Ben-co Popular Up 66

66%.

That is the number of respondents who viewed Ben Bernanke favorably in a recent Bloomberg customer poll.

I guess that's a fair estimate.

I would say that 2/3 of the people I have run across in my lifetime are either brain zapped morons or self serving turduckeons. Those are pretty much the only two sorts of people I could believe would be willing to show such overwhelming support for Shalom.

In fact, Bernanke's approval ratings are currently higher than every politician in the world, other than German Chancellor Angela Merkel.

Though I've beaten this dead horse to a pulp many times before, the results of this global poll of 1,000 Bloomberg customers (i.e. investors, traders, analysts) answers a lot of your questions as to why Wall Street is perceived the way that it is and why the general malaise surrounding markets can be expected to continue for a nice long haul.

The next time you wonder why things are as they are and why the hate flows towards The Street, think about the following:

Within the same poll only 27% of respondents responded favorably to QE2.

So let's do some layman's arithmetic.

You are hired to do a job. Your work satisfies 1 out of 4 of those who analyze it's worth. Yet...somehow, 2 out of 3 people from that same exact sample batch...have a positive opinion of you...how does this make sense?

I thought that the idea behind a market economy was to discover an efficient price, a more orderly modus operandi, competitive stimulus, growth, prosperity, general wealth acquisition, economic stability?

I was not aware that this was a giant beauty pageant who's only entrants are pudgy middle aged men who take turns in an endless circle-jerk while singing Kumbaya.

Would someone care to enlighten my simple mind?

How the Common Man Looks at This Disgrace:

When I was a kid, I shoveled snow to earn a buck. It was a bitch and a half. Pre-teen bodies are not developed enough to bend over and pick up heavy slushy mass all day long. But still I worked and I got paid...but I only got paid, once the snow was cleared.

Not a single one of those old ladies who paid me in singles, quarters and dimes gave a rat's ass about my being a handsome young man or how hard I had tried. They cared about results, not perceived effort.

If I did my job well, I got paid. If I didn't, someone else would and always did in my place.

Why is it that after doing absolutely nothing of tangible success and worth, Ben Bernanke still gets a hero's worship amongst so-called experts?

Oz Behind the Curtain

The truth is...the game is rigged. It always has been, but now it is so pathetically obvious that Deaf-Mute community can't believe its ears and eyes.

The busted wheels continue to spin on the greed and avarice of fools who think it will go on forever.

In any other profession from shoe shine boy to CEO of a F5 company, results like Bernanke's would have led to his dismissal eons ago.

Yet Shalom's still standing and will continue to. Certainly longer than the next failed bank his printing press won't save.

But as the funny money spigot begins to tighten, the world looks to those who are meant to be experts and meant to judge things rationally and logically.

None of those people are speaking up and speaking out.

Not the investors.

Not the traders.

Not the analysts.

None of you .

It may hurt feelings and I rarely get much love for saying things like this out loud,
but it's our own damn fault.

We are the ones with a front row seat for the slaughter and we are the ones pretending there's no blood on our hands.

If you have any association with Wall Street and news like this doesn't make you squirm, you can rest assured you've lost all of your scruples.

This is something money cannot buy or replace.

Speak up, a buried heads in the sand find greater horrors than those from which they hid...upon re-emergence.

 

Great post, SBd. Word on the street is that the FCIC skewers Greenspan and has some choice words for Helicopter Ben and Timmay. Too bad public discourse always seems to fall short of grasping these types of reports and running with them.

I find that people either want to abolish the Fed or think Greenspan and Bernanke are the most qualified people available. Hopefully it will occur to someone that out of the 300 million Americans out there, there might be someone who doesn't believe in blowing bubbles and actually decides to use his regulatory powers in a helpful manner. Kind of hard to get too excited about Obama's speech last night when you see the peeps on his economic team.

 

I think you hit it on the head. He seems like a nice, smart old men (not to mention our economy's in his hands), so we want to see him succed. Unfortunately, his policies have been ineffective and do not bode well for our future. Of course he things that he can keep on doing these things with no negative effects, since he doesn't view inflation as a threat. However, our government conveniently excludes food and energy prices when measuring inflation. Anyone who says there isn't any inflation hasn't been to the grocery store or gas pump recently.

 
jsmort11:
I'm pretty confused Midas. Can you suggest your opinion of "Shalom"s optimal course of action from the financial crisis forward.

I don't play the "20/20 Hindsight" game so I am not going to use what we know today to lambaste his mistakes. Your confusion stems from missing the point. The point is not to criticize the man. The point is that his decisions have led to no improvements. He is printing money, blowing bubbles and raising the debt.

He is de facto the guy who sees some trash on his lawn, sticks his hands in his pockets, whistles while looking around and kicking that trash down the street and towards his neighbor's yard.

The issue here isn't what he did wrong or what could have been done right. The issue is that his policies have not bred positive results and when you are in a position of power and you decisions bring no positive results, you are replaced...often instantaneously.

