No taper

[CA renter]

[quote=SK in CV][quote=livinincali][quote=FlyerInHi][quote=SK in CV]Just for a different perspective, I think he’s done an absolutely masterful job the last 5 years keeping the economy afloat. And continues to do so, despite the lack of support of legislators.[/quote]

That’s exactly it.

Fiscal policy has actually been very counter productive.

Bernanke did quite well with the monetary tools at his disposal.[/quote]

Nobody thought Greenspan’s low interest rates policies in 2003-2006 to deal with the dot bomb were bad either at the time. It wasn’t until after the housing bubble blew up, that we looked back and said that was kind of dumb. I figure this time will be no different. When Bernanke’s successor is forced to deal with the fed’s bloated balance sheet they’ll look to point the figure at Bernanke’s stupid policies of the time. “If Bernanke wasn’t so focused on the short term we wouldn’t have to be dealing with this mess,” will be the catch phrase 5 years done the line if not sooner.[/quote]

I don’t think those who think that low interest rates were the main problem from 2003-2006 have a clue what they’re talking about. It wasn’t the interest rates, the genesis was the almost non-existent lending standards.[/quote]

Agree with livin’ on this. The low rates were a big part of what caused the non-existent lending standards as investors (including pension funds!) kept reaching for greater yield. The Fed’s easy-money policies are largely responsible for the problems with the public pension funds. Bernanke and Greenspan are FAR more responsible for the problems with the pension funds (and healthcare costs due to inflation???) than the public workers are.

It’s happening now, too, but not WRT lending. When 30-40% of the housing purchases are made by investors with 100% cash, it is NOT a “normal” market. When the costs of basic necessities are going up while wages stagnate or go down, that is NOT indicative of a healthy economy. When the 1% sees their wealth double and triple while the working people continue to struggle more each year, it does NOT mean that the Fed is “doing a good job.”

We needed asset price deflation and defaults to go through on all of the loans that were made without regard to underwriting standards. That was the only way to wash out all of the excesses, and it would have gone a long way toward reducing the huge, and growing, wealth/income gap that has plagued our nation (and is also largely behind the stagnation of our economy, IMHO).

The Fed has totally screwed everyone who lives on a fixed income, and that includes all of the people who have diligently saved for decades and those who have to work for a living. He’s done this to save the wealthy capitalists who spend their time looking for ways to pillage public assets and cash flows, and lobbying for more ways to avoid paying taxes for the social, legal, physical, and educational infrastructure that make their success possible.

[CA renter]

[quote=FlyerInHi]If you are smart, you can do well regardless.

Remember that other people doing shitty doesn’t make you do better.

I agree that if you have good secure income; and if housing is depressed, you can accumulate cash and buy more. That’s an individual situation though.

I don’t want incompetent leaders who sabotage the economy like congress is doing right now.

When there is excess capacity, the key to economic recovery is creating demand. It’s stupid to let lack of money constrain economic growth.[/quote]

Agreed, but the Fed is not stimulating demand. The money is being fed to the top where it is traveling around the globe in search of the next bubble…and then sitting in tax shelters when profits are made. Supply-side economics is a failure. If this is the only thing the Fed knows, then we should get rid of the Fed.

[SK in CV]

[quote=CA renter]

Agree with livin’ on this. The low rates were a big part of what caused the non-existent lending standards as investors (including pension funds!) kept reaching for greater yield. The Fed’s easy-money policies are largely responsible for the problems with the public pension funds. Bernanke and Greenspan are FAR more responsible for the problems with the pension funds (and healthcare costs due to inflation???) than the public workers are.

[/quote]

Why aren’t prices spiraling up and out of control across the country now? Not a year ago. Now. Investors have driven up prices in some markets (though investor buying has dropped off sharply in most markets, including SoCal). But better underwriting has kept prices in check. Interest rates are still a full point to a 1.5 points below where they were during that period.

If lenders hadn’t abandoned lending standards, there would be fewer loans for the pension funds to buy and they would have found alternate investments. Nobody forced lenders to make those loans. The Fed made a lot of mistakes and maintaining low interest rates may have been one of them. But they didn’t create the bubble or kill the pension plans. They were no more than a tiny piece of the puzzle.

[CA renter]

It wasn’t the availability of these investments that caused the demand for them. It was the demand (fueled by the Fed’s low rates) that caused these mortgage (and related) investments to come to the market.

Prices for many things are still going up. It seems that almost every month brings a new “request for rate increase” in our water or power bills. Food prices are still rising from what I’ve seen. Medical and college costs are still rising, etc.

[scaredyclassic]

Gold 5,000 an ounce by 2019

[scaredyclassic]

[quote=spdrun]I’m just glad that prices in NJ are bouncing along the bottom. Hopefully they’ll stay that way for the next 1-2 years, so I can buy up enough foreclosures to be able to sit on my arse, collect rent, fix the occasional problem, and mostly stay on the couch, surf the Web, gain weight, and be drunk 50% of the time.

