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Bernanke's Circus Show Was Akin To Reality TV .. Scripted And Boring

Bernanke's Circus Show Was Akin To Reality TV .. Scripted And Boring

Ben Bernanke, chairman of the Federal Reserve, made history today when for the first time in the 98 year history of The Federal Reserve, he held a press conference and fielded questions from the press. He spoke about his interest rate decision and other matters currently in the spotlight including inflation, quantitative easing and how the Fed plans on dealing with an economy that still trying to find a pulse despite record money printing.

I will give you my personal impression. It was a farce and almost reminded me of the Netflix Q&A that followed the release of their first quarter results the other day. That is, it was as watered down as you are going to see.

Once you go past his speech, which was given in a tremolo style which obviously showed he was nervous because he was about to try to sell a bunch of bullshit to the reporters that had gathered and to those watching live around the worked, we got to hear some of the most watered down and meaningless questions that this "press corps" had to offer.
Here are some of Bernanke's key points:
  • The Fed cut its growth estimate
  • The Fed raised its estimate of inflation this year to a range of 2.1 percent to 2.8 percent, taking into account a recent surge in oil prices. However, it bumped its core inflation forecasts only marginally to a 1.3 percent to 1.6 percent range. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.  Yet, he failed to really go on at length about the 30% surge in oil, the rising costs of fuel to the consumer and the record food prices being experienced by populations not only in the U.S. but around the world.  This is why I personally hate that inflation numbers strip out what really counts.
  • The Fed lowered its forecast on unemployment but said it would stay elevated over its three-year forecast period. As is usual, these numbers are skewed because we are consistently getting first time jobless claims in the 400,000 range and the unemployment figure does not factor people that have stopped looking for work altogether.
  • Bernanke faced a boatload of questions about the dollar. The Fed is getting some blame because of its efforts to broaden credit availability. The blogger community, including me, was getting a kick out of tweeting the dollar dipping as he was speaking while gold seemed to tick up 10 cents with every word that came out of his mouth.  
  • Bernanke also said the first step in tightening interest-rate policy could occur when the Fed stops reinvesting the proceeds of its bond holdings.
  • Bernanke expressed confidence that a surge in the cost of oil and other commodities would be transitory and not spark broader inflation. Read my note above.  He will not bend on his position that the Fed's monetary policy is contributing to the spike in oil and commodities.  He's either just plain ignorant or he believes his own lies.
  • On the issue of Bond Buying he is insistent that the massive expansion of the Fed’s balance sheet helped pull the economy out of its deep recession. However, I question this thinking in light of the fact that we are far from out of the woods.   QE3 was not ruled out.
If you are interested, and have time to kill, I urge you to read the transcript of the Q&A session that followed his statement. 

I go a kick out of CNBC's Steve Liesman who has been Bernanke's biggest ass kisser on the network.  You can often catch him sparring with Bernanke and Fed critic Rick Santelli.  Boy I wish it was Santelli asking ALL the questions.  Now that would have been worth the price of a bucket of popcorn!   Liesman started by making sure that Bernanke was stroked first. "Mr. Chairman, first thanks for doing this. This is a tremendous development."  Oh please!  Pass the formage!

"There are critics who say that fed policy has driven down the value of the dollar and lower value to the dollar reduces American standard of living.  How do you respond to the criticism that essentially fed policy reduced the American standard of living? " asked Liesman. 

In typical Fed speak, Bernanke deflected the issue and said that the dollar is Geithner's responsibility.  Bernanke, being a supply and demand guy should know that the more you print of something the less it is worth.  In that regard, Bernanke should have addressed the Federal Reserve's money printing (infusing massive liquidity) and should have at least had the balls to admit that some of his actions are indeed lowering the standard of living for Americans.   This point, no matter how it is argued, can not be debunked.  What good is a higher stock market, which has been the main benefactor of the liquidity, if the value or purchasing power of the dollar is lowered?   There is a reason why the dollar is getting hammerred...there are simply too many of them in circulation backed by massive debt. 

Said Bernanke, "First, we are trying to maintain low and stable inflation by our definition of price stability. By maintaining the purchasing value of the dollar, keeping inflation low. That's obviously good for the dollar. The second thing we are trying to accomplish is get a stronger recovery understand achieve maximum employment."

Wait a second, "maintaining the purchasing power of the dollar"?  Is he kidding us?  Fed policies have done exactly the opposite.  This man can not be trusted if he can't see the effects of his policies.  I offer up an invitation to any reader to show me how the purchasing power of Americans has been increased.

