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Another ranting, Bernanke bashing commentary. I'm finding it a little disingenuous to be sympathetic here with the Dow up 71% since Obama took office. But, thanks Kenster for thoughts at FPA_Funds.
Bernanke bashing? Perhaps ecomomic theory bashing? For a sidenote, Paul Krugman noted yesterday, Sept. 12 ;that the "new" Fed. plan was not enough.
Do you find any problems with the continued Federal Reserve plans and policies; or do you feel these plans are needed and will be helpful going forward?
From the report: "In a similar vein, between 1924 and 1927, an easy monetary policy of low interest rates, with the goal of stabilizing the wholesale price level while stimulating economic growth, led to excessive capital investments in industrial goods industries and eventually, to investment speculation."
I respect Rodriguez's investing acumen but they are critical of the only entity trying to do something. Congress is not in a position to institute any stimulative fiscal policy so in the absence Fed is using its monetary policy tools no matter how dull they might be.
I am thankful that Fed is largely independent and a scholar that has studied the great depression is the chairman but Fed is getting attacks every day by the partisan crowd. It is very sad. Political priorities of a few are above the good of the country.
Reply to @catch22: I believe Krugman's exact words were that it needed to be "more stronger". When this does not work, he will say, "See, needed to be more stronger." And on and on...
And when that doesn't work, he'll wonder why we didn't spend money to fake an alien invasion like he suggested on television some time ago.
Oh, and I forgot, I can't disagree with someone or else I am being political. "The sky is blue." "No, it's not, stop being so right/left-wing with your blue sky!"
Politics becoming like a religion in this country and all of the anger and divisiveness (no one can have a freaking conversation in this country because if you have an opinion that differs from what someone's political party is currently doing you're "just being political!" Good luck fixing a thing in this country when no one will listen to each other because they're so defensive of their political side - both in DC and otherwise - that they won't listen to a differing opinion than their own without thinking it somehow has to do with politics if they disagree) and distraction from the real issues that it's causing it's what is truly sad.
Reply to @ron: He's actually still around, consulting with Pimco and Paulson and talking about things on CNBC as if he had nothing to do with the problems he sees. Of course, CNBC being CNBC, the questions are as softball as something one of the anchors might ask on the "Today" show (where you can see some of the CNBC anchors on the weekends, who look awkward not talking about business news.)
Reply to @Charles: everyone of your recent commentaries has an "Obama" in it. Someone might suspect an agenda. Agenda items are better placed under "off topic" categories, Charles.
Reply to @fundalarm: Sorry fundalarm if came across that way. No harm meant. No agenda. Just trying to put forward facts, as applicable, to counter the perpetual negativism. Sorry if comes off political. If it helps, I've been a Republican my whole adult life. Campaigned for Reagan in the Infinite Corridor in 1980...still have the buttons to prove it.
Reply to @catch22: I was just pointing out that those of us invested in the stock market since January 2009 are 71% wealthier today, which I am very thankful for. None of the critics of current fiscal policy seem to be pointing that out. Just wanted to get that fact out there. I cetainly hope the increase represents sustantial and not speculative value, like say the dot com bubble in 2000 or the housing bubble in 2008. Only time will tell.
Reply to @Charles: Charles, I'm on your side. I have no idea if 20 years from now economic historians will be praising or bashing the Q1-2-3 or more plans, but I do know my and my wife's nest egg was in a world of hurt before quantitative easing took place. Would we have made our money back if Bernanke didn't ramp up the printing machines? No chance in hell. My guess is we would be in the second great depression right now and unemployment would be double what it is today. Is a depression what we needed to get us long term stability? I doubt it. We still would need a government committed to working together for the good of the country - not for their own short term re-election goals.
So my take is the Fed has pulled us out of a hole with short term patches. Letting things slide into depression was not an appropriate response though some have alluded to that. It is our elected officials who need to step up to the plate to fix the longer term ills of this country. That is where guys like Rodriguez should be directing their displeasure.
Reply to @Charles: "None of the critics of current fiscal policy seem to be pointing that out"
No one will argue that the stock market has gone up a lot. It's also no surprise that that has happened when a historic amount of liquidity has been thrown into/at/around/over/under the system. As Jim Rogers once noted, "Give me four trillion and I can throw a really good party, too." How many trillions are we on now?
