naked capitalism

Dave Raithel says:

To be fair, I cannot tell where the paraphrasing stops and the quoting begins. The link back to the article reads:

‘Hale, a Chicago-based economist for investment managers, hedge funds and multinational companies, paraphrased the Fed chairman’s response.

“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”‘

I don’t dispute that things are out of control. I heard on Market Report of people buying Treasury paper for no return… just so they’d have a safe place to put it while they figured what else to do, I guess. That surely indicates things are amiss. But might Bernanke have been given the job of shining a turd?

Viv says:

There’s just too much going on to keep track off.

The credit markets, WaMu, Morgan, Goldman, AIG, moscow share slump, asian shares in freefall,TED spreads and LIBOR. House building permits tumbling, gold’s biggest spike in 28 years, t-bills at record lows. Phew!

All this and we’re still in the early stages according to Roubini.

DaddieMac says:

Boy Main Street will love this. Ben never had control, the market has always been bigger than the Federal Reserve, the FDIC and the treasury.

mickslam says:

I agree with your point Dave, that bernake was most likely talking about the prior “control” they had, and not simply dictating prices.

Anonymous says:

lets be honest.

The real problems are greed, ponzi scammers, to much self interest, too little oversight, obscene and vulgar leverage, pompous asses, whimpy academics, an old fart that ran the Fed for too long , imbecilic homebuyers, hedge funds raiding stocks, overpaid nitwits everywhere, a pumped up standard of living not justified by production…… and thats just the preamble.

Dean says:

This remark makes me to want to get back to the good old times:

http://www.youtube.com/watch?v=268p-BoyhfY

P.S. My favorite appears at frame 1:43

Dean says:

Actually frame 1:41 to 1:42.

And the reason is that unlike ben “she gets it while she can”.

Anonymous says:

Since Greenspan made the following comment in a meeting in France on 09-26-05, I don’t find Bernanke’s statement particularly surprising. Once control of the deficit was lost, what other outcome could there be?

‘In an extraordinary revelation after a meeting between Thierry Breton and Mr Greenspan, M. Breton told reporters: “‘We have lost control,’ that was his [Mr Greenspan's] expression.

“The US has lost control of their budget at a time when racking up deficits has been authorised without any control [from Congress],” M. Breton said.’

I also feel sorry for Mr Bernanke. I don’t think his prior experience prepared him in any way for his current job…In his first address to the pig men Ben made a comment, very telling, that he was glad that the big banks were not highly leveraged. His audiance laughed. In August of 07 Mr Bernanke had a cram course on derivatives to bring him up to speed. I wish him, and us, luck.

River

http://www.independent.co.uk/news/business/news/american-fury-over-greenspan-leak-508439.html

Steve says:

Bernanke simply could not have meant to say that the Fed recently lost control of commodity and FX levels, as the Trib article implies. An FX officer at the Fed told me over 20 years ago that the market was far too large to be forced in one direction or another—at best the CBs could tag a speculator and put a little fear into the markets—and there’s plenty of articles in the academic literature on the limits to CB intervention. Bernanke certainly know all this. And I don’t believe the Fed has ever thought that it could control commodity prices apart from the general pricing level. Anyway, what `we’ was Bernanke referring to? We the government, we the regulators, we the central bank, we the major central banks of the world, we as a sovereign state? I mean things are horrendous right now, but Bernanke is neither ignorant nor stupid.

Anonymous says:

The rule is confirmed again, you can manipulate short term but you can’t affect the long term trend, the markets are to big such as the US consumers as a whole.

Have you seen the latest TIC data? OMG

How’bout the oversea markets tonight?

Even the long term traders/analysts/pundits have never ever seen events like we are living through in real time now.

Yves Smith says:

I still believe the use of the word “control” shows cognitive dissonance. Bernanke and his colleagues may know on an intellectual level that the forces at work are bigger than they are, but still think their job is to control outcomes, not on a day-to-day basis, but to keep them within certain parameters.

Look at the Fed’s mission statement:

Today, the Federal Reserve’s duties fall into four general areas:

providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system

The statement was updated as of September 14, but when I first came across it, I think it was dated as of 2003 or 2005 and had “financial stability” as a duty. That’s not in any of the legislation passed by Congress. The Fed’s duties are price stability, full employment, and soundness of the banking system.

So the Fed has fallen victim to mission creep. Its self-assigned expanded role has given it responsibility with only partial ability to execute.

Again, I keep coming back to the fact that Bernanke discussed commodity prices as something that the Fed (or whoever “we” was) could or at some oiont had controlled. Commodity prices are so far afield of the Fed’s duties that the fact that he could say anything even remotely like “We have lost control…..We cannot control commodity prices” shows something seriously amiss.

SilverDollar says:

Yves said,

“Commodity prices are so far afield of the Fed’s duties that the fact that he could say anything even remotely like “We have lost control…..We cannot control commodity prices” shows something seriously amiss.”

Yves, I wonder if what’s “amiss” is that Bernanke doesn’t really know what his job is. He’s been single-handedly thrust into the position of saving a financial system that we Americans broke. I actually feel for the guy, but the problem, as Mish correctly states, is the Fed itself and fractional reserve lending.