The fact that I want you to focus on is that this man will run the Fed for as long as he's stroking the sacks of Goldman, Morgan, BofA, Citi and the long list of incompetent organizations which rob the public, their investors and ultimately, their own employees.

 
Midas Mulligan Magoo:
I guess that's a fair estimate.

I would say that 2/3 of the people I have run across in my lifetime are either brain zapped morons or self serving turduckeons. Those are pretty much the only two sorts of people I could believe would be willing to show such overwhelming support for Shalom.

Haha! Well played, sir.

Hey Midas, and anyone else who wants to chime in, how do you feel about "free banking?"

 

Midas,

Much truth is in what you said. I despise our political system for this very reason. It rewards those who can remain in power or are backed by powerful people instead of working for the benefit of our country. Unfortunately, the minority (The Ron and Rand Pauls of our legislature) must deal with the likes of the entrenched establishment and their backers. And Midas, I think you are wrong... it's not that there is no one speaking out about it, it's that they are either considered the fringe or are thrown off the air before they can even make a comment about it.

Right now, I'm just waiting for one of two things to occur... DOW 36,000 (and the Meltup Continues) or we actually have a forced correction that needs to happent cause the markets to drop significantly to a fair value.

 

I think the rhetoric is compelling overall, but I can't help but feel your analysis could just as easily be more wrong than Bernanke's. There are tens of thousands of trained, highly experienced professionals in finance and yet we're wrong about movements and approaches every single day, at least to a minimal degree. Sure, you might say that he's wrong now, but it'll be much more interesting reading the story in history textbooks in twenty years. Only then will I completely appreciate a hind-sight approach to analysis of Bernanke's strategy.

My personal opinion is that he could be doing better, but he also could be doing worse. He's an innovator regardless. I guess the real question is whether he's a genius innovator or a garage-band wanna-be.

 
Gr4v1ty:
I think the rhetoric is compelling overall, but I can't help but feel your analysis could just as easily be more wrong than Bernanke's. There are tens of thousands of trained, highly experienced professionals in finance and yet we're wrong about movements and approaches every single day, at least to a minimal degree. Sure, you might say that he's wrong now, but it'll be much more interesting reading the story in history textbooks in twenty years. Only then will I completely appreciate a hind-sight approach to analysis of Bernanke's strategy.

My personal opinion is that he could be doing better, but he also could be doing worse. He's an innovator regardless. I guess the real question is whether he's a genius innovator or a garage-band wanna-be.

An innovator of what exactly?

There are irresponsible people all over the country using credit cards to pay for credit cards to pay for credit cards...that's all he's doing. The difference is, he can default a thousand times over and still get another platinum card in the mail any time he wants.

I don't need a Princeton PhD to do that, a shopaholic high school dropout uses the same strategy...the key difference being is that her fuckups are hers, his fall on the shoulders of roughly 295 million people.

 

If I were him...which I may or may not be (never know, maybe I've got extra time on my hands down at the Fed now that the market is @ 12,000 and I've got nobody to save)...I'd be high-tailing it out of the Fed back to Princeton. The money printing/QE2/stimulus game they are playing is deadly and will have consequences. Walk away now at the top of your game or end up looking like Alan Greenspan. He had good approval ratings once too.

http://www.ritholtz.com/blog/2011/01/assessing-blame/

 

Fair enough. I'll call his strategy selective exorbitant leverage utilization. It's a huge bet, and it certainly could go terribly wrong. But, highly levered firms/funds get accolades for months when they call the move right, so we'll see how it goes.

 
Gr4v1ty:
Fair enough. I'll call his strategy selective exorbitant leverage utilization. It's a huge bet, and it certainly could go terribly wrong. But, highly levered firms/funds get accolades for months when they call the move right, so we'll see how it goes.

They get accolades until something goes wrong (see LTCM, BS, LB, etc.). We were supposed to have learned from these.

 

Gravity, the problem is that he's not investing peoples money and using leverage to help see gains, he's abusing taxpayer dollars and buying assets that shouldn't have been created in the first place. He's investing at the expense of the taxpayer and is holding assets that are so toxic and truely worth pennies on the dollar. I mean, have you seen the Maiden Lane Porfolios?

Etiher way, we are in a period of unparalleled trouble, to which printing more money is not working. It doesn't help that there is collusion between the banks and the Fed, or that Bernanke's view of the world doesn't reflect the reality of things. How can you argue that the markets need more liquidity and get pumped up even higher when there is no money to go around to begin with. Look at the unemployment rate? How can you argue for further leveraging and devaluation of the dollar when not enough people are employed to pay the debt service. You know things are messed up when the Banks borrow at a quarter point from the Fed to buy Treasuries and then sells them back to the Fed for guaranteed and riskless profits, especially when you consider that trading and traditional banking revenues have been declining. Hell, even getting rid of Mark-To-Market Accounting (Fair Value Asset Accounting) as the FASB is doing just furthers the problems we have instead of resolving them.

