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Author Topic: US Outlook if/when Bernake retires?  (Read 1756 times)
Branny
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June 18, 2013, 05:02:00 PM
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Hopefully this isn't out of order.

I read today that Obama noted on a recent interview that Bernake was ready to step down or otherwise not continue to be the federal reserve chairman here in the US - http://hosted.ap.org/dynamic/stories/U/US_OBAMA_BERNANKE?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2013-06-18-11-53-05

With a little bit of digging , it seems that Janet Yellen is on tap to replace him. I'm curious about what impacts this could have on bitcoin and the markets as a whole. She has stated in a few reports I've dug up that she does not want the US to go the way of Japan with low interest rates which lead to stagflation. It could be a good sign for longer term US economics, however there would be a huge shock if the US went from the artificially low interest rate we have now to real market rates (4% to 6%)
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June 18, 2013, 08:41:11 PM
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Not going to happen.  Banks feel entitled to cheap money now, it will be incredibly difficult to wean them off.  

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June 18, 2013, 08:43:14 PM
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Mr Money Printer aka Helicopter Ben will be sorely missed.  Besides him who else will be helping to print out money in such quantities?   I guess the markets will start to panic when he leaves.   
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June 19, 2013, 10:53:52 AM
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meet the new boss, same as old boss

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June 19, 2013, 01:43:40 PM
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The big banks have already hedged for this event, bought the appropriate stooges, and will continue to make money hand over fist.

Note that the market may dive and swoon, go sideways, or go up. But, it won't matter, because the small investor will get raped, and the banks will make money anyway.

Meanwhile, the value of the dollar will continue to go down, you will pay more at the pump, pay more for groceries, etc.

Same old song and dance.
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June 19, 2013, 02:53:19 PM
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The federal reserve is a private central bank, do your research folks, nothing will change as long as currency is in the hands of private interests, this is why everyone is beginning to like Bitcoin so much.
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June 19, 2013, 02:54:47 PM
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The faces may change, the policies will remain the same just under some new names
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June 19, 2013, 04:45:24 PM
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She is considered the 'dovest' of the Federal Open Market Committee, thinks inflation is good and of no concern, and wants to focus on the Fed's unemployment mandate.  So, more cheap money and bad policy.
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June 19, 2013, 06:08:58 PM
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  2:06 PM FOMC Economic Projections: 2013 GDP growth estimate is cut a hair to 2.3-2.6% from 2.3-2.8%, but is boosted in 2014 to 3-3.5% from 2.9-3.4%. The unemployment rate forecast for 2013 is trimmed to 7.2-7.3% from 7.3-7.5% and in 2014 to 6.5-6.8% from 6.7-7%. 14 out of 19 FOMC members see rate hikes beginning in 2015 (4 see hikes before then). [U.S. Economy, Breaking News, Top Stories]

  2:01 PM FOMC Announcement: No changes to the $85B per month in asset purchases and the committee stands ready to increase or decrease the level as necessary. Downside risks to the economy and the labor market have diminished since the fall. [Breaking News, Top Stories, U.S. Economy]

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June 20, 2013, 02:37:15 AM
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Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

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June 20, 2013, 07:52:46 AM
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Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

If they let the housing market fall to fundamental levels many more people will lose their homes.  But with the world's stock markets rolling over they will have to make some tough choices soon.

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June 20, 2013, 08:21:47 AM
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Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

If they let the housing market fall to fundamental levels many more people will lose their homes.  But with the world's stock markets rolling over they will have to make some tough choices soon.

Fall?  The housing market is already picking up quite a bit.  But yes, you're right that a lot of that may very well be due to the dirt cheap interest rates.  3.5% is almost unheard of, even 5% would be relatively cheap historically. 

But I don't think the Feds really care that much about the housing market.  Maybe it's just me, but there are several things that could have been done to improve the housing market that aren't that complicated.  But yeah, it'd involve things like marking people's mortgages down to the actual property value and the bank would be forced to take a loss on it.  That's really what it comes down to, the banks have more clout than the millions of underwater homeowners.  I saw a post in our weekly newspaper where they were talking about an eminent domain idea where the city would come in, seize the property, sell it back and market value to the original owner so that they wouldn't be paying grossly inflated prices.  Sadly, it never got off the ground.  It'd really be a win win for everyone - except, of course, the banks which sold this whole song and dance to begin with.

