joi, 18 noiembrie 2010

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Bernanke Seeks New "International Monetary System", Accuses China of Currency Intervention, Warns of Rising Unemployment and "End of Tepid US Recovery

Posted: 18 Nov 2010 09:42 PM PST

In speeches before a European Central Bank conference in Frankfurt, Ben Bernanke went on an unprecedented attack, accusing China of throwing a monkey wrench into the global recovery, blaming China for slow global growth and a potential "End to the Tepid U.S. Recovery".

He also said "The current international monetary has a structural flaw" calling on the "global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole."

Finally, he put up a misguided defense of Quantitative Easing that is sure to not go over well in the global community.

If Bernanke was trying to spook the markets, provoke China, cause a currency war, and get Congress to launch an extremely foolish set of tariffs, he would have been hard pressed to deliver a more powerful speech.

Please consider Bernanke turns up heat on China currency policy.
Federal Reserve Chairman Ben Bernanke put aside traditional central bank niceties and launched a direct attack on the slow pace of China's steps to strengthen its currency.

In a speech prepared for a conference at the European Central Bank on Friday morning, Bernanke said that China's decision to undervalue the yuan has essentially thrown a monkey wrench into the global economic recovery.

The result could be slow growth ahead "for everyone," he said.

Bernanke's remarks do not lower the temperature of the debate. Instead, he launched a fierce defense of the Fed's bond-purchase plan, also known as "quantitative easing II."

"On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years," Bernanke said.

The Fed could not rule out the possibility that unemployment "might rise further in the near term," he said. This could bring an end to the tepid U.S. recovery, he said.

He pointed his finger at China's slow adjustment of its exchange rate.

"The strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy," Bernanke said.

China's strategy of export-led growth "cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account," he said.

"Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals," Bernanke said.

"Unfortunately, so long as exchange-rate adjustment is incomplete and global growth prospects are markedly uneven, the problem of excessively strong capital inflows to emerging markets may persist," Bernanke said
Rebalancing the Global Recovery

The text of one speech in Frankfort is on the Federal Reserve Website Emerging from the Crisis: Where Do We Stand? It's not worth a read as it contains none of the above fireworks.

His speech Rebalancing the Global Recovery is the one to read. Here are a few snips.
In my view, the use of the term "quantitative easing" to refer to the Federal Reserve's policies is inappropriate. Quantitative easing typically refers to policies that seek to have effects by changing the quantity of bank reserves, a channel which seems relatively weak, at least in the U.S. context. In contrast, securities purchases work by affecting the yields on the acquired securities and, via substitution effects in investors' portfolios, on a wider range of assets.

Global Policy Challenges and Tensions

The two-speed nature of the global recovery implies that different policy stances are appropriate for different groups of countries.

The exchange rate adjustment is incomplete, in part, because the authorities in some emerging market economies have intervened in foreign exchange markets to prevent or slow the appreciation of their currencies.

It is striking that, amid all the concerns about renewed private capital inflows to the emerging market economies, total capital, on net, is still flowing from relatively labor-abundant emerging market economies to capital-abundant advanced economies.

A key driver of this "uphill" flow of capital is official reserve accumulation in the emerging market economies that exceeds private capital inflows to these economies. The total holdings of foreign exchange reserves by selected major emerging market economies, shown in figure 9, have risen sharply since the crisis and now surpass $5 trillion--about six times their level a decade ago. China holds about half of the total reserves of these selected economies, slightly more than $2.6 trillion.

Given these advantages of a system of market-determined exchange rates, why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals? The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development. This strategy, which allows a country's producers to operate at a greater scale and to produce a more diverse set of products than domestic demand alone might sustain, has been viewed as promoting economic growth and, more broadly, as making an important contribution to the development of a number of countries. However, increasingly over time, the strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy.

Improving the International System

The current international monetary system is not working as well as it should. Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals.

Conclusion

As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances. This problem is not new. For example, in the somewhat different context of the gold standard in the period prior to the Great Depression, the United States and France ran large current account surpluses, accompanied by large inflows of gold. However, in defiance of the so-called rules of the game of the international gold standard, neither country allowed the higher gold reserves to feed through to their domestic money supplies and price levels, with the result that the real exchange rate in each country remained persistently undervalued. These policies created deflationary pressures in deficit countries that were losing gold, which helped bring on the Great Depression.3 The gold standard was meant to ensure economic and financial stability, but failures of international coordination undermined these very goals. Although the parallels are certainly far from perfect, and I am certainly not predicting a new Depression, some of the lessons from that grim period are applicable today.4 In particular, for large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account.

