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Republicans grill Bernanke over inflation threat Yahoo
WASHINGTON (AP) -- Members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke Wednesday over whether the Fed's policies are raising the risk of higher inflation in the months ahead.

House Budget Committee Chairman Paul Ryan, R-Wis., said he is concerned that the Fed won't be able to detect inflation until "the cow is out of the barn" and inflation is already spreading dangerously through the economy.

Bernanke acknowledged that inflation is surging in emerging economies. But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising gasoline and food prices.

Inflation in the United States remains "quite low," Bernanke said. He blamed higher prices on strong demand from fast-growing countries such as China-- not the Fed's policies to stimulate the economy, including buying $600 billion worth of Treasury debt.

Rep. Ron Paul, R-Texas, held a hearing on whether the Fed's bond-buying program and record-low interest rates can really help create jobs. Paul, an outspoken critic of the central bank, favors abolishing the Fed.

Lawmakers at that hearing also expressed concerns that the Fed's policies will spur inflation.

"If the Fed didn't see this mess coming, will they see the recovery starting in time to turn off the printing presses to stop inflation," asked Rep. Frank Lucas, R-Okla. "I am not sure their vision in the future will be any better than in the past."

Bumbling Ben Bernanke will one day pay a high price for his lies to the American public. He sits in front of these lawmakers with a straight face and tells them that he is buying $600 BILLION worth of US Treasury Debt to keep interest rates low...and stimulate the economy. AS INTEREST RATES ARE RISING IN SPITE OF THE FED'S PURCHASES! Inflation "remains quite low" he proclaims. POPPYCOCK!

Home loan demand drops, rates at 10-month high Reuters
(Reuters) - A jump in U.S. mortgage rates to their highest level in 10 months has highlighted the fragility of the housing market that will make it difficult for Washington to remove its backstop.

Data on Wednesday showed fixed 30-year mortgage rates averaged 5.13 percent in the week ended February 4, up from 4.81 percent the prior week.

It was the highest rate since the week ended April 9, 2010, the Mortgage Bankers Association said.

The increase sapped demand for mortgages as the MBA's seasonally adjusted index of mortgage applications, which includes both refinancing and home purchase demand, fell 5.5 percent in the week.

Higher interest rates could prove problematic for a market where weak demand remains one of the biggest challenges.

Yeah, Bumbling Ben has definitely got his finger on the trigger of economic growth. NO ONE, AND NO COUNTRY has ever gotten rich by spending money they don't have.

Bernanke says job growth, inflation still too low Reuters
Acknowledging renewed momentum in the economy, Bernanke said a drop in the jobless rate to 9 percent in January from 9.8 percent in November, the biggest two-month decline since 1958, was "grounds for optimism."

Grounds for optimism? Bumbling Ben is full of sh*t! He knows as well as anybody that the recent drop in "headline" unemployment is a lie, but he uses it to skillfully created a "sound bite" that can be used by the blathering financial media to pump up the confidence of the American people in their governments ability to "fix this".

9% Unemployment Rate is a Statistical Lie
By Greg Hunter
“More than half a million people found work in January.” How? The BLS reported there was only a tiny gain of 36,000 workers to the payrolls, and even that number is a statistical lie, according to economist John Williams of Shadowstats.com. In his latest report (last Friday), Williams said, “Incredibly, despite ongoing regular overstatement of payrolls by the BLS, the BLS appears to have upped, not lowered, the excessive biases in its latest rendition. Without the higher bias, the reported January 2011 payroll gain of 36,000 would have been a decline of 52,000.”

As for the big drop in the unemployment number down to 9%, you can credit that with something the BLS calls “seasonal adjustments.” The government takes into consideration things like cold weather and snow when it puts together unemployment figures. Williams thinks these seasonal adjustments have been distorted by the dismal economy during the past few years. Williams says, “. . . the extraordinary severity and duration of the economic duress in the United States during the last three to four years has destabilized traditional seasonal-factor adjustments and the related monthly reporting of certain economic series. The unemployment rate rose in January 2011, not seasonally adjusted. The 0.4% decline reported in the headline January unemployment rate appears to be a seasonal-factor issue.” In other words, seasonal adjustment jobs are created out of thin air and are not really there for people. In reality, unemployment increased slightly. It did not decrease.

While we are on the subject of reality, after one year, the unemployed are no longer counted in government statistics. If unemployment was computed the way BLS did it prior to 1994, the true unemployment rate (according to Shadowstats.com) would be 22.2%. I wonder why the mainstream media feels compelled to only do stories that support government statistics. There is bona fide analysis that can show government numbers are rigged to make things look better than reality.

Yesterday's surge in the Precious Metals was halted today as the Fed bought 71% of today's $24 BILLION 10 year bond offering by funneling some of it's monopoly money through foreign central banks to give the "appearance" of "strong foreign demand" for US debt. This strong demand for America's debt left the Gold market motionless today. As absurd as that may seem...