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June 20, 2013, 10:37:29 AM
 #13

It's really simple. Once they start QE, there is no way of stopping. As soon as they stop, a recession starts again. There is a feedback loop. It's a no brainier that they continue with QE, ramping it up compared to before.
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June 20, 2013, 03:22:38 PM
Last edit: June 20, 2013, 08:18:56 PM by johnyj
 #14

From marketwatch

"high-profile investor Jim Rogers says bonds everywhere are in a bubble, and the pop is coming.

In an interview with Fusion MarketSite a day prior, Rogers says the timing on that bubble is tough, of course.

    “But at some point, markets won’t take central bank policies anymore, and interest rates go up regardless of how much bond buying they do. Market timing is tough. As for the fixed income market, I’m short junk bonds. In any market, the marginal stuff goes first. This could precede problems with sovereign debt.” "

Greenspan inflated the housing bubble, and Bernake inflated the bond bubble, at each step, they just delayed the unavoidable and pushed it to a much higher scale  Roll Eyes

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June 20, 2013, 05:39:59 PM
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Everything is going to be the same when he leaves

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June 20, 2013, 09:04:52 PM
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From marketwatch

"high-profile investor Jim Rogers says bonds everywhere are in a bubble, and the pop is coming.

In an interview with Fusion MarketSite a day prior, Rogers says the timing on that bubble is tough, of course.

    “But at some point, markets won’t take central bank policies anymore, and interest rates go up regardless of how much bond buying they do. Market timing is tough. As for the fixed income market, I’m short junk bonds. In any market, the marginal stuff goes first. This could precede problems with sovereign debt.” "

Greenspan inflated the housing bubble, and Bernake inflated the bond bubble, at each step, they just delayed the unavoidable and pushed it to a much higher scale  Roll Eyes

Thanks for the reminder, I really need to dump my bond fund.

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June 20, 2013, 10:19:34 PM
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Every minute he talks my shares goes down!  He better leave, it will be good for all.
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June 20, 2013, 11:23:55 PM
 #18

Who is worse? Bernanke or Greenspan?Huh
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June 20, 2013, 11:45:58 PM
 #19

Once the US pops I predict one of two scenarios;

1. The US crash brings the world into a global depression much like the great depression of last century, or

2. The US crashes to whcih China, Russia and OPEC switch from Petro/US to Petro/Gold. This puts US into a long term sprialling depression, Europe goes into a 3 year recession and Asia + Russia slow but hold firm.

In both scenarios, enough populance move some wealth out of their home nation through the BTC pathway which pushes BTC prices up exponentially for the next 3~5 years.

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June 21, 2013, 06:09:50 AM
 #20

meet the new boss, same as old boss

This is accurate.
worldinacoin
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June 21, 2013, 09:42:45 AM
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Wait for the next US Presidential election I guess.....then there may be changes, if the fiat economy don't collapse by then
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June 21, 2013, 05:48:19 PM
 #22

meet the new boss, same as old boss

This is accurate.

yes it is
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June 22, 2013, 12:07:35 AM
 #23

Once the US pops I predict one of two scenarios;

1. The US crash brings the world into a global depression much like the great depression of last century, or

2. The US crashes to whcih China, Russia and OPEC switch from Petro/US to Petro/Gold. This puts US into a long term sprialling depression, Europe goes into a 3 year recession and Asia + Russia slow but hold firm.

In both scenarios, enough populance move some wealth out of their home nation through the BTC pathway which pushes BTC prices up exponentially for the next 3~5 years.

Sure, there are plenty of reasons this might happen in a financial turmoil, normally you can't survive by your own even if you owned lots of gold during a bad time, but bitcoin could prevent the current system from collapsing, that's the most amazing part

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June 22, 2013, 01:42:55 AM
 #24

True but they each keep digging the hole deeper.

Dig a deep hole to hide from the debt.
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June 22, 2013, 02:56:43 AM
 #25

Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

If they let the housing market fall to fundamental levels many more people will lose their homes.  But with the world's stock markets rolling over they will have to make some tough choices soon.

