More Fed Easing? What Could BUBBLE ben bernanke Be Thinking?

Discussion in 'Economics' started by S2007S, Jul 13, 2011.

  1. S2007S


    Just when you thought QE2 was over QE3 is now coming, this system is failing on all levels, no QE is going to work, I said this since the beginning of the stimulus plan, its doing nothing yet they continue to think its creating a turn around, this entire economy is being propped up with hot air thanks to Bubble ben bernanke and friends! There is no turnaround in this economy, its all fluff. More QE and you will see inflation running through the roof with collapsing dollar, then what, QE4, how many QEs does this economy need before people wake the fuck up and realize its NOT working. IT wont work, only Bubble ben bernanke thinks its going to work because he studied the great depression, what he has no clue about is that you cannot compare this crisis to anytime in history and more money printing is not the answer.

    Welcome QE3 because without it this economy is worthless!

    More Fed Easing? What Could Bernanke Be Thinking? | July 13, 2011 | 12:51 PM EDT

    Apparently the bar has just gotten lower for Ben Bernanke.

    The central bank chairman stunned financial markets Wednesday when he told Congress that the next round of stimulus—much like objects in the rear-view mirror—is closer than it may appear.

    While there were plenty of caveats and continued references to the slowdown being nothing more than a “soft patch” for those 14 million Americans without jobs, that bar for doing even more quantitative easing suddenly doesn’t look so high.

    “Bernanke thinks the answer to everything is money-printing,” says Michael Pento, senior economist at Euro Pacific Capital in New York. “He thinks that’s what saved us from the Great Depression part two and that’s what could have saved us from the Great Depression part one. He’s doing what he said he would do, which is print money.”

    “I can’t fathom the logic,” Pento adds.

    Pento’s voice is a particularly important one on this issue because he’s one of the few economists of any stature who has been unrelenting in predicting a QE3 —or a third round of Fed easing.

    Pento also has been one of the loudest voices warning about inflation dangers, even as the Fed has been working overtime to combat a perceived deflation threat and as most of Pento’s colleagues brush his concerns aside.

    “Look at first quarter GDP and second quarter GDP. They will have a one handle,” Pento said as he watched Bernanke’s speech. (The “one handle” means GDP will be in the 1 percent range.) “It clearly puts Bernanke on the spot. I think he does what he does best, which is counterfeit the US dollar.”

    The central bank chairman posed two scenarios: One in which the economy improves more than expected and requires tighter monetary policy, and another in which unemployment and housing weakness persists and the Fed is wrong about inflation pressures being “transitory.”

    That would require more Fed intervention and, hence, QE3 .

    You can guess which side the market took.

    The Dow industrials surged as soon as Bernanke began his speech, rising about 100 points along the way as the dollar got hammered and gold and silver prices rallied.

    Since Bernanke delivered his seminal remarks at Jackson Hole, Wyo., last August signaling QE2, the dollar has lost nearly 10 percent of its value against the world’s currencies.

    In the meantime, import prices have jumped about 13 percent and inflation has risen 3.6 percent, tamped down primarily by sagging housing and rent costs, which make up 40 percent of the government’s main price gauge.

    The menu Bernanke laid out on Capitol Hill promises more of the same should the Fed come off the sidelines with the last pile of dirt only recently shoveled on QE2’s grave.

    He is considering more asset purchases to lengthen their average duration, providing “more explicit guidance” on how long the Fed balance sheet will remain in its current state, and, perhaps most significantly, cut the interest paid on bank reserves at the Fed, a move aimed at jumpstarting lending.

    “What I find most disturbing is he could lower the interest paid on excess reserves, which would be a huge impetus for commercial banks to make goofy, crazy loans,” Pento says.

    Pento is surprised mostly by the timing—he figured QE3 wouldn’t rear its head until late this year or early in 2012 as Bernanke had indicated “he would be dragged kicking and screaming to QE3, but he would be dragged there.”

    Most other economists who had dismissed the possibility of more easing figured Bernanke would only begin discussing it after a steep drop in the stock market, a rise to double-digit unemployment and signs that deflation again was a threat.

    That’s not the way it went, as the Fed appears to have few concerns about inflation and more worries about trying to prop up an economy that so far has resisted the central bank’s intervention efforts.

    “Can someone explain how the processes he used to combat deflation—lowering interest rates and expanding the money supply—if those processes are going to be intensified what makes him think inflation is going to be transitory?” Pento said. “The gentleman talking about exit strategies a little while ago is now talking about asset purchases and cutting rates on reserves. That sounds schizophrenic to me.”
  2. If it is the Fed's mandate to fight price rises, how could he contribute to the rise, and still keep his job? Who has the authority to fire him from his position?
  3. pupu


    Same fed, same Ben

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    Enough said. It is over folks. Until we have a revolution, it will be the same old tired song for this country. IMHO, 450K plus jobs lost on the next Jobs numbers...we shall see.

