Bernanke to Speak More Often
Submitted by
CalculatedRisk on Sun, 01/13/2008 - 5:09pm (57 comments)
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and he is such a nice young man,too!
I like it when he speaks but not as much as the markets do. I just hope that people really listen to what he says and parse it carefully. His job of heading off the liquidity crisis is the most important and unfortunately maybe the most impossible job that any FED chairman has had since 1930. I personally don't have a great deal of hope that he can pull that off, but it is somewhat comforting to know that he is a student of the Great Depression and is trying to ameliorate this crisis.
I think things will turn around agnificantly in the next two weeks.
O-Joe
FT - This is not merely a subprime crisis
FT.com / Columnists / Wolfgang Munchau - This is not merely a subprime crisis
OJ,
If things are never bad how can they pick up?
The Fed chairman will be speaking less often when his one term expires unless he takes up the Greenspan book tour lifestyle.
I haven't read his book, but by all accounts he blames a lack of liquidity for the GD. That's like blaming lost jobs for a recession; it completely misses the true cause(s).
End,every day is better and better in this,the best of all possible worlds!
I guess those weren't shiitake's after all,I'd better sit down.
Maria B. was just on NBC Nightly News, and was claiming that we'll know exactly how exposed the IBs are these next two weeks when they report 4Q earnings.
Wow, totally cute and totally clueless.
Tom, LOL!
I agree with O-Joe. I think things will turn around significantly in the next two weeks. I'm assuming he means that we will have an end to the "ostrich economics" and reality will sink in.
12th percentile,
We could only hope for your scenario.
As for OJ he drank a lot of that kool-aid I worry about him occasionally.
agnificantly
The old au/ag relationship was 16 to 1. Could be quite a pop... or not
Bernanke believes that if there is sufficient liquidity to prevent deflation, the overall level of economic activity won't drop much and people who lose jobs in declining industries will be able to get new jobs elsewhere.
He will do his damnedest to pump just enough money into the system to keep inflation slightly positive.
Because the entry of China, India, Eastern Europe etc. into world markets is at the same time both highly deflationary in impact on goods and services and inflationary in impact on commodities, the Fed will find itself walking a tightrope.
Perhaps if we had a liquidity crisis we would have something to discuss at the table. Parsing words are good for the short run to forestall the fact that we have a solvency freefall. All hands on Deck-gentlemen, for this week we will need it.
I think things will turn around agnificantly in the next two weeks.
A rip-roaring bear market rally is quite probable. The down leg that follows it will be even nastier than what we've seen so far.
jm,
I am expecting the W tax credit for 1/17/2008 to kill the expiring PUT options again.
08/21/2005 7,769
08/14/2005 7,447
01/07/2008 32,269
01/01/2008 31,757
inventory...
i'm right there with ya joe..
i see huge turn in two weeks... 25000 properties will either sell, or the seller's will pull there listing cause the prices are going SOOO much higher...
I'm heading out this week to tolleson to get my RE license, based on your analysis
It is true that the liquidity crisis is in fact the result of capital shortages in the banks from the mortgage meltdown and that many of them are likely insolvent were they to be liquidated today. However with the TAF providing in effect working capital for them to continue lending as usual the problem does boil down to a liquidity crisis. The banks (many of them anyway) are on life support and Bernanke's challenge is to keep them alive long enough for them to recover enough reserves through profits from other business lines to resume normal operations.
If a recovery from the liquidity trap is to be managed then the banks must survive largely intact. That is his first order of business. Else Japan is the pattern we follow for the indefinite future.
Well, if Ben is going to save the economy he need's to start by making more oil. Also it would be helpful if he told Chinese manufacturer's how to produce their goods with fewer toxic byproducts.
While he's at it he should do something to make people feel a bit better about losing some of their income to cheaper foreign labor so they can reap the rewards later on in terms of cheaper products and services, and make Baby Boomers feel better about watching their wealth being erased by inflation so younger generations aren't chained into decades of debt slavery.
He might also consider improving the level of education in the US during his speeches.
If the Fed is going to save the economy they better get to work.
God knows we can't do it.
It seems to me that a big problem for the markets during the past year or so has been too much talk by Fed officials, Board members and Bank Presidents. I do not see how more talk by Bernanke would help, but I think it is clear that less talk by the Bank presidents would be helpful. Their comments about housing and mortgages have been clueless during this debacle. Why do people even pay attention to them? For example, when Poole talks I put as much weight on that as when Barbara Streisand speaks (about anything). The Bank presidents seem more interested in making headlines than in understanding what is going on and communicating that to audiences.
More talk by Bernanke will only help if the markets perceive that he is in charge; however, it still appears that he is not only behind the curve, but also not dominant on the FOMC.
