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Don’t play hanky-panky with Bernanke

RobertBrusca's picture




 

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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Thu, 05/03/2012 - 12:52 | 2394239 Zero Govt
Zero Govt's picture

if he isn't retired (from journalism), let's hope he soon does

Thu, 05/03/2012 - 06:17 | 2393208 digitlman
digitlman's picture

Bullshit Brusca is back!

Thu, 05/03/2012 - 11:08 | 2393476 TheFourthStooge-ing
TheFourthStooge-ing's picture

...also known as Baghdad Bob Brusca.

 

[edit]

Also known as the ZeroHedge Bobo Doll:

http://www.youtube.com/watch?v=3M5MeTiMNzw

 

Thu, 05/03/2012 - 06:17 | 2393207 alexwest
alexwest's picture

idiot is back..

#
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.
##

sure dick-head.. and in short 3 years US debt will be 20 trln
thats all you need to know.

go away... there's nbc, fox, cnbc, cnnmoney, bloomberg for such persons..
leave us alone

alx

Thu, 05/03/2012 - 07:25 | 2393245 New World Chaos
New World Chaos's picture

Bernake is the best central banker in the same way that King George was the best king.  Revolution and rebirth are coming.  The Fed will be utterly destroyed.  Heads will roll.  Keynesian economics will become as respectable as radium cures.  Gold will return.  People will save again.  Government will be forced to shrink dramatically.  The wars will end.  Thank Ben for all of this.

Thu, 05/03/2012 - 14:06 | 2394614 John_Coltrane
John_Coltrane's picture

And let me add that personal responsibility will make a comeback along with the realization that only hard real work creates wealth.  The social welfare state based upon money backed by debt is in its death throes.  The Bernake is its high priest and enabler.

Thu, 05/03/2012 - 05:36 | 2393180 williambanzai7
williambanzai7's picture

THE HERO

Thu, 05/03/2012 - 07:30 | 2393257 razorthin
razorthin's picture

Because history will prove, eventually, that he destroyed it.

Thu, 05/03/2012 - 05:12 | 2393171 bank guy in Brussels
bank guy in Brussels's picture

Big whopping falsehood in the original of this Robert Brusca article - Brusca writes:

« ... Belgium still does not have a government ... »

Actually, we officially installed a new government five months ago, at the end of 2011 ...

We have a very capable and nice prime minister, Elio Di Rupo, a dapper, charming, talented socialist gay man who often wears snazzy bow ties ...

He's the kind of guy who would never thrive in bigoted extremist America, maybe that's why Brusca is forgetting about our government.

Here's a photo of Di Rupo being sworn in by our beloved King of the Belgians, Albert II:

http://www.bbc.co.uk/news/world-europe-16042750

Thu, 05/03/2012 - 12:55 | 2394248 ElvisDog
ElvisDog's picture

He's the kind of guy who would never thrive in bigoted extremist America

Are you kidding me? In any large city on the East or West coasts of the U.S., a gay man who wears bow ties would be a shoe-in for Mayor. I believe the current mayors of Seattle and San Francisco are gay and Rahm Emmanuel, mayor of Chicago, is widely rumored to be gay. Have you ever traveled to the U.S. or do you come up with these things based on Euro stereotypes and propaganda?

Thu, 05/03/2012 - 12:49 | 2394230 Zero Govt
Zero Govt's picture

".. talented socialist.."

No such person ever walked the Earth... all socialists are idealistic idiots. Period.


Thu, 05/03/2012 - 03:15 | 2393119 New American Re...
New American Revolution's picture

Dude, you must be in a coma.   Tell me why Hymie Dimon is leading the heads of the crime banksta families in a visit to the FED to see about softening some of the rules of Dodd Fwank?   What, the Great Chairsatan is now doubling as the Congress?   Unfortunately, he is, and that is Congress fault and they need to take back their constitutional powers.   But even if Ben B was the reincarnation of St. Paul he's still a goddamn crook working for even bigger crooks, or as George Washington described them, "cunning, ambitious, and unprinicipled men", whose act of usurpation of the powers of Congress, "is the customary weapon by which free governments are destroyed."

And you think the jury is still out on Ben Bernanke?   No more than they are still out on Ben Strong or Marriner Eccles, both gay guys who were so anti-social sociopathic, that they didn't give a rats ass about the people or the nation.   They were just there to fuck everybody, and that is the role that B.B. Chairsatan is filling, and filling quite willingly.    And if he has partaken of dissolving America's gold reserves, he is, under the Currency Act of 1794, up for capital punishment; he and those who conspire with him.  

That is my opinion, and there is nothing humble about it.   www.nar2012.com

 

Thu, 05/03/2012 - 10:11 | 2393605 DaveyJones
DaveyJones's picture

The only reason the jury is out on Ben is he's a banker. They don't do that

Thu, 05/03/2012 - 03:02 | 2393114 StychoKiller
StychoKiller's picture

So Mr. Brusca, you do know that you're only supposed to take one Delusionol™ per day, right?

