Bernanke spouts off again today..

[hipmatt]

I got a few good laughs today at the idiot fed chairman while watching CNBC this morning.. a few notes ..

Bernanke says:

Inflation is moderating nicely and doesn’t look like it will be a problem… HA.. unless you drive, eat, pay utilities, and get completely free health care.

Then he says..Weak dollar isn’t a problem, and that a strong economy will fix it, not monetary policy.. HA HA printing tons of money and slashing interest rates have nothing to do with the fall of the dollar.. right?

Then he says.. housing is slowing, but it isn’t spilling over into the broader economy… HA HA..

Then he says.. and this is my favorite.. the ecconomy is slowing a bit, but in spring of 08, it will pick back up and strengthen again… HA HA HA… ohh

I was starting to feel SOME empathy for the US gov. and the fed, but not anymore. What an idiot to get out there and spin things so rosy.

In six months when housing is tanking worse, the financials are falling apart even more, employment data starts to head south, consumer spending slows further, and the dollar is even weaker, can there even be anything left for Bernanke to spin off in his, there are no big problems way?

[cr]

I saw some of his speech this morning on CNBC. He looked pretty nervous and completely waffled on the follow up questions.

He also completely refused to speculate the likelihood of a recession, which to me is an answer in itself.

He’ll be able to blame sub-prime on the demise of financials for a while but he’s screwed no matter what now:

If he cuts rates:
– It won’t be enough to save the mortgage banks
– It will further weaken the dollar
– It will piss off the Chinese which BB isn’t “overly conerned about”

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

If he raises rates:
– The dollar will be respectable eventually again
– The sub-prime mortgage crisis will play out much quicker
– Stocks will fall

Somewhere Alan Greenspan is laughing…

…but hiding.

[patientlywaiting]

Does anyone remember the Fed prediction a recession? They simply won’t tell us what they know, or they are lousy at what they do. Either way, it’s not good for the transparency that Bernanke promised.

[patientlywaiting]

Does anyone remember the Fed prediction a recession? They simply won’t tell us what they know, or they are lousy at what they do. Either way, it’s not good for the transparency that Bernanke promised.

[patientlywaiting]

Does anyone remember the Fed prediction a recession? They simply won’t tell us what they know, or they are lousy at what they do. Either way, it’s not good for the transparency that Bernanke promised.

[patientlywaiting]

Does anyone remember the Fed prediction a recession? They simply won’t tell us what they know, or they are lousy at what they do. Either way, it’s not good for the transparency that Bernanke promised.

[no_such_reality]

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

I disagree.

If he leaves rates:
– the dollar will weaken even more.
– Wall Street will crater because, he’s doing nothing and the dollar is weaker.

[no_such_reality]

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

I disagree.

If he leaves rates:
– the dollar will weaken even more.
– Wall Street will crater because, he’s doing nothing and the dollar is weaker.

[no_such_reality]

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

I disagree.

If he leaves rates:
– the dollar will weaken even more.
– Wall Street will crater because, he’s doing nothing and the dollar is weaker.

[no_such_reality]

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

I disagree.

If he leaves rates:
– the dollar will weaken even more.
– Wall Street will crater because, he’s doing nothing and the dollar is weaker.

[cr]

I saw some of his speech this morning on CNBC. He looked pretty nervous and completely waffled on the follow up questions.

He also completely refused to speculate the likelihood of a recession, which to me is an answer in itself.

He’ll be able to blame sub-prime on the demise of financials for a while but he’s screwed no matter what now:

If he cuts rates:
– It won’t be enough to save the mortgage banks
– It will further weaken the dollar
– It will piss off the Chinese which BB isn’t “overly conerned about”

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

If he raises rates:
– The dollar will be respectable eventually again
– The sub-prime mortgage crisis will play out much quicker
– Stocks will fall

Somewhere Alan Greenspan is laughing…

…but hiding.

[cr]

I saw some of his speech this morning on CNBC. He looked pretty nervous and completely waffled on the follow up questions.

He also completely refused to speculate the likelihood of a recession, which to me is an answer in itself.

He’ll be able to blame sub-prime on the demise of financials for a while but he’s screwed no matter what now:

If he cuts rates:
– It won’t be enough to save the mortgage banks
– It will further weaken the dollar
– It will piss off the Chinese which BB isn’t “overly conerned about”

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

If he raises rates:
– The dollar will be respectable eventually again
– The sub-prime mortgage crisis will play out much quicker
– Stocks will fall

Somewhere Alan Greenspan is laughing…

…but hiding.

[cr]

I saw some of his speech this morning on CNBC. He looked pretty nervous and completely waffled on the follow up questions.

He also completely refused to speculate the likelihood of a recession, which to me is an answer in itself.

He’ll be able to blame sub-prime on the demise of financials for a while but he’s screwed no matter what now:

If he cuts rates:
– It won’t be enough to save the mortgage banks
– It will further weaken the dollar
– It will piss off the Chinese which BB isn’t “overly conerned about”

If he leaves rates:
– The dollar will at best stabilize at it’s lowest point ever
– Wall Street will have another sell-off

If he raises rates:
– The dollar will be respectable eventually again
– The sub-prime mortgage crisis will play out much quicker
– Stocks will fall

Somewhere Alan Greenspan is laughing…

…but hiding.

[bsrsharma]

hipmatt – Macroeconomics is messy due to large number of variables. Actually, Bernanke is being correct on his statements.

1. Inflation is moderating – The fact that house prices are falling at the rate of at least 10% per year nationally and even upto 50% in some isolated markets means overall inflation has to come down. If a person spends, say 30% of income on housing, and house prices fall 10% per year, that alone contributes 3% per year of annual deflation.

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

Rest of the statements, I won’t attempt to side with BB since I don’t agree with him. But surely that man is not an idiot. He is just interpreting the data differently.

[patientlywaiting]

I thought that house prices were not part of inflation calculation. If that were the case, inflation since 2000 would have been through the roof, especially in areas like San Diego.

The Fed is just trying to calm the markets. Any kind of honest public assessment from Bernanke would cause panic.

The Fed will continue to predict growth even after the recession begins. I don’t think that they will ever come out and declare that they expect a recession.

[NotCranky]

I got the inside scoop on Ben’s next comments.

They are about how well Americans could be doing..

He says:
The multitudes are eating road kill and raiding farmlands. However, our sophisticated indices clearly show there is signifigant purchasing power for them all to be shopping with abandon at Whole Foods. Since we are bad a predicting the true state of the economy I have secretly admonished the current administration and congress to grease the wheels for processing spiraling bankruptcies in a kinder and gentler way, so we can get these rabid consumers back on their feet in time for the holiday retail season.

[NotCranky]

I got the inside scoop on Ben’s next comments.

They are about how well Americans could be doing..

He says:
The multitudes are eating road kill and raiding farmlands. However, our sophisticated indices clearly show there is signifigant purchasing power for them all to be shopping with abandon at Whole Foods. Since we are bad a predicting the true state of the economy I have secretly admonished the current administration and congress to grease the wheels for processing spiraling bankruptcies in a kinder and gentler way, so we can get these rabid consumers back on their feet in time for the holiday retail season.

