Bernanke about to fire up the Helicopter...

[CosmicCowboy]

http://www.nytimes.com/2010/08/28/business/economy/28fed.html?emc=na

Fed Signals Stepped-Up Efforts to Spur Economy
By SEWELL CHAN
Published: August 27, 2010

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, said Friday that the Fed was determined to prevent the economy from slipping into a cycle of falling prices, even as he emphasized that he believed growth would continue in the second half of the year, “albeit at a relatively modest pace.”

Ben S. Bernanke, the Federal Reserve chairman, and Donald L. Kohn, governor of the Federal Reserve Bank of Dallas, at the Jackson Lake Lodge at the start of the annual Federal Reserve conference, in Jackson, Wyo., on Friday.
To help sustain the economy, Mr. Bernanke said that the central bank was ready to resume its large purchases of longer-term debts if the economy worsens, a move that would add to the Fed’s already substantial holdings.

“We have come a long way, but there is still some way to travel,” Mr. Bernanke said.

“I believe that additional purchases of longer-term securities, should the F.O.M.C. choose to take them, would be effective in further easing financial conditions,” Mr. Bernanke wrote in his prepared remarks for a Fed policy symposium here. He was referring to the Federal Open Market Committee, the panel that sets interest rates, which Mr. Bernanke leads; some members have expressed unease about the Fed’s pursuing any further monetary accommodation.

While Mr. Bernanke emphasized that deflation was “not a significant risk for the United States at this time,” he said “the F.O.M.C. will strongly resist deviations from price stability in the downward direction.”

It was his most robust statement to date that the Fed would do its part to avoid a Japanese-style deflation from taking hold.

Mr. Bernanke emphasized that the economy’s recent weakness did not alter his view that growth would likely continue in the second half of this year, “albeit at a relatively modest pace.”

And he said the “preconditions for a pickup of growth in 2011 appear to remain in place,” as banks increase lending, worries over the European sovereign debt-crisis abate and consumers increase their savings.

“Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year,” Mr. Bernanke said.

Indeed, the new report finding that the gross domestic product grew 1.6 percent in the second quarter nearly seemed to draw a collective sigh of relief from Mr. Bernanke and others gathered here — including the head of the European Central Bank, top officials from the International Monetary Fund and the World Bank, and most of the Fed’s top leaders.

The figure, which was revised down from 2.4 percent, came in higher than estimates by government and market economists.

In his 19-page speech, Mr. Bernanke outlined his views of the economy and explained the Fed’s recent action to prevent monetary policy from tightening by reinvesting the proceeds from mortgage bonds in longer-term Treasury securities.

Strikingly, Mr. Bernanke acknowledged that the traditional trade-off between inflation and employment had become all but obsolete, at least for now.

“Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally,” Mr. Bernanke said. “Because a significant further weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.”

Mr. Bernanke outlined in detail four approaches the Fed might use to further prop up the economy and ward off the threat of deflation.

First, he said the Fed’s purchases of longer-term securities had helped bring down long-term interest rates and lower the cost of borrowing, contribution to the economic stabilization and recovery that began in the spring of 2009.

However, he said such purchases seemed to be most effective in time of financial stress. It an oblique acknowledgment that the Fed might have to purchase trillions of dollars’ worth of additional assets if it decides that additional quantitative easing — the strategy of buying financial assets to put downward pressure on long-term interest rates — is needed.

Second, Mr. Bernanke opened the door to lowering inflation expectations beyond its current stances that “exceptionally low”

short-term rates would be warranted for “an extended period.” In Canada, the central bank committed to keeping a low policy rate until a specific time; in Japan, the central bank promised to keep low rates until consumer prices stabilized or rose. Mr. Bernanke said that in the United States, it might be “difficult to convey the committee’s policy intentions with sufficient precision and conditionality.”

Third, the Fed could lower the rate it pays on excess reserves — the $1 trillion in reserves that banks have been keeping at the Fed. But Mr. Bernanke said that cutting the rate even to zero would be unlikely to lower the federal funds rate — the benchmark short-term rate — by more than 0.10 to 0.15 percentage points. And doing so risked making short-term money markets “much less liquid.”