Bernanke's challenge is to keep them alive long enough for them to recover enough reserves through profits
That assumes there will be profits.
I can hardly wait- that means much more vol-vix. This next couple of months is going to be very outstanding for watching the insanity.
Someday this war's gonna end...
That assumes there will be profits.
tj & the bear | 01.13.08 - 9:11 pm
Yea, I have my doubts about that one too. Especially since so many of them seem determined to cut their own throats with excessive interest rates and fees on CC debt.
Lots of people expecting a short-term rally. I can definitely see that, given that it's par for the course on options expiration weeks. Still, can't help but wonder if any rally won't be into stiff headwinds, what with all the 4Q reporting these next two weeks.
I'm really torn on trying to play for the rally or just sit it out, sticking with my longer term view. The market is famous for defying common wisdom in the short term, and I wouldn't want to be on the sideline should the crash come right when everyone's expecting a pop.
Maria B. was just on NBC Nightly News, and was claiming that we'll know exactly how exposed the IBs are these next two weeks when they report 4Q earnings.
Wow, totally cute and totally clueless.
tj & the bear
I think she nails it on the head. The FED nd Treasury prepare policy action to abate the current issues in the credit markets. Parallely, banks expose whatever they may have in bad loans and dead bodies. We'll get the final sell-off panic from which a meaningful rallye to new ATHs emerges. Target week for the reversal is the week after this one. Expect a lot of bad news until then, but not so much market down follow-thru.
O-Joe
Maria get's her talking point's from her husband... some bigbanker dude... check it out
The cloud of uncertainty hanging over the credit markets was thrown into sharp relief yesterday as UBS told investors that it still could not be sure about the full financial impact of the credit crunch.
UBS admits that it still cannot quantify its exposure to sub-prime crisis - Times Online
I think the Fed's march to transparency helped get us into this fix. Market participants had a clear roadmap regarding the FOMC's intentions and the level of uncertainty was significantly reduced. In prior days when we would discuss how many angels could sit on the head of a Fedral Reserve pin the uncertainty would have restrained intelligent folk from buying the stuff which just melted.
Bring back volatility and uncertainty from the CB.
And many players treat the Fed as if it has perfect knowledge. They do not. They might have better knowledge and more extensive data but their knowledge is quite imperfect and one only has to view their forecsting record to know that.
Wow: December 1971, a study of the purpose of the Fed's bank examiners.
What changed since then?
JSTOR: Journal of Money, Credit and Banking, Vol. 6, No. 1 (Feb., 1974), pp. 23-44
The key is still housing and how many of the proletariat can stand making big payments when they are under water on the mortgage. Give it six months to sink in and then run for the hills.
The Fed chairman will be speaking less often when his one term expires unless he takes up the Greenspan book tour lifestyle.
Bernanke needs to get with the program and stop worrying about the economy so much and start worrying about how to swing the presidential election in favor of one party or the other. That way he can guarantee himself at least 5 years more income.
Talk is cheap. Politicians want to see elections thrown in their favor.
Unless there's free gasoline and groceries coming out of that mouth of his, I don't think he's going to impress Joe Sixpack enough to save himself through popular support.
O Joe,
u must enjoy being a fool. don't u get tired of being wrong?
follow the sequence of sector charts in this article. is this the trend u want to be investing against? u r going to lose everything.
Market Observation - Tim W. Wood 12.04.2009
The Fed chairman will be speaking less often when his one term expires unless he takes up the Greenspan book tour lifestyle.
FFDIC | 01.13.08 - 8:45 pm | #
Interesting. And of course that raises the question who his successor will be. At this juncture, I suspect he'll be replaced though. Do they serve 6 years?
ac- "Unless there's free gasoline and groceries coming out of that mouth of his, I don't think he's going to impress Joe Sixpack enough to save himself through popular support."
Ponies, dammit, ponies.
And O-Joe, what the hell kind of word is "parallely?"
These Fed morons last summer whined about the lack of "risk premium" in the market...the reason why is because they're seeking out every mic they can find to tell everyone what they're gonna do. Think it's about time they shut the f*ck up and do away with the dual mandate and just worry about inflation.
"...so that markets won't depend on remarks by lower-ranking..."
The markets? Bernanake is going to dance like a puppet because "the markets" want the big guy to tell them what is happening????
There is something really wrong with this whole thing. I think the Fed has forgotten who it works for.
Wally, if you think the Fed works for you, you are mistaken.
"I think the Fed has forgotten who it works for."
Who exactly do you think they work for? Hummmmmmmmm
I think the Fed's march to transparency helped get us into this fix.
