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Rosenberg With Observations On The Last Fed Chairman Resignation
With each passing day it seems that the impossible is about to happen, and Bernanke may very well not get the necessary 60 votes he needs from an increasingly skittish Senate. Our advice to Mr. Bernanke - resign with what is left of your integrity (and we use the word loosely) intact. As this week has shown that the impossible seems again to occur all too often, here is Rosie with observations of what happened the last time a Fed chief decided to take the high road out:
AS IF WE NEED ANYTHING MORE TO WORRY ABOUT
Greece. Portugal. Ireland. China tightening. Bank bashing. Foreclosures. The housing and mortgage market. Jobs. The Fed’s exit strategy (if it happens). And now we have Ben Bernanke’s confirmation hearings in the Senate and this is not a ‘done deal’. His current term as Fed Chairman ends on January 31 and a vote has been delayed until next week at the earliest – and he needs 60 supporters and a few Democrats have already said publicly that they will not support his reappointment and therefore he will need GOP help. Volatility is still very cheap even after yesterday’s jump.
The last time we had a sudden and unexpected turnover at the Fed was back on June 2, 1987 when Paul Volcker surprisingly announced his resignation. That day, the S&P 500 slipped 0.5%, which was a big deal then since we were in the throes of a major rally, the yield the 10-year note surged 27 basis points, the VIX index jumped 5%, the DXY was crushed 1.2% and gold rallied 1.3%. Keep that in your back pocket just in case.
We sure are keeping it in our back pocket.
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Ben is no Paul Volcker, so if Ben gets 'the dump' expect the opposite to happen.
Volcker is no friend to the banks and the big money interests (or so it seems)... market will not react favorably to this initially. Goldman Slime will not be happy
I'm not saying there wouldn't be a change, but recall that Volcker is the guy who crashed Brenton Woods, took the scraps, and turned it into our current monster.
"Gold Bitches"
A fiat standard can work if and only if you have a central bank willing to stomp out monetary bubbles before they get out of control. With a guy like Volcker, you actually have that.
The departure from Bretton Woods in and of itself was not harmful; the harm came when Greenspan departed from Volcker's conservative policies.
Volcker brought on a major recession in 1981. When he went off the gold standard in 1971, he joked in Paris with his fellow bankers, "well, we sure pulled that off !" or similar words.
Stick interest rates up through the roof now, and real estate will implode followed by the banking system. I can't see that as being an enjoyable experience !
Just a few months before the October 1987 crash.
Where is gold?
Where is Chumbawumba?
Speaking of which, where is Cheeky Bastard? He was all over the comments and now a ghost.
Cheeky, did you join the ranks of ZH? That would be great
The One is always with us: be it the precious metal, the "middle finger to the elite", or even justified silence, basking in historical significance.
Although Chumz is always quite fresh in my view.
Don't belong in the markets if one hasn't considered the money to be made on downside.
I don't remember exactly what was going on then but I seem to recall in '87 Volcker was counseling some prudence the Reagan folks didn't want to follow so he resigned. As bugs_ notes, not long after came the October crash.
If BS resigns it would be for the opposite reasons; he's lost the support of Congress (much less the people) and the Administration is willing to let him hang out for a variety of reasons. If BS doesn't resign and isn't reconfirmed, then his future value on the rubber-chicken circuit declines quite a bit.
It wouldn't surprise me at all that if BS resigns a stock market event isn't long in following, but I can't imagine that if we all loved BS and did what he wanted to do we'd avoid a crash. Indeed rather the opposite.
Overall I think this is politics more than economics or even finance. TPTB are starting to notice that people are really mad and their expression of that anger at the ballot box and when making out checks isn't just targeted at Republicans anymore. They're going to have to look different in some way, so now they're going to whip out their Populist beards and try that for a while.
Ben is gone. What is occuring now is the following:
The President is showing him support while the Chief of Staff is showing him the door. Classic political manuever.
Headline coming soon: " Ben Bernanke decides to step down amid uncertainty over his confirmation. Thanks President for this support but declines position."
This will keep his value moderately intact and give the appearance of not wanting his appointment to be controversial. He has nothing to lose because when rates go up and the market crashes he can say I told you so as if it would have matter when rates were elevated.
Change founded on a tactical resignation, Volcker repeat?
Unless BS has a medical issue develop at the Mayflower in the company of a young Ukrainian or Haitian immigrant working her/his way through college.
