Seeking Alpha

Bob Wenzel holds no punches in a speech this week to the NY Fed: "The noose is tightening on...

Bob Wenzel holds no punches in a speech this week to the NY Fed: "The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out."
Comments (136)
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    The Fed and The Mob are hardly different.

     

    If people paid as much attention to the actions of the Fed as they do the actions of the Kardashians then the Fed HQ would be on fire.
    28 Apr 2012, 04:16 PM Reply Like
  • New Century
    , contributor
    Comments (130) | Send Message
     
    please no fire... i live one block away!
    28 Apr 2012, 10:34 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    You live at the State Department?

     

    Einstein Memorial?

     

    Vietnam Memorial?
    29 Apr 2012, 03:50 AM Reply Like
  • HoeTamer
    , contributor
    Comments (186) | Send Message
     
    I've been saying this economy is a house of card, designed to last until the election for a whole year. It's a very bad sign that the economy continues to back slide so early in the summer. The Bernanke have will no choice but to start the printing presses again if they expect it to all hold together until November. Maybe it is time for the Fed to just go away, not just now but forever.
    28 Apr 2012, 04:22 PM Reply Like
  • srspa77
    , contributor
    Comments (326) | Send Message
     
    The FED is impartial and is not influenced by politics or the upcoming election. Its decision to do QE3 will have ben done only because it's the best thing for America.
    28 Apr 2012, 07:53 PM Reply Like
  • Jaayd
    , contributor
    Comments (51) | Send Message
     
    Are you a Fed employee?
    28 Apr 2012, 08:04 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    "Are you a Fed employee?"

     

    For heavens sake. I suppose we should all ask now if you're a hired basher.
    28 Apr 2012, 08:09 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1047) | Send Message
     
    Gag me with a spoon!
    28 Apr 2012, 10:20 PM Reply Like
  • The_Hammer
    , contributor
    Comments (4057) | Send Message
     
    HELLO!

     

    FED decisions are best for America?

     

    NOT

     

    The HERO wil become a LOSER soon.

     

    Ron Paul
    28 Apr 2012, 10:56 PM Reply Like
  • srspa77
    , contributor
    Comments (326) | Send Message
     
    No. Just a citizen.
    29 Apr 2012, 02:13 AM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    Sadly Bob Wenzel will not be heard.
    28 Apr 2012, 04:25 PM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    Read the full speech it is worthy of Saddam Hussein at his most meandering and deranged. Fidel Castro and Hugo Chavez have the same speech writer as this guy.

     

    There is little to say but...Garbage in, Garbage out.

     

    When you have zero responsibility, when what you say does not matter and when you play at policy rather than actually making policy then you can say whatever you like - no matter how daft and poorly thought through it might be. Furthermore you will get a following since there are those who want to swallow any crackpot idea since they reside on the wrong side of the bell curve and are willing to chew and digest any dogma that fits the narrative. This is especially true when you can make it sound populist and appeal to the little guy against the hated elite.

     

    Most of you have no clue...you are like the citizens in the Men in Black movie fantasy blithely going about your day to day unaware of what stands between you and the soup kitchen.

     

    As Wenzel proves...Ignorance is not bliss...seemingly.

     

    Bernanke for President.

     

    E
    28 Apr 2012, 04:37 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    What? Since when is the Austrian school "crackpot garbage"?

     

    It has its place like every other theoretical approach and has earned its share of Nobel prizes. Have you even studied economics?
    28 Apr 2012, 04:48 PM Reply Like
  • The_Hammer
    , contributor
    Comments (4057) | Send Message
     
    Econdoc acts like a Fed Shill. Would not put it past this arrogant organization, The Fed, to send out stooges to try to taint the truth across the blogosphere.
    You and your fraud Fed stooges are going down and the clock is ticking.

     

    The handwriting is on the wall and the petro-dollar recycling and the China Mercantilist recycling has come to an end. China and Middle East have chosen to invest their reserve dollars in productive assets and gold. I would hope this derelict Bernank would buy some gold instead of toxic treasuries.
    Treasury market and dollar are the biggest bubble waiting to pop.
    28 Apr 2012, 05:53 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    Says Wenzel, "I also find curious the general belief in the Keynesian model of the economy that somehow results in the belief that demand drives the economy, rather than production. I look out at the world and see iPhones, iPads, microwave ovens, flat screen televisions, which suggest to me that it is production that boosts an economy."

     

    Quick, let's all produce pet rocks and make bird nests. All that production will drive the economy and we'll all be rich!!
    28 Apr 2012, 06:00 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    You need to produce something for which there is demand at some level.
    28 Apr 2012, 06:19 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    That was my point. Thought it was obvious....
    28 Apr 2012, 06:27 PM Reply Like
  • mostserene1
    , contributor
    Comments (3344) | Send Message
     
    Econdoc, you are one of the few sane people around. Everyone else has ODS and BDS. Obama (and Bernake) Derangement Syndrome.
    28 Apr 2012, 06:39 PM Reply Like
  • srspa77
    , contributor
    Comments (326) | Send Message
     
    Interesting discussion..
    28 Apr 2012, 07:52 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    mosterene1, six likes (so far) say you and Econdoc are not alone :-)
    28 Apr 2012, 08:10 PM Reply Like
  • chuckholladay
    , contributor
    Comments (44) | Send Message
     
    No it was not obvious by any means.
    28 Apr 2012, 09:12 PM Reply Like
  • chuckholladay
    , contributor
    Comments (44) | Send Message
     
    To say the least.
    28 Apr 2012, 09:13 PM Reply Like
  • Vet4RonPaul
    , contributor
    Comments (81) | Send Message
     
    Econdoc, your criticism is suspect because you don't refute any of his points but instead resort to name calling and making an assertion that because he does not set policy, he cannot possibly have an informed view. Finally, nice of you to bash all of us as being like the citizens in MIB.
    28 Apr 2012, 09:30 PM Reply Like
  • Angel Martin
    , contributor
    Comments (1311) | Send Message
     
    ok, Vet4Ron, i will refute the self evident nonsense in this speech, for example:

     

    "..According to ABCT, it is central bank money printing that causes the business cycle..."

     

    So, what caused the 19th century recessions and depressions?
    http://bit.ly/sHiGSs
    28 Apr 2012, 10:22 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    SanDiegoNonSurfer
    Quick, let's all produce pet rocks and make bird nests. All that production will drive the economy and we'll all be rich!!
    ======================...
    I also find curious SanDiegoNonSurfer's belief that production of pet rocks are the same as production iPhones

     

    Idea is that economy is driven by production of items able to create and satisfy demand

     

    Idea is not that economy is driven by printing press able to create smart phones

     

    Idea is economy driven by printing press creates bubbles and distortion in production.

