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Ben Bernanke addressed Congress yesterday. While acknowledging that risks to the U.S. economy have grown, he proposed no new actions:  

The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.
Let me translate this from economic speak. What you just heard Ben Bernanke say was, we're not going to do anything until the situation gets worse.

This should make you angry.

Last Friday's jobs report found that employers added only 69,000 jobs in May, the fewest in a year, and analysts have reduced their estimates for economic growth in the U.S. to 2.0-2.2 percent (2.5 percent is the generally accepted rate required to keep unemployment from rising).

In the face of these jobs numbers, Ben Bernanke announced that he is going to do nothing unless things get worse.

 photo ben_bernanke_zps3c568b10.jpg

The unemployment rate rose to 8.2 percent from 8.1 percent. And our growth fell, indicating that unemployment is likely to go up even more in the future.

Yet the Federal does nothing. This should make you angry.

Why? Because there are steps he could take. It's a political choice. When Ben Bernanke chooses to do nothing, he's saying that an unemployment rate of 8.2 percent is acceptable.

Let me explain and then show you how you can help.

The problem is that there are real people out there suffering right now from a high unemployment rate.

Ben Bernanke and the Federal Reserve have a dual mandate:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.
The dual mandate is: 1) promote the goal of maximum employment, and 2) stabilize prices (read "keep inflation low").

Got that? One of the Fed's goals is "to promote effectively the goals of maximum employment".

This is important because what you heard Bernanke say yesterday is that unemployment has ticked upwards, it is likely to continue to tick upwards because economic growth is below 2.5 percent, and his plan is to do nothing until things get worse.

This is why you should be angry with Ben Bernanke and the Federal Reserve.

Is There Anything We Can Do?

I happened to have the great fortune to hear Karl Smith, Lisa Donner, and Matthew Yglesias address this very issue on the same day Bernanke spoke in a panel session entitled "Why the Fed is the Most Important Economic Issue You Know Nothing About."

The panel talked about how Ben Bernanke and the Federal Reserve have fallen down on the job when it comes to their dual mandate.

Instead of focusing on both maximizing employment and stabilizing prices the Federal Reserve has focused only on the latter, setting an inflationary rate of 2 percent that they refuse to budge from under any circumstances.

Matthew Yglesias phrased this as:

We're crucifying the country on the cross of a 2% inflation target.
In other words, Ben Bernanke could take steps to increase the money supply (which is what the Federal Reserve does) which economists will tell you would decrease the unemployment rate. But they fear that inflation might increase.

The key word here is "fear" because despite recent steps that the Fed has taken in the past to boost the monetary supply (quantitative easing), there has been no real evidence of inflation.

What this means is that Ben Bernanke and the Federal Reserve have decided that 8.2 percent unemployment is an acceptable number. They could take action on this number, but because of a "fear" of inflation, they are going to sit on their hands and do nothing.

If you listened to members of Congress quiz Bernanke, you'll notice that conservatives constantly harped on this "fear" of inflation. Liberals, on the other hand, while pressing Bernanke about regulations in the face of the recent JP Morgan debacle, remained silent on the issue of employment.

I asked the panel if there were any way that we might put pressure on Ben Bernanke and the Federal Reserve, if there were any levers progressives might be able to push and Karl Smith had a fantastic response which I will paraphase here.

He said we need to call out that these decisions Ben Bernanke is making are responsible for our high unemployment rate. People, by and large, don't understand that the Federal Reserve could be doing more about unemployment, but they aren't.

If you ask Ben Bernanke if the Federal Reserve's policies are responsible for the 8.2 percent unemployment rate, he won't deny this. Because it's largely accepted by economists that there are additional steps the Federal Reserve could take to reduce unemployment.

But they aren't.

This should make you angry.

Contact the Federal Reserve and let them know that you want them to do a better job with their dual mandate. Conservatives have done a good job of making their single-sided case on prices. But this is just one side of the coin.

Ask Ben Bernanke why he's not focusing on employment and let him know that this is a problem.

Here's My Letter to Ben

Dear Ben Bernanke,

After hearing you speak on the economy yesterday, I understand that unemployment has risen from 8.1 to 8.2 percent and that growth is slowing below the 2.5% rate required to keep it stable. This means unemployment is likely to rise further.

I further heard you say that the Federal Reserve intends no actions until the situation grows worse.

To me, this means that you have decided that higher unemployment is acceptable.

I know you could take steps to reduce the unemployment rate if you weren't solely focused on maintaining 2% inflation.

Based on past stimulus efforts, I believe this fear is unfounded.

Please remember the 2nd part of your dual mandate: promoting maximum employment.

Sincerely,
-David

Additional Links

Recording of yesterday's Federal Reserve meeting:
http://www.ustream.tv/...

Federal Reserve objectives under Ben Bernanke:
http://www.federalreserve.gov/...

Contact page for Federal Reserve
http://www.federalreserve.gov/...

Originally posted to akadjian on Fri Jun 08, 2012 at 04:42 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  I can't entirely agree (15+ / 0-)

    We have had some QE, not that my casual invocation of the letters means I really understand it.  To the extent we're asking the Fed to step in and go where our dysfunctional government refuses to go, I can't really go for it.  I midly wish the Fed would do more, along the lines you're thinking of, but I won't villify an entity that's basically done its job pretty well while the rest of our corporate-governmental complex has failed completely.

    Dear conservatives: If instead of "marriage equality" we call it "voluntary government registration of committed homosexuals," are you on board?

    by Rich in PA on Fri Jun 08, 2012 at 04:55:46 AM PDT

    •  Quantitative Easing isn't meant to do anything (6+ / 0-)

      about the unemployment situation, which is why it didn't really do anything to make a dent in the employment situation.  The only thing the Fed can do to affect unemployment is to increase the money supply.

