A Pretty Dangerous Thing
Readers suggested a topic on the latest Federal Reserve minutes. “Which asset class would get hammered the worst if QE-to-infinity-and-beyond were suddenly ended? My guess is that the current discussion is a jawboning exercise designed to start the adjustment process to the absence of QE before it actually begins in 2015 (or whenever). Once the expectation for an early exit by the Fed is priced in, the stock market can enjoy a future rally on the announcement that QE will end ‘later than expected.’”
A reply. “I don’t see QE ending anytime soon, as having to pay real interest rates would wipe out the Fed Gov. And as long as big inflation does not rear its ugly head, why would they even think of stopping?”
One said. “The Fed is becoming the sole buyer of bonds printed up by the Treasury. What does that tell you? The marketplace won’t buy at the current rate. So, yes, the Fed is controlling interest rates by not allowing free market bidding for Treasuries. Additionally, the collusion of Central Banks world-wide, working with Goldman-Sachs and the other big banks has created international instability.”
From Reuters. “In a surprise to Wall Street, minutes from the Fed’s December policy meeting, published on Thursday, showed a growing reticence about further increases in the central bank’s $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009. ‘Several (officials) thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet,’ the minutes said, referring to the narrower group of voting Fed members.”
From Quartz. “Most interesting is not what the committee said but why. Numerous statements within the minutes suggest that the Fed is truly growing concerned about the unintended consequences of ultra-loose monetary policy on a long-term basis. With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation. Depending on the path for the balance sheet and interest rates, the Federal Reserve’s net income and its remittances to the Treasury could be significantly affected during the period of policy normalization. Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability.”
“This hawkish stance extends to long-term interest rates, which could eventually hurt savers and push investors into unnecessarily risky assets.”
“A few participants, observing that low interest rates had increased the demand for riskier financial products, pointed to the possibility that holding interest rates low for a prolonged period could lead to financial imbalances and imprudent risk-taking. One participant suggested that there were several historical episodes in the United States and other countries that might be used to build a better understanding of the financial strains that could develop from a long period of very low long-term interest rates.”
“In other, shorter words, committee members are worried that prolonged easy money might get the economy addicted; that it will put a strain on the Fed’s own finances; and that it will encourage moral hazard. (That mystical reference to ‘historical episodes’ might be a warning about Japan’s ‘lost decade’ in the 1990s, or US stagflation in the 1970s.)”
The Business Insider. “Regular readers know that “bond king” Bill Gross, who runs the world’s biggest fixed income fund at PIMCO, is not the biggest fan of the Federal Reserve’s quantitative easing programs. In his January letter, entitled ‘Money for Nothing, Checks for Free,’ Gross tells investors to avoid long-term U.S. government debt, writing that ‘ultimately government financing schemes such as today’s QEs or England’s early 1700s South Sea Bubble end badly.’”
“Gross takes aim at a speech given by now-Fed Chairman Ben Bernanke back in 2002, in which Bernanke says the Fed can increase the monetary base ‘at essentially no cost.’ Gross writes: ‘When the Fed buys $1 trillion worth of Treasuries and mortgages annually, as it is now doing, it effectively is financing 80% of the deficit for free…Bernanke’s dreams of economic revival, which would then lead to the day that investors can earn higher returns, may be an unattainable theoretical hope, in contrast to a future reality. Japan we are not, nor is Euroland or the U.K. – just yet. But ‘costless’ check writing does indeed have a cost and checks cannot perpetually be written for free.’”
From CNBC. “According to Sam Chandan, president and chief economist with Chandan Economics, the Fed is trying to signal two things. The first is that the Fed believes that the U.S. economy is developing ‘its own momentum’ and a continuation of the easy monetary policy is not warranted. The second is that financial markets need to get used to the idea that this is the beginning of the end of easing.”