     

    It is printing press creates demand and production in areas where it does not belong and crash afterward

     

    Print money enough and see your pet rocks have more value than your money
    29 Apr 2012, 12:28 AM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Econdoc
    Read the full speech it is worthy of Saddam Hussein at his most meandering and deranged. Fidel Castro and Hugo Chavez have the same speech writer as this guy.
    ======================...
    You forgot
    Gitler, Stalin, Pol Pot, and hundred others

     

    Besides names calling what arguments do you have if any to enlighten clueless population
    29 Apr 2012, 12:37 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    Read Wenzel's words, coddy0. He says demand does not drive the economy. According to Wenzel, production does that. If demand is not a driver and production is, then we should all be able to rapidly become wealthy by simply churning out arbitrary and useless items.
    29 Apr 2012, 12:37 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9966) | Send Message
     
    AM,
    Wenzel did not say that. What he said was the Fed was supposed to "create price stability and economic stability". Neither of which they have done with:a) 19 recessions since the Fed stated- thus they have not achieved economic stability, and b) 2,000+% increases in consumer prices- which is certainly not price stability. Thus he rates the Fed as a total failure because they have accomplished nothing of what they were tasked to accomplish.
    29 Apr 2012, 02:07 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1500) | Send Message
     
    Doc, explaining to the peasants monetary policy, is futile and inane. They can't understand....
    29 Apr 2012, 02:12 AM Reply Like
  • moreofthesame
    , contributor
    Comments (743) | Send Message
     
    I think it was obvious.
    29 Apr 2012, 03:10 AM Reply Like
  • moreofthesame
    , contributor
    Comments (743) | Send Message
     
    The point thats not clarified is the word "Demand" certain demands can be created and certain demands never change. Food has a demand that never changes but the demand for smart phones can be created. I have to add though that no demand can be created that does not serve any purpose on a cultural, social or plain survival level. When a demand is created then it can seem equal to production to the blurry eyed. But the demand has to exist by the time production does, otherwise its gonna fail.
    29 Apr 2012, 03:17 AM Reply Like
  • Angel Martin
    , contributor
    Comments (1311) | Send Message
     
    Untrusting, I took the quote straight out of the speech, and it is in context.

     

    I don't argue that the Fed has done a good job. I think they are taking on a huge potential risk with very little gain with, for example, their massive balance sheet expansion.

     

    Nassim Taleb has described it as writing an out of the money option on hyperinflation. It's a good analogy, the option premium is small but the downside is really huge.

     

    The economic cycle is going to happen and recessions and depressions are going to happen. Rothbard and ABCT can't stop it any more than Bernanke and co.
    29 Apr 2012, 02:15 PM Reply Like
  • User 168446
    , contributor
    Comments (108) | Send Message
     
    Fail: Obama and Krugman both received Nobel prizes. Are we supposed to be impressed and somehow find them more credible for having received the award?
    29 Apr 2012, 08:51 PM Reply Like
  • User 168446
    , contributor
    Comments (108) | Send Message
     
    I think someone made a lot of money off pet rocks. Never underestimate the stupidity of the American consumer.
    29 Apr 2012, 08:58 PM Reply Like
  • User 168446
    , contributor
    Comments (108) | Send Message
     
    Oh really? What cultural purpose created the demand for $1,000 tulip bulbs and beanie babies?
    29 Apr 2012, 09:03 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    User 168446, that was then. Just try it now :-)

     

    I actually chose pet rocks deliberately because they illustrate something I find interesting: The vast majority, possibly 90% or more, of consumer demand is for social rather than material "needs". Pet rocks were something one bought to show to friends. They seem silly now but in some sense no different from much of what we buy, including the gadgets that so impress Wenzel. One can easily meet one's bare subsistence needs from garbage cans. No income needed. It's just that we choose to not live that way. Why do we spend countless hours tending our front yard and washing the car till it gleams? We don't need these things for ourselves. They're for our neighbors. The phrase "house of cards" gets bandied about a lot lately. You want to know the real house of cards? If humans were to suddenly stop buying things that mainly serve to impress others, all of modern society would fall to its knees.
    29 Apr 2012, 09:13 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2061) | Send Message
     
    Sadly, the Nobel is now a political ploy, mainly I believe is that its endowment is now vested mainly in the United States.
    29 Apr 2012, 09:19 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    SanDiegoNonSurfer
    According to Wenzel, production does that. If demand is not a driver and production is, then we should all be able to rapidly become wealthy by simply churning out arbitrary and useless items.
    ======================...
    production is driving economy
    but not production of anything like you said

     

    ======================...
    Take a look on China vs USA
    We have demand created by printed money
    They have production
    Now compare what and where drives economy
    30 Apr 2012, 12:28 AM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Joe Morgan
    Doc, explaining to the peasants monetary policy, is futile and inane. They can't understand....
    ======================...
    "False face must hide what the false heart doth know."
    30 Apr 2012, 12:32 AM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    I don't need to refute the points of some discredited dogma. This was done by no less than Milton Friedman - read his criticism of ABCT and the whole Austrian thesis.

     

    Just because scholars like Glen Beck or Ron Paul mention the Austrian School, von Mises or Hayek does not make it gospel. Have any of you ever actually read the Road to Serfdom? Please read it and then get back to me.

     

    Use commonsense.

     

    With so much slack in the economy is the problem a lack of production? Is the solution to the housing issue to build more houses? How?

     

    We have insufficient demand and a lack of confidence in lending and investment. Most recessions are triggered by Fed tightening causing short term lending to be crimped with a subsequent reduction in demand. This gets back on track when rates are cut back a little and or Government pumps in a little spending or eases up on taxes.

     

    In 2008 we had a panic that led to a shutdown in the credit markets. Liquidity dried up. Business did what it always does - it retrenched but due to the special nature of the panic - it was very severe. I know people who were reducing employees just in case - not waiting for orders to drop - the cuts were pre-emptive and deep driven by real fear. This led to demand falling off a cliff overnight as the panic spread.

     

    The response was threefold.

     

    TARP - saved the US banking system. And this is key since without a functioning credit system nothing follows. So the decision by the Bush Administration to save the banks was a fundamental building block in saving the system. If you live on Main Street you need Wall Street. This was proved in the '30's and was proved again in 2008.

     

    ZIRP and QE. The Fed rose to the task and forced liquidity into the system. Velocity declined and much money was merely stashed but the sheer force of money has had the needed impact in greasing the skids. Bernanke has run a clinic on what to do when faced with a panic. Great Depression 2 was avoided. This was a real possibility in late 2008. Post Lehman the world was ending. Literally. If you are in business and responsible for hiring, firing, investing you know that in late 2008 there was nothing - absolutely nothing happening. Bankers who months prior had been falling over themselves to lend me money would not return calls. Fear was rampant. It was over. Bernanke turned this around. All you need to do is say thanks. The policy continues because the Chairman is a student of history. He is not going to make the same mistakes.

     

    Fiscal Stimulus. The famous $800 bill package was a flop. Too small and mis directed. Poorly design. Other elements - the payroll tax cut and continuation of the Bush Tax system have been more beneficial. This has been the weakest policy area. I blame Obama and the Democratic house leadership. They wasted an opportunity to really get something done. Since 2010 the Tea Party zealots have been in charge and we are at a standstill. This is why I say throw out Obama and throw out the Tea Party.

     

    To criticize Bernanke is churlish in the extreme. To cite some discredited dogma is foolish. The whole thing sickens me. The solutions are not in looking back. Look forward. The US needs policies to drive growth today and action to rein in entitlements to improve the budget in the latter part of this decade and beyond. Forget about dead Austrian economists they are a dead end.

     

    E
    30 Apr 2012, 01:05 AM Reply Like
  • srspa77
    , contributor
    Comments (326) | Send Message
     
    That's like the recents elections in Russia...
    30 Apr 2012, 04:57 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Econodoc

     

    Agree with just about everything you say. Your analysis is excellent.

     

    I do think that the insufficiency of the $800 billion stimulus also rests on the Republicans. They "downsized" it and changed the structure in in-efficient ways.

