The Federal Reserve cannot solve all the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector.

-Ben S. Bernanke, chairman of the Federal Reserve Board of Governors

>

The Washington Post has this morning’s must read OpEd, in which Ben Bernanke attempts to explain/justify/rationalize the Fed’s actions, as well as containing a plea for help from Congress:

“Notwithstanding the progress that has been made, when the Fed’s monetary policymaking committee – the Federal Open Market Committee (FOMC) – met this week to review the economic situation, we could hardly be satisfied. The Federal Reserve’s objectives – its dual mandate, set by Congress – are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills.

Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling. In the most extreme case, very low inflation can morph into deflation (falling prices and wages), which can contribute to long periods of economic stagnation.”

I am not sure who he is speaking to: The new GOP House, the Tea Party, or the American public.

At a certain point, he will merely be creating a diary for future Fed historians. As of now, he seems to be trying to defend the institution against further political oversight and over manipulation — and asking for some help from Congress . . .

>

Source:
What the Fed did and why: supporting the recovery and sustaining price stability
Ben S. Bernanke
Washington Post, November 4, 2010  
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html

Category: Economy, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

71 Responses to “Bernanke: Why We Did What We Did”

  1. Guilty conscience for all of those retirees and older, prudent savers on whose backs his inflationary policies will weigh heavily?

    or

    Mea Culpa in advance?

    Take your pick.

    Is this what you would expect from someone in government who is supposedly “apolitical”?

  2. awells1902 says:

    Here is the thing about $600B. It equals 6 million jobs at $100,000 per year. Perhaps the Fed could simply hire all the unemployed to bring a morning coffee to their staff over the next 8 months. We could have, at least over the next year, Chinese like GDP growth. They expect 0.5 % GDP improvement. If we must blow it, at least make it count.

  3. foosion says:

    Who’s he speaking to? This paragraph may contain a clue:

    >>The Federal Reserve cannot solve all the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector. But the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.>>

    Inflationary policies? Yep, inflation has certainly been soaring over the past year or two.

    >>Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.>>

  4. Mike in Nola says:

    No need to worry about Congressional regulation as long as he gives the bankster more money for levering up in the latest hot spots. Ron Paul can rant all he wants, but the masters will protect the Fed.

  5. b_thunder says:

    This is nothing but a first stage of Bernanke’s self-defense: defense of unwarranted, corrupt, and largest ever wealth redistribution scheme while trying to mask it as “deflation fighting”?

    “This approach eased financial conditions in the past and, so far, looks to be effective again. Stoc
    ck prices rose and long-term interest rates fell when investors began to anticipate the most recent action” – investors or the stock/commodity speculators? Anyone knows of an investment made in expanding a business in the USA that would hire workers in the USA?

    “And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion. ” – here we go, THE REAL reason is to jack up stock/commodity prices. Did anyone ever mention to Ben that half of the population don’t own any stocks? Not outright, not through retirement funds. But they still have to fill up the car. And when gas hits $4, and $5 soon after – sure as sh*t they will spend more. On gas. And a lot less on everything else. The cash will go to Exxon, BP, arab sheikhs and russian oligarchs. How is that going to stimulate EMPLOYMENT in USA?????

    I used to own stocks…. but partially on moral and partially on risk/reward principles I refuse participate in this Ponzi as long as the Fed is manipulating prices. Thankfully there are other asset classes.

  6. Expat says:

    Argh, is there no limit to the lies and bullshit we must endure from our leaders!
    The Fed’s first mandate is to conduct the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.

    I don’t seem to see any reference to “low, stable inflation.” Nope, none. Stable prices are not the same as stable inflation. And “low” is hardly a scientific expression. What’s low for me isn’t necessarily low for you. And the measures of inflation are contrived, manipulated and unreliable.

    Basically Bernanke is a lying tool of the establishment. Unfortunately, given the general level of indebtedness of our nation as a whole and the individuals who comprise it, inflation is really the only way out of the hole. Actually, that’s not true…it’s the only to keep floating on top of the filthy water at the bottom of the hole as the hole gets deeper and deeper and deeper.

