Minneapolis Fed. Reserve President Narayana Kocherlakota: housing market has become overly dependent on government guarantees

Federal Reserve Bank of Minneapolis

president Narayana Kocherlakota:

mortgage interest tax deduction

encourages people to take on large

amounts of debt, instead of saving.

(Mr. Kocherlakota, Barney Frank is holding...)

Star Tribune
By: Chris Serres
April 5, 2011

Federal Reserve Bank of Minneapolis president Narayana Kocherlakota criticized government intervention in the housing sector, including federal guarantees of mortgages and the home interest tax deduction, in prepared remarks given at a homeownership workshop today in Minneapolis.

Kocherlakota argued that in the wake of the financial crisis the housing market has become overly dependent on government guarantees. About 90 percent of all mortgages originated over the past two years are guaranteed by government-controlled entities such as Fannie Mae and Freddie Mac, a situation that he referred to as "not a sound long-term strategy."

"Over time, our country needs a mortgage market that returns to greater reliance on private risk-taking and private risk assessment, along with the enhanced regulatory oversight that is already in place," he said.

Kocherlakota, a first-time voting member of the policy-setting Federal Open Market Committee, also questioned the longstanding federal tax deduction of mortgage interest payments. He argued that the deduction encourages people to take on "large amounts of debt," instead of saving.

"If we truly want to encourage home ownership, we should contemplate programs that provide incentives for individuals to save and become equity holders in their homes -- and, by extension, in their communities," Kocherlakota said.

The mortgage interest deduction has become a source of controversy in recent months, as concerns about the federal debt intensify. In December, the co-chairmen of the White House's deficit-reduction commission proposed paring the mortgage-interest deduction as part of a series of proposals to rein in the federal government's swelling debt

Charles Plosser: monetary policy can't retrain people

This mess was caused by over-investment in housing, and bringing down unemployment will be a gradual process. "You can't change the carpenter into a nurse easily, and you can't change the mortgage broker into a computer expert in a manufacturing plant very easily.

By Mary Anastasia O'Grady
Wall Street Journal
Philadelphia
2/12/2011

Federal Reserve Chairman Ben Bernanke was on Capitol Hill this week to answer critical questions about monetary policy, amid rising bond yields and sharply higher commodity prices. Mr. Bernanke showed no self-doubt, and Friday's resignation of Fed Governor Kevin Warsh, one of the board's inflation watchdogs, means that Mr. Bernanke's easy-money inclinations will have even fewer internal checks.

Enter Charles Plosser, the president of Philadelphia's Federal Reserve bank. A former dean of the William E. Simon School of Business at Rochester University, Mr. Plosser is widely known as an inflation hawk. And this year he has a vote on the Federal Open Market Committee (FOMC), which sets monetary policy. He's now a man to watch.

One of the most perplexing questions for the Fed these days concerns the continuation of "QE2," its second round of quantitative easing, which will dump $600 billion in new money into our banking system over the first half of this year.

Mr. Plosser doesn't see a deflation risk for the U.S. economy right now. Even those who were worried about deflation six months ago, he says, have begun to change their tune. That means that, with moderate GDP growth and low inflation in the mix, the only thing left as an excuse for QE2 is high unemployment. Can lax monetary policy change that picture?

Mr. Plosser's answer is unequivocal: This mess was caused by over-investment in housing, and bringing down unemployment will be a gradual process. "You can't change the carpenter into a nurse easily, and you can't change the mortgage broker into a computer expert in a manufacturing plant very easily. Eventually that stuff will sort itself out. People will be retrained and they'll find jobs in other industries. But monetary policy can't retrain people. Monetary policy can't fix those problems."

Mr. Plosser reminds me that when QE2 was first proposed last year, he wasn't in favor. "I didn't think it was necessary and I thought that the costs outweighed the benefits." He says he thought that "it carried some very significant risks" that "would not be borne today but would be borne down the road when the time comes to unwind what we've been doing."

But last month, when Mr. Plosser got his first chance to vote on the FOMC, he didn't dissent. When I ask why, he launches into a summary of his four principles of good policy-making: "clear communication of objectives," "credible commitments toward achieving those objectives," "transparency" and "independence."

