Bernanke's Self-fulfilling Prophecy
Living up to your own prophecy. It can be a daunting task. Sometimes in life we build our identity around a premise, what do we do when that premise takes us to task?
That's my question for Ben Bernanke whether he hears me or not.
There is no doubt that a hundred years from now when a new generation of monkeys looks back upon what we call "today", it will be the current Federal Reserve Chairman as the target in the cross-hairs of their focus.
Much of Mr. Bernanke's economic rhetoric over the years has been critical of the Japanese handling (mishandling) of their economy in the 1990's. In fact, it has been a large part of the public image he has built. The academic historian, prepared to deal with all that has occurred, because he has seen and analyzed it so thoroughly.
Today, Bernanke finds himself staring down a potentially long period of slow growth (or no growth, at all), high unemployment and declining inflation in the U.S.
Deja vu all over again?
This coming Friday, Bernanke will give a policy speech which should shed some light on where Fed policy will go from here. Bernanke is currently debating issues such as: driving down long-term interest rates to boost growth, preventing deflation by pushing inflation and other notably dissected quandaries.
What I find amusing about the process is that Bernanke has done quite a bit to mirror the behavior the BOJ in the 90's, since our own crisis began.
In an odd way, I find myself relating a man I have often criticized and thrown under the bus for many of our economic misfortunes.
You see as a kid, I used to lie up a storm. I was the boy that cried wolf. As I aged, however, I began to learn that the lies do indeed catch up...
Tell you teacher you were late because the tire popped, your bicycle was likely to be riding you home. Excuse a piss poor attitude on troubles at home, the old man might have the back of his hand waiting for your face when you returned.
Ben Bernanke has based a big part of his public persona on criticisms of the exact same policies he has been instituting. More and more, the American economy seems to be mirroring that of Japan's in the 1990's. What's worse for Bernanke, the aging of the American populace and the (at least perceived, if not actual) declining quality of American products in the global marketplace are strong secondary factors which contribute to the notion that the U.S. Today=Japan in the 1990's.
As I look at the closet full of new designer clothing I have recently purchased at Walmart level prices, I wonder if Ben Bernanke is learning the lessons of my childhood.
I wonder if we are seeing a man who staked his reputation on not being something, become precisely that which he denounced.
relevant:
http://dailycapitalist.com/2010/10/12/bernanke-is-heading-into-his-japa…
That's why people who have never had a real job shouldn't be in power. He has no real-world experience.
Great post man, I think this really brings up the difference between being well versed in the theory/research behind something and then, when one is put in a position to act, totally throwing all that out the window and going the common route. Also agree with Johnny that this is a great case for those from the Ivory Tower to stay there.
Thanks pants. I do believe that there has to be some sort of incentive optimization that can be done on the regulatory front. In spite of being sort of the town (de)crier of government around here, I do think the lifestyle of a regulatory position (fixed 40/no OT/ guaranteed vacation time/80% pension post-20 years of service) can be quite marketable.
I often hear the argument of "why would I go into government when I can make so much more in the private sector?". Though it is valid, the difference is not as great as it once was and the pendulum is certainly swinging the other way.
I really just see the issue as sloth and incompetence on the part of leather chair loving bureaucrats in failing to recruit experienced industry people into regulatory positions. I don't care how much high frequency trading has changed the game, I guaran-damn-tee you that a handful of old school pit traders could trim and organization like the SEC into a lean mean corruption crushing machine, instead of a lawyer's club capable of nothing other than instant replay review. You're telling me it's impossible to recruit those sorts of people?
"Murder the Monday Morning Quarterback" that's my campaign slogan!
I totally see your point about the lifestyle being the major attraction to the Federal Gov't with guaranteed job security (as far as layoffs), vacation, pension, etc. but, from, talking to my cousin at the SEC, the most frustrating part is having to work with the guys that are making that huge paycheck. It's one thing to be at the SEC living a pretty decent lifestyle but that kinda gets shit on when you walk into DE Shaw for a compliance meeting and the guy across the table from you is wearing a watch that cost him more than you made last year. I feel like the gap is widening between the business community and the government in that businesses value experience 1000X more than what degree you have. We see it here all the time, guy goes to shit college, networks for internships, and eventually makes his way in vs. the government appointing an Economic Advisory Council that was composed of academics. Granted this may not be the best example. I think the point is still valid. With a few exceptions, the stigma attached to Government work will keep private sector guys away from working at regulatory agencies and, conversely, the political implications of appointing 'big business' alums will make it less likely to have them take an active role in government.
my 2 cents.