    But, hey, one day the hole will be so deep that it will open up on the other side and spew all the shit and distressed borrowers all over…China! Revenge will be ours!

  7. Sechel says:

    Missing from Bernanke’s discussion was any mention of the lost income to the savings class and people living on a fixed income. Also missing was any discussion of the effect of the quantitative easing on our Nations’s pension funds and Insurance industry who are now faced with the dilemna of not being able to fund their obligations or to invest in speculative(i.e not conservative) investments.

    There was also no discussion of the obvious front running that will take place by the big banks ahead of each Fed purchase. A skeptic would say one of the goals of QE2 is to transfer additional monies to the banks, which suggests that providing zero cost of funds is not sufficient to get the banks on their feet.

  8. dougc says:

    Thunder nailed it. What QE2 is about has nothing to do with stimulating consumption or increasing employment but preventing stock prices from falling. Another bubble anyone, this time it will endly differently. ha ha

  9. MayorQuimby says:

    $600 billion is…get ready for it…

    $1,800 per American.

    That’s it.

    $1,800 bucks. That’s two weeks of salary.

    And how many trillions of bad loans are on the banks’ balance sheets?

    What a sh*tshow. This malaise will not end until the Keynsian idiocy is ousted from gvmt once and for all.

    ~~~

    BR: I am not sure QE is Kenysian — as opposed to say, stimulus spending on Infrastructure …

  10. Petey Wheatstraw says:

    “I am not sure who he is speaking to: The new GOP House, the Tea Party, or the American public.”
    ________________

    He’s not speaking to the middle class, that’s for sure. The baseball bat of disenfranchisement — wielded upside the head head of the likes of most of us does the talking for the corporatists (truth be told, he’s not really speaking at all — unless gibberish and/or shuckin’ and jivin’ have become recognized languages).

    Bernanke is the PR guy/apologist for the criminal cabal.

    Nothing has been unwound, and nothing will, until the people who engineered this robbery of the Treasury start getting arrested and the enterprises and scams they put in place are demolished and replaced with a system based on reasonable, prudent, and enforced regulation.

  11. Petey Wheatstraw says:

    Keynesian economic theory did not cause this crisis, and it will not, because it cannot, resolve it (any more than diet can control or negate the effects of cigarette smoking).

    Criminality caused this situation, and the passage and/or enforcement of laws are the only policies that can fix it.

    To blame an economic theory that was never adhered to in the first place only distracts from what need be done.

  12. wally says:

    “That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector.”

    Bernanke is 100 percent correct. Unfortunately, blundering idiots have now been placed in Congress, so they will do less than nothing and the administration will do little. Bernanke would be wise to keep making this statement in public over and over and over.

  13. trail says:

    He finally came out and stated that one reason for this was to prop up the stock market. The FED is now blatantly manipulating the stock market. Do you think this is a one way elevator, or will the FED attempt to drive the market down during inflationary periods? Most small investors already think the market is rigged, now they know for sure.

  14. Petey Wheatstraw says:

    “That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector.”
    ________

    We have regulators?

  15. Greg0658 says:

    under Clinton1 we sold off the factory base for profit .. under Bush2 we built buildings for get-up-&-go w/cheap money (the MIC did most excellent too) … NOW WHAT …

    ‎”under Clinton1 we sold off the factory base” let me sub-define that .. the Commerce Department allowed the USAs corporations and venture capitalists to take 1. Savings 2. Defined Pension 3. 401k Accounts and invest in foreign ventures … hense we really planted the factory base over there unwittingly ourselves

    new here @TBP .. give the BBguy a break .. I think he is trying to fix the mess .. (and maybe get you guys back on an assembly line instead of keystrokes)

  16. dead hobo says:

    Thanks, Ben. To me this is just a transfer payment, and its probably the same thing to you. Also, thanks for the bit about your support of asset prices. That was the deal clincher. You made a lot of tin foil hats disappear with that little remark. For the next few months, even Jim Cramer will look smart. I’ve got 1/2 of one foot in now and will have at least 1 foot plus a little of the other by the middle of next week. Some won’t go in until late December because its going into taxable mutual funds and I don’t want to pay capital gains on someone else’s fun. I promise to buy shit after the profits look secure. Please don’t be mad if I consider cashing out next summer, at least for a little while. I’m not greedy and I’ll need to size up the greater fool landscape when the cash dries up. Ben, you’re the best, buddy.

