Nice that Mr Bernake has finally caught up with what everyone here has been saying for a couple of years now. Too bad Mr Greenspan didn't think of these things.
Now the big question is, with costs increasing and getting passed onto consumers, commodities rising, the dollar tanking and martgage rates not responding, will he cut again and if so how much?
Bernanke may be starting to embrace reality, but most people don't see it yet. Here in the SF Bay Area people are happy and confident. The economy is robust. Skilled people can get a job within a few days. My friends in commercial property sales & contracting don't see a slowdown. If you don't read this blog it's hard to see a problem unless you drive out towards Stockton or Sacramento.
He is definitely waging the fight he thinks the Fed should have waged in 1929-33. But we are at a radically different point in our history and the effects of a severe recession now would be nothing like what occurred in the 1930s.
I really think he's both trying to hard to avoid the inevitable, because he over-estimates the severity, and being too sanguine about the costs in inflation and the long-term outlook for the dollar.
If I was running a big SWF fund filled with oil money, I would wait for the dollar to collapse and then buy assets here.
If I was running a big SWF fund filled with oil money, I would wait for the dollar to collapse and then buy assets here.
Why would you do that? You wouldn't save anything since you would be using dollars you currently own. Plus, you would have to compete with those who hold other currencies. The assets would be less expensive for holders of other currencies.
Iceberg dead-ahead (or we already hit it) and yet the stock market just keeps going back up. I need to start reading some other site, my mind just does not compute the BS of the stock market.
I don't think so crispy. I think what this says is .25 and that's about it. Although what they really should do is hold. That would provide the needed shock to the markets, and validate the inflation-fighter talk (and defend the dollar). But I'm sure that won't happen.
Indeed, the further increases in the prices of energy and other commodities in recent weeks, together with the latest data on consumer prices, suggest slightly greater upside risks to the projections of both overall and core inflation than we saw last month. Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored. Any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and could reduce the flexibility of the FOMC to counter shortfalls in growth in the future.
I think that the temptation to inflate away the mortgage mess (since loans are specified in nominal dollars) will be great, and the Fed will be under pressure to keep credit markets afloat by pumping dollars into the economy. Seems to me that inflation is the only bailout that can be done quickly and without any "vote" being had.
what prevents the SWF to convert these Dollars now, further tanking your economie and then buying you up???
I guess it's possible they could do this, but the action of doing this would cause the dollar to drop, so they wouldn't get as much of the other currency. The trick to making this work is to quietly be the first out of USD. Don't let the other SWF's know what you're doing until it's done.
Plus, the SWF's would have to change their policies of pegging to the USD, which would cause their currency to go up in value.
We're not dealing with a Plunge Protection Team. We're dealing with a Plunge Protection WORLD.
Logic cannot outweigh the kind of international resources that are being employed to save our economy.
I'm done fighting it. There is something going on behind the scenes that necessitates throwing out everything we've learned about economics. No one would invest billions of dollars in MBI/Ambac if they weren't relatively certain they would not fail. ESPECIALLY with Warren Buffet's immense influence and power waiting in the wings to take over for them.
I'm intellectually still a bear, but intellect is irrelevant when it turns out "the Great Oz" really IS "the Great Oz".
every day another shock to my system.
dry heaves are getting worse. we are in for anarchy. Did anyone read the Great Reckoning by Lord Wees Mogg and Dale Anderson, a book back in early nineties. I did and you should pick it up. It will make you even more scred and sick of what is to come. I am so surprised we do not have rioting yet. Bless us all in the future cause it sure looks grim. welcome to Rome.
I can just not get my head around all the people who happily bid the market up.But they are (as Hersch has said about Nixon on his last day as POTUS)"strangely indifferent" to the economic chaos around them.
My only rational answer is that they are
pod-people
"I can just not get my head around all the people who happily bid the market up."
Neither could I. The only answer is that there's something no one is factoring in, which is the unified will of industrialized nations to prevent the failure of our economy at any cost. There has to be an unknown variable that's fouling up every seemingly logical outcome.
It's been going on for 30 years; only one side has been fighting it. That will change.
