Fed Says Terrible Economy is Temporary

Of course in the long run we're all dead, so I guess that depends on what your definition of temporary is. While the Federal Reserve FOMC meeting claims the never ending economic malaise is temporary, they just downgraded the economy.

 

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Right, the economy is just hitting a bump in the road, the sun will come out tomorrow, yet GDP was revised down and unemployment, inflation projections were revised up.

 

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From the FOMC statement:

The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.

Seems more economic reports are busy blaming natural disasters as of late, although we saw Japan show up in the trade deficit.

Yet, the denial of the jobs crisis rears it's ugly head:

The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate.

Come on ya all, dance a jig with me, the Fed say no, no no more QE2! Surprise surprise, the Federal Reserve is ending QE2, yet clearly leaving the door open for QE3 as needed. Bernanke defended QE2 and tried to imply it helped create jobs.

The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

Bill Gross tweeted QE3 will be revealed at Jackson Hole:

Next Jackson Hole in August will likely hint at QE3 / interest rate caps

MarketWatch has put together a eulogy for QE2 and this is what Peter Morici has to say about it:

QE2 was as inconsequential as one hand clapping. Monetary policy — suppressing the federal funds rates or long rates through QE2 — does not have much impact if big U.S. companies are already flush with trillions in cash but don’t want to invest and hire, and moderate-sized businesses can’t get loans because regional banks can’t borrow from large Wall Street banks to get enough access to all that Fed manufactured liquidity.

Bernanke at least said immediate deficit cuts is a negative for job creation, during the conference. Longer term he implied the budget deficit is a problem.

I don't think immediate cuts in the deficit will create jobs.

Probably the most significant statement from Bernanke's press conference is how the Fed doesn't actually know why the economy is stuck in economic malaise. They cannot explain it. Perhaps some realization that trade, globalization and labor arbitrage have been tearing the middle class apart might finally come about?

ZeroHedge had some fun by turning the FOMC statements into word clouds and makes the report look all about them.

 

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Comments

The whole thing is twisted

Why isn't the Treasury Department saying this? Why isn't the Commerce Department saying this? Why isn't the White House saying this?

How did we ever get to the point that a non-governmental agency, an entity that is disguised as a government agency but is indeed a private banking cabal, owned by the Rothschild family and JP Morgan, why are these private banking interests the "keepers" of our economy?

How did the chairman of a cabal of private banking interests ever get viewed as some grand wizard and grand poobah of the economy of a free society?

This private banking cabal dedicated to nothing except making sure the wallets of bankers are fat and inflated is not even Constitutional. It shouldn't even exist. It should be exposed as the bubble blowing cause of malinvestment and market distorting farce and Wall Street's private piggy bank that it is.

Then let Ben Bernanke, the criminal who has engineered the largest transfer of wealth from the bottom to the top in world history, literally plucked countless billions out of the pockets of the working poor, conduct his press conferences from jail.

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O'Reilly? Ben is the least of the worst in my view

Ask yourself why this Administration, Congress, politicians, Treasury isn't doing a damn thing and why is it good ole Ben seems to be more worried about unemployment than them?

I know all love to do a lot of Ben/Fed bashing and we'll be right there with ya on bail outs, subsidized loans for foreign banks, buying and hiding toxic assets and on and on..

but the bottom line is our government are even more bought and paid for than the Federal Reserve, if you can imagine that being even worse...

but it's pretty clear by policy, legislation and the lack of action on a host of policies it is.

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No soft soaping of the

No soft soaping of the Federal Reserve cuts it any more in my view. This cannot be soft soaped. The Federal reserve should not exist. It is not a government entity, it is a consortium of private banking interests whose only concern is keeping the world safe for bankers, and transfering our nation's wealth into the pockets of it's friends.

It is an immoral institution. The dishonest and disgusting way it poses itself. Bernanke walks out there behind this big podium, flags in the background as if he is some honest public servant looking out for the good of the people. It's bull crap. He works for private banking interests. His interest is in keeping the financial elites inflated.

Pointing to how bad Congress and the president are does not justify the existence of the Federal Reserve one iota. The Federal Reserve is not the solution to a single one of our ills, it is in fact the very cause of many of them. Turning our monetary system over to this gang of private banking interests has been our very undoing.

And no soft soaping will change that.

