Monday, August 30, 2010

Ben Bernanke's Electric Kool-Aid Acid Test

"Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly."
-Ben Bernanke

The US Federal Reserve: A national disgrace, a national tragedy.

Desperation on the part of global central banks seems to be the order of the day. That the "promise" of further government stimulus is applauded by investors as "positive" is alarming. What kind of recovery do you have if that recovery is solely supported by government stimulus? That's an easy one: No Recovery.

World stocks up after Bank of Japan eases policy
LONDON (AP) -- Japanese stocks led the way in world markets Monday after the country's central bank eased monetary policy again in its latest attempt to shore up the economy.

Last Friday's hint from the Federal Reserve chief that the U.S. central bank was ready to do more to help the U.S. economy had already helped stocks around the world start the week on a positive tone.

Nevertheless, the Nikkei 225 stock average proved to be the standout, closing up 158.20 points, or 1.8 percent, to 9,149.26 after the Bank of Japan decided at an emergency board meeting to further ease monetary policy by expanding a low-interest loan program for financial institutions to 30 trillion yen ($355 billion) from 20 trillion yen.

Sentiment in the U.S. was buoyed Friday after Federal Reserve chairman Ben Bernanke indicated the central bank would back further stimulus measures if the U.S. economy continues to weaken. Figures on Friday showed that the world's largest economy grew by an annualized rate of 1.6 percent in the second quarter of the year, down from the previous estimate of 2.4 percent.

"Sentiment will at least begin this week on a positive note in the knowledge that the Fed stands ready to act although double-dip fears are far from over," said Mitul Kotecha, an analyst at Credit Agricole.

The willingness of major central banks to take more action to prevent a slide back into recession has generally reassured equity market investors who have been unnerved over the past couple of months by evidence from the U.S. to China that the global economic recovery is losing momentum.

A global delusion appears to have take firm root. If markets are "reassured" by government moves to increase liquidity, and or "promises" to do the same, then you can only bet that the global economy is going to get much worse before it gets better. Economic growth, REAL ECONOMIC GROWTH, does not spring from the well of the government printing press. Only the delusion of growth can come from spending more money conjured up out of thin air.

Fed Ready to Dig Deeper to Aid Growth, Chief Says
JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl.

Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.

While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.

As Mr. Bernanke’s remarks were released publicly, stock prices immediately fell, a sign that investors were hoping for some concrete signs that the Fed would step in to try to bolster the economy. But as the market digested the chairman’s full remarks, prices rebounded and the Dow Jones industrial average rose 164.84 points, or 1.65 percent, to 10,150.65.

Noticeably, the equity markets fell when Bernanke did not offer "some concrete signs that the Fed would step in to bolster the economy." The equity markets are like drug addicts. Terrified of the fall from their high should their fix of easy money be cut off at the source. The markets remain delude that an economic recovery rests solely on the open wallet of the Federal Reserve. Only after the markets convinced themselves that the "fix" was still in did it rejoice in the Feds "promise" to do whatever was necessary to "bolster the economy".

The Fed has already spent upwards of $2 TRILLION bolstering the economy. Where is the recovery? Folks, as long as the government is printing money, there ain't gonna be no recovery. The illusion of one might persist for a little while longer, but pouring money down a bottomless hole ain't gonna fill it up, no matter how much you print.

Bernanke Hallucinating
by Martin D. Weiss, Ph.D.
If Fed Chairman Ben Bernanke honestly believes what he said at Jackson Hole on Friday — that he can save the economy by printing more money and buying more bonds — he’s hallucinating.

Through the first quarter of this year, he printed $1.5 trillion of paper money and promptly bought $1.5 trillion in mortgage bonds, government agency bonds, and Treasury bonds.

But the entire effort was a dismal failure; the U.S. economy is still sinking and most large American banks are still weak.

The underlying reason: While the government has been borrowing massively, nearly everyone else has embarked on unprecedented debt LIQUIDATIONS.

In other words …

While Washington is gorging itself on new debts, nearly every other sector is undergoing massive liposuctions.

In sum, nearly all the money Bernanke has printed — plus all the money he has supposedly poured into the economy — is going nowhere, except perhaps down the drain. He’s clearly running on a treadmill … pushing on a string.

US GDP growth revised down to 1.6 percent as economy cools
The US economy rose at a 1.6 percent pace in 2010's second quarter, a number that's disappointingly tepid but still keeps hope alive that the US will avoid a dip back into recession this year.

