Published by WallStreetWeather.net
“It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value. It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.” – Federal Reserve Chairman Ben Bernanke
The Federal Reserve has a dual mandate, and it’s not price stability and maximum employment. Those are mandates imposed by Congress, and the Fed relishes their independence. But the dual mandate certainly provides a good cover for Bernanke's dual mandate of maximum profits for Wall St. and remaining in power.
Ben Bernanke saw his predecessor Alan Greenspan hailed as a hero while Fed Chairman, only to see the Maestro’s stellar reputation soiled after the credit bubble burst. As the panic slipped into “Depression 2.0,” and as a scholar of the Great Depression, Bernanke knew that he needed to make some bold moves by pulling out all the tools studied back at Princeton’s bubble lab. If the Great Depression lasted longer than it should have because the Fed tightened monetary policy too soon, Bernanke figured that doing the exact opposite would likely pay off and brand him in the history books as an economic hero.
Dropping interest rates down to zero and opening the floodgates of liquidity was Bernanke’s form of window dressing that has allowed Wall St. banks to recapitalize and pass the stress test. A new asset price bubble began rapidly growing in stocks, commodities, bonds, and emerging markets using the dollar as a carry trade. Neptune rules bubbles and inflation. With the Sun squaring Neptune, Bernanke had to assure the audience after giving a speech at the Economic Club of New York today that “supervisory and regulatory methods to restrain undue risk-taking” would ensure “the system is resilient in case an asset price bubble bursts in the future.”
Ever since President Obama announced on August 25 that he was nominating Bernanke to a second term as Chairman, the Fed has stepped up its efforts to emphasize that interest rates would be kept at virtually zero “for an extended period of time” in order to fulfill the dual mandate and persuade investors to continue buying riskier investments in order to obtain higher yield. Just as Bernanke sees no need to raise interest rates sooner in order to support the dollar, he can’t acknowledge that asset prices have formed a bubble. And the Fed Chairman sees no cause for alarm in the falling dollar and therefore no need to support the dollar by raising interest rates now. To admit these things would require the Fed to prepare to contract liquidity which is something he would not want to do at least until after the Senate approves his reappointment as Chairman.
Saturn in Libra is exactly squaring Pluto in Capricorn, affecting the Sun (identity/purpose; the Chairman), Pluto (power/hidden agendas), and Midheaven (sector of reputation) in the Fed’s chart. Even The New York Times today acknowledges “the conflicting goals that Fed officials may have to balance” to bridge the gaping hole between the artificially inflated economy on Wall St. and the harsher economic reality on Main St.
Saturn rules government. Saturn’s square to secretive Pluto coincided with the release of the Special Inspector General for the TARP’s audit that probed beneath the surface to reveal that Bernanke and the NY Fed then headed by Treasury Secretary Timothy Geithner, “refused to use their considerable leverage” to negotiate a reduced payout to AIG’s counterparties, costing US taxpayers billions of dollars. And for all of Bernanke’s talk of transparency, the SIGTARP report critized the Fed’s lame excuses for refusing to reveal the names of AIG’s counterparties.
Saturn and Pluto impacting the Fed’s chart indicate that Bernanke’s dual mandate is going to face tremendous headwinds as these planetary energies demand that structural changes be made that bring monetary policy back into balance by transforming the Fed’s purpose and power. Clearly Ben Bernanke has demonstrated that he is not up to the task as our economy requires a new foundation that will foster long term sustainable growth.