Credibility demands that the bank not "stomp on the brakes and then floor the accelerator," he says. "Why do you want to signal something and then yank it out from under the market? That's just not a good way to conduct policy."

I'm skeptical that policy makers will know when to change course, so I ask Mr. Plosser what signals he'll be looking for. He begins by cautioning that "with food and commodity prices, as well as oil prices for that matter, the challenge you always face is distinguishing relative price movements from price-level movements." For this reason, he tries "to get a feel for the underlying trends." Complete Must Read Article

Add'l Mary Anastasia O'Grady Articles

Federal Reserve Cuts Outlook on GDP and Jobs

By Luca Di Leo and Jon Hilsenrath
The Wall Street Journal
11/23/10

Federal Reserve officials downgraded their outlook for the U.S. economy at their early November meeting, projecting that the jobless rate could exceed 8% for two more years and that it won't return to its former vitality for five years or more.

Minutes of a Nov. 2-3 meeting and a previously undisclosed Oct. 15 video conference also revealed that Fed officials considered steps beyond the Fed's controversial decision to buy $600 billion more U.S. Treasury debt to lower long-term interests rates to boost growth—including setting a cap on longer-term interest rates, a move which hasn't been tried since the 1950s.

Federal Reserve officials downgraded their assessment of the U.S. economy at their last meeting three weeks ago as they debated the benefits and costs of a new bold step to support the recovery. Jon Hilsenrath has details from Washington.

The minutes offer some detail on the Fed's decision to buy more bonds, a divisive one inside the Fed and one widely criticized outside the Fed. "Somewhat more than half of the participants judged that, in the absence of any additional shocks to the economy, the economy would converge fully to its longer-run rates of output growth, unemployment, and inflation within about five or six years," the minutes showed. "The rest indicated that it could take longer for unemployment to fall back to its longer-run rate or for inflation to rise back to the level they deemed desirable in the longer run."

Meetings of the Fed's decision-making body—the Federal Open Market Committee—include the presidents of the 12 regional Fed bank and the members, currently six, of the Fed board in Washington. The bulk of that group projected unemployment, now at 9.6%, would descend slowly to between 8.9% and 9.1% at the end of 2011, between 7.7% and 8.2% in 2012 and between 6.9% and 7.4% in 2013, a grimmer outlook than the Fed's last official projections in June.

Fed official downgraded their growth projection to between 3% and 3.6% next year, compared to the 3.5% to 4.2% estimate it made in June. Fed officials forecast 2.5% growth in 2010, lower than the June prediction of between 3% and 3.5%. Though Fed critics warn its bond-buying program could spur inflation, the Fed projected inflation would remain below its informal objective of 2% through the forecast period.

The downwardly revised projections indicate the Fed might keep interest rates low for several years and suggests it is likely to follow through on plans to buy $600 billion in Treasury securities in the months ahead. The Fed said it stands ready to buy more securities if the forecast doesn't improve or deteriorates.

"They clearly indicated that even if the improved recent tone of the [economic] data continues and growth surprises to the upside next year it will not trigger any quick reversal in policy," Ted Wieseman, a Morgan Stanley economist, said in a research note.

The Fed's bond-buying has been attacked by GOP lawmakers and foreign officials, who said it could weaken the U.S. dollar and bring high inflation. Even though Fed officials voted 10-1 to support the move, strongly advocated by Chairman Ben Bernanke, the minutes showed that several worried about both those risks. "Some participants noted concerns that additional expansion of the Federal Reserve's balance sheet could put unwanted downward pressure on the dollar's value," the minutes showed. Several officials saw a risk it could "cause an undesirably large increase in inflation."

Fed officials held an unusual video conference on Oct. 15, a few hours after Mr. Bernanke laid out his thinking on inflation in a speech in Boston.

Officials discussed whether the Fed should target some long-term interest rate, in addition to holding its target for overnight rates near zero. In the 1940s and 1950s, the Fed pinned long-term rates below 2.5%. Though the Fed didn't take action in this direction, the discussion suggests the notion could come up later if the economy worsens.

