Monday, March 30, 2015

Ben Bernanke Has Launched a Blog




He writes:
On January 31, 2014, I left the chairmanship of the Fed in the capable hands of Janet Yellen. Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog. I hope to educate, and I hope to learn something as well. Needless to say, my opinions are my own and do not necessarily reflect the views of my former colleagues at the Fed.

And he begins to spread propaganda in his second post:
When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.

I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative. A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments. The slowing economy in turn would have forced the Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent years, several major central banks have prematurely raised interest rates, only to be forced by a worsening economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns.

He then went on to attack, without naming it, Austrian School Business Cycle Theory:
A....confused criticism often heard is that the Fed is somehow distorting financial markets and investment decisions by keeping interest rates “artificially low.” Contrary to what sometimes seems to be alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.” The Fed’s actions determine the money supply and thus short-term interest rates; it has no choice but to set the short-term interest rate somewhere. So where should that be? The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term, that is, at the (today, low) equilibrium rate. There is absolutely nothing artificial about that! 

  -RW

11 comments:

  1. The third excerpt is the most confused.

    - The Fed existing means that it does have to set a interest rate. This implies that it is an artificial rate.
    - He is entirely confused on the actual impact the Fed has on the money supply.

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  2. Former Fed Reserve Chairman with a BLOG? Bernanke obviously has a fear of becoming the Federal Reserve’s version of Jimmy Carter as his insecurity is evident through this attempt to connect with the public in defense of his policies. From here on out we can expect Helicopter Ben to be in the spotlight defending his track record and vehemently attacking those who have disagreed with him over the years. Don’t be surprised if he becomes spokesperson for Habitat for Humanity or joins Dancing with the Stars in an effort to soften his image and sell America on the notion that he’s just a cool guy.

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  3. There is a positive to him having a blog, and it is the potential exposure of his true inner thoughts to those that are truly seeking a logical truth/explanation.

    How can you not read " There is absolutely nothing artificial about that! " as his summation and wonder about his grasp on reality?

    His ongoing stream of potentially "real" inner thoughts is going to hurt Keynesian's in the long run, which is good.

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  4. His second excerpt defines the trap that the Fed is in to a T. Expect his description of the past to be prophesy. It's also a coded message to "seniors" or anyone else trying to get a return via interest, which is "fugghetaboutit... go long equities."

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  5. "The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term"

    Then why haven't interest rates been set to zero since the inception of the Fed? Weasel.

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  6. @Nick, to some extent I agree with you. Bernanke's inner thoughts will hurt Keynesians. However, it is important to realize that many (most?) people have poor critical thinking skills and inconsistent application of 'standards' (for want of a better term). For example, (http://www.economicpolicyjournal.com/2015/03/why-higher-minimum-wage-will-hurt-poor.html) the discussion on why higher minimum wages will hurt the poor. The standard libertarian question in response to raising the minimum wage to $10 per hour - why not $20? $30?? $1000? I think the normal statist reply could be something like 'don't be absurd, $1000 is too high'. If their theory is correct, it should not be too high. Inconsistency of thought. Or just relying totally on the opinions of experts without ever trying to understand why.

    However, Bernanke's blog should be entertaining, as he tries to reconcile his Keynesian approaches with the outcomes.

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    Replies
    1. Yes, I agree with your post & I believe you are correct. In my defense though, I said "those truly seeking a logical truth/explanation", I didn't suggest there were many doing that, let alone capable.

      :)

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    2. Sorry Nick. I missed your caveat. :-(

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  7. He's got a Twitter account now, also. Twitter replies and reTweets can't be moderated or removed as far as I know. This could be entertaining.

    I look forward to him getting trolled. Does that make me a bad person?

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  8. The blog allows comments. Looks like he would have to answer those who post. Maybe some videos of Bernanke stating we do not have a housing bubble. I think I will go over to Youtube.....find that Peter Schiff video, hmm....

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