      -8.88, -7.77 Social Security as is will be solvent until 2037, and the measures required to extend solvency beyond that are minor. -- Joe Conanson

      by wordene on Fri Jun 08, 2012 at 05:16:15 AM PDT

      [ Parent ]

      •  QE and printing money are sufficiently similar... (12+ / 0-)

        ...that I don't really see how the latter is an employment engine while the former isn't.  If it didn't work (and, like the stimulus, it's kind of hard to tell because you don't know what would have happened otherwise), it's because there are deeper issues at work in our employment-and-compensation crisis.

        Dear conservatives: If instead of "marriage equality" we call it "voluntary government registration of committed homosexuals," are you on board?

        by Rich in PA on Fri Jun 08, 2012 at 05:25:59 AM PDT

        [ Parent ]

        •  The Fed can't perform miracles (0+ / 0-)

          How can you affect job growth by printing money?  All it does is create inflation -- and BTW if you think inflation is really only 2% you are nuts.  See Shadowstats.com for the real numbers. Since the US dollar is the world's reserve currency we've managed to export the inflation, mostly.  Many of the "Arab Spring" events were a result of the sudden rise in food prices in the developing world being the straw that broke the camel's back. This was largely thanks to the second round of QE -- hot money rushed into commodities, driving up prices of everything from oil, to gold, to wheat. People in Egypt could no longer afford to feed their families.                          

          The Fed simply has to wait until things get much worse (think stock market tanking again) so that deflation starts to hurt the elite, then there will be a "consensus" for more money printing.  

          As far as jobs, the ball is in the politicians court, including Obama.  They could create much-needed infrastructure projects which could create many thousands of jobs, then print the money to pay for them.  There would be inflation but at least that way we'd all get something real out of it.  Former QE, "Operation Twist", etc have only benefited big banks.  If you think that's gonna happen in Obama's next term, dream on.

    •  Agreed. The Fed could do QE3, but why? (21+ / 0-)

      The reality is corporate America is sitting on about $1 trillion of cash right now.  Consumers are tapped out, having increased credit card debt the last 2 quarters, and with the market down and the housing crisis still depriving us of any wealth effect or ability to borrow off equity. Repubs are keeping gov't sector from helping.

      Increasing the monetary supply at this point, when the money is not being used, wont' do anything.

      The short-term mentality and the effects of hedge funds and private equity have led to a capitalist system that no longer provides for growth.  The virtuous cycle is broken, and the downward spiral is now in full force.

      Liberalism is trust of the people tempered by prudence. Conservatism is distrust of the people tempered by fear. ~William E. Gladstone, 1866

      by absdoggy on Fri Jun 08, 2012 at 05:35:22 AM PDT

      [ Parent ]

      •  And when Bill Clinton lauds our caapitalist system (1+ / 0-)
        Recommended by:
        VictorLaszlo

        even to the degree that he praises Mitt Romney's role in it, I can't help remembering that his beloved Chelsea is married to an investment banker formerly with Goldman Sachs now with 3G Capital Mgmt.

        Eliminate tax breaks that stimulate the offshoring of jobs.

        by RJDixon74135 on Fri Jun 08, 2012 at 03:27:43 PM PDT

        [ Parent ]

        •  Clinton recently said (0+ / 0-)

          that Jaime Dimon, head of JP Morgan "would make a great president". Gag me with a spoon.

          In retrospect, Clinton is a P.O.S. who enabled the present mess by allowing the repeal of Glass-Steagal. I'm no longer a fan of our last, or current Democratic POTUS.

      •  We dont need more growth. (0+ / 0-)

        We need sustainability with dynamic cyclical patterning. We need change and evolution not just more and more.

    •  Political pressure is not the same as villifying (1+ / 0-)
      Recommended by:
      randomfacts

      I'm merely advocating putting more political pressure on Ben Bernanke and the Fed (and the Obama administration as well) to focus on unemployment.

      I don't see why it wouldn't make sense to push for this if you agree with the general goal of increasing the monetary supply (or further quantitative easing).

      Advocating w/ the Federal Reserve also doesn't preclude pushing for further reforms elsewhere in the government.

      •  your focus is misplaced (0+ / 0-)

        -You want to change the system, run for office.

        by Deep Texan on Fri Jun 08, 2012 at 07:25:01 AM PDT

        [ Parent ]

        •  I believe Bernanke can & should do more (2+ / 0-)
          Recommended by:
          randomfacts, WheninRome

          I also believe that they are not in large part for political reasons rather than economic reasons.

          If we can help create that pressure to help Bernanke, the Fed, and others (Obama, etc) do more, I believe we should.

          We shouldn't simply shut down this conversation because someone says "you're villifying" or "you're waging class warfare".

          Is there the potential to create inflation? Possibly ... but past QE has not created undue inflation. I see no evidence to think additional would be any different.

          •  like what? (1+ / 0-)
            Recommended by:
            Dburn

            you don't know how it works so how could you know anything about doing more?

            -You want to change the system, run for office.

            by Deep Texan on Fri Jun 08, 2012 at 09:50:14 AM PDT

            [ Parent ]

            •  you don't know how it works (0+ / 0-)

              ... so how can you say anything?

              There ... we've both said the other person doesn't know anything. Have we gotten the name calling out of the way?

              •  so you think FED policy can create jobs? (1+ / 0-)
                Recommended by:
                Dburn

                create demand

                how so?  explain it.

