Thursday, December 17, 2009

Bernanke Confirmed

What an awful few days for news. Public option gutted. Bernanke confirmed. Medicare buy-in dead.

Matt Yglesias has it right. Here too.

There is more Bernanke could do. $1 trillion more of QE would certainly lower the value of the dollar and reduce long-term interest rates, and probably also increase asset values generally and improve banks’ balance sheets.

What nobody asked Bernanke was why, if his Fed projects 1.7 inflation for 2010, and unemployment to be 9.3-9.7% at the end of 2010, WTF isn’t he doing more?

And, WTF can’t anyone ask him this? What’s the reasoning?

As best I can tell, there is no good answer. Some say “well, the Fed can’t really do more” but this is false, for reasons I've already hashed out. Others say “hey, inflation will accelerate..” but we’ve been hearing this for nearly a year now, and the Core CPI in November was… unchanged from October. October’s rate was … up .2%. These aren’t hyperinflation numbers. If the core rate had come in at up .3 or .4%, my policy position would be to wait and see what happens next month before advocating much more QE (although I would probably still want a bit more than is being done). But even w/ a negative surprise in the core CPI rate, I don't see the Fed making its position substantially more accomodative. And, since Bernanke's Fed is the one predicting low inflation, he can't really use this excuse now, can he?

Also, if you read Bernanke’s actual academic papers, they range from OK to mediocre to f*cking terrible. His Congressional testimonies aren’t flukes — despite the H on the resume, the guy just isn’t that sharp.

The die is cast. I'm going to put my reputation on the line and predict that the US is in for an unnecessarily long unemployment slump... We may not get back under 5% unemployment until Obama is out of office...

W/love, Thorstein Veblen


  1. By now, I really don't care what happens to the Obama administration. If we're gonna get screwed in the time-honored Republican way, I'd rather it was by genuine above-board Republican sociopaths, rather than the whining disingenuous off-brand kind I guess I've been voting for all these years.

    Here's one leftie who's either going to vote Green, or not vote at all. I hope the entire Dem left-wing defects in the same way. It's time to flat-out heighten them thar contradictions.
    -- sglover

  2. Hey now, just wait until the Republican crazies take over the Congress...

    Way better to have the country ruled by centrists than right-wing crazies...

  3. How does more QE lower the value of the dollar? If it just goes into more excess reserves, it shouldn't have any effect on the dollar. I'm looking for a mechanism basically. Why would the next trillion be different than the first?