Thus, it would be desirable for the global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole. In particular, such a system would provide more effective checks on the tendency for countries to run large and persistent external imbalances, whether surpluses or deficits. Changes to accomplish these goals will take considerable time, effort, and coordination to implement. In the meantime, without such a system in place, the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity. I hope that policymakers in all countries can work together cooperatively to achieve a stronger, more sustainable, and more balanced global economy.
Preaching to the World

Bernanke is a man who could not find his ass with both hands and a roadmap when it comes to spotting the housing bubble, the recession, and levels of unemployment, yet he preaches to the world as if he has all the answers.

He is so hellbent on preventing deflation that he cannot see anything else. It would help if he even understood what it was. It sure would help if he could understand that rising prices without rising wages will crucify the average citizen.

But he is as blind, stubborn, academic wonk with no real world experience or common sense. I would love to debate him any day of the week.

The one thing I agree with Bernanke on is in regards to the term Quantitative Easing. We should simply call "Printing Money" or "Monetizing the National Debt". The former has the advantage in that most of the population would have a chance at understanding the term.

In regards to China, it bears repeating that what China is doing is no more manipulative that what the Fed is doing. In fact, a good case could be made that China's buildup of excess reserves has its origins in the housing bubble the Greenspan and Bernanke Fed blew.

His defense of 2% inflation targeting is beyond idiotic. The last thing 14 million unemployed people need is rising prices.

The other thing I agree with Bernanke on is the need for a "new" monetary system. The thing is, what's needed is not entirely new. We need a gold standard and the end of fractional reserve banking.

In his speech, Bernanke blamed gold for causing the great depression. Nothing could be further than the truth. It was a runup in excessive credit accompanied by micromanagement of interest rates by the Fed that kicked off the Great Depression.

Inciting Congress

Wittingly or unwittingly, Bernanke may have just incited Congress in two ways. The first way is Congress is unlikely to back down on how it sees QE. The second, more serious way is Bernanke may have just incited Congress to label China a "Currency Manipulator" and enact a bunch of horrendously foolish tariffs.

Heaven help us all if that is the result. It will not matter one bit whether or not that was his intention.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Newark Police Protest Union Treatment of Junior Officers

Posted: 18 Nov 2010 05:44 PM PST

I have been waiting for unions members to start bitching about how the union cannibalizes new members in contract negotiations. Today it happened.

Please consider Facing layoffs, newer Newark police officers protest union's favorable treatment of senior officers
Even as Newark's police officers facing layoffs publicly voiced their frustration with their union leadership, a state appellate court issued a ruling that could end their jobs as early as Friday.

Union officials say they are doing all they can to prevent the layoffs, but contend the city has forced them into a corner. And one union official said older officers wouldn't give "a dime" to prevent the layoffs.

Meanwhile, the court set a hearing for today on the city's request to immediately end a 10-day stay on the layoffs granted last week by a lower court, said Derrick Hatcher, president of Newark's Fraternal Order of Police.

If the city prevails at Friday's hearing, Mayor Cory Booker's plan to layoff 167 police officers could go into effect immediately, said Hatcher. A city spokeswoman did not immediately reply to a request for comment.

"An officer who has been on the job 15 years is not going to fight for you," James Stewart, the union vice president, told the group outside. "Veteran guys are not giving up a dime," he said.
The Union Lie

"Union officials say they are doing all they can to prevent the layoffs". All it would take to save those jobs is a small cutback in wages or benefits.

Fire Them All

The problem is doing this in piecemeal. The city should fire 100% of them. That would get the unions attention. That likely sounds impractical, but it's rather easy. Newark should consider one of two things, most likely both.

1. Declaring Bankruptcy
2. Outsourcing all police duties to a Sheriff's Association.

The former is the real solution. Then the officers can see what benefits they can get in bankruptcy court.

By doing the latter, Newark could get more officers for a reduced rate. It is high time cities play hardball with public unions.

Taxpayers have had enough of paying more and more and more for fewer services.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Hooray,ECB Saves Eurozone 2nd Time;Allied Irish Bonds Bid at 45% of Face Value, Anglo Irish SubDebt has 99.99% Default Odds;Irish Citizens "Namatized"

Posted: 18 Nov 2010 11:51 AM PST

Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.