+1 ring of truth
Yes, Mr. McCloy, this does have that "Positioning versus the Inevitable" smell to it. Things like this have to be handled with some delicacy because if anybody really dusts for prints on the knife, everybody's figerprints are on it...
And future billings at the Washington Speakers' Bureau are at risk, also.
From Wiki:
Chairman of the Federal Reserve
Paul Volcker, a Democrat,[5] was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.[6]
Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.
The federal funds rate, which had averaged 11.2% in 1979, was raised by Volcker to a peak of 20% in June 1981. The prime rate rose to 21.5% in '81 as well.[7]
These changes in policy contributed to the significant recession the U.S. economy experienced in the early 1980s, which included the highest unemployment levels since the Great Depression. Volcker's Fed also elicited the strongest political attacks and most widespread protests in the history of the Federal Reserve (unlike any protests experienced since 1922), due to the effects of the high interest rates on the construction and farming sectors, culminating in indebted farmers driving their tractors onto C Street NW and blockading the Eccles Building.[8]
Nobel laureate Joseph Stiglitz said about him in an interview:
From LD:
Like the modern Republicans, Reagan had run on his claims that he wld be a fiscal conservative and an inflation fighter. Stockwell's book details how the "fiscal conservative" claim quickly went to sheiser; Reagan initially supported Volcker but as R realized that higher interest rates tamped down the economy he began packing the Fed with governers who would loosen the monetary reigns. As Wiki recounts, Volcker's efforts to reign inflation in by raising rates to as high as 20% was the subject of huge protests. I recall people paying 22% on home mortgages. (And these policies along with several other errors probably cost Jimmy Carter the election, much to the delight of the Republican party)
Deregulation was an excuse but in truth the Fed Chairman has no power of regulation. A typical bit of BS from the right. Faced with a packed set of reserve chairman below him appointed by Reagan with the specific purpose to disagree with him, Volcker left the Fed.
The cost of Reagan's de-regulating the S&L industry has been put at $400-$600 billion, money never repaid.
The tax cut ideas have been fiscal disasters. In the 1980's, although inflation was out of control, at the time most local and state governments were flush with cash. Books by David Stockman and Bruce Bartlett, members of the Reagan administration, explain what actually happened to the tax cut policies, in the short run and long run respectively.
I informed both Schumber and Gillibrand that they can count on not being re-elected if Bernanke receives their vote by email today. Just like I emailed the White House the day before they announced the "No Prop" trading intentions that Obama will not be elected unless he breaks up thes big banks, removes Bernanke , RICO charges are brought against banks and their affiliates, the dollar is protected and Discount window access to GS cut off.
Since they are both influenced by the banking boys from Broad Street I am sure however they wil both vote in favor of his nomination just like they voted NOT to prevent TARP being returned ASAP.
You sir are a patriot. It is good to hear support for the Obama plan, love him or hate him. This is a necessary step regardless of who the president is or what party he is from, it MUST be taken.
This is a good observation (see below comment). If Dave is correct, volatility will expand proportionately. We are acutely aware that Obama now needs to "revamp" his image to survive, and this means any other area as well. The below is most feasible:
The last time we had a sudden and unexpected turnover at the Fed was back on June 2, 1987 when Paul Volcker surprisingly announced his resignation. That day, the S&P 500 slipped 0.5%, which was a big deal then since we were in the throes of a major rally, the yield the 10-year note surged 27 basis points, the VIX index jumped 5%, the DXY was crushed 1.2% and gold rallied 1.3%. Keep that in your back pocket just in case.
Assuming BigB doesn't get reconfirmed or he resigns, are the replacement candidates that much better? Larry Summers? Another former GS? I'm writing my senator but what "good" candidates can I suggest to replace him? Volcker would be great but that's alot of stress and work for an 82 year old guy...
Professor William K. Black.
If Bernanke were working for a company....
HE WOULD HAVE ALREADY BEEN FIRED....
WTF IS WRONG WITH THESE POLYS....
BEEN WRONG FOR FAR TOO LONG....
Ummm... one point here.
Ben doesn't have to resign just because he's not confirmed as Chairman by the 31st.
In other words the senators can't get enough votes to confirm him by the 31st Don Kohn would simply become Chaiman Pro Tem until the issue is resolved.
It appears that Kohn does not believe it is the Feds job to do anything about bubbles. He believes regulation is the answer (but of course it is not the Fed's job to regulate).
http://www.federalreserve.gov/newsevents/speech/kohn20091116a.htm
who care Ban or Paul Volcker , I don;t get it how can private institution isue money in USA ?
Get rid of Federal Reserve Inc not just Ben