GreenSpan to Retire Jan 31
09-09-2005, 03:35 PM
#1
is learning to moonwalk i
Thread Starter
GreenSpan to Retire Jan 31
Looks like he won't be staying for another term.
http://news.yahoo.com/s/nm/20050909/...NlYwMlJVRPUCUl
http://news.yahoo.com/s/nm/20050909/...NlYwMlJVRPUCUl
WASHINGTON (Reuters) - The Federal Reserve dropped a clear hint on Friday that Chairman Alan Greenspan will retire on January 31, ending talk he may stay on longer and reinforcing market concern that time is running out to name a successor.
The Fed said its first meeting of 2006 will take one day rather than two to avoid spanning the terms of two chairman. The Federal Open Market Committee will now meet on January 31, instead of gathering for two days, on January 31 and February 1, as it generally does in its first meeting of the year.
Greenspan's term ends January 31 and he has told associates that he would go on schedule.
But there has been persistent speculation the 79-year old may remain in office beyond that date, for instance if a replacement was not ready to take over in time. The Fed's announcement appeared to rule this out.
"This schedule change avoids a meeting that spans the terms of two chairmen," it said, adding that Greenspan would attend the January 31 meeting.
The decision reinforces a sense among Fed watchers that the White House must work fast to find an heir to Greenspan, who commanded the Fed for 18 years with such skill that financial markets fret he could prove an impossible act to follow.
Markets are preoccupied at the moment with high oil prices and the impact of Hurricane Katrina on U.S. growth and the Fed's interest rate policy. But once these topics fade, the issue of who will be Greenspan's successor will assert itself as a trading factor.
"This is likely to become a much bigger issue as we near the end of the year," said Lynn Reaser, chief economist at Bank of America Capital Management in Boston.
Three names lead the list of likely candidates to take over -- Glenn Hubbard, a past adviser to President George W. Bush; Harvard economist Martin Feldstein; and former Fed Governor Ben Bernanke, who now is a White House adviser.
But no one has emerged as a clear front-runner and the White House may yet decide to select someone from Wall Street or industry, while Fed Board Governor Donald Kohn could prove the insiders' choice if Greenspan gets a big say.
Financial markets are naturally wary about a change in leadership at the U.S. central bank, particularly since it comes at a critical juncture for monetary policy.
The Fed has said it expects to continue a 15-month campaign of raising short-term interest rates at a measured pace, although the devastation from Hurricane Katrina has some investors betting it might pause after its next hike, at 3.75 percent.
Whatever the outcome of that debate, the first quarter of next year will be an even more crucial period than usual for the bank to plot and communicate its monetary policy path.
The Fed said its first meeting of 2006 will take one day rather than two to avoid spanning the terms of two chairman. The Federal Open Market Committee will now meet on January 31, instead of gathering for two days, on January 31 and February 1, as it generally does in its first meeting of the year.
Greenspan's term ends January 31 and he has told associates that he would go on schedule.
But there has been persistent speculation the 79-year old may remain in office beyond that date, for instance if a replacement was not ready to take over in time. The Fed's announcement appeared to rule this out.
"This schedule change avoids a meeting that spans the terms of two chairmen," it said, adding that Greenspan would attend the January 31 meeting.
The decision reinforces a sense among Fed watchers that the White House must work fast to find an heir to Greenspan, who commanded the Fed for 18 years with such skill that financial markets fret he could prove an impossible act to follow.
Markets are preoccupied at the moment with high oil prices and the impact of Hurricane Katrina on U.S. growth and the Fed's interest rate policy. But once these topics fade, the issue of who will be Greenspan's successor will assert itself as a trading factor.
"This is likely to become a much bigger issue as we near the end of the year," said Lynn Reaser, chief economist at Bank of America Capital Management in Boston.
Three names lead the list of likely candidates to take over -- Glenn Hubbard, a past adviser to President George W. Bush; Harvard economist Martin Feldstein; and former Fed Governor Ben Bernanke, who now is a White House adviser.
But no one has emerged as a clear front-runner and the White House may yet decide to select someone from Wall Street or industry, while Fed Board Governor Donald Kohn could prove the insiders' choice if Greenspan gets a big say.
Financial markets are naturally wary about a change in leadership at the U.S. central bank, particularly since it comes at a critical juncture for monetary policy.
