“I think he knows that Europe is out of control, and he’s sure that American politics will screw things up there too. He’s been consistent since last Spring on giving warnings and expressing doubts. He’s one helluva good barometer.”

And so, as Uncle Ben’s mice vote by 8-2 for no more QE, everything is in place for the Black Dude’s second term. The growth figures have been sexed up, the unemployment numbers deliberately misread, and now the Federal Reserve has confirmed that America is out of the woods: the vast majority of Fedders think QE has done its job, so it’s onwards and upwards. Well done Ben, you stuck to the script. Mitt Romney can be safely consigned to the footnotes. Hurrah for the liberal cause.

At least, that’s the received wisdom among the doubting classes. But this isn’t the feedback I was getting overnight.

There’s been no greater critic of Bernanke over the years than The Slog. Every time he drifts into a press conference, a study in sedated catatonia, I dread the Bernanke Drone. It is more understandable than the Greenspan Gobbledygook, but it has all the appeal of somebody intoning the special offers at Walmart.

Further, despite the mass of evidence strongly suggesting that the multinationals and bankers have used the Fed’s money to pay big dividends and underwrite job-cutting mergers respectively, for far too long after 2008 Ben the academic continued to trot out his regular bollocks about things improving slowly, disaster averted, and lots of bazookas in that bag down there beside me just in case it doesn’t work.

But if you analyse what BB’s been saying more recently, both the tone and the tack have changed. And in the view of those I rate on both sides of the Pond, these changes reflect the nature of the man.

More of that further down. In the meantime, I want to drill down into Ben’s beard a little, and give some thought to his sayings over the last year.

In April 2011, the Fed Reserve’s Chairman said that, “A moderate recovery is expected to continue through 2011, with a slight uptick in both 2012 and 2013…and a slight downgrade to the predictions made in January.”

Love him or hate him, that’s been pretty much on the money. But when the growth didn’t look enough to him (and most of us, to be frank) by August 2011, Ben was pretty straight, observing that “Economic growth has been very disappointing, but the FOMC expects growth to pick up in the 2nd half.”

So, lots of ‘slights’ and ‘disappointings’….but at this point, he also starts to hand out warnings for those willing to listen. He expresses “great concerns about the European sovereign debts”, and then adds – close to home (my emphasis as well as his):

“I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if–and I stress if–our country takes the necessary steps to secure that outcome.”

Now this was partly a biggish mud pie slung at Congress folks jerking around on the deficit ceiling; bit it was also more than that. With an election coming the following year, Bernanke told confidants at the time that he was seriously worried about the politicians. Says a Washington source:

“Bernanke had spent some time with Trichet and other Europeans. He didn’t think either Congress or the White House was learning the lesson about being decisive. Also at the time, [Rick] Perry [Republican Presidential candidate] was mouthing off about Bernanke being a traitor and how cut-cut-cut was the only answer. Bernanke saw an impasse coming, and he felt quite genuinely that it was his duty to say, you know, I’m not carrying the can so these guys can kick the can a little further down the road here”.

When this didn’t seem to have much effect, in November last year Bernanke opined, “there are significant downside risks to the economic outlook, including strains in global financial markets…”

Federal Reserve Chairmen talking about “significant downside risks” waves a black flag at older Fed-watchers brought up on Greenspan. A New York media source observes:

“By now, Geithner was pooping all over the place about the Europeans being headless and untutored in the ways of the markets. I think Tim had a big effect on him at that time. Also, Bernanke could see things getting worse in Europe for himself, and he knew Obama was already in re-election mode. The President would be photographed opening some new technology factory employing a couple of hundred workers. By Christmas, every time an energy future went up, the White House would be hailing a recovery.”

The US establishment media went to town during January 2012, making some outright silly extrapolations from extremely flakey jobs and purchasing index data. But Ben wasn’t having any of it. At the February FOMC, he talked of an improvement in employment, but described it as “far from normal”….perhaps his polite way of saying he didn’t buy the US Labor Department’s interpretation either. The Fed Chairman rounded off his piece by saying he believed “healthy job growth requires stronger economic growth, and currently I do not see job growth in line with the current trend in GDP growth.”

