It’s in the Cards:
The Irresistible Force vs. A Solemn Promise

2012 September 25
tags:
by drdog09

In our world today we have two competing outcomes arriving from different visions. To the first we turn to Paul Ryan —


In this speech Ryan is attempting to assuage the concerns that many seniors have in regards to the future of the Social Security system and Medicare. The promise being that if you are already in the system or near to drawing into either system then nothing changes for you. The changes only affect younger member of the populace.

To the latter we cast our gaze to Ben Bernanke —


A compilation of a much longer speech. But it covers the salient points ongoing with the US FED for what essentially a QE3 —


  • The Fed will buy MBS instruments. And whom might they purchase these assets? Why Fannie and Freddie Mac.
  • The purchase regimen is open ended.
  • The lone back trigger is annualized inflation stays below 2%.

Where is the Fed to acquire the dollars to buy the MBS assets? From thin air, or should we say digital dumping into the system.


The Money Supply Problem

The issue here, as it relates to the Bernanke announcement is one of quantity.

Since the 2006 we have had a 5 fold increase in total dollars in circulation. One is seeing result in a broad base of products from food to fuel. The Fed is trying to shock the economy back to health like a vet trying to refib a two day old dead horse. It does little for a recovery and the horse is still dead.

Dallas Fed President Richard Fisher had this to say on the latest QE3 —


“It will come as no surprise to those who know me that I did not argue in favor of additional monetary accommodation during our meetings last week. I have repeatedly made it clear, in internal FOMC deliberations and in public speeches, that I believe that with each program we undertake to venture further in that direction, we are sailing deeper into uncharted waters. We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody – in fact, no central bank anywhere on the planet – has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank – not, at least, the Federal Reserve – has ever been on this cruise before.

This much we do know: Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash – or fuel for investment – is burning a hole in the pockets of money market funds and other nondepository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?…

“One of the most important lessons learned during the economic recovery is that there is a limit to what monetary policy alone can achieve. The responsibility for stimulating economic growth must be shared with fiscal policy. Ironically, and sadly, Congress is doing nothing to incent job creators to use the copious liquidity the Federal Reserve has provided. Indeed, it is doing everything to discourage job creation. Small wonder that the respondents to my own inquires and the NFIB and Duke University surveys are in ‘stall’ or ‘Velcro’ mode.

But I guess we need to give the Fed credit for trying right? Wrong. Mr. Fisher is still caught up in the idea of Fed/FOMC ability to ‘manage the economy’. He is still believes in a centrally planned econometric model.

The Unhealthy Outcome

Eventually all good deeds come home to roost. For the US that will be a malaise of stagflation like was seen during the Carter years. Low investment cycles, stagnant salaries and skyrocketing costs. The difference will be that we might very well see 20-30% inflation rates.

Which finally brings us back to Mr. Ryan and his speech. What value is it to keep ones word when the defacto situation is that it has little value? The pension/Social Security that one is consuming today would under a scenario of 30% inflation rates be worth little or nothing in two or three years. It’s nice if you can get it of course, but won’t go very far in an environment that $10/gal fuel and $8 Carl’s Jr’s burgers.

Not to be cynical but that sort of environment would be a politician’s dream. If they can hold the fort on COLA’s indexed seriously lower than the inflation rate — “Fellow citizens, it is your duty to contribute to the fight against inflation! Be happy with your 5% increase!” In a matter of years the Social Security component of the Federal budget would shrink relative to the overall budget. But it is not much succor to the granny eating $5/can cat food.

In the battle between Ryan’s promise and Bernanke’s actions, Bernanke wins. Has nothing to do with skill. Nothing to do with deviousness or falsehood. It has everything to do with leverage. Bernanke has it, at least till 2014, Ryan does not.

Best Action

For the family struggling out there what would be the best move right now? Buy metals. Silver or Gold. If your company 401k provides this option and it’s the only means to save by all means place some of your worth in that vehicle. If we reach 20% inflation metals will at least track the inflation rate. That may not be the case with a particular basket of stocks.

Better scheme is to physically own metals. There are already rumblings of audits finding rehypothicated metals stores coming up short.

