Archive for the ‘Ben Bernanke’ Category

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Blame It on Sequestration

Friday, May 3rd, 2013

President Obama and the Federal Aviation Administration blamed recent flight delays on sequestration.  Now the Federal Reserve Board’s Open Market Committee is blaming sequestration for the poor performance of the U.S. economy.

Both claims are equally frivolous.

As The Wall Street Journal noted, “The FAA’s all-hands furloughs managed to convert a less than 4% FAA budget cut into a 10% air-traffic control cut that would delay 40% of flights. The 6,700 flights that the FAA threatened to force off schedule every day is twice as many delays as the single worst travel day of 2012.”

With members of Congress among those affected by the flight delays, Congress acted with uncharacteristic quickness and approved a bill to revoke FAA’s politically motivated furloughs.

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Posted in Ben Bernanke, Sequestration, The Economy, The Federal Reserve Board, Uncategorized, Unemployment | No Comments »

90,000,000 Americans Have Stopped Working

Friday, April 5th, 2013

When the unemployment rate declines, even by a little bit, it should be good news.  But when it declines because people are leaving the workforce in record numbers, it’s not.

The U.S. Bureau of Labor Statistics (BLS) reported that the unemployment rate is now 7.6%, down from 7.7%.  But this 0.1% drop is due entirely to a drop in the labor force by 663,000 in March.

Non-farm payroll was expected to increase by 190,000 in March, with the lowest forecast at 100,000.  Instead, it increased by a meager 88,000 jobs.

As Zerohedge.com reported, a record 90 million Americans are no longer even looking for work.  The labor force participation rate dropped from 63.55% to just 63.3% – its lowest level since 1979.

The BLS reports the U-6 unemployment rate for March at 13.8%, which is a more accurate number than the U-3 rate of 7.6%, as it includes those who have been unemployed long-term.

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Posted in Ben Bernanke, Japan, The Economy, The Federal Reserve Board, Unemployment | No Comments »

Ben, the Great and Powerful

Friday, March 22nd, 2013

“Bernanke said, in essence, that he wasn’t a magician.”

                                                    Heidi Moore, The Guardian

The number one movie in America today, “Oz, the Great and Powerful,” could be a metaphor about The Federal Reserve Board and its role in the American economy.

Oz, a likable scoundrel, is a master of illusion.  There is no substance behind his tricks, but they give the illusion of strength, and, since people believe what they want to believe, he is able to overcome the forces of evil.

Likewise, Fed Chairman Ben Bernanke’s prestidigitation relies on quantitative easing to create the illusion of strength.  All appears well when the stock market rises and the unemployment rate drops, even if there is no strength behind the market’s rise and the drop in unemployment is by only 0.2%.

Of course, the U.S. Bureau of Labor Statistics has its own illusionists, as we’ve pointed out in the past, who are able to make a 14.4% unemployment rate look like a 7.7% unemployment rate.

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Posted in Ben Bernanke, Bureau of Labor Statistics, Quantitative Easing, The Federal Reserve Board, Unemployment | No Comments »

Don’t Worry, Be Happy

Friday, March 15th, 2013

“In your life expect some trouble 
But when you worry
You make it double
Don’t worry, be happy…”

                                              Bobby McFerrin

Higher and higher.  The stock market has gone in only one direction since our last post and that’s been up.

As of yesterday, the Dow Jones Industrial Average had risen for 10 straight days for its best performance since 1996.  The S&P 500, likewise, surged past 1,560 having gained 3.05% in the past month.

Don’t worry, be happy

And, so what if the world is going broke, if that genius Ben Bernanke continues printing money, the Dow could rise from its current 14,500 range all the way up to 18,000 by the end of the year, according to Wharton School Professor Jeremy Siegel.

Don’t worry, be happy

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Posted in Ben Bernanke, Dow Jones Industrial Average, S&P 500, Stock Market, The Economy, Unemployment | No Comments »

Follow The Fed At Your Own Risk

Friday, March 1st, 2013

If you think Fed Chairman Ben Bernanke has a firm grasp of the economy, you may change your mind after listening to Bain Capital co-founder Coleman Andrews quoting Chairman Bernanke in the accompanying video.

Andrews cites three quotes that show The Fed czar was out of touch with economic reality during the run up to the Great Recession.  And now, he asks, “would you trust your life-savings to an institution with that recent record of completely missing what happened in the housing sector and more broadly in the economy?”

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Posted in Ben Bernanke, Housing, The Economy, The Federal Reserve Board | No Comments »

The End of QE?

Friday, January 11th, 2013

The Fed’s quantitative easing program has been like that endless tub of popcorn or vat of soda that those with large appetites buy at the theater.  It goes on and on, but at some point, enough is enough.  Are you really ever going to refill that?

The Federal Reserve Board has gorged on bonds for years now and some board members are finally losing their appetite for continuing, according to minutes from the last meeting of the Federal Open Market Committee.

The supersized QE3, the third round of quantitative easing, was supposed to continue until the unemployment rate dropped to a reasonable number.  The only problem is that buying bonds doesn’t produce jobs.

Even accounting for Storm Sandy’s impact, job growth remains stalled, with the unemployment rate stuck at 7.8%.  While the rate is significantly lower than it was in 2009 (9.9%), it is nowhere near the 5.0% rate of 2007.  More troubling, much of the rate drop is due to people either dropping out of the workforce or taking low-paying part-time jobs.

