Ben Bernanke QE Policy from Psychological Perspective

Ben Bernanke is like almost anyone else.  He ignores contrary data, and accepts confirming data.  He knows what his overlords want, and unlike his better predecessors Volcker & Martin, he gives them what they want, because he is their “good boy.”  Say “Arf,” Ben.

Ben Bernanke QE Policy from Psychological Perspective

A good central bank fights the politics of the nation of which it is a part and tries to preserve purchasing power, ignoring labor unemployment.  It tries to be a paper “gold standard.”  That has not been the Fed for 25+ years.

But Bernanke has been inconsistent in his reasoning regarding monetary and fiscal policy.  Consider this:

“You can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” he said Wednesday at a conference held by the National Bureau of Economic Research, citing the high unemployment rate, low inflation and “quite restrictive” fiscal policy. He said he expects the Fed won’t raise short-term rates for some time after the unemployment rate hits 6.5%, which would be more than a full percentage point lower than its current level.

But fiscal policy is highly accommodative, just not as accommodative as it was one-to-two  years ago.  Why is Bernanke raining on the parade of fiscal policy?  Because he wants to defend his foolish monetary policy.

As it is, when he described future Fed policy at his last press conference, he indicated that policy accommodation would be reduced within two years, when the expectation was that it would last longer than that.  After the market jolt (the Fed does not understand markets), he and many other Fed Governors tried to re-explain what Ben Bernanke had said so clearly.

The apologists for the said that accommodation was continuing, just not as much as before.  The Fed was still accommodative.  But what of the shrinking US Budget deficit, which is “quite restrictive?”

Ben Bernanke speaks with a forked tongue.  He does not mean what he says, he only speaks to justify the Fed and its failed policies.  He can’t see that he is as guilty as what he condemns.  That means he is really evil, or really stupid.  I choose stupid.  What do you think, Ben?

By David Merkel, CFA of alephblog




About the Author

David Merkel
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.