Bernanke - Hero or Heal?

[MichaelB]

Let's keep it [-]friendly[/-] respectful , folks.

 

[youbet]

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]

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]

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.

 

[Independent]

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

The economic theory as I understand it is that the new money was used to buy bonds. The money ended up sitting in bank reserves, the bonds are on the Fed's books. The plan is that when banks lending goes up, the Fed will sell the bonds and soak up the money.

The only piper to be paid is that the bonds my be sold for less than the Fed paid for them. But there is no hyper inflation in that scenario.

I can get worried that the Fed won't be able to walk the tightrope - selling the bonds just fast enough to head off inflation, but just slowly enough to avoid strangling the recovery. But that's a different issue.

 

[Gatordoc50]

The economic theory as I understand it is that the new money was used to buy bonds. The money ended up sitting in bank reserves, the bonds are on the Fed's books. The plan is that when banks lending goes up, the Fed will sell the bonds and soak up the money.

The only piper to be paid is that the bonds my be sold for less than the Fed paid for them. But there is no hyper inflation in that scenario.

I can get worried that the Fed won't be able to walk the tightrope - selling the bonds just fast enough to head off inflation, but just slowly enough to avoid strangling the recovery. But that's a different issue.

That sums it up pretty well. The Fed credits the bank for it's purchases in the hope that liquidity is increased and investment increases. Hasn't happened, nor will it. The bottom line is that everyone knows that the Fed manipulates the value of money and thus the value of goods and services and so they have learned to do the opposite of what he wants. We no longer fear inflation or deflation as much as we fear being manipulated into losing our savings, homes, and businesses. Inflation data measure the costs of a basket of goods, not the value. I could give a crap that the costs are stated to be inflating at less than 2%. Their value is plummeting, so in reality the costs are much higher.

 

[F4mandolin]

The bottom line is that everyone knows that the Fed manipulates the value of money and thus the value of goods and services and so they have learned to do the opposite of what he wants. We no longer fear inflation or deflation as much as we fear being manipulated into losing our savings, homes, and businesses.

Not sticking up for the Govt...I have no idea whether their money policy is for the best or not. What I DO know, is that when the banks/financial groups were left more or less alone (which would allow....in their theory...the market to take care of itself)....the crap hit the fan rather badly. You might not trust the Govt folks.....but I trust the banking people a whole lot less....especially after all those people lost their savings, homes, and businesses.

 

[Gatordoc50]

Not sticking up for the Govt...I have no idea whether their money policy is for the best or not. What I DO know, is that when the banks/financial groups were left more or less alone (which would allow....in their theory...the market to take care of itself)....the crap hit the fan rather badly. You might not trust the Govt folks.....but I trust the banking people a whole lot less....especially after all those people lost their savings, homes, and businesses.

It would be nice if they both would act as intended.

 

[bjorn2bwild]

Dr, Lact Hunt asserts (and backs up his assertions with ample references) that debt must be productive - pay for itself and then some, to be good debt. If not, total debt will build up and become a serious drag on the economy.

Here is a nice two page summary of his thoughts - View attachment Speech_by_Lacy_Hunt.pdf

If the critics of this thread could explain how Bernanke will exit QE and pay the debt back, or how this thinking is wrong, I would be grateful.

 

[bjorn2bwild]

Sorry, I don't know how to attach a PDF. Here is a link-

http://www.hoisingtonmgt.com/pdf/Speech_by_Lacy_Hunt.pdf

 

[Gatordoc50]

Dr, Lact Hunt asserts (and backs up his assertions with ample references) that debt must be productive - pay for itself and then some, to be good debt. If not, total debt will build up and become a serious drag on the economy.

Here is a nice two page summary of his thoughts -

If the critics of this thread could explain how Bernanke will exit QE and pay the debt back, or how this thinking is wrong, I would be grateful.

You haven't been listening. The Feds work will be done when the price of things are so high that everyone can afford them.

 

[HFWR]

You haven't been listening. The Feds work will be done when the price of things are so high that everyone can afford them.

Heh heh...

My guess is UE around 6-6.5% and GDP growth around 3ish.

 

[AndrewJackson]

Unfortunately, we don't have anything that resembles a free market. The government is entangled in everything and thus the Fed has to work in that framework. It's easy to say that we should just allow deflation, but what do you do about the millions of government workers with constitutionally protected pensions? So you either have to whack the pensions or inflate everyone else's assets. It's not about creating efficient markets. It's about creating markets that are under the complete control of central banks and thus governments. It's a game. Play well.

Constitutionally Protected? I don't believe government pensions should be covered under any sort of contract law. I didn't sign any thing and was born into this liability, how is that a fair deal. As far as the government workers not getting their pensions, they can still get them, if the people decide to fund them through DIRECT taxes. Indirect taxes via inflation and debt are not honest and hide the true costs of the obligations.

Also, the fed does not have to act dishonest just because everyone else is doing it. The fact that they cave in so easily, just shows how weak and petty they are. I refuse to make excuses for these horrible people.

 

[AndrewJackson]

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...

How about call them on their bs and let the chips fall where they may. The reason the whole system will collapse is because it is based on fractional reserve banking. Every single $ has 10 claims against it. They signed up to operate in such an unstable fraudulent system and they have to bear the consequences when it fails.

 

[F4mandolin]

The sky is falling and everybody is evil......possible....not likely.....

 

[AndrewJackson]

The sky is falling and everybody is evil......possible....not likely.....

If you are going to make an attack, at least do the kind gesture to point out reasons for your disagreement.

 

[brewer12345]

The sky is falling and everybody is evil......possible....not likely.....

So they have gotten to you, too?!

 

[F4mandolin]

Poop.....I have been saving some money from my switch from EJones....obviously.....I need to put it in....Govt "anything" since that is what "they" are accused of doing....to....something....Sorry, I have been doing quite well with the run up of the stocks...it's the people without money to put into the market that are TOTALLY screwed. Meaning.....most of the people.

 

[Gatordoc50]

The sky is falling and everybody is evil......possible....not likely.....

20% of all children now living in poverty. Up from 14% in 2009.

 

[Alan]

Thanks for a lively thread, time to move on.