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Don’t play hanky-panky with Bernanke
I have been busily watching the markets and assessing the new economic numbers and there is a good deal of confusion to sort out in the economic reports for the US to be sure. And there is also a great deal of irregularity in the reports from the economies abroad.
As I look at a top down view of the US, while I am not very satisfied, I am impressed that the US is doing so much better than most other major economies. Consider that the US was ground zero of the financial crisis the economy is recovering better than most and US banks are in much better shape than banks in most other regions. And while Mr Bernanke is not a very a popular figure on this web site he may actually be the best central banker in the world right now (and I will distance myself from any of those who tried to set a similar if not more glorious title on Alan Greenspan before it all came down around our ears).
Bernanke has so far navigated a sold course for the US. Is there still risk? You Betcha. Is his reputation burnished? Well not yet. History will not forget him for all the innovative things he has done. But how he is judged is yet to be determined. But so far the US things are looking pretty darn good.
Compare to the UK… Bernanke’s old roommate Mervyn King has let the UK inflation rate percolate up to average over 3% over the last two years. The UK has an inflation ceiling of 2% and no dual mandate as a distraction. Currently the UK money supply (M4) is contracting at 4% Yr.yr in real terms and the economy is in recession.
China is a Go-Go growth economy and is hard to evaluate. But it has been struggling to get back on track. It’s banks are suffering and the jury is still out on China. When it gets settled China is supposed to shift gears to promote domestic demand in place of export-led growth. This switch should be tricky if China decides to stay with it. The central bank and all of chain’s policy will be challenged,
Japan is still struggling and it has had several central bank heads. It is still under the yoke of deflation and not righted its economy after its triple disasters of last year. The fiscal side seems in a tangle since the rebuilding impact on GDP still has not kicked into gear.
Europe… EMU is a great case study in WHAT not to do. They could write the book ‘Optimal currency areas for dummies: what not to do. Money growth is still weak. There is only the vaguest stirring of growth in money supply in the wake of several rounds of LTRO lending. Private sector credit is not stirring. We know why. LTRO monies mostly went into the government bond markets where banks have grabbed some more of that ‘tier one capital’ that is not really named that because of the threat that it could cause tears to stream down investors’ faces in the future.
What is really interesting in Europe is how austerity has spread its impact beyond economics to the political system. This was obviously going to happen and it why I keep saying that Europe has a competitiveness problem that just can’t be fixed by keeping the Zone together. The pain required to fix it would strain societies past their limits for tolerance.
In Europe, not all because of austerity but there is political instability in spades…Belgium still does not have a government. The Dutch government fragmented. France is facing elections with Sarkozy very much at risk and his opponent is the anti-Merkel. And in Greece a number of minority parties, and in some cases kooky parties, are in the running for influence. How’s austerity going there? Even in the UK where there is an independent central bank and a separate currency austerity is not faring so well.
Trichet, before he left the ECB, was too tight, busily putting the polish on his legacy. Draghi came in sort of sounding German then he switched and endorsed bond buying… then he opted for the LTRO injections. The Germans in response quit the ECB. Weber refused to take the head job that had been his for the asking. Jürgen Stark left. I can appreciate a guy who stands for his convictions but the Germans also quit. This leads so further suspicions of what the Germans are planning. If they are no longer working inside the ECB for EMU are they planning for the big split?
Compared to this tension I think we give Bernanke very high marks. He has muddied the financial markets and their signals with QE and Twist. He has blown up the Fed’s balance sheet and getting out of that could prove tricky.
But he is assailed by the anti Wall Street crowd on one side and by the libertarians like Ron Paul on the other as well as by a host of conservatives. And liberals don’t exactly like what he has done/is doing. Still a lot of people (FOMC members) from varying backgrounds endorsed this policy course. Now as the economy is improving we are seeing more dissent and desire to stop the special programs and to unwind the balance sheet bloat... soon.
As I said Bernanke’s legacy is still to be made. But he has put the US economy in a position from which it can succeed. If Europe falls apart, it will be more difficult. If we fall of the fiscal cliff we will have our own Thelma and Louise moment. The Fed Chairman has already said he can’t save us from that shock. It’s really time for fiscal policy makers to step up. As long as they refuse it makes Bernanke’s job all the harder. And the pressure on him is intense.
Liberal economist Paul Krugman (former Noble Price winning economist and currently NY Times communist-oops typo! I mean columnist) has lampooned Bernanke for not (NOT) creating more inflation. In a response to that demand but not targeted at Krugman, Bernanke said it would be reckless for the Fed to try to spur growth through inflation. In his next column maestro Krugman called Bernanke reckless for not pushing more inflation. Such is Bernanke’s life.