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Yes, but Robert Oak makes a valid point

It's true that the international central banking system, which lies at the heart of the WTO world-system, is corrupt, exposed, essentially monopolistic, operationally oppositional to liberty and democracy, and, economically dysfunctional today. At the heart of that system, we find the inherently instable system of fractional reserve banking.

 

The National Emergency Employment Defense Act (NEED) proposes an historic money reform ending 'fractional reserve' banking!

http://www.monetary.org/

As Robert Oak and others point out, there are reasons (current and historical) to distance the Congress from direct control of monetary management. Just putting an end to the Federal Reserve system is off the mark. A rational monetarist policy needs to be established by law, setting forth rules, not subject to demigods or 'tsars' or boards of bankers. Straight-forward rules, implemented with total transparency ... and considerable transparency must operate throughout the entire financial system.

We need to get away from all the political preference systems as well as from the insider conspiracies that operate to enforce the maxim:

'All dollars are equal, but some dollars are more equal than others."

That's no way to regulate a market or free enterprise system!

We need to get out of the neo-mercantilist game, which is essentially a system established to frustrate the operation of free markets and to intrude corrupt politics into every business decision. We need an across-the-board tariff (or VAT).

The dilemma here is always like that of Solon, who went into self-imposed exile after giving the Athenians their constitution ... because Solon understood that even he could hardly be trusted not to endorse changes when the forces of greed and fear came into play in difficult situations.

Congress needs the wisdom of Solon to establish rules for a sane monetary system, and then Congress needs to bow out. Of course, a later congress will surely revisit the rules, but that should be done only very carefully and prudently. The rules need to be understood as law, not something that a board of sanctified banksters are charged with manipulating and modifying according to their received revelatory knowledge or their inspired genius.

None of them are sanctified, none of them are geniuses, and none of it is revelation. They are all ordinary mortals, including the POTUS, all of his generals, the National Security Council and the SCOTUS.

As citizens, we need to pay much more attention to the Constitution of the United States, not treating it as some kind of occult document that only such as the black-robed wonders of the SCOTUS should ever read or attempt to understand.

Forcing the U.S. onto the Gold Standard would be a disaster. Keynesian economics needs to go, as does so-called 'supply side' and the pseudo-libertarian theories of the so-called 'Austrian School' (so beloved by the mavens of the Ludwig von Mieses Institute who appear to have hypnotized such as the otherwise praise-worthy U.S. Rep. Ron Paul). We can no longer afford delusional systems, posing as solutions.

We can no longer afford the skimming off the top by the casino operators and their con-artist cousins. Nor can we afford to live like patsies sitting hour-by-hour at slot machines, whiling away the hours between checks received for being unable to work for a multitude reasons -- but never, (perish the thought!), for the reason that the system has failed and there are no jobs available.

We also can no longer afford to delude ourselves that national salvation lies in gimmicks to avoid the difficulties involved in taking responsibility for a democratic government -- gimmicks such as 'term limits', 'gold standard', 'no more taxes', 'no more government' 'eat the rich', 'Tea Party', 'the Republicans are worser', or, 'as a Libertarian I am opposed to all REdistribution'. We can't even afford to kid ourselves that 'it's the politicians, they're all the same'. That's right, the country is so miserably broke, that we can no longer afford the moral highground of abstaining from voting! We can't afford to cut ourselves even that little bit of slack.

Monetarism can only work with a responsible democratic government. As Robert Oak and Michael Collins point out, we have no choice but to begin economic reform with political reform, that is, with campaign finance reform. There, we cannot ignore the elephant regularly pooping our living room, that is, our sanctified SCOTUS divided 5-4 against us AND against any attempt at campaign-finance reform.

Individually, we need to swallow the horse pill that will awaken us to the reality that we have no choice but to make democracy work by making our Constitution work ... unless, of course, we luck out and get ourselves an efficient benevolent dictator!

Problem is that we people tend toward puerile thinking, actually believing that we are electing a hopefully benevolent dictator every four years, a dictator who represents one of the supposed two political parties but is also 'the most powerful man in the world'!

Any sane understanding of the Constitution should disabuse us of any ideas about the White House as the home of benevolent dictators. The Constitution envisions that a group of non-partisan or even apolitical citizens, elected by the people to serve as members of the Electoral College, meet in the various states to propose someone to serve a term as bureaucrat-in-chief for the country, with (hopefully) one candidate acceptable to a majority. Although the details and fall-back contingencies of the process have been and continue to be about as snarled up as is imaginable, the basic idea of a POTUS who humbly represents all the people and stands above partisan politics wasn't such a bad idea. It worked as long as George Washington was in office! After that great beginning, the system was effectively never tried again!

