An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Saturday, April 21, 2012
Mike Whitney on the Bernanke put and its consequences
Mike Whitney describes the Bernanke put that the Fed has delivered to Wall Street. But wait, there's more.
According to the Fed's James Bullard, President of the Federal Reserve Bank of St. Louis,“Stabilization policy should be left to the monetary authority, which can operate effectively even at the zero lower bound,”… “Unconventional monetary stabilization policy has been quite effective over the last three years, making fiscal action redundant.” …….. “the turn toward fiscal approaches to stabilization policy has run its course.” (“Fed’s Bullard: Best To Leave Economic Stimulus To Fed”, Wall Street Journal)
Whitney: "What Bullard means by “Death of a Theory”, is that the theories of John Maynard Keynes–which led to 50 years of prosperity — are not going to be used anymore. The Fed is going to continue on the same path that it is now, implementing policies that only benefit the banks and investor class. That means that the frayed fiscal lifeline that presently keeps the US middle class from sinking beneath the waves will eventually be severed leaving millions of people jobless, homeless and destitute."
Oh, joy.
Read it at Counterpunch
Bernanke’s Plan for the Middle Class
by Mike Whitney
(h/t Kevin Fathi via email)
Whitney says QE gooses the stock market. Mosler says QE is a tax.
ReplyDeleteI'm confused.
I guess it depends on what the Fed is buying, doesn't it. Are they merely buying treasuries, or do they also buy MBS, stocks, etc. ?
If the Fed is not buying stocks, then how does QE goose the stock market ? Is it merely because low bond rates steer investors away from bonds and into stocks and commodities ?
I like Whitney, but I'd like to reconcile his view on QE with Mosler's.
I’m tearing my hair out. I assume Dan Kervick is as well.
ReplyDeleteQE according to the Fed's own admission makes asset prices higher than they would be otherwise.
ReplyDeleteRead Zero Hedge. Inflationary expectations. Yes, they are still expecting inflation to skyrocket "any minute now."
Low interest rates also means lower margin cost, permitting more leverage for the same buck.
Warren says that QE acts like a tax because it deprives non-government of net financial assets in the form of interest payments that the Fed passes on to Treasury instead of going to tsy holders.
No problem reconciling the two, as long as one understands that many people even in finance think that QE is inflationary through increasing the monetary base. MMT shows that is wrong.
Ralph, how did you know???!!!! :)
ReplyDeleteI know I have been a bit of a prig and a nag on this issue, but Bullard's statement shows why it is so important to get well-meaning center-lefties like Matt Yglesias and Krugman and DeLong and Thoma out of the monetary policy obsession business. This isn't just a difference over theory. Macro policy conservatives are determined to keep the American people out of their own economy so that financial sector elites can run everything.