Fourth, Mr. Bernanke discussed a controversial proposal, advanced by some economist, for the Fed to set a medium-term inflation target “above levels consistent with price stability.” But he dismissed that strategy as “inappropriate for the United States in current circumstances.” Inflation would likely be higher and more volatile under such a policy, he said, while inflation expectations would become less stable.

[CosmicCowboy]

Strikingly, Mr. Bernanke acknowledged that the traditional trade-off between inflation and employment had become all but obsolete

And in breaking news, Ben Bernanke states that gravitiy does not exist.

[boutons_deux]

Sounds like Ben Bernanke ain't gonna be effective with his tinkering.

[CosmicCowboy]

The really sad part is that after the Fed basically said they were going to open the cash spigots the market basically went sideways today. Always in the past when the fed has made announcements like that the markets have gone nuts.

[balli]

I wouldn't call a 165 point rally 'sideways'... unless I was a contrarian.

[Winehole23]

http://blogs.forbes.com/greatspeculations/2010/08/27/we-may-already-be-in-recession/?boxes=Homepagechannels

[Winehole23]

http://www.csmonitor.com/Business/2010/0827/US-GDP-growth-revised-down-to-1.6-percent-as-economy-cools

[Winehole23]

The Fed has signalled this previously, but yeah, more QE is a very big deal. This is where the dreaded em word comes in.

[CosmicCowboy]

I wouldn't call a 165 point rally 'sideways'... unless I was a contrarian.

Market still had 40 minutes when I posted that. It was only up 40 then. Apparently a lot of technical short covering at the close. Certainly wasn't a celebration of good news.

[Nbadan]

So, despite the dire warnings from the resident chicken-littles, we're paying less for goods, services, and energy and the wing-nuts are butt-hurt over this?

[SnakeBoy]

“Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year,” Mr. Bernanke said.

Do you think he really believes this?

[Winehole23]

No.

[Winehole23]

Monetization?

[Winehole23]

Ouch.

[CosmicCowboy]

Exactly. He just flat out announced to the world we were going to monetize our debt. Any one that has been paying attention knew that was the only politically palatable option they had, but still....

Damn

[Wild Cobra]

So, despite the dire warnings from the resident chicken-littles, we're paying less for goods, services, and energy and the wing-nuts are butt-hurt over this?
I know you mean people like me when you refer to wingnuts... I don't like the term, but so be it.

I will agree that's nice to pay less for services. However, i would prefer to have local people employed rather than call centers in India. I would prefer high school kids and US citizens to work in fast food rather than illegals. i would prefer manufacturing return to here, rather than buying most goods from Asia.

When the money we pay for goods and services go to other nations, in the long run, it harms us. The prosperous now is a decadent future.

[boutons_deux]

"When the money we pay for goods and services go to other nations"

How's that "free market always provides the best solution" working out for ya?

[Winehole23]

How's that "free market always provides the best solution" working out for ya?There hasn't been a free market in this country for at least 100 years.

[Winehole23]

The activist and energetic administration of TR put a decisive end to that.

[Winehole23]

There hasn't been a free market in this country for at least 100 years.And before that, we protected domestic industry with stiff tarriffs.

[Winehole23]

Any one that has been paying attention knew that was the only politically palatable option they had, but still....

DamnWhy should this be poltically palatable to anyone who is aware of it? That's what I don't get. Why is it "politically palatable" at all?

[Winehole23]

Because there's no recorded vote, but only the work of the shadow government behind the scenes? How comforting.

[Winehole23]

First we pawn our future, then we pawn our money. Alarming sequence.

[boutons_deux]

What are the Repugs' plans to Get America Back to Work after they make gains in November?

subpoena Magic Negro's kids?

impeach Magic Negro?

[Winehole23]

It's all about the partisan ping pong, eh?

[boutons_deux]

keep playing stupid, WH, it suits you

[Winehole23]

Are you even paying attention?

