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Bernanke Says Benefits Of QE Are Clear

Tuesday, February 26, 2013 - 9:18 AM
From MarketWatch:
Federal Reserve Chairman Ben Bernanke sent a strong signal Tuesday that he backs continuation of the central bank's $85 billion bond-buying program. "In the current economic environment, the benefits of asset purchases...are clear," Bernanke said in remarks prepared for delivery to the Senate Banking Committee.

Read more

Well, maybe they are clear to bankers. 
6
pearlbrownpearlbrown1,474 posts since
Nov 2, 2010
Rep Points: 6,407
1. Tuesday, February 26, 2013 - 2:41 PM
Future economic professors will laugh at this idiot for what he has done to our present economy. Bernanke is a fool.  The low interest gig is NOT working.   No inflation ?? !   When everday items that everyday people buy everyday rise in price 10-30% or higher in less than 12 months --I call that inflation. My wage has not risen 10% in 36 months ! Bernanke does NOT care about the everyday people, he cares only for his wall street crowd.  Get this fantasy world guy out and replace him with a "real world" person.
3
diamondxdiamondx72 posts since
Jan 19, 2011
Rep Points: 170
2. Tuesday, February 26, 2013 - 5:10 PM
There not only is no exit strategy, but Bernanke seems to think he can continue this charade for years to come. Just keep buying all the debt instruments, provide interest free money to the Wall Street megabanks to speculate with, keep interest rates at historical lows so the government can keep on borrowing and spending, and print infinite more money out of thin air. When this house of cards collapses, and it will one day, it's going to a real doozie of a financial crisis. Oh well, Ben Bernanke will be sitting in a beach chair some where in the Cayman Islands by then, so what does he care?
3
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
3. Tuesday, February 26, 2013 - 7:02 PM
Dear pearlbrown,

Excellent testimony today by the Chairman with the usual sharp focus on FOMC mandate "employment" and "stability".

According to Case-Schiiler the home prices are up, so perhaps what most Americans considers their biggest "investment" is not merely stable, but is rising.  Unemployment is a problem, but hopefully the robust bond buying program of FOMC will slowly help the millions of us who are still Unemployed get a job.

I like the job our public servants are doing at the FOMC for us.

Yours Truly,
Anonymous
3
ytytytytytyt8 posts since
Jan 28, 2013
Rep Points: 93
4. Tuesday, February 26, 2013 - 7:43 PM
Re: ytytyt @ 3. Tuesday, February 26, 2013 - 7:02 PM

"Unemployment is a problem, but hopefully the robust bond buying program of FOMC will slowly help the millions of us who are still Unemployed get a job."

Would you mind explaining the logic behind that statement please? Thank you.
1
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
5. Tuesday, February 26, 2013 - 7:55 PM
Dear Shorebreak,

No, I would not.  The robust bond buying is (partly) responsible for keeping the interests low, which is helping millions in taking different types of loans at lower rates (business loans, mortgage loans, car loans etc).  The lower rates in general save businesses/people money, that gets available for other purpose (business-spending/business-hiring/personal-spending), which in general results in creation of jobs.

Check the article at Reuters at URL:

http://www.reuters.com/article/2012/09/13/us-usa-fed-easing-idUSBRE88C1CT20120913

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
6. Tuesday, February 26, 2013 - 8:08 PM
Dear Shorebreak,

>> When this house of cards collapses, and it will one day, it's going to a real doozie of a financial crisis.

Narrow it down ... What day will that be?

It is rather easy to issue crisis predication that will happen one day, without actually putting a time-frame.  (Else it is as vague as the predication that one day a space rock will hit the earth and will wipe out the entire human race, just like what happened to dinosaurs ages ago.)