At the end of the day, it's not a matter of what Bernanke is doing, no matter how wrong I think his course of action is, but how blatent the farce is becoming. If someone can give me a reason reason why the market is above 12,000 or explain why proping up the equities markets is the way to restore confidence, I'd love to hear it. If someone wants to tell me that injecting all this excess liquidity is good despite the fact that consumers are still deleveraging, that'd be great. Ultimately, the tax payers are going to be squeezed and left holding the bag. It won't be pretty... That's for certain.

 

I guess I am brain-zapped :-) Ah, the blame game. So fun when no tangible alternatives are offered...

The issue I have here with the over-the-top lambasting is you have absolutely no way of knowing what a different course would have done.

So we can skewer the guy and say how he sucks at his job and he is trying to keep the balloon from losing all it's air, but I think that's pretty weak when the alternative (rising interest rates? cut the money supply?) in a recession makes no sense...unless you offer a completely different alternative? one that is actually realistic?

He and his team are the closest to the data -- if they think increasing the money supply 2x is necessary, maybe it has to do with the fact that the velocity of money has come WAY down..ie, the banks still aren't lending so the actual increase in the money supply is not as dramatic.

From wiki: "an increase in the money supply, unless trapped in the financial system as excess reserves, can cause a sustained increase in real production instead of inflation in the aftermath of a recession, when many resources are underutilized."

So what should he do or what should he have done? -- go ahead, let's play the "20/20 hindsight game" instead of spouting rhetoric ("game is rigged" etc etc etc)...your post was basically a long rant about how people are morons for approving of Bernanke when they disapprove of QE2...so what. From the link you provided:

Diane Swonk, who follows the Fed as chief economist at Mesirow Financial Inc. in Chicago, says Bernanke gets favorable ratings, though his policies are less popular, because investors may feel that “this guy is an expert on the Great Depression, and although we don’t know what this program is doing, and we’re not quite sure whether it’s doing anything, we don’t really want to find out what the world would be like without it.”

...so how about instead of calling everyone a moron we try and offer realistic alternatives or actually criticize specifics. Or should the entire central bank be abolished and we should move back to the gold standard?

 
WallStreetOasis.com:
I guess I am brain-zapped :-) Ah, the blame game. So fun when no tangible alternatives are offered...

The issue I have here with the over-the-top lambasting is you have absolutely no way of knowing what a different course would have done.

So we can skewer the guy and say how he sucks at his job and he is trying to keep the balloon from losing all it's air, but I think that's pretty weak when the alternative (rising interest rates? cut the money supply?) in a recession makes no sense...unless you offer a completely different alternative? one that is actually realistic?

He and his team are the closest to the data -- if they think increasing the money supply 2x is necessary, maybe it has to do with the fact that the velocity of money has come WAY down..ie, the banks still aren't lending so the actual increase in the money supply is not as dramatic.

From wiki: "an increase in the money supply, unless trapped in the financial system as excess reserves, can cause a sustained increase in real production instead of inflation in the aftermath of a recession, when many resources are underutilized."

So what should he do or what should he have done? -- go ahead, let's play the "20/20 hindsight game" instead of spouting rhetoric ("game is rigged" etc etc etc)...your post was basically a long rant about how people are morons for approving of Bernanke when they disapprove of QE2...so what. From the link you provided:

Diane Swonk, who follows the Fed as chief economist at Mesirow Financial Inc. in Chicago, says Bernanke gets favorable ratings, though his policies are less popular, because investors may feel that “this guy is an expert on the Great Depression, and although we don’t know what this program is doing, and we’re not quite sure whether it’s doing anything, we don’t really want to find out what the world would be like without it.”

...so how about instead of calling everyone a moron we try and offer realistic alternatives or actually criticize specifics. Or should the entire central bank be abolished and we should move back to the gold standard?

Things are pretty simple Patrick. When you owe you have to pay, if you don't pay somebody gets stuck with the bill. The financial crisis was caused by the fact that regulators and Wall Street sleep in the same bed. Companies which failed were propped up, not because they needed to be, but because powerful interests prevailed.

AIG, GM, just about every BB on The Street...do not need to be here now, more efficient, less corrupt competitors would have scooped up the wayward pieces of human, technological and physical capital.

The only thing Bernanke's policy (which I have no problem admitting is just an extension of Greenspan's) has done is to give a blank check to the same people who put the entire country in the toilet to do it again.

The point of my post which you clearly missed is that supporting the purveyor of a lousy product while admonishing his creation is the height of contradiction. Its the contradiction of the entire industry at large, the captain of the Titanic laughing at the iceberg.

If Bernanke is such an expert of The Depression then he surely must be aware that it was the mass industrial spark of World War 2 which got the American economic machine going...that and the destruction of centuries worth of wealth acquisition across the pond, to balance perceptions out.

I'd gladly get into the fine points of this, but to quickly answer your question on what should be done/should have been done:

Absolutely nothing. The TBTF crowd should have been allowed to fail. Perhaps unemployment would have risen to 15, 20 percent...who knows? The clear message, however, would have been sent that pump and dump can no longer be a viable method of doing business.