“‘They are signaling to the market that extraordinarily accommodative monetary policy is not something that will last forever,’ Chandan told CNBC Asia’s ‘Squawk Box’ on Friday. ‘They have done this in several ways - putting time frames around it, and with discussions around where rates might begin to rise. But the market hasn’t internalized a lot of that.’”
“‘If the market believes that this (easing) is going to go on forever, that’s a pretty dangerous thing,’ Chandan said.”
The Marin Independent Journal. “The jumbo loan is making a comeback, a welcome trend for Bay Area homebuyers and one more sign the housing market is reviving. After a sharp drop last year, loans greater than $625,500 have bounced back in Alameda, Contra Costa, San Mateo and Santa Clara counties in the past 12 months, according to DataQuick, rising from about 8 percent to 13 percent of Bay Area home loans. San Francisco has seen an even bigger increase in jumbos, from 18 percent to almost 33 percent of all loans.”
“‘The high-end homes market is reviving because buyers feel the combination of good prices and low interest rates make today a good time to buy,’ said Wells Fargo spokesman James Hines. ‘The availability of low-rate jumbo loans, therefore, is enabling these consumers to buy homes and finance them.’”
“The interest rates for jumbos are also now close to those of conforming loans. For example, Star One Credit Union in Sunnyvale last week offered a 30-year fixed-rate jumbo at 3.875 percent with no points; what it calls a conforming ‘high balance’ loan of $417,000 to $625,500 at 3.625 percent; and one below $417,000 at 3.5 percent. That’s a difference of only a quarter of a percent between the high balance and the jumbo loan. At the worst of the credit crunch, the spread at some lenders was 1 percent or more, according to Zillow.”
A Letter to the Editor, Vancouver Sun. “Re: Buyers waiting for housing bubble to burst could be in for a long wait, Dec. 29. I’m not a real estate expert, but Cameron Muir’s arguments against a real estate correction are so flawed even a novice like me noticed. He is correct that the 2008 financial crisis did not result in a real estate correction locally. However, at the time, the Bank of Canada was able to lower interest rates from 4.75 per cent to 0.5 per cent to help the economy. It is currently at one per cent. There isn’t a lot of room to lower rates should another crisis occur.”
“He is correct that a 10 per cent mortgage rate increase was required in 1982 to cause a sharp real estate drop. However, mortgage rates were generally higher then. The 10 per cent increase only doubled it. Today’s mortgage rates are much lower. A three per cent increase would double rates.”
“His statement ‘But are you willing to sell your house at 60 cents on the dollar? … You don’t have to sell and people have to have somewhere to live,’ is the most ridiculous of all. Under that logic, house prices will never go down. People in the U.S. needed somewhere to live in 2008, the house prices there still crashed. I think they discovered something new called renting.”
I’ve got posts from early 2005 where the Chinese government is going to ’stop’ their housing bubble. Then they flood the economy with currency, and it hits a new high. Same with Australia, and Canada. Then we’re back to ’stopping’ a housing bubble in China and Canada just a few years later. But not in Australia:
‘Interest rate cuts are losing their power to stimulate the property market, with concerns about the economy, affordability and the refusal of banks to pass on the full savings blunting their effectiveness, industry experts say. Despite the Reserve Bank slashing the cash rate six times in little more than a year, demand from home buyers remains weak and house prices have ended the year in the red.’
‘Normally this far into an easing cycle things should be running quite a lot stronger than they are,” said Shane Oliver, chief economist for AMP Capital Investors. ”Every time interest rates have been cut over the last 20 to 30 years there has been a response in the housing sector. We haven’t seen the same response this time.”
‘Housing finance commitments have increased only 4 per cent since the RBA began cutting the interest rate last year and demand remains below the level seen during the high-interest-rate period before the global financial crisis, according to the Bureau of Statistics. Meanwhile, the Housing Industry Association reports the new homes market has fallen back into recessionary conditions.’