                -You want to change the system, run for office.

                by Deep Texan on Fri Jun 08, 2012 at 10:14:04 AM PDT

                [ Parent ]

                •  To be fair to Ben Bernanke (3+ / 0-)
                  Recommended by:
                  playon, qofdisks, akadjian

                  he did say in his testimony that Congress is partly at fault in that they could take steps to create jobs.

                  And they can.

                  We could put people to work (millions, if fact) and build all kinds of infrastructure; and clean up pollution; and recycle waste; and beautify the country by reviving the old Works Progress Administration of Civilian Conservation Corps, or create similar-type projects.  That is not something the Federal Reserve can do.

                  The Federal Reserve only has basically one tool: monetary policy.  And it only has two speeds: stop and go.  Loosening the money supply does not have a direct correlation to jobs when the money just goes into buying gold, securities or even bonds.  What is needed is to get money into the hands of those that will use it to get out of the massive consumer debt that exists in this country.  And that cannot be accomplished by flooding banks and wealthy people with money.

                  Bernanke is right: Congress needs to create actual jobs with policy and outlays through the budgetary process.

                  But of course, we know that the party who has effective control of both houses of Congress won't do that because they think it helps their chances in November.

              •  explain how keeping interest rates low (4+ / 0-)
                Recommended by:
                gramofsam1, Dburn, playon, qofdisks

                and more free money, which just goes to the big players will help.

                this problem has a long history.  people have been left behind.  the jobs have left America.  

                -You want to change the system, run for office.

                by Deep Texan on Fri Jun 08, 2012 at 10:15:08 AM PDT

                [ Parent ]

                •  Low mortgage rates (2+ / 0-)
                  Recommended by:
                  JPax, TomFromNJ

                  Operation Twist and other activities have helped mortgage rates reach record lows.  This makes it easier for people to get cheaper mortgages, leaving more money in their pockets to spend.  It also helps stabilize the housing market, which is a good place for new jobs to develop.

                  Bernanke and the Fed has done a lot...but monetary policy can only do so much.  Ben pushed very hard on Congress to do its job -- that is, deal with fiscal policy (tax and spend issues).  

                  Everything in moderation, including moderation.

                  by pjphilter on Fri Jun 08, 2012 at 10:30:51 AM PDT

                  [ Parent ]

                  •  low mortgage rates imo (2+ / 0-)
                    Recommended by:
                    gramofsam1, qofdisks

                    don't leave more money in your pocket now.

                    over time the collected benefit is more money in your pocket but it's only helped juice the market, rather than leave you with more money.  

                    as for creating jobs, that market is still negative in that area right?  it's not enough.  you are right the proper place to fight this fight is in congress.

                    which is why my comments here are spot on.  wrong focus!

                    -You want to change the system, run for office.

                    by Deep Texan on Fri Jun 08, 2012 at 10:34:48 AM PDT

                    [ Parent ]

                  •  Low mortgage rates (0+ / 0-)

                    Ever asked anyone or know anyone who qualified for the lowest rate published?

                    •  The lowest published rates require paying points (1+ / 0-)
                      Recommended by:
                      Dburn

                      So, the rates quoted are a little misleading.  But I know of three residential mortgages that people got recently with 3.5% interest rate for 30 years.  

                      •  With points and a substantial Downstroke (0+ / 0-)

                        Although I have read of a few finance companies who are...wait for it...getting back into sub-prime. Some companies will buy homes for 20-36% either on the sale value or the mortgage value from the govt or banks desperate for real cash liquidity. Then they can do "rent to owns" , or sub-prime lending like a buy here, pay here car lot. Interest rates up in the teens but the mortgage balance lower.

                        The real goal is to get as much as they can and then foreclose or evict/repo , fix and start over. More likely found in non-judicial foreclosure states.

                        The 3.67 rate quoted as the "lowest ever in recorded history" always come with a who crap load of fees, points, and a large amount of upfront cash.

                  •  low mortgage rates dont mean sqat if (0+ / 0-)

                    You can't make the mortgage with your labor.

          •  rates can't go any lower (5+ / 0-)
            Recommended by:
            gramofsam1, Odysseus, Pluto, Dburn, Egalitare

            more money isn't necessarily going to create more demand, at least not in the U.S.

            corporate america is sitting on plenty of cash.  they could hire plenty of people.  they don't because of demand.

            they won't hire more people because ben has dropped more money into the economy.  remember that money is mostly going to the big players and they are just sitting on it.

            free money that gets gobbled up by corporate america won't fix the problem.  the stock market will go up though.

            but main street america will still be left behind, like usual.  krugman doesn't believe this is a structural problem but it is.  unemployment won't be affected that much by a new round of free money.  we need jobs and the FED can't provide that.

            -You want to change the system, run for office.

            by Deep Texan on Fri Jun 08, 2012 at 10:12:44 AM PDT

            [ Parent ]

            •  Actually, there is talk of negative rates, as well (1+ / 0-)
              Recommended by:
              greengemini

              as issuing currency with coupons that reduce its value over time. That should spur monetary velocity because if you don't use it, you lose it.

              -We need Healthcare Reform... but i'm selfish, I Need Healthcare reform-

              by JPax on Fri Jun 08, 2012 at 11:14:04 AM PDT

              [ Parent ]

            •  Corporate America Won't Hire...... (5+ / 0-)

              Not just because of demand...but because it takes money, ie wages and benefits, out of the pockets of the "shareholders".  This means less bonus money for the top execs.  We can use more people in our company.  Almost everyone is overworked and over-stressed.  The top execs have cut staff to the bone and beyond.  Not sure what is happening in private companies.  

              I've talked to a number of people about their situations at the companies they work at...and the answers are similar.  It is hard to find anyone satisfied with their current employment situation....and it isn't the work.  I really think it is partly due to the focus on the quarterly report.

