Archive for the ‘Ben Bernanke’ Category

Fed Policy Brings Record Stock Buybacks

Monday, November 9th, 2015

Just once, we’d like to post that the economy is growing like pumpkins in September, that personal income is soaring (or at least not falling), that jobs are being created, businesses are being started and capital is being invested.

Would that it were true.

Readers of this blog may thing we’re pessimistic by nature. We’re not. It’s just that the economy has been a disaster for as long as we’ve written this blog.Non-Farm Payrolls

Now, finally, the unemployment rate has fallen to 5% – just under 10% if you’re counting people who have given up looking for work or who are working part-time because they can’t find full-time work.  In addition, the U.S. Bureau of Labor Statistics reported that personal income grew 2.5% between October 2014 and October 2015.

The economy is cyclical and it could signal that the job market is finally improving.  However, the labor force participation rate remains at its lowest level in 38 years, so we’ll leave the cheery propaganda to mainstream media. We feel an obligation to tell the truth and the truth is that the economy is still in dismal shape. We’re not in a recession – at least not according to the traditional definition of one – but defining the current period of economic non-growth as a “recovery” is a stretch.

Consider what the current recovery hath wrought: (more…)

How Ben Bernanke Saved the World

Monday, October 12th, 2015

“It became necessary to destroy the town to save it.”

                    U.S. major talking about Bến Tre, Vietnam

The Wall Street Journal doesn’t have a humor section, so “How the Fed Saved the Economy” appeared on the op-ed pages under the byline of Ben Bernanke, former chair of the Federal Reserve Board.

In his commentary, Bernanke takes credit for saving the economy – rather than responsibility for the most dismal recovery in history.Bernanke

Anyone who has read even one of our blog posts knows that we would disagree with any claim about the Fed saving the world, especially given that the economy continues its slow-motion deterioration after nearly eight years and several trillion dollars’ worth of “saving” by the Fed.

However, Mr. Bernanke has a book to sell.  And while it will likely appear in the non-fiction section, we’re guessing by its title that it is even more self-congratulatory and less fact-filled (if that’s possible) than his op-ed piece. (more…)

Century Old Fed Has Inflationary History

Friday, December 27th, 2013

With the Federal Reserve Board celebrating its 100th birthday, it’s a good time to look back on the past century to see how The Fed has fared.

We’ve been critical of The Fed’s quantitative easing program, but that accounts for only the past five years of Fed history.  How has it fared in the previous 95 years?  Overall, has its work improved life for Americans or has it been a negative force?Inflation

The Fed’s role is to ensure the safety and soundness of financial institutions, stability of financial markets, and equitable treatment of consumers in financial transactions.  But its activities are primarily focused on using America’s money supply to manage inflation, unemployment and interest rates.

If The Fed has performed its job well, America’s standard of living should be greatly improved today when compared with, say, 1938, when the country was still recovering from The Great Depression.

But MyBudget360 made some surprising discoveries when it compared 1938 prices with today’s prices after using the U.S. Bureau of Labor Statistics inflation calculator to adjust for inflation.


Paper Taper

Friday, December 20th, 2013

So the taper begins in January.  Big deal.

That was the market’s initial reaction anyway.  In fact, the market viewed this week’s announcement as a positive, setting yet another record.  Conversely, when Fed Chairman Ben Bernanke first brought up the possibility of a taper in May, he sent the market reeling.  So talking about buying bonds has a greater impact than actually buying bonds.  Who knew?

Some believe the stock market rallied because The Fed made it clear that it will remain accommodative and that interest rates will remain near zero until the apocalypse.  That being the case, though, why did bond yields soar?  Go figure.Taper Impact

The taper announcement is not a big deal, though, because everyone knew it was coming – everyone except for the economists whose job it is to tell us when tapering is coming.  First they guessed wrong that it was coming in October, then they guessed wrong that it wasn’t coming in December.  Keep that in mind when you hear them tell you the economic benefits of more bond buying and more government spending.


When Common Sense Is Senseless

Friday, December 6th, 2013

What was I thinking?

Over the past couple of years, I’ve preached caution.  Corporate profits were down and unemployment was up.  The economy wasn’t growing, but the federal debt was.  Iran was developing nuclear capabilities while the entire continent of Europe was going bankrupt.  And investors were still shell shocked from the 2008 financial meltdown.

Not a good time to invest in stocks.  Not a good time to invest, period.  Common sense dictated restraint.Bungee Jumping

And the federal government’s answer was to spend as much as possible, while printing more money and buying more bonds than at any time in history.  After record stimulus spending and $4 trillion in bond buying, common sense would suggest high inflation and a sagging stock market; a good time to invest in gold and other hard assets.


Giving Thanks

Wednesday, November 27th, 2013

Given our general grumpiness and Chicken Little attitude about current economic policies, you might think we’re not big on giving thanks.  Not true.

We love Thanksgiving.  This uniquely American holiday is not just about overeating, pilgrims and football.  It’s a time when markets stop moving, politicians stop making bad decisions and stress takes a holiday.  So we have much to be thankful for, even with the economy stuck in neutral.

