This Time North Korea’s Belligerence Could Create Real Change

Published by WallStreetWeather.net

Adding to the recent turmoil in financial markets was North Korea’s artillery attack on South Korea’s Yeonpyeong Island last Tuesday which killed two civilians, two soldiers, and injured at least 18 people.

South Korea responded by halting humanitarian aid and prohibiting its citizens from visiting the Kaseong industrial complex it shares with the North. The next day, South Korea and the U.S. announced they would conduct joint military exercises in the Yellow Sea November 28 to December 1. Friday’s visit by the commander of U.S. forces in South Korea to Yeonpyeong Island was followed by rounds of artillery fire from North Korea that was contained within its border. North Korea has threatened the joint military exercises could propel the Korean peninsula to the “brink of war.” And China has expressed its opposition to any military actions that come within its “exclusive economic zone.”

Since the combined economies of South Korea, China, and Japan are substantial, these countries should be most concerned if a conflict on the Korean peninsula impedes their ability to export. This could have major implications for U.S. companies who have made substantial investments in the region.

This post will describe the current and upcoming planetary influences that increase the potential that the 1953 Armistice Agreement that brokered a ceasefire in the Korean War could unravel within the next year.

Each month the light of the Full Moon shines a spotlight on existing matters that have reached a culmination point. The November 21 Full Moon in the final degree of Taurus (1) represented a long standing and stagnant situation that is about to shift. Venus-ruled Taurus desires financial and physical comfort which has gotten harder to come by for North Korea’s leadership after the Obama Administration imposed sanctions earlier this year on the import of luxury goods.

As the Moon opposed the Sun in Scorpio (nuclear secrets) and squared deceptive Neptune in Uranus-ruled Aquarius, The New York Times reported a U.S. nuclear scientist’s visit to a new and secret nuclear facility in North Korea with an “ultra modern control room” containing “hundreds and hundreds” of centrifuges for Uranus-ruled uranium enrichment. This unexpected development followed evidence that North Korea violated an international agreement to end its nuclear weapons program by building a light water reactor at the site of a facility it had dismantled to comply with the agreement.

Old and instinctual behavior patterns can become intense in the light of the Full Moon which squared North Korea’s natal Saturn in Leo and Kim Jong-il’s Sun in Aquarius. It appears the “dear leader” wanted to exert the nation’s authority by showcasing its nuclear developments front and center on the global stage. Neptune squaring the Full Moon opposed North Korea’s Saturn in Leo (exact February 17, 2011) and conjoining Kim Jong-il’s natal Sun (exact January 9, 2011) indicates that the leader of the North Korean government has yet to make clear what their motivations are.

Past threats and aggressive actions have rewarded North Korea with aid (Neptune) from its neighbors and the West in an attempt to pacify its desire to become a nuclear nation. Thus, North Korea has been conditioned to believe that cooperation does not yield the rewards that bad behavior brings.

Oppositions between planets represent opposing forces. The Full Moon opposing South Korea’s progressed (2) Mars in Scorpio indicated the nation was vulnerable to being attacked and the actions taken by the government in response. It also reflects the nation’s anger and brought to the surface a deep seated desire for some kind of retaliatory response after tolerating many years of aggressive behavior.

The November 23 attack marked the first time since the Armistice Agreement that North Korea attacked South Korea on land. Whereas Mars represents aggressive acts that can lead to war, Venus acts to bring opposing factions together to reach agreement. The Full Moon squaring the Armistice chart’s progressed Venus in Leo (which conjoins North Korea’s natal Saturn) reflects the North Korean government breached the agreement by firing shots that struck beyond its boundaries. As I wrote back in March, Mercury retrograde at the time of the Armistice Agreement indicates the military ceasefire left unfinished business that has yet to be resolved.

North Korea’s artillery bombardment of Yeonpyeong Island occurred as the Sun moved into Sagittarius, following Mercury and Mars which conjoined in Sagittarius November 20. Sagittarius is symbolized by the archer who shoots his arrows over the horizon. The Moon in Mercury-ruled Gemini opposing Mercury and Mars represents those arrows coming in the form of artillery shells attacking its southern neighbor. Sagittarius and its planetary ruler Jupiter represent global issues; Jupiter conjoining Uranus in Pisces squaring the Moon, Mercury and Mars reflects the bold and unexpected hour long attack.

Jupiter and Uranus square North Korea’s progressed Jupiter in Sagittarius which conjoins Kim Jong-il’s natal Mars and squares his natal Neptune in Virgo; he is overly optimistic if he believes that once again the North’s aggressive behavior will be rewarded with aid. The attack on South Korea in broad daylight was caught on video; proof that North Korea can no longer portray itself being “victimized” by South Korea and its allies.

Mars is the planetary ruler of the chart of the attack, suggesting there is likely to be more aggressive actions and unexpected and rapidly unfolding developments over the next several weeks that could escalate into a global crisis.

This is the second time that Saturn (government; structures; boundaries) in Libra (relationships) will conjoin the Korean War outbreak chart’s natal Neptune (illusions). Modern North and South Korea, China, and Japan all came into being when Neptune was in Libra. But when Saturn in Libra conjoined these countries natal Neptune for the first time in the early 1980s, they were not the economic powerhouses that they are now. Saturn conjoining natal Neptune indicates conditions are likely to cool (Saturn) the hot Chinese and South Korean economies as the underlying fundamentals of their economies are not as robust as they appear to be (Neptune).

With its Sun in Cancer squaring Saturn in Libra and Jupiter ruling the chart of the USA, America has a reputation for acting as the world’s policeman. The U.S. played a starring role on the Korean Peninsula following World War II. These countries’ natal Neptune conjoins the USA Saturn in Libra, reflecting the U.S. has responsibility or obligations in one form or another to them. Saturn needs to exert control and structure the roles each is to play, while Neptune erodes it. Saturn together with the USA’s Mars in Gemini squaring Neptune in Virgo reflects the USA’s past preoccupation with controlling the spread of communism (Neptune). Saturn/Neptune relationships can be confusing and murky as neither side can easily distinguish reality from what each would like to believe is true.

There are no easy short term solutions when Saturn comes to call. The USA’s Saturn return (3) indicates the nation’s global reach has limits and must now decide what its top priorities are on the global stage. Pluto in Saturn-ruled Capricorn opposing the USA’s natal Jupiter and Uranus in Mars-ruled Aries squaring the USA Venus at the same time indicates military budgets will have to be cut and resources reallocated to more pressing global developments. Since President Obama’s Sun in Leo conjoins North Korea’s natal Pluto and with his progressed Sun now in diplomatic Libra, the responsibility of taking a leadership role in resolving North Korea’s nuclear issue falls on his shoulders.