Officials also discussed the pros and cons of adopting a firm numeral objective for inflation and considered holding occasional press briefings to explain the rationale for its decisions. Unlike the European Central Bank, which routinely gives press briefings after policy meetings, such a move would be a departure for the Fed.

Federal Reserve Unemployment Forecast:

• 2010: 9.5% to 9.7%
• 2011: 8.9% to 9.1%
• 2012: 7.7% to 8.2%
• 2013: 6.9% to 7.4%

Tuesday News Recapped in Pictures (Buffett, FDIC, Geithner, GM, QE2)

Warren Buffett: “The worst is behind us, but the pain

will be felt for a long time from what happened,”

New price of Starbucks Tall Skinny Flavored Latte as

FOMC confirms launching Quantitative Easing (QE2)...

To offset Bernanke's money printing, McDonald's offering a

reduced portion QE-2 Value Meal...same great price...

Interior Secretary Ken Salazar announced the oil drilling

moratorium has been lifted and drillers must meet

"the higher bar we have set" in order to get new permits

A Treasury official said the meeting is “an opportunity for

Sec. Geithner and Mr. Akerson (GM-CEO) to meet for the first time.

It is merely a brief meet and greet.”

FDIC proposed a rule that would begin the process of

setting up a mechanism to dismantle a failing too-big-to-fail

Lehman-like mega-bank...

Inflation Everywhere but in the Mind of the Fed (Michael Pento)

Friday, October 1, 2010
By: Michael Pento

The BEA released some amazing data on Personal Income and Outlays this morning. No, it wasn’t the fact that Personal Spending was up .4% and Income was up .5% for the month of August. It was the data on inflation that caught my eye and, more importantly, the Fed’s reaction to it.

Core PCE increased 1.4% YOY, while the overall inflation rate jumped 1.5% from August 2009. That’s correct--all you deflation propaganda pundits out there listen up--price levels are rising even when using the Fed’s own preferred inflation metric.

But our central bank’s reaction to this data is shocking. Fed policy makers on Sept. 21 moved closer to another round of unconventional monetary easing and said for the first time that inflation is too low. According to the Federal Open Market Committee statement, “Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”

This morning Fed Bank of New York President William Dudley said the outlook for U.S. job growth and inflation is “unacceptable” and that the central bank has options to add stimulus without any serious repercussions. “We have tools that can provide additional stimulus at costs that do not appear to be prohibitive,” Dudley, who serves as vice chairman of the Fed’s policy setting Open Market Committee, also said in a speech to business journalists in New York today, “Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.” Dudley even went as far as talking about the effects of another $500 billion increase in the Fed’s balance sheet.

So inflation that has risen 1.5% YOY as measured by the Bureau of Economic Analysis isn’t enough for our Federal Reserve. Our dollar, which is plummeting on the FX exchange, apparently isn’t falling fast enough for Mr. Dudley. Oil, gold and most other commodities are soaring this AM, but that doesn’t allay the Fed’s deflation fears.

The Institute of Supply Management Survey of Manufacturing for the month of September fell to 54.4 from 56.3 and the prices paid component soared from 61.5 to 70.5. Evidence of escalating inflation can be found everywhere except in the minds of those who are charged with the protection of our currency’s purchasing power.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Federal Reserve selectively releases data to a chosen few...the already RICH!

How is it that the already rich keep getting richer? Well, if you are one of the chosen few, you are privy to market moving data before we serfs. Yes, our grandchildren continue to be placed in financial harms way while Larry Meyer, Bill Gross and their elite group of chosen insiders stomp on our face. ROME IS BURNING!

Zero Hedge

Reuters has just released a stunning special report detailing how the Fed leaks all important, non-public, and ever so material, information to private parties. From the report:

On August 19, just nine days after the U.S. central bank surprised financial markets by deciding to buy more bonds to support a flagging economy, former Fed governor Larry Meyer sent a note to clients of his consulting firm with a breakdown of the policy-setting meeting.

The minutes from that same gathering of the powerful Federal Open Market Committee, or FOMC, are made available to the public -- but only after a three-week lag. So Meyer's clients were provided with a glimpse into what the Fed was thinking well ahead of other investors.