Yours Truly,
Anonymous
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
7. Tuesday, February 26, 2013 - 8:23 PM
Re: ytytyt @ 6. Tuesday, February 26, 2013 - 8:08 PM

Why am I not surprised that you can't "explain your logic" and that you come back with a question to a question. Your metaphor is laughable by the way. Of course endless printing of money out of thin air always ends in disaster. It has a marvelous track record. Do you really expect that this QE nonsense can go on indefinitely? By the way, "the day" is November 18, 2019. I guarantee it.
1
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
8. Tuesday, February 26, 2013 - 8:29 PM
Dear Shorebreak,

Right ... So you could not follow the logic  ... I am surprised that you could not even follow Reuters article ... Try harder ... Maybe you'll get it :-) ... Or maybe not ... :-)

What sort of guarantee is attached to your predication?  Would you post an apology if it does not happen on that date?

Yours Truly,
Anonymous
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
9. Tuesday, February 26, 2013 - 10:01 PM
Re: ytytyt @ 8. Tuesday, February 26, 2013 - 8:29 PM

"Right ... So you could not follow the logic  ... I am surprised that you could not even follow Reuters article ... Try harder ... Maybe you'll get it :-) ... Or maybe not ... :-)"

I get it completely. When you can't discuss the point just resort to attacking one's intelligence. I won't resort to replying to such nonsense on your part because you have just gone over the edge of civil discourse. Good night sir.
1
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
10. Tuesday, February 26, 2013 - 10:06 PM
Dear Shorebreak,

Were you honoring inteliigence of readers here by posting bxxxxxxx prediction of "real doozie of a financial crisis - one day"?

Yours Truly,
Anonymous
Moderated by KenBDG - No Offensive Language
1
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
11. Tuesday, February 26, 2013 - 10:09 PM
QE3 and Bernanke's Folly:

"While the most recent bond buying program will push liquidity into the equity markets pushing asset prices higher - it will do little to help the economy, employment or housing.  The evidence is abundant that the only beneficiary of these balance sheet programs is Wall Street."

QE3 And Bernanke's Folly - Part I - StreetTalk Live
3
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
12. Tuesday, February 26, 2013 - 11:09 PM
Dear Readers,

Shorebreak has posted link to article by Lance Roberts with the title that includes wording "Bernanke's Folly".

Upfront it is clear that Mr Roberts is attacking the Chairman, when in fact the Chairman has merely one vote on the FOMC.  For a moment if we assume that it is a folly, then it is not a person't folly, but a that of a committee.  As the title itself is rather flawed, one can easily make a guess that the content of the article will be of questionable quality. And after reading one can surely confirm the guess! :-)

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
13. Wednesday, February 27, 2013 - 6:34 AM
Going back to the content of the original article posted by pearlbrown, the only thing perfectly "clear" is that Bernanke's actions do not solve any problems, but they do guarantee that the dollars we have to work our way out of them will be worth less.
2
ShorebreakShorebreak2,686 posts since
Apr 6, 2010
Rep Points: 14,567
14. Wednesday, February 27, 2013 - 10:30 AM
Dear Shorebreak,

Yes ... yes ... I agree - it is not clear to you! :-)

The statement by the Chairman was addressed directly to your (our) elected reps who are in the committee.  They had complete authority to stop the Chairman and ask clarification if something was not clear.  Nobody stopped him and asked! ... So it was clear to them.

Well ... I tried to explain ... I pointed out article which has some details ... Since nothing is still not getting across to you, so how about you ask your elected reps to help you understand? 

And mind you there are topics / concepts that are a bit too hard for you to get given your level.  But ... Not to worry ... That's the reason you have your elected reps whose job it is to pose questions about and get the understanding of those topics/concepts that are way too hard for you. ;=)

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
15. Wednesday, February 27, 2013 - 9:26 PM
ytyt, (it seems kind of OCD to repeat these letters more than two times)

I hesitate to get into an acrimonious debate with you (which you seem to enjoy way too much), but if deficit spending and QE are so beneficial, why not double our deficits and let the Fed purchase the bulk of the debt. Why stop at $1 trillion annual deficits; let's go all the way and increase it to 2, 3, 4 or 5 trillion dollars. If govt spending is stimulative and is suppose to accelerate GNP and lower unemployment, let's put the pedal to the metal. Maybe the govt should send everyone in the US a $20,000 check to spend on consumer goods. That would increase demand, and the Fed could finance the entire expenditure. We could all have a big party at the Fed's expense. Just print the money; there are no consequences.
3
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
16. Wednesday, February 27, 2013 - 10:35 PM
.

