Helicopter Ben is speaking in Germany today. He basically makes the point that millions of unemployed workers are unacceptable and that another round of QE was justifiable under current conditions. Its nice that he has come to this conclusion after all the Obama Administration thinks getting a gutted FINREG bill passed and enacting a useless Health Care Bill that is only another giveaway to the industry lobbyists was and is more important than jobs.
I have to give Benny Inkjets some props here. He is subtlety making the point that Congress is useless and that fiscal policy is more useful in creating jobs. We all know this is true. QE doesn't create jobs or increase aggregate demand. Fiscal policy, stimulus, and targeted tax cuts can increase AD and create jobs. Throw in some real foreign policy and a reasonable trade policy that protects Americans from jobs from fleeing to Manila, Bangalore, and China, and we may have something here. In the absence of competence, Bernanke is forced to use unconventional monetary policy to tackle mismanaged fiscal/trade policies. With the GOP reclaiming the House and gaining ground in the Senate, the emphasis is going to be away from further stimulus and spending but tax cuts for the wealthy is back on. The gutless Democrats will go along with it which means perpetual double digit unemployment for the foreseeable future. This means Bernanke will ratchet up more unconventional monetary policy, which means a perpetual ponzy scheme between Treasury and the NY FED will continue on. This leads to both FINREG and ObamaCare partially defeated or even outright killed. The two big issues that Obama was obsessed about in his first two years totally down the drain.
...And they tell me I am too pessimistic!
I get his reasoning for QE, I think its stupid and misguided. My problem is why doesn't Chopper Ben come out and say it like it really is?
He should say the economy is bad. It can quickly unravel because the banking sector is in a zombie like state. The thing that most Americans look to in terms of the economy is the stock market. If we can prop up the stock market short term we can hope that the economy can come back. If w can create another bubble, hopefully this bigger bubble can close the gaps from the last one. When this current bubble bursts I can just blame Congress for not balancing the budget and fixing the trade policy. I can blame Obama for continuing to fight two ludicrous wars. I can blame Congress for extending the Bush tax cuts across the board which will increase the deficit which means I have to print more money to cover Treasury's borrowing needs, because China won't be as aggressive in buying our debt because by god they already own $800T. We can't keep hoping that the Japanese can fund their deficits thru our Treasury Bonds via the interest rate differential. Those Japanese women are not fertile enough to expand their population, and the closed Japanese society wont open their borders to new entrants. All of this leads to the fact that Japan is quickly aging and an aging society is not a saving society. All those JGB's will soon not be rolled over but just cashed in to pay for the care of the Japanese elderly. When this happens, we can suggest that JGB rates will be higher. When JGB rates go higher, Japan's borrowing costs also go higher. When that happens its game over in the land of the rising sun. Bernanke would also be right in letting Congress know that their immigration stance should also be looked into. This country needs immigration, "legal" immigration is needed because for what ever reason Toll Brothers and their band of thieves keep building houses that no one wants. Probably because they are incentivized to do so by the government via our tax dollars.We need to expand the population and lower the average age in the USA. This is structural in nature. Congress doesn't seem to care about structural problems like unemployment or the deficit. They care more about cyclical issues like tax cuts.
Why can't Mr. Chopper come out and say the reason I am enacting QE2 is because our banking sector is in serious trouble, soon it will be toast. What degree of burnt do you want? The recent fraud closure problems the banks have been conducting only leads Bernanke to believe that the entire system is surprisingly rotten to the core. The basic rule of law doesn't apply to the banking sector and it never did. The Obama Administration along with Treasury and the Fed have moved mountains in favor of Wall Street and the banking sector, they have moved rates to permanent zero so that the banks can rebuild their Net Interest Margins. They have instituted HAMP and other tax payer giveaways so that the banks can pile on fees to homeowners without fixing the underlying problem regarding housing finance which is a severely overvalued housing market that needs principle mortgage reduction. They have instituted accounting fraud via FASB rollbacks so that toxic garbage loans can be priced way above fair value. They have made Fannie/Freddie the new AIG. This is the dumping ground for all of the bad mortgages that Wall Street doesn't want. Yet after all of the bailouts. All of the handouts. All of the giveaways. The banking sector is insolvent! Why you ask? Its quite simple! Its the debt stupid! Debt needs to restructured and in many cases defaulted on. If we don't get these bad loans of the books this economy can't recover. If we don't prosecute fraud and miss dealings in the banking sector the economy can't recover because there is no confidence in anything.
Ben Bernanke and the Fed can't fix these structural issues. He can only make monetary policy accommodative so that the banks can try to right their ships, but the banks are run by traders and most traders on Wall Street are psychopaths. They have no clue that their bacon was saved by the tax payer. These guys walk around like they are stars on a porn set. Instead of doing the right thing, they have paid lobbyists hundreds on millions of dollars to make the system more complex and more accomodative to their needs. They continue to pay themselves billions in compensation because they can. The CEO's and trader supply chain are richer than ever, but the taxpayers and shareholders will be left holding the bag. Bernanke knows all of this, the country doesnt have the stomach for another bailout of Wall Street and the banking sector. QE2 is 100% another shadow bailout for the psychopaths on Wall Street.
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