Want to know what it’s like to be him for a day?
Watch a Zombie movie. Always someone else coming at you from another direction; they never stop.
As for the inflation gambit of Krugman-how would that work? The Phillips curve is a discredited ‘tool.’ There is no unemployment inflation tradeoff over the long haul. There is so much unemployment and competition that if we got inflation going, I doubt it would get it wages higher. Instead the real wage would actually fall. And that would not be good. I can’t see it hiking house prices rising because the CPI went up. How would inflation work” what prices would rise and how would that help?
How Paul? Enquiring minds want to know… Can they take away a Noble Prize for stupid policy suggestions?
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"Bernanke has so far navigated a sold course for the US."
Yeah "sold" down the river by the Fed since 1913. Nice Freudian slip there.
nice catch
Take a look at, "The Bernanke Put - Euro Style." Funny when you think about it after cajolling European leaders for kicking the can down the road, they may be ahead of us in dealing with their problems and yet, they are the ticking time bomb.
http://bit.ly/Iu8r0m
Mindless cheerleader.
Good post RB. Lets see if Bernanke can keep inflation under control once full employment returns and help to force the politicos hands to break up their campaign financiers (tbtf) to complete the trifecta. So far so good. Our political process seems irreparably broken anymore. Maybe we can just get rid of Congress and have Bernanke run.GOV also, just in his spare time as a hobby maybe.
Robert.... Seek help.
You are a delusional quack.
Brusca,
Does the UK and US use the exact same inputs and formulas to calculate inflation?
Regarding inflation, Bernankes stated goal is to have inflation 2% which is completly arbitrary. Krugman calling for 3 or 4 or 10% is as valid as saying 2% is the right amount.
You ask "As for the inflation gambit of Krugman-how would that work?"
How does 2% work, jerk?
I tire of the self-imposed ignorance like that spewed by Brusca above. To think that Bernanke just found himself in this dilemma is the height of madness. Our present condition has been brought about by a deliberate enacting of their plan. Brothers and sisters, what the bankers once did stealthily, they now do openly. That's because they think they have won, and that is their greatest weakness. Pride goeth before the fall.
I am guessing that Brusca's version of the "economy doing better" has to do more with the equities rising (aka Thanks ECB and FED) than anything else.
One thing that I very much look forward to in the upcoming financial collapse, which is inevitable at this point, is that people like Mr. Brusca will go away not to be heard from again for 80 to 100 years. At least by then I wont have to personally listen to the momo idiots...
Yeah right. These types are not going anywhere. It will always be someone elses fault. Read "When Money dies" It was foriegners fault, it was the jews fault, it was the communists, it was the war repatriations but never was it the fault of the central bank or government.
Please, STOP IT !!!
In summary this is the poster of this article:
The guy who pays some of my salary is the greatest, of course no mention in his article of the many conflcits of interst in his views.
I know a ass kisser when I see it, and the writer of this article is one.
It seems that the only exculpable explanation for this missive is...
Stockholm Syndrome.
Send in the S.W.A.T. Team.
I'm not convinced we can succeed. We will pay nearly $500 billion in interest this year with the 2-year note paying only about 1/4 of 1%. Bernanke has painted us into a corner. Once inflation starts to spike, the interest will bankrupt the US Treasury if he allows interest rates to rise to fight it. Imagine interest payments rising by four-fold to just 1%. It would take the entire tax revenue of the government just to pay the interest alone! And if he doesn't allow interest rates to rise, and inflation takes off, he's destroy the economy and the poor and middle classes at the same time. It's economic armageddon either way!
Between January of 2007 and January of 2012, the US saw 20+ million added to SNAP (from 26,367,174 to 46,449,850). That is a ~76% increase in 5 years.
http://frac.org/wp-content/uploads/2011/01/snapdata2012_january.pdf
Between May of 2008 and May of 2012, the US national debt grew by ~$6 trillion (from ~$9.7 trillion to ~$15.7 trillion). That is a ~62% increase in 4 years.
http://www.usdebtclock.org/2008.html
http://www.usdebtclock.org/index.html
Between April 2, 2008 and April 25, 2012, the Fed's balance sheet grew by ~$2 trillion (from ~$885.4 billion to ~$2.870 trillion). That is a ~220% increase in just over 4 years.
http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
That sounds like a real recovery... in Bob's Bizarro World...
I will respond with what Brusca would say "It would have been worse"
Thank you. How obvious can it be . . .
