Archive for the ‘Economy’ category

Ministry of Plenty 100% Sure It Will Control Inflation

December 7, 2010

Bernanke Is 100% Sure

From ZeroHedge.com:

I don’t know about you, but I’m not 100% sure about anything. The older I get, the less sure I am about everything. I question things that I was sure were true when I was 25 years old. I’m not sure I’ll wake up in the morning. I’m not sure I’ll survive my commute to work. That is why I was flabbergasted last night as I watched Scott Pelley interview Ben Bernanke on 60 Minutes.

As a side note, boy this show has gone downhill. In the old days of real journalism, Mike Wallace would have scorched Ben Bernanke, pointing out his phenomenal ability to be wrong or clueless on every financial issue the country has faced in the last 10 years. Today, Pelley underhands softball questions to Bernanke and never challenges him. It was a pathetic display of journalism.

Below is the dialogue that made me almost fall off my chair:

Pelley: Is keeping inflation in check less of a priority for the Federal Reserve now?
Bernanke: No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.
Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.

The hubris in this statement is breathtaking. The U.S. economy is a complex interaction of thousands of variables and is intertwined with the policies and actions of hundreds of other countries throughout the world. No one has a handle on the worldwide economy and no model can predict anything with any amount of accuracy. And still, this pompous professor from Princeton who has never worked a day in his life in the real world is 100% SURE that HE knows what will happen and when it will happen. I’m sure his track record of predictions and analysis will give you comfort in this statement:

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – 7/1/2005

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.” – 2/15/2006

March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,”

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

continued..

The Madness of a Lost Society

December 1, 2010

Video of the Day:

 

Song of the Day: F*ck the Fed

November 6, 2010

On the 100th anniversary of the secret Jekyll Island meeting that led to the creation of the Federal Reserve, Thirteen O’Clock’s Song of the Day is:

Fed Returns to the Scene of the Crime

November 6, 2010

The Federal Reserve returns this weekend to Jekyll Island – the scene of the secret meeting one hundred years ago that led to the formation of the Fed. Forbes magazine founder Bertie Charles Forbes wrote of this meeting some years later:

Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily riding hundred of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned, lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance. I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written… The utmost secrecy was enjoined upon all. The public must not glean a hint of what was to be done. Senator Aldrich notified each one to go quietly into a private car of which the railroad had received orders to draw up on an unfrequented platform. Off the party set. New York’s ubiquitous reporters had been foiled… Nelson (Aldrich) had confided to Henry, Frank, Paul and Piatt that he was to keep them locked up at Jekyll Island, out of the rest of the world, until they had evolved and compiled a scientific currency system for the United States, the real birth of the present Federal Reserve System, the plan done on Jekyll Island in the conference with Paul, Frank and Henry… Warburg is the link that binds the Aldrich system and the present system together. He more than any one man has made the system possible as a working reality.

If you are unfamiliar with what the Fed really does, how it does it and why you should care, you owe it to yourself to watch this video:

Bernanke’s Secret Plan To Raise Rates Too Late

November 4, 2009

Business Insider’s Henry Blodgett explains:

Explainer: Bernanke’s Secret Plan To Raise Rates Too Late (3 min):

Why is Ben Bernanke being so slow to start talking about raising rates, much less start raising them?  Because he has a secret plan that he can’t talk about.

What’s Ben’s secret plan?

Intentionally keep rates too low for too long, thus encouraging uncomfortably high inflation.

Why would Ben want that when he keeps talking about the importance of managing inflation?

Two reasons:

  • Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that’s happier with Ben Bernanke
  • Faster erosion of the real value of our debts.  Consumers and the government are drowning under a massive debt load.  One way to make paying off this debt easier is to make the dollars it is denominated in worth less.  Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell–but not quite to the point where China actually stops lending to us.

Click for video.

Constituents? Happier Congress? But I thought the whole argument against a full audit of the Fed is that it is supposed to be independent of politics. So which is it?

“Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less.”

That works for government and the biggest of the TBTF bankers (GS, JPM) because the dollars aren’t really devalued until they are released into the economy at large. By the time they reach the consumer, the prices of everything consumers might buy have already risen in response to the inflated money supply.

CIT Files Bankruptcy

November 1, 2009

mushroom_cloudThis has been a long time coming. CIT became a bank-holding company in December 2008 in order to qualify for a bailout from the Treasury taxpayers.  And what about the $2.3 billion of bailout money CIT received? You weren’t really expecting to ever see that again, were you?

Asian markets are in a tailspin after this announcement. I expect tomorrow will be another blood bath on Wall Street. 

This filing is significant not only because it is the fifth largest US bankruptcy ever, but also because CIT was a major source of financing for small and mid-size businesses. The pain from this collapse is going to spread all up and down Main Street.

Nov. 1 (Bloomberg) — CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy to cut $10 billion in debt after the credit crunch dried up its funding and a U.S. bailout and debt exchange offer failed.

CIT listed $71 billion in assets and $64.9 billion in debt in a Chapter 11 filing in U.S. Bankruptcy Court in Manhattan. The U.S. Treasury Department said the government probably won’t recover much, if any, of the $2.3 billion in taxpayer money that went to CIT.

The bankruptcy “will allow CIT to continue to provide funding to our small business and middle-market customers,” said Chief Executive Officer Jeffrey Peek in a statement.

CIT, which filed the fifth-largest bankruptcy by assets, said it plans to exit quickly due to support from bondholders, who voted in favor of a so-called prepackaged plan. None of CIT’s operating subsidiaries, including Utah-based CIT Bank, were included in the filing, and operations will proceed as normal, CIT said in a statement.

CIT has $1 billion from investor Carl Icahn to fund operations while it reorganizes. The credit line, to be drawn on until Dec. 31, will be a so-called debtor-in-possession loan. It also expanded its $3 billion credit facility by another $4.5 billion on Oct. 28.

Continue reading

Record Nine Bank Failures Yesterday

October 31, 2009

2228036852_f9705e9266The FDIC shuttered nine banks on Oct. 30, 2009, bringing the total for the year so far to 115.

Yesterday’s closures will cost the FDIC an estimated $2.5 billion, combined.

According to an AP report (via Clusterstock):

Regulators shut California National Bank of Los Angeles and eight other banks as the weak economy continues to produce a stream of loan defaults.

The banks closed by the Federal Deposit Insurance Corporation were in California, Illinois, Texas and Arizona. They were divisions of privately held FBOP Corp., a Chicago-based bank holding company.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions out of the deposit insurance fund. It has fallen into the red.

Failures have been especially concentrated in California, Georgia and Illinois. While the pounding from losses on home mortgages may be nearing an end, delinquencies on commercial real estate loans remain a hot spot of potential trouble, regulators say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks, especially, hold large concentrations of these loans.

The 115 failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $25 billion so far this year, and hundreds more bank failures are expected to raise the cost to around $100 billion through 2013.

The 115 bank failures this year compare with 25 last year and three in 2007.

The number of banks on the FDIC’s confidential “problem list” jumped to 416 at the end of June from 305 in the first quarter. That’s the most since June 1994. About 13 percent of banks on the list generally end up failing, according to the FDIC.

Also, be sure to check out this interactive visual of recent bank failures from the Wall Street Journal. The graphics are great. They really help put the whole mess in perspective.