charles hugh smith-Ukraine: Follow the Energy
charles hugh smith-Ukraine: Follow the Energy.
| Ukraine: Follow the Energy (March 4, 2014)
Scrape away the media sensationalism and geopolitical posturing and it boils down to a simple dynamic: follow the energy. Though many seem to believe that internal politics and geopolitical posturing in Ukraine are definitive dynamics, I tend to think the one that really counts is energy: not only who has it and who needs it, but where the consumers can get it from.Let’s cut to the chase and declare a partition along long-standing linguistic and loyalty lines a done deal. Let’s also dispense with any notions that either side can impose a military solution in the other’s territory. Media reports on the weakness of Ukrainian military forces abound (for example,Ukraine Finds Its Forces Are Ill Equipped to Take Crimea Back From Russia), but Russia’s ability to project power and hold territory isn’t so hot, either. A knowledgeable correspondent submitted these observations:
Conclusion: a de facto partition is already baked in because neither side can force a re-unification. Various jockeying and posturing will undoubtedly continue for some time, but the basic end-game is already visible: de facto partition. Let’s move on to correspondent A.C.’s observations about energy.
Thank you, A.C. Scrape away the media sensationalism and geopolitical posturing and it boils down to a simple dynamic: follow the energy. |
Share this:
Ukraine Steps Up Protection Of Its Nuclear Power Plants, Cites "Grave Russian Threat" | Zero Hedge
Ukraine Steps Up Protection Of Its Nuclear Power Plants, Cites “Grave Russian Threat” | Zero Hedge.
This one should be intuitive: with Ukraine scrambling to load up on natgas ahead of the price surge once Gazprom ends its discount pricing, and unclear what if any access it will have to Russian gas in the future and at what cost, it was only a matter of time before the Ukraine stepped up the protection of its only true energy asset: its 15 nuclear power plant, which supply nearly half of the country’s energy needs. Ukraine told as much to the U.N. atomic watchdog on Tuesday, although it framed it as a result of the “grave threat to the security” of the country posed by the Russian military.
Ukraine has 15 nuclear power reactors in operation, accounting for nearly 44 percent of its electricity production in 2013, according to the International Atomic Energy Agency’s (IAEA’s) website. Ukraine’s envoy to the IAEA said in a letter to IAEA Director General Yukiya Amano: “Illegal actions of the Russian armed forces on Ukrainian territory and the threat of use of force amount to a grave threat to security of Ukraine with its potential consequences for its nuclear power infrastructure.”
Ambassador Ihor Prokopchuk’s letter, dated March 4, was circulated among delegations attending a week-long meeting of the IAEA’s 35-nation governing board in Vienna. It was given to Reuters by a diplomat from another country.
Prokopchuk’s letter to Amano, apparently written before Putin’s comments, said: “Under these circumstances, the competent authorities of Ukraine make every effort to ensure physical security, including reinforced physical protection of 15 power units in operation at four sites of Ukrainian NPPs (nuclear power plants).
“However, consequences of the use of military force by the Russian federation against Ukraine will be unpredictable.”
On Sunday, Ukraine’s parliament called for international monitors to help protect its nuclear power plants, as tension mounted with its neighbor. Prokopchuk urged Amano to “join international efforts in de-escalating the crisis around Ukraine and to urgently raise the issue of nuclear security” with Russia.
Amano said on Monday there were 31 nuclear-related facilities in Ukraine that were being monitored by the IAEA to make sure there was no diversion of material for military purposes, as it does in other countries with nuclear plants.
Whether or not the protection surge is a result of Russian fears is irrelevant: one thing that is certain is that it is quite welcome, when one recalls that it was in the Ukraine where 28 years ago Chernobyl exploded in what was unti then the worst nuclear disaster in history.
In fact, perhaps instead of Crimea, Putin should have gone for one of the Japanese isles several years ago. Maybe only then could the great Fukushima disaster, which continues billowing alpha, beta and gamma rays to this day having surpassed Chernobyl in the worst radioactive catastrophes of all time record, would have been avoided.
Share this:
Ukraine Steps Up Protection Of Its Nuclear Power Plants, Cites “Grave Russian Threat” | Zero Hedge
Ukraine Steps Up Protection Of Its Nuclear Power Plants, Cites “Grave Russian Threat” | Zero Hedge.