I don't disagree, however, I think that our perspectives on certain issues are screwed up. It is not the government's job to "earn" or "maximize" or do anything in regards to prosperity, really. The government's job is to R-E-G-U-L-A-T-E in other words, when there's a financial meltdown, let the government step in but let them regulate and not meddle. It's sort of like when you're a kid and you can't draw between the lines for your coloring assignment, your mom sees you're struggling so she comes over gives you a piece of cake and does the coloring for you. Years later when your goofy ass can't deal with an employer telling you that you did shit work on an assignment, you can't take the heat ("my boss is a jerk") and even your mom gets in on the act ("I taught you better than that").
This is why I say the government needs to MARKET these roles and give regulators the power to regulate. One point I think you're overlooking (and this is the angle the Feds should attack, but don't...whether they are stupid or just afraid of losing their comfy chairs) is that POWER is very tempting. Especially to those who already have money. I have no doubt a guy like Vikram Pandit would enjoy the lifestyle of an SEC or CFTC honcho a lot more than being dragged through the mud all the time. He also could be persuaded into such a role pretty easily if given the POWER which all rich men CRAVE.
As far as your cousin, eh...the analyst sits across from the BSD storyline's kinda the same. Lower man on the totem pole's always going to be frustrated by higher ups. I heard an academic once say "capitalism is where I work for nothing when I'm young, so I can exploit them when I am old". Not so sure any system is different.
Long as those little blue pills are still around when I reach ancient man status, it's all good in my hood.
At the risk of hijacking your thread I have a legitimate question for both you and the rest of the monkey folk. Do you think the Fed, SEC, FDIC, etc. could convincingly market the 'power' of a regulator really being that much greater than the PERCEIVED power of a BSD at XYZ firm? I feel like part of the reason people are so willing to give up the majority of their 20's in the private sector is because of the perception that they will eventually be that guy across the table. Conversely, what motivation do you have to draw similar talent to government work? Hey there Bob NewGrad, if you work really hard in a couple years you'll be a senior regulator? I completely agree that if they where somehow able to play up the 'power' of government employees, they would have a much better chance at getting people to apply and get more respect from the people trying to get that coveted job.
This isn't hijacking, this is taking the discussion further. I wish all my threads got "hijacked" into deeper analysis.
I think we're too sold on the "money--->power--->respect" model of thinking. Regulators are inherently far more powerful than the wealthy, if you think that isn't the case...pull over to the side of the road an examine the Bentley driver grovel at the knees of a $48K/year traffic cop. The example is tongue-in-cheek on purpose.
No a badge or SEC, FDIC or FERC I.D. doesn't make you God, but it has a lot of inherent value. For instance, at some points 10/20 years from now when alternative energy begins to jump off...who's going to have more exit ops: the MM IB kid with his Excel wizardry and DCF mastery OR his classmate who worked at the Bonneville Power Administration and knows every wind/solar/hydro operator in the Pac.NW?
Not saying this is going to sway many 23 year olds into taking $51K over twice that, I am just saying that there are a great many marketable aspects of government jobs which the Feds (stupidly IMHO) don't play up.
There is CERTAINLY an intrinsic aspect of motivation for the potential quality civil servant. This is another reason why I think recruiting young people with: families, religious affiliations, political aspirations, military service time, etc are all potential avenues to attracting quality minds with tangible real world and industry experience that government needs.
On a separate but related note, did you serve in the military? I seem to recall you saying so, just don't want to get into it unless its with the right person.
I did and am still in the national guard but I'm not sure where you're going with that so I'll wait and see where that goes haha.
You definitely made some valid points and I think they give a nod towards larger issues. It's pretty fucking difficult to pass up 100k+ all in comp as a 23 year old guy (might be for girls too, couldn't tell ya). And the point you made about knowing all of the energy, solar, hydro etc. firms is a valid one and not something I had considered. Some of the Federal agencies recruit hard from the military and but they generally don't need to as most folks look there first if they're going to leave the service. This is simply because your time in counts towards your retirement and there are some laws in effect that give vets preference for federal jobs. (Side note: I know an enlisted guy that got out and went to college on the GI Bill and used these regs to get a job with the post office. He was making 80k a year at one point when you combine the GI bill benefits and pay/OT from the post office. Weird).
You're analogy of the police officer isn't as tongue and cheek as you think. The part that turns people off I think is the 'friend theory'. Basically, when you see your friends and tell them what you do, those in the know will look differently at a federal regulator v. an analyst at whatever firm. This is flawed obviously, but still something young guys will consider. The intrinsic piece is interesting as that is how the military gets 99% of officers and probably 70% of their enlisted people. I just don't know if you can make the same case for regulators. 'Fighting for your country' is a hell of a lot more motivating (to me and most I think anyway) than 'Preventing financial fraud and fiduciary impropriety'. Just a thought.
