Bernanke press conference

[Pancho Villa]

(How much you want to bet this sinks to the last page while the birth certificate thread goes to 100 pages?)

Ben Bernanke held a very elusive, noncommital press conference today. Here are the two highlights:

Our view is that -- based on past experience and based on our analysis -- is that the end of the program is unlikely to have significant effects on financial markets or on the economy. The reason being that first, just a simple point that we hope that we have telegraphed today, we hope we have communicated what we’re planning to do and the markets have well-anticipated this step. And you would expect that policy steps which are well-anticipated by the market would have relatively small effects, because whatever effects you’re going to have would have already been capitalized in the financial markets.

Essentially: since they have telegraphed this move, the thought is that the market has already "priced in" whatever effect the move was going to have. He is being purposefully vague here, because the truth of the matter is that the response has been drastically negative what with commodities skyrocketing and the dollar getting weaker by the hour.

Here was the fear (ill-founded, because there was no way this was going to happen): QE2 stops, and what happens? Interest rates go up. The only reason they are as low as they are is because they keep getting sucked up - virtually all of them - by the fed. So when they stop doing that, the market willl push the rates up.

Well, that's a bit of a problem, because an alarming % of government debt is held in short-term bonds. If the interest rate jumped from 1% to 4.5%, for example, the debt service - the money we have to pay to pay the interest on the debt - begins to jump rather dramatically. So, instead of 43% of our budget being deficiet spending, things would quickly jump to some higher percentage. That has the potential to create a negative feedback loop - basically, the increasing amount of debt requires higher interest rates, which increases the debt service, necessitating more debt, and so on until your dollars are toilet paper.

So, this bit really interested me:

What’s more, Bernanke said, the Fed for now plans to keep its portfolio of Treasury securities (currently $1.4 trillion) level by reinvesting the principal received from maturing Treasuries in new bonds.

“Put another way, the amount of . . . monetary policy easing should essentially remain constant going forward in June,” he said.

Is Bernanke saying that he's going to go forward with QE3? Keeping the Fed buying up bonds like crazy solves the problem listed above - but its still, in effect, printing money.

So far the markets have responded. Treasury rates are still at historical lows, the dollar has taken (another) dump and commodities had a strong day. What this tells me is that people are realizing what's happening and moving their money out of a weakening dollar and into assets that actually exist.

Unfortunately for everyone, the borrowing can't go on forever. Drastic - half the budget drastic - cuts are needed to avoid a debt meltdown. My view on the GOP getting such budget cuts through, even if they owned house, senate and white house, are dim. That much less so with the current situation.

Anyone, just my opinion. Feel free to call BS and discuss as wanted.

[Irving]

Is now a good time or a bad time to take out a loan?

[Ridge]

Take out a loan, use it to buy a shit ton of survival gear. Inflation is coming soon, and the loan will be worthless.

[rammit]

Take out a loan, use it to buy a shit ton of survival gear. Inflation is coming soon, and the loan will be worthless.

Looks like its time to get a loan, buy a few mac10s and m16s and a few pallets of ammo, at least that will all be worth something

[streetglideok]

I'm sure too, the birth certificate thing was to distract everyone from how bad things really are, and how they cant lie good enough to fool us anymore. Its what we get, when we elected a reject, who grew up outside of the US, and has no grasp how our economy works, just how it should work under shariah law,lol

[arz]

Weimar Republic, here we come!

[KevDen2005]

I'm sure too, the birth certificate thing was to distract everyone from how bad things really are, and how they cant lie good enough to fool us anymore. Its what we get, when we elected a reject, who grew up outside of the US, and has no grasp how our economy works, just how it should work under shariah law,lol

That's a good point. They waited until the "right" time to release it.

Bernanke always seems to be vague and it pisses me off that they don't come out and say what they are doing and we have to try and decipher it

[ChunkyMonkey]

Is now a good time or a bad time to take out a loan?

How about this Stu, I have taken out 2nds and line of credits on pretty much all of my investment properties and bought physical silvers when it was $32/ounce on 4% rate. Silver is a tad under $50 right now.

Paying over 4% APR while getting 56% returns in less than 4 months is GREAT!!!

[ChunkyMonkey]

Unfortunately for everyone, the borrowing can't go on forever. Drastic - half the budget drastic - cuts are needed to avoid a debt meltdown. My view on the GOP getting such budget cuts through, even if they owned house, senate and white house, are dim. That much less so with the current situation.

Anyone, just my opinion. Feel free to call BS and discuss as wanted.

We would need a 20 some odd year of Reaganomic to even come close to recovery.

[Ah Pook]

(How much you want to bet this sinks to the last page while the birth certificate thread goes to 100 pages?)Anyone, just my opinion. Feel free to call BS and discuss as wanted.

Nope. The Justin Bieber thread will beat them both.