Archive for the Bernanke Category

Rational Fear: Still “Unusually Uncertain” (November 8, 2010)

Posted in "L" Shaped Economy, Bailout/Bribe, Banks and Banking System, Bernanke, Depression, Federal Reserve, Greenspan, Kleptocracy, Technology, Unemployment, Volker with tags on November 8, 2010 by e-commentary.org

. . .

K         “Think about it.  Some maintain the blind conviction that the business cycle is ordained by nature like the tides to rise after it falls.”

J          “Faith in nature.  This season is bad so that the next season will be good because that is the way it is.  Good luck.”

K         “Some desire to return to unrestrained personal consumption and unbridled economic growth.  Even if it is attainable at this time it is not sustainable over time.”

J          “Faith in unchecked consumption.  With oil peaking and a world population that has not peaked, the prospects are not promising.  America had its opportunity to consume.  Other countries, particularly China and India, now want and have earned their opportunity to consume.  If the oil holds out.  And if the coal does not kill us.”

K         “Some believe that new technology will be pulled out of the hat and pull us out of this mess.”

J          “Faith in technological salvation.  The technology sector likely will continue to grow but not enough to propel the entire economy.  The tech world is producing some sexy developments and neat gadgets.”

K         “I’ve always supported free trade when it is truly free.  Decades ago, I could see that globalization would shift massive numbers of American jobs overseas.  They said the solution is to train and retool the America workforce.  The workforce is not retrained and retooled and may not be retrainable and retoolable.  Not many commentators in academic economics or in the financial press have a clue.”

J          “It is one thing to listen to Greenspan and know that everything he says is wrong, yet who is getting it right.  Knowing which way not to go in a maze is not the same as knowing which way to go.  Volker has a clue, yet he is on the sidelines.”

K         “Bernanke* has a clue.  Now that monetary policy has effectively failed, he is enacting what is effectively fiscal policy.  Fiscal policy is the province of the legislature, the Congress.  But Congress is broken.  The Humphrey-Hawkins Full Employment Act, an act of Congress, requires the Fed to promote full employment.  Perhaps he is actually trying to stimulate employment.”

J          “But there are no jobs, now or in the future.  Quantitative Easing II is nothing more and nothing less than TARP II implemented by the Fed rather than Congress.  The Fed’s purchase of bonds is nothing more and nothing less than a slick way to provide another bribe and bailout to Wall Street.”

K          “That is hard to dispute unless there are a few random hires here and there.  And he continues a tradition at the Fed of lying or at least deceiving the public.  He can do something.  He and the Fed regularly issue ‘Remarks’ and ‘Speeches’ on all manner of topics.  He should direct the Fed to issue a finding that a single bank with deposits and assets of more than 100 billion is a clear and present danger to the American economy and to the security and well-being of the Republic.  If a bank or other financial institution does not enter into an Enforcement Action with the Fed, close the resources of the Federal Reserve to the bank or financial institution.  In effect, require banks to downsize to manageable sizes.  They must be small enough to fail and to play well with others.”

J          “Won’t happen.  Our democracy is now a kleptocracy.”

K         “That won’t help employment, however.  But he could pull it off.  He can be bold.  He would have to play all his capital.  But for us citizens, however, the only things we have to fear are so many very real fears.”

. . .

Bumper stickers of the week:

The only things we have to fear are so many very real fears.

Don’t end the Fed, mend the Fed.

“And as things fell apart/Nobody paid much attention.”  “(Nothing But) Flowers” – Talking Heads

“This country’s hard on people, you can’t stop what’s coming.”  No Country for Old Men movie (2007)

On The Bribe/Bailout And Financial Reform (July 26, 2010)

Posted in Bailout/Bribe, Banks and Banking System, Bernanke, Federal Reserve, Journalism, Press/Media, TARP on July 26, 2010 by e-commentary.org

. . .

K          “So many commentators contend that the bailout/bribe of 2008 saved the American economy, yet they do not provide any detailed discussion or explanation.  Few seem to be challenging the conclusion.”

