Credit Writedowns » Ben Bernanke

Bernanke ‘Irresponsible’ to Compare US to Greece

Edward Harrison — Thu, 09 Feb 2012 19:39:36 +0000

That's the headline from my latest talk on RT's Alyona Show. Before I send you to the clip, let me explain my thinking because I don't think I was really clear in the video

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Chart of the Day: Government Deficits as Far as the Eye Can See

Edward Harrison — Thu, 02 Feb 2012 21:51:17 +0000

The chart below from the blog Pragmatic Capitalism shows the U.S. Federal government deficit for each quarter since 1952. As you can see, almost the entire period is marked by deficits

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[PREMIUM] The Fed’s Rate easing and Obama’s Mortgage refi plan are bullish

Edward Harrison — Thu, 26 Jan 2012 19:30:41 +0000

Investors must still be worried about the fallout from the European meltdown. However, the situation in the US is looking much better than it did last week because of this aggressive policy response

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Bernanke’s 29 Trillion Dollar Fog of Deceit

Randall Wray — Tue, 13 Dec 2011 19:00:33 +0000

Congress should immediately call Chairman Bernanke in for testimony on the veracity of the Fed’s response to the Bloomberg report. It should demand a comprehensive accounting for all the Fed’s commitments, by institution that benefitted. Bernanke should explain what the Fed did, when it did it, why it did it, and in whose interests it has been operating since the GFC began. No more obfuscation. No more secrecy. No more fog of deceit

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What They Are Doing?

Frederick Sheehan — Mon, 24 Oct 2011 12:30:00 +0000

The quantity of debt grows as the quality recedes. The problem of bad loans is no longer just the pre-2008 mortgages, CDOs, and LBOs. Debt issued after the bust is defaulting, such as Greek sovereign bonds, issued in June 2010. Some securities are born to part investors from their money, but it's remarkable the extent and variety of such instruments issued in 2011. The world choked on similar bonds and derivatives only three years ago, many of which are still held at false prices on financial institutions' books

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Who is winning the currency wars?

Edward Harrison — Fri, 07 Oct 2011 15:00:57 +0000

Judging from this chart drawn up by the Financial Times, it would seem that Turkey is winning the currency wars and China is losing them

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China will retaliate if US imposes sanctions

Edward Harrison — Mon, 03 Oct 2011 13:54:01 +0000

Professor Professor Xiang Songzuo from the Centre for International Monetary Research at Renmin University in Beijing told the BBC yesterday there would definitely be retaliation if the US moves to sanctions against China. If this scenario occurs, wouldn’t this be similar to the trade dynamic from the 1930s

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Here’s why inverted yield curves are a leading indicator of recession

Edward Harrison — Mon, 26 Sep 2011 13:43:44 +0000

Just following up on my last post about the expectations theory of interest rates, I wanted to explain why yield curve inversion signals recession – and why it hasn't this go round in the

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Treason?

Edward Harrison — Thu, 22 Sep 2011 02:19:35 +0000

If you believed the Republican leaders, you would say this is reckless monetary policy aimed specifically at supporting President Obama, a Democrat. You saw the last post I wrote, with the court scene from “A Few Good Men” tacked on. Boehner, Cantor, McConnell and Kyl would have you believe that Ben Bernanke is the misguided and dangerous Jack Nicholson character and they are the Tom Cruise character, trying to get him to admit to his crimes. Is Bernanke ‘almost treasonous’ then, as Rick Perry has said he is? Here’s my take

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Rosenberg also sees Operation Twist QE3

Edward Harrison — Fri, 02 Sep 2011 15:18:28 +0000

David Rosenberg was on Bloomberg and sees operation twist. But he also says he doesn't see how the Fed could prevent a US recession. His view is that the recession is already baked in. He goes further and says that Ben Bernanke is ‘always aggressive but never early’ meaning Bernanke will get the fed to do something – but it will be small beer until the economy collapses

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Nothing New from Bernanke

Marc Chandler — Fri, 26 Aug 2011 18:00:00 +0000

The much anticipated Bernanke speech in Jackson Hole is under-whelming. He did not break any new ground. While much of the recent history is re-hashed, the only forward looking guidance is to reaffirm the recent FOMC statement and boilerplate language about being prepared to deploy its range of tools as appropriate. He did not go into much detail about those tools. In this sense he was more revealing at his April press conference

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Bernanke: The Near- and Longer-Term Prospects for the U.S. Economy

Guest Author — Fri, 26 Aug 2011 14:27:14 +0000

Ben Bernanke's Speech to the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming

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The Curious Case of Benjamin Bernanke and QE3

Marc Chandler — Fri, 26 Aug 2011 11:30:48 +0000

Market action is quiet ahead of today’s Jackson Hole speech; US Q2 GDP likely to confirm slowdown. We do not expect an announcement of next round of asset purchases; yet doubt Fed will limit tools. EM asset prices are likely to continue trading as high beta irrespective of Bernanke’s speech

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Roubini: No QE3 announcement at Jackson Hole but QE3 will happen