[NotCranky]

I got the inside scoop on Ben’s next comments.

They are about how well Americans could be doing..

He says:
The multitudes are eating road kill and raiding farmlands. However, our sophisticated indices clearly show there is signifigant purchasing power for them all to be shopping with abandon at Whole Foods. Since we are bad a predicting the true state of the economy I have secretly admonished the current administration and congress to grease the wheels for processing spiraling bankruptcies in a kinder and gentler way, so we can get these rabid consumers back on their feet in time for the holiday retail season.

[NotCranky]

I got the inside scoop on Ben’s next comments.

They are about how well Americans could be doing..

He says:
The multitudes are eating road kill and raiding farmlands. However, our sophisticated indices clearly show there is signifigant purchasing power for them all to be shopping with abandon at Whole Foods. Since we are bad a predicting the true state of the economy I have secretly admonished the current administration and congress to grease the wheels for processing spiraling bankruptcies in a kinder and gentler way, so we can get these rabid consumers back on their feet in time for the holiday retail season.

[bsrsharma]

house prices were not part of inflation calculation

PW – Actually BLS uses a highly convoluted formula called "Owner's Equivalent Rent" to shoehorn home prices into CPI. This is very inaccurate as rent and real ownership costs don't correlate very well, especially during bubble conditions.

http://www.bls.gov/cpi/cpifact6.htm

[Eugene]

unless you drive, eat, pay utilities, and get completely free health care.

okay…
Gasoline is past $3. Oh the horror! It costs me whopping $4 to drive my BMW to work every day (20 miles each way). If I were working as a burger flipper, it would be 1/2 of my hourly salary or 6% of my total budget. I happen to make a little more than a burger fliipper. I think I’ll manage even if gasoline gets past $10 mark.

Food … hmmm … somehow I don’t see any growth in food prices. Actually no, I do. Chipotle burritos are about 50c more expensive now than they were in 2002. That’s like 10% increase. And again, I don’t eat so much that my budget would hurt from a 10% increase in food prices.

Utilities and healthcare… I’ll pass here… I don’t remember how much utilities cost 5 years ago, and my employer pays most of my health insurance anyway.

Now. Where do I _really_ spend my money?

Cars. In 2002, I could buy a new Toyota Corolla starting at $12.5k or a new BMW 330 (225 hp) for $37k. Today I can buy a new bigger Toyota Corolla starting at $14.5k or a new BMW 328 (230 hp) for $32k. Weak dollar you say? What weak dollar?

Rent. In 2002 I rented a 1br apartment in UTC for $1100 a month. Today these apartments go for $1350.

Electronics. Today you can get a nice 19″ LCD monitor for $250 or a 50″ plasma TV for $1500. How much did they cost 5 years ago?

Clothes? Books? Toys? Furniture?

I rest my case …

[5yearwaiter]

Just to remind the most common food items

Milk, Cereal, so many such items increased almost a $2 to $4 in the price range. Well we can’t really compare seeing Plasma TV now rates and 5years back rates due to the reason Plasma is not there in the math when the entire crisis started and many items on a regular buy basis are the major contributors. Plasma, Cloths all these are Year based or event based purchased one time items

5yearswaiter

[cr]

esmith are you actually contending prices are generally lower today than they were 5 years ago?

You’re joking right? You can’t look at technology based prices drops and use that as a basis that inflation is curbed…unless you’re the FED. For health-care most people have probably had increasing premiums through their employer sponsored program. And food, you been the store lately? The FEDs core inflation is a joke.

[cr]

esmith are you actually contending prices are generally lower today than they were 5 years ago?

You’re joking right? You can’t look at technology based prices drops and use that as a basis that inflation is curbed…unless you’re the FED. For health-care most people have probably had increasing premiums through their employer sponsored program. And food, you been the store lately? The FEDs core inflation is a joke.

[cr]

esmith are you actually contending prices are generally lower today than they were 5 years ago?

You’re joking right? You can’t look at technology based prices drops and use that as a basis that inflation is curbed…unless you’re the FED. For health-care most people have probably had increasing premiums through their employer sponsored program. And food, you been the store lately? The FEDs core inflation is a joke.

[cr]

esmith are you actually contending prices are generally lower today than they were 5 years ago?

You’re joking right? You can’t look at technology based prices drops and use that as a basis that inflation is curbed…unless you’re the FED. For health-care most people have probably had increasing premiums through their employer sponsored program. And food, you been the store lately? The FEDs core inflation is a joke.

[5yearwaiter]

Just to remind the most common food items

Milk, Cereal, so many such items increased almost a $2 to $4 in the price range. Well we can’t really compare seeing Plasma TV now rates and 5years back rates due to the reason Plasma is not there in the math when the entire crisis started and many items on a regular buy basis are the major contributors. Plasma, Cloths all these are Year based or event based purchased one time items

5yearswaiter

[5yearwaiter]

Just to remind the most common food items

Milk, Cereal, so many such items increased almost a $2 to $4 in the price range. Well we can’t really compare seeing Plasma TV now rates and 5years back rates due to the reason Plasma is not there in the math when the entire crisis started and many items on a regular buy basis are the major contributors. Plasma, Cloths all these are Year based or event based purchased one time items

5yearswaiter

[5yearwaiter]

Just to remind the most common food items

Milk, Cereal, so many such items increased almost a $2 to $4 in the price range. Well we can’t really compare seeing Plasma TV now rates and 5years back rates due to the reason Plasma is not there in the math when the entire crisis started and many items on a regular buy basis are the major contributors. Plasma, Cloths all these are Year based or event based purchased one time items

5yearswaiter

[bsrsharma]

I rest my case …

Without saying anything about house prices? You couldn't afford them in 2005; You can buy in 2010 at half off (2005 prices) or better. How is that for deflation?

[bsrsharma]

I rest my case …

Without saying anything about house prices? You couldn't afford them in 2005; You can buy in 2010 at half off (2005 prices) or better. How is that for deflation?

[bsrsharma]

I rest my case …

Without saying anything about house prices? You couldn't afford them in 2005; You can buy in 2010 at half off (2005 prices) or better. How is that for deflation?

[bsrsharma]

I rest my case …

Without saying anything about house prices? You couldn't afford them in 2005; You can buy in 2010 at half off (2005 prices) or better. How is that for deflation?

[snail]

esmith,
per your statement “my employer pays most of my health insurance anyway.” so you almost get a completely free health care. so this doesn’t apply to you.
You don’t eat so much. So cost of food doesn’t apply to you.
Your car is very thrifty with fuel (okay now $3.25/ gallon for premium and its only cost you $4.00 for 40 miles, so you get about 32mpg on your Beemer. What kind of beemer is this, a hybrid?). Again gas price doesn’t affect you.
Lets forget about utilities, who needs an AC anyway when you could watch the 50″ Plasma.
This make you not affected by all this price squeeze, but what I noticed is 2 gallons of milk is about $4.00 early of this year, now its about $5.50 (thats is more than 10% in less than a year), the inflation is real and I don’t care what the fed is projecting on the inflation number they generated its all garbage.

