Fear and Loathing in the Federal Reserve?
Going, going, Gonzo...
Don't tell the poor bastard about the bats. He'll find out soon enough.
Posted on 11/19/2010 8:50:57 AM PST by markomalley
There's something about quantitative easing that bothers just about everyone - including, believe it or not, Fed chief Ben Bernanke.
But in contrast to his many critics, Bernanke's problem lies not with the policy itself, in which the Federal Reserve has pledged to buy $600 billion worth of Treasury bonds over eight months in its latest bid to bring down interest rates and stimulate the economy.
What's in a name?
No, Bernanke's beef is that what the Fed is doing isn't properly called quantitative easing, as he reminded everyone in his speech Friday.
Incidentally, in my view, the use of the term "quantitative easing" to refer to the Federal Reserve's policies is inappropriate. Quantitative easing typically refers to policies that seek to have effects by changing the quantity of bank reserves, a channel which seems relatively weak, at least in the U.S. context. In contrast, securities purchases work by affecting the yields on the acquired securities and, via substitution effects in investors' portfolios, on a wider range of assets.
(Excerpt) Read more at finance.fortune.cnn.com ...
Perfect.
True, it’s simpler for you to say, obamma and berrwhackie are taking the food out of grand mam’s pantry and replacing it with dog biscuits.
First of all, Bernanke has already stated that the Congress should "stimulate" the economy by "cutting spending" and, hopefully, the new Congress will remove the idiotic Humphrey-Hawkings "mandate" for the Fed to "target unemployment" as if the Fed / monetary policy had any reasonable tools to do that, so everyone would not have to keep lying about this. So Bernanke is a natural ally of conservatives, not an enemy he is made out to be. Contrary to "popular" belief by all the graduates of the "evening news economics" Bernanke is not an idiot, and is the foremost expert on the Great Depression and understand the mistakes of Japan Inc.'s Lost Decades.
Second, simply by focusing on the Fed and Bernanke, which have done more than anybody to save the U.S. financial and banking system and the economy from collapse, they are diverted from focusing "like a laser beam" on the real problems for the U.S. economy - overtaxation, overspending and overregulations, caused by congresscritters and executive and even judicial branches. Democrats are just laughing and loving pointing fingers on different "causes" of problems and have Republicans follow and bashing them (previously, the "deregulation." like the repeal of Glass-Steagall, the "fatcats of Wall Street" any of the "BIG" Businesses, Chamber of Commerce etc. etc.) while not breathing a word about actual culprits CRA / GSEs Fannie-Freddie-FHA-HUD / Sarbanes-Oxley (Sarbox or SOX) and now the new ones that actually must be repealed - FinReg (Dodd-Frank) and ObamaCare which create additional costs and burdens in addition to the uncertainty in the U.S. economic "climate change".
NY Fed President Bill Duddley recently explained the reasons for QE2, and it's not designed to do what most "critics" say it does or will do, or what the actual consequences will be. It was one of the first Fed interviews since the QE2 was attacked at G-20 in Seoul. I didn't see it posted on here, so...
Excerpts from Fed Easing Is Not Aimed at Weakening US Dollar: Dudley - CNBC, by Steve Liesman, 2010 November 16
< snip > ..... A little bit more demand leads to more employment growth, higher income and rising confidence... rather than on the other side of things where we've seen Japan over the last 15 or 20 years." Dudley said a key reason for the new policy was to avoid a "double-dip" recession. "I think there is a fair amount of empirical evidence that suggests that there is a stall speed for the economy" ..... Dudley said that every time the unemployment has risen by three-tenths of a percent in the post-War era, the economy has ended up in recession. < snip > ..... As for the dollar , Dudley said that a currency usually depreciates when one nation eases monetary policy relative to another, but he said that's not always the case. He even held out the possibility that quantitative easing could cause the dollar to appreciate, which it has over the past several weeks. ..... He also disagreed with another point of criticism: that the Fed's policy would lead to inflation. Dudley contended that new tools the Fed has put in place to withdraw excess cash from the banking system when the economy rebounds ..... < snip > < snip > ..... "I think that's very off base because I think that the goal of our policy is a very simple one, to ease financial conditions," Dudley said. The Fed is "not trying to push the dollar to any particular level. What we're trying to do through our large-scale asset purchase programs is to remove Treasurys from the market and force private investors into other assets." .....
The interview is compressed, but Dudley's interviews are rare, so it's worth reading entire article. In it he also explains what the Fed's QE2 actually doesn't do - it doesn't print money - and why QE2 isn't likely to "solve" the lending problem (there are already plenty of reserves in the system) and how the QE2 can help the economy by lowering interest rate (and keeping them low for a while) ... in effect, allowing businesses and consumers to "refi" their debts at lower costs thus injecting more purchasing power into the economy (e.g., all the corporate debt issuance at record low rates, including even tech giants with great cash reserves on their balance sheets, Microsoft and HP, and see Big Wave of Mortgage Resets May Not Be As Bad As Feared - CNBC, by Mark Koba, 2010 November 11).