If there is one thing I have learned from my investment experience, and watching that of others, it is how short run attempts to fix things that aren’t going your way tend to backfire. If I look at all the reactionary trades I made to try and better position myself against known or perceived market threats, most became counterproductive money losers in the mid to long term. From this experience I have learned that the most difficult, yet most valuable and successful way to respond to short term market shocks is to do nothing. Most financial advisors follow the same basic investment philosophy. It’s not just a blind buy and hold philosophy. It’s about making strategic investments with commitment to the long term over the short term.
So I ask, how is it these central bankers see things so differently? Are they having a radically different experience with their personal investments than me and everyone else I know? Do they have some secret knowledge of how investing and markets really work that is contrary to what 99% of the investing community believes and practices? In fact, these central bankers are the only people I know who believe a reactive short term trading approach to investment (in our economy) will be successful. Where do they come up with this basic idea? That’s what baffles me.
Bernanke, krugman, and Brusca lack real world experience. The trader's Maxim- Your first loss is your best loss. Hiding your loss in the top drawer of your desk guarantees it will grow out of control.
ZIRP is a cancer that will kill the host.
Inflation is not growth. It's that simple. The debt path Bernanke has the US on is not sustainable. It's that simple. Any questions.
FYI ZHers.
ROBERT A. BRUSCA is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He is also teaching in a graduate program at the Zicklin School of Business at Baruch College in Manhattan. Mr Brusca has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial Markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International (for 16 years). Mr Brusca currently is a consultant. He was the first guest on the first day of CNBC and continues to make numerous TV and radio appearances. Mr. Brusca holds an MA and PhD in economics from Michigan State University and a BA in Economics from the University of Michigan. His wife hosts ‘The Hays Advantage’, a radio show on Bloomberg. He has a daughter in college in California.
http://seekingalpha.com/author/robert-brusca
No wonder he sings the company song.
Consulant? Like I said, paid shill.
"He was the first guest on the first day of CNBC"
That kind of says it all.
big lead story here on ZH, douche bag who works for the fed praises bernanke!!!
you have to give credit where credit is due. Bernanke has been a complete success in his mission of serving the wealthy elite banksters in their mission of impoverishing the rest of the world, enriching themselves, and leading us into a Militarist, Orwellian police state. Are there any fools who actually expected that he would serve the interests of humanity? If you've done well under Bernanke , it's only because you are part of that Little group Of Insider elites that wants to enslave the rest of us, or you just road along in their coattails with a certain measure of skill--but for the most part, just plain luck because you guessed right. the author of this piece is simply one of the paid, loyal propagandists who is rewarded for being a mouthpiece for these criminal elites.-either that-or he's just a fool.
Bernanke works for the US citizen middle class.
Rich are getting richer (some of them) by proxy: corporations.
Corporations are creatures of middle class societies.
As Bernanke protects the middle class, as a result, corporations thrive. Hence, rich pocket the money.
Don't you have a Chinese roadside somewhere to shit upon, or some puppies to fry up, or some endangered rhino horn to grind up for your quackery of "traditional medicine"?
He busy preparing great meal of delicacy: hot & sour elephant eardrums in squirrel testicle sauce.
With stir-fry of bear gall bladder and wolf penis.
Oh! the goodness tasting is!
Wholesome Chinese endangered species food: leave USA factory quick food behind in the powder!
Pluswise, bonus being had deriving of living in same hovels as they pigs and chickens, better making new strains of flu and deadly diseases to send to world rest of!
Wow, Bob, we're very much alike. I went to UM and have a PhD, as well (Chemistry). One of my kids is currently at UM studying science.
Fact and opinion? Should work the word fiction into your firm's name. Maybe unfounded optimism, too.
You're an idiot, Bob. Simply put, ANYONE can do ANYTHING when they have carte blanche with funding and NO supervision. The only thing Bernanke has to be careful about is pissing the powers that be off too much. A little is OK. Tell you what, give me the keys he has and I'll bet I wouldn't do any worse. Since I am a lucky sort of guy, I might even do better. I admire your optimism, I wish I had a bit more, but nothing about our current economic situation tells me the world my kids will inherit will be better than the one we have now. And that makes me sad.
Bernank has really only pumped stocks, floated it all on a huge sea of fake money, yet Bob thinks this is some masterful work? I can only conclude this article has to be satire.
You are correct, and like all those who have been well "educated" by the powers that be, he has no interest in truth or the prosecution of fraud as this would mean the end of his self-importance in society.
For those of us that produce and deliver real products people need to survive, the end of all this horseshit can not come fast enough. Olny when it does will compensation return people who's labor is actually worth a shit. The paper-pushers stink of fear (with good reason) and Mr Brusca is no exception. All economies are local and becoming more local by the minute. Good luck all.