This one should be intuitive: with Ukraine scrambling to load up on natgas ahead of the price surge once Gazprom ends its discount pricing, and unclear what if any access it will have to Russian gas in the future and at what cost, it was only a matter of time before the Ukraine stepped up the protection of its only true energy asset: its 15 nuclear power plant, which supply nearly half of the country’s energy needs. Ukraine told as much to the U.N. atomic watchdog on Tuesday, although it framed it as a result of the “grave threat to the security” of the country posed by the Russian military.
Ukraine has 15 nuclear power reactors in operation, accounting for nearly 44 percent of its electricity production in 2013, according to the International Atomic Energy Agency’s (IAEA’s) website. Ukraine’s envoy to the IAEA said in a letter to IAEA Director General Yukiya Amano: “Illegal actions of the Russian armed forces on Ukrainian territory and the threat of use of force amount to a grave threat to security of Ukraine with its potential consequences for its nuclear power infrastructure.”
Ambassador Ihor Prokopchuk’s letter, dated March 4, was circulated among delegations attending a week-long meeting of the IAEA’s 35-nation governing board in Vienna. It was given to Reuters by a diplomat from another country.
Prokopchuk’s letter to Amano, apparently written before Putin’s comments, said: “Under these circumstances, the competent authorities of Ukraine make every effort to ensure physical security, including reinforced physical protection of 15 power units in operation at four sites of Ukrainian NPPs (nuclear power plants).
“However, consequences of the use of military force by the Russian federation against Ukraine will be unpredictable.”
On Sunday, Ukraine’s parliament called for international monitors to help protect its nuclear power plants, as tension mounted with its neighbor. Prokopchuk urged Amano to “join international efforts in de-escalating the crisis around Ukraine and to urgently raise the issue of nuclear security” with Russia.
Amano said on Monday there were 31 nuclear-related facilities in Ukraine that were being monitored by the IAEA to make sure there was no diversion of material for military purposes, as it does in other countries with nuclear plants.
Whether or not the protection surge is a result of Russian fears is irrelevant: one thing that is certain is that it is quite welcome, when one recalls that it was in the Ukraine where 28 years ago Chernobyl exploded in what was unti then the worst nuclear disaster in history.
In fact, perhaps instead of Crimea, Putin should have gone for one of the Japanese isles several years ago. Maybe only then could the great Fukushima disaster, which continues billowing alpha, beta and gamma rays to this day having surpassed Chernobyl in the worst radioactive catastrophes of all time record, would have been avoided.
Share this:
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge.
While most attention has been focused on Nat Gas, BofA notes that Russia is unlikely to unilaterally curtail its oil exports. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control commerce flows. While BofA remains confident that oil-related sanctions are unlikely (as Europe cannot really afford to relapse into a third recession in six years), Brent prices could easily jump $10 on any disruption increasing the risk of recession for a number of weak economies.
Via BofA,
As for oil, we see temporary modest upside pressure…
As for oil, the Ukraine consumes about 300 thousand b/d, of which 220 thousand b/d comes from Russia and 80 thousand b/d is produced domestically. Unlike in the case of gas, however, the Ukraine does not have significant shale oil resources and does not pose a competitive threat to Russian dominance.
Moreover, transit volumes of Russian oil circulating through the Ukraine are rather minor, with the latest Transneft figures estimating normal flows of 300 thousand b/d through the Druzhba pipeline. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control both Azov and Black Sea commerce flows.
These routes are, for now, secure and diverse. Thus, while oil has risen in sympathy with other commodities, we believe the upside risks are rather modest from here unless the conflict escalates.
…unless Western powers get involved, which is unlikely
Moreover, we believe Russia is extremely unlikely to disrupt oil exports to the world, as it would destroy its reputation as a reliable and non-cartelized supplier to the world’s largest energy market. Also, oil-related sanctions against Russia are unlikely to happen, as we believe Europe cannot really afford to relapse into a third recession in six years. As nothing meaningful in terms of sanctions came on the back of Russia’s conflict in South Ossetia and Abkhazia in 2008, it is also unlikely that anything would happen now, in our view.
If the conflict in the Ukraine turned into a full-blown war and the 1 million b/d of Russian oil flowing through the Black Sea are temporarily disrupted, oil may briefly jump by $10/bbl or more.
With EM currencies weakening by the minute, however, a spike in Brent crude oil prices above $125/bbl would likely increase the risks of recession for a number of weak economies. Consequently, we believe prices would probably reverse back down rather quickly.
