Bernanke Describes US Economic Growth as "Frustratingly Slow"

Well… Big Ben Bernanke said the economy was “frustratingly slow”… So… For once, he agrees with me, for I said it long before he ever admitted it! So, we’ve got that to talk about this morning, and a few other things.

Well… As I walked out of the door yesterday, Big Ben Bernanke was speaking to the good people in Atlanta… I say they are good people, because they sat and listened, and didn’t pull a John Wilkes Booth on Big Ben! But, just like politicians who like to pat their own backs when something goes right, even though it had nothing to do with them, Big Ben is touting the “necessity” of his stimulus or quantitative easing (QE)… He told the audience yesterday that his stimulus was “warranted” because the economy is “frustratingly slow”… Hmmm… Yes the second part of that statement is correct; it is “slow”… But, unless you are trying to emulate the Japanese, shouldn’t you have just let the economy bottom out, and by now we would be moving in the right direction, instead of these starts and stops caused by your stimulus, Mr. Bernanke?

Hey… Did you hear that White House Chief Economist, Goolsby, is leaving his job? I find this very suspicious, considering that the other day, I told you how he had downplayed last week’s jobs data, and called it a “freak report” and merely a “bump in the road”… And now he’s gone… Oh well, he was as useless as a pay toilet in a diarrhea ward to me, or the US as a whole, given that he was so removed from reality…

So… The currencies rallied throughout the day and, as I left for the day, the euro (EUR) was nearing 1.47 (1.4690), and I was all prepared to talk about how the guys that have been calling for an end of the euro for over a year now, had to be squirming with the single unit gaining about 1-cent a day lately… But, the media decided to bring up the Eurozone debt problems again… And soon the euro was scrambling in the overnight markets.

With the euro scrambling, the other currencies were dragged down, along with gold and silver, which again, makes me scratch my balding head, for if there is uncertainty (Eurozone) then gold and silver should be soaring… But, let me bring something to your attention… Yesterday, gold was moving higher, and then within a couple of minutes gold fell $13! Now, how does that happen, you might ask, as I did… Ahhh grasshopper, this is the stuff that the GATA people have been talking about for years… I suggest you go check them out here

So… We had some strange occurrence move gold down $13 in a matter of minutes… I’m sure the boys and girls over at the CFTC (Commodities, Futures, Trading Commission) will tell you that it was just a co-inky-dink! But I’m not buying that swampland they are trying to sell… And it just ticks me off to no end that nothing is done about this stuff!

OK… So, we’re weaker in the currencies and metals this morning than we were yesterday morning… You know, I had a reader send me a note yesterday that pretty much said that I should write about opportunities in currencies before it’s too late, and they are already rallying… Hmmm… Sorry… Thought I already did that… Now, I do admit that sometimes I’m so far ahead of the market with a call, that people begin to question the call before it comes to fruition… And I do admit that sometimes you have to read between the lines, because the Legal Beagles would give me a swift boot if I actually “recommended” something, besides diversifying your portfolio!

The boys and girls over at Citicorp must be reading the Pfennig these days… Let’s listen in… “Over the last two years when you did have US economic weakness, you also had a policy response.” Ahhh… They’re talking about the prospects of more stimulus…

And the US President was doing his best to help out Greece yesterday… He said that the US stands ready to assist Greece through the IMF, to avoid a disaster… That’s nice, and makes sense on the side of the coin that calls for the US/IMF to keep another financial meltdown from happening in the world… But doesn’t make sense on the side of the coin that says the US is in no position to prop up other countries, when all it would do is add to their debt…

So… Like I said above, the media decided to drag the Eurozone debt problems out of the closet again, and hang on the clothesline so all the neighbors can see… And whenever that happens, the Swiss franc (CHF) goes on a tear, along with Japanese yen (JPY), (now that the coordinated effort to stem the yen’s weakness is a fading memory to traders). Yen is actually trading with a 79 figure this morning…

It used to be that the dollar would be the king pin safe haven currency… But, think about that for a minute… My colleague and friend over at the Sovereign Society, Jeff Opdyke, shows a slide during one of his presentations that lists all the things that have happened in the past year that would normally have seen a rush to the dollar… But NOOOOOOOOO! It didn’t happen…

So… I ask the question: Has the dollar already begun to lose its reserve currency status?

Well… All you have to do is ask that question in: Asia, Belarus, Argentina, Russia, and Brazil… For these countries have signed currency swap agreements with China, which removes dollars from the trade between China and each respective country on their currency swap roster… Oh, and China is currently working on an agreement with Japan and Korea, and there are rumors that the Arab nations are interested in a swap agreement with China…

So, if you asked these countries, they would say “yes” to that question. And it will continue like this from here on out, until the dollar is no longer the reserve currency… You might think that’s no big deal… But ask the people of the UK if it was a big deal after World War II, when they lost that reserve status for their currency… It’s a BIG DEAL, folks…

And it will come about mainly because of our deficit spending, and resulting national debt. Things like this story from yesterday’s USA Today (thanks Scott!)… “The federal government’s financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows. The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security.”

OK… I can’t blame all of the euro’s backing off of its assault on 1.47 on the media… German Industrial Production fell 0.6% in April… March’s number was revised upward, though, so the combining of the two months isn’t as bleak as a 0.6% fall would normally look…

And then on the Greek news… German Finance Minister, Schaeuble, sent a letter explaining his position, which just so happens to be in alignment with the story I told you about on Monday from the news agency Die Welt… Here’s what I said on Monday in the Pfennig

The German newspaper, Die Welt, reported that the plan the Germans have come up with for Greek debt maturing 2012-14, is to have them volunteer to exchange this debt for new 7-year bonds… With all sorts of bells and whistles attached to the bonds to make them attractive…

You all may recall that I made this same suggestion a couple of months ago… To simply exchange present maturing bonds for longer term bonds… The only thing the holder would be out was the interest, but there could be some makeup applied to smooth out the wrinkles here… So, it’s nice to see that these guys took my suggestion!

So… It looks as though this is the route that will be taken… All it does is kick the can further down the road, but the way today’s markets and consumers see the world… “Let’s party today, and not worry about tomorrow”… Almost sounds like a song, eh? This plan would allow some breathing room for the euro… But, in reality, the debt is still there… And unless Greece, Portugal, and Ireland all take the necessary steps to cut spending, we’ll be right back here in a few years…

Then there was this… Do you know what a “High Frequency Trader” (HFT) is? Well, it is was it says it is… But, when it becomes large institutions, it becomes a problem… Here’s the famous, and well respected, Ted Butler on HFT’s trading in Silver… (I had to remove references to specific companies that Ted feels are responsible, but most of you know who he’s talking about)

Ted Butler on High Frequency Traders in Silver…

Who are these HFT traders? You guessed it – mostly the big silver shorts, led by dominant CME Group members. Only these big traders can afford the million-dollar computer hardware and software to run the HFT algorithms. How has it come to the point where giant traders with documented concentrated silver short positions have been further allowed to dominate daily trading volume that causes sharp dives in the price of silver? It is so crazy and outrageous that it should make your blood boil. Believe it or not, I’m trying to contain my outrage. These HFT traders, led by the silver crooks, are like a band of outlaws in the old West who have come to control and terrorize a town and its citizens.

To recap… Eurozone debt fears came back to the markets overnight, and have pushed the euro down from yesterday’s high of near 1.47. That has taken most of the other currencies lower too, with the removal of the risk appetite. Gold and silver saw huge gaps down on the day within minutes of trading, and Big Ben Bernanke described the economy as “frustratingly slow”…

Chuck Butler
for The Daily Reckoning

The Daily Reckoning