Thursday, September 24, 2009

Words vs. Deeds

Watch what I'm doing, not what I'm saying.. This common sense advice is very timely right now, since there is a world of difference between what the Federal Reserve is saying and what it is actually doing.

Mr. Bernanke said yesterday that the economy is recovering and that the financial system has bounced back. But, at the same time, the Fed made clear it will keep interest rates near zero for a long time and will purchase the entire $1.25 trillion of agency mortgage-backed bonds, just as it had originally planned.

Zero rates and massive quantitative easing, but "the economy is bouncing back"? The discrepancy between words and deeds is obvious to the naked eye. What gives?

Well, the truth of the matter is that with real GDP shrinking at -4.9% from a year ago and unemployment at 9.7% (the broader U-6 is at 17%) the real economy is not recovering.

Fed Funds and Real GDP

Oh sure enough, the rate of decline has moderated and we will likely see a bounce in GDP figures due to inventory adjustments and some improvement in gross domestic investment after the savage cuts during the last two years (down 33%). But when it comes to consumer spending, which accounts for a massive 70% of the economy, things are not likely to be improving much any time soon (remember unemployment..).

And that's why Mr. Bernanke's deeds are so much different from his words, or should I say his attempts at cheerleading..


  1. How much of the "70%" is elastic? I'm not going to buy any more towels from Hermes but I still need towels.

    Have you ever looked at the work of Steve Keen, which should appeal to you as an engineer.


  2. Amen, Hell. The Fed's deeds belie their words. But then again, the head of the Fed is a great liar, though apparently, at least ostensibly, a dignified one.

    In the meantime, here is the work of another great liar (The BLS) deconstructed.

  3. Dear Edwardo,

    I just posted a comment at SA about the BLS data. I am afraid the writer is rather weak on mathematics and has not done much homework, at least on one part of his analysis. But thanks for the reference, I shall keep working on the idea.


  4. Thanks for that great link, Edwardo.
    I'm gonna pull a fast one, as you know I am a skimmer here...
    For quite some time now on this blog I have been saying that our financial crisis is actually a (smaller) part of a bigger crisis : our NUMBERS crisis, or should I say, the deterioration in our relationship with what we put behind those numbers that we have created various agencies to churn out on a minutely, hourly, daily, weekly, etc etc time frame.
    And remember the HISTORY of statistics, Edwardo : invented to be a GOVERNMENT tool to measure and control the citizenry, particularly the POOR citizenry, as we know.
    Are you REALLY all that surprised that this tool is being used to... CONTROL the citizenry, Edwardo ???
    Not me, at any rate...

  5. This rally since March has been a Fed-induced/injected liquidity rally with media hype.

    All one need do is look at what the USD has done since March.

    We are headed into a 4th quarter collapse with the obligatory attack on Iran as cover.

  6. I'm not surprised, Debra-see quote below- I just think it worthwhile to call bullshit when one thinks one sees/smells it. Having said that, by Hell's runes, the premise of the article has been dashed. This is not to say that Hell is a green shoots advocate.

    "There are lies, damned lies, and statistics."

    -Benjamin Disraeli

  7. thanks, Edwardo, I'm going to file that one away for future use. It is excellent.
    In exchange I'm going to give you my mother's (and who else's ???) elegant little acronym :
    BS PHD : which stands for : bull shit piled higher and deeper.

  8. Media spin is to government as space based weapons are to the military. It's the coveted high ground.

    Is it any wonder that an administration -- long on media appeal/short on action -- is making a concerted effort to control the reports of the situation? Only, it's rather easy when federal agencies and the largest media outlets have a vested interest in promulgating your distortions.

    This fall is going to be VERY interesting. The massive amounts of money the Fed has marshaled to throw at the recession is near depletion. Economic reality, which as persisted this past summer like a bad cold is now reasserting itself.

    The real wild card appears to be that the world is on the edge of casting the USD aside as a reserve currency. Alot of that decision is simple human emotion, thus the redoubled efforts by US powers to project a positive spin. I don't think it's going to work.

    Do realize that once the dam starts cracking, ... the SHTF as far as the US situation.

    Need more specifics, OK:

    1) USD dives (making imports more expensive)
    2) Countries STOP buying US debt (that leaves the Fed to monetize -- i.e. Print like crazy)
    Do realize there's not a snowballs chance in hell that congress will stop over spending. Thus, Inflation begins BIGTIME.
    3) OPEC no longer prices Oil in USD (oh oh ... that's the coup de grace). Once we have to pay for our Oil fix in Gold,dinars, Euros, etc....well, it's game over. Gasoline quadruples, the ripple effect thru the economy occurs, and our situation gets grim.

    Why (as a US citizen) would I post this? Because my country has been hijacked by a tiny (but hugely)wealthy minority.
    This group will stop at nothing to protect their ill gotten wealth and power. Congress and the Prez no longer are concerned about me, they are concerned with getting reelected and their own welfare. The Fed, the SEC, FDIC, ... the list of Gov agencies goes on and on...they don't help me. They don't benefit me. They are the problem, the enemy.
    Not Iraq, not Iran, not Global Warming, not anything else.

    The largest threat to MY welfare is home grown.

    That's the reality of present day America as I see it.

    And you and I do not have a chance unless we can arouse the stupified masses of US sheeple that routinely reelect the same corrupt congress ... simply because that's what is put in front of them ... plus these folks make so many appealing promises.