Bernanke Sees A Recovery - How Would He Know? Hussman

Just in time for the reappointment of Bernanke.......I´ve put some updates to the original Hussman piece..... "Yes, We Can´t".....

Paßt hervorragend zur Wiederernennung von Bernanke.....Habe ein paar Updates zum ursprünglichen Hussman Artikel hinzugefügt...."Yes, We Can´t...."



Bernanke Sees A Recovery - How Would He Know? Hussman

“Our forecast is for moderate but positive growth going into next year. We think that by the spring, early next year, that as these credit problems resolve and, as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in other areas outside of housing, will take control and will help the economy recover to a more reasonable growth pace.”

Ben Bernanke, Federal Reserve Chairman

On Friday, investors took great cheer in an optimistic statement by Ben Bernanke suggesting good prospects for economic growth ahead.

We might be inclined to place a sliver of credibility in Chairman Bernanke's assessment – if not for the fact that the quote above wasn't from last week at all, but rather, hails back to November 8, 2007, just before the recent recession began.

> I have also found this ( see What? Did Bernanke Really Say This ? ) from Nov 2007..... UPDATE: OECD June 2007 Outlook via Mish...... Suddenly Bernanke is looking less "dumb"......

> Habe im "Blogarchiv" noch dieses Sahnestück ( siehe What? Did Bernanke Really Say This ? ) von Bernanke gefunden..... UPDATE: Verhlichen mit dem OECD June 2007 Outlook könnte man sogar behaupten das Bernanke unter den Einäugigen König ist......

You might recall that the S&P 500 was pushing 1500 at the time. The implosion of the global credit markets was still just a slight rumble

Solving economic problems, to our Fed Chairman, is as easy as throwing money out of helicopters. Not surprisingly, throwing money out of helicopters has been the basic core of his strategy during this crisis.

This does not involve complex thought about debt restructuring, moral hazard, incentives, equitable distribution of resources, or other factors.

All it requires is the three second tape playing in Bernanke's head - "We let the banks fail in the Great Depression, and look what happened." And then the tape repeats.

Never mind that the cause of the upheaval was not the failure of banks per se, but the disorganized Lehman-style failure of banks. The tape isn't long enough to encompass such nuances.

Ben Bernanke (like Tim Geithner and his predecessor Hank Paulson), shows no hesitation in diverting the real resources of the American public to defend and compensate the bondholders of mismanaged financial companies who made reckless loans and who should have (and equally important, could have) been expected to write down principal or swap debt for equity as an alternative to receivership.

This is not decisiveness. It is timidity and poor stewardship. Worse, the underlying problems are not healed - only band-aided temporarily by a flood of public money.

Unfortunately, the resources used in the recent bailout were not just free money tossed out of a helicopter. Only a partial-equilibrium economist thinks that way.

No, this was an allocation of trillions of dollars of real resources that could be spent improving access of poor families to health care, finding cures for life-changing diseases, providing better education, and reversing the crowding-out of productive private investment.

A public servant willing to act this carelessly with the resources entrusted to him, and so strongly in defense of fellow bankers, frankly does not deserve the job. Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end. We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership.

> Another Bernanke quote via Rosenberg

Then again, he told us in June 2008 that “although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.”

Nice call. Those supporting Mr. B's reappointment should take this forecast into consideration. It's not quite like Chamberlain's “peace in our time”, but it's not that far off either.

> I have never heard the usually calm Farrel ranting...... I like it......

> Habe den ansonsten besonnene Farrel bisher nicht mal im Ansatz so "explodieren hören"......

Dismantle Bernanke's 'Happy Conspiracy' ... now! Paul B. Farrell

(MarketWatch) -- At last week's annual Jackson Hole meeting of Fed execs, Boss Ben Bernanke's braggadocio about saving the world from another Great Depression had the feel of an egomaniacal dictator trying to cement his legacy in history.

Any good behaviorist would tell you Bernanke's got some dangerous biases isolating him from reality (remember two years ago when he was denying the meltdown). His brash claims and radical, secretive policies present a grave danger to American capitalism and democracy.

The Case Against Ben Bernanke Stephen Roach via Kedrosky

He argues three points about the pre-Lehman incarnation of Bernanke:

He was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles.

He was the intellectual champion of the “global saving glut” defence that exonerated the US from its bubble-prone tendencies and pinned the blame on surplus savers in Asia.

