by ilene - October 18th, 2010 1:09 am
Courtesy of MIchael Snyder at Economic Collapse
When Federal Reserve Chairman Ben Bernanke gives a speech about the U.S. economy, it gets a whole lot more attention than when Barack Obama gives a speech about the U.S. economy. Why is this true? Well, it is because Bernanke has a whole lot more control over the U.S. economy than Obama does. It is the Federal Reserve that controls monetary policy and interest rates. It is the Federal Reserve that can create money out of thin air. It is the Federal Reserve which is going to have the most influence over whether there will be inflation or deflation. So when Bernanke gives a speech, world financial markets listen. On Friday, news of the Bernanke speech sent gold and silver soaring towards new highs and send the U.S. dollar tumbling once again. This new Bernanke speech was yet another very strong indication that Helicopter Ben is getting ready to fire up the printing presses in an attempt to get the U.S. economy moving.
So is it a good thing for an unelected, virtually unaccountable private central bank called the Federal Reserve to have more power over the U.S. economy than the president of the United States?
Of course not.
But that is the way our system works.
So what did Bernanke say during his speech in Boston that was so earth shattering?
Well, you can read a full transcript of what Bernanke said right here. The following are a few key excerpts from Bernanke’s remarks….…
by ilene - July 27th, 2010 5:52 pm
Courtesy of Karl Denninger at The Market Ticker
When it comes to the calibration, the Committee is proposing to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.
Ah, now that’s nice. How do we get that sort of leverage ratio being "allowed"? I wonder if Germany’s banks might have something to do with that….
I’ve read the entire report; Bloomberg has a "sanitized" version is that is mostly ok in it’s interpretation – the key point being:
July 26 (Bloomberg) — The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules …..
Someone needs to tell these clowns that both Lehman and Bear blew to the sky with leverage ratios around 30:1, and that their "proposal" allows more than double the former legal limit for investment banks in the US (before Hanky Panky Paulson got the SEC to remove the limit, of course.)
I suppose we need another global financial detonation before people start taking the words "leverage" and "reserves" seriously. Heh, you all know my view on this: One Dollar of Capital.
But if you do that, you have banks that are clearing agents for the economy and utility providers of credit, with each dollar of risk they take being pre-funded by an equity or debt purchaser who stuck THEIR money into the pot, knew they could lose it, and will demand a REASONABLE return.
That is, banks would be stodgy businesses again that paid out most of what they earned in dividends, and that would typically be 5 or 7% a year – and that’s it.
The common bankster’s salary would be a middle-class wage in the middle of America – a middling-five-figure number.
And the looting of the world’s commerce through finding some way to skim off a piece of each and every transaction, amounting in the totality of the marketplace to a colossal tax of well over a trillion dollars in the United States alone each and every year, would end.
by ilene - June 20th, 2010 4:56 pm
Courtesy of Karl Denninger at The Market Ticker
Referring to the G20 summit in Canada next weekend, Merkel said in a videotaped message that "we are going to discuss when to quit the phase of short-term measures and go on to lasting budget consolidation."
Such a move was "urgently necessary, in the view of the Europeans and particularly of Germany," she said.
Obama urged the world’s leading economies Friday to avoid scaling back government spending too quickly or risk derailing the global recovery.
Heh heh heh….
Oh Mr. President? Yes, you Mr. Obama.
Chancellor Merkel appears to have figured out the meaning of this graph:
That is, more than two years of attempting to force credit creation to expand, thereby once-again restarting the Ponzi Scheme, has failed.
All further exercises in this vein will do is make the damage worse, exactly as I said it would in 2007 initially.
"Our highest priority in Toronto must be to safeguard and strengthen the recovery," Obama said in the letter dated June 16, but released Friday amid concerns about the pace of the global recovery.
There is no recovery Mr. President. There has not been and will not be until the speculators and banksters that have taken on excessive debt, either as creditors or debtors, are forced to disgorge same.