Fall?  The housing market is already picking up quite a bit.  But yes, you're right that a lot of that may very well be due to the dirt cheap interest rates.  3.5% is almost unheard of, even 5% would be relatively cheap historically.  

But I don't think the Feds really care that much about the housing market.  Maybe it's just me, but there are several things that could have been done to improve the housing market that aren't that complicated.  But yeah, it'd involve things like marking people's mortgages down to the actual property value and the bank would be forced to take a loss on it.  That's really what it comes down to, the banks have more clout than the millions of underwater homeowners.  I saw a post in our weekly newspaper where they were talking about an eminent domain idea where the city would come in, seize the property, sell it back and market value to the original owner so that they wouldn't be paying grossly inflated prices.  Sadly, it never got off the ground.  It'd really be a win win for everyone - except, of course, the banks which sold this whole song and dance to begin with.

If the housing market is picking up, why is the Fed spending $85 billion a month on mortgage backed securities while millions of homes sit empty and are being held off the market.... just waiting for a recovery so the banks don't have to book the losses.

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June 23, 2013, 05:14:53 AM
 #26

meet the new boss, same as old boss
Exactly. She'll undoubtedly continue the same QE policies, she's of the same mind as Bernanke. All a Fed chairman is, is an economic priest there to give scientific cover to whatever the politicians already want to do. The politicians simply enshrine on these positions of power those whom already think in line with what they want to do: inflate the money supply.

Their answer to every crisis: inflate the money supply.

It's beautiful how a thing works until it doesn't. The tipping point will come caused by the inflationary policy. In the long run we may all be dead, but the guy who said that is now dead and has left us with the consequences he spawned.

Democracy is the original 51% attack.
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June 23, 2013, 05:18:45 AM
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It's really simple. Once they start QE, there is no way of stopping. As soon as they stop, a recession starts again. There is a feedback loop. It's a no brainier that they continue with QE, ramping it up compared to before.
Yes, but the problem is that the system will adjust to the existing level of QE, and when the next thing happens they'll have to pile even more than what they're doing to have an effect.

QE becomes economic heroin and the Fed chairman ends up chasing the dragon every time a new problem comes along.

What the neo-keynesians have never accepted is that while short term pumping may reduce unemployment, it creates economic distortions that lead to long term consequences, including bubble behavior and much greater unemployment than otherwise would've resulted.

What could've been bearable as a series of waves can instead line up temporally and become am economic tsunami.

Democracy is the original 51% attack.
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June 23, 2013, 05:24:01 AM
 #28

Who is worse? Bernanke or Greenspan?Huh
Bernanke. I think each succeeding Fed chairman becomes more of a rube and a tool than the last one, because they look at the actions of the last chairman and see what they got away with and consider it normal, and extend the policy of the previous guy. At some point that strategy crashes spectacularly.

Once the US pops I predict one of two scenarios;

1. The US crash brings the world into a global depression much like the great depression of last century, or

2. The US crashes to whcih China, Russia and OPEC switch from Petro/US to Petro/Gold. This puts US into a long term sprialling depression, Europe goes into a 3 year recession and Asia + Russia slow but hold firm.

In both scenarios, enough populance move some wealth out of their home nation through the BTC pathway which pushes BTC prices up exponentially for the next 3~5 years.
It really depends on when this happens. There's a possibility that by the time this crash comes, a few forward-looking countries may switch directly to bitcoin for settling international debts and currencies, essentially replacing the dollar in that capacity.

It also seems like China may be the one to spark this off. They can crash the dollar at will, and they'd love to put the yuan in its place as a world reserve currency. But no one trusts them enough to accept the yuan as a reserve currency. China may be happy simply to black-eye the dollar and replace it with bitcoin ultimately.

Democracy is the original 51% attack.
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June 24, 2013, 12:22:30 AM
 #29

Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

If they let the housing market fall to fundamental levels many more people will lose their homes.  But with the world's stock markets rolling over they will have to make some tough choices soon.

Fall?  The housing market is already picking up quite a bit.  But yes, you're right that a lot of that may very well be due to the dirt cheap interest rates.  3.5% is almost unheard of, even 5% would be relatively cheap historically.  

