QE II: Ben “Sikorsky Skycrane” Bernanke.

(9AM EST – promoted by Nightprowlkitty)

“We can do this!  Just tells us where you want it!”


Drug-addled fifth columnists: “C’mon, Holmes.  We don’t want it.  At all.”

“Uh-oh.  Robert Gibbs is going to be very, very cross come November.”

“Yeah?  Well, he can suck my fat debt!”


  1. to editorialize.  It will never happen again.

  2. http://www.bloomberg.com/news/

    Central bankers meeting yesterday adopted a $2.05 trillion floor for their securities portfolio, pivoting toward a quantitative target for monetary policy.


    “There is absolutely zero evidence that if you let the balance sheet run down $10 billion to $15 billion a month that it would be a binding restraint on the economy,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.

    Until now, Fed Chairman Ben S. Bernanke has deployed what he called “credit easing,” using backstops such as the Commercial Paper Funding Facility and purchases of $1.25 trillion in mortgage-backed securities to lean against higher credit costs for home buyers and U.S. corporations as investors shunned risk.

    Balance Sheet Swells

    The Fed’s total assets, which include loans and securities other than those used for monetary-policy operations, rose to $2.33 trillion last week from $878 billion at the start of 2007. Even so, Fed officials never had a formal target for the balance sheet level.

    “They have given us no evidence why quantitative easing works,” Stanley said.

    Some observers said yesterday’s decision took them by surprise after Bernanke and other officials in recent weeks maintained their outlook for a pickup in the economy over the next year.

    While weakness in housing and commercial real estate will restrain the recovery, and the job market’s “slow recovery” weighs on consumers, “rising demand from households and businesses should help sustain growth,” Bernanke said in an Aug. 2 speech in Charleston, South Carolina.

    ruh roh, the beltway not likey


    In ways that may not be well appreciated by markets, Bernanke has redefined the role of chairman of the Fed from his predecessor Alan Greenspan. Bernanke sees himself less as the leader of the FOMC than its moderator.


    The lack of forceful leadership showed up as far back as June. Looking at the minutes from the Fed meeting that month, a glaring omission becomes obvious. At that meeting, a majority of the FOMC concluded that the US economy would not hit its inflation or unemployment goals for “up to five or six years.”

    That’s a rather astonishing admission from the stewards of the economy, and missing was the leadership to push the committee for a response. Something like, “Hey guys, judging by your own forecast, we’re not going to get there for half a decade. What are you going to do about it?”

    They’ve been ignoring this forever, too.  Deliberately.  

    Fannie and Freddie’s Last Rites


    The Treasury Department will begin talking about Fannie and Freddie’s future publicly during a conference of financial companies, housing advocates and academics on Aug. 17. One thing that is certain is that the Treasury Department is looking for a design for the mortgage market that doesn’t rely much on taxpayers.

    I guess this is where the “government utilities” scenario Ben Bernanke spoke about comes in. These mortgage entities would be heavily regulated, like government utilities, but their main purpose in life would be to support the mortgage market. At least we wouldn’t have entities sold on the stock market whose main purpose in life was to enrich the executives and the shareholders — as Fannie and Freddie did — with little regard for the taxpayers who ended up footing the bill for their excesses.

    Right now the mortgage market can’t survive without government intervention. Most mortgage loans are being made by Fannie, Freddie or the FHA. The private market in mortgages is pretty much on its deathbed with little signs of life. Unless the private market revives between now and January, the government’s only choice will be to continue some sort of government support for the mortgage market or the housing industry will be suffering even more than it is now.

    14 million underwater now,

    20 million homeowners projected to be underwater by end of 2011


    whuppa whuppa whuppa whuppa

  3. … that the nonsense he peddled in his Money and Banking text was just that … except being a typical mainstream economist, “finding out” fact is the first step for finding a mathematical model that says that particular inconvenient fact does not matter.

    (1) Easy monetary policy can accommodate fiscal policy in depressed conditions, but you can’t push on a string … monetary policy can’t make people want to invest in new productive capacity if there is no demand for that product because the economy still sucks ….

    By contrast, allowing states to adopt a feed-in tariff for wind power would make businesses want to invest, establishing a Steel Interstate and Electricity Superhighway would make businesses want to invest, and the most direct way to target unemployment is to offer people a job.

    (2) The Fed showed in its fling with monetarism in the 80’s that it can’t hit monetary targets. Despite the purely ideological “model” of Friedman, monetarism is based on a lie about how a modern money system actually works. What the Fed can control is the short term cash rate … it can’t control the quantity of money supplied, when over 90% of money is supplied by commercial banks.

    (3) The Fed system as it was designed to operate could never go bankrupt. But now that an increasing amount of the Fed balance sheet is commercial debt rather than sovereign debt, Bernanke is setting up a Fed that could go bankrupt, which is about as criminally idiotic an undertaking as the decision to encouraging people to bet on whether someone else’s company was going to go broke.

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