His note cited the views of "most members" and "many members" as he detailed increasingly sharp divisions among the officials who determine the nation's monetary policy.

The inside scoop, which explained how rising mortgage prepayments had prompted renewed central bank action, was simply too detailed to have come from anywhere but the Fed.

A respected economist, Meyer charges clients around $75,000 for his product, which includes a popular forecasting service. He frequently shares his research with reporters, though he kept this note out of the public eye. Reuters obtained a copy from a market source. Meyer declined to comment for this story, as did the Federal Reserve.

By necessity, the Fed spends a considerable amount of time talking to investment managers, bank economists and market strategists. Doing so helps it gather intelligence about the market and the economy that is invaluable in informing the bank's decisions on borrowing costs and lending programs.

But a Reuters investigation has found that the information flow sometimes goes both ways as Fed officials let their guard down with former colleagues and other close private sector contacts.

Frankly, we stopped right there, very much disgusted that we have been proven correct yet again when we asked rhetorically if "Bill Gross just confirmed on live TV that he has an "advance look" at non-public fed data?". Now we know how it is that Bill Gross knew all too well that the Fed would lower its GDP expectations to 2% three weeks ahead of the minutes release. It also explains why PIMCO is ever so precise in going on margin in purchasing either bonds or MBS.

Expletive it!

This is beyond disgusting, but that is to what this bullshit country has devolved: leaking the most important decisions made on "behalf of the middle class" so that a few multi-billionaires can make a few extra soon to be worthless dollars.

We will indicate if and when Pimco goes on margin next when the Total Return Fund posts its holding distribution next in mid October, telegraphing what the Fed has told it about the November FOMC meeting, but frankly at this point it is irrelevant. It is now obvious that the Fed now realizes all is lost and just feeding its wealthy clients (that's right, these people are the Fed's CLIENTS) the last remaining scraps before it pulls the hyperinflation switch.

Reuters

By Kristina Cooke, Pedro da Costa and Emily Flitter
To the outside world, the Federal Reserve is an impenetrable fortress. But former employees and big investors are privy to some of its secrets -- and that access can be lucrative.

...No one is accusing Meyer and his firm, Macroeconomic Advisers -- or any other purveyors of Fed insights for that matter -- of wrongdoing. They are not prohibited from sharing such information with their hedge fund and money manager clients. WHY...WHY...WHY!!! This is transparency???

But critics question whether it is proper for Fed officials to parcel out details that have the potential to move markets around the world, especially with the government's involvement in the economy being so pronounced.

"It's certainly not what Fed officials should be doing," said Alice Rivlin, a former Fed governor and now a fellow at the Brookings Institute think tank. "The rules when I was there were you don't talk to anybody about anything that could be used for commercial purposes."


 Link to Reuters Report...you will not be happy!!

Goldman Sachs lowers 2011 GDP (Zero Hedge) and the U.S. Equity market launches well off its low

The algorithmic gamers manipulating the U.S. Equity market embrace Goldman Sachs' reduction of 2011 GDP growth by 24% as a reason to launch the market well off its lows. The Dow was down 160 and closes down a paltry 21 points. U.S. Equities remain a must own replacement for those outdated Hummels as a pathetic non-farm payroll  report combined with Goldman Sachs' GDP reduction for 2011 creates a perfect buying opportunity to start a new collection of common stock (a piece of paper that will never drop in value).

So passe'

A must own for 2010...all the popular

kids are buying...

Zero Hedge

It's official: the double dip is here. Goldman's Jan Hatzius just lowered his GDP forecast for 2011 from 2.5% to 1.9% (kiss goodbye all those 93 EPS estimates on the S&P), increased his unemployment forecast from 9.8% to 10.0%, boosted his inflation expectation from 0.4% to 1.0%, and said that QE lite is now on the table, as he expects that "the FOMC to announce that they will reinvest the paydown of mortgage-backed securities in the bond market at next Tuesday’s meeting." Look for all other sell-side "strategists" (here's looking at you Neil Dutta) to lower their economic outlook in kind, and the 2011 S and P consensus to decline accordingly.

