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Tuesday, August 31, 2010

Helicopter Ben Bernanke: Sorcerer, Mad Scientist, or Financial Tool?

Items of Interest:
Fed Chairman Ben Bernanke has become a multifaceted character in the Shakespearean drama that is the US economy.

David Goldman / Inner Workings:
Japan-Style Stagnation? You Should Be So Lucky -- The question we discussed was not whether America would suffer a “Japan-style stagnation,” but whether America would be lucky enough to sustain a Japanese style stagnation...

...we laughed at the miseries of the liberal establishment. Federal Reserve Chairman Ben Bernanke seems authentically perplexed; he followed the instructions to the letter, mixing the eye of newt with the tongue of bat, and adding $2 trillion in securities to the witches’ brew–but nothing seems to have happened. He sits up night in his tower studying ancient manuscripts: was it a she-goat or a he-goat that he is supposed to sacrifice on a moonless night?

And we felt some sympathy for the Tea Party types who want to march on Frankenstein’s castle and burn it down. If they ever have the misfortune to get into power, they will discover how much of the problem stems from the sloth, complacency, ignorance and incompetence of ordinary Americans. We’ve had the financial ride of our lives during the past fifteen years courtesy of the rest of the world, and now it’s over. We have to learn how to export again–and that is not going to be easy.

/The Economic Collapse:
Helicopter Ben Bernanke Says Everything Is Going To Be Okay -- But Bernanke insists that this time is different. This time the Federal Reserve really has got a handle on things. During his remarks at Jackson Hole, Bernanke said that the Fed will adopt “unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

Unconventional measures?

Could that be a thinly veiled way of saying that Helicopter Ben and his pals will do as much “quantitative easing” as they feel is necessary to keep the economy moving forward?

Unfortunately, most Americans have absolutely no idea what quantitative easing is.

Basically, when quantitative easing takes place the Federal Reserve creates money “ex nihilo” (out of thin air) and uses that money to buy stuff like U.S. government bonds and mortgage-backed securities. By pumping money into the economy like this, the hope is that banks will start lending more and people and businesses will have more money to spend...
Robert Wenzel / economicpolicyjournal.com:
The Case for Ben Bernanke as Mad Scientist -- The opportunity for Federal Reserve Chairman Ben Bernanke to stargaze in the clear skys of Jackson Hole, Wyoming and to bond with a horse whisperer has done Bernanke some good.

The speech he just delivered, in the land where Dick Cheney roams, was almost John Wayne like in its frankness. Perhaps, after his visit with the horse whisperer, he considers himself a cowboy. Whatever he may think of himself ,though, clearly the label "mad scientist", with the emphasis on "mad" fits best...
International Business Times:
So Much For The Bernanke Put -- The whole idea of creating another trillion dollars of bank reserves might be pointless anyway since there already is about $1.2 trillion sitting at the Fed now doing nothing but collecting 0.25% (and a mountain of dust)...
Wikipedia: Greenspan Put
John Crudele / NY Post:
Bernanke's song & dance act in Jackson Hole -- That, in a nutshell, is Ben Bernanke's problem right now -- all he has is words...

But here are the words from Jackson Hole that I find most curious.

Listed second among Bernanke's "policy options" last week is "modifying the [Fed's] communications."

Bernanke is suggesting that the central bank "ease financial conditions through its communication, for example, by modifying its post-meeting statement."

In other words, Bernanke now wants to use different words after the Fed's policymaking committee meets...
Marshall Auerback / The Daily Beast:
Don't Trust the Fed -- It is clear that Bernanke and Co. think that monetary policy is the main game in town. Unfortunately, this misguided faith in the Fed just ensures the perpetuation of bad policies that help our financial elites, but do little for Main Street.
Don't get fooled by Bernanke -- When the time comes to write Ben Bernanke's biography, I already have a great title. How about "Behind The Curve"? ...

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