Notes From Underground: NBER plays TOMMY; BENNY turns on the monetary jets

In what must be the results of being rendered deaf and dumb by the credit implosion of the last 36 months, the National Bureau of Economic Research has declared that the recession has ended. It must be great to be an employed economist. In what world do these analysts live and the bigger question is why does it matter what they declare?

If the recession has ended, why is Thomas Hoenig a lone wolf on the FED BOARD OF GOVERNORS? What difference does it make if the statistical data say the RECESSION HAS ENDED? When the FED is in hyper mode for fear that the U.S. may well plunge into a deflationary spiral we don’t care a lick of what a group of sequestered, molly coddled academics think. We wonder if Richard KOO would agree that this balance sheet recession has indeed come to a halt. Again, we tilt at the models and its builders who cannot predict or measure the true impact of a classic Austrian credit cycle. Oh well, at least TOMMY, the blind kid, became one with the pinball machine. It would have been difficult to be at one with the machine from the safety of an Ivory Tower.

The FOMC met today and released its statement on monetary policy. Although a direct quantitative ease statement was not mentioned, the tone was so soft that the markets took the language to mean that a new round of QE was inevitable. The key line appears to be, “inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.” We have opined for more than a year that GOLD was rising in fear of deflation and what the FED response would be. Now it appears that the market has begun to accept this view. For those who think that GOLD is an inflation play, they are way to early in that fear. The gold market has created worry that a deflationary scare would cause BEN and his modelers to turn on the monetary JETS.

The DOLLAR also took the cue and after trying a quick moment to rally, the U.S. currency sold off as it should. As one of our readers asked, “How is the FED statement different from the BOJ actions of Sept. 15?” The U.S. seems to have adopted the stance that a weakened DOLLAR will have a reflationary effect on the economy. We wonder how the Europeans will act if the DOLLAR really started to drop. The long end of the Treasury market also rallied as they were reacting to the sub-mandated inflation numbers and the high probability of more FED purchases. We will pay close attention to commodity prices as an indicator of the world’s desire to acquire stuff rather than hold paper of questionable value.

News broke this afternoon that LARRY SUMMERS has resigned as head of the National Economic Council and will return to Cambridge, Mass. It is amazing that after President Obama lauded Summers at yesterday’s TOWN HALL meeting Mr.Summers resigns. We don’t believe this puts a positive light on the Obama team. Just before the mid-term elections, the president’s economic team is in disarray. Who will be next to leave and what media darling will the president choose to replace the man who did such a good job? It sort of reminds us of 2005 and “You are doing a heck of a job, Brownie.” Its deja vu all over again.

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7 Responses to “Notes From Underground: NBER plays TOMMY; BENNY turns on the monetary jets”

  1. Paul Says:

    Again, I gather, someone from Chicago may be called upon to head the advisory team.

    Sorry, Yra, for being persistent on this one. Is there any chance you think the US economy might do well withOUT QEing now? Not until head of FED is out?

  2. Arthur Global Practice Says:

    Someone from Chicago? Uhmmm… are you ready to go to DC Yra? 🙂

    Agree about dollar and gold. Also, wondering about Trichet´s reaction.

  3. yra Says:

    Arthur–I am ready to go but the phone doesn’t ring

  4. yra Says:

    Trichet is resting very uneasy and Sarkozy was seen shopping for a white horse.Paul that is a big question.If you believe that a balane sheet recession is different then the stimulus must be different;but so far we have just seen more of the same recycled garbage.What will QE2 do—just don’t know on its own as it will need to be coupled with other efforts.Again we advise a payroll tax holiday and a very very low tax on dividends as a way to push money to main street

  5. JackA Says:

    NBER is about 3.5 miles from Boston Common. Perhaps they had a long weekend culminating in saying recession was over, every thing’s cool. dude.
    Best I can figure; they had to be smoking something

    Thousands Attend Boston Marijuana Rally
    Updated: Monday, 20 Sep 2010, 11:33 AM EDT
    Published : Monday, 20 Sep 2010, 11:33 AM EDT

    (CANVAS STAFF REPORTS) – Thousands of people including a Massachusetts gubernatorial candidate attended a marijuana rally in Boston held on Saturday…

    Dozens of marijuana users were seen rolling and smoking joints and pipes throughout the day, reportedThe Boston Herald .

  6. jeff Says:

    I think that technically they are correct. The recession is over since we have had positive GDP growth.

    It’s kind of like saying, “The Cubs are World Champions”. They were, in 1908. Technically correct.

  7. yra Says:

    Jeff you had to stick that dagger in my heart—forget technically correct.The the FED should just sit back and say like sargent Preston of the YUKNO—king this case is closed

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