The situation with North Korea is likely to intensify approaching the New Year as the December 21, 2010 Gemini Lunar Eclipse and the January 4, 2011 Solar Eclipse affect North Korea and Kim Jong-il’s chart. Mars in Capricorn at the Solar Eclipse squares Saturn and Neptune in the Armistice Agreement chart; events that occur now could come to fruition in October. Regardless of what year his son and appointed successor Kim Jong-un was born,(4) Saturn will square his Sun for his birthday on January 8 until March and again during September. This can coincide with taking on increased responsibility (such as a full leadership role) or facing increased hardship.

Saturn in Libra will turn retrograde (5) January 26 on South Korea’s natal Mars which could indicate the military is actively defending its border. Things heat up again in March as Jupiter opposes Saturn for the final time as Saturn retrograde in Libra returns again to its natal position in the USA chart. It was in this post written back in May that I described how the influences in March 2011 would transform North Korea, Iran, China, and Iraq.

Saturn turning direct on June 12 will conjoin South Korea’s natal Neptune, recreating the energies of Saturn exactly conjoining Neptune in Libra in the chart of the Armistice Agreement. Like Germany in 1989 when Saturn and Neptune last conjoined in the sky (in Capricorn), the border between North and South Korea might dissolve when Saturn returns to its natal position in the Armistice Agreement chart on October 24, 2011. Saturn in Libra will conjoin South Korea’s progressed Sun then, reflecting the nation’s economy could be under pressure from the burdens of unification. It took a decade to successfully integrate East and West Germany, reflecting that Saturn’s restructuring takes time but ultimately succeeds.

(1) The November 21 Full Moon was the second of six consecutive Full Moons that will occur at the end of the zodiac signs that began with Aries (the first sign of the zodiac) and conclude with the March 19, 2011 Full Moon in Virgo. The December 21 Full Moon in Gemini marks the midpoint of this pattern, and wields the strongest influence since it is a Total Lunar Eclipse that incorporates all of the planetary influences described above.

(2) A mathematical calculation that moves the planets forward in time as a method of prediction.

(3) While the exact dates are December 3, 2010, March 22, 2011, and August 27, 2011, Saturn’s influence will be strong November 2010-September 2011.

(4) North Korean officials claim he was born in 1982; intel experts think he was either born in 1983 or 1984.

(5) Planets do not really move backward, but appear to from Earth’s vantage point. A planet’s energies are more pronounced at the time a planet appears to change direction.

Armistice Agreement Enforced: July 27, 1953 10:00 PM JST Panmunjom
D.P.R.K.: September 9, 1948 time unknown Pyongyang
Kim Jong-il: February 16, 1941 time unknown Vyatskoye, Russia
Korean War Begins: June 25, 1950 4:00 AM at the Ongjin Peninsula (38th Parallel)
(Time cited on page 61 of “Rethinking the Korean War” by William Whitney Stueck.)
South Korea: August 15, 1948 time unknown Seoul
North Korea Attacks Yeonpyeong Island: November 23, 2010 2:34 PM KST
China: October 1, 1949 3:15 PM Peking
Japan: May 3, 1947 Midnight Tokyo
USA: July 4, 1776 5:10 PM Philadelphia
Barack Obama: August 4, 1961 7:24 PM AHST Honolulu, HI

NOTE:

There will not be a Weekly Forecast for this abbreviated holiday week.

GM’s IPO: A Government Success Story

Published by WallStreetWeather.net

Was it coincidence or was a conscious effort made to work with planetary energies so GM’s initial public offering would recoup as much money for the government as possible?

In order to increase the chances of attracting enough investors willing to pay up, it’s essential that the energies of Venus (money) and Jupiter (abundance) are strong. The return of General Motors as a public company trading under its old ticker symbol GM occurred on Thursday (the day of the week ruled by Jupiter), November 18 when Venus and Jupiter’s energies were strong as both planets shifted from retrograde to forward motion.(1) As Venus and Jupiter appeared stationary in the sky, the size and valuation of GM’s IPO increased from $26 to $29 before pricing at $33 a share.(2) At $18.1 billion, GM’s IPO was the second largest in U.S. history after Visa’s (V) $19.65 billion 2008 offering.

Retrograde planets bring a return of past matters into focus for reevaluation; it is an opportunity for what is not working as it should to get resolved. As the retrograde planets shift into forward motion again, attention is drawn comparing present conditions and future potentials to past circumstances.

Both planets turning direct (Venus in Libra) and (Jupiter in Pisces) in the signs they are at “home” in strengthened their energies and increased the positive PR that investors and the public would view GM’s resurrection as a success story. Scorpio and its planetary ruler Pluto represent the cycle of decay and death that GM has went through in order to engineer its rebirth.

The Sun in Scorpio squaring Neptune in Aquarius helped to increase investors’ confidence and motivation to purchase shares. The Sun symbolizes leaders and Neptune adds an element of “Hollywood” style glamour that optimistic Jupiter in Neptune-ruled Pisces expanded on while Venus poured on the charm. Venus exactly conjoined CEO Dan Akerson’s natal Sun in Libra as he drove up to a line of GM vehicles on display in front of the New York Stock Exchange in a Camaro convertible . Its revved up engine was heard as Akerson rang the opening bell. With the Moon (sentiment) in Mars-ruled Aries, the sound was meant to whet investors’ appetites so they would quickly hit the “buy” button. The importance of fulfilling the emotional instincts of the Moon in Aries by showcasing a muscle car even exceeded the longer term influence of Jupiter conjoining the electrical energy of Uranus in Pisces which would have favored Akerson arriving in a Chevy Volt and its quiet engine to open the trading day. (Akerson told reporters he drives a Volt.)

Although the influence of Jupiter conjoining Uranus in GM’s stock chart tends to be a beneficial influence, this alignment makes the stock highly susceptible to large price moves that propel the stock higher or lower than expected. A Mercury/Mars conjunction in Jupiter-ruled Sagittarius reinforces the theme that investors will be quick to overreact to news affecting the company. The strong Jupiter/Uranus influence can indicate that GM’s stock is more suited for short term trading.