And there’s this:
‘House prices in Norway rose the most in more than a year in December as near-record low interest rates fueled home buying, increasing pressure on the central bank and financial regulators to cool credit growth. House prices, which have doubled since 2002, rose an annual 8.8 percent in December compared with 7.5 percent in the prior month, the Norwegian Association of Real Estate Agents said in a statement today.’
‘The figures confirm our long hold view that the housing market needs some kind of stabilizing factor,” said Frank Jullum, chief economist for Norway at Danske Bank A/S. “We will see some measures from the government in 2013, aimed at damping the housing prices.”
‘The Finance Ministry last month moved to stem household lending as the central bank estimated private debt levels will exceed 200 percent of disposable incomes in 2013.’
‘Weak global growth prospects abroad have curtailed the central bank’s scope to address overheating risks without fueling krone gains. Central bankers in the euro area, the U.S. and Japan have resorted to additional stimulus, pushing rate increases further out in time.’
So here’s a question that’s not getting asked much: doesn’t this global roller-coaster in house prices, in and of itself, suggest something is seriously wrong with policies? Boost house prices, lower house prices, bail-out lenders, stop foreclosures, speed them up. It’s all an awfully expensive and destructive situation. So when does somebody at these central banks wake up and say, ‘let’s get off this dang thing!’
A better question is:
“Why do all the world’s government want high housing prices for their own citizens and have them all become debt slaves? Why don’t any of them want or desire affordable housing?”
I like it. I’m for any policy that keeps the banks in business.
Campaign contributions.
‘House prices in Norway rose the most in more than a year in December as near-record low interest rates fueled home buying, increasing pressure on the central bank and financial regulators to cool credit growth. House prices, which have doubled since 2002, rose an annual 8.8 percent in December compared with 7.5 percent in the prior month, the Norwegian Association of Real Estate Agents said in a statement today.’
There is a surprisingly large number of talks at this weekend’s American Economics Association annual meetings with the term “housing bubble” in their titles. Apparently, even main stream professional economists have discovered at this point that there was or is a U.S. housing bubble.
One such talk which I attended, given by a Norgesbank economist, showed graphs comparing the run-up in U.S. versus in Norwegian home prices. Norway’s meteoric price increases make the U.S. housing price increases leading up to 2006 look like a data blip.
There is a surprisingly large number of talks at this weekend’s American Economics Association annual meetings with the term “housing bubble” in their titles.
Awesome… Thanks for sharing, PB.
Of course, they are only six or so years late in catching on—it would have been WAY more valuable to have realized it back then.
Academic economists are legend for recognizing trends half-a-decade after they happen and for conducting post-mortems which completely miss primary causes. E.g. there was a plethora of red herrings but nary a mention of “subprime lending” or “too-big-to-fail bailouts” in several talks I sat through on the subject of what explained the bubble.
“I’ve got posts from early 2005 where the Chinese government is going to ’stop’ their housing bubble. Then they flood the economy with currency, and it hits a new high. Same with Australia, and Canada. Then we’re back to ’stopping’ a housing bubble in China and Canada just a few years later.”
Is it still a mania if the government completely controls it?
…when does somebody at these central banks wake up and say, ‘let’s get off this dang thing!’
Why would they get off this thing? I think it will have to bite the herdsmen hard, really hard, for them to want to get out of the saddle. I have no clue how that might happen.
“‘The high-end homes market is reviving because buyers feel the combination of good prices and low interest rates make today a good time to buy,’ said Wells Fargo spokesman James Hines. ‘The availability of low-rate jumbo loans, therefore, is enabling these consumers to buy homes and finance them.’”
Uh, and what happens if/when Congress caps deductions for those upper-income folks?
I still cannot believe people think these prices are “good.” All you have to do is check Zillow to see what houses sold for before 2000, back in the good old days of income verification and down payments. And a low interest rate environment causes prices to go up.
Wake me up when rates are back to 6% or 7%.
FWIW, that comment was in the context of jumbo loans in the pricier parts of the Bay Area, where you need a “jumbo” just to finance a 2 bedroom townhouse in the more desirable parts if Silly Valley.
