by John Galt
June 7, 2012 05:15 ET
So what keeps an academic figurehead for the world’s elite banksters up at night?
A repeat of the 2008 debacle. Thus far they think they have avoided it in the United States however that creeping feeling that the disaster de jour in Europe will not be avoided is starting to permeate the thought processes of our bankers and that means the U.S. taxpayer must be extorted into another bailout of their mistakes. The problem this time is the wildcards of national sovereignty and nationalism are starting to rear their heads in this discussion and bankers hate people using free will to make decisions about their country’s future. Today’s testimony by the Bernank on Capitol Hill will give us all an insight into the next move by the Federal Reserve, up to and including more QE which is nothing more than pushing against the string at this point in time.
What happened in 2008 that has this author concerned that we may mirror 2008? Let’s all read the June 25, 2008 FOMC statement together for a refresher:
Release Date: June 25, 2008
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
Interestingly enough it sounds a lot like yesterday’s Beige Book release. Moderating inflation, overall economic activity expanding, labor markets softening, and financial markets under stress. The difference this time is that the Fed was already taking action to add liquidity to a system that was dying in the U.S. but now limited action in the Eurozone could trigger the exact same consequences.
The rally in stocks yesterday looks a lot like two rallies in 2008:
The question that is open is are we witnessing a repeat of the April 2008 rally which failed at the 200 DMA or a repeat of the June-July 2008 rally which terminated when the major financial institutions started to fall like dominoes? The action year to date seems to indicate that we are replicating a closer pattern to the second rallly on the chart above but in the case of our markets now, but this year versus then we are witnessing substantially lower volume thus a lack of conviction.
Yesterday’s rally was an impressive candlestick to the upside but a lack of volume seems to indicate that this rally will fizzle rapidly just like it did in May barring drastic action by the Fed and ECB. With that in mind, the chart below is what keeps Ben Bernanke awake at night as any course of action to inject further liquidity into the markets taken now, may not reach Main Street until mid 2013, far after the disaster in Europe has brought down much of the financial system.
Just like 2008, I doubt the banksters in Brussels and D.C. are able to sleep much because we are on the precipice of a new disaster far worse than 2008.