It's worth reading and understanding, and not be sidetracked into indiscriminately bashing Bernanke and the Fed, just because falling for cheap "populism" and lashing out at "somebody around the problem" feels good... There are real, true and better political targets than blaming a convenient political scapegoat and "shooting the messenger" of the bad economic tides. Let's concentrate on those and drive the message for at least the next two years on who was and should be held responsible for economic troubles, without them being able to point at the bogeyman, "the evil Fed".
Taking the liberty to ping you, as the link in the post is related to the discussion on the other thread. Maybe even worth to make that article a separate thread, but I will have no time to maintain it.
The whole speech is worth reading. It's a tour de force of cherry picked facts and false choices.
Aw shucks, I arrived second!! “Bears” repeating anyway. D’oh!!
Ben sounds like Obama after the election: there is nothing wrong with what we are doing. We just did not use the right words to get the American people to like it.
Ben is a poltician and the economy is Obamapolitics to him which means it is Soros’ plan for the country.
Hold onto your hats!
Now we need solutions for something a bit more difficult: how to curb all the non-stop complaining. Fed-bashing, complaining about everything, and offering no solutions is at best lazy thinking and more precisely a toxic mentality. Morons writing op-eds and morons on these threads do worse than waste our time, they're a pain in the ghescheusteh.
So the question is how do we put a lid on it, do we make fun of them? Do we inform them politely of their errors?
OK, I'll call it BS!
Introduction of facts and education is all you can do, the rest is up to the individuals who happen to be exposed (and might help influence others) to it.
My concern is that conservatives and/or Republicans are at risk of getting stuck in certain factually wrong positions for no other reasons than it’s the opposite opinion from “the other side” or because of the general negativism of their “leaders” and they don’t know enough about certain subjects to discriminate between facts, fiction or uninformed opinions.
That’s what helped Clinton win again in 1996 when, if he said “the sky is blue,” the immediate visceral reaction became “no, it’s more like dark gray”. Credibility is difficult to earn and easy to lose, and Republicans were “losing it” then. Same can be said about the liberals with BDS who are stuck on stupid about “Iraq” being a “unnecessary, wrong war at the wrong time” and therefore are still and forever will stubbornly cling to the “Iraq war was lost” narrative because they can’t “justify” winning the “wrong war”.
In the same category is the notion of “Roosevelt’s New Deal got us out of the Great Depression” when all the evidence shows that Keynesian theory failed every time it’s been tried. Or how many people are led to believe the “global warming” and that man-made CO2 is the main cause of the [phantom] phenomenon of “climate change” and that the solutions are the more expensive “renewable” energy and the “green investment” financed through higher taxes and new mandates.
All these are on the strength of the lies being repeated often and long enough, supported by fake but impressive sounding theories and backed by false “facts” and “science”.
If people have the wrong ideas about what the problems are, there is little chance of them to provide or support the right solutions. I would be disappointed to see conservatives fall into the same trap again and then be backed into a corner in the same manner, especially on the subjects that are mostly economically uncontroversial - if taken outside of ideological realm - and only distract from the winning formula of explaining the simple facts about who was responsible for mortgage crisis / financial meltdown and unsustainable deficits of the welfare state. There are great examples of it on all levels of government - federal, state, municipal - that have gone or are going bankrupt. Since the responsibility lies with generations of politicians (corrupt or well-meaning) and their policies, it’s only natural that they will try to find scapegoats and scarecrows everywhere else and will try to convince people that they are going to “fix it” with yet another piece of legislation or draconian regulations that will finally “punish the guilty,” “protect the innocent” and stop the “abuse”... all the while making matters actually worse by increasing the scope and expense of the government.
Don’t see the point in helping politicians to pull the wool over people’s eyes, just because it’s the “populist” thing to do at the moment and might help getting political power, if all it’s going to do is make it more difficult to solve the actual problems once the power is gained.
One more consideration. There are thousands of Freepers and tens of thousands of lurkers (and I could be off by a significant factor) who are not whining, complaining, bashing etc. for no reason, but are “passing through” and might come across the information you provide, either serendipitously or by looking specifically for this kind of information or arguments pro/con on the subject (FR tags are very useful).
So, “if you build it, they might come” and be affected by your info or arguments but because of the nature of Internet, you might never know if or when it happened. So don’t get too frustrated, you may be a lot more successful than you might think... or ever know.
Call it what it is. Debasing the currency.
All this bellyachin' we're hearing is not from freepers in general, it's only coming from the noisy morons. We don't need to do anything with those guys other than accept their irrelevance, move along, and endeavor to engage the sane majority.
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