Thursday, June 11, 2009

Read My Lips

"Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation," said Ben Bernanke in response to a question posed by a member of Congress. Then, he added...
"The Federal Reserve will not monetize the debt."

That last sentence has a ring to it. It reminds us of Richard Nixon's "I am not a crook." Surely, it is destined to make its way into the history books, alongside Bill Clinton's "I did not have sex with that woman" and the builder of the Titanic's "even God himself couldn't sink this ship."

Monetizing the debt is precisely what the Fed will do. But it will not do so precisely. Instead, it will act clumsily...reluctantly...incompetently...accidentally...and finally, catastrophically.

That's our prediction, here at The Daily Reckoning. Prove us wrong!

-The Daily Reckoning, June 5, 2009

Think about it...

The rate of firings and layoffs may have cooled off, but the unemployment line keeps getting longer, not shorter. If you've lost your job, you're not finding a new one. That lengthening unemployment line is NOT in front of the "Door To Prosperity" no matter what kind of BS Bumbling Ben is using to obscure reality.

You have to stop and ask yourself, if Bernanke and Geithner, the Fed and the Treasury didn't, or couldn't, see this crisis coming, how in the hell can we expect them to know how to stop it and or fix it? How can we "believe" their predictions of a turn around, or the "safety" of US Debt? These clowns are nothing more than the blind leading the blind. How is a blind man going to see the cliff before he falls over it?

What if the Fed is "letting" interest rates rise under the crude assumption that it will drive home buyers into a falling market fearing rising financing costs? Could these guys be that insidious? I wouldn't put it past them, but there has been an "incremental" rise in home sales that seems to shadow these rising interest rates. Nah, the Fed couldn't be that smart,... just lucky. At most it will buy them some more precious time.

The general consensus in the equities markets right now is to be short the market. But if the Dollar continues to fall, odds are that equities will keep rising in spite of the BAD economic date that relentlessly suggests equities should be falling. Just the fact that interest rates are rising should be pushing equities lower. Should the inflation so many have recently come to "fear" materialize, ALL assets are going to rise in "price". Shorting equities in a highly inflationary environment might not be a good idea.

Dollar Crisis Looming — Don't Short the Market: Jim Rogers
A currency crisis is imminent, so investors should avoid shorting the market, said Jim Rogers, chairman of Rogers Holdings.

"I’m afraid they're printing so much money that stocks could go to 20,000 or 30,000," Rogers said. "Of course it would be in worthless money, but it could happen and you could lose a lot of money being short."

Rogers typically holds both long and short positions, but his perception of global currencies' instability has led him to pull out all his shorts, he said. The last time he can remember doing so was before the market fiasco in 1987.

Rogers called the US dollar a "terribly flawed currency," adding that it could be the starting point for the next currency crisis.

"I would suspect that somewhere along the line...someone's going to say, 'I'm going to start selling mine before everybody else does,'" Rogers said. "That's when you have a currency crisis."

China Losing Confidence in the U.S. Dollar?
GRETA VAN SUSTEREN, FOX NEWS HOST: Congressman Mark Kirk just returned from China, and he says the Chinese told him they are worried about the U.S. economy. But that's not exactly what our Treasury secretary, Tim Geithner, says after his recent trip to China. Secretary Geithner says the Chinese expressed to him justifiable confidence in our economy. So which is it? Are the Chinese flipped out about our exploding debt or not?

Illinois congressman Mark Kirk joins us live in Washington. Nice to see you, Congressman.

VAN SUSTEREN: OK, you're told one thing about our economy, and apparently, the Treasury secretary is told another.

KIRK: There was an honesty moment when Secretary Geithner was in Beijing University giving a speech. He said, Your investments in a trillion dollars worth of U.S. debt are secure, and the audience laughed at him. It's very un-Chinese to do, to embarrass a speaker in public, but I think it reflected a growing concern in Beijing.

VAN SUSTEREN: What would be the incentive for Secretary Geithner to get it so wrong or to miss that sort of honesty point? I mean, what -- what's in it for him to come back here and say, The Chinese are fine on our debt. They want to -- you know, they don't -- they're not worried at all about our economy.

