Brooklyn Red Leg
Anarcho-Capitalism FTW!
Bernanke lays out 3 options Fed could pursue if economic weakness persists including bond buys
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke said Wednesday that the central bank is prepared to provide additional stimulus if the economic lull persists.
Delivering his twice-a-year economic report to Congress, Bernanke laid out three options the central bank would consider. One possibility, he said, was another round of Treasury bond buying. That would make the third such effort since 2009.
The Fed chief's reassurances helped drive stock prices higher, but it also underscored the fragile state of the economy more than two years after economists said the recession had ended. Unemployment has risen for three straight months and a debt crisis in Greece and other European countries threatens to weaken the global economy.
Bernanke warned U.S. lawmakers that their failure to raise the nation's borrowing limit by Aug. 2 could trigger a major financial crisis. He said that if government defaults on its debt, it would throw "shock waves through the entire financial system."
Bernanke said more stimulus would only be necessary if economic conditions worsened and deflation re-emerged as a threat. Deflation is a destabilizing period of falling prices.
He also said the Fed was nimble enough to respond if the opposite happened. He said the Fed was ready to raise interest rates that have been held at record lows for nearly three years, should the central bank fear a greater risk of inflation.
"We have to keep all options on the table," Bernanke told the House Financial Services Committee on the first of two days of Capitol Hill testimony. "If we get to the point where the recovery is faltering" and inflation is dropping toward zero, then the central bank would consider the additional stimulus options, he said.
The Dow Jones industrial average rose more than 93 points in afternoon trading. Broader indexes also increased.
In addition to purchasing Treasury bonds, Bernanke said the Fed could help the economy by:
-- Cutting the interest paid to banks on the reserves they hold as a way to encourage them to lend more.
-- Communicating in more explicit terms how long it planned to keep rates at record-low levels. That would give investors confidence about the Fed's efforts to continue supporting the economy.
The Fed last month agreed to end on schedule its program to boost the economy through the purchase of $600 billion in Treasury bonds. But the central bank also acknowledged that the economy had slowed in the first half of the year. As a result, it lowered its economic growth forecast for 2011 and said unemployment wouldn't fall below 8.6 percent this year.
http://finance.yahoo.com/news/Bernanke-Fed-would-supply-apf-1990658503.html?x=0&.v=7
Coming to a Banana Republic near you! Oh, and btw, for those that missed it:
Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went
Courtesy of the recently declassified Fed discount window documents, we now know that the biggest beneficiaries of the Fed's generosity during the peak of the credit crisis were foreign banks, among which Belgium's Dexia was the most troubled, and thus most lent to, bank. Having been thus exposed, many speculated that going forward the US central bank would primarily focus its "rescue" efforts on US banks, not US-based (or local branches) of foreign (read European) banks: after all that's what the ECB is for, while the Fed's role is to stimulate US employment and to keep US inflation modest. And furthermore, should the ECB need to bail out its banks, it could simply do what the Fed does, and monetize debt, thus boosting its assets, while concurrently expanding its excess reserves thus generating fungible capital which would go to European banks. Wrong. Below we present that not only has the Fed's bailout of foreign banks not terminated with the drop in discount window borrowings or the unwind of the Primary Dealer Credit Facility, but that the only beneficiary of the reserves generated were US-based branches of foreign banks (which in turn turned around and funnelled the cash back to their domestic branches), a shocking finding which explains not only why US banks have been unwilling and, far more importantly, unable to lend out these reserves, but that anyone retaining hopes that with the end of QE2 the reserves that hypothetically had been accumulated at US banks would be flipped to purchase Treasurys, has been dead wrong, therefore making the case for QE3 a done deal.
In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!
http://www.zerohedge.com/article/ex...ign-banks-continues-expense-domestic-economy-
So, I wanna hear it. I wanna hear all you people who have routinely smeared me and called me a conspiracy theorist to come to the defense of the Central Bank. I wanna hear you blather on about how we need the Federal Reserve. I wanna hear you prostitute yourself for the very people that have impoverished our nation.
