Admission or concern?

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britinbe's picture
britinbe
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Admission or concern?

admission or concern???

http://www.ft.com/cms/s/0/4e9dadca-5057-11de-9530-00144feabdc0.html

Why Bernanke is right to be worried

By Mohamed El-Erian

Published: June 3 2009 17:21 | Last updated: June 3 2009 17:21

Fed chairman Ben Bernanke’s congressional testimony on Wednesday warrants careful attention by market participants – this at a time when policy measures play an unusually large role in determining both absolute and relative values in many markets.

In his prepared written remarks, Mr Bernanke correctly points to the ongoing healing in critical elements of the financial markets, including inter-bank and commercial paper transactions. He also notes the improved functioning of the corporate credit market which has enabled many companies to raise needed and precautionary capital.

Yet, the most interesting aspects of his testimony are elsewhere. They relate to his more nuanced outlook about the economy and his attempt to place fiscal issues in their proper place.

Mr Bernanke acknowledges that, despite the ”green shoots”, there are still question mark over which components of demand will kick into gear once the cyclical inventory pick-up runs its course, as it will inevitably do so over the next few months. Indeed, the chairman notes that ”businesses remain very cautious and continue to reduce their workforces and capital investments.”

Concerns about a sustainable recovery are not limited to the dynamics of the immediate cyclical recovery. Mr Bernanke also notes that ”even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilisation will increase further.”

Yet he stops short of addressing what, increasingly, will be on many people’s minds going forward. Specifically, the longer-term question goes well beyond the notion of a prolonged period of below-potential growth. The level of potential growth itself is likely to decline. Indeed, this is a central element of what we, at Pimco, call the ”new normal”.

When it comes to fiscal issues, the chairman is not timid about worrying about longer-term questions – and rightly so. He is explicit about the need for greater clarity on how fiscal sustainability will be restored after this period of emergency policy actions.

Mr Bernanke states that ”even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Prompt attention to questions of fiscal sustainability is particularly critical because of the coming budgetary and economic challenges associated with the retirement of the baby-boom generation and continued increases in medical costs.”

He does not stop here. He goes on to warn that ”near-term challenges must not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth.”

These are strong words, and appropriately so given the worrisome fiscal outlook facing the US. By necessity, Mr Bernanke will increasingly be in the business of countering monetisation and inflation concerns.

Indeed, the markets have already fired a couple of clear warning shots in the last couple of weeks, as illustrated by recent moves in US bonds and the dollar.

The chairman’s challenges on this count are neither easy nor amenable to quick solutions. Moreover, as markets increasingly look into the underlying factors, as inevitably they will, they will recognise the difficulty that the government faces in credibly committing to the needed primary fiscal adjustment in the absence of high economic growth.

The bottom line is that we should come away from Mr Bernanke’s testimony with at least two conclusions: the chairman seems more cautious about the growth outlook when compared with other recent public statements; and he wants to push fiscal sustainability issues clearly away from the Fed’s domain and back where they belong, with Congress and the administration. He is correct on both counts. He would have been justified on Wednesday in being even more forceful; and he mostly probably will be in the next few months.

tx_floods's picture
tx_floods
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Re: Admission or concern?

Here's my thoughts on this. I'm a reasonably rational person. In my thinking and evaluating this crisis/collapse, I vascillate in my thinking between conspiracy/complete incompetence. (sp?) Obama, Geithner, Benanke, et al, are obviously intelligent people, who know more about the subject at hand than I do. (I could so relate to the poster who needed to Google-up "bonds for dummies".) 

So, I almost have to rule out gross incompentence. The more I read about how the rich and poweful are, literally, interwoven with the powers in Washington, I wonder how much chance, we, the regular rank-and-file W2 earners, have. None. Well, not none. But, none as far as it relates to the PTB. We're on our own. Our chances to thrive in the future will be based entirely on our own efforts to get busy, and get our hands dirty and sweat a little. Now, on to Bernanke's comments:

When I read this, I was reminded of my own struggles with pornography addiction years ago. In my deepest heart of hearts, I knew I had a problem. But I used all the coping mechanisms typical of an addict: Denial, rationalization, excuse making, lies, etc., etc. When I was finally cornered by unmistakble evidence that I couldn't lie my way out of, I had to confess. But only a little. Similar to this: "Well, OK, I have a problem, but it's really only a little problem, and nothing I can't handle. Just a little bad luck, that's all." Just one line of crap after another. It was not until I was totally broken inside that I was able to shed all those mechanisms listed above, and re-build.

Bernanke's comments remind me of an addict who has been backed into a corner; The truth is obviously apparent to all. They know, we know, he knows, they know that we know that he knows, etc, etc. So the trick at this point is to let out the truth, just a little at a time, so the facts don't "seem" as bad as they really are. Of course, the facts don't "seem" anything. The facts are the facts. With Obama's recent speech about being out of money, it's my guess that as the addiction becomes more and more obvious to all, and the lies and duplicity become harder and harder to cover up and keep tracj of, we will be hearing many more speeches like this from TPTB.

Ragnar_Danneskjold's picture
Ragnar_Danneskjold
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Re: Admission or concern?

TMI!

suesullivan's picture
suesullivan
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Re: Admission or concern?

