Bernanke hatred

MarketMasher · May 25, 2013

First of all - Bernanke voted for Greenspan's policies - which means he helped to keep rates low enough for long enough to inflate the dot.com bubble and the housing bubble.

Second - there was no oversight by the Fed of the garbage MBS created and sold - he admits this himself.

Third - with MERS being unreliable and just a dodge for the big banks to not pay county filing fees, the underlying mortgage-backed crap is questionable. However, the Fed is "buying" them at face-value (paying too much for legally questionable paper) - in effect functioning as a money-laundering bank - replacing "bad" money for "cleaned" money for the TBTF banks.

Maybe attaching a name to this is pointless - it is how the system was set up to function by the people who originally set up the system. To look back and see who set up the system, ask, who benefits from the system as it functions now - and who doesn't?

pfranz · May 25, 2013

Quote from MarketMasher:

Maybe attaching a name to this is pointless - it is how the system was set up to function by the people who originally set up the system. To look back and see who set up the system, ask, who benefits from the system as it functions now - and who doesn't?

Yes, don't attach a name.I'm not saying they didn't steal/make errors (I agree with the points you make), but why all modern economies are now in trouble and not just US?

Who benefits from the system? As I said, I think we all got richer.

I don't know which system you are talking about, the important things I see date back to 1800 or 1600 (tulip market crash in Netherlands).

Waiter, can you please bring me a plan?

trkarl · May 25, 2013

Quote from pfranz:

So, all the people criticizing Bernanke, please tell what he has to do. [/B]

Take the Harding approach,

snip:
"The United States, by contrast, allowed its economy to readjust. "In 1920â21," writes Anderson,

we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.â¦ The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.

The federal government did not do what Keynesian economists ever since have urged it to do: run unbalanced budgets and prime the pump through increased expenditures. Rather, there prevailed the old-fashioned view that government should keep taxation and spending low and reduce the public debt."

http://mises.org/daily/3788

Humpy · May 25, 2013

Quote from pfranz:

Yes, don't attach a name.I'm not saying they didn't steal/make errors (I agree with the points you make), but why all modern economies are now in trouble and not just US?

The failure imho is democracy. The stringent policies needed to cope with the present financial failures are just not possible if the parties are going to try and get votes.

The US has been the champion of "free trade " for decades. All of a sudden now that it is in trouble, " free trade " is working against it. The 3rd world has made amazing strides in competition. Cars etc. are produced cheaper elsewhere. Either politicians accept this as a fact and look forward to a gradual decline in US GDP or they are living in cuckoo land. Will the bosses and labour accept lower wages to compete ? I don't think so. The Fed's antics are just a smoke and mirrors trick by the politicians to gloss over unpalatable facts.

Humpy · May 25, 2013

Quote from trkarl:

Take the Harding approach,

snip:
"The United States, by contrast, allowed its economy to readjust. "In 1920â21," writes Anderson,

we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.â¦ The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.

The federal government did not do what Keynesian economists ever since have urged it to do: run unbalanced budgets and prime the pump through increased expenditures. Rather, there prevailed the old-fashioned view that government should keep taxation and spending low and reduce the public debt."

http://mises.org/daily/3788

Well worth a read if you have 1/2 hour to understand these financial crises.

pfranz · May 25, 2013

Quote from trkarl:

we took our losses

That's the point. It is what I'd like to do as I wrote in other posts.
But problem is the public.
This solution means apparently "doing nothing".
Imagine the FED doing nothing, the economy collapse, and the Keynesians shouting "you have to pump money in the system,why don't you do it?"
Nowadays the average people is used to refuse suffering,pain,difficulties much more than in the past,in my opinion: we are "civilized" and don't have to suffer anymore,progress has eased our life.
I think now the situation is different also because the world is much more interconnected, as Nassim Taleb pointed out.
So,if in 1929 an US crash had a not-so-huge impact on the rest of the world,what would happen now? Remember that debt/growth problem is not only in the US.
Would you take the responsibility of letting the entire world crash probably more badly than in 1929 without doing nothing,without having ever tried to stimulate the economy with Quantitative Easing?
I think that in a scenario like this, anyone doing this would eventually be killed.
I agree that 1929 is the way to go, but it is just an opinion, we don't have enough practical cases in the past that clearly show that our idea is better than QE.
That's why I ask "what would you do in his place?": if I were alone in the world, yes, I'd probably let everything crash, but as there are 6 billion people besides me, I'd feel as if I were making experiments with real human beings.

Covertibility · May 25, 2013

Quote from trkarl:

Take the Harding approach,

snip:
"The United States, by contrast, allowed its economy to readjust. "In 1920â21," writes Anderson,

we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.â¦ The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.

The federal government did not do what Keynesian economists ever since have urged it to do: run unbalanced budgets and prime the pump through increased expenditures. Rather, there prevailed the old-fashioned view that government should keep taxation and spending low and reduce the public debt."

http://mises.org/daily/3788

The 1920 depression was not a result of a systemic banking crisis like the previous Panic's or what we had in 2008. I think one should read up on the Panic's of prior years, specifically the Panic of 1907 and Morgan's intervention, to understand why Bernanke, through QE, and the govt, through stimulus, did what they did to avoid a depression.

pfranz · May 25, 2013

Quote from Covertibility:

The 1920 depression was not a result of a systemic banking crisis like the previous Panic's or what we had in 2008. I think one should read up on the Panic's of prior years, specifically the Panic of 1907 and Morgan's intervention, to understand why Bernanke, through QE, and the govt, through stimulus, did what they did to avoid a depression.

Good point. I'd add that besides systemic banking crisis we have systemic government debt crisis and everything is linked.
So be careful when you say: OK, let's crash the world and start fresh.
And I'd say that Bernanke & Co. should be selected professionals: I don't think it's easy to become the president of even a local FED, I think it takes some qualities and merits, at least sometimes. I mean, they can't be all just dumb thieves sitting there only because they're someone's friend.
Are you sure you perfectly know and understand the reasons why they do what they do?

trade2live · May 25, 2013

Quote from pfranz:

I don't think it's easy to become the president of even a local FED, I think it takes some qualities and merits, at least sometimes. I mean, they can't be all just dumb thieves sitting there only because they're someone's friend.

They are brilliant guys in their theoritical field indeed, and they are selected because they will serve their masters. Look at what happens to dissenters and loose cannons in central banks, they end up leaving.

"not doing anything" is not an experiment, it's letting nature run its course, trying to do something IS the experiment. Central banks just like govt should only provide the best conditions for prosperity but they should not manipulate prices and the economy.

piezoe · May 25, 2013

Quote from Humpy:

I mean owned by the State not by private concerns. BUT independent. So they can tell the politicians, not grovell to them like now. Then the Chairman should be appointed for a 5 year term by an equal Rep/Dem comittee. Put in charge of the regularity bodies etc. in other words have considerable clout. Poor Benny looks like a rabbit and acts like a rabbit.

Humpy. Go to the Fed website. The structure of the Fed is explained. Also, there are good Wiki articles dealing with it.

The Fed is already "nationalized". It's an independent agency of the federal government. It is not privately owned, as many people think. Private banks do have the option of choosing to be a part of the reserve system (over 3000 have). If they chose to join, they are required to provide some capital and in return the Fed issues some "stock" to them, but this "stock" is very different from equity in a private, for profit corporation, and imparts no ownership rights. The Fed pays for the use of the member banks capital by issuing a dividend. All of Fed profits, after expenses, flow directly back to the U.S. Treasury. Member private banks, other than receiving a dividend (see the Fed site for latest dividend) for use of their capital, do not share in any way in the money earned by the Federal Reserve System.