by Zachary Karabell Info
Zachary Karabell is President of River Twice Research and River Twice Capital. A regular commentator on CNBC and columnist for Time, he is the co-author of Sustainable Excellence: The Future of Business in a Fast-Changing World and Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends On It.
Last night, the Fed chief trumpeted tax code changes and brushed off critics with his departmentâ??s typical over-confidence. Zachary Karabell on Bernankeâ??s desperate attempts at spin.
When Ben Bernanke and the Federal Reserve announced last month that it was initiating another round of $600 billion in â??quantitative easing,â? the reaction was swift and negative. The supposed profligacy of the Fed was yet another arrow in the Tea Party quiver and was used to support the contention that government spending is out of control. The international community was equally vociferous, with voices around the world slamming the Fed and Bernanke for devaluing the dollar while hypocritically claiming that the actions were simply meant to stabilize a fragile U.S. recovery.
Now Bernanke is attempting damage control. He wrote an op-ed in the Washington Post and last night appeared on 60 Minutes to explain and defend his policies. In a world where Fed policy is now the subject of Twitter feeds, a stately, removed central banker is a soon-to-be unemployed central banker. In the 1970s, no one paid much attention to when the Fed met and what it decided, but with Paul Volcker in the 1980s and then Alan Greenspan in the 1990s and 2000s, the chairman of the Federal Reserve became the prima inter pares of the American economy and its governance. If Bernanke is to achieve his goals of stabilizing the system and nurturing a recovery, he has to play the media game.
It would help if he were more dynamic. Greenspan cultivated an oracular air, his utterances vague and technocratic yet hinting at shamanistic powers. Bernanke has none of his predecessorâ??s aura, though he is also not saddled by the backlash that Greenspan suffered in the wake of the financial collapse. He is an economics professor deeply steeped in the history of central banking who has led the Fed into uncharted territory of massive balance sheet expansionâ??documents released as part of the financial reform package care of a clause inserted by Senator Bernie Sanders (our Vermont Socialist) show that the Fed extended $3 trillion in liquidity and loans in the wake of the failure of Lehman Brothers in September 2008. And he has remained steadfast in his conviction that the Great Depression was caused by inaction by the Fed.
Determined to avoid the perils of sagging demand, surging unemployment, and resulting deflationâ??all of which characterized the Great Depression of the 1930sâ??Bernanke has led the Fed into its current round of lowering real interest rates. With short-term rates as low as they can go, the Fed has taken to more atypical tools, such as buying Treasury securities at lower rates. Or at least that is what Bernanke intends.
Heâ??s certainly right about the problem: continued high unemployment combined with relatively tepid economic activity. In his 60 Minutes interview, he said flatly that unemployment is likely to stay high for four or five years and that it would have been considerably higher than its current 9.8 percent without Fed action over the past two years. He also argued that the current recovery is not self-sustaining without continued government action, and hence this next level of intervention. He sharply rebuked critics who describe what the Fed has done as â??printing money.â? It has not added any dollars, he claimed. That is too clever by half. The Fed doesnâ??t ever â??printâ? money; the Treasury does. But his policies put more money in motion, presumably for productive use. In that sense, his defense may be correct but only as semantics.
If Bernanke is to achieve his goals of stabilizing the system and nurturing a recovery, he has to play the media game.
Watch Fed Chairman Ben Bernanke on 60 Minutes.
Bernanke at least has a clear vision for what ails the American economy: unemployment and sluggish activity. He also has an unequivocal belief that inflation is not a proximate threat. Finally, he has a cure: more liquidity, more monetary stimulus and continued low rates until activity picks up and employment begins to rebound. In all respects, he has greater clarity than most of his domestic opponents and even many of his allies.
Yet that is also cause for concern, or should be. In his interview last night, Bernanke was asked how confident he was that his policies would yield results and how sure he is in his ability to control the situation. â??100 percent,â? he answered. 100 percent.
Really? Wasnâ??t it the over-weaning confidenceâ??arrogance some would sayâ??of economists, bankers and their models that helped create our current travails? Wasnâ??t it that sense that outcomes could be calculated, predicted, and gamed that led to much of the risk-taking in housing and derivatives that has proved so misguided? And yet here is Bernanke asserting with nary a blink or a hesitation that he is sure beyond doubt, beyond question, beyond margin of error that the current course of action will either work or can be controlled.
Even allowing for the political need to mollify and assuage, that level of certainty should raise alarms. Bernanke may be right, and his willingness to say what no elected politician will about our intractable unemployment problem is refreshingly candid. But that level of certainty is disturbing and suggests that gentle Ben has blinders not much different from those of so many of his predecessors.
