Bernanke says stemming bank runs may be difficult, does anyone care?

When I read Ben Bernanke statement today, I was floored by this statement:

He reiterated a worry that he and other top policymakers have expressed about the continued vulnerability of money market funds.
"The risk of runs ... remains a concern, particularly since some of the tools that policymakers employed to stem the runs during the crisis are no longer available," he said.


Wow, did I just hear a nuclear bomb go off?   Risk of bank runs is still a concern?   But Ben Bernanke is the worlds hero, he saved the world from financial Armageddon.
A hero is someone who changes the world for the better, doesn't do delay tactics and the world still faces the same issues 4 years later!
But the world yawns, and all is good.   What I am unsure of is what does this signal from Bernanke?  Does this mean in the next financial market downturn, his hands are tied?

The argument among bloggers is about The fed's loose monetary policy, can it be kept up forever without consequence?   The thought is the rise of natural resource prices are to blame for loose money games.  And that Ben cannot keep up the same level of monetary loose policies for fear of sparking more civil unrest.

We are seeing in Europe pressure of a classic Deflationary collapse, and in America and China, inflationary forces at work.  The cause is debatable.

What is reality is immaterial.  What matters is what the Federal Reserve believes is reality, and how the behavior may change in the year to come.  If Ben believes that his monetary policies cannot be pursued to the same extent as in 2008, then we will have a change in financial markets, its only a matter of time.

Bernanke Villain or Hero

I read a blog post or two, and saw picture of Ben Bernanke pictured as Hero.  Article goes on to say how there is much debate about Bernanke's actions, and what this will lead to.

For those not following Ben Bernanke, he is the chairman of the most powerful banking institution of the world, the private bank named Federal Reserve Bank.  This bank is not part of the US government, but does act in concert with US government co-operation.

Mr. Bernanke took extraordinary measures to prevent an all out deflationary collapse back in 2008.  Since 2009, normal accounting measures Mark to Market have been suspended as they are to this day.  Under the new order of super low fixed interest rates, corporate accounting changed to mark to fantasy valuations, the corporate earnings have never been better.

I actually don't have a problem with the dramatic steps taken in the time of pressure.  Some decisions may have been not the best, but overall at the time, the net result cannot be disputed by anyone.  The collapse feared did not materialize.

What I have a problem with is there is zero plan to return to normal accounting measured in place since the Great Depression.  Further, I have an issue with lack of any prosecutions at all for the trillions in fraudulent mortgage operations that have been clearly documented publicly.   Also I have issue that the US government has not had a budget since George W Bush and spends money as it sees fit, without any constraint.

These acts are a perversion that will lead to consequences.  Lets not forget WHY 2008 imploded.  Basically the Federal Reserve Bank allowed fraudulent asset bubbles to occur.  Ben Bernanke himself testified numerous times that the economy was rock solid.  He was either ignorant or lying.  And now he takes the credit for being right after all the drastic measures taken and saving the world?  The entire 2008 problem was partly to blame on him and his predecessor.

But I digress.  What I realized is I actually DON'T have a problem with Quantitative easing per say.   That is the Federal Reserve Bank purchasing long term US debt (30 year bonds) in the billions to artificially lower interest rates.   I used to until today.  Why the change of heart?

I realized, that my argument in the past of "what is money" and "gold is not money" align with what Bernanke is doing.  In effect, if 30 year bond rates go to zero interest rates, he is creating the scenario that cash can be printed with no interest attached.  This is in line with my thoughts of what currency should be.  Money should be created without a "bank tax".  Each US dollar you have in your hand, or in a bank, has a tiny amount of interest that is going to someone, somewhere.  Granted, with fractional reserve lending, the rate is net lower for each dollar created, but its there.

What will make this all fall apart isn't QE.  Its enforcing law, and treating currency (QE or not) with respect. Currency can't be created with zero limitations into thin air.  Money must be created with true value of work behind it.    For example, if you photo-copy money and spend it, the fraud is you did not contribute to society to EARN the cash.  In effect, your "promise note of work" is fraudulent.

If currency is printed and doled out without work behind it, the new dollars are in fact fraudulent, and will devalue faith in the USD over time.

In closing, the consequences of actions taken by Bernanke and others will unfortunately lead to hardships for all of us, as there is nothing for free in life.  The fraud running rampant will cause an effect.   Bernanke needs to take not just the good, but the bad that he encourages through the Fed.   And in 2013, when I think things will start to get hairy, I don't think you will be seeing Hero magazines of Ben.

My friend John says, when the market hits a top or bottom, no bell rings.  Today Bernanke is claimed to be  a hero while at the same time, market volatility index the "VIX" is at a 4+ year low, with stocks at a 4-year high (SPX 1400).   VIXY may be a buy here at $39.48.  That is as close as a bell as I can hear.

Bloomberg takes on Ben Bernanke...

Bloomberg to its credit fought through the courts to uncover the secret 7.7 trillion dollar in secret government loans to banks.  to put into perspective, since the history of the US, the total debt created to date is about 14 trillion.  And it took about 7 to be created in the last 10 years.

