Thread: Bernanke Makes a Pact with the Devil

Bernanke Makes a Pact with the Devil

Stock-Markets / Quantitative Easing
Oct 31, 2010 - 01:28 PM

By: Uncommon_Wisdom

Monty Agarwal writes: When Fed President Hoenig declared last week that Bernanke is making “a pact with the devil,â€

Bernanke gets his "pink slip"

Economics / US Economy
Oct 31, 2010 - 12:31 PM

By: Mike_Whitney

Question: What is the difference between a full-blown Depression and an excruciatingly "slow recovery"?

Answer--Inventories and a bit of fiscal stimulus.

On Friday, The Bureau of Economic Analysis (BEA) reported that 3rd Quarter GDP rose by 2% meeting most analysts expectations. The real story, however, is hidden in the data. Inventories added 1.44 percentage points to the 3Q real GDP, which means that--absent the boost to existing stockpiles-- GDP would be well-below 1%. If it wasn't for Obama's fiscal stimulus (ARRA), the economy would be sliding back into recession.

Improvements in consumer spending were too meager to indicate a "rebound", and residential investment dropped off sharply following the expiration of the firsttime homebuyer credit. The economy is in a coma and desperately needs more government support. But if Tuesday's midterm elections turn out according to predictions--and the GOP retakes the House of Representatives--there won't be any more stimulus. Instead, the economy will sputter along at a snail's pace until festering bank woes (this time, the foreclosure crisis) trigger another contraction.

There's no doubt now, that the Fed's efforts to engineer a sustained recovery have failed. The fact that Fed chairman Ben Bernanke is planning to resume his dubious Quantitative Easing (QE) program is an admission of failure. That said, I expect the Fed to “go largeâ€