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Posts Tagged ‘federal reserve’

Fed Chairman Bernanke Gloomy Over U.S. Economy

June 21st, 2012 Comments off

Perhaps the greatest money printer in monetary history, Ben Bernanke, the iconic chairman of the U.S. Federal Reserve, has publically stated his revised, gloomy economic forecast for the United States. According to Bernanke, the Fed now projects GDP growth in 2012 of 2.4 percent, down from nearly 3 percent earlier in the year. This is stall speed GDP growth, despite being goosed by more than a trillion dollars of deficit spending by the Federal government in the current fiscal year, and a bucket load of monetary stimulus measures by the Federal Reserve.

What is Bernanke’s response? An extension of a program for swapping short term bond purchases for longer-termed bonds, with the bizarre name of “operation twist.” The name alone tells us how ridiculous the Fed has become under the tutelage of Ben Bernanke. The reality, as plain as daylight, is that without a heap of borrowed money and monetary gimmicks, the American economy would implode. Unfortunately, the measures adopted by Bernanke and other policymakers, which only succeed in kicking the can down the road a bit more, assure us that when the bill needs to be paid, the cost will be even more dear for the U.S. and global economy.

                 

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U.S. Unemployment Rate Continues To Fall-As Discouraged Workers “Disappear”

May 5th, 2012 Comments off

he latest numbers from the Bureau of Labor Statistics indicate that the United States supposedly “created” 115,00 jobs in April. Not even President Obama’s supporters are cheering loudly over this figure, as it indicates a slowing down of job creation-and that is if the number is accurate. As many know, BLS jobs numbers are usually a mathematical abstraction based  on assumptions and inferences, not hard numbers. In any event, if there were 115,000 jobs created in April, that is below the approximately 200,000 new jobs that must be created in the U.S each month in order to keep up with population growth. In other words, 115,000 new jobs in April would mean that the American unemployment rate would increase.

But in April, again according to the BLS, the U.S. unemployment rate did not increase; in fact it “declined” to 8.1 percent. If job creation is lagging behind the expected entry of new workers into the U.S. labor market, how did the magicians at the Bureau of Labor Statistics construct a reduction in unemployment?  Very simple. There are so many discouraged unemployed workers in the United States, they are simply giving up and “leaving” the labor force. In many cases, actually, the BLS is exercising initiative and assuming that a certain proportion of the unemployed simply drop out of the workforce each month.

The real meaning of the April jobs number is that the participation of age-eligible Americans in the labor force -both working and unemployed-is at a 30 year low. How is that synonymous with an economic recovery?

In point of fact, a staggeringly high rate of unemployment, made artificially lower by not counting those long-term unemployed workers as being part of the active labor force, is by no means characteristic of a post-recessionary economic recovery. What has recovered since the onset of the global financial and economic crisis in 2008 are equity prices, which have regained almost all of their losses. However, that recovery is not due to increased consumer demand stemming from the reentry into the workforce of formerly unemployed workers. Rather, stock prices regained most of their losses and have enjoyed a recovery due almost entirely to the loose monetary policies of the Federal Reserve under the tutelage of its chairman, Ben Bernanke.

In contrast with the policies of President Franklin Roosevelt during America’s Great Depression of the 1930s, which focused on facilitating job creation, the policymakers in the U.S. have focused their efforts on reinflating equity prices through quantitative easing (money printing) and offering banks (including investment banks) historically low interest rates, in effect free money. Perhaps sooner than we can imagine, history will render its verdict on this policy of neglecting a recovery in the labor market in favor of reinflating the stock market.

                 

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Lender of Last Resort For European Banks: Mario Draghi of the ECB

March 8th, 2012 Comments off

It appears that the European Central Bank under the leadership of Mario Draghi is following in lockstep with the policy prescription devised by the Chairman of the U.S. Federal Reserve, Ben Bernanke. Just as the Fed expanded its  balance sheet to over $2 trillion, in the process becoming the lender of last resort to U.S. banks  that would otherwise have been insolvent without the cheap credit from Bernanke (and changing accounting rules from “mark to market” to “mark to fantasy”), the ECB is now doing exactly the same in the Eurozone.

