Wednesday, January 02, 2008


Read about it here. It's obviously no surprise to regular readers of this space. The weather in the North Sea must have been terrible for the past half-decade, eh?

In a perfect world, or at least one in which accountability mattered, Ben Bernanke, Hank Paulson, and certainly Alan Greenspan would be yanked in front of Congress immediately, put under some hot lights for a few days, and asked the following:
  • Is it now official Fed policy that $100 oil indicates "a strong economy" instead of inflation? If so, at what point would that change? $150? $200?

  • After how many more years will elevated food and energy prices no longer be spun as "temporary spikes"?

  • Has the Fed had an internal debate about how its monetary policy contributes to geopolitical tensions via the rising oil prices caused by a falling dollar?

  • Has the Fed ever warned the White House on the cost of Iraq?

  • From a policy standpoint, where is the line between encouraging risk and fomenting moral hazard? When, if ever, is a government backstop appropriate?

  • Do you have direct or indirect knowledge of any government entity or a proxy ever intervening to support the stock market (or any individual stock) via futures or in any other way?

  • Does the Federal Reserve have an opinion on the morality of debasing the income of wage earners and the cash savings of retirees in order to support speculators, stock-selling corporate executives, and 30-something hedge fund traders making millions a year?
Get them on the record. Ron Paul has already asked some of these questions, which is why the political and financial establishments hate him (you didn't think it was really about Iraq, did you?):

When Bernanke replaced Greenspan, I predicted that the length of his tenure would be a return to the norm after Greenspan's exceptionally long reign. I'm sticking to that prediction. Yes, imbalances left from the Greenspan years have made his job harder. But Bernanke isn't some unlucky rube out of South Carolina who came to Washington and stepped in someone else's mess. He's had a role in shaping monetary policy for the past few decades. He's tacitly or expressly supported the Bush administration every step of the way, and for that was rewarded with his current job. His statements about the role of monetary policy in stemming economic weakness have been the lifeblood of reckless speculators and dollar short-sellers and the bane of prudent savers. I think years from now Bernanke will be seen as a temporary cut-out, an Arthur Burns mini-me, a front man for expediency, someone to damn the monetary torpedoes and then get the hell out before some Very Serious People (who no doubt quietly shifted their own savings into euros and gold long ago) announce that no, that didn't go well, but we've found a Volcker-type to come in and clean things up. Let's hope I'm wrong.


Anonymous Anonymous said...

Has the Fed ever warned the White House on the cost of Iraq?

Whaddaya mean? That fucking traitor Greenspan is on record as saying that our glorious Mesopotamian adventure is a good thing! You knew that, CR!
-- sglover

1/02/2008 2:16 PM  
Anonymous Anonymous said...

And let's not forget that when Larry Lindsay suggested that the cost of Iraq might$100B, he was shown the door in about 96 seconds.

1/02/2008 4:25 PM  
Anonymous Anonymous said...

I think Paul O Neill's book made it clear who is running US economic policy and that is not Bernanke or Paulson. It is Cheney.

Ever since reading that book I have made my investment decisions on the basis that the US policymakers will do whatever seems like the best thing to get them through the next 3-6 months or so. So far thats worked out fine.

1/02/2008 6:56 PM  
Anonymous Anonymous said...

morality of debasing the income of wage earners and the cash savings

Morality of dabasing? More like conscious effort. It's the perfect way to tax. It's invisible, it's not voted on, it's not official policy, therefore it's never debated, therefore Congressmen never get a phonecall about it, therefore it's perfect.

On a completely random non-related note, you can get an HSBC account denominated in Euro, RMB, others, fairly easily. Even better to open that account using a new non-US passport, for banking privacy reasons. Of course I would never recommend doing that as that would be non-patriotic. And who is more patriotic than the American workin' man?

Anonymous, except for when AT&T delivers this message to the NSA, which will happen in 4..3..2..1..

1/02/2008 7:16 PM  
Anonymous Anonymous said...

Or...just buy gold. Even easier. Just buy in small quantities to keep it under the government's radar. Government doesn't track gold sales effeciently because not enough Americans are smart enough to own gold. Ahhhh the wonders of public education. I don't complain though. If more people knew where the exit door was the government would try to block it.

1/03/2008 10:43 AM  
Anonymous Anonymous said...