He is cut from the same market libertarian cloth that got the Fed into this mess.

Finally, and this is a broader point, Roach argues that it is too soon to grant Bernankeas having saved the day: “It would be the height of folly to reward Mr Bernanke for the recovery that never stuck. “

6 Bad Calls By Ben Bernanke Clusterstock Slideshow

Dean Baker via Tim

"Reappointing Ben Bernanke because of how he has dealt with the crisis is like giving another command to the captain of the Titanic, based on how effectively he got people into the life boats".

Rolfe Winkler

That said, I think Fed policy under Bernanke has been terrible. The Greenspan interventions he supported inflated the largest credit bubble in 80 years; the de-leveraging that needs to happen to correct the damage has been delayed indefinitely by Bernanke’s own interventions.

His supporters say he averted a second Great Depression. I disagree. He’s merely delayed it.

The liabilities of the financial and consumer sectors haven’t gone away, they’ve merely been absorbed by the public balance sheet. This is as much Hank Paulson’s and Tim Geithner’s fault as it is Bernanke’s. I’m not thrilled with their leadership either.

> I agree....

> Hätte es besser nicht sagen können......

When Monetizing 12% Percent Of GDP Isn´t Enough.......

Not quite an "Exit Strategy"....... This Cartoon on "Green Shoots" is spot on..... :-) As long as the pound & gilts are not crashing this will continue.....I´m pretty sure Bernanke is watching the market reaction very closely UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain .... Especially with the Fed running low on ammo..... Read A 300-year-old example of quantitative easing.... John Law, Alan Greenspan, Ben Bernanke... via The Mess That Greenspan Made as a reminder what can happen.......

Das ist wohl das Gegenteil der dank der tagtäglichen "Green Shoots Visionen" diskutierten Exitstrategie der Notenbanken......Die Lage muß wirklich KLASSE sein......Dieser Cartoon trifft den Nagel auf den Kopf...... Aber solange das Pfund & Gilts nicht crashen wird dieses in der Vergangenheit mehrmals massiv fehlgeschlagenes "Experiment" ( siehe A 300-year-old example of quantitative easing...... John Law, Alan Greenspan, Ben Bernanke... ) weitergehen...... Bernanke dürfte die Marktreaktion sehr genau verfolgen UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain ..... Das gilt umso mehr als die Programme der Fed auf "Reserve" ( siehe Running low on ammo via R.Winkler ) laufen......

The governor’s insatiable appetite for QE FT Alphaville

The Governor invited the Committee to vote on the proposition that:

Bank Rate should be maintained at 0.5%;

The Bank of England should finance a further £50 billion of asset purchases by the creation of central bank reserves, implying a total quantity of £175 billion of such asset purchases. The Bank should seek to complete the additional purchases within the next three months.

Six members of the Committee (Charles Bean, Paul Tucker, Kate Barker, Spencer Dale, Paul Fisher and Andrew Sentance) voted in favour of the proposition. Three members of the Committee (the Governor, Tim Besley and David Miles) voted against, preferring to increase the size of the asset purchase programme by £75 billion to a total of £200 billion.

Yep, Mervyn King, together with Besley and Miles wanted the rate of monetary stimulus increasing, not just extending at the current rate of £50bn-a-quarter. That was good for half a cent off sterling versus the dollar and a third of a cent v the euro on Wednesday morning. Gilts, of course, spiked higher.

Somebody stop me Alice Cook from the great blog UK Bubble

The extraordinary thing about UK monetary policy today is how close it is shadowing fiscal policy. This year, the Bank of England printing presses will produce roughly the same amount of new money as this year's fiscal deficit. Or to put it more bluntly, the private sector have, on a net basis, stopped lending money to the government.

The Casey Report

> The estimated issuance is based on this "optimitic" forecast.... Especially compared to the IMF, OECD, Bloomberg etc..... No surprise to see the BOE also out of touch....... Good to know that at least this leads to a "review" of the AAA rating.... Hallelujah! :-) After watching this & this chart it should be clear to anybody not working at an rating agency that an AAA is more or less history.....