Bernanke also touched upon and at least to me, confirmed that the purpose of QE was to ramp the stock markets.  This should be disturbing to anyone who thinks that the stock  markets are a free market.  News flash...they aren't!

Said Bernanke:
"Our view is based on past experience and based on analysis, the end of the program is unlikely to have significant effects on financial markets or on the economy. The reason being that first, just a simple point, that we hope that we have tell graphed today, we hope that we have communicated what we are planning to do and the markets have well anticipate the this step.

And you would expect that policy steps which are well anticipated by the market would have relatively small effects because whatever effects you have have been capitalized in the financial markets.

Secondly we subscribe generally to what we call here the stock view of the effects of securities purchases by which I mean that what matters primarily for interest rates, stock prices and so on is not the pace of ongoing purchase, but rather the size of the portfolio that the Federal Reserve holes.[sp]"
He then added in reply to another question:

"First, I do believe that the second round of securities purchases was effective. We saw that first in the financial markets. The way monetary policy always works is by easing financial conditions. We saw increases in stock prices. We saw reduced spreads in credit markets. We saw reduced volatility. We saw all the changes in financial markets and quite significant changes one would expect if one were doing a normal easing of policy regarding the federal funds rate."
And then in answer to another question:
"we view our monetary policies as being not that different from ordinary monetary policy. It's true that we used some different tools, but those tools are operating through financial conditions and we have a lot of experience understanding how financial conditions changes in interest rates changes in stock rates, so on, how they affect the economy, growth, et cetera."
I can go on and on about the press conference but the bottom line is that Bernanke ducked the real issues and the reporters are guilty of not hammering home the tough questions, letting Bernanke get away with trying to blame the rise in food and oil on supply and demand issues alone.  Yes, to his credit Bernanke touched upon the geopolitical issues currently impacting the price of oil, but those issues don't explain record surges in copper, silver, gold, cotton, rice, wheat or corn.   If those items continue to be priced in U.S. dollars then it goes without saying that a lower dollar buys you less of these goods which in turn causes the price of those goods to rise.  We aren't fooled.  Gold and silver are telling us a different story.  Inflation is real and cannot be shunned as Bernanke tried.

I came across a piece from vocal Fed critic Ron Paul.  What follows is from a transcript of a reply he provided to after the press conference.  Said Ron Paul:
It’s smooth talking, to make current policy sound reasonable, and let it go at that. Because they never admit anything. When it comes to prices, it’s never their fault. I mean, how many different things did he mention about why prices go up, why we have inflation? He never admits it’s the inflation of the money supply that’s the problem.

When he was asked about the dollar, he said, “Well you know, the person in charge for the value of the dollar is the secretary of the Treasury.” Well, Bernanke can triple the money supply, and then he wants to duck the issue that he’s responsible.

He says, “Our position is a strong dollar” ... with constant devaluation, even while he spoke it was devaluing. Against gold, it went down 1.5%. It doesn’t make any sense.

So, I think he does a good job for what he has to do, and that is try desperately to make a very, very failed system sound plausible. But from my viewpoint, it isn’t plausible, it’s not workable.
And there you have it.  When you go grocery shopping this week and notice that the price of your food has shot up, that your gasoline costs more and that the clothes on your back are also more expensive to replace, think about Bernanke's sugar coated (wait..suger costs more too) "supply and demand" logic and forget the fact that the money you are using to pay for those goods is worthless thanks to the tripling of the money supply. It's not Ben's's the sudden worldwide addiction to Wheat and rice products and the substitution of leather for cotton....a more humane way of making clothing.  Riiiiight!!

Many including myself were left with the impression that this entire press conference was peppered with prepared questions and equally prepared answers.   In fact, its easy to liken this circus to a reality show.  Boring and scripted.

As I noted earlier...the dollar falling and gold rising with every word that came out of Bernanke's mouth told the real story.  The rest of the world was calling bullshit to his nonsensical commentary.  Let's face's almost 4 years now since the economic crisis dessimated the nation.  Have Bernanke's policies helped the average American or have they fattened the pockets of the big banks, their executives and corporations?  If you selected the latter you are absolutely right.  The average American's wages (if they are lucky enough to have a job) have not seen incomes increase to the extent that their cost of living has.  All the funny math in the world cannot hide the fact that it is markedly harder to "just get by".

Come on Ben....I was born long ago but I wasn't born yesterday.