Will Washington Make a Bad Situation Worse? (Bernanke to testify before Congress Wed; QE3?)

CNBC ^ | 07/12/2011 | Lee Brodie

[The Magical Mischief Tour]

Wednesday could be a volatile trading day as Wall Street gets a better understanding of the politics and outlook that’s rapidly evolving in our nation's capital.

First and foremost, traders will be listening to Ben Bernanke as he delivers his semi-annual report to Congress. Sometimes called the Humphrey-Hawkins testimony, pros will be parsing over every word looking for clues about the economy and monetary policy and the potential for more stimulus.

But, beyond that, they’ll also be listening to the questions asked by lawmakers looking for clues about the political psychology of DC and just how well lawmakers understand issues involving the debt ceiling.

The Potential of QE3

Traders on the floor widely expect lawmakers to fire the Fed chief with questions about what can be done to further stimulate the economy. (On the Street that’s known as QE3, although it doesn’t necessarily have to take the same form as QE2, which was bond purchases.)

Considering many pros didn’t think QE3 was even a remote possibility – you may be wondering how the tide shifted, and so quickly.

Minutes taken during the FOMC’s two day meeting on June 21 and 22nd were just released and pros were stunned by some of the comments, especially the following:

”A few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus.”

S&P 500 Index(.SPX) 1313.64 -5.85 (-0.44%%) INDEX

Trader Stephen Weiss is among a growing contingent that think the Fed could have something up its sleeve. He reminds us that “the Fed has dual mandate of both inflation and employment.” And the latest jobs report showed unemployment ticking higher.

And although opponents of QE3 may argue the political will for the Fed to act may be diminishing Weiss doesn’t think it matters. Under these circumstances he thinks Bernanke may almost have an obligation to do something.

If we do hear Mr. Bernanke says anything about QE3, the usually bullish Joe Terranova thinks the results will be downright bearish. He says even a suggestion from Bernanke of QE3 would call the economy and recovery into questions and have a very negative impact on stocks.

Trader Karen Finerman agrees. “I don’t think a QE3 is a good thing at all.”

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She reminds that one of the ripples generated by QE2 was the march higher in oil because the program made the dollar considerably weaker. And it also drove corn, wheat and other food prices higher - two serious drags on the economy.

Terranova agrees entirely and says, what would QE3 do to prices at the pump, now?

The Debt Ceiling

The other major issue that lawmakers are likely to press is the debt ceiling. And the Fast Money traders largely agree the issue is growing more serious by the day.

”It’s getting dangerous,” says trader Karen Finerman referring to growing chatter that lawmakers might not reach an agreement by the August 2nd deadline.

According to his Beltway sources, FBR analyst confirms that trouble may lie ahead. ”I’m hearing the debt ceiling will be raised and that a deal will include massive spending cuts but no one will guarantee to get it done by August 2nd,” Mills says in a live interview.

And if Congress does crash the deadline markets will likely react very negatively – in fact Mills says it might be a necessary evil to get the two parties to reach an agreement.

And how long could Congress remain at impasse? According to Mills, Treasury will make sure the US doesn’t technically default,“ but they won’t pay social security Medicare or Medicaid or defense spending.

If and when the public outcry becomes so great, that’s when Congress will have to act.

[updatedscreenname]

Ben will announce that he has traded his tbill collection for
Alaska, Puerto Rico, Guam, the FCC(air wave rights in US), all off shore oil and mineral rights, and the Washington Nationals.

Thus reducing the national debt by the QEI&QEII amounts, and that the fed has decided to eliminate the middle man and is establishing a standing army and is hiring millions.

[AEMILIUS PAULUS]

Question: " Will Washington Make a Bad Situation Worse?..."

Answer: Yes.

Comment: Those now in positions of authority cannot help but worsen our lives, liberty and property. Further, they cannot help it as harm is in their nature, their essence, their very being. They are living proof of the truth of Aristotle's theory of "Bad" as a deprivation!

[JPG]

The D.C. urge to ‘do something’ is always stronger than the proper course which may be to ‘do nothing’.

[BobP]

It's all fiat money now, meaning that it has value only because the Fed says it does! So we have an unstable economy wobbling atop unsound money. Money that the government takes from taxpayers, or borrows with no intention of paying it back, or prints without end.

Barack Jackwagon Obama and his Administration admit that they don't have any idea what's wrong with the economy. Bernanke said: "We don't have a precise read on why this slower pace of growth is persisting" -- Wednesday, June 22, 2011.

If they tell us we had 1.8% growth, it really means we had no growth or negative growth.

Fire up the presses.

And make sure Ben doesn't run out of ink printing all that money - with nothing backing it up!

Obama bamboozled millions... gave them the old 'okee doke.'

Bernanke says the labor market is in 'a very deep black hole'

Countdown until Obama leaves Office: 557 days as of July 12, 2011.

[ProtectOurFreedom]

Will Washington Make a Bad Situation Worse?

Nothing has ever stopped them before.

[upchuck]

pros will be parsing over every word looking for clues about the economy and monetary policy and the potential for more stimulus.

Considering that The Bernanke is a frigging idiot and has freely admitted that I know as much as, if not more, than he does about the county's financial shape, that doesn't say much for the pros, does it?

[Pollster1]

Will Washington Make a Bad Situation Worse?

As inept as the communist in our White House is, that is his goal - and the one area in which he always succeeds.

[Bean Counter]

“When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.”

...

[hinckley buzzard]

That moment in time should have resulted in this idiot's forced resignation. The fact that few people even noticed reveals how fraudulent the current economic regime has become. The markets are now more "managed" than ever before, and the currency survives on a sea of fraud and lies.

[Iron Munro]

[justa-hairyape]

We told these paper shuffling morons 3 years ago that they were just throwing good money after bad, but I guess that was just too simple of a concept for them to grasp.

So after QE1 failed, they found out what happens when you throw good money after bad. You lose the good money and find yourself in a bigger hole.

So they used the wisdom they gained from their QE1 experience to try something new and improved. QE2 was going to fix the QE1 problem. This time we would throw bad money after bad. Hey, how could that fail ?

Now we have QE3 coming down the tracks. Wonder what genius plan these dolts will come up with next.

[Mariner]

Mr Bernanke should be reminded that the Fed was created in Dec 1913 by an act of Congress.

It could just as easily be destroyed and replaced by the 3rd Bank of the USA.

[screaminsunshine]

I wonder if it was like this in Rome? Only the decline and fall took so long because they did not have TV and the Internet.

[screaminsunshine]

Simple. Negative interest rates.

[GOPJ]

Dems want the economy humming for the 2012 election.

Think family about to go under from crushing debt and StepMom wants a full new wardrobe, some cool furniture, and a better car before getting the 4th divorce in 2012.

The charge card's in her purse - there's entitlement in her cold heart... and she doesn't care what happens to the suckers after 2012...

[newzjunkey]

"Will Washington Make a Bad Situation Worse?..."

Always.

[justa-hairyape]

Negative interest rates.

So is that like a reverse mortgage ? Not a bond player myself.

[screaminsunshine]

Forced loans. If they can force you to buy insurance they can force you to take a loan. At negative interest rates. They pay you to take the loan and thereby create new money. Yes it is that bad.

[arrogantsob]

H H is the Full Employment Act something which conflicts with the purpose of the Fed per se. Since you can’t hit two parallel targets with one bullet either financial stability or employment will be sacrificed.

Any honest report will be that the Administration’s economic policies are a disaster positively Hooverian.