Share this:
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge.
While most attention has been focused on Nat Gas, BofA notes that Russia is unlikely to unilaterally curtail its oil exports. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control commerce flows. While BofA remains confident that oil-related sanctions are unlikely (as Europe cannot really afford to relapse into a third recession in six years), Brent prices could easily jump $10 on any disruption increasing the risk of recession for a number of weak economies.
Via BofA,
As for oil, we see temporary modest upside pressure…
As for oil, the Ukraine consumes about 300 thousand b/d, of which 220 thousand b/d comes from Russia and 80 thousand b/d is produced domestically. Unlike in the case of gas, however, the Ukraine does not have significant shale oil resources and does not pose a competitive threat to Russian dominance.
Moreover, transit volumes of Russian oil circulating through the Ukraine are rather minor, with the latest Transneft figures estimating normal flows of 300 thousand b/d through the Druzhba pipeline. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control both Azov and Black Sea commerce flows.
These routes are, for now, secure and diverse. Thus, while oil has risen in sympathy with other commodities, we believe the upside risks are rather modest from here unless the conflict escalates.
…unless Western powers get involved, which is unlikely
Moreover, we believe Russia is extremely unlikely to disrupt oil exports to the world, as it would destroy its reputation as a reliable and non-cartelized supplier to the world’s largest energy market. Also, oil-related sanctions against Russia are unlikely to happen, as we believe Europe cannot really afford to relapse into a third recession in six years. As nothing meaningful in terms of sanctions came on the back of Russia’s conflict in South Ossetia and Abkhazia in 2008, it is also unlikely that anything would happen now, in our view.
If the conflict in the Ukraine turned into a full-blown war and the 1 million b/d of Russian oil flowing through the Black Sea are temporarily disrupted, oil may briefly jump by $10/bbl or more.
With EM currencies weakening by the minute, however, a spike in Brent crude oil prices above $125/bbl would likely increase the risks of recession for a number of weak economies. Consequently, we believe prices would probably reverse back down rather quickly.
Share this:
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge.
While most attention has been focused on Nat Gas, BofA notes that Russia is unlikely to unilaterally curtail its oil exports. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control commerce flows. While BofA remains confident that oil-related sanctions are unlikely (as Europe cannot really afford to relapse into a third recession in six years), Brent prices could easily jump $10 on any disruption increasing the risk of recession for a number of weak economies.
Via BofA,
As for oil, we see temporary modest upside pressure…
As for oil, the Ukraine consumes about 300 thousand b/d, of which 220 thousand b/d comes from Russia and 80 thousand b/d is produced domestically. Unlike in the case of gas, however, the Ukraine does not have significant shale oil resources and does not pose a competitive threat to Russian dominance.
Moreover, transit volumes of Russian oil circulating through the Ukraine are rather minor, with the latest Transneft figures estimating normal flows of 300 thousand b/d through the Druzhba pipeline. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control both Azov and Black Sea commerce flows.
These routes are, for now, secure and diverse. Thus, while oil has risen in sympathy with other commodities, we believe the upside risks are rather modest from here unless the conflict escalates.
…unless Western powers get involved, which is unlikely
Moreover, we believe Russia is extremely unlikely to disrupt oil exports to the world, as it would destroy its reputation as a reliable and non-cartelized supplier to the world’s largest energy market. Also, oil-related sanctions against Russia are unlikely to happen, as we believe Europe cannot really afford to relapse into a third recession in six years. As nothing meaningful in terms of sanctions came on the back of Russia’s conflict in South Ossetia and Abkhazia in 2008, it is also unlikely that anything would happen now, in our view.
If the conflict in the Ukraine turned into a full-blown war and the 1 million b/d of Russian oil flowing through the Black Sea are temporarily disrupted, oil may briefly jump by $10/bbl or more.
With EM currencies weakening by the minute, however, a spike in Brent crude oil prices above $125/bbl would likely increase the risks of recession for a number of weak economies. Consequently, we believe prices would probably reverse back down rather quickly.
Share this:
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge
These Countries Are At Risk If The West Sanctions Russia, BofA Warns | Zero Hedge.
While most attention has been focused on Nat Gas, BofA notes that Russia is unlikely to unilaterally curtail its oil exports. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control commerce flows. While BofA remains confident that oil-related sanctions are unlikely (as Europe cannot really afford to relapse into a third recession in six years), Brent prices could easily jump $10 on any disruption increasing the risk of recession for a number of weak economies.
