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Goldman's Take On Bernanke's Defense
Just out from Jan Hatzius of Goldman
BOTTOM LINE: Fed Chairman Bernanke delivers a) a strong defense of the Fed’s renewed monetary easing, b) a fairly explicit endorsement of near-term fiscal expansion (coupled with longer-term consolidation) in the United States, and c) a fairly explicit plea to reduce current account imbalances via exchange rate appreciation in emerging market economies.
MAIN POINTS:
1. In a speech at the European Central Bank in Frankfurt to be delivered on Friday, Chairman Bernanke provides a strong defense of the Fed’s decision on November 3 to purchase another $600 billion (bn) in longer-term Treasury securities. He notes that “on its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years. As a society, we should find that outcome unacceptable.” Compared with his most recent public comment on the Fed’s decision – an op-ed article in the Washington Post on November 4 – he also strengthens slightly the assessment that inflation is now too low, saying that it is “below” as opposed to “a bit lower than” the mandate-consistent rate.
2. He takes issue with the term “quantitative easing” on the grounds that the impact of the policy does not work via the quantity of bank reserves but instead via the impact of the Fed’s asset holdings on the bond term premium. (We agree, but will nevertheless continue using the shorthand “QE2” for simplicity.) The distinction is one that Fed officials have long made, but in this case it is part of a broader attempt to demystify the November 3 decision and emphasize the similarities with conventional monetary easing decisions.
3. The chairman is relatively explicit in his support for expansionary fiscal policy as well, albeit coupled with longer-term consolidation. Specifically, he says that “a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits would be an important complement to the policies of the Federal Reserve.” Admittedly, the phrasing “near-term measures to enhance growth” does leave some wiggle room, but this is nevertheless a strong hint that Fed officials would like to see accommodative fiscal policies in the near term.
4. Finally, the speech includes a strong plea for exchange rate appreciation in economies with large current account surpluses. Bernanke argues that the large-scale capital inflows experienced in the surplus countries – which many EM policymakers have blamed on inappropriately easy monetary policy in the United States – instead reflect incomplete currency adjustment in the surplus countries, which in effect offers investors a one-way currency bet. Moreover, he argues (and presents evidence) that the currency adjustment is incomplete because EM policymakers have intervened aggressively in the foreign exchange markets. Bernanke closes by noting similarities between the current situation of incomplete exchange rate adjustment and the flaws in the international monetary system prior to the Great Depression of the 1930s, when the United States and France ran large surpluses and refused to let the resulting inflows of gold feed through into a higher domestic money supply. Although he is careful to say that he is “certainly not predicting a new Depression,” that is a strong warning coming from a Fed chairman.
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MUST WATCH THE BERNANKE AND THE GOLDMAN CARTOON.
http://www.youtube.com/watch?v=PTUY16CkS-k
Classic! even a child could understand this.
Ben Shalom Bernanke IS the antichrist.
Simple. To the point.
If the Fed was serious about strengthening the dollar, they would swap the head shots of the Presidents on the bills with pictures of hot models in bikinis. You'd see demand for dollars explode.
Check out this picture,http://www.csmonitor.com/Innovation/Horizons/2010/0421/US-Treasury-New-1... Tell me it doesnt resemble the Euro? Then again So do all the new bills...
Thats the beauty of the whole thing. Its NOT what they are trying to do. They are going to weaken the currency, so that the debt and unfunded liabilities can be paid in devalued currency. Stealth default for them, hyperinflation for everyone else. All the central bankers have decided to blow their fiat up together, although in their devaluation they will try to be orderly, and take turns.
China will blame the US. The US will blame China. Europe will blame the US... But the oligarchy of these nations decided this fate long ago, when they decided to make all these nations INTERdependent (meaning: dependent on each other). Prosper together, hyperinflate together.
http://psychonews.site90.net
PsychoNews: Exposing the Oligarchy, one Psycho at a time.
Please tell me that this GS release is a spoof.
