Wednesday, August 10, 2011

Was It Greenspan? And What's Bernanke's "Two-Year" Deal?

Ritholtz advances an interesting case that it was "Easy Al" Greenspan who poured the gasoline before someone else lit the match.

...We can trace the origin of the current Fed situation to a drift away from those two mandates. This occurred sometime in the 1990s, when then FOMC chair Alan Greenspan somehow began focusing on markets, asset pricing and a nonsensical catchall “investor confidence.”

It wasn’t long after that when traders deduced that the Greenspan was their bitch. It soon became apparent that at the first sign of trouble, the Fed stood ready to flood the system with liquidity. In just 4 short years, markets saw the Fed respond massively to the Asian Contagion (1997), Russian bond default, Long Term Capital Management Collapse (1998), Y2K bug (1999), Dot Com implosion (2000), 9/11 (2001).
There was no small irony in that Greenspan, Mr. Free Market himself, had become Mr. Centrally Planned Economy. This was not lost on the Wall Street community, whose jobs were to figure our where the best and most lucrative opportunity lay. Liquidity driven asset prices was the answer to that question.

In other words, Greenspan got comfy with his Ruling Class status.  Note well:  Easy Al was FRB chair under both Clinton and Bush; it's just as easy to say that he was 'apolitical' as it is to maintain that he was the money-launderer for the Party Of Government.  Could be that both are true.

Ritholtz has another observation:

...With the Fed Funds rate at 6% in late 2000, the Fed began slashing rates in January 2001. They made 8 rate moves between January and August 2001, cutting rates in half to 3%. Note this was all prior to 9/11. I believe Greenspan panicked, taking rates all the way down to 1.25% following the attacks.

At the time, it was unprecedented to have rates below 2% for three years, and at 1% for a year.

Well.  Now that there's one "precedent," Bernanke sets another one:  announcing that the Fed will maintain damn-near-zero rates for 'two years.'  (By the way, THREE Governors voted 'no' on that).

That's the first time in my memory that an FRB chair has gone that long.  Maybe he's trying to provide predictability for a jumpy market; maybe his inner 'predictive economist' has escaped its confines.  Maybe he was drunk.

He just bet several umptyzillion dollars that there will NOT be any inflation for the next two years, no way, no how.  Struppster would agree with him; so would Ticker, who claims the Bond Bandits telegraphed that message.

But it's a helluva big bet for a helluva long time if you're a Fed chair.


Saint Revolution said...

Biggest Stock Market Drops In History - CNBC:

All drops have occurred in the last ~10 to ~15 years even though the stock markets have existed for DECADES longer than that.


It is evidence and testimony to the TRUTH of a completely broken USA government/corporatocracy (the two are INSEPARABLE).

Saint Revolution said...

Fighting The New (One) World Order:

This is a set of clips from 2009 exposing the new (one) world order, Barack Obama, and the fraudulent Federal Reserve system. Watch as great American patriots like Alex Jones, Judge Andrew Napolitano, Jeremy Scahill, Jesse Ventura, Dennis Kucinich, Gerald Celente, Peter Schiff, and Ron Paul speak TRUTH to power. The information you will see in these clips is still pushed as a minority opinion by the corrupt corporate media.