Edward Harrison — Fri, 26 Aug 2011 02:28:28 +0000

Nouriel Roubini spoke to CNBC today about the Speech that Federal Reserve Chairman Ben Bernanke will deliver tomorrow. Roubini does not expect Bernanke to announce QE3 in this speech. However, he does expect QE3 at some point in the future because the economy is so weak

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The Jackson Hole Spaghetti Toss

Guest Author — Wed, 24 Aug 2011 11:00:00 +0000

If the Chairman has to do something, then the real question is what policy response is adequate to a) reviving asset prices and b) returning the US to trend real GDP growth (since the portfolio balance channel appears to be the only one left for monetary policy transmission to work). Many institutional investors may be realizing that is a null set given current political configurations, and so whatever the Chairman delivers - even if he goes boldly where no Fed governor has ever gone before - may have a very short half life, as we saw with the last move of pegging the 2 year US Treasury yield at the fed funds rate

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Now For Something Completely Different: WPA

Marc Chandler — Tue, 23 Aug 2011 16:00:00 +0000

This column argues that while Bernanke will want to show that the Fed still has options at its disposal, with various trade-offs associated, perhaps he may want to also underscore the limitations of monetary policy. If current conditions are somewhat like the Great Depression, then we may need to face up to the fact that it ultimately was not monetary policy that ended the crisis but fiscal policy

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Ben Bernanke and J.P. Morgan on Gold

Frederick Sheehan — Tue, 02 Aug 2011 15:22:33 +0000

On July 13, 2011 Chairman Bernanke explained: "The reason people hold gold is protection against tail risk, really, really, bad outcomes. To the extent that the last few years have made people more worried about the potential of a major crisis, then they hold gold as a protection."

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No Crisis Here

William Black — Tue, 19 Jul 2011 14:26:45 +0000

I decided to look at what President Bush’s Council of Economic Advisors (CEA) were saying in their annual reports for 2005-2007 about the massive real estate bubble, epidemic of accounting control fraud and mortgage fraud, the resultant rapidly developing financial crisis, and the great increase in economic inequality. Here’s what I found on these topics

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Bernanke: “We are not prepared at this point to take further action”

Edward Harrison — Thu, 14 Jul 2011 16:30:52 +0000

One thing I like about the Fed Chairman is that he speaks in understandable prose, unlike his predecessor. Why did everyone think the Fed will ride to the rescue? It’s wishful thinking

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Why does everyone think the Fed will ride to the rescue?

Edward Harrison — Thu, 14 Jul 2011 11:45:06 +0000

There will be no stimulus unless the economy and/or asset markets deteriorate further

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What Bernanke should have said?

Edward Harrison — Wed, 13 Jul 2011 15:30:28 +0000

These questions sound like Congress thinks the US will be the next Greece. And that makes them likely to turn the US into the next Japan. The Congressmen almost never ask questions. They are statements posed as questions to get Bernanke to back their ideological position. Here’s what Bernanke should do when he doesn't want to answer questions. Why doesn't he just do this: point to the debt ceiling debate and say to every single question he’s asked

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Bernanke’s Prepared Testimony for the Semiannual Monetary Policy Report to the Congress

Edward Harrison — Wed, 13 Jul 2011 14:30:31 +0000

Rather than just send you to the link of Chairman Bernanke’s prepared remarks, I have coopied it hear and underlined the part you should pay attention to

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The Federal Reserve is a political organization

Edward Harrison — Wed, 13 Jul 2011 13:00:39 +0000

The Fed could do a number of things: rate easing, municipal easing, inflation targeting, nominal GDP targeting. It is just that “the forward-looking cost-benefit analysis has shifted away from the potential benefits and towards greater costs and risk” of more monetary stimulus. Unfortunately with fiscal policy also tightening, that spells economic weakness

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This is why Sheila Bair blames Bernanke for the credit crisis

Edward Harrison — Tue, 12 Jul 2011 12:40:33 +0000

Yesterday, Sheila Bair wrote an unusual Op-Ed in the Washington Post in that it was penned just after departing a high-ranking government position and it was also highly critical of the government’s policy responses. The obvious conclusion must be that Sheila Bair blames Geithner, Paulson and Bernanke for the credit crisis. Below is a collection of video clips of Ben Bernanke in his own words demonstrating why

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The impotence of monetary policy

Edward Harrison — Fri, 24 Jun 2011 00:30:51 +0000

For my part, I am with Richard Koo. Monetary policy reflation will not work in a balance sheet recession when fiscal policy is contractionary. But at some point, the Fed will be compelled to act anyway

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What are the differences between QE1, QE2 and QE3?

Edward Harrison — Mon, 20 Jun 2011 14:00:26 +0000

Last week, when discussing what QE3 could look like I indicated that were the Federal Reserve to start expanding its balance sheet, QE3 will see interest rate caps after a pause and period of reflection. Let me address the differences between the various QEs here to illustrate why interest rate caps are being contemplated

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Gross and Rosenberg: QE3 will see interest rate caps

Edward Harrison — Wed, 15 Jun 2011 00:48:17 +0000

Yesterday, I indicated that the FOMC has already considered offering unlimited quantitative easing to target specific interest rates during the second round of quantitative easing. I believe the Fed will do this in QE3, and apparently Bill Gross and David Rosenberg do as well. While a QE3 is still a way’s off – probably not until 2012 – it makes sense to think about how it will be conducted

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What QE3 could look like

Edward Harrison — Mon, 13 Jun 2011 20:00:00 +0000

Unfortunately, the US economy has weakened somewhat and so the speculation about QE3 has gathered apace. Let me say a few words on this topic here

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Who’s Fool?

Frederick Sheehan — Wed, 01 Jun 2011 01:16:19 +0000

Legislation to modify debit-card interchange fees cannot compete with celebrity gossip. It is not surprising that lobbying efforts have changed the minds of 19 senators who formerly aligned themselves with consumers and small banks (to which the lower fees do not apply.) The legislators have now hopped in bed with Too-Big-to-Fail Banks. That is politics as we know it

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Sidelights to 1994

Frederick Sheehan — Mon, 02 May 2011 17:30:49 +0000

LURING THE UNSOPHISTICATED into the stock market was considered a risk by Federal Reserve Chairman Alan Greenspan in 1994. So much so, that protecting the individual investor was a mandate of the Fed. (The Fed advertises and then omits new mandates faster than spring fashions. My favorite is the brainstorm of former Fed governor Frederic Mishkin in 2007: "The modern science of monetary policy proceeds under the assumption that the central bank's purpose is to maximize the well-being of households in the economy; the objective function specifies exactly what should be maximized.") On May 27, 1994, Greenspan told the Senate Banking Committee it was for this very reason that he - his FOMC - had started raising rates in February, 1994: "Lured by consistently high returns in capital markets, people exhibited increasingly a willingness to take on market risk by extending the maturity of their investments." The People had shifted assets out of bank deposits and the like. The avuncular Fed chairman, by raising rates, was shepherding his sheep: "[S]ome of those buying the funds perhaps did not fully appreciate the exposure of their new investments to the usual fluctuations in bond and stock prices." Given this acknowledgement, the Fed later violated its Investor Protection Mandate when it did not raise margin requirements: a means to reduce credit to the stock market, but, as much so, a warning of forbearance to those who do "not fully appreciate the exposure of their new investments." The Federal Reserve has absolute authority to raise margin requirements at any time. The Dow rose from 3,757 on May 27, 1994 to over 11,000 in early 2000; the Nasdaq from 733 to over 5,000. During these manic years, households served as sacrificial lambs to finance an economy that was funded by rising stock and bond prices

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Win Thin: Bernanke is giving a green light to the risk-on trade

Edward Harrison — Sat, 30 Apr 2011 01:00:55 +0000

Win Thin of Brown Brothers Harriman was on Bloomberg talking to Tom Keene and Michael Cloherty, head of U.S. rates strategy for fixed income and currencies at RBC Capital Markets, about the global markets for a good fifteen minutes today. Just as I recently posited, Win sees the Bernanke press conference giving a green light to speculators running risk-on dollar-short trades as well. You may think these markets are overvalued. But Bernanke is telling us that zero rates will prevail. That means risk-on. And while they may not be trying to debase the dollar, a byproduct of low rates in an environment where rates are increasing elsewhere is a low dollar. Much more in the video

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James Galbraith on Ben Bernanke’s Press Conference and the Federal Reserve

Edward Harrison — Thu, 28 Apr 2011 18:30:10 +0000

Here is a prequel to Ben Bernanke's press conference from James Galbraith. He seems to think that this approach is risky. But, in retrospect, Bernanke acquitted himself well. Gavyn Davies said it well. That goes to style though. I agree; Bernanke was poised and god on style. But what about the mechanics and the substance? Here are some questions from Galbraith that weren't really asked or answered

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Ben Bernanke’s Press Conference

Edward Harrison — Wed, 27 Apr 2011 20:45:48 +0000

Today marks the first time we are witnessing a regularly scheduled news conference by a Fed chairman in the Federal Reserve's 98-year history. Most reactions to Ben Bernanke's performance were positive, meaning he reiterated the themes he has consistently delivered in the past without making any gaffes. But that goes to style; what about substance? Here's my take

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Meet the Press, Mr. Bernanke

Marc Chandler — Wed, 27 Apr 2011 11:49:36 +0000

The US dollar continued to weaken for the seventh consecutive day, with the dollar index hitting its lowest level since August 2008, ahead of the today’s FOMC meeting. In our view the Fed is likely to reaffirm its ultra-accommodative policy, which has kept up interest in higher yielding currencies, with most of the dollar bloc currencies hitting fresh multi-year highs. Continued evidence of inflationary headwinds in the euro zone, in turn, drove the euro to push through 1.47, while sterling surged after UK Q1 GDP rebounded 0.5%, adding marginal support for an August rate hike

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More thoughts on the new communications strategy at the Fed

Edward Harrison — Tue, 26 Apr 2011 13:45:25 +0000

The Fed chairman is now crafting the Fed's public image just as politicians do. The press conference is a part of that pubic relations campaign. What should we expect then?

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