That doesn’t mean that quantitative easing is without consequences.  The sudden nervousness of some Fed members reflects the fear that buying $85 billion in Treasuries and agency paper will destroy the dollar.

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Posted in Ben Bernanke, Bonds, Inflation, Quantitative Easing, The Economy, U.S. Debt, Unemployment | No Comments »

Going For Broke

Friday, September 14th, 2012

So The Fed is “all in.”  QE3, the third round of quantitative easting, will continue until the unemployment rate drops to an acceptable level.

The implication is that buying bonds will improve the unemployment rate, which has been over 8% for a record 43 months.  Yet if unemployment remained high after QE1, QE2 and Operation Twist, why should QE3 be any different?

The unemployment rate, of course, is bound to drop sooner or later.  When it does, will The Fed take credit and claim that QE3 is the reason?

Granted, this round of QE is different from the others, as The Fed will be buying $40 billion worth of mortgage-backed securities a month.

Added to existing bond buying, that will come to $85 billion a month through the end of the year.  If unemployment doesn’t drop, the Fed said it will buy even more bonds!

So we’ve come full circle since 2008, when the financial system nearly went bust by … investing in mortgage-backed securities.

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Posted in Ben Bernanke, Job Creation, mortgage-backed securities, Quantitative Easing, The Federal Reserve Board | No Comments »

Consumers Might Spend – If They Had Any Money

Friday, September 14th, 2012

Bond buying will pump money into the economy and reduce long-term interest rates, which are already at historic lows.

Theoretically, this will give consumers a greater incentive to spend their money now.  Or it would, if they had money to spend.

The Fed announcement comes on the heels of a Census Bureau report that annual household income fell in 2011 for the fourth straight year to $50,054, which is the level it was at in 1995.

In addition, of course, many Americans are currently living off of their unemployment benefits.  As we reported, many Americans have given up looking for jobs.  The deficit between the number of jobs created and the number of jobs shed exceeded 200,000 in August alone.

While the reported unemployment rate dropped from 8.3% to 8.1% in August, if those who are underemployed and those who have stopped looking were included, the real unemployment rate would be about 19%, according to The Wall Street Journal.

And, of course, bond buying will increase inflation.  Many Americans, who are barely subsisting, will need to find a way to spend more on food and gas.  So, tell me again, how is this helping the middle class?

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Posted in Ben Bernanke, Bonds, Quantitative Easing, The Economy, Unemployment | No Comments »

The Other QE

Friday, September 7th, 2012

It’s not QE3, the Fed’s highly anticipated and much discussed quantitative easing program, but the European Central Bank’s (ECB) bond buying program is having a similar impact.

Stock markets worldwide rose announced its bond-buying program yesterday.

Bond buying is Wall Street’s version of crack … it costs money and has a negative long-term impact, but it creates a temporary euphoria and makes everything seem just find for the those who want to live in the moment.

As The Wall Street Journal put it, “we suppose the good news is that it isn’t as sweeping as it might have been.”

To receive money from the ECB, countries that want help must first apply to the eurozone’s bailout fund.  Countries that receive assistance must consent to reducing government spending and debt.

In reality, though, countries like Spain, Italy and Greece are under pressure from citizens who don’t want austerity.  They’re protesting in the streets of Spain because the government would like to reduce their generous benefits … and politicians who want to survive had better take heed.

The program also has the potential to send bond yields soaring, not to mention causing higher inflation.

Conversely, one reason the markets responded favorably is that the program reduces the risk of a Eurozone break-up – at least for now.

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Posted in Ben Bernanke, Bonds, Eurozone, Sovereign Debt | No Comments »

Bernanke’s “On the Other Hand” Speech

Friday, August 31st, 2012

To the disappointment of many on Wall Street, and to the relief of many in the real world, the Federal Reserve Board did not announce a third quantitative easing program (QE3) today.

But Fed Chairman Ben Bernanke did not rule out a QE3 in the future.

Op-ed writers and politicians are often criticized for taking an “on the other hand” approach, in which they combine criticism and praise in the same commentary or speech.  Of course, Mr. Bernanke is not an op-ed writer, but his highly anticipated Jackson Hole speech today would certainly qualify as an “on the other hand” speech.  Both supporters and opponents of ongoing monetary easing could find plenty to like – and plenty to dislike – in what he had to say.

Consider a few excerpts from Reuters:

“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

Sounds like QE3 is coming!

“Key sectors such as manufacturing, housing, and international trade have strengthened, firms’ investment in equipment and software has rebounded, and conditions in financial and credit markets have improved.”

Oh, wait … I guess we don’t need it.

“ … the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”

Yes, there will be a QE3!

” … the bar for the use of nontraditional policies is higher than for traditional policies. In addition, in the present context, nontraditional policies share the limitations of monetary policy more generally.”

Well, no … I guess not.

Also of interest, he says that, “It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs.”

Keep in mind that Congress has not passed a budget in three years.  On the other hand:

“However, policymakers should take care to avoid a sharp near-term fiscal contraction that could endanger the recovery.”

So there will be no QE3 now.  On the other hand …

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Posted in Ben Bernanke, Quantitative Easing, The Federal Reserve Board | No Comments »

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