It is a basic rule of economics that the markets abhor uncertainties. In ambiguous times, the markets will do wild and unpredictable things, swinging one way and then another. In fact, you could even argue that, when it comes to economic markets, uncertainty begets uncertainty. And then it all just gets crazy out of control!
In a show of certain certainty and unambiguous un-ambiguity, President Obama nominated Fed Chairman Ben Bernanke to a second term at the Federal Reserve yesterday.
The markets, of course, love it. Or they at least don’t hate it. And why would they? We’re talking about a Fed Chairman who threw billions of dollars at failing institutions like AIG and Bank of America, leading to announcements of $1.8 billion in quarterly profits at AIG only a few weeks ago, and $4 billion in profits for 2008 at Bank of America. Sure, sounds absolutely ducky for Wall Street. Back here at the corner of Main Street and Taking-It-Up-The-Ass-Between-Bank-Fees-And-Healthcare Street, national unemployment is still at an almost all time high of 9.4% for July 2009, we’ve lost almost 2.9 million jobs in the last six months alone, and GDP has declined in all three of the preceding quarters.
Do I agree that it appears as if the “Great Recession” (totally lame name if you ask me) is drawing to a close and the economy may even turn around sometime soon? Sure, it looks like that could possibly be the case. (I am feeling awfully optimistic today though. Try me again in a few days and I may have changed my mind.) Am I going to give Chairman Bernanke credit for steering us out of this mess and keeping us out of another Great Depression like everyone else seems to be doing? God no. (I said I was feeling optimistic, not that I was feeing nice.)
What prevented a run on the banks this time around? Don’t get me wrong, we came close, but the public still had confidence (see paragraph #1) in a very important institution: the FDIC. No matter how bad it got, we always believed that we could get our money back. So do I think that Chairman Bernanke prevented the failure of so many banks and kept the economy from totally tanking? No, I think that credit should go to the consumer and its confidence in the FDIC. Thank you FDR and the 73rd congress.
For these very reasons, as it turns out, some people in Congress are less than thrilled by his reappointment also. However, the senate will, more than likely, reconfirm Chairman Bernanke for the standard reasons:
You don’t change horses in midstream.
Better safe than sorry.
Don’t rock the boat.
Better the devil you know than the devil you don’t.
Should we look forward to four more years of Bernanke? Or should we take the Senator Ron Paul (L-TX) approach who said about the reappointment, “Chairman Bernanke’s reappointment is rather irrelevant. Our current monetary system is unmanageable, and changing the individual in control will not change the long-term outcome.”
To read a more scandalous (scathing) article on the Federal Reserve, check this out: http://www.minyanville.com/articles/fed-bernanke-bubble/index/a/24208
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I think the next real test for Bernanke will be when China comes "knocking" at our door looking for payment on OUR humongous debt that China owns.
ReplyDeleteEveryone talks about the percentage of our GDP that "entitlement" programs will take up by a certain year but I would like to know what percentage of our GDP will be devoted towards repaying our debt, principle AND interest.
Let's get real here. I just read Paul Krugman's NYTimes column (SJ Mercury News, August 26, Other Views) where Krugman wrote, "There is a lot to be said about the financial disaster of the past two years, but the short version is simple: Politicians in the thrall of the Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis - and the crisis came."
Krugman goes on to explain that none of those regulations have been fixed since this current crisis.
So my point? Thank God they never dismantled the FDIC. That could explain why people are putting their money (what little they have) into savings accounts and avoiding other financial instruments.
Hmm you know, I'm starting to think that you and I should do a tag team blog! You can write a blog and I can write a rebuttal, which will be good practice for my debate skills.
ReplyDeleteOh, and I agree on your point about our national debt!
Where do I start today. These three issues all tie in as they all have to do with living in America and California.
ReplyDeleteFirst, an article in the SJ Mercury News, August 27, "Donations to Blue Dogs block health care reform" in which it states the "Blue Dogs" (and these are democrats) have accepted more lobby money than any other democrats. And, surprise, the Blue Dog, "Rep. Mike Ross, D-Ark., who heads up the coalition's task force on health care, publically expressed the Blue Dogs' misgivings about the Democratic leaderships efforts, (my capitalization) THE FORMER PHARMACY OWNER WAS FETED AT A SERIES OF HEALTH CARE INDUSTRY RECEPTIONS."
Second, in the same daily paper, UC Berkely is now going to start admitting more out-of-state students because these students pay the full cost of their education. Hence, the university can get more money from these out-of-state students. So now, people living in California are actually at a disadvantage for admittance into a California University.
Third, also in the SJ Mercury News today, the "FDIC may need financial help", due to "the epidemic of collapsing financial institutions" which has resulted in depletion of it's "coffers", which "may sink into the red". Which means it will run out of money.
Why does our government hate us so?