Federal Reserve Chairman Ben Bernanke has done it. He has succeeded in creating a new housing bubble. By driving mortgage rates down to the lowest level in 100 years and recklessly printing money with wild abandon, Bernanke has been able to get housing prices to rebound a bit. In fact, in some of the more prosperous areas of the country you would be tempted to think that it is 2005 all over again. If you can believe it, in some areas of the country builders are actually holding lotteries to see who will get the chance to buy their homes. Wow – that sounds great, right? Unfortunately, this “housing recovery” is not based on solid economic fundamentals. As you will see below, this is a recovery that is being led by investors. They are paying cash for cheap properties that they believe will appreciate rapidly in the coming years. Meanwhile, the homeownership rate in the United States continues to decline. It is now the lowest that it has been since 1995. There are a couple of reasons for this. Number one, there has not been a jobs recovery in the United States. The percentage of working age Americans with a job has not rebounded at all and is still about the exact same place where it was at the end of the last recession. Secondly, crippling levels of student loan debt continue to drive down the percentage of young people that are buying homes. So no, this is not a real housing recovery. It is an investor-led recovery that is mostly limited to the more prosperous areas of the country. For example, the median sale price of a home in Washington D.C. just hit a new all-time record high. But this bubble will not last, and when this new housing bubble does burst, will it end as badly as the last one did? (Read More….)
- Posted by Becket Adams
Chairman Ben Bernanke sent a clear message Friday that the Federal Reserve will do more to “help” the still-struggling U.S. economy. His remarks seemed to leave two questions: What exactly will the Fed do? And when?
It’s no longer a matter of “if.” It’s going to happen.
Echoing what the Fed said in a statement after its last policy meeting July 31-Aug. 1, the chairman said they would act further, as needed, to stimulate economic growth and job creation.
He called the weak job market “a grave concern” that causes “enormous suffering,” wastes talent and can inflict lasting damage on the economy. Bernanke also described the U.S. economy’s health as “far from satisfactory” and noted that the unemployment rate, now 8.3 percent, hasn’t declined since January.
He stopped short of committing the Fed to any specific move. But in his speech to an annual Fed conference in Jackson Hole, Wyo., Bernanke said that even with interest rates already at super-lows, the Fed should do more to “help” the economy.
“From our reading of the speech, it appears that Bernanke has given up on the idea of Congress stepping up and taking care of its business, which means he thinks the ‘fiscal cliff’ will remain an issue through the November election and likely right up to the end of the year,” writes Paul Vigna for the Wall Street Journal.
“The drag on the economy will only get worse the longer that hangs around, and that’s apparently unacceptable to the Fed chieftain,” Vigna adds.
Some economists predict the Fed will unveil a new plan as soon as its Sept. 12-13 meeting, possibly a third round of bond purchases meant to lower long-term interest rates and encourage more borrowing and spending (i.e. “quantitative easing,” or QE).
In two rounds of QE, the Fed bought more than $2 trillion of Treasury bonds and mortgage-backed securities. Many investors have been hoping for a third round — a QE3. Others expect something less dramatic: a plan to keep short-term rates near zero into 2015 unless the economy improves, perhaps followed by bond purchases later.
In his speech, Bernanke assessed the economy’s weaknesses, defended the steps the Fed has taken to date, and insisted it can do more.
Investors took time to digest Bernanke’s speech but in the end seemed pleased. After his remarks were released at 10 a.m. Eastern time, the Dow Jones industrial average shed some of its earlier gains. Then it rose more than 100 points. It closed up nearly 91 points, or 0.7 percent.
Bernanke acknowledged that the Fed is operating in essentially uncharted territory. Central banks can take “nontraditional” measures when they’ve run out of conventional ammunition. And under Bernanke the Fed has tried many.
Federal Reserve Chairman Ben Bernanke walks outside of the Jackson Hole Economic Symposium, Friday, Aug. 31, 2012, at Grand Teton National Park near Jackson Hole, Wyo. (AP Photo/Ted S. Warren)
It’s made its public communications more explicit. For example, it’s sought to embolden investors and businesses by saying short-term rates will stay low as long as the economy is weak. The Fed originally said it expected to keep rates “exceptionally low” through mid-2013. It extended that target to late 2014.
And besides embarking on two rounds on QE, the Fed has sold short-term Treasurys and replaced them with long-term Treasurys. That shift is intended to push long-term rates down further.