Bernanke could have corrected this mistake (and still can) by doing NOTHING.

There's a psychological factor and the notion of "it's not my fault, they did it" pervades.
Once you force people to swallow the bitter pill they will get it. Whether its the guy on unemployment who won't take a lower paying job, the girl on welfare claiming to have six kids while she's single or the CEO fudging numbers and jacking his employee's pensions.

Bernanke's policy and the policy coming out of DC for longer than I can remember is clear in one message only.

You need us, you can't survive without our wisdom.

I am inclined to agree. After all, if you pay taxes, aren't on welfare and make less than 8 figures the brunt of Ben's brilliance is coming out of your pocket.

 
Midas Mulligan Magoo:
I'd gladly get into the fine points of this, but to quickly answer your question on what should be done/should have been done:

Absolutely nothing. The TBTF crowd should have been allowed to fail. Perhaps unemployment would have risen to 15, 20 percent...who knows? The clear message, however, would have been sent that pump and dump can no longer be a viable method of doing business.

Bernanke could have corrected this mistake (and still can) by doing NOTHING.

There's a psychological factor and the notion of "it's not my fault, they did it" pervades.
Once you force people to swallow the bitter pill they will get it. Whether its the guy on unemployment who won't take a lower paying job, the girl on welfare claiming to have six kids while she's single or the CEO fudging numbers and jacking his employee's pensions.

Bernanke's policy and the policy coming out of DC for longer than I can remember is clear in one message only.

You need us, you can't survive without our wisdom.

I am inclined to agree. After all, if you pay taxes, aren't on welfare and make less than 8 figures the brunt of Ben's brilliance is coming out of your pocket.

That's like telling someone right before he gets shot: remember this, learn the lesson, don't do this again.... Sure he won't, coz he will be dead...

When the entire financial system is crashing, you do whatever you can to save the system first, do the cleaning/fine tuning later....

Yeah, we all know the basic economic theory: a company should be allowed to fail, its resources then will be released to the market and allocated for better use. But, don't forget the underlying assumption here, that there will still be a functioning market system to recycle these resources...

 
WallStreetOasis.com:
I guess I am brain-zapped :-) Ah, the blame game. So fun when no tangible alternatives are offered...

The issue I have here with the over-the-top lambasting is you have absolutely no way of knowing what a different course would have done.

So we can skewer the guy and say how he sucks at his job and he is trying to keep the balloon from losing all it's air, but I think that's pretty weak when the alternative (rising interest rates? cut the money supply?) in a recession makes no sense...unless you offer a completely different alternative? one that is actually realistic?

He and his team are the closest to the data -- if they think increasing the money supply 2x is necessary, maybe it has to do with the fact that the velocity of money has come WAY down..ie, the banks still aren't lending so the actual increase in the money supply is not as dramatic.

From wiki: "an increase in the money supply, unless trapped in the financial system as excess reserves, can cause a sustained increase in real production instead of inflation in the aftermath of a recession, when many resources are underutilized."

So what should he do or what should he have done? -- go ahead, let's play the "20/20 hindsight game" instead of spouting rhetoric ("game is rigged" etc etc etc)...your post was basically a long rant about how people are morons for approving of Bernanke when they disapprove of QE2...so what. From the link you provided:

Diane Swonk, who follows the Fed as chief economist at Mesirow Financial Inc. in Chicago, says Bernanke gets favorable ratings, though his policies are less popular, because investors may feel that “this guy is an expert on the Great Depression, and although we don’t know what this program is doing, and we’re not quite sure whether it’s doing anything, we don’t really want to find out what the world would be like without it.”

...so how about instead of calling everyone a moron we try and offer realistic alternatives or actually criticize specifics. Or should the entire central bank be abolished and we should move back to the gold standard?

This exactly. The fed is faced with some serious structural issues in an economy that is continually losing its edge. Since the fed doesn't have the tools to address these issues, they can really only use what they've got. Congress needs to address the bigger problems. All Bernanke can do is push as much monetary stimulus as possible and hope to persuade the morons in Washington to do the rest.

 
WallStreetOasis.com:
The issue I have here with the over-the-top lambasting is you have absolutely no way of knowing what a different course would have done.

Very true. However, that's often a problem in every case, since we often can't observe a counter-factual. If a CEO doesn't do well running a company, nobody really knows how much better or worse someone else would of done in his shoes. As the economist John Taylor likes to joke, "My wife bought me some new golf clubs for my birthday, and I'm not shooting any better. However, I'd be shooting much worse if it weren't for those clubs."

 

I'll give it a whirl:

Since we're talking about the QE2/Bernanke divide, let's start with deciding whether to implement QE2 or not. We don't do QE2. Yields are at rock bottom already and companies aren't hiring. Will a marginal decrease in yields be worth the exorbitant cost and increase in our deficit? Probably not. Minuscule yields force investors to reach for yield, not always in the best places as the housing crisis demonstrated. Where's yield hiding right now? In emerging markets and commodities (pre-QE2 that was). For companies, hiring workers in emerging markets will have a higher "yield" than hiring ones here. QE2 will only aggravate the problem. To help the economy we need to start pulling other levers.