     

    I blame Obama for his failure to embrace Simpson Bowles in the fall of 2010. This gave the Tea Party the opening they needed to assert their infuence. This is Obama's biggest failure.

     

    The socio/economic climate in this country now closely represents the Antebellum period. Ideology and economics are inter-connected in such a way that we are completely polarized and frozen in place.

     

    Neither side will accept a fiscal solution that runs against their ideology. The Supreme Court is ideologically not constitutionally based.

     

    We had, in 9/11, a great unifier and wasted it by-over extending our reach. I don't know what it will take this time.
    30 Apr 2012, 06:35 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    The problem of the U.S. economy, and Europe's is, indeed, lack of production. The thing is, it DOES matter WHO produces. Those missing production are the ones taking on debt, they need to make something demanded by those accumulating cash.

     

    There is no lack of demand - people STILL want the new, spacious, modern, homes. They just can't afford them. And many would want a Ferrari or Mercedes as well, they just can't afford it. And why can't they afford it? Because they don't produce something of equal value, wanted by others.

     

    So there is, indeed, a lack of production - even in the midst of an economy that seems under a huge slack. The problem is WHO is lacking production.
    30 Apr 2012, 08:26 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    Monetary policy together with fiscal policy seeks to temporarily replenish the pockets of those that are not producing enough so that they can keep on consuming. And when it does that, is SEEMS to be working. But isn't, it just delays the inevitable and makes it worse. If fiscal policy tried to build up production of those sectors/people, it would work better long term.

     

    If the present course is held long enough, production will be hollowed to the point where, once the dollar collapses, most of the U.S. will live like the Chinese of yesterday.
    30 Apr 2012, 08:29 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    coddy0, I'll take the U.S. over China any day. China is an extremely poor country with a state-run economy and complete disrespect for individual liberties.
    30 Apr 2012, 09:28 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    Reel Ken (and Econdoc), it's easy to criticize the early efforts of the current administration for focusing on health care rather than more direct economic considerations but the fact is that the rising cost of health care was on trajectory to bankrupt the nation and Congress had previously shown itself to be incapable of addressing this longstanding problem. This trajectory of excessive and rising healthcare burden was (and is) an especially crucial consideration in a nation with a structural deficit and an aging population. The most intractable of our entitlement deficits, Medicare, has already shown improvements in its trajectory since the passage of the ACA. It's still running at a deficit, but the deficit trajectory is already improving as providers gear up proactively to prepare for the ACA's requirements.

     

    I agree that the stimulus was too small and was poorly implemented. The former failing is a Republican one. The latter was a failure of the current administration. It was a bipartisan let down. That said, every quarter the CBO analyzes (attempts to analyze) its effects and every quarter that stimulus we're all so disappointed in apparently has been having some rather significant positive impacts on the economy.
    30 Apr 2012, 09:39 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi SanDiego,

     

    Full agreement here.

     

    I don't think Obama's fault was in health overhaul, but in underestimating the impact of the 2010 incursion by the Tea Party.

     

    This could have been mitigated had he not dismissed Simpson Bowles. That, I believe is his only critical failing. The Tea Party got it legs in the 2010 election and his failure to act gave them their arms. Now their reach is obstructionist.

     

    I guess, I can say, that his shortcoming was a political mis-calculation, more than economic one. I base this on the premise that the congressional deadlock is our biggest hurdle now.
    30 Apr 2012, 09:51 AM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    SDS:

     

    Funny enough, that's precisely the model the current Administration wishes to emulate.
    30 Apr 2012, 10:44 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    There was much to like about the Simpson Bowles plan. I'm far from convinced that it could have passed during the short interval of the lame-duck session if only Obama had stumped for it.

     

    Regarding gridlock, even Texas conservative John Mauldin is on record as saying we'd be better off with a 100% Dem Congress than with the current gridlock. I may be the only political junkie in the nation who's not greatly worried about it because this too will pass. I see the wisdom of the founding fathers at work here. Other nations have fallen into fascism in times of crisis and public uprisings. There but for the grace of God....
    30 Apr 2012, 10:45 AM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    SDS:

     

    You get a 100% Democrat Congress, and this ideologue President being re-elected for four years (and not having to posture for further elections), coupled with a Constitutionally passive Supreme Court, and we'll arrive at that fascist state in no time at all.
    30 Apr 2012, 10:52 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    Paulo, "demand" doesn't mean "desire" or "wishful thinking". It means buying pressure, which includes purchasing power.
    30 Apr 2012, 11:03 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    Yes, and that's why what's missing is production to provide purchasing power. Purchasing power comes from production, not from printing money - printing money can fake purchasing power for a while, but that's the worst it can do, for it forgoes creating additional production.

     

    That's why I am saying that if this goes on long enough, there will be a point where the dollar ceases to be accepted and then we find the U.S. with very little production and most people end up living like the Chinese of yesterday.
    30 Apr 2012, 11:05 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    You missed my entire point, Paulo. You can produce as much as you want but if there's no one to buy it -- no demand -- you'll never see a benefit from your labors. No one disagrees that employment is the goal. That's just a strawman -- a very tired and overused strawman in need of a rest.
    30 Apr 2012, 11:10 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Tack,

     

    We are an "extremely poor country?" Please elucidate.

     

    We have a state-run economy? You have a point here. In the classical sense, any gov't that controls money supply can be considered a state run economy. Should we let the banks handle our money supply?

     

    Disrespect for liberties. Completely agree. First, freedom of religion. Need to stop someone else's religious beliefs from dictating my choices. Everyone should be free to live their lives based on whether they care to follow any particular religious belief, or no religious belief.

     

    Freedom from oppression. Stop profiling. Stop oppressing those who choose a different life style. Equal rights for all.

     

    The right to vote. Stop regulations designed to marginalize citizens by impeding their access to vote.

     

    I could go on, but you get the point.
    30 Apr 2012, 11:10 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    SanDiego, look at what I said originally. It's not just about producing more. It's WHO needs to produce more.

     

    This is something that conventional neo-classical economics does not take into account.

     

    That's a huge difference, the State can spend on something useless providing purchasing power, or it can try to spend in a way that creates self-sustaining productive activities - For Keynes, all spending is about the same, this way of looking at it, shows it's not.
    30 Apr 2012, 11:14 AM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    My God, a graduate from the Students for a Democratic Society. I was wondering where they all went.

     

    Let's just say we're at polar opposite ends of the spectrum.
    30 Apr 2012, 11:17 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Tack,

     

    Gee,my remarks are embodied in the founding documents of these United States. What "polar opposite" are you?

     

    I will plead guilty of being for a democratic society. If we are at polar opposites, what is the society you are for?
    30 Apr 2012, 11:40 AM Reply Like
  • moreofthesame
    , contributor
    Comments (743) | Send Message
     
    Why don't you look into it and let us know. May be the world was ready to use flowers as payment at that time, it would be difficult to know in the present exactly where society or culture was back then.
    30 Apr 2012, 01:08 PM Reply Like
  • User 168446
    , contributor
    Comments (108) | Send Message
     
    I already have. It's well documented. Can markets be rational if humans aren't? PBS Watch it and get back to us.

     

    http://to.pbs.org/Ij74xv
    30 Apr 2012, 01:33 PM Reply Like
  • joe kelly
    , contributor
    Comments (1775) | Send Message
     
    This idiot is complaining about money printing then saying economy will crash when Fed stops printing money.