          •  They actally want higher unemployment. (0+ / 0-)

            It creates a pressure to roll back labor rights big time.

    •  QE3 can, and will work, at least temporarily. (6+ / 0-)

      As absdoggy says, there is at least a $trillion  from corporations sitting on the sidelines, and probably as much in consumer credit that the upper middle class isn't using.

      If the FED targets an inflation rate of 4-5%, as Krugman suggests, All that money that is sitting in those mattresses is going to come pouring out and into assets such as housing and cars, and some other raw materials that manufacturers will want to buy before the price goes up...  Just the threat of this happening (which is what I think we'll see at the FOMC and G8 meeting on June 19), will give a kick to the economy.

      It would be much better if the FED could simply buy a lot more U.S. Treasuries, and the Gov. would go out and build the infrastructure of the future, but Republican obstructionism won't let that happen.  So QE3 is going to be a surprise on what the FED buys, but it's coming, and along with the lower oil prices (which itself is a $100 billion stimulus), it could very well save Obama's job.

  •  I don't think the fed is worried about inflation (14+ / 0-)

    as much as it is worried that its tools have done all they can.

    Romney is campaigning to be President SuperBain; his cure is to cut wages, end pensions, let companies go bankrupt, and let the assets of production go dark or be sold to China. He really thinks thats the best of all possible Americas.

    by Inland on Fri Jun 08, 2012 at 05:02:36 AM PDT

    •  oh oh my god... I agree (1+ / 0-)
      Recommended by:
      OIL GUY

      Bad is never good until worse happens

      by dark daze on Fri Jun 08, 2012 at 06:21:01 AM PDT

      [ Parent ]

    •  That's exactly it (6+ / 0-)

      And no lesser authority that Paul Krugman has said so on many occasions and he gives Bernanke generally high marks.

      I completely don't understand the vilification of Bernanke of all people on this website.

    •  He also said he would like Congress to do more. (6+ / 0-)

      Like maybe pushing through some STIMULUS! A Jobs bill, public works projects and on and on....

      •  Learn to read between the lines (2+ / 0-)
        Recommended by:
        akadjian, qofdisks

        In order for Bernanke to print money the debt ceiling has to be raised. That is all he is interested in. The banks capital is still taking a beating (See JP Morgan).

        The banks need more money so yes the debt ceiling will be raised but only when we see public rebukes from the banks for not raising it. They need the money. If Europe gets worse, and it will, the cry will be that much more louder. Not only does Bernanke have to print against T-Bills, but he has to print for all the banks. Debased currency = inflation for the rest of us and higher deficits which means less money for social programs.

        The public BS is Kabucki theater, nothing more. He cannot hide inflation when people see if everyday they go into the grocery store.

        Only people that have been unaffected by this depression would believe for a second the FED has done a good job.

    •  There is a fear of fast, high inflation if the... (2+ / 0-)
      Recommended by:
      Pluto, Dburn

      economy catches and heats up really fast. Some worry that with all the QE already in the system, the Fed might not be able to pull it out fast enough.

      There's also talk of hyperinflation, but I don't think that's likely to happen. Although I wouldn't rule it out with all the money games being played in Washington. But since we seem to play those games better than others around the world, US money is still considered a safe haven... unless and until the Tepubs have their way.

      -We need Healthcare Reform... but i'm selfish, I Need Healthcare reform-

      by JPax on Fri Jun 08, 2012 at 11:21:30 AM PDT

      [ Parent ]

  •  Disagree completely (16+ / 0-)

    Bernanke, to his credit, has been the most activist Fed chairman since the FDR administration.  I've been surprised that he has worked so hard against the Republican strategy of tanking the economy in order to do whatever the Fed can do to reduce unemployment.

    At  this point, there isn't a lot more he can do.

    What many people seem not to realize is that in the absence of a functioning banking system, the Fed has become the nation's retail bank (although through some masking intermediaries) and is basically the lender for virtually every mortgage and car loan that has been made in the last three years.

  •  I was at that session as well. (1+ / 0-)
    Recommended by:
    akadjian

    The message communicated to the Fed needs to be more personal: "tell Ben Bernanke that his decision is hurting you," specifically.  Karl Smith's message was to do the same thing to the members of the Fed ad Barack Obama instructed the electorate when he was elected -- essentially, "make me do it."

    -8.88, -7.77 Social Security as is will be solvent until 2037, and the measures required to extend solvency beyond that are minor. -- Joe Conanson

    by wordene on Fri Jun 08, 2012 at 05:13:37 AM PDT

  •  Yes, very good - I like to get outraged (3+ / 0-)
    Recommended by:
    Gooserock, Deep Texan, CitizenOfEarth

    about something every day and now I can get that out of the way early in the morning , yay!

    Except, I'm having a bit of trouble getting angry about this in particular, since I suppose that doing nothing is better than the usual throwing of juicy rich bones to the Very Rich . . .

  •  Amazing (8+ / 0-)

    It amazes me on a progressive website the number of people who advocate firing up the printing presses and jacking up the inflation target as if it is good policy.

    Doing so is a wildly regressive tax increase that disproportionately harms the poor and most vulnerable in our society.

    Opening the inflation genie as a matter of policy is the most short sited thing that can be done to the economy. Once the cat is out of hte bag, it is tough to really "control" as many people seem to think is possible.

    Higher than normal Inflation is a mortal enemy of fiat currencies, and has largely taken out every empire in history.

    If Helicopter Ben came out and announced another huge QE program we would see the prices of everything rise except wages (that sounds great doesn't it). It could also expose once and for all that "the emperor has no clothes" as far as the FED and its ability to really do much to turn things around.