What other levers can we pull?

1.The big difference between this Administration's response to financial crisis and FDR's New Deal is the lack of large-scale infrastructure projects. Why not spend $600 billion on our roads, bridges and airports? Whether it's through widely available research or ubiquitous anecdotal information, we all know our infrastructure is getting awfully old. Infrastructure projects could employ major swaths of workers who saw their jobs disappear when the housing market took a tumble. Sounds like a much sounder way to reduce unemployment than a $600 billion asset swap.

  1. Interest rate risk is pretty defined right now. We can't go lower and there's really no reason to go higher right now. What still affects yields though is credit risk. Sure, the US is a far cry from being in serious trouble on that front, but when the clown car that is the ratings agencies talks about downgrading the US, people listen. There are definitely ways to reduce our current deficit without crushing the economy. For one, the loopholes in the tax code and irregularities in regulation lose the US hundreds of billions of dollars each year. Simplifying the tax code and reducing the corporate tax rate, even temporarily, could both stimulate the economy and reduce the deficit, pushing yields lower as a bonus. Tort reform could make a dent in the Medicare deficit as well. Simply put, there are plenty of ways to reduce the deficit without smoking the little guy. We're not talking austerity here (just look at the UK, double dip here we come), but getting rid of massive leaks that have been poisoning our political process. This could help pay for the infrastructure program outlined above and make for a healthier platform to build the country off of in future years.

Those are just a couple ideas, but the point is, Bernanke doesn't have a monopoly on best ideas and by sticking with the failed policies of the past, we're not doing ourselves a favor. I'd love to hear what other people have to say on this.

 
Perhaps unemployment would have risen to 15, 20 percent...who knows?

That's exactly my point, who knows...so let's ask the following. BoA, Merrill, Citi, GS, MS, and basically every BB bank goes bankrupt along with GM (good), AIG, Freddie, Fannie....you think that's only 15-20%? that is more like a 0 credit available, Great Depression II scenario.

That's really the best alternative / best way to teach a lesson when a large % of people that are getting laid off / screwed had nothing to do with the collapse? You say we need to swallow the bitter pill, but I say that was basically the death of our economy. Who is right? Not sure, but I don't think you could dismiss the possibility of a major global depression back in 2008 when the shit was hitting the fan.

1.The big difference between this Administration's response to financial crisis and FDR's New Deal is the lack of large-scale infrastructure projects. Why not spend $600 billion on our roads, bridges and airports? Whether it's through widely available research or ubiquitous anecdotal information, we all know our infrastructure is getting awfully old. Infrastructure projects could employ major swaths of workers who saw their jobs disappear when the housing market took a tumble. Sounds like a much sounder way to reduce unemployment than a $600 billion asset swap.

Agree here - but that's not Bernanke's fault. He is trying to use whatever tools are available to him to stabilize the economy and help get GDP growing again (while making sure inflation doesnt spiral out of control...that will actually be really interesting). If the Gov. doesn't increase G to help get people back to work for whatever reason (gridlock in congress, whatever) , he has to take that into account and do what he can evaluating the data that is provided to him.

The point of my post which you clearly missed is that supporting the purveyor of a lousy product while admonishing his creation is the height of contradiction.

Nah, actually, I didn't miss that point at all. The inherent contradiction you are trying to point out really is not that shocking when you take into account that fact that people have MIXED feelings on the topic. They may HATE the idea of QE2 (and the rhetoric surrounding it), but realize Bernanke is probably 10x smarter than them (likely true) and still trust that his intentions are good. If you like, I could point you to a bunch of other "contradictory" opinion polls that ask the same exact question twice, phrased differently, with vastly different results.

Back on topic....so Midas and other Bernanke critics, should we just abolish the central bank? Is monetary policy the wrong way to go or should there just be more prudence shown before hitting "print"?

 
WallStreetOasis.com:

Nah, actually, I didn't miss that point at all. The inherent contradiction you are trying to point out really is not that shocking when you take into account that fact that people have MIXED feelings on the topic. They may HATE the idea of QE2 (and the rhetoric surrounding it), but realize Bernanke is probably 10x smarter than them (likely true) and still trust that his intentions are good. If you like, I could point you to a bunch of other "contradictory" opinion polls that ask the same exact question twice, phrased differently, with vastly different results.

Back on topic....so Midas and other Bernanke critics, should we just abolish the central bank? Is monetary policy the wrong way to go or should there just be more prudence shown before hitting "print"?

You're on point about the mixed feelings. The bottom line is that you can stand on two sides of the fence on this sort of issue. You can be one of the guys who wants to live by their own wits, skills, strengths and means OR you can be one of the guys who wants somebody smarter to decide for them. I think you know where I am so we don't have to beat it up.