The big matchup: money and power versus the mass of little guys whose cooperation is needed to make money and power actually meaningful. If enough of them actually wake up -- and having your supposed financial security vanish will do that -- the more the odds favor the little guys, and change. Which is probably why Bernanke and friends are soiling their underwear these days.
Lots of money are on the sideline because of all these financial frauds and shenanigans. Funny money is driving the market. The big trend is the continuing unwinding of debts, so less reserves will be available for financing new debts, a significant drag on the economy dependent on assets and credits. The Feds will try their best, flooding the market with credits and newly printed money, to limit the damages. We will have to see how all of this unfolds. But the risk of inflation is significantly higher today.
Recession??!! What a nasty word. Not to be used, ever. The operative words are "decelerate" and "subdued" and "slowed" and "deteriorate." Nice words. Soothing words. Gentle words.
I think that the temptation to inflate away the mortgage mess (since loans are specified in nominal dollars) will be great, and the Fed will be under pressure to keep credit markets afloat by pumping dollars into the economy. Seems to me that inflation is the only bailout that can be done quickly and without any "vote" being had.
How many salaries are keeping up with the inflation we're having and about to have? How many fixed income seniors are going to struggle? Why do innocent people have to pay for big finance crumbling?
Putin is talking about switching his oil sales from the dollar to the Russian currency. All we need is for one other big oil producer to do that and our economic future is that much more grim. This really stinks, not so much for what people have so far experienced, but for what they are about to experience in terms of wealth reduction.
My theory is people will wake up in April/May when gas prices hit $3.75-$4.00. Most people have no idea what is going on behind the scenes, and most people don't care.
It is going to take a large shock to wake people up, but when they do it is anyone's guess as to who/what they come after. This election should be fun.
Bernanke is selling "growth recession" and Mr. Market is lapping it up.
The problem is that economic fundamentals and the credit situation will continue to deteriorate as the market rises. The OEX put/call ratio is suggesting that "smart" money is expecting a bottom soon. After so many years of Greenspan, Mr. Market is pricing-in a Bernanke Put.
When Mr. Market realizes that we're in for a 'real' and prolonged recession, there'll be another Wile E. Coyote moment and we'll have another big leg down.
"How many salaries are keeping up with the inflation we're having and about to have? How many fixed income seniors are going to struggle? Why do innocent people have to pay for big finance crumbling?"
Yep, that's who's supposed to pay the bill for bailing the banks out of the cesspit that they dug, filled, and then fell into.
Why do innocent people have to pay? Because the guilty run the game.
Close friend of mine works for a major SWF. Don't underestimate their ruthlessness. By 2010, they will own large parts of our economy. And they are waiting to make these investments. They are waiting for regulatory changes though; business moves much faster in the parts of the world they invest in and there is no need to wait for the regulatory process. So watch their quiet support for a liberatarian in the White House....Arizona McCain, maybe?
By the time the Fed finally accepts that "inflation expectations" have become unmoored, it will be way too late. By that time oil will be 150+ and gold into 4 digits. This is the brilliance of bogus CPI numbers.
"What inflation problem? I don't see any inflation problem. Look- the figures say so."
That is the prime reason the dollar is being dumped again by the truckload. The Fed has no credibility.
Perspective from California. More than likely soon to filter into rest of US.
General rant below from non wealthy average American.
Gas prices are too high with gas companies making too much profit in a non free market situation. This equals high pressure on he average American who is paying $50.00 for half a tank of gas. Also will decrease big car sales or over extend people who won't give up their gas hogs. This also puts pressure on airlines fuel costs.
US dollar down so far against world currencies that traveling is almost out of the question except if you have friends overseas.
Energy and utility prices are going up wages staying the same.
Food quality going down except in highly expensive stores like Whole Foods. (The fattening and sickening of America)
Fed lowers interest rates but loan rates are still high cc rates are still high and loans are harder to get. No trickle down to consumer.
Fed bails out financial institutions but no relief for individual home owner. Government refuses to allow bankruptcy judges to lower interest rates on existing high rate loans. Once again no trickle down to average American. Problem caused by poor lending policies of financial institutions. Average consumers once again having to pay the price for institutions taking advantage of real estate bubble by offering irresponsible loans.
