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Friday, September 30, 2011 3:41 AM


Shilling Sees Evidence of Deflation in 5 of 7 Key Areas; Bernanke Begs Congress for Fiscal Stimulus, Admits Fed is Out of Bullets


Shilling Sees Evidence of Deflation in Financial Assets, Tangible Assets, Median Income, Commodities, Currencies



Shilling says "Forces of deleveraging and deflation are greater than the Fed can handle."

I certainly agree and have been saying the same thing (correctly I might add) for several years. All the Fed has ever managed to do is slow the deflationary outcome and that is in spite of $trillions in both monetary stimulus from the Fed and fiscal stimulus from Congress.

Once again, if you mistakenly think inflation and deflation are about consumer prices instead of vastly more important credit, you will come to a different conclusion.

For further discussion as to what deflation is all about, please see


Fed Out of Bullets

In spite of what the Fed says and wants everyone to believe the Fed is Out of Bullets
Let's Twist Again (and Not Much More) as I expected

There were a lot of expectations regarding numerous options the Fed might take today. I did not expect the Fed would risk trying them.

See Six Things the Fed May Announce Tomorrow (But Likely Won't); Would Any of Them Matter? Gaming the Reaction for details.

The Fed said "Let's Twist Again" and not much more other than throwing a bone at mortgages. Neither will work and the Fed is out of bullets.
Bernanke Begs Congress for Fiscal Stimulus

In a question session following Bernanke's speech Lessons from Emerging Market Economies on the Sources of Sustained Growth (in which Bernanke proves he does not really understand what is really happening in China), Bernanke begged Congress for help and admitted the Fed is out of bullets.

Yahoo Finance reports Bernanke: Long-term unemployment a national crisis
Federal Reserve Chairman Ben Bernanke said Wednesday that long-term unemployment is a "national crisis" and suggested that Congress should take further action to combat it. He also said lawmakers should provide more help to the battered housing industry.

Bernanke said the government needs to provide support to help the long-term unemployed retrain for jobs and find work. And he suggested that Congress should take more responsibility.

In the question-and-answer period, Bernanke cautioned U.S. lawmakers against cutting deficits too quickly to reduce budget deficits. He has said that could put the fragile economy at risk.
In practical terms, Bernanke was begging Congress for help, and in the Q&A session, Bernanke went even farther.

Please consider Everyone Missed It, But Ben Bernanke Peed On The Fed Again Last Night by Joe Weisenthal.
We've talked about this before, the fact that Ben Bernanke is growing increasingly vocal about his skepticism that monetary policy can do much to save this economy.

This is a HUGE change from someone who once said that the Great Depression was entirely the Fed's fault, and that the Fed would never let that happen again!

In his daily note, Art Cashin caught a key bit from a Ben Bernanke Q&A last night after he gave a speech, further emphasizing that Bernanke has radically changed his views.

"Monetary policy can do a lot, but monetary policy is not a panacea," Bernanke said.
That is a close an admission that the "Fed is out of Bullets" that you are ever going to see.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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