     

    Does this clown get paid for this crap?
    28 Apr 2012, 04:47 PM Reply Like
  • Jeff Spiller
    , contributor
    Comments (23) | Send Message
     
    1. I think that he expects that we will have to 'pay the price' for all of the money printing, but that it will be a one time cost, and in return we will get long term economic stability.

     

    2. It appears, from the text of the speech, he got a free meal.
    28 Apr 2012, 05:14 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Clearly wenzel doesn't believe in managed addiction...
    28 Apr 2012, 04:48 PM Reply Like
  • Gatesh
    , contributor
    Comments (25) | Send Message
     
    There is no "huge price inflation" coming. The economy is too weak for inflation to get any real traction. People have been saying this now for years and it's always "just around the corner". Getting a little old listening to these guys. By any measure, Bernanke has done his job, stable prices and low inflation. If it were not for all this latter day money printing that is so despised, we would have been over the abyss. Stop listening to others and instead think things through for yourselves.
    28 Apr 2012, 05:14 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    "Stop listening to others and instead think things through for yourselves."

     

    Then why do you bother typing a post if you don't want others "listening" to you. The whole purpose of a discussion (or communication) is to listen and learn from others and share your thoughts.

     

    As to your inflation comment: money always finds a way. Commodities and share prices are assets that have risen sharply since QE, other goods less so, because real wages are stagnant and labour participation rates are dropping sharply, i.e. all that created wealth is not trickling through to the masses. Take a look at prices for goods demanded by the wealthy 1%. You will find they are hardly depressed. Housing and rent for the up-markets are doing really well and charging high prices. Luxury goods producers are selling like crazy and are able to maintain large margins -> a clear inflationary signal, but only for a minority. Inflation in the traditional sense will be difficult to repeat, because not since the 19th century of Charles Dickens has wealth been this unevenly distributed.
    28 Apr 2012, 05:29 PM Reply Like
  • sr1977
    , contributor
    Comments (336) | Send Message
     
    I liked his closing statement:

     

    "Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat.

     

    Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats."
    28 Apr 2012, 05:26 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    eheh, brutal.
    28 Apr 2012, 05:27 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    I've read his speech, carefully.

     

    He is specific in stressing that there are no constants in economics, no predictability, as in the physical sciences.

     

    He then goes on to use constants to predict the effects of policy in reaching his conclusions.

     

    Hasn't anyone noticed this?
    28 Apr 2012, 05:48 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    He doesn't use constants in his conclusion, he just says it will fall one side or the other. He doesn't say where the divide is.
    28 Apr 2012, 05:55 PM Reply Like
  • Jeff Spiller
    , contributor
    Comments (23) | Send Message
     
    I think that what he is saying is that since there is no predictably and his evidence shows that due to this the actions of the fed are destructive (he just can't predict how destructive) there's no point in doing this anymore since its not working.

     

    Insanity: doing the same thing over and over again and expecting different results.
    --Albert Einstein
    28 Apr 2012, 06:23 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Paulo,

     

    Disagree. he makes statements that pre-suppose underlying constants. To wit ...."Don’t you think it would make more sense to stop these policies which are a direct factor in causing unemployment, than to add to the mess and devalue the currency by printing more money?"

     

    Unless there is a constant in the background, somewhere, how can he conclude that "... these policies...are a direct factor in causing unemployment..."

     

    No different than saying "... oxygen is a direct factor in causing rust..."

     

    He even says, if it happened ten times in a row in the past, in economics, it is not predictive of the future.

     

    Yet, in this one excerpt he links a cause and effect (actually two different cause/effects if you read carefully). Yet he says cause/effect doesn't exist in economics. Does it, over and over again.
    28 Apr 2012, 09:21 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    I don't think his point is about there not being linkages, as much as there not being quantifiable, fixed, linkages.
    28 Apr 2012, 09:26 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Paulo,

     

    If there are no quantifiable, fixed linkages then how does ...

     

    "... these policies which are a direct factor in causing unemployment, than to add to the mess and devalue the currency by printing more money?"

     

    Seems to me he is linking and fixing the policies with unemployment and printing money to devaluing the currency.

     

    He goes much further than you suggest. He clearly states that even if something repeated its results 10 time, it is not a constant.
    28 Apr 2012, 09:32 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Jeff,

     

    He starts with a premise that you cannot draw a linkage line from one action to any particular result. He uses this premise to denounce, not only the Feds actions, but most economic theories.

     

    He then concludes all the Feds actions, based on the presumption of such a linkage, are in error.

     

    He then, astonishingly, proceeds to draw his own linkage lines between what the Fed did and what he says this will or has already caused.These linkage lines differ only to the extent that they are, essentially, opposite of the linkage line the Fed has drawn

     

    If you can't see the irony in this, I give up.
    28 Apr 2012, 10:32 PM Reply Like
  • Jeff Spiller
    , contributor
    Comments (23) | Send Message
     
    Ok, I read it again and he does say that "All Economists are full of it, except for the Economists I agree with." I was so excited about the first part that I failed to fully process the second part. Since premise supporting his argument is contradicted by his own argument, it is logically flawed. While I'd like to rely upon it to support my own beliefs I cannot.

     

    Thanks for the insight.
    28 Apr 2012, 11:18 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Jeff,

     

    WOW !!!

     

    Your comment speaks very highly of you. Very few people actually disregard information that is flawed in their quest to reinforce their beliefs.

     

    You are to be commended and stand as an example of intelligent rather than ideological behavior.
    29 Apr 2012, 06:21 AM Reply Like
  • Jeff Spiller
    , contributor
    Comments (23) | Send Message
     
    I have too much of my own flawed logic, I don't need others flawed logic too.
    29 Apr 2012, 11:03 AM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Bob Wenzel is a joke,,,please base your investments on him...
    28 Apr 2012, 06:27 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    You shouldn't base your investments on him - you should base them on the actions of the people on the other side of the table. Those people can buy ANY amount of assets and take those assets to ANY price they choose. And not long ago, they deemed the level of the Russell 2000 as proof that they were doing was working.

     

    If those people have the ability to control their yardstick that they've choosen as a measure of their success, what do you think they'll do each time that yardstick falls and somehow says "failure" for a while?

     

    That said, what Bob Wenzel says is perfectly logical. It makes sense. The people on the other side of the table are distorting outcomes, and choosing winners - something which the government shouldn't do.
    28 Apr 2012, 07:03 PM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Understand one thing ...the Business Cycle...
    28 Apr 2012, 07:30 PM Reply Like
  • Josh Krause
    , contributor
    Comments (1361) | Send Message
     
    And how the Fed's actions are interrupting it and perverting it?

     

    Yes, I fully understand that.
    29 Apr 2012, 12:03 PM Reply Like
  • TippingPoint
    , contributor
    Comments (152) | Send Message
     
    At least they are inviting opposing views.
    28 Apr 2012, 07:51 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4013) | Send Message
     
    Great comments and debate. I try to be aware of my conviction bias and hedge accordingly. If I'm wrong, I'll still have something left. If I'm right, I'll be hobnobbing with the 1%.
    28 Apr 2012, 07:52 PM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    QE2 ended last June, almost an entire year ago. Twist has been money-supply neutral (buys and sells are matched), yet the doom crowd says the Fed will print us to death, even as their repeated claims that QE3 is "about to happen next week" have completely ignored what the Fed has said, is saying and is doing, i.e., that there isn't going to be any QE3.

