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FreeMarkets (89.97)

Bernanke's Big Mistake

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July 21, 2010 – Comments (9)

After reading this article about how Bernanke is now testifying that the economic future is uncertain, I couldn't help but think "What a total idiot he is."

First and foremost, if traders (assuming they have seen the last three months of crappy economic indicators) are still insisting on pushing up stock prices, why in the world would you shatter their delusional fantasies?  Obviously stock prices are based on bluster and fluff - definitely not economic reality, so give it to them.  Say something like "No matter what the number say, I see green shoots everywhere!"

I've pretty much lost faith in the stock market if this testimony is hurting stock prices.  He's saying NOTHING we didn't already know.  If people had a currency based on gold, they could at least save their wealth, today they've got two choices 1) Watch savings disappear in a crappy market or 2) Watch it disappear in the printing press.

Sucks to be a saver in this environment, so spend, spend, spend (assuming you've got it to spend).

9 Comments – Post Your Own

#1) On July 21, 2010 at 3:28 PM, Griffin416 (99.97) wrote:

It means the market is too high.

Bad news + good action = buy

Good news + bad action = sell

neutral news + bad action = sell a little.

Personally, I have been in a very good situation and I couldn't agree more with your last paragraph. Sort of like, "heavy hangs the head with the crown", but instead of a crown it is a boatload of savings

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#2) On July 21, 2010 at 3:38 PM, Griffin416 (99.97) wrote:

Bernake says we are "prepared to take further policy actions as needed". This sounds great, Don't fight the Fed. He will devalue the dollar as long as it takes to stave off a double dip.

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#3) On July 21, 2010 at 4:21 PM, ralphmachio (27.53) wrote:

There are factors beyond our stock market that will influence Bernanke to do otherwise, in my opinion. If we lose more credit rating, we borrow at a higher rate, and the government may not want to take one for the team. If gold goes much higher, it will not reflect well on confidence in the US government, further escalating the hyperinflation/goldbugs were right scenario, which is the LAST thing the government wants. The forefathers warned about the power of the central bank to control the masses through DEFLATION, not inflation. The threat of inflation is only making people fall into the trap of paying for the deleveraging with bad investments.

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#4) On July 21, 2010 at 4:51 PM, allstarvulture (< 20) wrote:

FreeMarkets-

I am no fan of BB. But in fairness, he had already said after the last two FED meetings that the recovery was slowing and the forward outlook tenuous.  If his remarks today were a surprise to anyone (including being prepared to take further policy actions), that should be on them.  We can't really balme him for shattering delusional fantasies that had no business existing in the first place.

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#5) On July 21, 2010 at 5:05 PM, starbucks4ever (94.36) wrote:

Why do you call him an idiot for saying the truth? To me, that sounds reassuring. The message I got from this is that

a) Bernanke is confident the market can handle bad news

b) Get ready for more QE 

c) Give up any hope for rate hikes

This is clearly bullish for the nominal asset prices. 

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#6) On July 21, 2010 at 11:35 PM, russiangambit (29.32) wrote:

I was actually surprised to hear "unsually uncertain". Coming from Bernanke, one of the designated cheerleaders this sounds like the end of the world.

I think he is holding on QE 2 because QE 1 didn't really work, id you don't count Wall Street.Bernanke's primary concern is the economy,  not the Wall Street. Though he is very partial to the latter.

I think he also feels like FED has been doing all the hard work while the Congree keeps fooling around. And he wants to step back just a tiny bit from the limelight. He is already in lots of hot water for helping Wall Street but not Main Street with his programs.

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#7) On July 22, 2010 at 12:45 AM, DarthMaul09 (29.74) wrote:

Neither Bernanke nor the market appears to know what they are doing.  By stating merely the obvious, the Fed Chairman may have been talking over the heads of most in the Congress, who still have yet to comes to grips with the fact that they were the ones who broke the economy and the markets.  When failure is rewarded and savings are punished, then the economy will die.  The market's lack of direction is also based on the uncertainty supported by the Fed and the Federal government.  If as zloj points out, the Fed is hinting that further interventions are in the works, then the rules are about to change yet again.  When the rules continually change, who can really judge the value of the market.  And this is why the market appears to be going in every direction at once, since it follows a compass which is broken.

This is not a bash on just the Democrats since the Republicans were guilty of similar offences when they were in power.  Remember the "ownership society" and the Part D Medicare drug program.  But like a game of one-upsmanship, the Democrats have sought to buy everyone's vote by making them dependent on the Federal government for their survival.  The problem with this plan is that the Federal government does not currently produce anything of value.  That would require the totalitarian take over of all of the critical private sectors of the economy, which I doubt that even the politically left would be very comfortable with given the history of past planned societies.

So in summary, Bernanke may not be an idiot, but he is just not very good at economics; and the market may be responding rationally by not knowing where to go.

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#8) On July 22, 2010 at 12:56 PM, AbstractMotion (52.07) wrote:

Honestly I think there were a number of people who flat out wanted to hear Bernake say he would backstop the markets if there were further decline period.  They wanted that Greenspan-esq commitment to keep equities solid regardless of the overall impact it had on the underlying economy.  Bernake has done a lot already, and honestly I don't think further QE would help much besides equity prices.  Most of the challenges facing the economy right now are structural, and aside from purposefully debasing the currency to give the US an export advantage there's not a whole lot the Fed can do that will change them.  Bernake's message was pretty much "at this point we've done enough" and I think he's right on target.

 

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#9) On July 22, 2010 at 2:06 PM, awallejr (79.49) wrote:

I found his choice of words kind of amusing.  "Unusually uncertain future" as opposed to a "usually uncertain future?"  I also had to shake my head to the market's initial reaction.  So now today we are up over 200 points (well who knows what will happen that last hour I suppose).  But at least today's action makes a little sense since people are focusing on earnings.

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