But I don't think the Feds really care that much about the housing market.  Maybe it's just me, but there are several things that could have been done to improve the housing market that aren't that complicated.  But yeah, it'd involve things like marking people's mortgages down to the actual property value and the bank would be forced to take a loss on it.  That's really what it comes down to, the banks have more clout than the millions of underwater homeowners.  I saw a post in our weekly newspaper where they were talking about an eminent domain idea where the city would come in, seize the property, sell it back and market value to the original owner so that they wouldn't be paying grossly inflated prices.  Sadly, it never got off the ground.  It'd really be a win win for everyone - except, of course, the banks which sold this whole song and dance to begin with.

If the housing market is picking up, why is the Fed spending $85 billion a month on mortgage backed securities while millions of homes sit empty and are being held off the market.... just waiting for a recovery so the banks don't have to book the losses.

Probably because the housing market, and the economy, hasn't picked up as much as the Fed wants it to pick up.  I feel like the low interest rates are more about helping the economy than helping the housing market personally, although it does help both, ultimately.

Either that or they've just ran out of traditional tools because the effective interest rates are 0% now and this is the only thing they can do to affect the economy.

I didn't realize it was mostly mortgage backed securities, though.  I thought it was bonds in general they were buying.

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June 24, 2013, 04:37:45 PM
 #30

Sooner or later they're going to have to jack up the interest rates or risk rampant inflation.  Right now, I think the Fed is still far more worried about unemployment than inflation, but it's bound to happen eventually.  I'm kind of surprised he's still buying assets at such a rapid rate, personally.

If they let the housing market fall to fundamental levels many more people will lose their homes.  But with the world's stock markets rolling over they will have to make some tough choices soon.

Fall?  The housing market is already picking up quite a bit.  But yes, you're right that a lot of that may very well be due to the dirt cheap interest rates.  3.5% is almost unheard of, even 5% would be relatively cheap historically.  

But I don't think the Feds really care that much about the housing market.  Maybe it's just me, but there are several things that could have been done to improve the housing market that aren't that complicated.  But yeah, it'd involve things like marking people's mortgages down to the actual property value and the bank would be forced to take a loss on it.  That's really what it comes down to, the banks have more clout than the millions of underwater homeowners.  I saw a post in our weekly newspaper where they were talking about an eminent domain idea where the city would come in, seize the property, sell it back and market value to the original owner so that they wouldn't be paying grossly inflated prices.  Sadly, it never got off the ground.  It'd really be a win win for everyone - except, of course, the banks which sold this whole song and dance to begin with.

If the housing market is picking up, why is the Fed spending $85 billion a month on mortgage backed securities while millions of homes sit empty and are being held off the market.... just waiting for a recovery so the banks don't have to book the losses.

Probably because the housing market, and the economy, hasn't picked up as much as the Fed wants it to pick up.  I feel like the low interest rates are more about helping the economy than helping the housing market personally, although it does help both, ultimately.

Either that or they've just ran out of traditional tools because the effective interest rates are 0% now and this is the only thing they can do to affect the economy.

I didn't realize it was mostly mortgage backed securities, though.  I thought it was bonds in general they were buying.

http://en.wikipedia.org/wiki/Quantitative_easing#QE1.2C_QE2.2C_and_QE3
Quote
A third round of quantitative easing, QE3 was announced on 13 September 2012. In an 11-to-1 vote, the Federal Reserve decided to launch a new $40 billion a month, open-ended, bond purchasing program of agency mortgage-backed securities. Additionally, the Federal Open Market Committee (FOMC) announced that it would likely maintain the federal funds rate near zero "at least through 2015."[48][49] According to NASDAQ.com, this is effectively a stimulus program which allows the Federal Reserve to relieve $40 billion dollars per month of commercial housing market debt risk.[50] Because of its open-ended nature, QE3 has earned the popular nickname of "QE-Infinity."[51] On 12 December 2012, the FOMC announced an increase in the amount of open-ended purchases from $40 billion to $85 billion per month.

So yea, good luck with your "housing market is picking up quite a bit" theory.  I would really love it if I were wrong.

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