‘David Benton is probably the most important man you have never heard of’

Is the writer being somewhat condescending here, or do they have a good point?

I can’t help feeling it’s the former.

I can think of worse places to hide out

Is it me, or is this becoming tedious?

3 years old today.

I’d like to take this opportunity to thank you all for your patronage over the past three years.   Without you, there is no “us”

Please make sure to spread the word by telling all your trading buddies about the ForexLive community.  

Jelly and icecream for everyone!!

By Steven K. Beckner

(MNI) – St. Louis Federal Reserve Bank President James Bullard
warned Friday about the inflationary risks of expanding the Fed’s
balance sheet and about basing monetary policy on what he considers
faulty assumptions about the size of the “output gap” — the difference
between actual and potential GDP.

It will take “a long time” to recover from the bursting of the
housing bubble and the Fed should not be trying to reflate that bubble,
Bullard said in a speech prepared for delivery at Simon Fraser
University in Vancouver, Canada.

Bullard, who is not a voting member of the Fed’s policymaking
Federal Open Market Committee this year, also questioned the credibility
of calendarized commitments to zero interest rates. He was even more
skeptical of trying to tie the zero federal funds rate to unemployment
or other economic triggers as Chicago Fed President Charles Evans has
recommended.

While opposing an “extended period” of zero rates, Bullard was an
early proponent of the second round of quantitative easing in November
2010 which added $600 billion to the Fed’s balance sheet.

However, he seemed to express reservations about supporting a QE3
at this time, warning “increases in the size of the balance sheet entail
additional inflationary risks if accommodation is not removed at an
appropriate pace.”

Those who have expressed an openness to QE3 or other easing
measures have often cited the wide “output gap” — often expressed in
terms of the large amounts of resource slack, particularly in the labor
market. But Bullard urged caution in taking that approach.

He noted that “most components of U.S. GDP have recovered to their
2007 Q4 peak,” but said “the exception is the components of investment
related to real estate.” And “these components of GDP will take a long
time to recover.”

“It is therefore not reasonable to claim that the ‘output gap’ is
exceptionally large,” Bullard continued, adding, “It is neither feasible
nor desirable to attempt to re-inflate the U.S. housing bubble of the
mid-2000s” because “the crisis has likely scared off a cohort of
potential homeowners, who now see home ownership as a much riskier
proposition than renting.”

Noting that U.S. homeowners have about $9.9 trillion in debt
outstanding against $712 billion of equity, Bullard said that “to get
back to the normal (loan to value ratio of 58.4%) households would have
to pay down mortgage debt by about $3.7 trillion, about one-quarter of
one year’s GDP.”

“This will take a long time,” he said. “It is not a matter of
business cycle frequency adjustment.”

What’s more, Bullard quoted economists as contending that “some
households may not be able to react normally to easy monetary policy”
because “they cannot borrow more against their home values.”

As evidence, he observed that “states with the largest declines in
home values have the weakest recoveries.”

And so “monetary policy may not be able to reach the constrained
households,” he said, suggesting further quantitative easing might
accomplish very little.

At its Jan. 25 meeting, the FOMC extended the expected period of
zero rates from mid-2013 to late-2014 in a bid to hold down interest
rates across the yield curve and induce more spending and investment.
but Bullard was dubious about the effectiveness of that strategy.

“By shifting this date, the Committee, at least according to some
models, can influence financial market conditions and provide further
monetary accommodation if it so desires,” he said, but he was skeptical:
“The communications tool works inside models but has some important
caveats for actual policy application.”

“Namely, it is not clear how credible actual announcements can be,”
he said. “If the economy is performing well at the point in the future
where the promise begins to bite, then the Committee may simply abandon
the promise and return to normal policy.”

“But this behavior, if understood by markets, would cancel out the
initial effects of the promise, and so nothing would be accomplished by
making the initial promise,” he added.

As for proposals to tie a promise of near-zero policy rates to
actual outcomes in the economy, such as the unemployment rate, Bullard
said, “Most proposals use an actual unemployment rate but an anticipated
inflation rate. This asymmetry is hard to justify.”

“Unfortunately, unemployment rates have a checkered history in
advanced economies over the last several decades,” he said.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]

The winner of the caption contest is ‘turtle’.

“One fat finger is not enough – you need TWO fat fingers to trade Greece!”

Runners up were:

farmer
"im not kidding, last time i made a promise, my nose grew this long!! "

wsr007
Fellas, from now on, no more buffets, we will only have a choice of 1 starter and 1 main course.