"Bernanke closes by noting similarities between the current situation of incomplete exchange rate adjustment and the flaws in the international monetary system prior to the Great Depression of the 1930s, when the United States and France ran large surpluses and refused to let the resulting inflows of gold feed through into a higher domestic money supply. Although he is careful to say that he is “certainly not predicting a new Depression,” that is a strong warning coming from a Fed chairman."
Scariest thing I've read in a while. And there's a lot of scary stuff out there.
When are they gonna get off this "confidence inducing" b.s. and figure out that telling the truth and asking for "sacrifice" will get all of us closer to where we can manage the future that this extraction of sacrifice without explanation and simply rewards for the banks.
I am so pissed!!!!
Trust, once lost, is impossible to restore, and how can we have confidence where there is no trust. I'll never trust a bank again. I'll never trust worthless paper money or hold it again. I'll be converting it as quickly as it comes to me into tangibles. I'll do my savings and my estate planning in precious metals.
Ben is an expert on the Great Depression? Then he is flat out lying about it's primary cause! Gold was not the cause of the GD and Ben certainly should know it.
In fact the great depression was caused by Fed micromanagement of interest rates plus a long expansion of easy credit. Sound familiar?
The Fed blew a bubble throughout the 1920s and it blew up with a resulting credit/asset price contraction that morphed into the Great Depression.
The US and world face a similar outcome now if the Fed is not stopped. Serial bubbles do not a strong economy make. The Fed is an experiment that has failed and now needs to go the way of the first two US central banks. Capitalism cannot function without occasional busts to clear the market of malinvestments, regardless of what Ben thinks or what actions he takes to prevent busts.
Ben's remarks sound to me like those of a desperate man.
Bernanke: “strong plea for exchange rate appreciation in economies with large current account surpluses.” “he argues that the currency adjustment is incomplete because EM policymakers have intervened aggressively in the foreign exchange markets.” He just admitted that EM countries kept the dollar OVERVALUED! Admission that he is purposely devaluing. And with speeches like this don’t expect it to stop.
Then there was the threat to let us do this or face GD2
Hell yea scary. Gold & Silver ftw.
I love and fear God. But how dark is the humor of Helicopter Ben explaining why he impoverished at least half the world. I wish Ben Bernanke no harm. His fate depends on the Grace of God just like all us sinners. "Father"...
More friggin double speak.
"Finally, the speech includes a strong plea for exchange rate appreciation in economies with large current account surpluses. "
Why were these currencies devalued in the first place?
Because they were incentivized to become manufacturers of last resort (health, safety.....basically everything except price be damned) and soon got dependent on the export teat.
Getting the new manufacturers to appreciate is so blatantly WRONG. Unfortunately, the rest of us (like India/Thailand/Phillipines) do not have the fire-power that China does.
The whole system is so broken!
Back to the farms peeple!
Hoe, Sow, reap, eat, repeat.
Sounds nice and simple!
ORI
http://aadivaahan.wordpress.com
Self-improvement is masturbation.
Tyler, disable this user immediately.According to the UGG official site, any url with the name UGG in it is fraudulent. Crappy fake knock-offs from China are all they sell.
http://www.youtube.com/watch?v=poDV_cy5C74&feature=youtube_gdata_player
Ben didn't make a strong defense. He is way off course, point of no return.
He now want's to refer to "Quantitative Easing" as something else? Like man-made disaster?
He's in uncharted waters, there be dragons and such. Mutiny in the offing.
He's going to have to try to crush PMs. Good luck with that Benny.
Comparing today's economy with the Great Depression is also not a comfort
Acting steadfast and confident is all Benheart has got left.
Accomodative policy "near term" and fixing it "long term"? Long term is now already.
The end of a supercycle -- and it was super duper.
Something doesn't feel right. Feel like there is some sort of last ditched hail mary pass coming.
December is going to be a wild ride. Have to make sure I don't get caught with too much cash in the bank, have it in gold and silver (already) and gold and silver stocks.
Ireland is on the ramp and Spain is getting nervous, like the next guy in line at the guillotine.
