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!

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).

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.

It is interesting how the boogie man of the econalypse keeps changing.  First it was subprime loans, then CDOs and SIVs, then CDSs and other derivatives.  These days Schiff, Taleb and others are warning that the worse is yet to come, in the form of a devalued currency and hyperinflation as the Fed and Treasury keep throwing money at the problem.  As much as I applaud them for forecasting the current storm, I think they’re wrong this time.

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