From Goldman Sachs:

Over the past two to three months, the US economic recovery has lost a considerable amount of its momentum. As a result, our forecast of a significant slowing in US growth in the second half of 2010—widely regarded as implausible just three months ago—is now increasingly accepted as the baseline. As the data disappointments intensified in early July, we indicated that we would consider revisions to our economic outlook. With the annual revisions to real GDP now behind us, we are making the following changes:

1. Slower growth in 2011. We continue to expect real GDP growth to average 1½% at an annual rate in the second half of 2010. However, we have scaled back the anticipated reacceleration in US output in 2011, largely due to heightened congressional resistance to extending various measures of fiscal stimulus. Thus, whereas we previously forecasted growth to rise from 2½% in the first quarter to 3½% by the second half, we now look for a more gradual pickup—from 1½% in the first quarter to 3% in the fourth quarter. The 2¼% fourth-quarter-to-fourth-quarter average is about 0.9 percentage points below our previous forecast; on an annual average basis our forecast for growth in 2011 drops to 1.9% from 2.4%. As a result of this downgrade, we now expect the jobless rate to rise to 10% by early 2011 and remain there for the rest of the year.

2. Continued disinflation, but at a slower pace than before. We now expect both the price index for personal consumption expenditures excluding food and energy (core PCE index) and the core CPI to slow to a year-to-year rate of ½% by year-end 2011; our previous forecasts were ¼% and zero, respectively. Although the growth revision implies a larger output gap over the next 18 months, two other considerations dominate: (a) upward revisions to core PCE inflation announced in the latest annual GDP revisions, and (b) signs that disinflation in rents may have ended.

3. A return to unconventional monetary easing by late 2010/early 2011. We expect the Federal Open Market Committee (FOMC) to respond to renewed upward pressure on the unemployment rate with another round of unconventional monetary easing. These measures could involve more asset purchases—probably Treasury securities—and/or a more ironclad commitment to low short-term policy rates. If the committee decides on more asset purchases, the amount would be at least $1 trillion (trn).

4. A “baby step” to unconventional easing next week. Although it is a fairly close call, we now expect the FOMC to announce that they will reinvest the paydown of mortgage-backed securities in the bond market at next Tuesday’s meeting. This would be a “baby step” in the direction of renewed unconventional easing, although it would probably be packaged as a decision to prevent a gradual tightening of the overall stance.

Senate Banking Committee Approves All Three New Fed Governors (Zero Hedge) and more policy destruction to be shouldered by our grandkids

The Senate (Bought By) Banking Committee has spoken (the bribes finally cleared): say hello to your three brand new permadovish Keynesian kritters: Yellen, Raskin and Diamond.

All three now have direct access to the Goldman Sachs emergency red telephone, the suitcase carrying the printer launch codes, and a lifetime supply of How to Lie With Impunity and to "F" With The American People for Dummies.

All three will also be shortly sworn to defraud, steal and rob the US middle class blind until the failed economic experiment is over and done with.


Grandpa: does anyone in government care about what they continue to dump on our children and grandchildren!!!!!!!!!!!

Friday Funnies and Jim Cramer Does Not Save the Equity Market

Warren Buffett Sings the Blues after SEC Brings Fraud

Charges Against Goldman Sachs

Buy the market, Jim Cramer just gave me the wink and

you know what to do if he is wrong.

"I won't pay. I know too much about extortion."

Silvio, please show Jim Cramer to the door.

Special Musical Guest on CNBC this Monday as they

kick off Credible NBC week.

 Erin "Cramer's my daddy" Burnett will sit in with

Fab and Rob on "Girl You Know It's True"

Jamie Dimon's initial reaction to the SEC bringing

fraud charges against Goldman Sachs

FOMC Beige Book

"Helicopter Ben Speak" and the equity market disconnect (this is not a rock band)

Cut and pasted from FOMC meeting statements

March 16, 2010 (DJIA closed 10,686)
Economy and Labor Market: Economic activity has continued to strengthen and that the labor market is stabilizing

Housing: However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls

Household Spending: Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

Financial: While bank lending continues to contract, financial market conditions remain supportive of economic growth

Grandpa: Labor market is stabilizing however; employers remain reluctant to add to payrolls and household spending remains constrained by high unemployment. Bank lending continues to contract however; market conditions remain supportive of economic growth…WHAT!!

