Tag Archives: Bernanke

EXPLAINING BERNANKE’S TWIST

When an economy needs a little boost, the lowering of interest rates spurs consumer big ticket buying and encourages businesses to expand by lowering the cost of anything that is financed.  However, with short term interest rates already near zero, this tool is no longer in the Federal Reserve’s toolbox.  So Bernanke’s move is to lower long term rates in the hope that that will encourage companies to expand and consumers to increase their purchases of automobiles and homes. That’s the Bernanke Twist.

Tell me, with short term rates near zero and long term rates at 1.94%, the lowest in more than a half century, how much more likely is it you will buy a car if long rates go from 1.9 percent to perhaps 1.7 percent?  How much more likely is it the owner of the tire store in your neighborhood will open another outlet now that he can borrow for a few pennies less?  None. 

Corporations are not lacking money.  Consumers are not holding back because of interest rates.  The Fed is pushing on a string — again.  It is not the cost of money or the lack of money in the system that is holding back a recovery.  It’s executive government policy that’s crippling the economy.  The tire shop owner may be ready and anxious to open another store, but first he must know how much it will cost to take on the new employees.  He also needs to know what the latest regulations are and how much it will cost to comply with them.  But none of this is knowable given the complexities of Obamacare and the vagueness written into many of the new laws.  So we sit.

What this country needs is not a good 5 cent cigar or lower interest rates.  What this country needs is a presidential election year.  Let’s hope the voters don’t make the same mistake twice.

FROM THE BIRD DOG

The bird dog flushed these out and hopes you will click the links and read the whole article – only for those you find of interest of course.

High gasoline prices are consistent with Obama’s transformational plans.
Power Line Blog reports

President Obama named Steven Chu his Secretary of Energy just three months after Chu told the Wall Street Journal in a high-profile interview that “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Presumably Obama put Chu in charge of energy policy because he shared Chu’s goal of driving American gas prices far above their then-current level. The policies that Obama, Chu and Obama’s EPA have subsequently followed confirm that higher energy prices was their objective. Now, confronted with the political fallout from his policies and facing rejection at the polls in 2012, Obama is flailing helplessly to re-cast himself as an advocate for American consumers. But he still is not willing to do the one thing that is within his power and that will bring down energy costs: turn loose America’s vast energy resources for development.

You can’t fight a nuclear enemy with spears no matter how strong your arms may be.
From The American Thinker

Beyond their ideological animosity toward free enterprise, perhaps the real reason the left wing activists want to destroy nuclear power is because the plants produce plutonium that is an economical raw material for nuclear weapons.  Leftist utopians dream of a day when the world will live again in the glorious Dark Ages — back when armies used catapults to launch diseased cows into enemy camps.  But until that happens, the real world has nuclear weapons, and if we don’t build them, our enemies will use theirs to destroy the nuclear-free Santa Cruz and most everything else.  Good luck though, with your medieval windmills and weaponized cows.

Bernanke predicts stagflation. Slowing growth and higher inflation. The ‘good news’ is unemployment will range from 8.4 to 8.7 percent over the next 3 years.
Read the full CNBC report.

The Fed cut its growth estimate for 2011 to between 3.1 percent and 3.3 percent from a January forecast of 3.4 percent to 3.9 percent.

The Fed also raised its estimate of inflation this year to a range of 2.1 percent to 2.8 percent, taking into account a recent surge in oil prices. However, it bumped its core inflation forecasts only marginally to a 1.3 percent to 1.6 percent range.

REPUBLICANS ROARED and the MARKET SOARED

What must Obama be thinking? …, uh lousy day, one stinkin day! Bernanke did me in. waited til after th ‘lection, Ida won, #2&$#% it! (People don’t think in regular words).

BEN BERNANKE

But I wonder…hmm. It was Bernanke’s move alright, but the background in which it occurred was the resounding defeat of the Democratic party. A thousand uncertainties were removed. The election results leave no doubt whatsoever that the Obama agenda has been capped. The free market system is very flexible. It can accommodate a wide set of rules, but the one thing that stops it cold is when the game has an unknown set of rules.

Now we are sure Cap and Trade is dead. Card Check is too. The “1099 rule” will be withdrawn. Obamacare will, at a minimum, be modified to something less onerous for business. Now you can estimate the cost of adding an employee where you couldn’t do that before. Maxine Waters’ comment that “Socialism is the goal” rings hollow now. Her threat is now but a joke.

Bernanke’s step was risky and bold. It could take the economy either way. It all but assures Carteresque stagflation if businesses don’t respond. It offers good promise if they do. The market would not react to such a step as it did if it were a step into a darkness willed with unknowns. No Barack, it was not the election that you lost by a day, it was the election that saved the stock market by a day, or maybe it was two.