My prediction is that their "hail mary" pass is designed to keep the bubble afloat in the US and Europe until some time in 2011. Then they'll suddenly shut down the US and Europe in a combined "state of emergency" under martial law "to restore international order". Prior to that, they will continue to print and bail out every country and borrowing sector. The rest of the world will follow under global government in 2012 under the guise of some "returned messiah" or "alien invasion" to ride the superstitions of all the Mayan-Nostradamus-Revelation idiots in the West.
The only solution I can see (and I'm a pretty good strategist!) is for the European states to leave the EU and for the US states to dismantle the Federal Government. Each independent state can then control its own militia and issue new hard currency to attempt a restart from the current central planning cock-up.
The oligarchs can't hope to herd 50 US cats plus 27 European cats, together with their combined populations of 800 million freedom-loving kittens. It has taken them at least 100 years to set up the UN and disable the constitutional powers of the independent US and European states ... yet we could bring it all back down again to citizen control in just one year with the knowledge of what they have been planning.
Maybe next time around we'll hang onto a free society and keep government out of the way completely! I can only hope.
QE2 is the hail Mary pass. When it runs out in 6 months to a year I agree that we will face a shutdown for a 'bank holiday'.
Whatever scheme awaits us after the bank holiday you can bet will not benefit Main St or the public in general.
I believe that TPTB have realized that getting future taxes from the new US banana republic to pay off ever more treasury issues is a futile endeavor....and, they will act accordingly.
At the end of the day Bernanke is saying this: "Emerging market economies, please stop looking toward the USA as a end market for your goods and services. Unemployment is so bad here that the USA risks having an ever increasing UNEMPLOYABLE CLASS.
Please compensate by conditioning your consumers to demand useless trinkets while we recondition ours to accept "dirt under the fingernail" type work.
I've already been handed my shovel, and it's stamped "Made in China".
It's rumored we're going to build a pyramid to honor our great benevolent rulers -- sorry, I mean leaders.
Fuck Goldman Sachs and anything associated with that Vampire Squid.
Hatzius, you are either an ignorant slut or a knowing whore.
My money is on the latter.
On the contrary, Jan Hatzius may be the best economist in the world.
Don't touch my junk...
Don't touch my junk...
I didn't junk you, but I did find you estimation of Hatzius 'interesting,' considering who he works for, and given that there appears to be a steep conflict in even allegedly being the best when you work for a money-is-my-god entity like Goldman Sachs.
Then you should take the time to read his stuff. Most analysts from Goldman believe that what they say is true and they are not "talking their book." Goldman really doesn't want to take your money on such a piddly scale. They would rather take your money on a massive scale- bank to bank- and I sincerely doubt that you'll have access to that information.
Hatizus has proven to be nearly pin-point in some of his economic predictions, particularly as it regards the unemployment figures. You should read it more closely. And, of course, he is one of the best and brightest: he works for Goldman-Sachs.
JAN HATZIUS, YOU ARE THE MOST HYPOCRITICAL PERSON I EVER HAD THE DISHONOUR TO MET ! UNBELIEVABLE BULLSH!T "DEFENSE" OF YOUR UNCLE BEN´S BULSH!T POLICIES. YOU SHOULD BE ASHAMED TO WRITE SUCH BULSH1T ! SHAME ON YOU !!!!! GO BACK TO OXFORD AND MOVE ON STUDYING "PHILSOPOHY" !!!!
Nobody here actually thought "the Ben Ber-nank" wasn't gonna go down swingin? ?? Did ya? He's gonna sell it to us, and sell it hard... and get his boys to sell it to us.. and no matter what, no matter WHAT happens.. his excuse can always be we didn't print enough.
Via Xinhua, China govt message site to the world...
Last line of the article..
http://news.xinhuanet.com/english2010/china/2010-11/19/c_13613374.htm
A boat load of stuff to come then..
Monday morning in Sydney is going to be off the chain!
They have been practicing near-term fiscal expansion -- and promising longer-term consolidation -- for 100 fucking years!! The expansion always happens, and the promised consolidation never comes. Same socialist 'extend and pretend' as always.
FED is by elites, for elites, from elites and works for elites & Fraud Street gang. FED has nothing to do with Main Street.
advocatus diaboli
I think that under the circumstance the US Federal Reserve Chairman Ben Bernanke is doing an excellent Job,keeping the US economy from even greater harm.