J          “When you think about it, no one has offered a coherent explanation of two things.  No one has explained the exposure of the economy and the problems encountered in September, 2008; no one has traced the impacts and consequences of the bailout, good and bad.”

K          “Spewing money randomly was unwise and counterproductive.  The market was the only way to purge the excesses of the market.  Purging the economy of the poison would have been painful, yet we as a country would be much better off in the intermediate and long runs.”

J          “Not many commentators were sounding warnings in 2005 or earlier.  I recall some warnings and misgivings from a few writers with the conventional press.  I also recall scattered concerns shared in some of these things called ‘blogs.’  Yet there was not enough chatter to capture the public imagination and stir any action or pause.”

K          “Some reports suggest that the some government funds have been repaid.  There is no way to verify the claims.  The Federal Reserve in particular is exempt by statute from any effective scrutiny, oversight and regulation.”

J          “The financial reform bill may be one of those bills that has not been read carefully by its proponents or by its opponents.  However, I believe that a small group of connected individuals is making far too much money to allow any meaningful reform to pass.”

K          “Aren’t we in worse economic trouble now because things have not changed.  Yet no one is really worried.”

J          “Too few journalists, even economic journalists, understand the economy.  Just reading and digesting the public statements issued by the Federal Reserve is almost a full time job.  The popular press may summarize some of the information in the Beige Book and G.19 Consumer Credit reports, yet there is not much analysis.  Who has the background and the experience to connect the dots.  And who do you trust.”

. . .

Bumper stickers of the week:

Don’t end the Fed; mend the Fed

ABCNNBCBS does not have many answers; Faux/Fox does not even ask the right questions.

“Ever since my husband began listening to NPR, he is so informed . . . and so depressed.”

The Double Ought (00) “Decadent Decade” (January 4, 2010)

Posted in Afghanistan, Bailout/Bribe, Bernanke, Bush, China, Congress, Debt/Deficits, Economics, Federal Reserve, Foreign Policy, Greenspan, Health Care, Housing, Iraq, O'Bama, Presidency, Supreme Court on January 4, 2010 by e-commentary.org

1999:  No major wars yet percolating problems in a dozen venues; budget deficit surplus of about 236 billion dollars, although Bush inherited about a 5.7 Trillion dollar National Debt; and a boiling but unstable and slowly cooling economy.

The decade that threatened to come in with a bang sauntered in with only the traditional fire works.  Y2K may have been such an epic universal non-event because everyone realized that it was a real deadline that could neither be disregarded nor overlooked.  It was not Y2.001K.  Problems were timely addressed in a timely manner in time.  That was not the attitude for the remainder of the decade.

An outwardly non-descript and largely unknown bumbling scion who had been shepherded by others for their own purposes through an uneventful life was appointed by the Supreme Court to run things.  The ship of state sailed uneventfully for a time.  A written invitation to impending disaster delivered to and disregarded by the White House in August, 2001 was honored in September, 2001 by a quartet of airships.  The course of action was simple.  Know who we are and remain faithful to who we are.  Stay our course.  Redouble our vigilance and redouble it again (and redouble it one more time).  Too many in power and influence in the country lost their heads.  Leadership was non-existent.

A perfect storm.  An obscenely incompetent President, a flagitious and arrogant vice-President, a smug, bungling and petulant Secretary of War/Defense (Rumsfeld), hamstrung Secretaries of State (Powell and Rice), a mendacious Secretary of the Treasury in the second term (Paulson), a marginal Attorney General (Gonzales) and their ilk were not the Dream Team.  The damage they inflicted in the decade will take decades to repair.

Bush proclaimed that WeMaD (Weapons of Mass Destruction) and almost everyone joined in the madness.  No one ever made a compelling case for the invasion of Iraq.  The national press (WP, NYT and so many others) yearned for war, any war, just give us a war with photo ops and film at eleven.  The major television networks (NBC, CBS, ABC, Faux) were thrilled and went wild with glee.  It was a time, the only time, to watch their coverage non-stop to bear witness in real time to the folly and the madness.  The few dissenting voices (Warren Strobel and Jonathan Landay with Knight Ridder’s Washington Bureau, Terry Gross and guests with NPR/Fresh Air, Walter Pincus with the WP and a few dozen other courageous individuals) did not reach a wide audience.  They were voices in the darkness.  The Iraq quagmire is the greatest foreign policy blunder in American history.

