3 NOV 2010, Wednesday

• This post is dedicated to you Ben Bernanke...
• Background music to start while you go reading the next items...Bennie does his very best Barry White!
• The following is a collection of posts from Karl Denninger whom I happen to agree with regarding the Federal Reserve's decision today regarding QE2...
• Today's Fed announcement analyzed.
• Another hit for the addicts...
• Congresswoman condemns QE2...
• Glenn Beck charges perjury on Bernanke...
• The deception builds...
• Ben Bernanke admits that he's targeting stock prices?
• Today was a watershed moment in our history.  You'll notice that I've put forth many discussions recently leading up to QE2 (including the failure of QE1).  They're my opinions and, without a doubt, I could be very wrong.
• But...IT'S MONETIZE THE DEBT TIME.........YEAH!!!
• Welcome to a brave new world...we've been solidly thrust into an experiment.  I'm not comfortable with either my country, my family and neighbors or myself as a lab rat.  Yet, here we are!  Find the cheese...or electric shocks!
• Fork in the road time...
• The possible outcomes are two.
• FACT:  QE1 failed....no improvement to the economy however all the hot money pumped assets including bonds, stocks and commodities.  So, double down....
• FACT:  After the Jackson Hole meeting of the Fed Heads in mid-August, the promise of QE2 filled the markets (and the POMO cash) and we've seen stocks burst upward 15% with no decent corrections.  Also, we've seen the grains (ie, corn, wheat, oats, etc) jump 40%.  Cotton has jumped 50%.  And oil, despite inventory levels being at their highest in history, has jumped 20%....$4-5 gas coming?  Don't know about you...but these are things that I tend to need to live life daily.    
• Sheesh!!!  Those moves occurred in 2 months...two!!!  No inflation?  Ben...are you crazy?  Red pill?  Blue pill?  How far does the rabbit hole go?
• FACT:  Producers / manufacturers that use those products will be forced to try to push those price increases through to the consumer (ie, you and I).  If they can't, because consumer demand is low, their profit margins will suffer and thus their stock prices will fall.
• OPINION:  We are at THE fork in the road.  Buckle up....this could be a very wild year ahead of us.
• OPINION (A):  If the price push occurs and people lose faith in the US Dollar, then we'll get very high levels of inflation sustained over a period of time.  Interested in that?  Didn't think so.
• OPINION (B):  If we get a brief inflationary spike and it causes folks to hunker down even more, it will severely impact our already struggling consumer economy.  It could be the trigger that starts the next leg down.  Folks that are rolling off the extended 99 weeks (2 years...used to be 26 weeks) of unemployment benefits will be in max defense mode.  We could get an initial spike higher in interest rates due to fear of a falling Dollar which would force housing prices even lower since people buy a monthly mortgage payment and not the house...would make housing less affordable to average potential buyers lowering demand further.  People already struggling to make ends meet and the monthly payment could be driven to foreclosure / bankruptcy more quickly...not good for the banks holding these loans.  The banks experience higher loan failure rates would require lower lending so that they can meet their legally required reserve ratios.  The Mortgage Backed Securities pitched to investors / pension funds blow up since the cash flow that supposedly is backing them dries up.  Especially not good for pension funds as the Boomers are hitting retirement age.  Etc, etc, etc.
• Do you smell a trap in either direction?
• It's complex...there are so many connections and moving parts in this mess...it's like a Rube Goldberg.  Hopelessly complex and when one domino falls it results in a totally unimaginable cascade of unintended consequences.
• So, thanks Ben!  I'm having a straight up triple whiskey and hoping that you get it right!
• I fear that you aren't.  For example, the elderly who saved their whole lives and were hoping to live off interest income have been totally crushed due to your 0% interest rates...one solid example.  Nice, huh!
• So again, I hope you're right....
• Yet I fear that the rest of us will be paying your tab.
• So good luck to you all while Ben takes care of Da Boyz!