Posted on 11/04/2009 10:22:44 AM PST by FromLori
Video at site.
Why is Ben Bernanke being so slow to start talking about raising rates, much less start raising them? Because he has a secret plan that he can't talk about.
What's Ben's secret plan?
Intentionally keep rates too low for too long, thus encouraging uncomfortably high inflation.
Why would Ben want that when he keeps talking about the importance of managing inflation?
Two reasons:
Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that's happier with Ben Bernanke
Faster erosion of the real value of our debts. Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less. Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell--but not quite to the point where China actually stops lending to us.
(Excerpt) Read more at businessinsider.com ...
“Why is Ben Bernanke being so slow to start talking about raising rates, much less start raising them? Because he has a secret plan that he can’t talk about.”
Uh, don’t forget the 2010 elections. The OTHER reason why so little “stimulus” money ain’t spent yet ;-)
Bernanke is keeping rates low because the unemployment rate is still 10%, capacity utilization is still in the 60% range, and there is no inflation.
There is therefore excellent reason not to raise rates and no compelling reason to do so. So he won't.
As those things change, so will the Fed. Every professional in these matters knows how they make their decisions and why. If year over year prices are significantly higher they may raise rates, regardless of other factors. Otherwise, they will not raise rates until the unemployment rate falls significantly and capacity utilization climbs back to the 80% level.
None of which has a single thing to do with political anything, or congress, or China. It is economic management, and that is all.
But professionalism is too boring for the conspiracy theorists and doom mongers. So they flat make things up, instead.
Good point same thing with that socialized health care even that is after the next elections it is a vote buying scheme to retain control.
25% inflation for 5 yrs cuts the debt by 76%.
And then the next Obama declares the introduction of the “New Dollar” valued at 10 to 1, everyone feels good again, and the borrowing starts anew.
Yes Jason sure I wrote the article NOT you could just skip my posts and save yourself the heart ache of the truth.
This article is completely wrong on its premise.
The Fed has never, ever wanted inflation as an end result.
The Federal government is the entity that desires inflation.
The international bankers always have deflation as their ultimate goal. They just allow inflation for a period of time to fool the ignorant public into producing things of wealth.
The Fed (banks) will then pull available credit (like they have now done) - and cause the created wealth to be defaulted upon and transferred to the banks.
We're all a bunch of serfs to the banking infrastructure.
Things to think about obama remember when he told the bankers the only thing keeping them safe from mobs with pitchforks is him?
Remember Goldman Sachs and JP Morgan saying they agree to international rules?
Have you ever watched the film The Capitalist Conspiracy?
This is an excellent video. If you have read End Run or you know anything at all about the people who want a New World Order this is a must watch. Think Goldman Sachs, JP Morgan, Federal Reserve. It seems perplexing to people that firms like Goldman Sachs, JP Morgan donated so heavily to Obama. Well to those who realize it of course his base is clueless they are the people who were in Chicago protesting the small banks who are not involved the very same types of people that JP Morgan and the other big banks help fund. Rather interesting combination of characters this film explains the usefulness and the real agenda of doing so.
It seems to be in direct contrast to rational thought that they would indeed help destroy Capitalism but these men are not true Capitalists they are Socialists with the desire to rule the world.
This film explains it all. Make it look like Government Control to keep it in their hands! Exactly what we see Obama doing now. It explains the role of The Council of Foreign Relations, the use of mainstream news. This is a must watch video take the time and watch it all.
Rates are artificially low so the government can afford to pay the interest on the debt like to China and Japan.
The Federal Reserve can only follow the markets in setting interest rates. When foreigners refuse to purchase US debt at low rates of return then reluctantly rates will begin to rise ending any hope of economic recovery here at home.
Obama is just a foolish puppet, and has no economic control over anythinig.
His masters are the international bankers.
I agree but I think the over all goal is Totalitarian control by like minded individuals who all belong to the CFR. Watch the film.
http://bluelori.blogspot.com/2009/10/capitalist-conspiracy-inside-view-of.html
if the article is accurate they will first have to bring the hammer down on credit card issuers and 30% interest rates. Otherwise it won’t work.
But professionalism is too boring for the conspiracy theorists and doom mongers. So they flat make things up, instead.
I may disagree with you, but I love your precise, contrarian evaluation of things economic.
I will assert that emotion and politics play a far greater role in Fed decisions than you give credit. They (Ben et al) are, after all, accountable to no one but the rest of their transnationalist banker clique.