Deficit spending and economic looting became the national pastimes.  Almost everyone involved in directing and controlling the economy (Reagan, Gramm and Rubin in earlier decades with the assistance of Bush, Greenspan, Paulson, C. Cox, Geithner, Summers and others in this decade) almost without exception (Brooksley Born and a few others) were committed to undermining the American economy at every opportunity for the benefit of a few.  One must concede that they succeeded handsomely.  Although they are domestic economic terrorists, their activities never became the subject of the vaunted “war on terror.”  No one ever made a compelling case for the bribery and bailout of Wall Street.  Bernanke* remains the enigma, the outsider and the ultimate insider, who did not recognize what was obvious before and after he became Chairman in February, 2006 and disregarded the advice of his colleague Edward Gramlich.

The first African-Irish-American was elected President.  There were a few things they did not tell him before he got elected that he learned quickly after he got elected.  He re-nominated Bernanke* to run the Federal Reserve which may be the only option given the limited economic talent in America.  His appointments to date are adequate, yet the administration is still seeking traction and direction.  Health care is becoming his domestic economic quagmire.  Although it is not really the job of the government to provide jobs and/or homes, the populace wants a job to go to during the day and a house to come home to at night.

About the House.  And the Senate.  Congress could be declared a natural disaster area.  The Republicans are useless, the Democrats are not particularly useful.  Forty-five percent of Americans respond to and are motivated by fear and loathing; the Republicans know and stoke their base.  The Republicans may make great strides in the November elections.  The party committed to destroying government may again be given that opportunity.

The nine members of the Supreme Court are more myopic and narrow-minded than just about any other Court in the history of the Republic.  The Court sports two religions (with one exception), two schools (with one exception), and two (mas o menos) schools of thought (with a few exceptions), yet it has two women, too.  The war at the Court and for the Court continues.  O’Bama may have an impact, although the impact of the economy on O’Bama’s future will greatly impact his impact on the Supreme Court.

The profit-maximizing universities in America should be part of the solution, but they are part of the problem; they may be more accurately described as part of the process and the processing.  They recruit, train and drill the next McNamaras and Rumsfelds.  To their credit, they adhere to a thirty-year business plan rather than the three-month strategy pursued by other businesses.

The information made public in the National Intelligence Reports over the decade patiently and exhaustively chronicles the decline of America’s role in the world after six decades of preeminence.  America has done much wrong during that time, yet America has done far, far, far more good, often with resentment and usually without thanks.  On balance, everyone is better off with the United States as the dominant superpower.  This is China’s century.

Now:  Multiple wars, battles, skirmishes and police actions with two major foreign base camps (Iraq and Afghanistan); massive and growing deficits and about a 12.3 Trillion dollar National Debt; zero private-sector employment gain and zero economic gain for the average family over the decade; and no industry to inflate other than the federal government industrial complex.

[See the “e-ssays” dated Jan. 5, 2009 titled “The Millennium to Date”; dated October 6, 2008 titled “A Bleak Day:  The Trillion Dollar Tragedy”; dated September 29, 2008 titled “Futile Efforts”; dated May 4, 2009 titled “Picking the Supreme Beings”; dated May 14, 2007 titled “Term Limits”; and dated Jan. 30, 2006 titled “Greenspan’s Legacy:  Apres moi, Le Meltdown.”]

Bumper stickers of the week:

The Recession is Over.

The Recession is Over; Let the Depression Begin

Halcyon Ano Nuevo

An Economic Tsunami?: The Road Ahead (Dec. 14, 2009)

Posted in Bernanke, Depression, Dollar - World's Reserve Currency, Economics, Volker on December 14, 2009 by e-commentary.org

. . .

