The Golden Truth: The Bernanke Helicopter Drop is Leading to Another Credit Bubble

Tuesday, March 23, 2010

The Bernanke Helicopter Drop is Leading to Another Credit Bubble

The Fed is enabling free credit to consumers now. I just got off the phone with someone who said that lately they've been inundated with 0% credit card offers - 0% for 12 months and 0% on balance transfers. Of course, this is sheer insanity. It would appear that the Fed/Obama are trying to stimulate another big wave of shopping mall/big box retail consumption.

Lest you forget, credit card debt is unsecured, backed only by the full faith and credit of the consumer. Also don't forget that a large portion of the big bank bailout was related to monetizing credit card defaults.

This is the ultimate result of the complete moral hazard imbued in our system now. The Fed/Bernanke/Big Banks know that Geithner/Treasury will compensate them for any losses from default. So they can lend away for free, make lots of money on hidden fees, late fees, over-limit fees, etc and face ZERO downside.

This will not end well for our system and especially not well for the Taxpayer.

13 comments:

EdwardoTuesday, 23 March, 2010
This is somewhat OT, somewhat, mind you, since this is a gold site, but you might want to take a look at the (none too bullish) chart of FCX and ponder the implications.
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Dave in DenverTuesday, 23 March, 2010
Nothing is OT LOL. Just looked at a 1 yr/2 yr FCX chart with a macd and rsi (standard settings). Looks somewhat similar to most large cap gold stocks and also the SPX. You can make a case that it is bearish, but I think the Fed is going to float the market higher on a flood of liquidity. You see Yellen's speech today? She wants to take interest rates negative if she can LOL.

What were your thoughts?
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EconomicDisconnectTuesday, 23 March, 2010
I am awaiting the double dip and then the panic button will be hit and liquidity will be everywhere. We should have a better sens at that point what is coming.
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Joe KernanTuesday, 23 March, 2010
But But But, Prechter said the US Peso is going back to 120....
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Dave in DenverTuesday, 23 March, 2010
LOL. Hey Joe! You gonna mention The Golden Truth tomorrow? I heard my blog makes Becky slide around her leather seat...
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Dave in DenverTuesday, 23 March, 2010
Hey gyc, the liquidity is being manufactured in ways that are not showing up in MZM/M2. I have a feeling the Fed is giving 0% money to the big banks, using the massive $2 trillion in excess reserves as collateral. They are using other secretive, please-don't-audit-us tricks as well.

Gold is actually behaving very well in light of the massive sell attacks iniated ever since that discount rate hike a few weeks ago.

By the way, anyone wonder where that IMF 190 tonnes for sale went? Have not heard one peep about it in a few weeks.
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EconomicDisconnectTuesday, 23 March, 2010
Dave,
I bought it! LOL
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MikeTuesday, 23 March, 2010
haha it is a distraction story, public gold sales are never the real story.
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Dave in DenverTuesday, 23 March, 2010
Agree Mike.

GYC - you a front for the Chinese Govt? LOL
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EconomicDisconnectTuesday, 23 March, 2010
A front? No, its all buried out back.
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OldSouthTuesday, 23 March, 2010
That would explain the sudden reappearance of credit card offers in the mailbox. I thought that stuff was part of the past.

Silly me!
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Dave in DenverTuesday, 23 March, 2010
You too, huh? You're the third person who's alluded to that.

It's a function of complete moral hazard. The Fed/Big banks know that the Treasury will back-stop them on any losses from default. So why not make the loans?
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Dave in DenverTuesday, 23 March, 2010
Just added OldSouth to my blogroll, by the way.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.