The Fed has said it expects to continue a 15-month campaign of raising short-term interest rates at a measured pace, although the devastation from Hurricane Katrina has some investors betting it might pause after its next hike, at 3.75 percent.
Whatever the outcome of that debate, the first quarter of next year will be an even more crucial period than usual for the bank to plot and communicate its monetary policy path.
10-04-2005, 06:28 PM
#2
I feel the need...
Greenspan, Term Ending, Returns to Randian Roots: Caroline Baum
2005-10-03 00:02 (New York)
(Commentary. Caroline Baum, author of ``Just What I Said,''
is a columnist for Bloomberg News. The opinions expressed are her
own.)
By Caroline Baum
Oct. 3 (Bloomberg) -- In the autumn of his life as Federal
Reserve chairman, Alan Greenspan is thinking about his legacy.
He's not alone. Last month, at the Kansas City Fed's annual
Jackson Hole symposium, Greenspan was toasted as ``the greatest
central banker who ever lived'' by Princeton University's Alan
Blinder and other notables who trekked to the Grand Tetons in the
hope some of his greatness would rub off on them.
Greenspan surely wants to have some say in how he'll be
remembered. Perhaps that's why, with one burst bubble under his
belt and a potential one still inflating, he returned to his
philosophical roots in a speech last week to the National
Association of Business Economics annual meeting in Chicago.
You wouldn't have seen any reference to it in the media
coverage. And understandably so. There was no market-moving news
in the first two-thirds of his speech.
Instead, Greenspan provided a brief history of the changing
attitudes toward the government's role in the economy: the free-
market capitalism of Adam Smith that prevailed in the 19th and
early 20th centuries; the attempt at interventionist, demand-side
management advocated by John Maynard Keynes during the 1930s
Depression, when the market system seemed to fail to restore the
economy to full employment; the resultant stifling of competition
and economic stagnation of the 1970s; the failure of wage and
price controls and eventual disillusion with regulation; and the
ultimate triumph of free markets when ``the collapse of the
Berlin Wall in 1989 exposed the economic ruin behind the Iron
Curtain,'' Greenspan said.
Commanding Heights
It was ``Atlas Shrugged'' without Dagny Taggart and Hank
Reardon to lead us through the struggle.
Greenspan was present at the creation of Ayn Rand's
masterpiece as part of the free-market philosopher's inner circle
in the 1950s. It makes perfect sense that as he gets ready to
retire from the Fed on Jan. 31, Greenspan would create an
idealized image of himself, even if it differs from reality.
The last third of Greenspan's speech last week -- the one
that got media attention -- was less impressive and much less
noble. He left Ms. Rand to fend for herself as he stepped into
his role of government bureaucrat.
Greenspan's thesis, if you could call it that, was that
successful economic policy, including the monetary management to
which he is entrusted, leads to nutty behavior on the part of
investors.
Good Is Bad?
Yes, that's right. If the Fed does its job in providing an
environment of low inflation, the economic stability it engenders
leads to ``market exuberance,'' Greenspan said, implying the
behavior is rational even if it's frivolous.
``Why would a better economic environment cause investors to
be more careless?'' asked Jim Glassman, senior U.S. economist at
JPMorgan Chase & Co. ``A true Randian would have total trust in
individual judgments.''
Perhaps investors are induced to be more careless by the
presence of a safety net. Greenspan's risk-management approach to
policy-making implies acting to offset the biggest risks and
protect the biggest risk-takers. Like the doctrine of ``too big
to fail,'' it suggests that if you are going to roll the dice in
a big way, make sure any failure creates a systemic risk to
ensure government intervention.
Greenspan's 18-year tenure at the Fed has been characterized
by multiple such interventions, the kind his mentor would have
despised.
The `Greenspan Put'
Consider that the ``Greenspan put'' has become as much as
part of the lexicon as the maestro's own popularized inventions,
such as ``irrational exuberance'' and ``economic headwinds.''
A put option gives the buyer the right to sell a security,
index or futures contract at a specific price by a specific date.
Buying a put protects the holder against a decline in prices.
After multiple rescue efforts -- Greenspan cut rates in 1995
following the Mexican peso crisis and Orange County blowup and
again in 1998 in response to the near-collapse of hedge fund Long-
Term Capital Management -- investors began to refer to, and rely
on, the Greenspan put as an implicit guarantee that the Fed would
cut rates if things got too dicey for the stock market.
