What?? I Want What Bernanke Is Smoking!!!

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Bernanke says Fed stimulus benefits clear, budget cuts a risk

WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke strongly defended the U.S. central bank’s bond-buying stimulus before Congress on Tuesday, saying its benefits clearly exceed possible costs.

The Fed chairman also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a “significant headwind” for the economic recovery.

See, it’s already happening.

But, what benefits? 

But he added these did not seem material at the moment, adding the central bank has all the tools it needs to retreat from its monetary support in a timely fashion.

No, they don’t.  How does one turn off this spigot?

In response to the financial crisis and deep recession of 2007-2009, the Fed not only slashed official interest rates to effectively zero but also bought more than $2.5 trillion in mortgage and Treasury debt in an effort to push down long-term interest rates and spur investment.

The Fed is currently buying $85 billion in bonds each month and has said it plans to keep purchasing assets until it sees a substantial improvement in the outlook for the labor market.

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13 Responses to What?? I Want What Bernanke Is Smoking!!!

  1. Keitho says:

    They did this in Zimbabwe too. I lived through it.

    I can assure you that if printing money led to prosperity Zimbabwe would be the richest, most productive country in the world by several trillion percent.

  2. PhilJourdan says:

    You misinterpreted Bernanke’s statement. He does have all the tools to turn it off. He had all the tools to turn it on. What he does not have is a way to make the shut off non-destructive to the economy.

    But the QE whatever is like Heroine. It is not really helping, just masking the problems. Once you remove it, the problems will become apparent AND you still have to go through the withdrawal symptoms.

    As soon as you inject horse, you start to incur the problems of being an addict. It will kill you if you continue on it (and Keitho is exactly right), and the withdrawal is painful. But the longer you stay on it, the worse will be the effects, and the withdrawal (unless you die from it).

  3. gator69 says:

    I’m not a fan of having gamblers handling my money…

    • kelly liddle says:

      Gator the clip you have put here is very thought provoking if it is thought about carefully. The problem with Milton Friedman’s idea of a good system is that it would need good people to implement it in the government.

      • philjourdan says:

        Kelly, you missed the point entirely! Friedman is saying that any system that relies on individuals to do “good” is inherently flawed. So he is not asking ANYONE to implement it (and there is the inherent difference between you and I). He is saying get out of the way! As soon as you have to get someone to dictate – you get a bad system. Whether it is a president, PM, or a bureaucrat. It will always go wrong because you cannot get the person to act in the self interest of others. Friedman believed that people, collectively, acting in their own self interest make the best system. And he is right.

        Would it be perfect? No. Nothing of man is perfect. But it would promote the most good for the most people since everyone would be looking to maximize their positions. The fault lies with lazy people who do not want to expend the effort to negotiate for their self interest, instead relying on someone (government) to do it for them.

        • gator69 says:

          You can lead a leftist to logic, but you cannot make him think. ;)

        • kelly liddle says:

          Phil
          I dissagree because you will need good voters then if that is what you are arguing followed by a good government to implement such a system (or “get out of the way” if you want to call it that) that is less not more intrusive. We have governments like it or not that do not always do the best thing and we can’t force our fellow voters to vote how we might like. For Friedman’s idea to take effect you need these things. The only significant difference is between his idea and Keynes’ idea is that it might be possible you only need good voters and government one time resulting in a constitutional change making it difficult for future governments to reverse it.

  4. philjourdan says:

    Kelly, there are over 500,000 words in the English Language. Unfortunately that is not always enough. Friedman was not talking about “Good” voters. He was not talking about “Good” government. He was not talking about “implementing” ANY system. What he said is simple. You cannot trust ANYONE to try to manage a system for the “Good” of others. Period. Not a good man doing it. Not even a good government doing. But ANYONE doing it for the GOOD of others.

    The above is not in question (other than you can disagree with Friedman), Where you can disagree with me is in where Friedman was heading. And that is the role of government. It is no secret that Friedman was very libertarian. And his view of government is very closely aligned with the founders,. Government was meant to be minimal. The purpose is simple. To protect its citizens from foreign powers, and protect them from criminals. Period. That is all the Federal government was supposed to do. And nowhere in there is there any provision for anyone doing “Good” for anyone. Because as soon as you interject a subjective term, there is no objective measure. Period. Where America went wrong (is going wrong) is in trying to force equal outcomes for everyone. It never will happen, and the destruction of liberties and freedom to achieve that ethereal goal is the result of some clowns doing “Good”.

    No one has to vote it in. It was there. No one in government needs to be “good” or “bad”. They just need to follow the law.

    We just screwed the pooch. And we lost it. Like the first pancake, hopefully man will learn. So that the next time, they build in stronger restrictions on government to avoid it from happening if there is a second chance.

    As for Keynes, there are many differences. The PRIMARY difference is in how each thought would be the best way to stimulate monetary growth in times of monetary contraction. What most people understand about Keynes, not even Keynes would recognize.

    • kelly liddle says:

      Phil
      I agree with the essence of what Friedman was saying. The problem is how can this be effected especially in a rich modern society. If it is unlikely to happen then it is just academic. This is where the discussion has to focus, on a tactical political level if you want change. I have no idea about how to do this but I would say to defeat an enemy you must know the enemy. I am not saying any particular people are the enemy only opposition and you must empathise with them and understand their thinking and feelings if you are to change their minds. Although it might be a nice emotional response (feels good) at times to call people stupid this will in my opinion only make them more stubborn.

      • philjourdan says:

        Kelly, we were not discussing hypotheticals or realities. We were discussing what Friedman said. Whether it is possible or not is another discussion entirely. But it has no bearing on what the content of Friedman’s words mean.

        If you want a discussion on what should or could or would happen, be my guest. But let’s put this debate to bed. Whether Friedman was a pipe dreamer, a realist or a documentarian is purely a matter of personal opinion. What he said is a matter of historical fact.

      • kelly liddle says:

        From what I have seen from clips of Friedman he was an optimist.

        • DirkH says:

          Kelly, separation of powers is one time tested practical means of hindering a takeover of a system by , let’s say, iconoclasts. So it is possible to improve a system against such events (even though, given recent events in the US and in the EU, it looks like that obstacle has now been overcome. It took a while.)

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