> Die o.g. Emission der Gilts basierd auf der unten aufgeführten "wenig konservativen" BSP Prognose...... Vergleicht diese mal mit denen von IMF, OECD, Bloomberg..... Überflüssig zu erwähnen das die BOE ebenfalls jenseits aller Realität prognostiziert..... Immerhin wird "gedroht" das AAA Rating einer ernsthaften Prüfung zu unterziehen..... Was wären wir nur ohne die Ratingagenturen....... Spätestens nachdem man sich diesen & diesen Chart vor Augen führt dürfte jedem der nicht gerade für eine Ratingagentur arbeitet klar sein das ein AAA wohl auf Jahre hinaus nicht mehr als ein feuchter Traum von Brown & Co sein wird.....

FT Alphaville

The Chancellor has forecast that the economy will contract by 3.5% in 2009, followed by GDP growth of 1.25% in 2010 and 3.5% in 2011. He sees long-term trend growth at 2.75%

> While i´m still in the deflation camp for some time to come but i´m pretty sure down the road the central banks will once more cause massive inflation ( read Inflation: What the heck is it? from Mish). If you want to know the details why i think this will happen i would like to refer to the podcast with Chris Martenson. Couldn´t have said it better.....H/T Pension Pulse.... One of many reason why i´m a "Goldbug" ( regardless of the timing - H/T Zero Hedge). The best "insurance"( relatively speaking ) you can buy to protect yourself from the "wisdom" of King, Bernanke & Co.. :-)

> Obwohl ich die nächsten Jahre noch dem Deflationscamp zuzuordnen bin steht zu befürchten das die Notenbänker Ihr Ziel einer stark "erhöhten" Inflation nicht verfehlen wird. Wichtig zu wissen das ich mit der Definition von Mish ( siehe Inflation: What the heck is it?.) übereinstimme die mit den Veränderungen der Konsumentenpreisen nur sehr indirekt etwas zu tun haben. Für alle die die Logik hinter dieser Einschätzung erfahren möchten die verweise ich gerne auf den erstklassigen Podcast mit Chris Martenson. Kann es beser nicht formulieren..... Dank an Pension Pulse..... Einer von vielen Gründen warum ich ein Freund des Goldes bin ( und das unabhängig vom timing / Dank an Zero Hedge ) Auf Dauer gesehen die zumindest relativ beste Absicherung gegen die "Weisheit" von Bernanke, King & Co .....

Ben, You Have A Problem......

So far the QE hasn´t worked.....Must be due to all the "Green Shoots..... :-) Enjoy the following images...... I wish everybody a nice weekend.....

Bisher hat das sogenannte Quantitive Easing ( also der Kauf von u.a. Staatsanleihen durch die Notenpresse ) keine Wirkung gezeigt. Böse Zungen könnten gar behaupten das das Gegenteil der Fall ist. Könnte natürlich auch an den täglich bejubelten "Green Shoots" liegen ( Meine Meinung hierzu dürfte bekannt sein....) Ich kann eine gewisse Schadenfreude nicht verhehlen. War aber auch wirklich irrwitzig zu glauben das man mit schlappen 300 Mrd. bei der gleizeichtigen Lawine von Billionen an neuen Anleihen nachhaltig Einfluß nehmen kann. Da auf Ben aber Verlaß ist können wir uns jetzt schon mal gedanklich darauf vorbereiten das die nächste Ankündigung des QE um einiges größer ausfallen wird. Bleibt zu hoffen das die Ausländer diese einmalige Gelegenheit nutzen um sich Ihrer Papiere zu entledigen.... Lasse die nachfolgen Bilder und Charts mal ohne weiteren Kommentar stehen und wünsche ein schönes Wochenende.....

Karl Denninger

Contrary Investor

Gold’s Post-Bubble Performance In The UK, US And Japan.

I still think that we will see deflation in the US and other parts of the world but in the end i think the report from Dresdner is spot on....... Needless to say that i call myself a goldbug and have "little" faith in any fiat currency...... It´s probably helpful ( often overlooked ) to note that Gold in reaching new highs in almost every other world currency besides the $ ( see Goldchart in €, British Pound, Swiss Franc, Yen etc ) . Would be nice to see a goldchart vs the Icelandic Krona or the Forint......

