For Brentastic and others--Bernanke will give lectures online

[wiegie]

In March 2012, Chairman Ben S. Bernanke will deliver a four-part lecture series about the Federal Reserve and the financial crisis that emerged in 2007. The series begins with a lecture on the origins and missions of central banks, followed by a lecture that will discuss the role and actions of the Federal Reserve in the period after World War II. In the final two lectures, the Chairman will review some of the causes of, and policy responses to, the recent financial crisis, focusing specifically on the actions of the Federal Reserve.

 

The lectures are being offered as part of an undergraduate course at the George Washington University School of Business.

 

Live video of each lecture will be available to the public at http://www.ustream.tv/federalreserve . Transcripts and video recordings will be made available following each lecture.

http://www.federalreserve.gov/newsevents/lectures/about.htm

 

My guess is that it probably will be worth watching.

[Avernus]

So he is going to give his interpretation of how our monetary system works to the vast majority of people who would probably believe that we can just print $xxxxxxx.xx dollars and there would be no repurcussions?

[wiegie]

So he is going to give his interpretation of how our monetary system works to the vast majority of people who would probably believe that we can just print $xxxxxxx.xx dollars and there would be no repurcussions?

 

he is one of the best economists in the world and has spent basically his whole life studying this stuff. Perhaps, just perhaps, he might know what he is talking about.

[Avernus]

he is one of the best economists in the world and has spent basically his whole life studying this stuff. Perhaps, just perhaps, he might know what he is talking about.

 

 

I would hope so but printig your way out of a crisis seems like something a child would consider

[godtomsatan]

I would hope so but printig your way out of a crisis seems like something a child would consider

 

 

He's only 6 years old, that's what makes him remarkable!

[SheikYerbuti]

I, and my fellow republicans, are choosing to forget that this Bernanke clown saved the global financial system from complete collapse. Sorry, never happened. He should be fired, and his position and the fed in its entirety should be done away with. The financial world can regulate itself. Just ask John Corzine, Bear Sterns and Ron Paul, who I'm assuming is spending St. Patrick's Day guarding his pot of gold at the end of an unregulated rainbow.

[bushwacked]

I, and my fellow republicans, are choosing to forget that this Bernanke clown saved the global financial system from complete collapse. Sorry, never happened. He should be fired, and his position and the fed in its entirety should be done away with. The financial world can regulate itself. Just ask John Corzine, Bear Sterns and Ron Paul, who I'm assuming is spending St. Patrick's Day guarding his pot of gold at the end of an unregulated rainbow.

 

 

[delusions of grandeur]

Gross oversimplification of the origins of the Fed (that probably isn't as far off as you think):

 

A long time ago, some discovered how profitable war can be, almost as profitable as the debts incurred from these conflicts/rebuilding (in addition to domestic spending of course)... Thus started the rise of central banks, of which only now 3 countries Iran, Syria and Cuba don't have (down from 7 in the last 10 years )... However, the problem became that at a certain point, there weren't quite enough funds available for this to be as profitable as possible. Thus, we then discovered that you could simply print more money to continue the spending and debt from countries all over the globe. Yes it devalues the purchasing power, but that's only of concern to those with very few dollars. What little devaluation we incurred only allowed for more money to come in, and the Federal Reserve system was designed for just this unsustainable purpose (for you suckers anyway).

 

I, and my fellow republicans, are choosing to forget that this Bernanke clown saved the global financial system from complete collapse. Sorry, never happened. He should be fired, and his position and the fed in its entirety should be done away with. The financial world can regulate itself. Just ask John Corzine, Bear Sterns and Ron Paul, who I'm assuming is spending St. Patrick's Day guarding his pot of gold at the end of an unregulated rainbow.

 

So let me ask you, which is going to be more responsible? The company who knows that if they conduct too risky of business, they'll end up out of business, or the "too big to fail" one who knows that their irresponsible/inefficient behavior will get bailed out if it ends up biting them in the butt... I mean, it's not even like you had to let these companies tank, just go bankrupt and be bought. It happens all the time without government intervention, and should be the fate of a poorly-run company, regardless of whether they're too big to fail.. But no, surely no business mogul is going to want to restore the Chevy name, we need to reward the current ones for making inefficient vehicles when they should have been adapting to the marketplace.