Many of you who like to think of yourself as patriotic Americans like to point the finger to find someone to blame,why some of you even blame others for the bed-bugs in New York.
Imagine just for a second having Ben Bernanke's Job,with everyone doing nothing else but complain.
Nobody forced americans to take out sub-prime loans they could never afford.It was not Goldman Sachs or Ben Bernanke who got America and the world into the crisis it finds itself in.The global financial crisis was caused by you and me!
It was caused by those,who wanted a way of life they had not been able to achieve and that was beyond their means.So they went and got that Loan anyway and fuck anyone else!
Now these same people are pointing their fingers,looking for someone else to blame for their own idiotic greed,their own incompetence and their own irresponsible and even criminal behaviour.Don't blame Goldman Sachs,it is their Job to make money and if it was not for their tax Revenue and clever trading,America would be in far worse shape than it is now. Too many Americans took out Loans they knew could become a problem for them to repay.But they just went ahead anyway and the more I look at this cool and objectively, the more this argument rings true to me. Ben Bernanke, for now seems the best solution you Americans have right now, to help you get out of this mess you got yourself into.
Advocatus diaboli - "Die Weiße Rose", some true remarks regarding the greed of "average people" taking out loans that they couldn´t afford. Of course - or shall I say as usual - a one way street of looking at "things".
Don´t blame Goldman Sachs ? Goldman Sachs is not to blame for individuals taking unpayable loans- true. Goldman is to blame for yet another very important aspect of this "criminal loan" tradegy : the company bundled the same subprime credits, loans and other stuff into structured products, selling these toxic papers around the world - looking for bag holders in order to get rid of the risk associated with it. And as usual, Goldman Sachs DID FIND these bag holders - or shall I say "IDIOTS" - around the globe ! Europe, Japan, China elsewhere. That´s Goldmans business model - dividing a large risk into small little "hand-packed" portions and sell it to clueless "investors". Good to have a "STRONG" global franchise ( Goldman´s marketing slogan No.1 ). Yeah, good to have this franchise to find enough fools ! FOOL SEARCHING FRANCHISE....
If the world has anythin learned than it´s the following: whenever Goldman Sachs is offering you a prodcut or service - it´s not for the well being of it´s client or investor. No, it´s for the well being of making its partners rich.
The same conclusion can be drawn to Ben Bernanke´s interest rate policy : he is looking worldwide for bag holders like China, Japan and Germany to export and monetize the US debt ! It´s always good to be a reserve currency. It´s the easiest way to ph..ck your trading partners !
And Weiße Rose : Schöne Grüsse an Jan Hatzius. Bulls1t bleibt bullsh1t - egal wie man es "bemalt" !
you are a disgusting creature
It seems we have little timmy posting here..
blame for mega bank failures should fall on the common man seems to be the theme
when what is common understanding on ZH is that we have socialized the risk while the banksters and the Fed get the rewards of the risk
I wounder if little timmy could answer that one.
The squid (Satan) defends the antichrist (Bernanke). Hardly surprising.
hey mr trader
I don't know this Jan Hatzius of Goldman und ich bemahle nix.
If there are fools in this world who come into the market to make a quick buck and invest in risky securities they don't understand,I gladly will take their money.
Lets make one thing clear: I am not Mother Theresa !
I am in the market to make money by trading,and so is everyone else,
even the bag-holders and especially the bag-holders.
To take on risky exotic securities, atm loans ,bonds or derivatives, often financed by highly leveraged margin loans,without really understanding the risk has always been receipe for disaster.To take a risky bet on financial markets,take on leverage and risk and then cry foul when it all goes wrong, now that is what I call bullshit.
Financial markets are there to trade stuff and make money,
Those fools who want to just place a bet and take a punt should put their fool money on a horse or into a slot machine...
oder werft das Geld doch gleich aus dem Fenster....
Are you referring to what the big banks did?
I don't think you understand the outrage of the common average working man.
You are obviously a professional trader. I am not. I earn my living like 99% of the other common men in the country - hard work and the daily grind.