Louis Rappaport
As you can plainly see one and one make 7.. see the deficit aint that bad

John Cheers
Bend over. The austerity measures are going about this deep…..

AndyB
So far we've got 2 bailouts. Anyone interested in going for a third?

John T
we have as much chance of meeting their targets
as i have fitting my fat ass through a door this wide

–Retransmitting Story Published 12:13 ET Friday

By Denny Gulino

WASHINGTON (MNI) – As the years after the financial crisis
accumulate it has become clear that it separated winners from losers by
the millions, and many, perhaps most of the losers will not recover.

It’s not pleasant to contemplate. Which is why rear-guard efforts
to hold back time’s power to erase both the bad memories and accustom us
to ignoring the continuing damage may be bound to fail. Omar Khayyam was
on to something with that Moving Finger, “having writ, moves on.”

Witness Treasury Secretary Tim Geithner’s plea in his morning Wall
Street Journal op-ed, “Financial Crisis Amnesia.” It may be a worthy but
futile effort. As he, and his deputy, Neal Wolin, later on CNBC try to
argue, the financial crisis was big, bad and deserves a societal
response, just not the kind represented by industry pushback and the WSJ
editorials and columns by the dozens in opposition to Dodd-Frank’s
retribution.

And in the morning’s New York Times, the op-ed by the one-time
chair of the Financial Crisis Inquiry Commission, Phil Angelides, “Will
Wall Street Ever Face Justice,” calls for larger retribution in the
courts. Other than a sputtering series of delayed attempted
prosecutions, the time may have long passed for such massive legal
inquiries.

Therefore it may be mostly irrelevant to ask whether Geithner,
Wolin and Angelides are right or wrong. The balance of regulation and
permissiveness will be determined by today’s realities, not yesterday’s
horrors.

But will justice be forever subverted, even if they are right?
Actually, there seems to be a law of the conservation of justice as
immutable as the one for conservation of energy. Instead of providing
satisfying relatively immediate answers, however, these laws seem to
take time to play out. Worst of all, the responsible parties who face
punishment under them are not always those who get pilloried on the
front pages of the newspapers and Web sites.

It could be argued, in fact, that those ultimately responsible are
all around us — and maybe are us. After all, we can influence our
leaders, we can read the tea leaves as well as they. We can protect
ourselves by encouraging vigilance and rigorous policymaking. How then,
is it with a national debt so large, annual deficits so big and debt
burdens on future generations so monumental, that historians won’t pin
the whole mess on us?

So blind Lady Justice may choose her own targets and, reviewing
the national scenery, seems to have done so already. Let’s review what’s
been happening, and figure out who is actually in her cross hairs.

Small-business casualties litter the landscape, having lost their
ability to hire. Many neighborhoods hollowed out by foreclosures will
remain hollowed out.

Millions of the long-term unemployed will never be re-employed and
as they age into involuntary retirement, the work force is being
re-sized in fact if not yet by definition. Ratios like the unemployment
rate have become less comparable with pre-crisis years.

NAIRU, the old monetary policy guidepost, as the non-accelerating
inflation rate of unemployment, now may be obsolete. And GDP growth no
longer is calibrated with employment in the same way, as both Ben
Bernanke and Henry Paulson have pointed out in the past two weeks.

In the political sphere the need in an election year to settle on
talking point weapons for the campaign troops freeze in place
bumper-sticker notions that won’t resume their evolution into guidelines
of greater relevance until well after the votes are counted.

Conservatives who value family formation as much as household
formation find themselves mouthing anti-family platitudes for now.
Liberals who care about safety nets find themselves adopting language
that contemplates shredding them.

Meanwhile the economy grows mainly on the backs of the winners,
those who survived with adequate earning power and the ability to still
visualize the far horizon. The American socio-economic spectrum has been
re-weighted, with one end clustered much more heavily with those for
whom the financial crisis was economically fatal, whose capabilities
were devalued too soon by the lightning strike.

Banking finds that deleveraging and the impulse to shrink the
financial sector are not abstruse theoretical concepts. They power
the buzzsaw ripping away the foundations.

Wall Street incentives are resized and aimed differently, while
Street participants see colleagues and divisions and reliable profit
centers disappear. The market mechanism itself seems threatened both by
hyper-regulation and by the way a cloudy future cripples rebuilding.
Mutual funds have an existential reassessment.

In fact, among American institutions, there is no greater
post-crisis loser than Congress, which found itself blindsided, forced
to swallow unprecedented emergency spending backed by a Republican
president, and then has been channeled by outside forces into a confused
effort to adjust ever since. It somehow had become hard of hearing with
limited eyesight and missed the gathering storm.