  17. Lugnut says:

    “The Federal Reserve’s objectives – its dual mandate, set by Congress – are to promote a high level of employment and low, stable inflation”

    There’s your problem right there, Congress abdicating it’s responsibility and authority and giving it to an inappropriate agent. I would no less tell my daughter she’s responsible for all the home repairs, and expect for her to accomplish it with the skills and tools at her disposal.

  18. call me ahab says:

    blundering idiots have now been placed in Congress

    I guess all the independents who voted them in just aren’t as smart as you Wally (why Wally why?)- maybe in some kind of crazy future you will be able to hand select who sits in Congress-

    I am certain that would turn out well

  19. rktbrkr says:

    “We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time”

    What exactly are their preparations to unwind their $2T+ positions?

    What will happen when they swing from major buyer to major seller? Will they have a couple years to graciously exit their positions without causing a tsunami. They have been buying at or near the top, their selling will be on the way down, if they sell slowly they’ll be taking big losses, if they sell abruptly they could cause the tsunami, if they don’t sell that will be hugely inflationary, buying 2-3trillion of financial assets in a 14trillion economy, no new widgets, factories or tunnels – just paper.

    Lets say they judge the economy is finally recovering but the US deficit is still huge and unemployment is still 8-9%, do they have the political nerve to move their right foot from the gas to the brake with employment still high while also drive up the borrowing costs of the US? Of course not!

    This is just another round of reckless can kicking. I think their unspoken plan is to make lemonade out of lemons and try to manage the hyper inflation caused by QEx to avoid a formal currency devaluation and allow the US to repay the foreign debt with peso-like dollars, stiff retirees by permanently freezing COLA for Social Security and other “entitlement” payments, allow the banks (and themselves) to escape the RE trap they have sprung on themselves by making every house a million dollar home etc

  20. Petey Wheatstraw says:

    Greg0658 Says:

    “new here @TBP .. give the BBguy a break .. I think he is trying to fix the mess .. (and maybe get you guys back on an assembly line instead of keystrokes)”
    ____________

    Bernanke has taken a very bad mess and made it worse. Tried to put out a fire with gasoline, and he’s the equivalent of the Fire Chief. Dude is an arsonist.

    If you think those who comment here ever worked an assembly line (there might be a few, but I doubt it), you have made a ridiculous assumption.

    The only line BB has put people into is the line for extended unemployment benes.

    Maybe you should spend the next couple of months reading TBP archives.

  21. dead hobo says:

    BR, about that sentiment thingie you like to think about … would some of the negative remarks posted here, given recent events, qualify as blood on the street?

    ~~~

    BR: No, self selecting group, probably not representative

  22. Robespierre says:

    It is hard to see that QE2 will work the same way as QE1 considering the rest of the world does not seem to be willing to go along this time. I’ll like to see the reaction of other governments (the BRICs may be) this time. So far the eurozone has done nothing but for how long?. I expect some very significant unintended consequences out of QE2.

  23. lalaland says:

    “I am not sure who he is speaking to: The new GOP House, the Tea Party, or the American public.”

    The election proved to us they are one and the same.

    Also, remember, taking away the fed’s independence is another plank in that tea party platform. We could hypothetically hamstring the one operator left in the fight against deflation; make Japan look like a walk in the park on an endlessly sunny day.

  24. rktbrkr says:

    BB was making his plea to Congress – all the other players are the same. He is asking the newly elected in Congress to listen to him and not the people who elected them and play nice with him and the admin. Allow him to continue his tender care and feeding of the TBTF banksters and other corporate welfare recipients while Main street twists in the breeze.

    Not only will the newly elected Rs and tea baggers push back but Dems who hope to be reelected in 2 years will be singing from the same hymnal too.

