Want to Fight Deflation? Give a Worker a Raise

The slight rebound in housing looks a lot different when one considers how much the Fed is meddling in the market. Fed chair Ben Bernanke has purchased $240 billion in US Treasuries to keep long-term interest rates artificially low while–at the same time–buying $740 billion in Fannie Mae and Freddie Mac mortgage-backed securities (MBS) to provide the financing for new home buyers. It’s the double-whammy; and that’s not all.

How Bad Will It Get? – Mike Whitney

The U.S. economy is at the beginning of a protracted period of adjustment. The sharp decline in business activity, which began in the summer of 2007, has moderated slightly, but there are few indications that growth will return to pre-crisis levels.

Memo to Bernanke: “No Wage Growth; No Recovery”

A recent poll shows that most economists now believe that the recession, which began in December 2007, will end in the third quarter of 2009. There’s been an uptick in manufacturing and consumer confidence, and the decline in housing prices appears to be flattening out. Unfortunately, the return to positive GDP will likely be short-lived.

This Depression is just beginning

Too bad Pulitzers aren’t handed out for blog-entries. This year’s award would go to Zero Hedge for its “The ‘Money on the Sidelines’ Fallacy” post. This short entry shows why the economy will continue its downward slide and why the US consumer will not get off the mat and resume spending as he has in the past. The fact is the Net Wealth of US Households has “declined from a peak of $22 trillion to just under $12 trillion in early March.”

Wall Street’s Love Affair with Ben Bernanke – Mike Whitney

A careful reading of Federal Reserve chairman Ben Bernanke’s op-ed in Tuesday’s Wall Street Journal, shows that Bernanke thinks the economy is in a deflationary spiral that will last for some time.

Is the Fed Juicing the Stock Market?

Why has the stock market been on a 3-month tear when the economy is undergoing the worst economic contraction since the Great Depression? The S&P 500 has shot up 40% from its low on March 9 and the Dow Jones Industrials have followed close behind. Is this a typical bear market rally or is the invisible hand of the Fed goosing the markets?

We have created a monster … banks with access to public funds

The government doesn’t want to admit this because it is banking on our flexible friend, inflation, to come along and pay off the debt for it. The Bank of England is in the process of effectively printing billions of pounds through Quantitative Easing, which will have the effect of undermining the purchasing power of the pound.

Will there be Zimbabwe-type Hyperinflation in the U.S.A.?

The Republicans are convinced that hyperinflation is just around the corner, but don’t believe it. The real enemy is deflation, which is why Fed chief Bernanke has taken such extraordinary steps to pump liquidity into the system.

Bond Market Blowout – Michael Whitney

Last week’s ructions in the bond market, leave little doubt that the financial crisis has entered a new and more lethal phase. Of particular concern is the spike in long-term Treasuries which are used to set interest rates on mortgages and other loans.

Financial Crisis: The Next Leg Down

Collapsing home prices and credit markets continue to put downward pressure on consumer spending, forcing the Federal Reserve to take even more radical action to revive the economy.