.

Dear lou,

Feel welcome to jump into the debate.  Whether it becomes acrimonious or not really would depend upon two of us.

Now coming to the topic you are raising.  You are confusing the two "QE" and "deficits", in the sense that QE is soemthing that FOMC can do.  However the deficits are not something that the FOMC can do.

Rephrase your hypothetical by stating clearly which department will do what so that we can have a hypothetical party, and I'll try to "crash the party"! :-)

Yours Truly,
Anonymous
1
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
17. Wednesday, February 27, 2013 - 11:12 PM
Well, the Fed and our govt do act in concert in the sense that the Fed finances the bulk of the deficit spending legislated by Congress and the President. $40 billion of QE (purchase of treasuries) each month would not be possible if Congress and the President ran surpluses. Also, if our legislators know that the Fed is there to backstop this federal spending, what incentive do they have to exercise restraint. So if you believe Keynesian economic policy or pump-priming is warranted, why not have the govt issue $20,000 checks to everyone. We could double the deficits and the Fed could increase their treasury purchases to $80 billion a month. If you believe the current stimulative fiscal and monetary policies are lowering unemployment or acclerating economic growth, why stop here - let's ramp it up a few more notches.

Lastly, at some point, I think you would agree that interest rates will have to go up. With 71% of the public debt to roll over in the next 5 years, what do you think will happen to the federal budget? When the interest on public debt triples or quadruples, what other expenditures are we going to cut to make room for this additional interest expense.
1
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
18. Wednesday, February 27, 2013 - 11:39 PM
Dear lou,

I think you yourself are able to see the flaw the rather wild hypothetical you are proposing.

What do mean by the govt issue $20,000 checks to everyone?  Which department?  I'd assume you mean the US Treasury which is an independent department than the FOMC.  Right?  If that's what you mean, then I see no issue with that if "I" am the FOMC.  (In fact, "our" government has already done something on those lines when after we occupied Iraq, we distributed wads of cash to Iraquis.)  In short let the party beign.

Now coming to the stance of FOMC for the aforementioned party.  Assume that sales of Beer, Wine, Meat, Chips, Pizza and whole lot of consumer goods will spike.  This will cause rapid "price instability". FOMC will be required to act to counter this instability.  Therefore it will crash the party by tightening (raising the interest rates). What can stop the FOMC from crashing the party?  Only if the mandate of "price stability" is revoked.

>> Lastly, at some point, I think you would agree that interest rates will have to go up.

Yes, I agree.  And this rise will come gradually, as the unemplyment decreases. 

Without sufficient employment (and absent significant inflation) it makes no sense to violate the mandate of "max employment".

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
19. Thursday, February 28, 2013 - 12:09 AM
Okay, so you agree if the Treasury Dept issued $20,000 checks to everyone, the result would be destabilizing and the price of consumer goods would spike, prompting the Fed Reserve to tighten. So deficit spending by our federal govt can have deleterious consequences. Apparently, it is not at $1 trillion but would be at some number greater than this. The Federal Reserve, which has implicitly given assurances to federal govt that they will finance this deficit spending through open-ended QE, would be constrained from increasing their treasury purchases. However, if the federal govt ran $2 trillion of deficits without corresponding inflation, would you be amenable to having the Federal Reserve double their treasury purchases? As long as we don't have a spike in inflation currently, you're in favor of more deficit spending and more treasury purchases?

Regardless of whether rates rise preciptiously or gradually, what federal budget expenditures are you going to cut to accomodate the increasing interest expense. Two year treasuries are .27% today. They have averaged in excess of 5% for the last 35 years. If the rate gradually goes up to 1%, that is a four-fold increase. Today we spend $220 billion for interest on national debt. If it went to  $1 trillion, that is a $800 billion increase in a $3 trillion budget. What do you think the consequences will be when this occurs. Or are you telling us that 2 year treasuries will never go to 1% again?
1
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
20. Thursday, February 28, 2013 - 12:31 AM
Dear Lou,

That's way too much hypothetical.