  25. rktbrkr says:

    We are headed to a financial manic/depressive situation here where BB will be stuffing the Wall street geese while the US and the state and local govs will be imposing financial austerity on Main street. Fois gras for the banksters and dog food (less smelly than cat food) for main streeters.

  26. Sechel says:

    Bernanke wrote that op-ed to muster support for his initiative. The Fed very much has a P.R. machine and this is part of it. They understand that while they are not accountable in the same way as an elected official, the public can demand a change via Congress. If and/when(and I think this likely) that the latest quantitative easing initiative fails by producing a bubble, higher inflation and a weak dollar the public will demand an audited Federal Reserve with greatly diminished powers. The Fed has taken on way more than simply managing monetary policy here. It’s very scary.

  27. dead hobo says:

    Robespierre Says:
    November 4th, 2010 at 9:18 am

    It is hard to see that QE2 will work the same way as QE1 considering the rest of the world does not seem to be willing to go along this time. I’ll like to see the reaction of other governments (the BRICs may be) this time. So far the eurozone has done nothing but for how long?. I expect some very significant unintended consequences out of QE2.

    reply:
    ————
    Absolutely. On a macro economic level, it’s a disaster. The dollar will fall, the price of imports will rise. It will stratify society like nothing else. The rich will get richer and the poor will get poorer. Foreigners will consider and implement currency controls to protect their economies. Their equity markets will ignore them.

    But that’s not the point with me. The nearly $1T of cash being doled out until summer with the express intention of supporting asset prices is nothing more than a transfer payment for all who want to apply for piece of it. The price of admission is investment. Anything from overseas that will be priced in dollars, such as foreign equities, will reflect the ocean of cash washing over their markets. US Exporters will have pricing power since they will be paid in crappy dollars. Value stocks will benefit due to a hunt for where to put hot money. Tech always appears to rise when hot money floats around. Then, early 2011, the dumb money will arrive after they sense something going on that looks pretty good. Sales pundits will be happy to rope them in.

  28. Petey Wheatstraw says:

    Sechel Says:

    “. . . the public can demand a change via Congress.”
    ___________

    Just as they have been demanding it since 1980, or so. We got change, all right.

  29. whskyjack says:

    It looks to me as if BB started smelling the hot tar and noticed the pitch forks.
    I don’t think it is a coincedence that he comes out with a detailed explanation, aimed at the average person, just 2 days after the election. I, also, suspect he is getting as frustrated with Washington politicos as the rest of us.

  30. Robespierre says:

    @dead hobo Says:
    “US Exporters will have pricing power since they will be paid in crappy dollars. Value stocks will benefit due to a hunt for where to put hot money. Tech always appears to rise when hot money floats around. ”

    Actually I like tech for a different reason. I don’t expect China to de-peg and most US tech companies manufacture in china (and will continue to do so). However, I still think that silver and gold will do better than “factories” and I expect Barry to lose his gold bet :)

  31. rktbrkr says:

    If Congress and the states impose austerity measures then BB will have to expand and extend QE, this is his party and he doesn’t have to account to the little people for his actions.

    Maybe there will be enough votes in Congress now for a comprehensive audit of the fed, boy that will create a run on pace makers.

  32. Mannwich says:

    Gotta hand it to him. Never thought he’d be able to blow another bubble (or series of bubbles) so soon, but never underestimate just how greedy and shortsighted human beings can really be. Get in now or be priced out forever.

  33. Mannwich says:

    And, by the way, that’s “cover your ass” corporate-speak by Benny. He’s well versed in that lingo, it seems. What he should have said is, “the Fed can’t ruin our economy and control alone, it will need help from Congress, the president, and the entitled parasites on Wall Street and in the executive suite in big corporate America.”

  34. Mannwich says:

    Exactly Petey. Let’s not get diverted here. This is about fraud and criminality. Always has been.

  35. Darkness says:

    I think he’s saying, “Hey, you made me put this gun to your head. And Hey, you made me pull the trigger . . .”

