“Bernanke Defends Fed’s Crisis Moves” ~ WSJ
“We’ve been quite successful in keeping inflation low.”
No, he hasn’t. Inflation is higher than his statistics suggest. He loves to put the blame for the disfigured computation on the BLS, as if he and his 200 PhDs cannot and do not compute their own inflation statistics. David Einhorn has eloquently explained the government distortion. People shedding debt and defaults have kept inflation low. In some respects, he’s correct. The Fed encouraged the debt bubble in the first place by keeping interest rates artificially low, leading to mortgage defaults, and bankruptcies. So by this logic, repulsive as it is, Bernanke is correct.
The question is whether Bernanke will have done a good job keeping future inflation low. This study showing a 5-year lag suggests no; he will not have done a good job. He has substituted one disaster for another.
“There will not be any more large, complex systemically critical firms that have no oversight.” – Bernanke.
The big six banks are much larger than pre-crisis. Dodd-Frank would not have prevented anything. On the FDIC’s claim that it would have prevented a disorderly unwind:
“A crucial assumption here is that Lehman would have gone along with this,” said Peter J. Henning, a professor of law at Wayne State University in Detroit. “I think that’s a big assumption. ~ Bloomberg
The exponential increase in debt, enabled by the Fed, suggests the economic system is in a more precarious situation pre-crisis, not less. How loses any remaining credibility with this statement. He credits Volker for his ability to get away with what he has so far, but If we’re banking on Bernanke’s credibility as an inflation fighter, many who fail to recognize what’s happening are fucked.
Deutsche Bank recently gave an excellent presentation on inflation. Three components are key to the transition from money printing to inflation, with the catalyst being higher inflation expectations, as Bernanke knows. However, he ignores: the impact of bank lending and commodity input cost inflation on inflation; that the gold market suggests a lack of confidence in the Fed; its balance sheet suggest it will not be able to fight inflation. The Fed and its international cabal of printers has spread kerosene all over the world. We only await the spark.
Bernanke has mentioned looking at the below for his measure of inflation expectations – we should all create a mirror of Bernanke’s trading screen. Of course, by this measure there was no inflation during 2007 when asset prices surged and gas and food prices surged by leaps and bounds. Inflation expectations will rise when it’s all too late; in fact, it already is too late, again, suggests the study on the long and variable lags between monetary policy and inflation.
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