As for abolishing the central bank, of course I am for that and the removal of any other mechanism which promotes people to sheepledom. That having been said, I would have no issue with the Fed, Bernanke, etc... if were talking about a transparent entity which answers to a higher authority. That is the issue. A regulated Federal Reserve which is held responsible for its mistakes is something I am very open to, but I think we'll all walk on water before that happens.

The fact which you conveniently sidestep whenever we have these debates is that the Federal Reserve is owned and operated by a banking cartel, a cartel which puts its own needs and wants over that of the country as a whole, while getting the benefit of the tax payer's funding. That's not anything more than theft, no matter how much you dress it up.

It's absolutely untrue that credit would have dried up or ever will dry up if the BBs failed or do fail. Someone will always step in, as long as there is someone with money. But hey, the Chinese have been proving that via Treasuries and will continue to do so into the foreseeable future. If there's nobody to step in, those who fucked it up...take the hit...and yes, when you have 15, 20, 50,80% unemployment then those precise people hang from the gallows. Which is where many of them deserve to be and need to be for actual change to happen.

When you reward thieves for stealing, with the money of the people they stole from, there is no room for rationale and logic.

 
Midas Mulligan Magoo:
The fact which you conveniently sidestep whenever we have these debates is that the Federal Reserve is owned and operated by a banking cartel, a cartel which puts its own needs and wants over that of the country as a whole, while getting the benefit of the tax payer's funding. That's not anything more than theft, no matter how much you dress it up.
There is always a need for a lender of last resort, because banks by definition will always have liability mismatch. Even if you abolish the Fed, all the major banks will still join force and form something similar. Since it is no longer a government entity, it will then totally run wild...
It's absolutely untrue that credit would have dried up or ever will dry up if the BBs failed or do fail. Someone will always step in, as long as there is someone with money.
I don't know.... You need financial insitutions to collect and channel all the capitals, need someone to collect money from one place and deploy it to another.... Without a functioning financial systems, most of the surplus savings wont' even find a place to invest... That's why banks/IBs/stock markets are so important to the economy, something the mainstreet didn't realize
 

Gold standard is a no-no. Unless we were to curtail our democracy and turn protectionist, there's simply no way of making it work. If you need some convincing of that I would urge you to read "Globalizing Capital" by Barry Eichengreen, it's an impressive history of the international monetary system. My argument above is that in a nutshell, you have to realize when monetary policy is reaching the point of diminishing returns and start wielding fiscal policy instead, which so far hasn't happened.

 
GoodBread:
Gold standard is a no-no. Unless we were to curtail our democracy and turn protectionist, there's simply no way of making it work. If you need some convincing of that I would urge you to read "Globalizing Capital" by Barry Eichengreen, it's an impressive history of the international monetary system. My argument above is that in a nutshell, you have to realize when monetary policy is reaching the point of diminishing returns and start wielding fiscal policy instead, which so far hasn't happened.

Good point. I guess given the fact that the government has shown little ability to implement any significant fiscal stimulus (that i know of), should Bernanke just sit back and throw his hands in the air?

I could definitely see QE2 backfiring in the sense that we could overshoot and enter into a period of rapid inflation -- but I just am not sure we can be so critical of a guy (actually the entire central bank, since he isnt making these decisions alone) when we are not privy to the same information/data he likely gets on a daily basis.

 

I am weak on this subject but I like Bernanke and support the bank bail out. What I dont support is the screwing of the bond holders to placate the unions with GM. Let's face it, the order came down to lend more from the Fed. Banks responded but didn't want this low quality paper on the books. Wallstreet simply took it, tried to diversify and insure away the risk and make a profit. Things went nuts and the banks got screwed. I don't support imploding this county though.

The government bailed the banks out and they are getting paid back. Uncle Sam is going to lose money on their own programs, Fannie and Freddie. I am not happy with the precedence it sets, but I think it is right having a lender or liquidity provider of last resort.

 
Midas Mulligan Magoo:
66%.

I was not aware that this was a giant beauty pageant

Isn't that what capitalism and especially financial markets are all about? :) You guys should diversify your reading list, drop Milton for a while and accept that John Maynard might have said some really interesting stuff.

Concerning Bernanke I think he does the job he has been asked to do with the means at his avail. It's not about the Fed or Obama, it's about the whole economic system of the past 60 years that has failed miserably in achieving a society with lower economic inequality along with true social justice.

'Oh, yeah, that's right. That's what's it's all about, all right. But talkin' about it and bein' it, that's two different things.'
 
fitzmanon:
Midas Mulligan Magoo:
66%.

I was not aware that this was a giant beauty pageant

Isn't that what capitalism and especially financial markets are all about? :) You guys should diversify your reading list, drop Milton for a while and accept that John Maynard might have said some really interesting stuff.

Concerning Bernanke I think he does the job he has been asked to do with the means at his avail. It's not about the Fed or Obama, it's about the whole economic system of the past 60 years that has failed miserably in achieving a society with lower economic inequality along with true social justice.

