In anticipation of the Fed Open Market Committee meeting, CNBC used their daily "Squawk On the Street" poll to offer viewers a Confidence/ No Confidence vote on Fed Chairman Ben Bernanke. With almost 20,000 votes cast, 96% voted "No Confidence". Now this is an unscientific poll - and - the wording begs the question why anyone, least of all the Fed Chairman, should be considered uniquely responsible for "handling the economy", but - scientific or not - the numbers are mind-blowing. Who would believe these results? I mean... really... who are those 4% of the respondents who think Bernanke is doing a good job???
Fed Chief Ben Bernanke held his second press conference and reinforced why the 96% have the opinion that they do. The headline of this AP story says it all:
Economic Trouble Puzzles Fed Chief, Too "The economy's continuing struggles aren't just confounding ordinary Americans. They've also stumped the head of the Federal Reserve. Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year. "We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."
Hard to understand why Bernanke would seem confused about the economy that he is "handling". After all, this was the same guy who said in June, 2007:
".. at this point, the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system."
In any case, we can rest assured that when it is time to implement an exit strategy for unwinding the most accommodating monetary policy in the history of the United States with an unprecedented currency annihilating hyper-inflation potential, Ben Bernanke is (as he said in a 60 Minutes interview last December) "100% certain" that he can raise rates in time to keep inflation under control.
Sleep well my fellow Americans. The economy is in good hands.
Happy Thanksgiving everyone! Time to count our blessings. The Dividist is particularly thankful that after only two years, the electorate has seen fit to restore divided government, a full two years before he thought it possible. The Dividist is less thankful about what our leaders are doing to our currency.
Your Thanksgiving dollar dinner is served: For our main course, let us check in with Peter Schiff, who you may recall was right in 2006-07 predicting the impending recession and crash of the real estate bubble caused by inflationary monetary policy at the fed, misguided public policy in Washington, lax lending by the banks, and criminal fraud on Wall Street. He was also right in 2008 when he warned President-elect Obama about the folly of trying to borrow and spend ourselves into prosperity. Monotonously he was right again exactly one year ago in 2009 when he told us to keep buying gold at the record price of $1,186 /oz (15% lower than Wednesday's close of $1,372/oz) as a hedge against the devaluing dollar.
Serving up the meat and potatoes - Schiff on the insanity of Congress mandating a two headed Fed charter. They are required to manage monetary policy to maintain a stable currency, and also to promote maximum employment by umm.. devaluing the currency:
"Prior to 1977, the Fed only had one job: maintaining price stability. However, the stagflation of the 1970s inspired politicians to assign another task: promoting maximum employment. This “mission creep” has transformed the Fed from a monetary watchdog into an instrument of social policy. We would do well to give them back their original job.
The imposition of the “dual mandate” was informed by the Keynesian belief that inflation and unemployment don’t mix. An economic concept known as the ”Phillips curve” postulates that low levels of one cause high levels of the other. But, like many things in modern economics, the curve is a fiction. There is no real reason why low inflation would produce unemployment or full employment would create inflation...
The real reason that prices rise, for both goods and wages, is that the Fed creates inflation. This policy undermines the economy by destroying both current savings and the incentives to accumulate future savings. Since savings finance capital investment, lower savings equal weaker economic growth.
So, the best way for the Fed to create maximum employment is to focus on the single mandate of price stability. While a few elected officials seem to be figuring this out, most are just as clueless as the Fed. Unfortunately, even if Congress succeeds in changing the Fed’s mandate, there is not much chance that monetary policy will change significantly. Keynesian thinking is so ingrained in Bernanke and his colleagues that they will exploit any wiggle room in their directives to jump back in the driver’s seat and send us ever faster toward the edge of an economic cliff."
For a side dish, Peter Schiff checks in with CNBC and browbeats the usual suspects on Fast Money:
Tasty. The most amazing thing about this video - it is closing in on almost 3 million views after being posted on YouTube for only 3 weeks. After knocking this out in an afternoon, its creator is in demand by the media, being interviewed by the likes of Slate and CNBC.
C'mon. A six minute long primitive animation about economics, Fed policy, and Quantitative Easing - going viral? Three million views? How does that happen? The Dividist has no explanation.
Finally, for a relaxing after dinner smoke - "The Bernanke" hits the road to defend the QE2 policy to the world. Good luck with that, Ben.
In any case, we can rest assured that when it is time to implement an exit strategy for unwinding the most accommodating monetary policy in the history of the United States with an unprecedented currency annihilating hyper-inflation potential, Ben Bernanke is (as he said in a 60 Minutes interview last December) "100% certain" that he can raise rates in time to keep inflation under control.