    •  It's the lesser of 2 evils. austerity is worse (7+ / 0-)

      Yes, many workers will have their purchasing power depreciated, but they'll have a job, and others who don't have a job, will finally get one.

      The time to pay down this debt, is when the economy is recovering, and it MUST be done.  If we don't go after that debt during the recovery, we are truly toast, but if we don't try and reflate now, we are toast now.

      •  both evils (0+ / 0-)

        do we want to die by water or fire.  Thats our choice really.  Neither is that different, both choices suck.

        Bad is never good until worse happens

        by dark daze on Fri Jun 08, 2012 at 06:23:56 AM PDT

        [ Parent ]

      •  ...than Stagflation? (0+ / 0-)

        I seriously doubt that.

        •  Um, yes. (8+ / 0-)

          I'll take the Carter economy over the Hoover economy any day. And for the record inflation has always been considered well by progressives because it benefits debtors, who are more likely to be poor, and hurts creditors, who are more likely to be wealthy. It redistributes away from those sitting on huge piles of undeployed cash in favor of those earning income from economic activity.

          "It is, it seems, politically impossible to organize expenditure on the scale necessary to prove my case -- except in war conditions."--JM Keynes, 1940

          by randomfacts on Fri Jun 08, 2012 at 10:01:38 AM PDT

          [ Parent ]

          •  I agree, and to make an example I use this: (3+ / 0-)
            Recommended by:
            citydem, randomfacts, OkieLawyer

            If a person makes 1000 a month and has 500 in debt service, it's half their income. If deflation occurs and makes their income drop to 500, they have nothing left and they're toast. If inflation occurs and makes their income rise to 1500, then the 500 in debt becomes a smaller part of their total monthly expenditures. This is how Inflation can help the average person.

            This is also how I explain why I'm against getting rid of the Minimum Wage. With no MW, a company can reduce wages and that can mean you get a loss similar to deflation (which can result in actual deflation in the larger economy).

            Of course, some people want deflation... it makes the Gold Standard more do-able.

            -We need Healthcare Reform... but i'm selfish, I Need Healthcare reform-

            by JPax on Fri Jun 08, 2012 at 11:32:12 AM PDT

            [ Parent ]

            •  the problem is income isn't rising with inflation (0+ / 0-)

              so in your scenario, you still have 1000 to work with but all your expenses have gone up because of inflation.

              in some cases, many actually, their 1000 has gone down while inflation went up.  not good.

              -You want to change the system, run for office.

              by Deep Texan on Fri Jun 08, 2012 at 12:19:08 PM PDT

              [ Parent ]

            •  Do you have examples (1+ / 0-)
              Recommended by:
              greengemini

              in the last 12 years of where workers have seen their wages jump because of inflation? Inflation is there once one looks pass the BS CPI. How are public unions doing, what's left of them?

              How about retired people who planned to live off of savings. Kind of hard now with the long bond yield at 3.5%. They weren't looking for much. An extra $7G a year to supplement social security on a 100G or so in their IRAs they are too afraid to put in the stock market. Maybe an Extra 4G on the average 63G that are in all IRAs.

              Do you actually think that record Corporate debt wouldn't be paid down by the record cash on hand that they borrowed if interest rates went up? The only companies that would benefit are those with unencumbered free cash and they would definitely like to see interest rates go as would any saver of money.

              If interest rates were at 7% as they were in 2000, Apple alone would earn 10 Billion a year just on their cash hoard alone, allowing them to pay dividends without endangering cash.

              Other than Apple, Cash was damn hard to get in 2009 which is why companies show much cash in 2012. It's amazing how much this is repeated here without mentioning the corresponding debt that has been incurred to raise  cash to pay dividends, not to mention not knowing what percentage of it is off shore.

              Borrowing below 1% (is even better than selling stock) would be damn hard to get again if interest on debt hurt the manufactured earnings we see in the financial sector which has been falsifying financials with impunity since March of 2009.

      •  Political Toast (0+ / 0-)

        Monetarily, that bread is burnt hardened and broken.

    •  We are in deflationary times (9+ / 0-)

      Your argument doesn't fit the reality of today's economy. Inflation is below target, and we could sustain small amounts of additional inflation. Even just allowing inflation to rise to the Fed's existing target would be beneficial.

      It's not the 1980s anymore. We need solutions for this decade. Worrying about problems that existed during Ronald Reagan's presidency isn't going to help us.

      You know who loves deflation the most right now? Banks. With just a tiny bit of inflation, every dollar a bank lends you is worth less by the time you repay them. Allowing inflation to go up just a bit would relieve the cost of debt servicing by consumers.

    •  Good analysis John (0+ / 0-)

      N/T

  •  doing nothing (2+ / 0-)
    Recommended by:
    CitizenOfEarth, Dburn

    getting out of the way is the best thing the FED can do.

    They are part of the problem, not solution.

    Bad is never good until worse happens

    by dark daze on Fri Jun 08, 2012 at 06:22:18 AM PDT

  •  Another point worth making (7+ / 0-)

    Their definition of inflation is a joke. It doesn't include food or energy. So what exactly is it a measure of, and why does it have to be maintained?

    I'm no philosopher, I am no poet, I'm just trying to help you out - Gomez (from the song Hamoa Beach)

    by jhecht on Fri Jun 08, 2012 at 06:45:45 AM PDT

  •  It made my 401(k) angry, I know that. (2+ / 0-)
    Recommended by:
    shaharazade, Dburn

    You don't need to firebomb Dresden to prove that you can fly a plane.

    by SpamNunn on Fri Jun 08, 2012 at 06:53:31 AM PDT

  •  no it shouldn't (make you mad) (1+ / 0-)
    Recommended by:
    Dburn

    we prefer him to not do anything else that isn't absolutely fucking necessary.