[Eugene]

Beemer will get 30-32 mpg freeway if you don’t drive it like you stole it.

My point is, gasoline is up a lot and food may be up a little bit but gasoline and food are small parts of a typical family budget. An average American family spends more on car loan & insurance payments than on food. You should average prices properly instead of focusing on a couple of low-importance items.

[snail]

I just have a lead foot, so it would be really hard for me to get that kind of milage.
Agreed on your point about the overall cost of living standard. However this thing affect some family more than others, a large family and people that commute more for instances. These people get the pinched directly and some start maxing their credit card already.

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[JWM in SD]

No, what we are likely to see, and it’s happening right now, is Deflation. That is what the Fed is really afraid of.

Ah, I love the smell of credit destruction in the morning…smells like…victory.

[JWM in SD]

No, what we are likely to see, and it’s happening right now, is Deflation. That is what the Fed is really afraid of.

Ah, I love the smell of credit destruction in the morning…smells like…victory.

[JWM in SD]

No, what we are likely to see, and it’s happening right now, is Deflation. That is what the Fed is really afraid of.

Ah, I love the smell of credit destruction in the morning…smells like…victory.

[JWM in SD]

No, what we are likely to see, and it’s happening right now, is Deflation. That is what the Fed is really afraid of.

Ah, I love the smell of credit destruction in the morning…smells like…victory.

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[LostCat]

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

I don’t get this, I also don’t believe inflation works the same now as it did 30 years ago when most americans bough american goods. now if the dollar become weaker, we’re all going to need a lot more to buy a lot less. So the thing the Fed isn’t telling us is, it’s not inflation we are about to see, it’s called stagnation. The last time we saw stagnation was during the great depression. How what that have an effect on the market?

[snail]

I just have a lead foot, so it would be really hard for me to get that kind of milage.
Agreed on your point about the overall cost of living standard. However this thing affect some family more than others, a large family and people that commute more for instances. These people get the pinched directly and some start maxing their credit card already.

[snail]

I just have a lead foot, so it would be really hard for me to get that kind of milage.
Agreed on your point about the overall cost of living standard. However this thing affect some family more than others, a large family and people that commute more for instances. These people get the pinched directly and some start maxing their credit card already.

[snail]

I just have a lead foot, so it would be really hard for me to get that kind of milage.
Agreed on your point about the overall cost of living standard. However this thing affect some family more than others, a large family and people that commute more for instances. These people get the pinched directly and some start maxing their credit card already.

[Eugene]

Beemer will get 30-32 mpg freeway if you don’t drive it like you stole it.

My point is, gasoline is up a lot and food may be up a little bit but gasoline and food are small parts of a typical family budget. An average American family spends more on car loan & insurance payments than on food. You should average prices properly instead of focusing on a couple of low-importance items.

[Eugene]

Beemer will get 30-32 mpg freeway if you don’t drive it like you stole it.

My point is, gasoline is up a lot and food may be up a little bit but gasoline and food are small parts of a typical family budget. An average American family spends more on car loan & insurance payments than on food. You should average prices properly instead of focusing on a couple of low-importance items.

[Eugene]

Beemer will get 30-32 mpg freeway if you don’t drive it like you stole it.

My point is, gasoline is up a lot and food may be up a little bit but gasoline and food are small parts of a typical family budget. An average American family spends more on car loan & insurance payments than on food. You should average prices properly instead of focusing on a couple of low-importance items.

[snail]

esmith,
per your statement “my employer pays most of my health insurance anyway.” so you almost get a completely free health care. so this doesn’t apply to you.
You don’t eat so much. So cost of food doesn’t apply to you.
Your car is very thrifty with fuel (okay now $3.25/ gallon for premium and its only cost you $4.00 for 40 miles, so you get about 32mpg on your Beemer. What kind of beemer is this, a hybrid?). Again gas price doesn’t affect you.
Lets forget about utilities, who needs an AC anyway when you could watch the 50″ Plasma.
This make you not affected by all this price squeeze, but what I noticed is 2 gallons of milk is about $4.00 early of this year, now its about $5.50 (thats is more than 10% in less than a year), the inflation is real and I don’t care what the fed is projecting on the inflation number they generated its all garbage.

[snail]

esmith,
per your statement “my employer pays most of my health insurance anyway.” so you almost get a completely free health care. so this doesn’t apply to you.
You don’t eat so much. So cost of food doesn’t apply to you.
Your car is very thrifty with fuel (okay now $3.25/ gallon for premium and its only cost you $4.00 for 40 miles, so you get about 32mpg on your Beemer. What kind of beemer is this, a hybrid?). Again gas price doesn’t affect you.
Lets forget about utilities, who needs an AC anyway when you could watch the 50″ Plasma.
This make you not affected by all this price squeeze, but what I noticed is 2 gallons of milk is about $4.00 early of this year, now its about $5.50 (thats is more than 10% in less than a year), the inflation is real and I don’t care what the fed is projecting on the inflation number they generated its all garbage.

[snail]

esmith,
per your statement “my employer pays most of my health insurance anyway.” so you almost get a completely free health care. so this doesn’t apply to you.
You don’t eat so much. So cost of food doesn’t apply to you.
Your car is very thrifty with fuel (okay now $3.25/ gallon for premium and its only cost you $4.00 for 40 miles, so you get about 32mpg on your Beemer. What kind of beemer is this, a hybrid?). Again gas price doesn’t affect you.
Lets forget about utilities, who needs an AC anyway when you could watch the 50″ Plasma.
This make you not affected by all this price squeeze, but what I noticed is 2 gallons of milk is about $4.00 early of this year, now its about $5.50 (thats is more than 10% in less than a year), the inflation is real and I don’t care what the fed is projecting on the inflation number they generated its all garbage.

[Eugene]

unless you drive, eat, pay utilities, and get completely free health care.

okay…
Gasoline is past $3. Oh the horror! It costs me whopping $4 to drive my BMW to work every day (20 miles each way). If I were working as a burger flipper, it would be 1/2 of my hourly salary or 6% of my total budget. I happen to make a little more than a burger fliipper. I think I’ll manage even if gasoline gets past $10 mark.

Food … hmmm … somehow I don’t see any growth in food prices. Actually no, I do. Chipotle burritos are about 50c more expensive now than they were in 2002. That’s like 10% increase. And again, I don’t eat so much that my budget would hurt from a 10% increase in food prices.

Utilities and healthcare… I’ll pass here… I don’t remember how much utilities cost 5 years ago, and my employer pays most of my health insurance anyway.

Now. Where do I _really_ spend my money?

Cars. In 2002, I could buy a new Toyota Corolla starting at $12.5k or a new BMW 330 (225 hp) for $37k. Today I can buy a new bigger Toyota Corolla starting at $14.5k or a new BMW 328 (230 hp) for $32k. Weak dollar you say? What weak dollar?

Rent. In 2002 I rented a 1br apartment in UTC for $1100 a month. Today these apartments go for $1350.

Electronics. Today you can get a nice 19″ LCD monitor for $250 or a 50″ plasma TV for $1500. How much did they cost 5 years ago?