[Winehole23]

Your posts here reflect zero familiarity with the topic.

[TDMVPDPOY]

so do you guys approve another spending handout from the govt?

[Wild Cobra]

"When the money we pay for goods and services go to other nations"

How's that "free market always provides the best solution" working out for ya?
The problem is, it's not free. It's damn expensive to be productive here, that's why we get productivity from cheaper places.

[boutons_deux]

The problem is, it's not free. It's damn expensive to be productive here, that's why we get productivity from cheaper places.

The US will never be able to compete with sweatshop/low-wage countries like China, India. The only hope is that foreign salaries rise.

I read an article where a huge Indian out source company is now looking to hire US people. :lol

The tech companies have been bitching about visas for years because they can't import enough cheap, unmarried Indians who live 5 to an apartment vs US engineers who have a house and family. The US engineers know exactly what kind of scam US tech employers (Intel, MS, etc) are trying to pull off by demanding big increases the quote of tech visas.

[boutons_deux]

Why Cheaper Money Won't Mean More Jobs

Robert Reich

Can the Fed rescue the economy by making money even cheaper than it already is? A debate is being played out in the Fed about whether it should return to so-called "quantitative easing" -- buying more mortgage-backed securities, Treasury bills, and other bonds -- in order to lower the cost of capital still further.

The sad reality is that cheaper money won't work. Individuals aren't borrowing because they're still under a huge debt load. And as their homes drop in value and their jobs and wages continue to disappear, they're not in a position to borrow. Small businesses aren't borrowing because they have no reason to expand. Retail business is down, construction is down, even manufacturing suppliers are losing ground.

That leaves large corporations. They'll be happy to borrow more at even lower rates than now -- even though they're already sitting on mountains of money.

But this big-business borrowing won't create new jobs. To the contrary, large corporations have been investing their cash to pare back their payrolls. They've been buying new factories and facilities abroad (China, Brazil, India), and new labor-replacing software at home.

If Bernanke and company make it even cheaper to borrow, they'll be unleashing a third corporate strategy for creating more profits but fewer jobs -- mergers and acquisitions.


The M&A wave has already started. Continental and United Airlines just got approval to merge. Biotech giant Genzyme is on the auction block after Sanofi-Aventis announced a $18.5 billion bid. On Friday, 3Par, a data storage company, accepted a $1.8 billion takeover offer from Dell -- one day after Hewlett-Packard raised its offer. Campbell's Soup is eying parts of United Biscuits, BHP Billiton has put in a takeover bid for Potash, Oracle or H-P are likely to pay up to $1.5 billion for security software maker ArcSight. Bain Capital is expected to acquire Air Medical Group for almost $1 billion. The insurance industry is headed for the biggest merger boom in recent history.

Who wins from all this? If history is a guide, shareholders of acquired companies do better than shareholders of companies doing the acquiring. Top executives who end up running bigger corporations get fatter pay packages. And Wall Street and big-name corporate law firms who engineer the M&As reap a bundle.

Who loses? Large numbers of ordinary workers will lose their jobs. After all, the purpose M&As is to create greater economies of scale and more "synergies." Translated: More pink slips.

Last week in Jackson Hole, Ben Bernanke insisted the Fed will do what's necessary to increase consumer and business spending in order to keep the economy growing. But cheaper money won't necessarily create the kind of spending that generates more jobs. In fact, right now it's having the opposite effect. When consumers and small businesses can't and won't borrow more, big businesses use cheap money to bid up the prices of corporate assets and cut payrolls.

What we need now is more jobs, not bigger corporations.

[boutons_deux]

The other scam the financial sector has going is borrowing at 0.5% or 0% and then buying t-bills at 3%, and pocketing millions in guaranteed, no-risk spread of 2%.

[Wild Cobra]

The US will never be able to compete with sweatshop/low-wage countries like China, India. The only hope is that foreign salaries rise.
Bullshit.

