We cannot solve our problems with the same thinking we used when we created them.
9/13/2012
Today Ben Bernake, chairman of our Federal Reserve Bank, promised to print $40 billion a month "To Infinity and Beyond!" until employment in the USA is "acceptable". "Acceptable" being 5% unemployment. Or 6%. Or 7%. He wasn't real clear on that, but I assume he'll let us know. He also promised to print more than $40 billion a month "if the stock market goes down" "if circumstances warrant". So if you, Joe Sixpack, still don't have a job after Ben gave Goldman Sachs and the Too-Big-To-Fail banks $2.8 Trillion in free money over the last four years fear not. Ben will give them MORE free money until such time as things are "OK... per Bernake". In other words, the monetary beatings of the bottom 80% of America will continue until morale improves. The same Too-Big-To-Fail banks that created the housing bubble with free money from the Fed will now get limitless money, at zero percent interest, to "help" lower the unemployment rate. That's right...the same banks that vaporized our economy in 2008, got bailed out at taxpayer expense, had exactly zero criminal charges brought against them, paid record bonuses in 2010 and are now 25% "Too-Bigger-To- Fail" will now help create jobs. Hmmm. Here's the list of primary dealers that get to borrow free money from the Federal Reserve.
Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.
Ben's plan is to print money until things get better. If I was the one getting the money I guess I'd be OK with that...but let's see what these charts from the Federal Reserve tell us about that theory. Click to enlarge.
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| Fed Balance sheet v. Total Employment |
When Ben says he's "saved or created" over 3 million jobs as a result of his printing press, he's referencing this chart. In Ben's world, we should only need another $3 trillion or so to get employment to where it was in 2008. Once you depart Ben's textbook fantasy, though....
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| Population Growth v. Total Employment |
Population growth has nearly equalled the number of "jobs" Ben claims to have created...meaning unemployment would be nearly unchanged since 2009. Which it is. Remember your parallel lines from grade school?
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| Mr. Potatohead can see the problem here... |
Factoring in population growth means those jobs Ben "created" cost upwards of $2.5 million apiece. I would REALLY like to have one of those...only they don't exist out here in the real world.
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| This job cost $2.5 million but pays 26 grand? WTF! |
Let's review what our government did when bailing out the TBTF banks: Banking fortunes were made, bonuses paid, and then the banks said "Oops...we might have made a few bad loans that were not our fault. Can you please give us a couple trillion so we can do this again except in stocks?" Our government, under the strict advisement of those same bankers, said "Sure. Our people are rich and we need awesome bankers like you. Sign this campaign donation form on the dotted line."
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| Total Credit owed v. Credit owned by Federal Government This is what a bank bailout looks like...party hard till 2009, make a fortune, then flush that toilet full of bad loans onto Uncle Sam and start over. Woohoo it's great to be a Bankster! |
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| Federal Government buying Bad Bank Loans |
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| Main Street stuck with the tab v. Wall Street free & clear |
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| FED Balance Sheet v. Labor Force Participation Rate |
Now focus on how many people are working, period, compared to our population.
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| Labor Force Participation Rate v. Total Population |
Gee...printing money doesn't seem to be helping workers. I wonder where the 1,898 mile high stack of $100's Ben's already printed has gone, if not to the labor force? Let's check those primary dealer accounts that magically go up when Ben hits the "print" button on his laptop...
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| Fed Balance Sheet v. Reserves at Primary Dealer Banks |
The big banks are parking most of this money right back at the Fed who gave it to them, where they earn a risk-free 2.5% return by buying treasuries. It's like this...the Fed prints money and loans it to the primary dealer banks at 0%. The Fed then prints more money to buy Treasury certificates from the government to finance over 70% of our deficit (and you thought it was China!). The primary dealers, flush with cash from Uncle Ben, buy those Treasuries from the Fed and the Fed pays them interest. Got it?
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| Bonuses all around, gentleman! You've earned it! |
The big banks also use the spare change to speculate in stocks...
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| Fed Balance Sheet v. SP-500 |
The banks that get free money have basically three options with what to do with it:
1. Earn a risk-free 2.5% as long as our government runs a deficit (forever).
2. Earn 22% or better a year in a risk-free stock market (definitely NOT forever but a blast while it lasts).
3. Lend money to some credit-impaired entrepreneur that desperately needs it to create a small business and some jobs.
I'm seeing two-out-of three in the charts above.
Ben has promised "Zero Percent" rates for the TBTF banks through 2015. Main Street shouldn't feel left out though...the banks are passing Zero percent rates on to you as well.
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| 1-year Certificate of Deposit yield 0% Money Market yield 0% Interest Checking yield 0% Ben saying he's helping Main St. with a straight face: Priceless |
They just aren't passing it on to where it might help...
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| 10.3% finance rate on commercial bank personal loans..if you can get one. |
For those keeping score Wall Street gets money for free. Main Street gets it for 10.3% if they already have 90% of what they need in cash and co-sign their firstborn child. Unfortunately Ben doesn't think his money-printing, dollar-debasing, bottom-80%-of- America-screwing, stock-market-manipulating policy isn't working because it's inherently flawed.
Ben thinks it isn't working because he hasn't done enough of it.
