Bernanke: Fed will sit tight—for now
Bernanke announced no new steps on the economy, although he urged the government to “pursue tax, trade, and regulatory policies that encourage economic health.”
I guess that for Bernanke, though, it’s a case of “first, do no harm.”
Paul Krugman believes that Rick Perry’s threats have cowed Bernanke into inaction; otherwise, of course, Bernanke would be doing whatever Paul the Great dictates. I think Krugman flatters Perry in terms of influence; the evidence is that there’s actually a fair amount of bipartisan support for staying away from QE3.
It’s funny, though—practically everybody in the comments section of every blog and every article in the MSM has got the answer. I certainly don’t. But I don’t think it lies in printing more money.
The answer?
The answer lies in the government doing less.
Reduce the government and the economy will rebound.
For sure. 100%. No ?’s.
Numbers of answers are in direct proportion to the generality of the question. The number of correct answers is in direct proportion to the number of people whose answer would not benefit them or their most favored agenda. The answer that’s most often the right one? I don’t know. I mean “I don’t know”.
Anyone who has any money is sitting on it. I know I am. I know business is. I don’t have enough to bet with.
Actually, Helicopter Ben has tacitly admitted his monetary policy failure. And has put responsibility for the fix on the fiscal side. That is, he’s put the ball squarely in Barack Hussein’s court. Now we’ll get to watch our dribbler Prez throw up a brick. Maybe more than one. Then pass to Tearful John the Boner.
I favor letting things play out, and deflation is fine with me. It rewards the right people–savers, those who avoid leverage: squirrels. Inflation tends to reward those who spend, borrow, spend; and that’s mostly liberals: rats.
Rick Perry’s comments about The Bernank have been blown WAY, WAY out of proportion. Krazy Krugman knows it, too. He’s just trying to keep milking it for political gain.
In the short video clip I saw of Perry’s “gaffe”, while it’s true he appears to be holding a microphone, at no point did he look into the camera. Furthermore, at no point did the camera show more than 10 people listening to him. And those people were not bunched up indicating he was speaking to a large group. Instead, they were very spread out. That all suggests to me that Perry felt like he was speaking to a very small group of people at the Iowa fair who are sympathetic to him. So if he’s talking to a sympathetic group in an intimate setting (note they applauded after he made the treasonous remark), he’s bound to be far less guarded in his language than he would be if he was giving a policy speech or some formal communication that was intended to reach a much larger public audience.
Not only that, but Perry’s slip came on the heels of about a 2-3 solid weeks of pundits calling Tea Partyers terrorists, or worse. MoDo wrote a column in the New York Times calling the Tea Partyers cannibals and zombies. Tom Friedman wrote in the fishwrap of record that they are the “Hezbollah faction” of the GOP. Steve Rattner went on MSNBC to call them suicide bombers willing to blow up the country. Even Warren Buffett called them “hostage takers” in an interview on CNBC.
These people expressed their opinions KNOWING full well they would reach a mass audience — unlike Perry who by all appearances was speaking to a small group and there is no reason to believe he was aware his comments were being recorded, let alone that they would go viral and become international news. Nobody got their panties in a wad when the professional pundits were smearing the Tea Party with vile and over the top rhetoric, but with Perry they treat it like it’s a capital crime.
I’ve heard it said that Perry has never lost an election before. I suspect he has learned the lesson the hard way that he must always assume he is being recorded. I doubt he will repeat this mistake again.
But the double standard makes me want to pull my hair out.
Not to be left out… The answer is to drill drill drill… for oil and every other fossil fuel you can get your hands on everywhere you reasonably can.
It would contribute to the economic solution in two major ways.
1) Jobs. Real jobs that pay well in an enormous industry that is aching terribly under gov’t regulation and
2) Let me put it this way, what do you think $2 a gallon (or less) gas would do for the economy right now? What would it do for travel spending, airlines, hotels, food costs (not just transportation but the reduction of ethanol which eats up farmland) it goes on and on and touches every aspect of the economy.
It FREAKING OBVIOUS!!!
But no.. We now have a “green economy” blech..
I’m just an aging Iowa farm boy but I know that debt via easy credit has been the mainstay of the economy reaching back into the late 1980’s. We are now at the beginning of the end of this period because, as we see in Europe, there is a limit to how much of their money other people are willing to lend to spendthrift. Last time I looked Greece is forced to offer 40+% interest (yikes!) on its short term treasury notes and very few want to buy even at that rate.
My 3 cents as to what to do are simple: Government at every level must shrink by spending less and regulating less. Individuals must be responsible for their own lives and financial health. And last but not least, there is no such thing as too big to fail.
