US Economy: In a crummy economy, why are stocks soaring? It's Ben's money

Economic growth is pitiful. Unemployment has topped 8 percent for an exhausting 43 months. The nation is careering toward a so-called fiscal cliff, and maybe a recession.

So why is the Dow Jones industrial average, that trusty gauge of corporate America’s strength, just 4 percent shy of an all-time record? And why are the smaller public companies measured by the Russell 2000 index almost there already?

Start with two words: Ben Bernanke.

Bernanke, the Federal Reserve chairman, this week announced unprecedented measures aimed at lifting the sagging economy — and boosting the prices of assets like stocks and houses. The market rallied all summer in anticipation of such a move.

The Fed made an open-ended promise to purchase $40 billion a month in mortgage bonds and said it will keep interest rates low through 2015, even if the economy starts to improve.

Note EU-Digest:  The above Ben Bernanke saga can best be classified as a Fata Morgana.

Read more: In a crummy economy, why are stocks soaring? It's Ben's money | The News Journal | delawareonline.com

US Economy: Ben Bernanke says "U.S. Debt at Unsustainable Level"

While the official debt is sitting at $15.66 trillion, the additional amount of unfunded liabilities owed by the United States government is a mind-numbing $115.49 trillion, bringing the total debt level to $131 trillion . Even Ben Bernanke is finally warning Congress that things aren't as rosy as the Federal Reserve boss has tried to paint them.

Bernanke's words to the Budget Committee are ominous, to say the least: "By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit."

Considering that it would take more than two years of the entire world's GDP to pay off all of the U.S. government's current outlays and liabilities, it's a wonder that America's debt rating has only been downgraded once. Additionally, the federal deficit for the first half of FY 2012 alone is greater than the entire GDP of Indonesia. Amazingly, politicians don't seem intent on actually doing anything about this.

Contrary to modern economic assumptions, devaluing a currency has proved through history to be the undoing of many an empire or nation. For instance, the collapse of the Roman Empire can be traced through their monetary inflation and onerous tax burdens used to sustain the "panem et circenses" (bread and circuses) public warfare/welfare programs that keeps the inhabitants of Rome content enough to not revolt.

For more: Ben Bernanke: U.S. Debt at Unsustainable Level

Europeans See Crisis Near End, Bernanke Warns on Recovery - by Shamim Adam and Andy Sharp

European leaders signaled rising confidence that their region’s crisis is near an end, while Federal Reserve Chairman Ben S. Bernanke warned that a U.S. recovery isn’t assured.

The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes.

Bernanke, who cited “green shoots” of recovery in the U.S. in March 2009 only to see his nation’s jobless rate climb to 10 percent seven months later, said in remarks published yesterday “it’s far too early to declare victory.” The jobless rate remains too high and policy makers don’t rule out further options to boost growth, he said in a transcript of an interview with ABC News anchor Diane Sawyer provided by the network.

Bernanke’s comments contrasted with a series of declarations by Monti during a visit to Japan, with the Italian leader saying a solution to Greece’s challenges is almost accomplished, Spain is employing discipline and Italian actions have helped stop deterioration in Europe’s woes.

For more: Europeans See Crisis Near End, Bernanke Warns on Recovery - Bloomberg

US economy lacks strength to sustain gains says Ben Bernanke

Federal Reserve Chairman Ben Bernanke says the US economy still lacks enough spending and investment to sustain its recent gains.

Bernanke says consumer demand remains weak relative to its level before the Great Recession. He notes that other contributors to economic growth - including borrowing and trade - have declined. 

Ben Bernanke said the slow recovery from the Great Recession and 2008 financial crisis illustrates how vulnerable the global economy is, while urging economic policymakers to learn from that lesson.

For more: US economy lacks strength to sustain gains: Ben Bernanke - The Economic Times

US Economy: Bernanke calls Bloomberg report on US Fed $13 billion loans to banks "wildly inaccurate"

Bloomberg Markets Magazine last month published an article called "Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress." The article was widely referenced by other news organizations, including The New York Times.

The Bloomberg article said the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system when all guarantees and lending limits were added up.

While Bernanke did not mention Bloomberg or any other news organization by name, he said in a letter to lawmakers that the figure and other estimates of larger total amounts of lending, were "wildly inaccurate." On any given day, Fed credit from its emergency liquidity programs was never more than about $1.5 trillion, he said.

Matthew Winkler, editor-in-chief of Bloomberg News, said in a statement: "Bloomberg stands by its reporting." The news agency also released a lengthy point-by-point response to the Fed staff memo.

The US Fed had strenuously resisted providing information about discount window borrowers, arguing that banks would be unwilling to use the lending facility if their actions risked becoming public out of fear they could be seen as weak.

When the data was released in March, it showed that banks from Europe had drawn tens of billions of dollars from the U.S. central bank during the crisis. In addition, the Fed was instructed by the new Dodd-Frank financial reform law to divulge borrowing from other lending programs it created to stabilize financial markets during the economic meltdown. A December 2010 data release revealed that major banks had been big beneficiaries from some of those programs.