“Log this road map in the back of your mind.  The M3 money supply is no longer even reported. The world currently has reservations about the world’s reserve currency – our handy-dandy trusty dollar.  Petrodollar implodes; gold explodes.  Residential housing market, commercial real estate, and criminally over-leveraged corporations (LBOs) start really diving precipitously.  Fire employees; productivity/profits increase.  U6 unemployment up to 20% or more.  Fired employees decrease purchases; profits decrease.  Murdoch (Dow) down to 6K or less.  Gazillions of no good dollars spewed by the Fed; no goods are produced nor services provided by plundered economy.  Imagine unimaginable inflation exploding.  A great, catastrophic and unanticipated economic surprise surprises us.  And you get the Great Depression 2.0.  We are on the road.”

“To ruin?  To perdition?  To serfdom?  We’re Americans, we always do something.  We demand success and we expect success.  We can just decree that it not happen.”

“The problem is that nothing can be done effectively or efficiently to stimulate the economy when the economy at core is so fundamentally broken.  O’Bama inherited this imploding and exploding economy.  However, other than possibly some insights from Paul Volker and Warren Buffett, O’Bama has failed miserably in selecting his economic advisers.  He is now in control of an economy that is out of control and out of his control.  Many members of the public are angry, anxious, frightened, and desperate.”

“And there is nothing you can do about it.  Nothing.”

. . .

[The Murdoch (Dow) could go to 6,000 or 4,000 or 5,000 but not likely 36,000.  See the “e-ssay” dated Oct. 12, 2009 entitled “Dow: 10,000 To 5,000: The ‘FUBAR’ bubble” and the “e-ssay” dated May 11, 2005 entitled “The Coming Depression Is Not Depressing.”]

(O’Bama in Oslo.  “Si vis pacem, parati para bellum.”  Strong speech; right message.)

Bumper stickers of the week:

Next stop – Pottersville

Great Economic Tsunami 2010; Great Depression 2.0

The Republicans are part of the problem; the Democrats are not part of the solution.

Pass the Terrorist Tax

Doin’ Okay, Sort Of (Oct. 19, 2009)

Posted in Bernanke, O'Bama on October 19, 2009 by e-commentary.org

The O’Bama administration has now gestated for nine months.  His campaign cobbled together a consortium of often conflicting constituencies, so some if not many disappointments in many quarters are inevitable.  O’Bama is challenging so many entrenched interests and discovering that even the President is hamstrung by other institutions and individuals.  He has been informed regarding those he must consult before a decision is made.

Most of the appointments to date are appointing (Clinton, Holder, Gates, Locke, Salazar, Shinseki, Chu, Bernanke*); a few are very disappointing (Geithner, Summers, Bernanke*).  Appointing solid heads at three (State, Justice, Defense) of the Big Four agencies (Treasury) is a positive start.  Sotomayer is a skilled and sound jurist.  O’Bama’s creation of the Council of Goldman Sachs Advisors (CGSA) will prove disastrous.  And some things don’t change.  The revolving door of appointees becoming lobbyists and vice versa does not seem to have stopped spinning.  His administration is full of technicians and devoid of intellectuals.

His two books are in part veiled campaign literature.  His exam questions and answers as a law professor at the University of Chicago in his early years are much more revealing.  He never wrote anything lengthy commenting on the work of the economists at Chicago, favorable or unfavorable.  He may continue a long line of Americans, in and out of government, who really do not understand economics.

He has now taken title to the two wars.  If there is a strategy or are strategies, it or they should be shared.  America simply cannot afford to maintain its empire and must focus its finite energy and limited resources on national interests.  He dissed the Dalai Lama and disregarded America’s uncertain commitment to human rights to keep from disappointing America’s Banker, China.

Instead of awarding the Nobel Peace Prize as a golden watch to a septuagenarian, the Committee awarded it to a person who is creating golden opportunities in the September of his life on his watch.  The Committee awarded aspiration rather than perspiration.  He is working hard.  Much is left to be done.  He now has the international gravitas to remind the world that peace is only possible if, in some circumstances, the right war is pursued purposefully.  Yes, others were more deserving and likely will not be around to receive the prize.  And of course those who want America to be at war everywhere all the time remain furious.

