Jim Bianco, president of Bianco Research LLC, talks about the Federal Reserve’s move to provide up to $540 billion in loans to help relieve pressure on money-market mutual funds, credit market conditions and the outlook for the U.S. economy and stock market.

click for video
Bianco

00:00 Fed move to buy money fund commercial paper
01:59 Commercial paper market; "shortage" of loans
04:36 U.S. credit markets, Fed liquidity efforts
06:59 Outlook for housing, mortgage markets
07:54 Potential second stimulus a "short-term fix"
09:27 Fannie and Freddie loan, mortgage rules
11:08 Bank lending practices, housing market
13:10 Fed liquidity efforts: impact on inflation
16:01 Outlook for U.S. dollar, stocks: strategy
Running time 19:47

Sources:
Bianco Calls Fed Liquidity Efforts `Hyper-Inflationary’
Bloomberg, October 21, 2008 13:30 EDT
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aloQWaKlGBNE

Category: Economy, Federal Reserve, Inflation, Video

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15 Responses to “Bianco Calls Fed Liquidity Efforts ‘Hyper-Inflationary’: Video”

  1. Ori says:

    What is ‘short term liquidity’ then ?

  2. baychev says:

    none of that money has been churned through the markets yet, so so far the fed interventions have been sterilized.
    but will they be able to withdraw the liquidity in time and put in place some leverage rules that would prevent banks from creating hyperinflation?
    and just as low interest rates are addictive, so is credit with no counterparty risk (the gov’t).

  3. rickrude says:

    the banks don’t create hyperinflation, the government does.

  4. Greg0658 says:

    the banks don’t create hyperinflation, the government does.
    Posted by: rickrude

    imo stock certificates do too; when your allowed to borrow on their #’s

  5. leftback says:

    Can’t play this as usual on the MacBook, will try to find it on Bloomberg.com at the weekend.

  6. DANM says:

    banks don’t create hyperinflation, the government does
    ——————
    When government owns them, same diff.

  7. wally says:

    Hyperinflation? I’m not sure about ‘hyper’, but certainly inflation is one of the goals, don’t you think?
    You have a mountain of debt. You can either 1. default 2. work for years to pay it off or 3. inflate out of it.
    What course do you think the US (and other world governments) have decided upon?

  8. zackattack says:

    The thing is, if you intend to make any money off it, the timing’s a bitch. I don’t think anyone’s good enough to call the exact moment it becomes inflationary.

    For the last couple of weeks, Fed/Treasury is printing like mad on the short end and shoveling it into a deflationary blast furnace. It’s not inflationary right now. Everybody makes like it’s a good thing because it’s bringing the TED spread down. It’s not. It’s destroying the yield curve.

    Start printing on the long end, we wind up with Carter-esque mortgages.

    People remember the Japan lesson. The best asset class was long-dated government bonds. You can see the flight into the long end of the curve.

    Also, I don’t see any wage-price spirals shaping up here anytime soon.

    My working assumption is that Fed/Treasury will pooch this. I’m started a position in TBT off that double-bottom near 54… waiting for it to come back some more to add.

    Also, waiting for $8 and below silver to start taking delivery of physical. Two ways to win there, as I see it.

    You can see what’s going to happen, but, as always, it’s just that the timing is going to be a bitch.

  9. bdg123 says:

    I am not surprised when I read blog comments telling us we are headed for a Wiemar or Zimbabwe hyper-inflationary outcome. But, I am surprised when Bianco is clearly on the wrong side of the trade. He is completely wrong. The dismal science.

  10. metaltrader says:

    bianco’s comments are quite a different take than MS’s Dick Berner.

    “We think those worries are vastly overblown. First, ‘printing money’ won’t boost inflation as long as investors prefer cash to risky assets. The preference for cash today reflects the deleveraging of balance sheets full of risky assets, uncertainty over what they are worth, and a recession that is undermining their values. In effect, both the money multiplier (the link between bank reserves and the money supply) and the so-called velocity of that money (the link between money supply and economic activity − otherwise known as the Marshallian k in the monetarists’ equation of exchange) appear to have collapsed. This reflects the impact of a severe credit crunch in which intermediaries are hoarding cash rather than lending it on. Most importantly, the sharp slowdown across the developed economies and the prospect of it also hitting many emerging economies will tend to reduce inflation by more than we thought only a month ago as the forces that helped push up inflation through mid-summer fade away. And if the sharp slowdown turns into something worse than a traditional recession, the risk of deflation would quickly become a bigger worry.”

    Comment?

  11. David says:

    your friendly neighborhood short seller sez:

    Gradually covering certain equity shorts, still short retailers, commercial property and basic materials. Unfortunately covered emerging markets too soon.

    Increasing short of long bonds.

    There’s always a bear market somewhere.

  12. Jeff says:

    Yes, the markets are certainly discounting a hyperinflationary path here. Hmmm, maybe that’s why the price of nearly every single thing except the dollar and treasuries have been dropping like a stone.

    Uh, that’s been exactly wrong for well more than three months now…..and really, much longer than that. Nevermind the slowdown, total delevering of system, the reverse multiplier effect, complete velocity breakdown, a coming societal debt revulsion, etc. Deflation rules the roost, let’s face it — at least for the time being.

    Sure, at some point, the government may be able to reflate through continuing massive intervention as well as the fish taking the credit bait and running with it, but like an early poster noted, the timing there’s a real, real bitch. If you were a big gold, silver, energy, commodities, short dollar/treasuries investor, here’s hoping there’s some dry powder left when the turn comes.

  13. David says:

    Shorting treasurys is something to leg into. you have plenty of time between now and about this time next year. expect to hear the deflation bugaboo just like 2002-2003 when Easy Al cut rates. ben’s going to do the same thing, ergo treasurys still have some room to rally.

    by 2010, the jig will be up. the long end of the yield curve is going to explode, and you’ll want to be short short short.

    Timing here isn’t difficult at all. Just average out a short position over the next 12 months like i said.

  14. Pat G. says:

    BR: Do you agree or disagreee with his opinion?

  15. Andree says:

    due to what reason does he say he d rather prefer to be one month last than one month earlier?
    if you imagine a bell curve, the amount of cash you invest will be the same at the same point in time. even if its not a symmetric bell curve, just the time differs….

    right or wrong thinking? comment?