Sure, we cannot compete for the small things that a shipping container holds thousands or millions of. Still, why are we buying large, heavy items from them like steel, sheetrock, etc. It's because we business cannot compete from a cost of production standpoint, and there is so much more in production costs than labor. regulations, fees, taxes, and insurances that business here must pay that they don't over there. Changing our taxation to a consumption based tax system from our production based tax system would do us so much good overall.

The tech companies have been bitching about visas for years because they can't import enough cheap, unmarried Indians who live 5 to an apartment vs US engineers who have a house and family. Talking out your ass again?

I worked with an engineer from India a few years ago. Have you worked with any?

The US engineers know exactly what kind of scam US tech employers (Intel, MS, etc) are trying to pull off by demanding big increases the quote of tech visas.
Yep.

These same people who want unions to protect them for being inefficient and lazy should worry that employers want someone who will work an honest day for an honest wage.

[Winehole23]

Wages are stickier than ever.

Thing I don't get is: if you're unemployed isn't being underpaid and underemployed better than having no job at all ?

[Winehole23]

Let capitalism pay us like illegals under the table again? Yes or not?

[Winehole23]

When 8-9% unemployment assumes a structural pose, you have to ask yourself this question.

[Winehole23]

One amazing fact about the financial bust that followed WWI: McKinley insisted successfully on wage flexibility. Somehow, the unions saw the necessity too.

[Winehole23]

What a difference 90 years makes.

[Winehole23]

When 8-9% unemployment assumes a structural pose, you have to ask yourself this question.I'm fairly sure a large number of free agents are pondering just this sort of bargain.


What can I do for money?

[Winehole23]

The other scam the financial sector has going is borrowing at 0.5% or 0% and then buying t-bills at 3%, and pocketing millions in guaranteed, no-risk spread of 2%.Yes, but they have no one to lend it to in a declining market.

[Winehole23]

So they just save it as reserves to meet the accentuated risk profile of their portfolios.

[Winehole23]

Relatively speaking, small banks are lending more, but they're relatively more connected to their communities. That's something you can't fake.

[Winehole23]

(Disclosure: WH23 is a credit union user.)

[Wild Cobra]

Wages are stickier than ever.

Thing I don't get is: if you're unemployed isn't being underpaid and underemployed better than having no job at all ?
I would think so, and I have resorted to minimum wage jobs at least three times in my life now.

[boutons_deux]

http://graphics8.nytimes.com/images/2010/08/31/us/20100901_JOBS_graphic/20100901_JOBS_graphic-popup.jpg

With the country focused on job growth and with unemployment continuing to hover above 9 percent, comparatively little attention has been paid to the quality of the jobs being created and what that might say about the opportunities available to workers when the recession finally settles. There are reasons for concern, however, even in the early stages of a tentative recovery that now appears to be barely wheezing along.

For years, long before the recession began, job growth had become increasingly polarized in this country. High-paid occupations that require significant amounts of education and training grew rapidly alongside low-wage, service-type jobs that do not, according to David Autor, a labor economist at the Massachusetts Institute of Technology.

The growth of these low-wage jobs began in the 1980s, accelerated in the 1990s and began to really take off in the 2000s. Losing out in the shuffle, Dr. Autor said, were jobs that he described as “middle-skill, middle-wage” — entry-level white-collar positions, like office and administrative support work, and certain blue-collar jobs, like assembly line workers and machine operators.

The recession appears to have magnified that trend, Dr. Autor wrote in a recent paper, released jointly by the Center for American Progress, a left-leaning policy group, and the Hamilton Project, which has a more centrist reputation. From 2007 to 2009, the paper said, there was relatively little net change in total employment for both high-skill and low-skill occupations, while employment plummeted in so-called middle-skill occupations.

http://www.nytimes.com/2010/09/01/us/01jobs.html?_r=1&partner=rss&emc=rss&pagewanted=print

===============

Meanwhile, CEOs who fire the most people pocket the biggest incomes

"The CEOs of the 50 firms that have laid off the most workers since the onset of the economic crisis took home nearly $12 million on average in 2009, 42% more than their peers at S&P 500 firms, according to CEO Pay and the Great Recession, the 17th in a series of annual Executive Excess reports from the progressive think tank.

