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February 7th 2010

Bernanke and the Dollar…Part Two

In December, I posted about Ben Bernanke (Bernanke’s Background and Near-Term US Monetary Policy), specifically about how a basic understanding of Bernanke’s academic background and philosophical approach to monetary policy could be useful for predicting the general direction of interest rates, irrespective of prevailing economic conditions. This post, is somewhere between a follow-up and a step back.

By this, I mean that when I last wrote about Bernanke, it was already a foregone conclusion that Bernanke would be approved for a second term as Chairman of the Fed. While his confirmation is still pretty much a given (despite the requisite speechifying by a small but vocal opposition), the fact that it has been so bumpy has caused all of us talking heads to seek higher ground and look afresh at the situation. My intention here, however, is not to look at other potential candidates for Bernanke’s position, as such would be a complete waste of time at this point. Nor do I want to discuss the implications of Bernanke’s eventual confirmation, as I have already done that. Rather, I want to discuss the implications of the delay/complications in his being approved. You would think that there wouldn’t be enough meat here for a substantive analysis, but you would be wrong.

That the confirmation process has been anything but smooth tells us much about both public attitudes towards Bernanke and about the attitudes towards the Fed. With regard to Bernanke, there is now a strong amount of criticism being leveled against him – for fomenting the housing bubble via low rates, lowering rates too quickly, not injecting enough new money into the financial markets. That such criticism is often contradictory is not important. What is important, is that such criticism is increasingly being taken seriously by Bernanke et al, such that the Fed is gradually losing its position as an independent stabilizing force and is instead becoming a highly politicized organization, that may soon be subject to the same checks and balances as other branches of government.

Of course, many commentators (and not a small number of politicians, as evidenced by the progress of Ron Paul’s ‘Audit the Fed’ bill), couldn’t be happier with this turn of events. They argue that the Fed has too much power, and for too long has been able to successfully operate in a public gray area with the power of a government institution but the freedom of a private one. Bernanke – and supporters of the status quo – argue that the Fed needs to be independent so that it can continue to shape monetary policy in line with certain economic objectives, rather than the whims of political parties and competing ideologies.

Many of you are probably indifferent to this issue. But consider that the outcome of this battle (whether the Fed remains independent, or its decisions will become subject to Congressional scrutiny)  – of which Bernanke’s confirmation is part of – carries potentially serious implications for currency markets. It is arguable that the Dollar’s safe haven perception at the onset of the credit crisis stemmed in part from actions that the Fed took to stabilize currency markets, in the form of swap lines and liquidity injections. If such decisions could be vetoed by the government, suffice it to say that investors would begin to question whether the Dollar was really the king of currencies that it purports to see.

On the one hand, accountability in any organization is important. On the other hand, skepticism towards the government is currently near an all-time high, and I would venture to guess that most of you wouldn’t want to see the role of auditor filled by the government. While criticism towards the Fed is justified, turning it into a political institution probably isn’t the solution. Abolishing it all together, on the other hand, well, that’s a different story altogether…

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Posted by Adam Kritzer | in Central Banks, News | 6 Comments »

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6 Comments of “Bernanke and the Dollar…Part Two”

  1. t Says:

    As long as the Fed keeps printing money there is nothing to worry about…right? They are the only one who can create money out of thin air. …How can you “audit” the Fed?

  2. hungry4food Says:

    the perfect economic storm was created when we deviated away from the Reagan Trade Policies for the policies to rally a majority of voters in the environmentalist block of voters , by shutting down and relocating large sectors of raw material and manufacturing that was then relocated By the Multi-National Corporate players who you will find on the donor list below , and financial support was what the 1994-5 WTO FREE TRADE agreement lead to .
    See this donor list , and you will find all the beneficiaries of the Tariff Free Import trade policy , as well as the Environmentalist Interests , which led to the complete merger and consolidation of the retail sector thus consolidation of the wealth of the distribution of this wealth , thereby making a crisis that then would need to be regulated , these politicians think long term and plan out these types of outcomes ; the 2 links below show you who was the greatest beneficiaries of the WTO Free Trade agreement , there heads of the Big Retail Multi-National consolidators make up a larger portion of the list .

    http://www.nytimes.com/2008/12/19/us/politics/w19clinton.html voices.washingtonpost.com/…/2008/12/clinton_donor_list.html

