Ben Bernanke Says Everything Is Going To Be Okay
goingbroke
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Helicopter Ben Bernanke Says Everything Is Going To Be Okay
Don't worry everybody. Federal Reserve Chairman "Helicopter Ben" Bernanke says that the U.S. economy is going to be just fine, and that if it does slip up somehow the Federal Reserve is ready to rush in to the rescue. That was essentially Bernanke's message to an annual gathering of central bankers in Jackson Hole, Wyoming on Friday. Bernanke insisted that even though the Federal Reserve has already cut interest rates to historic lows it still has plenty of tools that could be used to stimulate the U.S. economy if necessary. Well, considering Bernanke's track record, the "don't worry, be happy" mantra is just not going to cut it this time. After all, if Bernanke and his team were such intellectual powerhouses the "surprise" financial crisis of 2007 and 2008 would not have caught them with their pants down. The truth is that just before the "greatest financial crisis since the Great Depression" Bernanke was telling everyone that the economy was just fine. So are we going to let him fool us again?
But Bernanke insists that this time is different. This time the Federal Reserve really has got a handle on things. During his remarks at Jackson Hole, Bernanke said that the Fed will adopt "unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly."
Unconventional measures?
Could that be a thinly veiled way of saying that Helicopter Ben and his pals will do as much "quantitative easing" as they feel is necessary to keep the economy moving forward?
Unfortunately, most Americans have absolutely no idea what quantitative easing is.
Basically, when quantitative easing takes place the Federal Reserve creates money "ex nihilo" (out of thin air) and uses that money to buy stuff like U.S. government bonds and mortgage-backed securities. By pumping money into the economy like this, the hope is that banks will start lending more and people and businesses will have more money to spend.
As far back as 2002, Bernanke has been openly advocating "easy money" policies as a way to stimulate the U.S. economy out of troubled times....
"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."
Now, before we go on and discuss some of the problems with quantitative easing, it must be noted that the statement by Bernanke above is absolutely rife with errors.
It is absolutely frightening that someone like Bernanke has more power over the U.S. economy than any member of Congress or even the president of the United States.
First of all, the U.S. government does not issue our dollars. They are issued by the Federal Reserve.
Just pull out a dollar bill right now. It says "Federal Reserve Note" on it right at the top.
Secondly, the U.S. government cannot produce as many dollars as it wants. Whenever it wants more U.S. dollars it has to give U.S. Treasuries to the Federal Reserve in exchange.
If the U.S. government could produce as many dollars as it wants, it could just print up $13 trillion and pay off the national debt tomorrow.
But under the current system, it cannot do that. The Federal Reserve controls the currency, and the truth is that the Federal Reserve is a private central bank that is about as "federal" as Federal Express is.
Thirdly, there is always a cost for producing more dollars. We'll talk about inflation in a moment, but first it must be noted that any time "the printing presses are fired up" the U.S. government goes into more debt, and every time the U.S. government goes into more debt, more interest must be paid on that new debt.
So there is a very high cost involved in the creation of more dollars.
In addition, every time a new U.S. dollar is created, every other U.S. dollar becomes a little bit less valuable. Essentially, the more dollars there are in existence, the less purchasing power each dollar is going to have. This phenomenon can be masked or delayed for a while, but inflation will always triumph in the end when the money supply is constantly expanded.
The U.S. dollar has lost over 95 percent of its value since the Federal Reserve was created in 1913. This has not been a mistake. The Federal Reserve system is designed to slowly but surely inflate the U.S. dollar. What they do want to avoid, however, is doing it too quickly.
And this is exactly what is in danger of happening in the years ahead. As the U.S. money supply dramatically expands in response to the exploding U.S. national debt we are eventually going to be dealing with some very, very serious inflation.
Right now, the Bush and Obama administrations have been getting the United States into so much debt that there aren't enough buyers in the world to absorb it all (at least at the current super low interest rates on U.S. government debt). So, instead of raising interest rates to a point where U.S. debt would be suitably attractive to investors, the Federal Reserve is stepping in and is "buying" (once again with money created out of thin air) all the excess U.S. Treasuries that don't sell. This is essentially a Ponzi scheme and it keeps interest rates on U.S. Treasuries artificially low.
In addition, the Federal Reserve has been handing gigantic sacks of cash to very large banks and financial institutions such as Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup at almost zero percent interest and those big banks and financial institutions have been turning around and investing a large percentage of that cash in U.S. Treasuries. This has created a gigantic U.S. Treasury carry trade bubble, and it has enabled many of these giant financial monsters to make massive piles of essentially risk-free cash. This is another Ponzi scheme.
But these Ponzi schemes are not sustainable and they cannot last forever. Right now Bernanke and his cohorts have been able to finance trillions in U.S. government debt and still keep interest rates on U.S. Treasuries and inflation very, very low. At some point, their juggling act will come to an end and we will have a gigantic mess on our hands.
