Friday, August 26, 2011


OK, I couldn't just leave this alone as an "update" to my post from yesterday. I have to elaborate ...

It's déjà vu all over again. It was February 2007. Markets were in a tizzy over stocks that went crazy days before. Ben Bernanke came out after the market took a tumble and said that "markets were working well" and that he expected the U.S. economy to pick up. In June of 2008 he would add, “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.” Oops.

Then we have Bernanke's other pre-market collapse gaffes, which include predicting 5% unemployment through 2011.

Look, Bernanke's mistakes aren't him simply saying inflation is going to be 2.5% when it turns out to be 3.1% They are numerous, and they are huge. This link helps us understand how he and the Federal Reserve have become the chief apologists and enablers of Wall Street.

But wait, there's more.

Back in September 2008, right in the middle of our market collapse, Fed Chair Bernanke supported granting Treasury Secretary Hank Paulson Czar-like authority to do what he wanted with $700 billion dollars. No looking at what actually caused the mess, just hand over the money. No strings attached. Seriously. No strings attached.

Rosy pictures before. No questions asked afterwards. Move along, nothing to see here. Nice, if you're a market player on Wall Street.

Fast forward 4 1/2 years to August 26, 2011 (i.e. today). Markets were worked up over recent roller coaster rides on Wall Street, and what appears to be an imminent recession. Federal Reserve Chairman Ben Bernanke gave a much anticipated talk in Wyoming and said that the U.S. is on track for long-term economic growth. While he also announced that no new economic stimulus measures were on the table, he did leave open the possibility of more action by the Fed if another recession looks likely.

Now, where have I heard this kind of open-ended murky talk before?

Oh yeah, I started writing about the Fed's "everything is fine" pep talks almost as soon as I started my blog, back in 2007. I kept talking about our collapsing economy throughout 2008, right up until the market collapsed. And through it all, Mr. Bernanke was painting a rosy picture ...

At the end of the day, it really doesn't matter. It's business as usual in Washington and on Wall Street. You and I are going to pick up the tab, like we did the last time. And it could well be done in a way that nobody notices (as I discuss here and here).

If we look at Bernanke's track record, and translate his Fed-speak talk at Jackson Hole this afternoon, we should know that the die has been cast. And we should all be seeing the same thing. We're in trouble. Expect another money dump (i.e. a quantitative easing stimulus).

It really is déjà vu all over again.

- Mark

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