The Sun squaring Neptune and trine to Jupiter and Uranus boosts the stock’s chances of being perceived as a growth stock. Jupiter represents what is foreign; Jupiter and Uranus in Pisces along with the Sun square Neptune reflect that GM’s stock could be considered as a way to speculate in the frothy world of emerging markets since GM currently sells more vehicles in China than it does here at home.

GM officially began trading at 9:36 AM. The stock opened up $2 from its IPO price to $35.00 and climbed to intraday high of $35.99 in the first few minutes of trading before falling back to close at $34.19. GM shares closed up 7 cents to $34.26 the following day.

GM could have had a much greater gain on its opening day than 3.6% if the IPO price had been kept lower. But with Saturn in Venus-ruled Libra as the ruler of its stock chart and Venus in Libra conjoining the sector of the chart representing its reputation, GM’s fortunes are tightly tied to its "partnerships." Venus in Libra describes the purpose of GM’s IPO is to raise money to repay its partners. As GM’s largest shareholder, it is in the beneficial interest of the U.S. government to ensure the IPO is as profitable as possible. If the IPO debuted for less than $33 a share, the Obama Administration would have been accused of leaving too much on the table for Wall Street.

Venus in Libra stationing direct exactly squared the USA’s natal Pluto in Capricorn located in the sector of the USA chart representing the economy and the nation’s wealth. The often quoted expression emanating from the 1950s (“as the nation goes, so does GM”), is reinforced by the GM incorporation chart’s Venus in Cancer conjoining the USA Sun. These influences reflect that both GM and the Administration’s reputation are enhanced as GM repays the government.

Saturn ruling GM’s stock chart with Pluto in Saturn-ruled Capricorn conjoining the chart’s Capricorn Ascendant presents an initial impression of a company mired in the debt owed to the U.S. as well as the governments of Canada and Ontario. Additionally, GM has obligations to its other “partners” - a union pension and retiree healthcare trust. None of the proceeds raised from the IPO went to GM. $11.8 billion went to the U.S. government from the sale of 358 million shares, reducing the government’s stake in GM from 60.8% to 37%. (If the overallotment shares are sold, the Treasury’s take would rise to $13.6 billion and its stake reduced to 33.3%.)

Capricorn and Saturn represent the government. With Saturn as the ruler of the stock chart and Pluto conjoining the chart’s Ascendant,(3) it’s time for some history regarding the relationship between GM and the government. The Bush Administration gave GM $13.4 billion. With no strings attached, the money allowed GM to continue business as usual. Saturn requires accountability for one’s actions. The additional $36.1 billion the Obama Administration approved came with conditions. The Administration forced GM to restructure (Saturn) in exchange for a quick passage through bankruptcy (Pluto). Whether referring to an individual or a company when Pluto is involved, you don’t emerge from its underground domain in the same state as when you entered it. By choice or by force, you will be transformed.

Like a snake shedding its skin,(4) as part of its restructuring GM shed plants, dealerships, and four brands (Saturn, Pontiac, Hummer, Saab). The Obama Administration had already forced CEO Rick Wagoner to resign earlier in 2009. By the end of that year, Fritz Henderson was replaced by Chairman Ed Whitacre who relinquished his position as CEO to Dan Akerson on September 1, 2010. Akerson’s progressed(5) Sun in Capricorn exactly conjoins the GM stock chart Ascendant and his progressed Mercury in Capricorn conjoins the GM founding chart’s progressed Sun. Together with his natal Sun and Mercury conjoined in Libra, the former Managing Director of the Carlyle Group is the “spokesman” who must balance the competing yet mutual interests that GM repay its debts and emerge as an independent and viable car company.

After posting a $1.2 billion loss in the third quarter of 2009, GM had repaid $9.5 billion to the Treasury and earned a $2 billion profit in the third quarter of 2010 which marked its third consecutive quarter of profitable earnings. While it’s been estimated that GM’s share price will need to rise as high as $53 for the U.S. government to break even, critics of the government’s “bailout” have neglected to factor in the toll GM’s failure would have had on the overall U.S. economy. Critics cite ideological reasons for their objections. However, no one has questioned the dramatic speed and agility the Obama Administration exercised in shepherding GM through bankruptcy and major reorganization with almost no adverse effects.

Recall that back in December 2008 Ford (F) testified before Congress that it shared many parts suppliers with GM, and that if any of those suppliers went out of business as the result of GM, Ford’s production and viability would have been severely impacted. The loss of GM and its suppliers would have also severely impacted foreign transplants such as Toyota in their U.S. production as they also share suppliers with GM. A study released November 17 by the Center for Automotive Research estimates the U.S. would have lost $28.6 billion in tax revenue and social service expenditures if close to 1.5 million jobs had been lost if GM and Chrysler had been allowed to collapse.

The Wall Street Journal editorial board blames the Obama Administration for creating a “hybrid” in GM. Some of the largest health insurance companies receive over half of their revenue directly from the government via Medicare and Medicaid while almost all participate in the Federal Employee benefit plans. Yet the Journal doesn’t consider these companies to be a “hybrid.” In fact, the Journal wants a full repeal of the healthcare legislation so that our “free market” system can continue to feed at the government trough while rejecting millions of Americans for health insurance. Many uninsured go bankrupt from paying retail rates for their care while their tax dollars go towards enriching executive compensation. According to the Journal’s own survey, at $99 million, United Healthcare (UNH) CEO Stephen Hemsley ranked #2 among the highest paid in total realized long-term incentive compensation; his total direct compensation exceed that of Goldman Sachs (GS) CEO Lloyd Blankfein. Aetna’s (AET) Ronald Williams received total compensation of $15,323.70, putting him slightly ahead of JPMorgan Chase (JPM) CEO Jamie Dimon. At $12,804.80, Wellpoint (WLP) CEO Angela Braly is compensated more than Proctor & Gamble’s (PG) Robert McDonald.

Despite the outcry about “government-run healthcare,” you never hear seniors complain about their government-run Medicare. If it’s good enough for our seniors, why isn’t it good enough for the entire nation? Medicare for All would allow GM to save millions of dollars it is obligated to pay for healthcare coverage for retired employees and their spouses.

The Treasury has agreed not to sell more GM shares during the six month lock-up period. The May 17, 2011 Full Moon in Scorpio conjoins the GM stock chart’s Sun. Taurus is ruled by Venus, and Mercury conjoining Venus in Taurus together with Jupiter in Aries opposing the GM stock chart Venus in Libra and squaring the USA Pluto raises the probability that the government will be eager to sell more shares.