Bernanke argued Friday that collectively, such measures have succeeded. He cited research showing that two rounds of QE had created 2 million jobs and accelerated U.S. economic growth.
However, even if the Fed does act further, many analysts doubt it would make much difference. Interest rates, both short- and long-term, are near historic lows. Borrowing — for those who have the credit — has never been cheaper. Yet the economy remains in a rut.
Critics have also argued that besides escalating inflation later, the Fed’s easy-money policies could push individuals and institutions into riskier investments. That, in turn, could destabilize the financial system.
Bernanke conceded that nontraditional policies carry risks. But he argued that these risks are “manageable.”
A third round of quantitative easing “seems like a done deal, and the market is trading it that way. So the timing, while interesting, isn’t really very relevant beyond the whole trading-opportunity game,” Vigna notes
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The Associated Press contributed to this report.
During the Fed’s annual address from Jackson Hole, Wyoming, US Federal Reserve Chairman Ben Bernanke said current economic conditions are setting America up for “daunting” challenges and continued grim employment numbers.
Friday morning, the overseer of America’s central bank said during the Fed’s annual symposium that “we must not lose sight of the daunting economic challenges that confront our nation,” suggesting that as the country assesses the benefits and costs of alternative policies, the outcome might worsen nevertheless.
Mr. Bernanke also insisted that the current unemployment epidemic that has haunted the length of much of President Barack Obama’s administration may extend into the unforeseeable future if changes for the better aren’t implemented soon.
“The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years,” Bernanke said.
As grim as the chairman’s predictions are, that isn’t to say they are out of character. Although the Fed does not regularly make public addresses about the country’s economic status, Bernanke has brought up his fears of a recession repeatedly in 2012 alone.
In June, Bernanke told lawmakers on Capitol Hill that any lack of initiative on their part would push the rest of the country over a proverbial fiscal cliff. One month later, the chairman warned Congress, “We are looking very carefully at the economy, trying to judge…whether or not the economy is likely to continue to make progress towards lower unemployment,” which, he added, would “obviously” prompt the Fed to intervene with additional steps to help any attempts at recovery.
On Friday, Bernanke once more said that the Federal Reserve was concerned and that they’d be considering additional action, although he failed to officially endorse a third round of quantitative easing, despite persistent predictions from economists that the Fed will argue for such.
“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” Bernanke said from Jackson Hole.
The Fed will meet against on September 12, and are expected to discuss if QE3 will have to be implemented then.
Another round of quantitative easing could be right around the corner: upon concluding the latest meeting of the US Federal Reserve, some of the central bank’s top figures forecast that they may need to implement QE3.
Citing a continuously stagnant jobs report and a seemingly perpetually perturbed international economy, members of the Fed say that a third run of quantitative easing — yet another round of bond purchasing — could be in the cards for the country’s central bank. The Fed is unlikely to formally make a decision either way until there next meeting wraps up on August 1, but some members of the bank are announcing on the heels of their latest get together that the option is still on the table.
Last week, Federal Reserve Chairman Ben Bernanke said to the US Congress, “We are looking very carefully at the economy, trying to judge…whether or not the economy is likely to continue to make progress towards lower unemployment.” If a positive outlook didn’t appear in the cards, warned Bernanke, the bank would “obviously…have to consider additional steps.”
Only days later, San Francisco Federal Reserve President John Williams tells the Financial Times in a sit-down that the chairman’s warning wasn’t just an empty threat. Upon being quizzed to come up with a solution as America economists continue to forecast a fiscally weak future, Williams says to FT that a continuation of current trends “would argue for further action,” but fell short of singling out QE3 as the be-all and end-all solution.
During his report to Congress last week, Bernanke said the Fed was examining whether or not “the loss of momentum we’ve seen recently is enduring, and whether or not the economy is likely to continue to make progress,”calling the speed of reversal for the grim unemployment figures “frustratingly slow.”
Last August, Bernanke called the road to recovery “much less robust” than the Fed had hoped for, and at the beginning of 2012 warned that “we need to be thinking about ways to provide further stimulus if we don’t get improvement in the pace of recovery and a normalization of inflation.” Although jobs figures have taken a turn for the better — albeit only slightly — the chairman has been clear for over a year now that QE3 is becoming more and more likely.