I was never asked by the Wall Street banks if it was OK to put my mortgage in a pool, slice it and dice it 9 different ways and then trade it amongst yourselves. If I was, I would have said no way - f*** off. Nor did I care if the banks lent money for highly leveraged loans, wrote derivative contracts or whatever other bullshit was created to "trade". Trade away and have fun.
But when your ficticious tradable crap collapsed and jeopordized the world economy, I bailed you out. Not by choice mind you but in the end, it is my money and my kids money that kept your game alive. You exist today because I, and others like me bailed you out.
I never wanted to be part of your game in the first place. I was forced to be. You exist today, trying to find a greater fool to trade with - well, here I am. And the next time you blow up, I'll be forced to bail you out again.
"Financial markets are there to trade stuff and make money"
actually, they exist to serve a critical role in capital allocation, and traders serve to add liquidity - a critical role in a critical component of our free market (cough) economy.
It is not surprising that people like you have forgotten that; that people like you - professional traders - now believe the markets exist to serve THEM rather than society. It is one of the symptoms of the current disfuntionality of our system, which in a nutshell has inverted the structure so that the whole now serves the financial markets.
by the way, you make me sick
If Ben Bernanake didn't drop money from a helicopter, what would be the outcome? My guess...deflation. Deflation would plunge us further into the depression. Unemployment would continue to rise with no relief, TBTF would collapse, and the resulting failures would shake U.S. society to its knees. The monitization of our debt, liquidity injections into TBTF, and stock market inflation are all that keeps us from falling into an agonizing depression. Let's face the facts. None of the U.S.'s underlying structural problems have been fixed. They are festering below the surface. I like extend and pretend policies. The medicine to fix what ails the U.S. will be long and hard. The baby boomers are making the transition into retirement. Imagine falling further into the abyss. Who will take care of this large segment of the population that can't support itself? Everyone wants austerity, right up until they get it. If we are going down...I'd certainly prefer inflation.
ignorance,,,,who do you think is paying for this monetization - savers, the retirees and pension funds, as well as small business.....there is NO yield.... all that interest income should be finding its way to pension funds and retirees and savers, but is transferred to the banks instead (this is deflationary). speculators are driving up commodity prices and its called margin compression........
there is nothing wrong with deflation or deleveraging. the buying power of the $$ increases for consumers. the only players that hate deflation are the banks.........and the only players that are reaping huge bonuses as everyone else pays - the bankers........
and much of the debt is the result of - who else - bankers!! instead of having the market dictate higher interest rates when debt levels get too high - it is the bankers that (can you say greenspan, and now bernake) that kept rates artificially low......
so think about what your are saying and who you are speaking for. if you want to support bankers and big corporate, then by all means call for more monetization....but for the rest - think again.......
Personally, I think we are beyond paying for these policies as well as paying for any of our major National obligations. We are well past the point of U.S. financial solvency. Before these helicopter policies were implemented we had a debt load of over 16 trillion dollars. How do you propose to pay for that? We have the largest generation ever...retiring. How do you propose to pay for that? We have a massive military, Gov't, social services, zombie banks, bankrupt States, local Gov't, millions of unemployed, 1.4 annual trillion dollar deficit, the list goes on...How do you propose to pay for that? My point is...we are destined for default. Bernanke is buying us time to prepare for the future. Don't worry about paying for the helicopter or the stimulus. We won't have to. We are already bankrupt, and his policies are just the beginning of the last act.
So tell us who gets to watch TV from 8-9? Is that your hour a day or Patti Hearst's?
if we are going down, I prefer the route that goes down the least. Hyperinflation will completely destroy the country. And it will leave the world extremely vulnerable to threats currently held at bay by the US as superpower.
The more debt we add to this debt problem, the more pain will be dealt. period.
exactly.
this situation is not some kind of computer game or dress rehearsal,
this is the real deal and I get a sense most people don't realize
what an Impact this will have on their life if Bernanke fails.
believe me,you would not like Austerity...
