Wednesday, February 27, 2008

Dishonesty, Lies and then a little more deception

How many times have we heard from our highly paid, politically appointed financial leaders that "The Subprime problem is contained?" How many times have we heard that a US recession will be averted? Far too many... It's all lies, deceit, smoke/mirrors and deception.

Well, Helicopter Bernanke spoke to Congress again today, and though his comments (deceptions) were a bit closer to the truth than previous, I imagine for him to say such things, our economy must be in MUCH, MUCH worse shape than that which he let on to.

In today's speech Bernanke hinted at further rate cuts and stated “The economic situation has become distinctly less favorable since the summer." He then noted that inflation pressures abound, but he feels these pressures will recede by summer due to a slowing economy. He also feels the $168B economic stimulus package will energize the economy by mid-year. (Yea Right).

Bernanke: Fed ready to act to boost economy

WASHINGTON - Federal Reserve Chairman Ben Bernanke warned Congress that the nation is in for a period of sluggish business growth and sent a fresh signal Wednesday that interest rates will again be lowered to steady the teetering economy. (My comment: expect a 50bp cut on or before March 18th)

“The economic situation has become distinctly less favorable” since the summer, the Fed chief told the House Financial Services Committee. (duh--come on Einstein, tell us something we don't know... Even Stevie Wonder can see this)
Since Bernanke’s last such comprehensive assessment last summer, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment. This, he said, has further weakened the economy.

Incoming barometers continue to “suggest sluggish economic activity in the near term,” Bernanke told lawmakers. At the same time, he added, the Fed must keep a close eye on inflation given the recent run-up in energy and other prices paid by consumers and businesses.

Were energy prices to continue to rise at a sharp clip — which the Fed doesn’t anticipate — it would “create a very difficult problem” for the economy. It would spread inflation and would put another damper on growth, Bernanke said. If that happened, he added, it would be a “very tough situation.” (with below comment on the dollar in mind, expect energy prices to rise)

For now though, the No. 1 battle is shoring up the economy. (My thoughts: this statement makes it official--The Fed has sacrificed the US Dollar and will do whatever it takes to try and save our economy... Therefore, you can bet the massive inflation wave has just begun)

Bernanke pledged anew to slice a key interest rate to help the wobbly economy, which many fear is on the verge of a recession — or possibly has already toppled into one. (My Comment: expect to see 2% or below FFR this year and 1% or lower in 2009)

The Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” Bernanke said, hewing closely to assurances he offered earlier this month. (My Comment: ... act in a timely manner to Support growth? Come-on now. I think he really wanted to say "... will act in a timely manner to prevent an economic collapse"

The central bank, which started lowering a key interest rate in September, has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points — the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18.

The Fed chief was hopeful that previous rate reductions along with a $168 billion stimulus package of tax rebates for people and tax breaks for business will energize the economy in the second half of this year. (just ain't going to happen--you're merely applying a band aid on a wound that requires a tourniquet)

Even as the Fed tries to shore up the economy, it must remain mindful of inflation pressures, Bernanke said.

Record high oil prices — topping $100 a barrel — are pushing consumer prices upward. That’s shrinking paychecks, and with people feeling less well off because the values of their homes have dropped, consumer spending “slowed significantly” toward the end of the year, the Fed chief said.

The Fed forecasts that inflation will moderate this year compared with last year. But the Fed’s recently revised inflation projection of an increase between 2.1 percent and 2.4 percent is higher than its old forecast from the fall. (again, w/regard to the US Dollar comment above--inflation isn't going anywhere and will continue to rise. M3 is already at 16% and Consumer price inflation is currently running 12%. This 2.1-2.4% figure is absolutely ludicrous)

Bernanke said there are “slightly greater upside risks” that inflation could turn out to be higher than the Fed currently anticipates, given the recent run-up in energy and food prices. (Again, my Stevie Wonder comment applies here)

“Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored,” Bernanke warned. If people, companies and investors think inflation will move higher, they will act in ways that could turn inflation even worse, a sort of self-fulfilling prophecy. And Bernanke said that could complicate the Fed’s job of trying to nurture economic growth while also keeping inflation under control.

