“The Fed doesn’t have a clue, neither does the President, neither does Congress.”

21 Replies to ““The Fed doesn’t have a clue, neither does the President, neither does Congress.””

1. Santelli has it right. “The Fed doesn’t have a clue, neither does the President, neither does Congress.”, and I might add neither does 95% of the population, as it is too concerned about what will be up on the latest survivor show. The foreign policy has become a joke, and the ME has become even more of a tinderbox and all the POYUS does is talk about himself.
   The country is going down the tubes, both economically and morally, and few are trying to arrest the slide. The barbarians will not even have to batter down the gates…just call payment due.

2. Indeed the epic Great Santelli, lays a splashdown of hot bathwater…that was beautiful!
   As G. K. Chesterton was known to remark, “I love hot water, it keeps you clean…”
   Cheers
   Hans Rupprecht, Commander in Chief
   1st Saint Nicolaas Army
   Army Group “True North”

3. It should have been POTUS, but some enterprising soul might b3e able to put another useful word in place of the “Y”.

4. POYUS: President Of Yippee-ki-yay United States
   Yippe-ki-yay, fiscal cliff-mas…!
   100 trillion in unfunded liabilities, what could possibly go wrong?
   Cheers
   Hans Rupprecht, Commander in Chief
   1st Saint Nicolaas Army
   Army Group “True North”

5. Some of the commenters at ZeroHedge have grown tired of Santelli’s rants. What’s changed since his “TEA – Taxed Enough Already” and “Stop spending, Stop spending, Stop spending, Stop spending, Stop spending, Stop spending, Stop spending – rants?
   nothing.

6. Better turn your holdings into cash now. No reason to be sentimental when there’s no reason to have confidence. Makes sense (and preserves dollars) to put it in a mattress for a while. I’ve been there before, and it seemingly takes forever to recover losses. When emotions get in the way, logic takes flight, and we have no control over what the masses do. Best to keep a step ahead of it this time…

7. I don think Obama will make him Treasury secretary by saying that sort of thing! 🙂

8. The Fed,DemoncRat.The TOTUS,whatever,not even sure American.Congress,DemoncRat.When it’s all emotion,and no brains,well.

9. On a sad note, General Norman Swartzkopf died today. A true hero, who dedicated his livufe to his country. He will be missed. vu7gyy

10. Actually, Tripper523, one should expect “cash” to be worthless when TSHTF. Maybe some small amount of gold and silver, preferably as minted coins so whoever you may be able to trade them to has reasonable confidence in their purity. But far better to have:
    1. Guns
    2. Ammo for same
    3. Food
    4. Water, if you live in an area where a pitcher pump isn’t sufficient to draw drinkable water. Or a pitcher pump if you DO live in such an area
    5. Toilet paper. Most folks won’t want to use the Religion of Peace solution, so that will be a valuable trading commondity.
    6. Tribe. Although one needs to be ESPECIALLY careful there. The favorite tactic of “Law Enforcement” is “infiltrate to incite and indict“, exemplified by MANY of their operations. Michigan Hutaree, Four Grandpas in a Waffle House, and Oklahoma City come to mind. Or did you not understand that Eric Holder helped McVeigh obtain the ammonium nitrate through his operatives in Elohim City?

11. @Tripper
    While I may not be as prepared as Mr Matis, I agree that cash in the mattress may not be the best means to ride out the massive quantitative easing the Democrats seem bent on using to “solve” their fiscal problems: all their plans will do is erase the debt they’re running up by printing more money, destroying the value of the currency while erasing all that terrible wealth they seem bent on redistributing.
    It would seem they are planning to re-run the socialist experiment from Russia circa 1917, without even bothering to change the flags to red.

12. I don’t understand what there is in the “Fiscal Cliff” for Obama to dislike. US taxes go up, DoD goes down, and the hated capitalists are otherwise damaged. Remember that his malignant narcissism also contains a substantial component of sadism. He thinks, probably correctly, that he dominates the Americans, and he intends to whip them now, for his enjoyment: an evil slavemaster.

13. I don’t think Obama has thought this through. The goal seems to have been to correct some perceived wrong to the extent that the only conceived end was to destroy the USA.
    But has he ever during his obsession considered any other outcome? Has he ever considered that there would be outcomes destructive to his fellow travelers?
    Likely not, and it appears that he has no plan after that…and that’s when it gets scary.
    Btw, if you want to know what to stock up on that could carry some currency, load up on iodized salt. One hundred and one uses, from disinfectant to preserving food.
    Also used by the romans as currency.

