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What do a mountainside resort and economists have in common?  Next to nothing, if it weren’t for an annual invite-only summit the Kansas City Federal Reserve hosts  at the Jackson Lake Lodge nestled  in a valley by the Teton mountains just outside Jackson Hole, Wyoming Some individual contributions have, over the years, had a lasting impact such as that of University of Chicago Professor Raghuram Rajan.  https://freakonomics.com/2010/06/predicting-the-financial-crisis-a-qa-with-fault-lines-author-raghuram-rajan/ Still, year after year, it’s the chair’s speech that attracts the most references — just mention Bernanke 2010  https://www.businessinsider.com/ben-bernanke-text-of-jackson-hole-speech-2010-8 or Powell 2022   https://www.bloomberg.com/news/articles/2022-08-26/read-fed-chair-jerome-powell-s-speech-at-jackson-hole-symposium While the sudden and large price dislocations were reversed over the next two weeks, the unsettling episode felt like a warn...

The problem, if it can be called that, is that the economy appears to be in rude health. These are not the numbers that would be produced by an economy desperately in need of a rate cut. Ben Bernanke’s record is very defensible, but his best-known quote by far is his comment in the summer of 2007 that the “vast majority of mortgages, including even subprime mortgages, continue to perform well.”  https://www.cnbc.com/id/18718555 There’s a widespread belief in markets that the FOMC will want to do all it can to avert a Trump victory in November, and therefore cut rates sooner than otherwise.  Whether or not this is true, it does make it harder to cut; Donald Trump would doubtless call foul, and heap derision /hån/ on Jerome Powell and his colleagues. John Authers Bloomberg 26 januari 2024 https://www.bloomberg.com/opinion/articles/2024-01-26/inflation-politics-fed-fears-being-sucked-into-a-rate-cut-riptide About Ben Bernanke at International Communications Rolf Englund (internet...

Hur fick vi en hel generation som vant sig vid att köpa lägenheter med lånade pengar som är nästan gratis?  I boken ”The lords of easy money” går journalisten Christopher Leonard  (The Wall Street Journal Best Book of the Year NEW YORK TIMES BESTSELLER)  igenom de beslut och de diskussioner som ledde fram till den nya penningpolitiken. Under mötet berättade representanten från Dallas, Richard Fisher, om ett samtal han nyss haft med teknikföretaget Texas Instruments finanschef. Företaget, berättade han, hade lånat 1,5 miljarder dollar – över 15 miljarder kronor – men företaget tänkte inte använda pengarna för att bygga en ny fabrik, investera i forskning eller rekrytera nya anställda. I stället tänkte de använda pengarna för att köpa tillbaka sina egna aktier. ”Vi arbetar under hypotesen”, fortsatte Fisher, ”att om vi sänker kostnaden för kapital och förser företag med billiga pengar så uppmuntrar vi dem att växla upp… att investera och skapa jobb. Jag tror inte att det är...

Throwing a lifeline to the financial system in times of crisis can have unintended consequences.  Among them: Making the world feel safer can lull people into complacency and excessive risk-taking. The attempt to eradicate failure from the financial system, of course, is part of modern society’s broader push to make life itself riskless and idiot-proof As my colleague Greg Ip pointed out in his 2015 book “Foolproof,” however, It also tends to coalesce massive power into the hands of a few people at the pinnacle of the financial system. Former Federal Reserve Chair Alan Greenspan was known as “the Maestro”. After U.S. authorities intervened to help calm a series of financial crises in 1998, Time magazine christened Mr. Greenspan, then-Treasury Secretary Robert Rubin and then-Deputy Treasury Secretary Lawrence Summers the “Committee to Save the World.”  Unfortunately, having some sway over markets can delude regulators and policy makers into believing that they can foresee the f...

 “Did you know that bank runs – where many savers withdraw money at once – can lead to bank collapse?” the Royal Swedish Academy of Sciences asks visitors to its website.  The answer is yes. The Blackstone Real Estate Income Trust has also been able to absorb the impact of outflows. While not a bank, the trust bears similarities by pairing illiquid assets with demand-based funding.  The rapid growth of such open-ended investment funds has been a cause for concern among policymakers precisely because of this mismatch.  In October this year, the International Monetary Fund cautioned that “in the face of adverse shocks, OEFs that offer daily redemptions to investors but hold relatively less liquid assets are vulnerable to the risk of investor runs (or large outflows) that could force these funds to sell assets to meet redemptions.” It’s timely that among all this attention to bank runs, the Nobel Prize for Economic Sciences should have this year been awarded to three ec...