Postscript

In writing this article I came across a curious thing. Are graphs being manipulated for a political purpose? Are the graphs accurate? Yes. But what is being displayed is showing a curious aspect. Let’s take a look at Google —

Why is it in the first case most of the charts being offered tend to end before 2008 rolls around? While if I add the adjective 2012 charts all the way to 2015 show up in the search? Is Google being political in only showing the Bush years (‘I inherited a mess’) vs. the more current charts from the same data suppliers like the St. Louis Fed? I leave it to you the reader to decide.

This is a first in a series of explorations into where we are headed regardless of who assumes the White House.

© BeJohnGalt Blog

43 Responses leave one →
  1. 2012 September 25 1:43 pm
    [1]
    justrand permalink

    the AARP response (boos) to Paul Ryan’s DOSE OF REALITY was appalling!

    Proof, as though we needed it, that some people cannot be disuaded of the notion that R-E-A-L-I-T-Y doesn’t exist where THEIR programs are concerned.

    Ryan’s plan does NOT affect current recipients, and would give FUTURE recipients a chance to BE recipients!!! But they do not care. Obama and the Dems say: “Don’t worry..trust us!”

  2. 2012 September 25 2:01 pm
    [2]
    JustMary permalink

    This is a first in a series of explorations into where we are headed regardless of who assumes the White House.

    I love it!

  3. 2012 September 25 2:04 pm
    [3]
    JustMary permalink

    For the family struggling out there what would be the best move right now? Buy metals. Silver or Gold. If your company 401k provides this option and it’s the only means to save by all means place some of your worth in that vehicle.

    Ours won’t let us. BOOOOOO

    Here is what they will allow us to do though. We can take money out as a loan, with a small interest rate that gets paid back to the account, so we’d make money on the deal. I suppose we could take the loan and invest what we take in metals, but I see that as being the only way we could accomplish this. Frankly, I am tempted to do that anyway, but use part of it towards bartering items.

  4. 2012 September 25 3:21 pm
    [4]
    drdog09 permalink

    3,

    Suggestion: Get really good at spotting solid sterling silverware at garage and estate sales. I mean really good. A `solid silver` compote might have a lead shot weighted base. Its not cheating as such items say `weighted sterling` or have a designated mark for such. But if one can swing deals at 50% off the value of the spot price of silver you can make serious profit.

    There was a reason that successful colonial Americans bought silver items. It was their way of having cake and serving it too. Their form of inflation hedge.

  5. 2012 September 25 4:17 pm
    [5]

    JM~~They powers that be may allow you to buy gold mutual funds that invest in gold.

    http://tocqueville.com/mutual-funds/tocqueville-gold-fund

  6. 2012 September 25 4:25 pm
    [6]
    RepublicanPundit permalink

    I am digging in my back yard (Which happens to be a city park, but they never show up to check it) and trying to find gold or buried treasure. If that don’t work, I will grow potatoes, beans and get a cow and some chickens.

    I have running water within 1000 yards and I can pee and crap in the aforementioned park (which the city never comes around, because there is a lot to do in my part of the park; if they ignore it, they don’t have to do it.)

    I will have hundreds of pounds of flour stored along with lots of cans of fruit and veggies.

  7. 2012 September 25 4:26 pm
    [7]

    The man with a plan is what he am.

  8. 2012 September 25 4:29 pm
    [8]
    JustMary permalink

    I still want a goat, Hubs still says no. hmph! He is warming to the idea of chickens though, so we’ll see.

  9. 2012 September 25 5:09 pm
    [10]
    drdog09 permalink

    Akin officially on the ballot in MO.

  10. 2012 September 25 5:09 pm
    [11]
    brucefdb permalink

    The muslims will steal your goat, torture it, and then eat it. Stick with the chickens.

  11. 2012 September 25 5:12 pm
    [12]
    drdog09 permalink

    The muslims will steal your goat, — bruce

    They might, but I suspect it will be for other pleasures….

  12. 2012 September 25 5:13 pm
    [13]
    RepublicanPundit permalink

    goats will eat all your trees, your grass and your chickens.

    Goats created the middle east deserts.