Already, through its stealth quantitative easing program, the European Central Bank has expanded its balance sheet by more than $1.3 trillion, thus preventing Europe’s banks from collapsing due to the weight of worthless assets they hold in sovereign loans to insolvent (and defaulting)nations such as Greece, along with Ireland, Portugal, Italy and Spain on their balance sheets.

It is no surprise that many investors, and certainly all the banks, are cheering central bankers such as Bernanke and Draghi. They seem to ignore the fact that if money printing by central banks were truly an effective method of restoring genuine economic  growth, than counterfeiting would be legal for us all, and not just the trans-sovereign central banks.

 

 

                 

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IMF Warns: Global Economy Is In a “Dangerous Place”

September 22nd, 2011 Comments off

The global economic crisis that erupted in 2008, and was supposedly “cured” by the massive public debts incurred by the policymakers, is apparently evolving into a terminal tailspin. A growing number of reputable economists, including Nouriel Roubini, are frankly stating that advanced economies, in particular the United States, the Eurozone countries and the United Kingdom, have entered a double-dip recession. The economic outlook is so bleak that even establishment institutions such as the International Monetary Fund, and to a lesser extent the U.S. Federal Reserve, are candidly acknowledging the dire state of the global economy and the precariousness of its financial architecture. Fed Chairman Ben Bernanke was forced prematurely to hint at some level of policy intervention; the result, the so-called “Operation Twist,” a macabre arrangement whereby the Federal Reserve’s short-term purchases of U.S. Treasuries are swapped for long-term government debt instruments. The resulting plunge in equity values demonstrates that the market is no longer easily fooled by Bernanke and his clowns.

In a starkly candid statement, the new managing director of the IMF said that the world’s economy was entering a “dangerous place.” Given that the leaders of major global economic bodies do not seek to erode market confidence during turbulent economic times, it must be surmised that Christine Lagarde would not have issued such a pronouncement as the leader of the IMF unless the data she is privy to shows that things are actually much worse than what is being publicly discussed.

Will my prediction of economic catastrophe in 2012 hold true? Based on current developments and increasingly grim talk by economists and policymakers such as the IMF’s managing director, I think the chances that I am wrong are weaker than the likelihood that my forecast is correct.

 

                 

 

    

 

 

 

 

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Former Fed Chairman Paul Volcker Urgently Warns Against “Planned” Inflation

September 19th, 2011 Comments off

 

In an Op-Ed  piece in The New York Times, Paul Volcker, chairman of the Federal Reserve during 1979- 1987, issued an eloquent warning against economic policymakers deliberately increasing the inflation rate as a way of dealing with escalating economic and fiscal problems that have defied all other policy measures. Volcker’s Op-Ed, entitled, “A Little Inflation Can Be a Dangerous Thing,” warrants serious reading by all concerned with the global economic crisis. Paul Volcker knows what he is talking about; it was he as Fed Chairman during the Reagan administration who squeezed high inflation out of the U.S. economy through a draconian process of high interest rates.

 

Here are extracts of what Volcker wrote in his Op-Ed piece:

 

There is great and understandable disappointment about high unemployment and the absence of a robust economy, and even concern about the possibility of a renewed downturn. There is also a sense of desperation that both monetary and fiscal policy have almost exhausted their potential, given the size of the fiscal deficits and the already extremely low level of interest rates.

“So now we are beginning to hear murmurings about the possible invigorating effects of ‘just a little inflation.’ Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the ‘animal spirits’ of business, or so the argument goes… Some mathematical models spawned in academic seminars might support this scenario. But all of our economic history says it won’t work that way. I thought we learned that lesson in the 1970s. That’s when the word stagflation was invented to describe a truly ugly combination of rising inflation and stunted growth… At a time when foreign countries own trillions of our dollars, when we are dependent on borrowing still more abroad, and when the whole world counts on the dollar’s maintaining its purchasing power, taking on the risks of deliberately promoting inflation would be simply irresponsible.”

