Bernanke's New Scheme

Posted: Dec 06, 2010 9:51 AM
Bernanke's New Scheme

The stubborn unemployment rate of 9.6% finally leaped upward up to a butt ugly 9.8% and the panel of regular experts on CNBC were shocked. The same experts who were shocked when there was a housing meltdown, because wrongly they shared Ben Bernanke’s 2006 opinion, that a housing meltdown in the U.S. was not possible. According to the worlds brightest commodity trader Jim Rodgers, he said, “Bernanke has never been right about anything.”

In my own opinion, Bernanke shares a distinction with Donald Luskin, an elitist snob who is a regular on CNBC’s Kudlow and Company. Luskin said when the meltdown occurred, “it’s just a blip don’t worry about it, it’s nothing and it’s ridiculous to think it would spread” of course like Bernanke, Luskin was wrong, and it spread like a wild South Dakota prairie fire all over the world and it’s still not contained.

As a result of the scorch and devastation left behind, home prices fell and are still dropping faster than a flying crow bar! Prices of homes are still declining each month at double the pace these so-called experts on CNBC were expecting, and as a result, more and more people are holding back there house payment, many as much as 32 months. That is the reason for the better than expected retail sales, as black Friday had not improved the economy, as being told by CNBC regulars a lie!

When the increase in the unemployment number of 9.8% from 9.6% came out, President Obama quickly sent out Pelosi and her Secretary of Labor, Hilda “socialist” Solis. Solis said, “that for every $1 you give to the unemployed it creates two dollars’ worth of economic activity.” Then Pelosi said, “that unemployment insurance is one of the biggest stimulus to our economy, that it injects demand into the economy, it creates more jobs than any other initiative you can name.”

Alright then, what she is saying is lay everyone off! Huh? But my question to Ms. Pelosi is, if we do who will create the demand as demand is a function of supply. If no one is working who will make the products? What is she nuts? YES! Then she also wants to steal (tax) even more earnings of the small business people who work 15 to 18 hours a day so she can give that money to those who don’t work. Then those who don’t work can go out and buy products made in China? Yup! Now China can employ even more workers! ARGH!

There are twenty two million workers and consumers in the United States who are out of work, many for as much as ninety nine weeks and losing their benefits. In order to meet Wall Street’s expectations, big corporate CEO’s must cut their biggest expense, their employees! Nor do they purchase any equipment, specially information technology. This way they will get their bonuses and exercise their options, then the purchase of equipment. Their stock will go up but it’s not sustainable and that’s why CEO’s and top management are now selling 600 shares for every one they buy.

Only earnings from increased market share, top line sales and good margins are sustainable. Therefore, because we have no growth and we need 250 thousand new jobs a month to drive up the GDP to 5% and not the thirty nine thousand they reported on Dec 3rd, in order for the banks to loan to consumers. The housing market will continue to be a drag on the economy for the next 15 years to 20 years just like it was for Japan. Bernanke is following Japans failed policies. Now how smart is that, I ask you!

That is why Bernanke instituted the QE1 and QE2 and soon to follow the QE3. By Bernanke buying up all the bonds so to drop the yield, so they will no longer be attractive to speculators. This will then force speculators to continue to borrow money from him at zero and force them to speculate in stocks and commodities instead of treasuries as this will drive the stock market artificially higher.

The scheme of “buy on the pull back” works because the market has nowhere to go but up, and Bernanke is betting that CNBC will pump buy on the pull back to its viewers along with planners and fund managers. This is called a “bubble” because it’s going up on speculation not earnings. The only one who makes money at the end are the speculators, the shadow banksters like Goldman and JP Morgan and other large speculators around the world. It’s designed for the retail customer to lose like they did in the dot con and lending con and now the no earnings buy on the pullback con.

If you want to learn more about “What Wall Street Doesn’t Want You To Know” then come join me Phil Grande at so you too can be on the winning side using charts and technicals in the next great buy on the pullback scheme!