    That’s how I read it. Defensive too. Yikes.

  36. Sechel says:

    Peter, The public has not been overly vocal about a change at the Fed. It’s only been after the banking melt-down that their support has started to wane. One more blow-up/Fed screw-up and they’re toast.

  37. Greg0658 says:

    I saw on CNBC a couple days back a segment that USA manufacturing is 1st in the world @21% and China was 3rd with 13% .. I forget who was 2nd … but I told the tvscreen “I don’t believe that” .. “maybe USA patented products reimported under the Made in the USA label” … and if that 21% was true just think what the trade deficit would be when China pegs … we better get the American Dream costs down a peg or 2 or 3 .. or tell J6P he needs to raise his kids somewhere else

  38. Joseph Martinez says:

    Gentle Ben Cocktail

    1 part vodka
    1 part gin
    1 part Tequila

    Instructions:
    Put all ingredients with ice in the punch bow with ice. Top off with orange juice and stir. Decorate with cherries

  39. JimmyDean says:

    Yeah, saying we did this because the “Federal Reserve has a particular obligation to help promote increased employment and sustain price stability” is a lot different than saying “we did this because it was the right thing to do”
    Has any country ever successfully inflated their way out of a GDP to Total obligations ratio as high as ours (approx. 8:1)?
    More currency war anyone?

  40. gordo365 says:

    How about BR steps up with Glen Beck and Jon Stewart – and launches the “Rally to restore passbook savings rates” with 50,000 fixed income seniors swarming (slowly with walkers and electric scooters) the Washington mall.

    Of course travel expenses for all attendees would have to be covered – since they are fixed income and making S**T on their savings.

    Playing off the low rent candidate.

    CNN “Mrs. Smith – why didn’t you attend the rally?” – Smith “Because I’m a fixed income senior, and my passbook savings rates are too damn low…”

  41. KentWillard says:

    With the change in control of Congress, Ron Paul is in line to become chairman of the Subcommittee on Domestic Monetary Policy. So the leading proponent for abolishing the Fed will be in charge of Fed oversight. Bernanke’s life could get even more difficult.

  42. cognos says:

    What a bunch of silly bears on this board.

    1) The Fed DOES NOT “spend” the $600B. They go out and buy securities, mostly treasuries, that EARN interest. The $600B will be returned to them when they sell these securities… or gradually over time as the securities pay interest and principal.

    Get it. This costs $0. Its just a balance sheet move. Push cash $ out into circulation, take securities onto the Fed balance sheet.

    Therefore comparisons with “giving people money” or “hiring 6m people for 1-yr” are NON SENSE. Total F-ING non-sense. Ignorance is best kept to oneself.

    2) Why dont people get that we have deflation? Even Bernanke does not quite admit it in his op-ed piece. Yet the main CPI index — US CPI Urban Consumers — peaked on Jul 2008 (!!! seriously) and today stands just off those levels at 218.4. Peak was 219.96. Thats 1% deflation in 2 years.

    So… if contracts plan on 2% inflation… the 219.96 level would be expected to be above 228 today. We are SHORT of expected inflation by over 5%. This explains the entire banking, foreclosure, unemployment issue. Its just the Fed mis-setting the price level, in a fairly large way.

  43. A special quote, for all you Keynesians out there, from the man himself:

    “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

    ~Cognos must be one of the profiteers.

  44. ashpelham2 says:

    Cognos makes a valid point.

    There is a lot of hand-wringing here. I usually am one of the bears, and a pessimist by my very nature. While I do see some temporary issues with commodity prices going to high and putting pressure on the consumer, this might be a BIG PICTURE moment. In other words, while we should see a short term drop in dollar value, the end result will be to re-inflate and grow the economy through more private dollars in circulation.

    Still, even though i can see that there is a goal in mind by this latest Fed move, I can’t help but also ask the question: when to let off the accelerator? And how can it be done without quickly undoing all the good that this asset purchase might do? We do not have the manufacturing base right now, and it’s not going to come back until wages increase in the manufacturing countries of China, Indonesia, etc. What can cause us to be able to level the playing field? Well, it certainly isn’t by pushing commodities higher for the average working consumer…The key is to get China’s costs higher, so that it makes less sense to make things there than here. Right now, it’s shooting fish in a barrel.