It simply blows me away that people there simply accept such an astronomical cost of living as “normal”. And none of my Bay Area colleagues are interested in transferring to our Broomfield campus, since in their words Denver is a “cow town”.
I guess I’m going to have to visit the bay area sometime because I just don’t see how it could be that much better. I’ve been a lot of other places and the Rockies are pretty nice.
It isn’t better, but it’s what they are used to. Personally, I think that it’s mostly one upmanship. I heard similar nonsense when I lived in San Diego:
“But we can go anytime to the beach!”
“The beaches here are fully of stinky seaweed and the water is ice cold. And besides that, when was the last time you went to the beach?”
“The weather is great!”
“If you live you right on the coast, the summers are hot if you live inland. And you spend all of your time indoors anyway, you’re either at work, at home or stuck in your car in a traffic jam.”
And so on. When we announced we were moving to Colorado all of our friends told us we were nuts.
Drive from Palo Alto across the highway to East Palo Alto.
Hi. Lived in San Fran during the internet bubble. The topography and climate and weather are great. (Though a little cool for some people’s taste) Culturally very interesting like living in other countries (Japantown, Chinatown, the Mission (Latino), Russian neighborhood in the Sunset (Western part of town), North Beach (Little Italy), etc..So great dining scene. Beautiful architecture, great live music scene, wonderful recreation a outside the city, Skiing, wine country, etc.. Downside high cost. And looney left politicians = high taxes, hoards of bums, panhandlers, and junkies, everywhere. They need a Rudy Guliani to fix quality of live issues. Read about the naked guys in the Castro as an example of what’s wrong with SF.
It is nice in SF. Very scenic and good weather, too. But just not 4-5 times better than here (somewhat scenic section of flyoverland).
I just got back from visiting family in eastern PA. Not only is the high-end homes market there NOT reviving, it’s not even close to getting off the sickbed.
Case in point: House down the street from my parents. Mom says it’s been on and off the resale market for almost a year. I looked up the price in the local MLS: $639,400. Priced to sit, if you ask me. Mom agreed.
Then there’s that nearby place that’s owned by a member of the DuPont family. It was for sale when I visited my folks for Xmas 2011. Guess what: Still for sale and a bargain at only $500k.
I lived in Western PA, and every now and again you’d see a house priced for 400+K in my area. They’ve been sitting for years (although there wasn’t much of a bubble where I was). I know several upper middle class people from Philly who would think you’re nuts for buying a house that expensive anywhere in PA. But, I guess it’s good for people there if the market doesn’t take off, right? Those houses either get priced lower, or sit and rot.
Agreed. Think the high end market will get clobbered the next decade. Even look at places like NY, DC, Boston. Soooooooooo many houses $1 million +. Just hard to believe there are enough buyers.
Get out of housing and get out while you still have a chance.
Yep, I live in Marin County, and absolutely, people here accept that astronomical housing is perfectly normal. But it was in line with local incomes until the DotCom silliness in the late 90’s, followed by the bubble mortgage silliness in 2000-2005. Prices are lower, but still in bubble territory.
“Prices are lower, but still in bubble territory.”
And jobs and incomes are increasing in the bay area, it’s not flyover country like sour grapes artists like Housing “Anayst” would like to belive.
That’s interesting. Santa Clara County unemployment rate is nearly 10% and rising.
http://www.bls.gov/lau/laucntycur14.txt
And worse yet for housing debt junkies, housing demand has collapse a whopping 24% in a single month the Bay Area.
http://www.zillow.com/local-info/CA-Santa-Clara-County-home-value/r_3136/#metric=mt%3D24%26dt%3D1%26tp%3D5%26rt%3D6%26r%3D3136%252C33839%252C54626%252C13713%26el%3D0
Housing is in the bay area is at the edge of a precipice and ready to collapse. DO NOT buy housing in anywhere in CA. The risk of loss of A LOT of money is guaranteed at current inflated asking prices of resale housing.