Thu, 05/03/2012 - 08:44 | 2393372 TheFourthStooge-ing
TheFourthStooge-ing's picture

He's doubled up on the dosage and is combining it with Corazine®.

 

Thu, 05/03/2012 - 12:50 | 2394000 akak
akak's picture

I don't know which is the more amusing troll here --- AnAnonymous with his mangled Engrish and his constant and nonsensical bleating about his mythical "US Citizenism", or Robert Bruschetta with his wholesale denial of reality and his economically and financially pollyannish unicorns-and-rainbows shtick that would make even the parrots on CNBC blush with embarrassment.

Give it up, Bruschetta --- NOBODY is buying your pro-status-quo lies here.

 

PS: Welcome back, Leo.

Thu, 05/03/2012 - 13:39 | 2394459 Intoxicologist
Intoxicologist's picture

Funny. I was thinking the same thing, Akak.  I liken both of them to that rare "floater" that stubbornly refuses to be flushed down the toilet with the rest of the shits.

Thu, 05/03/2012 - 02:36 | 2393103 williambanzai7
williambanzai7's picture

Bernanke has so far navigated a solid course for the US?

Good luck to you in your future endeavors...

Thu, 05/03/2012 - 12:50 | 2394234 ElvisDog
ElvisDog's picture

Well, I guess you can say that under Bernanke's stewardship the U.S. is less of a basket case than Europe or Japan. It's like having leprosy and saying you're healthier than two guys who have the bubonic plague.

Thu, 05/03/2012 - 05:22 | 2393175 Zero Govt
Zero Govt's picture

Yep, this village idiot would back the Captain of the Titanic for a 2nd vessel

with 'journalists' like this around, who needs enemies

Thu, 05/03/2012 - 07:13 | 2393239 BigJim
BigJim's picture

He gets a '2' from me for slagging off Krugman.

Thu, 05/03/2012 - 10:57 | 2393335 Manthong
Manthong's picture

Just for the record, the Sveriges Riksbank  is the central bank of Sweden and…

“In 1968, Sveriges Riksbank instituted an award that is often associated with the Nobel prizes, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The first such prize was awarded in 1969. Although it is not an official Nobel Prize, its announcements and presentations are made along with the other prizes.”
http://en.wikipedia.org/wiki/Nobel_Prize

Broken windows, anyone?

Thu, 05/03/2012 - 14:00 | 2394580 John_Coltrane
John_Coltrane's picture

The "social science" of Economics is neither a science nor especially social.  Discuss among yourselves.

I'll get it started:  to be a science, the scientific method must be applicable which means a hypothesis must be testable and importantly, falsifiable.

Thu, 05/03/2012 - 02:17 | 2393095 infiniti
infiniti's picture

"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."

 

$1.4 trillion deficit. That's just the stuff we need to account for this year. It's probably impossible for an economy to go into a full-fledged recession when that much spending is being pulled forward. The scariest thing is that $1.4 trillion of savings burn gives us a growth rate of 2.5%. Sans that pull-forward demand, the S&P 500 would be at 600 and the 10-year treasury would yield 1%.

 

Thu, 05/03/2012 - 07:34 | 2393259 Ghordius
Ghordius's picture

+1 - I strangely find the deficit number ($1.4 Trillion) less terrifying than if you traduce it in: something like -10% of GDP.

How many World Wars are being fought at the same time to have this kind of deficit?

I note that nobody asked Mr. Brusca any elucidations on the long term consequences of Operation Twist, yet...

On the light side: if Mr. Bernanke was at the head of the ECB, he would (be forced - have to) explain on press conferences that he has a plan. An Exit Strategy. It would be required.

Mr. Brusca disparages the performance of Mr. King (which is "unfair" because of the smaller size of the BoE and the UK economy - size matters and the UK has to import food and many other things) but the LTRO has at least a nominal, theoretical "Exit" built in, similar to expiry date of the Bush Tax Cuts...

Thu, 05/03/2012 - 09:43 | 2393511 fuu
fuu's picture

Oh good Rubber Balls is back! MDB_ must have gotten bored in the main page threads.

Thu, 05/03/2012 - 10:53 | 2393763 LowProfile
LowProfile's picture

 

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.

"Better" is not "good", just "less shitty" than "slow motion train wreck waiting to riot and burn".

And OF COURSE the USSA is doing better than other countries - THOSE WITH ACCESS TO FRESHLY-PRINTED RESERVE-FIAT DO BETTER THAN OTHERS, BECAUSE THEY GET TO SPEND IT FIRST BEFORE IT INFLATES PRICES, YOU FUCKING, FUCKING IDIOT.

Thu, 05/03/2012 - 10:13 | 2393615 DaveyJones
DaveyJones's picture

crap, I hope I don't win the I got the article award

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