``He has been willing to ease, and ease aggressively,
thereby creating the right financial conditions for a mania,''
said Bill Fleckenstein, president of Fleckenstein Capital in
Seattle, who has painstakingly documented Greenspan's bad
forecasts over the years. (Think ``Whip Inflation Now'' in 1974.)
Proud Parent
While Greenspan's topic last week was ostensibly how greater
flexibility has enabled the U.S. economy to handle shocks, the
speech was really ``an attempt to rewrite history and can only be
titled, `Damn, I'm Good,''' Fleckenstein said. For example,
Greenspan went out of his way to remind us that the Fed was
uncomfortable ``with a stock market that appeared as early as
1996 to disconnect from its moorings.''
The Fed chief has been spending more time of late on the
possibly unmoored housing market than on any irrational pricing
in the equity market. (Last week, the Fed published a working
paper co-written by Greenspan on home equity extraction.) He must
know ``the stock market is not valued any differently now than it
was in 1996,'' Glassman said.
The price-to-earnings ratio of the Standard & Poor's 500
Index averaged 19.21 in 1996 compared with 19.59 in the first
nine months of 2005. In other words, if it was disconnected then,
it's disconnected now.
Does that mean that both home and equity prices are detached
from the fundamentals?
Rand believed that individuals, including investors, act in
their own self-interest. Greenspan is certainly acting in his. On
that score, at least, his mentor would be proud.
Source: Bloomberg.com
2005-10-03 00:02 (New York)
(Commentary. Caroline Baum, author of ``Just What I Said,''
is a columnist for Bloomberg News. The opinions expressed are her
own.)
By Caroline Baum
Oct. 3 (Bloomberg) -- In the autumn of his life as Federal
Reserve chairman, Alan Greenspan is thinking about his legacy.
He's not alone. Last month, at the Kansas City Fed's annual
Jackson Hole symposium, Greenspan was toasted as ``the greatest
central banker who ever lived'' by Princeton University's Alan
Blinder and other notables who trekked to the Grand Tetons in the
hope some of his greatness would rub off on them.
Greenspan surely wants to have some say in how he'll be
remembered. Perhaps that's why, with one burst bubble under his
belt and a potential one still inflating, he returned to his
philosophical roots in a speech last week to the National
Association of Business Economics annual meeting in Chicago.
You wouldn't have seen any reference to it in the media
coverage. And understandably so. There was no market-moving news
in the first two-thirds of his speech.
Instead, Greenspan provided a brief history of the changing
attitudes toward the government's role in the economy: the free-
market capitalism of Adam Smith that prevailed in the 19th and
early 20th centuries; the attempt at interventionist, demand-side
management advocated by John Maynard Keynes during the 1930s
Depression, when the market system seemed to fail to restore the
economy to full employment; the resultant stifling of competition
and economic stagnation of the 1970s; the failure of wage and
price controls and eventual disillusion with regulation; and the
ultimate triumph of free markets when ``the collapse of the
Berlin Wall in 1989 exposed the economic ruin behind the Iron
Curtain,'' Greenspan said.
Commanding Heights
It was ``Atlas Shrugged'' without Dagny Taggart and Hank
Reardon to lead us through the struggle.
Greenspan was present at the creation of Ayn Rand's
masterpiece as part of the free-market philosopher's inner circle
in the 1950s. It makes perfect sense that as he gets ready to
retire from the Fed on Jan. 31, Greenspan would create an
idealized image of himself, even if it differs from reality.
The last third of Greenspan's speech last week -- the one
that got media attention -- was less impressive and much less
noble. He left Ms. Rand to fend for herself as he stepped into
his role of government bureaucrat.
Greenspan's thesis, if you could call it that, was that
successful economic policy, including the monetary management to
which he is entrusted, leads to nutty behavior on the part of
investors.
Good Is Bad?
Yes, that's right. If the Fed does its job in providing an
environment of low inflation, the economic stability it engenders
leads to ``market exuberance,'' Greenspan said, implying the
behavior is rational even if it's frivolous.
``Why would a better economic environment cause investors to
be more careless?'' asked Jim Glassman, senior U.S. economist at
JPMorgan Chase & Co. ``A true Randian would have total trust in
individual judgments.''