How about I tell you bullet points about what I'm amenable to?
  • I am amenable to the idea that FOMC should care for the so called "savers" and retirees, but only after the dual mandate is changed to include this specifically
  • I am completely amenable to the idea of US Treasury issing wads of cash to every American, only after scrapping the dual mandate of FOMC
>> What do you think the consequences will be when this occurs.
>> Or are you telling us that 2 year treasuries will never go to 1% again?

Too bad ... I lack the ability to predict the future, so I cannot tell you anything regarding this.  (I can speculate, but that's not important.) 

Bottom line - The hypotheticals you are proposing about deficit spending have no relation to FOMC, as it is not within FOMC's mandate/authority and frankly it is not FOMC's concern.  (Remember fiscal policy is way outside of FOMC's domain, as their domain is only monitory policy.)

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
21. Thursday, February 28, 2013 - 12:37 AM
BTW, this full employment mandate you seem to be enamored of was the brainchild of Hubert Humphrey and the Democratic Congress and President in the late 1970's. So you apparently think the Federal Reserve printing dollars will lower unemployment. We know it is not happening from the new money in the system as a result of the 3 QE programs, considering that almost all of it is sitting idly in the reserves of our megabanks. It must be because we have lowered long term rates, enabling many people to refinance their mortgages and other debt. Unfortunately, this is more than offset by the decrease in interest income for savers, a net reduction of money in the system that can be used to purchase consumer goods and stimulate demand. The real unemployment rate is close to 15%, including all the people who have dropped out of the labor pool. The evidence doen't seem to support your thesis

Friendlier regulatory policies, simplified and reformed tax code, long-term entitlement reform and less expensive labor costs for business would help much more to lower unemployment than bulk purchases of treasuries and mortgage securities.
1
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
22. Thursday, February 28, 2013 - 12:40 AM
"I lack the ability to predict the future"

 

So does Bernanke
1
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
23. Thursday, February 28, 2013 - 12:45 AM
Chairman never claimed that he did!
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
24. Thursday, February 28, 2013 - 1:14 AM
He acts like he is prescient when he testifies on the Hill that he will know when to unwind the Fed balance sheet and it can be done without adverse consequences. He lulls the American public in a false sense of security that the loose monetary policies of today will only have benign consequences in the future. I hope his predictive powers in this area are better than his prognostications of the real estate sector and the economy prior to the recession. He was spectacularly wrong on both accounts.
2
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
25. Thursday, February 28, 2013 - 1:22 AM
Dear Lou,

No.

Actually the FOMC has declared an algorithm to follow as the unemployment decreases and/or the inflation increases. This is a clear statment that FOMC does not know when these events will happen, but that FOMC is prepared to act when either of them happen.

FOMC has done a great job, and I appreciate the public servants there who are serving us, especially the Chairman who was appointed by a Republican originally, and was re-appointed by a Democrat afterwards.

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
26. Thursday, February 28, 2013 - 1:37 AM
"FOMC does not know when these events will happen, but that FOMC is prepared to act when either of them happen."

I am scratching my head trying to figure this out. The FOMC won't know when it will happen, but is prepared to act when it will happen. The second half of the sentence doesn't follow the first half. This is a syllogism turned on its head.

Yes, a Republican appointed Bernanke. Shame on him.
1
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
27. Thursday, February 28, 2013 - 7:01 AM
Dear Lou,

All right ... I was not clear ... My mistake.

What I mean about when these events will occur means that the time-frame (what day/week/month/year).   FOMC does not know when the unemplyment will drop to 7%, 6%, 5% etc.  FOMC does not know when the inflation (as measured by the BLS) will start rising 1%, 2%, 3% etc.  So the time-frame "when" these events will occur is not know.  So ... whenever these events occur FOMC is prepared to respond by the algorithm they have published.

>> Yes, a Republican appointed Bernanke. Shame on him.

Really? ... Okay then, since you (voters) elected that Republican, how about shame on you? ... Also since the the Senate confirmed the Chairman, so how about shame on them as well?  ... And again since you (voters) elected the senators, shall we double the shame that was on you already? ... :-)

Yours Truly,
Anonymous
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
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