I think that the current FED may have realized that considerable problems lay ahead and may well have considered that transparency might be an advantage. Especially in the Internet age (e.g. we are now participants in a forum of a blog that has revealed to the world many of the foibles and errors committed by leaders as well as the employees of some of the largest companies on the planet.)
And many players treat the Fed as if it has perfect knowledge. They do not.
Exactly correct. No argument at all. In fact I would say that the biggest problems in this mess were caused by a near total lack of feedback to the FED and other regulators from those they were supposed to regulate. I doubt very much that Greenspan had any idea of the quantity of fraud that was occurring in the loan origination process. I think he is probably appalled at the number of no doc loans, if not of their existence.
One of the reasons for the new TAF is to obtain intelligence on which banks are in trouble without exposing this knowledge to the world. I don't really like the fact that the stockholders in those banks are being kept in the dark but I understand the rationale. So the FED is not being all that transparent even now.
"...the S&P500 has been up an average of 1.4% on days that Bernanke has spoken (last 3 speeches)."
So, if Bernanke goes on some sort of speechifying bender, we'll all get rich.
O-Joe (you little ray of sunshine, you!):
Optimism is good and virtuous and all that, but realism is where the rubber meets the road.
The current situational reality is that the fundamentals of our economic system - compounded by the unprecedented pressures of globalization - are seriously flawed. The chances that the ship of finance will right itself (despite the best efforts of the feckless Commodore and his bumbling crew, and their concomitant lack of chart-reading/sailing skills), is close to none.
We hare heading for seminal change. What is coming will not be the same as what we left behind, and it's likely to get much worse before it gets much better.
Lets hope good things happen. In the meantime, I'm building an ark.
On a related note, Casey, hero of the poem 'Casey at the Bat', strikes out.
What? Speak more? And more clearly? Fine. Prove what many suspect, that those who speak don't know, and those who know don't speak?
Go ahead. Do it. Just say, "Hypocrisy? Because we endlessly tought free markets for everyone, but fix the price of credit in secret sessions, for the benefit of a few well-connected bankers, corporate exec's and their politicians?"
Please, just once.
Isn't Paulson's guest hosting on CNBC enough exposure? Or are they suggesting that Bernanke show up in Paulson's place? Or maybe do alternating days?
This is all the communication that is needed: "No more bailouts. Start liquidating."
Bernanke's challenge is to keep them alive long enough for them to recover enough reserves through profits
That assumes there will be profits.
tj & the bear | 01.13.08 - 9:11 pm | #
Thats one of the key reasons to cut rates aggessively, the dollar be dammed, and even risking significantly higher inflation. Steepen the yield curve and thus infate net interest margin. Yeah given the magnitude of the probelms it is going to take a long time to do. Along with it however, the Fed should also be forcing every bank in the country to eliminate their dividend (those few sound banks who ever they are as well, but they can be the ones to buy the left over assets/gain market share etc on the way out). Ofcourse keep going hat in hand to the SWF's for more capital and pray that it will be enough to tide things over. Yeah the growth in loans will have to go negative to get capital ratios back in line from the other side of the balance sheet as well, but maybe by doing this he can limit the damage to having total loans and leases at commercial banks fall only 10%, rahter than falling to near -100% in a total collapse of the system. Ok, thats a bit of an exageration, but look at it this way. every $ of capital supports $10 of loans. If 20% of the $5T decline in housing values is borne by banks, thats $1T in blown capital, more than the total capital of the banking system. Total loans and leases outstanding at commercial banks are $6.72T. Ok some of the losses not borne by homeowners will be borne by other players, pension funds, foreign central banks, insurance companies etc. Still lets just say $150 B is lost at commercial banks. Well if $75B of that can be raised from combo of SWF's cutting dividends and steep yield curve raising NIM, throw in more TAF maybe we can hold it to $700B of less lending, or about a 10% decline. Just for a point of reference, we have not had year over year declines in total loans of more than 1% in the last 50 years. Ugly yes, but the republic still stands.
You had me, O-Joe, you had me. Let's go to the tape:
"I think she nails it on the head."
Yes, Yes! (vigorous nods) Maria B. Outstanding analyst. Deep thinker. Cuts right to the heart of most any issue.
"The FED nd Treasury prepare policy action to abate the current issues in the credit markets."
Yes, of course. So simple and yet . . . brilliant! Policy action -- why didn't anyone else think of this solution. Now I see how the Fed and Treasury will steer us clear, take us home again -- policy action.
"Parallely . . . ."
Oh my. That's . . . ah . . . not . . . well . . . like a fart in church . . . not pleasant at all . . . somewhat unexpected . . . he seemed like such a nice boy . . . .
This is all the communication that is needed: "No more bailouts. Start liquidating."
