360° Coverage : Taper II and Goodbye Mr. Bernanke

2 Updates

Taper II and Goodbye Mr. Bernanke

Jan 29 2014, 3:09pm CST | by

While I wasn’t surprised that the FOMC accelerated their taper today, I wouldn’t have been surprised had they hit the pause button this time. The December jobs report plus other recent weaknesses in...

Filed under: news


38 weeks ago

Taper II and Goodbye Mr. Bernanke

Jan 29 2014, 3:09pm CST | by

While I wasn’t surprised that the FOMC accelerated their taper today, I wouldn’t have been surprised had they hit the pause button this time. The December jobs report plus other recent weaknesses in the data had provided sufficient cover to pause. That they did not do so suggests that they really wanted out, which is quite a contrast to their apparent attitude just a few months ago. They’ve gone from looking for an excuse to continue to looking for an excuse to taper.

It was time. I’m not one of those who thought all the QE was a mistake despite having to rely on counterfactuals to justify it. But, if it was helping the economy to grow faster and create jobs faster, then it surely had hit diminishing returns.

I’m glad we had two months of taper decisions under Chairman Bernanke’s watch. He can leave now with the assurance that he didn’t go a bridge too far. The new Chairman will find it more difficult to reverse course.

I sat next to Ben Bernanke at the FOMC table when he served his first term as Fed Governor. And, while pleasant and smart, he never struck me as a fine Chairman in the making. That shows how much I knew. Or, perhaps, as so often happens, the job made the man rather than the other way around. I retired in November 2004, but one can’t help wondering at each well-publicized FOMC meeting how one would have voted had he been there. That wasn’t hard. What was hard was, in late 2007 and throughout 2008, wondering what in the world I would do if I were chairman. I couldn’t imagine. They were in unchartered territory and the new Chairman more than rose to the occasion.

Watching events play out from the sidelines was interesting but frustrating. In the early stages of the financial crisis, I couldn’t believe how the main players stood by and watched mark to market accounting rules, which never should have been applied to banks, destroy so much bank capital unnecessarily and cause so many bank failures.

Also frustrating was all the talk about moral hazard when the world seemed to be falling apart. Apparently, we were supposed to let the world implode this time to reduce the effects of moral hazard next time. No one seemed to notice the irony when almost overnight—after Lehman failed—how the narrative changed from “let ‘em fail” to “letting Lehman fail was their worst mistake.”

As the Fed’s balance sheet grew through the excess reserves of the banking system came calls for the Fed to sell securities to “mop up” the excess reserves. After all they weren’t necessary today and they could feed inflation later. Thankfully, the Chairman had been enough of a student of the Great Depression to realize he was being asked to repeat the Fed’s great mistake in that regard then. On two separate occasions in the mid-1930s, the Fed raised reserve requirements to mop up those excess reserves. Of course they turned out not to be excess in the minds of the bankers who were being beaten about the head and shoulders.

Another interesting irony to watch unfold was the attitude toward quantitative easing expressed daily on financial TV. The guests on financial shows were overwhelmingly against it until it began to dawn on them that it was supporting the stock market so much. Then the worries went from being against QE on principle to dreading even a small taper in the pace of QE.

It was sad for me to see the Libertarian candidate for President draw almost the entire presidential field into being anti-Fed and anti-Bernanke. At least he based it on his reading of Austrian economics. I’m not sure about the rest of them—just their reading of the polls I reckon.

Anyway, I personally believe that Chairman Bernanke did a fine job, and I wish him well.

Source: Forbes Business


7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by ...
Source: Business Times Singapore   Full article at: Business Times Singapore


7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double ...
Source: Business Times Singapore   Full article at: Business Times Singapore


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

Want to stay sharp? Develop a rich vocabulary
London, Oct 23 (IANS) Possessing a good vocabulary could shield you from incipient dementia when age catches up with you, a study has found.
Chinese company signs Rio 2016 uniform deal
Rio de Janeiro, Oct 23 (IANS) Chinese sports apparel maker 361 will be the official uniform supplier for the Rio 2016 Olympics, the organizers have said.
Ukraine lacks sufficient gas for winter
Kiev, Oct 23 (IANS) Ukrainian Prime Minister Arseny Yatsenyuk has said his country lacks sufficient natural gas for winter.
Obama 'cautiously optimistic' about Ebola
Washington, Oct 23 (IANS) President Barack Obama Wednesday said he is "cautiously optimistic" about the Ebola situation in the US, as his government announced a new programme that will actively monitor for 21 days every person coming from West African nations hit by the deadly virus.

Latest from the Network

European Champions League standings
Paris, Oct 22 (IANS) Following are the European Champions League standings for Groups E to H after Tuesday's matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to Xinhua...
Read more on Sport Balla
Rogerio set to break Giggs world record
Rio de Janeiro, Oct 22 (IANS) Sao Paulo goalkeeper Rogerio Ceni is one victory away from earning his fourth Guinness World Record by eclipsing a mark held by Manchester United legend Ryan Giggs. The 41-year-old will...
Read more on Sport Balla
Ryan Reynolds can't keep his hands off Blake Lively
Ryan Reynolds was ''really sweet'' to Blake Lively at the Angel City Ball. The couple, who got married in September 2012, made their first red carpet appearance together in New York City on Monday night (10.20.14) since...
Read more on Celebrity Balla
Kris Jenner doesn't know who Bruce Jenner is dating
Kris Jenner has ''no idea'' whether Bruce Jenner is dating her best friend. The 58-year-old reality TV star, who split from the Olympic gold medallist last October after 23 years of marriage, claims she doesn't know if...
Read more on Celebrity Balla
When Rihanna dressed like 'Harry Potter'
New York, Oct 22 (IANS) Singer Rihanna was spotted here in a Harry Potter style costume. She wore the wizard-like get-up while heading for a business meal here Monday, reports mirror.co.uk. The 26-year-old combined a...
Read more on Celebrity Balla
Germany raises humanitarian aid to Iraq
Berlin, Oct 22 (IANS) Germany has pledged a further 20 million euros (about 25.5 million dollars) in humanitarian aid to Iraq, the foreign ministry said in a statement Tuesday. The additional funds are immediately...
Read more on Politics Balla
India calls on Israel, Palestine to resume peace process
United Nations, Oct 22 (IANS) India has called upon Israelis and Palestinians to resume the peace process as "dialogue remains the only viable option" to address the issues confronting the region. In a brief statement...
Read more on Politics Balla
Airstrikes help ground forces fight IS: Pentagon
Washington, Oct 22 (IANS) Kurdish forces are in control of the majority of the Syrian city of Kobane despite efforts by the Islamic State (IS) to take the town, a spokesperson for US defence department said Tuesday....
Read more on Politics Balla
Palestine, Israel urged at UN to halt unilateral initiatives
United Nations, Oct 22 (IANS) UN Secretary-General Ban Ki- moon Tuesday called on Palestine and Israel to overcome differences and halt unilateral initiatives that fuel mistrust, so as to pursue long-term stability in...
Read more on Politics Balla
China urges Israel to create conditions for peace
United Nations, Oct 22 (IANS) Chinese government has called on Israel to create necessary conditions for the resumption of peace talks with Palestine. At an open debate of the Security Council on the situation of the...
Read more on Politics Balla