Thankfulness, though, is all relative.  You may have lost your life’s savings on your investment in a chinchilla farm, but still be thankful to be alive.  Or you may be in despair, because you’ve dropped a few notches on the Forbes 400 list.

Larry Summers

Larry Summers

Yet, if we try hard enough, we can all find something to be thankful for.  For example …

Fed Chairman Ben Bernanke can be thankful that his term will end before quantitative easing causes the U.S. economy to collapse.  As Charles Hugh Smith wrote in the OfTwoMinds blog, “When the multiple bubbles burst and the financial house of cards comes crumbling down, Ben Bernanke will be comfortably secure, far from the consequences of his policies.”

Larry Summers can be thankful he took his name out of the running to be Chairman Bernanke’s successor.  The former economic advisor to President Obama has been saying truly crazy things, such as admitting that it’s not a good idea to run huge budget deficits every year and that quantitative easing (QE) for years with no end in sight raises serious concerns.  Can you imagine the trouble he’d make if he was named Fed chair?


Taperphobia Hits Wall Street

Friday, November 22nd, 2013

A taperphobia epidemic has Wall Street in a panic yet again.  “Taperphobia” is an irrational fear of common sense.  Symptoms include a falling stock market, soaring bond yields and ongoing anxiety attacks.  There is a cure, but it’s expensive – it costs at least $85 billion a month, but that’s enough to cure all of Wall Street and send the stock market soaring.

Taperphobia was discovered by Federal Reserve Chairman Ben Bernanke in May, when he invented a new definition for the word “taper,” using it to describe the gradual slowdown of quantitative easing (another phrase he invented, which translates to “buying bonds forever”).Philly Fed

Symptoms of taperphobia subsided through calm reassurances of ongoing bond buying to eternity, but they returned in October, because most economists had predicted with absolute certainty that tapering would begin then.

It didn’t, so taperphobia subsided again.  But now, thanks to discussions by board members included in minutes of the Federal Reserve Board, many believe that tapering will begin soon.


It’s a Dove! It’s a Hawk! No, It’s a Dowk!

Friday, November 1st, 2013

The Federal Open Market Committee issued a statement this week and no one knows what it means. 

A Forbes headline on Wednesday said, “FOMC Statement Dovish,” but on Thursday, the same reporter updated his story and the headline referred to the, “Hawkish FOMC Statement.”  FXStreet called the statement, “less dovish than expected” on Thursday and in a separate story called it “slightly less dovish.”  Meanwhile, Business Insider said, “It’s ‘hawkish’ on balance.”

So is it a hawk or a dove?

What a Dowk looks like.

What a Dowk looks like.

It’s neither and both; it’s a dowk, with the head of a dove and tail of a hawk.  Or maybe it’s a hove, with the head of a hawk and tail of a dove.  Whatever it is, it’s not flying.

Markets have deemed that it wasn’t dovish enough or maybe it was too hawkish.  Some expected a strong statement about continuing (or even increasing!) bond purchases because of the temporary government shutdown’s expected drag on economic growth … as if the economy were growing before the shutdown.

Instead, The Fed settled on more of the same.  As Business Insider put it: “There were no changes in the policy rate or adjustment to $85bn asset purchases. The committee made few changes to the statement and keep the key phrase ‘decided to await more evidence that progress would be sustained before adjusting the pace of purchases.’ “


The Queen of QE

Friday, October 11th, 2013

Amidst a government shutdown, a debt-ceiling crisis and other assorted financial turmoil, President Obama this week nominated Janet L. Yellen to chair the Federal Reserve Board.

As a Keynesian economist and academician who served as second-in-command at The Fed, her boost to the top spot was about as predictable as another budget crisis in Washington.  She still needs to be confirmed by the U.S. Senate, but confirmation there is also as predictable as another budget crisis in Washington.

So what can we expect from the first woman to ascend to one of the most powerful positions in the free world?

Janet Yellen

Janet Yellen

The presses will keep rolling.  Current Chairman Ben Bernanke has become the King of Quantitative Easing, but he has been in denial about it.  His roots are as a monetarist.  You wouldn’t know it by his record as chairman, but he is a follower of Milton Friedman.

Ms. Yellen, conversely, is a true believer.  As an “unreconstructed Keynesian,” which we assume is the opposite of a reconstructed Keynesian, she believes that stimulus is a cure-all.  If the government spends more and the Fed prints more, evidence to the contrary, the economy will boom.

As such, we can expect a continuation of QE.  The King is dead, long live the Queen.


House of Cards

Friday, July 19th, 2013

The current housing recovery is not a house of brick, but a house of cards.

The cards came tumbling down this week, as the U.S. Commerce Department reported that housing starts in June fell to their lowest level in almost a year.  At June’s pace, new housing starts would total 836,000 for the year, down 9.9% from May’s 928,000 pace.  Multi-family projects plunged 26.2%.

The announcement blunted the stock market rise initiated on Wednesday by Federal Reserve Chairman Ben Bernanke, whose warm-and-fuzzy comments (more fuzzy than warm) can be summarized as “we have no idea when quantitative easing will end and, even if we did, we wouldn’t say.”