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Global economic slowdown 'confuses' policy makers...but it doesn't confuse us!
Understanding why we are experiencing a global economic slowdown seems to be difficult for the Ivory Tower dwellers who are tasked with saving the economy and yet typically possess no real life business experience!
In other words this massive global experiment of printing money, bond buying and expanding government balance sheets in order to spark economic growth appears to have been a very expensive failure.
And if failure is too strong a word for you, how about glancing at the US labor force participation rate and disappearance of the middle class and at least concede that it hasn't really worked all that well.
And while those on the other side of the argument will state that these policies staved off financial ruin, we will undoubtedly be dealing with the the potential for extreme unintended consequences when the money spigot is eventually turned off.
Global economic slowdown confuses the IMF's Christine Lagarde!
What happens to the global economy next after a statement like this one about Ms. Lagarde is made on Sunday:
Gathering signs of a slowdown across many parts of the world are roiling financial markets and confounding policy makers, who after years of battling anemic economic growth have limited tools left to jump-start a recovery...
...The IMF sounded the alarm last week by cutting its forecast for global growth, adding another downgrade to four years of what it called “serial disappointments.”(Source)
Good and critically important question for sure!
But as confused as Christine Lagarde (and our own Janet Yellen) seems to be now is as laser focused we were at TPC back in December 2012 when writing the article...
Ben Bernanke: Snake oil salesman! (Bonus animated video: QE explained)
Watching Ben Bernanke answer questions am I the only one who thinks he sounds as if he is just throwing s--t against the wall hoping that something will stick? (While the lemmings (business news pundits) in his audience just seem to listen and nod)
To date the aforementioned s--t that I speak of is comprised by QE1, QE2, QE3, Operation Twist and whatever name they give to his announcement today.
And so far, nothing has worked typified by an unemployment rate that drops only because people have lost hope and have given up looking for work!
In any event, all of us have known "that" one salesman who tries every gimmick and plays every angle in order to put as much into the pipeline as possible hoping it will all close when in reality very little of it ever will.
Ben Bernanke is that salesman who is expanding the Fed balance sheet to a point at which it will be impossible to reverse and yet, nothing in the economy actually seems to improve when you scratch below the surface of the numbers.
At the same time government borrowing spikes higher with treasury debt outstanding now at a point where the country cannot afford to pay for that debt needing to borrow more money simply to service the interest due bondholders. And these bondholders to a large extent is actually our federal government itself!
Sufficiently confused yet?
Now imagine for a second the impact on federal spending were yields ever to revert to historically "normal" rates. Therein lies the Fed Chairman's true quandary.
He warns us about the dangers of Washington kicking the can down the road when it comes to "solving" the fiscal cliff but, if any agreement is actually put together, the people we are forced to call our leaders will do exactly that because after all when difficult and unpopular decisions need to be made politicians will be politicians.
Bottom line - Ben Bernanke is an academic who will continue to try his Ivory Tower methodologies to get us out of the mess that we are in, and we can only hope that he is better in the future than the unmitigated failure that he has been in the past!
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