Comments on: Central banks make an historic turn Sat, 03 Jan 2015 16:42:55 +0000 hourly 1 By: AZreb Mon, 26 Nov 2012 12:33:37 +0000 The Fed’s two jobs – price stability and employment. Big FAIL on both. Due to the drought, our food prices on anything having to do with grain – feed for animals, baked goods and more – will go up next year. Our fuel prices go up, then down, then up again, then down again – like a roller-coaster affecting anything needing to be trucked or flown to markets.

We hear talk of the “recovery”, but many are facing loss of homes due to foreclosures, loss of jobs or cut in hours and benefits, rise in healthcare costs including insurance, and we have 42 million of our people having to depend on food stamps and welfare while hunger and poverty are still on the rise.

I do wish someone in these “economist” circles would send me a pair of the rose-colored glasses they seem to be wearing or some of the wacky-tobacky they must be smoking. Just keep the printing presses going full speed, pushing out more bills that will soon be worthless. Why not just give each of us our own printing press with a limit of about $5,000? That might help.

By: HansVanMingroot Sun, 23 Sep 2012 14:34:24 +0000 Mr. Kaletsky,
I read your article in its IHT format, and want to thank you for providing sense in a subject one would otherwise have a hard time not to categorize as a ‘systemic problem without solution’ since all economic parameters indeed are intertwined. I believe, though, that in order for this policy to take its effect, main-stream companies and business leaders will need to be better briefed and communicated to.

By: DifferentOne Thu, 20 Sep 2012 16:21:24 +0000 An important assumption the author makes is that Bernanke no longer intends to control inflation. However, the only evidence for this is that Bernanke has not specified an end date for this round of QE.

This may merely be an attempt to talk up the stock market, or increase inflationary expectations, to counteract deflationary forces. It is by no means a commitment by Bernanke to embark on reckless monetary expansion.

Anyway, the Fed’s dual mandate is to maximize employment AND minimize inflation. Bernanke does not have the authority to abandon this. So this article is based on a false premise. And the sky is not falling.

On the other hand, if the author is somehow right, and Bernanke and the entire Fed are actually going wild, consider how commodity prices would rise, and how that would heat up inflation in China — which pegs the Yuan to the USA dollar, in effect.

Sharply higher Chinese inflation would either force China to raise interest rates or curb lending to cool their inflation, which could significantly slow their growth. If a sharply slower economy led to internal unrest, China would be forced to allow significant appreciation of the yuan, to make imported commodities cheaper in Yuan terms. This yuan appreciation would help the USA economy, and reduce the cost of Chinese imports in Yuan terms, encouraging domestic consumption in China.

By: fabioaraujo Thu, 20 Sep 2012 14:14:10 +0000 Very well written. Great article

By: Gordon2352 Thu, 20 Sep 2012 13:52:22 +0000 Great propaganda piece!

As with all great propaganda, it contains just enough elements of the truth to make it believable to those who don’t know better.

Not even Adam Smith thought markets were self-correcting, going so far as to detail the reasons why not in his Wealth of Nations — collusion among the wealthy to subvert the government to their desires and against free trade.

By the way, I don’t think Mr. Bernanke realizes that by printing money (sorry, unlimited bailouts forever through QE programs) that he is doing EXACTLY what Mr. Keynes warned against in such a situation.

“A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.”

The only adjustment necessary in that description is to including “hoarding cash by the wealthy”, simply because that is what the wealthy do with excess profits (reference Adam Smith) to the detriment of society.

The fact is that the central bank CANNOT generate jobs or lower inflation without the appropriate federal legislation to support it.

THAT is what is missing and why this effort is doomed to fail.

You would think Mr. Bernanke would know and understand this, but apparently not.

The real underlying problem is decades of job outsourcing — especially manufacturing jobs that bring in real revenue to the US economy — plus trade and tax legislation that favors capital investment virtually anywhere but in the US.

By Bernanke giving more money to the wealthy, he is simply contributing to the already desperate problem of job loss for decades, especially since the beginning of free trade with China.

Congress MUST REVERSE what it has wrought over the past 30+ years in terms of trade and tax legislation that favors capital investment outside of the US. ONLY that can turn this country around.

Bernanke in the meantime is simply “tilting at windmills”.

By: reality-again Thu, 20 Sep 2012 13:20:24 +0000 Remarkable, in-depth article.
Injecting liquidity doesn’t create jobs, because there is essentially no liquidity problem that needs solving. The problem is Trust (I.E. lack thereof), and lack of confidence in the business community.
Inflated stock prices don’t boost business people’s confidence.
Tax cuts don’t work that well, because not too many people in the US pay taxes to begin with…
Entitlements such as welfare and unemployment benefits don’t work to create jobs, because workers with low skills may decide they’d rather get paid little for doing nothing, than be paid a little more for working hard.
So, going back to the Trust-Confidence problem, central bankers don’t seem to realize that by inflating a debt bubble bigger than anything we’ve known before, they’re directly contributing to the malaise in the business community. We business people, feel that this farce can’t go on forever, and it doesn’t seem to be going in the direction that we’d like to see it go, at least judging by the results of QE1 and QE2.

By: keebo Thu, 20 Sep 2012 13:15:18 +0000 …won’t that lead to ever more desperate and risky efforts to artificially stimulate employment? Does anyone truly believe that the fed hasn’t been in a state of desperation since the financial crisis and actually before? Bernanke’s bloated ego is at stake since according to him this money creation is the solution. If it is not then all his musings of economic theory don’t amount to much more than a lot of gas to put it succinctly. These guys are creating more phony wealth by stealing from one group and giving to another. This used to be socialist dogma redistribution of wealth – but in the case of the fed they take from the poor and give to the wealthy. What arrogant as***.

By: Mirogram Thu, 20 Sep 2012 09:35:30 +0000 One way or another, isn’t the whole purpose of QE precisely to create hyper inflation without calling it by the name? Can’t be a devil’s work, surely, if it’s to create jobs?

Direct cash handouts, as an alternative method, might perhaps be just a bit too obvious (and scary) to the general public?