Financial topics

[Higgenbotham]

"Does Bernanke like a drunken gambler triple up on QE in order to stimulate the economy, counter the Gingrich threat, and get Obama reelected? Or does he chicken out and do the safe thing, fearing a Gingrich victory in 2012?"

Well, I don't know if we really got an answer today. Maybe the polls aren't clear enough yet.

Bernanke doesn't know what the economy will do next month, much less at the end of 2014. In fact, in the press conference, he admitted that. So what's the point? I take it as something like, "You thought a trillion in QE was big, look pal, you ain't seen nothing yet. Just you watch." And it worked. The herd kept dancing to the music.

[Trevor]

Well, he still thinks his great historic experiment is going to work. However, I've noticed a certain amount of desperation, meaning that part of this is that he has to believe it. If things don't look up, he may not hold his job for long.

[aedens]

OBSERVATIONS ON THE DROWNING OF NONSWIMMERS

I will leave it at that in context to the division of labor from Human Action from Mises.
Like many who refuse to give up since even if we are poor swimmers, we can. I am reminded
once again to the cultural veneer until the fog lifts.

[Trevor]

Well, I just looked up the Greek 2-year bond yields; they have officially reached 200 percent. That's nothing short of astonishing. I figured they would get there, but seeing it is a whole different matter.

[OLD1953]

I doubt Bernake thinks he is doing anything positive now, but he's afraid to stop. His religon is solvent banks. I expect US banks are less exposed to Europe now than most seem to think, hedge funds I'm sure have more exposure. I'd wager a good bit that the "exposure" headlined is the total of all Europe, which makes little sense from a standpoint of "how bad is it". There's as much (and as little) difference between hedge fund losses and direct bank losses as the difference between chicken pox and HIV.

If Germany ties itself to Greece, Portugal and the others, then Germany falls. If they do not, the EURO fails. I think I know which way they'll choose, and WWII guilt be damned. Several countries will either exit the EURO the easy way or the hard way, or all EURO based bonds take a SUPER hit as the investors finally figure out that Germany is not backing everything that says "Europe".

It's always good to check what you think you know against reality:

https://www.cia.gov/library/publication ... 6rank.html

https://www.cia.gov/library/publication ... 8rank.html

https://www.cia.gov/library/publication ... 3rank.html

How do dropping commodity prices correspond to improving economies? People are excited over futures, but the now presents a different story. Everyone is trying to outguess the market, and that's a losing game. Volume charts are not looking happy to me, more like the cats are waiting at the mousehole.

[vincecate]

I doubt Bernake thinks he is doing anything positive now, but he's afraid to stop.

I have a new investment idea. I think buying silver call options right before Bernanke press conferences and sell them the next day would do well.

But I also think buy and hold works for silver too.

[Higgenbotham]

Towards thee I roll, thou all-destroying but unconquering whale; to the last I grapple with thee; from hell's heart I stab at thee; for hate's sake I spit my last breath at thee.

--Captain Ahab's last words in Moby Dick

[Higgenbotham]

Just did a search on the concept above and found an interesting little book. He has a chapter entitled "Why We Need Deflation". I haven't read it all yet but the parts I've read so far are interesting.

http://www.hoalantrangallery.com/Turnoutlights.htm

Misters Greenspan, Paulson and Bernanke and all their friends in Washington and on Wall Street were kings of the world (they apparently called themselves ‘The Masters of the Universe’ – Greenspan’s nickname was ‘the Maestro’ -- graced by God, each a Sun in his own system. Who, given such a high state, such grand power, a god ruling over men, would accede quietly to the regular, cyclic loss of power that the Night was demanding? Who would willingly climb down from a omnipotent throne and fall to his knees and proclaim: ‘God, you are higher than I! Your will is my will!’

To the minds of America’s Ruling Class, Deflation was not God. In fact, deflation was the Devil – as to Ahab, Moby Dick was the Devil. Death was a Devil that needed to be fought, needed to be resisted, needed to be defeated! Perhaps technology could defeat the Devil! Perhaps semiconductors might do it! (Even better: perhaps Viagra could do it.) Perhaps Death was just a trick of accounting, something we could take off the books – with everyone looking in the other direction (in the direction of their own self-interest), perhaps no one would even notice that Greenspan had erased Death from the Cosmic ledger.

People (nearly everyone) would get richer and richer and we would sail off into the sunset on our collective Ted Hood Yacht. Perhaps, together, the Great Society of Individuals, could kill the Great White Whale of our finiteness. Perhaps we were the generation God had willed to finally destroy that form of spiritual Gravity which transformed Hope to Despair, which transformed Victory to Defeat, which annihilated Beauty and Bodily Power and terminated Youthful Dreams, and was the tragic denouement of every play and every existence ever writ!

And perhaps not.

We need deflation; and we need inflation. Deflation saves human souls from their isolation, from their self-love, from their manic disease of pride and inhuman will. Inflation saves human souls from their self-loathing, from their lost direction, and from their lonely descent into failure.

[Trevor]

I think at this point, Bernanke is realizing that his plan is not working the way he thought it would. However, what else can he do? His entire reputation is on the line, so he's not going to change course. I believe he's thinking something like: "Okay, it hasn't worked yet, but give it time. we'll be roaring back to recovery; we have to." There's also a certain amount of self-delusion in this, and it's very difficult for someone to turn back after they've put a lot on the line for what they believe.

[Higgenbotham]

More from the above mentioned little book:

I have written that Alan Greenspan is America’s most recent Ahab, and that his ‘sin’ is his inflated nature, his pride: he came to believe that he was God. Therefore he was setting himself up to be overthrown by God, thrown out of Eden (he ate the forbidden fruit so that he could become as powerful as God), cast into death and darkness and labor (‘labor’, in this instance, constituting at least a dual meaning: work and a symbolic maternal pain of re-birth).

Alan Greenspan is not the only Ahab in America at this moment. But he was the leader (in many ways more a leader, longer, than George Bush) of the expanding Ego in America, the inflated state of America. His nickname ‘the Maestro’ indicates the level to which his Ego had been elevated by friends and colleagues. The Maestro. The Genius. The Fuhrer. The Man Without a Shadow. The Man Who Walks On Water. The Sun-King. The Magnificent. With his staff, the Sceptre, the new Pope of modern global capitalism, King Alan, brought wealth and health and happiness to common people all over the globe. With his finger on the magic button, he could expand or contract the world economy at will, simply by inflation or deflating the wonderful Credit Machine (note: he did much more inflating than he did deflating). He was a mountain of a man. A man from the mountain.

And, like Ahab, none of his crew on the Pequod questioned his judgment, even those who tacitly understood that his policies would lead to the eventual destruction of the Pequod, of home and hearth, of city and industry.