The critics aren't arguing that the stock market has gone up (or that gold has gone up more than that since Jan 2009 - the two charts, especially the nominal vs real versions of the first chart, presented here are recommended viewing - http://www.zerohedge.com/news/zee-stabilitee-wealth-effect-name-these-two-charts), simply that it's a completely short-term mentality that doesn't create a sustainable recovery (um, if it did, I'm not sure we would be doing a THIRD round of QE - and an open-ended one into a stock-market high, no less. )
As for bubbles, it's a bubble (and Bernanke effectively admitted as such at the press conference - you also have congresspeople who are effecively telling Bernanke that they aren't going to do anything at all and he should go do what he does.) How far it goes is anyone's guess.
1.:) If you own stocks, real assets (gold, land, there's a lot that falls under that), etc. you will do well in this environment and outpace inflation. If not, well... (see #2)
Bernanke's desire is clearly attempting to reflate until he gets his desired result. I mean, read the Bernanke doctrine and his belief in the printing press. The fact that we are getting an open-ended QE3 into a market high should say something about that.
I'll wager a guess that five years later, the lower %'s own even less of a % than in 2007.
3. Yes, yes, congress is not able to do anything apparently (who can tell Bernanke idiotic things that should anger citizens like, "Get to work, Mr Bernanke" (translated: we aren't going to make difficult or unpopular decisions, so print some more money, like yesterday), so it's up to the Fed. So, now we have a market whose primary concern beyond anything else - and has been for some time now - when is the next round of Fed stimulus. Anything that doesn't suggest another round of QE is coming makes the market have a mini-tantrum. You have to have Congress, you know, doing something (Congress apparently does not care that they have a lower approval rating than Paris Hilton.) One round of QE after another (or, QE4EVER and ZIRP4EVER) is not going to work to create a sustainable recovery or fix any of the underlying structural issues in the economy and the thing I find most remarkable is that people act as if these actions are just, like, free lunch.
What is being done (QE, etc) is going to help asset prices (not really a surprise, again, and double again, I continue to wonder why Hussman continues to act otherwise.) It will help banks (and that's really the biggest concern in this - the priority is the banks, nothing else.) It will not create a sustainable recovery. It will increase the gap between rich and poor in this country, among other issues. As I noted the other day, when food prices ramp further, I tend to think it may cause some understandable upset in developing nations.
That's all. No one's going to argue that the market is up a lot, but that's really no surprise when you print money - it's going to go into commodities (um, and it should be no surprise to politicians that people throw money into commodities - oil, metals, whatever - when you have three rounds of QE, the last one open ended), stocks, fine art, whatever. But there's no free lunch, and people act as if that's not going to have any consequences whatsoever. If we can print our way to prosperity and that all problems can be fixed by printing money, we should have done that ages ago.
It's not political, in my view, it just is. Romney - despite his discussion of removing Bernanke - would almost certainly continue along the same lines if he's elected. You have a political system in this country that's corrupted and broken, and having the Fed do things like QE and ZIRP as far as the eye can see is going to help asset prices (again, everything from stocks to fine art, in a country where the bottom 50% only owns 0.5% of the stocks/bonds/funds and that number is probably going to be less than it was in 2007), but isn't going to create a sustainable, organic recovery. If the desired end result is more consumer spending, I guess we're still of the mindset where we should be en economy pretty much based on consumer spending and not a great deal else.
Rono has also posted some good thoughts about this lately, as well in other threads.)
I'm not going to post on this subject any further (not upset, just I've discussed it, and I'll move on to talking about other investment-related things.)
Reply to @MikeM: Mike has it right here. Can still recall meeting folk on the street back than - folk who never talked about investing before - practically in tears over 50%+ losses nearly overnight. How easy to forget. Further, I question the value to be gained in trying to critique Fed policies. This doesn't mean they're always right. But, by and large they have an understanding of monetary policy (and the related context) that surpasses that of most of us That's one reason they're supposed to be independent of Congressional and Executive interference. In defense of Charles, I too have taken exception to some of Rodriguez's past commentaries - but this one didn't seem too radical. Maybe I missed something. He's good at managing $$, so certainly belongs here among all the other commentaries. However, rather than critiquing or criticizing the Fed, one's time and effort might better be spent figuring how best to protect and grow one's nest egg in light of their policies. Certaintly can't fault them for not being transparent.
Comments
Bernanke bashing? Perhaps ecomomic theory bashing? For a sidenote, Paul Krugman noted yesterday, Sept. 12 ;that the "new" Fed. plan was not enough.
Do you find any problems with the continued Federal Reserve plans and policies; or do you feel these plans are needed and will be helpful going forward?
