Atilla
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I have written my views on the US twin defecits and the US lust for wars many a times on previous threads. I was delighted by Bernanke's comments last week confirming the 'fiscal crises' and his warning on the fear of a crises and how it should have been tackled 10 years ago.
Given what he was saying I was equally shocked by the markets reaction to it. Little or no change. Here are some highlights of what he said and what I suspect it means to the markets.
"Bernanke warns US of ‘fiscal crisis’ fear" When the head speaks of crises financial markets should listen very carefuly.
Ben Bernanke stepped up the pressure on Congress to address the budgetary impact of soaring spending on entitlement programmes on Thursday, warning that they could one day cause a “fiscal crisis” in the US. The Federal Reserve chairman told the Senate budget committee that the recent improvement in US public finances was only the “calm before the storm”.
Unless the politicians pass some tax laws the rates will go up. Rates going up is usually a signal that the equity markets are reaching the peaks of the bull market.
He urged immediate action to head off the looming Medicare and Social Security funding gap, saying the right time to start was “ten years ago”. But Mr Bernanke refused to comment on whether this should be done by curbing spending, raising taxes or some combination of the two, saying that was for elected officials to decide.
This IMO must be done by raising interest rates to strengthen the dollar and raising taxes to curb demand.
His uncharacteristically hard-hitting intervention came as data revealed that US inflation rebounded in December, all but ruling out any chance that the Federal Reserve would cut interest rates soon. The Fed chief said that without new policies, entitlement spending would result in mounting fiscal deficits, and the effect on the “vibrancy, efficiency and growth rate of oureconomy” would soon be “palpable”.
Sooner or later that budget defecit will have to balance or interest rates must rise. Not sure about the hard-hitting. You can't pussy foot round the financial markets. Say it like it is. Take lessons from our BoE.
His tough talk will make it more difficult for the newly elected Congress to shy away from politically explosive entitlement reform, and may help Treasury Secretary Hank Paulson’s efforts to entice some Democrats into joining a bi-partisan push on Social Security.
This is expendiutre cuts and tax rises. Politicians favourite two lies... Promise to spend like there is no tomorrow and tax cuts all the way to the ballot box and let the next guy sort out the mess.
Mr Bernanke, though, identified Medicare as the core of the threat, describing it as a “much bigger problem than Social Security”. He called for a root-and-branch overhaul of the US health sector to cut costs and increase efficiency. In other comments, Mr Bernanke expressed mildly more concern about the external deficit than did his predecessor, Alan Greenspan, saying there was “good reason” to consider that it “needs to start coming down slowly”.
They call "good reason - needs to start coming down slowly" hard hitting. Those poor darling White House politicians on their spend spend promises.
The consumer price index rose 0.5 per cent in the month, driven by a 4.6 per cent jump in energy prices, which had fallen in previous months. The higher-than-expected increase ended a two-month run of softer prices that had raised hopes the Fed would quickly drop its bias towards tightening rates and start preparing the ground for rate cuts in the spring or early summer.
Core CPI – which excludes volatile energy and food costs, and is more closely watched by the Fed – rose 0.2 per cent, after being flat in November.
Well all this money swimming around in the system can only lead to inflationary pressures. Hence the call for $ to continue dropping.
US government bond markets were little moved in reaction, with the yield on the benchmark 10-year bond edging up 0.2 basis points to 4.787 per cent.
Well I don't understand any of this market reaction. What do I know.
We are at the cusp of a new era and the end is nigh. If this above isn't a recipee for a significant downward correction within a month or two the following scenario below may play out.
US troops have skirmishes with Iranian troops. Escallation of deaths. Full on conventional war with Iran.
Iraq Shias so far who have supported the US in Iraq turn agains the US troops united with the Sunnis.
US friendly allies like Kuwait and Saudi Arabia and other MEast countries will see outrage in their popullations and will be unable to support the US and inevitably will lead to instability in the whole MEast.
China and Russia will support the Iranians.
The whole area will become a war zone including spillage into the Western US/Israeli targets.
A real nightmare scenario.
Petrol will go up - $100+
Gold will go up - $700+
$ will fall - £2=$1
Our only chance is that the Democrats can talk some sense into the Bush/Chenney/Rumsfeld administration. (I'd strongly recommend reading Bob Woodwards - State In Denial book)
Failing that, lets hope the US Army kicks their leaders into touch and have a small coup to clean out the mafia gangsters squatting in the white house.
