USA - Run By 'Old Coots' With Childish Intellects

So I point out to my son that the local *comic book store* just closed shop:

CaptiousDad - Look John, the comic book store is out of business now....It's a bad economy right now, do you know what that means?

Son - Nah.

CaptiousDad - It means that a lot of people don't have jobs....that a lot of people don't have any money these days.

Son - Well....then they should just print more money!

HAH!!!

There you have it - the current national economic policy can be intuited by a 7.32 year old!

While my son is certainly very precocious....he hasn't read a lick of economics and so doesn't understand it a little bit - a la Bernanke, Obama, Bush, et al.

Talking To A Runaway Printing Press

I might of linked to one of these videos a while back, but am not sure.

Nonetheless it's worth another watch:

Greg Mankiw - In Favor Of Money Printing

Listen to that Harvard Economics professor - Greg Mankiw - the Moron whom I harrassed into removing ALL COMMENTS from his econo-aliterate blog:

My view is that QE2 is a modestly good idea. I say it is a "good idea" because, like Ben Bernanke, I am more worried at the moment about Japanese-style deflation and stagnation than I am about excessive inflation. By lowering long-term real interest rates below where they otherwise would be, QE2 should help expand aggregate demand. I include the modifier "modestly" because I don't expect these actions to have a very large effect.

It's amazing that a purported *economics* professor thinks printing money a modestly good idea - even if he mumbles his trademark hedging.

But then again macroeconomics is a junk science.

And Greg Mankiw is nothing short of a self-aggrandizing slimeball.

Of course he, and the other plutogogues, are afraid of deflation.

In that case he might have to lower the a$$-ripping price of his textbook! In that case his salary might go down!

So what if the printing press hits Joe Blow at the pump and in his grocery bills...

And so what if the disgustingly-euphemized QE eventually leads this nation to a hyperinflationary ruin...

Just so long as Greg Mankiw's annual book royalties remain artificially inflated.

For more Mankiw bashing - click here.

Moronic QE - QED

Inflation - Illusions and Delusions

In a couple of months, New Yorkers will get slammed with huge train and subway fare increases.

Using the subway will cost 17% more in January.

And tickets on the commuter rails (Metro North and Long Island Railroad) will jump an average of about 10%.

Recall also that they recently raised the parking fees at my wife's train station outside of Boston; they raised it by $2 a day or $500 for the entire year!

Electricity bills here in NY are already slated to rise 12% over the next 3 years.

Water bills are rising everywhere.

Credit card companies and banks are sliding all sorts of new fees onto their customers.

Property taxes have continued their inexorable rise; as has college tuition.

Health insurance rates are still creeping up AND they are also finding inventive ways to JAM their customers. Recall the $500 co-pay they hit me with for my knee MRI.

Remember when cable TV installation/wiring used to be free? You know, because they were going to recoup that investment in spades, right off the bat?

Well, I had Verizon FiOS expanded here - actually it was already fully installed upstairs - so all I had the guy do was wire (re-wire) one bedroom and drop another router into the basement. Guess what...

THEY CHARGED ME $450!!!

No one, in the course of ordering the expanded service, said a word about *cost*. I just assumed it would be free - as it had been throughout my lifetime.

I'm paying $3.09 a gallon for gas, again.

Also, the cost of *saving* has skyrocketed because money market interest rates are around 75 basis points. In this same vein, the cost of saving for retirement has also INFLATED by 10-20% via the furious bear market stock rally. Think about it. Y'all are investing in the DOW at near 11,000 when you could instead be buying shares closer to 8,000 - where it's inevitably going.

And yet somehow, these reality-inverters stand up and assert:

They have the balls to say there's no inflation!!!

Sure, some things have in fact gone down in price BUT they are mostly in the unnecessary or frivolous categories: iPods, pleasure boats, commercial real estate, Floridian condos, etc.

Bernanke obviously subscribes to the theory that if one going to lie, they may as well tell a REALLY BIG ONE.

See also my post from three years ago - What Inflation? - Soybeans and the Lying CPI.

Ben Bernanke...

....and Alan Greenspan, as *professionals*, were not allowed to participate!

I especially chuckled at the screaming, *bubble within a bubble* analogy.

It is somewhat surreal these days, to look about and see people still making highly leveraged investments in over-priced stocks, bonds, and real estate, still squandering all their *home equity* for their brats' useless college education, and still scurrying around in much the same manner that they always did. And, not to pick on the lumpen masses....note that *governments* have also been recidivating.

Last year's financial meltdown wasn't simply a one-off event.

Unfortunately, the end-of-the-worlders will eventually (soon?) have their day.

A Pyramid Scheme Of Cards

So, the latest science fictional narrative on how Big Government is going to extend Big Ponzi Scheme is this:

The Fed to Buy Long Dated Securities

Dec. 1 (Bloomberg) -- Treasuries rose, pushing yields to record lows, as Federal Reserve Chairman Ben S. Bernanke said the central bank may purchase Treasuries and target long-term interest rates to combat the deepening recession.



So by what means exactly are they going to buy Treasuries?

By issuing more of them? By issuing more short term and more LONGER TERM (100 year) bonds?

Ben Bernanke should be in a padded room - within a jail.

Here's an excerpt from a post I wrote one year ago:

So it's difficult to understand why investors would get all excited about the Fed temporarily buying up a few billion in government securities, when we've got a Federal government that's simultaneously and permanently issuing and then constantly rolling over many, many times that amount. It's an escape into dreamland to believe that Fed actions have any chance at all of providing more "liquidity" when the Federal government's deficits suck up in a matter of weeks every bit of liquidity that the Fed has provided in a year. These Fed actions are nothing but marginal tinkering around the edges of the global financial system, and investors are starting to catch on.

