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Paul Volker states that the financial markets have gotten away from Benanke, that the crisis is spinning out of control and the Fed has to act fast now.
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
I just read the lengthy NYT article "The Education of Ben Bernake" online ahead of its 1/20 appearance in the print edition. Volker has a very minor part in that article, and to say he 'spanks' Bernake would be a mischaracterization IMO.
Could be a totally separate interview, I guess.
http://news.google.com/news/url?sa=t...cid=1126124006
“I think Bernanke is in a very difficult situation,” Paul Volcker told me. Volcker was the Fed chief who preceded Greenspan and who conquered, painfully, the great inflation of the 1970s and early ’80s. (He was chairman from 1979 to 1987.) “Too many bubbles have been going on for too long,” Volcker added. “The Fed is not really in control of the situation.” -
Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
You are right. I stand corrected. Interesting that he'd comment at all about the challenges facing a standing Fed chairman. That's something Greenspan would do out of self interest, to protect his own reputation.Originally posted by WDCRob View Post
“Too many bubbles have been going on for too long,” Volcker added. “The Fed is not really in control of the situation.”
That may turn out to be the understatement of the decade.Ed.Comment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
VOLCKER ROCKS!!!!!!
I remember 17% Rates......................Oh Please P L E A SE lets have them again!
MegaComment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
Mike i will be in London soon with the wife and kids let's have a drink - that is if you are from England lolOriginally posted by Mega View PostComment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
careful what you wish for, mega. 17% interest rates now is taking our rusted gear box banking system and filling it with sand. those days it was so greasy and slimy he had to keep pouring freon over it to gum it up a bit.Originally posted by RickBishop View Post
rick, no friggin' way mega drinks. i can't imagine mega with a pint. no way!Comment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
Am In Liverpool
MegaComment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
sounds like a not-so subtle indictment of Greenspan, not Bernanke.Originally posted by FRED View Post
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
The article has a pretty good go at Greenspan, though in a fairly civilized way.Comment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
The article is here.Originally posted by WDCRob View Post
The Education of Ben Bernanke
Published: January 20, 2008
This article will appear in this Sunday's Times Magazine.
Ben Bernanke’s first exposure to monetary policy was reading the works of Milton Friedman, the Nobel laureate. That was 30 years ago, when Bernanke was a graduate student at M.I.T., and he has been studying central banking ever since. By the time President Bush nominated him to run the Federal Reserve, at the end of 2005, Bernanke knew more about central banking than any economist alive. On virtually every topic of significance — how to prevent deflationary panics, for instance, or to gauge the effect of Fed moves on stock-market prices — Bernanke wrote one of the seminal papers. He championed ideas for improving communications between the Fed — whose previous chairman, Alan Greenspan, spoke in riddles — and the public, believing that clearer guidance about the Fed’s aims would help the economy run more smoothly. And having devoted much of his career to studying the causes of the Great Depression, Bernanke was the academic expert on how to prevent financial crises from spinning out of control and threatening the general economy. One line from his “Essays on the Great Depression” sounds especially prescient today: “To the extent that bank panics interfere with normal flows of credit, they may affect the performance of the real economy.”Ed.Comment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
But I haven't come across anybody addressing the conundrum posed by Michael Hudson in his paper "The Mathematical Economics of Compound Interest" (Part One) (Part Two)
The following poem - along with its explanation is quite good.The preferred method of mathematical economics is general equilibrium analysis in an environment in which only small marginal disturbances are envisioned, not major structural problems or legal changes in the economic environment. Marginal analysis avoids dealing with quantum leaps. It selects and correlates a rather narrow set of phenomena (supply, labor and materials costs, the interest rate, income and the pattern of demand) to produce models that show how economies might settle at an equilibrium point if left free from outside political interference.
Many economists are trained in calculus and higher mathematics without feeling much need to test their theories quantitatively. They tend to use mathematics less as an empirical measuring tool than as an expository language or simply as a decoration to give a seemingly scientific veneer to their policy prescriptions. Mathematical economics rarely is used to statistically analyze the inherent tendencies at work to polarize wealth and income.
In fact, the mathematical 'badge of science' has distracted attention from the tendency for economies to veer out of balance.[1] The problem is that to achieve a single determinate, stable solution to any given problem (always posed as a 'disturbance' to a pre-existing balance), general equilibrium theorists are driven to assume diminishing returns and diminishing marginal utility in order to 'close the system.' A narrow set of variables is selected that all but ignore the economy's growing debt overhead relative to its assets, and the associated flow of interest.