Please don't take my word for it that Ben's policies are hurting most of us...take his:
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80% of Americans are getting financially hosed by an unelected official that is both Red (Bush appointed him) and Blue (Obama reappointed him). You can't vote him out. His policies affect EVERYONE, and he has printed 20% of our entire national debt in the last four years to artificially inflate stocks, with the blessing of both parties. To date the widening gap between the stock market and reality hasn't mattered. However on September 26th, a mere 9 market days after Ben's QE3 announcement, the SP-500 was back to where it was before the announcement. This immediately led to Wall Street shills to cry for...wait for it...QE4! The case for QE4 . Like a drug addict who needs ever-stronger and frequent dosing to catch that buzz, Wall Street can't go two weeks without a stronger "fix". This time, however, is different. Stocks are near 5-year highs, yet Ben has promised QEInfinity. QE4 would only be an increase of QE3. How do you one-up "Infinite"? Why, Infinity and beyond, of course! 
Markets have risen almost non-stop 113% since 2009. They did not rise because of fundamentals or a strengthening economy (80% of America is making LESS than they were 4 years ago, with wages the same as what they made in 1995). They rose because every time markets fell Central Bankers would hint at "more QE" and the markets would dramatically reverse higher. With QE3 however, the constant implied rescue of a falling market overnight by a "more QE" hint has been replaced by a permanent rescue.. Markets have been manipulated to near all time highs by threatening a thunderstorm of money at every downturn, but the actual storms were infrequent. Now it's raining money all the time. $40 billion a month for starters.
Listen, and understand. That Fed Chairman is out there. He doesn't feel pity, or remorse, or fear. And he absolutely will not stop...ever...until your dollar is DEAD!
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| Aahhll be Prin-ting... |
Ben's textbook tells him that if he increases the money supply and credit, that the economy will grow. With nearly 80% of our country making less than they were 10 years ago and paying more for necessities because of him devaluing our dollars, the demand to get deeper in debt isn't there. We cannot solve debt problems with more debt. The money he's so freely printing is not going to the people who will use it to create jobs and grow the economy...it is going to the TBTF banks. You cannot lavish free money on a handful of people at the expense of millions and expect the real economy to grow. Stocks cannot be artificially inflated forever. We cannot print our way to prosperity. Look what happens to food and fuel prices when the printing presses are running. (That's why food and fuel are not included in the headlined inflation numbers)
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| Fed Balance sheet v. Food Prices |
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| Fed Balance Sheet v. Gas Prices |
Europe and America are near debt to GDP levels previously reached only in WWII. Evidently stopping the Nazis was easier than addressing Social Security, Medicaid and Defense spending.
Launching a worldwide money-printing effort to kick the debt-can and keep stocks artificially inflated under the guise of "helping unemployment", is going to backfire. We have record drought and crop failures this year, corn and soybean prices are already at all-time highs, and Brent Crude is fast approaching $125 per barrel. Food and Fuel will spike higher since you can't print them, and poorer countries will face civil unrest as basic necessities skyrocket in price. I believe Central Banks will quickly face two choices:
1. Stop printing money to manipulate markets, let them fend for themselves and discover what prices should be on their own (hint: a lot lower) in order to drop fuel and food prices to help the real economy from the bottom up, not the top down.
2. Continue printing money, devaluing currencies worldwide and face the simultaneous collapse of both the real worldwide economy AND the artificial stock market economy.
Ben has painted himself into a nasty corner with QE Infinity. The stock market he's so valiantly defended with his printing press for four years can no longer be "surprised" upwards with more money printing. The real world economy is about to hit a brick wall of high prices resulting from devalued currency. There is no easy way out, and Ben's focus on the artificial stock market economy is now adversely affecting the real economy, which will adversely affect the markets despite his efforts. Reality is going to assert itself whether your head is stuck in the sand or not, and the longer Ben's fantasy goes on the more violent will be Reality's return. In the meantime, life just gets harder for 80% of the country.
"I believe that banking institutions are more dangerous to our liberties than standing armies"
-Thomas Jefferson
For more on this subject from a billionaire, whom you might find more credible because,well, he's a billionaire, click the link below (Note that MY letter to clients predates his, and I have cooler pictures...maybe I can score a real job with him)
David Einhorn explains how Ben Bernake is destroying America
This article highlights the disastrous impact of money-printing on societies, and how money-printing escapades have ended throughout history (a history Bernake evidently never read):
Memo to Central Banks: You are destroying more than our currency
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| Intervention Convention...the party is over when the printing presses stop. |
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| More Importantly, each intervention is less effective as stocks rise further away from reality. The failure of endless intervention is mathematically inevitable. |
"I believe that banking institutions are more dangerous to our liberties than standing armies"
-Thomas Jefferson
For more on this subject from a billionaire, whom you might find more credible because,well, he's a billionaire, click the link below (Note that MY letter to clients predates his, and I have cooler pictures...maybe I can score a real job with him)
David Einhorn explains how Ben Bernake is destroying America
This article highlights the disastrous impact of money-printing on societies, and how money-printing escapades have ended throughout history (a history Bernake evidently never read):
Memo to Central Banks: You are destroying more than our currency
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