The Dollar Will Not Crash By Mike Whitney

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By Mike Whitney
Information Clearing House
October 19, 2009

The dollar is not going to crash. There may be grumblings in foreign capitals and “secret meetings” between finance ministers but, for now, the dollar appears to be safe.

Foreign countries don’t trade in dollars because they like America. They do it because they have no choice. If they want oil, they need dollars; it’s as simple as that.

It’s great to talk about a “basket of currencies” replacing the dollar, but that’s still a work-in-progress. It might happen, or it might not; no one really knows. What’s clear, is that we still live in dollar-centric world where paper claims on wealth are arbitrarily increased at will by a handful of unelected officials at the Federal Reserve. It’s a process which relies more on Gutenberg than moral authority.

A Dollar Rout Or More Bernanke Trickery? By Mike Whitney

Dandelion Salad

By Mike Whitney
Information Clearing House
October 12, 2009

Consumer credit is falling fast. In July, consumer credit plunged by $19 billion, followed by an August drop of $12 billion, a 5.8 percent annual rate. Credit card spending decreased by nearly $10 billion in August, while non-revolving debt, including auto loans, fell by $2 billion. Credit has shrunk for 7 consecutive months, the longest period of decline since 1991. The banks have shrugged off their commitment under the TARP program to increase lending to consumers and businesses. They’ve either deposited their excess reserves with the Fed, where they earn interest, or invested them in the equities markets for better returns. The bottom line: Credit is shrinking and the economy is slipping further into deflation.

From MarketWatch:

Restoring a Viable System of Bank Credit – Bernanke Rolls Snake-eyes by Mike Whitney

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by Mike Whitney
Global Research
October 6, 2009

Fed chief Ben Bernanke is in a bit of a bind. He’s being asked to restore a system for credit expansion which collapsed more than two years ago and has shown no sign of life ever since. During the boom years, securitization accounted for more than 40 percent of the credit flowing into the economy. No more. When two Bear Stearns hedge funds defaulted in July 2007, the system crashed as investors of all stripes backed away from complex, illiquid assets. The Fed’s TALF lending facility–which provides up to 94% government funding for investors who are willing to purchase bundled debt for credit cards, mortgages, auto loans and student loans–was intended to breathe new life into securitization, but has fallen woefully short of its original objectives. It pretty much fizzled on the launching pad. Even the shrewdest hedge fund sharpie couldn’t figure out how to make money on (what amounts to) fetid assets.

Bernanke’s Remedy: Pump More Blood Into a Corpse By Mike Whitney

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By Mike Whitney
Information Clearing House
October 05, 2009

Credit is everything. Without credit expansion there’s no recovery because there’s no pick-up in overall demand. But credit growth is going backwards. The banks have tightened lending standards and the pool of credit-worthy applicants has vanished. Bank lending is off 14 per cent since October 2008. Private credit is presently decreasing at a 10.5 per cent annual rate. The situation is getting worse, not better.

From the UK Telegraph:

“Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation…

Time To Change Bernanke’s Medication? Secret White House letter to G-20 by Greg Palast

by Greg Palast
Featured Writer
Dandelion Salad
www.gregpalast.com
September 22, 2009

For The Huffington Post

I still get a thrill whenever I get my hands on a confidential memo with “The White House, Washington” appearing on the letterhead. Even when—like the one I’m looking at now—it’s about a snoozy topic: This week’s G-20 summit.

But the letter’s content shook me awake, and may keep me up the rest of the night.

The 6-page letter from the White House, dated September 3, was sent to the 20 heads of state that will meet this Thursday in Pittsburgh. After some initial diplo-blather, our President’s “sherpa” for the summit, Michael Froman, does a little victory dance, announcing that the recession has been defeated. “Global equity markets have risen 35 percent since the end of March,” writes Froman. In other words, the stock market is up and all’s well.

Memo to Bernanke: “No Wage Growth; No Recovery” By Mike Whitney + Did Bernanke save the world?