Mr. Bernanke doesn't know when to keep his mount shut, and lucky for us, Bloomberg is standing its ground.  I actually have a tiny bit of optimism here.  It's very tiny, but I hope Bloomberg rides this story to it's full conclusion.

See Bloomberg article "Bloomberg News Responds to Bernanke Criticism".
I covered this in post "Eliot Spitzer speaks out about USA Financial Games" and "Daily Show on Free Money"

Go Bloomberg!

Market thoughts month to year ahead.

Back in June 24th, I posted that there maybe a Major Rally ahead. That did come true. But the markets rallied WAY to far to fast, as I posted on July 1st. I had hoped for a nice upswing in July, until the bear market return mid August, that's when I started to post much less on this blog.

Once August came, a freaking crazy downswing ensued, SPX 1350 down to about 1100 in a couple of weeks. Woosh, all gains for the year and beyond gone, taking the markets to levels back to 1998. How's that for a nice loss 13 years of profits...AGAIN.

I do have some hope for the next 1 month into possibly next year. For example, Europe is banning short selling of some banks in France, Spain, Italy, and Belgium. I am quite positive the Federal reserve bank is up to illegal (either explicitly or Bill Clinton level splitting hairs of what does the word "is" mean.) Plus, the market has not been this oversold since 9-11-01! These items are sowing a market to firm up, but also setting the stage for the final market swan dive. How these governments get away interfering with private business on a whim is frankly outrageous, and stupid.

People may look at the recent market fall as a possible 2008 repeat. I seriously doubt it. Back then pretty much the world sat on their tuckus and just followed America without serious questioning. When the stuff hit the fan in Sept 2008, the rest of the world plunged with America, completely blindsides by the wall street games.

This time around, the governments are fully and painfully aware of the house of cards they have built. Instead of facing the core problems the financial world faces and fixing them, the governments decided to do more pretending. First and foremost abolishing Great Depression era accounting practices of valuing assets using "mark to market" accounting. To date, the fantasy accounting is still used to value companies. If things were normal, accounting would be too. It is not.

Then we have good old man of the year 2009, Ben Bernanke, who has made it his life's mission to work in the exact seat he is in now, and to play out his doctorate paper, that he, a single man, can prevent the Great Depression from happening. That he alone, has the secret sauce, and the rest of the world is idiots. His belief system is Keynesian ecomonics, and I for one, believe it is dead wrong.

What he is doing is adding to extend and pretend. All that is truly being done between government debt, Bernanke Quantitative Easing (raw money printing), and fictional accounting is to double down on the problems of 2008 making them exponentially worse.

What Mr. Bernanke is missing is, this is not 1929-1939. Technology will expose the fraudulent system he supports. The banking system is very sick at it's core, and it doesn't know it. See my post on how technology will undo the existing system.

For now, the reality is, the governments will do one last , heroic feat to thwart the market implosion. The only question is when. Will the markets hit much lower lows THEN the heroics begin? Or has the markets seen a bottom to build from for months or possibly a year to come?

I am betting on bottom is in, or near in for months, and re-evaluate if I think we may make it into February 2012 or so.

Whatever the timeline, this is the final act that I have been concerned over since August 2006. For general investing, I still maintain a mixture of cash and resource investments, as posted will be most prudent.

I post this now, to allow me to refer back to these thoughts in a few months, or maybe 9 months from now. In the near term, I still own natural resources, sold all GLD, DGP, but I kept my gold miners as a gamble.

I await Gary of the smart money tracker to inform me of when it is safe to enter GLD and the next play. The stocks I have now are my "long" from here, I have completely different stocks than Gary, but in general, a rising market rises all stocks, and from that perspective its the same play.

If we break the lows set on Monday, when I posted DONT PANIC!, It may be then time to panic. Lets hope the market forms a bottom here and now, until the next swan dive, hopefully in 2012.

Austrian Economic view

Great videos I ran across when looking at the people who made the cleaver video about Ben Bernanke/Keysian economics vs Austrian. If you have seen it, SKIP the first video below.

If you haven't seen it, watch it, it will help keep attention to the economists interviews.

All videos are good, they do a good job trying to keep a dry topic interesting.

Keynsian view, GREAT video to understand the "religion" of Ben Bernanke

Linking Bernanke to Food Riots

America won't care until we see same percentage price hikes in consumer goods.

2011 – THE YEAR OF CATCH-22

I strongly recommend a blog article I found that does a pretty darn good job summarizing the world financial mess the US is in. I am adding a link in my new readers area to this summary. I also added The Burning Platform blog on my list of blogs on the right.

The title is "2011 – THE YEAR OF CATCH-22" by blog The Burning Platform

Below I quoted a couple of highlights. Please click on this link to read it in it entirely.

