Warnings of economic collapse from inside Bernankes Fed


By Bubbabear   Follow   Tue, 15 Jan 2013, 10:56am   1,621 views   19 comments
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http://www.marketwatch.com/story/mayor-michael-bloomberg-as-next-fed-chairman-2013-01-15

Calif. (MarketWatch) Yes, America needs new blood, a strong leader like Mayor Michael Bloomberg as the next Fed Chairman. After a quarter century of failed monetary policies under the disastrous chairmanships of Alan Greenspan and his disciple Ben Bernanke, we need a decision-making powerhouse like Bloomberg, Wall Street visionary, high-tech innovator, philanthropist and proven government leader focused on whats best for the country and all people.

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  1. tr6


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    1   11:23am Tue 15 Jan 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    I think the above opinion is not main stream. Most mainstream economists look at Bernanke's terms as successful. They have a good argument when you compare US to Spain or Greece. They tend to ignore bubble in farm land or super crazy low yields on junk debt.

    Bloomberg would make a decent Fed chairman.

  2. CaptainShuddup


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    2   12:14pm Tue 15 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    treatmentreport says

    Bloomberg would make a decent Fed chairman.

    No he wouldn't NYC is doing so well, Bloomberg has to make frivolous laws to make him self seem relevant. I would shutter to think how he actually tackles real issues. Our problems are far greater than anything $12 smokes and a ban on Big Gulps could fix.

  3. Bubbabear


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    3   1:05pm Tue 15 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    IIII CAPTIAN! Regardless of who becomes Chairman, the Fed still needs a fall guy when the economic situation reaches terminal velocity & we all know "INK JET B." doesn't want to be in the picture when that happens...

  4. David9


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    4   2:12pm Tue 15 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike  

    Billybigrig says

    fall guy

    So True. No matter what the outcome, past, present, or future policies. That is all that matters. Sad.

  5. Kevin


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    5   8:04pm Tue 15 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Ooh, Farrell!

    I tried to find anything that this guy has ever written that he's been correct about, and came up with nothing. He's been saying dumb shit on marketwatch since at least 2001.

  6. Bubbabear


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    6   11:47pm Tue 15 Jan 2013   Share   Quote   Permalink   Like   Dislike  
  7. Kevin


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    7   12:17am Wed 16 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)  
  8. deepcgi


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    8   1:29am Wed 16 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike  

    Saw the news leaking out of Germany?
    The currency war is coming. The major creditor nations wouldn't let us debase the dollar indefinitely at their expense. Of course they will debase their own to raise their margins. Watch Germany, Japan and China to begin with.

    The result will be the same as a decrease in demand for treasuries, except that the stock market won't be patiently awaiting a happy ending.

    If Fed generated liquidity fails to raise the country by Springtime, they will act. It will show a lack of solidarity amongst the Central Banks and the governments of nations throughout Europe will start to worry that their derivatives gambling may not be covered tit-for-tat by one another.

    A grim situation. Start looking at commodities in the spring.

  9. Bubbabear


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    9   6:31am Wed 16 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    deepcgi says

    Central Banks

    Central Banks and Goverments will begin to go rogue as a result of the Fed devaluating their currency and it only takes one country to start that chain reaction.....after that the Fed will turn on the U.S. and spike rates to save themselves ....the clock is ticking down

  10. ttsmyf


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    10   7:56am Wed 16 Jan 2013   Share   Quote   Permalink   Like   Dislike   Protected  
  11. Bubbabear


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    11   8:48am Thu 17 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    deepcgi says

    Saw the news leaking out of Germany?

    Bundesbank to Repatriate 674 Tons of Gold to Germany by 2020
    http://www.bloomberg.com/news/2013-01-16/bundesbank-to-repatriate-674-tons-of-gold-to-germany-by-2020.html

  12. raindoctor


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    12   8:14pm Sun 20 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Montetary policy is useless. Hence, there is nothing Fed can do. Whatever Fed does via QEn does not increase the aggregate demand.

