Bernanke's Zugzwang

[trysail]

How the bloody hell is the Federal Reserve going to get out of the corner it's painted itself into?



By running the printing press like a madman, "Helicopter" Ben Bernanke has succeeded in recreating the economic bubble that got the U.S. into this mess in the first place.


By reducing interest rates to nothing, the Federal Reserve has forced those with savings back into the stock market and real estate. Bernanke & Co. has forced speculative behavior and risk-taking down their throats.

AND EVERYBODY KNOWS IT.

So— riddle me this— how is the Fed going to get out of this mess without sparking a panicky rush for the exits?

[sufisaint]

They are pumping into a tire with a severe leak just so it can look like it can function as tire but the second pump is removed it will collapse...that is my analogy .... and the economic vultures are preparing for a feast...

[JohnnySavage]

Originally Posted by trysail

How the bloody hell is the Federal Reserve going to get out of the corner it's painted itself into?



By running the printing press like a madman, "Helicopter" Ben Bernanke has succeeded in recreating the economic bubble that got the U.S. into this mess in the first place.


By reducing interest rates to nothing, the Federal Reserve has forced those with savings back into the stock market and real estate. Bernanke & Co. has forced speculative behavior and risk-taking down their throats.

AND EVERYBODY KNOWS IT.

So— riddle me this— how is the Fed going to get out of this mess without sparking a panicky rush for the exits?

What's the alternative?

In for a penny, in for a pound.


If they let the interest rates go up, the housing market dies. That kills construction. It also destroys the #1 investment of the average joe.

It's quite a pickle we are in.

[trysail]

Originally Posted by JohnnySavage

What's the alternative?

In for a penny, in for a pound.


If they let the interest rates go up, the housing market dies. That kills construction. It also destroys the #1 investment of the average joe.

It's quite a pickle we are in.

The highly volatile, non-linear mathematics that dominate outcomes at market extremes are asymmetrical. Very few people understand and appreciate that fact.

Any fool can carry on. It takes a wise man to shorten sail in time.

-Joseph Conrad

At the extremes, the market is not a random walk. At the extremes, the market is more likely to destroy fortunes than to create them.

-Peter L. Bernstein
Against The Gods, The Remarkable Story of Risk
New York, NY 1996

I can calculate the motion of heavenly bodies, but not the madness of crowds.

-Sir Isaac Newton

It amazes and amuses me to watch people put 100¢ at risk in order to make an extra hapenny. That's the definition of irrational.

[JohnnySavage]

Originally Posted by trysail

The highly volatile, non-linear mathematics that dominate outcomes at market extremes are asymmetrical. Very few people understand and appreciate that fact.

-Joseph Conrad

-Peter L. Bernstein
Against The Gods, The Remarkable Story of Risk
New York, NY 1996

-Sir Isaac Newton

It amazes and amuses me to watch people put 100¢ at risk in order to make an extra hapenny. That's the definition of irrational.

So what's the alternative?

[JohnnySavage]

If interest rates go up, what would that do to the deficit and debt?

[JAMESBJOHNSON]

Originally Posted by JohnnySavage

If interest rates go up, what would that do to the deficit and debt?

Make them more than the economy can repay.

Its like a woman with too many kids. They can eat more than she can provide.

[trysail]

Originally Posted by JohnnySavage

So what's the alternative?

Zugzwang is a wonderfully useful word.


http://en.wikipedia.org/wiki/Zugzwang

[kbate]

“The long run is a misleading guide to current affairs. In the long run we are all dead.”
― John Maynard Keynes, A Tract on Monetary Reform

[Anquan Jihad]

the problem ISNT the FED

the problem is that the FEDS effort isn't bearing fruit!

[kbate]

Originally Posted by Anquan Jihad

the problem ISNT the FED

the problem is that the FEDS effort isn't bearing fruit!

Sure it is, it only took 5 years of 0% interest before the banks felt they'd made enough investing in order to begin lending to home buyers again. Now the housing market is moving again and people are buying and unless they're total losers are able to get loans.

Why the hell do you think the DOW is 15000? Because the economy has been the greatest ever since Obama took over?

In another 3 years, we will be back to 5% unemployment and most of the glut of foreclosure houses will be mortgaged again with new buyers all backed by FHA loans under the new lending regulations that make foreclosure about impossible.

[Anquan Jihad]

it is a balloon

held aloft

not on its own

but by force

the force must be maintained

or it implodes

the question is

will the FED succeed in making the balloon float on its own

or

will the balloon

turn

to

lead?



I believe, the lead ballon will be obvious

The first few months of the next R administration

[kbate]

thus why I posted the Keynes quote - which was his answer to where his system would end up . . . "I don't care, I'll be dead before the crash comes."

[islandman]

I suppose we should get on the gold standard again.

[kbate]

Originally Posted by islandman

I suppose we should get on the gold standard again.

Yes, but this time a dollar will only represent 0.00000000000001 ounces of gold.

[trysail]

The more I think about it, the more it scares me. I just heard David Stockman call the Federal Reserve "a serial bubble creator."


The only reason the ten year U.S. Treasury bond has a yield-to-maturity of 1.90% is because the traders have been told by Bernanke (and the Fed) that it's perfectly safe to ride the yield curve. The traders know they can finance that 10-year Treasury purchase at a repo rate of 0.25% and that spread is going to go on until "Helicopter" Ben tells them otherwise (as he has promised to do). All those bond traders think they're going to be able to unwind their carry trade at the same time every other bond trader in the world is desperately trying to unwind their own.


