Pretense Of Knowledge

Finally, the End of Keynesianism

"Are you a Keynesian? So many seem to be. Do you really believe that a properly functioning, mathematically literate approach to high finance can salvage what's left of the financial systems of the US, the West, the entire world? Top central bankers apparently don't. Just look at this article excerpt. They've retreated from the idea of tapering until 2014 and Peter Schiff was probably correct that they won't really taper at all because they can't. That should put an end to Keynesianism, though probably it won't. The technocratic meme of money control is the most cherished of all dominant social themes." Continue reading →

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Bill Bonner: Alan Greenspan’s Shock Revelation

"We know from bitter experience that trying to force economies to do what you want is a thankless task. Markets are fundamentally based on free exchange, cooperation, trust and trade. Force them in one direction or another and you are just asking for trouble. As Alan Greenspan described this week, in an interview with John Stewart on 'The Daily Show,' people are a little 'screwy' from time to time. Which means they don’t necessarily go along with your central planning, no matter how good you think it is. But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. This is occasionally true." Continue reading →

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Federal Reserve Policy Failures Are Mounting

"One possible reason why the Fed have consistently erred on the high side in their growth forecasts is that they assume higher stock prices will lead to higher spending via the so-called wealth effect. The Fed's ad hoc analysis on this subject has been wrong and is in conflict with econometric studies. The studies suggest that when wealth rises or falls, consumer spending does not generally respond, or if it does respond, it does so feebly. During the run-up of stock and home prices over the past three years, the year-over-year growth in consumer spending has actually slowed sharply from over 5% in early 2011 to just 2.9% in the four quarters ending Q2." Continue reading →

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Barack Obama’s Nixonian Fed Pick

"As a result of the Fed’s Quantitative Easing programs, banks are now sitting on more than $2.2 trillion in excess reserves. How the Fed eliminates these excess reserves before they produce an explosive growth in the money supply and surging inflation should be more of a concern to the next Fed Chair than an unemployment rate that is more the product of uncertainties associated with deficit spending and business fears about Obamacare than any lack of liquidity caused by the Fed. Yellen’s defenders say there’s nothing to worry about. As Georgetown University professor Henry Holzer put it, Yellen is fully aware of inflation and not a 'mindless stimulator.' Others aren’t so sure." Continue reading →

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We All Know Who Janet Yellen Is, And That’s Terrifying

"The acclaim in the media sends a shiver down the spine. Janet Yellen, just nominated by President Obama as the next head of his Federal Reserve, will be 'the most powerful woman in the planet'. If we were living in a stable monetary order she would be the least powerful woman in the world. Think back to the era of the gold standard before 1914. Britain was the leader of the orchestra in the monetary system. But no one outside a few discount brokers in London knew the name of the Bank of England Governor, who changed each 2 years." Continue reading →

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Bill Bonner: The Fed Chief America Deserves

"If it were that easy to create real wealth, of course, everybody would be doing it. Real wealth – like everything else that is precious – takes time, patience, and forbearance. You don’t get it by using cheap tricks and economic gimmickry. Instead, you have to pay for it. That is, you have to give something up in the present to gain more prosperity in the future. The feds’ programs promise the opposite: Americans will get something now… and pay (dearly) later. Eventually – sooner or later – Mr. Market will come down hard on investors’ heads, like a murderer armed with a claw hammer." Continue reading →

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The Most Qualified Fed Chair Since Arthur Burns

"It is not possible for any one human to have the knowledge needed to accomplish the goals established for the Federal Reserve. No person can assure Mr. Wolfers’ daughter her economic future will be bright. Ironically, that might only happen if Yellen took the job but then stepped aside to let the market determine interest rates and the flow of capital. Given Yellen’s views and experience, best case, the professor’s daughter can look forward to a world of no-growth punctuated with the occasional banking crisis. In the worst case, Ms. Yellen will conjure up the memory of Arthur Burns." Continue reading →

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‘Rejoice: the Yellen Fed will print money forever to create jobs’

"We now know where we stand. Janet Yellen is to take over the US Federal Reserve, the world's monetary hegemon, the master of all our lives. The Fed will be looser for longer. The FOMC will continue to print money until the US economy creates enough jobs to reignite wage pressures and inflation, regardless of asset bubbles, or collateral damage along the way. No Fed chief in history has been better qualified. She has pedigree. Her husband is Nobel laureate George Akerlof, the scourge of efficient markets theory. Her lodestar is the 'non-accelerating inflation rate of unemployment' (NAIRU). When the rate is above NAIRU, she is a dove: when below, she is a hawk." Continue reading →

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The FED Does Not Control the Federal Funds Rate

"Because they are sitting on $2 trillion of excess reserves, banks rarely borrow money overnight. They do not have to. They have plenty of reserves. Before late 2008, a bank would borrow overnight if its reserves threatened to fall below the legal requirement set by the FED. But now banks have so many reserves that they rarely borrow. So, there is little demand. So, the rate is low. The FOMC has increased the monetary base at times. In most of 2012, it decreased it. The FedFunds rate has not changed when FOMC policy has changed. Here is the inescapable conclusion: the Federal Reserve does not control this rate. The FED pretends that it does." Continue reading →

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Bill Bonner: Larry Summers Was a Lousy Choice Anyway

"Yes, Summers is smarter than we are. Yes, he has a better academic record. Yes, he is a real economist. Yes, he has widespread political support and a winning personality. But beyond those things, studies find that people with lower IQs make better truck drivers than people with high IQs. Which puts the critical question right out in the open: What kind of thing is running a central bank? And how smart do you have to be to be a successful central banker?" Continue reading →

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