Yesterday, the overwhelming majority media view was to interpret the ditching of QE3 as ‘no longer necessary’. I don’t. Bernanke was very careful this time to keep his counsel: “There’s been little or no change, and so still no QE3,” was the Sun headline from where I’m sitting. An American analyst based in Germany this time:

“My take on this is simple….Bernanke thinks QE3 isn’t going to help, so why do it? He’s expecting nature to take its course. I’m sure he didn’t tell the Committee members that, but you know, he gets a bad press for nothing sometimes. I think he knows that Europe is out of control, and he’s sure that American politics will screw things up there too. He’s been consistent since last Spring on giving warnings and expressing doubts. He’s one helluva good barometer.”

I agree. I sense Ben Bernanke is a man who thinks about his place in history. And if he sticks with the current FOMC course, he can argue that he tried to tell people what was coming, but they didn’t listen. Many will disagree with that self-assessment, but it’s hard to if you look at his pronouncements this side of 2010.

And there’s another issue that shouldn’t be discounted: Bernanke is a Republican. But he is no Tea Partier, and no friend of Rick Perry’s out-on-a-limb ideas. The initial Washington source again:

“I don’t think Bernanke is set alight by Romney, but he sees him as safe. Ben Bernanke has no desire to see Barack Obama returned to the White House. There’s a large set here that sees Obama as likely to fold in a crisis, and I think Bernanke quietly belongs to that school. And though only a fiscal and or economic disaster could turf Obama out of the White House, I have the strangest feeling that the Federal Chairman’s private view is that’s exactly what’s gonna happen come what may.”

A senior Wall Street legal contact shares the view that Bernanke has no faith in the ‘recovery’, and points to the housing market – a hobby-horse of mine too:

“What we have here right now is the madness of crowds. The housing data is as bad as ever. Confidence just isn’t going to return until that takes an upturn, and equally it’s not going to climb in value until enough economically active people people really believe a recovery is under way. This is like when you’re on a plane and it’s taking too long to get off the ground….nobody wants to be the hysterical one who jumps up and yells ‘Let me out!’ But a lot of people think they really ought to.”

However, this person doesn’t claim to know the Fed Chairman’s plan – if indeed there is one.

“You know, not that many people running America are mad. They may be deluded into thinking they have more control over events than they do, but they’re not dumb. Nobody employed in a senior Fed position in either part of it really thinks the euro is going to come good without enormous loss of blood along the way. The Federal Reserve Chairman is very wisely avoiding false optimism, and when people wake up to that, it’s not going to do the President any favours. What does Bernanke think of Romney? I doubt if he thinks about him at all. He [Bernanke] remains an enigma to me. He’s a Conservative academic from a narrow background, I’m a europhile liberal lawyer with a passion for history. I suspect we both know there’s no easy way out of this mess, but for different reasons.”

As I’ve observed before, this is going to be a race against time. As always, the big unknown is when the kicked cans start falling over the cliff at the end of the road. But if I was a senior Obama campaign planner this morning, I’d be a worried man. Having for years looked like a lame duck President, Barack Obama’s team senses that, in Mitt Romney, they have nothing to beat. I have been told that, in the light of that, some advisors are telling Obama, “the worse is gets, the more people will cling to the Devil they know”. But that’s not a majority view: as we’ve seen before, President Obama fears an EU meltdown that gets into gear too long before next November. It would only take one intelligent Romney strategist to advise the challenger, “Tell the voters this is all down to deficits, and this is a spend-spend President.” That could, I suspect, turn things around alarmingly for the White House.

Is Romney good enough to get that across? Personally, I doubt it. But the bottom line of this piece is that there is both a woeful and wilful unwillingness at the minute to analyse properly what Bernanke is up to, and what he expects. America just entered Q2 with no QE in sight. I think the near-certain consequence of that, in time, is going to be a big dip in Wall Street stock values. And I suspect the real nature of this very tepid ‘recovery’ will add to that market pessimism without any QE2 to big things up any more.