 

But um, you do realize that things like fraud are still illegal in a de-regulatory environment, don't you (and also that no one is arguing for no regulations, just smart and fair ones that don't promote irresponsible behavior, right?). I don't see how regulations and bailouts have done anything but prop up these companies to do whatever they want with very little consequence, and to me that's the problem..

Edited March 17, 2012 by delusions of granduer

[Savage Beatings]

Listen in. You too can be a Keynesian Globalist!

[SheikYerbuti]

I don't see how regulations and bailouts have done anything but prop up these companies to do whatever they want with very little consequence,

 

 

And that's the point. Had TARP not been passed, the DOW would have plunged to Brent-like levels and your 401K would be worth a fraction of what it currently is. But, since that didn't happen and the market is hitting multi-year highs, everyone is choosing to ignore the fact that at the time it was the correct move. If AIG and Bear Sterns had been allowed to go belly up and the CDS's had triggered while Bernanke sat on the sideline and let it all happen, the same people who scream "socializm!!" would be furious that the gubbument did nothing while their life savings went down the crapper.

 

And do you really think Lehman and Bear Sterns suffered "very little consequence"?

[bushwacked]

And that's the point. Had TARP not been passed, the DOW would have plunged to Brent-like levels and your 401K would be worth a fraction of what it currently is. But, since that didn't happen and the market is hitting multi-year highs, everyone is choosing to ignore the fact that at the time it was the correct move. If AIG and Bear Sterns had been allowed to go belly up and the CDS's had triggered while Bernanke sat on the sideline and let it all happen, the same people who scream "socializm!!" would be furious that the gubbument did nothing while their life savings went down the crapper.

 

And do you really think Lehman and Bear Sterns suffered "very little consequence"?

 

 

This pretty much summarizes it; along with the fact most of the TARP money was paid back.

 

ETA: Not to mention if one is honest, one would admit that the mortgage disaster was an obvious result from lack of regulation (not vice-versa).

 

And I'd like Wiegie to chime in on this but it's my understanding that Bernanke wasn't thought of as a hardcore Keynesian when appointed to chair the Fed by W. From what I can tell, that label gets flung around erroneously in economic discussions much like socialism does in political circles.

Edited March 17, 2012 by bushwacked

[Ursa Majoris]

And that's the point. Had TARP not been passed, the DOW would have plunged to Brent-like levels and your 401K would be worth a fraction of what it currently is. But, since that didn't happen and the market is hitting multi-year highs, everyone is choosing to ignore the fact that at the time it was the correct move. If AIG and Bear Sterns had been allowed to go belly up and the CDS's had triggered while Bernanke sat on the sideline and let it all happen, the same people who scream "socializm!!" would be furious that the gubbument did nothing while their life savings went down the crapper.

 

And do you really think Lehman and Bear Sterns suffered "very little consequence"?

 

 

Well said.

[wiegie]

And I'd like Wiegie to chime in on this but it's my understanding that Bernanke wasn't thought of as a hardcore Keynesian when appointed to chair the Fed by W.

correct

From what I can tell, that label gets flung around erroneously in economic discussions much like socialism does in political circles.

 

correct

[Brentastic]

he is one of the best economists in the world and has spent basically his whole life studying this stuff. Perhaps, just perhaps, he might know what he is talking about.

 

We're so far apart on our beliefs it's not worth the effort to respond but I can't help myself.

 

It's discouraging to realize that many still buy into our current system and really it's the money system in general that is flawed, no matter what economic theory you believe in. The fact that so many people limit the human potential to the confines of accumulating wealth and power, is really, REALLY depressing. Once you realize that our potential is limited only by a system of rules created by greedy men who desire control and power, you can finally think outside of the system. Unfortunately, you mimic the perception of most and that saddens me.

[Ursa Majoris]

We're so far apart on our beliefs it's not worth the effort to respond but I can't help myself.

 

It's discouraging to realize that many still buy into our current system and really it's the money system in general that is flawed, no matter what economic theory you believe in. The fact that so many people limit the human potential to the confines of accumulating wealth and power, is really, REALLY depressing. Once you realize that our potential is limited only by a system of rules created by greedy men who desire control and power, you can finally think outside of the system. Unfortunately, you mimic the perception of most and that saddens me.

 

 

Surely your wish for universal hippiedom makes any monetary system anathema?

[Brentastic]

Surely your wish for universal hippiedom makes any monetary system anathema?

 

If you think money is necessary then I'd say your soul is immature. What words are you putting into my mouth in saying "my wish for universal hippiedom"?

[wiegie]

If you think money is necessary then I'd say your soul is immature.

For somebody who thinks money is unnecessary, you sure as hell spend a lot of time giving advice about it.

[Brentastic]

For somebody who thinks money is unnecessary, you sure as hell spend a lot of time giving advice about it.

 

I do? There was a time when I spent a lot of time warning huddlers of the impending depression, however, I no longer waste my time.

 

Money is very necessary now under the current system we've been forced to live. For the human race in general, it is not necessary at all and imo, hinders the progression of humans.

[billay]

 

 

It's discouraging to realize that many still buy into our current system and really it's the money system in general that is flawed, no matter what economic theory you believe in. The fact that so many people limit the human potential to the confines of accumulating wealth and power, is really, REALLY depressing. Once you realize that our potential is limited only by a system of rules created by greedy men who desire control and power, you can finally think outside of the system. Unfortunately, you mimic the perception of most and that saddens me.

 

 

This is downright Thewsian.

[Ice1]

he is one of the best economists in the world and has spent basically his whole life studying this stuff. Perhaps, just perhaps, he might know what he is talking about.

 

 

Well, he is one of the best academic economists in the world. Unfortunately our debt increasing 4 or so billion every day on top of over 15.5 trillion in hard debt and 100 plus trillion in unfunded liabilities is not something Bernanke seems to discuss much as it relates to economic policy and the role of the Federal Reserve.

 

I wonder at what point the politicians of the day will truly grasp the concept that the lender of last resort must itself be a solvent entity. We certainly seem to have a serious liquidity trap in play as it relates to business and no clear cut long term tax policy to actually stimulate the engine. We give little tokens to the passengers for votes which simply add more debt that does little for real sustainable investment.

 

Benanke is smart guy but I can't help think he wakes every day and wonders what in the hell this Administration is doing by engaging in silly class warfare arguments more concerned about the Buffet tax BS that most likely will do squat or come close to addressing the 4 billion per day in new debt and may actually make it far worse.

 

Until this country realizes that roughly 50% cannot fund 100% of the government without massive reductions in government we will continue to march towards the cliff at an ever increasing clip. Bernanke has pretty much tried everything to a point within a decade or less our money and our entire monetary system may face a real collapse with no bail out to push it down the road.

 

Today, the game of Kick the Can continues. .

 

That said, lecture 1 was interesting; not sure he is nearly strong or forceful enough to convey the real messages needed but I am certain he understands the path we are on is not sustainable.

 

We certainly seem to be addressing economic policies using a very old framework thinking it will work but the debt picture today and in the future looks terrible.

 

Maybe it is time we find a new smartest economist centered on solvency based solutions not inflation/deflation based solutions. Just think wiegie, maybe it could be you using a strategy to drill like crazy on Federal land to pay down the debt and once again get the USA Flush at a federal level.

 

I don't blame him too much but it sure seems the right and left hand know not what they are doing and may not much care.

Edited March 22, 2012 by Ice1

[Brentastic]

Things are getting so much better:

 

Deficits Push N.Y. Cities and Counties to Desperation

March 10 (New York Times) On Monday, Rockland County sent a delegation to Albany to ask for the authority to close its widening budget deficit by issuing bonds backed by a sales tax increase. [Only politicians could think that yet more borrowing and yet another tax increase are going to fix the problems they created by too much spending, borrowing and taxing.]