11 reasons Bernanke's recession lasts till 2011

ARROYO GRANDE, Calif. (MarketWatch) -- Remember that hot 1973 Stealer's Wheel song marking the end of the Nixon era? "'Cause I don't think that I can take anymore. Clowns to the left of me, jokers to the right, here I am stuck in the middle with you!"

It's still a perfect metaphor. Testifying before Congress: Fed Chairman Ben Bernanke on the left. Treasury Secretary Henry Paulson on the right. The American public stuck in the middle.

Last summer they assured us the subprime-credit crisis was "contained." We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: "America will avoid a recession." New data tells a different story.
Clowns to the left ... jokers right ... stuck in the middle ... can't take it anymore.

But we have to, we have to hang on at least 10 months more, praying they won't do too much more damage. But I'm afraid they will: more lies, blunders and incompetence will drag out this bear. Like the song says: "Got a feeling something ain't right."

Read the new InvestmentNews, a professional journal for financial advisers. The lead headline grabs you: "Bad times for stocks could last many years." A long secular bear.

Do you believe it? That's the big question today: When's the next bull? How long will the bear last? And forget Washington's rhetoric about "no recession." The truth is, you can call it a "bear," "slow growth," a "downturn," a "recession" -- call it whatever you want. Timing's the real question. How long will it last? When will it bottom? 2008? 2011?

Test your timing skill. You tell us, what'll drag this out 30 months, like in 2000-2002? Or shorten it? Here are 11 critical factors for your timing equation, things that could make this bear-recession shorter or longer. You tell us. Add a comment. What's your prediction: How long before the next bull?

1. Stagflation: Bernanke's no-win Achilles heel

Reading Fed-watcher William Fleckenstein's new book, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve," you get the feeling that for 18 years America's banking system was run like a "new age" hippy commune, by a Ayn Rand free spirit who believed "anything goes."

Now the Fed's run by a college professor and Fleckenstein says he's "in over his head." Except this is the real world, a $13 trillion economy in a $48 trillion world, not a college seminar on economic theory.

In the 1970s Nixon faced a similar problem, convinced then by Fed Chairman Arthur Burns: "No one ever lost an election on account of inflation." Wrong! Low rates generated inflation not growth. That stagflation triggered a bear/recession. Is Professor Ben trapped, repeating history?

2. Housing-credit meltdown: We've got a long way to go!

It's far from over folks and still spreading: Years of inventory, foreclosures, building slowdown, risky bond insurers, weak rating agencies, funds holding bad debt, freezing exits and fuzzy math on values. Yet Bernanke and Paulson still live in a Washington bubble of wishful-thinking fantasies.

Economic realists say what's needed is a massive $1.6 trillion demand-driven program (that's the record cash Corporate America's hoarding) not a dinky $160 billion supply-side "appease the voters" giveaway that ends up increasing the odds of a lengthy Nixon/Burns style bear-recession.

3. Commodities: World's new reserve 'currency,' not dollars

Forget paper money and IOUs. Commodities are the world's new "currency:" Hard stuff like oil, grains, metals, gold. And that means America is financing the growth of our enemies, surrendering our long-term economic power for short-term oil-guzzlers and plastic toys. We are responsible for making Russia and China into threatening world powers. Buffett warned us. We're selling the farm, piece by piece.

4. Toxic derivatives: World's $516 trillion ticking time bomb

Derivatives are great for deal-by-deal risk management in a $48 trillion GDP world. But leverage them 10 times over across the globe and we got a financial "weapon of mass economic destruction."

Bill Gross warns that the world's new unregulated "shadow banking system" is printing new money, now at $516 trillion, out of thin air, with no "central banks of last resort" backing up the "Frankenstein" monsters they've created.