What do you think is going to happen the minute all those bond traders get the slightest hint that the Fed is going to taper off its "Quantitative Easing" program?


I'll tell you what's going to happen. The bid-ask spread is instantaneously going to go to 200 basis points— assuming there are any bids at all (alright— I admit this is a bit hyperbolic, but people are going to be astonished at just how fast the whole bond market goes south.


This is a fucking accident waiting to happen— it ain't a question of "if."



Goddamn Bernanke should be taken out and shot for what he has done. He knows it, too. That's why he's attempting to get the hell out before the shit really hits the fan. He's trying to hang on just long enough to dump the whole fucking mess he's created into some other poor dumbfuck's lap.

[4est_4est_Gump]

Originally Posted by JohnnySavage

What's the alternative?

In for a penny, in for a pound.


If they let the interest rates go up, the housing market dies. That kills construction. It also destroys the #1 investment of the average joe.

It's quite a pickle we are in.

I understand your concern, but the longer you keep the market from its necessary correction, the worse the crash will be when it comes.

That is the question I have been asking for well over a year now; if the Fed and the Democrats, led by the likes of Krugman, have hit the nail on the head economically, then when do they ease out of their program? It is a clear admission of failure that they have not done so because the approach is obviously wrong.

If the housing market dies, it is clear that people will still need a place to live, that means apartments, either built or renovated out of existing homes whose size has for the moment priced themselves out of the market or lofts created in the cities as is the trend in several midwestern cities.

[mercury14]

Originally Posted by 4est_4est_Gump

I understand your concern, but the longer you keep the market from its necessary correction, the worse the crash will be when it comes.

That is the question I have been asking for well over a year now; if the Fed and the Democrats, led by the likes of Krugman, have hit the nail on the head economically, then when do they ease out of their program? It is a clear admission of failure that they have not done so because the approach is obviously wrong.

If the housing market dies, it is clear that people will still need a place to live, that means apartments, either built or renovated out of existing homes whose size has for the moment priced themselves out of the market or lofts created in the cities as is the trend in several midwestern cities.

If we let interest rates go back up what plan do you have to finance the debt? And when the fragile recovery stalls out what's your plan to get it moving again? Austerity?

Yeah you don't have a plan, you have ideology that has never been shown to work. Or has been shown not to work. And your comment about the housing market exposed your laughable ignorance on economic issues. You actually sounded less stupid when you tried to assert that the stock market is a lagging indicator of the economy.

[JAMESBJOHNSON]

We can live indefinitely off of paper swapping and lawsuits and FBI investigations and crisis counseling. Its true you cant eat or drive what your shrink does but we're too fat, and there will be less pollution from driving less.

[4est_4est_Gump]

And remember, all of this plan was going to get us under 5% in a year...


The Education Bubble is also rearing its ugly head and now we see Obama doing the predictable, floating a student amnesty for all of his cultural studies peeps who will never, ever possibly recoup their student debt in earnings.

[4est_4est_Gump]

PS - When the dominoes start to fall, they will all fall rather quickly. They are teetering now in Europe and Asia, especially Japan...

I'm Hungary for some French-fried Cypriotic €PIIGS!
A_J, the Incredulous
__________________
"Ceterum autem censeo, Liberalismum esse delendum"
A_J, the Stupid

[JAMESBJOHNSON]

Originally Posted by 4est_4est_Gump

And remember, all of this plan was going to get us under 5% in a year...


The Education Bubble is also rearing its ugly head and now we see Obama doing the predictable, floating a student amnesty for all of his cultural studies peeps who will never, ever possibly recoup their student debt in earnings.

HATER! Gay studies is critical to creating tolerance in all Americans. Once we're okay with all these cocksuckers we'll be ready to embrace Juan Valdez and his burro.

[kbate]

Originally Posted by 4est_4est_Gump

And remember, all of this plan was going to get us under 5% in a year...


The Education Bubble is also rearing its ugly head and now we see Obama doing the predictable, floating a student amnesty for all of his cultural studies peeps who will never, ever possibly recoup their student debt in earnings.

Ah, but you see - the way you execute a student loan amnesty is that you print money and transfer it to the banks who are holding the bonds which underwrite the money printed to make student loans - Bank Stocks go up, the DOW follows and the students vote democrat so everyone is happy and nobody is hurt.

With that debt erased, they no longer need seek jobs paying $50,000 or higher and can fill in the Walmart greeter deficit and qualify for an Obamacare subsidy and continue voting democrat.

[4est_4est_Gump]

Originally Posted by JAMESBJOHNSON

HATER! Gay studies is critical to creating tolerance in all Americans. Once we're okay with all these cocksuckers we'll be ready to embrace Juan Valdez and his burro.

*chuckle*

A PhD in Gender Studies doesn't even qualify you to run the MickyD's cash register...





... they know how badly you need the cash and how low your morals are.

[4est_4est_Gump]

Originally Posted by kbate

Ah, but you see - the way you execute a student loan amnesty is that you print money and transfer it to the banks who are holding the bonds which underwrite the money printed to make student loans - Bank Stocks go up, the DOW follows and the students vote democrat so everyone is happy and nobody is hurt.

With that debt erased, they no longer need seek jobs paying $50,000 or higher and can fill in the Walmart greeter deficit and qualify for an Obamacare subsidy and continue voting democrat.

Dat's funny!


Thanks. I needed that.