14. John, there’s lots of reasons why the Democrats don’t want this to happen. The government has lots of fixed costs, particularly in things like labour. Initially there will be little or no effect. But later on…
    Think of California. It’s in the same condition. It has spending it can’t control and tax revenues grossly inadequate to cover it. So when the government runs out of money, suddenly civil servants are out of work. In this case, departments will be told, your budget is 10% less this year. Programs will start getting killed left, right and centre. For the first couple of months, the effects will seem limited, but by summer the wave of cuts in programs will hit. Many programs are statutory in nature, meaning the government is required by law to deliver them. So there’s going to be a tendency to want to make disproportionate cuts in non-statutory items. Things like defence acquisition. Things like green energy subsidies. Things like EPA carbon restriction programs.
    The Democrats hate this. Various forms of state welfare cheques will stop coming. The government will find itself eventually in thousands of breach-of-contract suits. When this happens, it will blow a very large hole in the notion of government’s ability to deliver services. Remember, Democrat voters are much more dependent on government services than Republicans.
    Government is a sufficiently large entity that it will kill US GDP growth and plunge it into a recession. It demolishes the notion that Obama has presided over a recovery from the disasters of the Bush regime. Unemployment is going to soar. The knock-on effects include severe losses in manufacturing, Democrat union support. This will be unevenly distributed, with Democrat voting states getting hit the worst. Just when housing prices were starting to recover, it’s going to kill the housing market. Again. And that means further large losses to the average wealth of Americans.
    And remember, the US still has to come up with its interest payments to foreign held US treasury debt, now about 40% of the total, about 15% held by China, and growing. They are not bound by American fiscal failures, and if the US fails its interest payments on its debt it goes into default. The fiscal cliff then makes debt service a larger part of the total US budget, giving foreign debt holders even more leverage over the US economy. Even Greece hasn’t plunged over that waterfall yet. We’re now in Argentina territory.
    Oh yes, and business investment will grind to a complete halt. What investment there is will go completely overseas. The losses on the stock market and futures market will be large and long lasting. Which further greatly diminishes the amount of private capital available to pick up the slack from the decline in government spending.
    In all of this, unemployment rises, with youth employment being particularly hard hit, again more Obama voters. And a rise in unemployment means further social violence and disruption.

15. Most of America’s problems, as well as its recent and historic depressions and inflationary spirals, are centered in the Fed. When America takes back the constitutional right to create and circulate debt free hard currency, the lives of citizens will improve greatly. As a private central bank the Fed has failed miserably at managing the economy and its conflicted interests have been at fault.

16. cgh, your comment is insightful as well as detailed. Under any other President, of either party, these considerations would prevail. However, I doubt that they matter to Obama, nor does the welfare of the Democratic Party. During the last US election, he used their services but, really, gave nothing back. And the Democrats have never been able to stand up to him, those who even understood what he is about.
    US finances are not key to understanding Obama. The lives of Robert Mugabe, Joseph Stalin, Ivan Grozny do put one in the correct perceptual universe.

17. Anyone who thinks the day to day machinations of stock markets are reliable indicators should give their head a shake. The major stupidity of investors is thinking short term volatility is akin to actual market value. I love Santelli’s quip that day to day fixation on the Dow is “immediate gratification.”
    Sounds like the Obama administration. As they enter the economic danger zone of rising interest rates (not if, when) and aging boomers what do they do? The borrow even more when at this point, with these low interest rates, they cannot even meet their entitlement and interest obligations with present revenues. Then they assign to the US federal treasury roughly $60 trillion in unfunded liabilities with Obamacare, precisely at a time boomers will require more and more medical services, not to mention Social Security.
    It’s easier to wax philosophically about “investing” in training or blaming others for their failure.
    Why, because Santell is right – none of them has a clue. They’re like that floor trader who flop around day to day actually thinking they’re doing any good when they’re actually leaving economic wreakage in their wake. VDH provides more illumination of the Obama economic disaster:
    http://www.nationalreview.com/articles/336447/anecdotal-presidency-victor-davis-hanson