TREASURIES-Bonds rise after strong $24 bln 10-year auction
NEW YORK, Feb 9 (Reuters) - U.S. Treasury debt prices added to gains on Wednesday after yields near 9-1/2-month highs drew buyers to a $24 billion auction of 10-year Treasury notes.

A huge indirect bid, roughly correlating to demand from overseas, led to the robust results. Indirect bids took 71.3 percent of the sale, the U.S. Treasury said.

"There was a huge indirect bid, 71.3 percent versus a 44 percent norm," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.

The strong institutional demand for the sale left primary dealers, charged with underwriting U.S. auctions, with just $6.73 billion of the $24.0 billion sale.

"Yields have gotten to a point that are attracting some buying," said Thomas Roth, executive director in U.S. government bond trading with Mitsubishi UFJ Securities USA in New York.

The REAL Reason Ben Bernanke Leaves A PaperweightOn The "Print" Button When His Finger Gets Tired
By Graham Summers
Bernanke is printing money and funneling it into the Wall Street banks for one reason and one reason only. That reason is: DERIVATIVES.

According to the Office of the Comptroller of the Currency's Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION.

Five banks account for 95% of this. Can you guess which five?

Looks a lot like a list of the banks that Ben Bernanke has focused on bailing out/ backstopping/ funneling cash since the Financial Crisis began doesn't it? When you consider the insane level of risk exposure here, you can see why the TRILLIONS he's funneled into these institutions has failed to bring them even to pre-Lehman bankruptcy levels.

Ben Bernanke is a stooge and a fraud, but he is at least partially honest in his explanations of why he wants to keep printing money. The reason is to try to keep interest rates low. Granted he's failing miserably at this, but at least he understands the goal.

Of course, Bernanke tells the public and Congress that the reason we need low interest rates is to support housing prices. He doesn't mention that $188 TRILLION of the $223 TRILLION in notional value of derivatives sitting on the Big Banks' balance sheets is related to interest rates.

Yes, $188 TRILLION. That's thirteen times the US's entire GDP and nearly four times WORLD GDP.

Now, of course, not ALL of this money is "at risk," since the same derivatives can be traded/ spread out dozens of ways by different banks as a means of dispersing risk.

However, given the amount of money at stake, if even 4% of this money is "at risk" and 10% of that 4% goes wrong, you've wiped out ALL of the equity at the top five banks.

Put another way, Bank of America, JP Morgan, Goldman, and Citibank would CEASE to exist.

This evening, Harvey Organ in his blog, explains the threat to the financial system that these interst rate derivatives Bumbling Ben is hell bent on protecting are:

The 5 USA bankers have over 250 trillion of these derivatives.

In simplistic terms, the trade can be summarized like this:

JPMorgan and banker friends buy trillions of dollars of long bonds in the future and short equal amounts of treasury bills in the future. This is the swap. The long bond when initiated had yields as low as 3.7%. The treasury bills had yields of .09%.

So if you short the treasury bills, you are basically shorting at par.

But now look at the long end. If interest rates rise a full point then let us say collectively these banks have 250 trillion dollars in long bonds in the future. A 1% rise in yield will cause the bankers to suffer losses equal to 2.5 trillion dollars.

This is why interest rates must remain low or the banks obliterate themselves with a 1% rise. Also the huge derivatives initiated by the bankers caused the real bonds to be purchased in mass and this itself caused interest rates to fall as dealers needed to find real long bonds to match the derivative long.

Now the world is sensing rising commodity prices and also the less note-worthiness of sovereign nations. This is causing long bond yields to rise and this is putting the pressure on JPMorgan and friends.

In a nutshell then:

JPMorgan can blow up on a debt default caused by its huge derivatives in interest rate swaps

or it can blow up with a physical default by not providing the real physical silver and gold metal on the comex or LBMA.

And foreigners were lined up to buy US debt today? I don't think so... This is an illusion being created by the banks with money given to them by the Fed. It is the proverbial "house of cards". How the price of Gold and Silver can not already be circling the moon is the story of the day folks.

Consider that the US Federal Reserve chairman is sitting in front of a Congressional panel today, telling them he must continue to buy US Treasury debt to keep interest rates low to support a [nonexistent] economic recovery. When in fact he is funneling money into a black hole the Fed itself helped create [to suppress the price of Gold], in the hopes that he can prevent an interest rate swap time bomb from exploding and completely vaporizing the financial system as we now know it.

This is why Bernanke and Geithner are adamant that the Congress raise the debt ceiling. Failure to raise the debt ceiling, and interest rates explode. And so do JP Morgan, Bank Of America, Citi Bank, Goldman Sachs, and HSBC...and the entire financial system.

Precious Metals anyone? BUY THE DIPS!