Savings Glut and other nonsense

My only reservations with Bernanke are a couple of his speeches as a Fed Governor:

The Global Saving Glut and the U.S. Current Account Deficit — was just so much political blather. It completely fails intellectually.

Deflation: Making Sure "It" Doesn’t Happen Here –was hopefully just jawboning. I assume that threatening to drop follars onto the landscape from helicopters to fight deflation was merely an amusing visual, and not actual monetary policy.

This means that that there is still an opening for a new Governor . . .
(I know who it is going to be, but I am sworn to secrecy             ; )

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  1. Idaho_Spud commented on Oct 24

    I have some reservations too…

    The ‘government has an invention called a printing press’ (to print money) scares me. The ‘classic helicopter drop’ of money to combat deflation statement didn’t impress me too much either.

    The equity markets seem to be happy with the announcement – and why not? He gives the impression of being easy with monetary policy. Prepare for more bubbles.

    Looks like we may *all* be billionaires in a couple of years :)

  2. fred c. dobbs commented on Oct 24

    I don’t think Bernanke will continue the Greenspan “put”. Unlike Greenspan, who worked on Wall Street, Bernanke has no ties to the Street. I don’t think he’ll panic over market corrections like Big Al used to.
    And the deflation paper was supposed to scare people; deflation is just about the worst thing that can happen to an economy (other than having another Bush elected.) It’s clear he was taking the Fed’s power to its ultimate level to reassure markets that the Fed would not allow deflation to take hold like it did in 1990s Japan or 1930s America.
    Read his other stuff and you’ll find someone who’s pretty serious about inflation.

  3. Ralph commented on Oct 25

    Bernanke’s views on the global savings glut also struck me as nonsensical. This made me worry that Bush had Bernanke on his short list for Fed chairman. But today listening to the TV panels discuss Bernanke I have to admit he is qualified academically although not in the market battlefields just yet.

  4. pjfny commented on Oct 25

    I think analysts and the mkt underestimate how crucial bernanke’s lack of steet experience is. In an imbalanced world, a rebalancing (dollar crisis, bear mkt in equities, inflation scare, major credit event etc etc)will test his ability soon…….time will tell if his lack of experience and his weak tv persona, will make him “pee in his pants” or be a calming influence on the mkts

  5. Idaho_Spud commented on Oct 25

    I’m willing to cut Mr. Bernanke a lot of slack on his comments about helicopters and printing presses vis-a-vis fighting a major deflationary .

    On the other hand there is one other thing about the man that concerns me: I don’t like the idea of ‘targeted inflation’, unless the target number is zero. Not one or two percent, not five percent. Zero.

    Zero should be the inflation rate targeted by the Fed, just as zero is a desirable number for unwanted pregnancies, crime rate, smog days, industrial fatalities, airline crashes, etc, etc, etc.

    Because human beings are imperfect creatures, we will never get these numbers as low as we would like, which is to say zero.

    The idea that there is a tolerable/acceptable ‘shrug your shoulders’ level for any of these things strikes me as negligent. The Fed chair we have right now has *allegedly* kept inflation in check during his tenure, without using a targeted inflation rate – his goal being zero.

    And yet here we are, nearly two decades later, and my twenty dollar bills spend about like my five dollar bills did when he took over. ATM machines will soon need to switch to larger denominations, won’t they?

  6. fred c. dobbs commented on Oct 25

    Spud: Zero is a stupid goal for inflation because you might miss it and go under. And then you’d be in real trouble. If Barry’s right, then we can’t measure inflation very well. If we try to hit zero, we might find that zero in our measurement is actually -2% in Barryworld and then we’d have deflation. That’s why they target a small but positive number like 1.5%.
    As for targeting a zero crime rate: that’s easy: either declare everything legal or keep people so afraid that they don’t venture out of their houses. Zero smog? Easy: Ban all fires.
    Zero tolerance is for people with zero intelligence. Unless you want a police state and a neanderthal living standard, you’ll have to live with an “acceptable” level of bad stuff. Grow up and accept it.

  7. Idaho_Spud commented on Oct 25

    Fred I guess we’ll have to agree to disagree.

    Note that I’m not indulging myself by saying your ideas are ‘stupid’ or taking your thoughts to hyperbolic conclusions to ‘ban fires, police state, neanderthal living standards’ or telling you you to ‘grow up’ That’s because I prefer to discuss this subject as an adult :). Would you care to join me?

    My suggestion was that zero should indeed be the desirable and worthy *goal* for airline accidents, botched surgeries, inflation, etc, etc.

    Again I didn’t say it was *acheivable*. I propose that zero it should be a desired outcome – rather than your view, which apparently is that some arbitrary number the gov’t decides on is OK. Geez, talk about police states! Look how they spin the numbers on CPI to suit their ends.

    Once you allow yourself the luxury of the shoulder shrug (about contaminated drinking water, airline crashes, chemical releases, whatever), you’ve let the camel’s nose under the tent, and now you’ve got an ‘acceptable’ level of… whatever bad thing you’re discussing. Then we get to the interesting part – who decides what the ‘acceptable’ level of ‘x’ is? Do you and I get to vote on these things? Probably not.

    Just curious. You seem to perceive 2% deflation as a disaster, while 2% (or more) inflation forever and ever (targeted, even) seems perfectly OK. Before you put words in my mouth, a brief period of 2% deflation should be no worse than a brief 2% period of inflation, right? In the long run, it will even out.

    As people on fixed incomes will attest, continuous 2% annual inflation adds up. In the long run, most of us will end up living on fixed incomes for part of our lives, and will be *very* vulnerable to inflation, intentionally targeted or not.

  8. Mark T commented on Oct 26

    The notion that rest of world ex US has a need for high(er) yielding low risk assets is entirely consistent with both theory and observation. That it is not consistent with the overleveraged consumer obsessions of the bond markets does not mean that it is wrong. The “Greenspan put” is also a misplaced notion created in the bond markets (where the sibling rivalry with equities is dangerously obsessive) ; the Fed will act to maintain the stability of financial markets in general, under Bernanke or anyone else. Bottom line, the Fed is simply not going to buy into notions of simplistic, rules-based Taylor Rule rate setting, overleveraged US consumers and global imbalances or the need to burst whichever asset bubble the bond markets have identified/disapprove of this week. Better get used to it.

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