Tuesday, November 11, 2008

Bernanke's Last Act

"Now, after the [Fed's] interest rate cuts on Wednesday, the conclusion for a new story is being written. As it happens, we're essentially watching the end of the Ben Bernanke Story. ... There is every reason to believe that the Fed made this month's cuts with the greatest reluctance. After nine rapid-fire reductions that took the Target Rate to 2% from 5.25% in just eight months, the Fed had been holding pat from late April to this month's first cut, the emergency interest rate reduction of October 8. ... As if he had decided to prove the point that, in the words of philosopher George Santayana, 'A fanatic is someone who redoubles his efforts as he loses sight ofhis goals,' former Fed governor Laurence Meyer says that it won't be enough to lower the rate to 0.75% or 0.50%, it has to be, and will be, cut to 0.0% next year. ... The basic problem here is that, at its core, capitalism is a system that wants, and is supposed to reward, the behavior that these rate cuts are punishing--thrift, savings and delayed gratification. ... It's the failure of the economic policies so long dominant in America to bring long-term prosperity that is really seen here", my emphasis, Julian Delasantellis (JD) at http://www.atimes.com/, 30 October 2008.

I agree with JD. We are apparently replicating Stalin's economics, in that some of Stalin's economists believed capital was a "free good" in their workers' paradise. Boy were they wrong. But they realized it in the 1930s!


Anonymous said...

Doug Noland - A Times, 11-12-08

"It's popular to label Federal Reserve operations as a massive effort to "print money". Yet it is important to recognize that, at least to this point, the expansion of the Fed assets (Fed credit) is counterbalanced by the collapsing balance sheets of leveraged financial operators.

The inflationary effects - the increased purchasing power created by the expansion of credit - occurred back when the original loan was made, securitized, and leveraged by, say, a hedge fund.

Today's ballooning central bank holdings (and TARP spending) may very well stem financial system implosion. This is, however, a far cry from engendering a meaningful increase in either the market's appetite for risk assets or the expansion of new system credit in the real economy..."

The central planners may use 0% rates to recap GM and other failed groups...

1930's? O-Man is no Stalin. And Herr Golden Sacks gone soon. In fact it's his protege that has been out front lately... the shiny dome posse.

Anonymous said...

They reward failure, stifle competition, quash innovation, usurp justice, pervert capitalism.