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Obama, Federal Reserve Further Muddy Economic Waters

Originally posted in the Daily Journal of Commerce, Portland OR

Published July 8, 2013
William RutherfordFederal Reserve Chairman Ben Bernanke, usually very clear and precise in his comments, muffed his recent testimony to Congress. Bernanke attempted the impossible and ended with egg on his face. Every thinking person on the planet has known for some time that the Fed would begin raising interest rates at some time. Every thinking person has known that interest rates had been kept abnormally low by quantitative easing, which also buoyed the equity markets. Every thinking person has known that the effort to curtail QE would be very difficult to achieve and could potentially cause great upheaval in the markets.

The Federal Reserve has taken great pains to tell the markets under what circumstances it would reduce QE, and raise rates. The conditions were a reduction in unemployment to 6.5 percent, a growing economy and a lack of serious inflation. Two of these conditions are being met. Therefore, every thinking person has known that rate increases were in the cards and being contemplated. Indeed, Federal Reserve minutes and Fed speakers indicated that there was not board unanimity, and some governors favored ending quantitative easing even now. But when Bernanke, in testimony before Congress, tried to emphasize that the Fed was considering tapering QE, the equity markets staged a tantrum.

Ending QE is admittedly a very difficult task for anyone, even normally articulate Bernanke. However, the markets appeared “shocked and appalled” that the Fed would even consider raising rates. Talk about an entitled generation. How about a whole industry? Wall Street, which has been bailed out over and over during the Great […]

July 10th, 2013|Categories: Daily Journal of Commerce|Tags: , , , , , |Comments Off on Obama, Federal Reserve Further Muddy Economic Waters

Nightmare On Wall Street: Federal Bailout Probably Won’t Turn Things Around Anytime Soon

The fear and trepidation surrounding the financial markets came to realization in the month of September. The broad market fell 8.9 percent in the month, with the average U.S. equity mutual fund down 10.5 percent. This brings the market down 25.6 percent from its Oct. 9, 2007 high through Sept. 30, 2008. Credit markets seized up. Bank failures continued. Auto sales plummeted. Unemployment rose.

The Secretary of the Treasury, Hank Paulson, and the Chairman of the Federal Reserve, Ben Bernanke, told President Bush and Congress of the dark peril that faced the U.S. if a massive aid package was not adopted. The epiphany for Paulson came as he watched his trading screens flatline across global credit markets. The London Interbank Offered Rate soared as banks hoarded cash and declined to loan even to one another. Commercial paper activity, the lifeblood of industry, dried up and rates soared. America stood on the brink.

Paulson and Bernanke brought a massive recovery package to Congress that included granting extraordinary powers to the Secretary of the Treasury.

Alan Greenspan, in an interview with Maria Bartiromo on CNBC, volunteered himself to serve on a committee as yet unnamed, presumably as chair, to be given extraordinary powers over the economy. It is not known if anyone accepted his offer. […]

October 15th, 2008|Categories: Daily Journal of Commerce|Tags: , , , , , , |Comments Off on Nightmare On Wall Street: Federal Bailout Probably Won’t Turn Things Around Anytime Soon
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