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Bernanke On Hardtalk

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I didnt watch all of it , but towards the end of the interview, appeared to be fudging replies to some direct questions in relation to QE devaluing currencies...he reminded me of a rabbit frozen in headlights, when talking..

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I went to an event on Tuesday where he was interviewed by Andrew Neil, so a bit too much Bernanke for one week but I'll get round to watching it at some point soon.

I am sympathetic to his point that essentially fiscal policy is restricitive and so the CBs had to do the heavy lifting with low interest rates. But it depends what your objectives are? So in a world where cental banks seek to keep the plates spinning, with some semblance of financial stability in the short term whilst also trying to hit the increasingly difficult 2% inflation target....yes he's right.

But the Austrians are really quite similar to the rank and file (if there is such a thing anymore) HPC crowd, that they see this current plate spinning as stable dis-equilibrium, that at some point in time will be impossible to control.

However, now he is out of the hot seat it would be nice to see some more intellectual honesty. For example in the event I went to he said that QE had a more positive impact on the US labour market than it had on driving asset prices. I mean it doesn't matter what school of economic thought you follow, the overwhelming evidence suggests that asset prices have been hugely impacted by QE + ZIRP and beyond the low unemployment rate, job market internals in the US are still very poor.

I was also amazed how in our talk (1.5 hours in length) he didn't mention China, which even as a blinkered US-centric academic the amount of Chinese exported inflation and now deflation has got to be a big driver of US policy. Not to mention the impact of a potential hard landing on global liquidty etc etc.

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It's the sort of stuff that Greenspan came out with soon after leaving office (defending the policy) but later on started to not defend it so much and over time even started to talk little bits of sense about what was happening and had happened (compared to what they said when in office) and even pointing out flaws in past and present policy.

Mervyn King of the BoE the same.

It seems to be a well trodden path by central bankers. Either way they're difficut to believe.

Edited by billybong

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I mean it doesn't matter what school of economic thought you follow, the overwhelming evidence suggests that asset prices have been hugely impacted by QE + ZIRP and beyond the low unemployment rate, job market internals in the US are still very poor.

If he didn't mention the US labour force participation rate, then he is:

Shameless. Totally shameless.

Also a complete nutcase as well.

ED:

cotd-lfpr-1.jpg

Edited by yellerkat

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Did you notice the positive reference to the actions the UK government took in 2009? He basically said the actions of the last Labour government. I wonder what George Osborne would make of that.

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comment got clipped

*He basically said the actions of the last Labour government, had they not taken the action they did, our economy would be in a worse state.

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Also the reference to the UK following almost identical economic policies to the US.

That bit when the "interviewer" said that QE was finished and interest rates would rise before the end of the year was quite amusing. Bernanke managed to keep a straight face though.

Edited by billybong

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*He basically said the actions of the last Labour government, had they not taken the action they did, our economy would be in a worse state.

As measured my nominal GDP, current growth and inflation vs. target he is technically correct......for now.

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Also the reference to the UK following almost identical economic policies to the US.

That bit when the "interviewer" said that QE was finished and interest rates would rise before the end of the year was quite amusing. Bernanke managed to keep a straight face though.

Yes that was very condescending, as I said a blinkered US-centric academic. The FED copied the BofE every step of the way....soon the Fed will publish a paper on "Money creation in the modern economy". However, Bernanke or Yellen are clealry unable to admit or subscribe to the theory of endogenous money, which will again be the Feds downfall.

Looking at private sector credit to GDP this cycle has about 1.5-2 more years left to run.

Edited by bankstersparadise

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It looks like it tripled from 1980 to 2000, a period of 20 years. Then it quadrupled in 15 years. With that kind of momentum it's very possible it could six-fold again before 2030. Of course much of it never enters the real food chain otherwise there would be hyperinflation. If it did, then look out. A lot of fiat is stacked up in liabilities that demand crisis after crisis in order to continue.

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It looks like it tripled from 1980 to 2000, a period of 20 years. Then it quadrupled in 15 years. With that kind of momentum it's very possible it could six-fold again before 2030. Of course much of it never enters the real food chain otherwise there would be hyperinflation. If it did, then look out. A lot of fiat is stacked up in liabilities that demand crisis after crisis in order to continue.

Excellent post. We have stored-up hyperinflation, and so far all the plate spinning has contained it in the bond market, including the mortgage bond market. They have to defy the economic history of the world and keep that 30+ year bond bull market going forever. Because the day it does crack, we will be up to our knees in money that nobody wants. Then it's all over for at least a quarter of a century.