Lower income inequality would be a bad thing for America. America, a nation of immigrants, always has groups who come here with nothing and work hard to better themselves. Even if there wasn't inter-generational poverty due to drugs/crime/poor education/back-firing social programs, income inequality would grow.

Another reason for income inequality is the new rich who are able to add more values to the global society because we have better communication and transportation technology. JK Rowling is the first billionaire author, although there have been others before her with more talent.

Even the poor in this country still enjoy better a higher standard of living than most people in the world and in human history. The poor also receive this boost in living standards from the rich who's taxes pay for social support systems(not just welfare but things like public schools and police/fire dept/ambulances). How much more do the financially successful people have to give?

The more income inequality, the more incentive people have to work. It's not like 20% of the population is homeless, they just have smaller homes and only 1 plasma TV.

 
ANT:
I didn't realize capitalism and the USA's main job was to create economic equality.

I talked about reducing economic inequality and you directly think about pure economic equality. Am I right? Well it happens it has nothing to do.

The goal of an economic system is to offer opportunities for every willing individual to live a decent life (what's a decent life is probably subject to discussion). And capitalism as it exists today doesn't make that happen and that's why it's losing support from the population in the US and Europe. Just saying. Then maybe you can't see it because you are making 200K a year and live in a condo in Manhattan but the world goes beyond Wall Street.

'Oh, yeah, that's right. That's what's it's all about, all right. But talkin' about it and bein' it, that's two different things.'
 

In GMO's quartely letter from a few months ago, Jeremy Grantham suggested that the Fed should only be asked to focus on inflation and not unemployment. I think that's a pretty solid idea considering focusing on the two has shown to be rather difficult. Perhaps Bernanke should put the onus of stimulating employment on the govt as opposed to taking charge, which so far hasn't worked.

I actually don't think we're headed towards inflation. There's so much slack in the economy right now, we'll probably see it coming if it does. The problem is the race to risk assets. At this point we've gotten into a reflexive type situation where any affirmation of QE2 is equated with risk-on and people pile into commodities and out of treasuries. If you look at today's futures prices (http://www.finviz.com/futures.ashx) you get a sense of what's going on. QE2 is essentially doing the opposite of what it's supposed to because of how the market is extrapolating the inflows into emerging economies. The most likely way I see this ending is a slow down. The US is probably the most insulated because of how much we have stimulated the economy but emerging markets are getting hit with serious inflation and once demand destruction settles in, commodity producers will get rocked. That probably equates to a sharp reversal in US equity markets later this year, maybe a quarter with no growth. And that's how QE2 gets smoked, with nothing to show for it.

As far as the information thing goes, the average person has access to a whole lot if he goes looking for it and I'm not sure how much more the Fed has. They have the time to produce exceptional research but their policies aren't immune to ideological biases. I tried to apply the "they know more than we do" approach to the Iraq invasion back in 2003 and you can imagine my disappointment when I found out "they" had made up more than I knew and the Iraq Study Group showed how wrong the Administration had been. The FCIC being published tomorrow is pretty damning of Greenspan and by extension Ben Bernanke without really criticizing the actual Greenspan put (3rd year of a presidential cycle, Obama needs all the help he can get).

The Fed is full of smart people, but being smart doesn't mean being right, just like being right doesn't mean making money or successfully governing.

 

Capitalism is losing support in the USA? Wow, please direct me to this. In fact, polls have shown that the majority of Americans are strongly anti socialism. Something about taking from those who work and giving to those who don't that pisses most people off.

This is not a a zero sum game. Plenty of wealth going around. I am sorry that middle America is not educated enough to understand what the financial system does. Losers like to use the word "bankster" because they don't like people who have more than them. Then when banks don't freely hand over money to them they cry because they are being hurt and ripped off.

This is a free country. Plenty of opportunities.Banks make money off fees and interest. Use a credit union and pay cash. Real simple.

I with I could go long pissing and moaning. It is the only thing that is guaranteed to increase every single year.

 
ANT:
Something about taking from those who work and giving to those who don't that pisses most people off.

Cleaning ladies cleaning the trading floor at 2AM and having two other jobs DO work. Why shouldn't they have the right to a decent lifestyle? The society is not divided between people who work and make money and people who don't work and don't make money.

Concerning socialism ... you the hell talked about that? Being critical of capitalism as it exists today doesn't mean advocating socialism.

Americans don't say they are critical of capitalism because from the cradle we have been taught that capitalism is the greatest thing invented by mankind to create wealth and happiness for all. Be critical of capitalism and you'll be considered a socialist (it always made me piss my pants when I hear people calling Obama a socialist).

'Oh, yeah, that's right. That's what's it's all about, all right. But talkin' about it and bein' it, that's two different things.'
 
ANT:
Capitalism is losing support in the USA? Wow, please direct me to this. In fact, polls have shown that the majority of Americans are strongly anti socialism. Something about taking from those who work and giving to those who don't that pisses most people off.