     

    Remaining lost in space about QE seems much more popular than assessing what's actually happening with the economy.
    28 Apr 2012, 08:16 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4013) | Send Message
     
    Tack: Mr. Market seems to think QE3 is a near certainty. The debt can either be inflated away or liquidated and the latter isn't an option for The Bernank.
    28 Apr 2012, 08:20 PM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    Geoff:

     

    I don't agree.

     

    It's the QE doomsters that have been relentlessly and only focused on QE, as the mover of everything. Meanwhile, ignored has been the march upward for months of almost every coventional economic measure. In essence, the preoccupation with QE has faked the bears out of their jocks.
    28 Apr 2012, 08:33 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    Op. Twist is not entirely neutral. The FED buys higher risk instruments and sells lower risk instruments. The impact from the FED's moves is a substitution effect (those who sell to the FED turn around and buy something else). If the FED buys higher risk, the substitution is on higher risk instruments.

     

    So it's not entirely neutral for the markets. But it does seem less effective in pumping them up than straight QE or LTRO.
    28 Apr 2012, 09:28 PM Reply Like
  • RSI Raistlin
    , contributor
    Comments (400) | Send Message
     
    At least if they keep printing at some point i'll make more than .0001% on my savings. Of course a loaf of bread will be $10
    28 Apr 2012, 08:22 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2061) | Send Message
     
    Last week's GDP number released by the Government confirmed a 2% annulated growth. But national debt is growing at an annual rate of 7% unabated.

     

    As one Greek commenter noted elsewhere, that nation is now coming to a rude awakening, that they have been living off other people's money.

     

    It doesn't take an MIT PhD in economics to see that we are heading for deep trouble. Worse than that, we are not only living off other people's money, we are living off Chinese money.
    28 Apr 2012, 09:02 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Seems to me that Bernanke is a genius.

     

    He gets oodles of money from China and everywhere else and pays practically no interest on any of it. Was a time he charged for the privilege of them parking their money here.

     

    He then uses this, nearly free money, to spur economic growth (slowly, but positive) and increase tax revenues.Not to mention avoid a world-wide financial break-down.

     

    Seems that the same people who complain about Bernanke lending money to Big Banks at no Interest so they can line their pockets can't see the efficiency in having the Chinese, and others, give us money nearly free, so we can line our treasury.

     

    What person schooled in economics, busines or finance wouldn't love an interest free loan from another country? It is about time we were able to leverage our "reserve currency" status for something of benefit.
    28 Apr 2012, 09:40 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2061) | Send Message
     
    Reel Ken:

     

    Re: "...give us money nearly free..."

     

    Free, really? Every dime and nickel has to be paid back. There is no free lunch.

     

    Oh, BTW, Professor Ben did happen to earn his PhD from MIT; so did former Chair of the Council of Economic Advisers, Professor Christina Romer as well. (Incidentally)
    28 Apr 2012, 09:56 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Teutonic,

     

    You miss the point. Who cares if the money has to be given back? He has use of it in the meantime. Would you rather he pay a higher interest rate on the money, and then give it back?

     

    Would you refuse a no interest loan simply because you have to pay it back?
    28 Apr 2012, 10:40 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2061) | Send Message
     
    Hi Reel Ken:

     

    I don't get your logic. You're a highly qualified financial professional and I'm just a dumb retired engineer.

     

    A certain amount of debt at the national level proportional to its GDP, current debt level and growth potential is fine. But the present trajectory points to we incurring at least about $1T additional deficit per year for the next many years.

     

    There is a thing called credit rating. Look at the PIIGS example.

     

    Please educate me.
    28 Apr 2012, 11:46 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2816) | Send Message
     
    Teutonic Knight, if you think there's no benefit in getting lots of capital at zero or almost zero interest, I have a deal to offer you. You loan me $10M for three years at 0% interest. I'll invest it conservatively at 3-5% interest. When the three years are up, you get your $10M back and I keep all the earnings from it for myself. I'll even write that into my will for you.

     

    If that sounds like a great deal to you, let me know and I'll give you the address where you can send the money. If you think this doesn't sound quite fair to you, then perhaps you begin to understand the point.
    29 Apr 2012, 12:44 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Teutonic,

     

    You are confusing two separate concepts.

     

    1. Debt incurred by overspending is bad (fiscal problem). I agree and so would most everyone else.

     

    2. Lowering the interest rate on money you borrow is good. (monetary advantage)

     

    Bernanke has managed to take advantage of the world-wide monetary crises and leverage our "reserve status" so that our existing debt load carries next to no interest. As long as there are willing purchasers of our debt, he's stupid not to flood the economy with money. This is not a fiscal issue, it is a monetary issue.

     

    The problem Greek faces (and the PIIGS) is that the interest rate on the refinancing of their bonds is unsustainable. No one is willing to lend them money without a high rate of return. If their debt/GDP becomes too great, maybe even not re-financeable. We are nowhere near this problem.

     

    As long as other countries believe we can pay off our debts and see us a safe haven, we can pursue the one sided monetary policy to our advantage for years to come That's what Bernanke's doing, at least through 2014.
    29 Apr 2012, 06:34 AM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2061) | Send Message
     
    Reel Ken:

     

    To me your 1) and 2) are about the same thing.

     

    Take for example, the Chinese Treasury purchase of Trillions of dollars is simply a place-holder of their trade surplus over the U.S.

     

    The Fed had to lower interest to near zero to salvage the collapsing effects of the bursting housing bubble.

     

    The Government over-spends to sustain the economy including hundreds of billions of dollars on extended unemployment benefits, not to mention the toll of suffering of millions of the unemployed and under-employed.

     

    The net effect is a transfer of wealth to Wall Street's using Chinese slave labor, loss of our factories to China, ballooning national debt which ultimately has to be paid for by the middle-class.

     

    In sum, I would surmise that this act is not only a result of poor, or even bad management of the Bureaucrats and the Politicians, it is a crime committed against Humanity.
    29 Apr 2012, 08:51 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi teutonic,

     

    If you really believe that monetary and fiscal policy are the same thing, I don't think I can help you.

     

    That said, I'll give it one more try.

     

    Borrowing money is not, in and of itself, bad. It is what you do with it. Borrowing to buy food or other consumables is bad, borrowing to invest is good.

     

    Congress (fiscal policy) spends it. Bernanke (monetary policy) invests it.

     

    Congress can never get it back without creating revenue or debt (which ultimately requires revenue). Your children or the middle class pay for this (strange how you left out the wealthy as payers? They would be first on my list)

     

    Bernanke raises rates and the debtors pay it back in. Then he simply repays the Chinese, who were so nice to give him the money at ZERO interest. No big deal. It's all just a question of when Bernanke sees the most opportune time to call it back in. He need only try to judge when the economy can best afford higher rates.

     

    Unfortunately, there are some who saddle their political aspirations on a failed economy. They put up smoke-screens and spin to convince those that don't understand, of their political position. Keep in mind, they are espousing a political not economic position. In his comments Bob Wenzel has nominated himself to go to the head of this class.
    29 Apr 2012, 09:12 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    The thing it, if the state borrowed to invest in further productive activities, it would be warranted. Borrowing to avoid the need for productive activities will, over time, destroy the economy even if it allows you to suppress suffering in the short term.
    29 Apr 2012, 09:18 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Paulo,

     

    Does investing to keep the whole world from unnecessarily falling into a financial collapse, meet your criteria of a "productive activity"?

     

    Does investing to give the banks the liquidity they need to keep small (and large) companies operating meet your definition of "productive activity" ?