I'm sure you're joking, Ragnar, but as humor doesn't come across always without facial expressions, I want to add that it's not TMI to me, I think it's an interesting comparison to make (not to mention and impressive personal feat to overcome an addiction and be confident in talking about it.) But I don't think Bernanke says anything scripted without a huge amount of strategizing (or scheming, depending on your viewpoint) so I don't think this is a naked look into his psyche. As I read the reports about his speech, I wondered, where the hell were you when the stimulus package was being passed?  I assume this is just another attempt to reassure holders of our national debt that we're going to get straight, now, our binge is over, which brings me back to your addiction analogy after all!

fwiw,

sue

LogansRun's picture
LogansRun
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Re: Admission or concern?

Tx,

You got it!  They're letting water through the dam little by little so that as the flooding increases and finally crests over the top it doesn't diluge the lands.  If ALL the sheeple popped their heads out of the sand  at once, I really do believe there would be revolution.  They're doing everything possible to flood the airwaves with positive, positive, positive while leaking little negatives to psycholigically implant that it's happening but you should still feel good.  The damn is about to break and the lowlands (the avg. person) is about to be swept away!  

Just remember, we were told about this last March (2008) when the Congress held that little secret meeting:

http://morris108.wordpress.com/2008/07/07/deprogram-flashback-congress-secret-meeting-prepares-for-imminent-economic-collapse/

http://www.dailypaul.com/node/42730

We as citizens of the US and the world should be outraged that this was NOT discussed and has still NOT disclosed by the gov't to the public!  They KNEW this was going to happen and said nothing to US! 

Ragnar_Danneskjold's picture
Ragnar_Danneskjold
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Re: Admission or concern?
suesullivan wrote:

I'm sure you're joking, Ragnar, but as humor doesn't come across always without facial expressions, I want to add that it's not TMI to me, I think it's an interesting comparison to make (not to mention and impressive personal feat to overcome an addiction and be confident in talking about it.)

The point could've been made without the 3rd paragraph.  JMO

gregroberts's picture
gregroberts
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Re: Admission or concern?

I just started reading Crossing the Rubicon by M.C. Ruppert and in the second page of the first chapter he writes, (not an exact quote) that to prevent the extinction of the human race the population must be reduced by as many as 4 billion people and that TPTB are aware of this and are acting to bring this about.

I'm interested to see how he backs this up, will let you guys know.

mpelchat's picture
mpelchat
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Re: Admission or concern?

Hey Greg,

That it is a tough pill to swallow ((population reduction)) however to become sustainable, we have little choice.  I just wish we could do this in a natural flow over a few generations ((family planning)) over what the TPTB may be planning. 

pinecarr's picture
pinecarr
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Re: Admission or concern?

Hi LogansRun-

   I tend to go back and forth between what you are surmising -that they are trying to make the general public aware little by little- and Ben trying to do some CYA for the anticipated future ("I TOLD you that you had to change your behavior or else...").  What a neat way to shift the blame to those he "warned" about not mitigating the consequences of events he helped perpetuate.

LogansRun's picture
LogansRun
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Re: Admission or concern?

Pinecarr,

I think it's both in some ways although I honestly think BBernanke is immune to any backlash in the future.  The FED is running the show no matter what anyone says.  And in the "FED" I mean the whole Financial Elite/NWO/Oligarchs/however you feel comfortable stating the same people.  He in all honesty doesn't need to do any CYA because he's really untouchable.  Although, he will be the fall guy along with Geithner when tshtf.  But seriously, look at Greenspan....the guy is at the center of this mess and is still listened to by the public as being the absolute "guru" of finance. 

I really believe it's both to elude blame and to trickle info that ts IS htf real soon.  Or I should say, they're going to slowly inform the sheeple (uninformed/MSM believing/head in sand/idiots) that their standard of living is going to become the same as Madagascar.

And again, congress KNEW this was coming and told no one!  The FED knew this was coming and told NO ONE!  String em' up!

pinecarr's picture
pinecarr
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Re: Admission or concern?

It's sad, isn't it LR?  And what's ironic is that (I believe) the people we know and care about, who don't believe us warning them about what's coming down, will be much more open-minded to what Ben is now saying about the current situation!  How whacked is that?

britinbe's picture
britinbe
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Re: Admission or concern?

I just had a conversation with a friend in the UK who truely believes the MSM, after all it is BBC!!  When I looked to discuss this statement further, he said, "I'm just a simple guy....I trust the experts"

I'm sure Ben will go down in history because he is the one "left holding the baby"!  Of course people will realise too too late

LogansRun's picture
LogansRun
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Re: Admission or concern?

Pinecarr,

I've had so many discussions with people and they think I'm nuts!  It's right before their eyes if they'd only OPEN them.  Eyes wide shut~

The people that I find aggrivating are the ones that say "Now I get it" or "Ahh, that's what's going on" and then go on to tell me about a couple stories they watched on CNBC or FoxFinance concerning the improvement of the economy.  Or, they come and continue to tell me about how Obama and the Dems are just destroying the country!  I just can't tell them....."YOU DON"T GET IT!"  Obama/McCain/Bush/Clinton......they're all the same!

At least most of my immediate family is on board.  Can't save the planet.

BTW:  Showed Zeitgiest to my Cousin yesterday, she was shaking by the end.  Had to watch the Obama Deception next with her husband and they're digesting right now.  Should be interesting to see where they come out.

tx_floods's picture
tx_floods
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Re: Admission or concern?

Thanks, LogansRun. You, at any rate, were able to get the point was trying to make.

Sorry if it was too personal. Just sharing my thoughts, filtered through my own experience, on BB's lies. I mean, his astute analysis.

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