Skip to comments.The Time Has Come Mr. Bernanke For More Stimulus!
Posted on 06/02/2012 5:52:11 PM PDT by blam
The Time Has Come Mr. Bernanke For More Stimulus! Stock-Markets / Economic Stimulus
Jun 02, 2012 - 02:26 PM
By: Sy Harding
For several months Fed Chairman Ben Bernanke has been assuring Congress and by extension, investors, that the Fed stands ready with ammunition to re-stimulate the economy if it becomes necessary.
It has become necessary.
In each of the last two summers the Fed waited until the economic recovery had stumbled near the point of sliding into recession, and the stock market correction was close to crossing the 20% line into a bear market, before coming to the rescue (with QE2 in 2010 and Operation Twist last summer). And it lucked out. Both times the economy picked up for another six months before rolling over again. Both times the stock market recovered and resumed the bull market that has been in place since early 2009.
But the global problems of the last two summers were picnics in the park compared to what is going on this year. Sure, both times the eurozone debt crisis had reared its head again, and there were worries about how much it would cost to bail Greece out, and how much it would cost to put a ring fence around the rest of the eurozone.
However, this year we are witnessing a train-wreck of historic proportions taking place in the eurozone, Greece expected to fall off the tracks and tumble clear out of the eurozone, with who knows what results to the European financial system, with Spains train following and now potentially piling into the wreckage, while economically the 17-nation eurozone is already clearly in a worsening recession.
In the last two summers, the worries from Asia were merely that China and India faced rising inflation, and in their efforts to bring it under control might slow their booming economic growth, which could have a marginal effect on economies elsewhere.
This year, Asias problems are much worse. The slowdown in China, the worlds second largest economy continues to worsen. Its manufacturing output has declined for seven straight months, with its HSBC PMI now running under 50, indicating recessionary contraction. India reported this week that its economic growth slid to its lowest level in nine years.
In South America, Brazil, the worlds 7th largest economy, cut its official interest rates to a record low this week in an increasingly desperate effort to re-stimulate its slowing economy.
And then there are stock markets, which tend to lead the economy by six to nine months. They sure dont seem to like what theyre seeing down the road.
While in the U.S. the S&P 500 has declined less than 10% since mid-March, global markets outside of the U.S. have been in serious corrections. The stock markets of the worlds next 11 largest economies have plunged an average of 18.4% and show few signs of bottoming. Several have exceeded the 20% decline that defines entry into a bear market.
Meanwhile, U.S. economic reports have been grim for several months, and the additional dismal reports this week do not encourage the thought that the U.S. recovery can get back on track on its own.
The weeks reports included economic growth (GDP) for the first quarter being revised down to just 1.9%, from the previously reported 2.2%. Consumer Confidence fell in May in its biggest monthly decline in 8 months (versus forecasts that it would rise). The Pending Home Sales Index (contracts for future home sales) fell 5.5% in April, its first decline in 4 months. The closely watched Chicago PMI, which measures business conditions in the Feds Chicago region, fell to 52.7 in May from 56.2 in April. Any number above 50 indicates that businesses are still expanding, but it was the third straight monthly decline, clearly headed in the wrong direction. And the national ISM Mfg Index dropped to 53.5 in May from 54.8 in April.
On Friday, the Labor Department released a bomb of a jobs report. Only 69,000 new jobs were created in May, versus already pessimistic forecasts of 150,000. And perhaps worse, as it provides further evidence that the economy has been weaker even than feared, the previous report for April that 115,000 jobs had been created was revised down to only 77,000.
For the Fed, as the U.S. economic recovery stumbles again this summer, thats a much uglier backdrop than in the slowdowns of the last two summers.
It makes it much less likely the Fed will luck out if it waits until the last minute to come to the rescue this time. In fact theres no assurance that the Fed even has firepower that will work this time. But at least an effort might pick up confidence enough to make some difference.
Observers believe that stimulus needed to reinvigorate Chinas economy is on hold until the Chinese government leadership changes in October. But, analysts expect the European Central Bank to step in with renewed stimulus efforts next week.
The Feds next FOMC meeting is June 20. Expectations have been for it to take no action. But this weeks economic reports and further plunges in global stock markets should change its mind. Its time for the Fed to act.
Screw this Eurobasturd! The whole world expects the US to bail it out. Screw all of them!
I'm reminded of Carly Simon
Shove it where the sun don't shine!!!
Sy Harding is insane
They keep applying band aids at 1 trillion dollars a pop, but they never address the injury
Could we have more gruel, sir?
Honestly, you’d think we were third-world paupers standing with our begging bowls out so our government masters could dole out a bit more “porkulus” to keep us going, at least until after the election.
Which ignoramuses thought it was a good idea to let the government run our economy? Predictably, the same government that gave us the Postal Service and the Food Stamp Program and many other failures has driven the most powerful economy in the world to the edge of the cliff. If they do any more, we will go over it.
You know the NYSE invoked rule 48 Friday?
Despite all the trillion talk breezily bandied about, the deficit is verging upon being unimaginably huge now, but the black hole of the looming collapse is bigger still. All the trillions thrown into this, and yet here we are looking at round three.
What that appears to mean at this point is, they’re stuck with a policy of massive intervention and liquidity injections. To do otherwise would be to allow deflationary collapse, and if the deficit is difficult to imagine now, it would really be incomprehensible then.
The dollar as we know and understand it no longer exists, it seems. It hasn’t, really, since at least 2008. It seems a foregone conclusion that some other means of exchange will have to arise. We can laugh at the Euro due to the fractiousness of the political union purportedly behind it, but the dollar will be no better off, by the time it’s all said and done.
This guy is right! Zeros are cheap and they’re easy to produce - 1000000000000000000000000000.
Things must be worse than we thought, if they can’t even afford commas for their headlines...
The definition of insanity: doing the same thing over and over and expecting a different result.
The real solution is to build a heavy manufacturing base again, employ the evil, young “males” in manufacturing and allow their families to live in peace without interference from local harpies.
It won’t be done, though, because active political regulators want to finish the genocide that they’ve started against all who were once truly productive. They are too vain to know that they are about to destroy themselves.
So if you want more time, inflate again. If you don’t, then whatever. We’ll get on with it. Those local government and pension incomes will cease pretty soon without the recirculating debt.
The “zombie” adventures of grandeur are in the minds of those incapable of minding their own business and doing real work. Most of the people with “tunnels and bunkers” are local government employees and pensioners (word from a small contractor).
There won’t be any large, general insurrection. There will only be squalor, misery and many small scores settled later against those who’ve robbed others in plots of organized corruption. Those of you who really know what’s happening, have fun. Enjoy the slide. Stay out of the way and watch the feeding frenzy. The mob is about to eat its own.
Yep - I had visions of someone living in a run-down trailer, holding a $15K/yr job, having $50K in debt, and going to an "easy money" shop for $25K more so they could live "high off the hog" for a month before facing reality.
I worry that you're correct....just slow-motion misery the rest of my life.
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