The below chart lays forth the wasteland you are creating:
You (and you predecessor, George Bush) have replaced 11% of final demand (in the form of GDP) with deficit spending. You have no credible plan to stop doing it as final private demand has failed to rebound, just as it did not in the 2003-2007 years and thus George Bush was unable to withdraw his bogus "stimulus" measures.
You are now trapped in an exponentially-deteriorating credit picture Mr. President. The only question remaining is whether you and your idiot "advisors" will recognize this and act in time to prevent the destruction of the political system of The United States.
There is no means by which you can avoid the pain and adjustment that has to be taken. It is not possible, mathematically, to continue to increase the total systemic indebtedness, irrespective of the manipulations and games you attempt to pull on the body politic.
by ilene - June 9th, 2010 12:58 pm
Courtesy of Karl Denninger at The Market Ticker
You want to know where the spikes in the Euro came from today?
That’s "official intervention" by the Swiss National Bank and if they don’t cut this crap out they’re going to cause an equity and credit market collapse.
These jackasses now have double the Euros they held just a short while ago from these "operations", and as you can see, they’re pissing into a hurricane on even a daily basis, say much less on anything more consequential:
Congress does not have the right to get involved in the affairs of a foreign sovereign.
But Congress has every right to demand that Bernanke close his goddamn swap lines right now until this shit stops, lest The Fed be the one who is on the hook when the entire ECB structure comes apart and WE THE TAXPAYERS are on the hook.
This sort of tampering, performed by a private party, is illegal. Of course it’s routine and "expected" in the FX space for sovereigns to interfere, but much of the instability that we have seen of late has been caused by this sort of "intervention." Specifically, today it was responsible for a sixteen point, or 1.5%, jackrabbit move in both directions in the stock market in the space of less than two hours.
There is absolutely no excuse for The United States to support this sort of garbage with our taxpayer backstops. These instabilities in the foreign exchange markets make it impossible for real companies to hedge costs and profits in foreign nations and do severe and irrevocable damage to these firm’s operations.
It is also reflecting into the US Commercial Paper markets and driving spreads wider there as well. This is the very same market that locked up in 2008 and triggered the equity market collapse.
The SNB’s "interest" in doing this is clear: Half of European banks are stuffed full of debt written in Swiss Francs – in nations where the currency is the Euro! These idiots (both the borrowers and the banks that offered these "products") have now seen the principal balance of these loans represented in Euros rise by 11% in the last year.
by Chart School - April 15th, 2010 3:53 pm
Courtesy of Karl Denninger at The Market Ticker
In essence, White was saying: "it’s the debt, stupid." When aggregate debt levels build up across business cycles, economists focused on managingwithin business cycles miss the key ingredient that leads to systemic crisis. It should be expected that politicians or private sector participants worried about the day-to-day exhibit short-termism. But White says it is particularly troubling that economists and their models exhibit the same tendency because it means there is no long-term oriented systemic counterweight guiding the economy.
This short-termism that White refers to is what I call the asset-based economic model. And, quite frankly, it works – especially when interest rates are declining as they have over the past quarter century. The problem, however, is that you reach a critical state when the accumulation of debt and the misallocation of resources is so large that the same old policies just don’t work anymore. And that’s when the next crisis occurs.
It seems that Mr. [Edward] Harrison has it figured out. He goes on to spend a lot of digital ink on the periphery of the bottom line, which is that we continue to think of debt in terms of service costs (indeed, you’ll hear Bernanke talk about it, but never about the actual gross financial system debt outstanding.)
When you boil all this down, however, you get to the following chart (trendline added by moi):
You can see what’s going on here – each "crisis" leads to lower lows and lower highs.
This presents two problems:
Lower lows have run into the zero boundary. That wasn’t sufficient this time, which of course is why we got "Quantitative Easing" and other similar abortions intended to distort market rates – like guarantees on bank debt, for example. Ultimately this devolves into The Fed or The Government (as if there’s a real difference) guaranteeing everything to prevent spreads from blowing out.