The gold price has fallen further this morning GMT than it did the whole of last month. I’m eyeing this as a potential buy opportunity. What you do is your concern.

Stay tuned.

Related: More unexploded bombs unearthed in Europe





  2. Never forget that USA for decades has never had a Beneficial Foreign Policy nor a Beneficial Economic Policy…

    When Charity begins at home the Economic policy ought to have taken priority yet it never did.

    Only Easing encouraged by the ‘Central Bank’ (not) has been implemented, a death by debit….


  3. I don’t trade gold because I don’t really understand it. However, I’m quite a keen follower of Robert Prechter and he makes a very good case for the collapse of most asset prices, gold included in a deflationary depression, which he contests is underway and intensifying. He is a proponent of owning some gold but by his analysis it should get quite a bit cheaper still.


  4. If Helicopter Ben is cool about TARPx it can only mean the Fed thinks Wall St is now in the clear over Hellas. Unless that’s what he wants us to think. I for one would love to know how well Ben fits Greenspan’s old slippers at the BIS, but there is a distinct dearth of gossip on the subject.


  5. Looks like Ben is covering his ass if/when the twisters start landing.
    QE3; all options still open. It may be that Ben’s flooding the markets with the idea that it’s not necessary to drive down the gold price, so that when he does do it, it’ll have more effect…acting like a direct injection of stimulus. Late summer/early autumn will be decision time.
    Obama; he still has the Iran issue to play our to his advantage…if he doesn’t run away and hide inside a local mosque.


  6. Pingback: CRASH 2 ‘NO QE3 A WARNING FROM BERNANKE… « zumoit

  7. So does this mean no QE3 at all? Have the “ctrl” and “p” keys on his computer given up from overuse?!

    It would be quite refreshing for the system to step back and realize that they can’t buck the market and let nature take its course. I just can’t believe that banana-bucks Ben would take such an honest decision.


  8. Bernanke is just like Mervyn King; they make sure they slip in some ambiguous comment into their speeches so they can say they were cautioning governments and markets. For the huge, unelected power they wield, they have an obligation to be blunt and show understanding of the crisis and provide butch leadership to get to the solution.
    But they don’t like to get their spats muddy. If BB or MK don’t watch out, they will be by-passed.
    King understands completely the mess we are in, and he wants to wear the captain’s hat and fancy braid -so prove you deserve it Merv. You have to break up the banks, outlaw the derivitives, control commodities speculation, and raise the interest rates. (we need some casualties in the financial markets, the zombies have to be exposed)
    Uncle Ben has shown no sign of wanting to argue things out, he likes to be seen as a pompous pontiff, handing down silk hankies of abstract academic wisdom. I suspect he doesn’t have a clue what caused the Great Depression*, and what resolved it. Just as he doesn’t know how to deal with this one.
    Wishing polite cuts in the US budget deficit is only a tiny part of the putrifying American economic empire.
    * his much-vaunted specialist subject


  9. Michael Burry of Scion Capital fame, predictor and profiteer of the crisis had this to say about his investments going into the future… “I believe that agricultural land, productive agricultural land with water on site, will be very valuable in the future. And I’ve put a good amount of money into that. So I’m investing in alternative investments as well as stocks.” He has also stated that he has also purchased gold but that his future with gold would depend on ” How he sees things playing out” I am sure he is selling those bricks asap, and buying more Brazilian rain forest, or North American water rights as we speak. The only things with real value in a bankrupt world are food and water.

    Many other high profile investors have been quietly extolling the virtues of agricultural real estate with included water supply over the last year… I think it is time we all realized that stocks, bonds, etc. only have value as much value as the politicians that are their cheerleaders… just ask anyone that bought Greek bonds.


  10. Pingback: John Ward – Crash 2 : “NO QE3 A Warning From Bernanke, Not A Green Light” – Sources – 4 April 2012 | Lucas 2012 Infos

  11. Yup, pretty soon we’re going back to the land, whether we want to or not. Personally, I’m rapidly becoming an expert on aquaponics systems. Just built my third large system for a client. Have a modest one myself, too – keeps me in tomatoes, cucumbers and chillies year round.