Clothes? Books? Toys? Furniture?

I rest my case …

[Eugene]

unless you drive, eat, pay utilities, and get completely free health care.

okay…
Gasoline is past $3. Oh the horror! It costs me whopping $4 to drive my BMW to work every day (20 miles each way). If I were working as a burger flipper, it would be 1/2 of my hourly salary or 6% of my total budget. I happen to make a little more than a burger fliipper. I think I’ll manage even if gasoline gets past $10 mark.

Food … hmmm … somehow I don’t see any growth in food prices. Actually no, I do. Chipotle burritos are about 50c more expensive now than they were in 2002. That’s like 10% increase. And again, I don’t eat so much that my budget would hurt from a 10% increase in food prices.

Utilities and healthcare… I’ll pass here… I don’t remember how much utilities cost 5 years ago, and my employer pays most of my health insurance anyway.

Now. Where do I _really_ spend my money?

Cars. In 2002, I could buy a new Toyota Corolla starting at $12.5k or a new BMW 330 (225 hp) for $37k. Today I can buy a new bigger Toyota Corolla starting at $14.5k or a new BMW 328 (230 hp) for $32k. Weak dollar you say? What weak dollar?

Rent. In 2002 I rented a 1br apartment in UTC for $1100 a month. Today these apartments go for $1350.

Electronics. Today you can get a nice 19″ LCD monitor for $250 or a 50″ plasma TV for $1500. How much did they cost 5 years ago?

Clothes? Books? Toys? Furniture?

I rest my case …

[Eugene]

unless you drive, eat, pay utilities, and get completely free health care.

okay…
Gasoline is past $3. Oh the horror! It costs me whopping $4 to drive my BMW to work every day (20 miles each way). If I were working as a burger flipper, it would be 1/2 of my hourly salary or 6% of my total budget. I happen to make a little more than a burger fliipper. I think I’ll manage even if gasoline gets past $10 mark.

Food … hmmm … somehow I don’t see any growth in food prices. Actually no, I do. Chipotle burritos are about 50c more expensive now than they were in 2002. That’s like 10% increase. And again, I don’t eat so much that my budget would hurt from a 10% increase in food prices.

Utilities and healthcare… I’ll pass here… I don’t remember how much utilities cost 5 years ago, and my employer pays most of my health insurance anyway.

Now. Where do I _really_ spend my money?

Cars. In 2002, I could buy a new Toyota Corolla starting at $12.5k or a new BMW 330 (225 hp) for $37k. Today I can buy a new bigger Toyota Corolla starting at $14.5k or a new BMW 328 (230 hp) for $32k. Weak dollar you say? What weak dollar?

Rent. In 2002 I rented a 1br apartment in UTC for $1100 a month. Today these apartments go for $1350.

Electronics. Today you can get a nice 19″ LCD monitor for $250 or a 50″ plasma TV for $1500. How much did they cost 5 years ago?

Clothes? Books? Toys? Furniture?

I rest my case …

[bsrsharma]

house prices were not part of inflation calculation

PW – Actually BLS uses a highly convoluted formula called "Owner's Equivalent Rent" to shoehorn home prices into CPI. This is very inaccurate as rent and real ownership costs don't correlate very well, especially during bubble conditions.

http://www.bls.gov/cpi/cpifact6.htm

[bsrsharma]

house prices were not part of inflation calculation

PW – Actually BLS uses a highly convoluted formula called "Owner's Equivalent Rent" to shoehorn home prices into CPI. This is very inaccurate as rent and real ownership costs don't correlate very well, especially during bubble conditions.

http://www.bls.gov/cpi/cpifact6.htm

[bsrsharma]

house prices were not part of inflation calculation

PW – Actually BLS uses a highly convoluted formula called "Owner's Equivalent Rent" to shoehorn home prices into CPI. This is very inaccurate as rent and real ownership costs don't correlate very well, especially during bubble conditions.

http://www.bls.gov/cpi/cpifact6.htm

[patientlywaiting]

I thought that house prices were not part of inflation calculation. If that were the case, inflation since 2000 would have been through the roof, especially in areas like San Diego.

The Fed is just trying to calm the markets. Any kind of honest public assessment from Bernanke would cause panic.

The Fed will continue to predict growth even after the recession begins. I don’t think that they will ever come out and declare that they expect a recession.

[patientlywaiting]

I thought that house prices were not part of inflation calculation. If that were the case, inflation since 2000 would have been through the roof, especially in areas like San Diego.

The Fed is just trying to calm the markets. Any kind of honest public assessment from Bernanke would cause panic.

The Fed will continue to predict growth even after the recession begins. I don’t think that they will ever come out and declare that they expect a recession.

[patientlywaiting]

I thought that house prices were not part of inflation calculation. If that were the case, inflation since 2000 would have been through the roof, especially in areas like San Diego.

The Fed is just trying to calm the markets. Any kind of honest public assessment from Bernanke would cause panic.

The Fed will continue to predict growth even after the recession begins. I don’t think that they will ever come out and declare that they expect a recession.

[bsrsharma]

hipmatt – Macroeconomics is messy due to large number of variables. Actually, Bernanke is being correct on his statements.

1. Inflation is moderating – The fact that house prices are falling at the rate of at least 10% per year nationally and even upto 50% in some isolated markets means overall inflation has to come down. If a person spends, say 30% of income on housing, and house prices fall 10% per year, that alone contributes 3% per year of annual deflation.

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

Rest of the statements, I won’t attempt to side with BB since I don’t agree with him. But surely that man is not an idiot. He is just interpreting the data differently.

[bsrsharma]

hipmatt – Macroeconomics is messy due to large number of variables. Actually, Bernanke is being correct on his statements.

1. Inflation is moderating – The fact that house prices are falling at the rate of at least 10% per year nationally and even upto 50% in some isolated markets means overall inflation has to come down. If a person spends, say 30% of income on housing, and house prices fall 10% per year, that alone contributes 3% per year of annual deflation.

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

Rest of the statements, I won’t attempt to side with BB since I don’t agree with him. But surely that man is not an idiot. He is just interpreting the data differently.

[bsrsharma]

hipmatt – Macroeconomics is messy due to large number of variables. Actually, Bernanke is being correct on his statements.

1. Inflation is moderating – The fact that house prices are falling at the rate of at least 10% per year nationally and even upto 50% in some isolated markets means overall inflation has to come down. If a person spends, say 30% of income on housing, and house prices fall 10% per year, that alone contributes 3% per year of annual deflation.

2. Weak $ is a plus in some respects – it reduces trade deficits, increases exports, that in turn causes rise in employment etc., Weak $ only hurts importers and people with large accounts of cash (or cash equivalents). Since most Americans have net negative cash (or cash equivalent) – being in net debt generally, inflation is actually not bad for them.

Rest of the statements, I won’t attempt to side with BB since I don’t agree with him. But surely that man is not an idiot. He is just interpreting the data differently.

[Arraya]

Ben Bernanke: Hello, how may I help you?

Robert Rubin: Dr. Chairman, it’s your old friend Bob over at Citi.

Bernanke: Oh Bob, what a pleasure. It’s nice to hear from you again. What can I do for you?