In particular, due to the global sovereign debt crisis, economists and policymakers are discussing behind closed doors the desirability of a 5-6 percent annual inflation rate as a way of reducing the burden of national debts in advanced economies. As if the experience of Weimar Germany and Zimbabwe wasn’t enough to show the irrationality of such an approach, Paul Volcker again reminds us of the futility of engineering deliberate inflation as a policy “cure” for our economic woes. One can only hope that the former Fed Chairman’s clear warning is heeded.

                 

 

 

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Wall Street, Ben Bernanke and Illusions

August 24th, 2011 Comments off

 Today the Dow Jones rose by more than 300 points. This was not due to positive economic news; to the contrary, negative news drove the NYSE up. How is it that the cascading torrent of appalling economic data would raise cheers on Wall Street? In the bizarre economic and financial world of today, the computer program traders and investors on Wall Street are convinced that the worsening economic situation globally will compel Ben Bernanke, Chairman of the Federal Reserve, to unleash a third bout of quantitative easing. In the myopic universe of the Wall Street crowd, this is considered the most wonderful  thing that can happen on our planet.

The two bouts of quantitative easing already engaged in by the Fed have been, by consensus of most credible economists, ineffectual. What this mad money printing did accomplish was to inflate commodity prices, creating a drag on the global economy. But if at first you don’t succeed, try again, so say the Wall Street oligarchs. And so when the central bankers convene for their annual conclave in Jackson Hole, Wyoming the Wall Street oligarchs will be hoping and praying for QE3.  Only a clique infused with short-term greed and distorted illusions could believe that bad economic news leading to Bernanke unleashing another round of printing money will end the global economic crisis.

 

 

 

                 

 

 

 

Fed Chairman Ben Bernanke Appears Clueless as Global Economy Sinks

June 9th, 2011 Comments off

Alan Greenspan, former Fed Chairman and a prime facilitator of the U.S. housing bubble, appears in retrospect a scion of fiscal prudence in comparison with his successor, Ben Bernanke.  This disaster-prone Fed Chairman presided over the financial collapse of 2008, which came in the wake of his prediction that the housing bubble would not cause a recession, let alone a global financial meltdown. And this man is still the most powerful architect of U.S. monetary policy?

 In his recent speech delivered at the International Monetary Conference in Atlanta, Bernanke blamed everything but himself for what he concedes is anemic economic growth, which he knows all too well is being artificially propped up by the most expansive monetary and fiscal policies in human history. In the Fed Chairman’s world, the earthquake and tsunami in Japan, weather conditions and other unpredictable “acts of God” are to blame, not the Federal Reserve’s polices, for the utter disaster that the U.S. and many other advanced economies are coping with.

While in Atlanta, Ben Bernanke made passing reference to the sharp rise in commodity prices, though without admitting that this was due largely to the Fed’s policy of quantitative easing. He then added the illogical assessment that inflation is “not broad based” in the economy. Really?

As he has done before, Bernanke made perfunctory remarks about the need for the policymakers to eventually bring down the U.S. federal government’s budget deficit. As he and his colleagues continue to propel the United States towards a fiscal train wreck, he holds the politicians with no power to rein in Bernanke with responsibility for preventing the future shocks that the Fed’s policies have in store for everyone.

The disconnect this man has with the real world is mind-numbing. One thing, however, we can be thankful for. At least Bernanke has avoided the personal behavior issues that led to the recent resignation of the head of the IMF. With Fed Chairman Ben Bernanke, the question is all about his performance as Fed Chairman, and nothing else. On that score, history will probably judge President Barack Obama harshly for reappointing Ben Bernanke as Fed chairman.

 

 

 

 

 

Ben Bernanke’s Wrecking Crew Engineers Downward Spiral of the U.S. Dollar

May 2nd, 2011 Comments off

If anyone really believed that Federal Reserve Chairman Ben Bernanke was not deliberately destroying the intrinsic value of the American dollar through his recklessly loose monetary policies, the current downward spiral of the greenback is abundant evidence to the contrary. Most telling, despite severe fiscal problems in the Eurozone, even the wobbly euro is gaining strength in significant measure against the U.S. dollar.