I hate working and productivity, and hope to get out of the game as soon as possible. I’m tireder in my 30s than most people are at 80, and I saw the 2008 crash as one mofo of an opportunity to be able to spend the rest of my life doing exactly what I want (i.e. as little as possible). Hope it works out for me.[/quote]

If you are tired, feeling drunk and old, you need scaredycatsus tee totaling heavy weights program!

Send me 20.00 a month and I’ll guide you to a whole new spdrun

[scaredyclassic]

I’ll say this. I honestly feel better stronger more optimistic less scared less tired and more kickass at 50 than at any point ever in my sad little life.

[SK in CV]

[quote=CA renter]It wasn’t the availability of these investments that caused the demand for them. It was the demand (fueled by the Fed’s low rates) that caused these mortgage (and related) investments to come to the market.

[/quote]

That’s like saying illegal drug dealers have no responsibility for selling drugs, it’s the drug users. If the demand wasn’t so high, they wouldn’t be dealing.

[scaredyclassic]

Fault, cause, effect… Who can say?

Best just to keep yourself sane.

[CA renter]

[quote=SK in CV][quote=CA renter]It wasn’t the availability of these investments that caused the demand for them. It was the demand (fueled by the Fed’s low rates) that caused these mortgage (and related) investments to come to the market.

[/quote]

That’s like saying illegal drug dealers have no responsibility for selling drugs, it’s the drug users. If the demand wasn’t so high, they wouldn’t be dealing.[/quote]

And that would also be true. No demand, no supply. You could have all the dealers in the world trying to sell drugs, but if nobody bought them, the dealers and drugs would disappear.

OTOH, if you tried to eliminate the dealers without affecting the demand…well, we’ve seen how successful the “War on Drugs” has been.

That’s not to say that there shouldn’t be regulations and restrictions on the supply side, but those products would not have been as prevalent, nor as damaging, if the Fed hadn’t poured on the gasoline and spurred demand.

As you know, many institutional investors “need” a certain return. They can go a year or two with sup-par returns, but if other investment managers are making hay with the new, “innovative” investment vehicles, then the “conservative” managers will find themselves out of a job if they don’t meet or beat those same returns over time. The Fed essentially forced the institutional investors (including pension funds) into the riskiest investments possible. This is what has caused the large losses in the pension funds, and the blame for this has been redirected toward the hapless employees who had NOTHING AT ALL to do with asset allocations or return assumptions (that would be the PRIVATE MARKET who was selling these investments to the funds via their well-connected insiders and lackeys).

The Fed was not only responsible for the credit/housing bubble, but the stock market bubble in the late 90s as well (as a result of the Fed’s/regulators’ inaction and supposed belief that bubbles don’t exist until they have already burst) — which led to the outsized gains during the bubble which enabled the irresponsible pension boosts to be rolled out at the height of that bubble. The stock market bubble and housing/credit bubbles are largely why we’re in the mess we’re in today. They’ve also managed to mask the real problems with our economy, and enabled the supply-siders to continue to game the system over the past couple of decades. Without the Fed, we would have been forced to deal with the underlying problems within our economy instead of playing “Las Vegas” and pretending that we were seeing real, sustainable “growth” during all these years.

[SK in CV]

[quote=CA renter]
That’s not to say that there shouldn’t be regulations and restrictions on the supply side, but those products would not have been as prevalent, nor as damaging, if the Fed hadn’t poured on the gasoline and spurred demand.

[/quote]

Just one question. How do lower interest rates spur demand for investors in interest bearing securities? It should be just the opposite. Do investors chase after lower yielding dividend paying stocks? Lower the dividend, higher the demand?

[spdrun]

Lower interest rates == more demand for RISKY products that (promise to!) pay higher-than-normal interest rates.

[scaredyclassic]

everyone has their part to play in this drama, and the role of central banker can only be played as central banker. you have to stick to the script.

[scaredyclassic]

but its not a good goal to be driunk fat and on the couch

[livinincali]

[quote=FlyerInHi]The loose lending standards led us the economic crisis.

Today is a much different situation. We are not in a bubble and we have a fiscal policy that is counter productive.

Bernanke said than “federal fiscal policy continues to be a restraint on growth and a source of downside risk.” Bernanke repeated his compliants about congress several times.[/quote]

How do you know there’s not a bubble somewhere in the economy. The fed is very good at creating bubbles and usually nobody sees them very well until it’s too late. The problem for the fed this time around is the bubble they are building isn’t being felt in the overall economy. The dot com bubble and housing bubble actually produced quite a few jobs for the common man.

This time the bubble in bonds or perhaps stocks isn’t spilling over into the real economy much and so they aren’t getting much measurable growth from the bubble they are creating this time. If your flooding the market with 7% of GDP in money and only getting 2% growth than that money is finding it’s way into rising prices of goods and assets.

Wwith that said hindsight will be everything yet again. When we look back at this time 5-10 years from my bet is we’ll be saying Bernanke’s policies were dumb because created this future blow up we haven’t experienced yet. The alternative is somehow these policies work to create significant growth and nobody in congress or the future fed president screws it up. You’d think you’d have seen something positive after 4 years of QE and 0 rates but there’s not much there yet. It’s possible I suppose and considering the short term pain that any alternative offers maybe you have a point. It’s better to be on life support than dead if you’re hoping for a miracle.

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