The market rose over 300 points today, mostly on hopes and rumors that the Fed will take some kind of action this week at Jackson Hole – perhaps announcing plans to buy up more bonds and thus begin QE3.

Yes, folks, it’s a “when bad news is good news” kind of moment for stocks:

Another round of dismal economic reports prompted hopes that Federal Reserve Chairman Ben Bernanke will employ more accommodative measures to boost the economy. The Richmond Fed’s regional manufacturing survey showed sharply declining economic activity this month. New home sales also dropped for a third straight month and fell to the lowest level since February.

The downbeat reports have put more of an emphasis on Bernanke’s scheduled speech in Jackson Hole, Wyo., on Friday. Investors hope Bernanke will be more open to new easing measures, but at the same time are unclear as to what the central bank may have in store.

“There’s definitely a tint of optimism that he’ll pull a rabbit out of his hat,” said Michael Church, president of Addison Capital.

Compared to rumors and conjecture, things like a little acid reflux from the Earth’s tectonic plates were relatively ignored. After the initial “oh s***” reaction to today’s earthquake, it failed to dampen the hope that another helicopter drop is incoming.

And speaking of the rest of today’s breaking news, we’re also beginning to think there is some kind of conspiracy theory afoot with the runs on discontinued HP Touchpads that have been all over the news lately. Seriously, this much hype for a $99 tablet PC? A couple nefarious possibilities include:

- The Fed has been actually been the buyer for these tablets, thus increasing monetary supply $99 at a time every time it can nab one from Best Buy, Staples or OnSale; they’ll subsequently be spraypainted gold and used as filler to replace the sold-off reserves in Fort Knox

- Plunge Protection Team is acquiring the tablets and is developing a cutting-edge WebOS app that steps in at 3:30pm to BUY BUY BUY if the market falls more than -2%

Got another idea? Leave it in the comments

FED Chairman Ben Bernanke told Congress today that the economy is growing more slowly than expected, and should this anemic growth continue, the FED is ready to launch more stimulus.

“given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.”

Source: CNBC

I translated this statement and out came QE3.

The markets seem to have come to the same conclusion, as the major indexes are all up over 1% as of 1:30pm. Gold has jumped to 1585.60.

Speaking of Gold, Ron Paul asked the Bernank an interesting question:

Paul: Do you think gold is money?
Bernanke: (pause) .. No.
Paul: Even if it’s been used as money for 6,000 years… somebody reversed that? Eliminated that economic law?
Bernanke: Well, it’s an asset. Would you say treasury bills are money? I don’t think they’re money either.
Paul: Why do central banks hold it? Why don’t they hold diamonds?
Bernanke: Well it’s tradition. Long term tradition.
Paul: Well, some people still think it’s money.

Classic Bernank!! Sure, the banks could hold gold out of “tradition” but we never really got an answer from Ben on why he thinks gold isn’t money. Is gold a medium of exchange? Is it a store of value? Does Ben even understand this, or is gold just an intrusion on his fiat-money fantasyland? Who knows?

-Bill

PS: Alyx just informed me that we went through something similar in March.

Which way should we choose?
more bottom up or more top down
the fight continues…
Keynes and Hayek’s second round

Bill Here!

Happy April Fools Day! Many of you will wish this was an April Fools Joke, but unfortuntely, it isn’t.

Bloomberg has the following report on the release of FED documents which say that the discount-window lending program which gave out loans in 2007 and 2008 during the height of the crisis gave most of that money to foreign banks. Thanks to something called the Depository Institutions Deregulatory and Monetary Control Act, which was passed in 1980, a foreign bank which maintains reserves at a FED bank may receive discount window credit. (Incidentally, the Monetary Control Act has been blamed in circles for a lot of the mess we are in. It allowed banks to get on with some hot merging action and helped make the banking world “safe” for subprime lending.)

Says Ron Paul about the foreign bank bailouts:

The American people are going to be outraged when they understand what has been going on. What in the world are we doing thinking we can pass out tens of billions of dollars to banks that are overseas? We have problems here at home with people not being able to pay their mortgages, and they’re losing their homes.

Something tells me Ron Paul doesn’t get invited to a lot of Benny’s parties. Anyway here are some of the foreign banks that took advantage of Benny’s generosity:

• Dexia SA. They borrowed $33.5 billion through their New York branch. Dexia is a Belgian-French institution headquarted in Brussels. Their history is interesting to say the least and probably deserves its own post. In 2001 they bought up a bank in the Netherlands that went through some kind of asset-leasing controversy that damaged Dexia’s reputation. On the political front, they are trouble – investing in companies that have committed human rights violations (they also invested in the BTC pipeline which is in a very volatile area). They also have a subsidiary that operates in Israeli settlements in the occupied territories (which you may have read about in the newspapers). Oh! They were one of Madoff’s victims, too, losing €78 million! Doh!
• Depfa Bank. They borrowed $24.5 billion. Based in Dublin, they were taken over in 2007 by German real-estate lender Hypo Real Estate Holding, which was eventually completely nationalized by the German government.
• Bank of Scotland. Borrowed $11 billion. Bank of Scotland was a subsidiary to HBOS Plc, based in Edinburgh. Lloyds Banking Group eventually took them over. Andy Hornby, CEO of Bank of Scotland at the time, took his winning strategy to Alliance Boots. He just announced his decision to leave them as well. Probably a good idea before he gets found out again.
• Societe Generale. France’s second largest bank got $5 billion.
• Norinchukin Bank. Tokyo-based bank borrowed $6 billion.
• Bank of China. Their New York branch got $198 million in August 2007. Oh, the irony!
• Deutsche Bank AG. Two of their divisions received $1 billion a piece.
• Arab Banking Corp. Its New York branch borrowed $1.1 billion in October 2008. At the time, they were 29% owned by the Libyan central bank. (I think that percentage still holds in 2011). You might not have heard of the country of “Libya” but you should read up on it one day if you are bored. ABC is a joint stock company established in 1980 through a decree by the Amir of Bahrain. In case you haven’t heard of “Bahrain” either, well just know that there are protests going on there against the authoritarian regime, which is backed by our Saudi friends. Seriously, you should pick up a newspaper once in awhile.

It should be noted that the Bernanke held out as long as possible from giving this information. His reasoning is that revealing names of the borrowers “might lead market participants to infer weakness.” Now why would anyone ever infer that?

But after both Bloomberg and News Corporation (Fox News) filed Freedom of Information Act requests to get the names, the courts ordered the FED to comply.

Vincent Reinhart, the former FED Director of Monetary Affairs, said:

The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation

Gee, ya think?

Something for the goldbugs today –

Ron Paul: “I want a definition of money”

The Ben Bernank: “Derp”

Video (right around 2:32):

“Consumers don’t want to buy gold, they want to buy food and gasoline, they want price stability…” which still doesn’t define what a dollar is, but that’s cool.