You actually hit on some of the points I wanted to make. I think that we live in a time of vastly changing values and attitudes. Wherein "once upon a time" serving your country was the moral, manly and righteous thing to do, today (not for all, but certainly many) it is a way to pimp the government out of some benefits. In a world where identity theft poses a far greater threat to individual security than the proverbial "soviets, nazis, insert bad guy nation here" , I don't think that "Preventing financial fraud and fiduciary impropriety" is as nerdy as it once was.
Getting members of the armed forces, who are already patriotically inclined to see the level of good they can do "in the boardroom" is crucial. In spite of what many geeks think, the Armed Forces are home to some of our brightest minds, why not keep them in government. I get the feeling that most soldiers who have the know-how leave for industry, keeping them aboard with added perks is better than having so many milk the system like they do.
In fact, if there were a man or woman today in any sector of the Federal Government, who stood up and said, "we have gotten lazy, we have gotten complacent and we are going to earn your votes with swift dedicated action..." that person would be regaled to a level befitting of a rock/movie star. This is why I think ex-military guys are the potential key piece of the puzzle.
The reason you don't see that level of passion, is because the government doesn't market. Why does every little girl want to be a movie star and every little boy an athlete? Because it is marketed down their throats.
50 years ago women were told to be housewives and mothers, so they were. Today they're told to to play hopscotch from cock-to-cock, so they do it. Image. Marketing. Rhetoric.
Make government cool and the cool kids (e.g. the competent experienced adults) will come and sit at your table.
This is sort the "friend theory" turned upside down. If we can mass market Kim Kardashian's bikini wax as a newsworthy event, why can't we invest in getting an economist with industry experience into the Federal Reserve Board of Governors?
I could not agree with you more as far as marketing the government as a viable employment option and the prevailing idea in this county that everyone has to grow up and drive a bentley so they can show it off during their episode of cribs.
The problem is this; how do you make working at the SEC/FDIC/FINRA cool? Kids in high school and college watch Mad Men, Entourage, etc. and think that's the only way to be truly successful. I think that, in and of itself says a lot. There is nothing 'unsuccessful' about working hard at a good government job making quality money, having a family, etc. I think the fact that this is now viewed as 'chump' status speaks to your point about the military being the masculine path so many years ago. The manly path now, instead of working towards a greater good or serving the public, is driving your Range Rover to your place on the Shore for the weekend. It does bother the shit out of me when people, both here and other places, tell people to turn down jobs at firm X because it's not respected or its a 'shitty firm' etc. (I'm lookin at you Jimbo). The idea that an individual is 'above' working for the government is fucking ridiculous. Similarly, I don't think you will see these change until you have some sort of marketing campaign that uses a guy that formerly worked at a big name firm come out and say, 'Yea, I left GS to work for the SEC because I wanted to work hard and ensure that the economy would not fall victim to any number of detrimental actions by individuals or organizations. It was important to me that I protect the taxpayers and their interests and value that over my own personal wealth etc.'
Until they can find someway to connect with people that 1) are qualified to do the work 2) are driven to do the work and 3) aren't doing it for the 'exit ops' we will have a really difficult time convincing anyone to value the power that they may derive from working for the gov't.
You have to realize too that guys getting out of the military (Officers in particular since they are the people that would be qualified for these jobs) get offers thrown at them from 100 different directions. The Captain that was with me at a school I went to told me that he had offers from Fedex, UPS and DHL for a 6 figure job because he was a logistics officer. Thats the kind of stuff the fed would have to compete with in regards to getting prior service guys to commit to anyone of these jobs.
I think racism is key. You know... doing racist things like: promoting American values, American sovereignty, American borders, the American worker, the American (or as some call it today, the PURITAN) work ethic.
Promoting people like: George Washington, Teddy Roosevelt, John Wayne, Gary Cooper instead of paying guest speakers like: Mahmoud Ahmadinejad, Snookie, Al Sharpton, Bono and Lady Gaga to yap about nothing.
What is hilarious to me, is that either directly or indirectly it is PRECISELY THE U.S. GOVERNMENT which promotes anti-American ethic and anti-American sentiment. Whether it is union appeasement of self-expansionist pork policy it really doesn't matter.
We can address a myriad of issues on the subject but for now I would like to try and keep it focused to military folks.
Here's my question for you, how would you motivate the guy from your example "FedEx, UPS, DHL logistics officer" to take an SEC/FINRA/FDIC gig?
I have an idea, but let me see if I can steal some juice from you first...