 

On Tuesday, Suffolk County, one of the largest counties outside New York City, projected a $530 million deficit over a three-year period and declared a financial emergency. Its Long Island neighbor, Nassau County, is already so troubled that a state oversight board seized control of its finances last year.

And the city of Yonkers said its finances were in such dire straits that it had drafted Richard Ravitch, the former lieutenant governor, to help chart a way out. [The only way out is to renege on promises, so the only question to decide is which ones.]

 

Even as there are glimmers of a national economic recovery, cities and counties increasingly find themselves in the middle of a financial crisis. The problems are spreading as municipalities face a toxic mix of stresses that has been brewing for years [these are the predictive stresses we saw ten years ago], including soaring pension, Medicaid and retiree health care costs. And many have exhausted creative accounting maneuvers and one-time spending cuts or revenue-raisers to bail themselves out. [The charade is over, and it is just months from being outed as such.]

 

In Rhode Island, the city of Central Falls declared bankruptcy last year, and the mayor of Providence, the state capital, has said his city is at risk as its money runs out.

New York City’s annual pension contributions have increased to $8 billion from $1.5 billion over the past decade. [How’s that going to end?]

 

And Thomas S. Richards, the mayor of Rochester, recently described a grim situation facing New York’s cities in testimony to the State Legislature, saying, “I fear that Rochester and other upstate cities are approaching the point of financial failure and an inevitable financial control board—as is the case in Buffalo—unless something is done now.” [There is only one solution: Cut spending and borrowing. But that’s deflationary. So is not cutting, because that means default.]

 

Pension costs are a particular problem. The stock market collapse of 2008 decimated public pension fund investments, and municipalities are now being asked for greater contributions to make up for the losses. [in other words, the short bout of pessimism in 2008—producing a “great recession” that is supposedly over—caused an unstoppable drain on public finances.] The impact has been drastic: Three percent of New York property tax collections were used to pay pension costs in 2001; by 2015, pension costs are expected to eat up 35 percent of property tax collections. Falling property values have also affected cities and towns because lower assessments hurt property tax collections.

 

The state is taking some steps to ease municipal burdens, but they come with risks. A relatively new plan allows municipalities to borrow from the state pension fund, with interest, a portion of their required contributions to the pension system. [Read that again: They are going to borrow money from the bigger pension fund so they can put that money into the smaller pension fund.]

 

Suffolk and Nassau are borrowing a combined $85 million this year to pay their required contribution into the state pension system. “It’s the worst thing that you can do financially,” said Steve Bellone, the Suffolk County executive. “But when you are up against the wall and you have a county that has used every one-shot revenue that it can possibly use already, and you’re facing a deficit of huge proportions, suddenly that becomes not such a bad option.” [so, conditions have reached the point at which “The worst thing you can do [is] not such a bad option.” Doing the worst possible thing to get past the short term just makes the ultimate end worse

Most of these entities have yet to stop paying, because they continue to find voluntary lenders, but only because those lenders have a monopoly on force over involuntary lenders. The Northeast is not the only problem region. Here is an entity that finally stopped the game-playing:

March 5 (Reuters) - Alabama’s Jefferson County is fully eligible for Chapter 9 bankruptcy protection and can proceed with its $4.23 billion filing, the biggest ever by an American municipality, a federal judge ruled.

 

Here’s an entity that is about to stop:

February 15 (Bloomberg) Stockton, California, may take the first steps toward becoming the most populous U.S. city to file for bankruptcy next week because of burdensome employee costs, excessive debt and bookkeeping errors that misrepresented accounts, city officials said yesterday.

 

Stockton stopped paying its bondholders months ago. The city owes $760 million in debt and unfunded liabilities. But wait. The state has mandated mediation, another short term stop-gap:

March 12 (ABC News) Stockton, CA - The City of Stockton is in a 60-day mediation process with creditors to find ways to avoid bankruptcy, which is outlined in Assembly Bill 506. [Will reality hit in 60 days? Or will they think up a new delay?]