    ALL OF MY CLIENTS WHO ARE SMALL BUSINESS (200 employees and less) and Half of MY LARGE CLIENTS (employees from 200-1000) have plans on laying off next month. Not sure what % of their workforce.


    Keep in mind I only deal with Private Owners of Companies...not Public...I have no Idea what Public Companies are looking to do.

    IMHO, Less the 3 months before the word DEPRESSION is printed on some of our main stream bullshit news papers.
  5. RPaul12


    I'm in the minority here but here it goes:

    Yes QE3 will lead to further devaluing of the dollar, no argument there. But what is the alternative? The Fed was created as a result of the panic of 1907 and stood by during the Great Depression. Consensus after the fact was at all costs avoid another Great depression. Everyone seems to know "how bad" the credit crunch was/is, but really it's grossly understated. It wasn't just the big banks, and it wasn't just the average American. As big of trouble as we are in right now, so to is the rest of the world. One of two things needs to happen for us as a country and the world to get out of this mess. A MASSIVE deleveraging event i.e. a major depression, or a SLOW and steady deleveraging process. Part of the reason "Bubble Ben" is inflating the dollar has many reasons. One is obviously liquidity. People always harp on that they bailed out the banks, but it bailed out everyone. If Lehman and AIG simply went under, so to does Merrill and BoA and JP and GS etc, and we have another Great Depression. Yet in the 1930's many communities were more self sufficient then they are now. That is a by-product of globalization. This would have hit a whole lot harder. And yes some of you are very smart, may or may not lose your job, but probably are not sunk in your mortgages and lived far above your means for many years. Problem is you are in the minority. Must people are stupid. Everyone claims this economy is terrible (not debating that) but imagine 20-30% unemployment? I honestly cringe at the thought of what the majority of stupid people would do.

    Also housing prices were so inflated it was insane. Some saw it then, we all see it now. If houses aren't being built, and the blue-collar class as a whole is out of work, the economy is awful. (Remember these people don't save, they spend, thus propping the economy). In order for home prices to come back up you need time and inflation. Honestly it may take 10+ years for houses to return to the nominal level they were at with low steady inflation. So what you need is higher than expected inflation to bring them up. Plus as I'm sure you are all aware, Europe is in far more trouble than we are. So what is to replace the the USD? Nothing for now. China has it's own nasty real estate bubble which will probably give soon. Not to mention if our economy severely tanks (along with Europe's) China's manufacturing sector will tank with it, bursting their bubble as well.

    I think people in America need to come to grips with the fact that the period of 1945-1970 was a gift of circumstances for our country and we will forever remain a driving economic force and a dominant military power. But other's will catch up over time relatively and that's not the end of the world.

    The other big issue at play is unemployed workers salary expectations as well as college graduates job expectations, partly due to again people being stupid and partly due to the cost of education bubble, but that is a whole different can of worms.
  6. TGregg


    I got a bead on that. He's thinking an EU failure cascade and continued downtrend in housing, all of which wipe out trillions and gives the Super Fed plenty of room to expand. Meanwhile, he can blame those dastardly republicans for their "deep cuts" that caused QE2 to fail and required QE3 and 4.
  7. joneog


    You're making a pretty big assumption there.

    Seriously though, it's probably a few things:

    1) He's using the GD as an analog. There were huge bank failures and money supply shrank sharply in first phase of the GD. Our current problems are more on the balance sheet and demand side.

    2) He believes that he can pump up the markets to create positive wealth effects.

    3) He believes creating higher inflation expectations will spur consumption and (economic)investment.

    4) He's being pressured by the executive branch to do something since more fiscal policy is not politically possible

    I bet if you asked him in private he'd say he favors more demand-side gov. stimulus than another round of QE.
  8. You're kind of nuts guy. Hiring is increasing in Canada. You seem to have mediocre clients. I have my serious doubts you have clients. Certainly, if you do, it better not be financial advice because you haven't got a clue on that.

    You recently claimed the DEPRESSION was already on. 4 months ago you said within 6 months. Now you're waffling on it. Pure BS, there is no DEPRESSION. Do you even know what the term means ?

    The Internet can't filter for sanity and rational thinking, so guys like you have a place to post BS. Elite Trader doesn't seem to care.
  9. LEAPup


    Try a silent depression. That's what we're in. I think you're comparing the Great Depression to this one. The difference then vs. now is apples and oranges.

    Then, there were very little govt. programs in place like we have today to mask the true pain.
    #10     Jul 14, 2011