The fallback crutch of Congress has been acute partisanship, the
arena where the rules are still clear. But acute partisanship may well
be revealed as a symptom of deeper institutional problems, not
their cause.

To the dismay of the vast middle of the electorate, which senses
the nation’s deep structural problems cannot be dealt with, the
paralysis of a Congress unable to deal with structure becomes a daily
embarrassment and a deeply imbedded concern.

Meanwhile, structural change, positive and negative, is taking
place at a rapid rate in many other spheres far removed from Dodd-Frank
as forces unleashed by the crisis and technology’s disruptive influence
blindly rework the pillars amid the vacuum of effective civic intent.

Construction industries look to Congress for infrastructure
spending and see a highway bill being downsized into near insignificance
while the nation’s investment in residential housing undergoes a
permanent reshaping.

The health care industry begins to outlive its many traditional
protections and inexorably gets squeezed as its share of the economy
reaches a bloated limit. Big pharma meets big India pharma.

Education, like health care, hits the pricing-power wall and so
begins to experience its convulsive future from top to bottom.

The auto industry rebounds, surprised to find out how many people
want 40 mile-per-gallon cars, and haltingly begins to supply the demand.

U.S. manufacturing, not just the auto industry, sees its
exaggerated productivity edge being matched around the world and begins
another phase of robotization. That ensures it remains the top
high-value producer in the world, with even fewer employees per dollar
of output. About no other sector does political rhetoric comport less
with reality.

The oil industry adjusts to new domestic production technology and
its new economics as U.S. oil imports shrink. The domestic production
resurgence that was wholly unexpected, creates jobs and promises much
better prices at the pump — even as it builds the potential to
jeopardize long-range alternative energy initiatives. Not yet, though,
while Iran keeps the oil-price bubble alive.

Lady Justice — or maybe just the choreographers of the March of
Time — certainly keep busy. It’s all how today’s problems are being
worked out — with a lot of pain and little planning or
direction involved, and less comfort and peace of mind in the bargain.

Given that, when Geithner writes that his wife “reminds me of the
panicked calls she answered for me at home late at night or early in the
morning in 2008 from the then-giants of our financial system,” can we
ask, is amnesia all bad?

“Amnesia is what causes financial crisis,” Geithner answers.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MK$$$$,M$U$$$,MI$OI$,MFU$$$,MCU$$$]

–$5.00/Gallon Gasoline Presents A Different Set Of Risks

By Brai Odion-Esene

WASHINGTON (MNI) – Ratings firm Standard & Poor’s Friday said it
believes the U.S. economy can weather the impact should the price of
gasoline rise to $4.00 per gallon.

Many fear higher gas prices, pushed up by soaring oil prices, could
have a contractionary effect on U.S. economic growth as consumers cut
back on spending to compensate.

In a report, however, S&P said “We are inclined to conclude that
$4.00 per gallon of gasoline will not derail the U.S. economy, but
acknowledge that $5.00 per gallon presents an entirely different set of
risks, especially as we approach the summer peak driving vacation
months.”

According to the Energy Information Administration, the average
price of a gallon of gasoline hit $3.72 this week, up from $3.38 in
January.

“Despite this sharp increase in prices, consumers are not yet
showing any noticeable signs of vulnerability when it comes to
discretionary spending,” S&P said. It pointed out that, as of January,
consumer spending on clothing and accessories was up 5.3% versus a year
ago, spending increased 4.3% at sporting goods, hobby, book, and music
retailers, and the food and drinking establishment business increased by
8.2% year over year.

S&P argued that it seems other factors such as the declining U.S.
unemployment rate are offsetting potential risks to GDP growth
associated with rising crude oil and retail gasoline prices.

S&P added that while rising household energy expenses will, at some
point, become problematic for the U.S. economy, “We are, however,
slightly wary of the general notion that GDP growth would decline by 1%
if crude oil jumps to $140 per barrel in 2012 from roughly $99 per
barrel at year-end 2011.”

It noted that U.S. GDP growth generally remained between 2% and 4%
during the prior recovery cycle — 2002 to 2006 — a period in which
crude oil prices increased by 208% to $61.05 at the end of 2006 from
$19.84 at the end of 2001.

It did acknowledge that many other factors boosted economic growth
during the prior cycle, including job creation and the housing boom,
which helped offset any drags on domestic economic activity associated
with rising crude oil prices.

S&P stressed that while crude oil prices are currently heading
higher, “natural gas prices are at the lowest levels recorded in at
least a decade.

