Fed Chairman Ben Bernocchio did a press conference this afternoon after the release of the Fed statement. He says that the “main headwind” for the economy is “fiscal policy.” You know, taxes and spending, budget surpluses and deficits…well not so much surpluses. He basically said “don’t blame it on us as we’ve done all that we possibly can.” In human speak; he is putting the blame on Congress. He is saying that if the fiscal house was in order, none of this would ever have happened and the Fed wouldn’t have had to drop rates to zero and monetize debt.
Rick Santelli of CNBC earlier this morning asked “What are you so afraid of Ben?” This is a great 3 minutes to watch and if you’re like me, it validates the times when I hear idiocy and start screaming at the TV. Yes, Congress is to blame for spending more than we took in, I agree. I also believe that without the Fed which creates inflation and thus makes the debt “cheaper” to pay back in the future (which can now never happen) then Congress would never have gone hog wild with spending. They spent and they spent and they spent…because they figured that it would be “cheaper” …later to pay back. Also, the Treasury could never have borrowed what they have over the last 4 years in particular without the Fed buying (monetizing) the debt. There was no one else left to buy Treasuries…so they bought everything that was offered by Treasury.
By the way, if you look at what was said, “fiscal policy as a headwind” can and should be extrapolated into “we are broke.” I say this because it is true and it is reality. If the Fed doesn’t continue with QE, the Treasury cannot borrow what they need to borrow. If the Fed stops printing the economy will go into serious reverse and tax revenues will drop, thus putting more pressure on the Treasury to borrow even further. For that matter, if the Fed were to stop printing, the banking then the financial systems would seize up and not even overnight loans would clear. This is not rocket science, it is merely looking at what is and isn’t. The Treasury is broke and the vaults have been looted while our Central bank keeps the Ponzi game going by printing “reserve currency” out of thin air so that the banks who sit on huge losses (though not disclosed because of fantasy accounting practices) can keep their doors open.
Please do not be fooled into believing that they have a “solution.” They don’t because there is not one. If everything was “so good” then why has legislation recently been writing on how to raid customer accounts whenever a bank fails? We were on the very edge of total collapse back in 2008-09, nothing was fixed, and actually nothing has even changed (except for accounting principles.) We continued on with exactly what got us into the problems in the first place…only with much higher doses of bad business logic. Not that he is having fun but Mr. Bernocchio must surely hope that “time” passes quickly so that he can get out of Dodge before the house comes down. At this point, the only thing he can hope for is “it didn’t happen on my watch!”
I wonder how high US gov bond yields have to rise before the $200 trillion in interest rate swaps that JPM, Citi, BOA, GS and MS are holding blow up.
there is no telling and we won’t find out until after it happens…which of course will be too late to do anything about it
Love reading ur writings Bill! What do you see happening with all the small home town banks and there ability to survive when this all hits the fan?
it’s hard to say but they should have less risk since they don’t own derivatives
“I wonder how high US gov bond yields have to rise before the $200 trillion in interest rate swaps that JPM, Citi, BOA, GS and MS are holding blow up.”
For as long as the USD is world reserve currency and Banana Ben has control of the infinite printing press!!!
Additionally, this is also how long Gold/Silver will be manipulated.
I believe that the real spike ahead in rates will coincide with delivery failures of physical. How high? We’ll have to see but you will know it when you see it.
A king is only as wise as his council. If Ben is getting advice from the likes of the President, Secretary of Treasury and others in government, then this is the results of it. A LIE destroys everything in its path. This whole entire Ponzi economy is built on a LIE and that is why it will be destroyed. It reminds me of the story of Adam and Eve. When they were asked about eating the fruit, both of them found someone else to blame instead of taking the responsibility for their actions. This is the same thing we are experiencing today. It’s a game of hot potato and many people are getting burned by it.
This time(unlike 2008) Silver and Gold have already been sold off before the real market pain comes. People will have no choice but to place their money in them since they are the most undervalued asset class. This year reminds me of 2007, I am just waiting for the news to start coming out this summer when people are on vacation. This roller coaster in getting ready for the drop moment so hold on to your stomach.
Thanks again Bill!
I will save the dollar. That’s right- just me- with my amazing powers! In the seventies, I invested in silver, just before the Hunt Bros. debacle sent it into the toilet. In the eighties, extreme poverty forced me to sell it at a huge loss. In the nineties, I had some $ from an inheritance and bought stocks, just before the dot com crash. In the aughts, I decided to invest in something solid, something of intrinsic value that had always gone up in value- REAL ESTATE!
Being a slow learner, I believed all of the predictions of silver’s inevitable skyrocketing prices and bought again at the beginning of ’13. The price of silver will rise again when I sell, probably when it gets into negative numbers.
Yeah- it’s magical thinking, but thirty years of investment losses have turned me into a believer. Just call me “the cooler”.
just sit tight and relax Paul, not even God can save the Dollar.