But for right now, Bernanke seems quite please with himself. The following is how Bernanke concluded his speech at Jackson Hole....
As I said at the beginning, we have come a long way, but there is still some way to travel. Together with other economic policymakers and the private sector, the Federal Reserve remains committed to playing its part to help the U.S. economy return to sustained, noninflationary growth.
In Bernanke's fantasy world, the U.S. economy is going to roar back to life and will soon be stronger than it ever has been.
But don't you believe him.
The truth is that every single month the U.S. economy is seeing large numbers of jobs leave the country.
The truth is that thanks to our exploding trade deficit, the U.S. economy is poorer at the end of every single month than it was at the beginning.
The truth is that every single month the U.S. government (along with the vast majority of state and local governments) gets even deeper into debt.
The United States economy is not on the road to prosperity.
The United States economy gets poorer and deeper in debt every single month and is slowing bleeding to death.
Ben Bernanke can run around all he wants and try to convince us that "the sky isn't falling", but at some point the American people are going to wake up and simply not believe him anymore.
Text
Don't worry everybody. Federal Reserve Chairman "Helicopter Ben" Bernanke says that the U.S. economy is going to be just fine, and that if it does slip up somehow the Federal Reserve is ready to rush in to the rescue. That was essentially Bernanke's message to an annual gathering of central bankers in Jackson Hole, Wyoming on Friday. Bernanke insisted that even though the Federal Reserve has already cut interest rates to historic lows it still has plenty of tools that could be used to stimulate the U.S. economy if necessary. Well, considering Bernanke's track record, the "don't worry, be happy" mantra is just not going to cut it this time. After all, if Bernanke and his team were such intellectual powerhouses the "surprise" financial crisis of 2007 and 2008 would not have caught them with their pants down. The truth is that just before the "greatest financial crisis since the Great Depression" Bernanke was telling everyone that the economy was just fine. So are we going to let him fool us again?
But Bernanke insists that this time is different. This time the Federal Reserve really has got a handle on things. During his remarks at Jackson Hole, Bernanke said that the Fed will adopt "unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly."
Unconventional measures?
Could that be a thinly veiled way of saying that Helicopter Ben and his pals will do as much "quantitative easing" as they feel is necessary to keep the economy moving forward?
Unfortunately, most Americans have absolutely no idea what quantitative easing is.
Basically, when quantitative easing takes place the Federal Reserve creates money "ex nihilo" (out of thin air) and uses that money to buy stuff like U.S. government bonds and mortgage-backed securities. By pumping money into the economy like this, the hope is that banks will start lending more and people and businesses will have more money to spend.
As far back as 2002, Bernanke has been openly advocating "easy money" policies as a way to stimulate the U.S. economy out of troubled times....
"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."
Now, before we go on and discuss some of the problems with quantitative easing, it must be noted that the statement by Bernanke above is absolutely rife with errors.
It is absolutely frightening that someone like Bernanke has more power over the U.S. economy than any member of Congress or even the president of the United States.
First of all, the U.S. government does not issue our dollars. They are issued by the Federal Reserve.
Just pull out a dollar bill right now. It says "Federal Reserve Note" on it right at the top.
Secondly, the U.S. government cannot produce as many dollars as it wants. Whenever it wants more U.S. dollars it has to give U.S. Treasuries to the Federal Reserve in exchange.
If the U.S. government could produce as many dollars as it wants, it could just print up $13 trillion and pay off the national debt tomorrow.
But under the current system, it cannot do that. The Federal Reserve controls the currency, and the truth is that the Federal Reserve is a private central bank that is about as "federal" as Federal Express is.
Thirdly, there is always a cost for producing more dollars. We'll talk about inflation in a moment, but first it must be noted that any time "the printing presses are fired up" the U.S. government goes into more debt, and every time the U.S. government goes into more debt, more interest must be paid on that new debt.
So there is a very high cost involved in the creation of more dollars.
In addition, every time a new U.S. dollar is created, every other U.S. dollar becomes a little bit less valuable. Essentially, the more dollars there are in existence, the less purchasing power each dollar is going to have. This phenomenon can be masked or delayed for a while, but inflation will always triumph in the end when the money supply is constantly expanded.
The U.S. dollar has lost over 95 percent of its value since the Federal Reserve was created in 1913. This has not been a mistake. The Federal Reserve system is designed to slowly but surely inflate the U.S. dollar. What they do want to avoid, however, is doing it too quickly.
And this is exactly what is in danger of happening in the years ahead. As the U.S. money supply dramatically expands in response to the exploding U.S. national debt we are eventually going to be dealing with some very, very serious inflation.