Richard Kline says:

So Yves, I’m _not_ surprised to hear that this was Ben B.’s perspective; it was assuredly Alan Greenspan’s view of himself and his position in the world economy. —And not entirely wrong. Sure, the Fed _by itself_ has only so much weight, although the ability to steer the lean on the world’s reserve currency is far more of an influence than the Fed’s own balance sheet. But Greenspand, quite clearly, ACTIVELY COLLUDED with all the major iBanks on his moves: He did exactly what they wanted, and so they all played it ‘his’ way. And the iBanks had a serious chokehold on the shadow banking system by virtue of finding them credit and being the chokepoint on the hedgies dealies. So the iBanks _and_ the Fed together came much, much closer to controlling the financial system. Not control, as in absolute discretionary power, but control as in, knowing what’s up first, putting their weight in the right place, rolling the show their way, and gaming the system to crush non-compliers. I do not personally doubt that the Fed had info from the big Is about commodity moves, and we have discussed before the Fed’s gaming the equity markets. _This_ was what Greenspans’ real game was about to me, colluding with the major players to amp his/their plays. And that wasn’t simply an illusory control.

—And Ben Bernanke is right that the situation has now spun out of the grip of that set of players, who thus by definition have lost the ‘control’ that they had. That was bound to be the end of the kind of collusion I would posit, so I don’t regret it at all. But we are all getting collateral damage in consequence, in all senses of the phrase. If we don’t get fascism out of it, the learning experience will be salutory: the outcome on that is, to me, too close to call. . . . There are things _worse_ than market crashes. It was the hyper-out of the 20s in Deutschland, and the financial crash of the 40s in Argentina which both paved the wave for terror and execration. Hmmm.

Blissex says:

«He’s been single-handedly thrust into the position of saving a financial system that we Americans broke.»

That’s because of the ideology of his party: the Republican faith is that the government is always the problem, never the solution. More practically, the government is already running a colossal deficit because of the borrow-and-spend policies of the Republicans.

So they are using the Fed as a fig-leaf, as a frontman, to pretend that problems that are fiscal in nature can be solved with monetary policy.

Because the faith says that the only fiscal moves one can do are cutting taxes and spend more on wars and corporate welfare.

The Republicans hope that they can use the Fed to kick the can down the road and that if Obama gets elected and has to use the government budget to fix the problems then they can attack him for wasting public money and corporate welfare.

Anonymous says:

“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”

I’ve met David Hale and feel sure that he would be conscientious about quoting Bernanke accurately.

But surely “stabilizing the dollar” and “controlling commodity prices” are well down on the Fed’s list of priorities, in the midst of toppling financial institutions.

After all, even as crude oil has bubbled higher for the past seven years, the Fed has dismissed its significance by using core PCE and core CPI to say, “That don’t matter.” NOW they’re suddenly concerned about commodity prices? Concerned about them rising or falling? If they didn’t matter on the way up, why do they matter on the way down?

And has the U.S. EVER cared about the external value of the dollar, whose holders it has shafted over and over through the years?

In other words, unless Bernanke’s remark was taken out of context, he’s lost his grip on the order of priorities. When your house is on fire, you don’t worry about fixing that leaky faucet.

The larger issue, which has concerned me for years, is that a $900 billion entity is (as Yves says) not remotely big enough to rule the markets. I asserted when Bernanke came on board that he would be remembered for growing the Fed’s balance sheet at a fantastic rate, perhaps $100 or $200 billion a year.

Well, it’s already happening, but big chunks of the various term facilities are being treated as off balance sheet. It’s not clear to me that this accounting convention is valid.

Bernanke is playing with fire, because a real meltdown would bring a fierce surge of populist political anger. If he escapes lynching, Bernanke may well see the Federal Reserve nationalized and made a directly-ruled creature of Congress. If so …

Rock on, gold! Dollars to dimes, in the blink of eye!

SPECTRE of Deflation says:

So several months ago Ben said this, but we learn of the conversation in the last couple of days? If the FED Chairman made this statement, I would guess it would be important news, but we know that Ben supposedly made this Earth Shattering statement months ago. I think Hale is more full of Shit than a stuffed Christmas Turkey.

anon says:

I second anon 9:10

Stop pushing such condescension.

It will destroy your brand and yourself.

Matthew Dubuque says:

Matthew Dubuque

The key point is that David Hale (who was mistaken at key points in 1982 and 1987) “PARAPHRASED” Bernanke. That’s what the article says.

I’ve read more than 30 papers on monetary policy by Bernanke (far more than this unknown reporter and likely more than David Hale) and it’s obvious from even a cursory reading of them that Bernanke understands the limited role of the Fed. This is not rocket science.

Let’s hear the actual tape. Obviously there were lots of other reporters there and no other reporter commented on what would have been a truly stupid and shocking statement, had it occurred.

Let’s hear the tape, before we rely on some third hand report that “Paraphrases” Bernanke’s comment.

Matthew Dubuque

Walt Pohl says:

groucho, that’s not what that quote means. That quote just means that if T-Bills are a better deal than gold, people will hold T-Bills instead of gold.