     

    Does investing to prop up the value of the stock market and restore a sense of well being to so many, meet your definition of "productive activity"?

     

    How soon people forget the state of mind of this country, and the world, in 2008. We are in a different place and a different time. Could they have done things better? Of course. No one assumes a perfect solution. In our system of government the best result is usually achieved by annoying both sides of the isle. My hats off to Bernanke, he has done this.

     

    But to assume he is blatantly wrong is preposterous.
    29 Apr 2012, 09:36 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    Reel Ken, the problem here is that you're looking only at the FED reaction to something the FED, with its powers, could have avoided in its entirety - and yet, promoted.

     

    The housing bubble could have been contained at a much earlier point by FED action. Instead, to stop a minor 2001 recession, the FED actually promoted that same housing bubble, leading to disaster, leading to the need to print their socks off. Ah, and even the 2001 recession was, in a way, promoted by the FED a bit further back, by scaring themselves with the inexistent 2000 bug problem and flooding the market with liquidity when the market was already working on a huge tech bubble.
    29 Apr 2012, 10:15 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Paulo,

     

    Agree 100%.

     

    I'm not saying the Fed got it right in the past, just that Bernanke is doing the right thing now.

     

    So many want to visit the current state on him, when Greenspan is the culprit. I was totally turned off when I heard, live, Greenspan's testimony back in,I think 2004, when he encouraged homeowners to buy variable rate mortgages, when rates were historically low.

     

    It was clear then, that he was only a puppet of the banking community.

     

    I see the same attack on Obama for problems he inherited resulting from Chris Dodd's ties with the industry.

     

    I just guess people would rather bash those around now. There is no joy in bashing the culprits, as they lay quietly out of sight.
    29 Apr 2012, 10:41 AM Reply Like
  • chuckholladay
    , contributor
    Comments (44) | Send Message
     
    I am guessing the Fed felt that speech was a waste of their time but the man certainly made some interesting points concerning the roller coaster ride our economy has been on since the inception of the Fed. Now my job as a retail investor is to keep plugging away with both eyes open. It is the greatest game in town and if everybody could make it work, it would not be as much fun.
    28 Apr 2012, 09:49 PM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    For those who have studied the Great Depression, poor Fed policy and government policies turned a regular garden-variety recession into an event that destroyed the American economy (and families) for over ten years.

     

    The hallmark events included tightening credit during the recession, setting up protective tariffs, raising taxes (esp. "soaking the rich") during a weak recovery, trying to bolster the unions while demonizing business formation.

     

    The misery of the Great Depression is unimaginable for Americans today. Off the scale unimaginable.

     

    Bernanke has been determined not to make the same mistakes of 1930 and 1937. Unfortunately, our executive branch appears just as determined to repeat many of the failed policies.
    28 Apr 2012, 11:18 PM Reply Like
  • wes mantooth
    , contributor
    Comments (311) | Send Message
     
    "For those who have studied the Great Depression, poor Fed policy and government policies turned a regular garden-variety recession into an event that destroyed the American economy (and families) for over ten years."

     

    Really? I think the promoting and encouraging of extreme valuations in various asset classes is poor policy. We wouldn't need these heroes if the Fed would stop outlawing recessions. They do serve a purpose.
    29 Apr 2012, 12:06 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    wes, I agree to a point. However the extreme misery caused by the Great Depression should avoid duplication if possible.

     

    While valuations are a valid issue, every question / critique should be viewed in the light of if not XX, then what? Economic and government policies have consequences. So does inaction. No action is an action insofar as it will drive a result.

     

    If the Fed did not provide a great deal of liquidity to the markets, if they did not prop up the banks, if they didn't lower interest rates (thereby creating other valuation issues, perhaps), then what would have the results have been?

     

    I'm not smart enough to know all the answers, but I can say with some level of certainty that if the Fed did not step in to do with they did, we would not be in the same place we are today. Maybe it would look a lot more like 1934 than 2012. And 1934 was heaven-sent versus 1932 and 1933. The average American's problems today are smaller than the Average Joe of 1932-33. No government intervention to help the economy from cratering: coupled with no social safety nets. For instance, Social Security was not created until 1935. Food stamps (some 50 million people are on it?)......not a thought. Unemployment insurance? Nope. U. S. exports in 1933 fell to one-third of what they were in 1929. Incredible.
    29 Apr 2012, 12:27 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Ray,

     

    Agree with almost everything you say.

     

    Disagree that you can pin this on the executive branch. It lies squarely on Congress, as well.
    29 Apr 2012, 06:49 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    Reel Ken: You are absolutely correct. Congress is as culpable as the Executive Branch. My intent was not to give Congress a pass, but to note that the Executive Branch has the ability to set "the tone at the top."

     

    A conflict now is the ideology of the American left is at cross-purposes with the reality of the ebb of the Great Recession. It's hard to promote a "free stuff" agenda when the economy is facing a tough road back from a business and banking system that was teetering on the brink in 2008-09. The "free stuff" politics works much better when there's lots of extra money sloshing around.

     

    True Socialism could play to the far Left, but the vast majority of Americans would reject true Socialism outright. It's too radical for this country: with roots still based on the (declining) principles of freedom and hard work = opportunity.

     

    Despite rhetoric from the right calling Dems/Obama socialists, they really are not; or at least they cannot claim it outright or risk political suicide. Heck, they don't even like to be labeled "liberals."

     

    In true Socialism, the central government controls supply/demand, creates autonomous businesses to compete (sort of) with private enterprise, and controls all major institutions for the collective good of the masses. Banks, energy, major industrial businesses, medicine, agriculture....all under central government ownership. Much greater span than regulatory oversight. Think ObamaCare on steroids.
    29 Apr 2012, 09:27 AM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Ray,

     

    You make some great points. I 'm not sure I agree with your freedom and hard work equal opportunity. Yes, in the past, not now. The middle class is working harder than it ever has (productivity) and is sinking slowly towards less opportunity. The 1% spends, proportionately, less and less time being productive and has opportunity abundant.

     

    I have trouble understanding the current philosophy that the best way to get the middle class and poor to work harder is to reduce their share of gov't largesse while the wealthy will work harder if we increase their share of the gov't largesse.

     

    It all looks backwards to me.
    29 Apr 2012, 10:09 AM Reply Like
  • SA Editor Eli Hoffmann
    , contributor
    Comments (732) | Send Message
     
    Here's why I love SA (my bias notwithstanding): Where else can you actually spectate and participate in a balanced and civilized discussion about exceptionally loaded and polarizing topics?
    29 Apr 2012, 12:07 AM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Me thinks ya'll at SA love throwing these subjects out there....and watch the dogs fight over the meat...well done.
    29 Apr 2012, 02:15 AM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    the fed has failed miserably in one of its primary missions...to bring stability to the financial system. those who can't understand that simple fact should take their blinders off.

     

    to those who believe the fed has rescued the system, i would ask why it ever had to come to that with the fed supposedly on the job and at the ready? the answer is: the federal reserve has made enormous policy errors throughout its history and the subsequent "fixes" are of an increasingly ad hoc, high risk nature that raises the cost of failure ever higher, should it occur. the fed is the equivalent of the physician who thinks the hypocratic oath...first do no harm...is a bunch of bullshit.

     

    i would like to believe bernake knows exactly what he is doing. but i fear he is simply trying to hold up the house of cards until his term is over...and he doesn't have to clean up his own mess.

