Posted on 09/14/2012 3:51:58 AM PDT by SoFloFreeper
One of the most powerful moments of Ben Bernanke's press conference yesterday, after the Fed announced Unlimited QE, was when he refuted some myths about Fed action before he started the Q&A.
In particular, he took on the idea that the Fed was screwing savers because rates are so low, and you can't get any return holding money in the bank.
Here's what he said:
On the second concern, my colleagues and I are very much aware that holders of interest- bearing assets, such as certificates of deposit, are receiving very low returns. But low interest rates also support the value of many other assets that Americans own, such as homes and businesses large and small. Indeed, in general, healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job. Thus, while low interest rates do impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates help promote.
So in other words: The main thing is that you can't save if you don't have a job, and that's what the Fed is trying to address. Furthermore, there are lots of kinds of assets that do benefit from low rates.
When the economy returns to health, savers will be able to get paid, just like everyone else. But until then, there's no special right to earn income on having money in a bank.
(Excerpt) Read more at businessinsider.com ...
A related article that deserves a thread of its’ own. Sadly I don’t know how.....http://www.bloomberg.com/news/2012-09-12/about-those-policies-that-got-us-into-this-mess-caroline-baum.html
As far as I understand it, the notational amount is the total amount of debt covered by interest rate swap protection.
So if it was all covered at a time when say the prime rate was five percent, and the prime went to seven percent, somebody would be on the hook for 2 percent times 340 trillion.
Personally, I think they found a way to leverage it even farther than that...
Why? So it can become more worthless by the hour?
Invest it.
Food, Spices, An apparatus that can purify water, Ammo, Weapons (At least a 12 ga. a Kabar knife and a 22 rifle for each family member.) First aide supplies, Junk Silver.
All of the above is going to go up in price so buying now is the same thing as investing. And, it may save your life if the SHTF!
Indeed, commodities are what you should put your savings in.
You’ll need SOME cash in hand for a while, even if it’s worth 50-80% of what it was yesterday, it’s still not 0.
I’m seriously looking at taking out some IRA money, taking the hit, and converting it to silver.
>>‘Manufactured crisis’ comes to mind.
http://www.google.com/#hl=en&sclient=psy-ab&q=QE3+Mortgage+backed+securities
Uhuh.
Another Ba’al-Out for NyLon Suuuuper Genius gold buggers.
Thanks
More and more, I’m thinking of a type of item that would be priceless if SHTF...
Soap.
Think about it. We wash our clothes with soap. We wash our pitts with soap. Our dishes, our sheets... and we don’t think much about it, because now it’s everywhere.
Think how much it would be worth if it was almost nowhere, not everywhere!
Sure.
And think about it.
If what I said about what “notational” means is correct, then we are talking 340 trillion dollars.
Annual GDP is like what, 15 trillion dollars?
And we are in hoc for (at least what we KNOW of) 340 trillion dollars?
It’s unsustainable. It’s to the point of being meaningless.
It can’t be leveraged against. It can’t be insured. It can’t be paid back.
It’s totally un-regulatable and if you put five people in a room and ask them what it means, you will get six or seven different answers!
The primary competing interest to higher interest rates is the national debt. It is far easier to pay on a debt with 0% interest. If interest rates were to go to 4% on the debt the fed would default.
We already pay $250 billion in interest each year on the debt with notes near 1.5% on average. Imagine the debt at 4%, the interest payment would be $640 billion. At 7% the debt interest would be $1.12 trillion.
We are broke. The older generations have borrowed/stolen from their children, grand children, and many generations past that.
“Annual GDP is like what, 15 trillion dollars?”
Far less than $10 trillion. The fed likes to count money twice and counts service industries as some kind of product.
Then that makes it even worse. The bond rating agencies like Moodys, etc. get their collective panties in a bunch and start downgrading if a countries sovereign debt reaches 100% of their GDP.
What can they possibly say about debt that amounts to ten times the GDP? Twenty? Thirty or more?
It’s meaningless. It can only end in total repudiation of debt or raping and pillaging on a massive scale. Literally.
No weapons for me. I’d probably kill someone.
I do have some supplies just in case.
If you need paper towels or toilet paper, I have it. I could open my own store just to sell paper products. LOL
I thought about buying gold or silver, but don’t you need some serious money? And where to keep it? Sure don’t want to keep it at home and I don’t trust the banks. What would prevent the banks and/or the government from raiding a safe deposit box?
You should read up on ferfal.blogspot.com - he’s experienced the Argentinian economic collapse firsthand and has a lot of advice.
You’re right, it would be a good idea to have a good sum of cash on hand because immediately after the crash, cash is king, even if it is constantly reducing in value.
You need two home safes. You need a “front” safe with a couple hundred dollars in cash, maybe a cheap gun or two, and a minimal amount of silver.
Your “deep” safe should be sunk into the basement floor and contain your real stash.
It’s a scary scenario, but home invaders will put a gun to the head of your wife or kids and demand you show them the safe. Give them what’s in the “front” safe and pray that it’s enough.
eery time the government - and those who hold the power of government - give with one hand, they take with the other - EVERYTIME
the real question is (a) to what end, and (b) does achieving that end EQUIRE the government action
again the answer to (B) is nearly always NO, no matter benevolent ends the goverment says it’s action is intended to produce
it is not a question of whether or not the economy will recover; it will
but whether or not it is more helpful to recover on a political schedule - which is what the use of government power is actually for - or more helpful to recover without government intervention
history shows that recoveries engineered by government fiat are less stable, produce volatile markets, and take more agressive action for the government forces of stimulus to retreat, and actually counteract their stimulus, which eventully they must; they actual draw out the lenght of time natural recovery takes
when the government does not intervene, the “bottoms” are reached sooner, the market value adjustments - across the board - are reached sooner, stability returns sooner, and when the economny does return to growth that growth is more stable
the Fed, like an Obama-type presidency is another version of Americans believing in a “Wizard of Oz”, and both hide behind the curtain of public ignorance created by the media
We have just seen our total national debt and our annual economic output intersect at around $16 trillion dollars. Now you say that the interest rate swaps which cover only the possible interest expense increases in variable interest rate loans total 340 trillion dollars, more than 21 times our annual economic output.
That is insane, and if true should be made illegal. If financial high flyers want to deal in such risky instruments they should do it with their own money and no depository banks should be allowed to ‘invest’ in such instruments.
But you have bought totally into a particular theoretical scenario. If there were any consensus we’d be hearing a lot more about it from far more financial analysts.
And if that should happen, they should be allowed to fail and the shareholders lose whatever they lose, and then they should be recapitalized under more conservative regulations. That’s what should have happened in late 2008.
> Among the biggest concerns about Fed action is the idea
> that low rates “screw savers.”
“Yep, that’s what we’re doing all right,” said Bernanke, “we intend to really stick it to people who have saved money, especially those on fixed income and retirement. They are just leeches, parasites, on our economy anyway.”
“Anyone foolish enough to have money in banks that we control, instead of in a safe at home, are obviously suckers who need to be taken for every penny. So screw ‘em”, he concluded.
If Bernanke mentioned debt, I must have missed it. It was more like "until the economy gets better." So, in the context of Obama's current political needs, jobs, or maybe just the promise (where have I heard that word before?) of future jobs makes the threat of inflation insignificant. Bernanke must have thought about inflation, but he does not seem to want to talk about it.
Instead of QE followed by a number, now we have "Unlimited QE."
” Instead of QE followed by a number, now we have “Unlimited QE.”
Until it all implodes.
But even after it implodes, will they stop?
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