The number represents a sharp decline in the speed of economic recovery compared to the first quarter, when the gross domestic product (GDP) grew at a 3.7 percent pace. The Friday morning report from the Commerce Department also represented a downward revision to its initial estimate for the second quarter (2.4 percent) from a month ago.

US stock indexes opened marginally higher on the news, since the downward revision was not quite as bad as expected.

$2 TRILLION along and the best the economy can do is 1.6%? Oh, but it was better than the 1.4% "expected". Hooray! Participants on Wall Street have lost there minds to the hallucinogenic ramblings Bumbling Ben Bernanke. Bumbling Ben in his own hallucinogenic haze continues to cling to the hope that anemic growth in the economy will bolster the confidence of Americans. Americans rejoice in the illusion that tepid growth is better than no growth. Both are sadly mistaken in their beliefs, but blame the bad drugs...there is NO GROWTH, and NO RECOVERY.

Bernanke will not release the helicopters laden with monopoly money until GDP goes negative again. By all real measures it already is, but by "government estimates" it is not. When the government can no longer fudge a positive GDP number, Bernanke will have no other option than to "UNLEASH THE CHOPPERS!" But Ben assures us that will never happen:

Here Is the Money Quote from Bernanke: We Will Fight Deflation and Economic Stagnation
posted by Darren Gersh, Washington Bureau Chief
For mere mortals, this is the most important thing to take away from Bernanke's speech in Jackson Hole:

Falling into deflation is not a significant risk for the United States at this time, but that is true in part because the public understands that the Federal Reserve will be vigilant and proactive in addressing significant further disinflation. . . .

Second, 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. Because a further significant weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.

Translation: the Fed will do what it takes to keep this slowdown from becoming something much nastier.

So, the economy will not go into a death spiral because Bumbling Ben believes that the US Public believes that he won't let that happen? Good freaking luck with that Ben....

Ben has a history of wishful thinking. Few of his wishes have come true...most just hallucinogenic jabbering.

March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.” and "Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,"

June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect the economy overall.''

February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned,

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized"

September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon."

September 23rd, 2008 – Bernanke: "My interest is solely for the strength and recovery of the U.S. economy,"

Over the period in time covered by these quotes above, the DOW fell from 12,268 on February 28, 2007 to 7,609 on March 31, 2009. "Often Wrong" Bernanke was wrong every time he opened his mouth. If he were a doctor, he would have been sued into homelessness for malpractice.

So, when Bernanke says that it is unlikely that the economy will slip back into a recession [as if it ever left the current one], don't get your hopes up...Bumbling Ben is "Often Wrong". Hallucinogens do that. They make you see things that aren't really there. Ben sees a recovery, but there really isn't one at all.

Japan casually throws another 10 TRILLION Yen into the money pot, and Ben pledges to see that, and raise them "whatever it takes" to thwart negative growth in the US Economy. Your only investing option is to buy more Silver and Gold, while you still can, to protect what wealth you may have, and wait for "Often Wrong" Ben Bernanke to be wrong, once again. Safe in the knowledge that the TRUTH rests with REAL money, and not Bumbling Ben's cash laden helicopters.

Consumer spending picks up
NEW YORK ( -- Consumer spending rose in July, but Americans remain wary about the future of the economy.

Personal spending rose by $44.1 billion last month, or 0.4%, after falling less than 0.1% in June. This came in above the 0.3% increase economists expected.

Data of this sort should be taken with a grain of salt. When prices rise, spending rises along with it. Consumers aren't spending more because they want to, but because the have to. Inflation is very real despite the constant "fear" of deflation. This headline and story opening is designed to raise consumer confidence, but between the lines lies the inflationary truth about "rising consumer spending". As inflation accelerates later this year, and greatly into next year, you can be certain to see many more headlines touting "rising consumer spending".

Never lose sight of the fact that consumer spending data are derived from receipts of money spent, and not on the volume of goods sold. This is the foundation of lies our economy is built on: Rising prices equals economic growth. It's silly and deceptive, but this is the honet truth about our economy and why the fear of falling prices is so rampant. Falling prices equals less spending equals no growth. It really is that simple. The Fed's #1 job is price stablity, yet without rising prices [inflation] there can be no growth in the economy. Stable prices are what we had back in the day, BEFORE the existence of the Federal Reserve. If there was ever more proof that the Fed is merely an inflation machine, look no further than Bernanke's speech in Jackson Hole, WY on Friday:

Chairman Ben S. Bernanke
At the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming
August 27, 2010

The Economic Outlook and Monetary Policy

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