Bernankerama

It should be any news for readers of my blog that Bernanke is an incompetent person which is committing mistakes after mistakes and with a weapon of massive currency-destruction in his hands. Unfortunately, he has already triggered many times with that weapon, to the point where not only the US currency is in danger, but the whole US economy and the future of the Americans is now on the line.

Please see previous posts:

• Bernanke has lost it
• Bernanke is out of control

But during the past few days, he has been talking a lot. Probably too much. The problem with this kind of people, is that usually, they do not express themselves, and it makes it that much easier for them to hide their lack of understanding and knowledge...

Here are various reports and articles of Bernanke's appearance during the past 8 days:

The Fed chairman, Ben S. Bernanke, spoke at the National Press Club in Washington on the 18th of Feb:
NYT:

The chairman of the Federal Reserve, Ben S. Bernanke, vowed on Wednesday to do whatever it took to pull the economy out of its downward spiral, even as he acknowledged that the most recent indicators were “dismal.”

The people who drove us in this mess are now expected to pull us out. Interestingly, even when the collapse had started, he didn't notice it. But now, he will pull the economy out. As if the Economy needed him.

Speaking at the National Press Club, the first time that a Fed chairman has taken questions from journalists in a public forum, Mr. Bernanke defended the central bank’s efforts and tried to allay concerns that it had been printing money at a dangerous pace.

Indeed, doubling the amount of currency in 6 months is not dangerous at all....

“The Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability,” he said.

Within the limits? That's a blatant lie, Mr. Chairman! Please refer to Mish for details.

[...] He also warned that the unemployment rate, which reached 7.6 percent last month, would climb to 8 percent “for sure.” [...]

Now I can see how bright the Chairman is. After 30 years of academic study, he can see that with the current trend, unemployment will rise by another 0.4%

Fed policy makers also expect the economy to shrink this year in a range of 0.5 to 1.3 percent, which mainly reflects deepening gloom about the severity of the downturn in the first half of this year. Last October, most Fed officials had predicted that the United States would come out of the recession quickly enough to end this year with a small gain.

Indeed, they don't understand what is going on, but people still listen to these people. I am wondering why?

For the first time, the Fed also released projections of longer-term growth going beyond its normal one-to-three-year predictions. The committee members said that the American economy was expected to grow by 2.5 to 2.7 percent annually over the next five to six years, and that unemployment rates would hover near 5 percent in the longer term.

Another big lie. They couldn't predict what was unfolding as they were speaking and denying the crisis just a few month ago. But now, they are predicting what is going to happen in 6 years or so! I think they are back to their old strategy: simply talking up the market.

Mr. Bernanke focused his remarks on the Fed’s expansion of lending activities since last fall. Using its power to create additional money at will, the central bank has more than doubled its “balance sheet” of holdings to about $2 trillion, from $900 billion since last September. The expansion reflects the Fed’s effort to thaw the frozen credit markets by pouring money into the financial system through a half-dozen new programs.

Acknowledging that some experts had raised fears that the Fed would end up stoking inflation, or losing money on risky loans, Mr. Bernanke argued that the central bank would be able to reverse course fairly swiftly as soon as the crisis abated.

Riiiiight! This is exactly what his predecessor, Alan Greenspan - called the Maestro at that time - managed to do, right? He raised interest rates at the exact time when they needed to be raised, leaving them at 1% for only 2 years. Bernanke dropped them to 0% and will probably leave them there for many years...

“A significant shrinking of the balance sheet can be accomplished relatively quickly,” he said, adding that most of the Fed’s new holdings were short-term loans that had to be repaid within a few months. Most of the loans, he added, entail very little credit risk because they are either routine, short-term loans to financial institutions or currency “swap agreements” with foreign central banks.

“For the great bulk of Fed lending, the credit risks are extremely low,” Mr. Bernanke said. About 5 percent of the Fed’s lending entails comparatively risky assets, and those are the ones involved in the central bank’s rescues of Bear Stearns and the American International Group.