I think the recession is giving Bernanke cover for keeping the interest rates low. No fear of inflation by keeping rates low when the economy is so slow. The problem happens when global interest rates rise and investors seek higher returns elsewhere. At that point, the Fed either raises rates or the Treasury can't sell its bond and the USA defaults.
Are they emotionless or machines, no. But they are professionals and they have a settled body of doctrine and procedures, and they dutifully examine data and recommendations forwarded to them by a large staff. It is not a fly by night operation, it is a byword for sobriety. And when I see men who do this every day for years of their lives, for all the rest of us, smeared as being like Zimbabwe or in it for personal gain, I know I am in the presence of ignorant injustice on a collosal scale.
But who is so naive as to expect justice in this world, least of all from the hyper-politicized?
As for fears that no one will buy treasuries, everyone keeps saying that but the bid to cover keeps clocking in at 2 1/2 to 1 with rates on the floor. They aren't doing that, in other words.
Meanwhile in case everybody just forgot, it was every private institution on the planet that couldn't sell their own debt even at 15-20% offered rates this time last year. And if they can borrow today at reasonable cost, it is all because the much maligned US treasury and the Fed saved their ungrateful backsides by lending some of their own credit and financial strength, to everyone who needed it.
I personally think the Fed and US treasury are gaining on the US military (and before it, the Royal Navy, come to that) as institutions at which the greatest amount of mud has been thrown over the years by men who should be down on their knees thanking God they exist and work well as they do. And do you know what all the ungrateful bastards smearing them have ever done for any of us?
Not one godddamn thing...
This is patently obvious and is exactly what Bernanke wants. The only question is, will he succeed or will something trigger a deflationary spiral. I suspect he will succeed. Bernanke wants 20% inflation.
Core Inflation“The Fed is focused on a very low core inflation number and is assuming that it is only going to get lower,” said Stephen Stanley, chief economist at RBS Securities Inc. “They are pretty worried about the low level of inflation and think they are on hold for a very long time.”
The difference in yield between 10-year inflation-protected Treasury notes and nominal Treasury notes is 212 basis points, indicating that investors see consumer prices rising by 2.12 percent per year over that time. In October, consumers anticipated inflation of 2.9 percent over the next five years, up from 2.8 percent in September, according to the University of Michigan’s consumer sentiment survey, released Oct. 30.
I currently have positions in a TIPS fund and a gold fund as hedges should velocity return and the Fed can't drain the excess liquidity fast enough.
Fact one, ObaMao and his flying monkeys just injected over 4 Trillion dollars with the Porkulus and 2009 budget, into the economy. (supposedly) In addition to ordering banks etc, to keep giving ultra cheap loans to home buyers, people starting business, etc,. This is designed to create a false economy and give the illusion that Socialism really does work when the “right” people do it.
Burn-yank-me has agreed to keep rates artificially low, believing that the combination of this will force the economy to snap out of this recession. Of course, they will raise them accordingly as soon as the economy is declared saved, 2010 gets the Democrats reelected and sets ObaMao up for a second term.(Why do you think that the Health Care scam will not kick in until 2013?)
This will also give the ignorant public a reason to think that Government Health Care, Cap & Trade are “good” for Amerika and the World. ObaMao gets his second term, the Democrats get their one party system and later declare no term limits for the Emperor ObaMao.
Believe it, the Fed. Chairman is right in line with this master plan. It's just that simple......
Thanks Psycho welcome thoughts and now
FHA Delays Audit, Yet Another Bailout Coming Your Way
http://www.businessinsider.com/fha-postpones-release-of-audit-as-bailout-worries-mount-2009-11
How do you explain the run up in gold prices? Do you think its a trend or a fad?
Those who think the reason for gold is inflation being right around the corner do not have a coherent diagnosis of all markets; they cannot explain e.g. why inflation adjusted treasuries trade at 2% inflation expectations, or 2 year notes are oversubscribed at 1% yields. I can - everyone is seeking to reduce what they perceive as their risk and the "non-money-ness" of their asset position.
Whether gold near $1100 an ounce is actually so riskless remains to be seen. I have my doubts on that score, and I would not recommend accumulating gold at these levels.
I think the reality is we face a prolonged period of low interest rates without any serious inflation, due to underused economic capacity and ongoing deleveraging and debt repayment by all economic actors other than governments. Those predicting high inflation right around the corner are going to prove wrong.
As for those predicting hyperinflation and saying the dollar is worthless, I have a shiny HP calculator for sale for just $150,000. I've yet to get any takers, so maybe dollars aren't exactly worthless just yet. In short, they are hysterical and saying things for their newspeak moral "feel", not because they actually believe or act on them.
