumental mistake. No, two of them.

    The first is already in progress. By promising the world extremely low rates for an “extended period” of time, they have created the exact conditions they wanted to avoid. President of the St. Louis branch of the Federal Reserve, James Bullard, explained that the Fed had unwittingly put the economy into an “unintended steady state.” The key rate cannot go any lower as prices sink; it is already at zero. It cannot go higher, either, not as long as inflation remains below the target. So, it does not move. The private sector has come to expect no policy response, Bullard concludes, “so nothing changes with respect to nominal interest rates or inflation.” As in Japan, the US economy remains in a coma.

    The second major mistake is still ahead. Quantitative easing is a new weapon. It is not meant to kill dollar holders or bond buyers. It is intended merely to scare them with a little bit of inflation. But with the Fed’s QE shotgun staring him in the face, an investor may doubt the Fed’s promise to pull the trigger “just a little.” He will drop the dollar and US bonds and run. Inflation will soar.

    Here at The Daily Reckoning, we have argued that it is coming…but not soon. Our opinion hasn’t changed. We’re just getting tired of waiting.

    Regards,

    Bill Bonner
    for The Daily Reckoning (snip)


    Read more: Print Money and Be Damned!

  8. #7
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    And to put the cherry on top, the FOMC is standing by ready to buy up even more U.S. debt.
    They voted 8 to 1 to do so with Hoenig, of the K.C. Fed. the only dissenter.

  9. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    ^^^ yeah no s#!t ! I see that the FED did another two billion in POMO's yesterday, effectively buying up existing US Treasury Bonds using freshly printed dollars. This is on top of the 5 billion in FED POMO's executed last week and the 4 billion in FED POMO's executed the previous week. According to the FED's schedule, they're planning to do some 30 billion dollars worth of total POMO's leading into election day ... pure coincidence of course !



    But the 'smart money' is getting wise to this action ... the US stock market indexes go up on the day of the POMO because the Wall St. banks selling their US Treasury Bonds turn right around and use the money for prop stock trades, but those same US stock market indexes drop back down again if another POMO doesn't take place the following day ( like today ) !!!

    Of course, the US dollar index / foreign exchange rate / purchasing power index takes a fresh dive with each additional POMO but a dive that does NOT recover the following day.



    ... and gold moves in the opposite direction.



    What goes somewhat unnoticed is that the US dollar denominated prices of world market commodities are moving up as the US dollar exchange rate / purchasing power moves down. The single major exception is crude oil ( which has built big inventories based on earlier assumptions that some real economic recovery was taking place - NOT ). And some commodities like cotton are hitting new multi-year highs ...



    Unlike gold or oil, price increases for commodities like cotton requires weeks or months to percolate through to rising prices for clothing ... or the clothing manufacturers may not be able to float a price increase thus resulting in lower profit margins / lower earnings / lower stock prices. Same holds true of rising prices for food ingredients like soybeans



    ... where it may take weeks or months for processed food prices to increase in response to rising ingredient costs ... or the food processors may not be able to float a price increase to cover their rising ingredient costs thus resulting in lower profit margins / lower earnings / lower stock prices.

    Again it is pure coincidence that the eventual rise in clothing prices, food prices etc. stemming from the rising world market commodity prices originally stemming from the declineing US dollar exchange rate that directly results from the FED printing billions of new dollars out of thin air week after week won't become apparent until after election day !

    ~
    Last edited by Melonie; 09-22-2010 at 02:32 PM.

  10. #9
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    Maybe Bernancke et. al think they can write a brand new book on economic history. At no time
    in history were we able to have rising gold prices and a falling dollar and were able to avoid a nasty dose of inflation.

  11. #10
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    ^^^ actually, this has never been the case in ANY nation's history !!!

  12. #11
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: weekend commentary - Bernanke vs Trichet or 'A-Hole at J-Hole'

    ^^^ Correct. It seems that Bernancke and the other "soft money" folks at the Fed are not as concerned as they ought to be because there is no significant inflation NOW. History teaches that it takes awhile for all the money sloshing around to have a deleterious effect.

Similar Threads

  1. I screwed myself in a hole =/
    By BuffyFlame in forum Stripping (was Stripping General)
    Replies: 6
    Last Post: 09-29-2011, 03:08 PM
  2. Replies: 0
    Last Post: 07-25-2010, 06:21 AM
  3. I'm an a-hole so here's a penny!
    By BalletBaby in forum Stripping (was Stripping General)
    Replies: 10
    Last Post: 01-09-2007, 12:04 PM
  4. A**hole Owner
    By DSUsb19 in forum Customer Conversation
    Replies: 13
    Last Post: 01-31-2005, 03:58 PM
  5. Song, I'm an A**hole
    By whirlerz in forum Music Mix
    Replies: 10
    Last Post: 09-21-2004, 10:04 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •