Treason?

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

ALERT: Bernanke orders an Operation Twist QE Code Red

The Fed is not just doing QE via Operation Twist, it is also throwing in some mortgage-backeds to up the ante a little bit

This is starting to feel a lot like 2008

I was on BNN this afternoon talking about the Fed running out of ammo, America banks getting downgraded, European banks needing $300 billion in capital, and Greece defaulting on its debt obligations plus a host of other issues – none of them good.

A Policy "Twist" is Better than None

European market consolidates ahead of FOMC decision; GBP softer after potential for QE increases . Operation Twist is likely to be supportive of the dollar; dovish actions include QE and inflation target. Hungarian central bank likely to offer FX reserves; Brazil CPI surprises to the upside, CBRT dovish

Continued Policy Mistakes in Brazil

BRL is one of the worst EM performers today, and continues a string of underperformance (-10.8% vs. USD) that began with the unexpected 50 bp rate cut August 31. Since then, only HUF has done worse at -11.5%. It’s really a confluence of factors, but markets are clearly punishing Brazil for its continued efforts to weaken the currency, which have distorted markets there. Besides the countless FX measures, of which Friday’s was only the latest in a long line of poorly communicated policy shifts, we are now seeing even more distortions added into the economy with the imposition of import tariffs to help protect domestic manufacturers. Not only is this inefficient from pure trade theory, but it will also likely add to already high price pressures

The Unusual Case of Euroland

In the next series of blog posts, we will look in more detail at fiscal and monetary operations of a nation with a sovereign currency. Before we do that, let us briefly examine the case of the Euro. Let me say that we will not address the unfolding crisis across Euroland in detail. The reason is that events are moving too quickly and we do not know where they will lead. This primer in some sense needs to be “timeless”—anything specific that we discuss will quickly become outdated. The fundamental point to be made here is that the Euro arrangement was flawed from the beginning. Crisis was inevitable—as I have been writing since the mid 1990s. There is no way the system as designed could possibly survive a significant financial crisis. And a crisis began in 2007. Due to flaws in the set-up, it was obvious (at least to those who adopted MMT) that the original arrangement was not sustainable. We could not say for sure how the resolution would turn-out, but a fundamental change would be required

Monetary Policy and the Future of China

There is a road open for China involving controlled inflation that would lead to re-balancing, both domestically and internationally, which has some uncertainties. These must be compared to those of sustaining the export-led growth model, basically an even bigger currency mismatch in the PBoC balance sheet and ever more unproductive capital investments

Asian central bank preview: on hold for now

In the Asian EM space, central banks from Malaysia, the Philippines, Indonesia, and South Korea all meet this Thursday. We don’t see any change from these four central banks and in general we believe EM central banks have moved into dovish wait-and-see mode for now, with the obvious exception of Brazil and Turkey, who have both cut. At some point, more EM central banks are likely to cut if the global outlook worsens, but we think it is prudent, and likely, that most remain on hold for now. Markets are, however, punishing countries that have cut rates with an eye towards a weaker currency, Brazil and Turkey

Rosenberg also sees Operation Twist QE3

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

Goldman’s Hatzius sees Operation Twist QE3 due to weak jobs number

The jobs numbers in the US were weak. There was no change in non-farm payrolls. Unemployment was unchanged from July at 9.1%. Underemployment was 16.2%. Total revisions to previous months’ data were –58,000, meaning the number today was equivalent to -58K print. The numbers sparked a selloff in stocks and crude oil, but caused the Swiss Franc and Treasuries to rally

Nothing New from Bernanke

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

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

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