The Olympics?  O’Bama offered his dos centavos.  The Committee decided to award it to Rio.  Great choice.  South America has never hosted the Olympics.  He did not fail.  The process worked.

A second term is somewhat akin to a second marriage, the triumph of hope over experience.  By 2012, experience may triumph over hope.  A campaign to maintain let alone expand his Party’s numbers in the early stages of the Depression II will be as great a challenge in 2010 as getting elected was in 2008.

Bumper sticker of the week:

Still hopeful

So Many Words, So Few Ideas (Sept. 21, 2009)

Posted in Bernanke, English Language, Journalism, Recession, Society on September 21, 2009 by e-commentary.org

Too many books published today are distended essays on steroids.  Too many essays are too wordy and not too woody.  Writers are not paid by the word, yet they write as if they were.  Writers should write less; editors should edit more.

Nonetheless, there are far more well-written pieces than one can savor before the candle goes out.

(“The recession is very likely over at this point.”  Ben Bernanke, September 15, 2009 in a speech at the Brookings Institution, one year to the date after Senator McCain proclaimed on September 15, 2008:  “The fundamentals of our economy are sound.”)

Bumper sticker of the week:

The Six-Word Memoir is America’s Haiku

Obituary:

“During his lifetime, he penned over 418 books, 1279 essays, 3065 monographs, . . . received seven Pulitzer Prizes and three Nobel Prizes . . . and is known for one cleverly crafted original phrase propounded in 1985.”

The Meltdown Continues, Subtly (Sept. 14, 2009)

Posted in Bailout/Bribe, Bernanke, Economics, Federal Reserve on September 14, 2009 by e-commentary.org

We mark 9/15 tomorrow as the day Lehman Bros. failed.  By then, America had failed.  Senator McCain had proclaimed the fundamentals of the economy to be sound, although they were fundamentally unsound.  A “red-letter day” marks the day when America did something to stay “in the black,” albeit a small step, by not doing something.  Lehman failed and was allowed to go the way of all flesh in a capitalist system; Lehman was allowed to die and file a petition in bankruptcy.  One wonders if Lehman received this “special treatment” because of a personality dispute between its then president Fuld and then Secretary of Treasury Paulson.  America would have been better off with more such personality disputes.

Bribing the perpetrators of other failed financial institutions was not the appropriate strategy to purge the poison in the financial system.  Bush, Paulson and Bernanke should have done nothing prior to and after Lehman.  Only the market could flush the filth out of a broken financial system.

Doing nothing would have had immediate and negative economic and thus political consequences.  Doing something will have much greater and much graver economic consequences for a generation or more.

The appropriate decision is part economic and part moral.  Future (and present, subtly) generations were jettisoned to keep a failed financial system limping along today and to delay the day of reckoning until someone else’s watch.

The Economic Terrorists own Congress and control O’Bama lock, stock and sinker.  There is not much hope of change.

Bumper sticker of the week:

America:  California Writ Large

Bernanke 2.0 (August 31, 2009)

Posted in Bernanke, Economics, Federal Reserve, Greenspan, Volker on August 31, 2009 by e-commentary.org

Bush’s best appointment is one of O’Bama’s better reappointments.  Bernanke is not the best choice yet is the right choice at this time.  Yet there should be some reservation about and reflection on the entire Federal Reserve scheme.

The Founding Fathers as they are known could not agree on the creation of a central bank.  The issue was at the heart of many early presidential elections.  Every sovereign nation needs a central bank.  The bankers created a central bank in 1913 and filled the vacuum.  America must examine the role of the Federal Reserve and incorporate it into our constitutional system characterized by a separation of powers and accountability to the populace.

The central bank has a history of competent and independent chairmen such as Paul Volker who pursued some harsh policies with painful but necessary consequences without any significant political intervention.