By Mike Whitney
August 28, 2009 “Information Clearing House”

A recent poll shows that most economists now believe that the recession, which began in December 2007, will end in the third quarter of 2009. There’s been an uptick in manufacturing and consumer confidence, and the decline in housing prices appears to be flattening out. Unfortunately, the return to positive GDP will likely be short-lived. The current surge in production is mainly the result of President Obama’s fiscal stimulus and the rebuilding of inventories that were slashed after Lehman Bros defaulted in September, 2008. These factors should boost GDP for two or perhaps three quarters before the economy lapses back into recession. The most serious problems facing the economy have not yet been addressed or resolved. Consumer spending and bank lending are still contracting, and the banks are buried beneath $1.5 trillion in toxic assets and non-performing loans. Also, the wholesale credit system, (securitization) which provided up to 40 percent of the credit flowing into the economy, is barely operating. No one really knows whether the system is salvageable or not. On a fundamental level, the financial system is broken and neither the Fed’s zero percent interest rates nor Obama’s gigantic fiscal stimulus has reversed the prevailing downward trend. Capital has stopped moving; the velocity of money has slowed to a crawl. It’s true, things are getting worse slower, but the signs of “recovery” are as faint and irregular as a dying man’s breath.

Green Shoots or Scorched Earth? – Bulletins From Clunkerville By Mike Whitney

By Mike Whitney
August 14, 2009 “Information Clearing House”

Is the economy really recovering or is it all just hype?

Here’s what we know. The Fed doesn’t drop rates to zero unless its facing a 5 alarm fire and needs to pull out all the stops. The idea is to flood the markets with liquidity in order to avoid a complete financial meltdown. It’s a last-ditch maneuver and the Fed does not take it lightly.

The Fed initiated its zero interest rate policy, ZIRP, eight months ago  (December 16 2008) and hasn’t raised rates since. In the meantime, Fed chair Ben Bernanke has pumped huge amounts of money into the financial system using thoroughly-untested and unconventional means. No one knows whether Bernanke can roll up his multi-trillion dollar lending facilities or not (and avoid Zimbabwe-like hyperinflation) because no one has ever created similar programs. It’s all “make-it-up-as-you-go” policymaking. What we do know, however, is that the Fed intends to keep rates at rock-bottom for the foreseeable future, which means that the lights are all still blinking red.

Here’s an excerpt from the Federal Open Market Committee (FOMC) on Wednesday:

Question for Bernanke: “Do You Have The Cojones To Raise Rates?” By Mike Whitney

By Mike Whitney
August 12, 2009 “Information Clearing House”

Booyah. It’s morning in America. The jobless numbers are stabilizing, the stock market is sizzling, quarterly earnings came in better than expected, traders have turned bullish, housing is showing signs of life, and clunker-swaps have given Detroit a well-needed boost of adrenalin. Even Cassandra economists –like Paul Krugman and Nouriel Roubini–have been uncharacteristically optimistic. Is it true; did we avoid a Second Great Depression? Is the worst really behind us?

Maybe. But there is only one way to find out for sure. Raise rates.

Bernanke should welcome the opportunity to show everyone how he’s pulled the world’s biggest economy back from the brink of disaster. All he needs to do is stop giving away free money, shut down a few of his so-called lending facilities, and stop manipulating interest rates by purchasing mortgage-backed securities (MBS) from Fannie and Freddie. How hard is that?

The World Needs A Breather From The US By Mike Whitney

By Mike Whitney
August 7, 2009 “Information Clearing House”

And they’ll get it sooner than many think

We’re making this way too complicated. It’s simple really.

The Fed has only one tool at its disposal; to create more money. Typically, the way the Fed adds to the money supply is by lowering interest rates. When the Fed lowers rates below the rate of inflation; they’re basically selling dollars for under a buck. That’s a good deal, so, naturally, speculators jump on it and trigger a credit expansion. What follows is a frenzy of market activity that ends in a housing, credit, tech or equity bubble. Eventually, the bubble bursts and the economy goes into a tailspin. Then, after a period of digging-out, the process resumes again. Wash, rinse, repeat. It’s always the same.