    I just wish the Fed, if it does anything at all, would work alongside government to help the deleveraging process move along. That is where we really are. We have a lack of demand because people don’t want more debt. If we can move that deleveraging process along, folks will go back to normal spending, and maybe even spend a little more. That is a GOOD.

  45. Mannwich says:

    @ash: Check out this chart on unemployment. How much QE will be needed to bring this line down in any significant way? And how much of that QE will cause big spikes in food and energy prices? I’m already seeing big price spikes here in food and to a lesser extent gasoline. That has a big impact on most people, if not the parasitic cognos’ of the world.

    http://www.calculatedriskblog.com/2010/11/weekly-initial-unemployment-claims.html

  46. machinehead says:

    Bernanke is ramping securities prices by overtly stealing purchasing power from securities holders.

    The Federal Reserve should be abolished, and its board members indicted for racketeering, fraud, grand larceny, conspiracy, wire fraud, and money laundering. For starters.

    A nation run by criminals has no future.

  47. Grace Styles says:

    Find it increasingly difficult, if not impossible, to believe US QE2 has anything to do with the real economy, and am very sceptical about Bernanke’s “trickle down” economic theory and justification. More and more economists, including here today http://www.mindfulmoney.co.uk/2211/economic-impact/real-economy-the-loser-from-us-qe2.html….seem to be saying that all it will end up doing (mostly) is increase appetite for risk, create asset bubbles in emerging markets. I do think USQE1 had some success (certainly much more UK QE1) because it was structured and targeted correctly – it even stimulated some lending. With yields so low and households develeveraging, the latest one is out of time and place, it will do very little apart from effects noted earlier.

  48. itsme says:

    Cognos,

    You don’t see a Circle here?

    Government needs money & issues treasuries.
    Fed creates money out of thin air and buys these treasuries.
    Government pays Interest to Fed.
    Fed makes profit and pays this back to Government.

  49. “In other words, while we should see a short term drop in dollar value, the end result will be to re-inflate and grow the economy through more private dollars in circulation.”

    Dude, you have bought the kool-aid, that even the Fed admits is laced w/ strychnine. Changing the accounting does not change reality, and “more private dollars in circulation” is just a change in the accounting.

    The Fed can improve things through inflation only if by doing so they make real wage rates decline until it is again profitable to hire American workers.

  50. FormerlyknownasJS says:

    Risk: on

    I see this public avowal of support for stock prices by a Fed chairman as a watershed event. It is comical in retrospect to think back to all the endless and acrimonious debate everyone had about whether or not the Fed did or did not or would or would not support the stock market, all the tin foil accusations etc etc. Now it is settled. As usual, and unsurprisingly, the cynics win.

    Now what we need is the Fed to state its price targets for the different stock indices. I’ve been looking at the 20th century as a model and I’m guessing 30-50K on the DOW within 15 years. Amazingly enough, it looks like they need to get the DOW to 1 million plus by the end of the century. But hell, if they’re just going to print it, that shouldn’t be a problem.

  51. FormerlyknownasJS says:

    Correction: I meant DJIA, not DOW

  52. notakid says:

    @THEcurmudgeon

    You, SIR are on a roll today.

    Sad that no matter what the sane among us think, this thing is going to blow chunks and wipe out any hope for the lower 40-50% of peeps.

    A tragic time for those at the edge.

  53. Mannwich says:

    @formerly: The PPT lives on baby!

  54. I see gold and silver have gone over and kicked Bernanke’s argument square in the teeth

    =============================================

    @MayorQuimby Says:
    November 4th, 2010 at 8:07 am

    $600 billion is…get ready for it…

    $1,800 per American.

    That’s it.

    $1,800 bucks. That’s two weeks of salary.