    Of course, the policy makers and mainstream economists (both Chicago school new classicals and MIT school new keynesians) think that interest rates inrease the aggregate demand. It is not true in the empirical world, except in their alternative worlds called models.

  13. Bubbabear


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    13   10:16am Mon 21 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    raindoctor says

    Montetary policy is useless. Hence, there is nothing Fed can do. Whatever Fed does via QEn does not increase the aggregate demand.

    Of course, the policy makers and mainstream economists (both Chicago school new classicals and MIT school new keynesians) think that interest rates inrease the aggregate demand. It is not true in the empirical world, except in their alternative worlds called models.

    True, I'd say that since 1980, they had it easy to create customers by lowering standards. It was the mid 2000's where Greenspan heavily pushed for subprime housing and low interest rates where they thought they could mass generate homeowners to create an "ownership society".

    Once Ben increases the rates, payments became expensive and those customers vanished. 2008 is proof that their policies is a farce and since then,they just are protecting banks and continue the same policies as propaganda...

  14. tatupu70


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    14   10:31am Mon 21 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)  

    Billybigrig says

    It was the mid 2000's where Greenspan heavily pushed for subprime housing

    Wait, I thought it was Barney Frank? Or was it Obama bring lawsuits? Or Clinton?

    Seriously--why can't people just accept that banks lowered lending standards of their own free will because they were making money hand over fist. There was no governmental conspiracy...

  15. Bubbabear


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    15   11:05am Mon 21 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    tatupu70 says

    There was no governmental conspiracy...

    Who ever mentioned the White House Workers ?
    The Good Old Boys Club at the Fed nodded and winked for all the other boys to lower their own standards...
    http://articles.businessinsider.com/2012-02-09/wall_street/31040431_1_interest-rates-big-banks-member-banks

  16. raindoctor


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    16   1:30pm Mon 21 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Billybigrig says

    True, I'd say that since 1980, they had it easy to create customers by lowering standards. It was the mid 2000's where Greenspan heavily pushed for subprime housing and low interest rates where they thought they could mass generate homeowners to create an "ownership society".

    Once Ben increases the rates, payments became expensive and those customers vanished. 2008 is proof that their policies is a farce and since then,they just are protecting banks and continue the same policies as propaganda...

    In that subprime case, yes, it created some jobs in construction industry. We have to be careful about its benefits: the most loot went to the financial industry, not to the ordinary workers in the construction. Sure, some of the loot helped increase the aggregate demand. Even here, the monetary policy played a secondary role. The real culprit was and is the regulatory policy or regime.

    Banks create and destroy money: create when they create mortgages; destroy when these mortgages are paid off. Low interest rates was not the real cause of subprime crisis. This, because banks are capital constrained, but not reserve constrained. So, how banks get rid of capital constraints? By loose regulatory policies: CDOs, securitizations, rating agencies, etc have all made these assets (subprime mortgages) less risky; therefore, banks needed a less of capital.

    If there had been a strict regulatory regime, low interest rates would not have created the subprime business and construction jobs. Bill Black calls it "control fraud", perpetuated by regulators and finance industries. Who is the government anyway? Just all those lobbysts via revolving door.

    Monetary policy has teeth if there is a corrupt regulatory policy. Otherwise, monetary tricks are useless, because they tricks just change portfolio composition of NFA (net financial assets of the private sector). NFA does not matter much in terms fo aggregate demand: if intererest rates go up, those who live on interest will consume more, and the investment goes down a bit; and vice versa.

    What other financial innovation helps consumption? Housing and subprime belongs to the past.

    Once you bring in all that useless calculus and curves of MIT and chicago schools, everything appears sophisictated: it is called seduction by deduction, a Ricardian vice.

  17. raindoctor


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    17   3:07pm Mon 21 Jan 2013   Share   Quote   Permalink   Like   Dislike  
  18. bmwman91


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    18   3:17pm Mon 21 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike  

    raindoctor says

    Monetary policy has teeth if there is a corrupt regulatory policy.

