Bernanke - Hero or Heal?

[FinanceDude]

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Originally Posted by explanade People have been predicting inflation since the crisis. Even when deflation was a bigger looming threat.

So we can just keep printing money, and we will never have to pay the piper? Economic theory says otherwise.......

[MichaelB]

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Originally Posted by explanade People have been predicting inflation since the crisis.

They even have a name .. inflationista.

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Originally Posted by explanade Even when deflation was a bigger looming threat.

From the most recent CPI report, deflation remains a serious threat Consumer Price Index Summary

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The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.

[Gatordoc50]

Anyone who thinks we don't have inflation has got their head in the sand. Education, gas, health care, autos, homes, commodities, food, all up substantially in the past few years. And ALL those things are up due to government interference and or subsidies. When the Fed talks about deflation, he means that the costs of things aren't high enough to support the present level of government spending. I see no end but rather a time in the near future where those with skills will barter their services and scoff at the idea of providing a service in exchange for worthless currency.

[HFWR]

So easy to be an armchair quarterback, but let's revisit. YOU are in a meeting with Wall Street crooks CEOS, all who tell you that within days, if not hours, the entire banking system will collapse.

What will you do?

You have 60 sec...

[Gatordoc50]

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Originally Posted by HFWR So easy to be an armchair quarterback, but let's revisit. YOU are in a meeting with Wall Street crooks CEOS, all who tell you that within days, if not hours, the entire banking system will collapse. What will you do? You have 60 sec...

I thought they did a great job in the face of the crisis with a few exceptions. But the bailouts have long since been repaid. The financial crisis caused by credit default swaps, etc. is history. Big Ben is still throwing Hail Mary's when we are now on to a whole different set of problems. Caused not by wall street but by government intrusion in the market.

[HFWR]

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Originally Posted by Gatordoc50 I thought they did a great job in the face of the crisis with a few exceptions. But the bailouts have long since been repaid. The financial crisis caused by credit default swaps, etc. is history. Big Ben is still throwing Hail Mary's when we are now on to a whole different set of problems. Caused not by wall street but by government intrusion in the market.

I don't believe he's throwing hail marys at all. He's allowing underwater homeowners to re-fi and governments to finance debt at super low rates, etc. May or may not be the right thing to do, but I don't think it's equivalent to "punting". Pretty deliberate, IMO...

[MichaelB]

Well, I don't think any of us have our heads in the sand, even if we don't agree about inflation. When we look around we all see different things, that is why I don't trust my " inflation vision" and instead look for data.

If we had consumer inflation it should show up first in the CPI measure. Even if it did not, it would still appear elsewhere. Revenue growth of consumer staple producers, such as P&G, and retail leaders, such as Wall-Mart - but they are showing no pricing power at all, and no inflation. If the inflation were broad based it would appear as business to business revenue growth, like at IBM, which also has no revenue growth. If it were true economic inflation it would also push up price of labor, which is clearly not the case. Higher inflation would mean the nominal rate of GDP growth would need to be even higher than the anemic numbers we see now.

In a (mostly) self sufficient and competitive economy, broad based inflation just doesn't happen alongside declining wages unless there is a significant increase in credit. For the past 5 years the opposite has been happening, and there is no sign of change.

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Originally Posted by HFWR I don't believe he's throwing hail marys at all. He's allowing underwater homeowners to re-fi and governments to finance debt at super low rates, etc. May or may not be the right thing to do, but I don't think it's equivalent to "punting". Pretty deliberate, IMO...

Right. Deliberate, and also pretty straightforward.

[Gatordoc50]

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Originally Posted by MichaelB Well, I don't think any of us have our heads in the sand, even if we don't agree about inflation. When we look around we all see different things, that is why I don't trust my " inflation vision" and instead look for data. If we had consumer inflation it should show up first in the CPI measure. Even if it did not, it would still appear elsewhere. Revenue growth of consumer staple producers, such as P&G, and retail leaders, such as Wall-Mart - but they are showing no pricing power at all, and no inflation. If the inflation were broad based it would appear as business to business revenue growth, like at IBM, which also has no revenue growth. If it were true economic inflation it would also push up price of labor, which is clearly not the case. Higher inflation would mean the nominal rate of GDP growth would need to be even higher than the anemic numbers we see now. In a (mostly) self sufficient and competitive economy, broad based inflation just doesn't happen alongside declining wages unless there is a significant increase in credit. For the past 5 years the opposite has been happening, and there is no sign of change. Right. Deliberate, and also pretty straightforward.