“While consumers are definitely paying more at the pump, many
consumers are benefiting from the lowest winter heating bills in years
due to the combination of natural gas prices and the exceptionally mild
winter in the northeastern U.S.,” it said.

Adding that consumer gasoline purchases currently account for less
than 5% of total personal consumption expenditures, S&P said based on
its analysis, “We find it difficult to believe that anything short of a
major price spike in a category of retail spending that accounts for
less than 5% of total personal consumption can represent a significant
threat to the overall economy.”

Should oil and gasoline prices continue to rise, S&P said it is
entirely plausible that additional incremental consumer spending on
gasoline — and household energy related expenditures in general — will
first come at the expense of various forms of discretionary consumer
spending.

“Consumers will be forced to divert money from non-energy related
categories of retail spending, many of which include goods produced
outside the U.S., to accommodate additional dollars spent at the pump
before we reach the point where rising gasoline prices place the broad
U.S. economy at risk of recession,” the S&P report said.

To avoid a recession and keep the recovery chugging along, S&P said
the U.S. economy now requires sustained disposable income growth, coming
from some combination of wage growth and tax policy.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$$,MI$OI$,MAUDS$,M$$CR$]

• Papademos expects significant debt swap participation
• Q4 Canadian GDP +1.8 vs +1.8% exp, Q3 revised higher
• Budget minister: Spain to continue on austerity path
• IMF uncertain Ireland can return to bond market next year
• Ireland’s Jan-Feb budget deficit larger than last year
• ECB’s Coata says it’s “undesirable” to revisit Portugal’s budget gap
• IMF’s Zhu says ECB shouldn’t hesitate to use unconventional tools
• Fed’s Bullard: $4 gasoline not impeding consumers
• Obama: All options on the table with Iran
• Iceland may adopt Canadian dollar
• EUR shorts cut, JPY longs eliminated in COT report
• S&P 500 falls 0.3% to 1375
• USD leads, NZD lags
• CAD is top weekly performer, CHF lags

Most of the EUR/USD damage was done in Europe after the soft reports on German retail sales and Spanish unemployment. The pair staggered into NY trading at 1.3220 and will close about 20 pips lower. Sellers took out a barrier at 1.3200, but only slid as far as 1.3187.

USD/JPY continued its ascent, edging to 81.70 from 81.50. Longs went stop-loss hunting in a whisper-quiet NY afternoon sending the pair to 81.87

The market chewed through cable buy orders from 1.5835/30 but was unable to keep the momentum going, stalling at 1.5824 then rebounding to 1.5838.

EUR/CHF found some life, climbing to 1.2069 and finishing near the day’s highs.

Canada’s GDP report had no effect on the currency as commodity currencies drifted lower through the session.

EUR/GBP range of 0.8313 to 0.8351.

The Middle Eastern News Agency says a pipeline has exploded in Yemen, citing the interior minister.

Aside from the large drop in EUR shorts that Jamie noted, yen positioning has gone from long to short for the first time since May 2011.It concludes a three-week drop to a net short 1,203  compared to long 17,257 a week earlier.

Switches from long to short are a traditional sell signal and vice versa. The most recent example was CAD, which switched to long in early February and hit a six-month high yesterday.

The rest of the numbers:

• GBP shorts fell to -23,235 from -31,350
• AUD longs fell to 78,201 from 74,700
• NZD longs also pulled back to 22,114 from 24,211
• CAD longs climbed to 22,480 from 14,112
• CHF shorts were virtually unchanged at -19,391 vs  -19,846

According to the CFTC commitments of traders report, traders are 23% less short of EUR/USD than they were the week before, as of the close of business last Tuesday. On Tuesday we closed at 1.3468…

A bit more room on the downside now as the trade is clearly less crowded…

I posted this

Hope y’all took note

Not a bad start

• Merkel meets coalition members for talks (could they soften on the firewall? Doubt it)
• The Fed’s Bullard is speaking in Vancouver
• China will release it’s non-manufacturing PMI on Saturday, it was at 52.9 in Jan.
• China top government advisory body — the CPPCC — also begins annual meetings in Beijing
• Iran is hosting parliamentary elections
• Russia is hosting Presidential elections

Nothing to lose sleep over, unless you voted against Putin. In that case, pack your bags for the gulag.

WASHINGTON (MNI) – The following statement was issued Friday by the
National Federation of Independent Business’ Chief Economist William
Dunkelberg:

“February was a ‘break-even’ month for job creators on Main Street.
For small employers, the net change in employment per firm (seasonally
adjusted) was 0.04. While this is better than January’s net zero report,
it’s certainly nothing to get excited about.