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These guys all start from the assumption that high asset prices are good, therefore everything they do/did to maintain high asset prices is also good.

Well their policies have been "successful" and now asset prices have been very high for a long time. Predictably, most people born in the developed world after about 1975 will never now accumulate significant assets during their working lifetimes because assets are so expensive relative to their wages.

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These guys all start from the assumption that high asset prices are good, therefore everything they do/did to maintain high asset prices is also good.

Well their policies have been "successful" and now asset prices have been very high for a long time. Predictably, most people born in the developed world after about 1975 will never now accumulate significant assets during their working lifetimes because assets are so expensive relative to their wages.

I disagree.

All of these guys start from the assumption that GDP, low unemployment and a myriad of other skewed and nonsensical macro eocomic data series are correct and sustainable.

The fact that a large proportion of the recent demand in the consumer sector UK for example has been caused by high asset prices, primarily houses, would be of little concern (at least publically) for someone like Bernanke.

At the event I attended he said that QE/Zirp hadn't really caused high asset valuations, it is just that returns are now structurally low globally. Which is clearly a circular non-argument. As returns are structurally low because asset valuations are (structurally?!) high.

All I know that Yellen is cut from the same cloth and so if Bernanke believes what he says the Fed will make a grave policy mistake at some point soon, as they arent qualified. Or he is just plain lying, in which case, they know they are in a corner and have no-where to run and so will probably keep lying and continue down the same path. Just like a compulsive gambler who tries to hide their losses from their friends & family by borrowing money from a loan shark....they always get found out and it always ends badly.

Edited by bankstersparadise

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I disagree.

All of these guys start from the assumption that GDP, low unemployment and a myriad of other skewed and nonsensical macro eocomic data series are correct and sustainable.

The fact that a large proportion of the recent demand in the consumer sector UK for example has been caused by high asset prices, primarily houses, would be of little concern (at least publically) for someone like Bernanke.

At the event I attended he said that QE/Zirp hadn't really caused high asset valuations, it is just that returns are now structurally low globally. Which is clearly a circular non-argument. As returns are structurally low because asset valuations are (structurally?!) high.

All I know that Yellen is cut from the same cloth and so if Bernanke believes what he says the Fed will make a grave policy mistake at some point soon, as they arent qualified. Or he is just plain lying, in which case, they know they are in a corner and have no-where to run and so will probably keep lying and continue down the same path. Just like a compulsive gambler who tries to hide their losses from their friends & family by borrowing money from a loan shark....they always get found out and it always ends badly.

Yes, they're all cut from the same cloth. The BoE's (post-Crash) central organising model COMPASS is a market clearing New Keynesian general equilibrium model in which economic agents optimise their consumption decisions over their entire lifetimes with infinite foresight. Scientifically illiterate garbage from first to last.

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I disagree.

All of these guys start from the assumption that GDP, low unemployment and a myriad of other skewed and nonsensical macro eocomic data series are correct and sustainable.

The fact that a large proportion of the recent demand in the consumer sector UK for example has been caused by high asset prices, primarily houses, would be of little concern (at least publically) for someone like Bernanke.

At the event I attended he said that QE/Zirp hadn't really caused high asset valuations, it is just that returns are now structurally low globally. Which is clearly a circular non-argument. As returns are structurally low because asset valuations are (structurally?!) high.

All I know that Yellen is cut from the same cloth and so if Bernanke believes what he says the Fed will make a grave policy mistake at some point soon, as they arent qualified. Or he is just plain lying, in which case, they know they are in a corner and have no-where to run and so will probably keep lying and continue down the same path. Just like a compulsive gambler who tries to hide their losses from their friends & family by borrowing money from a loan shark....they always get found out and it always ends badly.

Nice post. I sometimes find it hard to believe that these people can be so wrong. Its almost as if they cling to their models as a Christian clings to their faith, falling back on it the more they are tested, doubling down. The bit in bold, academics aside, plain common sense is obviously not built in to their model.

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It is already ending badly especially in the UK - look at the crazy house prices just to start with. It's not just something that is going to happen only in the future. There's a lot more to come of course.

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Nice post. I sometimes find it hard to believe that these people can be so wrong. Its almost as if they cling to their models as a Christian clings to their faith, falling back on it the more they are tested, doubling down. The bit in bold, academics aside, plain common sense is obviously not built in to their model.

You assume that they are merely naive ? Maybe they know exactly what they are doing, they just happen to be not on our side ?

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