    So, monetary policy has pretty sharp teeth at the moment then? Regulatory capture is as bad or worse than it was during the bubble peak.

  19. raindoctor


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    19   4:24pm Mon 21 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    bmwman91 says

    So, monetary policy has pretty sharp teeth at the moment then? Regulatory capture is as bad or worse than it was during the bubble peak.

    At the moment, yeah, if they can come up with some financial innovation that helps some industry. They can't reuse the old trick again, as rating agencies don't work in the favor of bankers.

    Look at the whole subprime fiasco (or any financial Innovation FI), how it increased the aggregate consumption, which reduced unemployment.

    1. Banks lend out for a certain purpose (CP). When they lend, it creates asset-liability pair for both the bank and the customer.
    2. Loans create deposits. So, Banks are not constrained by reserves, even the regulation requires a certain percent of reservers. For instance, Canadian banks don't have any reserve requirements--meaning Zero reserves.
    3. Every bank has to maintain capital, which is different from reserves, which are held at Federal reserve. The regulatory regime requires that assets (loans lent to households and firms) have to have a certain capital. Not all assets (loans) are created equal: so, they have to grade their assets. High risk assets (loans) require more capital than low risk ones. Since banks are capital constrained, they have to play some game to reduce the capital required: so, they find some innovation to obfuscate the risk of assets. One such innovation: transform high risk assets into low risk ones via securitization with the help of rating agencies. Rating agencies knew subprime mortgages are risky. But they were not rating subprime mortgage portfolio; instead, tehy were asked to rate securitized tranches. This layer (securiritzation) obscured the risk and rated low risk by rating agencies: this helped banks not to raise additional capital.

    The financial industry created some jobs and helped some get fat bonuses: car salesmen who used to make $80K made $200K a year as they worked in subprime. Realtors made good commissions; plumbers, electricians, construction workers made more money; wall street boys thanks to securitiztion got fat bonuses. In sum, you saw an increase in income; some of it caused an increase in consumption. For instance, the people on the lower rung (that $200K guy, realtor, plumbers, etc) bought nice cars, renovated their homes, took expensive vacations, dined in fine restruants. it is a spending multiplier effect. The question is about sustainability.

    One can always come up with some financial innovation (FI) to obscure the risk of the assets banks hold. And then you need to find a certain purpose (CP) to create loans or assets. In subprime case, it was the slogan: American dream requires a home, we all need to own one or two. Unless we can find a different CP, financial innovation does not work.

    So, the necessary components are: (1) orrupt regulatory regime (which already exists); (2) a certain financial innovation (wall strreet boys can always come up with one such): (3) a certain purpose for people to get loan from banks (like housing, subprime). Today, we lack the third one. Once we can come up with some public slogan (like American dream home), the second one is easy to manufacture.

    This whole monetary policy business is ineffective for 95 percent of the public because these 95 percenters are pawns in the game. Interest rates and quantitaive easing just changes the composiiton of financial assets for the households and firms. Companies don't invest because interest rates are low. Companies in general invest based on the demand, not because it is cheaper to get funds. Public does not consume more because interest rates are low except for those who live on the interest income like retirees.

    Fiscal policy (spending on infrastructure, giving jobs to do whatever people want to do) is effective, because it has more multiplier effect on the private consumption side. Once people consume, companies hire more to service more demand. Once the full employment is secured, the govt can get out of the fiscal policy mode.

    MIT school (they are called new keynesians, like Paul Krugman) and Chicago School (new classicals) just engage in their own masturbations. Look at the following masturbation on inflation by one such guy: http://wwz.unibas.ch/fileadmin/wwz/redaktion/witheo/personen/aleks/Teaching/FS12/Monetary_Theory/hotpotato%20-%20solutions.pdf

    Check this article by Jamie Galbraith: Who are these economists, anyway?

    http://www.nea.org/assets/docs/HE/TA09EconomistGalbraith.pdf

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