Lie By Omission (Bernanke) in [Market-Ticker]

Posted 2012-03-29 14:24
by Karl Denninger
in Federal Reserve

Lie By Omission (Bernanke)

The Fed’s asset purchases are not government spending, because the assets the Fed acquired will ultimately be sold back into the market.

Factually true but intentionally misleading.

The Fed's purchases are not themselves government spending, but every bond purchased by The Fed came into existence as a consequence of government deficit spending.

So while the claim itself is true, without the purchases the government would have to pay more to borrow the money it wanted to spend but was unwilling to tax -- or might not be able to borrow it at any commercially reasonable set of terms at all.

Of course Bernanke doesn't bother mentioning that little detail.... just like the drug pusher doesn't mention that without his drugs the user who just cacked himself with a giant speedball couldn't have attempted to get high (and killed himself instead.)

Discussion below (registration required to post)

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User Info	Lie By Omission (Bernanke) in forum [Market-Ticker]
Curbyourrisk Posts: 3595 Incept: 2008-08-19 Farmingdale, NY	Why the MSM not call him out on crap like this? Don't bother answering Karl...I already know the answer. A) they are too stupid and don't get it. B) It's Bernanke...they are the media. enuff said C) A and B ---------- Time is up. I hate to burst your bubble, but there is no Santa Claus, the tooth fairy does not exist and American justice does not involve the courts. 2012-03-29 14:38:45 Permalink
Themortgagedude Posts: 8853 Incept: 2007-12-17 saint louis	Just more reason to think Bernanke is not printing but rather counterfeiting. ---------- I'm already visualizing you with duct tape over your mouth. 2012-03-29 14:42:13 Permalink
Jubber Posts: 14144 Incept: 2007-07-05 UK Online	Surprising strength in the Euro the last few days, even today hardly down much...are people selling the US$? or is purely central Banks supporting the Euro?? ---------- The problem with socialism is that, sooner or later, you run out of other peoples money. Thatcher 2012-03-29 14:42:54 Permalink
Mannfm11 Posts: 3551 Incept: 2009-02-28 DFW, Tx	I don't know that the interest statement is necessarily true in the long run. What he is actually covering up is the trillions it would cost to bail out the banks. The real lie is that he is ever going to sell these securities back into the system. The entire purpose of the buying wasn't to finance the government so much as it was to aid in an attempt to create more total debt. Bernanke is handcuffed to a handgrenade and his hands glued to his balls. Either way he moves, one of them is going to get blown off. The Atlantic (?) magazine cover is the greatest contrarian indicator in history. His solution is the hair of the dog that bit him. Jubber, there is a liquidity crisis on Europe. I understand the money market funds are back to lending to European banks, so the banks don't need dollars so badly. That will change, just give it a little while. The rest of us don't have any influence on the dollar values, it is all about what banking system needs more of them or has enough. Money is going to flee Europe like the plague. http://www.acting-man.com/?p=15922#more-.... ---------- The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith Last modified: 2012-03-29 14:50:35 by mannfm11 2012-03-29 14:45:53 Permalink
Bertdilbert Posts: 2662 Incept: 2008-12-22 CA	It will never happen. If what is on the Fed balance sheet is sold into the market it will jack the interest rates back up and destroy the budget. It will all be effectively raked into a pile and burnt at some future point. ---------- Dear Euroland: Relax, Germany has a plan for your money! Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro. 2012-03-29 15:57:12 Permalink
Coondog Posts: 1582 Incept: 2008-01-21 MI	What's the difference if the market buys Treasury's directly or via proxy through the fed? It seems to me like it's the same spending. ---------- "The purpose of all political action should be to promote liberty. We should always maintain the conviction that free people will be able to take care of all of their needs. When government gets involved, it can do things with a lot of good intentions, but it cannot do so without undermining our liberties." - Ron Paul Last modified: 2012-03-29 16:15:01 by coondog 2012-03-29 16:13:09 Permalink
Themortgagedude Posts: 8853 Incept: 2007-12-17 saint louis	Coondog - It's the same as printing. Or worse. The debt will never be paid back. I'll go so far as to opine that we will never see a budget deficit under a trillion until we are forced to bring the deficit to $0. When you print debt backed currency with no intention of ever repaying it I can't see how that is not counterfeiting. ---------- I'm already visualizing you with duct tape over your mouth. 2012-03-29 17:28:28 Permalink
Widgeon Posts: 13481 Incept: 2007-08-30 Region formerly known as the United States	Me Neither. 2012-03-29 17:33:16 Permalink
Marvinmartian Posts: 752 Incept: 2011-03-16 Pasadena, CA	A quibble that the Bernank could use: the Fed does not directly buy Treasuries, they have to be first "bought into the market" by a primary dealer. The Fed then buys a Treasury from the PD or some other entity that bought from a PD. However, the Federal Reserve is owned by the member banks, a large number of which are primary dealers, so the circular references here make my head spin. 2012-03-29 18:53:32 Permalink
Donethat Posts: 771 Incept: 2009-04-22	The only reason the banks do not just cover all the new "debt" directly for the Treasury seems to be they want the FRB to be the fall guy for the long end of the securities and to be the bag holder for some mortgage backed securities. To the tune of 1.5 trillion dollars. I think Bernanke is a useless lightning rod for comment. As Karl as written previously when Greenspan was done making the US bank reserve requirements less than 1 per cent of total US bank deposits/assets, the only strings the FRB has a hold of is interest rates and buying garbage securities. The FRB does not control interest rates any more than GS does. Yes they are the biggest player, but they only "lead" interest rates at best. It is the banks that create exactly as much money as they want, credit a loan, debit a deposit and subtract a penny from their excess deposits at the FRB. This is the new reality, enabled by Greenspan, and the game of the U.S. since 2008. Again, Bernanke and the FRB are really powerless tools of their owners. The only QEs the US gets are what the banks give them. In a place where any asset appreciation due to inflation is taxed, why bother to hold assets or invest if you have any debt to pay down. 2012-03-29 19:56:23 Permalink
Jslique Posts: 467 Incept: 2008-07-28 Melbourne	Goes with the other Factually true but intentionally misleading statement that a country that has control of its money cannot go Bankrupt. 2012-03-29 22:55:51 Permalink
Hogman Posts: 7874 Incept: 2008-02-18 Derby City, USA	sure wish more people (of substantial influence) understood this 2012-03-30 10:21:35 Permalink
Wwwild Posts: 30 Incept: 2011-07-11 Pacific Northwest	I listened to a good part of Bernanke's presentation and was especially disheartened, but not particularly surprised, by the Q&A section. When the young lad essentially asked do you think 2% inflation is enough all I could do is shake my head. Often we hear resentment from the younger generations toward the older generations and bemoan the state of the world we give/leave them; but, in this case either the young ones aren't thinking or are so completely brainwashed that we should feel extra guilty. Having said that, I'm sure the questions were all pre-screened any any hope of shedding actual light on the situation was infinitesimal. Still, that's why I keep watching/listening to crap like this, in hopes of seeing some light. www 2012-03-30 10:53:04 Permalink