Bernanke shares a rock-solid conviction that cycles can be controlled, genies bottled, and that right policies will tame the anarchy of human economies. At times, that may be an antidote, but just as often it is the seed of the next great fallacy. It would be more assuring if Ben acknowledged that indeed, we donâ??t know what we donâ??t know, that the future may present challenges unforeseen and difficult to predict, and that creativity and a nimble pragmatism are the most important qualities to guide policy. That would not be an admission of weakness, but a sign of wisdom and maturity.
But no. As Ben says, unemployment and deflation may be greater risks than inflation, but he and therefore we seem to have learned not a whit from the overwhelming arrogance and illusions of control that helped generate the most recent dancing on the abyss. And that is troubling indeed.
Zachary Karabell is president of River Twice Research and River Twice Capital. A regular commentator on CNBC and a columnist for Time magazine, he is the co-author of Sustainable Excellence: The Future of Business in a Fast-Changing World and Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends On It.
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And anyone with an ounce of common sense knows he is full of crap. It is time to start doing some of the things representatives like Ron Paul keep calling for and right off the bat we should start with auditing the Fed. This man is being paid hundreds of thousands of dollars a year and anyone with eyes to see knows he is going to bankrupt the country, (with Obama's help, of course).
And who re-appointed old Ben to another four-year term as head of the Fed last summer? =Why it was that champion of the middle class, Barack Obama. The same president who brought those other "men of the people"--Larry Summers, Tim Geithner and Pete Orszag--to Washington to join his economic team. =Imagine if President Obama did NOT re-appoint Bernanke and, instead, put someone in charge of the Fed who might, at least, have some concern for the effect of central bank policies on the 99% of Americans who are not millionaires. =But, then, that imaginary list is already pretty long: 1--Imagine if President Obama had made an example of turncoat Joe Lieberman instead of supporting his continued Senate seniority? 2--Imagine if Joe ("You Lie!") Wilson had been taught a lesson about what happens when you publicly disrespect the President of the United States? 3--Imagine if President Obama had appointed Elizabeth Warren to head the new Consumer Financial Protection Bureau, instead of giving her a powerless/ephemeral role as an "advisor"? Etc., etc.
Bernanke looked like a scared little rabbit. I would be too. Following in the footsteps of the Messtro, he's helped engineer the biggest transfer in wealth in history from the middle class to the Investment Banking Elite, their plutocrat friends in corporate board rooms and in the corner offices and the leisured class. The pitchfork crowd is growing restless. His pants are down, his cover's blown. George Patton
. The unelected, unaccountable Fed is the most powerful entity in the world. The Bernak is able to enact any monetary policy that HE sees fit, without fear of repercussions. And those policies affect the whole world's financial systems. Why wouldn't he be the smug, arrogant, know it all that he comes off as? The Bernak is subjecting the U.S.,and the rest of the world to a huge experiment in "trickle down economics" as he pumps $Trillions into the TBTF banks and Wall Street(while punishing small savers with low interest rates) with the hope that they will pass some of the largess down to main street. IMHO the Fed's policies since Greenspan are the cause of the current financial turmoil, as they are more powerful than any elected official. When we emerge from this financial turmoil it will be despite the Fed, not because of it.
I am an independent write-in candidate for president. Here is my program to create at least a couple, three million jobs, wherever there is water and people need work. Mr. "Burn-A-Yankee" can fund it. The Lev Deal clipper ship building program is a major key in remaining the world's leading economic influence, besides being the long term solution for eliminating our depressing loss-of-jobs recession. The campaign for our presidency was supposed to be about solving prob limbs. This clipper ship building program, long term jobs where ever there is water and people need work, will reaffirm our lead er ship on good ship mother earth. I did not get elected president of USA my last time out, but Barky Obama can see enacted my clipper ship building program, or maybe Obama doesn't have the intestinal fortitude to go against the arrogant labor union barons who front special in trysts; all those American owned Liberian flagged ships whose owners are behind the lobbyists' caches of soft money, Money & Power, opposed to the millions of jobs created - because our fleets of merchant sailing ships would carry package cargoes they feel are theirs to freight. My goal is to build a thousand fleets of strong clipper ships, 10,000 ships, with software controlled fully automatic sails, to carry our exports all over the world. Everything in our stores, made in America, we export. We export Kool-aid, Ivory soap, tooth paste. All the plentiful goods we take for granted in USA: cooking oil, grains, computers, and software, whatever you see for sale on our shelves here, we sell world wide, over there. When I was 10 years old, fifty-eight years ago,the most famous Russian inventor known to manvwas a USSR fellow named Reguspatoff. Reg US Pat Off. His name was stamped on everything. America, once upon a time, clearly led the world. The fascist US Congress, with their stuffing their own pockets policy, is changing all of that. Building 10,000 clipper ships, wherever there is water, and people need work, will create, within a few years, 4 million good unskilled, and semi-skilled jobs, leading to even better, fully skilled jobs! Not all of our citizens dream of operating a computer, writing software, and going online. For lots