Great Job Ben. Back to your op-ed....
Two years have passed since the worst financial crisis since the 1930s dealt a body blow to the world economy.
A collapse you were responsible for.
These mortgages were sold to Fannie Mae, Freddie Mac and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.
In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.
I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.
We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production.
You are the "uber-supervisor" of these banks. Where was your supervision during these years? Why did you allow Citibank to make and sell hundreds of billions of knowingly-defective loans?
Working with policymakers at home and abroad, the Federal Reserve responded with strong and creative measures to help stabilize the financial system and the economy. Among the Fed's responses was a dramatic easing of monetary policy - reducing short-term interest rates nearly to zero. The Fed also purchased more than a trillion dollars' worth of Treasury securities and U.S.-backed mortgage-related securities, which helped reduce longer-term interest rates, such as those for mortgages and corporate bonds. These steps helped end the economic free fall and set the stage for a resumption of economic growth in mid-2009.
Really? Growth eh?
Uh, what growth? In point of fact what we've done is put the entire economy on the credit card. $1.4 trillion a year since 2008. Economic recovery? Resumption of growth? Certainly you jest - this is what GDP is once one takes out the government credit card:
Yes, we have the "revisions" in there too. Got to, you see, since the government just loves to report a lie and then later on revise it back out - when you're not looking.
If you lose your $50,000 a year job and have a credit card with a $20,000 credit line, you too can spend as if you didn't lose your job and "grow" your economic prosperity - if you lie to yourself and your neighbors.
For a little while.
But now we got another problem. See, The Government doing this for a long period of time leads to what happened in Greece. Bond rates back up and suddenly you can't pay the interest. The nation has happen exactly what happened over there - the interest demanded becomes impossible to cover, and the economy and government collapse.
So now, instead of recognizing what we've been doing (which involves being honest about the above numbers) Ben "I lie like a snake" Bernanke has chosen instead to lie again - this time right here:
Dateline, August 8 2009
So what did Ben Bernanke do?
He inflated the money supply by more than 100%. After saying he wouldn't. And now he's doing it again - this time, he's just announced that he intends to monetize $600 billion - approximately exactly what the Treasury will issue over the next six months.
More than a year ago Bernanke lied in front of Congress. In fact, while he was lying the very act he said he wouldn't commit was, in fact, committed.
Yesterday, he committed to do it again. And again. And again.
Bernanke claims this will "help the economy." He's lying. It will do no such thing.
What it did do is drop the dollar by more than 1% essentially immediately.
Here is what the stock market has done overnight. You can see that right when Europe opened and the Dollar got hammered, the stock market futures went up. This is exactly what Bernanke said he is trying to do:
(White line is the dollar on a relative basis)
Here's the problem: Not only did the stock market futures go up, so did oil, by roughly double the amount the dollar declined and the market advanced.
And so did corn, despite an excellent harvest.
And so did soybeans
Without jobs you cannot have any sort of durable economic recovery. Yet there are no jobs being created.
The reason there are no jobs being created is that margins are being trashed. There is no wage pressure available to inflate wages as manufacturing is all offshore in China - a direct consequence of our economic and trade policies. Therefore, the American Worker has no ability to demand higher compensation.
In fact, just yesterday the unionized workforce of Olin Corporation refused to agree to a nine year wage freeze:
In a statement released Wednesday, Olin President and Chief Executive Officer Joseph Rupp said, "Unfortunately, without the cost savings and efficiencies that the (union) would have provided, the state incentives alone would not have allowed us to remain competitive for the long-term at our current location in Illinois."
The plant is being moved to a new non-union plant in Mississippi - with lower wages.
Unit labor costs are falling (there will be a ticker on this shortly) which Steve Liesman is claiming is "good". The problem is that commodity price increases are ramping production costs and while labor cost goes down so do wages, which means that you can't pass through the cost increase.
What The Fed is doing, basically, is imposing a huge tax increase of $600 billion over the next six months on the economy. While we're arguing over a $700 billion tax problem over the period of ten years, or $70 billion a year, Ben Bernanke has just imposed an effective $1.2 trillion annualized tax increase on the American Economy - seventeen times the size of the Bush "Tax Cuts".
It's just hidden.
The Government is selling their debt to The Fed. The Fed is in turn debasing the currency. This causes the dollar to go down in value, which in turn causes all commodities denominated in dollars to go up in price.
But wages are not rising (unit labor costs) which means you are forced to absorb the increase in commodity prices without any increase in your earnings.
That's a tax increase.
It's that simple folks.
This isn't good for the economy, it's bad for the economy.
The Market will continue to play along for a while, right up until the reality of margin collapse is realized.
You buy stocks for future earnings. Those earnings are going to go the wrong way.
Tomorrow? Probably not.
But will it - with certainty?
This is monetary suicide, and if Ben Bernanke had an ounce of decency (he doesn't) he'd pull a Budd Dwyer and do to himself what he's doing to America - and Americans.
(Warning: The video above is graphic - but yes Ben, you should do it. On national TV. It would be the honorable thing to do - but we know that in fact you have no honor, and that protecting the banks - both here and abroad - from their own outrageous acts is all you care about. No matter how many people you literally starve, or how high you drive the imputed tax rate due to commodity price ramps.)
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