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Tag Archives: Ben Bernanke

Losing Control of Federal Funds: What’s Transmission Got To Do With It?

What’s transmission got to do with it? An odd question perhaps, but not when you step back and think about everything you’ve been taught or told about when it comes to this stuff. From the very beginning, they tell you unequivocally how the Fed is in the middle and everyone must simply obey. It does things with its printing press and the markets, all of them, responds accordingly. Never, ever fight the Fed. What happens when the Fed does things…and the market doesn’t respond accordingly?...

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An Overlooked And Important Point: The Fed’s Overnight Repo Operation Had Less To Do With Repo Than You Are Led To Believe

There is one additional important point to note in all this repo uproar. Why did the Fed conduct the overnight repo operation this morning? The answer isn’t what you might think. It sounds like officials particularly at the Open Market Desk sounded the alarm about repo and the FOMC forcefully responded. And if you think that, policymakers would be beyond thrilled because that’s just what they want you to think. Expectations-based policy demands that you believe in a competent central bank...

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Your Unofficial Europe QE Preview

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking. When Ben Bernanke wrote for the Washington Post in November 2010 announcing somehow the need for a second QE...

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Gold: Big Difference Which Kind of Hedge It Truly Is

It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens. For the month of July 2019, the index increased 1.38% year-over-year....

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Does A Second Floor Make An Effective Ceiling?

For central bankers like Bill Dudley and Ben Bernanke, the Global Financial Crisis was a godsend. So much had been a disaster it was hard to pin down specific failures. Where does one begin? Practically everything went wrong, so take your pick. The Financial Crisis Inquiry Commission (FCIC) did its part pointing the finger at those greedy Wall Street bankers and the toxic waste of their subprime mortgages. The saga of IOER proves there’s so much more to the story. For his part, Dr. Bernanke...

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The Fallacious Doctrine of ‘Abundant Reserves’

It wasn’t the first time it had happened, but to that point it did suggest something had changed. Things were going wrong and afterward the very idea of wrong took on an even more disastrous nature. On Monday, September 29, 2008, the Dow Jones Industrial Average plummeted nearly 778 points. It was the largest single day’s point loss in the index’s history. As luck would have it, this was a record that would stand until early February 2018. In percentage terms, the penultimate trading day in...

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The RHINO Conundrum of UFO Non-believers

In 2005, Ben Bernanke kicked up quite a bit of controversy, or what qualifies as drama in the dry space of top-level Economics. It was Alan Greenspan who really started the conversation, practically begging for someone to offer an answer. Long-term interest rates were not behaving the way they were supposed to; the maestro’s true swan song was his “conundrum.” Bernanke saw what everyone else did; there was suddenly a whole lot of monetary and financial activity going on outside the US. Even...

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Globally Synchronized (Bond Yields)

If you have nothing left, it can sound like a winning argument but you have to really try hard enough. In October 2015, with another false dawn dawning on the public, former Federal Reserve Chairman Ben Bernanke wrote and op-ed published in the Wall Street Journal. As had become his habit, it was full of praise – for his own work. Though he likely didn’t choose the title, it reflected his article nonetheless; and it tells you all you need to know about it. How the Fed Saved the Economy. How...

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Anesthesia Right On Schedule

In early January, much of the world was dazed and confused. What the hell just happened? Two weeks before, in the middle of December 2018, Jay Powell stood in front of the microphones confidently declaring his rate hikes justified by an extremely strong economy. Yet, even the stock market had turned against him. When the calendar changed to 2019, not even the Fed’s Chairman was so sure. What followed was merely the first step in what was always going to be a long, drawn-out process. It began...

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When Verizons Multiply, Macro In Inflation

Inflation always brings out an emotional response. Far be it for me to defend Economists, but their concept is at least valid – if not always executed convincingly insofar as being measurable. An inflation index can be as meaningful as averaging the telephone numbers in a phone book (for anyone who remembers what those things were). If you spend $1,000 a month on food for your family, and food prices rise 6% generally that’s an additional $60 that has to come from somewhere. It is...

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