     

    this isn't the way to run a railroad.
    29 Apr 2012, 02:52 AM Reply Like
  • WisPokerGuy
    , contributor
    Comments (886) | Send Message
     
    While it may not be the ideal way to "run a railroad", I completely disagree with you that the Fed has not brought at least some measure of stability to the US financial system. Have you seen what it happening to the major banks in Europe right now on almost a daily basis??? While I may not agree with the Fed giving the major financial institutions in this country basically free money to keep them afloat in 2008, I don't think you can disagree they are much more secure as a result then the likes of a Banco Santander or Royal Bank of Scotland. In fact I would urge you to look at JP Morgan as an investment. Once the major banks in Europe start selling assets to balance their books, JPM and other major players are incredibly positioned to take advantage of that situation.

     

    People from all over the world are pouring money into our stock market because basically everywhere else in the world sucks right now or is just too risky. There's a reason for that.

     

    (just my .02)
    29 Apr 2012, 05:05 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    What the FED is doing, by not letting the economic corrections take place, risks turning the U.S. into China over the long term. Not the China of today, but the China of yesterday. It will hollow out the economy over time, removing the need to produce, until one day the dollar is no longer accepted and the U.S. doesn't have the production. You can guess what happens then.

     

    (production recovers over time, but meanwhile you live like the Chinese used to ...)
    29 Apr 2012, 08:57 AM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    so our standard of comparison for financial stability is europe? why not switzerland? or norway? there are a few countries in the world that haven't ruined their economies through a 30 year, uncontrolled credit binge, with the inevitable result of an explosion of debt at every level...debt which cannot possibly be supported with any kind of normalization of interest rates. the great irony so many fail to see is the fed is trying to use the same old, tire, cure....credit expansion....that caused the disease. deleveraging is a myth...it hasn't occurred and the fed doesn't want it to.

     

    and by the way...this story is still unfolding. before you pass judgment on the success of fed policies, let's at least wait until the economic recovery is self-sustaiing. we ain't even close...and the fed knows it.
    29 Apr 2012, 11:13 AM Reply Like
  • Street Instincts
    , contributor
    Comments (98) | Send Message
     
    Isn't Bob Wenzel a basketball coach?
    29 Apr 2012, 04:41 AM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Different guy...nice promotion by SA...must be a buddy of one of the editors...
    29 Apr 2012, 04:49 AM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Some favorite places for Mr.Wenzel,,, the Drudge Report, LewRockwell.com, Whiskey and Gunpowder and Mises.org...He is
    a big fan of the Weiner Schnitzel....
    29 Apr 2012, 04:59 AM Reply Like
  • WisPokerGuy
    , contributor
    Comments (886) | Send Message
     
    This is a very interesting blog with points from both sides of the question as to what the Fed should have done and what it should do.

     

    While I sympathize with the Fed bashers above, I have to agree with [Ray Merola] above because I think that people today (both young and old) have truly forgotten the complete social upheaval that occurred during the Great Depression. The Hoover administration at that time did basically everything wrong to try stop things from spiraling down. Everything they did only made things worse (as Mr. Merola points out above). Think about this: how do you think 25-30% unemployment and a stagnant industrial base would be viewed now? That is what I personally believe we might have been looking at in September 2008. I think Bernake looked back at history and determined that he was going to prevent the Great Depression II from happening at all costs. And he was going to use anything in his power to prevent that event.

     

    As for the issue of inflation, it's my rudimentary understanding of economic theory that deflation and NOT inflation is the real evil to be avoided at all costs. Deflation was rampent in the 1930's. If we had collapsed into a world depression, asset values would have crashed (like they did in the 30's) and taken years - if not decades - to recover. Remember the Great Depression only ended with the start of World War II. A third World War would not be a real pleasant solution to a complete world economic crisis considering we now have the power to destroy ourselves which wasn't the case back in 1939.

     

    Obviously it is easy for the Ron Paul's of the world to say "the sky is falling". People like him only have to be right in one instance to be labeled a profit. However, no one can convince me that the crisis of 2008/2009 didn't have the ability to turn into a complete decades long disaster without immediate and coordinated economic intervention. And frankly, up to this point we have avoided that scenario. So I look at the whole situation like this, if someone tells me that I'm going to die unless I take some bitter medicine, then I'm probably going to swallow almost anything to live a few years longer. In this case that medicine is QE1 and QE2 or however more there are to come. Bernake is dealing with the immediate problems and probably hoping he can deal with the latter issues that printing a trillion dollars of capital will cause when the economy is stronger. If anyone has a better plan then they I'd like to hear it. However, my gut tells me that those people would complain the loudest once they lose their job and are faced with standing in soup lines and living in cardboard boxes under the freeway. And when you think about what is happening in Europe right now, that is not such a farfetched vision into the future.
    29 Apr 2012, 04:48 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20458) | Send Message
     
    You're thinking about what the FED should have done AFTER the collapse of the last bubble. That ignores what if should have done not to permit the very existence of the bubble that now conditions its answer.
    29 Apr 2012, 08:59 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    Thanks for the acknowledment WisPokerGuy.

     

    You bring up an excellent point on deflation: another monster of the Great Depression. The prices of electronics going down today is not like the deflationary spiral of the early 1930s. In 1933, collective prices went down 11 percent. Costs for everything was falling fast. Wages went down. However, the cost to service old debt remained the same. Banking froze up. People won't buy things (think autos, durable goods, clothing, etc.) today because if they can hang on and wait (and they have any money at all) they can buy it later at a lower cost. This feeds further reduction in demand and further price declines. That is a deflationary spiral. We have seen nothing like that today: this is what the Fed wanted to avoid at all costs.

     

    Compounding matters in the 1930s was no FDIC or federal backstop of the banks. Banks can't collect on debts because people have no money. People want their money out of the banks for fear they will fail (think 2008 MMFs "breaking the buck" all over the place: a panic to get money out). Plus, if there's deflation, why keep your money in the bank? No one pays any interest; and it's not "safe," either. The worst of all worlds. So they run on banks and they fail (no government backing to save anything).

     

    So one loses their job and their savings isn't secure. Banks are not insured, the stock market has fallen 85 percent by 1932 from the peak in 1929. No safety nets. Yet their debt payments remain the same. Bernanke was not going back to the Fed policies of the 1930s.
    29 Apr 2012, 09:52 AM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    Ray:

     

    Superbly stated and explained.

     

    In many months, years even, of discourse and much diatribe on current montary policy you have, perhaps more succinctly than almost anything I have read, outlined the consequences of deflationary, contractionary monetary policies and illuminated their ruinous impact on both macroeconomics and on the fortunes of each individual citizen.
    29 Apr 2012, 01:14 PM Reply Like
  • bbro
    , contributor
    Comments (9837) | Send Message
     
    Factoid...Household debt service plus Government debt service to GDP is at a 31 year low..lowest since 4th qtr 1980...
    29 Apr 2012, 04:51 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    ...until interest rates jack up.
    29 Apr 2012, 08:02 AM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    a useless factoid in a zero interest rate environment. it's not the debt service that kills....it's the principal repayment. wait until the credit junkies try to roll over their debt and there are no takers.
    29 Apr 2012, 11:44 AM Reply Like
  • Street Instincts
    , contributor
    Comments (98) | Send Message
     
    While the adults in 1929-1932 were broken, bitter and fearful, their children only knew they ate cabbage soup a lot, and their parents seemed worried.