Let Ben fail, his plan won't work. Why would dropping 600bn, or another 1tr into the money supply get people back to work? I'm in finance. Why would the Fed's actions encourage me to lend someone money? I lend if they want it and if they can afford it. Otherwise, I'll use the money for something else, like play casino. And why would the money devalue the USD (supposedly against EUR/JPN). Last I checked neither pair had srtong selling suits.
Ben is trying to flatten the yield curve. Translating that into getting the economy going is nonsense, especially since the banks still have zombie balance sheets that need to be capitalized (which is the purpose of his actions imho)
How about hyperinflation? How much are we going to like that?
This "we can't afford austerity" shit is utterly assinine.
The Ben Bernanake helicopter gives us time to prepare. We all know that our Gov't and our business leaders don't have a credible solution to solve the deep financial and structural problems that our society faces. Bernanke has bought us time. I am preparing for an extremely dark and uncertain future. I appreciate the extra time. Think of it as late autumn...and there is a deep winter approaching. I don't want to hasten the monumental upheaval that is approaching.
The Ben Bernank is not buying time for you or I ... he is buying time for his masters to complete the installation of their next phase of our subjugation.
Bernanke has been trying to say all along that the unemployment problem is not the Fed's problem, but rather the domain of the politicians. He's taking the easy way out (no pun on 'easing'). He's saying: 'blame them not me. They need to come up with programs and tax policies'. He also wants them to take more of the heat for spending.
Never in the history of the world has every nation on the planet been on a floating fiat currency standard and attempted to force correction of global trade imbalances with currency adjustments over the objections of the country tasked with the majority of global production. It has been 30 years since I was grilled on interest rate parity. Any of you more recent vintage graduates care to take a stab at the math here?
We are in a bear trap. Now what? Ben is buying time for his nefarious schemes. Fine..he is an asshole. I am using the time to prepare for whatever happens next, and I believe no matter how much time is being given...no one can be truly prepared. We as a generation or generations have never seen anything like this in our life times. I have no idea what a true blue deep depression or hyperinflation will be like. No clue, and neither do the majority of posters on this board. I admit my ignorance and expect whatever the future holds to redefine my understanding of the words strife, pain, and frustration. We are witnessing the beginnings of something very alien to our understanding of life as we know it. We cheer when Gold or Silver goes up, not grasping that the very thing we cheer is our approach to something I would prefer not to experience. I personally have loaded up on Gold and Silver and like to see it go up...but what it really measures isn't my personal increase in wealth, but a ticking clock.
hey mmlevine,
But I do understand the outrage of the common average working man.
I just think it's a bit late for outrage now after the damage is done.
I am a german trader and I come from three generations of people
who have lost everything during more wars and destruction than I care to remember.
Everything I got, I had to earn, working many different jobs and
learning many different skills and trades.I know Austerity, I know Poverty, I know the Street .
So you think I need bailing out because you got a monopoly on legitimate, sincere and hard work ?
mmlevine, you better think again , save your rage for yourself.
safe your bail-out and advise for yourself ;)
Yes, I have rage.
Sorry if you had to know the streets and hard times and maybe now you are a rich man. Good for you - I always like a rags to riches story.
But if you trade professionally for a bank in exotic products, looking to find a fool and take his money, and think what you are doing or creating is anything but a benefit for yourself and your fellow IB's and Traders, you're wrong. You create nothing. In fact you take away from rest of us. You have deluded yourself to thinking you are mighty but you are not. Ask yourself, "whose money am I trading?" If the rest of the common people like me would take our money away from you, what would you have to trade? Zero.
Goldman F*cking Sachs never fails to come through on the side of evil.
In any case, the bernank is basically an employee of the goldman sach, so of course they like everything he says -
it is most likely that they told him to say it
Y'know, Ben...being polite during a hold-up doesn't make it any less of a crime. Lowering interest rates doesn't make it something other than debt either.
Ben was certain that he understood the Great Depression better than anyone in the world.
Ben jumped at the opportunity to avert another Great Depression by trying his class room theories on the real world's financial system.
Ben has found out that his theories are not panning out so he is lashing out at other soverigns for what the Fed triggered with their easy money policies.
Ben is no different than billions of frustrated children in the world when they discover that they are as impotent as the child next door.