Dave in Denver, who is a hard-money militant, shares this tidbit with us today:
A reader has asked me to comment on the announced unwinding of the $500 billion in currency swaps that were implemented by the Fed between the U.S. and the British, Japanese, EU and Swiss National Banks. It's a really good question and given that Bernanke issued a statement, under oath in front of Congress, that he doesn't know how that money has been used or the specifics of where it went, then we have to assume that even Bernanke can't answer that question. Let me make it clear that I believe Bernanke lied under oath.
O.K., I'll discount that last sentence, since there's no way to know. What is recounted before that is disturbing enough.
$500 billion, and Bernanke can't tell us what became of it. He's chair of the US Federal Reserve Bank, it's his business to know, is it not? He was chair of the economics department at Princeton, so no one can claim he's stupid. He remembered his car keys that morning, 'cuz he made it to the hearing.
$500 billion sloshing around unaccounted for could, well, destabilize things. His job is to keep things stable, is it not?
And the Senate confirmed him, anyway. At least thirty Senators had the good sense to vote 'no'. It's a little progress.
10 comments:
I guess that it is not possible to know the unknowable
"Was this preventable? I don’t believe that asset price and credit booms are preventable. They cannot be effectively diffused preemptively. There is no reliable early warning system for financial shocks. And yet policy plays an important role in determining the dimensions of financial booms, and policy helps determine the ability of the financial system and the economy to adjust to its aftermath. We need to undertake a broad set of changes to address the vulnerabilities in our financial system revealed by this crisis. Just as a long list of factors contributed to the trauma, there is no single reform that offers the promise of sufficient change."
Tim Geithner - March 6, 2008
The full speech can be seen on line.
-Jeff
remember the old German character from Hogan's Heroes who would say "I know nothing!"?
Again, can't know the unknowable...
"As events evolved, we recognized that, despite our suspicions, it was very difficult to definitively identify a bubble until after the fact--that is, when its bursting confirmed its existence.
Moreover, it was far from obvious that bubbles, even if identified early, could be preempted short of the central bank inducing a substantial contraction in economic activity--the very outcome we would be seeking to avoid."
Alan Greenpan - August 2002
Jeff
Thanks, Jeff for contributing.
I had to read this thing through several times to get my arms around it.
Geithner's words are pretty amazing. Given the depth, breadth, and availability of historical research on the hows and whys of economic booms and busts, it's a breathtaking statement.
Especially as, in March 08, he headed the New York Fed, one of the institutions charged under the law with heading trouble off at the pass.
So, if we don't know how to predict or prevent busts and booms, how do we create policies to reign them in and recover from them, as he suggests?
What 'broad set of changes' would he embrace? Would they not inevitably lead toward a command-and-control economy?
I can't make sense of Geithner's statement. Maybe that's because it sounds like elegantly phrased nonsense.
I'll try to find the full speech, to see if more sense is found in context.
Thanks again, Jeff.
What gobsmacks me is this: In the 1990's, as I drove through my beloved Middle Tennessee, and saw the housing developments of wall-to-wall cheaply built dwellings, each sold at a high premium with tiny down payments, I would comment to my bride: 'I wouldn't want to be the banker holding the bag on all these in about ten years!'
I don't have an econ degree. I don't work in banking. I was blurting out raw common sense. There was NO WAY this could end happily.
So, I could see this driving around, and these guys couldn't?
I don't understand. To this day, I do not understand how any of them missed it.
I guess what I'm trying to introduce as a possibility is that the Fed for whatever reason(s) decides that "it doesn't know" is the right message to put out. I do know from personal experience that there were bloggers warning that all of this wasn't going to lead to any good within the same time frames. This is kind of like the old argument about the impeachment of Nixon - what did the President know and WHEN did he know it? to use a Howard Baker phrase. So, what did the Fed know and when did it know it? I have a hard time believing these men / women are stupid... they are certainly smarter than me but I don't think they are as honest.
Jeff
"So, if we don't know how to predict or prevent busts and booms, how do we create policies to reign them in and recover from them, as he suggests?"
Personally, I think you answered your own question in your other posting. I think the Fed already knows how to predict and prevent busts but it is playing opossum. It should be crafting its actions and policies at least in part by observing behavior and ethics (or the lack thereof - as you said). Just an opinion. To do what I said above, they would have to be judgmental and to be effective in their role as judges, they would have to be removed from the influence of politics. Gonna happen???
Jeff
...by the way, I found this place by going through JDA's blog. Thanks Al Gore for inventing the internet.
http://newsblogs.chicagotribune.com/marksjarvis_on_money/2010/02/paulson-says-he-was-scared-and-clueless-during-lehman-collapse.html
From Chicago news... more playing opossum, Old South this time from the guy who was the equal of Jaws swimmin' in the shark tank known as Goldman Sachs... no patterns there, right? One Southerner to another, isn't it fun when they piss on your boots and try to convince you it is raining? I love that line from Outlaw Jose Wales.
Jeff
shark turns to opossum
one of the 10 best movies made in the USA.
back and not boots my bad
Jeff
Post a Comment