  12. I think the price of gold will largely be dependant on QE or a lack of it. As far as governments and central banks are concerned, preventing deflation seems to be argument enough for more QE, so my guess is that gold won’t fall (guess being the key word here!).


  13. I am prepared to take some personal responsibility, to the extent of saying that I agree with you.. The problem for them is that the solution lies in an old apothecary’s bottle marked POISON.


  14. Prechter is a flaming —-hole. He has been wrong about gold since it was $250. Like may gurus he was correct about the great bull market in stocks from 1980 to 2000 and has been useless since then. That’s JMHO. To each his own. Mine, for what it’s worth, is that gold is the ultimate insurance policy. It’s not a get rich scheme. I own some and sleep soundly because I do and don’t worry about the price.


  15. Nice write up John. Old Benny had me fooled this time. April was his last chance to do a QE before November. I felt sure the answer would be no until he sent other signals last week. Still Bill Gross got it wrong too and he’s paid a few squillion more than me.


  16. (having spent all night on Waterloo station..) They’ve been staring into the headlights for too long, just looking away for a while in the hope that when they look back the bus will have turned into a moped.


  17. “This is going to be a race against time”

    Instability in the bond markets again and note that the PIIGS are struggling even to sell one to three year debt (ie LTRO matched). This shorter term debt will inrease volatility as it needs to be rolled over more often. ECB spent a trillion Euros and maybe bought 6 months. The ink isn’t even dry…


  18. @OAH:
    The issue I always have with investing in gold (and silver come to that) is that its price is subject to serious manipulation by various vested interests, much more so than stocks. If one could simply assess its value based upon fundmentals and assume that 1+3-7+9-6 = a rising gold price, that would be a fair risk for investors. But it don’t work like that. As we have seen recently, Ben at the Fed knowingly reduces the gold price by implying that QE3 is off and we know that the US do not want gold to replace the USD as the prime currency.

    That said, it does appear to have a good record of preserving wealth over the long term…


  19. Thanks BT – that’s informative – however it does not really address the issue of what may happen to gold in a deflationary depression (such as we have not seen since the 30’s). Their base scenario seems to be one of inflation. My assumption is that we will see a situation very similar to the great depression as credit expansion comes to an end, leading to forced selling of pretty much every asset class. Such selling does seem to be characteristic of financial bubbles which burst and I’m assuming that the bust will be in proportion to the boom, which is unprecedented in size. I can’t see why gold will not have been a beneficiary of the same overindulgence seen in all other asset classes. But at any rate – I think we’re soon enough going to know the outcome!


  20. lol. I guess you’re not in the Prechter camp then. I can’t say I’ve been following his gold musings since it was at $250. His deflation / depression theory is certainly not widely shared and I think that’s possibly a good sign. I quite like his sense of humour too.


  21. Suicides saw a dramatic increase during the last three years of deep economic crisis. According to Greek Ministry of Citizen Protection, the suicides and attempted suicides saw a sharp rise of 22.5% since 2009. A total of 1,727 recorded suicide death and attempted suicide incidents have occurred nationwide since the Greek recession began in 2009.

    They are thinking it is probably higher if you factor in the road fatalities… but it’s difficult to assess this.


  22. Also the people who die earlier than they would have from ‘natural causes’ due to stress and fear, etc. But that is not exactly suicide either. Collateral damage that’s never counted.


  23. Sorry, not related but has anyone received an email message containing this?:

    ‘In the coming days, you should be aware…..Do not open any message
    with an attachment called: Invitation FACEBOOK, regardless of who sent
    it. It is a virus that opens an OlympIc torch that burns the whole hard
    disc C of your computer. …..’ – There is more.


  24. @Chris

    Quite understand, obviously considerably more important..

    We had to let Jampton go, got too big for himself altogether.