Markets up AGAIN today. Someone out there is confident in earnings and revenues. They must be using different data than you.

[FinanceDude]

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Originally Posted by Gatordoc50 I thought they did a great job in the face of the crisis with a few exceptions. But the bailouts have long since been repaid. The financial crisis caused by credit default swaps, etc. is history. Big Ben is still throwing Hail Mary's when we are now on to a whole different set of problems. Caused not by wall street but by government intrusion in the market.

+1

[FinanceDude]

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Originally Posted by Gatordoc50 Markets up AGAIN today. Someone out there is confident in earnings and revenues. They must be using different data than you.

Businesses used the economic downturn to stockpile cash and get rid of a bunch of older employees that were making high salaries. Now they are flush with cash and increasing earnings. Plus, they got to refincnace all their 5 and 6% corporate dent to 2 and 3%. Again, a good thing for them. Greed and fear drive Wall Street, and it is nearly always a 50/50 proposition.

The only real way to fix the national debt is to allow interest rates to rise and inflate our way our of the problem. It will be painful. Or we can be like Greece and just default at some point in the future........

[CCdaCE]

Didn't see Brad DeLong's commentary/blog link posted yet - mostly regarding why interest rates/prices on bonds haven't acted the way they "should".

Brad DeLong : Moby Ben, or, The Washington Super-Whale: Hedge Fundies, the Federal Reserve, and Bernanke-Hatred

It just seemed to be another interesting piece to the puzzle, to me. ...and what will this all turn into? Time will tell.

-CC

[MichaelB]

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Originally Posted by Gatordoc50 Markets up AGAIN today. Someone out there is confident in earnings and revenues. They must be using different data than you.

Not sure what point you are trying to make.

[Gatordoc50]

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Originally Posted by MichaelB Not sure what point you are trying to make.

The data you present may not actually reflect what is actually happening. I don't agree that there is no inflation, Just measured in a way to reflect lower numbers. Funny at how you hear about our deflationary environment one day and the need for chained CPI the next. I also contend that the size of our underground economy causes GDP to be understated and unemployment to be overstated. In fact, according to some, the tax revenues from that economy would be enough to balance the budget. Sure, maybe the economy stinks like you say. Then why hasn't it "improved" with all the massive stimulus? Or maybe I am right. The economy is fine and the Feds actions are just a smokescreen that allows the government to continue to overspend and enjoy the benefits of financial repression.

[brewer12345]

I love these threads. they make it so easy to pick out new candidates for my ignore list.

[Gatordoc50]

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Originally Posted by brewer12345 I love these threads. they make it so easy to pick out new candidates for my ignore list.

You have to ignore anonymous opinions? lol

[MichaelB]

Let's keep it friendly respectful , folks.

[youbet]

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Originally Posted by growing_older Freudian slip? He's the hero who healed the financial system after poor controls allowed some very dangerous situations to develop. If the hyperinflation that has been predicted for the last three years ever shows up, then he can be a goat, but it's long overdue and may not be his problem if the recovery keeps muddling along mildly.

The word "hyperinflation" is often over used and mis-used.

I think current Fed policies will likely lead to inflation of say 4% - 6%. This will be painful for most families, retirees and similar if it persists for a number of years.

It's doubtful "hyperinflation" (folks pushing wheel barrows of money down the street to pay for a loaf of bread) is going to happen.

[Bestwifeever]

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Originally Posted by HFWR I don't believe he's throwing hail marys at all. He's allowing underwater homeowners to re-fi and governments to finance debt at super low rates, etc. May or may not be the right thing to do, but I don't think it's equivalent to "punting". Pretty deliberate, IMO...

And Mr Market seems record-breakingly happy, too.

[Gatordoc50]

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Originally Posted by Bestwifeever And Mr Market seems record-breakingly happy, too.

Yes, three hundred thousand new U.S. millionaires ( excluding primary residence) created with the recent run up. Brings the total to 9 million. That's not too many with this interest rate environment of <2% ten year treasuries. However, way too many if rates were normal.

[explanade]

We will never be like Greece.

Hedge fund managers, who are apparently having problems beating the indexes, are unhappy with Ben:

If Hedge Funders Are So Smart, Why Are They So Relentlessly Wrong? - Matthew O'Brien - The Atlantic


BTW, the big banks still want to play derivatives, even if they have to go offshore where they can evade regulation to do it. Or if not, they use lobbyists to de-fang Dodd-Frank and other laws.

The shadow banking system is more of a threat than hyperinflation.