  13. 2012 September 25 5:15 pm
    [14]

    It amazes me the attention this NFL crap gets in comparison to actual issues of importance. Nation = Cooked

  14. 2012 September 25 5:16 pm
    [15]
    drdog09 permalink

    Polk Country Sheriffs Office —

    An illegal alien, in Polk County , Florida , who got pulled over in a routine traffic stop, ended up “executing” the deputy who stopped him. The deputy was shot eight times, including once behind his right ear at close range. Another deputy was wounded and a police dog killed. A state-wide manhunt ensued.

    The murderer was found hiding in a wooded area. As soon as he took a shot at the SWAT team, officers opened fire on him. They hit the guy 68 times.

    Naturally, the liberal media went nuts and asked why they had to shoot the poor, undocumented immigrant 68 times.

    Sheriff Grady Judd told the Orlando Sentinel: “Because that’s all the ammunition we had.”
    Now, is that just about the all-time greatest answer or what!

    The Coroner also reported that the illegal alien died of natural causes. When asked by a reporter how that could be, since there were 68 bullet wounds in his body, he simply replied: (BEST QUOTE ever) . . ..”When you are shot 68 times, you are naturally gonna die.”

  15. 2012 September 25 5:20 pm
    [16]
    justrand permalink

    How can you tell that Obama’s foreign policy is in flames?? Easy, the media is now saying things like THIS all over the place (headline on Yahoo News):
    How Obama, Romney foreign policies are alike

    Yup, multiple “pundits” now declaring Obama and Romney are just alike on foreign policy.

  16. 2012 September 25 5:23 pm
    [18]
    RepublicanPundit permalink

    Hey, I think we started something here with the RP-BJG poll correction formula:

    http://www.breitbart.com/Big-Government/2012/09/25/media-polls-are-the-latest-negative-campaign-ad

    We can claim credit for being the first, if not the first, to start correcting polls. We are heroes!!!

  17. 2012 September 25 5:34 pm
    [19]
    drdog09 permalink

  18. 2012 September 25 5:42 pm
    [20]
    drdog09 permalink

    A Republican, in a wheelchair, entered a restaurant one afternoon and asked the waitress for a cup of coffee.

    The Republican looked across the restaurant and asked, “Is that Jesus sitting over there?” The waitress nodded “yes,” so the Republican requested that she give Jesus a cup of coffee, on him.

    The next patron to come in was a Libertarian, with a hunched back. He shuffled over to a booth, painfully sat down, and asked the waitress for a cup of hot tea. He also glanced across the restaurant and asked, “Is that Jesus, over there?” The waitress nodded, so the Libertarian asked her to give Jesus a cup of hot tea, “My treat.”

    The third patron to come into the restaurant was a Democrat on crutches. He hobbled over to a booth, sat down and hollered, “Hey there honey! How’s about getting me a cold mug of Miller Light?” He too looked across the restaurant and asked, “Isn’t that God’s boy over there?” The waitress nodded, so the Democrat directed her to give Jesus a cold beer. “On my bill,” he said loudly. As Jesus got up to leave, he passed by the Republican, touched him and said, “For your kindness, you are healed.” The Republican felt the strength come back into his legs, got up, and danced a jig out the door. Jesus passed by the Libertarian, touched him and said, “For your kindness, you are healed.” The Libertarian felt his back straightening up and he raised his hands, praised the Lord, and did a series of back flips out the door. Then, Jesus walked towards the Democrat, just smiling. The Democrat jumped up and yelled, “Don’t touch me … I’m on disability.”

  19. 2012 September 25 5:50 pm
    [21]
    mulletover permalink

    A wife asks her husband,
    “Could you please go shopping for me and buy one carton of milk,
    And if they have eggs, get 6.”

    A short time later the husband comes back with 6 cartons of milk.
    The wife asks him, “Why did you buy 6 cartons of milk?”

    He replied, “They had eggs.”

    ******

    Who says husbands don’t listen?

  20. 2012 September 25 6:28 pm
    [22]
    RepublicanPundit permalink

    I occasionally watch “Morning Joe” to confirm that Liberals are stupid, and Joe is usually just as stupid. However, this morning he had finally had enough the air head, Mica:

    Enjoy:

  21. 2012 September 25 6:33 pm
    [23]
    RepublicanPundit permalink

    😆

  22. 2012 September 25 7:01 pm
    [24]
    RepublicanPundit permalink

    I missed the Hannity portion tonight which showed Stern interviewing Obama Voters.