Combined, the CEOs at those 50 firms made $598 million and laid off 531,363 workers -- accounting for more than three quarters of the 697,448 announced layoffs at the top 500 firms. The study also found that 72% of them announced their mass layoffs during periods of positive earnings reports, and that those companies enjoyed a 44% profit increase in 2009.

"These numbers all reflect a broader trend in Great Recession-era Corporate America: the relentless squeezing of worker jobs, pay, and benefits to boost corporate earnings and maintain corporate executive paychecks at their recent bloated levels," the study authors said.

See full article from DailyFinance: http://www.dailyfinance.com/story/company-news/paid-off-for-layoffs-ceos-at-pink-slip-leaders-earned-42-more/19616517/?icid=sphere_copyright
"

http://www.dailyfinance.com/story/company-news/paid-off-for-layoffs-ceos-at-pink-slip-leaders-earned-42-more/19616517/

===========

I'm sure the Repugs, always on the lookout for "moral hazards" that might be created for the poor, NEVER are bothered by the moral hazard of CEOs increasing profits and their paychecks/bonuses by job destruction.

[LnGrrrR]

Wages are stickier than ever.

Thing I don't get is: if you're unemployed isn't being underpaid and underemployed better than having no job at all ?

The only problem with that is that if you're making, say 70K a year, and you take a job at 40K a year, that 40K employer won't be too happy if a 70K job opens up and you jump at it.

[Winehole23]

I'm not sure that's a moral hazard so much as an expedience in tough times. Companies have to survive the downturn so they get lean. What they shed is people. Would you outlaw that?

[LnGrrrR]

(Disclosure: WH23 is a credit union user.)

My main is a credit union, though I have money in a few banks too.

[LnGrrrR]

Oh, and WH, offtopic but....





I'M OLD GREEEEEEEEEEEG!

[Winehole23]

The only problem with that is that if you're making, say 70K a year, and you take a job at 40K a year, that 40K employer won't be too happy if a 70K job opens up and you jump at it.Point of contemporaneousness: for most people it's not that sort of job market right now.

But yeah, I would imagine that sort of thing happens all the time regardless of the condition of the market.

[boutons_deux]

"I'm not sure that's a moral hazard so much as an expedience in tough times"

Many of the companies that are killing jobs are profitable and increasing profitability, they aren't going bankrupt, are not losing money. The CEOs are padding their bonuses by cutting payroll costs. And of course, the employees who stay on have to work much harder for same pay, and always under the black clould that they may be next. aka, the wealthy class's War on Employees.

[LnGrrrR]

Point of contemporaneousness: for most people it's not that sort of job market right now.

But yeah, I would imagine that sort of thing happens all the time regardless of the condition of the market.

Probably. If I needed a job, I would swear up and down to my employer that I'd stick with him through thick and thin, but probably jump ship if a better opportunity appeared. Is it a morally correct thing to do? Probably not. But considering that I don't think the company would be willing to keep me on if I wasn't a valuable asset to them, I think it wouldn't worry me too much.

[Winehole23]

Oh, and WH, offtopic but....





I'M OLD GREEEEEEEEEEEG!Do you like Bailey's?

[Winehole23]

What about the boat times?

[Winehole23]

hUGcIAturAc

[LnGrrrR]

Do you like Bailey's?

The drink or the episode? Love the drink, but I'm half Irish, so that's to be expected. As for episodes, I enjoy nearly all the Mighty Boosh episodes, but I think Season 1 was weaker than later episodes. (That goes for It's Always Sunny in Philadelphia as well.) I think my favorite episode would either be Nanageddon or the Krumpin' episode.

[Winehole23]

Nanageddon was awesome.

[Wild Cobra]

The only problem with that is that if you're making, say 70K a year, and you take a job at 40K a year, that 40K employer won't be too happy if a 70K job opens up and you jump at it.
Being overqualified is part of the problem with finding employment. This is more a chance for low wage earners to move up than they realize. They just have to be capable of moving up.