Quantitative Easing Catch 22

Ben Bernanke’s quantitative easing (dropping dollars from helicopters) is riddled with Catch-22 implications. Bernanke revealed his plan in his 2002 speech about deflation:

“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

The expectations of most when reading Ben’s words were that his helicopters would drop the dollars across America. What he has done is load up his helicopters with trillions of dollars and circled above Wall Street for two years continuously dropping his load. Bernanke’s quantitative easing, which will triple the Fed’s balance sheet by June of 2011, began in earnest in early 2009. The price for a gallon on gasoline was $1.62. Today, it is $3.05, an 88% increase in two years. Gold was $814 an ounce. Today, it is $1,421 an ounce, a 61% increase in two years. In the last year, the prices for copper, silver, cotton, wheat, corn, coffee and other commodities have risen in price by 30% to 90%

Quantitative easing has been sold to the public as a way to avoid the terrible ravages of deflation. The fact is there are less jobs, lower wages, lower home prices, zero returns on bank deposits, higher fuel costs, higher food costs, higher real estate taxes, higher medical insurance premiums and huge jaw dropping bonuses for the bankers on Wall Street. Somehow the government has spun this toxic mix into a CPI which has resulted in fixed income senior citizens getting no increases in their pitiful Social Security payments for two years. You can judge where Ben’s Helicopters have dropped the $2 trillion. Quantitative easing has benefited only Wall Street bankers and the 1% wealthiest Americans. The $1.4 trillion of toxic mortgage backed securities on The Fed’s balance sheet are worth less than $700 billion. How will they unload this toxic waste? The Treasuries they have bought drop in value as interest rates rise. Quantitative easing’s Catch 22 is that it can never be unwound without destroying the Fed and the US economy.

The blog entry does read kinda like a rant, but the situation is complex, and does a good job of trying to touch base on the multiple moving areas.

Bernanke's War

I try to listen to the pod casts from the Financial Sense News Hour, by Jim Puplava when I can.

This week the episode titled Bernanke's War is a must listen for those paying attention to the monetization of the economy by the Federal Reserve bank and US government.

While I find the pod cast on target about Mr. Bernanke, I do warn listeners that both people presenting the episode are gold bugs. Meaning gold is the real money or safe storage of wealth. So while I listen and learn from such podcasts, please be aware everyone has something to prove and sell on.

I am a gold bug, but probably not for the same reasons as most. China and India are going to continue to consume gold as they increase in wealth. This podcast does back this view, but mixes that gold will go up due to money printing. I find this view slightly flawed.

But the important part isn't about gold. The important part is knowing the man, the myth, the legend, Mr. Bernanke.

Enjoy.

Ben Bernanke is wrong at every turn

The Federal Reserve Bank, a private institution, is lead by the Federal Reserve Board of Governors. The leader of the board is Ben Bernanke.

He follows in the footsteps of his predecessor, Allan Greenspan.

Mr. Bernanke's opinion and approach to finances was well documented by himself, in a college thesis paper. In that paper he described how the Federal Reserve could have minimized the Great Depression through additional actions they failed to take.

What we have been witsnessing since 2002 is Mr. Bernanke following his own playbook he started when he was in college. The problem I have with this approach is, he somehow knows better than the rest of the world, and has a "Secret sauce" to save the world economy.

Mish has a post that is exceptional reading (click). Mish starts with looking at Mr. Bernanke's own words issued in 2002 on how he would minimize the deflationary forces.

I do take one noteable issue with Mish's generalist view he presents of deflation will win over inflation. The US is tied to China like it or not. China's economy, although full of asset bubbles, is generally acknowledged to be growing. And assuming China will continue to grow over the next decade, it will surpass the US as the economic powerhouse.

What is perplexing is Mish acknowledges this as a possible outcome, in this post here. So I am at a loss on how he presents a world where deflation across the board "wins". So while I agree with Mish about Greenspan, and deflationary forces, I am in disagreement that his typical post view does not illustrate the resource calamity we all face from China's growth.

What it will be is USD devaluation, and should not be confused with economic inflation, with respect to natural resources and Asian currencies. American's (and all western countries) will face is a lowering of standard of living even more, as most wages remain depressed, but costs increase.

I hope Mish is right and I am wrong, but I am hedging my bets.

Mish has a great post explaining all the differing sources of information and opinions he either draws from, or disagrees with titled Straight Talk" with Economic Bloggers. I encourage people to read it and seek other perspectives.

Ben Bernanke Speaks

The market fall today was connected to Ben Bernanke speaking.

At the bottom if a 10 day graph of the S&P 500 to put todays drop into context.

Video is of NJ Senator talking to Ben Bernanke. What GAULS me is Ben Bernanke says raising debt is a negative. Amazing, where was Ben the last 7 years? Now is the time to get fiscally responsible? How about 2002-2007? The Brass ones Ben has.

So Ben has cheap borrowing allowing banks to earn money with next to zero risk through the fed discount window, and has the GAUL to say he is supporting banks lending?

Summarize: Debt bad, "free earnings through discount window" ben doesn't like but enables it, and wants more lending. Lend to who? People who are bankrupt? I highly doubt solid businesses or people can't find loans. I'd like some examples please, instead of the problem is banks won't lend.

From WebSufinMurfs FinancialBlog2