    Does anyone know where it is?

    IP, surely has it.

  23. 2012 September 25 7:05 pm
    [25]
    RepublicanPundit permalink

    I found it.

  24. 2012 September 25 7:16 pm
    [26]
    mulletover permalink

    Wake Forest University has a guest lecture series called “Voices of Our Time.” Tonight’s guests were Erskine Bowles and Alan Simpson talking about the shelved report from the National Commission on Fiscal Responsibility and Reform.

    It was interesting and enjoyable with a lot of wit and quips, but they never answered why it was shelved. They are on a national tour to try to push it. Forty senators and 150 representatives have signed on, and they intend to continue regardless of the election outcome. Looking to the lame duck session with a petition of a million signatures.

    I got a news flash for them. Obama will never accept any spending controls, with or without revenue increases. That would slow down the destruction of America and would not please his muslim masters.

    An aside…Bowles sounded very conservative, but he will, I am sure, march to the polls in November and dutifully pull the lever for the commie.

  25. 2012 September 25 7:28 pm
    [27]
    drdog09 permalink

    Mullet,

    No one is a conservative in my view if they have the attitude that they are entitled to my income(s).

  26. 2012 September 25 7:29 pm
    [28]
    RepublicanPundit permalink

    That Howard Stern video talking to Obama Supporters is a riot. One way to know if a president in trouble is when the left-wing hollywood types start making fun of you.

  27. 2012 September 25 7:37 pm
    [29]
    mulletover permalink

    drdog #27

    No one is holding a gun to your head. – – – Oh, wait.

  28. 2012 September 25 7:42 pm
    [30]

  29. 2012 September 25 7:48 pm
    [32]
    drdog09 permalink

    When BJG hits the A list, I recommend IP as the video producer.

  30. 2012 September 25 7:52 pm
    [33]

    Don’t bother me now, I’m busy with my hair dryer.

  31. 2012 September 25 8:54 pm
    [34]

    30 IP,

    HAHAHAHAHAHAHAHAHAHAHAHAHAHHAAHAHAHAHAHAHAHAHAHAHAHAHHAAHAHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHA

  32. 2012 September 25 8:55 pm
    [35]

    32 DR,

    IP’s vids are by far the best at BJG.

  33. 2012 September 25 9:02 pm
    [36]

    22 RP,

    Does Mica have a uterus? What about Joe S. ???

  34. 2012 September 25 11:57 pm
    [37]
    PRNmeds permalink

    That stern bit, pure gold!

  35. 2012 September 26 4:03 am
    [38]
    RepublicanPundit permalink

    Here is a Black conservative telling it like it is:

  36. 2012 September 26 4:04 am
    [39]
    RepublicanPundit permalink

    eph, your 36. I would not bet on either.

  37. 2012 September 26 5:45 am
    [40]

    EPH the early years

  38. 2012 September 26 5:55 am
    [41]

    All golfers should live so long as to be this kind of old man!

    Toward the end of the Sunday service, the Minister asked, “How many of you have forgiven your enemies?”

    80% held up their hands.

    The Minister then repeated his question. All responded this time, except one man, Walter Barnes, who attended church only when the weather was bad.

    “Mr. Barnes, it’s obviously not a good morning for golf. It’s good to see you here today. Are you not willing to forgive your enemies?”

    “I don’t have any,” he replied gruffly.

    “Mr. Barnes, that is very unusual. How old are you?”

    “Ninety-eight,” he replied. The congregation stood up and clapped their hands.

    “Oh, Mr. Barnes, would you please come down in front and tell us all how a person can live ninety-eight years and not have an enemy in the world?”

    The old golfer tottered down the aisle, stopped in front of the pulpit, turned around, faced the congregation, and said simply, “I outlived all them assholes”, and he calmly returned to his seat

  39. 2012 September 26 5:59 am
    [42]
    drdog09 permalink

    40,

    Joe Biden, the later years…..

  40. 2012 September 26 6:04 am
    [43]
    justrand permalink

    IP, there’s a moral in the story of #41…but I’ll have to stop laughing before I can see it! 🙂

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