Bernanke’s message to Americans: Run! Run for your lives!


5 responses to “Bernanke’s message to Americans: Run! Run for your lives!

  1. Greetings to this Web site.
    I have been a regular reader and contributor on Nouriel Roubini’s site for the past twoyears. I will also be sharing some thoughts on this blog. Perhaps we’ll see some growing discussion here.

    Before starting, let me mention a few ground rules and points that I have noticed are helpful – for blogs dealing with economics and finance.

    * Sharing of diverse viewpoints is welcome (bulls, bears, and independent views can all contribute freely)

    * No ad-hominem attacks! Please argue your viewpoints based on the data. Posts with vulgarity or excessive sarcasm should be deleted. I hope Mr Acheson does this. Since he’s a lawyer, I have confidence in his belief in fair and ethical debate.

    * Politics and emotion are very natural for human beings. Some inclusion of these comments is probably reasonable – just try to keep it within moderation. Again – it pays to stick to the facts and the data.

    I will add one additional point. This is not a requirement for posting to this blog. But it would certainly help a lot.

    * If you are talking about economic or financial data, please add a few sentences to explain what you mean in basic English. Something that the layman can undertsand more easily.

    I have added the last point because I get the sense that a growing number of Americans are really struggling to understand their economy right now. I very much support the efforts of every American to understand what’s happening in the economic life of their own country – and to make better decisions about their financial future. After all … isn’t that what America is really about? Americans taking charge of their own lives!

    Lete’s move on.
    I’ll post some articles below.


  2. Alright. Let me suggest tnat people might take a look at a very nice article that just appeared on Financial Sense.

    For readers for familiar with this source, go to . This Web site is really an excellent source for a lot of independent financial thinking. If you follow the articles there, you can learn a lot about the economy.

    Here is the link I am referring to:

    Ronald Cooke is a new contributor to Financial Sense – I haven’t seen his work before. He has taken the time to dig into what’s going on with the US Government statistics for GDP. A growing number of Americans are becoming suspicious that official statistics are not accurately reflecting what’s really happening with our economy. Mr Cooke has taken the time to analyze the GDP figures, and it’s a worthwhile contribution.

    Let me digress for just a second to explain something. If you look at data on US inflation, it is difficult to get a good feeling about what’s going on. Inflation is measured using the Consumer Price Index (CPI). However, these numbers appear to be being juggled, due to confused analysis and/or deliberate manipulation. Mr Cooke notes that for the yearly increase of inflation (from Q3 2006 to Q3 2007) the BLS data states a CPI increase of 2.36%. But Mr Cooke analyzes this figure to instead be 4.02%.

    I would also direct readers to an alternate source of data at The author there, John Williams, has been working on independent data analysis for some time. His own estimates for CPI are now running at 7.5%.

    Looking at Mr Cooke’s paper, we get to the bottom line. If Mr Cooke is right, the net increase in GDP for the USA in Q3 of 2007 was only 1.28%. This is far below the official figure of 4.9% !!!

    This explains why the average American feels like the economy is slowing much faster than the news from the Gov’t indicates. It is! It also explains why the US economy can slip into a recession in Q1 of 2008. Some people have objected that if the GDP was 4.9% towards the end of 2007, then there is no way that a giant economy can suddenly decelerate to zero growth (or negative growth). But with Mr Cooke’s analysis, the real GDP figures are much lower and the possibility for a recession is much more credible.

    The alternate data on inflation figures also raise real issues for investors who have money in US Gov’t bonds. Such investments get eaten away by high rates of inflation. So the discussion in these articles is something that bond investors should consider seriously.

    My real point in writing this article is that it’s tremendously helpful to have people like Mr Cooke and Mr Williams take the time to delve into the basis for these statistics. I think that more debate would be healthy, and people like Mr Cooke may even get subscription-based services going (Mr Williams already has such a service in operation at his site).


  3. Here’s one more article for readers on this blog. This should give people plenty of food for thought.

    Chris Puplava contributes very good articles on Financial Sense. Here is his latest:

    Mr Puplava devotes a lot of time and energy to plotting economic data. In this particular article he is making the case for why the USA is headed into stagflation … a rather nasty combination of economic malaise (or recession) and high rates of inflation. It is well worth reading through the entire article, and some of the charts deserve deep thought. In addition, Americans who are wondering why gold prices have been soaring lately should understand that behavior after considering the data in Mr Puplava’s article.

    However, I want to direct your attention to one very specific chart that caught my eye. Figure 10 shows recent data on US banks and the tightening of mortgage loan standards. It’s certainly not suprising that US banks would be tightening their standards now – since everyone has heard of the problems with subprime mortgages. But what’s noticeable in the data in Figure 10 (taken from Moody’s) is that mortgage standards are now being tightened faster on prime mortgages.

    Why is this important? Well, the majority of the US housing market is prime mortgages. So if banks are now tightening standards on their main source of residential lending, what does that say about possible home sales in the future? It seems pretty clear that future home sales are likely to continue to be weak in 2008. And further, with US umemployment now rising, a greater number of home owners will have difficulty meeting their mortgage payments (and ARM re-sets). That sets the scenario for further increases in foreclosure rates in 2008. Not good news for the financial industry or the banking industry in the USA.

    Personally, I will be surprised if we don’t see a banking crisis in the USA in 2008. The current crisis in the US credit markets dwarfs the problems in the 80’s and 90’s that caused the Savings & Loans crisis (S&L crisis). At that time the potential losses in the S&L debacle are estimated to be only about $160 billion. The current crisis has the potential for losses that are ten times higher (or more!).

    We are nowhere near seeing all the fallout from the current problems facing America.


  4. Here’s one other chart that a lot of people should be thinking about right now. We’re coming out of one of the longest bull markets in recent US history. But things change, don’t they?

    Thanks to Chart of the Day for the analysis. Folks who are interested can get a free subscription to their basic charts. They send them out once a week. Check their Web site.

    You’ll notice that the S&P500 has now broken out downwards from a long term trading channel.

    What this means for regular folks with money in US stocks – is that you better think harder about protecting your money. The operative words are “risk management”. There are lot of ways to do it. But no excuses if you just sit back and let things go .

    Good luck.
    I accept no responsibility for financial or investment advice. Those decisions are entirely up to you. If you think I’m wrong – that’s perfectly O.K. The important thing in my opinion is that more Americans are thinking for themselves.


  5. how much are they paying him?

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