Perhaps investors are induced to be more careless by the
presence of a safety net. Greenspan's risk-management approach to
policy-making implies acting to offset the biggest risks and
protect the biggest risk-takers. Like the doctrine of ``too big
to fail,'' it suggests that if you are going to roll the dice in
a big way, make sure any failure creates a systemic risk to
ensure government intervention.
Greenspan's 18-year tenure at the Fed has been characterized
by multiple such interventions, the kind his mentor would have
despised.
The `Greenspan Put'
Consider that the ``Greenspan put'' has become as much as
part of the lexicon as the maestro's own popularized inventions,
such as ``irrational exuberance'' and ``economic headwinds.''
A put option gives the buyer the right to sell a security,
index or futures contract at a specific price by a specific date.
Buying a put protects the holder against a decline in prices.
After multiple rescue efforts -- Greenspan cut rates in 1995
following the Mexican peso crisis and Orange County blowup and
again in 1998 in response to the near-collapse of hedge fund Long-
Term Capital Management -- investors began to refer to, and rely
on, the Greenspan put as an implicit guarantee that the Fed would
cut rates if things got too dicey for the stock market.
``He has been willing to ease, and ease aggressively,
thereby creating the right financial conditions for a mania,''
said Bill Fleckenstein, president of Fleckenstein Capital in
Seattle, who has painstakingly documented Greenspan's bad
forecasts over the years. (Think ``Whip Inflation Now'' in 1974.)
Proud Parent
While Greenspan's topic last week was ostensibly how greater
flexibility has enabled the U.S. economy to handle shocks, the
speech was really ``an attempt to rewrite history and can only be
titled, `Damn, I'm Good,''' Fleckenstein said. For example,
Greenspan went out of his way to remind us that the Fed was
uncomfortable ``with a stock market that appeared as early as
1996 to disconnect from its moorings.''
The Fed chief has been spending more time of late on the
possibly unmoored housing market than on any irrational pricing
in the equity market. (Last week, the Fed published a working
paper co-written by Greenspan on home equity extraction.) He must
know ``the stock market is not valued any differently now than it
was in 1996,'' Glassman said.
The price-to-earnings ratio of the Standard & Poor's 500
Index averaged 19.21 in 1996 compared with 19.59 in the first
nine months of 2005. In other words, if it was disconnected then,
it's disconnected now.
Does that mean that both home and equity prices are detached
from the fundamentals?
Rand believed that individuals, including investors, act in
their own self-interest. Greenspan is certainly acting in his. On
that score, at least, his mentor would be proud.
Source: Bloomberg.com
10-18-2005, 05:26 PM
#3
I feel the need...
It will be interesting to see who Dubya picks for the job - this is his most important decision EVAR!!!!
Bernanke, Possible Greenspan Successor, Toes White House Line
2005-10-17 00:16 (New York)
By Brendan Murray and Craig Torres
Oct. 17 (Bloomberg) -- Ben Bernanke, Ivy League economist
and monetary theorist, meet Ben Bernanke, White House economic
adviser. You might have some difficulty recognizing each other.
Bernanke the Harvard undergrad was fascinated by
libertarianism; Bernanke the Princeton professor shunned suits
and ties and spoke his mind in papers on subjects from inflation
to the Great Depression. Bernanke, chairman of President George
W. Bush's Council of Economic Advisers, is button-down and
buttoned up, the model of quiet teamwork and cautious public
statements.
``I can't freelance,'' Bernanke, 51, said in an interview.
``It's not appropriate for me to take it upon myself to go
beyond where the administration is at a certain point in time.''
In developing such restraint, Bernanke isn't just being a
team player. He is doing what fellow economists say he must do
if he wants Bush to pick him to succeed Alan Greenspan as
chairman of the Federal Reserve in January -- a development that
many on Wall Street expect.
Bernanke is ``certainly qualified to be chairman'' of the
Fed, Milton Friedman, winner of the 1976 Nobel Prize in
economics, said in an interview. He calls Bernanke ``a first-
rate economist,'' especially in monetary economics, who has
``done a good deal of original work in the area.''