The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.

Got that?

Here is a short video from the Wall Street Journal that explains why the bailout will not work.



Ireland Nears Bailout

Now let's consider details of this foolishness in greater detail, starting with Crude Oil Rises From Four-Week Low as Ireland Nears Bailout
Crude oil increased from a four-week low as Ireland moved closer to a European Union-led financial bailout, strengthening the euro and boosting commodities.

Irish Central Bank Governor Patrick Honohan said in an interview with state broadcaster RTE today he expects the country to ask the EU and the International Monetary Fund for "tens of billions" of euros to rescue its banks.

Desirable Outcome

"If these talks were to result in a substantial contingency capital funding" pool that didn't need to be drawn down, that "would be a very desirable outcome," Finance Minister Brian Lenihan said in the Irish parliament in Dublin today. He said no agreement has yet been reached.
Fairy Tale Nonsense

Check out that fairy tale silliness from Finance Minister Brian Lenihan, then answer this question: What are the odds that a "substantial contingency capital funding" would not be drawn down?

If you answered zero percent you are a winner, which makes the Irish taxpayer a loser.

Allied Irish Bonds Have Face Value Bid of 45 Percent

Bloomberg reports Allied Irish Bonds Fall on Concern IMF 'Bad Guy' to Impose Loss.
Allied Irish Banks Plc's 12.5 percent subordinated bonds due 2019 were quoted at a bid price of about 45 percent of face value, according to Jefferies International in London, down from 100 percent in September. Credit-default swaps insuring 10 million euros ($13.6 million) of the debt cost 5.9 million euros in advance and 500,000 euros annually, according to CMA.

Irish central bank Governor Patrick Honohan said he expects the country to ask for aid from the European Union and the IMF worth "tens of billions" of euros to rescue its battered banks and stop contagion across the region. The government already pledged to impose losses on junior bondholders at Anglo Irish Bank Corp. and Irish Nationwide Building Society.

Anglo Irish was nationalized in January 2009 as loan losses spiraled after a property bubble burst. The government also has taken a 36 percent stake in Bank of Ireland Plc and is preparing to take a majority stake in Allied Irish.

Credit-default swaps on the junior debt of Bank of Ireland Plc cost 2.9 million euros in advance and 500,000 euros a year, signaling a 58.75 percent likelihood of default within five years. Contracts on Anglo Irish's sub debt cost 8 million euros upfront, showing a 99.99 percent probability of default. Swaps on Allied Irish signal a 90.24 percent chance of default.
UK Wants to "Help" Ireland

Please consider Ireland May Be Next Greece as Europe's Economic Superstar Fades
"Ireland is our closest neighbor, and it's in Britain's national interest that the Irish economy is successful and we have a stable banking system," says George Osborne, the U.K. chancellor. "So Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability."

The Irish underestimated the severity of the losses for the past two years. In September, the government said that the bank bailout may cost as much as 50 billion euros. NAMA says it will absorb an estimated 73 billion euros of loans from the banks at a discount of about half of their value.

The figures sound small relative to the U.S. rescue of its banking system, except that Ireland's population hovers at 4.4 million, according to the World Bank; the bailout so far equals 30 percent of the country's 158 billion-euro gross domestic product. EU officials say Ireland's emergency aid package may tally $136 billion, roughly the same amount given to Greece in May.

While the U.S. economy was driven off a cliff by the reckless securitizing of subprime mortgages and Greece collapsed under the burden of misrepresented government spending, the Irish traveled a simpler road to ruin: by taking out enormous, unregulated loans. Ireland's economy has contracted for three consecutive years, and the Irish Central Bank governor has declared his country's fiscal deterioration "worse than almost any other country."

Today, according to former Central Bank of Ireland economist David McWilliams, the average Irish family owes 132,000 euros to banks.

Many Irish people won't be able to pay off their debts in their lifetime, and almost all commercial developers are broke.
New Buzzword "Namatized"

NAMA stands for National Asset Management Agency, Ireland's "bad bank." Bloomberg notes that NAMA was created by the Irish government in 2009 to help stanch a crisis within the Irish banking system that has pushed the country to the edge of insolvency.

NAMA clearly did not work. I am saddened to report Irish citizens have been "Namatized", a fitting tribute to the fools in Irish government that authorized the nonsensical guarantee of Irish bank debts.