    Something tells me that if they had just cut a check for $1,800 to every American it would do a lot more to boost the economy and economic activity than what him and his friends plan on doing with the money. But we all know that is not what this is about

  55. Estragon says:

    Cognos has is right. The money quote from BB is “most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. This is consistent with other recent fed comments, and is a defacto inflation target. QE is targeting that rate, and BB’s communication strategy is to bring public expectations to that target rate.

    Curmudgeon also has it right when he says “The Fed can improve things through inflation only if by doing so they make real wage rates decline until it is again profitable to hire American workers.“. Wages are very obviously above a market clearing level given unemployment rates, and since wages are sticky in nominal terms, the fed is creating higher inflation expectations, which they expect will bring wages to market clearing levels in real terms.

    Whether this is the correct or best policy is a subject for legitimate debate among reasonable people, but it clearly is the policy.

  56. Long term says:

    Dear BB, this has no good long term outlook. I trust that my ephemeral electronic gains from your new QE will theoretically balance out my higher cost of gas, apples and baby formula. But you are going to make me play it exactly right to achieve that; not to mention the preponderance of folks will pay more for gas, apples and baby formula but will NOT look forward to electronic gains.

  57. itsme says:

    Quote:

    Let’s get something straight right off the bat… the “Fed” is OWNED (literally) by private banks. They act in THEIR interest. Understanding this is key to understanding why their actions help the banks and work AGAINST the people. Simply look at the BANK STOCKS following the FOMC announcement yesterday and you will see WHO was helped by this CRIMINAL activity. Which, by the way, is BIGGER than TARP and yet has NO CONGRESSIONAL approval or oversight. In fact, Ben Bernanke in sworn Congressional testimony said, “The Fed will not monetize the debt.” And yet that is exactly what they are doing, and yes, that is PERJURY. Yes! Bernanke should be JAILED as he is inflicting SEVERE damage to our nation.

    (..)

    Let’s get something else straight about yesterday’s announcement… it was NOT just $600 Billion! It was $600 billion ON TOP OF QE1, but what is clever about the announcement is that the time period only runs through the end of quarter 2 of next year! QE1 and QE2 working together amount to $110 Billion per month, or $1.32 TRILLION annualized! Effectively this means that we are PRINTING the entirety of our national deficit. Remember, we only take in approximately $2.5 Trillion in taxes, this means we are printing 50% more than that out in the open.

    (…)

    Continues: http://economicedge.blogspot.com/2010/11/morning-update-market-thread-114-qe2.html

  58. dead hobo says:

    I just went back for another big gulp. God, I feel normal again. And I’m not even done yet. Woo Woo. Who was that fucking whiner who posted using my name? What a dipshit.

  59. dead hobo says:

    dead hobo Says:
    November 4th, 2010 at 9:17 am

    BR, about that sentiment thingie you like to think about … would some of the negative remarks posted here, given recent events, qualify as blood on the street?

    ~~~

    BR: No, self selecting group, probably not representative

    reply:
    ————–
    OK, blood on the street is probably the wrong phrase, but maybe this is that wall of worry thingie. What I hear is “Don’t pick up that $100 bill from the pavement … it might have cooties or may bring bad mojo if you touch it.”

  60. obsvr-1 says:

    @itsme 12:05 pm

    Cognos,

    You don’t see a Circle here?

    Government needs money & issues treasuries.
    Fed creates money out of thin air and buys these treasuries.
    Government pays Interest to Fed.
    Fed makes profit and pays this back to Government.

    —- Reply

    And when it comes to sell the assets off the FED balance sheet, will Circus Circle be closed such that the UST buys the treasuries back ? No the UST has no money remember they are broke running +T$ deficits and 14T in debt.

    So, UST will issue more treasuries (at higher interest rates) and sell them at a lower price to guess who – wink, wink – the banksters and oligarchs to get the cash to pay the FED for the old QE2 treasuries. And where did the banksters and oligarchs get all the cash to buy the new treasuries — you bet – from the greater fools that buy up commodities, equities and other frothy assets at top of the bubble … so round and round we go ending up with another round of wealth transfer to the top .1%, USA deeper in debt, unemployment at or above the current rate, record bankster bonuses, deflation and delevering still under way, but masked by the great illusionist BB.