Unfortunately, there seems to be high positive correlation world-wide relating several factors: dictatorship, big-time corruption, global corporatism, unemployment, social instability, and, continuing fraudulent efforts to attempt to grow a viable global society by way of the 'WTO' world-system.

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Monetarism - the con

I am not sure you should use the term 'monetarism' in this context. I would replace it with something like fiscal responsibility or fiscal prudence. Monetarism is rubbish and has always been rubbish - it has been a self serving tool of the elites to run a 'casino' operation an skim value that they have not earned. The evidence is all around us.

It has taken us over 30 or so years to find out that it is a con and for the whole system to totter to the edge of collapse and topple over the edge of a cliff. It has been used as a cover to justify the the 'finance capital' policies of the IMF and World Bank and their banking cronies to enable the theft of public assets and the 'commons' via privatization along with the destruction of economic systems that are not to their liking.

The notion that monetarism can be used to run a real economy is laughable as this requires physical investment in assets (factories, people and knowledge) to produce things of have value to trade. The use of QE has simply turbo charged debt and pushed the economy into further decline while it has allowed the banks to speculate and destabilize commodity markets around the world and make more profits - the real purpose of QE I would suggest.

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Monetarism vs. monetarism

You're right. There is monetarism and then there is monetarism. It depends on what is meant by the term, and, like any word, it can be abused for propaganda purposes.

"Monetarism" has been horribly abused since it was brought forward as an alternative to "Keynesianism" by the founder of the true libertarian (classic liberal) school of economics, Henry C. Simons.

Misunderstandings arise out of different definitions of money.

From a monetarist point of view, money is a medium of exchange. It's really just another commodity, a necessary commodity, maybe more necessary than gold. Why try to tie one commodity to another? What's the point? Just as with a monetarist-managed currency, metallic or bimetallic standards never work without fiscal responsibility and fiscal prudence.

Metallic components are needed for a currency only because people doubt the "full faith and credit of the United States," which reduces to that they lack full faith and credit in themselves collectively, and if that's the way it is, there's no hope for it anyway. The Founders could have saved themselves the trouble and stuck with the Crown.

Is there gold in Fort Knox? How much? How would it help the United States to base a currency on something that may or may not be there in sufficient quantity? Or is it? You tell me. For all I know, you and Ron Paul are personally sitting on a horde of gold, but why should I trust you to manage the currency any more than I can trust the Federal Reserve?

Yes, the word "monetarism" has been and is abused by schemers and scammers, who have equally abused the glamorous flag of the "gold standard." Sure, it could be nice if the United States Treasury had a big pot of gold, but the crooks who run things now would see to it that it was gone in the wink of an eye! Guns don't kill: people do. Monetarism isn't the problem: the crooks are!

Bottom line: although the Constitution -- in the section that prohibits any state from entering into a confederation -- declares that no state shall "coin money, emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts," nonetheless Art. I, Sect. 8, effectively declares a policy of monetarism with no mention of metallic or bimetallic standards. If you don't like it, you should advocate an amendment to the Constitution.

The problem isn't monetarism or a monetarist policy, as such. The problem is that monetarism and monetary policy are misunderstood. People think that it's okay to electronically create any amount of money, just because that is theoretically possible. People think that somehow the theory of monetarism releases the government from responsible behavior. People think that because there is no gold standard, therefore no one (especially those who put their money offshore) should pay any taxes and/or no one should be denied any monetary benefits. Beyond the problems of economic and monetary education, the problem is corporate globalism and the international system of fractional reserve banking.

Without fiscal responsibility and fiscal prudence, what does it matter if you proclaim a ratio of your currency to some commodity? Is there gold in Fort Knox? Which begs the question:

Does it really matter if there is gold in Fort Knox? -- aside from the criminal issue of who stole it?

Of course, to some extent, money must also be a store of value and a measure of worth. Money supply must be managed with that in mind. However, we should keep foremost in mind that what we are after is a supply of something that is absolutely necessary for any economy to flourish or even exist, namely, a medium of exchange!  Like tariffs on imports, a monetarist policy is part of the Constitution of the United States.

Anyway, I have said that if we must have some kind of commodity-based monetary standard, then let it be a basket of commodities. The economic-fiscal-monetary models for this have been worked out. The idea has been presented by Hayek, and it makes some sense. But it still comes down to some version of monetarism. (Otherwise we've left economics and gone over to theology!)