5. Massive debt: Everywhere, trade, federal, states, local

America's Comptroller General David Walker, Congress's head accountant who is leaving his position next month, warns our government is "bankrupting America." Using unethical accounting worse than Enron's. Fiscal responsibility lost. He sees "striking similarities" with Rome. Both parties are gluttons in a spending orgy.

We spend-spend, load debt on future generations, then use accounting gimmicks to hide our greedy excesses: Hidden earmarks. Supplemental war appropriations. Meaningless IOUs after stealing from Social Security.
6. America's new 'pushers:' Banks feeding consumer addicts

Trader's Daily captured it perfectly: "Never underestimate the power of the superpsycho, hyper-spending American consumer. Where there is no cash, they will sell their soul. Or just charge it. Let's just not think about what it all means for credit-card debt down the road."

Meanwhile, the credit meltdown is making banks desperate for money. A recent Chase credit-card commercial fuels consumer addictions: Wife wants bigger television. Husband smiles. They shop to the pounding drumbeat of Queen's hit 80s song: "I want it all, I want it all, I want it all ... and I want it now!" Tag line: "Chase what matters!" Yes, Chase debt, all you addicts. Forget saving, spend like there's no tomorrow.

7. More wars: Pentagon predicts bigger, costlier conflicts

The Pentagon's internal studies see a perfect storm accelerating wars worldwide: Global population growth, limited natural resources and global warming. Our war machine is exploding. The Pentagon gets over 50% in the new federal budget. We're only 21% of the world's GDP, yet spend 47% of the world's total military expenditures.

Our power-hungry mindset is becoming self-destructive, suicidal. Remember Nixon strategist Kevin Phillips' warning: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."

8. Greed: Wall Street and Corporate America's defining 'value'

Values start at the top. But the top won't change for 10 months. Leadership, statesmanship and character are vanishing. Five short years ago Corporate America and the mutual fund industry were consumed by greed. How quickly we forget.

It's worse today. We see greed consuming not just Wall Street's clueless CEOs, but the entire industry: Outrageous bonuses of $38 billion amid mega-billion write-offs. Fire sales of billions more American equity to sovereign nations.

From the top down, greed is driving America from bubble to bubble. Wall Street's already fueling the next bubble, trading on a volatile market.
9. Democracy failing: America now run by 35,000 lobbyists!

Forget government "of the people, by the people, and for the people." Adam Smith's "invisible hand" is now a small group of 35,000 highly paid, greedy lobbyists demanding handouts. They run America from the shadows, for those at the top of the economic food chain and vastly outnumber Washington's 537 elected officials.

Nationally there's an estimated quarter million lobbyists, with hundreds of millions of dollars to buy favors in campaign contributions. Politicians talk "change," but America's lobbyists will still be working for their special interest clients in 2009. And they'll fight all "changes."

10. America's already in a recession, and in denial

This year's elections will be a huge factor in lengthening the recession. Our lame-duck government will delay action on critical issues. It reminds me of my days counseling addicts and alcoholics. Change never happens until they admit they have a problem. Same here.

Paulson and Bernanke cannot admit there's a recession. They'd have to take blame for America's failed policies. And congressional Democrats are weak co-conspirators in this meltdown. Nobody has the guts to take responsibility. They're all like addicts and alcoholics, in denial, giving lip-service to "change," while they blame the other guys and support ineffectual stimulus plans.

Vote for whomever, but this lame-duck mindset plus lingering partisan rancor will push any recovery at least into 2009, probably delay the next bull till 2010 or 2011.

11. Class warfare: Superrich vs. Main Street America

No matter who wins, the presidential campaign is warning us: A major battle's coming between "the rich and the rest;" over taxes, benefits, cuts, power.

For years the media collaborated with Wall Street and Corporate America, hyping "Ownership, the New American Dream," where everyone benefits, shares the wealth, gains a piece-of-the-action, ownership in "The Dream" through the magic of housing, stocks, growth, profits, retirement plans. But the housing-credit contagion killed the dream.

Yes, the superrich did get richer. But "the rest" didn't. And they're waking up to a widening gap. A backlash is brewing and will explode ... delaying a recovery and a new bull.