  61. obsvr-1 says:

    What’s Bernanke Smoking? “A Complete Mystery” How QE2 Helps the Economy, Galbraith Says

    http://finance.yahoo.com/tech-ticker/article/535571/Whats-Bernanke-Smoking%3F-%22A-Complete-Mystery%22-How-QE2-Helps-the-Economy%2C-Galbraith-Says?sec=topStories&pos=8&asset=&ccode=

    MORE LIKE What’s Bernanke pushing to get us to smoke ….

  62. rip says:

    The main question I have is how can Bernanke say inflation is so low as commodities are racing to the moon?

    Doesn’t anybody have any sense of honesty about what’s going on?

    Oh, I get it.

  63. I cannot imagine those seniors said to be responsible for the Republican sweep in Congress are likely to remain quiescent as the purchasing power of their savings further collapses on account of this blatantly fascist QE policy. The last thing that every age is ready to accept right now is a furthering of the divide between the haves and the have nots. No bit of Bernanke’s sophistry can rationalize a policy 100% certain to accelerate a hyperinflationary explosion in commodity prices (on account of the fact there is an acute shortage of qualified securities available to absorb the added liquidity, because confidence in that game is shot). QE threatens to be catastrophic on both personal and societal levels. Sure to result is a further shut down of the physical economy. Indeed, scarcity looms.

    I have no doubt that, Bernanke is painting a giant target on his chest and his hometown of Dillon, South Carolina is at risk of being burned to the ground in symbolic protest to what this foolish man is venturing. The growing millions whose lives are being thrown onto the scrap heap as a result of political incompetence and outright criminal fraud represent a highly disruptive paradox to those austerity-minded fascists among us whose cowardice is resulting in police and fire protection being scaled back. Truly, in matters of comprehensive policy being affected during this time of crisis one might find brighter things in a box of Crackerjax. Quantitative easing certainly is no exception.

  64. cognos says:

    So…

    Why dont you guys understand commodity prices are DOWN about 50%? They ARE NOT.. seriously, ARE NOT up. They are down. Yet you guys are “afraid” of inflation. Its wierd.

    Why dont you understand that house prices are DOWN about 30%. They ARE… seriously ARE NOT up. They are down. Yet you guys are “afraid” of “debasing the currency to steal” from someone. Its wierd.

    If the currency is being so debased… how come housing is down and commodities are down since 2008?

    You do know that the currency is also up, right? EUR peaked versus USD in June 08 above 1.60. Today it stands at 1.42. Are the europeans “debasing their currency”? Hmm… maybe they are.

    Facts and numbers are important tools.

  65. cognos says:

    Some helpful numbers might be:

    Oil $140 in Jul 2008 — today $85/bbl.

    Copper, wheat, corn… all DOWN since July 2008.

  66. rip says:

    @cognos: choose your numbers. What about rice, cotton, sugar, milk, cheese, … Oil at $85 compared to what? Trends of the last year? How about 6 months ago?

  67. Sechel says:

    I’m cynical. I believe the real point was transfer of profits into the banks via front running q.e and pushing up the asset prices on the banks balance sheet.

  68. cognos says:

    rip -

    The g-damn commodity index — CRB is DOWN 30%.

    How do I “chose my numbers”? The f-ing INDEX is DOWN 30%.

    I chose the index, what numbers do you chose?

  69. cognos says:

    How about natural gas? I think thats down alot… like 80%! Maybe even more.

    Howabout the EUR point? If the EUR is down versus USD… since 2008 (also since 1-yr ago). Why isnt anyone talking about the “debasement of the EUR”? Basically you are all (almost) silly non-sense peddlers.

  70. Ted Kavadas says:

    re: “must read OpEd”

    I agree. IMHO this is one of Bernanke’s most notable pieces in many regards.

    Although he mentions a couple of risks that accompany additional QE, I believe there to be many, many more. Here is my post on the subject for those interested:

    http://www.economicgreenfield.com/2010/11/05/ben-bernanke-on-qe2/