of people, a decent paying job, where they lurn on the job, and can upgrade to semi and fully skilled labor, as carpenters, plumbers, and electricians, using their hands, is for them, a great trade and a dream come true, something thay take with them wherever they go. College stew dense (dent is singular), will pay reduced tuition, and get their under grad education, while sailing the ships as co-ed crew. So the ships won't cost to operate, even when sailing light, without a cargo. Undergraduate 101 courses are infamous for their giant impersonal lecture halls, with grad students teaching, so course work, programmed in Flash, digitized, on muscular workstation computers, with wireless at sea access to internet, and the school libraries online, or aboard ship on dvd will do just fine, and the students will see the world, and get a genuine lived-on sense of the planet, our good ship mother earth. The ships will pay for their building, carrying cargo! Some of this shipyard money could come from University Endowments, absent the president's bully pulpit, by Executive Order. Funds might also materialize on Wall Street, with or without federal government backing. The beauty of this job creating program is the jobs are long term for real, and government is not required to make it happen. How did the Dutch do it a couple three hundred years ago? This is a giant jobs program that will put America back to work!!! This needs to happen for the strength and rejuvenation of our economy. The 10,000 clipper ship advantage, in a WTO free trading world is clear. We can say to all of our trading partners, world wide, "We welcome all your exports to United States. Our only request (diplomatese for requirement), is that your exported goods come to America on our ships, at negotiated f.o.b charges all the parties can live with." In the event the world grain markets are depressed, with our export grains going on our clipper ships, we can adjust the shipping charges to protect our farmers. Certainly WalMart and K-Mart can inform their Chinese suppliers, that their next boatload of shoes and pants are to be loaded on our clipper ship fleet, waiting in their harbor. Wen I am president, by Exeutive Order, all the people languishing in jail because of drug violations, related to marijuana, will be pardoned, saving the states money. This clipper ship program needs to be in place so there are potential jobs waiting for these people, too, whether they are pardoned or released after they completed their sentence! Once upon a time we were a great seafaring nation. We must become a great seafaring nation again. Our clipper fleet could also include 20 non-nuclear submarines, for ocean research, mostly on duty in the shipping corridors where speed boat pirates ply the waters. The ship's undergrduate crews might also include a few youngsters integrated who are uneducated; kids who were raised in the roughest neighborhoods, and who may have already done time, and may even be paroled to the ship, to learn how to read and write and have a chance at a better life. The college kids can teach these underpriviledged, gone wrong kids, reading, and writing, and all the basic skills they missed, growing up, before they turned to crime and got caught. In the event a fleet of twenty clippers around Indonesia, or Somalia is under attack, and there are at least forty speedboats coming, and one of our research subs is an hour away, these hard knock toughs are my selected crew members who can handle the 50 caliber super high power sniper guns, tow missles, and grenade launchers issued from the Captain's locker. We need not fear any pirates attacking our clippers on the open sea. Notwithstanding the myriad of independent, small non-union maritime related businesses, sail makers and the like, who will all enjoy excellent, healthy growth from this clipper ship plan, the top heavy democrat party unions will oppose this clipper shipping program because they want the status quo: to keep tight their skilled labor supply and demand, in their prevailing, overpriced skilled labor pool. One of the reasons for the bankruptcy of GM and Chrysler can be laid on the doorstep backward looking democratic party supporting the bloated unions. Relative to our labor unions, having been a member in good standing, in the Seafarers International Union, for nearly a decade, best to quote my old shipmate long lost friend, the bots'n Arthur Harrington, of Boston, about the unions, "...used to be in this country, a workin' stiff could say, they give me a job to do, and I stand behind them." Nowadays they say, "They give me a job to do, but I hired them." Arthur Harrington told me that on the deck of the S.S. Missouri, two days south of the Equator, heading to South Africa, in 1969. By Executive Order, all the paper used by the federal government, and all the clothing worn by the military, shall be produced from industrial hemp, grown in America. I hold the view, in light of the history of our money, that we should have two varieties: one variety, is the Silver Certificate, that should be reproduced on long life hemp paper, especially for redistribution by the ship's crews in the third world, when the crews go ashore to make micro-economic business with the unemployed underpaid masters of hand made goods in the third world country they are visiting. The other variety of dollar is the dollar as commodity, where a trillian dollars are wire transferred overnight. These dollars should be equally backed, but by Federal Reserve Notes, not silver. One is a modicum of eggs change, used in the everyday conduce of affairs by the lowly workin' folk who live close to the ground. The other, Federal Reserve Note, is for high wire transfer. The clipper ship program will enrich the third world peoples, in their own countries, by bringing Silver backed dollars into their poor communities, in exchange for hand made goods to fill out a return ship cargo. Industrial hemp will make available our whole domestic lumber industry for building clipper ships. michaelslevinson.com
That interview was chilling. Get out of the middle east and work on OUR country.