Economies change their shape as they grow. This shape is distorted by the inherent tendency for financial claims - bonds, bank loans and other financial securities - to grow more rapidly than the economy's ability to carry them, much less to pay them off. The volume of such claims tends to grow by purely mathematical principles of self-expansion, independently from underlying economic trends in wealth and income, and hence from the ability of debtors to pay.
The task of economic regulation is reduced to setting an appropriate interest rate to keep all the economy's moving parts in equilibrium. This interest rate is supposed to be controlled by the money supply. An array of measures is selected from the overall credit supply (or what is the same thing, debt securities) to represent 'money.' This measure then is correlated with changes in goods and service prices, but not with prices for capital assets - bonds, stocks and real estate. Indeed, no adequate statistics presently exist to trace the value of land and other real estate.
The resulting economic models foster an illusion that economies can carry any given volume of debt without having to change their structure, e.g., their pattern of wealth ownership. Self-equilibrating shifts in incomes and prices are assumed to enable a debt overhead of any given size to be paid. This approach reduces the debt problem to one of the degree to which taxes must be raised to carry the national debt, and to which businesses and consumers must cut back their investment and consumption to service their own debts and to pay these taxes.
Excluded from the analysis is the finding that many debts are not repayable except by transferring ownership to creditors. This transfer changes the shape of the economy's legal and political environment, as creditors act as rentiers to subordinate labor and capital to the economy's financial dynamics.
Rent-seeking exploitation and the proverbial free lunch are all but ignored, yet real-world economics is all about obtaining a free lunch. That is why one seeks to become a political insider, after all, yet such considerations are deemed to transcend the narrow boundaries of economics. These boundaries have been narrowed precisely so as to limit the recognized 'problems' only that limited part of economic life that can be mathematized, and indeed, mathematized without involving any changes in social structure ('the environment').
A particular kind of mathematical methodology thus has come to determine what is selected for study, recognizing only problems that have a single determinate mathematical solution reached by or what systems analysts call negative feedback. As noted above, such entropic behavior is based on the assumption of a falling marginal utility of income: The more one earns, the less one feels a need to earn more. This is fortunate, because most models also assume diminishing returns to capital, which is assumed to be invested at falling profit rates. Income and wealth thus are portrayed as tapering off, not as soaring and polarizing until a financial collapse point, ecological limit or other kind of crisis is reached.
Dramatists and novelists often have paid more attention to debt than do modern economists. The novels of Dickens, Balzac and their contemporaries, as well as earlier British drama, are filled with debt imagery. In fact, one of the earliest applications of Napier's logarithms, developed in the late 1500s, occurs at the outset of Shakespeare's A Winter's Tale. Floridly expressing gratitude for the nine months of hospitality he has received, the character Polyxenes jokingly uses the metaphor of a burdensome debt that can never be repaid. The idea is that to take the time to thank his host properly would consume yet more time, using up yet more hospitality for which yet more thanks would be due, creating a never-ending obligation.
Nine changes of the watery star [the moon] hath been
The shepherd's note since we have left our throne
Without a burden: time as long again
Would be fill'd up, my brother, with our thanks;
And yet we should for perpetuity,
Go hence in debt: and therefore like a cipher,
yet standing in rich place, I multiply
With one we-thank-you many thousands more
That go before it.
"Without a burden" means without debt. The "cipher . . . standing in a rich place" is the language used in the early 1600s to indicate the logarithmic exponential. The imagery was that of a debt mounting up unpaid at compound interest, multiplying to the point where it engulfs the kingdom.
Economic writers in earlier times were more ready than their modern counterparts to confront the problem of debts growing so large as to be unpayable. In The Wealth of Nations (V, iii), Adam Smith observed that "Bankruptcy is always the end of great accumulation of debt. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment."Comment
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Re: Rumor: Upcoming interview in NYTimes, Paul Volcker spanks Bernanke
If Ben survives this down turn it won’t be entirely of his cutting policy it will be the wave of foreign repudiation of funds coming to the US injecting rescue liquidity and access to purchasing real assets.
With growth conditions lined up and a little hand holding to keep the shaking hand of Ben stable he can light his first fire bubble.
As said in the NYTimes article page 2
As I said on I tulipBernanke has a serious manner, befitting a scholar who once expected to spend his entire career in academia. He is shy and seemed faintly ill at ease, stiffly folding his arms while we talked; his hand trembled slightly when he gave me one of his books. He answered questions with an absence of emotion but with a torrent of carefully worded fact.
http://www.itulip.com/forums/showthr...=9140#post9140
but we will see a little “KA” before Bernanke (shaking hand) gets around to lighting the match to his "first" bubble fire.
Last edited by bill; January 17, 2008, 10:14 AM.Comment
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