The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation
eventually when the division of the haves and the have nots is far enough apart, the distinction between middle class and poor will be so proportionally small that one could say there was no more middle class.
at that point its aristocracy… where the aristocracy eliminates ability to actualize ideas and rise up or even be noticed, and instead only allows themselves to come up with ideas despite that they cant really do this. the basic concept is then, it will appear as if all that is good and mystically functional would have been provided by those oh so special elite humans who take care of us, and we in return, i guess will do what? serve them? fight for them? provide labor so their magic can be made?
the answer to now?
there isnt any? we love our cancers too much, and we will not eradicate them or the desire for them and our belief in the good that they dont bring.
Heck we cant even convince them that compared to the world and all of history, we really dont live in a happy “comfortable concentration camp,” much like Friedan described?
Wouldnt a society where your taken care of and socially programmed be such a thing. as if it grew so large that all the walls were removed leaving no place on the planet to leave to…
Demographics drives all.
It is imperative that the official retirement age moves to 67 ASAP — and then gradually up to 70.
This ONE factor would heal the Federal budget in a hurry.
Instead, Congress is pulling a King Knute against the demographic curve.
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We’re not ever going to export our way out of trouble. But we can certainly throttle back imports. ( Oil and Autos )
The way forward is to erect MODEST import tariffs. Everyone else already achieves the same ends via devious means.
Blue collar wages cannot ever rise with unlimited immigration. This bizarre policy is ripping the guts out of Mexican society — we’re taking away the productive heart of their economy — while destroying job prospects for NAM youth native to America.
The astounding theft perpetrated by the Money Trust ™ has to be stopped and the monies recovered. The Trust has to be broken up.
Morality has to be reintroduced to government and academe. That means defunding mega-frauds like AGW.
I enjoyed this little insight on Krugman and the Twilight Zone:
http://www.investors.com/EditorialCartoons/Cartoon.aspx?id=582366&Ntt=
In order to make sense of the chaos among economists – contradictory prescriptions are being thrown about – you have to understand the key assumption difference (about how the world works) between the two main contenders – Keynes and Hayek.
Keynes believed that economic value was created by spending (demand side).
Hayek believed that it was only created by saving/investing (supply side).
If spending works then it would be possible for the government to step in with its spending to substitute for an aggregate drop from private sources and thereby encourage some sort of recovery.
If it doesn’t and economic value is created from successful investment i.e. making/offering something others want to buy or hire then government spending not only won’t encourage a recovery, but will tend to slow or even prevent it from happening. Government spending also doesn’t help because it’s generally taken from those people and companies who would have used the money productively creating value from existing proven patterns and given to people who just spend it (as opposed to investing it).
Generally people and companies tend to repeat what they did the day before to create value/make a living. When the usual patterns are disrupted people and companies have to find new patterns (e.g. jobs, products) and test them out. The time it takes to do this shows up as slower economic growth (e.g. lower GDP) and if modest is called a recession, and when there’s a bigger disruption along with government interfering in the recovery process, a depression.
If the Hayek side is right then the correct course of action is to cut government spending – by a lot – which would leave money with the private side, which with time will bring about recovery.
The primary reason that Keynes’ thinking is so widespread in academia and government is that the two groups have a lot of nice things to say about each other. Under Hayek a lot of government workers would lose their jobs.
Another reason is that as long as prevailing debt levels – public and/or private – are low then Keynes ideas seem to work. Really what goes on is that a slowly inflating debt bubble gets encouraged.
The reason that Keynes is failing now is that the last run up in debt created a massive bubble of high debt and a run up in asset bubbles – not just in housing. Significant de-leveraging or pay down of debt must occur, which extinguishes currency creating a strong deflation and will register as lower consumer activity. Prices have to reset downward according to Hayek in order for the price system to send accurate signals to people and companies about what activities/products will succeed. Keynes would try to prevent prices from resetting, which would be another factor in preventing recovery.
Resetting of prices (including labor) downward is not something anyone on the receiving end appreciates, and with the increased urbanization in the 20th century (less connection to farms – form of safety net) and decrease in size of families, it has become more difficult politically to get people to undergo the process. In the 1800’s a downturn could result in a sharp drop in GDP of 20 or 25% followed by a strong recovery.
Keynes offered a more palatable solution – fiat currencies – central banks – freed from gold – undertake a mild inflation during normal times and steeper inflation when needed to trick labor into lower wages and get rid of excessive debt run up during asset/debt bubbles which tend to increase with fiat currencies.
Bernanke – as far as I can tell – is taking a pure Keynes solution. Along one side he has been keeping interest rates very low to help recapitalize the banks. Much of the pain flows abroad through the carry trade. He also has been attempting to overcome the deflationary pressure from the deleveraging process by flooding currency out into the system in order to inflate away the debt – both public and private.
The problem is that we are going to get the pain from both ends – deflationary deleveraging even as monetization of debt adds to inflationary pressures – resulting in very confused people and companies who are likely to be unable to find new patterns of value creation through the chaotic mess created.
Worse established patterns are being interfered with hindering the necessary deleveraging and creating high levels of unemployment.
