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"We are not out of the woods," says Fed chief Bernanke in "a conversation" at the University of...

"We are not out of the woods," says Fed chief Bernanke in "a conversation" at the University of Michigan's Ford School. Raising the debt ceiling does not create new spending, he says. It simply allows the government to pay bills already racked up. There's no speech - he's currently taking questions from a moderator and will later take questions from the audience and from the twitterverse.
Comments (27)
  • User 509088
    , contributor
    Comments (1082) | Send Message
     
    one of the unexpected alphas of seeking alpha are your floating of links like this one.

     

    thank you.
    14 Jan 2013, 04:26 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    The government can pay the bills, including debt servicing costs, with the current debt limit. To do that, it must cut spending, immediately. This is about a spending problem, not about default. Reverse course needs to happen here, and now. It is a choice made by every business and household. Raising the debt ceiling will give license to further profligate spending - how could it not? Bernanke/Fed as enabler, once again.
    14 Jan 2013, 04:41 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Doesn't it make you mad that the Republicans are doing nothing stop this?

     

    http://seekingalpha.co...
    14 Jan 2013, 07:50 PM Reply Like
  • blackswans
    , contributor
    Comments (155) | Send Message
     
    You can't cut already spent money.
    15 Jan 2013, 05:17 AM Reply Like
  • alf2011
    , contributor
    Comments (466) | Send Message
     
    After the years of lip service to 'starving the beast' it looks like a new era of 'fattening the beast' and 'force feeding the beast' has arrived.

     

    Sadly, it may end up with everyone's wallets being made into foie gras.
    14 Jan 2013, 04:58 PM Reply Like
  • WMARKW
    , contributor
    Comments (10397) | Send Message
     
    Like the many "mythical" creatures that live in the woods, many have a hard time distinguishing the forest for the trees. I like to see Bernanke openly admit that there really is no solution to the US's spending problems - until the Dolts in DC get their heads screwed on straight.
    14 Jan 2013, 05:43 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19499) | Send Message
     
    He's not asking for a solution. He's asking for a bigger problem ...
    14 Jan 2013, 05:54 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19499) | Send Message
     
    What Bernanke means is that for spending to have an impact, it needs to be INCREASED be there a deficit already or not. It's like he's in the same bed, saying "don't worry, I'll print the cash to pay for it".
    14 Jan 2013, 05:53 PM Reply Like
  • WMARKW
    , contributor
    Comments (10397) | Send Message
     
    So Paulo - why does Bernanke have to come into the public view and take these positions? Why can't he just sit down with the president, House and Senate leaders and say, "Come on guys....let's do this!" I don't know about you, but I suspect they all wanna do it anyway. So why all the posturing for the public's sake??
    14 Jan 2013, 07:23 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    You are right Mark. They all want to do it. For some strange reason they do not want a repeat of the Great Depression. I don't get it. Even the Republicans are backtracking.
    14 Jan 2013, 07:51 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19499) | Send Message
     
    It's natural for the politicians to want to print money to spend - it's the very reason why there's an independent Fed, to keep them from being able to do it.

     

    As for it allowing to avoid a Great Depression - it does allow for that, at the cost of maybe making a Weimer and a Hitler.
    14 Jan 2013, 07:57 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    I didn't know the Fed's job was to prevent money creation Paulo. I thought it's dual charter was price stability and low unemployment. At least that's what the law says in the USA. I know that the ECB has only one charter, price stability. I know the Fed should really just do what is ECB best practice, but after all this is the New World and all, and we make our own laws here and act independently of what the mother countries would approve of.

     

    Seriously, I always found you to be very balanced. You invoking Hitler is ... disappointing.
    14 Jan 2013, 08:00 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19499) | Send Message
     
    Macro, the very notion of an independent central bank is that if the central bank is not independent and the State controls money issuance, the State won't resist the temptation to pay the bills with freshly minted money.

     

    Hitler was a result of the deeply disturbed German economy that resulted from, years before, having gone to war, lost it, having to pay reparations, printed a lot of money, had hiperinflation, had the collapse of hiperinflation, etc.
    14 Jan 2013, 08:13 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Paulo, Do you realize that the US Fed has a dual mandate, price stability and low unemployment, and that since there is super low inflation and above average unemployment, it is required by law to focus on lowering unemployment? Do you realize that it can take that decision independently? Finally, do you realize that the comparison to Hitler is just plain goofy?

     

    Look, I have talked to European "Austrians" before, and they simply can't fathom the dual mandate of the Fed. In their mind, the whole point of a Central Bank is to starve the economy of monetary stimulus - the German model so to say though the Germans still have huge deficits.

     

    Sorry, but USA is not the EU.
    14 Jan 2013, 08:22 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (19499) | Send Message
     
    I understand the dual mandate, what I am saying is that when that employment mandate is fulfilled by printing gobs of money, there can be unpredictable consequences down the road.

     

    You can be sure that the German polititians who printed their way out of their problems though it was the right thing to do, as well. Their fear of what it became lasted till this day ...
    14 Jan 2013, 08:33 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Paulo, it is not unpredictable at all. It is actually very predictable. Inflation will rise. Then we will pull the Volcker solution. It worked very well when we last tried it. Because some Europeans couldn't do it doesn't mean Americans can't. Unlike Europeans, we have a proven track record in balancing the dual mandate. Perhaps the Europeans are incompetent, but that doesn't mean we are.
    14 Jan 2013, 08:42 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    1. Nothing goofy about highlighting how economic instability leads to social instability.

