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Bernanke Is Clueless
- Thread starter AAAintheBeltway
- Start date
I can see how people who were priced out of the housing market are taking some glee in this, but schadenfreude is not a good basis for a central bank to run monetary policy. Clearly there was excess liquidity, and a lot of it went into housing. But the Fed has dual objectives. One is to maintain a sound dollar. The other is to facilitate full employment. Politically, the latter is far more important. The FX market has already priced in anticipated rate cuts, and it's not like the ECB will be raising euro rates.
Bernanke basically has put himself in a box by his indecision. If he had cut when I advised him to, today's news would make him look like a visionary. Now if he cuts today, it looks like panic. If he doesn't, the markets will not like it and next week could get ugly. Then he could find his hand forced the week before an FOMC meeting.
Bernanke basically has put himself in a box by his indecision. If he had cut when I advised him to, today's news would make him look like a visionary. Now if he cuts today, it looks like panic. If he doesn't, the markets will not like it and next week could get ugly. Then he could find his hand forced the week before an FOMC meeting.
Quote from trefoil:
...and all those pairs would be influenced by Fed policy. You're contradicting yourself.
please start to use your brain. influenced yes - controlled no.
the bottom line here is it does not control long term rates. it is easy to imagine fed cutting rates and long rates going higher - remember what happened in the spring?
Quote from AAAintheBeltway:
I can see how people who were priced out of the housing market are taking some glee in this, but schadenfreude is not a good basis for a central bank to run monetary policy. Clearly there was excess liquidity, and a lot of it went into housing. But the Fed has dual objectives. One is to maintain a sound dollar. The other is to facilitate full employment. Politically, the latter is far more important. The FX market has already priced in anticipated rate cuts, and it's not like the ECB will be raising euro rates.
Bernanke basically has put himself in a box by his indecision. If he had cut when I advised him to, today's news would make him look like a visionary. Now if he cuts today, it looks like panic. If he doesn't, the markets will not like it and next week could get ugly. Then he could find his hand forced the week before an FOMC meeting.
well that's exactly the problem, nobody was priced out of housing anywhere. if joe mcdonalds wanted to play homeowner or even leveraged spec - he could.
for older folks who won't be around to see it, this complacent gorging has been fantastic, but for grads and people just starting families, sustainability is important. how do you fix loose money with looser money? it just isn't sustainable
Yes, I know that's possible. And note that I did say in my original post in a parenthetical statement "Influenced, not controlled." Please read and respond to what I actually write, not what you think I wrote.
And if long rates had gone higher in response to a lower FF, that would have been quite a normal response, and would have meant more or less normal conditions in the money markets. The only way to regard that as bad is if you think no growth at all should take place, which is what a flat to inverted yield curve tends to presage.
And if long rates had gone higher in response to a lower FF, that would have been quite a normal response, and would have meant more or less normal conditions in the money markets. The only way to regard that as bad is if you think no growth at all should take place, which is what a flat to inverted yield curve tends to presage.
Quote from AAAintheBeltway:
How exactly do Fed rates impact health care costs?
Substitute the price of food if you wish. It's all the same. I'm sure you can agree that as the value of the USD decreases, inflation in all areas of life is a byproduct. I want interest rates up higher to protect the dollar which will in turn curb the current inflation predicament.
Quote from trefoil:
Greed is always around. The form it takes in finance, though, depends on the environment.
Bernanke set up an environment where there was an incentive to lend to riskier people, because risk=higher rates (every bp over a Treasury rate is a measure of the risk you're taking, as
Greenspan kept real rates negative for years. negative real rates spurred highly leveraged speculation. the bill is coming due. speculation pushe asset prices higher - the dumb money came in at the top - what else is new?
you cant blame this on bernanke - bernanke has been head of the FED for less than 1 year. get a clue already?
Yeah, yeah, yeah. You and everyone else thinks that. Reflexive Pavlovian response around here it seems.
Think about the business of banking, then think about what kind of incentive a flat curve would give you to play games to get better profits. Think, in short, like a businessman, not an ideologue.
The answer to why this happened then becomes obvious.
Think about the business of banking, then think about what kind of incentive a flat curve would give you to play games to get better profits. Think, in short, like a businessman, not an ideologue.
The answer to why this happened then becomes obvious.
Quote from AAAintheBeltway:
One is to maintain a sound dollar. The other is to facilitate full employment.
it is NOT the FED's job to maintain a strong dollar. i think that falls to the Treasury Dept. the FED does not print money, it is a PRIVATE organization. it is owned by the member banks, NOT the govt.
here is the FED RESERVE ACT
To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.
here is
SECTION 2AâMonetary Policy Objectives
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.