Far more sinister, however, is what happens to the top line. The top line – that is, the maximum rate between crises, declines because it becomes impossible to normalize rates - nobody can afford to pay "normal" rates with the amount of leverage they have.
by ilene - March 18th, 2010 4:13 pm
Housing is still on the rocks and prices are headed lower. Master illusionist Ben Bernanke has managed to engineer a modest 7-month uptick in sales, but the fairydust is set to wear off later this month when the Fed stops purchasing mortgage-backed securities (MBS). When the program ends, long-term interest rates will creep higher and sales will begin to flag. The objective of Bernanke’s $1.25 trillion quantitative easing program was to transfer the banks’ toxic assets onto the Fed’s balance sheet. Having achieved that goal, Bernanke will now have to find a way to unload those same assets onto the public. Freddie and Fannie, which have already been used as a government-backed off-balance-sheet dumping ground, appear to be the most likely candidates.
Bernanke’s liquidity injections have helped to buoy stock prices and stabilize housing, but the economy is still weak. There’s just too much inventory and too few buyers. Now that the Fed is withdrawing its support, matters will only get worse.
Of course, that hasn’t stopped the folks at Bloomberg News from cheerleading the "nascent" housing rebound. Here’s a clip from Monday’s column:
"The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006. Increases in jobs, credit and affordable homes will help offset the end of the Fed’s purchases of mortgage-backed securities this month and the expiration of a federal homebuyer tax credit in April. ‘The underlying trend is turning positive,’ said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York."
Just for the record; there have been no "increases in jobs". Unemployment is stuck at 9.7 percent with underemployment checking in at 16.8 percent. There’s no chance of housing rebound until payrolls start to rise. Jobless people cannot afford to buy homes.
Also, while it is true that the federal homebuyer tax credit did cause a spike in home purchases its effect has been short-lived and sales are gradually returning to normal. It’s generally believed that "cash for clunker-type" programs (like the homebuyer tax credit) merely move demand forward and have no meaningful long-term impact.
by ilene - January 29th, 2010 8:14 pm
Courtesy of PAUL CRAIG ROBERTS at CounterPunch
The election of Republican Scott Brown to the U.S. Senate by Democratic voters in Massachusetts sends President Obama a message. Voters perceive that Obama’s administration has morphed into a Bush-Cheney government. Obama has reneged on every promise he made, from ending wars, to closing Gitmo, to providing health care for Americans, to curtailing the domestic police state, to putting the interests of dispossessed Americans ahead of the interests of the rich banksters who robbed Americans of their homes and pensions.
But what can Obama do other then spout more rhetoric?
The Democrats were destroyed as an independent party by jobs offshoring and so-called free trade agreements such as NAFTA. The effect of "globalism" has been to destroy the industrial and manufacturing unions, thus leaving the Democrats without a power base and source of funding.
Obama and the Democrats cannot be an opposition party, because Democrats are as dependent as Republicans on corporate interest groups for campaign funding.
The Democrats have to support war and the police state if they want funding from the military/security complex. They have to make the health care bill into a subsidy for private insurance if they want funding from the insurance companies. They have to abandon the American people for the rich banksters if they want funding from the financial lobby.
Now that the five Republicans on the Supreme Court have overturned decades of U.S. law and given corporations the ability to buy every American election, Democrats and Republicans can be nothing but pawns for a plutocracy.
Most Americans are hard pressed, but the corporations have only begun to milk them.
Wars are too profitable for the armaments industry to ever end. High unemployment is now a permanent state in the U.S., thus coercing job seekers into military service.
The security industry profits from the police state and regards civil liberties as a hindrance to profits. By announcing that he intends to continue the Bush policy of indefinite detention, a violation of the Constitution and U.S. legal procedures, Obama has granted the Democratic Party’s consent to the Republicans’ destruction of habeas corpus, the main bastion of individual liberty.
Jobs offshoring is too profitable for U.S. corporations for Obama to be able to save American jobs and restart the broken economy.