January 27, 2010: (DJIA closed 10,236)
Economy and Labor Market: economic activity has continued to strengthen and that the deterioration in the labor market is abating. Also: investment in structures is still contracting and employers remain reluctant to add to payrolls

Housing: NO COMMENT

Household Spending: Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.

Grandpa: Deterioration in the labor market is abating however; household spending remains constrained by a weak labor market and employers remain reluctant to add to payrolls??

December 16, 2009 (DJIA closed 10,441)
Economy and Labor Market: economic activity has continued to pick up and that the deterioration in the labor market is abating. Also: businesses remain reluctant to add to payrolls

Housing: housing sector has shown some signs of improvement over recent months

Household Spending: Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit

Grandpa: See January 27, 2010

November 4, 2009 (DJIA closed 9,802)
Economy and Labor Market: economic activity has continued to pick up (closest comment regarding the labor market: “businesses are still cutting back on fixed investment and staffing, though at a slower pace)

Housing: Activity in the housing sector has increased over recent months

Household Spending: Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit

Grandpa: Housing activity has increased over recent months however; household spending remains constrained by ongoing job losses???

September 23, 2009 (DJIA closed 9,749)
Economy and Labor Market: economic activity has picked up following its severe downturn (closest comment regarding the labor market: “businesses are still cutting back on fixed investment and staffing, though at a slower pace)

Housing: activity in the housing sector has increased

Household Spending: Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit

Grandpa: See November 2009, January 2010 and March 2010. Same Ben, different meeting.

As of the close on 3/16/2010, the DJIA is up a staggering 937 points (9.6%) from the 9/23/2009 close. During this same period, the S & P 500 is up 8% (who said you can't manipulate 500 stocks), while the NASDAQ found Pluto and is up 247 points or 11.5% in just under 6 months.

During this 6 month period, Household Spending remains constrained, employers remain reluctant to add to payrolls and bank lending continues to contract. Clearly the Quant boys and girls are in charge. Welcome to the New World Order...robots have in fact taken over.

Grandpa maintains this will all end very badly and suggests stocking up on your favorite snacks as they are finishing the shoot of a sequel to The Perfect Storm.

Ben Bernanke: Recap of more Federal Reserve Spewing 2/24/2010

The U.S. economic recovery is still not yet on a sustainable path, and near-zero interest rates are still needed, Federal Reserve Board Chairman Ben Bernanke told lawmakers Wednesday.
Grandpa: The overall economy will tank if we were not there to place countless of billions of dollars of debt on our grandchildren’s backs let alone the inflation time bomb... 

Bernanke noted that economic growth expanded at a 4% pace over the past two quarters of 2009, but was pushed higher by temporary factors. Whether the recovery can last depends on whether businesses and consumers open their wallets, he said.
Grandpa: Wait a minute Ben, Sheila Bair (FDIC) just kicked off "America Saves Week"?

"As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services," Bernanke remarked. He described the recovery as "nascent."
Grandpa: See "America Saves Week".

We don't see inflation as an imminent threat," Bernanke said. Conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period." "Most indicators suggest that inflation likely will be subdued for some time."
Grandpa: As long as Ben is able to coerce other government agencies into manipulating the Consumer Price Index, he can continue the “inflation is not an imminent threat” spew. Let's not forget the manipulated CPI figures also reduce or eliminate cost of living increases to an entire parental generation!

Bernanke added that the economy appears to be headed in the right direction. "Private final demand does seem to be growing at a moderate pace." He noted that consumer spending has recently picked up and said there were "tentative signs of stabilization in the labor market." More than 40% of the unemployed have been out of work for six months or more, he observed.

"Notwithstanding these positive signs, the job market remains quite weak," according to Bernanke.
Grandpa: WHAT, tentative signs of stabilization and remains quite weak?

Tentative signs of stabilization in the labor market 

"Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to tighten monetary conditions to prevent the development of inflationary pressures.