    -You want to change the system, run for office.

    by Deep Texan on Fri Jun 08, 2012 at 07:24:13 AM PDT

  •  Fed help is mainly low interest rates (4+ / 0-)

    we currently have extremely low short term, medium term and long term interest rates.  What further actions would you have the Fed do that it has the power to do?

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Fri Jun 08, 2012 at 07:59:19 AM PDT

    •  Lower int. pd on bank deposits at Fed (0+ / 0-)

      Banks can afford to be lazy and inactive because the FED is still coddling them. Bernanke needs to encourage banks to get cash into productive investment instead of sitting on it. Right now the Fed pays interest on money banks park at the Fed. They should get nothing or next to nothing in interest and then the banks will put dollars into the economy.

      Cities are good for the environment

      by citydem on Fri Jun 08, 2012 at 12:07:25 PM PDT

      [ Parent ]

      •  right and i have a bridge to nowhere to sell you (0+ / 0-)

        the banks won't put dollars into our economy.

        sure they might put it into their economy.  main street won't see the benefit.  

        -You want to change the system, run for office.

        by Deep Texan on Fri Jun 08, 2012 at 12:21:14 PM PDT

        [ Parent ]

      •  That's becuase the banks are insolvent (0+ / 0-)

        They are leveraged up too. Look at their equity to loan assets. That doesn't include anything about the derivatives that are hidden off balance sheet.

         Analysts complain that they don't know how much fraud to factor into their price targets. The market values Citi at 1/3 of book. JP Morgan at 65% of book. The list goes on. The market is wildly optimistic because no one is going to jail too. Think about that.

  •  Bernacke was appropriate..put the blame where it (8+ / 0-)

    belongs on congress.  Fed can't fix congress

    http://maddowblog.msnbc.msn.com/...

    Macca's Meatless Monday

    by VL Baker on Fri Jun 08, 2012 at 08:13:05 AM PDT

  •  Catch What else he said? (4+ / 0-)
    Recommended by:
    skyounkin, Sean Robertson, caul, chuckvw

    From Yahoo

    "What I'm saying is that, in ways that are up to Congress, steps should be taken to mitigate that overall impact. And what combination of tax reductions and spending increases [to enact], that's really up to you," Bernanke said. "But I urge Congress to come to agreement on that well in advance so as not to push us to the 12th hour. But again, I think that trying to put our fiscal situation on a sustainable basis is perhaps one of the most important things that Congress can be working on."
    The single biggest item making up the fiscal cliff, Bernanke said, is the potential expiration of the so-called Bush tax cuts. If everything else were held constant, he said, the expirations alone would have adverse effects on spending and growth in the economy that would be significant.
    Think Permanent Tax Cuts, And Spending cuts, But not sequester, Think Medicare/Medicaid/Food Stamps..

    Shocking..

    •  He should be Merkel's finance minister. (6+ / 0-)

      How idiotic that he's decrying the effects of the EU disaster on our economy, while in the next breath encouraging the US Congress to do what the EU did that has them standing on the cliff.

      We, are standing on the same cliff, Ben, and it's the cliff of deflation.  It looks to be to be foreordained.  Ben is Obama's guy, and Geithner is on the same page.  The paltry stimulus the Dems passed before the GOP grabbed the house was weighted stupidly to tax cuts and only danced around the edges of major infrastructure projects, while completely ignoring the buttressing of local govts as their funds evaporated (thus the crippling loss of public sector jobs that has neutered the much ballyhooed gain in private sector jobs, which has resulted in 8+ unemployment rates).

      Time to cash in the stocks.

      "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

      by nailbender on Fri Jun 08, 2012 at 09:29:55 AM PDT

      [ Parent ]

    •  Arguing for extending all Bush tax cuts? (9+ / 0-)

      That's a fail right there.  Hike taxes on the rich and redistribute it to actual small local business and state and local governments that create real jobs.  I'm tired of hearing about teacher and police/fire layoffs while the corporations and the wealthy keep hoarding cash.  Fuck them, it's time to fix this crap with or without them.  And the next Republican that talks about austerity needs to have it shoved right back up his @$$ where it came from.

  •  ot/but I have a question for any finanseers? (1+ / 0-)
    Recommended by:
    Pluto

    1.  It seems to me that pension funds are a significant part of the investor community.

    2.  Which would make it highly advantageous for the street to have an affluent middle class.

    3.  However, it did occur to me that you could say that as wealth is being distributed, there is the same amount of capital available to invest, but a smaller investment number of investors.  So maybe it doesn't matter?

    4. Or maybe it does?   Is it in the street's interest to have a larger number of investors with wealth more widely spread out?  Does that make for higher employment with a larger number of brokers and houses?

    Thinking this through/value any input?

    •  Just push it out to the extreme (0+ / 0-)

      ...to analyze the scenarios.

      If only ten individuals held all the investing wealth in the US, the markets would grow if they invested it there -- and the fundamentals of the company's (earnings ratio) were ignored.

      These ten individuals would be making all of their money from investing money. Not from creating jobs. Jobs are not needed because the consumer class is too poor to buy much and create demand.

      That's pretty much where we are now.

      _____

      If 100 million individuals held all the investing wealth in the US, the markets would also grow if they invested it there. This time there is no need to ignore the fundamentals of the companys, since everyone would also be a consumer -- so demand would be very high.

      These 100 million individuals could NOT be making all their money from investing. They would also have jobs to supplement the income from their investments. Companies would be creating jobs like mad -- because of the intense demands from this wide and deep American consumer/investor class.