Clowns to the left, jokers right, we're stuck in the middle. Can't take it anymore? Add a timing comment. Tell us: When's the recovery? Next bull? Late 2008? Not till 2011?


Anonymous said...

Ben Bernanke wants to cut rates so that he can take even more money out of American's pockets by causing higher gas prices and food prices. How the hell is this going to get the economy growing since 3/4 of the economy is consumer spending and you are weakening their purchasing power? This guy has no clue!

Randy said...


Though I agree with most of your comment, I do have to disagree with your last sentence.

Ben DOES have a clue, but he's kowtowing to the banking/financial industries and could really give a rats ass about joe 6-pack and the rest of America.

I believe it has now become a matter of (unwritten) policy to try to hyper-inflate our financial system out of its current and future insolvency crisis.

In their attempt to inflate, the world will experience significant dollar devaluations which will (over time) allow the United States to 1) eliminate much of its foreign debt and 2) pay for future (currently $60 Trillion in un-funded) obligations through devalued payouts.

Bottom Line: Our standard of living in the US will drop significantly over the next decade.

I just hope we Americans finally wake up (after the fall) and press to get rid of all the crooked slime running our government and economy.

It's about time we restore a government of the people for the people vs a government for big business, bottom lines and special interests.

Thanks for posting up


Anonymous said...

speaking from the top of the ridge n tennessee,howdy maybe i am just wishfull thinking but what if everyone spent there stimuulus check on "made in usa" only products, i believe that would help at least be a step in the right direction an give america a lil boost in confidence,although its probably like shooting a elephant with a bb gun with mammoth debt facing our for what we can do individually is limited,but for me i will have a big'o garden this year an ride my motorcycle whenever i can(50 mpg)will it help? yes it will what will/can you do?....donnie

Anonymous said...

Spending stimulus checks on US products will just cause inflation, just like spending it on foreign goods would.

Seriously if the stimulus check is such a good idea, just send every American a check for $1,000,000 - if $600 is good imagine how great a million dollars would do. Everyone will be rich and happy...

Anonymous said...

Not only would we be rich and happy, we wouldn't have any debt. But then gas would be $1,000,000 a gallon. You would be better off getting 1 million 1 dollar bills and burning those for energy.

I have a feeling Bush and Bernanke will end up getting jailed for what they are doing.

Randy said...

Anon 9:28,

Regarding your comment: "maybe i am just wishfull thinking but what if everyone spent there stimuulus check on "made in usa" only products, i believe that would help at least be a step in the right direction an give america a lil boost in confidence".

Problem is, unless you want to buy a plane or military hardware, good luck in finding any American made Products. You certainly wont find a big-screen TVs, VCRs, Microwaves, or other electrical products. Even Levi's Jean Manufacturing has been moved overseas--outsourcing is a MAJOR part of the problem. We are now a service based economy who depend on selling each other foreign made goods.

Anon 10:19,

This $168 Billion in new money will NOT be the last of the gvt's stimulus packages. I expect we'll see another by the end of this year.

Anon 10:42,

All new money devalues existing circulating money--that is why the dollar is tanking. I expect the US dollar index to fall below 65 this year and below 50 before all is said and done. SCARY Stuff!

Thanks to all of you for posting up.


Anonymous said...

If I had my way, I would have all Americans lower/middle class Americans stop paying all income taxes at once and pull all their money from the banks.

topple the house of cards, and force a fresh start.

Randy said...

Anon 6:34

I agree, but think that if enough people actually become educated on the Central Banking System and Income Taxes, it may eventually happen -- will take some time though, as people don't usually open their eyes until surrounded w/difficult/impossible circumstances -- which IS coming

Virginia said... a single mom, this is teaching me a lot!!! What do you suggest one does with money in the bank...certainly not the stock market....real estate??? a house in the country...put in solar power, wind power and grow your own food????
What do you see in your crystal ball for middle Americans???
Thanks...I'll keep checking your advice and information!!!


The money game has to end sometime.


Theirs much deception at the fed.