Until we can get a Congress and a president who understand the Hayek side of things a little more, the best we can hope is Bernanke, Obama, Reid, Pelosi etc are kept from doing more harm.
I agree with Parker. We need to:
Increase our savings rates. Both our huge public and private debts are time bombs that will sink us when interest rates rise or the government slowly defaults through monetary inflation. Capitalism requires reasonably sound money and predictable borrowing rates. We must de-lever or see others with stronger balance sheets grab all the opportunities.
Start encouraging technical education and welcoming “advanced education immigration” to make sure that we have the world’s most capable labor force. Our science and math capabilities have been undervalued and shrinking, while elsewhere the talents have been rapidly expanding.
Spend more of our money on investment and innovation rather than unproductive consumption. R & D improves our IP moat and productivity (if we can keep ahead of those who will copy innovations for their own purposes). Kicking back and spending our time and money on life’s enjoyable niceties is a luxury that we can’t afford when world competition is gaining strength every day. Lean and mean will win the day.
Reduce the regulatory micromanagement and empower the people to act responsibly because they are ultimately at risk for their own actions. End the bailouts, moral hazard creation, and regulatory overhead load that have been increasing at a rapid rate.
If all of the steps above sound painful and like a significant lifestyle shift for our citizens, it is. If we don’t see trends shift back toward this winning competitive posture, we better get used to the “new normal” of an anemic economy and lower standard of living here in the USA,
Spend more of our money on investment and innovation
thats not the problem…
the problem is social engineering is keeping whole groups of unprotected classes from acting as the gifts to protected classes are so great and one sided that there is little incentive to bother at all with the other side.
and how do you fund innovation, if you cant recognize innovation, and find the most creative ideas unpalatable by their very nature?
i have some great solutions that i wasted huge blocks of my life on in extreme focus, solving some keen problems…
but
People are biased against creative ideas, studies find
The studies’ findings include:
* Creative ideas are by definition novel, and novelty can trigger feelings of uncertainty that make most people uncomfortable.
* People dismiss creative ideas in favor of ideas that are purely practical — tried and true.
* Objective evidence shoring up the validity of a creative proposal does not motivate people to accept it.
* Anti-creativity bias is so subtle that people are unaware of it, which can interfere with their ability to recognize a creative idea.
http://www.physorg.com/print233561045.html
Karl Denninger gives Bernanke an epic fisking here:
Bernanke Shoves DC In The (Jackson) Hole
A little off topic, but last night as I tossed and turned with visions of TV reporters standing on beaches warning us not to stand on beaches as Irene approached, I had an epiphany.
I am not a Conservative. I am a Constitutionalist. Henceforth, my terms to describe the diverging parts of the political spectrum will be Statist and Constitutionalist. I do believe these are much more accurate than the terms favored in public discourse. The least accurate is the term Progressive, which is most favored by the Statists.
I offer these terms for consideration by Neo and her band of Merry Thinkers and commentators.
Constitutionalist is a good term to describe the basic ideas of the tea partiers.
Bernanke (IMHO) was being a little disingenuous.
He knows how close to collapse the European banks are. He knows the impact that will have on US banks (and indeed the entire world).
He knows when that balloon goes up, he will have cover to provide as much “liquidity” as he wants.
Therefore, he is waiting for events to “force” him to do what he wants to do. Print money.
Without inflation, insolvency must be admitted to by all western governments. Inflation is the only way out for the governing class. It means they can continue to spend (i.e. buy votes) by popular demand to mitigate a crisis they created.
The ruling class do not fear inflation because those with warning and access to money (the governing class) in the early stages can get rich in a high inflation environment.
Only those that save to accumulate wealth (the middle class) are destroyed by inflation.
Europe is very class ridden. I noticed that when working for a European company. They failed in the US because they could not manage workers who did not “know their place.” Our ruling elite wants to destroy our middle-class dominant society and replace it with a serf/master society like Europe (with themselves as masters, of course). To accomplish that, they need to grind the middle class between inflation and taxes.
Bernanke is helping that along.
Neo,
It sounds like I’m alone in this opinion, but here it is anyway.
Bernanke has done the right thing so far, and (by the monetary numbers I follow), is doing the right thing by not doing QE3. That is: QE1 and 2 were justified, QE3 is not.
It is my general sense that Bernanke is well aware of the damage that Obama is causing, but it is outside his authority to criticize Obama for it. So he does what he has to to keep the banking system in as close to a normal posture as he can, while ignoring the destruction of Obama. He really doesn’t have the authority to do anything else.
James-
Whence cometh your ‘general sense’, as in, ‘It is my general sense that Bernanke is well aware of the damage that Obama is causing, but it is outside his authority to criticize Obama for it.’?
General Sense reminds me of Hope and Change. It needs some supporting data.
There’s also the issue of ‘outdide his authority’. Obama cannot fire him, nor does he report to Obama.