Via BofA,
As for oil, we see temporary modest upside pressure…
As for oil, the Ukraine consumes about 300 thousand b/d, of which 220 thousand b/d comes from Russia and 80 thousand b/d is produced domestically. Unlike in the case of gas, however, the Ukraine does not have significant shale oil resources and does not pose a competitive threat to Russian dominance.
Moreover, transit volumes of Russian oil circulating through the Ukraine are rather minor, with the latest Transneft figures estimating normal flows of 300 thousand b/d through the Druzhba pipeline. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control both Azov and Black Sea commerce flows.
These routes are, for now, secure and diverse. Thus, while oil has risen in sympathy with other commodities, we believe the upside risks are rather modest from here unless the conflict escalates.
…unless Western powers get involved, which is unlikely
Moreover, we believe Russia is extremely unlikely to disrupt oil exports to the world, as it would destroy its reputation as a reliable and non-cartelized supplier to the world’s largest energy market. Also, oil-related sanctions against Russia are unlikely to happen, as we believe Europe cannot really afford to relapse into a third recession in six years. As nothing meaningful in terms of sanctions came on the back of Russia’s conflict in South Ossetia and Abkhazia in 2008, it is also unlikely that anything would happen now, in our view.
If the conflict in the Ukraine turned into a full-blown war and the 1 million b/d of Russian oil flowing through the Black Sea are temporarily disrupted, oil may briefly jump by $10/bbl or more.
With EM currencies weakening by the minute, however, a spike in Brent crude oil prices above $125/bbl would likely increase the risks of recession for a number of weak economies. Consequently, we believe prices would probably reverse back down rather quickly.
Share this:
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.
Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.
Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”
So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?
Ready?
“Overconfidence.” (no, not “weather”)
Yup. That’s it.
The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.
Actually what is going to sound even more obvious, is that subprime was not contained.
But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.
Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.
But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:
He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.“He concluded that he should “try to simplify the message, but not simplify too much”.
Oh you mean something like this, uttered literally moments ago:
- LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE
Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.
But don’t worry, it’s the “overconfidence” that did us in…
And then, on to regrets – because Bernanke has a few:
“We could have done some things on the margin to mitigate somewhat the crisis.”“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”
You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.
But wait, because the punchline beckons:
“My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”
So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.
* * *
So how much does such profound brilliance cost?
Bernanke received at least $250,000 for his appearance.
Or, in other words, more than he was paid for one full year as Fed chairman.
And that, ladies and gentlemen, is a wrap.
Share this:
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.
Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.
Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”
So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?
Ready?
“Overconfidence.” (no, not “weather”)
Yup. That’s it.
The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.
Actually what is going to sound even more obvious, is that subprime was not contained.
But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.
Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.
But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:
He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.“He concluded that he should “try to simplify the message, but not simplify too much”.
Oh you mean something like this, uttered literally moments ago:
- LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE
Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.
But don’t worry, it’s the “overconfidence” that did us in…
And then, on to regrets – because Bernanke has a few:
“We could have done some things on the margin to mitigate somewhat the crisis.”“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”
You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.
But wait, because the punchline beckons:
“My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”
So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.
* * *
So how much does such profound brilliance cost?
Bernanke received at least $250,000 for his appearance.
Or, in other words, more than he was paid for one full year as Fed chairman.
And that, ladies and gentlemen, is a wrap.
Share this:
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge
Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.
Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.
Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”
So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?
Ready?
“Overconfidence.” (no, not “weather”)
Yup. That’s it.
The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.
Actually what is going to sound even more obvious, is that subprime was not contained.
But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.
Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.
But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:
He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.“He concluded that he should “try to simplify the message, but not simplify too much”.
Oh you mean something like this, uttered literally moments ago:
- LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE
Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.
But don’t worry, it’s the “overconfidence” that did us in…
And then, on to regrets – because Bernanke has a few:
“We could have done some things on the margin to mitigate somewhat the crisis.”“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”
You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.
But wait, because the punchline beckons:
“My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”
So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.
* * *
So how much does such profound brilliance cost?
Bernanke received at least $250,000 for his appearance.
Or, in other words, more than he was paid for one full year as Fed chairman.
And that, ladies and gentlemen, is a wrap.
Olduvaiblog: Musings on the coming collapse 