It is not only against the basket of foreign currencies, including those considered weak, that the American dollar is winning the dubious race to the bottom. Commodities across the globe have risen sharply against the dollar. This is reflected not only in the price of known hedges against price inflation and currency manipulation such as gold and silver. A diverse range of resource commodities, including oil and natural gas, minerals and basic foodstuffs have increased in their dollar price. With the U.S. dollar remaining (for now) the global reserve currency, the morbidly inverse ratio between the plummeting value of the dollar and rising cost of commodities has had severe negative repercussions across the globe, both economically and politically. The current unrest sweeping the Arab world is at least in part due to rising food prices precipitated by Bernanke’s deliberate policy of eroding the value of America’s dollar.

My read of this situation is that the Federal Reserve is in a panic. They know that the American fiscal imbalance is unsustainable, and it seems Bernanke and company are deliberately eroding the value of America’s currency in order to default stealthily on the nation’s massive foreign debt, which the Fed knows can never be repaid, at least in terms of real value as opposed to nominal repayment. Inflation is the direct outcome of the Fed’s quantitative easing and monetization of the debt. The American taxpayer and consumer is being sacrificed, at whatever the cost, in order to inflate away that portion of the U.S. national debt which cannot be repaid.

The fools at the Federal Reserve really believe that China, OPEC and other foreign creditors are going to accept the destruction of their investment in U.S, Treasuries lying down, and that the U.S. dollar will forever remain the world’s reserve currency. I think that sooner rather than later future developments will render inoperative all the flawed assumptions of Ben Bernanke and his wrecking crew, otherwise known as the Federal Reserve.

Home Foreclosures In U.S. Exceed One Million For 2010

January 17th, 2011 Comments off

Two years after the onset of the global financial crisis, sparked largely by the collapse of the American residential home market, primarily proprieties financed with sub-prime mortgages, the aftershocks continue. The latest data concludes that 2010 witnessed one million home foreclosures in the United States, a record high. While the tail end of 2010 did witness a deceleration in foreclosure filings, this seeminlgly positive news is misleading. The slowdown was caused by revelations that banks had resorted to improper documentation in persuing home foreclosures. This has led to a temporary reduction in such filings, however this merely means that there will likely be an acceleration in the foreclosure rate during 2011.

 

The continuing and growing foreclosure disaster in America contradicts all the other supposedly positive economic data pointed to by policymakers and their spin-masters ( that is, if you think the Federal Reserve engaging in a second round of quantitative easing is “positive” news). Despite the massive stimulus-derived public budget deficits and Fed money-printing, the weak housing sector in the U.S. will likely continue to be a wet blanket that suffocates the marginal economic growth being conjured into existence through unprecedented levels of public debt expansion. Clearly, the housing crisis that begat the global financial and economic crisis is far from over.

 

 

 

Ben Bernanke, the Federal Reserve and the Road To Ruin

December 15th, 2010 Comments off

It is not the “Road To Morocco” ( for those who remember the classic film with Bing Crosby and Bob Hope) but he proverbial road to ruin that Fed Chairman Ben Bernanke is leading the U.S. economy towards, at flank speed. Under his leadership, the last meeting of the Federal Reserve’s FOMC of 2010 confirmed the zero interest rate policy being maintained, and the policy decision to purchase $600 billion in long-term U.S. Treasury debt. This, despite claims by many punch-drunk economists that the American economy is recovering, and at a heightened pace. Give Bernanke credit for one thing; he knows the supposed economic growth is not real, but rather marginal increments painfully extracted through massive public borrowing. But his solution, in effect creating even more public stimulus, this time through monetary policy, is totally antithetical.

Supposedly, Bernanke’s stratagem is to force down long-term interest rates through his $600 billion second round of quantitative easing. However, the bond market is reacting in a manner contrary to expectations. With Europe already mired in a deep sovereign debt crisis, the prospect of a surge in now record low interest rates on U.S. sovereign debt is becoming increasingly likely, due to the Fed’s policies. Should the U.S. encounter anything remotely like the spike on bond yields currently plaguing Europe, the game is up. Not even Bernanke could print enough money to cover the ruinous implosion an increasingly likely sovereign debt crisis will have on the already fragile American economy.

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