- Nothing but lies from Bernanke, Paulson, and Geithner Bernankerama
- Bernanke has lost it
- Bernanke is out of control
Here's the market reaction to this decision. Does this chart look familiar?
There are nonetheless three very interesting things that emerge from this madness and the violent reaction that followed on the market:
- Markets failed to forecast this move and to "price" this devaluation in advance. So much for all the people who believe in market efficiency and forward looking...
- Long term treasuries (20 and 30 years) jumped big time (bringing the yield to lower levels) on the prospect that the Fed will by them at high price. But what the market failed again to understand is that Bernanke announced "only" $300 billion of treasuries purchases. This is a ridiculously small amount compared to the $1.5 trillion quarterly "expected" deficit of the Obama administration (expected means that they have underestimated the figures big time).
- This announce will have unintended consequence and Bernanke is likely to regret it sooner than later because it will be the perfect opportunity for the US creditors (mainly China and Japan) to sell their US Tresuries back the Fed, cash in a huge amount of valueless USD paper and convert it into real assets such as oil, gold, silver? Will they take their chance? It's not impossible in my opinion. Now suppose that the FMI jumps in and offers to sell their gold in order to sink the gold market. Well, China might actually decide to buy their whole gold reserves after selling their Treasuries. Wouldn't be convenient?
Finally, let's have a good laugh courtesy of Bloomberg:
Economist Richard Hoey said Bernanke has created the “Rambo Fed,” referring to the Sylvester Stallone character skilled with weapons.I prefer laughing when I read so much nonsense, because on the long run we are all dead — said Keynes, the dead corpse that brought us into such reckless policies.
“This is a very powerful and aggressive move,” Hoey, chief economist at Bank of New York Mellon Corp., said in an interview with Bloomberg Television. “One of the reasons I’ve been arguing we won’t have a depression is we’ve got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine.”