Those who think inflation must be right around the corner cannot explain why they aren't piling into real estate with high leverage. Oh right, everyone on earth already tried that. Sometimes dollars are worth more than real assets - if a trade gets crowded enough, it cannot and will not pay.
In the last 2 years, the treasury has issued over $2 trillion net of all rollovers. The Chinese endlessly mentioned in every news story have taken about 10% of it. The Fed has taken none of it net, having run down its treasury holdings in 2008 and run them back up in 2009. The UK and the Caribbean (read, hedge funds) have taken more of it.
Most of it has gone to domestic US purchasers. US households directly hold $606 billion in treasuries, up from only $240 billion at the end of last year. The other big buyer has been money market mutual funds (up $400 billion since the end of 2006, half of that since the middle of 2008).
Breaking the buck on Lehman commercial paper was not something that made them want to hold more short term corporate debt. They let their corporate debt run off into cash as it came due, and bought T-bills instead, even if it was yielding zero, because at least the capital was safe. This squeezed credit available to companies. The Fed then lent to them instead. When the bond market turned this spring, this stopped accelerating at least, but money market funds have a permanently higher portion of T-bills.
Savers are saving more even with CDs around 1.5%, treasuries at 1% for the 2 year, and T-bills and money funds near zero. This is "risk aversion". People are holding 15% of their lower total asset values in cash equivalents, compared to 10% before last year's crash.
The total money equivalents in US household balance sheets is up about $1 trillion, which the Fed has created directly, since the banks aren't expanding lending at all, themselves. But their total asset values are down like $11 trillion over the peak. About half of that is the fall in real estate and half is the fall in stocks. The bottom was in March of this year, and total assets and net worth increased $2 trillion in the 2nd quarter of 2009. We get the figures for the 3rd quarter in December, but it will probably be up another $2 trillion, from the continuing stock market rally mostly.
Understand also that disposable income, after taxes, is about the same now as it was this time last year, before the crash. It fell only 1% at the March lows. Yes, even with the big jump in unemployment. That is what the big deficit does - maintain after tax incomes. Tax receipts fell a lot while transfer payment spending (unemployment payments e.g.) expanded a lot. The hit to GDP came as the government sector going into deep deficit, one, and as a big fall in business investment, two.
Consumer spending fell too, but the savings rate rose; it wasn't income after tax that took the hit. About half of that uptick in the savings rate has now reversed. Basically whenever the real estate and stock valuations are rising, people don't see as much need to save - their assets own line is moving up $2 trillion a quarter without new additions to savings, etc.
Long run we'd be better off with a more sustainable savings rate around 7-10%, which would finance our internal capital investment without a trade deficit. But that isn't where things are stabilizing right now...
For what it is worth...
Yeah, like the brainiacs in Long Term Capital Management.
Not a very convincing endorsement.
But they are professionals and they have a settled body of doctrine and procedures
Yup, just like LTCM.
It is not possible to engage in serious finance without risk and occasional losses. Enough people are doing it that some will lose.
Next you will say all soldiers murder their officers and cite one ROP nutjob in Texas...
That wasn't my point. My point was a PhD in economics gives you a really crappy track record as far as actual financial management expertise goes.
I don't actually think "unregulated derivatives" are/were a bad thing. I think government assumption of private risk is pure evil, however.
It is not possible to engage in serious finance without risk and occasional losses. Enough people are doing it that some will lose.
Zero disagreement there.
Next you will say all soldiers murder their officers and cite one ROP nutjob in Texas...
You really want to jump into the ad hominem ring with me?
Really? I don't think you do, so I'll give you this one token and let you walk on by.
Yes, I understand. But... WHO has the cash these days? Who has all of the cash in their possession today to buy all of these bonds? Or, is it just rolling over? And if its just rolling over, then we should not be seeing an increase in Federal debt. So... WHO is sitting on all of this cash?
The US private sector investors, is the short answer. Mostly the retired, also successful business owners, senior corporate officers, families that inherited, etc. The usual high net worth individuals, and the institutions that represent and intermediate for them - mutual funds, hedge funds, banks and brokerages, etc.
Every house sold at peak prices was sold by somebody. Every share of stock sold at peak prices was sold by somebody. Every oil future traded at $125-147 a barrel was sold by somebody. Every put contract written was owned by somebody. There are winners in every major market swing, not just losers.
The losers spend more time complaining to politicians and journalists...
ping
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