From the report: "In a similar vein, between 1924 and 1927, an easy monetary policy of low
interest rates, with the goal of stabilizing the wholesale price level while stimulating economic growth, led to excessive capital investments in industrial goods industries
and eventually, to investment speculation."
Regards,
Catch
I am thankful that Fed is largely independent and a scholar that has studied the great depression is the chairman but Fed is getting attacks every day by the partisan crowd. It is very sad. Political priorities of a few are above the good of the country.
And when that doesn't work, he'll wonder why we didn't spend money to fake an alien invasion like he suggested on television some time ago.
Oh, and I forgot, I can't disagree with someone or else I am being political. "The sky is blue." "No, it's not, stop being so right/left-wing with your blue sky!"
Politics becoming like a religion in this country and all of the anger and divisiveness (no one can have a freaking conversation in this country because if you have an opinion that differs from what someone's political party is currently doing you're "just being political!" Good luck fixing a thing in this country when no one will listen to each other because they're so defensive of their political side - both in DC and otherwise - that they won't listen to a differing opinion than their own without thinking it somehow has to do with politics if they disagree) and distraction from the real issues that it's causing it's what is truly sad.
So my take is the Fed has pulled us out of a hole with short term patches. Letting things slide into depression was not an appropriate response though some have alluded to that. It is our elected officials who need to step up to the plate to fix the longer term ills of this country. That is where guys like Rodriguez should be directing their displeasure.
No one will argue that the stock market has gone up a lot. It's also no surprise that that has happened when a historic amount of liquidity has been thrown into/at/around/over/under the system. As Jim Rogers once noted, "Give me four trillion and I can throw a really good party, too." How many trillions are we on now?
The critics aren't arguing that the stock market has gone up (or that gold has gone up more than that since Jan 2009 - the two charts, especially the nominal vs real versions of the first chart, presented here are recommended viewing - http://www.zerohedge.com/news/zee-stabilitee-wealth-effect-name-these-two-charts), simply that it's a completely short-term mentality that doesn't create a sustainable recovery (um, if it did, I'm not sure we would be doing a THIRD round of QE - and an open-ended one into a stock-market high, no less. )
As for bubbles, it's a bubble (and Bernanke effectively admitted as such at the press conference - you also have congresspeople who are effecively telling Bernanke that they aren't going to do anything at all and he should go do what he does.) How far it goes is anyone's guess.
1.:) If you own stocks, real assets (gold, land, there's a lot that falls under that), etc. you will do well in this environment and outpace inflation. If not, well...
Bernanke's desire is clearly attempting to reflate until he gets his desired result. I mean, read the Bernanke doctrine and his belief in the printing press. The fact that we are getting an open-ended QE3 into a market high should say something about that.
2.
I'll wager a guess that five years later, the lower %'s own even less of a % than in 2007.
3.
What is being done (QE, etc) is going to help asset prices (not really a surprise, again, and double again, I continue to wonder why Hussman continues to act otherwise.) It will help banks (and that's really the biggest concern in this - the priority is the banks, nothing else.) It will not create a sustainable recovery. It will increase the gap between rich and poor in this country, among other issues. As I noted the other day, when food prices ramp further, I tend to think it may cause some understandable upset in developing nations.
That's all. No one's going to argue that the market is up a lot, but that's really no surprise when you print money - it's going to go into commodities (um, and it should be no surprise to politicians that people throw money into commodities - oil, metals, whatever - when you have three rounds of QE, the last one open ended), stocks, fine art, whatever. But there's no free lunch, and people act as if that's not going to have any consequences whatsoever. If we can print our way to prosperity and that all problems can be fixed by printing money, we should have done that ages ago.
It's not political, in my view, it just is. Romney - despite his discussion of removing Bernanke - would almost certainly continue along the same lines if he's elected. You have a political system in this country that's corrupted and broken, and having the Fed do things like QE and ZIRP as far as the eye can see is going to help asset prices (again, everything from stocks to fine art, in a country where the bottom 50% only owns 0.5% of the stocks/bonds/funds and that number is probably going to be less than it was in 2007), but isn't going to create a sustainable, organic recovery. If the desired end result is more consumer spending, I guess we're still of the mindset where we should be en economy pretty much based on consumer spending and not a great deal else.
Rono has also posted some good thoughts about this lately, as well in other threads.)
I'm not going to post on this subject any further (not upset, just I've discussed it, and I'll move on to talking about other investment-related things.)