     

    When these children came of age, they went out, took risks, and started rebuilding America. Their parents could have done it but they were just afraid.

     

    It's psychological, really.
    -JKirk
    29 Apr 2012, 05:07 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    For those who had money (which was very few), some great businesses were created from the Great Depression. The problem was that if you lost your job, and your savings was gone, there really wasn't much opportunity. Mortgages (typically 5-year balloon notes in the 1920s-1930s) still came due. So did the electric bill.

     

    Taking business risk still requires capital. In those days, there's no government "free money" and "free stuff." If the banks won't loan, and your friends have no money, and you risk losing your job and all your savings, for the average Joe there were more pressing things to do than look to take business risks.

     

    The few that could...did. Some made fortunes in all manner of businesses, from the start of United Technologies, to the NFL to Colonel Sanders.

     

    The misery and reality of the Depression was unimaginable to most of us, today.
    29 Apr 2012, 09:59 AM Reply Like
  • ByloSelhi
    , contributor
    Comments (177) | Send Message
     
    Good discussion here. It helps when comments are kept to the situation as it is today. We know that Greenspan was an idiot, we know that MERS should not have been allowed, we know that Glass-Stegall should not have been repealed, we know that the big investment houses should have remained partnerships with personal liability for their executives............. but the question still remains: Is the Bernanke doing the right thing now?

     

    Good comments from several points of view.
    29 Apr 2012, 11:43 AM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    i'm amused and dismayed by those who think the fed has successfully avoided great depression II. you have declared victory far too early...just as they did during the 1930s.
    29 Apr 2012, 11:55 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3493) | Send Message
     
    Avoiding the potential collapse in 2008 did not mean it's all over. Indeed, Fed actions may have avoided the disaster scenario as part of the first act of a historical script. My view is that without Fed actions 2008-09; the proceeding years would have looked more like 1932 and 1933. Of course, reasonable people can debate that.

     

    Furthermore, the aftermath of the 1930-1933 panic and crash was a pretty steady trend up from 1934 through 1936. However, poor government policies created the "Roosevelt recession" in 1937-38 that tanked the economy again. Roosevelt and his followers, feeling pretty good after being re-elected in 1936, raised taxes, advocated stronger unions, and worried about balancing the budget. They bashed banks and businesses with more populist rhetoric and threatened more "fairness" regulations. It plunged the country back into a recession, though nowhere near as deep as 1930-33. Still bad enough so that employment and output did not recover to early-1937 levels until World War II.

     

    I harbor concerns about a repeat of such a scenario; based upon campaign speeches, either political party could pull all the wrong levers. However, the Dems populist rhetoric seems to lean more towards repeating the same mistakes. The Fed could get pulled along for a ride. Bernanke, a deep student of the Great Depression is well-aware of the scenario; however he cannot overrule exec and congressional folly to pander to special interests and / or collect votes.
    29 Apr 2012, 01:21 PM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    Ray:

     

    Again, you've nailed it.

     

    My guess is that when real vote projections, not the current media hyperbole, start to be tallied closer (September?) to the election, the market will vote on its outcome. Unfortunately, one can make a cogent argument, I'm afraid, that the market may see either outcome as having negative side effects.

     

    If the Republicans gained full control of Congress and the Executive office, I could easily see the market fearing contractionary, austerity-like policies being implemented, even if tax policy were extended. On the other hand, Obama's re-election, coupled with inability of Congress to pass extensions of tax policy, could likewise be seen as a big downer.

     

    And, none of the foregoing calculates the impact on the impending Supreme Court decision on Obamacare. That could set events in motion even earlier.

     

    Whatever happens, my guess is that it won't occur on placid seas.
    29 Apr 2012, 02:08 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi don,

     

    Recessions, panics and depressions are, unfortunately cyclical. Though I believe we've skirted one now, it doesn't mean we won't be in for another one.

     

    In fact, I'd be surprised if we don't have one at some time in the future.

     

    To the best of my knowledge, no one has yet come up with a formula that can change this. So when it comes, it will be impossible to trace to any one cause,such as the Fed's mismanagement, Europe, earthquakes, whatever.

     

    So, I don't think it's wrong to declare victory, but I'd keep the powder dry.
    29 Apr 2012, 12:29 PM Reply Like
  • Tack
    , contributor
    Comments (13557) | Send Message
     
    RK:

     

    Of course, they're cyclical. Human nature is constant, and it's human nature -- for whatever reason, probably because each generation fails to appreciate how things really work until they live it -- for people to get scared out of their wits unnecessarily, causing panics and resultant recoveries, as they discover the world isn't ending, after all (it never does).
    29 Apr 2012, 01:20 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi Tack,

     

    Good comment.

     

    Instead of trying to fix blame, we should realize that " the fault lies not in our stars, but in ourselves".
    29 Apr 2012, 01:50 PM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    ken:

     

    the fed doesn't believe recessions have to be cyclical. i think the fed believes they can smooth, if not eliminate downturns in the business cycle...and therein lies my opposition to what they are doing.

     

    the fed has made a massive bet that the extraordinary and unprecedented measures they have taken to "preserve the system" (or preserve the status quo, in my view) will restore economic growth to pre-crash levels from which the massive bet will be repaid. doubts are rising that it will succeed...and if it doesn't we're going right back into the shi**ter with a far more constrained, if not impaired, federal reserve that has lost credibility with financial markets worldwide.

     

    to suggest we'd have been no worse off for trying to avert the problem is naive....we'd unquestionably be worse off with the massive debt overhang from the failed bet that would exist for years to come; and we might be far worse off if it becomes proven to the world that the fed has failed and no other support mechanism exists.

     

    bet the farm strategies are usually born of desperation and panic and i think that's exactly what the fed and the treasury did...they panicked. the fed could have let the markets work and focused their life-saving efforts on savers and depositors rather than debtors, corporate gamblers and other misfits, many of whom made absurdly leveraged or ill-timed bets that brought their houses down upon them. but markets were not allowed to work. the cleansing mechanism was subverted in an ad-hoc, discretionary way by the fed and the congress, likely for the benefit of cronies as much as for the benefit of the economy. how that can benefit the long term health of the economy i simply don't see. neither do i see the arguments of those who defend those actions.
    29 Apr 2012, 11:02 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi don,

     

    You raise very good points.

     

    I'm in a little disagreement in one area. In 2008 we were a sinking ship. The first thing you do with a sinking ship is to try and stop the leak. that, Bernanke did.

     

    Next you try to get the motor working and make some headway. That he is now doing.

     

    Keep pumping (bailing) as necessary to stay afloat. He's doing this.

     

    When you're in port, you make repairs. Not there yet, hopefully soon.

     

    I think it is wrong to try and make repairs until you are in safe harbor. You don't have as many tools, parts and you risk opening up the hole.

     

    We should let the boat get to safe harbor, let him make the repairs and then, if inadequate, find someone else. Until that time, he's the captain.
    30 Apr 2012, 10:05 AM Reply Like
  • icandoitdon
    , contributor
    Comments (617) | Send Message
     
    thank you ken. i think the captain has steered us into very dangerous waters while looking for the safe harbor...

     

    best of luck.
    30 Apr 2012, 01:34 PM Reply Like
  • Reel Ken
    , contributor
    Comments (3865) | Send Message
     
    Hi don,

     

    May very well be true.

     

    But we're still afloat. I do have one arm wrapped around my life preserver, just in case.
    30 Apr 2012, 01:41 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector