Federal Reserve Chair Ben Bernanke gave one hell of a speech at the G-20 implying emerging economies are to blame their own inflation and currency manipulation could lead to another global financial crisis.
Firstly, Bernanke's speech, Global Imbalances: Links to Economic and Financial Stability, is reprinted below, in it's entirety. The reason to reprint the speech in total is too many in the press are interpreting his speech, many incorrectly, so I suggest reading what he said directly first.
Does Ben Bernanke even know what he is doing? I've certainly wondered about that point, and it is increasingly a topic of conversation among stock market analysts who have come to understand that all the major US stock market indexes are pushing relentlessly upward because of the Bernanke put.
There hasn't been a significant correction in the stock market since early September, when the S&P 500 left the 1040 range to its present very lofty height of 1330. This rally has set a number of records, including days when the stock market moves less than 1%, and number of stocks above their 200 day moving average. While some analysts credit this advance to improving economic conditions, most observers point to the Fed's deliberate policy to keep the stock market "higher than it would otherwise be", fueling it with hundreds of billions of dollars from the quantitative easing program.
If the US can’t constrain its own central bank from ruining the nation and the global economy, it will be up to the financial markets to punish the US in order to put a stop to the madness.
By definition, an unhealthy financial market is one in which prices move daily in one direction only, for an extended period of time. Markets without corrections, without the give and take of investors having different opinions about the future, are prone to sudden shocks. This is precisely the situation that has afflicted US stock markets since last July, when investors began to entertain the unanimous opinion that the stock market can only go up because the Federal Reserve will never allow it to correct. And why shouldn’t they think this way, when Fed Chairman Ben Bernanke keeps repeating that a rising stock market with low volatility is a monetary objective of the central bank? He said so again yesterday during his speech and follow-up press conference at the National Press Club:
... the Federal Reserve's securities purchases have been effective at easing financial conditions...equity prices have risen significantly, volatility in the equity market has fallen, corporate bond spreads have narrowed, and inflation compensation as measured in the market for inflation-indexed securities has risen from low to more normal levels...
Just when you are lulled into sleep, thinking the financial crisis is over, here comes the World Bank with different ideas. While they start with how the world has economically recovered and all is well, later in the report are some not so swell numbers for the U.S. as well as warnings that the Globe could return to the financial crisis of 2008. Below is the World Bank's latest GDP growth projections for 2011 and 2012.
Oil hit $94 a barrel, just in time for the Holidays, and is staying there. Now the blame is coming on speculation, inflation, QE2, the falling dollar and good old fashioned supply and demand. Despite even bills in Congress designed to curb commodities derivatives, the CFTC delayed rules introduced to curb oil speculation. Bottom line, it's back, we had a pause, due to the global economic slowdown, but we appear to be witnessing the return of $100 dollar oil.
Paul Krugman is saying the reason for increasing oil prices is emerging economies and limited resources:
What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story.
By Numerian Does Ben Bernanke make any connection between the asset bubble in a commodity like corn, and the economic pressures this creates for the middle class or poor people? Given their lofty and isolated position, and the fact that Fed officials talk only to businessmen and millionaires in Congress, one of the things most lacking in Fed policy debates, public or private, is any concern for the average person in the US. It’s as if these are the people of least concern to the Fed, or if they are of concern, it is only as economic factors in econometric models. You get the impression that the Fed has, for a long long time, forgotten about the real, and often immediate personal consequences its policies have for the average person. Numerian
Ben Bernanke has come out with a now, now, there, there on the falling dollar:
The Federal Reserve is monitoring currency markets “closely” and will conduct policy in a way that will “help ensure that the dollar is strong”, Ben Bernanke said on Monday in rare comments on the US currency.
The Fed chairman also indicated that the US central bank would not ignore the impact of rising commodity prices when evaluating the outlook for inflation. He said he would not rule out using interest rates to combat new asset price bubbles, even though he did not see obvious mispricing in the US at this stage.
Hmmmm, no obvious mispricing. Does that include the oil speculative bubble of 2008?
Meanwhile Gold is through the roof, in part due to the dollar decoupling.
With 1.3 billion people, the People's Republic of China is the world's most populous country and the second largest oil consumer, behind the U.S. In recent years, China has been undergoing a process of industrialization and is one of the fastest growing economies in the world. With real gross domestic product growing at a rate of 8-10% a year, China's need for energy is projected to increase by 150 percent by 2020. to sustain its growth China requires increasing amounts of oil. Its oil consumption grows by 7.5% per year, seven times faster than the U.S.
Sponsored by corporate lobbyists - so many candidates, so many ways to buy them
Good Morning! Rise and Shine! Get that Cup O' Joe...
break out the O.J....hang out with the pooch...time to check out the Funnies!
Today's theme are the best of the election campaign videos that are brazenly sexistracistrudebiasedlieshostile
antagonisticmisogynisticusingbigtitgonadstogetsomevotesstupid
notfunnydumbbogusspinpunditryinaboxwasteofbits funny.
Can't sleep, been thinking about the price of oil, worrying about it to be honest. Now you may be thinking "Venom, what are you crazy? A putz? A drop in the price of oil is a good thing!" And I would reply, yes, under normal circumstances it is. But these days, things ain't so normal. Actually, right now, oil is up since yesterday, but it's been in a slide for the past week or so. A prophetic lunch
A couple years ago, I had lunch with a trading friend/mentor of mine at Hackney's on Harms Road. He was an older gentleman, made his money in options, in fact was one of the first to trade at the CBOE back in the 1970s. We had just gotten back from one of those sales seminars from Equis, a company that makes a product called Metastock. While gobbling down on Hackney's infamous onion loaf and later cheeseburgers, topics ranging from the software to commodities came up. This was around 2002, and Enron was still in the headlines.
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