“Seasonally adjusted, 14 percent of the owners added an average of
2.9 workers per firm over the past few months, and 12 percent reduced
employment an average of 3.5 workers per firm. The remaining 74 percent
of owners made no net change in employment. While the percent of firms
reducing employment was the 2nd lowest since 2007, the percent of those
increasing employment was one of the highest reading since 2007. Firms
have eased firings (initial claims for unemployment now around 350,000
per week) but haven’t resumed strong hiring, although job creation is
improving from a low of 3 percent in 2009.

The net percent of owners planning to create new jobs unexpectedly
fell 9 points to -4 percent (seasonally adjusted)-the fourth monthly
decline and ominous news for the months to come. Unadjusted, 10 percent
plan to increase employment and 8 percent plan reductions, meaning we
can expect few new jobs from Main Street. From the start of the
expansion (July 2009), job creation plans have lagged all other recovery
periods, including the ‘jobless recovery’ in 2001.

“The ability to find qualified applicants for available jobs
continues to be a problem for many small business owners. Forty-four
percent of owners hired or tried to hire in the last three months and 33
percent of them reported few or no qualified applicants for the
position.

“The percent of owners reporting hard to fill job openings fell 2
points to 16 percent, but still one of the best readings in years. It is
a good predictor of the unemployment rate and anticipates little change
in the current 8.3 percent reading unless there is a large reduction in
those looking for work, exiting the labor force.

“Overall, the February NFIB survey anticipates a relatively weak
job creation number with little change in the unemployment rate-very
disappointing. With job openings and plans for job creation falling,
prospects for continued job creation in the small business sector are
not promising.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$]

The European crisis isn't dead, it's on hiatus.

The LTRO has dramatically improved the fortunes of Italy and Spain but disaster still looms in Portugal.

We're all tired of the Greek saga and don't want to re0watch the same play with different actors at the moment. But it's not going to go away. European leaders need to grasp the opportunity they have at the moment while markets are calm. With another reasonably sized bailout they can snuff out the problem in Portugal; instead, they're wishfully hoping it goes away on its own.

The ECB's  Carlos Costa, who also heads the Bank of Portugal, today said it's "not desirable" to revisit the topic of Portugal's financing gap and that a second rescue is "undesirable".

It's a familiar story. For every sovereign default, there has been a government that has played wait-and-see, that has said "Maybe the economy will pick up and bond yields will come down on their own." It never happens. If you don't "desire" to deal with it sooner, you always pay more later.

There is no sense in breaking down the Portuguese debt/revenue/repayment situation. It is what the bond market says it is – unsustainable. Aside from Greece, Portuguese CDS are the highest in the world, topping Pakistan, Argentina, Ukraine and Venezuela.

Not a cent of the trillion euros of cheap LTRO money has gone into Portuguese bonds. Since November, Italian yields have improved dramatically while Portuguese yields have demonstrably worsened.

The market even has a good idea when the port will hit the fan. Bonds maturing in February 2013 yield 4.8% (more than double Italy and Spain but roughly equal to Ireland). Seven months later, they jump to 13.1% compared to 5% in Ireland and around 2% in Italy and Spain.

It's politically tough to deal with Portugal at the moment and it risks upsetting other periphery bond markets but it's times like these when leadership matters. Unless European leaders start talking at different tune, this is yet another reason to sell euros.

US DATA: TSY: HAMP MODIFICATIONS SLOW IN JANUARY; 18K VS 23.4K IN DEC
FHA JAN LOSS MITIGAT’N INTERVENTIONS INCREASE; 51.2K V 38.7 DEC
JPMORGAN, B OF A IMPROVED PERFORMANCE UNDER HAMP IN Q4

US DATA: NFIB statement on Feb jobs (NFIB survey is due Tues, Mar
13) says “the net change in employment per firm (seasonally adjusted)
was 0.04 vs January’s net zero. Seasonally adjusted, 14 percent
of the owners added an average of 2.9 workers per firm over the past few
months, and 12 percent reduced employment an average of 3.5 workers per
firm. The remaining 74 percent of owners made no net change in
employment. While the percent of firms reducing employment was the 2nd
lowest since 2007, the percent of those increasing employment was one of
the highest reading since 2007.”

There’s been talk all day of 81.75 barriers in play and of that is the case, they are now toastato.

If you were hanging around waiting for a pre-weekend dip to cover a short, it looks as though that train has already left the station without you…

81.72 is the high thus far.