Rubin: Well Ben, we’ve got some problems over here. Now I trust you will be discrete on this. We can’t let this get out in the market. I think we’re insolvent.

Bernanke: What?

Rubin: See we have about $65 billion in capital, but we have $55 billion in Super Senior CDOs, and no one will buy them from us.

Bernanke: No one?

Rubin: We can’t sell them for $1. I’m now being told that if no one wants to buy pieces of paper from you, it turns out they are worthless. Believe me. I’m as shocked as you are.

Bernanke: But don’t you have a lot of cash flow? That’s what I’ve been hearing on CNBC.

Rubin: Well, in addition, we have $80 billion in SIV exposure, an additional $80 billion in conduit exposure, and a lot, lot more in derivative exposure that might not be worth what we said it was when we paid out our bonuses over the last couple years. I talked to some ex-traders, but they aren’t inclined to give back the bonuses. You add it all up, and we don’t have enough money to meet our liabilities.

Bernanke: I see. I hadn’t realized that.

Rubin: We have a lot of cash flow, but our creditors are no longer buying that story. Counterparties are asking use to put up more capital for every trade we do, traders are leaving, and the whole thing is starting to wind down. If this information ever gets public, we could see our depositors start to leave as well. Oh, and with the economy possibly going into recession, we might have a lot more losses from credit cards.

Bernanke: I see. I understand how important what you are telling me is. I spent years studying the Great Depression.

Rubin: Right, and the worst part about it is that other banks have tremendous amount of counterparty exposure to us. There are $45 trillion in Credit Default Swaps in the system right now. Our accounting isn’t that good, so I can’t even tell you how many trillion we have with other banks. But I do believe it’s in the trillions. So if we start to go down, well, you know what happens.

Bernanke: A total meltdown of the U.S. financial system.

Rubin: Right! So you’ve got to help me out.

Bernanke: So how can I help you? You know I’m here to help. That’s my entire job. You should know that after your time in the government.

Rubin: Yes. We were good at bailing people out. We saved the world. So here’s what I need. I need you to give us $500 billion. No loan. No lowering interest rates. Those things are not going to help. They will just prolong the day. Look what lowering interest rates did to Japan. Their stock market is still below where it was 17 years ago. No, that route won’t do. What I need is cold, hard cash.

Bernanke: But I said I would never bail out investors and bondholders for the risks they took.

Rubin: Yes, but we’re talking about the entire U.S. banking system.

Bernanke: But why not just lower rates?

Rubin: Because banks would just take that money and buy commodities and move it off-shore. They know the banking system is weak, so they don’t want to lend into it anymore. They want to make a profit. It’s amazing how selfish people can be.

Bernanke: Hmmmm. So how does it work?

Rubin: Well, usually it works by the government claiming that there is no other option, that financial meltdown is the only outcome. You talk about the risk and how the government was forced to take this step in order to save the public, to protect the people. In return, I call my Democratic friends and tell them what a great job you are doing in the face of such troubling times, and I work behind the scenes to ensure that you will get re-nominated to be Fed Chairman. I also work my banking contacts to ensure that you get an extremely high-paying job once you’re out of office.

Bernanke: Is that how it worked for you?

Rubin: Definitely. I had a great job at Citi, earning a ton of money, without real responsibilities. But then this darn credit crunch came along. I wanted to bail, but Sanford Weill convinced me how bad that would look for my legacy. So I’m here to protect my legacy, and of course the entire U.S. banking system. Anyway, you guys were the ones who created this mess.

Bernanke: What? Us guys? What do you mean?

Rubin: Well, when markets were sky high and Long Term Capital threatened to bring them down a little, you lowered rates, and equities skyrocketed to new highs. That was back in 1998. The Internet Bubble should have been popped, not encouraged! Then in 2001, you dramatically lowered rates. It caused this Housing Bubble. And you and Greenspan did nothing to remove excess credit from the markets. In the 1990s, credit was growing $1 trillion a year. Over the last years, it’s been growing $4.5 trillion a year. You blamed the Chinese for this excess liquidity. Now that was smart. I couldn’t have thought of a better one than that, but it turns out it wasn’t true. It was you and Greenspan who were creating all the liquidity and encouraging risky trading practices by all the major banks. Well, we took the risk you encouraged us to take, and amazingly markets didn’t go up forever. Remember, you guys are the ones who set the rules. You told us to leverage up our balance sheets 20 to 1, and we were also able to work with other people in Washington to get that ratio up further by hiding things off our balance sheet, just like Enron did. But it was all legally done this time. It was allowed by Washington.

Bernanke: But you know the dollar is at an all-time low and people are running away from our currency?

Rubin: I know, but don’t worry. I’ve sold a lot of my shares in Citi, and I’m well diversified. I appreciate your concern.

Bernanke: No, I meant what will the American people think?

Rubin: As long as you talk about the greater good and how you’re doing it for their sake, you’ll get re-nominated. Plus, you can’t even imagine the New York City perks at these big banks.

Bernanke: What are my other options?

Rubin: Well, none really. The only other option is that we unwind Citi and sell it off in pieces. We might have a strong dollar, but we’ll have quite a recession. Banks will stop lending. You think the housing market is bad now? Just imagine that scenario. As for me, I lose my job and Jaime Dimon gets the last laugh. He’ll kick away Sanford Weill’s life work and legacy. You know I think Dimon is a Republican, and I don’t think they are going to win the next election. So you might want to think twice about going down that route. That might be the morally right thing to do. But it won’t help you.

Bernanke: But if we bail out Citi, people will lose confidence in the system. The dollar will plummet. Gold will skyrocket. Oil will shoot above $100 a barrel and then some. Inflation will be at hand, and long-term interest rates might go up! But I really do like this job. And it would be nice to make some money once I’m done here.

Rubin: I know. It’s great. Maybe you’ll even get on the cover of Time magazine if we pull this off.

Bernanke: Oh Time! I love Time.

Rubin: Yeah, it’s great, isn’t it? I loved the piece they did last week on…Well never mind.

Bernanke: Hmmmm. Let me think about it. We need to come up with some clever way to make it look as if I’m not helping you out directly. I’m sure I can come up with something. You know I have a PhD.

Rubin: I know. That’s why we all supported you for the job.

Bernanke: Ok. Don’t worry. I’ll come up with something. We can definitely get this done. We’ll save Citi.

Rubin: Yes. We’ll save Citi! Get back to me soon, though. We don’t have much time.

Bernanke: Ok. Let me ruminate a little. I’ll get back to you in a jiffy.

Rubin: Ruminate away. That’s what you academics are good for [aside to the audience: and for having no backbone!].

Bernanke: Toodles.

Rubin: Chao.

[Arraya]

Ben Bernanke: Hello, how may I help you?

Robert Rubin: Dr. Chairman, it’s your old friend Bob over at Citi.

Bernanke: Oh Bob, what a pleasure. It’s nice to hear from you again. What can I do for you?

Rubin: Well Ben, we’ve got some problems over here. Now I trust you will be discrete on this. We can’t let this get out in the market. I think we’re insolvent.

Bernanke: What?