Get out NOW.
From reports from my friends who still live there, it’s almost impossible to get a tech job in Santa Clara co. if you are over 40 years old.
I’m guessing this will force that cohort to bail to other cities, thus putting their houses on the market to support their moves.
Still peddling your bad advice ?
I think it’s good advice. We got out of SF this summer and I’m glad we did because it’s a disaster unfolding at this moment.
Welcome aboard, Lynn G.
Mo Money = housing shill and troll.
….. and a liar too.
In other, shorter words, committee members are worried that prolonged easy money might get the economy addicted
Might? They’ve gotta know we’re already in Rush Limbaugh territory. Only we don’t have the money for a nice rehab place.
Might? They’ve gotta know we’re already in Rush Limbaugh territory. Only we don’t have the money for a nice rehab place.
+1 Hehe, pork bellies are up ‘ya know.
Then, rms, Limbaugh’s net worth just tripled!
The Fed’s committee minutes are so sterile and formulaic that they might as well be computer-generated. We’re talking about a public entity that has to be sued to release information, so I have no confidence whatsoever in anything that is released for our consumption. Maybe instead of discussing economic policy they passed a bong and listened to Pink Floyd.
And these statements by “participants” stunned me:
“A few participants, observing that low interest rates had increased the demand for riskier financial products, pointed to the possibility that holding interest rates low for a prolonged period could lead to financial imbalances and imprudent risk-taking. One participant suggested that there were several historical episodes in the United States and other countries that might be used to build a better understanding of the financial strains that could develop from a long period of very low long-term interest rates.”
This is like me “suggesting” the “possibility” that two plus two “might” equal four. Any culture that has to describe reality as a possibility is in serious trouble.
“…they might as well be computer-generated.”
FOMC drones?
It’s not far-fetched — I read Mish’s blog, and he linked to a piece last year showing how a standard summary of a baseball game, or a typical corporate earnings statement, now can be written by an algorithm.
http://tinyurl.com/7txfscv
A few participants, observing that low interest rates had increased the demand for riskier financial products, pointed to the possibility that holding interest rates low for a prolonged period could lead to financial imbalances and imprudent risk-taking.
Well, duh!
And that Brilliant observation is by the smartest people we have in America.
Ya Think?
It only goes to show how government employees and those serving the State don’t need to have any more brains than an average 8th grader, but will be paid a small fortune for their intellectual prowess, and “credentials”.
It’s really quite sickening.
We’ve considered reality as a possibility here for a few years. It seems to be taking the round about route. Delusion is hogging the road.
“…a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation.”
That’s the part that leaves me scratching my head: They speak as though they will eventually need to withdraw monetary policy accommodation.
But if this is going to be a problem, why ever bother withdrawing it? Why not just accommodate forever, as their actions suggest they could if they wanted?
Here may be some relief for your head: They lie.
We are in a global credit deflation. The Fed wants you to believe this cannot happen. Our government (and those of our buddies) want us to believe this cannot happen. So “Now is the best time ever to be in debt!” is the message. “Watch out, tomorrow we may raise interest rates. Borrow now while you still can.”
It’s not working. Some dupes are following the piper, but overall, less, less, less.
Our Central Bank is berserk. Creating money to stuff the banking system to lend for productive enterprise is one thing. Creating money to fund government operations, and charging interest on that, is horrible.
Even worse: who is receiving that interest? You know it’s bad when even The Nation runs a piece lionizing Ben Bernanke claiming that he is “not a dutiful camp follower to arrogant financiers.”
Even worse: who is receiving that interest?
Lessee… First, Treasury pays that interest to the Fed. Next, the Fed skims it, using some for payroll, some for open market operations, miscellaneous other expenses, what have you. Then, the Fed updates their books, and sends whatever portion they desire (ahem, sorry—any profits) back to the Treasury.
So really Treasury is paying that interest to itself, minus the skim.