What chance do we have of either happening. Jack diddly dot... I'm dreading March.
Given what he was saying I was equally shocked by the markets reaction to it. Little or no change. Here are some highlights of what he said and what I suspect it means to the markets.
"Bernanke warns US of ‘fiscal crisis’ fear" When the head speaks of crises financial markets should listen very carefuly.
Ben Bernanke stepped up the pressure on Congress to address the budgetary impact of soaring spending on entitlement programmes on Thursday, warning that they could one day cause a “fiscal crisis” in the US. The Federal Reserve chairman told the Senate budget committee that the recent improvement in US public finances was only the “calm before the storm”.
Unless the politicians pass some tax laws the rates will go up. Rates going up is usually a signal that the equity markets are reaching the peaks of the bull market.
He urged immediate action to head off the looming Medicare and Social Security funding gap, saying the right time to start was “ten years ago”. But Mr Bernanke refused to comment on whether this should be done by curbing spending, raising taxes or some combination of the two, saying that was for elected officials to decide.
This IMO must be done by raising interest rates to strengthen the dollar and raising taxes to curb demand.
His uncharacteristically hard-hitting intervention came as data revealed that US inflation rebounded in December, all but ruling out any chance that the Federal Reserve would cut interest rates soon. The Fed chief said that without new policies, entitlement spending would result in mounting fiscal deficits, and the effect on the “vibrancy, efficiency and growth rate of oureconomy” would soon be “palpable”.
Sooner or later that budget defecit will have to balance or interest rates must rise. Not sure about the hard-hitting. You can't pussy foot round the financial markets. Say it like it is. Take lessons from our BoE.
His tough talk will make it more difficult for the newly elected Congress to shy away from politically explosive entitlement reform, and may help Treasury Secretary Hank Paulson’s efforts to entice some Democrats into joining a bi-partisan push on Social Security.
This is expendiutre cuts and tax rises. Politicians favourite two lies... Promise to spend like there is no tomorrow and tax cuts all the way to the ballot box and let the next guy sort out the mess.
Mr Bernanke, though, identified Medicare as the core of the threat, describing it as a “much bigger problem than Social Security”. He called for a root-and-branch overhaul of the US health sector to cut costs and increase efficiency. In other comments, Mr Bernanke expressed mildly more concern about the external deficit than did his predecessor, Alan Greenspan, saying there was “good reason” to consider that it “needs to start coming down slowly”.
They call "good reason - needs to start coming down slowly" hard hitting. Those poor darling White House politicians on their spend spend promises.
The consumer price index rose 0.5 per cent in the month, driven by a 4.6 per cent jump in energy prices, which had fallen in previous months. The higher-than-expected increase ended a two-month run of softer prices that had raised hopes the Fed would quickly drop its bias towards tightening rates and start preparing the ground for rate cuts in the spring or early summer.
Core CPI – which excludes volatile energy and food costs, and is more closely watched by the Fed – rose 0.2 per cent, after being flat in November.
Well all this money swimming around in the system can only lead to inflationary pressures. Hence the call for $ to continue dropping.
US government bond markets were little moved in reaction, with the yield on the benchmark 10-year bond edging up 0.2 basis points to 4.787 per cent.
Well I don't understand any of this market reaction. What do I know.
We are at the cusp of a new era and the end is nigh. If this above isn't a recipee for a significant downward correction within a month or two the following scenario below may play out.
US troops have skirmishes with Iranian troops. Escallation of deaths. Full on conventional war with Iran.
Iraq Shias so far who have supported the US in Iraq turn agains the US troops united with the Sunnis.
US friendly allies like Kuwait and Saudi Arabia and other MEast countries will see outrage in their popullations and will be unable to support the US and inevitably will lead to instability in the whole MEast.
China and Russia will support the Iranians.
The whole area will become a war zone including spillage into the Western US/Israeli targets.
A real nightmare scenario.
Petrol will go up - $100+
Gold will go up - $700+
$ will fall - £2=$1
Our only chance is that the Democrats can talk some sense into the Bush/Chenney/Rumsfeld administration. (I'd strongly recommend reading Bob Woodwards - State In Denial book)
Failing that, lets hope the US Army kicks their leaders into touch and have a small coup to clean out the mafia gangsters squatting in the white house.
What chance do we have of either happening. Jack diddly dot... I'm dreading March.