The CEA chairman acts as a president's chief economic
consultant, and the job can be a steppingstone to the Fed
chairmanship, as it was for Greenspan nearly two decades
earlier. It can also be just a brief detour from academia for
those given to frank and politically inconvenient musings, such
as Harvard's Greg Mankiw, who ruffled feathers last year by
characterizing the loss of U.S. jobs as an inevitable part of
globalization.
Defender of Policies
``Keeping himself out of trouble is a crucial thing because
part of his current job description is to defend the economic
policies of this administration, which to my mind, in many
respects, are indefensible,'' Princeton economist and former Fed
Vice Chairman Alan Blinder says of Bernanke.
Bernanke called himself ``a mainstream economist'' in the
interview. ``Economists in general have considerable faith in
the power of markets to solve economic problems, and view the
role of government as to provide a foundation or a backdrop that
allows markets to work as effectively as possible,'' he says.
``Part of that implies free and open trade among countries. It
involves applying cost-benefit analysis to regulations.''
Since he was sworn in June 21, Bernanke has testified once
before Congress and given five speeches on three non-
controversial subjects. He nonetheless has stayed busy,
providing research on such topics as Bush's policies on
immigration and trade.
`Full Member'
``I feel that I've been made a full member of the team,''
Bernanke says. One main difference between his CEA job and his
past experience, he says, is the ``rapid turnaround'' he's asked
to provide -- sometimes just a day -- for economic analysis.
Occupying much of Bernanke's time in recent weeks is the
economic fallout from two Gulf Coast hurricanes. To arrive at
his initial assessment of Katrina's damage, Bernanke called in
economists from policy-research organizations in early
September. His diagnosis: The hurricane would take a bite out of
economic growth in the third quarter that largely would be given
back early next year as rebuilding accelerates.
``He understands how important it is to speak clearly when
clarity is required and elliptically when it's appropriate to,''
says William Beach, a senior fellow in economics at the
conservative Heritage Foundation in Washington, who attended the
CEA's Katrina meeting.
Tops Survey
Wall Street is betting that Bernanke is likely to follow
Greenspan's path from the CEA to the Fed chairmanship. In a
survey of investors last month, he ranked No. 1 on the list of
likely candidates, getting 38 percent of 104 votes. The second-
closest candidate in the poll by Stone & McCarthy Research
Associates, a Skillman, New Jersey, economics firm, was Harvard
professor Martin Feldstein, who got 31 percent.
Bush said Oct. 4 he is looking for a nominee who would
maintain the Fed's independence from politics, which some
analysts viewed as a sign the White House was considering people
outside the administration.
A day earlier, however, Bush nominated White House Counsel
Harriett Miers to be a Supreme Court justice. Miers was the
latest in a long line of White House staffers Bush has sought to
elevate to higher-level posts, including Secretary of State
Condoleezza Rice and Attorney General Alberto Gonzales, and
critics immediately branded the Miers nomination as cronyism.
Colleagues say it would be difficult to make a similar
charge against Bernanke, should Bush name him to head the Fed.
``It's hard to see how anyone could possible identify Ben
as a crony,'' says Stanford economist Robert H. Hall, a member
of the National Bureau of Economic Research, the group that
charts economic cycles. ``He got to where he is by doing
outstanding research and being a great mind.''
Willing to Challenge
In almost three years at the Fed, from August 2002 to June
of this year, Bernanke was willing to challenge Greenspan on
occasion and to address major issues.
He re-ignited the debate over setting a numerical inflation
goal, a strategy Greenspan and Fed governors Donald Kohn and
Roger Ferguson oppose. The Fed's Open Market Committee decided
at their February meeting to defer the discussion, according to
the minutes of the meeting.
Bernanke supported Greenspan on not using monetary policy
to lance bubbles in stocks or other markets. He also backed
steps toward greater transparency, such as releasing minutes
three weeks after Fed meetings instead of six and using language
in the statements issued after meetings to describe the likely
path of interest rates.
`Voice of Reason'
Bernanke ``has been a voice of reason'' and ``very
straightforward'' and for those reasons is favored in the bond-
trading community, says Paul McCulley, a managing director at
Newport Beach, California-based Pacific Investment Management
Co., which runs the world's biggest bond fund.
Greenspan and Bernanke approach economic analysis
differently, their public remarks show. Greenspan is a
forecaster who digests mountains of diverse data to develop a
sense of where the economy is heading. Bernanke starts from `` a
broad framework'' of savings, investment, and spending to gauge
the economy's health, says New York University economist Mark
Gertler, who has collaborated with Bernanke on papers.