EU-Digest

Ben Bernanke offers no hint of new Fed action to aid economy in Jackson Hole speech - by Neil Irwin

The recent swings in world financial markets pose risks to growth, Federal Reserve Chairman Ben S. Bernanke said Friday, and the Fed must be “responsive to changes in the economy.” But he offered no hints that any specific action by the central bank is on the way.

Bernanke did not spell out what any new steps by the Fed to bolster the economy might look like, saying only that the central bank will “employ its tools as appropriate” and adding that the next Fed policy meeting, in September, has been extended from one day to two to allow a fuller discussion of options.


For more: Ben Bernanke offers no hint of new Fed action to aid economy in Jackson Hole speech - The Washington Post

US Economy: Bernanke Ignores Basic Laws of Economics - John Tamny

Eager to justify his latest dose of "quantitative easing" (QE) amid increasing skepticism even in Washington where the false concept of getting something for nothing is religion, Bernanke proclaimed that lower interest rates wrought by QE will increase stock prices on the way to more consumer wealth and confidence. According to our Fed Chairman, this might boost spending, and "Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." One can't make this up.

But if the sentient among us could climb inside Bernanke's dopey dreams for a moment a la the film Inception, we might insert the part about production preceding demand so as to make his Utopian visions in the middle of the night whole. In Bernanke's case, it's apparent that he always wakes up before the production aspect enters his incomplete picture. Absent it, the increased demand that Bernanke presumes is no such thing. That's the case because the wealth effect that he naively believes to exist is non-existent.

As a result, Americans and the world will continue to suffer a Fed head that, with every utterance shows how very unequal he is to his job. A self-proclaimed expert on the 1930s, Bernanke continues to intervene in the economy despite clear lessons from that decade showing that government intervention then turned what should have been a brief downturn into a Great Depression.

For more: Bernanke Ignores Basic Laws of Economics | Value Expectations by The Applied Finance Group

US Fed World Currency Poker Game: Thirty-Three Hour Race May Induce ECB Surrender ?

Federal Reserve Chairman Ben S. Bernanke’s push to jump-start the U.S. economy this week may weaken the dollar, forcing at least one other central bank to add its own stimulus to offset a rising exchange rate.

Bernanke is set to embark on an unprecedented second round of unconventional monetary easing, one result of which may be a cheaper dollar that boosts U.S. growth by helping American exports. A related consequence: stronger currencies abroad, threatening European and Japanese expansion.

With the major central banks all announcing decisions within 33 hours this week, fallout from the Fed could cause Bank of Japan Governor Masaaki Shirakawa to do more for his economy and Bank of England Governor Mervyn King to leave the door open to more aid. Even as European Central Bank President Jean-Claude Trichet holds the line against inflation, he may eventually change course if the euro surges, while emerging markets are already acting to restrain currencies.

For more: Thirty-Three Hour Race May Induce ECB Surrender - Bloomberg

Bernanke Preps Markets For Further Fed Action Despite Questions About Impact

Federal Reserve Chairman Ben Bernanke further prepped Wall Street on Friday for another round of Fed activity to lower interest rates despite the risks it poses and questions about its effectiveness.

In a morning speech delivered at a conference organized by the Federal Reserve Bank of Boston, the Fed chairman said that "[g]iven the [Fed's] objectives, there would appear -- all else being equal -- to be a case for further action."

For more: Bernanke Preps Markets For Further Fed Action Despite Questions About Impact

US Economy: Bernanke soothes fears over US economy - by Dave Shellock

 Growing fears about the outlook for the US economy sent nervous investors scrambling for the perceived safety of government bonds and the yen for most of this week as equities and commodities racked up hefty losses.
But there was a shift in sentiment on Friday as comments from Ben Bernanke, chairman of the Federal Reserve – plus a better than expected revision to US growth numbers – appeared to soothe frayed nerves.

For more: FT.com / FT's rolling global market overview - Overview: Bernanke soothes fears over economy

US Economy: FOMC Move a Signal of Alarm About Econ, Infl Outlk

Panic? Or just precaution? Take your choice of "P" words, but there's no question Federal Reserve Chairman Ben Bernanke and all but one of his fellow policymakers took a calculated risk in deciding to go in for what amounts to some additional monetary stimulus at their Aug. 10 Federal Open Market Committee meeting.

In deciding not to allow the natural shrinkage of the central bank's balance sheet that otherwise would have taken place, the FOMC was basically announcing to all the world that it has lost confidence in the economic recovery. It was not only signaling that the downside risks to economic growth have intensified, but also, implicitly, that deflationary threats have worsened.