I am really just arguing for education, enlightened self-interest, Americanism, global peace, protectionism and social sanity. (About protectionism, relating to ideas of Henry C. Simons, the national/global situation today is very far from what it was in 1946., and, IMHO, Simons today would advocate an across-the-board tariff or VAT.)

I don't know, but we may be in 99% agreement. My view is that things can be looking up, but democratic institutions and governance are in a terrible mess. The big long-term dangers to the American economy (and to the global economy) are the WTO world-system with its inherent destabilizing tendencies including neo-mercantilism and drawn-out institutionalized warfare (unless those are reformed on the initiative of the United States). The mid-term danger is runaway inflation (unless the Federal Reserve and U.S. monetary and trade policy are reformed soon). The short-term danger is that the "Bush tax cuts" will not be repealed and all the issues related to that, including the necessity for an across-the-board tariff as part of a reform to eliminate corporate tax loopholes.

We need structural political reform, especially of campaign financing, We need protectionism. We need a new Reform Party contending not only for the White House but for every seat in the Congress.

But very few listen to me. Most don't even read EP.

If you haven't already, please check out the American Monetary Institute

P.S. I have no idea if my ideas match those of Robert Oak or anyone else posting here at EP.
 

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Cart before the horse

Well, I'm the anon drive-by guy who writes railing against the Federal Reserve, and I read what you write and it makes a great deal of sense to me.

But I think in a lot of ways what you suggest circumvents the process of revolution. It would be like skipping the whole throwing out the British thing and perhaps the turmoil thereafter, and jumping right to the Constitutional Convention. Couldn't happen - something was standing in the way. Namely the British army.

Likewise giant forces are standing in the way of what you suggest, namely the global elites.

You see, one major thing would have to happen for your ideas to come to fruition: Rich people would have to use money.

And rich people aren't allowed to lose money. That simply truth is the whole reason we have a crisis to begin with. If rich people were allowed to lose money, then failed institutions and policies would fail, the rich who invested in those ponzi schemes would take a bath, we'd probably have a short and deep depression, but then we could clear the books and move on.

But because the rich aren't allowed to lose money, debt gets piled upon debt, chokes the system, and we slog along in deep malaise but the rich are preserved.

Do you expect them to go quietly? No, something physical will be needed.

I suggest a "Don't let them in" campaign. No violence, just symbolic human chains. Start first with just the Federal Reserve Bank in NYC, and the headquarters of Goldman Sachs. The premise will be, "Every time they walk in those doors you lose."

Now I am not suggesting physically preventing someone from going in. But they will have to duck under the chain. The American people are going to have to rise up - the government won't do anything to help because they are owned by those very institutions. So the people are going to have to step and say "Enough! Whatever it is they're doing in those buildings, no more! Every time they go in there, we lose. Every time they go in there, we got robbed some more."

Now at some point it will likely get much worse. But there will be no other way. The American people are going to have to rise up and tear down Goldman Sachs, tear down the Federal Reserve, tear down the IMF, tear down the WTO, tear down JP Morgan, tear them all down with their bare hands.

That is the only way it will ever be accomplished. The government is only capable of shoving Dodd-Frank like pieces of garbage down our throats that only make the too big to fail banks even bigger and more dangerous. Every single thing they do only makes it worse, only makes the people that much poorer.

Then we can sit down and replace it all in the reasoned way you suggest. But the elites are standing in the way and will not voluntarily give up their control. It is a fact of history that the elites absolutely will not stop until they are hanged. There is no limit to the enslavement and poverty they can inflict upon the people. They are a group that throughout history doesn't seem to be happy until they are hanged.

Now I'm not suggesting any of that and I hope it doesn't come to that. But I think it must start with the American people physically getting in the way - literally blocking the door, barring, at least symbolically, entry to their oppressors. Because every time they walk in those doors, the people lose more.

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Agreed

Anon says "rich people aren't allowed to lose money." And I agree with that. It's what I call the principle that ...

"All dollars are equal but some dollars are more equal than others!"

That's the problem alright. And it's dishonest to talk about any kind of global free market when the 'principle' of unequal dollars reigns.

Anon also says: "it must start with the American people physically getting in the way - literally blocking the door, barring, at least symbolically, entry to their oppressors."