[Wild Cobra]

The drink or the episode? Love the drink, but I'm half Irish, so that's to be expected. As for episodes, I enjoy nearly all the Mighty Boosh episodes, but I think Season 1 was weaker than later episodes. (That goes for It's Always Sunny in Philadelphia as well.) I think my favorite episode would either be Nanageddon or the Krumpin' episode.
I try not to buy it cause I love it so much. I end up putting it in my coffee, and I drink allot of coffee!

[LnGrrrR]

I try not to buy it cause I love it so much. I end up putting it in my coffee, and I drink allot of coffee!

:toast In the Ala Moana mall here in Honolulu, they've got a little ice cream booth in the food court (Dreyer's I think) that makes a delicious Bailey's shake. I got my wife hooked on it.

[SnakeBoy]

Relatively speaking, small banks are lending more, but they're relatively more connected to their communities. That's something you can't fake.

About a year ago my wife wanted to make a major purchase and I didn't want to fork out that much cash at that time so I told her to go by our bank (BoA) and ask about a loan which we would secure with cash. She never even got to tell them we would secure the loan, they just asked business or personal loan and then sorry we're not making any personal loans. So we switched to Broadway bank who was more than willing to make the loan even unsecured.

[Wild Cobra]

About a year ago my wife wanted to make a major purchase and I didn't want to fork out that much cash at that time so I told her to go by our bank (BoA) and ask about a loan which we would secure with cash. She never even got to tell them we would secure the loan, they just asked business or personal loan and then sorry we're not making any personal loans. So we switched to Broadway bank who was more than willing to make the loan even unsecured.
Yes, there is plenty of money to be lent. Just need good credit and a stable job that isn't in the cross-hairs of a changing economy.

Now if we could only convince the democrats to stop putting fear into the people who provide jobs, we could have a recovering economy.

[Winehole23]

^^^Seems to think the Dems *psyched out* the market.

[Winehole23]

It never occurred to this wino is that all this economy needs is an attitude adjustment.

[Wild Cobra]

It never occurred to this wino is that all this economy needs is an attitude adjustment.
It definitely isn't the only thing needed, but without an "attitude adjustment" nothing else will work either.

[Winehole23]

Ok, fine.

[Winehole23]

(burp)

[Winehole23]

Many of the companies that are killing jobs are profitable and increasing profitability, they aren't going bankrupt, are not losing money.Sure, why not?


The CEOs are padding their bonuses by cutting payroll costs. And of course, the employees who stay on have to work much harder for same pay, and always under the black clould that they may be next. aka, the wealthy class's War on Employees.Sure, why not?

It makes no sense to expand in a shrinking domestic market.

[Winehole23]

CEO shenanigans are what they are. Contractual.

[boutons_deux]

"It makes no sense to expand in a shrinking domestic market."

For many of companies mentioned, their revenues weren't down, they are up, increasing, not shrinking.

[Winehole23]

For many of companies mentioned, their revenues weren't down, they are up, increasing, not shrinking.You mean, their profits were up. That's not the same thing.

[Winehole23]

Central bankers, out of ammo, plead for fiscal boldness:


But they also are hunting for ways to jolt the economy out of its doldrums, and a fiscal push is a possible tool.


In a lunch address by Princeton University economist Christopher Sims, policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future.


"Fiscal expansion can replace ineffective monetary policy at the zero lower bound," Sims said. "It requires deficits aimed at, and conditioned on, generating inflation. The deficits must be seen as financed by future inflation, not future taxes or spending cuts."

http://www.reuters.com/article/us-usa-fed-fiscal-idUSKCN1120SU?il=0

[boutons_deux]

Central bankers, out of ammo, plead for fiscal boldness:

http://www.reuters.com/article/us-usa-fed-fiscal-idUSKCN1120SU?il=0

So the monetary/Austrian boys are now counter-cyclical Keynesians?

USA won't get any fiscal stimulus from the Repug Congress of strict austerians, strict obstructionists, now seen to be the principal reason the recovery from 2008/9 has been so weak and so long.

Thanks, Repugs, you sociopathic mofos.