 

Nor is the problem in California confined to only one city:

March 2 (Bloomberg) Unfortunately, the financial mess in Stockton echoes problems throughout California. Writing in the Bee this week, Stanford professor Joe Nation, a former Democratic assemblyman, argued that “from Stockton to San Diego, government pension costs are crushing local governments.” The article explained: “Based on economic and finance standards used everywhere except in the public pension world, the top 24 independent pension systems are collectively $136 billion in debt and have only 54 cents for every dollar they owe. In nearly every municipality, employee pensions are being prioritized over libraries, parks, street maintenance, health care and public safety.”

 

But politicians are doing almost nothing about it. Why?

The answer is that the state’s legislators are so beholden to public sector unions that they are oblivious to the financial meltdown all around them and aren’t about to do anything before more cities’ finances hit the wall. [T]he problem is spreading across California, and there’s nothing much the unions can do once cities start running out of money.

 

This is exactly the scenario we are steadfastly predicting: bankruptcy. And bankruptcy—reneging on debt—is deflation. Investors think they have money when they hold a bond, but bond values are going to melt away. That’s deflation. Public retirees think they will keep getting money, and many of them have no doubt planned for future living expenses based on pension promises. But the expected money won’t materialize. The flood of municipal bankruptcies coming this decade is going to be something to witness. The wait has seemed interminable, but when the crisis hits, everyone will talk about how “sudden” it is.

 

The Commercial-Bank Lending Machine Is Out of Order

Our small town has as many banks as churches. Back in 2002, when CTC came out, I thought the game was up, only to watch in awe as yet new banks sprung up to exploit the final years of the real estate mania. But the law of gravity has finally caught up with the banking industry, and once again statistics are harking back to the Great Depression:

 

First year in decades without new US bank

March 4 (FT.com) There were no new banks created in the US in 2011, making it the first year in decades that the country has gone without the establishment of a single start-up lender. A de novo bank is a freshly chartered bank that has not been created through the takeover of an existing institution But none of the three new banking charters reported by the US Federal Deposit Insurance Corporation for 2011 were de novos. “These new banks are takeovers of failed banks,” said Richard Bove at Rochdale Securities. The three new charters reported for 2011 were the lowest annual number since FDIC records began in 1934.

 

The crash in private lending is one reason why governments have taken up so much of the debt slack. The other reason is that, like municipalities, they can’t stop promising and spending.

 

Edited March 22, 2012 by Brentastic

[Brentastic]

The Investment-Bank Leveraging Machine Is at Risk

Investment banks and hedge funds use collateral to get lines of credit so they can leverage their speculations. The sounder the firms are, the more leverage they can command. Extreme leverage (30x and higher) from investment institutions is one of the reasons that stocks are priced as high as they are today. As financial conditions deteriorate, creditors demand more collateral. Downgrades are inevitable once the cycle turns back down. But even today, after three years of market recovery, there is still risk of near-term downgrading:

 

February 28 (Reuters) - Moody’s warned February 16 that it might downgrade Morgan Stanley by as much as three notches following a reassessment of large financial institutions. Morgan Stanley said it will have to post another $6.52 billion in collateral to counterparties and clearinghouses if Moody’s follows through on a warning that it might cut the Wall Street bank’s long-term debt rating by up to three notches.

In its Interim Report of February 28, the SafeWealth Report asked some key questions. If Moody’s downgrade of Morgan Stanley comes to pass, it asked,

• (1) What kind of quality collateral will they post?

• (2) What will happen to the equity ratios of such institutions?

• (3) To post more collateral, will they close down their related market positions?

• (4) Doesn’t this threat spotlight the risk that the collateral/asset ratio structures of the U.S. and 
other global institutions are weaker than most people realize?

 

Whatever the answers are to these questions, they point to deflationary risk. A reduction of leverage in the investment markets will result in falling prices, and falling prices will lower the value of collateral and the size of loans to investment institutions.

