Author Topic: Sundays CBS Ben Bernake Interview  (Read 4820 times)

SharperDingaan

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Sundays CBS Ben Bernake Interview
« on: March 16, 2009, 08:17:50 AM »


htttp://www.theglobeandmail.com/servlet/story/RTGAM.20090315.wbernanke0315/BNStory/Business

Notables are the 'apparent governmental PR offensive', 'carefully hedged' very rare discussion in 'extraordinary times' with a media outlet, & a 'lack of political will'. AIG's 165M weekend bonus, & big banks won't fail on his watch though if neccessary the government should try to 'wind it down in a safe way'

We realize that to some extent Bernake needs to 'talk up his book', but any thoughts as to why he needs to have this 'rare' discussion with the public ?

It would seem to us that the Fed has reached a tipping point, beyond which the world is going to look very different (& for which there needs to be some political investment).

Perhaps a very good time to be hedged both ways ?

SD



JAllen

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Re: Sundays CBS Ben Bernake Interview
« Reply #1 on: March 16, 2009, 09:13:15 AM »
I think that they talked about why he granted an interview now as opposed to never before.  That because of the extraordinary times and large intervention by the FED that the interview was an effort in transparency for the "American People".  They even talked about how the interview was requested at least a year ago and the person that was asked, laughed when he heard the request. 

Stove

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Re: Sundays CBS Ben Bernake Interview
« Reply #2 on: March 16, 2009, 09:49:48 AM »
Last time a Fed Chairman was interviewed was Greenspan a week before the '87 crash.

dealraker

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Re: Sundays CBS Ben Bernake Interview
« Reply #3 on: March 16, 2009, 10:34:16 AM »
I was somewhat relieved to see that Barnake is a man with roots in the real world.  I guess the thing that bothers me the most was his being blindsided by the housing bubble.  I knew Greenspan was a severely limited "real world experience" man who had absolutely no clue about business in general but Barnake now appears to me to have the skills to be a really good leader in his position and I just can't understand how it missed it.

I was a homebuilder for many years and we used to say, "When the contractors are buying new trucks it is time for a recession."  But then the homebuilders bought new trucks for 15 straight years!  I guess that's why we are having the this "size extra large" downturn.


Hoodlum

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Re: Sundays CBS Ben Bernake Interview
« Reply #4 on: March 16, 2009, 11:16:18 AM »
I was a homebuilder for many years and we used to say, "When the contractors are buying new trucks it is time for a recession."  But then the homebuilders bought new trucks for 15 straight years!  I guess that's why we are having the this "size extra large" downturn.

So true!!  My father in-law is a crane operator and he has been buying new vehicles it seems for ever now.  But for the first time in many years he had little work this winter.

JackRiver

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Re: Sundays CBS Ben Bernake Interview
« Reply #5 on: March 16, 2009, 11:33:29 AM »
But that's not the best part of the interview.  The exchange where Bernanke talks about how the fed expands its balance sheet is priceless and it will serve many useful purposes for our country.  First, it shows that he's not BSing about being open.  For those of you who are less versed than even me on this subject, the fed literature has always been obscure in describing how they print money.  That is to say, the texts usually describe how the banking system prints money, but what is usually left out is the fact that the fed can, with the stoke of keys on a keyboard, create as much money as they want in their ledger accounts and the ledger accounts at the banks.  Just like that.  No need to borrow.  So Bernanke's comments, about how the fed can expand its balance sheet, suggest he's genuine when he says he believes in transparency.

The second reason I believe he did this is to send a reminding shot at the Chinese government.  To say, look it buddy, you're the one with the problem and not us.  You can threaten to do whatever you want with the 800 billion in government debt and trillions in dollar reserves, but If you do try to do something stupid, I can replace that amount of money in the time it takes me to type the numbers on my computer keyboard.  The Chinese and their currency manipulation is in large part what got us into this mess and they too will pay a large part of the price.  Their only exit is to buy other U.S. assets or consume our goods and services.  When they come to their senses they will realize that that is what they should do.  Their reserves are too large to do otherwise.  Besides, the debasement of a deficit nations currency is one of the penalties envisioned when our floating rate currency system was designed.  It's one of the natural corrections for continued surplus and/or continued deficit nations.  

A third reason for the openness that I can think of is a shot at those in the U.S. that are harboring this notion that the government will run out of money to combat the financial crisis.  Uh, no they wont.  If you are placing bets on that eventuality you are a moron.

Anyway, that's just some thoughts of my own about the Barnanke interview.

Yours

Jack River


SharperDingaan

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Re: Sundays CBS Ben Bernake Interview
« Reply #6 on: March 16, 2009, 02:12:11 PM »

Thanks for your responses.

We're inclined to think that he's going to make a deliberate example of somebody, & use it to establish historic precedent.

AIG would seem to have burnt its bridges, its execs appear to be aware of it, & the culture seems to be that with 170B of fed money invested they are too big to fail. ie: Moral hazard.   

We suspect there will be a forced tender for the rest of AIG (citing legal requirement), an immediate revocation of the approved bonus payments (firings & lawsuits accepted), a fairly rapid anti-trust breakup, & a forced asset divestiture to the worlds other major carriers. Popular on main street, but death to Wall Street.

- It would set a US precedent for nationalization, & stengthen the mechanism by which to force it.
- It would set a US precedent for forceable breakup, when a company becomes 'too big to fail'.
- It would establish US precedent as to when the fed can call the markets bluff.
- It would add a blanket national interest override to compensation contracts.
- Moral hazard will be contained, & there will be bodies to prove it.
- The super-regulator will have teeth.
 
He is also about the only person in the world who could do this - as it can only be done by someone openly transparent, who is very well schooled on the depression era, well versed on the streets 'culture', & who will never need to work on the street again.

It would seem likely that he would also go on to become the super-regulators founding chair, & most likely lead a re-write of the Investment Act of 1930.

May we all wish this man the greatest of success.

SD









scorpioncapital

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Re: Sundays CBS Ben Bernake Interview
« Reply #7 on: March 16, 2009, 03:48:55 PM »
What's this thing about political will to fight the depression? I understand it to mean that unless we allow things like the AIG bonuses to occur, regardless of how much we hate it (I.e. the political will is to reverse it) the recession could go on a long time. I.e. we need the help of the criminals to get us out but the will of the people to allow this is very small.

Viking

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Re: Sundays CBS Ben Bernake Interview
« Reply #8 on: March 16, 2009, 04:12:37 PM »
Sharper, good question... Why do the interview and why now?

I was surprised at how angry he said he was at AIG. Obama is reportedly looking into the bonus payments. In this environment, how does AIG keep its good people?

I was also surprised he said he expects the economy to bottom this year and recovery to start next year. If things do not play out this way he has set himself up big time (look at how people are quoted from back in the 20's and how silly they sounded after the fact).

It is interesting that he is not from Wall Street, leading one to conclude that perhaps he is less biased than most everyone else. Perhaps he is trying to build his credibility directly with the American people so he has the 'political capital' to play hardball with Wall Street interests as this crisis enters its next phase...

arbitragr

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Re: Sundays CBS Ben Bernake Interview
« Reply #9 on: March 16, 2009, 06:27:47 PM »
I wouldn't want his job, that's for sure.
"worry top down, invest bottom up ..."