Grandpa: As the expansion matures?

 

"We are confident that we have the tools we need to firm the stance of monetary policy at the appropriate time," Bernanke said.

 

 

Commercial real estate remained the "biggest credit issue" facing the country, according to Bernanke.

 SLEEP WELL BEN....

 
 
 
 
 

 

 

 

 

 

 
 

 

 

Bernanke to testify before congress 2/24/2010

Bernanke to testify before congress 2/24/2010

Bernanke is readying his first visit back to congress since our elected representatives afforded him another four years (at the expense of future generations). Ben begins two days of his annual Humphrey-Hawkins testimony on monetary policy before the House Financial Services Committee. He is scheduled to give his latest view on the economy.

The "green shoots" of economic revival are already evident, Bernanke told CBS program "60 Minutes" during a March 15, 2009 interview. "And I think as those green shoots begin to appear in different markets, and as some confidence begins to come back, that will begin the positive dynamic that brings our economy back," he said.

The unemployment rate was 8.5% in March 2009 and currently sits at 9.7% (courtesy of the government’s seasonal adjustment magic). The consumer confidence figure was 26 in March of 2009 and today, the reading for January 2010 came in at 46. The reading in March 2009 for “jobs hard to get” registered at 48.7% while the January 2010 read was 47.7%. “Green shoots” will likely not be roll off his lips as many of the green shoots have withered.

Grandpa expects some variation of the following:
Today, financial conditions are considerably better than they were then, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible. Nevertheless, I think it is fair to say that policymakers’ forceful actions in late 2008, and others that followed, were instrumental in bringing our financial system and our economy back from the brink. The stabilization of financial markets and the gradual restoration of confidence are in turn helping to provide a necessary foundation for economic recovery. We are seeing early evidence of that recovery….continued modest growth”.

Yes, this will be another circus comprised of two wasted days as each representative makes irrelevant and self serving opening statements and when they finally get around to asking a question; Barney Frank gives them the hook.

Most of the House Financial Services Committee could not reconcile their personal checkbook let alone comprehend entry level economics so once again, Bernanke will bamboozle them with his assurances that he and his crack team have a PhD proven monetary policy exit strategy; as he will personally turn off the money spewing faucet at the precise and strategic moment.

The committee will also breathe a sigh of relief when Ben tells them that he will keep interest rates low for the foreseeable future. Even though the Federal Reserve is an “independent entity within the government”, Ben knows the Democrats do not need any more challenges with their mid-term elections.

Barney Frank and Paul Kanjorski will once again use up more fresh air than they are entitled however look for a potentially “lively” spar with Ben courtesy of Alan Grayson (FL), Jeb Hensarling (TX) and of course Ron Paul (TX).

Michele Bachman (MN) is a member of the committee and she could be worth the price of admission. Identifying Michele is relatively easy; simply look for the woman struggling to pull a foot out of her mouth before her turn to ask questions.

Enjoy the show and keep your expectations really low.

Sunday Comics

National Commission on Fiscal Responsibility and Reform
preparing for their initial meeting

Nancy Pelosi and Howard Dean strategizing

on 2010 mid-term elections

Federal Reserve working on Exit Strategy

Glenn Beck and Ann Coulter igniting the

Conservative Political Action Conference crowd

State of California Currency

Toyota Motors New Feature: deploy airbags, then start vehicle

Yippee! 2 million jobs saved or created

Governor Schwarzenegger:

 "The economy shows signs of a comeback and

I believe the worst is over. BUT, it's very clear

that the comeback is not going to be as quick

as we've seen in the past".

Hoenig Says Fed’s Objectives Threatened by U.S. Debt

Bloomberg:
Federal Reserve Bank of Kansas City President Thomas Hoenig said the U.S. must take “difficult” steps to reduce spending and increase revenue so the central bank isn’t pressured to fund the “unsustainable” federal debt.

The Obama administration estimates budget deficits will total $4.3 trillion during the next five years and hit a record $1.6 trillion in the year ending Sept. 30. The U.S. must be “willing to disappoint a host of special interests” and tackle the debt, or it risks “its own next crisis,” Hoenig said.