Nobel laureate Robert Solow, a professor at the
Massachusetts Institute of Technology in Cambridge, says
Greenspan ``is a little more given to exercising his intuition
and sometimes talked about his stomach as part of his policy-
making apparatus. I don't think that Bernanke would put a lot of
weight on his stomach and would be more formally analytical than
Greenspan.''
Informal Side
Since joining government, Bernanke hasn't completely
surrendered his informal side. As a Fed governor, he would join
junior staffers in the cafeteria, something governors rarely do,
according to former staff members.
In one of his first Oval Office meetings with Bush after
joining the CEA, Bernanke wore tan socks with a dark suit,
clashing attire that drew comment from the president. Before his
next encounter with Bush, Bernanke convinced Vice President Dick
Cheney, Deputy Chief of Staff Karl Rove and other senior
advisers to wear tan socks as well. Bush liked the joke.
--Editors: Sobczyk, Fireman, Chan.
Story illustration: To graph the change in the U.S. budget
deficit, click {FDEBTY <Index> GP <GO>}. For U.S. gross domestic
product, see {GDP CQOQ <Index> GP <GO>}. To read Bernanke's
speeches at CEA, see:
http://www.whitehouse.gov/cea/speeches.html.
For information on other potential Greenspan successors, see
{NXTW NSN INRNEM0UQVI9 <GO>} for an article on Federal Reserve
Governor Donald Kohn and {NXTW NSN IO5ZYG0D9L35 <GO>} for an
article on Harvard University economist Martin Feldstein.
Bernanke, Possible Greenspan Successor, Toes White House Line
2005-10-17 00:16 (New York)
By Brendan Murray and Craig Torres
Oct. 17 (Bloomberg) -- Ben Bernanke, Ivy League economist
and monetary theorist, meet Ben Bernanke, White House economic
adviser. You might have some difficulty recognizing each other.
Bernanke the Harvard undergrad was fascinated by
libertarianism; Bernanke the Princeton professor shunned suits
and ties and spoke his mind in papers on subjects from inflation
to the Great Depression. Bernanke, chairman of President George
W. Bush's Council of Economic Advisers, is button-down and
buttoned up, the model of quiet teamwork and cautious public
statements.
``I can't freelance,'' Bernanke, 51, said in an interview.
``It's not appropriate for me to take it upon myself to go
beyond where the administration is at a certain point in time.''
In developing such restraint, Bernanke isn't just being a
team player. He is doing what fellow economists say he must do
if he wants Bush to pick him to succeed Alan Greenspan as
chairman of the Federal Reserve in January -- a development that
many on Wall Street expect.
Bernanke is ``certainly qualified to be chairman'' of the
Fed, Milton Friedman, winner of the 1976 Nobel Prize in
economics, said in an interview. He calls Bernanke ``a first-
rate economist,'' especially in monetary economics, who has
``done a good deal of original work in the area.''
The CEA chairman acts as a president's chief economic
consultant, and the job can be a steppingstone to the Fed
chairmanship, as it was for Greenspan nearly two decades
earlier. It can also be just a brief detour from academia for
those given to frank and politically inconvenient musings, such
as Harvard's Greg Mankiw, who ruffled feathers last year by
characterizing the loss of U.S. jobs as an inevitable part of
globalization.
Defender of Policies
``Keeping himself out of trouble is a crucial thing because
part of his current job description is to defend the economic
policies of this administration, which to my mind, in many
respects, are indefensible,'' Princeton economist and former Fed
Vice Chairman Alan Blinder says of Bernanke.
Bernanke called himself ``a mainstream economist'' in the
interview. ``Economists in general have considerable faith in
the power of markets to solve economic problems, and view the
role of government as to provide a foundation or a backdrop that
allows markets to work as effectively as possible,'' he says.
``Part of that implies free and open trade among countries. It
involves applying cost-benefit analysis to regulations.''
Since he was sworn in June 21, Bernanke has testified once
before Congress and given five speeches on three non-
controversial subjects. He nonetheless has stayed busy,
providing research on such topics as Bush's policies on
immigration and trade.
