Sunday, August 19, 2007

Ben Bernanke: You Must Resign

I dugg it.

We all talk a lot of shit in our lives -- pretending to be who we wish we could be. We make up stories about things we've done or said which are nothing more than retellings of personal events as we wish they had been; retellings that portray us the way we wish we had behaved; all with the goal of winning the favor of our friends, lovers, parents, bosses, idols. For the more healthily adjusted among us we tend to do this for personal gain (a job, money, admiration, sex). But the truly screwed among us are those who are so depraved, so lacking in self-esteem, as to actually believe their stories.

But there always comes a time in a person's life (and if they are fortunate, many times) when he is forced to face the lie. It is during times of crisis, duress, and moral strain that a person's true nature is revealed to all.

Last week Ben Bernanke played his cards and showed the world that his nickname, "Helicopter Ben", is, in my opinion, likely a deserved one. I say "likely" only because it was the Fed-to-bank discount rate that he lowered and time will only tell whether Ben extends that to the Fed funds rate.

How long can America survive the moral hazard that is today's Fed? Perhaps you have a personal or professional stake in seeing to it that people continue to live on ever-increasing burdens of debt while their incomes languish. Or perhaps you "got in" before the madness overcame America, and you've now hunkered down and closed the hatch of your private bomb shelter, and everyone else can be damned. Perhaps you feel that it is all okay as long as you believe that you can keep your own head above water. But what if one day you can't? What if our out of whack system overtakes you too? Would you want to be met with your own indifference?

If you take one moment to step away from our culture of selfishness and think about others, about your children and grandchildren, or, if you are single, the possibility that you might one day want to have children, do you still think the path we are on as a nation leads to the sort of world that you want your kids to play and live in? Or maybe you think you are immune and you will be able to shelter your progeny.

Now is the time to cut the crap -- stop making excuses, stop thinking about just ourselves, look at the big picture, and be honest with ourselves.

Americans have become debt junkies on such an unprecedented scale that even with the slightest of interruptions to their debt fix they scream bloody murder. And all through it the Fed has been their all too willing dealer. How much continuing self-inflicted economic harm must we endure before we as a society admit that the 9-11 terrorists won and succeeded in hurting us, and that the actions of the Fed since then have been nothing more than a form of self-medicated economic forgetfulness on a massive scale?

Now is the time for strength in leadership. We need a Paul Volcker, not a continually spineless Fed, not a Greenspan clone. Ben, let the free-markets work; let them heal themselves. Hillary and others, forget the bailouts; they are not the answer. Short-term pain breeds long-term gain.

Anyway, that's what I think, for all it's worth. Use this forum to share your thoughts if you want or vent.

10 Comments:

Blogger rdm said...

I have long thought the Fed/Bernanke is fairly powerless in this situation. They have three choices and none are good: 1.Lower interest rates and inflate their way out 2. Raise interest rates and throw the country into recession and defaltion 3. Do nothing other than piddle around the edges(the bank discount rate and liquidity infusions) which is what they have done thus far and hope for a slow glide to a mild recession and or mild stagflation. I am betting there is a 60% probability that the Fed will do nothing significant but that the slide will be into deflation and it will be bad. The 40% is for inflation which would now entail a dramatic cut in interest rates to accomplish. This path if taken, should have been embarked upon months ago. I see virtually no chance they will raise rates as they fear deflation most but my belief is, likely that is what we will receive. We have been watching a slow motion train wreck which appears to be accelerating.

Aug 19, 2007, 8:25:00 PM  
Blogger mountainwatcher said...

Marinite,

I keep looking at the National Debt Counter that you have provided.
It is almost at Nine trillion.
It is going up at a very scary rate.
Does this have any bearing on our current situation?

What can Ben do about this?

Aug 20, 2007, 1:51:00 AM  
Blogger Matthew said...

Marinite,

I don't have much time to post on this one as I'm heading out of town on business for a week this morning, but more needs to be done than simply having the Fed Chairman resign... Hell, the entire Fed Central Bank system needs to go away as far as I'm concerned..

Check out Bill Fleckenstein's most recent article on this... titled. "Central Banks are Stealing from the Average Citizen".

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CentralBanksAreStealingFromTheAverageCitizen.aspx?ref=patrick.net

Exactly.... As we've noted before on this blog and other blogs, we have all just witnessed the largest transfer of wealth in this country from the poor and middle class to the wealthy and super wealthy in the history of this country... All done in the form of mortgages where an entire generation now have signed up to pay their banker(s) an ever bigger ande bigger chunk of their family wealth and their monthly nut to stay live.. how special is that... who profits from all this and it's amazing that it's a no risk proposition really now that we see the Fed will guarantee their bottom line... unbelievable..

I'm with Bill Fleckenstein and have been for a while. His camp is growing by leaps and bounds too mind you, as most camps that call a spade a spade eventually do...

Benny B doesn't have the hutspa to right this ship.. that is now clearly evident... he's a banker (and an inside banker at that) remember by trade, so what the hell does he know about hard work and the value of a buck earned?? He doesn't, so he'll create more and more of those dollars to keep the punch juiced for as long as he can..

All Fed statements, by the way, should have a required section on the impact to the small guy after they are done puking over each other on BS inflation data and other econonic observations that they drivel on about in their policy statements... Hey, how refreshing would it be to hear BB or Sir Allen say something like..

