Perhaps, but the gamble that Bernanke and his cohorts are making is that negative real rates will dissuade Joe and Jane six pack from "cashing out" of their stocks. Since they pay no attention to metals and commodities (and the media pays them scant attention), they will have no idea what "real" buying power they are losing as their stocks tread sideways to lower while their cost of living goes skyrocketing.
All Ben is doing is bailing out the incredible corruption, unreigned greed and colossal stupidity called Wall Street. Anyone hear of any banks or wall street firms being investigated for scamming everyone else with the sub-prime mess? Excepting for the major equity exchanges, if everything else on wall street got shoved into the sea, the average guy would be much better off.
likely also fed is following a premeditated strategy to the book; a packaged scheme ready to be implemented since greenspan's accomodative times....and ya, for all the reasons you've given.
Who here said "cash is where you want to be?" That, as a matter of fact, makes absolutely no sense, if, as alleged, metal and commodity prices are "skyrocketing," and "stocks tread sideways to lower," while the cost of living rises dramatically. It especially makes no sense if savers are getting paid far less than the rate of inflation in after-tax yield (measly 3.x% in money markets, and less in treasuries - munis are tax exempt, but aren't faring much better). So, the real question becomes, where does an investor want to be? Do they want to chase commodities and precious metals after the absolute rip they've already run, and the economhy is showing palpable signs of cooling, possibly buying a top at the worst time? Are equities less valuable than cash in a climate of low growth but high inflation? If you know the best asset class to be most heavily invested in right now, and you know it with any degree of certainty, and history judges you correctly in retrospect, congratulations, you should definitely be running a very large fund.
This is what I have been saying all along . . . From the article earlier posted: "Now for extra credit, how much did Citibank pay for their last round of "hard money" to apply to their Tier Capital? That'd be a double-digit coupon from Abu Dhabi, right? So yes, the TAF is cheaper. A lot cheaper. But let's talk a bit about that. Was there a lot of demand for the TAF? Hmmmm.. what was the "Bid To Cover" on the last TAF? Pretty poor, right? The premise of my blog entry isn't that banks are insolvent (and if you read it, you'd know that.) Its that commercial credit demand is collapsing, which is why The Fed is following that collapse down in rate (and will, in fact, likely all the way to zero) and even "sub-market" rates aren't stimulating credit demand. Why? Several reasons, with the most important being a lack of good collateral to post for the loans that people might WANT. Evidence? How are the sales of all that LBO debt that's clogging up the bank balance sheets going? Oh, you mean its not selling so well, with bids coming in - when you can find them at all - at 90 at best? Well now that's the point, isn't it? "No Mas!" - or Guido-style terms being demanded for hard money, The Fed trying to push on a string via the TAF, and yet credit demand continues to collapse, because all the good collateral has already been margined (pledged). We're witnessing the velocity of credit creation heading for the ditch - sure, if you practice selective reporting you can find "ramping" areas, but those are the acts of desperate people (e.g. homeowners whacking on their plastic to try to take the place of HELOCs which no longer can be drawn) - and won't last long. Bottom line: The Fed is attempting to "restart" the credit creation engine, the attempt is failing, the TAF has replaced the hard money (which has left or demanded extremely high rates of return to come play) and yet even that "artificially-stimulated" demand is anemic and falling quickly. This is how a deflationary credit collapse gets legs..... Is it assured? No. Not yet, anyway, but the markers are there."
He won't debate inflation, he always just defers the blame to Congress. Ron Paul grilled Bernanke again over inflation today. Too bad most Americans are just too stupid to vote for him. <object width="425" height="355"><param name="movie" value="http://www.youtube.com/v/7EQ1sg6GhZE&rel=1&border=0"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/7EQ1sg6GhZE&rel=1&border=0" type="application/x-shockwave-flash" wmode="transparent"width="425" height="355"></embed></object> <object width="425" height="355"><param name="movie" value="http://www.youtube.com/v/yybFGh1sUcQ&rel=1&border=0"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/yybFGh1sUcQ&rel=1&border=0" type="application/x-shockwave-flash" wmode="transparent"width="425" height="355"></embed></object>
I'm writing his name in on the ballot with a giant magic marker, after crossing out all the other lame ass candidates' names. I know they'll discard the ballot - so be it. The system is fucked, so fuck the system.
Too bad the majority of the American public has no clue when it comes to Econ. 1, otherwise Ron Paul would be as "electable" as all hell. Notice how he made his "point" with Bernanke and Bernanke replied back as succinctly as possible - - - and with a "wink and a nod" Paul drove home his point and then let the Fed Chairman off the hook. Asked and answered. Touche'