18. John, quite right; I was describing what a few of the consequences are likely to be and why anyone either left or right would care about it. Since we’ve all pretty much agreed that Obama is a narcissist, it’s all about him. He cares only to the extent that he will be blamed for it. Which is why he and his myrmidons are busily trying to pin everything on the Republicans.
    Jimmy Carter may have been a bad President, but he was never irresponsible. He was always doing what he thought was best for the nation, however wrongheaded it turned out. Obama IS the worst President the US has ever had. None have been as irresponsible as he. Every President has had to build coalitions from both parties to govern the nation. From Day 1, Obama’s tactic has been to marginalize the right as much as possible. To a very real extent, the Tea Party is his creation.
    Shamrock, the stock market indexes may indeed be about day-to-day gratification but the medium and long term trends tell you everything you need to know. For example, what the stock market shows is that the NYSE has hemorraged about $150 billion over the psat year. That’s a trend, and it’s meaningful. Since there’s been nothing to change that trend, it’s going to continue. This is where Santelli is wrong.
    “The borrow even more when at this point, with these low interest rates,”
    That’s the whole point of low interest rates. That’s what you’re supposed to do. It’s the market signal that credit is cheap and therefore you build debt using lenders’ money rather than your own capital. In short, the US Fed has been conflicting the market signals by maintaining low interest rates when there’s too much bad debt in the system. But no one wants to raise interest rates because that brings on another recession. Japan has been following exactly this policy for the past 20 years. And their economy remains anemic with only a mountain of debt, twice that of the US, to show for it.
    We knew going into this that quantitative easing doesn’t work, makes things much worse in the long run, but they went ahead and did it anyway.

19. Shamrock, one other point. As a foreign investor in US securities, you have to think short term only. For the past 15 years, the US has been following a weak dollar fiscal policy. This started in Bill Clinton’s first term triggered by a decline in US trade balance. If you bought an index, say the Dow Jones, and held it for those 15 years, you lost money. Heavily. Because of the decline in the value of the US dollar. You have to get in and get out before decline in the dollar value flattens your investment.
    This is a large part of the reason why institutional investors no longer care as much about equity growth. What they want are dividends, cash paid out to shareholders NOW.

20. cgh, low interest rates and their relationship to the value of investments such as real estate and the stock market are no excuse to borrow at the obscene rate the US has in the last eight years. The piper comes calling when a highly leveraged economy must deal eventually with both higher debt servicing charges and lowered investment values. If one bases their real estate purchase and mortgage on interest rates today they better put in contingencies for higher debt servicing costs going forward coupled with some invevitable real estate volatility. Yes one can go with the purchase if they are value hounds. I see no such prudence presently in the US; in fact things are going to get a lot worse before they have any chance of getting better.
    Regarding investing in the US I have refused to invest there since about 2000, and the main reason Cdn investors made money prior to that was because of the low $Cdn. I think the US market has been and continues to be frought with risk of overpriced &/or poor quality assets, even before the idiotic government debt since then.
    I totally agree with your notion of seeking dividends which, when reinvested, produce about 2/3 of overall investment return long-term. I couple that stratgegy with using the high quality Cdn market as my base.

21. Shamrock, I agree with all of your last except partly the first sentence. Here’s the difference. If you or I go to seek a loan, we are doing so in a market. There are differences among the various lenders. As borrowers, you and I have no control over the interest rate except to negotiate among various lenders.
    However, the US government sets its own interest rate for itself. The game is thus rigged in favour of government borrowing. The obscene consequences you describe are the INTENDED RESULT of the low interest rate policy.
    Now supposedly, the defence against this is the natioal bank. Its sole mandate has been in all countries for the past couple of centuries to defend the value of the currency and to curb inflation. However, what we have seen is the systematic corruption and politicization of the Fed, particularly in the last dozen years or so.
    Hence, the political process now manipulates the Fed to give the government the interest rates it wants so that it can postpone the “day of reckoning”. In the past, the Bank of England or the Fed would have told the government of the day to take a long walk on a short dock, but no longer.
    For Canada, fiscal virtue is easy. Canada is too small to manipulate interest rates, so we had to establish some fiscal discipline. We are takers, not setters, of interest rates, unlike the US. Hence there was no point to trying to force the Bank of Canada to stray from its mandate.
    And by the way, corporate America agrees with both of us. That’s why they’re sitting on trillions of retained earnings. They don’t trust the US government fiscal ponzi scheme any more than do you or I. If they don’t have a better use for it, though, they should pay it out to shareholders. Or do stock buy-backs at a premium.