      That's pretty much where we were before 1980.


      "People who are forgetful have no future." — Chen Guangcheng, blind human rights activist who escaped house arrest and sought refuge in the U.S.

      by Pluto on Fri Jun 08, 2012 at 12:50:45 PM PDT

      [ Parent ]

      •  thanks, but still not clear (0+ / 0-)

        I was originally trying to make a case that it is to the wise boy's advantage to have an affluent middle class...with pensions, etc...

        From what I could tell, you are claiming that a large investor class should result in more effective and rewarding investments as brokers would not need to ignore a company's fundamntals as much?

        And, again, is it to the street's advantage to have a large number of investors because there would also be more brokers, more support staff?

        thanks/sh (not too well, so sorry if I didn't completely understand)

        •  Heh. (0+ / 0-)

          The fault is all mine. The middle class in America WAS the investor class, until just recently.

          Truth.


          "People who are forgetful have no future." — Chen Guangcheng, blind human rights activist who escaped house arrest and sought refuge in the U.S.

          by Pluto on Fri Jun 08, 2012 at 09:49:06 PM PDT

          [ Parent ]

  •  A better translation of that opening blockquote: (3+ / 0-)
    Recommended by:
    Jabarten, Superpole, Dburn

    "The situation in Europe is fucked. There's not a damn thing we can do about it. It's going to hit us hard. We will try to keep our own ship from sinking."

    There are enough falling dominoes in play that Bernanke is in total crisis mode. While trying to play pretend that all is BAU and offer soothing words.

  •  Problem is Bernakster can only do two things (6+ / 0-)

    1) Drop interest rates which is almost at 0% now so that is a dead end.

    2) Print money which he has been doing since 2008. That benefits the bankers and the stock market, while destroying savers and people on fixed incomes and pensions.

    We are in bad shape (some say worse now than in 2008) and Bernak is out of bullets.

    There's enough on this planet for everyone's needs but not for everyone's greed. ~ Gandhi

    by CitizenOfEarth on Fri Jun 08, 2012 at 10:16:32 AM PDT

  •  Let's replace Bernanke next term (1+ / 0-)
    Recommended by:
    akadjian

    You could argue that he needed to be reappointed to bring stability after a crisis. But at this point, we need fresh thinking. The crisis is over, now it's time for someone who understands growth.

    •  "The Crisis is Over" (3+ / 0-)
      Recommended by:
      Dburn, Icicle68, wsexson

      Really?

      That's not what I hear from Krugman, Stiglitz, etc., and the 25 MILLION unemployed/underemployed people.

      It's absurd you or anyone thinks the crisis over.

      "I don't feel the change yet". Velma Hart

      by Superpole on Fri Jun 08, 2012 at 11:20:53 AM PDT

      [ Parent ]

    •  The crisis is over? Replace him? (0+ / 0-)

      The crisis is still here and getting ready for act 11. Bernanke will go when the banks don't believe they have their best interests at heart. The Kabucki act of a Presidential appointment apparently impressed you.

      He needs that debt limit raised to print money for the banks. He could care less about jobs.

  •  My understanding is that (1+ / 0-)
    Recommended by:
    Dburn

    quantitative easing didn't do anything to increase the money supply, it merely loaned money to banks that they then used to buy treasury bonds and collect easy free money from the American taxpayer.

    I agree with him that it should really be up to Congress to fix this, monetary policy has done almost all it can.  I also agree with you that the fed's laser-like concentration on inflation is wrong and should be changed.

    Atheism is a religion like Abstinence is a sexual position. - Bill Maher, 2/3/2012

    by sleipner on Fri Jun 08, 2012 at 11:03:03 AM PDT

    •  No, that's not what it was at all (2+ / 0-)
      Recommended by:
      Deep Texan, gramofsam1

      First of all it was a myth that banks could borrow from the fed and buy t-bills for arbitrage profits.  That story first appeared because a financial reporter didn't understand that the Fed charges both fees and interest rates -- and that taken together they are more expensive than the low interest paid on t-bills.

      QE meant buying debt that benefited the real economy -- from corporations borrowing to expand, to homeowners mortgages, to the car loans that made the auto bailout possible, to credit card receivables that prevented card companies from cutting people off below their balances.

      Above all, the fed funded virtually every home loan and car loan made during the last 3 years.

      •  Well, they certainly weren't using it (0+ / 0-)

        to loan money to anyone, that's for sure.  

        Atheism is a religion like Abstinence is a sexual position. - Bill Maher, 2/3/2012

        by sleipner on Fri Jun 08, 2012 at 12:21:41 PM PDT

        [ Parent ]

        •  yeah they did (1+ / 0-)
          Recommended by:
          HamdenRice

          what part of the FED was backstopping all loans did you not get?

          -You want to change the system, run for office.

          by Deep Texan on Fri Jun 08, 2012 at 12:23:22 PM PDT

          [ Parent ]

          •  I meant the banks did not increase lending (0+ / 0-)

            Seems as if it was just the fed buying off or insuring some of their trash loans they wanted to get rid of, but small businesses and individuals had no easier time qualifying for loans than they did before.  Hence the effect was to help out the banks' bottom line and the rich (as always) but didn't really do anything at all to drive the economy forwards.

            Then again, I'm no expert so I should probably shut up about this unless I do more research ;)

            Atheism is a religion like Abstinence is a sexual position. - Bill Maher, 2/3/2012

            by sleipner on Fri Jun 08, 2012 at 02:55:24 PM PDT

            [ Parent ]

            •  You're not getting it (1+ / 0-)
              Recommended by:
              akadjian

              The banks are indeed dysfunctional.  In order for the economy to survive -- which requires people getting loans to buy large ticket items -- the Fed stepped in and basically has become the nation's "Citibank."  It's a bit complicated in structure, but essentially rather than as in the past, the Fed lending money to banks which lend to consumers, the Fed is lending to consumers through some thinly disguised intermediaries.  It does this by buying something like 95% of all mortgage backed and car loan backed securities that have been issued.