Right now, the Bush and Obama administrations have been getting the United States into so much debt that there aren't enough buyers in the world to absorb it all (at least at the current super low interest rates on U.S. government debt). So, instead of raising interest rates to a point where U.S. debt would be suitably attractive to investors, the Federal Reserve is stepping in and is "buying" (once again with money created out of thin air) all the excess U.S. Treasuries that don't sell. This is essentially a Ponzi scheme and it keeps interest rates on U.S. Treasuries artificially low.
In addition, the Federal Reserve has been handing gigantic sacks of cash to very large banks and financial institutions such as Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup at almost zero percent interest and those big banks and financial institutions have been turning around and investing a large percentage of that cash in U.S. Treasuries. This has created a gigantic U.S. Treasury carry trade bubble, and it has enabled many of these giant financial monsters to make massive piles of essentially risk-free cash. This is another Ponzi scheme.
But these Ponzi schemes are not sustainable and they cannot last forever. Right now Bernanke and his cohorts have been able to finance trillions in U.S. government debt and still keep interest rates on U.S. Treasuries and inflation very, very low. At some point, their juggling act will come to an end and we will have a gigantic mess on our hands.
But for right now, Bernanke seems quite please with himself. The following is how Bernanke concluded his speech at Jackson Hole....
As I said at the beginning, we have come a long way, but there is still some way to travel. Together with other economic policymakers and the private sector, the Federal Reserve remains committed to playing its part to help the U.S. economy return to sustained, noninflationary growth.
In Bernanke's fantasy world, the U.S. economy is going to roar back to life and will soon be stronger than it ever has been.
But don't you believe him.
The truth is that every single month the U.S. economy is seeing large numbers of jobs leave the country.
The truth is that thanks to our exploding trade deficit, the U.S. economy is poorer at the end of every single month than it was at the beginning.
The truth is that every single month the U.S. government (along with the vast majority of state and local governments) gets even deeper into debt.
The United States economy is not on the road to prosperity.
The United States economy gets poorer and deeper in debt every single month and is slowing bleeding to death.
Ben Bernanke can run around all he wants and try to convince us that "the sky isn't falling", but at some point the American people are going to wake up and simply not believe him anymore.
Text
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Comments
Summers and Geitner said the same thing:
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
"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."
No cost? They sell the debt to China, and other investors.
It is absolutely frightening that someone like Bernanke has more power over the U.S. economy than any member of Congress or even the president of the United States.
I think it would be a real problem if the FED were controlled by Congress. Just imagine how hard it would be to get anything done. No, it's not frightening.
Thirdly, there is always a cost for producing more dollars. We'll talk about inflation in a moment, but first it must be noted that any time "the printing presses are fired up" the U.S. government goes into more debt, and every time the U.S. government goes into more debt, more interest must be paid on that new debt.
Again, if they can sell the debt, then they can print more. As soon as they can't sell the debt, then they can't print more money (in theory).
In addition, every time a new U.S. dollar is created, every other U.S. dollar becomes a little bit less valuable. Essentially, the more dollars there are in existence, the less purchasing power each dollar is going to have. This phenomenon can be masked or delayed for a while, but inflation will always triumph in the end when the money supply is constantly expanded.
Again, only if they are printing without selling the debt, which they are not, so the premise is wrong.
Right now, the Bush and Obama administrations have been getting the United States into so much debt that there aren't enough buyers in the world to absorb it all (at least at the current super low interest rates on U.S. government debt). So, instead of raising interest rates to a point where U.S. debt would be suitably attractive to investors, the Federal Reserve is stepping in and is "buying" (once again with money created out of thin air) all the excess U.S. Treasuries that don't sell. This is essentially a Ponzi scheme and it keeps interest rates on U.S. Treasuries artificially low.
I think buying back Treasuries is good. What am I missing? Ponzi scheme? hardly.
In Bernanke's fantasy world, the U.S. economy is going to roar back to life and will soon be stronger than it ever has been.
I honestly don't think he said anything like that.
The truth is that in the midst of the terrible economic mess you can't expect things to get better overnight. There were and are way to create more jobs, but there is a balance between too much Government intervention and too little. Want more jobs? Don't hold back Jobs bills in Congress. Want to lower the deficit? Allow the Bush tax cuts to expire, draw down the wars.
Remember, this is an election season, so the gloom and doomer are out in force! They want to scare people into thinking things are so bad that prosperity will never return. I'm not advocating any Party against the other, I'm just say there is way too much fear out there right now. Much of it is unwarranted.
Whenver, Bernanke's name is mentioned I tend to throw up in my mouth a little...........
Rick, the Fed should be abolished. Really. Problem solved.
Ben is good for gold bugs. He has that going for him.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I understand. It is easy to say, but first you have to think of what would be put in its place. And if whatever would be put in place would actually work at bringing us prosperity.