Rubin: See we have about $65 billion in capital, but we have $55 billion in Super Senior CDOs, and no one will buy them from us.

Bernanke: No one?

Rubin: We can’t sell them for $1. I’m now being told that if no one wants to buy pieces of paper from you, it turns out they are worthless. Believe me. I’m as shocked as you are.

Bernanke: But don’t you have a lot of cash flow? That’s what I’ve been hearing on CNBC.

Rubin: Well, in addition, we have $80 billion in SIV exposure, an additional $80 billion in conduit exposure, and a lot, lot more in derivative exposure that might not be worth what we said it was when we paid out our bonuses over the last couple years. I talked to some ex-traders, but they aren’t inclined to give back the bonuses. You add it all up, and we don’t have enough money to meet our liabilities.

Bernanke: I see. I hadn’t realized that.

Rubin: We have a lot of cash flow, but our creditors are no longer buying that story. Counterparties are asking use to put up more capital for every trade we do, traders are leaving, and the whole thing is starting to wind down. If this information ever gets public, we could see our depositors start to leave as well. Oh, and with the economy possibly going into recession, we might have a lot more losses from credit cards.

Bernanke: I see. I understand how important what you are telling me is. I spent years studying the Great Depression.

Rubin: Right, and the worst part about it is that other banks have tremendous amount of counterparty exposure to us. There are $45 trillion in Credit Default Swaps in the system right now. Our accounting isn’t that good, so I can’t even tell you how many trillion we have with other banks. But I do believe it’s in the trillions. So if we start to go down, well, you know what happens.

Bernanke: A total meltdown of the U.S. financial system.

Rubin: Right! So you’ve got to help me out.

Bernanke: So how can I help you? You know I’m here to help. That’s my entire job. You should know that after your time in the government.

Rubin: Yes. We were good at bailing people out. We saved the world. So here’s what I need. I need you to give us $500 billion. No loan. No lowering interest rates. Those things are not going to help. They will just prolong the day. Look what lowering interest rates did to Japan. Their stock market is still below where it was 17 years ago. No, that route won’t do. What I need is cold, hard cash.

Bernanke: But I said I would never bail out investors and bondholders for the risks they took.

Rubin: Yes, but we’re talking about the entire U.S. banking system.

Bernanke: But why not just lower rates?

Rubin: Because banks would just take that money and buy commodities and move it off-shore. They know the banking system is weak, so they don’t want to lend into it anymore. They want to make a profit. It’s amazing how selfish people can be.

Bernanke: Hmmmm. So how does it work?

Rubin: Well, usually it works by the government claiming that there is no other option, that financial meltdown is the only outcome. You talk about the risk and how the government was forced to take this step in order to save the public, to protect the people. In return, I call my Democratic friends and tell them what a great job you are doing in the face of such troubling times, and I work behind the scenes to ensure that you will get re-nominated to be Fed Chairman. I also work my banking contacts to ensure that you get an extremely high-paying job once you’re out of office.

Bernanke: Is that how it worked for you?

Rubin: Definitely. I had a great job at Citi, earning a ton of money, without real responsibilities. But then this darn credit crunch came along. I wanted to bail, but Sanford Weill convinced me how bad that would look for my legacy. So I’m here to protect my legacy, and of course the entire U.S. banking system. Anyway, you guys were the ones who created this mess.

Bernanke: What? Us guys? What do you mean?

Rubin: Well, when markets were sky high and Long Term Capital threatened to bring them down a little, you lowered rates, and equities skyrocketed to new highs. That was back in 1998. The Internet Bubble should have been popped, not encouraged! Then in 2001, you dramatically lowered rates. It caused this Housing Bubble. And you and Greenspan did nothing to remove excess credit from the markets. In the 1990s, credit was growing $1 trillion a year. Over the last years, it’s been growing $4.5 trillion a year. You blamed the Chinese for this excess liquidity. Now that was smart. I couldn’t have thought of a better one than that, but it turns out it wasn’t true. It was you and Greenspan who were creating all the liquidity and encouraging risky trading practices by all the major banks. Well, we took the risk you encouraged us to take, and amazingly markets didn’t go up forever. Remember, you guys are the ones who set the rules. You told us to leverage up our balance sheets 20 to 1, and we were also able to work with other people in Washington to get that ratio up further by hiding things off our balance sheet, just like Enron did. But it was all legally done this time. It was allowed by Washington.

Bernanke: But you know the dollar is at an all-time low and people are running away from our currency?

Rubin: I know, but don’t worry. I’ve sold a lot of my shares in Citi, and I’m well diversified. I appreciate your concern.

Bernanke: No, I meant what will the American people think?

Rubin: As long as you talk about the greater good and how you’re doing it for their sake, you’ll get re-nominated. Plus, you can’t even imagine the New York City perks at these big banks.

Bernanke: What are my other options?

Rubin: Well, none really. The only other option is that we unwind Citi and sell it off in pieces. We might have a strong dollar, but we’ll have quite a recession. Banks will stop lending. You think the housing market is bad now? Just imagine that scenario. As for me, I lose my job and Jaime Dimon gets the last laugh. He’ll kick away Sanford Weill’s life work and legacy. You know I think Dimon is a Republican, and I don’t think they are going to win the next election. So you might want to think twice about going down that route. That might be the morally right thing to do. But it won’t help you.

Bernanke: But if we bail out Citi, people will lose confidence in the system. The dollar will plummet. Gold will skyrocket. Oil will shoot above $100 a barrel and then some. Inflation will be at hand, and long-term interest rates might go up! But I really do like this job. And it would be nice to make some money once I’m done here.

Rubin: I know. It’s great. Maybe you’ll even get on the cover of Time magazine if we pull this off.

Bernanke: Oh Time! I love Time.

Rubin: Yeah, it’s great, isn’t it? I loved the piece they did last week on…Well never mind.

Bernanke: Hmmmm. Let me think about it. We need to come up with some clever way to make it look as if I’m not helping you out directly. I’m sure I can come up with something. You know I have a PhD.

Rubin: I know. That’s why we all supported you for the job.

Bernanke: Ok. Don’t worry. I’ll come up with something. We can definitely get this done. We’ll save Citi.

Rubin: Yes. We’ll save Citi! Get back to me soon, though. We don’t have much time.

Bernanke: Ok. Let me ruminate a little. I’ll get back to you in a jiffy.

Rubin: Ruminate away. That’s what you academics are good for [aside to the audience: and for having no backbone!].

Bernanke: Toodles.

Rubin: Chao.

[Arraya]

Ben Bernanke: Hello, how may I help you?

Robert Rubin: Dr. Chairman, it’s your old friend Bob over at Citi.

Bernanke: Oh Bob, what a pleasure. It’s nice to hear from you again. What can I do for you?

Rubin: Well Ben, we’ve got some problems over here. Now I trust you will be discrete on this. We can’t let this get out in the market. I think we’re insolvent.

Bernanke: What?

Rubin: See we have about $65 billion in capital, but we have $55 billion in Super Senior CDOs, and no one will buy them from us.

Bernanke: No one?

