Roubini for Bernanke

July 26, 2009

Dr. Doom praises the chairman, in no uncertain terms:

Mr. Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.

Excellent!

The chairman’s reviews start coming in.

For the record, as I told my friend George back in early ’08, the only good thing Bush ever did was to appoint him.

Throwing money from a helicopter is exactly what we needed, and noone except professor Bernanke could have come up with as many ways to do it that quickly.  This also gives me great confidence he will find the ways to sop up the liquidity as needed.

I have no doubt without his actions we would still be shrinking, everyone freaking out, and unemployment at 15%+

Bloomberg has a great article on the tough spot Bernanke finds himself all of a sudden with long-term rates shooting up.  I was hoping for another 200B in purchase commitments this week, but they have a good point this is unlikely, because….

The Fed probably won’t make any adjustments to the size of the Treasury purchase program before its next policy meeting on June 23-24, in part to avoid reinforcing perceptions policy is reacting to swings in yields, according to Jim Bianco, president of Chicago-based Bianco Research LLC.

“The Fed wants to operate in predictable ways,” Bianco said. “They are also trying to not just look arbitrary, which makes people think ‘I can’t ever go to the bathroom because there could be a press release that the Fed changed the buybacks.’ That’s been a real concern: ‘Wow, I just went to the bathroom and lost $2 million dollars.’”

So why can’t the Fed simply fine tune the current program, purchasing only long-term debt with what remains of the 300 billion they’ve already announced?

Actually, they may be doing just that.  Wednesday’s scheduled purchase is for maturity dates of 2019-26.  Look for that one to be big (10-20B).

Simon Johnson makes an excellent point:

Remember this.  If you run an expansionary fiscal policy (building bridges), I have an incentive to free ride (selling you BMWs) and not engage in a similar fiscal stimulus.  But if you run an expansionary monetary policy, your exchange rate will tend to depreciate, putting pressure on my exporters and I’ll be pushed – by BMW-type producers – towards providing a parallel monetary stimulus.

Europe will come around.  But 1 trillion to Eastern Europe and Latin America from the IMF will help a lot for now.

Ron Paul recently asked Bernanke “What Would It Take For You To Admit You Were Wrong?”.  To which he replied “I’m always open to changing my mind when the facts change”.  Instant YouTube hit.

But this should go both ways, shouldn’t it?

What will it take for Ron Paul, the Free-Marketers and Austrian Schoolers that THEY are wrong about the usefulness of the Fed?

If Bernanke keeps inflation under 5%, is that proof?

Fed’s new tools

March 27, 2009

I told my friend last year the only good thing Bush did was to appoint Bernanke.

This isn’t a very popular opinion I know. But I am convinced that without “helicopter-Ben’s” creative ways to flood the markets with cash the crisis would have been much, much worse.

Will they avert an inflationary hangover?  Based on how they’ve performed so far, I have a good feeling the Fed will find a way.  So Janet Yellen’s recent remarks caught my attention:

The central bank is in talks with Congress about some new tools that would help the Fed’s exit strategy, Yellen said.
One idea would be to allow the Fed to issue debt to sop up excess reserves.
“Issuing such debt would reduce the volume of reserves in the financial system and push up the funds rate without shrinking the total size of our balance sheet,” Yellen said.

Give. Them. Time.

March 22, 2009

A reader at the Baseline Scenario describes just maybe why Treasury is moving cautiously:

Finally, let me remind you that Peter and Simon wrote a piece in the FT just over a month ago arguing AGAINST nationalization. Now, they are all for it. Yes, when the facts change, we change our minds…. but recognize that Tim Geithner  and Ben Bernanke do NOT have the option to change their minds. And they are NOT suddenly sell-outs or economic illiterates. But maybe they know too much about how close we came to the precipice and have become excessively risk averse. Perhaps. But quite honestly, I am not sure I blame them for wanting to be extra prudent. Back in  September, the vast majority of the financial commentariat said  Paulson made the right decision to let Lehman fail – it was not too big to fail. Now it’s the biggest mistake since Mellon liquidated the US banking sector. In such a crisis, certainty is not justified and should be left to the Rick Santellis of this world. At a time when Paul Krugman is disagreeing with Alan Blinder, maybe each side needs to listen more to the arguments of the other.