Highly qualified legal immigrants from European countries with job skills and who speak English cannot find their way into the job market as their jobs are taken by cheaper illegal labor with low job skills who don't speak English. These legal immigrants are finding it difficult if not impossible to get into the country due to tightened legal immigration policies.
Leads to lower quality of life. Food and service industries.
Cost of health care so high its obscene. Inflated prices in emergency rooms crushing people with high deductible insurance or no insurance. Meanwhile illegals jam the hospitals for free care forcing prices higher for responsible citizens.
Southwestern US suffers from Mexicanization of whole communities destroying anglo European way of life, increasing gang presence while cops sit around with their thumbs up their asses. Whole sections of communities fall into 'bad neighborhood qualification' decreasing real estate value.
Legal system biased in favor of deadbeats. Deadbeat renters string out court proceedings forcing landlords into foreclosure or great expense with increased eviction rates. Attorneys have increased work.
Underground of individuals becoming proficient at law suits and court proceedings take advantage of system by lying their way through months of court hearings. Greed becoming a main motivation of citizenry.
Police and judges finding it harder to discern truth from lies as lying becomes an art of the citizenry. People who tell the truth seem more like they are lying than the lier.
Summary,
Average American leading a responsible life being squeezed and driven downward in class. Deadbeats and greed mongers on the rise taking advantage of system. Rich and wealthy individuals pressured lightly if at all. Their coffers fall slightly but they find way to squeeze more from the rest. Large corps have all the money pay high wages have high expense accounts. Small business suffer high cost of rent and utilities, gas prices and superfluous government fees and regulations. Average working American independent hanging on by a thread as food, utility, gas and service prices increase around them.
Person to person friendly quotient down in US. Assholes on the rise. Successful greed revered.
Nice that Mr Bernake has finally caught up with what everyone here has been saying for a couple of years now. Too bad Mr Greenspan didn't think of these things.
Now the big question is, with costs increasing and getting passed onto consumers, commodities rising, the dollar tanking and martgage rates not responding, will he cut again and if so how much?
Bernanke may be starting to embrace reality, but most people don't see it yet. Here in the SF Bay Area people are happy and confident. The economy is robust. Skilled people can get a job within a few days. My friends in commercial property sales & contracting don't see a slowdown. If you don't read this blog it's hard to see a problem unless you drive out towards Stockton or Sacramento.
Bernanke seems to have a keen grasp of the obvious.
"distinctly less favorable ..."
Sounds like Yoda Greenspan ... the farce is strong in Ben.
Short:
" we opened a economic Pandoras Box in the assumption just profits jump out.."
side note:
" we are working hard to erase the fingerprints on the lid.."
He is definitely waging the fight he thinks the Fed should have waged in 1929-33. But we are at a radically different point in our history and the effects of a severe recession now would be nothing like what occurred in the 1930s.
I really think he's both trying to hard to avoid the inevitable, because he over-estimates the severity, and being too sanguine about the costs in inflation and the long-term outlook for the dollar.
If I was running a big SWF fund filled with oil money, I would wait for the dollar to collapse and then buy assets here.
Hmm, hmm . . . when have the data I see, you do. . . crap your pants, you will. Hmm, Hmm.
"investment in equipment and software will be subdued during the first half of 2008"
Another recovery in 2nd half of 08 bottom caller?
If I was running a big SWF fund filled with oil money, I would wait for the dollar to collapse and then buy assets here.
Why would you do that? You wouldn't save anything since you would be using dollars you currently own. Plus, you would have to compete with those who hold other currencies. The assets would be less expensive for holders of other currencies.
"I would wait for the dollar to collapse"
Uh, it already has...
BoB: guess thats what the chinese will do.... oh the irony....
New Bernanke prediction: The markets will crash and the US will go into a great depression in 1929.
All I got out of what Bernandke said was to expect furthur rate cuts.
ZIRP redux
charlie:
what prevents the SWF to convert these Dollars now, further tanking your economie and then buying you up???