I'd be interested in the practicality of "owning" gold.
Could I walk into a 711 and buy milk for my hungry children? How about paying my rent or heating bill?

1/03/2008 3:45 PM  
Anonymous Anonymous said...

Payrolls up only 18,000 last month (way less than the genius "economists" were predicting), so expect another rate cut and more pain to be indirectly inflicted on the American populace (mucho inflation). It's pretty obvious now they're just holding the thing together with duct tape until November when they'll just let it go.

1/04/2008 9:40 AM  
Anonymous Anonymous said...

In a perfect world, or at least one in which accountability mattered, Ben Bernanke, Hank Paulson, and certainly Alan Greenspan would be yanked in front of Congress immediately...

Instead, in our imperfect world, Congress is much more interested in baseball players taking steroids. Go figure.

1/05/2008 12:36 AM  
Blogger Chris said...

Man, if I wasn't a raving liberal loonie, I'd love Ron Paul. Shit, the man is a journalist, not a politician.

1/05/2008 12:40 AM  
Blogger Pope Ratzo said...

Knowing that it's really Cheney that's making the economic policy decisions has led me to base my investment strategy on the notion that there might not be anything left after the last 9 months of the Bush administration.

I'd never vote for Dr. Paul, but I'm glad he's around. It's time that the genteel veneer was ripped off the right-of-center Establishment that has run this country for decades now. Paul (and to some extent, Huckabee) is helping that process along.

1/05/2008 8:02 AM  
Anonymous Anonymous said...

it's the result of our own economic patching that's pushed inflation off the edge, nudging the barrel to 100 dollars. the minimum wage hike that went through like butter, borrowing, and printing more money is causing inflation to spiral upward without end. that makes EVERYONE'S wealth worth less. The poor feel it, but it effects everyone accross the board. it's a hidden tax and it has to stop. the fed ought to bite the bullet and let the hard times roll. the longer we wait, the worse it will be.

1/05/2008 10:24 PM  
Blogger Tony said...

I'm not an economist, but why do some people talk about the US being in a deflationary cycle?

Ron Paul's arguments about the devalued dollar and inflation make sense to me, but so does the deflation idea-- especially when my house's value is decreasing.

Is it possible to have both at the same time? If so, what is an investor to do?

1/06/2008 8:23 AM  
Anonymous Anonymous said...

oh judyo...I try and I try to educate you people...and to no avail. You are just too stupid to learn. Gold can be bought with the current empire's fiat money at any time. You can then sell your 10 years later and receive the same empire's fiat money only much more of it. If you don't have enough money to buy silver. It is only $15/ounce. You don't even have to tell the feds of your windfall!!!
Here you go...see for yourself.
You can give your poor starving children caviar and champagne!!! LOL. Liberals are sooooooo stupid. You are guys are supposed to be so well read. How about reading the history of money? A little education and anybody with a brain cell or two would have immediately started buying gold when Bush went on his spending binge!!! When he started this nonsense Gold was less than $300!!! Ummmm lets see...No child left behind....expanded medicare...Expensive never ending war...nation for Israel, help for Egypt, help for Pakistan, ad nasuem...add in tax printing press day and night....I mortgaged my house to buy Gold!!!!!!!!!!! Fixed interest rate of course. Nothing like inflation to help make that mortgage payment.

1/06/2008 8:34 PM  
Anonymous Anonymous said...

Ohhh...a good question Grodge. And is very possible. In fact you can just read your own post because it is happening to you!!!! Falling demand and rising prices is both deflation and inflation. This has been called stagflation in the past. Interesting article discussing the differences.

1/06/2008 8:42 PM  
Anonymous Anonymous said...

I am sure that current oil price has reached its ceiling. Some turbulence in this price is still possible through 2008 but on the downward trend.
The reason behind this conclusion is simple and strong from my point of view. There has been a (negative)linear trend in the difference between the core CPI and the energy price index observed since 2003. Previous positive linear trend was observed between 1980 and 1999. Currently, the difference has reached zero. It is likely that this is the turning point (period) of the trend as was between 1999 and 2002. So, one can expect the core CPI outstrip the energy index. Effectively, oil price has to grow at a rate below that for other goods and services.

1/09/2008 3:19 AM  
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