My Take on The Bernank's Latest

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California Lawyer
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My Take on The Bernank's Latest

Good Ol' Chairsatan said what I thought he would say yesterday.  I went through his written speech, and pulled out some gems.  So, let me parse his words and put some context into it.  Remember, I am a real citizen, and am not some trained economist with a wall full of sheepskin from the Ivy League halls of academia.  (Bernake's comments are in bold italics.)

Bernanke said:  “As indicated in today's policy statement, the economic recovery appears to be proceeding at a moderate pace, though somewhat more slowly than the committee had expected, and some recent labor market indicators have also been weaker than expected.”

First of all, he assumes there even is an economic recovery, without citing to a single, credible source.  Economic recovery my ass.  Then, not unsurprisingly, he was surprised.  He said they were confronted by the unexpected!  How come we all know, but he does not?  It is implausible to believe that he is ignorant, uninformed, or simply missed what is obvious.  He is, thus, lying.  Since we know he is lying, the question is why is he lying?  Then, the question becomes is he lying for his own incentive (for example, to keep his job), or is he lying because he is told to lie?  If he is told to lie, then who is telling him to lie?  So, we come full circle to the reality of the dying dollar.  TBTF and TPTB need QE3, but need time and other events to be able to pull it off.  Hence, Chairsatan is given a script, and lies as he is told.

Bernanke said: “We don't have a precise read on why this slower pace of growth is persisting. One way to think about it is that maybe some of the headwinds that have been concerning us, like, you know, weakness in the financial sector, problems in the housing sector, balance sheet and de-leveraging issues -- some of these headwinds may be stronger and more persistent than we thought.”

Again, as predicted, he used the term "headwinds" to describe the massive fundamentals which portend the collapse of the dollar.  The real problem was not fixed back in 2008, but instead more debt was dumped into the system.  A reset, or collapse if you will, is the only real, lasting solution.  But Bernanke will not tell the truth about this.  So, we KNOW that his next speech will again mention the unexpected headwinds, and thus will be borne QE3.

Bernanke said: “And so I think it's very desirable that we take strong action to lower our budget deficits over the longer term.  In doing that, I think it would be best not to -- in light of the -- the weakness of the recovery, it would be best not to have sudden and sharp fiscal consolidation in the very near term.”

This sure looks to me like he is building a reason for the failure of past QE.  He can always come out and say later, that IF the Congress had acted responsibly and put forth sustainable budget goals, THEN his QE would have worked.  However, like any Keynesian, it is always about tomorrow, and never today.  Thus, he addresses the near term, and give his warning that the Congress better damn well raise the debt ceiling for his banker bosses, or else there will be losses.

Bernanke said: “So I think in the very short run that, you know, the fiscal tightening is -- is at best neutral, but probably somewhat negative for job creation.  I think what people will understand -- should understand-- is that our budgetary problems are very long run in nature. The -- the projections made by the CBO,for example, talk about where our debt- to-GDP ratio will be in 2020, 2025 and so on.  That doesn't mean we should wait to act. The sooner we can act, the better.  But the most efficient and effective way to address our fiscal problems -- and, again, I think this is extremely important -- is to take a longer-run perspective, not to focus the cuts heavily on the near term.”

Wow, this is classic:  "Fiscal tightening is negative for job creation."  True only if you are a government worker.  Personally, I wish the size of government would shrink dramatically.  If it did, no doubt that the private sector could grow.  The private sector will not grow with incessant govt red tape and disincentives.  "Budgetary problems are very long run in nature" - TRANSLATED: interest rates will be suppressed indefinitely or else the whole ponzi scheme collapses immediately.  He says the most effective way to address fiscal problems is to take a longer-run perspective.  Well, how long, then?  A year, a month, decade?  In the current system, there is no conceivable way to take a longer-run perspective than ONE ELECTION CYCLE.  So, he is delusional.  Also, he says to take a long-run perspective, but he provides no solution or guidance at all.  What he does say is classic Keynesian claptrap "not to focus the cuts heavily on the near term."  Well, if the country is broke, is more debt the solution, or is cutting expenditures the solution?

Bernanke said: “It's interesting now that although house prices overall are declining, all of that is concentrated in distressed properties; that is, houses which are not being sold on a distressed basis have much more stable prices than those which are being sold on a distressed basis, and that suggests that if we can reduce the current number, something of more than a third, maybe 40 percent of home sales which are on a distress basis, that would do a lot to stabilizing the market and helping give people confidence that they can buy and not be buying into a falling market.”

Housing, ah, my favorite.  Here, Bernanke proves he is a tool of the banks.  Note that he presumes that higher current home prices are the solution!  But notice the solution only benefits the banks, and no one else!  Looking at this argument from a different perspective, here is the flip side, where I change his words and take the counter position:  "house prices overall are declining, all of that is concentrated in [arm's length transactions without artificial, subprime, alt-a or no doc loans based on real buyers with real money at closing]; that is, houses which are not being sold [in a legitimate market transaction to a real buyer with real money] have much more [inflated prices] than those which are being sold [in a normal market].  That suggests that if we can [increase] the current number, something of more than a third, maybe 40 percent of home sales which are on a [normal market transaction basis], that would do a lot to stabilizing the market and helping give people confidence that they can buy and not be [overpaying for shadow inventory artificially being withheld from the market in order to prop up insolvent banks]."  Here is the rest of what he should have said: "As soon as the shadow inventory comes on line, prices will correct to equilibrium, thereby sparking the home buying market, which will thus help generate momentum to break through the headwinds."

So there you have it.  Good luck out there!

Edited by admin on 11/08/2014 - 05:06

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lochsa
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Thanks for your insight Cal

Thanks for your insight Cal Law  always enjoy your posts.       

Nigel Black
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@CL You sir, are an asset to

@CL

You sir, are an asset to this community.  Thanks for posting this.  Hat tip to you!

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