Rubin: We can’t sell them for $1. I’m now being told that if no one wants to buy pieces of paper from you, it turns out they are worthless. Believe me. I’m as shocked as you are.

Bernanke: But don’t you have a lot of cash flow? That’s what I’ve been hearing on CNBC.

Rubin: Well, in addition, we have $80 billion in SIV exposure, an additional $80 billion in conduit exposure, and a lot, lot more in derivative exposure that might not be worth what we said it was when we paid out our bonuses over the last couple years. I talked to some ex-traders, but they aren’t inclined to give back the bonuses. You add it all up, and we don’t have enough money to meet our liabilities.

Bernanke: I see. I hadn’t realized that.

Rubin: We have a lot of cash flow, but our creditors are no longer buying that story. Counterparties are asking use to put up more capital for every trade we do, traders are leaving, and the whole thing is starting to wind down. If this information ever gets public, we could see our depositors start to leave as well. Oh, and with the economy possibly going into recession, we might have a lot more losses from credit cards.

Bernanke: I see. I understand how important what you are telling me is. I spent years studying the Great Depression.

Rubin: Right, and the worst part about it is that other banks have tremendous amount of counterparty exposure to us. There are $45 trillion in Credit Default Swaps in the system right now. Our accounting isn’t that good, so I can’t even tell you how many trillion we have with other banks. But I do believe it’s in the trillions. So if we start to go down, well, you know what happens.

Bernanke: A total meltdown of the U.S. financial system.

Rubin: Right! So you’ve got to help me out.

Bernanke: So how can I help you? You know I’m here to help. That’s my entire job. You should know that after your time in the government.

Rubin: Yes. We were good at bailing people out. We saved the world. So here’s what I need. I need you to give us $500 billion. No loan. No lowering interest rates. Those things are not going to help. They will just prolong the day. Look what lowering interest rates did to Japan. Their stock market is still below where it was 17 years ago. No, that route won’t do. What I need is cold, hard cash.

Bernanke: But I said I would never bail out investors and bondholders for the risks they took.

Rubin: Yes, but we’re talking about the entire U.S. banking system.

Bernanke: But why not just lower rates?

Rubin: Because banks would just take that money and buy commodities and move it off-shore. They know the banking system is weak, so they don’t want to lend into it anymore. They want to make a profit. It’s amazing how selfish people can be.

Bernanke: Hmmmm. So how does it work?

Rubin: Well, usually it works by the government claiming that there is no other option, that financial meltdown is the only outcome. You talk about the risk and how the government was forced to take this step in order to save the public, to protect the people. In return, I call my Democratic friends and tell them what a great job you are doing in the face of such troubling times, and I work behind the scenes to ensure that you will get re-nominated to be Fed Chairman. I also work my banking contacts to ensure that you get an extremely high-paying job once you’re out of office.

Bernanke: Is that how it worked for you?

Rubin: Definitely. I had a great job at Citi, earning a ton of money, without real responsibilities. But then this darn credit crunch came along. I wanted to bail, but Sanford Weill convinced me how bad that would look for my legacy. So I’m here to protect my legacy, and of course the entire U.S. banking system. Anyway, you guys were the ones who created this mess.

Bernanke: What? Us guys? What do you mean?

Rubin: Well, when markets were sky high and Long Term Capital threatened to bring them down a little, you lowered rates, and equities skyrocketed to new highs. That was back in 1998. The Internet Bubble should have been popped, not encouraged! Then in 2001, you dramatically lowered rates. It caused this Housing Bubble. And you and Greenspan did nothing to remove excess credit from the markets. In the 1990s, credit was growing $1 trillion a year. Over the last years, it’s been growing $4.5 trillion a year. You blamed the Chinese for this excess liquidity. Now that was smart. I couldn’t have thought of a better one than that, but it turns out it wasn’t true. It was you and Greenspan who were creating all the liquidity and encouraging risky trading practices by all the major banks. Well, we took the risk you encouraged us to take, and amazingly markets didn’t go up forever. Remember, you guys are the ones who set the rules. You told us to leverage up our balance sheets 20 to 1, and we were also able to work with other people in Washington to get that ratio up further by hiding things off our balance sheet, just like Enron did. But it was all legally done this time. It was allowed by Washington.

Bernanke: But you know the dollar is at an all-time low and people are running away from our currency?

Rubin: I know, but don’t worry. I’ve sold a lot of my shares in Citi, and I’m well diversified. I appreciate your concern.

Bernanke: No, I meant what will the American people think?

Rubin: As long as you talk about the greater good and how you’re doing it for their sake, you’ll get re-nominated. Plus, you can’t even imagine the New York City perks at these big banks.

Bernanke: What are my other options?

Rubin: Well, none really. The only other option is that we unwind Citi and sell it off in pieces. We might have a strong dollar, but we’ll have quite a recession. Banks will stop lending. You think the housing market is bad now? Just imagine that scenario. As for me, I lose my job and Jaime Dimon gets the last laugh. He’ll kick away Sanford Weill’s life work and legacy. You know I think Dimon is a Republican, and I don’t think they are going to win the next election. So you might want to think twice about going down that route. That might be the morally right thing to do. But it won’t help you.

Bernanke: But if we bail out Citi, people will lose confidence in the system. The dollar will plummet. Gold will skyrocket. Oil will shoot above $100 a barrel and then some. Inflation will be at hand, and long-term interest rates might go up! But I really do like this job. And it would be nice to make some money once I’m done here.

Rubin: I know. It’s great. Maybe you’ll even get on the cover of Time magazine if we pull this off.

Bernanke: Oh Time! I love Time.

Rubin: Yeah, it’s great, isn’t it? I loved the piece they did last week on…Well never mind.

Bernanke: Hmmmm. Let me think about it. We need to come up with some clever way to make it look as if I’m not helping you out directly. I’m sure I can come up with something. You know I have a PhD.

Rubin: I know. That’s why we all supported you for the job.

Bernanke: Ok. Don’t worry. I’ll come up with something. We can definitely get this done. We’ll save Citi.

Rubin: Yes. We’ll save Citi! Get back to me soon, though. We don’t have much time.

Bernanke: Ok. Let me ruminate a little. I’ll get back to you in a jiffy.

Rubin: Ruminate away. That’s what you academics are good for [aside to the audience: and for having no backbone!].

Bernanke: Toodles.

Rubin: Chao.

[Arraya]

Ben Bernanke: Hello, how may I help you?

Robert Rubin: Dr. Chairman, it’s your old friend Bob over at Citi.

Bernanke: Oh Bob, what a pleasure. It’s nice to hear from you again. What can I do for you?

Rubin: Well Ben, we’ve got some problems over here. Now I trust you will be discrete on this. We can’t let this get out in the market. I think we’re insolvent.

Bernanke: What?

Rubin: See we have about $65 billion in capital, but we have $55 billion in Super Senior CDOs, and no one will buy them from us.

Bernanke: No one?

Rubin: We can’t sell them for $1. I’m now being told that if no one wants to buy pieces of paper from you, it turns out they are worthless. Believe me. I’m as shocked as you are.

Bernanke: But don’t you have a lot of cash flow? That’s what I’ve been hearing on CNBC.