AZ_Cowboy | 01.13.08 - 11:06 pm | #
Thank you very much Secretary Mellon, your advice worked out great the last time.
Dirk - You and I both know they won't do that. The govt will do everything they can to delay the natural course of a bust. Leading to a long and painful experience instead of a short and painful experience.
The WSJ article is highly misleading, IMO.
First, who are these "low ranking members" of the FOMC? The Governors? The rotating Regional Bank Presidents? The Fed is one-man-one-vote majority rule, and the Chairman cannot fire the members. How much influence can the Chairman really have on the "lower ranks?" The Fed is structured as a democracy, pure and simple.
The article goes on to imply that Bernanke willingly gave up some of Greenspan's power to make the Fed more "democratic". Bull hockey. The voting members of the Fed during the Greenspan era faced a Chairman with unparalleled political capital, and they did dared not mess with him. Greenspan is gone now, and Bernanke did not inherit his (now damaged) popularity.
Lastly, the Fed has not been "swinging from one extreme to another" due to a faulty communications strategy. The swings in opinion come out of the data, which is signaling both accelerating inflation AND a slowing economy. If anything, the Fed's mistake was in believing that those two outcomes were mutually exclusive.
For someone whose beat is the Fed, Greg Ip really screwed this piece of "reporting" up.
I am looking forward to these fireside chats.
Yeah, Dirk, let's keep that ridiculous credit tap open. No need to worry that debt-to-income is now twice that in '29.
Me, I'm happy to see that prices for homes in some of the best areas in San Diego are now below $600K, down from just under $1MM. Getting near affordable, finally, for the hoi polloi.
Galbraith's 1929 book talks about the "no-business meeting" of bigshots who don't want to take any substantive action but want to give the impression that they will Real Soon.
Helicopter Ben may be doing no-business speaking.
Sort of OT: I heard a guest on Kudlow state that the Fed believes that they are under speculative attack - witness the Treasuries at 2Yr at 2.55%, 5Yr at 3.04% 10 Yr at 3.79%, all this when the FFR which is at the short end of the curve at 4.25% - so when BB more or less says we'll give 1/2 % the market drives down the Treasuries even more, demanding seeming 3/4%, 1%.
Meanwhile, Gold is close to $900.
If I got by how the speculative attack against the Bank of England was conducted
Black Wednesday - Wikipedia, the free encyclopedia
then the ingredients for this seem to be a openly announced range or specific value for an indicator ( the UK pound range against the Mark ), when some other value cannot possibly sustain it ( an appreciating UK Pound against the US$, since the DM was appreciating against the US$ and dragging the UK pound UP with it when the UK trade with the US at the fundamental did not support a strong UK pound against the US $ ).
So, what's the underlying fundamental that the purported speculative attack is relying on ? The only one I can think of is that the dual mandate is not supportable at the fundamental level and they'll have to pick one - ameliorate unemployment and accept inflation or the other way round.
That they HAVE to choose.
Ideas ?
-K
The only one I can think of is that the dual mandate is not supportable at the fundamental level and they'll have to pick one - ameliorate unemployment and accept inflation or the other way round.
SK
Yeah, and when push comes to shove they will chose growth over inflation. The danger of a very deep downward spiral are just to great at this point. play for time and hope a steep yield curve can save the banking system. Alternatively think of a dr who has a cancer patient who is also having a heart attack. Stablilize the heart first, keep them on life support, then come back with more aggressive chemo later. If you chose to ignore the heart attack and continue with just treating the cancer you might cure the cancer but have a dead patient.
Dirk,
If we are at medical analogies, I have a better one. The patient is a drug addict. His former doctor, Dr. Greenspan, applied drugs to "cure" all symptoms. Now the patient has withdrawal symptoms together with deteriorating health. It may survive after detox but the doctors see him suffering and apply larger doses of drugs instead. Does it improve his chances of recovery?
I hope that after the dust settles and the crisis is gone, we will finally get rid of this stupid notion that you can solve all the problems by pumping money. Keynes said "we are all dead in long term" so we should take into account short-term problems, too. But if you only care for short term for many years, finally the "long term" arrives. Call it a "Minsky moment".
Hey maybe they will let Ron Paul ask him questions again.
YouTube
- Broadcast Yourself.
So, Bubbles Ben Bernanke, or "Bendover Ben" is going to speak more often? Great... why can't he just get to the heart of the matter: he's going to destroy the dollar to save his Wall Street Pig buddies, we're all going to be facing $5 a gallon gas on minimum wage jobs, and he'll be very "confused" about the fallout of all this since "nobody could have predicted it" and "The US has a strong dollar policy" even as we cut rates to zero or less. Right!