`Full Member'
``I feel that I've been made a full member of the team,''
Bernanke says. One main difference between his CEA job and his
past experience, he says, is the ``rapid turnaround'' he's asked
to provide -- sometimes just a day -- for economic analysis.
Occupying much of Bernanke's time in recent weeks is the
economic fallout from two Gulf Coast hurricanes. To arrive at
his initial assessment of Katrina's damage, Bernanke called in
economists from policy-research organizations in early
September. His diagnosis: The hurricane would take a bite out of
economic growth in the third quarter that largely would be given
back early next year as rebuilding accelerates.
``He understands how important it is to speak clearly when
clarity is required and elliptically when it's appropriate to,''
says William Beach, a senior fellow in economics at the
conservative Heritage Foundation in Washington, who attended the
CEA's Katrina meeting.
Tops Survey
Wall Street is betting that Bernanke is likely to follow
Greenspan's path from the CEA to the Fed chairmanship. In a
survey of investors last month, he ranked No. 1 on the list of
likely candidates, getting 38 percent of 104 votes. The second-
closest candidate in the poll by Stone & McCarthy Research
Associates, a Skillman, New Jersey, economics firm, was Harvard
professor Martin Feldstein, who got 31 percent.
Bush said Oct. 4 he is looking for a nominee who would
maintain the Fed's independence from politics, which some
analysts viewed as a sign the White House was considering people
outside the administration.
A day earlier, however, Bush nominated White House Counsel
Harriett Miers to be a Supreme Court justice. Miers was the
latest in a long line of White House staffers Bush has sought to
elevate to higher-level posts, including Secretary of State
Condoleezza Rice and Attorney General Alberto Gonzales, and
critics immediately branded the Miers nomination as cronyism.
Colleagues say it would be difficult to make a similar
charge against Bernanke, should Bush name him to head the Fed.
``It's hard to see how anyone could possible identify Ben
as a crony,'' says Stanford economist Robert H. Hall, a member
of the National Bureau of Economic Research, the group that
charts economic cycles. ``He got to where he is by doing
outstanding research and being a great mind.''
Willing to Challenge
In almost three years at the Fed, from August 2002 to June
of this year, Bernanke was willing to challenge Greenspan on
occasion and to address major issues.
He re-ignited the debate over setting a numerical inflation
goal, a strategy Greenspan and Fed governors Donald Kohn and
Roger Ferguson oppose. The Fed's Open Market Committee decided
at their February meeting to defer the discussion, according to
the minutes of the meeting.
Bernanke supported Greenspan on not using monetary policy
to lance bubbles in stocks or other markets. He also backed
steps toward greater transparency, such as releasing minutes
three weeks after Fed meetings instead of six and using language
in the statements issued after meetings to describe the likely
path of interest rates.
`Voice of Reason'
Bernanke ``has been a voice of reason'' and ``very
straightforward'' and for those reasons is favored in the bond-
trading community, says Paul McCulley, a managing director at
Newport Beach, California-based Pacific Investment Management
Co., which runs the world's biggest bond fund.
Greenspan and Bernanke approach economic analysis
differently, their public remarks show. Greenspan is a
forecaster who digests mountains of diverse data to develop a
sense of where the economy is heading. Bernanke starts from `` a
broad framework'' of savings, investment, and spending to gauge
the economy's health, says New York University economist Mark
Gertler, who has collaborated with Bernanke on papers.
Nobel laureate Robert Solow, a professor at the
Massachusetts Institute of Technology in Cambridge, says
Greenspan ``is a little more given to exercising his intuition
and sometimes talked about his stomach as part of his policy-
making apparatus. I don't think that Bernanke would put a lot of
weight on his stomach and would be more formally analytical than
Greenspan.''
Informal Side
Since joining government, Bernanke hasn't completely
surrendered his informal side. As a Fed governor, he would join
junior staffers in the cafeteria, something governors rarely do,
according to former staff members.
In one of his first Oval Office meetings with Bush after
joining the CEA, Bernanke wore tan socks with a dark suit,
clashing attire that drew comment from the president. Before his
next encounter with Bush, Bernanke convinced Vice President Dick
Cheney, Deputy Chief of Staff Karl Rove and other senior
advisers to wear tan socks as well. Bush liked the joke.
--Editors: Sobczyk, Fireman, Chan.