HOLY F***
How can he justify cutting rates more!?
How is that going to help growth or inflation!?
****!!!
Iceberg dead-ahead (or we already hit it) and yet the stock market just keeps going back up. I need to start reading some other site, my mind just does not compute the BS of the stock market.
Class war a'-comin'! w00t!
ZIRP redux
I don't think so crispy. I think what this says is .25 and that's about it. Although what they really should do is hold. That would provide the needed shock to the markets, and validate the inflation-fighter talk (and defend the dollar). But I'm sure that won't happen.
orders to Minitrue: strike "recession", find suitable substitution.
... nonresidential construction is likely to decelerate sharply in coming quarters ....
Steep, deep and long, baby!
Bernanke is just making sure Obama becomes president.
Big-Ticket Orders Down 5.3 Percent- AP
Fannie Mae Posts Nearly $3.6B Loss in 4Q- AP
New Home Sales Fell 2.8 Percent in January- Reuters
Oil Briefly Tops $102 a Barrel- AP
Bernanke: Economic Situation Distinctly Less Favorable
Sounds like a huge rally to me!
I guess all the smart money already split all that is left is the eternally optomistic.
From briefing.com:
OFHEO to remove portfolio caps on Fannie, Freddie March 1- DJ
and the market rallies on the news.
Indeed, the further increases in the prices of energy and other commodities in recent weeks, together with the latest data on consumer prices, suggest slightly greater upside risks to the projections of both overall and core inflation than we saw last month. Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored. Any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and could reduce the flexibility of the FOMC to counter shortfalls in growth in the future.
I think that the temptation to inflate away the mortgage mess (since loans are specified in nominal dollars) will be great, and the Fed will be under pressure to keep credit markets afloat by pumping dollars into the economy. Seems to me that inflation is the only bailout that can be done quickly and without any "vote" being had.
"orders to Minitrue: strike "recession", find suitable substitution."
How about 'soft patch'? As in: we hit a soft patch when the earth beneath our feet opened up and we tumbled to the depths of Hell.
OT:
what kind of Effe will be turn up this time and are there any fingers left???
YouTube - Nixon Ends Bretton Woods International Monetary System
and do you think Intenational Investors will swallow it ???
what prevents the SWF to convert these Dollars now, further tanking your economie and then buying you up???
I guess it's possible they could do this, but the action of doing this would cause the dollar to drop, so they wouldn't get as much of the other currency. The trick to making this work is to quietly be the first out of USD. Don't let the other SWF's know what you're doing until it's done.
Plus, the SWF's would have to change their policies of pegging to the USD, which would cause their currency to go up in value.
charlie:
fair enough , but isnt buying time playing to the SWF??
And do they forgot see above??
Its all about trust isnt it??
CR - Do you keep track of T-bill auctions? Just wondering how yesterday's news of increasing inflation and today's hint of a rate cut will play out.
What are the odds a SWF is angling to buy the IMF gold in one big purchase?
w:
high, imo they will line up for it ( if they are smart)...
Glad to hear that Bernake will be proposing regulations in the future to deal with the problems of the past.
Also, GSEs will be raising conforming limits to spread mortgage risk onto the government's books.
Sounds like everything is just peachy.
No wonder the stock market is up.
People in the stock market are clearly insane.
Cheers,
orders to Minitrue: balloons must have party colors
Ken Z -
We're not dealing with a Plunge Protection Team. We're dealing with a Plunge Protection WORLD.
Logic cannot outweigh the kind of international resources that are being employed to save our economy.
I'm done fighting it. There is something going on behind the scenes that necessitates throwing out everything we've learned about economics. No one would invest billions of dollars in MBI/Ambac if they weren't relatively certain they would not fail. ESPECIALLY with Warren Buffet's immense influence and power waiting in the wings to take over for them.
I'm intellectually still a bear, but intellect is irrelevant when it turns out "the Great Oz" really IS "the Great Oz".
There is something going on behind the scenes that necessitates throwing out everything we've learned about economics.