Any questions?
“Some dupes are following the piper, but overall, less, less, less.”
Another interpretation: Those dupes are serving to mitigate the pain of deflation.
Thanks, dupes!
“…and push investors into unnecessarily risky assets.”
Lottery ticket purchases, anyone?
“One participant suggested that there were several historical episodes in the United States and other countries that might be used to build a better understanding of the financial strains that could develop from a long period of very low long-term interest rates.”
“In other, shorter words, committee members are worried that prolonged easy money might get the economy addicted; that it will put a strain on the Fed’s own finances; and that it will encourage moral hazard.”
Does them voicing this concern pretty much confirm that it is already extant?
They’ve ignored moral hazard for a long time. It comes back around to Greenspan’s belief that the market would self-regulate, instead of the market participants furiously gaming the market for maximum personal benefit with no concern for costs imposed on the rest of the system.
Yet shaping people’s behavior is one of the goals of government policy. And they pretend to be shocked when they find they’re encouraging more destructive behavior with their policies. Of course, their crony sectors are being enriched with public wealth. Which will benefit them in the long term. The Fed governors are humans just like the rest of us. They wipe their behinds just like the rest of us.
If they are acting like they are just starting to learn about moral hazard when the goals of government policy is shaping behavior - well… it’s a bit incredible. Like hard to believe. Either they’re idiots or they’re starting to play CYA.
So the Fed encouraged destructive behavior by believing the market would self-regulate, which it didn’t.
Anyone who believes a market not subject to a rule of law will “self-regulate” is a moron.
Anyone who believes a market not subject to a rule of law will “self-regulate” is a moron.
So the Austrian School is a bunch of morons?
Do they really think the market shouldn’t be subject to rule of law?
Winner winner chicken dinner!!!!
Do they really think the market shouldn’t be subject to rule of law?
What is the difference between rule of law and regulation?
No policy of any governmental agency can be assured until it has been officially denied.
I believe they have denied they were rigging the system, so we know for a fact they have been.
Look for official denial of any policy as confirmation that the policy has been put in place.
“The first is that the Fed believes that the U.S. economy is developing ‘its own momentum’ and a continuation of the easy monetary policy is not warranted.”
This isn’t like teaching your kid to ride a bike with training wheels on, with the expectation he will be able to keep his balance once they are taken off.
It’s more like a brain-dead patient on life support; once the feeding tubes are disconnected, the patient dies.
“This hawkish stance extends to long-term interest rates, which could eventually hurt savers and push investors into unnecessarily risky assets.”
What the hell do they mean, EVENTUALLY hurt savers?
We’ve been hurting for FOUR YEARS now.
Another stab at hedging reality. This is akin to saying that oxygen could eventually be necessary to sustain human life.
I’ve seen some discussion of negative real interest rates. The idea seems to be becoming more mainstream.
“…negative real interest rates. The idea seems to be becoming more mainstream.”
Look at the period from 1975 through the big blowout in interest rates circa 1982 for a recent historical example of how these can play out…
What savings?
Survey: 40 Percent Of Americans Have $500 Or Less In Savings
“It doesn’t shock me, but it does scare me. You know, we often say that the reason so many people fall off the edge in a tough economy is that they’re standing way too close to it, and I think this is a perfect demonstration of that.”
Michal says there’s a lack of training in personal finances.
“This is about life skills. It’s not just about arithmetic and reading, but we have to be able to teach the next generation that we have to be able to save for our own futures and we have to be able to save for those risks that could come our way.”
This is what poor is all about. Most of these losers would burn through a lotto win like “chit through a tin whistle”, and be right back where they started. Poor!
Spent it all on down payments to buy houses, no doubt…
“I’m not a real estate expert,….but…his statement ‘But are you willing to sell your house at 60 cents on the dollar? … You don’t have to sell and people have to have somewhere to live,’ is the most ridiculous of all. Under that logic, house prices will never go down. People in the U.S. needed somewhere to live in 2008, the house prices there still crashed. I think they discovered something new called renting.”