Indeed, they are so little risk that the Fed is going to make money out of this. If there aren't any risk, why does he refuse to disclose what he has been doing? To the point where Bloomberg and Fox has sued the Fed?

[...] “Extraordinary times call for extraordinary measures,” Mr. Bernanke said. “Increased transparency is the best way to demonstrate that the Federal Reserve’s nontraditional policies are well conceived.”

At this point, I need to be pitched. Please, someone.

Today, on MarketWatch: Bernanke tells Congress Fed knows what it is doing

"We're not making it up," Bernanke told the House Financial Services panel.
"We're working along a program that has been applied in various contexts," he said.
"We're not completely in the dark."
[...]
Bernanke told Congress Tuesday that the key to ending the recession was fixing the financial system.
"If there is one message that I'd like to leave you with, if we're going to have a strong recovery, it has got to be on the back of a stabilization of the financial system. It is black and white," Bernanke said.
"If we don't stabilize the financial system, we're going to flounder for some time."

Isn't he responsible for stabilizing that system? Hasn't he been constantly failing for the past 18 months?

To me, what they are doing is completely clear, black on white. They are:

• Buying time for the banks, hoping that something good is going to come out of the pile of garbage. This reminds me of CDOs made of subprime mortgage. Bernanke the Alchemist is here to save us.
• They are grabing more and more power, extending their reach and the one of the government. And since they are extending, they are limiting and reducing the freedom of the US citizens.
• They are doing a massive transfer of wealth from the USD barer (the US citizen, the US tax-payer, but also the Chinese, Japanese, Saudi, and every other creditor nation) to their friends in the banks.
  

Feb. 24 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke rejected the idea that officials plan to use reviews of banks’ balance sheets as a pretext for government takeovers of the nation’s largest lenders.
[...]
The stress tests “will look at the balance sheets and the capital needs of each of our 19 largest $100-billion-dollar-plus banks over the next two-year horizon,” Bernanke said

Buying time...

Regulators won’t let banks “hide anything” as they look at how lenders have valued their assets, and will ensure that firms are using “appropriate models” for mark-to-market accounting, Bernanke said.

Hum... I am surprized to see that he's not discarding MtM accounting!

Bernanke took issue with some observers’ characterization of major U.S. banks as “zombie” firms, kept alive only through access to federal programs. They have “substantial franchise value,” he said.

Buying them two years and hoping they will be able to clean their balance sheets in the meantime is the definition of "zombie" to me.

Feb. 25 (Bloomberg) -- The government set a six-month deadline for the biggest 19 U.S. banks to raise any new capital deemed necessary after a mandatory review of their balance sheets.

More time buying here... Banks cannot raise capital at the current share prices, and they are all insolvent by definition, but with a leverage of 30-times and given the current climate, there's only two ways to raise money: the Fed or the Treasury.

The regulators will oversee the so-called stress tests by the end of April, which will identify how much extra cushion each bank will need, the Treasury said today in Washington. Lenders will have six months to raise private capital or accept government funds and the conditions that come with it.

Here they admit that banks are not well capitalized. Yet, they won't send them the FDIC to shut them down and liquidate them. Instead, they will give them money...

[...]
Bernanke said today that while the U.S. government may take “substantial” stakes in Citigroup Inc. and other banks, it doesn’t plan a full-scale nationalization that wipes out stockholders.

Another thing that's interesting about Bernanke is that the Fed is supposed to be independent from the other governmental bodies. But for the past many months, he has been actually working hand in hand with various government bodies, the President, the Treasury Secretary and he's been actually doing the policies!

Related interesting reads (published within the last few days):

• Bernanke Admits Fed Is Clueless and Banks are Zombified
• Bernanke's Boiled Frog Plan To Recapitalize Banks
• Bernanke's Hide and Seek Delaying Tactics
  

[NB: this post is quite rough and will be updated and improved...]