Hey Ben, wake up! The problem is your message, not its delivery!

 

So this was it. The week where a Federal Reserve Chairman finally stepped out of his ivory tower and came down to speak to the unwashed masses.

Specifically, the Federal Open Market Committee didn’t just release a post-meeting statement on the economy Wednesday. Ben Bernanke later trotted out in front of the microphone, made some comments on the economy, and then took questions from the press for about an hour.

How’d it go? Well, he didn’t put his foot in his mouth or trip walking up to the podium. But he did once again show that he’s completely out to lunch on inflation, the dollar, and his role in destroying our standard of living.

Look, there is no doubt in my mind — zero — that the Fed’s interest rate and easy money policies are a huge reason the dollar is cratering and commodities are soaring. Yet Bernanke kept trying to blame things like geopolitics and emerging market growth for those market developments. And while he said that monetary policies aimed at controlling inflation are good for a country’s currency, he refused to adopt any such policies!

If there’s one thing Bernanke DID get right, it’s this: When a Fox Business reporter asked about S&P’s recent downgrade of America’s sovereign credit outlook, he replied:

“America has a very serious long-term fiscal problem … the fiscal deficit is simply not sustainable, and if it’s not addressed, it will have significant consequences for economic growth and our financial stability.”

But again, by essentially monetizing the U.S. debt and buying 85 percent of the Treasuries the government is issuing, the Fed is enabling the government to continue to run those very same deficits!

Can you believe this guy?

Saying Something Louder, and More
Often, Doesn’t Make It True!

Openness is great. I’m all for transparency. My problem with the Fed’s approach is simple:

Bernanke’s message is doing nothing for Main Street.

Bernanke thinks it’s the DELIVERY of his message that’s at fault. He thinks if he can just give more speeches, release more statements, and be more open by taking questions from the press four times a year, then people will understand the Fed really does know better than them. That, gosh, Bernanke really is on their side.

But what the Fed has been doing is NOT helping the average American. It’s helping hedge funds, speculators, and investors … at the expense of people who don’t own stocks and are just trying to keep food on their tables or gas in their tanks.

Just consider: Since last August, when Bernanke laid out the case for QE2, crude oil prices have risen 59 percent. Retail gasoline has surged from $2.69 per gallon to $3.88 per gallon. Cattle has gained 18 percent in price, wheat has rallied 26 percent, soybeans have jumped 40 percent, and corn has skyrocketed 92 percent.

On Wednesday gold hit the highest level in history — $1,530 an ounce — while silver prices have exploded 172 percent. Meanwhile, the broad Dollar Index has collapsed to its lowest level in 32 months, and its lowest level in history against sound-money currencies like the Singapore dollar and Australian dollar.

Inflation expectations? The ones that are supposedly tame, well-anchored, “well stabilized” or whatever the Fed wants to call them?

Well, Americans polled by the University of Michigan now expect inflation to run at a 4.6 percent rate over the next year. That’s up from 2.7 percent last August. The broader Conference Board survey for April showed inflation expectations for the next year surging even higher — to 6.3 percent from 5 percent.

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Lastly, what about those struggling homeowners and mortgage borrowers? The ones who the trillions of dollars of QE2 — as well as FHASecure, HAMP, HOPE NOW, etc. — were supposed to help? Or bondholders, who were supposed to see higher bond prices and lower interest rates?

They’ve gotten two things from QE2 — jack and squat!

The evidence? Long-term Treasury futures have dropped 11 percent in price, while 30-year mortgage rates have climbed to 4.8 percent from 4.36 percent since last August.

New home sales, existing home sales, and construction activity have essentially gone nowhere for the past couple of years, while the 20-city Case-Shiller housing price index just fell to 139.27. That’s a measly 1/100th of a point away from the February 2009 low, and down more than 6 percent since Bernanke’s hard sell for QE2 last August.

If This Is Success,
I’d Hate to See Failure!

The Fed’s monetary policy is driving up the cost of almost everything you have to buy.

The Fed seems to think we out here in real America just don’t get it. That’s why Bernanke is being more open on the communications front.

But the simple reality is that Bernanke is destroying the value of your dollars. He’s helping drive up your cost of living. He’s forcing seniors to take their hard-earned dollars out of safe investments like CDs and plow them into things like junk bonds.

Meanwhile, he has driven interest rates UP, not down. And his policies have been a total, utter, dismal failure when it comes to re-energizing the housing market.

Or in simple terms, if this shows that QE2 has been a “success” like some economists say, I’d hate to see failure!

You have only one choice in this environment, folks. You have to take things into your own hands as long as Bernanke and the rest of the Fed is going to get things dead wrong on the monetary policy front.

Consider buying gold and shares of companies with higher yields than Treasuries and a large percentage of overseas revenue. Buy currencies, stocks, and short-term bonds of countries with better economic growth and monetary policy.

And please, if you haven’t watched it yet, check out the American Apocalypse presentation we’ve just put together. It goes into much more detail about the issues I’ve presented here — and gives you concrete, actionable advice on what to do to protect yourself and profit in this environment. Click here for more.

Until next time,

Mike

http://www.moneyandmarkets.com/hey-ben-wake-up-the-problem-is-your-message-not-its-delivery-44368