Return the Fed/Central bank to the people. This Fed runs the country and answers to no one.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>Rick, the Fed should be abolished. Really. Problem solved
I understand. It is easy to say, but first you have to think of what would be put in its place. And if whatever would be put in place would actually work at bringing us prosperity. >>
I'm willing to give that Constitution thingy a try.
_Reset
<< <i>Replace it with nothing. Air. I'm serious. The Fed is nothing more then a central bank. Both previous US central banks have been pure evil. This version is no different. Jefferson had it right 200+ years ago. What exactly does the Fed do that we really need? If they went on vacation for an extended period of time who would really miss them? What would seize to function? The free market may actually send the USD into orbit without the Fed. Let the free market determine interest rates................
Return the Fed/Central bank to the people. This Fed runs the country and answers to no one.
MJ >>
An interesting idea. The corruption at the Federal level has become blatantly obvious.
What's really sad is that most people are either completely tolerant of the fact or otherwise ignorant of the whole mess.
Click on this link to see my ebay listings.
<< <i>
<< <i>Rick, the Fed should be abolished. Really. Problem solved
I understand. It is easy to say, but first you have to think of what would be put in its place. And if whatever would be put in place would actually work at bringing us prosperity. >>
I'm willing to give that Constitution thingy a try.
_Reset >>
Absolutely. It's so clear to any thinking person, any true American.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
<< <i>BB, Is awful. BB, has to say everything is ok. Only former Fed Chiefs can tell the truth.
Whenver, Bernanke's name is mentioned I tend to throw up in my mouth a little...........
Rick, the Fed should be abolished. Really. Problem solved.
Ben is good for gold bugs. He has that going for him.
MJ >>
Same with the IRS. Eliminate them. You'd collect just as much with a VAT and wouldn't need to harass millions, prosecute tens of thousands and jail thousands of people.
Free Trial
<< <i>Rick, the Fed should be abolished. Really. Problem solved
I understand. It is easy to say, but first you have to think of what would be put in its place. And if whatever would be put in place would actually work at bringing us prosperity. >>
We established a Central Bank to copy the Europeans who had made fun of America for the Panics of 1893 and 1907. Replace it with nothing is absolutely correct.
Free Trial
Where is Andrew Jackson ,when we really need him?
Camelot
for others, not so good.
same as it has always been, since the dawn of time
it is up to the individual behavior, and some random chaotic forces, which group they're in, and when.
Liberty: Parent of Science & Industry
<< <i>The truth is that in the midst of the terrible economic mess you can't expect things to get better overnight. >>
<< The truth is that in the midst of the terrible economic mess you can't expect things to get better overnight. >>
2008-2010 things still headed south fast
Sure, it's fun to speculate and say that this is bad and that is bad, but frankly it's never going to happen, since the banks run things and they get nearly free money from the FED and guarentees too. We are powerless, unless any of you are on the board of BoA.
If it makes you happy to feel bad about it, so be it.
(don't think any election will help fix things - you can't elect bank CEO's)
Just try and get a bank loan when there is no FED. Buy a house, forget it.
<< <i>Just try and get a bank loan when there is no FED. Buy a house, forget it. >>
You have probably forgotten more about coins than I'll ever know... I have probably forgotten more about mortgage/banking than you'll ever know...
Then please enlighten us!
My take is that the FED supplies liquidity to the market. If you take away the FED, the banks are the forces of liquidity all on their own. This is good and bad.
This would have been the best situation in preventing the housing bubble, right? Also, we wouldn't have had the easy money that fueled the economy for the past 10 years.
In today's economy with fairly tight credit, I think credit would be 10 time worse if banks operated without any central bank behind them making guarentees and supplying money.
What's your take?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>This would have been the best situation in preventing the housing bubble, right? >>
Wrong... again.
Your 'take' is wrong. Using CNBC language doesn't help you sound any better either.
You don't seem to even understand how the vast majority of mortgage loans are funded.
Your boring me.
Fred, Las Vegas, NV
And you're boring us with your "appeals to authority" nonsense! Put up or shut up!
Come on show your stuff!
Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.
"If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved," Bernanke said Thursday while testifying before the Financial Crisis Inquiry Commission.
Bernanke also said it was impossible for the Fed to rescue Lehman Brothers from bankruptcy in 2008 because the Wall Street firm lacked sufficient collateral to secure a loan. Lehman's former chief executive told the panel a day earlier that the firm could have been saved, but regulators refused to provide help.
I guess the bottom line for me is that I'm sick of mediocrity. At the end of the day I think that's the best we can hope for under the current system. So I guess I'm a realist as well. I realize things are not going to change under the current system. I would love to see the current system shaken to it's core and shuting down The Fed is where I would start..This is change I could believe in.
The recycled garbage from both sides of the aisle nauseates me ad infinitum.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......