Three recent books suggest that the Fed has the capacity to function as a device of indicative planning, coordinating economic activities to fulfill democratically determined social purposes. By now you’ve probably heard of collateralized debt obligations, quantitative easing, helicopter drops, shadow banking, hedge funds, private equity, leveraged buyouts, asset pricing, cryptocurrencies, and so on.  Why are the arcane terms of finance – the “secrets of the temple,” as William Greider famously called them – so familiar, and how have its gray protagonists become household names? The short answer is easy: where bankers go, it seems, shit inevitably meets fan. These firms – “shadow banks” unbound by any statutory or customary constraints the Fed can impose on “member banks” – have presided over crisis after crisis since October 1987, when a stock market awash in idle money generated by Ronald Reagan’s tax cuts crashed and burned.  Or, rather, with the Fed backstopping them as th...

Ben Bernanke, a former chair of the Federal Reserve, shares the award with Douglas Diamond and Philip Dybvig Mr Bernanke is most famous for his time as a central banker. But it was his work at Stanford University that the committee cited. They mentioned an article on economic history published in 1983 that looked at the causes of the Depression.  Unlike previous historical accounts, Mr Bernanke’s work emphasised the role of the banking system, arguing that a self-sustaining cycle of bank runs caused the plunge in economic activity in the 1930s, rather than just being a consequence of it. The Economist 10 October 2022 https://www.economist.com/finance-and-economics/2022/10/10/economists-win-nobel-prize-for-work-on-bank-runs Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne går i år till amerikanerna Ben Bernanke, Douglas Diamond och Philip Dybvig för forskning som de grundlade i början av 1980-talet. Douglas Diamonds och Philip Dybvigs forskning från samma år vi...

This book, published in 2018, makes a compelling case that the Fed could have bailed out Lehman Brothers in 2008, but that fear of a political backlash and an underestimation of how bad the investment bank’s bankruptcy would be prevented it from acting.  Mr Bernanke would disagree. The Economist 7 September 2022 https://www.economist.com/the-economist-reads/2022/09/07/what-to-read-to-understand-central-banking One of America’s most prominent dismal scientists, former Federal Reserve chairman Ben  Bernanke, returns with “21st Century Monetary Policy: The Federal Reserve From the Great Inflation to Covid-19.”  https://englundmacro.blogspot.com/2022/07/one-of-americas-most-prominent-dismal.html Lehman Brothers at IntCom https://internetional.se/lehman911.htm

 Two new books set out sharply conflicting perspectives on underlying issues. Arguably, Bernanke is the most influential thinker and practitioner on central banking of our era. His book, 21st Century Monetary Policy Edward Chancellor, historian, asset manager, journalist and author. The Price of Time offers a history of interest back to the Babylonians Behind each of them stands a different guru. For Bernanke, it is John Maynard Keynes Bernanke insists, the Fed has been successful in preventing another Great Depression and returning the US economy to growth. I agree with him. Chancellor emphatically does not. His guru is Friedrich Hayek Chancellor condemns the low interest rates adopted by central banks as the root of almost all economic evils. Does this charge sheet make sense? Not much.  Chancellor also has many complaints about the effect of low interest rates on financial instability and fragility. Yet it is unlikely that the modestly higher interest rates he recommends wo...

returns with “21st Century Monetary Policy: The Federal Reserve From the Great Inflation to Covid-19.”  The message: What we at the Fed have done in recent decades has worked, and our only problem is figuring out how to do more of it. According to him, it deftly managed the 2007-08 panic with a suite of emergency policies that staved off another 1930s-style depression. It then rolled out a range of new tools to adapt to an economy that had evolved beyond what the old theories could explain. Observers have noted, for instance, a shift in Mr. Bernanke’s interpretation of the legal limits on the Fed’s activities during the global financial crisis. He no longer insists that the law would have prohibited a bailout of Lehman Brothers, but instead suggests that it was a bad idea on the policy merits. Joseph C. Sternberg Bloomberg 22 July 2022 https://www.wsj.com/articles/21st-century-monetary-policy-review-rosy-memories-of-the-fed-11658499462 Lehman Brothers at IntCom https://internetiona...

 Kohn said, “Most of this distortion is deliberate and a desirable effect of the stance of policy. We have attempted to lower interest rates below long-​term equilibrium rates and to boost asset prices in order to stimulate demand.” Both Greenspan and Bernanke were in the room when Kohn said this. The record shows neither expressed any reservations. Kohn himself called the distortion “desirable.”  So, by 2004 the Fed had made a full transition. Its leaders knew their low interest rates were distorting the economy and they liked it.  Moreover, under Bernanke the Fed made a deliberate decision to ignore asset bubbles until they popped, seeing its job as simply repairing the damage. We continue exploring William Chancellor’s forthcoming book, The Price of Time: The Real Story of Interest. John Mauldin 15 July 2022 https://www.mauldineconomics.com/frontlinethoughts/forgotten-lessons By boosting asset prices, policy makers aimed to buttress elevated debt levels and, via the we...