“Households remain concerned about their employment and income prospects and their overall level of confidence remains relatively low,” Bernanke said last week. A year earlier, he called the jobs problem “a national crisis” and warned that a reversal would be necessary for the sake of America’s economic future.
Bernanke hinted at QE3 once again last week, saying that “the logical range” of solutions would be initiative some sort of purchase program.
Federal Reserve Chairman Ben Bernanke delivered his annual address to Congress on Tuesday, and he did very little to give lawmakers much confidence about where the U.S. economy is heading. Bernanke told members of Congress that recent economic data points “suggest further weakness ahead” and that the Federal Reserve is projecting that the U.S. unemployment rate will remain at 7 percent or above all the way through the end of 2014. Now, it is important to keep in mind that Federal Reserve forecasts are almost always way too optimistic. The actual numbers almost always end up being much worse than what the Fed says they will be. So if Bernanke is saying that the U.S. unemployment rate will be 7 percent or higher until the end of 2014, then what will the real numbers end up looking like? During his testimony, Bernanke seemed unusually gloomy about the direction of the U.S. economy. He seemed resigned to the fact that there really isn’t that much more that the Federal Reserve can do to stimulate the U.S. economy. Yes, the Federal Reserve could try another round of quantitative easing, but the first two rounds did not really do that much to help. The truth is that the United States is absolutely drowning in debt, and when that debt bubble finally bursts the Federal Reserve is simply not going to be able to save us from the Great Depression that will happen as a result.
At this point, Bernanke appears to be in “cya” mode. For example, the following is from Bernanke’s prepared remarks to Congress on Tuesday….
The second important risk to our recovery, as I mentioned, is the domestic fiscal situation. As is well known, U.S. fiscal policies are on an unsustainable path, and the development of a credible medium-term plan for controlling deficits should be a high priority. At the same time, fiscal decisions should take into account the fragility of the recovery. That recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken. The Congressional Budget Office has estimated that, if the full range of tax increases and spending cuts were allowed to take effect–a scenario widely referred to as the fiscal cliff–a shallow recession would occur early next year and about 1-1/4 million fewer jobs would be created in 2013. These estimates do not incorporate the additional negative effects likely to result from public uncertainty about how these matters will be resolved. As you recall, market volatility spiked and confidence fell last summer, in part as a result of the protracted debate about the necessary increase in the debt ceiling. Similar effects could ensue as the debt ceiling and other difficult fiscal issues come into clearer view toward the end of this year.
The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery. Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.
Did you catch that?
Bernanke says that the federal government is on an “unsustainable path” and must reduce debt, but he also says that the economy cannot afford tax increases and spending cuts right now. In fact, Bernanke is warning that “a shallow recession would occur early next year” if something is not done about the looming “fiscal cliff” that so many people are talking about.
So what does Bernanke want us to do?
If we continue on the path that we are on, our debt will continue to grow by leaps and bounds.
But if we seriously cut spending or raise taxes, that will significantly slow down the economy.
Either path leads to a whole lot of pain.
Bernanke sounds like a politician that is trying to cover all of his bases without giving us a recommendation about how to fix things.
Of course the truth is that the Federal Reserve system itself is at the very heart of our economic problems and has been the engine that has caused our national debt to explode at an exponential rate, but we all know that Bernanke will never admit that.
Bernanke can see that things are starting to fall apart, and he wants to shift as much blame to Congress and to other entities as he can while there is still time.
Bernanke knows that the U.S. economy is not going to produce enough jobs for our population anymore, and he does not want to be blamed for that.
Bernanke knows that the money printing done by the Fed is going to cause prices to continue to go up and that this will seriously stretch family budgets all over America, and he does not want to be blamed for that.
Bernanke wants to come out of all this looking like a good guy. At this point he is probably hoping that the next great global financial crisisdoes not happen until his term ends.
Unfortunately, he is not going to have that luxury. The next wave of the economic collapse is rapidly approaching, and it is going to hit the U.S. even harder than the last recession did.
And when the unemployment rate soars well up into the double digits, what do you think is going to happen?
The truth is that the entire country will soon resemble cities such as Gary, Indiana and Flint, Michigan.
To get an idea of what most of our cites will soon look like, just check out this video.
When people lose hope, they tend to get desperate.
And desperate people do desperate things.
Just look at the mob robberies that we are seeing all over the country right now.