Alan Greenspan, a conservative Republican, acted as the “central planner” of the economy for far too may years with devastating consequences.  At least he has enough integrity and self-awareness to admit some mistakes.  Some thoughtful political intervention was appropriate and necessary during his tenure.

Faith in the Fed. has dissuaded Congress from taking more direct control and dictating policy.  Legislation such as the Humphrey-Hawkins Full Employment Act does set some guidelines and parameters.  However, the Fed cannot and should not attempt to establish full employment.

At this time, Ben Bernanke is determining both “monetary policy” and “fiscal policy.”  Fiscal policy has been and should be the province of Congress.  Monetary policy should focus on price stability.

Who should address these matters?  The politicians.  That should give one pause and yet motivate us to act.

Bumper sticker of the week:

Price stability

Greenspan’s Legacy – Apres moi, Le Meltdown (January 30, 2006)

Posted in Bernanke, Economics, Federal Reserve, Greenspan, Housing on January 30, 2006 by e-commentary.org

In March, 2000, the economy began the well-publicized high tech slide.  Manufacturing and services continued to flee the country.  Technology was a transitional industry, but the best minds were disproportionately and increasingly foreign; too many of the goods and services could be and are being manufactured and provided overseas.  As one bubble burst, however, another one was being blown.  Only one remaining domestic industry existed that could also be subsidized effectively – the real estate industrial complex.  The Fed provided the steroids.  Interest rates (the Federal Funds Rate) were precipitously reduced which significantly undermined the retirement income for those retirees (born before 1935) who relied on interest income to support them during their golden years; sacrifices have to be made.

American land, American land owners, American (and Canadian) timber, American (and Hispanic) labor, American builders, American real estate agents, American appraisers, American surveyors, American bankers, and American candle stick makers all profited handsomely.  The land perforce cannot be moved offshore, the houses cannot be built overseas economically, and most of the players, with a few exceptions, cannot be outsourced.  Between 2001 and 2005, the construction trades and the financial and real estate service sectors provided seventy percent of the economic growth in America.  Yet the largest share of the real money to construct the house of cards was foreign-born.  Americans don’t own their homes today; foreigners own their homes and rent them to Americans.  The Fed should have issued stronger warnings and recommended Congressional action to supervise the spew of credit; in the face of inevitable inaction, the Fed should have corked the champagne in the summer of 2003 by bumping up the interest rates.  [See the April 25, 2005 e-ssay entitled “Our Friend the Fed.”]  As the market peaked in the summer of 2005, however, increasingly marginal economic candidates were seduced by intoxicating no-money-down/interest only/adjustable rate mortgages to enter a hyper-inflated market.  The homes were ATM’s which provided the consumer spending that drove the economy for four profligate years.  [See the February 7, 2005 e-ssay entitled “The Microeconomics of Suburban Subsistence.”]  The “wealth effect” engendered by the growing equity in homes encouraged more spending on credit.  The homes are now occupied by “renters” who are consuming a growing percentage of their income just to service the interest payments.  The savings rate predictably went down in 2005 for the first time since 1933. Something is in the cards; the house of cards will collapse by Christmas.  It could not go on forever; as many have observed, what cannot go on forever will not go on forever.  The last viable domestic industry has now run its course with devastating consequences.  And now the country is left with vast numbers of McMansions that will soon cost too much to heat.

Ben Bernanke may be Bush’s most promising appointment.  However, he will inherit a mess beyond repair or management.  There is no industry in America left to subsidize.  With consumers and the country up to their tonsils in debt, consumer spending is and will be inadequate to drive the economy.  Foreigners will quietly reduce their purchases of t-bills and demand more return for their remaining investment in dollars.  The growing demand for oil is occurring at a time when the supply may be interrupted by some unstable or unfriendly regimes.  Rising oil prices will drive up the producer and the consumer price indexes.  Not raising interest rates will allow inflation to soar.  Raising interest rates to check inflation will stall the collapsing economy.  The Fed is likely to raise interest rates to 5.0 percent to check inflation even though the economy is entering a period of “stagflation.”