Paul B. Farrell
Nov. 2, 2010, 12:01 a.m. EDT
Sell bonds now, Fed’s QE2 is doomed to fail
Commentary: Buffett, Gross, Grantham, Faber, Stiglitz agree: Bernanke plan a disaster
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By
Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.
The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”
How the Fed could disappoint markets
A quantitative-easing program that's too small, say under $300 billion, or not open-ended is unlikely to inspire investors, according to Pimco's Tony Crescenzi, who says the Fed also has to avoid stoking inflation expectations. Laura Mandaro reports.
Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.
“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.
And Warren Buffett agrees, warning that anyone buying bonds now is “making a mistake.” Don’t buy. Sell.
Here’s how Bloomberg News reported Faber’s warning: “Global markets are heading for an ‘important turning point’ with interest rates beginning to rise within about three months and the U.S. dollar gaining strength … Instead of interest rates going down, they could start to go up. Instead of the dollar being weak, it could strengthen.”
Is Faber reliable? You bet: One week before Black Monday 1987 Faber warned investors to dump stocks. Then in early 2006 he warned of a “correction coming.” Again in mid-2007 Faber said U.S. stocks were “entering a bear market.” After that, Wall Street lost over half of America’s retirement money in its subprime disaster … and Wall Street’s about to do it again. So when Faber says sell bonds, buy stocks, please listen.
After Bernanke’s bond bubble pops, a Japan-style 20-year recession?
Lately Bernanke’s acting like an egomaniacal politician, a savior trying to manipulate the economy in the wake of the failures of Congress, Obama and the GOP Tea Party of No-No to get results. That’s not the Fed’s job, and still Bernanke’s pulling out all the stops, repurchasing government bonds, printing too much money, flooding the currency markets.
Fed zombies hungry for quantitative easing.
The New York Times warns that the Fed is making bad decisions like the ones that led to Japan’s 20-year recession. No wonder savvy investors are getting nervous, worried Bernanke’s pushing us the wrong way, making matters worse, throwing jet fuel on fears of another credit bubble/bust cycle worse than the 2008 meltdown.
All so predictable: This has been building since said he wanted to buy back more bonds. The Wall Street Journal’s Jason Zweig warned earlier this month of a “Bond Bubble,” noting that while many are blaming “small investors for taking big bets,” the truths is, “it isn’t Joe Schmoe, it’s Uncle Sam.”
Nobel economist Stiglitz predicts it will fail: “Easy money won’t work … the Fed risks fueling a destructive bubble.”
It’s an old game: Since the 2008 meltdown the Fed has been Wall Street’s secret conspirator, stealing from Main Street (by keeping money market interest rates low) and giving that cheap money to a failing Wall Street (so their quant-speculators can keep gambling on derivatives, to justify paying themselves mega-bonuses).
Warning, this is all part of the Fed’s ongoing Ponzi scheme to bail Wall Street out of the destructive subprime decisions that sank the economy in 2008. Bernanke’s latest Ponzi scheme will soon backfire, this time bringing down the economy again, further reducing the retirement savings of America’s 95 million investors.
Obama’s ‘Bush III’ decisions created Tea Party house-cleaning
Before inauguration, president-elect Obama approved former Treasury Secretary Henry Paulson’s toxic bailout plan. Soon after Obama appointed Tim Geithner and Larry Summers, two old-style Wall Street insiders, to his team.
Those staffing decisions were early warnings that “change” was little more than campaign rhetoric. Instead of “change” Obama morphed into “Bush III” and the past two years may be worse than if McCain won and appointed Phil Gramm at Treasury.
But things did get worse: When Obama reappointed Bernanke, “Black Swan” author Nassim Nicholas Taleb was “stunned” by Obama’s failure to “change” the direction of America’s misguided monetary policies. I called Bernanke’s reappointment “Obama’s biggest domestic policy blunder … Obama’s black swan.”
Unfortunately Bernanke is just one of Obama’s many capitulations to the failed Reaganomics of the past generation.
So here we are on Election Day stuck with the failures of the Bush-Paulson team, aggravated by the failing of their replacements, Obama, Summers, Geithner and Bernanke. Two failed teams that set the stage for the GOP’s lethal return and the creation of the Tea Party, a new team high on hollow rhetoric with no interest in compromising.
Warning, “gridlock” is the sole policy-making rule in Washington for the next two years.
And beyond: Because odds are Obama will be replaced by an ultra-conservative president whose brain will be driven by the discredited ideologies of Milton Friedman, Ayn Rand and Reaganomics … a political scenario guaranteed to trigger another, bigger economic meltdown that will push America into a long Japan-style recession.
Pimco boss: Bernanke’s plan a self-destructive Ponzi scheme
Today we have two of America’s most respected investment managers angry and worried about Bernanke’s irrational behavior: One of them is Bill Gross, founder and director at bond powerhouse Pimco, managers of $1.2 trillion of assets. His warnings about Bernanke’s dangerous meddling were shared by Jeremy Grantham GMO chief investment strategist, managers of $95 billion in retirement assets.
The Fed’s plan to “buy government bonds, intending to lower interest rates and stimulate demand won’t work, Gross and Grantham say in letters to investors: They actually make things worse.”
Gross says Bernanke’s plan is a “brazen Ponzi scheme.” Instead of a rational plan to pay for “maturing debt with receipts from financial sector creditors, the Fed” is acting as a speculator, a high-risk gambler.“The government will be its own investor, feeding its own Ponzi machine.” Bernanke’s extreme “meddling” is a disaster waiting to happen.
QE2 a Ponzi scheme, says Pimco's Gross.
Grantham’s hostility toward Bernanke is oozing from in his Halloween letter to investors. In “Night of the Living Fed,” he warns that Bernanke’s plan is just a short-lived “adrenaline injection” that will backfire: “If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation … force it to swear off manipulating asset prices through artificially low rates and asymmetric promises of help in tough times. ... It would be a better, simpler, and less dangerous world.” Send in the vampires!
Don’t blame Bernanke … you are to blame … you voted for them
Gross’s outrage also oozed like the bloody bite of a vampire: “I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time … It is not a Bernanke scheme … It is a Sammy scheme. You and I and the politicians that we elect every two years ... deserve all the blame.”
Yes, you and I are to blame, not “them” … we voted for Reagan, Clinton, Bush, then Obama … we let them pick the Paulsons, Cheneys, Geithners and Summers, addicts who believe in living high on borrowed money … we created China to replace us as the world’s next superpower … we created the Tea Party ... we are to blame for appointing a Supreme Court that’s unleashed billions destroying democracy, from within … we are to blame for an insatiable Wall Street that stole trillions from the Treasury in 2008 and keeps stealing in Wall Street’s derivatives casino ... and in these midterm elections, we’ll vote to make things even worse … then we’ll do it again in 2012.
Yes, we will … you and me … we will keep doing it … setting up the mother-of-all-meltdowns. And like all addicts, we just don’t get it, can’t stop our self-destructive behavior
Gross is right, don’t blame “them.” We’re to blame for what’s happening … we are responsible … you and me, we’re doing this to ourselves … we are killing the golden goose.
. grazie drive 
e volevo SOLO aggiungere l'ultimo report di GS, (fresco fresco di ieri)...