  25. Per your closing remark, the law of diminishing returns appears to be evident at all levels of the fiat universe:

    “On the now infamous Ron Paul/ Bernanke silver raid of February 29th, we documented how 225 million ounces of silver were dumped on the market over a span of only 30 minutes, smashing silver $4 from $37.62 to $33.68.

    “In a sign of the diminishing returns of paper market manipulation, on the heels of today’s Fed minutes disappointment, beginning at 2pm EST, over 127,000 contracts, or 637.535 MILLION OUNCES OF PAPER SILVER were dumped on the market in only 1 hour, resulting in a massive silver decline of…. $0.65.

    “You read that correctly.

    “Nearly 80% of ENTIRE ANNUAL WORLD MINING SUPPLY was dumped on the market (during the thinly traded Globex session), over a single hour, and all the cartel could muster was a lousy .65 decline in the paper price of silver!”…


  26. @Padda: Yep, you’ve raised some valid points which mirror my own uncertainties about gold. And if we go further into any sort of depression I haven’t got a clue what’ll happen to the gold price, except that I think most governments will have to start printing big time to inflate their sovereign debts away and reset the counters. Sovereign debts are simply too big to deal with and the markets have called time.

    I’ve come to the general conclusion that the criteria to apply is whether one is simply trying to hedge against inflation in the short/medium term or to protect wealth over the longer term. One must not ignore that gold/silver (unlike cash) are subject to: dealer mark-up and VAT at the time of purchase, produce zero interest whilst held and CGT when sold. All that mitigates against short-term buying/selling unless one is very close to the market, which few ordinary people are. I’m not trying to discredit gold/slilver as an investment but people should consider the various pros/cons before buying.


  27. guilty.
    I got completely demotivated for months, thinking ‘why bother with my little contribution as a worker-bee in society’ there were much bigger issues happening right now that will change the world.
    Then I managed to focus again.
    But now I’m back to thinking ‘I should do something about this’.
    -but moi, pillar of society-
    (…cue knock at the door…) *

    * WordPress is snooping, can you get your people to set up other portals to post comment.


  28. Excellent piece John. I think you are right about BB, his heart is in preventing a great depression two but his head is telling him that he has run out of ideas that will prevent it, so he warns the folks who will listen and waits for the inevitable decline.


  29. John de Melle

    I’d been happening for sometime. I remember at the time Lenihan & Clowen were giving away the country, there was a report on BBC news in which a Dublin fireman was interviewed, he described the then massive increase in people chucking themselves in the Liffey.

    No word of this was reported in the Irish media, RTE TV news etc, but I’m sure if it had been the other way around, an increase in suicides in the UK. the Irish would probably have reported the truth & the BBC would probably have ignored it.


    Dead right. Casualties of an economic war do not have memorials.


  30. Oh Sloggy,

    You really have overthought this. To my suprise I am proving rather good at predicting American politics. Romney was the “credible” republican candidate and he’s a joke. Obama will wipe the floor with this maggot brained little turd.

    The wider state of the right in America is off the scale. The guns and gold brigade make a noise that is exactly inverse to how much notice sane people take of them. Without the ridiculous barriers the republicans threw up America would be in a much better place.

    As for our Ben he can recognise a loser when he sees one and Romney is a loser. Whilst every balanced portfolio should contain gold it will fall much further if the banks get there dose of free money via QE3.

    Sod presidents Ben only listens to Wall Street.


  31. In travels up the coast of British Columbia in our sailboat we learned about a company that planned to sell water via supertankers to California. After a terminal was constructed on the coast to dock the tankers the government of B.C. stepped in to block the exportation of water. I think these water wars are just beginning. Wales I believe has heavy rainfall do they get any money for the export of water to Liverpool or wherever they export it to?

    1998: Sun Belt Water Inc.
    A California company files suit under Chapter 11 of the North American Free Trade Agreement (NAFTA), after British Columbia bans the export of bulk water. Sun Belt sought to export Canadian water to California and is seeking $10.5 billion in damages.