See you on the barricades!
every day another shock to my system.
dry heaves are getting worse. we are in for anarchy. Did anyone read the Great Reckoning by Lord Wees Mogg and Dale Anderson, a book back in early nineties. I did and you should pick it up. It will make you even more scred and sick of what is to come. I am so surprised we do not have rioting yet. Bless us all in the future cause it sure looks grim. welcome to Rome.
I can just not get my head around all the people who happily bid the market up.But they are (as Hersch has said about Nixon on his last day as POTUS)"strangely indifferent" to the economic chaos around them.
My only rational answer is that they are
pod-people
"I can just not get my head around all the people who happily bid the market up."
Neither could I. The only answer is that there's something no one is factoring in, which is the unified will of industrialized nations to prevent the failure of our economy at any cost. There has to be an unknown variable that's fouling up every seemingly logical outcome.
No, the market is not insane. If the rates go down, the dollar tanks, so the market goes up.
Price it in Euros and take a look again.
"Class war a'-comin'! w00t!"
It's been going on for 30 years; only one side has been fighting it. That will change.
The big matchup: money and power versus the mass of little guys whose cooperation is needed to make money and power actually meaningful. If enough of them actually wake up -- and having your supposed financial security vanish will do that -- the more the odds favor the little guys, and change. Which is probably why Bernanke and friends are soiling their underwear these days.
Lots of money are on the sideline because of all these financial frauds and shenanigans. Funny money is driving the market. The big trend is the continuing unwinding of debts, so less reserves will be available for financing new debts, a significant drag on the economy dependent on assets and credits. The Feds will try their best, flooding the market with credits and newly printed money, to limit the damages. We will have to see how all of this unfolds. But the risk of inflation is significantly higher today.
And now all his prior statements about the economy seem "distinctly less" accurate. Mealy mouth award for 2008.
Tanta
Well I must admit that your answer sounds better then mine. I would add our creditors also.
Assuming you are correct
then.... how can we get them to pay for the bail-out?
If we outsourced an FHA call center I expect there are enough Indian Chartered Accountants to individually review each application for a write-down
But we are at a radically different point in our history and the effects of a severe recession now would be nothing like what occurred in the 1930s.
Business tip: Tents and portable toilets. Get in, ground floor opportunity.
Outdoor plumbing. It's going to be all the rage.
Recession??!! What a nasty word. Not to be used, ever. The operative words are "decelerate" and "subdued" and "slowed" and "deteriorate." Nice words. Soothing words. Gentle words.
I think that the temptation to inflate away the mortgage mess (since loans are specified in nominal dollars) will be great, and the Fed will be under pressure to keep credit markets afloat by pumping dollars into the economy. Seems to me that inflation is the only bailout that can be done quickly and without any "vote" being had.
How many salaries are keeping up with the inflation we're having and about to have? How many fixed income seniors are going to struggle? Why do innocent people have to pay for big finance crumbling?
Putin is talking about switching his oil sales from the dollar to the Russian currency. All we need is for one other big oil producer to do that and our economic future is that much more grim. This really stinks, not so much for what people have so far experienced, but for what they are about to experience in terms of wealth reduction.
My theory is people will wake up in April/May when gas prices hit $3.75-$4.00. Most people have no idea what is going on behind the scenes, and most people don't care.
It is going to take a large shock to wake people up, but when they do it is anyone's guess as to who/what they come after. This election should be fun.
Bernanke is selling "growth recession" and Mr. Market is lapping it up.
The problem is that economic fundamentals and the credit situation will continue to deteriorate as the market rises. The OEX put/call ratio is suggesting that "smart" money is expecting a bottom soon. After so many years of Greenspan, Mr. Market is pricing-in a Bernanke Put.
When Mr. Market realizes that we're in for a 'real' and prolonged recession, there'll be another Wile E. Coyote moment and we'll have another big leg down.
That's Conjure's read, and I agree with him.
"How many salaries are keeping up with the inflation we're having and about to have? How many fixed income seniors are going to struggle? Why do innocent people have to pay for big finance crumbling?"
Yep, that's who's supposed to pay the bill for bailing the banks out of the cesspit that they dug, filled, and then fell into.