I agree again. I call it "Across-the-Board tariff" (or VAT). I will not vote, contribute to, or express approval of, any candidate or party that fails to advocate for a tariff protectionist policy.


BTW: There's nothing wrong with railing against the Federal Reserve, except that isn't enough. Ron Paul opposes and exposes the Fed and the WTO, but then he promotes abolition of all trade barriers (zero tariffs!) and the gold standard. No negative policy agenda is really ever adequate to a negative situation. Two negatives make a positive, but life is more than one-dimensional. Which consequent positive direction are we taking?

Maybe it will come to a revolution, but generally revolutions are  merely reactionary and therefore counter-productive. Creative destruction involves somebody having a creative idea and actively pushing it forward.

 

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American are hurting while Congress and Obama fiddle

Congress could put an stop to the Fed's backdoor bailouts and policies, but they choose not to. Congress is letting the Fed do their dirty work. The Fed is providing political cover for Congress.

Congress, the Fed, they're two peas in a pod. Neither represent the interest of the American people. Both represent the interests of large corporations, wealthy donors, and the well connected.

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It is scary as to consider

It is scary as to consider what could happen to the US next. Unemployment is at 1930's levels so that 20%+ are unemployed (based on the realistic unrevised stats). Therefore, there are 80% or so 'employed'. If things continue then many thousands could be made unemployed from the public sector and at that point we will enter new territory. At what point does society reach a cusp and start to collapse in on itself and what will be the response from the authorities.

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Courage!

You need to steel your nerves and prepare yourself to follow the advice of Nathan Rothschild! Get ready to invest in America when blood runs in the streets 

Take advantage of bargain basement prices

Meanwhile, hang in there and do like the rich do -- your money safely invested in China

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the theme of The Economic Populist

If there is any underlying premise, at least from me, it is if the U.S. middle class goes, the nation will implode, first economically.

That's what's happening. They have screwed working people so much, it's now affecting macro economic data.

There is so much income inequality, affecting macro economic results.

They really need to tie corporate behavior to the well being of the U.S. middle class and their employees, as well as U.S. citizen workers.

That's the problem. G.E. or Cisco do not care if the U.S. middle class implodes and the U.S. economy they don't care either, beyond will it affect their global profits and executive bonuses.

Considering how corrupt our government is at this point, I don't see much happening beyond a U.S. economic implosion at this point.

Although I do not think the U.S. will suddenly implode, more this never ending downward slope, although that slope is increasing, i.e. it's becoming more like a cliff instead of a downward hill.

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Eventually it gets there

I may be dead or 101 years old by the time it happens, but I think class consciousness eventually will crystallize in America (maybe after President Palin screws up or Peter G. Peterson gets his wish and Social Security goes away). Greece will pull out of NATO and demand that the Germans pay for rebuilding the Corinth Canal and dock facilities. Will the (former) middle class wake up in my lifetime? BTW, can someone remind Bernanke of Humphrey-Hawkins?

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Frank T.

National consciousness or self awareness

We don't need class consciousness, just national consciousness.

I think class or other sub-population consciousness is killing national consciousness.

"All we really need is love," but love is incompatible with self-hatred.

How about just a healthy awareness of enlightened self-interest?

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Macro- versus voodoo- economics

To me, EP doesn't advocate anything but telling it like it is. If you like information and believe information can exist independent of propaganda, then EP is for you. I think of EP as the best source for non-professionals on macro-economics. If you believe that there are macro-economies, then there must be macro-economics.

I don't think of macro-economics as a science, more like social criticism informed by econometrics. Macro-economics could also be considered a discipline or as an approach for decision-making, based on one principle which can take two forms:

1. A rising tide lifts all boats; and,

2. A falling tide ultimately strands all boats.

After you grasp this fundamental principle, there's nothing left but statistics and pragmatics. What works? If it doesn't work, discard it. Try something else. If it doesn't make sense from the gitgo, then you identify it as "voodoo economics" and you discard it without even trying it.

To extend the metaphor into hypothetical examples, with a falling tide or sea level, maybe you decide to move your boat or sell your boat. If you can't do that, maybe you decide to prepare for living in a stranded boat. For sure, you mark down the book value of any mooring rights you may have.

If you're the Harbor Master, and you see generally rising tides, maybe you advise the Harbor Commission to put aside funds to improve the jetty. If you are the President of the Republic of Maldives, you may look into moving your entire nation! Generally, you don't delude yourself that you are in charge of "tide control," unless you are strong-willed Dutch.

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