How Bankers Ruined Ireland

Please consider Why the Irish Crisis is Going Global for a nice synopsis of how bankers ruined a once thriving Ireland.
On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.

Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.

But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.

That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.
Rat's Ass Perspective on "Help" from UK, EU, and IMF

Finally, I would like to repeat something I said in European Banks have $650 billion Exposure to Ireland; Germany's Economy Minister says "EU Cannot Throw Money from Helicopters"
Rat's Ass Perspective

The other countries in the EU do not give a rat's ass about Ireland. All they really cares about is $650 billion in loans on the books of UK, German, French, Italian, and Spanish banks.

The US is of course the third most interested party and will no doubt apply pressure on the IMF to apply pressure on Ireland to accept some sort of bailout.

Ireland is sitting on a pile of cash. That cash will last much longer if Ireland defaults and that I believe is just what Ireland should do.

The IMF may be prepared to "Help" but I repeatedly ask and answer whether or not it can do any such thing in IMF Ready to "Help" Ireland; Can the IMF "Help" Anyone?

The short answer is for Ireland to tell the EU and IMF to "Stuff It".

Every country for itself. There is simply no reason for Irish citizens to bailout UK, German, French, and US banks.
Postponed is Not Solved

Bailout "help" will do nothing but overburden Ireland while making its problems worse down the road. Resentment will build up and hopefully Irish voters will do the same thing Icelandic voters did: throw the bums out and tear up the agreement.

Meanwhile, Spain is waiting in the on-deck circle. The proverbial s* hits the fan when Spain comes up to bat.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Bear Flattener in Treasuries Continues; Mortgage Rates Climb

Posted: 18 Nov 2010 10:07 AM PST

Curve Watchers Anonymous has a quick update on US Treasuries.



click on chart for sharper image

The yield curve is flattening, in a bearish way. A Bull flattener would be when yields are dropping across the board with yields on the long end dropping more than the short end.

In this case, 5-year and 10-year yields are up about 45-50 basis points from the low just after QE II started, while yields on 30-year treasuries are up only about 30 basis point.

Daily Snapshot


You can see this easily in a daily snapshot from Bloomberg.



click on chart for sharper image

As I have pointed out before, this action is not at all usual. It is an artifact of everyone front-running the Fed's announcement of Quantitative Easing purchases, then selling the news.

Yields are higher across the board than in August when the Fed first hinted at another round of QE.

Mortgage Rates Climb

Curve Watchers Anonymous also points out that mortgage rates are on the rise



Mortgage rates are a quarter point higher than a month ago and back to where they were three months ago, even as housing slips further into the gutter. Please see Bernanke Claims QE II will Create 700,000 to 1 Million Jobs; Where? Mexico, Peru, China for more on mortgage applications and mortgage rates.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Bernanke Claims QE II will Create 700,000 to 1 Million Jobs; Where? Mexico, Peru, China

Posted: 18 Nov 2010 12:40 AM PST

In the truth is stranger than fiction category, Fed chairman Ben Bernanke tells US Senators that Quantitative Easing will create 700,000 to 1 Million Jobs.

Please consider Bernanke Defends Fed Stimulus in Closed-Door Talk With Senators
Federal Reserve Chairman Ben S. Bernanke met with U.S. senators today to defend his expansion of record monetary stimulus, saying it would aid job growth and the central bank would control any inflation.

Alabama Senator Richard Shelby, the senior Republican on the Banking Committee, said Bernanke cited an estimate that the program may help create 700,000 to 1 million jobs. Bernanke met with about 11 committee members amid a Republican backlash against the Nov. 3 decision by U.S. central bankers to buy an additional $600 billion of Treasury debt.

Bernanke reiterated his view that the central bank needs help from Congress in aiding the economy. "He went out of his way to say that he absolutely hopes Congress will take the lead in setting economic policy," [Indiana Senator Evan] Bayh said.
Curiouser and Curiouser

Inquiring minds are asking, if that's all it took, why didn't he do so in 2008 when the unemployment rate started soaring? Why not double it and create 1.4 to 2 million jobs?

That last paragraph in the Bloomberg snip above has me wondering if Bernanke went down the rabbit hole. Allegedly Bernanke wants help from Congress to set Economic Policy?! Really? What about that big battle Bernanke had with Congress over that very same issue?

Failure of QE Round One

Round one of QE was supposed to stimulate housing. Did it?