"Well, our actions here today are definitely inflationary and will eventually hurt those Americans who have the bulk of their savings in dollars. As your Fed Chairman, I recommend you withdraw a portion of your dollar bearing savings and, instead, put it in Euro's or Yens as those currencies will definitely benefit from our short term actions here today."

Holy crapolla, wouldn't that be a breath of fresh air..

Matt..

Aug 20, 2007, 6:49:00 AM  
Blogger carlivar said...

You can start to solve the problem by voting for Ron Paul, the only presidential candidate that is acutely aware of the Fed problems.

Aug 20, 2007, 12:35:00 PM  
Blogger Lisa said...

http://www.marinheatindex.com/discussion.php

New discussion posted on The Marin Heat Index. Since Marin was at abysmally low levels already, further drops in the index since the mortgage mess blew up aren't any big deal. Except in entry level. Except for the fact that entry level is what keeps the rest of the chain greased up.

Without entry level buyers, no one trades up, trades over or gets to trade down.

Good luck with that.

Aug 21, 2007, 9:47:00 AM  
Blogger marinite2 said...

So the Heat Index owner finally updated his discussion.

Only the top 5% of the market ($4 million and above) is more active now than at the beginning of the summer, but this segment of the market is strikingly hot. The MHI for the county's most expensive housing increased shot up by well over 200% between mid- May and mid-August. As usual this segment of the market doesn't reflect mortgage-related concerns.

So 95% of Marin's market is slow to dead. Hence, that is why the Heat Index this selling season has been as pathetic as last year's.

Is this the sign of a sharper decline in market activity because of the mortgage issues?

Good question. Greenpoint mmortgage of Novato is now the latest to close its doors. I'll be blogging that shortly.

Lisa, you are absolutely correct about the move-up/move-over chain breaking.

So where are the Marin housing bulls of past on this blog? Tell us why we were wrong.

Aug 21, 2007, 12:24:00 PM  
Blogger Frank said...

Today Fed's Lacker made the following comments:

"MARKET VOLATILITY DOES NOT REQUIRE A RATE CUT; POLICY MUST BE GUIDED BY FUNDAMENTALS."

If this is truly a free market, it requires no interventions. The fed should stay put and let the market do whatever it takes to sort out this mess.

Aug 21, 2007, 12:25:00 PM  
Blogger Risa said...

Well said! i agree, we do need a Paul Volcker - now!!

Aug 21, 2007, 1:17:00 PM  
Blogger marinite2 said...

Someone sent me this trader's comments:

The Fed lowered the Discount Rate, but not the Federal Funds Rate, by one half percent. This was a bank bailout, and the timing was coincident with options expiration date in order to bailout options writers who were about to get their clocks cleaned. They needed a huge rally and they got one, albeit the rally was insufficient to fully cover these derivatives positions. What the Fed is saying, is they want banks to borrow money from them aggressively, however, they don't particularly want individuals to borrow more. This is a bank bailout, whereby large financial institutions who are holding depreciated mortgage backed securities suffering from the subprime and spreading prime loan mess can now access dollar denominated cash cheaper. But it is something else. It is a green light for banks to borrow directly from the Fed without the normal scrutiny borrowing from the Fed entails. Financial Institutions cannot sell much of their mortgage backed securities to raise cash because the loss they would take is prohibitive. They are stuck holding the old maid card. They can play games to some extent on the value these deteriorating securities hold on the books, however to exchange them for cash is a reality check. They are worth substantially less than what they paid for them, as underlying mortgages default on payments. This is a liquidity rescue of financial institutions. A bank bailout.

There are a lot of problems in the economy right now. The subprime and spreading prime mortgage situation is just one. That will get worse next year as more of these marginal mortgage loans reset to much higher interest rates (higher mortgage payments) as the teaser periods, typically the first one to three years of the mortgage, give way to the final 27 to 29 years of interest rates reset at a higher than normal rate than had they grabbed a fixed rate to begin with. And that is where the problem lies for consumers. Many of theses teasers were obtained with the idea that the property would be flipped at a profit, under the assumption the property would rise in value. However, property values are falling, thus mortgages are in many cases greater than the properties are worth, ergo, property owners are stuck. If they default, we are talking foreclosures. Pass through payments to securities holders fail, and the underlying holders of packaged mortgages end up with securities deteriorating sharply in value.

Another problem brewing here is the latest stock market plunge. The Wilshire 5000 index is essentially an index of all of the stocks listed on the NYSE, NASDAQ, and AMEX exchanges. At one point Thursday, August 16th, it had dropped from 15700 ($15.7 trillion) to 13800 ($13.8 trillion). This means the stock market had experienced a loss of $1.9 trillion in one month. In other words, the stock market saw 1.9 trillion of wealth wiped out in the past month. Some of that has been recouped the past day, however this decline is expected to continue for several months, so the damage could get much worse. This will no doubt trickle through to the economy. The loss this weekend sits at $1.2 trillion.


Let them all burn.

Aug 21, 2007, 5:42:00 PM  
Blogger Hostech said...

This comment has been removed by a blog administrator.

Aug 21, 2007, 11:24:00 PM  

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