  32. Romney graduated from Harvard University with a dual degree in law and business. He has been the Governor of the state of Mass. and headed up the Olympic games in Salt Lake City as well as being a successful Hedge fund manager. Hardly a loser. If the US economy tanks before November it will be President Romney.


  33. The hardtalk interview with Jurgen was quite interesting. He’s far from positive. It would have been a great deal better if the interviewer could have shut up and listened, rather than proving yet again what a smartass he is.


  34. Lots of claptrap replies on here tonight, you lot can think what you like but Gold and Silver are 100% rigged by high frequency trading platforms and if our friends on Wall street want the price at zero or a million they can do it.
    Simply buy the physical and wait until this whole phoney system is taken down which Im confident will be in the very,very near future.


  35. BT: “One must not ignore that gold/silver (unlike cash) are subject to: dealer mark-up and VAT at the time of purchase”

    That’s not quite true. Investment gold (unlike silver) is exempt from VAT in the whole of the EU.


  36. @The real phil:
    So, the gold and silver markets are 100% rigged according to you, but you recommend people buy these metals anyway. Is that right? Where’s the rationale?


  37. Börjesson:
    Thanks for that. I thought there was summat wrong there. Is it just gold *coins* that are exempt or does the exemption also apply to gold bars?


  38. Padda Rotti,

    You’re following the wrong man. Prechter’s theories are total BS. There is simply no logic, or history, that would show that gold/silver should decline in an inflationary scenario. And if you think that we are NOT in such a scenario given all the printing of paper and digits and worthless derivatives that exceed all the monies every created in the entirety of history, then you are not living in REALITY.

    Better to go to JSMINESET.COM or ARMSTRONG ECONOMICS to get THE TRUTH about what is happening. Sinclair is right LONG TERM about gold, but Armstrong can give you insight into the fluctuations of all our markets and TIME TABLES as to what will happen and when. He has been remarkable accurate.

    The metals markets are HIGHLY MANIPULATED BY THE CENTRAL AND BULLION BANKS used to move the markets each day and to SUPPRESS them to prevent the dollar from appearing as worthless as it truly is.

    All FIAT CURRENCIES will soon be worthless and gold and silver will be the only thing that will retain the value of your present assets as well as stand the possibility of increasing them dramatically, but you would have to know how to trade those values back and forth into fiat currencies to be able to buy and sell and the opportune moments which is beyond most peoples’ capabilities without having MANY YEARS of experience of trading these markets.

    Your best bet is to own cash gold coins IN YOUR POSSESSION and have the means to defend yourself against robbers and government confiscation which will be an almost certain occurrence when the economic system collapses.

    Follow my blog at: and you will begin to understand.


  39. There’s no restriction on the export of Canadian water as long as it is in bottles.

    What folks here worry about is some scheme to flood the Rocky Mountain Trench, build a canal over the Rockies to carry freight from Chicago to the West coast and drain the McKenzie, Columbia and sundry other rivers down to California and 21 other US States plus Mexico.

    Anyhow, it’s more profitable selling H2O by the bottle.

    Interesting assessment of BB. Will Obarmy finish up like Bush the First, waiting for the recovery that never came, done in by a Fed Chairman willfully resisting an election-tipping stimulus?


  40. BTW, in some EU countries, for some types of gold, I believe you can also avoid capital gains tax; e.g. Britannia coins in Britain. But I don’t know the details of this (and I haven’t found any such exemption here in Sweden, unfortunately).

    On the other hand, gold dealers are not required to report to the authorities who buys their gold, so CGT or no CGT is perhaps a matter between you and your conscience…


  41. @cedricward: OK thanks. I thought Phil was saying the gold market was 100% rigged ..implying all variations of it (physical and trackers etc).
    I actually believe that too but your point about limits to rigging maybe are good. I’ll also take a peep at that blog to learn more :-)


  42. Pingback: THE FAKE US RECOVERY: Slog doubts vindicated by new jobs data | A diary of deception and distortion

  43. Pingback: John Ward – The Fake US Recovery : Slog Doubts Vindicated By New Jobs Data – 7 July 2012 | Lucas 2012 Infos

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