If investors think the Fed buying up a few billion of Treasury and agency debt means a hill of beans, they might do well to remember that the U.S. government is running up annual deficits in the hundreds of billions. In fact, the U.S. Treasury will float tens of billions of new debt in December alone (most of which will be sopped up by foreigners, who have increased their holdings of Treasuries by well over $200 billion in the past year). This will be mixed in with refinancings.

That was me quoting John Hussman. Read Nobody Verifies Anything!!!.

I've read Mike Shedlock's post Helicopter Ben Pulls Out Bazooka twice now but couldn't find the part where he exposes this fallacy of *buying bonds with more bonds*.

Shedlock has been saying to buy Treasuries for the past 12-18 months (I think). He's been dead right whilst shorts like myself have been taking a beating.

The last beating I took....was when I didn't buy a house in the latter half of a raging real estate market. How'd that work out in the end?

Look at this chart of the 30-year Treasury yield going back 30 years:



Click chart to enlarge if necessary.

I like the odds for rates to rise and have my money bet accordingly.

Worth Watching, And Digesting

"There's no need for the Federal Reserve to monetize any of this borrowing....I do not expect additional inflationary consequences from this." - Ben Bernanke

If anyone has additional and/or better clips worth highlighting please let me know. This stuff should be preserved and posted for at least the benefit of future voters and tractable Morons.

Greg Mankiw On The Nationalization Of Finance

What is my opinion about all this? I am of two minds about the complex situation we find ourselves in.

On the one hand, I share many of the concerns of the letter signers and other critics of the Treasury plan.

On the other hand, I know Ben Bernanke well. Ben is at least as smart as any of the economists who signed that letter or are complaining on blogs and editorial pages about the proposed policy. Moreover, Ben is far better informed than the critics. The Fed staff includes some of the best policy economists around. In his capacity as Fed chair, Ben understands the situation, as well as the pros, cons, and feasibility of the alternative policy options, better than any professor sitting alone in his office possibly could.

I were a member of Congress, I would sit down with Ben, privately, to get his candid view. If he thinks this is the right thing to do, I would put my qualms aside and follow his advice. (link)



Now I understand full well that Hahhhvaaard buffon Greg Mankiw is ALWAYS angling for a cushy policy job; he's always out there bootlicking the *candidates*.

Nevertheless it's tragic that someone so allegedly learned would defer expertise to Bernanke simply because Helicopter Ben *understands the situation* better. Precisely what in the past several months - with bankruptcies, bailouts, bank-runs, etc - has bespoken of Federal Reserve omniscience???

This country was founded on the very principle that the people are wiser than the government.

And when Greg Mankiw is properly lumped in with the socialists running the country the above still holds true.

Marginalizing Ben Bernanke

I am aware of the financial news scuttlebutt but twelve years of experience has conditioned me not to pay too much attention to it.

The other day, while idly watching my son at the park, I grabbed the only reading material I could find in my car - the April 2007 Futures magazine. (I DID NOT buy it. My buddy in Manhattan made me steal something from his contemptible roommate. This is just the type of service that I provide for my friends.)

Page 22 excerpts from Steven K. Beckner's Market Watch column:

Bernanke told the House Budget Committee there had been "no material change" in the Fed's economic forecast in the wake of the market slide and said he saw no "liquidity crunch" in the world or any breakdown in the workings of financial markets. He said he still expects moderate, if not improving, growth as the housing market stabilizes.

...Upside inflation risks, the Fed chief said, are the Fed's predominant concern.

Just to remind y'all the Dow dropped 416 points on Feb 27th, 2007. The media clowns attributed most of it to "subprime woes" but Wall Street roundly declared them "contained". Such was the backdrop to Bernanke's Congressional testimony two weeks later.

Let's fast forward to what we do know FOR A FACT today.

• Subprime mortgage problems have not been "contained"; they are actually proving contagious.
• August's market meltdown proves that the financial markets are prone to crunches of "liquidity". A liquidity crisis is not a singular landmine to avoid - it's an endless minefield. Or one can better think of it as a permanent gun pointed at the head of our financial system.
• Six months after his testimony, the "moderate growth" from a "stabilizing housing market" has not materialized. If fact we have been riding lower growth and a worsening housing market. What a sage!
• And back in April, with oil trading $64, soybeans trading $7.60, wheat trading $5.00, and gold trading $700 Bernanke was most concerned about "upside inflation risks". Yet today, on the eve of another Bernanke rate cut, gold is pushing $800, wheat is almost 70% higher, soybeans over $10, and oil is trading at $93 per barrel - I guess aside from the higher commodity prices, upside inflation risks can be brushed aside.

Remember when Bernanke dropped rates 50 basis points last month with the fierce intimation that it was "one and done"?

The guy is provably a walking monthly-contradiction of whatever he said last. Perhaps when oil is $100 a barrel he'll go back to worrying about "upside inflation risks"? In that case, you'll know to brace yourself for another "liquidity crunch"!

As I have said before, the hardest part about trading the financial markets is NOT UNDERESTIMATING the stupidity of all parties. For example, the Fed Chairman may well be a vacillating dolt, doing long term harm to our economy for short term feel-good, stock and bond upticks. Nevertheless, fund managers and sheepish investors (who should be farsighted) may go hog wild and bid up securities again after the inevitable rate cut tomorrow. I seemingly spend all my mental energy trying to figure out who the biggest Morons are, and how to bet against them.

It ain't so easy.