Max Keiser: Gordon Brown’s Bottom + Ben Bernanke on Tour + Unemployment

http://maxkeiser.com

August 7, 2009

On the Edge with Max Keiser Summer Special Edition

Wall Street’s Love Affair with Ben Bernanke by Mike Whitney

Dandelion Salad

by Mike Whitney
Global Research, July 21, 2009

A careful reading of Federal Reserve chairman Ben Bernanke’s op-ed in Tuesday’s Wall Street Journal, shows that Bernanke thinks the economy is in a deflationary spiral that will last for some time. Ben Bernanke:

The depth and breadth of the global recession has required a highly accommodative monetary policy. Since the onset of the financial crisis nearly two years ago, the Federal Reserve has reduced the interest-rate target for overnight lending between banks (the federal-funds rate) nearly to zero. We have also greatly expanded the size of the Fed’s balance sheet through purchases of longer-term securities and through targeted lending programs aimed at restarting the flow of credit….My colleagues and I believe that accommodative policies will likely be warranted for an extended period.”

No talk of recovery here; just a continuation of the same radical policies that were adopted after the collapse of Lehman Bros. The only sign of improvement has been in the stock market, where Bernanke’s liquidity injections have jolted equities back to life. The S&P 500 is up 40% since March. Conditions in the broader economy have continued to deteriorate as unemployment rises, the states find it harder to balance their budgets, and the real estate bubble (commercial and residential) continues to unwind. The Fed’s policies are Bernanke’s way of saying, “The states are not the country. The banks are the country.” The public seems slow to grasp this message.

Chair. Bernanke reports to Congress about the economy + Testimony + Grayson grills

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Testimony

Chairman Ben S. Bernanke
Semiannual Monetary Policy Report to the Congress
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
July 21, 2009

Is the Fed Juicing the Stock Market? by Mike Whitney

Dandelion Salad

by Mike Whitney
Global Research, June 29, 2009

Why has the stock market been on a 3-month tear when the economy is undergoing the worst economic contraction since the Great Depression? The S&P 500 has shot up 40% from its low on March 9 and the Dow Jones Industrials have followed close behind. Is this a typical bear market rally or is the invisible hand of the Fed goosing the markets?

Everyone seems to agree that the Fed’s multi-trillion dollar quantitative easing (QE) is the jet-fuel that’s put stocks into orbit. But how is the money filtering into the market?

The first place to look is the Fed’s lending facilities which have provided trillions of dollars in loans and US Treasuries for dodgy mortgage-backed collateral. These loans are not collecting dust in company vaults, but are being used for speculation in the stock market. Unfortunately, Bernanke refuses to say which financial institutions have gotten the loans, or how much they have borrowed, or even what type of toxic garbage that’s been taken in exchange. It’s all very hush-hush. Bernanke’s even shrugged off the threats of legal action from Bloomberg News, which is demanding greater transparency in the Fed’s programs. What a joke. The Fed doesn’t have to comply with the law; it IS the law. Meanwhile Bernanke’s stealth monetizing operations have continued without pause, boosting market activity, driving up the price of commodities and inflating another equities bubble. It’s all just business as usual at the Fed.

What the Big Banks Have Won – Regulatory Capture by Mike Whitney

Dandelion Salad

by Mike Whitney
Global Research, June 26, 2009
CounterPunch

Trouble started 24 months ago, but the origins of the financial crisis are still disputed. The problems did not begin with subprime loans, lax lending standards or shoddy ratings agencies. The meltdown can be traced back to the activities of the big banks and their enablers at the Federal Reserve. The Fed’s artificially low interest rates provided a subsidy for risky speculation while deregulation allowed financial institutions to increase leverage to perilous levels, creating trillions of dollars of credit backed by insufficient capital reserves. When two Bear Stearns hedge funds defaulted in July 2007, the process of turbo-charging profits through massive credit expansion flipped into reverse sending the financial system into a downward spiral.

It is inaccurate to call the current slump a “recession”, which suggests a mismatch between supply and demand that is part of the normal business cycle. In truth, the economy has stumbled into a multi-trillion dollar capital hole that was created by the reckless actions of the nation’s largest financial institutions. The banks blew up the system and now the country has slipped into a depression.

Congressman Kucinich Questions Ben Bernanke (Rounds 1 & 2) + Entire hearing

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