Tuesday, Aug 04, 2009
Find the Lady
Counterpunch: Bernanke's Shell Game
Cash created from Bernanke's QE - buying US Treasuries and mortgages to swell the monetary base - was mainlined into equity (and bonds and commodity) markets to produce green shoots (a boom in tradeable assets but not in the real economy). The plan was for the funds created in this way to find their way into equities etc. - the Fed calculated that there was nowhere else for them to go. This equities boom then bolsters the equity/capital positions of banks, which in turn buy Treasuries, thus taking up the slack resulting from sagging demand from China etc. for US Treasuries. One hand washes the other - as long as the wizard stays behind the curtain. This kind of money laundering saves central banks the bother of going through democratic processes to get things done.
24 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. alan_540 said...
Double dip recession indeed when the Fed's house of cards comes tumbling down!
2. drewster said...
In other words, the central bank just prints money. Plus ça change...
3. bystander said...
.......any ideas when the next dip may occur, as the investors and banks are flying high at the moment?
4. icarus said...
bystander - ask Bernanke
5. icarus said...
drewster - the question is: when did the new money stop flowing into the real economy (old-style investment) and start flowing almost exclusively into assets and income streams that are already in place? When did the banks de-couple from the real economy?
6. hpwatcher said...
The answer to all problems seems to be throwing cheap new money......
7. uncle tom said...
I think you have to question the independance of this writer.
There is a certain predictability about the way the Americans write, when they have a spleen to vent; and I sense it here.
This is not, I suspect, the commentary of one who has thought long and hard about the economic issues of the day, and is now offering a selfless opinion for the good of mankind.
It reads like the words of one who shorted the equity market at exactly the wrong time; has now lost a packet, and needs someone to blame...
Whilst I don't worship at the shrine of St Ben, I don't think this particular bit of journalism is of any great significance.
8. devo said...
Can you be more specific uncle tom?
Which facts in the article do you have an issue with?
9. uncle tom said...
Devo,
There is a very common pattern here:
- Build 'em up
- Knock 'em down
- Sneer
- Imply corruption, but without hard evidence
The chosen formula of those who really have nothing to say..
10. icarus said...
hpwatcher @6 - don't forget that the vast majority of money in the system is "printed" by privately-owned banks when they create credit. Also this bank credit is drying up (credit squeeze), so a good case can be made out for governments' printing money as long as it goes into creating new goods and services. Problem is that it's not governments but central banks that do the printing, and it's done in a way that goes into paying for the chips in a rigged backroom casino.
11. devo said...
@9. uncle tom
You haven't answered my question.
12. devo said...
How about this, uncle tom...
"It means the revered professor Bernanke figured out a way to circumvent Congress and dump more than a trillion dollars into the stock market by laundering the money through the big banks and other failing financial institutions."
True or false?
13. bellwether said...
I'm more mediately concerned about the UK where the same problems exist but without the many advantages possesed by the US. Central is UK's undeflated house market.
Our currency has appreciated well over the duration of this stock rally, I have already bought dollars and plan to buy more, as I think we will have another sterling shock before long.
Many Stocks are already pricing in a huge recovery in earnings that is not going to happen, indeed many earnings will in fact atrophy once cost cutting is finished and as consumer spending continues to contract.
The only way out is meaningless inflation which will only further supress real production.
There is much talk of healing, there has been no healing and healing, which involves pain and breakdown is not being allowed to happen
14. uncle tom said...
Devo,
I did answer your question - the piece was partisan waffle.
With regard to your 'true or false' question, I've not seen any evidence that Bernanke has exceeded his authority.
Do you know otherwise? Do you know the limits of his remit?
I suspect not.
15. devo said...
"I did answer your question - the piece was partisan waffle"
I asked you to disprove the facts, not the opinion.
You haven't.
16. devo said...
'Do you know the limits of his remit?'
Of course not, silly! That would require transparency.
17. doggett said...
Uncle Tom wrote (9:20pm)
"This is not, I suspect, the commentary of one who has thought long and hard about the economic issues of the day".
Whether you agree with him or not, this is demonstrably not true. Read some of the many articles by him available on the internet.
"It reads like the words of one who shorted the equity market at exactly the wrong time; has now lost a packet, and needs someone to blame ..."
As you yourself said, "Sneer, imply corruption, but without hard evidence; the chosen formula of those who really have nothing to say"
"... the piece was partisan waffle".
There are many from right across the political spectum who have written in a similar vein - Whitney references several articles from the Wall Street Journal, as well as Zero Hedge's Tyler Durden. And Karl Denninger, one of the most outspoken and incisive critics of the Bernanke and the Federal Reserve is hardly what you'd call left wing. So, partisan? Hardly.
18. uncle tom said...
Much of US journalism has become extremely partisan and political in recent years - Fox Is probably the worst mainstream offender.
If you want to know what is really happening in the US, you need to ignore the political/conspiratorial garbage (of which there is plenty..), and listen to those sources that have less of an agenda.
19. bidin'matime said...
Uncle Tome - "listen to those sources that have less of an agenda" - I may have missed some postings, but if you could post some of the articles to which you refer, this would be good. Thanks.
20. bidin'matime said...
Sorry Tom - that was my typing - some might say it was Freudian, but it certainly wasnt intended!
21. uncle tom said...
bidin',
For US economic reporting without a conspicuous agenda, try Bloomberg.
For general US news coverage, CBS is probably as objective as you'll find (but far from perfect).
For an outlook on global news that doesn't pay homage to Old Glory, along with a lot of reportage on middle east stories that the BBC chooses to either ignore or marginalise (and is also very well presented); an occasional look at Al Jazeera's English language news channel can be quite interesting.
22. icarus said...
UT @21 - but a large part of Whitney's argument is echoed in the Bloomsberg piece he quotes near the end of the \rticle.
23. devo said...
@22 icarus
You're wasting your time;Uncle Tom's stuck in his own HPC world, where the USA leads us out of recession.
WE know that isn't going to happen, don't we?
24. This comment has been removed as it was found to be in breach of our Blog Policies.