Ben Bernake: Impeach Me – I'm A Damned Liar


This is unbelievable:

The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed.

And if you could support that decision with actual facts, it would be ok.  But when you lie, it’s not.

The first lie is here:

Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.

No it’s not.  Your “favorite” and published inflation gauge is the GDP Deflator.  The latest report is here, and the Deflator is in pink.  It is 2.2 for the most-recent quarter, and 2.0 for the previous.  It is rising, up from 1.1 (which is at the lower boundary) in Q1.

But the outrages do not stop there.

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action.

Really?  How did the 30 year Treasury Bond react since you started threatening this action?  Let’s look:

That’s lie #2.  The 30 year Treasury Bond went from 3.46% when you started threatening QE2 to 4.06% today, when you enacted it.  In anticipation of your actions long-term interest rates ROSE, not fell

Worse, you knew this would happen because the same thing happened when you started QE1!

This is an intentional lie.  10 seconds with a terminal or chart would leave you inexorably to the conclusion that rates have been going up, not down, in anticipation, and that this is exactly what you should expect from the last time you performed QE.

Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment.

Just like the last time you did QE Ben?  Remember that?  I do.

Here ‘ya go:

Rates on the 10 year, which is most-closely linked to mortgages, went up, not down, after you announced your first Quantitative Easing stint and they did not start to come back down until you finished.  That is, you didn’t help long rates you damaged them and now you’re going to do it again.

Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation.

ANOTHER lie, especially if one cares about things like oil.  Here’s the two-year oil price:

Gee, nice correlation there.  Oil rises from just under $50 to $85 in lockstep with QE1.  When it ends, oil falls in price to $70.  As soon as the threat to do it again starts, oil once again starts going up in price, even though the claim is made that economic recovery is “soft”, thus justifying the act.

If the change is roughly identical, oil is headed to about $110 in the next three to six months, and gas to $4.00/gallon.

We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.

In a word: Bullshit.

Not only are not committed to it, you’ve said so in this piece itself, right here:

And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

Higher stock prices are an example of inflation, as they are, without underlying growth in the business, simply an expansion of the multiple paid for a dollar of earnings. 

That’s the same thing in the stock world as adding more dollars to the system and calling each still a dollar.  Each dollar is a smaller proportion of the whole of the currency, just as each dollar of share price buys a small proportion of a dollar of earnings.

That’s inflation Ben.

Why is it happening?  Right here.

That’s the dollar, and it has dropped by about 15% as a direct result of your threats and, today, your actions.  The price ramps that this is causing are already being complained about by companies in their input costs, including Kimberly-Clark which said last week that they are experiencing the worst cost-push pressures on their inputs in the company’s history.

There is no “stock market rise” when one looks at it in terms of the dollar.  The dollar is sinking – that’s why the the apparent price of stocks are going up. 

During the time that the market has risen you have suffered an actual 15% inflation caused by the intentional devaluation of the dollar!

You’re lying Bernanke, and the above proves both that you’re doing so and that you’re doing it on purpose.

There’s only one more question: WHY?

I’ll tell you what I think.  You’re desperate, like a rat trapped in a maze.

You should have taken the big banks into receivership – bankruptcy – in 2007.  You knew damn well they had been writing crap loans and had well over a trillion dollars worth of trash on their balance sheet and two trillion more that they had sold off to suckers around the world, including our own government GSEs Fannie and Freddie.  Hank Paulson knew it too – he was doing some of it himself when he ran Goldman.

That’s why you didn’t use TARP to buy toxic assets – it wasn’t enough to clear the balance sheets, and you knew that too, especially if any of the bad paper sold off starting to boomerang.  If you had bought any of the “toxic assets” out of the banks the suckered investors would have figured it out immediately and inundated those same banks with repurchase demands, collapsing your little scheme.

So you and Paulson decided instead that you were going to try to hide the damage with a “capital infusion” program. 

It would have worked too, if house and commercial property prices would have gone back to where they were in 2005 or 2006 within a couple of years.

But that was mathematically impossible, and if you were thinking, you would have realized that. Those “prices” were predicated on fraud.  There aren’t enough people who earn enough money to be able to buy at that price, or service the debt required.  And having offshored too many of our good jobs, there was no way to fix that in a reasonable amount of time either.

Now you’re trapped in your own games and lies.

The bad debts are overwhelming the big banks.  They have over $400 billion worth of Home Equity loans on their balance sheets.  70% of that dollar volume was in the sand states.  In those states, 50% or more of the homes are underwater and of those more than half are delinquent.  The problem is that a second loan is worth zero if it’s behind a first that defaults and forecloses.  But the banks are carrying those loans at 95 cents on the dollar.

If the truth comes out all the big banks blow up and you are forced to admit both to your current failure and to your regulatory failures going all the way back to your first appointment in 2004. 

So this is your “Hail Mary” pass, just like it was done in Japan.

It won’t work Ben.

I’ve already laid out why in countless articles.  Go read my stuff on Foreclosuregate.  That’s just one of the many triggers that will set this off and bring the entire house of cards down on your head – justifiably so.

Perhaps – just perhaps – this time the New Congress, with its solid Republican and Tea Party representation, might force you to eat these lies.

Before our economy and monetary system is destroyed by your actions.

You’re caught Bernanke – by your own hand.

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