  •  QE threw a lot of bank money into the market (2+ / 0-)
    Recommended by:
    Deep Texan, gramofsam1

    It's about churning, it made shareholders happy which is somewhat important but created no jobs.  In a dead economy, at least somebody had some fun.

    The goal should be coordinated worldwide printing of money to pay for JOBs only, not to pay down debt. Right now Merkel is the only barrier on that end. On our end Congress doesn't want to create jobs., so there shall be no JOBs.

  •  The Fed? (0+ / 0-)

    The Federal Reserve is only chartered by congress. It is a private institution otherwise. Bernanke is chosen by the Banks because he follows their orders,  which they have found to be incredibly profitable. That is then formalized by a "6 year "appointment' by the President that has all been arranged by the banks that Bernanke and the President serve under.

     Bernanke doesn't really want to deal with inflation with as much money as he has printed to save the banks asses here and abroad each time they break the law and lose depositors money. If people actually had disposable income, do you know what the inflation rate would look like once Health care Costs, Food etc were put in and the iPad taken out?

    Do you have any idea what the deficit would look like if Bernanke had to raise rates even 50 basis points? What if he took it up to 2%?  Imagine the interest payment on 16T dollars of debt with a per annum interest rate increase of 100-200%. (Hint it's at 500B right now)

    Bernanke voted for Obama. I promise you Obama's team has decided to put the onus of responsibility on congress for not "doing anything" as if they even knew what to do if they could do anything which they can't. The money jar is empty thanks to the banks.  

    The Fed can't do anything but  stand still and Lie on inflation and lie for the banks. That's their job, that's what they do, that's all they do. They don't give a fuck about me or you or anyone else but those who give them the power to play God.

    That mandate? HA HA

  •  QE has no economic effect (0+ / 0-)

    ...in nations with very high wealth inequality.

    The US has the highest of all 40 developed nations, and it continues to soar.

    There's really nothing to discuss here. No one knows that better than Ben Bernanke.


    "People who are forgetful have no future." — Chen Guangcheng, blind human rights activist who escaped house arrest and sought refuge in the U.S.

    by Pluto on Fri Jun 08, 2012 at 12:53:02 PM PDT

  •  Well .... (0+ / 0-)
    What you just heard Ben Bernanke say was, we're not going to do anything until the situation gets worse.
    This should make you angry.
    The Fed has already gone to ridiculous extents to pump up the economy. It has probably gotten to the point where it realizes that it has no way out from the record low interest rates that it has brought about (with the help of QE).

    The FED wants inflation right now. It is not worried about the 2% target, it is scared shitless about DEFLATION.

    Simply put the FED is all but out of ammunition. It can do more QE, but the impact will likely just be to pump up asset prices and commodities (maybe).

    The real problem is a lack of demand ... because consumers and government are up their eyeballs in debt. The Fed can't solve this problem (although it did help create it). Only time and/or debt repudiation will work. The only other alternative is hyper inflation, which would help get rid of the debt too ... but you really don't want to go there ... and you would eventually go there if the Fed kept on using CTRL+P at every opportunity.

    Those who make peaceful revolution impossible will make violent revolution inevitable. - JFK

    by taonow on Fri Jun 08, 2012 at 01:22:38 PM PDT

    •  Actually the Fed can, but hasn't, charge banks for (0+ / 0-)

      their reserves- in effect having NEGATIVE interest rates. That way banks will be more or less forced to lend money. This is not popular enough that they're going to do it, but it is an untried arrow in the Fed's quiver.

  •  From Atrios... (2+ / 0-)
    Recommended by:
    wsexson, akadjian

    Evil...

    More people with microphones and appropriate audiences need to start using moral language to describe Ben Bernanke's actions. He's not stupid, so there's only one other option, really. We know that the costs of relatively low (as in, sub-8%) inflation are trivial. We also know that that a willing Fed has precisely zero problem killing inflation if it so desires. There is no need for "credibility" on this issue unless you have a government that's spent years running the printing presses to pay its bills. Bernanke sleeps well at night so he can get up every day and ensure that millions experience severe economic hardship.

    "I don't try to describe the future. I try to prevent it." - Ray Bradbury

    by chuckvw on Fri Jun 08, 2012 at 02:59:38 PM PDT

  •  Wouldn't high unemployment keep (0+ / 0-)

    wages low, thus reducing inflation? Seems to be his goal, but I could be wrong.

    "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

    by Lily O Lady on Fri Jun 08, 2012 at 04:42:16 PM PDT

  •  Elizabeth Warren or Julia Bair... (0+ / 0-)

    ...for head of the Federal Reserve.

    9-11 changed everything? Well, Katrina changed it back.

    by varro on Fri Jun 08, 2012 at 09:15:38 PM PDT

  •  Main-Street bails out Wall-Street, (0+ / 0-)

    Wall-Street then says “Fuck Main-Street”. And they expect us to hook a “D” to this ‘bipartisan’ economic agenda. I’m firmly convinced that 1 republican party is better than 2.

  •  We dont need more money. (0+ / 0-)

    There is plenty of money. It is just being siphoned into the top.where it circulates on Wall Street. The big financials are the fake and contrived economies rather than the real human economic activities that sustain human beings and the planet. More money is not going to remedy the obscene  and unsustainable distribution of wealth time and resource.

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