Lee Adler at the The Wall Street Examiner has a nice report on housing this month that touches on this very issue. Here are a few snips from a 19 page (subscription) PDF.
Housing Report – Wednesday, November 17, 2010

Purchase mortgage applications dropped to near record lows last week as government programs to suppress mortgage rates first failed to stimulate demand, and now seem to be failing to suppress rates. Zillow sales volume data now confirms that this September was by far the worst September since the housing collapse began. Since then, purchase mortgage applications have remained near record lows.

That means that housing sales data to be reported over the next two months will continue to be terrible. Data from Housingtracker.net as of mid November shows that price declines are actually accelerating. Meanwhile shadow inventory will continue to feed into the supply with the inventory to sales ratio already near record levels. Supply demand imbalances will grow increasingly unfavorable.

Mortgage Applications

Mortgage purchase applications fell in the week ended November 12 leaving them barely above the absolute lows, recently unresponsive to the record plunge in mortgage rates. Now an uptick in mortgage rates threatens to shut down what's left of a barely functioning market. The Fed's strategy to drive down long term rates to stimulate the housing market has failed miserably and now it looks as though an even larger program of QE2 may turn out to be an even bigger bust.




click on chart for sharper image

Applications are now down 12% versus this date last year which itself was in the vacuum that followed the ending of the first homebuyer's tax credit. They are down 38.5% since the end of the second homebuyers' tax credit, and down 28.8% since April 2009 when mortgage rates made their last previous low. Applications are down 66% since the May 2005 peak. Rates are currently approximately 16 basis points lower than they were in April 2009 and yet sales are far weaker.

Even worse, the market has now been dead in the water at these levels for 5 months, including what are usually the strongest months of the year. Where do we go from here? Falling rates have not stimulated sales. Nor have falling prices enticed buyers into the market. The level of applications remains at the lowest levels of the past 13 years.
Anyone who refinanced at cheap rates has more money to spend each month, but that is the only conceivable point of success for QE I. The cost side of the equation is increased taxpayer exposure to Fannie, Freddie, and the FHA.

QE II like Using Shotgun to Kill Mosquitoes

The first and foremost problem in arbitrarily cranking up the printing presses is the Fed has no control of where the the money goes, or indeed if it goes anywhere at all.

QE I at least had a definitive target, mortgages (not that it helped much, as noted above). QE II is more like trying to kill mosquitoes with a shotgun. Not many (if indeed any) pellets will hit the intended target.

Cheap Money Creates Jobs in Mexico, Peru, China

Bloomberg reports Bernanke's 'Cheap Money' Spurs Corporate Investment Outside U.S.
Southern Copper Corp., a Phoenix- based mining company that boasts some of the industry's largest copper reserves, plans to invest $800 million this year in projects such as a new smelter and a more efficient natural-gas furnace.

Such spending sounds like just what the Federal Reserve had in mind in 2008 when it cut interest rates to near zero and started buying $1.7 trillion in securities to spur job growth. Yet Southern Copper, which raised $1.5 billion in an April debt offering, will use that money at its mines in Mexico and Peru, not the U.S., said Juan Rebolledo, spokesman for parent Grupo Mexico SAB de CV of Mexico City.

"You're seeing leakage from quantitative easing," said Stephen Wood, chief market strategist for Russell Investments in New York, which has $140 billion under management. "That leakage is going into emerging markets, commodity-based economies, commodities themselves and non-U.S. opportunities."

"I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an Oct. 19 speech.

Wal-Mart Stores Inc., the world's largest retailer, raised $5 billion last month and said it would use the money to pay off existing short-term debt and for general corporate purposes. A spokesman for the Bentonville, Arkansas-based company didn't respond to an e-mailed question about planned investment locations.

Tim Hoyle, vice president for research at Haverford Investments in Radnor, Pa., which manages $6 billion, said Wal- Mart is among several corporations he follows that are refinancing existing debt and reinvesting the proceeds.

"In Wal-Mart's case, all of the reinvestment is happening in overseas markets," he said.

That phenomenon illustrates the challenge confronting Bernanke. "All the Fed can do is create liquidity," Hoyle said. "What Fisher is saying is correct: The Fed has no control over how that liquidity is used."
There are many more examples in the article. Yet somehow we are supposed to believe this shotgun blast will create 700,000 to 1 Million Jobs.

Bernanke is out of his mind if he believes that. So is Bernanke out of his mind or is he purposely lying to Congress to shut them up?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


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