In Jacksonville, Florida the other day, hundreds of young people that had just left a massive house party that police had broken up decided that they would descend on the local Wal-Mart.
According to police, approximately 300 people stormed into Wal-Mart and started going crazy. They threw produce at each other, many of them started putting merchandise into their pockets, they destroyed an anti-shoplifting security scanner that is worth about $1,500 and there were even reports that shots were fired outside of the store.
It was absolute chaos. You can see video of this incident right here.
A similar mob robbery happened in the Portland, Oregon area on Saturday night….
A group of teens targeted a Troutdale store last weekend in a ‘flash rob’ and investigators are trying to identify the suspects.
Investigators said as many as 40 kids entered the Albertsons store at 25691 SE Stark Street at the same time late Saturday night and started stealing things.
Security officers chased the thieves out, but no one was captured. They also left employees pretty shaken up, including one woman who was in tears after getting terrorized by the robbers.
So will Ben Bernanke and the Federal Reserve be able to save us from this kind of chaos?
Of course not.
If you have any faith in Bernanke at this point then you are being quite foolish.
Our economy is on the verge of collapse, and when it does collapse there is going to be hell to pay on the streets of America.
These days young people seem to commit absolutely brutal crimes just for the fun of it. For example, in Chicago the other day two teens beat to death a 62 year old disabled man who was collecting cans for no apparent reason whatsoever. The following is from a report about this incident from the NBC affiliate in Chicago….
Police said a 16-year-old gang member punched Delfino Mora, father to 12 children and a grandfather to 23, last Tuesday in an alley in the 6300 block of North Artesian. Mora’s devastated family told NBC Chicago that Mora was on his regular route of collecting cans that he sells for cash when the teens confronted him.
Nicholas Ayala, 17, of the 6300 block of North Talman and Anthony Malcolm, 18, of the 5500 block of North Broadway were both charged with first-degree murder and robbery.
Malik Jones, 16, the Latin Kings member accused of striking Mora, was charged with first-degree murder and ordered held without bail Sunday by Judge Adam Bourgeois.
Police said Jones handed his friends his cell phone to start filming then demanded money from Mora and punched him in the jaw. Ayala and Malcolm are accused of taking turns filming the video which allegedly showed Mora’s head smashing into the concrete.
But just because you aren’t in the city does not mean that you are safe.
For example, just check out what happened to three rural Michigan teens when they decided that it would be fun to hop on a passing train. The following is from a recent article in the New York Times….
For generations of Midwestern youths who have grown up hearing the long whistles and deep rumbling of passing locomotives, hopping a freight train to another city has seemed like a free ride to adventure.
But for three rural Michigan teen-agers who actually followed this dream, the results proved disastrous. The two 15-year-old boys and a 14-year-old girl climbed off the train when it stopped last Wednesday evening in a rough neighborhood here. Within hours, the girl had suffered multiple sexual assaults and all three had been shot in the head and left for dead in a park.
One boy, Michael Carter, was killed, while the other, Dustin Kaiser, and the girl staggered to a road and flagged down a truck driver. Dustin is in stable condition at the Hurley Medical Center after two rounds of surgery, while the girl, who was shot through the cheek, was treated and released on Friday, said Donna J. Fonger, a hospital administrator.
Our country is degenerating, and the Federal Reserve is not going to save you.
We have been living in the greatest debt bubble in the history of the planet, and it is going to burst at some point and that is going to cause amassive economic depression.
Just check out what Richard Duncan, the author of The New Depression, told CNBC the other day….
When we broke the link between money and gold forty years ago, this removed all the constraints on credit creation. And afterwards credit absolutely exploded. In the U.S. it grew from $1 trillion to $50 trillion – a fifty-fold increase in forty three years.
This explosion of credit created the world we live. It created very rapid economic growth. It ushered in the age of globalization.
But it now seems credit cannot expand any further because the private sector is incapable of repaying the debt that it has already. And if credit now begins to contract there is a very real danger that we will collapse into a new great depression.
In the chart posted below you can see what he is talking about. Once upon a time the total amount of debt in the United States (including government debt, business debt and consumer debt) was sitting at about a trillion dollars.
Today, it has nearly reached 55 trillion dollars….
We have lived way above our means for decades, and now a day of reckoning is rapidly approaching.
Ben Bernanke and the Federal Reserve may be able to delay the coming depression slightly, but they cannot avert it.
You better get ready.