    In my opinion this was all by design , and means to a ends , as laid out here in these 2 links ; http://en.wikipedia.org/wiki/The_Communist_Manifesto
    http://vcn.bc.ca/citizens-handbook/rules.html

    And this policy below was the vehicle that led to this consolidation , and was told by independent analysis that the outcome was pertinent to the position we face today , but was ignored by the policy makers , Why ??? You know why , so they could create the crisis which now they can try to appear as the remedy too , by actually now what is trying to be put in place is Bigger Government because of a destruction of the Mom and Pop retail Sector of the wealth redistribution frame work of the period of time in US history before this Trade Policy was enacted was the greatest period of American family wealth creation in modern history but was altered to favor the power brokers on wall street , that put together the frame work that led to the consolidation of this wealth creation and redistribution network that feed a local community , made American families able to be self providing . In the 1990s I often wondered while all the merger and acquisition of the retail sectors , and manufacturing sectors that then led to the off shore movement of the labor , where was Our FTC that was to be the regulator on how much of a controlling interest a corporation could own , where were these regulators , but see from a WTO rule point , the Percentage of Consolidation of a sector is not measured on a national level , but from a Multinational level . But with Gresham’s Law of the 14th Century at play here , allowing different valued currencies to trade in the same market places , the manipulated lower valued currency will always end up consolidation the durable wealth a market . This is crucial to what happened over the last 15 years . Read this link ; http://www.statemaster.com/encyclopedia/Gresham%27s-law – this 14 th Century economic calamity was what brought down the economies of England leading up to the flight of citizens in search of a new world , like Columbus and all the others that fled and relocated to other parts of the world . What happened was a Trade action that took durable creation away from the local merchants in England , over to north Africa , by the parliament that led to a consolidation of the barter system of trade and durable wealth creation and distribution , this is almost like a road map for wealth destruction , and before the 1990s , economics taught students this fundamental flaw in economic function , and is the reason why tariff rules between different valued currency nations who want to trade exist so as to create a way to maintain balance between nations bartering and at the same time keep fundamental balance in labor and price for durable goods markets . This is what is the determining factor in a nations sovereign wealth and sovereignty overall . With this mechanism out of place , we see the results . But was it by design , and I ask this because the people we put in place to Government are Proven to be the highest educated and or hirer the highest educated in their field of expertise , but when you factor in a political agenda , and the ideology in that venue , you have to wonder if these events are all by design for a certain out come to transpire ????
    The High Cost of the China-WTO Deal: Administration’s own analysis suggests spiraling deficits, job losses
    By Robert E. Scott,
    February 1, 2000

    http://www.epi.org/publications/entry/issuebriefs_ib137/
    Ross Perot said this would happen in 1991 ; http://www.thenation.com/doc/20011231/greider

  3. hungry4food Says:

    Understanding the agenda setforth in these links can help to bring reason to why Consolidation of wealth of economies around the world has been the progressive movement of current trade policies over the last 15 years of the current trade policy

    http://www.mathaba.net/0_index.shtml?x=90207

    http://www.chinadaily.com.cn/china/200912/10/content_9151129.htm

    http://www.archive.org/stream/TheFirstGlobalRevolution

    http://www.clubofrome.org/eng/cor_news_bank/19/

    http://www.warsocialism.com/America.htm

  4. hungry4food Says:

    here is a new link to the China says Population control key to climate change deal ;

    http://www.chinadaily.com.cn/china/2009-12/10/content_9151129.htm

    in terms of debating a recovery in supply-side economic fundamentals , how does population control effect the ability to value a economy that has to value consumption growth if consumer growth is stagnate going forward under this type of monetary policy ?

    See this link on the future of population growth by the top tier 1 money group ;

    http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6350303.ece

  5. hungry4food Says:

    this link was changed ; http://ia311021.us.archive.org/3/items/TheFirstGlobalRevolution/TheFirstGlobalRevolution.pdf
    this is a vital link to understanding the resistance to free enterprise and why we are in a phase of uncertainty in supply-side economics

  6. Esra Says:

    too much bubling essay
    didnt get the point
    is the Feds going eventually raise the interest rate in comming weeks or what… we all can forcast that the IR is going to be changed some time in the future and for this, one dont need to write so much
    sorry Yochay,..

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