Previously, if a Fed Chief even hesitated in his pronouncements or even sounded a bit reticent, the stock markets would be traumatized, business journalists would wax melodramatic and the world wold shudder.Greenspan, indeed, had his 'oracular air' and ability to lead listeners of all persuasions. But isn't that what a top flight con man can do...start by thinking Bernie Madoff? But Greenspan was also so wrong about the details, so confused about the dynamics, and so mistaken in his very free market framework that I am not sure why such a presentation is missed. There is no housing bubble and the market is its own best 'policeman.' Remember? I could certainly go on here about Obama and Bernanke's own errors...or at least my perception of those errors...and what they should and could have done and could be doing instead. But, you know, as writer of an excellent New Yorker piece on the economy recently identified, Obama was given the "in box from hell" and the Bush destruction of American finances and economy is, in fact, still painfully relevant and all encompassing. Can anybody here say Iraq and Afghanistan - and that is just for starters. Remember those bottomless money pits; pits which are still sucking up and compromising huge segments of the American economy? Remember the sub-prime mortgage debacle which was, in part, led by a Bush era and wholly parasitic Wall Street who saw good friends, colleagues and apologists living in the White House? We now have a Republican Party desperately pandering to a so-called 'Tea Party' which, rather than the 'movement' so crowned by the media, is really no more than a legitimately angry but disparate, deeply disoriented and fractured populist swell. Remember that the re-invigorated Republicans' agenda...by their own statements...is to continue, and even increase, the use of the exact same policies which Obama found in his 'in-box from hell' and have eviscerated the economy. I could be provide a bit more details on that 'in-box from hell,' but frankly, this post is already getting too long and I doubt if any has even read to this point! But, for those still with me, suffice it to say that while I agree with the author here that Bernanke probably should show a bit more discretion in his public pronouncements at this point, I hardly think Bernanke's attempts to assure is the problem. I actually find it interesting that his assurances, long demanded by a Fed Chief, has suddenly created an opposing aura. The reality is that for all their imperfections and fumbles (and there definitely are those), Obama and Bernanke have been able to mute and, at least in part, neutralize an economic crisis and melt down which could have been far, far worse....and still could be. Who out there actually expected Obama and his team to resolve what has taken years to evolve to include its exponential burst during the 8 years of Bush and his fellow self proclaimed CEOs? If you did, well, I have a bridge in Brooklyn I'd like to sell you. So, I would argue for some perspective based on the cards left behind by the Bush years which, to repeat, remain highly relevant. I would argue that heavy breathing journalists consider more closely the Republican's bizarre strategy of talking economics and deficit reduction but doing everything exactly in opposition. This include, of course, pressing hard for policies that have failed over and over in the past; and policies, too, which will actually and dramatically raise the deficit...and to go so far as actually issuing overt threats to the entire country as a political 'strategy' to enhance their desired legislation. And can you say...killing off unemployment benefits...as a way to intimidate the White House and Democrats to passing the 700 billion dollars with of tax cuts to the richest Americans? I would argue we re-frame our priorities and start to challenge the Republican establishment, their voyeurs and cronies rather than giving them a free pass to attack Bernanke and Obama.
You say: "Wasn't it the over-weaning confidence-arrogance some would say-of economists, bankers and their models that helped create our current travails" Duh!!! Actually, I take exception to the word 'helped'. They created it, period. This whole episode was caused by shady banksters working completely in front of and with the approval of the Federal Reserve suck ups.
Genius is in short supply and is desperately needed by the US in this age of scientific and information technology. A billion intellectually or psychologically challenged minds cannot design one pencil or nail clipper. Instead of wasting money trying to jump start an economy bogged down in brawn, the US should use it by importing hundreds of thousands of the quickest thinking and smartest scientists. The offer of government supplemented jobs paying 200 thousand dollars a year will flood the US with the genius it needs. One of the first tasks of the imported geniuses would be to solve the problem of how to speed up the thinking processes of the millions who are less than smart. No mind should be left behind in the quest for an economy propelled by quick thinkers.
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Zachary Karabell is President of River Twice Research and River Twice Capital. A regular commentator on CNBC and columnist for Time, he is the co-author of Sustainable Excellence: The Future of Business in a Fast-Changing World and Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends On It.
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