“A government faced with rising debt levels must provide a credible long-term plan to re-establish fiscal balance,” Hoenig said in remarks at a policy forum hosted by the Peterson-Pew Commission on Budget Reform.

Hoenig said the plan should include “controlling budget earmarks, trimming subsidies to numerous economic sectors and resolving our banking problems and the perception that Wall Street is favored over Main Street, all of which would otherwise foster mistrust and cynicism among the public.”

The U.S., to curtail the debt, should choose the option that’s the “most difficult and probably the least palatable politically: We can act now to implement programs that reduce spending and increase revenues to a more sustainable level,” Hoenig said.

“I recognize that this last option involves hard choices and short-term pain,” Hoenig said. “However, in my view it is the responsible path to sustainable economic growth with price stability.”

Hoenig, 63, is the longest-serving Fed policy maker, having been the Kansas City bank’s president since 1991. At last month’s Federal Open Market Committee meeting, he cast the lone dissenting vote, objecting to language in the statement indicating interest rates will remain low for an “extended period.”

HELLO!! Is anyone listening? KEY PHRASE: The U.S. must be “willing to disappoint a host of special interests” and tackle the debt, or it risks “its own next crisis,” Hoenig said.
 
Our grandchildren desperately deserve someone that listens and acts on their behalf versus the usual congressional "its all about me" club. Thank you Mr. Hoenig! Did you happen to send a copy of your speech to Bernanke, Geithner and the putz group elected to represent the citizens of the country?

4 more years of Bernanke

The inept Senate voted to extend Bernanke’s fiscal policies for another 4 years. 30 senators actually had the courage and foresight to vote no however the “no change we can believe in” crowd cast 70 votes.

Clearly, the 80/20 rule is applicable to the Senate. 80% of the 100 senators are fundamentally inadequate, self serving, ill-informed and are utterly negligent regarding our next generation. This is classic “its all about me”. 20% of our representatives possess a vision of the future and their respective role in assuring our grandchildren of a fair opportunity. Unfortunately, 80% vote along party lines (due to the fact that they are not able to conjure up their own thought) and what is least likely to “rock the boat”.

We are “represented” by a lemming crowd of career politicians belonging to an exclusive club serving lobbyists and other special interest groups (need those campaign dollars) and who are absolutely removed from those they took an oath to represent. You are nothing more than a group of carnies hawking your wares at the fair. The midway is rigged and so is fair-minded representation.

These pampered and spoiled “representatives” are a disgrace to those in history that actually had gumption to do what was right for the country and make necessary sacrifices to ensure that the next generation had a favorable opportunity to succeed.

Ben Bernanke (5/17/07): “The sub prime mess is grave but largely contained. Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the sub prime sector on the broader housing market will likely be limited”.

4 MORE YEARS...DUH!!!

Take a look in the eyes of the next generation and tell this grandpa how you could possibly add another $1.9 trillion to an already bloated debt ceiling and give Bernanke another 4 years all in the same day!

Oh Ben, I so hear Princeton calling. Time to go home Ben.

Ben Bernanke (1/3/10): “The Federal Reserve had a role in inflating the housing bubble, but it wasn’t low interest rates in the U. S. that fueled speculation in housing around the globe. Rather it was lax supervision of toxic mortgages by the Fed and other bank regulators along with excessive flows of capital around the globe that inflated the bubble, setting up the world economy for what may have been the worst economic crisis in modern history”.

Helicopter Ben’s current plan has been and continues to be the purchase of mortgage backed securities and agency paper in an effort to keep interest rates low. Apparently artificially low interest rates are different this time.

Let’s not forget Uncle Ben’s brilliant comments a couple of short years ago:

Ben Bernanke (3/28/07): “At this juncture…the impact on the broader economy and financial markets of the problems in the sub prime markets seems likely to be contained”.

Then, after the alarm clock going off a mere 50 times, another poignant view:

Ben Bernanke (5/17/07): “The sub prime mess is grave but largely contained. Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the sub prime sector on the broader housing market will likely be limited”.

Be very, very careful Uncle Ben, grandpa is watching…