Why do innocent people have to pay? Because the guilty run the game.
Close friend of mine works for a major SWF. Don't underestimate their ruthlessness. By 2010, they will own large parts of our economy. And they are waiting to make these investments. They are waiting for regulatory changes though; business moves much faster in the parts of the world they invest in and there is no need to wait for the regulatory process. So watch their quiet support for a liberatarian in the White House....Arizona McCain, maybe?
"distinctly less favorable"
He just can't say "much worse" I guess.... The spinning is pathetic.
i wanted to link to a BBC article about the weak dollar.. like this..
BBC NEWS | Business | Dollar falls to record euro low
2 hours ago there was a nice part where they said even jay -Z is flashing Euro in his new video instaed of Dollars....
now it is gone... man are they quick...
By the time the Fed finally accepts that "inflation expectations" have become unmoored, it will be way too late. By that time oil will be 150+ and gold into 4 digits. This is the brilliance of bogus CPI numbers.
"What inflation problem? I don't see any inflation problem. Look- the figures say so."
That is the prime reason the dollar is being dumped again by the truckload. The Fed has no credibility.
"What inflation problem? I don't see any inflation problem. Look- the figures say so."
Every time I hear this crap from pundits on financial networks I want to rip my hair out. Do any of these people have to buy groceries or gas?
Perspective from California. More than likely soon to filter into rest of US.
General rant below from non wealthy average American.
Gas prices are too high with gas companies making too much profit in a non free market situation. This equals high pressure on he average American who is paying $50.00 for half a tank of gas. Also will decrease big car sales or over extend people who won't give up their gas hogs. This also puts pressure on airlines fuel costs.
US dollar down so far against world currencies that traveling is almost out of the question except if you have friends overseas.
Energy and utility prices are going up wages staying the same.
Food quality going down except in highly expensive stores like Whole Foods. (The fattening and sickening of America)
Fed lowers interest rates but loan rates are still high cc rates are still high and loans are harder to get. No trickle down to consumer.
Fed bails out financial institutions but no relief for individual home owner. Government refuses to allow bankruptcy judges to lower interest rates on existing high rate loans. Once again no trickle down to average American. Problem caused by poor lending policies of financial institutions. Average consumers once again having to pay the price for institutions taking advantage of real estate bubble by offering irresponsible loans.
Highly qualified legal immigrants from European countries with job skills and who speak English cannot find their way into the job market as their jobs are taken by cheaper illegal labor with low job skills who don't speak English. These legal immigrants are finding it difficult if not impossible to get into the country due to tightened legal immigration policies.
Leads to lower quality of life. Food and service industries.
Cost of health care so high its obscene. Inflated prices in emergency rooms crushing people with high deductible insurance or no insurance. Meanwhile illegals jam the hospitals for free care forcing prices higher for responsible citizens.
Southwestern US suffers from Mexicanization of whole communities destroying anglo European way of life, increasing gang presence while cops sit around with their thumbs up their asses. Whole sections of communities fall into 'bad neighborhood qualification' decreasing real estate value.
Legal system biased in favor of deadbeats. Deadbeat renters string out court proceedings forcing landlords into foreclosure or great expense with increased eviction rates. Attorneys have increased work.
Underground of individuals becoming proficient at law suits and court proceedings take advantage of system by lying their way through months of court hearings. Greed becoming a main motivation of citizenry.
Police and judges finding it harder to discern truth from lies as lying becomes an art of the citizenry. People who tell the truth seem more like they are lying than the lier.
Summary,
Average American leading a responsible life being squeezed and driven downward in class. Deadbeats and greed mongers on the rise taking advantage of system. Rich and wealthy individuals pressured lightly if at all. Their coffers fall slightly but they find way to squeeze more from the rest. Large corps have all the money pay high wages have high expense accounts. Small business suffer high cost of rent and utilities, gas prices and superfluous government fees and regulations. Average working American independent hanging on by a thread as food, utility, gas and service prices increase around them.
Person to person friendly quotient down in US. Assholes on the rise. Successful greed revered.