I know I’m sounding repetitive now, as I’ve said this over and over, but I need to say it once again as I am very frustrated.  Uncertainty Creates Fear!

Now you one could call me paranoid, but now I have some ability to show just how the market is impacted when Bernanke and Paulson speak in public about the current state of the market.

Here is some evidence via Newsbusters:

That message and others like it have had an impact on financial markets. Altogether, it has lost a total of 2,507 points during the 21 days listed on the Federal Reserve Board’s Web site that Bernanke delivered public remarks. That’s more than half of the 4,127 points the market has lost in that time.

 

Jerry Bowyer, chief economic advisor to BenchMark Financial Network and columnist for National Review told the Business & Media Institute it is reasonable to assume this is more than just a coincidence and the barrage of live media coverage of Bernanke has something to do with it.

 

“Yup. It’s quite reasonable,” Bowyer said. “After all CNBC usually runs the Dow on a split screen with Bernanke speaking on the other. I’d also look at Paulson – same pattern seems to hold.”

 

It’s an issue of trust, according to Bowyer – Wall Street is leery of Washington.

 

“Big Picture: the investor class doesn’t trust the political class, even if they are Republican,” Bowyer said.

The administration needs to speak with one voice because the credibility of the U.S. is in question when public officials are providing two difference views of the situation.  It really makes it look like someone isn’t at the helm of the ship.

Here is a tip – if you really want to confuse your young child, send them mixed signals. 

Every time I listen to members of the current administration speaking about the states of the economy, I feel like that young, confused child receiving mixed signals from his parents.  Case in point, look what Federal Reserve chairman Bernanke and President Bush were quoted as saying Monday about the current economic situation…

Bernanke

“Well, you hear a lot of loose talk, but let me just … say, as a scholar of the Great Depression — and I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” 

Bush

“I can remember sitting in the Roosevelt Room with Hank Paulson and Ben Bernanke and others, and they said to me that if we don’t act boldly, Mr. President, we could be in a depression greater than the Great Depression,”

President Bush was recalling a conversation between himself, Bernanke and Treasury Secretary Henry Paulson only weeks ago.  During the last two months only negative information has hit the market – housing starts at lows, unemployment rising, credit still unavailable, Citi Group needed Government assistance – so what changed and which is it.  

Is the United States simply in a long, deep recession or is the Nation facing a “depression greater than the Great Depression”

I am not a believe of conspiracy theories, and I have no intent on being cynical, but it almost appears Bernanke and Paulson are giving the “real” information to Bush and trying to keep the public calm by saying “there is nothing to worry about, pay no attention to the man behind the curtain”.  Actually, the ones who are really getting the correct signals are those pulling money out of hedge funds but it even looks like they are starting to have problems getting their money.

Economic information aside, if the administration wants to make public perception of the economic situation any worse, continue to send mixed signals. 

Oh – and for the record – I think Bernanke is right, this has no major comparison to the Great Depression of 1929.  To me it smacks of, and has a direct comparison to, the Long Depression of 1873.

This is a bit of interesting news that came out of the Fed today:

The Federal Reserve announced on Tuesday that it will purchase as much as $600 billion worth of mortgage-backed assets from fledgling companies in hopes of jump-starting lending by banks nationwide.

But it was less than two weeks ago the Fed said:

Purchasing toxic assets from troubled lenders, once the centerpiece of the rescue effort, is now seen as “not the most effective way” to use the government funds, Paulson iterated.

What I cannot tell from the information released today is if the assets mortgage-backed assets the Fed will now purchase are toxic or not. Also, lost in the news coming out today is the fact that the Federal will lend up to $200 billion to holders of securities backed by consumer debt (credit cards, student loans, auto loans).

I almost get the feeling that the government is now in 100% reactionary mode, just throwing money at any problem they see. Remember, uncertainty creates fear.