The Money GPS 18 May 2022 (3) ⚠️ This Will Make 1970’s Look Like NOTHING ⚠️ - YouTube Once Every Hundred Years This Happens  The Money GPS 22 May 2022 https://www.youtube.com/watch?v=ecYsFORCr2E

 - Having experienced the damage that asset price bubbles can cause, we must be especially vigilant in ensuring that the recent experiences are not repeated. John P. Hussman April 2022 https://www.hussmanfunds.com/comment/mc220429/

Earlier this week, Ben Bernanke raised the possibility of stagflation in an interview published in the New York Times.  https://www.nytimes.com/2022/05/16/business/dealbook/bernanke-stagflation.html “Even under the benign scenario, we should have a slowing economy,” he said. “And inflation’s still too high but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high.” https://www.wsj.com/articles/high-inflation-slowing-growth-raise-risk-of-global-downturn-11652908756 Ben Bernanke says the U.S. economy, for the first time since the 1970s, could be heading toward a period of stagflation Bernanke told DealBook, in an exclusive interview with Andrew ahead of Bernanke’s new book.  Bernanke says backing away from a 2 percent inflation target would be a mistake. “In everyday life, we judge the credibility of promises more by the reputations of the promise-makers than by the exact words t...

Nicholas Wapshott’s book, Samuelson Friedman: The Battle Over the Free Market. Friedman’s victory was ambiguous. Though Paul Volcker’s interest rate hike in 1979 put a stop to inflation in the US, Friedman disowned the experiment. The shock therapy that Volcker administered was not monetarism as Friedman envisioned it.  To mark Friedman’s 90th birthday in 2002, Ben Bernanke paid tribute to him and Schwartz. Referring to the Fed’s baneful role in the Great Depression, he remarked: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.” In 2008 Bernanke and his colleagues let Lehman Brothers fail. The result was to drive the world to the brink of the greatest financial crisis since the 1930s. Adam Tooze FT 14 October 2021 https://www.ft.com/content/b04dd8d1-75bd-4aaa-bf60-36ad73faac93 Kaletsky menar att det var Paul Volcker som ledde återgången till "demand management". https://englundmacro.blogspot.com/2018/01/kaletsky-menar-att-det-var-paul-volck...

The IMF and the Nobel fraternity are more worried that the global economy will slip into a protracted slump as defaults increase and long economic Covid does its worst.  If so, there will be pressure on central banks to tear up the rule book and opt for helicopter money or something akin to Modern Monetary Theory (MMT), in which case debate on the technicalities of today’s QE becomes irrelevant. Ben Bernanke is calling for a “coordination mechanism” between the Fed and Congress, pointing the way to joined-up fiscal and monetary policy.  He has suggested the nuclear option of helicopter money to fund the federal deficit and inject money into the veins of the economy. Central bank independence as we knew it has become a shibboleth.  Lord Adair Turner from the Institute for New Economic Thinking proposes a fiscal twin to the Monetary Policy Committee that could calibrate the dosage of monetisation in order to prevent electoral prime-pumping by politicians. It woul...

How the crisis of 2008 continued to reverberate through the following decade FT 30 December 2019

Top policymakers look back on lessons learnt and mistakes made during 2008 meltdown. Martin Sandbu FT 9 July 2019 Stanley Fischer said there was “no legal basis” for what the Fed did on multiple fronts after the collapse of Lehman Brothers.  The Dodd-Frank Act passed by Congress - when anti-banker sentiment was at its peak - prevents the Fed from acting freely as a lender of last resort...  The authorities may not rescue individual companies, or lend to non-banks, or offer blanket guarantees of bank debt and money market funds.  The lightning-fast action and $1.5 trillion of emergency loans that restored control in 2008 is no longer possible. Ambrose 18 June 2019 Financial Crises Bernanke  Paulsson Geithner Lehman Brothers 

Det är för att i hans ekonomiska modell så existerar ingen ”kreditdriven efterfrågan”. Han avfärdade professor Irving Fischers kreditbaserade förklaring av Den stora depressionen  Professor Steve Keen med flera SvD 13 juni 2019 Bernanke Hyman Minsky - Economics may be dismal, but it is not a science

One way to view the situation is that there have been four serious diagnoses of the ills of the Global North.  They are: A Bernanke global savings-glut.  A Krugman-Blanchard return to ‘depression economics’. A Rogoffian-Minskyite crisis of overleverage and debt overhang.  A Summers secular-stagnation chronic crisis.” DeLong points out that each leads to different policy recommendations FT 4 November 2016 Stabiliseringspolitik