For those of us that produce and deliver real products people need to survive, the end of all this horseshit can not come fast enough.
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Ah, yes, real products...
Maybe also real survival too...
I see you Brusca. You are a paid shill, and part of a psyop program to propaganda into the heart of the enemy camp. Its either that or you have no idea where you are and what the score is.
I wonder why ZH continues to publish his articles. Maybe they desire to stir the pot once in a while.
they do it for balance. You cannot fully appreciate the honesty, truth, And sincerity of other zero hedge authors, without occasionally contrasting them with the rantings of a paid shill propagandist such as brusca.
I understand balance and truth but this is pure propganda. Why give a forum for propoganda.
"Bernanke has so far navigated a sold course for the US. Is there still risk? You Betcha. Is his reputation burnished? Well not yet. History will not forget him for all the innovative things he has done. But how he is judged is yet to be determined. But so far the US things are looking pretty darn good."
I love the way these guys use that word "innovative"..I'm sure that bankers would not use that term to describe a bank robber.
"Oh look at that fellow stealing from us, his use of a gun and mask to aquire wealth without working for it, was quite innovative"
Bernanke is stealing, as all Private Central Banks do, it's nicely hidden from the average "citizen"...
But let's call it what it is: fraud, ponzi scheme, theft, stealing.
This article sucks and I can sum it up in 2 sentences..The USA is the best horse at the Glue factory...That's nothing to be proud of....
The COMIC RELIEF is much appreciated. At first I thought the article was serious, then realized it had to be satire.
How do I know? The rule of law is still completely broken. His inflation figures are bogus. Fascism is being installed at an accelerating rate. Nothing has been solved with the economy that will provide long lasting survivability UNLESS you call creating a dependent slave class and the gutting of the middle class a long-term benefit.
... and he starts out with the laughable assumption that central banking is needed and the norm... only in this nightmare slice of history.
How do I know? The rule of law is still completely broken.
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That should be the criterion. Rule of law complety broken.
Hey, since the US has a long history of broken rule of law, quite a number of papers must be satire.
.
No comparison to the comedy book of Great Leaping Forward Chairman Mow:
Chairman Mow's Little Red Joke Book
It causing many millions laughing out loudly being.
Those Chinese citizenism citizens not laughing, well, hey, the suffer the consequences for sense of humor being lacked...
In Mao's defense he did get one thing right: "power grows out of the barrel of a gun" (which explains the lack of a second amendment in China)
When you combine that with Lenin's: "the end justifies the means"
You get Central banking and the all powerful state.
HAS to be just a troll columnist, theres no way this can possibly be serious!
I think you're right-it must be satire. In that regard I apologize to Bruscafor the unflattering remarks I made in earlier posts. As satire, I find it to be a well-written post. in fact, As satire,it's very good-Initially,I actually thought the piece was serious.
Boy do I disagree, His legacy is a disaster and he should be in jail, sent to siberia, or executed. He and greenspan were asleep in their many years at the fed, fixed in very out dated models and allowed leverage to build to the danger levels. for the greatest scholar of the great depression he completely missed wht caused it (excess leverage). Now all he does is run the printing press, but doesn't use his position for real reform like ending too big to fail, and breaking up the banking oligopoly. Which is why we hace such a shitty recovery!!
The proper analogy for him is he is the robber who shots you when robbing you (and yes his many years of zero interest rates has robbed the vast majority of americans from their savings), and then calls the ambulence. Then for some stupid reason everyone calls him ahero for making the call and forgetting he's the guy who shot you in the first place. Anything else is attempting to rewrite history!!
Why does he keep getting called a hero. because the 1% own 42 % of the assets in this country, and the media outlets, and are part of the elite. he rescued their asses at everyone's expense. So of course that's the propaganda they push.
Sorry but the emperor has no clothers, and no matter how many times the idiots in charge say it's a beautiful outfit it isn't.
I really think he should stand trial and be hung. If he lived in almost any country in the world it would have happened. Even commie countries at least know that those in power who made epic failures had to be gotten rid of. But in the usa we keep trotting out these failures and acting like their thoughts matter. These people got ahead for one reason and one reson only. That is taking care of the 1% who pull the levers to put people in those positions.
He's gulity of crimes against humanity with all the destruction his theories have caused (unemployment, lost wages, homeless, food inflation). To state anything else is just a fallacy
OH, and that mother fucker refuses to even acknowledge the role the fed had in causing the crisis.
My baby does the Ben Bernanke..
That is very funny
Thanks mate. Your stuff has made me laugh more times than I can count...