This is not a a zero sum game. Plenty of wealth going around. I am sorry that middle America is not educated enough to understand what the financial system does. Losers like to use the word "bankster" because they don't like people who have more than them. Then when banks don't freely hand over money to them they cry because they are being hurt and ripped off.

This is a free country. Plenty of opportunities.Banks make money off fees and interest. Use a credit union and pay cash. Real simple.

I with I could go long pissing and moaning. It is the only thing that is guaranteed to increase every single year.

People on the top, the senior executives, wall street people, HNW investors, have benefited tremendously from the globlization, since they now have a much bigger pie to work with, can deliver their services to a much bigger customer base..

For the middle-low income people, because of the globalization, they are competing directly with billions of cheap labor from the developing world. The supply for comparable labor has increased several fold. At the same time, due to the technology revolution, it is harder than ever to migrate to a non-tradable sector No wonder their living standard was negatively impacted.

That's why I do think those who benefited from the globalization should carry a higher tax burden to help out those who get left behind during the process. US is still a democracy, without majority's support, there won't be a globalization.

 

I'm late to this party but its time to chime in.

First off, GoodBread or WSO, you mentioned QE2 dollars not being lent out. This is the very topic of Pimco's Yucca Mountain article yesterday.

Midas, in theory, I am all for the elimination of the central bank, and a return to free banking. Of course, the pragmatic reality that I have come to accept is that this will never happen in my lifetime.

As for QE2, you were the one who brought to my attention that it is used as a foreign policy tool. I've mentioned an article by Andy Lees several times on this site:

We are told that China has been the main driver of global growth in recent years as indeed it has. We shouldn’t forget however that by using its massive production of fossil fuels to impose capital controls on the rest of us, this growth has to a large extent simply been transferred from abroad, and in particular it has been taken from investment in productivity advancement. Though quite stunning, China’s growth has been at the expense of global economic advancement as it has used its fuel to support inefficient domestic industry rather than export the fuel to countries that could produce more with the energy. To be fair to China, not many countries wanted their coal as it didn’t necessarily suit our greener credentials; it was preferential to see China pollute its own environment and sell us the goods. It is here where the US could quite easily turn the table back on China by imposing an equalising tax on the embedded carbon within all manufactured goods.

Thus, QE2 will raise coal and energy prices worldwide. As this occurs, China's ability to subsidize its inefficient manufacturing industry will decrease, and they will be forced to life capital controls, thus devaluing their own currency relative to the dollar. After this happens, American manufacturers will be more competitive and trade deficit (as well as budget deficit) should narrow, as we begin to export more and import less. Seen from this perspective, QE2 is actually quite clever, since it is actually being used to debase another country's currency, making our industrial base more competitive. Couple this with the increase in consumption associated with rising equity prices, QE2 might just actually work better than you anticipate (although I do not think it will do so to the extent to actually end this depression).

looking for that pick-me-up to power through an all-nighter?
 
Best Response
Midas Mulligan Magoo:
But as the funny money spigot begins to tighten, the world looks to those who are meant to be experts and meant to judge things rationally and logically.

None of those people are speaking up and speaking out.

Not the investors.

Not the traders.

Not the analysts.

Generally, I agree with you, except this. What are traders experts in besides how to make money in some narrow range of products? Investors range from quantitative guys (experts in algorithms) to Warren Buffett (expert in getting a good deal), and nowhere on that spectrum is expertise in economic policy.

But there are an assload of professional economists who disagree with Bernanke, and recent events suggest that they're the ones who are correct. And in general, we tend, with good reason, to let our economic policy be guided by professional economists. The problem is just that we might not have picked the right one. It might be tempting to think that anyone working in finance is an "expert," but their expertise isn't the kind of expertise we need at the Fed.

One of those lights, slightly brighter than the rest, will be my wingtip passing over.
 

The lower class has also benefited from globalization. Walmart has keep prices low for lower income individuals and allowed them to buy more goods with less money.

The plain fact is people make decisions. These decisions lead to outcomes. If you don't like the outcome, make a different decision. Do not punish those who work hard and make correct decisions for those who do not.

Capitalism IS CORRECT, not because we are taught so, but because it is in the human soul. Freedom as a human right, being rewarded for ones efforts is a human trait. I am so sick and tired of the poor cleaning woman being used as a reason to become more socialistic.

Let me be clear.

FUCK HER. She decided to do things her way. She is happy cleaning. You know why I know this? Because in a free world she made decisions that benefited here.

Long pissing and moaning. Short responsibility and work ethic.

Obama is a socialist, but our wonderful country and Republican vanguard is keeping him from destroying what great men built.

Go donate your salary to the poor and needy if you want. You have zero right to tell me what I should do with MY money.

Boys and girls, this is what is wrong with this country. You see someone in need, but instead of helping them, you rob the guy next to you and take that money and give it to the other person. Never take a dime from your own pocket.

Taxation = Robbery

 

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