For more: Analysis: FOMC Move a Signal of Alarm About Econ, Infl Outlk | Real Time Market News | Need to Know News

Daily Intel: US Economy - Hank Paulson Sees Himself and Ben Bernanke As a Team of Outlaws - by Jessica Pressler

For the complete report from the New York Magazine click on this link

US Economy - Hank Paulson Sees Himself and Ben Bernanke As a Team of Outlaws - by Jessica Pressle

Joe Nocera had a long sit-down with the Treasury secretary for his book a dramatic Page One Times feature today, in which Paulson describes what was going through his mind during the early weeks of the financial crisis, as he raced from one problem to the next, trying to solve them, only to have another one appear on the horizon. “I feel like Butch Cassidy and the Sundance Kid," he told the Times. "Who are these guys that just keep coming?" Paulson is super-pleased with this analogy, you can tell. Like when he describes how Ben Bernanke asks him to go ask Congress for help, "it's just like when Butch, the thoughtful one played by Paul Newman, comes up with the idea for the two of them to go to Bolivia because there's gold there", he says.

See? They are partners till the death. Just like B&S! Only: no. No, no. No. This is basically like the worst metaphor ever for Paulson to have used. Not only were Butch Cassidy and the Sundance Kid robbers — immoral, lawless, murdering robbers — they were feckless robbers. They had no idea what they were doing! But maybe Bernanke and Paulson also identified with that:

bloomberg.com/EU-Digest - "Fire Bernanke ? - There he goes again" - Fed `Rogue Operation' Spurs Further Bailout Calls - by Craig Torres

Thomas-Jefferson -"When patience has begotten false estimates of its motives, when wrongs are pressed because it is believed they will be borne, resistance becomes morality."

For the complete report from Bloomberg.com/EU-Digest click on this link

"Fire Bernanke ? - There he goes again" - Fed `Rogue Operation' Spurs Further Bailout Calls - by Craig Torres

A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress for more help.This time to prop-up the student loan lenders.

``It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced ``a backstop for the entire financial system.''. Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions. The Fed's loans to Bear Stearns were ``a rogue operation,'' said Anna Schwartz, who co-wrote ``A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.``To me, it is an open and shut case,'' she said in an interview from her office in New York. ``The Fed had no business intervening there.'' There are already indications that investors perceive the safety net to be widening as a result of the actions by Bernanke, 54, and New York Fed President Timothy Geithner. The Bear Stearns bailout and an emergency facility to loan directly to government bond dealers triggered a decline in measures of credit risk for investment banks and for Fannie Mae, the Washington-based, government-chartered company that is the nation's largest source of funds for home mortgages.

``If there is a public purpose in lending to investment banks, and taking dodgy mortgage securities as collateral, then it is a question of degree about other potential lending,'' Vincent Reinhart, former director of the Fed board's Division of Monetary Affairs, said in an interview. ``That's the consequence of crossing a line that had been well established for three- quarters of a century.'' Note EU-Digest: 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 1807 Thomas Jefferson said to M. deStael, "When patience has begotten false estimates of its motives, when wrongs are pressed because it is believed they will be borne, resistance becomes morality." It is time for the people to take destiny in their own hands and clean up the mess, greed and inequality this so-called "Global Free Market Economy" has brought the world.

EU-Digest: Consumers Must Revolt - Federal Reserve Chairman Ben Bernanke throws up smokescreen to apease consumers - Will Europe follow suit

Federal Reserve Chairman Ben Bernanke throws up smokescreen

Special report on the sick state of the financial community and their collaboration with the political system

Consumers Must Revolt - Federal Reserve Chairman Ben Bernanke throws up smokescreen to appease consumers - Will Europe follow suit

The Federal Reserve Board moved Friday to place new regulations on the nation's credit-card industry that would make it more difficult for lenders to raise interest rates and would give consumers more time to pay their bills. They say if enacted, the regulations would be the most sweeping change in decades, offering consumers more protection against late fees and stopping lenders from making credit offers that regulators deem to be deceptive. "The proposed rules are intended to establish a new baseline for fairness in how credit-card plans operate," Federal Reserve Chairman Ben Bernanke said.

All this is a smokescreen by Federal Reserve Chairman Ben Bernanke to appease disgruntled consumers, and to cover-up a financial system which has gone out of control. Central banks have, and are continuing to bail out banks with tax payers money. Most of these banks have, and are continuing to act irresponsibly and without accountability. It is time for a consumers revolt and to take matters in their own hands by stopping to pay their credit card payments until legislation is passed to correct these inequalities. Leaving it up to political legislators to correct the problem will only mean more delay and certainly work in favor of the banking institutions and credit card companies to continue their uncontrolled and devious practices. The power lies with the consumers, not with the financial community and the time to act is now.

Xiinhua: US Economy - Fed chief: Outlook for U.S. economy has worsened - by Yan Liang

For the complete report from Xinhua click on this link

US Economy - Fed chief: Outlook for U.S. economy has worsened - by Yan Liang

.S. Federal Reserve Chairman Ben Bernanke told Congress Thursday that the outlook for the economy has worsened in recent months and the central bank is ready to act "as needed" to support growth. Although the forecast envisions an improving picture, Bernanke said "it is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further." The Fed will be carefully evaluating incoming information bearing on the economic outlook and "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," the central bank chief said.