     

    2. Inflation, among the biggest headline lies:

     

    a. compiled by the BLS, a dependant state organisation
    b. Its publicised result has a strong economic behavioural impact, therefore:
    c. Inherently large incentive to be manipulated
    d. switch to a geometric weighting resulted in a lower weighting to CPI components that were rising in price
    e. the BLS instituted a system of “hedonic” adjustments. Hedonics adjusts the prices of goods for the increased pleasure the consumer derives from them
    f. "intervention analysis" in the seasonal adjustment process, thereby smoothing sharp price rises as witnessed in food and energy

     

    All leads to original CPI measurements from the 70s coming in at close to 10% inflation rate.

     

    3. you said: " the Germans still have huge deficits".

     

    What??
    I'm shocked someone with a contributor status would make such a blatantly wrong and uninformed comment.

     

    Germany's deficit is heading towards 0% and was only 0.8% for 2011.
    15 Jan 2013, 03:58 AM Reply Like
  • winningtrader
    , contributor
    Comments (2476) | Send Message
     
    There will be no Volcker solution. The FED cannot hike rates. If govies yield even 5%, that will be 5% of GDP on interest only (and more as DEBT/GDP is rising). The FED has no exit strategy because such strategy doesn't exist. There will be inflation and the sheep who believe in deflation will be slaughtered to the alter of the banking and other special interests.
    15 Jan 2013, 06:57 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Germany's national debt is 85% of GDP. It took some huge deficits to create that don't you think?
    15 Jan 2013, 02:54 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Awesome, then we are in for a long term rally.
    15 Jan 2013, 02:55 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    You said "STILL have huge deficits", which is plain wrong.

     

    Germany today announced a tiny budget surplus for 2012.

     

    As to the DEBT burden, well it all started in the 70s with misguided Keynesian policies, then transgressed into bailing out the new territories in the unification process, which probably added a third of the debt to GDP alone to date and can still be seen as a millstone around the taxpayer's neck. Quite a miracle it hasn't cost more for having had to take over the result of 50 years of communist mismanagement.

     

    Tbf, what today's report did not mention is the massive cost incurred through the Euro. 750 billion € of claims on the TARGET2 Bundesbank balance sheet and further billions in guarantees and claim last year alone. Expect Greece to come begging soon and next in line will be the Spanish government after they have finished plundering their pension funds and run out of ways to steal from their own people. The rest of the Med. nation's fundamentals are continuously deteriorating, so I've steeled myself for plenty of downside surprises. This year and many years to follow.
    15 Jan 2013, 03:23 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    I will take Germany's proclamations of fiscal responsibility seriously when they cut down national debt to slim to none. Otherwise I have no time for the excuses. Yes, they have huge deficits. That shows up in the huge national debt.
    15 Jan 2013, 05:55 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    I'm not quite sure if I'm being whooshed here, otherwise I suspect you are having difficulties distinguishing between the two very basic concepts of deficit and debt.

     

    Debt = sum of all accumulated deficits and surpluses over the years

     

    Deficit = budgetary shortfall for one year.

     

    Germany has had a 0.8% shortfall for 2011 and a small surplus for 2012.

     

    How is that compatible with your claim of "still having huge deficits"?
    15 Jan 2013, 06:12 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    I think I made my position clear enough.
    15 Jan 2013, 06:14 PM Reply Like
  • EK1949
    , contributor
    Comments (1567) | Send Message
     
    "Inflation, among the biggest headline lies:"

     

    Who cares? The official numbers track the unofficial ones perfectly. Do you think inflation can be kept a secret by sinister government statisticians?. Really, this is the problem with all goofball theories. You only have to think about all the people who would have to be bought off, and how every unofficial measure would have to be changed in some way to reflect the false numbers, how everyone who disagreed with you would have to be in on it.

     

    Plus all these people would have to have comic book villian motives. My rule for handling these odd beliefs is that any theory that requires you to think public officials are smarter and more evil than they appear can be better explained by positing that the theorizer is dumber than furniture and has seen too many James Bond movies and thinks they're documentaries.

     

    Changes to inflation formulas mean nothing. If you want to look up the reason for them you can, just to satisfy your curiousity. Or you can go on dreaming of conspiracies. I can't be bothered with this stuff, it's too juvenile.

     

    Governments exist to print money. They charter banks to do it, too. That's where money comes from. The real economy needs money so people can buy the goods. What happens when there isn't enough money? The goods are not bought, workers are not hired, the economy is depressed. Now you can say the money should not be "spent out of thin air" by the government but if it isn't the depressed economy becomes Depressed, so let's change our minds and spend the money to get more jobs and growth.

     

    The problem is not that the result will be uncertain, it's that at some point we may be fortunate enough to get the inflation that comes with a booming economy. We should be so lucky.
    15 Jan 2013, 04:43 AM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    Where to begin....

     

    you categorize me into the conspiracy theorists, yet I list point by point (and it's not even exhaustive) why current CPI is so different from original CPI and the motives behind them.

     

    ....and how do I respond to such comments?:

     

    - "official numbers perfectly tracking unofficial"

     

    - "Governments exist to print money"

     

    - "What happens when there isn't enough money? The goods are not bought, workers are not hired, the economy is depressed"

     

    No offence, but I'm at a loss for words.

     

    I guess you mean well, but economics is more technical, academic and complicated than "secrets kept by sinister government statisticians" and watching James Bond movies.

     

    I did not study economics for 7 years to be placed into the "goofball theorists" camp and I've done enough statistical data processing for the private sector to be acutely aware of motives, specific assignments and the required results needed. I was part of that system.
    15 Jan 2013, 05:06 AM Reply Like
  • jhooper
    , contributor
    Comments (6028) | Send Message
     
    "It simply allows the government to pay bills already racked up. "

     

    But it also creates a barrier for new spending to come on line as well. To that extent, it has some value.
    15 Jan 2013, 05:45 AM Reply Like
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