Pluto conjoining the GM founding chart’s progressed Sun during the next two years coincides with the timeframe Akerson has estimated it could take to repay taxpayers. GM must combine creative and technological innovation to produce the best quality vehicles in each class that money can buy. As Uranus in Aries completes its transit to GM’s progressed Sun in March 2013, GM has the chance to rise from the ashes free of government control.

(1) Planets do not really move backwards, but appear to from Earth’s vantage point. Jupiter is retrograde for about four months each year and went retrograde July 23; Venus turns retrograde every 18 months and had stationed retrograde October 8.

(2) The number 33 doubles the energy of the number 3 which resonates to Jupiter. It is considered a “master number” and the highest degree of Scottish Rite Freemasonry since it represents the attainment of the highest level of wisdom and truth. 33 breaks down to 6 (3+3=6), a number that vibrates to Venus’ energies of harmony, love, and balance. Adding the numbers up in this way shows the beneficial connection between these two planetary energies.

(3) The zodiac sign rising on the eastern horizon when GM’s shares began trading.

(4) Saturn and Capricorn rule the skin as well as the bones (the structure).

(5) A mathematical calculation that moves the planets forward in time as a method of prediction.

GM Founded: September 16, 1908 time unknown Flint, MI
GM Inc: August 11, 2009 11:20 AM EDT Dover, DE. (The link to GM’s Certificate of Incorporation can be found by clicking here.)
Daniel Akerson: October 21, 1948 in California (birth time & birth town unknown)GM Bankruptcy Filing: June 1, 2009 7:57:51 AM EDT New York City

WallStreetWeather.net Forecast For Week Of November 14, 2010

Venus and Jupiter are considered to be the most beneficent planets as they rule what we’d all like a whole lot more of. Venus is love, money, and beauty; optimistic Jupiter is growth and abundance. Jupiter in Pisces has been retrograde* since July 23, and Venus since October 8. The energies of both planets will be more pronounced this week as they revert to direct motion on Thursday, the day ruled by Jupiter.

Having both planets change direction on the same day is akin to Venus conjoining Jupiter, ** especially as Jupiter in Pisces and Venus in Libra are signs these two planets are at “home” in. This combination tends to bring out people’s generosity and tendency for indulgence and excess, along with the desire to socialize. Relationships and diplomatic efforts that got off track during Venus retrograde have a major opportunity to mend fences; coming to agreement by setting aside the dogma and focusing on the highest objectives that all sides involved claim to share (love, peace and prosperity) .

Venus/Jupiter energies can bring large market moves. While the moves have a greater tendency to be bullish, their shift in direction could spur the desire to take profits if the market is viewed as being overbought.

The Sun represents self-identity and leaders. “Follow the leaders” is the other theme this week as the Sun in Pluto-ruled Scorpio harmonizes with Jupiter Monday, squares Neptune in Uranus-ruled Aquarius Thursday, and harmonizes with Uranus in Pisces Friday. All of these solar alignments ultimately connect back to Jupiter due to the close proximity between Jupiter and Uranus since late spring (especially since September) which further increases the potential for large market moves on these days.

Jupiter’s energies are reinforced as the Moon (sentiment) will be in Pisces Monday and Tuesday, a sign ruled by Jupiter prior to Neptune’s discovery. A favorable aspect between Mars in Jupiter-ruled Sagittarius to Saturn in Venus-ruled Libra could elicit action by government regulators that at least for the time being is viewed favorably by the market. The harmonious alignment between the Sun and Jupiter can increase confidence and optimism to buy into the pullback. Even though Congress returns Monday in a lame duck session, these energies reflect wealthy investors hoping their taxes (Scorpio) won’t be rising next year.

All of the energies this week have the tendency to be inflationary. The Producer Price Index (PPI) for October is released Tuesday, followed by the Consumer Price Index (CPI) on Wednesday. PPI is a forward looking indicator as it alerts consumers to the price increases that retailers will be passing through.

MKM Partners analyst Paul McKeever has created a price survey that tracks 86 “every day” grocery items at Wal-Mart (WMT) that has increased 0.6% in the past two months. As the CNBC article points out, “At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate.” Not that it matters, since the Fed has their preferred gauge of inflation (the core PCE Index) which excludes food and energy costs as well as medical expenditures.

The real purpose of McKeever’s price survey is to ascertain whether Wal-Mart is slowly increasing prices without affecting traffic which would be interpreted as a bullish signal for the stock. Wal-Mart reports quarterly earnings Tuesday. Saturn in Libra is squaring the Wal-Mart stock chart’s natal Venus in Cancer and conjoining Uranus in Libra. Saturn’s influence which is exact in mid-December can indicate that Wal-Mart might have to rollback prices beyond their slogan to maintain holiday sales. Monetary policy is having a double negative effect on Wal-Mart. First, the only thing inflating under Bernanke’s policy are food and energy which consume a disproportionate amount of Wal-Mart customers income. Secondly, the trashing of the dollar makes Wal-Mart’s imports more expensive which squeezes margins.

One of the factors that can slow the market’s upside momentum is Saturn in Libra squaring the USA’s natal Sun in Cancer which reinforces the USA’s natal square between the Sun and Saturn in Libra as the USA undergoes a Saturn return for the first time since 1981. When Saturn in Libra exactly squared the UK’s Sun in Capricorn (Cancer’s opposite sign) on October 20, the UK government announced major budget cuts and spending freezes to reduce the deficit. (An exception was the National Health Service which will get a budget increase.) Saturn transits represent a time to “sober up” and strengthen economic and societal structures.

The Sun in Scorpio squaring Neptune in Aquarius Thursday can bring attention to speculative bubbles, particularly gold (ruled by the Sun) and other commodities extracted from underground (Scorpio), along with Neptune ruled oil and rubber. Combined with Jupiter and Venus turning direct it can inject confusion about whether to take profits or have faith the market is moving higher. GM is set to return to being a publicly traded company Thursday (more about this in a separate post).

Oftentimes an individual (or nation) with the same planetary signature in their chart are prominent in the news at the time the same aspect pattern is repeated in the sky. President Obama was born with the Sun in Leo squaring Neptune in Scorpio. This planetary signature is reflected by the President frequently using the phrase “let me be clear,” as individuals with this aspect in their chart have the tendency to be misunderstood. Inviting Congressional leaders of both parties to dinner in the residence quarters of the White House is the ideal way to work with the energies Jupiter and Venus turning direct.

The Sun harmonizing with Uranus in Pisces indicates that unexpected developments or news from leaders can cause the market to gyrate in one extreme or the other. This is more likely to bring profit taking. Venus stationary direct in Libra together with the Moon entering Venus-ruled Taurus on the day of the week ruled by Venus, puts banks, financials and monetary policy in focus. Libra is represented by the scales of balance. After facing a barrage of criticism over QE2 from global finance ministers to Sarah Palin since last week, Fed Chairman Bernanke will give a speech early Friday morning on “Global Rebalancing.” Venus squaring the USA Pluto in Capricorn in the sector of the chart representing the economy and the nation’s wealth, as well as squaring the Federal Reserve’s Neptune in Cancer can reveal financial secrets and unmask the real reason why the Fed has embarked on QE2. In a post written last month I indicated that good PR for the Fed at this time might be in short supply.

Monday, November 15, 2010
Positive

Tuesday, November 16, 2010
Negative conditions improve to choppy/mixed, reversing to positive later in the day.

Wednesday, November 17, 2010
Positive conditions weaken and turn negative by afternoon before improving later in the afternoon; mixed close.

Thursday, November 18, 2010
Positive

Friday, November 19, 2010
(Options expiration) Negative

*Planets do not really move backwards in the sky but appear to from Earth’s vantage point.

**Venus conjoined Jupiter in Pisces on February 16 which was a bullish day for the stock market.

The Wall Street Journal’s False Conclusions On Pre-existing Conditions

Published by WallStreetWeather.net

In “The 8,011-Person Crisis,” The Wall Street Journal editorial board has aptly identified the problem of limited enrollment in healthcare reform’s new high risk pools for individuals with pre-existing conditions. Due to the high cost and the six month waiting period, eligibility as well as financial constraints has severely limited the population who can take advantage of this program. But instead of providing suggested improvements so more Americans with a pre-existing condition can benefit, the editorial board is using the Affordable Care Act’s flaws as leverage to dismantle the entire healthcare reform effort.

While the editorial admits that “polls show that voters are worried” about people with pre-existing conditions being denied health insurance, the Journal considers these “horror stories” to be “relatively rare.” But if the number of individuals rejected by insurance companies was “relatively rare,” then why does the data voluntarily submitted by the insurance companies to the healthcare.gov website reflect otherwise?

Go to healthcare.gov, click “Find Insurance Options,” select a state, then check “healthy individual.” From there, click “I need health insurance” and then select an age group. Then select “Health Plans for Individuals and Families.” Enter a zip code, coverage start date, birth date, and gender, and whether you are a tobacco user. (Selecting “healthy individual” and not checking any additional conditions that might apply will yield the largest amount of search results.)

Before clicking “Show me the plans,” the following message will appear on the screen:
“Keep in Mind… Until the Affordable Care Act is fully implemented, insurers may still deny you coverage based on your health status.”

When the list of plans appears on the screen, select either “Enrollment, low to high” or “Enrollment, high to low” and then click “Sort By.” The results will display the insurance company, their plan, and the percentage of individuals who applied for that plan who were turned down for coverage. Clicking “How many people were denied?” brings up a window that states: “This is the percent of people who applied for an insurance policy in the last 3 months and were denied.”

Let’s use the example of a 40 year old male living in Tallahassee Florida and refine the search results to only display plans offered by the nonprofit Blue Cross and Blue Shield of Florida.* The search results show that 66% of the applicants who applied to each of the 9 plans BCBS offered were denied a policy. Inputting the same parameters for a 40 year old female and a 29 year old male and female brought the same results.**

Whether looking up my hypothetical example or imputing your own data, the facts contradict the Journal’s assertion: “That so few have grabbed this lifeline suggests that the reality of pre-existing conditions isn’t nearly as grim as the President continues to claim. A shelf of academic research says the same thing, by the way.” Yet how could the unnamed “academic research” compare to statistics submitted to the federal government by the insurance companies themselves? Such a high rate of rejection proves the editorial board's conclusion is not justified by the facts.

The fact that 66% of applicants for individual BCBS policies in Florida are rejected exemplifies that the definition of a pre-existing condition can contain as many potential risks as actual risks. And an applicant does not actually have to have a pre-existing condition to be rejected for insurance.

Let’s examine the security of those currently covered in either the employer or individual markets. While the focus of the political discussion has been on President Obama’s declaration that “if you like your current healthcare plan you can keep it,” the real focus should be on how easy or difficult it is to change plans if you don't like your current healthcare plan.

Employees have no control over what plan(s) their employer offers. Beyond the tight job market and homes that are “underwater,” an employee (and/or their family member covered under the employer’s plan) with a pre-existing condition can impede the employee's ability to pursue a better career opportunity at another company.

According to the CDC, 1 in 10 Americans has diabetes. While some employees might be able to afford to pay for their diabetes care during the six months to one year that coverage for pre-existing conditions is typically excluded, very few employees have the financial resources to pay for cancer treatments. (Interestingly, a Journal story earlier this week reports on the rise of people ages 15 to 29 with cancer and cites their lack of health insurance as a major factor why cancer in this age group has become particularly lethal.)

Most people fail to understand that guaranteed renewability is not the same thing as guaranteed issue insurance. While many states guarantee renewability in the individual market, few if any will allow individuals with a pre-existing condition to change plans. These individuals have no recourse if their current insurer pushes through unreasonable premium and/or co-pay increases. Some insurance companies will allow an individual to reduce their coverage without jeopardizing renewability. However, there appears to be no protection for individuals to either increase their coverage with their current insurer or switch to another insurer without going through the medical underwriting process and risking rejection. The individual stuck in their current plan might lack the mobility to move to another county let alone another state.

Contrary to what the Journal’s editorial states, an individual applying for the new Pre-Existing Condition Insurance Plan (PCIP), “must have been uninsured for at least the last six months” AND provide “a letter from an insurance company, dated within the past 6 months denying your application for coverage, or excluding coverage of your medical condition,” along with proof of U.S. citizenship.

The reason why Congress inserted a six month exclusion clause into the Act was to prevent states with high risk pools dumping their members onto the PCIP even though Florida is one of the 15 states that do not have a high risk pool.

Using Florida (one of the 23 states that selected HHS to administer the PCIP), the 2010 rates for the hypothetical 29 year olds would be $363 a month and the 40 year olds would pay $435 a month for the 2010 plan which has a $2,500 in-network deductible and a maximum out of pocket cost of $5,950 per year within network. Most people with pre-existing illnesses cannot afford to go without insurance for six months; nor can most people afford premiums as high as $773 per month for people in Florida age 55+.

After much criticism over the high premiums, HHS is expanding to three plan options in 2011. (In the Florida age examples, 2011 premiums for the 29 year olds would range from $294-$395 a month. Premiums for 40 year olds would range between $352-474 per month, and those 55+ would pay up to $842 per month.)

The editorial board’s assertion that “HHS plans to make its cut-rate insurance even cheaper (and thus more expensive for taxpayers) so it can avoid having to admit that the President’s claims about a nation of the indigent sick denied insurance were false” is misleading at best. The fact that HHS Secretary Kathleen Sibelius has made adjustments to the plan does not reflect negatively. Rather it demonstrates that this Administration is not as rigid and bureaucratic as the common Washington wisdom would lead you to believe.

The Journal's editorial board should understand that cause and effect cannot always be determined just because two statistics correlate. The light participation in this program has more to do with its restrictions than its need.

*BCBS of Florida and Humana (HUM) whose information is so far absent from the website, are among the dominate players in the Florida market.

**I was unable to get the links to these screens to work but with the instructions I’ve provided, readers can input the parameters in my example to see the search results for themselves.

WallStreetWeather.net Forecast For Week Of November 7, 2010

Summary Of Last Week’s Influences:
Magic, spellbound, euphoria, addicted. What inspired these words spewing from the financial media was what Harris Private Bank chief investment strategist Jack Albin referred to as “the government’s latest faith-based initiative” in the form of the Federal Reserve’s announcement Wednesday to purchase $600 billion in Treasuries through June 2011.

These words reflect the prominent influence of Neptune November 2-11 which from Earth’s vantage point it appears to be stationary in the sky as it turns direct November 7 after being retrograde since May 31. Neptune rules dreams, and Wall St. had certainly been eagerly anticipating its dream of more quantitative easing by the Fed and a Republican victory in the midterm elections to come true for some time now.

Although the real message of Neptune is to be inspired enough to turn your dreams into reality regardless of external circumstances, the market behaves no differently than most people looking for a quick and easy fix that is overly dependent upon someone or something else to come through for them. In the market’s case this refers to needing something beyond fundamentals to increase asset prices.

The market has been on a tear since Saturn in Libra separated from its opposition to Jupiter (August 16) and made its final square to Pluto (August 21). Saturn’s strong influence brought concerns of deflation and the risk the economy would slide into a double dip recession. These fears began to wane as the influence of Jupiter and Uranus conjoining in Neptune-ruled Pisces (September 18) became stronger. This dynamic duo tends to bring large and unexpected spikes that inflate asset prices as Jupiter was the traditional ruler of Pisces prior to Neptune’s discovery. Pisces and Neptune can create asset price bubbles. As we have already witnessed just two short years ago, Uranus transiting Pisces creates and busts bubbles. Between Jupiter conjoining Neptune in Aquarius during most of 2009 and Jupiter conjoining Uranus in Pisces until January 2011, the market has been gorging on a lavish government provided buffet.

The timing of these planetary influences correlates to the words and deeds of the Federal Reserve. And who better to bring Jupiter’s optimism and bounty to the market than Mr. Jupiter himself, Fed Chairman Ben Bernanke, born with the Sun and Moon in Jupiter-ruled signs! David Wessel is the author of the book “In Fed We Trust,” yet in his column in Thursday’s Wall Street Journal he writes that “Ben Bernanke doesn’t seem like a gambler.”

The Sun represents speculation, self-identity and describes a person’s career and reputation. The Moon is our emotional barometer and represents instinctual and habitual behavior patterns. Born with the Sun in Sagittarius opposing Jupiter (in Mercury-ruled Gemini) and the Moon in Pisces,* Bernanke is a high roller. While this behavior might not surface in his personal life, Bernanke is not afraid to roll the dice with the U.S. as well as the entire global economy. After pulling the levers of the global economy all day, going to Vegas would be a letdown. Saturn also describes one’s professional calling. Not meaning to get too technical here but with his Sun semisquaring and Jupiter sesquiquadrate Saturn in Pluto-ruled Scorpio, Bernanke places big bets using other people’s money.

Jupiter and Sagittarius represent matters on a global scale; these are inflationary influences. Since oppositions between planets represent dealing with external forces that tend to manifest as other people, Bernanke’s Sun opposite Jupiter in Gemini reflects the Fed Chairman is exporting deflation while importing inflation in the form of higher commodity prices. While the Fed is trying to spur consumers to spend on discretionary goods and services, consumers are facing increases in food and energy costs just in time for the holidays. (Of course, the Fed conveniently excludes food and energy costs in its inflation calculations.)

Sagittarius is part of the enthusiastic fire element which thrives in the world of academia and conceptual theories but does not necessarily translate well to real world application. Bernanke (as well as Fed Vice Chairman Janet Yellen) were born without any planets in the practical earth element to help ground them.

Both Bernanke and the Federal Reserve’s chart have Mercury conjoining Venus in Sagittarius, indicating that the Fed Chairman communicates an expansive monetary policy. As long as Bernanke is running the Fed, investors are right to have a healthy skepticism that Bernanke won’t end the party before the bubble bursts.

In assessing Bernanke’s moves, Wessel writes that Bernanke “compared the risks of doing nothing with the risks of doing something uncertain. He opted for the latter.” That’s because Bernanke’s progressed** Sun is conjoining progressed Venus (monetary policy) in Aquarius. Ruled by Uranus, Aquarius is all about what is “unusually uncertain” and is not afraid to do something far out. With progressed Venus favorably aspecting his Sagittarius Sun, Bernanke is optimistic he can successfully pull off his gambles. And with the Fed’s progressed Sun in Aries, the Fed has no qualms about boldly going where no central bank has gone before.

With Uranus in Aries squaring the Fed chart’s natal Pluto, Sun, and conjoining the sector of the chart representing its reputation between March 2011 and January 2012, the Fed is likely to face a few unexpected shockwaves. Among them could be a rebellion coming from within the Fed. Saturn in Libra will square Bernanke’s natal Uranus in Cancer in October 2011 and conjoin his natal Mars/Neptune conjunction the following month. These challenging transits will be a prelude to Bernanke’s Saturn return in November 2012. Saturn’s return to its natal position around every 29 years is a time of testing. If the individual (or nation) has learned the lessons of the planetary taskmaster, the Saturn return can be a time to reap the rewards of your efforts. For those who refuse to learn the lesson and continue to try to recreate the failed policies of the past, the Saturn return can be a time of difficulties.

Boundaries and barriers can dissolve when Neptune is prominent. In “QE2: This Time It’s VERY Different!,” I explained why the Fed is using monetary policy to carry out fiscal policy. Neptune is the world of myth and illusion, where things are not always what they appear to be. In last week’s Forecast I wrote that the outcomes of the FOMC meeting and the midterm elections “might be somewhat confusing and raise more questions than they answer.”

Unless you agree with my analysis that the true purpose of QE2 is to crowd out the Treasury market, Bernanke’s explanation for the Fed’s actions is confusing. (It would also reflect that he is bluffing about its true intent.) People visualize Bernanke “printing money” as the Fed proclaims inflation is too low. Then Bernanke backtracked Saturday and said the Fed is “not in the business of trying to create inflation” but is doing QE2 because the Fed’s prior actions were “insufficiently stimulative.” But still the Fed continues to assure us that it’s got inflation under control. The public tends to be skeptical, believing that inflation (Jupiter) is coming in the future (Uranus) that will cause the bubble (Pisces) to burst. And the first asset bubble to pop will be long term Treasuries.

Neptune prominent together with the Sun, Mercury, and Venus retrograde in Scorpio (taxes and corporate welfare) saw the GOP gain the largest number of seats in the House of Representatives since 1938. Republicans were assisted by corporate interests supporting the Tea Party movement behind the scenes to “reclaim America” by pledging to cut taxes and spending and limit regulation. They campaigned for smaller government but one that is not so small it stops giving out subsidies and special favors to businesses and senior citizens.

Other than what its corporate handlers instruct it to do, the Tea Party movement has yet to coherently explain what it is for rather than what is against and angry about. Although there are some involved or connected to the Tea Party who would like to not only rein in the Fed but take the far out extreme and end it altogether (with Rep. Ron Paul being the most prominent person in this camp), both Republicans and Democrats can agree they’re addicted to the Fed.

At a higher level, Neptune represents oneness. At its lowest level Neptune represents propaganda and smear campaigns. If President Reagan was looking down from above, he wouldn’t recognize what the Republican Party has become and would be disgusted by it. His “big tent” philosophy was unfortunately replaced by Karl Rove’s “base” that elevated President George W. Bush’s “you’re either with us or against us” remark to insinuate more than a challenge to combat terrorism. The Tea Party movement has brought out the most hateful and polarizing behavior that the GOP has deemed acceptable conduct in the name of winning.

Now that they’re going to be in control of the House and setting policy, fissures are developing between Republicans and the Tea Party who is vowing to defeat Scott Brown even though they helped elect him to the Senate earlier this year. Sen. Jim DeMint vowed President Obama would face his Waterloo. Now it seems DeMint wants Sen. Lisa Murkowski who ran as a write-in candidate after the GOP snubbed her for Tea Party candidate Joe Miller, to face hers. If Murkowski retains her Senate seat, how amenable is she going to be to towing the Republican party line at this point?

The USA was born with Saturn in Libra, indicating that the nation achieves its greatest success when members of both parties work through their differences with the goal of doing what is best for the nation overall than for the benefit of the few. Saturn squaring the USA Sun in Cancer (exact November 17) and the USA experiencing its Saturn return (December 3 and during 2011) reflects that the U.S. will be tested on how it can deal with the many structural issues facing the nation that for too long has been left on the back burner.

Call it a relief rally or being under Neptune’s spell, the stock market closed the week at its highest levels in over two years along with major commodities closing at or near new highs. Rather than engaging in a bit of profit taking, the largest gains came on Jupiter-ruled Thursday as dualistic Mercury harmonizing with Jupiter brought two pieces of news that boosted asset prices. First was Bernanke’s Washington Post op-ed stating that “higher stock prices will boost consumer wealth and help increase confidence.” That was followed in the afternoon by an article in the Wall Street Journal that the Fed was working on rules to allow “strong” banks to increase dividend payments for the first time since the financial crisis.

All this came about as the Moon was in Venus-ruled Libra on the first day that Venus emerged as a star in the early morning sky until July 2011. Venus as a morning star can correlate to higher stock prices which can increase the potential that the market could peak within this timeframe. However, this does not mean the market will be free from pullbacks and/or a couple of corrections between now and July. As mentioned in my post on the Autumnal Equinox, the market could start to hit a few road bumps approaching mid December.

Friday’s employment report confirmed that markets have become addicted to the Fed’s stimulus, already speculating on QE3, 4 and 5 before the release of the report. Rather than rejoicing at a gain of 159,000 jobs in October along with September’s report revised to reflect a loss of 41,000 jobs from a previous report of minus 95,000, the market was mostly negative and choppy for most of the day before turning positive at the close as the upside surprise raised concerns the Fed might not expand QE. Although the unemployment rate remained unchanged at 9.6%, the report correlates to my prediction that the employment situation would improve by the third quarter of 2010.

Summary Of This Week’s Influences:
Saturday’s New Moon in Scorpio occurred on the same degree that Venus went retrograde on October 8, bringing a return to issues prominent then such as banks handling of foreclosures. Venus retrograde at the New Moon can bring new information and fresh ideas that can assist in reevaluating financial matters especially as they related to debt, insurance, taxes, wills and legacies. The New Moon conjoins the Fed’s natal Moon in Scorpio which is the ruler of the Fed’s chart, indicating the Fed will be an outsized influence on market sentiment over the next month.

As Neptune turned direct early this morning, Venus re-entered its home sign Libra this evening until November 29. Venus will be moving slowly now, repeating territory last traveled September 5-8. Venus retrograde in Libra offers the opportunity to repair relationships of all kinds and can help to facilitate cooperation and diplomatic efforts. Mercury entering Sagittarius Monday evening until November 30 (and again December 18 – January 13 due to Mercury being retrograde next month) together with Venus in Libra and Mars in Sagittarius until December 7 puts the focus on global trade agreements. This could signal a shift in global currency values.

With his progressed Sun in Libra, President Obama is working to strengthen the U.S.’s strategic and economic partnership with India before heading to the G20 in Seoul Thursday and Friday.

Saturn in Libra describes governmental imbalances. As Saturn conjoins China’s Mercury this month and Neptune next month at the same time Pluto in Capricorn squares natal Uranus in Cancer, we might see that China’s economy is not as solid as investors believe it to be. The potential for revaluation of the yuan is getting much stronger now.

The combination of Neptune turning direct, Venus switching signs, and Mercury moving into Sagittarius where Mars is already traveling indicates the potential that the market could take a brief break in its upward trajectory early and at the end of the week.

Wednesday’s 30 year bond auction will gauge how the market views inflation. The combination of a light calendar of events this week and Veteran’s Day Thursday is likely to put even greater focus on the G20 meeting.

Monday, November 8, 2010
Shifts between negative to choppy/mixed conditions.

Tuesday, November 9, 2010
Negative.

Wednesday, November 10, 2010
Positive.

Thursday, November 11, 2010
Positive conditions could weaken to choppy/mixed in afternoon.

Friday, November 12, 2010
Negative conditions could improve going into the close.

*Since Bernanke’s birth time is not known, it is uncertain what aspects his Moon in Pisces makes to the other planets in his birth chart. If his Moon squares his Sun/Jupiter opposition that would motivate him to take on even more risk and would also reflect his utter lack of sensitivity to the largely detrimental effects the Fed’s actions have on consumer finances.

** A mathematical calculation that moves the planets forward in time as a method of prediction.

Ben Bernanke: December 13, 1953 time unknown Augusta, GA
Federal Reserve: December 23, 1913 6:02 PM EST Washington, DC
USA: July 4, 1776 5:10 PM Philadelphia, PA
China: October 1, 1949 3:15 PM Peking, China

QE2: This Time It’s VERY Different!

Published by WallStreetWeather.net

Contrary to a post I wrote last month outlining why I thought Bernanke was bluffing about starting another round of quantitative easing (QE), the Federal Reserve announced Wednesday it intends to purchase an additional $600 billion in “longer-term” Treasuries between now and June 30, 2011. This does not include its ongoing Treasury purchases reinvesting agency debt and MBS.

Both the FOMC statement and an op-ed piece in Thursday’s Washington Post by Fed Chairman Bernanke explaining that another round of QE is necessary to help the Fed fulfill its dual mandate to “promote a high level of employment and low, stable inflation.” In the most blatant acknowledgement yet of the Fed’s intentional use of the wealth effect, Bernanke wrote that “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.”

But deep reflection and inspiration derived from an article in the November 1 issue of Bloomberg Businessweek has led me to conclude that the Fed is using their dual mandate as a smokescreen for currency manipulation.

In “The Keynes Solution,” Peter Coy outlines three options the US could engage in to correct chronic trade imbalances without resorting to retaliatory measures that could spark a trade war with China. While the Obama Administration is against imposing trade barriers outside of the WTO (option #1), monetary policy has already devalued the dollar (option #2), and appears to be launching QE2 as a vehicle to secretly implement option #3. This would force our trading partners to spend their dollars on U.S. goods, services, or mortgages instead of buying Treasuries. The more Treasuries the Fed is holding on its balance sheet, the fewer Treasuries will be available for both domestic and foreign investors to purchase.

Since all dollars will eventually have to be spent or invested in the U.S., the Fed is using QE2 to transform our trade imbalances to productive economic uses of capital. If the Fed’s goal is to maintain its balance sheet of between $2 and $3 trillion primarily in Treasuries, that amounts to $2-3 trillion less available for foreigners to purchase. In essence the Fed is trying to control how trade surpluses are being spent by China and our other large trading partners.

QE1 (March 2009 – March 2010) was different as only $300 billion consisted of Treasuries. With QE2 comprised solely of Treasuries, the Fed is “cornering” the market, restricting China and other countries to spend their excess reserves in the U.S. economy.

Since Bernanke knows that further fiscal stimulus is not politically feasible (especially in light of Tuesday’s midterm election results) and the Treasury’s plan to cap surpluses at 4% has fallen on deaf ears, the Fed is using QE2 to force China to provide the stimulus. The Fed is sending an under the table message to the Chinese government that says you didn’t raise the value of the yuan, so we will use QE2 as a weapon to wreck your economy and force you to buy American, lowering our trade deficit with you.

As an additional side benefit, QE2 helps the deficit. It amounts to an interest free loan since the Treasury pays interest to the Fed on its bond purchases and then the Fed turns over its profits to the Treasury.

If the Fed wants to increase employment and spending, QE2 is not the right vehicle to do it. According to calculations by Macroeconomic Advisors LLC, even if the Fed ended up buying $1.5 trillion in Treasuries it would only lower the unemployment rate 0.2% by the end of 2011. And even that might be too optimistic since economic growth normally is accompanied by an increase in the money supply.

The Fed is not increasing the money supply when it conducts QE because individuals and businesses who want credit don’t qualify. Those who do qualify don’t need additional credit as they are trying to deleverage from the previous Fed supported housing and asset price bubbles. The Fed’s traditional means of spurring economic growth is to lower interest rates to spawn speculation which causes asset bubbles. This creates more collateral “value” to expand credit. But this time is different because so far the Fed has been unsuccessful in expanding the money in circulation through either traditional or untraditional means.

The only way the Fed could help to increase employment would be by partnering monetary policy with fiscal policy. One idea would be for Congress to pass a major infrastructure spending bill that is “paid” for by the Fed monetizing the corresponding debt.

The Fed claims that inflation is too low. Yet the unfortunate irony is that price inflation without wage inflation will only end up reducing demand. Bernanke has the chicken and the egg reversed since excess capacity in the labor market will prevent wage growth even in a price inflationary environment. Creating wage inflation would require Congress increasing the minimum wage. And Bernanke knows that idea would be D.O.A.

Increasing economic growth could better be achieved through regulatory measures than through QE. Bernanke writes that QE1 “had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation.” Since Bernanke is telling us that QE1 did not work as the velocity of money did not increase, why embark on QE2 unless there is a hidden agenda at work?

If the Fed wanted to help expand credit, it could eliminate the 0.25% interest it pays on excess reserves sitting at the Fed as well as establish limits on the amount of excess reserves banks can keep there. University of Massachusetts economist Robert Pollin has proposed a 1-2% tax on the estimated $1.1 trillion in excess reserves. However, as the bank regulator the Fed has to carefully balance the potential economic benefits of these options with banks taking excess risk.

The myth that QE is devaluing the dollar is contradicted by the sterilization of QE by excess bank reserves held at the Fed. The fall of the dollar and the rise of gold are the result of ultra low interest rates and speculation. Inflation won’t occur until the actual amount of currency in circulation increases. Therefore, the only thing that Bernanke is aiming to achieve is to remove the risk free option from both foreign and domestic investors.

The commodity inflation that has evolved is actually reducing demand due to a lack of wage inflation. Unlike the 1970s wage/price inflation spiral, globalization has capped the ability of labor to keep up with price inflation.