Ich bin nach wie vor der Meinung das es in naher Zukunft eine Deflation in weiten Teilen der Welt geben wird. Im Endeffekt wird es aber zu dem im Dresdner Report geschilderten Ergebnis kommen...... Wohl überflüssig zu erwähnen das ich ein Goldbug bin und mein Misstrauen hinsichtlich Währungen nicht nur auf den $ ( obwohl dort extrem ausgeprägt ...) beschränkt ist.....Werde zumindest nicht mehr ganz so offen belächelt wie noch vor einigen Jahren..... PS: Bei der Qualität der heimischen Wirtschaftspresse ist es wenig überraschend das oftmals lediglich der Goldpreis in $ behandelt wird. Dabei wird wie nicht anders zu erwarten in schöner Regelmäßigkeit ausser Acht gelassen das Gold in den anderen Leitwährungen momentan nahe historischen Hochs notiert ( siehe Goldchart in €, British Pound, Swiss Franc, Yen etc ) . Habe leider keinen Goldchart vs islänsiche Krone oder ungarischen Forint auftreiben können......

Thanks again to Wall Street Follies

FT Alphaville

One way to combat the mess of a bubble popping is, as Dresdner puts it,“reducing confidence in the value of money” — i.e. creating inflation.

What the rise in the US and UK gold price tells us is that those two countries (assuming gold is in fact acting as an inflationary hedge here) are not shying away from their inflationary task.

They are, unlike Japan, really going for it.

Back to Dresdner:

Japan had no Japanese precedent to study. The last experience of deflation was buried so far in the past that anyone predicting a recurrence could be safely dismissed as a crank. The BoJ was dominated by inflation vigilantes who bitterly rued inflating the bubble and were determined at all costs to avoid a repeat. They remained far behind the curve and allowed growth in the monetary base to collapse. The contrast with the United States could not be clearer. Ben Bernanke is an authority on the historical experiences of deflation, and in his famous speech of 2002 laid out his playbook for all to see.

And to conclude:

No policy response to a post-bubble bust can ever be free of unintended consequences. The speed and scale of the current economic fiasco as good as ensures that the mistakes will be serious. The key question for investors is whether over the long haul their bias will be deflationary (too little, too late) or inflationary (too much, too fast). Given the different pressures that policymakers are working under, we find it hard to believe that the world as a whole will choose the Japanese path.

UPDATE: Prefect timing.....

If you still have some doubts make sure you read the latest (desperate) Fed effort via Naked Capitalism Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet

Sollte immer noch leichte Zweifel bestehen dem empfehle ich einen Blick auf den neuesten (verzweifelten) Versuch der Fed zu werfen Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet Via Naked Capitalism

No Limit Specified........

Lets hope they still can find enough buyers of their treasuries ( see Who Will Be Left To Buy US Treasuries...... & China Slashes Lending Rate to Support Slowing Economy ) to finance their daily bailout ( see Breakdown of the Bailout Rescue Efforts & Various Fed Lending Facilities ) with a yield close to 3% .... The bigger issue down the road could be that the "investors" are demanding bonds that are not $ denominated......Got Gold.....?

Bleibt zu hoffen das die USA es weiterhin schaffen genügend "smarte" Investoren finden ( siehe auch Who Will Be Left To Buy US Treasuries...... & China Slashes Lending Rate to Support Slowing Economy ) die bereit sind dies täglichen Bailouts ( siehe Breakdown of the Bailout Rescue Efforts & Various Fed Lending Facilities ) für 3% in US Währung zu finanzieren..... Die US sollten sich schon einmal entfernt darauf gefasst machen das es in naher Zukunft bald Investoren gibt die keine US Anleihen auf $ Basis mehr abnehmen wollen.......Got Gold...? UPDATE: Netter Bericht der FTD 700 Milliarden? Ha! Es sind 8500 Milliarden

WSJ

An even better graph is coming from the NYT

Eine noch besser Übersicht liefert die NYT

bigger / größer

Barry Ritholtz has much more and slightly different data ( but what are a few trillions here and there these days ) and the quote of the day......

Barry Ritholtz hat noch mehr und leicht abweicdhende Daten ( aber was sind heutztage einige Billionen unter Freunden ) zu diesem Thema und ein Zitat das wohl mehr als alles andere die Ausmaße der aktuellen Bailouts beschreibt......

The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).

Go figure: WWII was a relative bargain.

No wonder the CDS on US Debt are "moving"........ Via FT Alphaville

Kein Wunder das die Absicherung gegen einen möglichen US Bakrott langsam in "Bewegung" kommen..... Dank an FT Alphaville