Eh...there is no real easy answer but I would probably go with the following:
It would have to be some sort of 'package' for lack of a better term. Something along the lines of a former military incentive plan. It would probably involve some sort of signing bonus and relocation expenses as well as a defined hierarchical type promotion structure that would take his previous service into account. I would also change the retirement requirements for former military guys. Lets say to retire from the fed govt outside the military you need X number of years, then the package would include 1.5 times the years of military service put towards retirement but would only count after x number years of service to the SEC/FINRA whatever. This would make it seem more attractive in that you would get the upfront cash which would (moderately) reduce the sticker shock of not taking the higher paying job, the retirement incentives would add the element of long term security that a lot of these guys feel like they have to give up to go into the corporate world and the promotion structure would give some sort of 'value' to the leadership experience the guy brought to the institution.
Alright, what's your idea and how much credit do I get haha, only kidding.
When I was a young monkey, I worked for a firm that got audited by the SEC a lot. It was a "where there's smoke, there's fire" kinda thing.
These guys were the most pathetic yuks you ever saw in your life. They'd walk in for a surprise audit, and all we'd see were a bunch of middle aged guys who looked like they just stepped off the pages of the fucking J.C. Penney catalog. Meanwhile, we flew in our own tailor from Hong Kong twice a year.
Think about how beaten down you have to be in life as a 50-year old guy to sit and listen to a 24-year old kid who's making three times as much as you crack jokes about what your wife must be up to while you're rifling through his old trade tickets. I'm amazed the suicide rate isn't higher at the SEC.
I'd probably make a great regulator because I've seen it all, but I'd sooner jerk off buffalo for a nickel a herd than become one of those losers.
And therein lies the problem haha
Eddie,
Give it a decade or two. The SEC'll be armed with barely post-pubescent Ivy League Nazis goose walking all across The Street, not a pube on the crotch, not a care in the world. Full of selves and devoid of thought, yet fluffed by MDs one and all.
Pants,
That's actually a very rational idea. Problem is that I think the one factor we're not accounting for is intrinsic motivation. Those are still just perks and as we established early on the public sector cannot really compete with the private when it comes to those. The solution in my view is to behead all the lower level bureaucrats. For example, decapitate several hundred of the $85K/year bank examiner drones and appoint one missile cock guided serial bank rapist for $3 mill. Give that gow-rillah so many banana bullets that he can shit fling any BB into shape upon first stride into head office vestibule...then just hiss at him and yell "sick'em".
We shall call him the banking czar I assume?
I actually really like that idea, though giving any portion of the federal government more power makes a little nauseous. Any thoughts on who it could be? Gotta be someone who is smart enough to catch little shit, intimidating, and well connected. Let's hear it.
dollar down= equities up= gold up...hmmmm looks like we are going to need a laundry bag of bucks to buy bread soon..... i HEART QE2 lite or QE2 whatever...good job...good job
Balthazar the Bank Tsar, with the decidedly Romanov-ian spelling for added intimidation factor.
What's best about this hallucination of mine, is that it doesn't give government more power. It doesn't expand, it consolidates. Remember, drones feel safer in a bureaucracy because it gives them sludge, trudge and slow down power. The immediacy and efficiency that a "bank czar" would eliminate tons of blubber. More powerful individual regulators doesn't necessarily make government bigger or give it more power, it makes it more efficient and A LOT MORE RESPONSIBLE if shit hits the fan. So its a fiscal savings and it puts the spotlight on regulators...MAKING THEM PERFORM.
I would go with a retired CEO with a financial background. So someone who was an auditor, an actuary, a master trust guy perhaps. Otherwise an old school trader, like I said. I'm not talking Eddie old school, I'm talking choke the morse code operator and swim from Brooklyn to Manhattan old school.
In my mind its a Jim Rogers type who walks in in overalls with a gilded pitchfork and starts bludgeoning senior VP's and yelling shit like "WHERE'S FULD...GIVE...ME...FUUUULLLLLD".
Now, as to how you would recruit someone like this?
THIS is what the Armed Forces are truly made for:)
I just thought of something that might actually make this whole thing doable. What if you gave his cronies the same mystique as the CIA. Guys talk about going to the CIA all the time and not one of them cares about the exit ops or comp or anything, Its all about the mystique and the cloak and dagger shit.
I'm saying limit this crazy pitchfork weilding madman to a 'staff' of suits, stone face, sunglasses the whole shabang. I would also give them guns. Why not? People don't shit on the FBI and half of those fuckers are accountants and what not anyway. Let them have guns just for the hell of it. I feel like one former BSD with 100 hand picked gun carrying, Men-in-Black looking motherfuckers would be fairly effective.
The CIA supposedly has an attrition rate of black suit (but not too black, because that would be racist) and give him a paint ball gun. Call him "The Scarlett Letter".
That is precisely the type of mystique the officer of Balthazar the Bank Czar needs.
"The BBC, keeping Bulge Bracket Bitches in Check"
I think it could work. I'll email my congressman.
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