KIRK: What Secretary Geithner reflected was what the public statements of the Chinese government was, which is they are afraid that if they talk down the dollar too much, their own trillion-dollar investment will be cheapened. But privately, the key concern is, Should we buy any more U.S. debt? And over time, what's happening is China is beginning to cancel Congress's credit card, doesn't want to lend much more money to the United States, and especially is worried about the Fed's policy of printing money to buy new debt.

VAN SUSTEREN: So it isn't that the secretary is deceitful or sugarcoating, it's that he's naive and was hoodwinked and wasn't there when they were talking candidly to you? Is that the story?

KIRK: It's a common thing in Asia that you hear one thing in public and then you may hear some more direct concerns in private. And you have to listen to that because, unfortunately, China has become America's biggest creditor, and if the Congress's plans go forward, we will borrow even more to spend on additional bills, a transportation bill, a health care bill, and our regular practice of waiving our budget constraints towards the end of the year.

VAN SUSTEREN: If -- have you pulled the secretary aside and said, Look, you know, when you're out of the room, they're telling me they're really worried about our -- about our situation?

KIRK: I'm fairly sure that he heard the same thing in private and...

VAN SUSTEREN: So why is -- so why would he make -- why would he say something else, the "justifiable confidence"? I mean, why -- why would he tell us something different?

KIRK: Well, because both parties don't want to create a panic, but there is growing concern that the United States may not borrow $1.8 trillion, it may borrow even more, especially if it passes additional legislation on the Speaker's table, and that begins to look unsustainable. Also...

VAN SUSTEREN: Well, why would they lend at that point? I mean -- I mean, if our credit is so lousy...

KIRK: Right.

VAN SUSTEREN: ... if this is getting so grim, why in the world would the Chinese want to pick up any more of our debt? I wouldn't!

KIRK: I think...

VAN SUSTEREN: I mean -- I mean, if I were going to lend someone money, I'd want to say, you know, Show me your cards. What have you got?

MOORE: Well, they already are beginning to hedge. I think they expect quite a bit of inflation in the United States next year. So they made a major investment. They funded a second strategic petroleum reserve, and they plan to buy $80 billion worth of gold. That's two Fort Knoxes. Both of those investments only make sense if you expect significant dollar inflation.,2933,525639,00.html

Fed lost $5.3B on Bear Stearns, AIG holdings in 1Q
WASHINGTON (AP) -- The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group Inc., according to a report issued Wednesday.

The loss on the holdings, which include mortgage-backed securities, reflected a decline in their value as the recession carried over into the first three months of this year. The cumulative loss on the Bear and AIG holdings come to $16.46 billion since they were taken over last year.

The Fed is hoping that if it holds onto the securities long enough, they will eventually rise in value once the economy returns to full health again, the housing market heals and the financial and credit crises are past.

Fed Would Be Shut Down If It Were Audited, Expert Says
The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC.

With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.

"If the Fed examiners were set upon the Fed's own documents-unlabeled documents-to pass judgment on the Fed's capacity to survive the difficulties it faces in credit, it would shut this institution down," he said. "The Fed is undercapitalized in a way that Citicorp is undercapitalized."

Grant said he would support legislation currently making its way through Congress calling for an audit of the Fed.

STATUS REPORT: Ron Paul's Audit the FED Act, HR 1207 and S 604
This February, Congressman Ron Paul (R-TX) introduced HR 1207, the Federal Reserve Transparency Act of 2009 to audit the FED. When I first reported on it in March, privately I was quite ecstatic that there were 11 co-sponsors, and three were Democrats. Why?

Well, Dr. Paul has tried for some time to audit and limit, even abolish, the Federal Reserve. The hallmarks of Dr. Paul's twenty years in Congress are common sense bills that have been mostly ignored as our past Congresses and the Federal Reserve led us down the path to economic ruin. However, what happened next in the House is amazing - HR 1207 now has 207 co-sponsors, close to a majority!

The big picture is that it only takes half a brain and a pulse to get angry about the fact that the central bankers gave the American people the equivalent of a middle finger on Bloomberg's Freedom of Information Act request. The FED denied to disclose how they used $2 trillion dollars in open market operations that they executed outside of Congressional authority. Congress has no clue or control over how the FED used the money since that is not how the FED works. Without an audit, Congress does not even know how much gold our nation owns.

No comments:

Post a Comment