Investment

» allancoleman - Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by success409:

You are so correct , success409 , that the true battle against inflation is " expectations " . If the Fed cuts rates every time the market gets themselves in a jam because of greed , then we'll quickly be back in Jimmy Carter days of high inflation where I paid over 21% interest rates on short money at that time .

Every quarter point rate cut that Bernanke has in his " inflation gun " is a bullet to use in the coming battle if the economy does go to heck or jobs growth doesn't maintain a large enough pace . Right now with stocks less than 5% to 7% off all time highs and likely to increase further by year's end and our job's growth staying on their present pace and likely to grow , the Fed is doing their job well .

If the Fed does nothing , the S & P is likely to be above 1600 by next year after this subprime loan meal works it's way through the python . And if the Fed panics , the bad news bears could get what they wish for .

-- posted by allancoleman

» permabear - Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by success409:

Just as there are no good solutions to Iraq, there may be no good solutions to the credit crisis. I agree with Success that Greenspan responded to every crisis by flooding the system with liquidity and by lowering rates. Greenspan received a lot of praise as the "maestro" for supposedly putting out the fires of every crisis he faced during his term in office. The problem is that Greenspan may have avoided a crisis during his term as Fed Chairman. But he may have been putting off even deeper pain for his successor, who happens to be Bernanke. Greenspan's two greatest sins were not doing something substantial to temper the tech bubble during the late 90s. While he critiqued the market as being overly exuberant in the "irrational exuberance" speech in 1996, he didn't do anything to slow the market down. In fact he defended the high tech prices in the late 90s.

Then in response to the Nasdaq meltdown and 9/11 Greenspan lowered the Fed Funds rate to 1 percent and proceeded to encourage irresponsible lending practices in 2004 with speeches espousing the benefits of alternative financing practices such as ARMs.

I believe that Greenspan will go down in history, along with Reagan, Bush and the Republicans as the major contributors to the fall of the United States as the preeminent world power. The combination of endless budget deficits, trade deficits and Fed liquidity, all combined to almost eliminate the business cycle in the past 30 years. By eliminating the downsides of the economy, they produced massive bubbles, ending in the current mega credit bubble, which is going to really decimate our economy going forward.

-- posted by permabear

» success409 - Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by permabear:

Bernanke needs to be disciplined and stick to his principles and stay the course. Let Cramer screem and yell and cry and melt down. Here is a statement by a fellow professor that supports Bernanke staying the course,

"Among the most prominent is Allan Meltzer, a Carnegie-Mellon University monetary economist who is writing a history of the Fed. "The people on Wall Street are making a lot of noise because they don't like to lose money, and we can all understand that," he says. "But...it would be a huge mistake to change policy to rescue a bunch of people who made stupid mistakes." In fact, argues Meltzer, losses by speculators could clean out the financial markets and make them healthier. "Capitalism without failure is like religion without sin," Meltzer says. "It doesn't work."

-- posted by success409

» axolotl - Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by success409:

So the FED is all knowing? They did not lower rates too much and then raise rates too much? They acted exactly right? What if the economy goes down - main street? Should the FED bail us all out? Cramer says that Bernanke may be right - that Bernanke wants cheaper homes for people - of course, I did not know that home prices were the FED's responsibility. Milton Friedman is being proven right again that the FED could use a computer to provide about 3% money growth and the economy would largely perform well.

-- posted by axolotl

» Normxxx - Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by axolotl:

Hey you guys[!?!] Don't confuse issuing repos with lowering rates. Read my last posting in the John Hussman thread.

So far, the Fed is doing just fine!

P.S. Milton (one of my heros) recanted on that pronouncement about the Fed being replaced by a computer when 'monetary' theory so notably failed to coral the '70s runaway inflation.

-- posted by Normxxx

» Jas_Jain - Re: Bernanke- Same philosopy as Greenspan ?

In response to Bernanke- Same philosopy as Greenspan ? posted by Normxxx:

--
"So far, the Fed is doing just fine!

The key words are "so far"! Another 5 weeks at the most (the next FOMC meeting).

Jas

-- posted by Jas_Jain

» axolotl - DOES BERNANKE HAVE A FIDDLE?

.........is he fiddling away? The patient has been brought into the emergency room and the surgeon, Bernanke, is washing his hands for the third time - he does not want to panic anyone, see? The patient has lost a lot blood, but Bernanke does not want to panic anyone, so he takes his time with the transfusion. I suppose when the inflation no. is flat zero, he will finally cut?

-- posted by axolotl

» success409 - DOES BERNANKE HAVE A FIDDLE?

In response to DOES BERNANKE HAVE A FIDDLE? posted by axolotl:

Cuts are to a great extent why we have the current credit crunch. The Federal Reserve cut the rates to 1% and we are now starting to pay the consequences. The cure is not more cuts. They are part of the problem. The current rates are moderate by historical standards. If inflation comes down some more and stays down, then he can look at a small cut in rates. He needs to dry his hands and go back to the Library. The cure is tightening the lending criteria, getting rid of speculators, good business decisions concerning the use of credit, getting rid of liar loans, etc. We are on our way to correcting the excesses and poor economic decisions, which is healthy for the economy and markets long term. He needs to stay the course and the future will likely be good. He shouldn't try to bail out those who made mistakes at the expense of the better good.

-- posted by success409

» axolotl - DOES BERNANKE HAVE A FIDDLE?

In response to DOES BERNANKE HAVE A FIDDLE? posted by success409:
So, you are saying that the FED cut too much and caused the problem, but now the FED is going to do the right thing? Maybe a trillion of the value of homes will be wiped out by falling prices here. The economy is going to have problems with mortgages being reset and the people walking away from the homes. The builders may have partly overestimated the no. of homes needed which compounded the problem. I think that Bernanke is driving down a mountain road and he is overestimating his driving ability and he is driving too close to the edge. A recession here may require a lot of cutting to get out of and it will do a lot of economic damage , but he only needs to cut a little to avoid a recession if he acts fast. The people he will help is everybody. We don't know what goes on at the FED - maybe they are discussing some arcane economic stuff - maybe they are talking politics - I believe that if the FED alllows a recession here by their inaction, it could turn into a disaster.......and time is running out on the FED.

-- posted by axolotl

» allancoleman - DOES BERNANKE HAVE A FIDDLE?

In response to DOES BERNANKE HAVE A FIDDLE? posted by success409:

Excellent post , success409 . Couldn't agree with you more .

-- posted by allancoleman