Rubin: Well, in addition, we have $80 billion in SIV exposure, an additional $80 billion in conduit exposure, and a lot, lot more in derivative exposure that might not be worth what we said it was when we paid out our bonuses over the last couple years. I talked to some ex-traders, but they aren’t inclined to give back the bonuses. You add it all up, and we don’t have enough money to meet our liabilities.

Bernanke: I see. I hadn’t realized that.

Rubin: We have a lot of cash flow, but our creditors are no longer buying that story. Counterparties are asking use to put up more capital for every trade we do, traders are leaving, and the whole thing is starting to wind down. If this information ever gets public, we could see our depositors start to leave as well. Oh, and with the economy possibly going into recession, we might have a lot more losses from credit cards.

Bernanke: I see. I understand how important what you are telling me is. I spent years studying the Great Depression.

Rubin: Right, and the worst part about it is that other banks have tremendous amount of counterparty exposure to us. There are $45 trillion in Credit Default Swaps in the system right now. Our accounting isn’t that good, so I can’t even tell you how many trillion we have with other banks. But I do believe it’s in the trillions. So if we start to go down, well, you know what happens.

Bernanke: A total meltdown of the U.S. financial system.

Rubin: Right! So you’ve got to help me out.

Bernanke: So how can I help you? You know I’m here to help. That’s my entire job. You should know that after your time in the government.

Rubin: Yes. We were good at bailing people out. We saved the world. So here’s what I need. I need you to give us $500 billion. No loan. No lowering interest rates. Those things are not going to help. They will just prolong the day. Look what lowering interest rates did to Japan. Their stock market is still below where it was 17 years ago. No, that route won’t do. What I need is cold, hard cash.

Bernanke: But I said I would never bail out investors and bondholders for the risks they took.

Rubin: Yes, but we’re talking about the entire U.S. banking system.

Bernanke: But why not just lower rates?

Rubin: Because banks would just take that money and buy commodities and move it off-shore. They know the banking system is weak, so they don’t want to lend into it anymore. They want to make a profit. It’s amazing how selfish people can be.

Bernanke: Hmmmm. So how does it work?

Rubin: Well, usually it works by the government claiming that there is no other option, that financial meltdown is the only outcome. You talk about the risk and how the government was forced to take this step in order to save the public, to protect the people. In return, I call my Democratic friends and tell them what a great job you are doing in the face of such troubling times, and I work behind the scenes to ensure that you will get re-nominated to be Fed Chairman. I also work my banking contacts to ensure that you get an extremely high-paying job once you’re out of office.

Bernanke: Is that how it worked for you?

Rubin: Definitely. I had a great job at Citi, earning a ton of money, without real responsibilities. But then this darn credit crunch came along. I wanted to bail, but Sanford Weill convinced me how bad that would look for my legacy. So I’m here to protect my legacy, and of course the entire U.S. banking system. Anyway, you guys were the ones who created this mess.

Bernanke: What? Us guys? What do you mean?

Rubin: Well, when markets were sky high and Long Term Capital threatened to bring them down a little, you lowered rates, and equities skyrocketed to new highs. That was back in 1998. The Internet Bubble should have been popped, not encouraged! Then in 2001, you dramatically lowered rates. It caused this Housing Bubble. And you and Greenspan did nothing to remove excess credit from the markets. In the 1990s, credit was growing $1 trillion a year. Over the last years, it’s been growing $4.5 trillion a year. You blamed the Chinese for this excess liquidity. Now that was smart. I couldn’t have thought of a better one than that, but it turns out it wasn’t true. It was you and Greenspan who were creating all the liquidity and encouraging risky trading practices by all the major banks. Well, we took the risk you encouraged us to take, and amazingly markets didn’t go up forever. Remember, you guys are the ones who set the rules. You told us to leverage up our balance sheets 20 to 1, and we were also able to work with other people in Washington to get that ratio up further by hiding things off our balance sheet, just like Enron did. But it was all legally done this time. It was allowed by Washington.

Bernanke: But you know the dollar is at an all-time low and people are running away from our currency?

Rubin: I know, but don’t worry. I’ve sold a lot of my shares in Citi, and I’m well diversified. I appreciate your concern.

Bernanke: No, I meant what will the American people think?

Rubin: As long as you talk about the greater good and how you’re doing it for their sake, you’ll get re-nominated. Plus, you can’t even imagine the New York City perks at these big banks.

Bernanke: What are my other options?

Rubin: Well, none really. The only other option is that we unwind Citi and sell it off in pieces. We might have a strong dollar, but we’ll have quite a recession. Banks will stop lending. You think the housing market is bad now? Just imagine that scenario. As for me, I lose my job and Jaime Dimon gets the last laugh. He’ll kick away Sanford Weill’s life work and legacy. You know I think Dimon is a Republican, and I don’t think they are going to win the next election. So you might want to think twice about going down that route. That might be the morally right thing to do. But it won’t help you.

Bernanke: But if we bail out Citi, people will lose confidence in the system. The dollar will plummet. Gold will skyrocket. Oil will shoot above $100 a barrel and then some. Inflation will be at hand, and long-term interest rates might go up! But I really do like this job. And it would be nice to make some money once I’m done here.

Rubin: I know. It’s great. Maybe you’ll even get on the cover of Time magazine if we pull this off.

Bernanke: Oh Time! I love Time.

Rubin: Yeah, it’s great, isn’t it? I loved the piece they did last week on…Well never mind.

Bernanke: Hmmmm. Let me think about it. We need to come up with some clever way to make it look as if I’m not helping you out directly. I’m sure I can come up with something. You know I have a PhD.

Rubin: I know. That’s why we all supported you for the job.

Bernanke: Ok. Don’t worry. I’ll come up with something. We can definitely get this done. We’ll save Citi.

Rubin: Yes. We’ll save Citi! Get back to me soon, though. We don’t have much time.

Bernanke: Ok. Let me ruminate a little. I’ll get back to you in a jiffy.

Rubin: Ruminate away. That’s what you academics are good for [aside to the audience: and for having no backbone!].

Bernanke: Toodles.

Rubin: Chao.

[TheBreeze]

Didn’t Bernake say at one point that the government hadn’t put any money into CDOs? Isn’t that an outright lie? Hasn’t the fed bought like $100 billion worth of CDOs through the discount window? Bernake seems like he’s in way over his head.

[TheBreeze]

Didn’t Bernake say at one point that the government hadn’t put any money into CDOs? Isn’t that an outright lie? Hasn’t the fed bought like $100 billion worth of CDOs through the discount window? Bernake seems like he’s in way over his head.

[TheBreeze]

Didn’t Bernake say at one point that the government hadn’t put any money into CDOs? Isn’t that an outright lie? Hasn’t the fed bought like $100 billion worth of CDOs through the discount window? Bernake seems like he’s in way over his head.

[TheBreeze]

Didn’t Bernake say at one point that the government hadn’t put any money into CDOs? Isn’t that an outright lie? Hasn’t the fed bought like $100 billion worth of CDOs through the discount window? Bernake seems like he’s in way over his head.

[Author]

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