 

Even the U.S. Government’s Business Lending Is Drying Up

The U.S. government’s lending spree to shaky businesses is grinding to a halt. The U.S. Treasury went on a $750 billion spending binge in 2008 to shore up weak financial institutions. But today, lending programs are shutting down, for example the one funding the sinkhole known as “green energy” companies. The impetus, along our lines of expectation, is voter outrage. Here is the latest report:

 

Billions in energy loans dry up
Solyndra backlash not a factor, say energy officials.
March 13 (New York Times) More than $16 billion in loans authorized five years ago by Congress to develop fuel-efficient vehicles has yet to be dispersed, with applicants for the money complaining that the Energy Department is crippling plans for greener cars and trucks at a time of rising gas prices.

 

Some companies contend that the loans, administered by energy officials, have dried up because of a political firestorm that followed the bankruptcy last year of the solar-panel company Solyndra, which had received a federal loan from a related program.

 

“Since Solyndra became politicized last fall, the Department of Energy has failed to make any other loans,” said William Santana Li, chief executive of Carbon Motors, which dropped its $310 million application to build police cars with diesel engines that use 40 percent less fuel than current models.

 

Echoing other companies that were denied loans or have withdrawn their applications, Li said that federal officials had repeatedly altered the terms of the possible loans. Last month, Chrysler withdrew its application for $3.5 billion in loans—after three years of negotiations—because the government kept raising the amount of collateral required, company officials said.

 

The consequences have been dire for Bright Automotive, a start-up in Michigan that withdrew its application last month. It is shutting down operations to produce a plug-in hybrid delivery van after energy officials demanded the company raise $345 million in private funds for a project that needed a $314 million loan.

 

Even with President Obama’s emphasis on promoting cleaner cars, only $8.4 billion of the $25 billion authorized by Congress for a program to develop them has been allocated, with just one small project of $50 million gaining approval in the last two years.

 

Keynesian economists want the government to keep borrowing and spending, but social outrage is getting in the way. This kind of social outrage is deflationary.

 

The Exodus from Debt Is Already Beginning

Smart people around the globe are doing what we’ve already recommended: converting debt—bonds, notes, bills, money-market funds and bank deposits—to currency. Apparently this idea is quietly catching on. Lee Adler of WallStreetExaminer.com turned in this report on February 22:

 

...from 2003 until 2008, currency outstanding grew at a compound rate of 2.75%. Then from September to December of 2008, the Fed added 6% to the amount of currency outstanding. There was a similar surge from September 2010 and January 2011 and it’s been pretty much pedal to the metal ever since. The last 2 weeks looks like an even greater acceleration. That 2-week, $15 billion increase in currency outstanding is a record. Furthermore, currency outstanding has now increased by 10% in the past 12 months. I don’t know what to think of all this, but maybe it relates to confidence issues in some quarters. Perhaps it is related to the European financial crisis, as some players seek the “safety” of US dollars in safe deposit boxes rather than bank accounts, stocks, bonds, or gold.

 

Think about it: Debt today is an IOU for currency. Short term debt has no yield. Why own debt when you can own the promised final payment at the same yield? The government is even threatening to introduce a negative-yield T-bill. This is no doubt a psychological sign of an approaching low in yields, but if it happens even for a short while, cash would yield more than Treasury bills!

 

If T-bill yields start rising, it will not be because the economy is growing. It will be an early sign that the crisis has arrived. A nimble investor might be able to ride that trend for awhile, but in the end if the Treasury can’t pay, then holding currency will have been the better long-term play. If the government passes laws restricting currency holdings, the panic to figure out how to survive financially will be on. It’s going to be a mess, and the way to survive is to avoid traditional investments and diversify globally in money and money-substitutes. Don’t keep your assets in a safety deposit box, either. Find an independent depository that you trust.

[Brentastic]

Yet another story of default. What huddlers other than Bushwacked and wiege still don't think a deflationary depression is on the horizon and why?

http://www.arabianbu...lks-443556.html

Edited March 22, 2012 by Brentastic

[Pope Flick]

It won't be long now.