Gotta love when the amateurs out think the ‘experts.’
“It is hard to make a man understand something when his salary depends on his not understanding it.” — Upton Sinclair
There’s a lot of willful “self delusion” going on when it serves to benefit the self-deluded.
Here’s something from the Elliot Wave people:
‘In the latest Elliott Wave Theorist, Bob Prechter noted: The Fed has changed its policy, and it has done so in dramatic fashion. Look at this history of what the Fed has done.’
‘You can go all the way back to 1929, and [the Fed] was doing what its job is supposed to be, which is to put dampers on exuberance and only make money easier when the markets are down and the economy is contracting.’
‘Following that plan, the Fed raised the discount rate in 1929 to 6%. Here at the 1937 high, it raised margin requirements and bank reserves. In the 1968 bull market, when the public was excited about stocks, the Fed raised margin requirements and raised the discount rate to 6%. In 2000, right at that high, the Fed again raised its discount rate to 6%. In 2006, when the housing market was topping, and a year before stocks topped, it raised it to 6¼%.’
‘What is it doing now? The market is right back in the rarified areas that it was when the Fed dampened speculation, but now the Fed is doing the opposite. Not only has the Fed not raised the discount rate to 6%, or even to 1%, but it is keeping the Fed funds rate at zero, and it is promising a 0% Fed-funds rate through 2015, three whole years.’
‘This 180-degree turn tells me that the Fed is in a panic.’
http://www.elliottwave.com/freeupdates/archives/2012/11/01/How-the-Federal-Reserve-is-Showing-Financial-Fear.aspx#axzz2HDOQE5yv
‘This 180-degree turn tells me that the Fed is in a panic.’
I’m sure the closed-door meetings no longer resemble confidence; they really are in uncharted waters. The Dent v. Rickards clip was insightful. Up next, broken promises: the municipal bond and public pension crisis. Can the fed print fast enough?
And, in a most interesting contrast, the MSM is utterly clueless that anything other than a normal economic recovery (albeit very gradual) is underway.
I don’t believe your assessment of the FED is correct.
The FED thinks it can “fix” things by its policies.
Bernanke is a moronic academic. He looked at what has transpired historically and concluded that if the FED had NOT raised the interest rates during the 1930’s, that the Depression would not have been nearly as severe and recovery would have been imminent, before the WAR economy.
He was wrong, as the past 5 years have borne out. But, he is an imbecilic intellectual that refuses to give up on his “vision” of what the FED can do.
With NYT staff and his alter ego, Paul Krugman & Co. egging him on, he refuses to stop.
He is sure, just like Krugman, that if we just keep goosing the money supply and having the FED take all the bad debts with more freshly printed $1000 Bills, that we can get back to “growth”, and Prosperity.
He is wrong. He has done far more damage than good, only delaying further failure, while looking for every economic indicator to say, “see, I told you so.” I’m sooooo smart.” “I outplayed the Market”.
Consequently, we are all dooooomed.
And in case the indicators don’t cooperate, financial engineering measures are put into play to change the readings.
‘This 180-degree turn tells me that the Fed is in a panic.’
Tells me Ben Bernake and the rest of these boomer economist’s are idiots. Way too over confident they can control the economy. This could end very badly
“Way too over confident they can control the economy.”
Do they really believe it, or do they just pretend to as part of the confidence scam?
“committee members are worried that prolonged easy money might get the economy addicted; that it will put a strain on the Fed’s own finances; and that it will encourage moral hazard.”
Well I`m not encouraged at all.
I don’t know. I can recall half a decade back when “moral hazard” was an off-limits term, along with “housing bubble” and “bailout.”
I see signs of progress with this statement.
http://www.youtube.com/watch?v=Abcc1ElvPOo
‘We are facing bubbles everywhere’
At 7:55 in.
Gotta admire someone who shoots from the hip like that!