Story illustration: To graph the change in the U.S. budget
deficit, click {FDEBTY <Index> GP <GO>}. For U.S. gross domestic
product, see {GDP CQOQ <Index> GP <GO>}. To read Bernanke's
speeches at CEA, see:
http://www.whitehouse.gov/cea/speeches.html.
For information on other potential Greenspan successors, see
{NXTW NSN INRNEM0UQVI9 <GO>} for an article on Federal Reserve
Governor Donald Kohn and {NXTW NSN IO5ZYG0D9L35 <GO>} for an
article on Harvard University economist Martin Feldstein.
10-18-2005, 07:04 PM
#4
Rooting for Acura
iTrader: (1)
Truly the end of an era. I can't understand why people hate this guy. The only thing I can say negative about him is that he's a "I understand what I am doing" kind of guy that leaves even the most tenured Wall Street gurus baffled at times.No one will be able to do what he does. They can only create their own rhyme, reason and rhetoric as he has done. Which, ain't all that bad if you ask me.
10-18-2005, 07:27 PM
#5
I feel the need...
Originally Posted by knight rider
No one will be able to do what he does. They can only create their own rhyme, reason and rhetoric as he has done. Which, ain't all that bad if you ask me.
Fed replacement means high stakes for Bush
Chairman's role now one of national economic spokesperson
ANALYSIS
By Elizabeth Wilner
NBC News Political Director
Updated: 1:43 p.m. ET Oct. 18, 2005
WASHINGTON - Facing reporters in the Rose Garden recently, President Bush fielded a question about a high-profile, high-stakes nominee who, if confirmed, would instantly exert great influence over policies familiar and vital to Americans' everyday lives.
No, not one of the eight questions tossed at Bush about Supreme Court pick Harriet Miers. The one about his upcoming nominee to chair the Federal Reserve when Alan Greenspan steps down in January.
The Fed, you ask? Arbiter of arcane monetary policy? As opposed to the Court, with its influence over galvanizing social issues? Purchasing power parity and diminishing marginal utility -- not property rights or doctor-assisted suicide?
Yes, the Fed. It's not just inverted yield curves anymore.
In 18 years at the helm of the nation's central bank, Greenspan has made the job darn near sexy by wonkish Washington standards, and unprecedentedly relevant to its daily course of business.
Energy prices? A housing bubble? Social Security solvency? The Chairman weighs in on them all for lawmakers whose middle-class and senior citizen constituents (read: swing voters) are more pro-actively engaged with Wall Street than ever, investing college funds and nest eggs in stocks, bonds and real estate.
By turns calming and provocative, Greenspan has become the nation's economic sage, influencing opinions about historically non-Fed issues with the arch of an eyebrow.
"This is not just a job about monetary policy anymore," says anti-tax activist Grover Norquist. "Whoever Bush picks will be seen as a great economic spokesperson, period."
Non-partisan appearance vital
A Fed chief's credibility depends upon his or her not being perceived as conventionally political or tied to the White House. Responding to that question in the Rose Garden, Bush himself observed, "It's this independence of the Fed that gives people not only here in America, but the world, confidence." Yet the process of replacing the most recognized authority on U.S. economic policy may be unprecedentedly political.
For both the White House and Democrats, the opportunities presented by this vacancy are too good to pass up.
Bush's domestic legacy is uncertain. Shadows hang over his signature laws from his first term: No Child Left Behind is being challenged by some states, and the administration is having to spend $300 million to educate seniors about the Medicare prescription-drug law.
Bold initiatives planned for this first year of his second term are either doomed or in trouble. Bush lacks the public support -- and among his own party, the political will -- to win private accounts for Social Security, and his tax-reform panel is recommending changes to the tax code that are politically risky and -- so far, at least -- uninspiring to conservatives. His ability to pass controversial domestic legislation arguably wanes with every passing week and every lost point of job approval.
Nominations for positions of great influence over U.S. social and economic policy remain a way for Bush to leave his mark. But nonpartisan political analyst Charlie Cook suggests Supreme Court pick Harriet Miers, whose nomination has roiled prominent conservatives in Washington, is not expected to be the ideological force that Antonin Scalia and Clarence Thomas are. Indeed, it's hard to argue, Cook says, that Bush's Roberts-Miers duo will be any more conservative than Rehnquist-O'Connor.
Debates about the stability of the US money supply being a thing of the past, Greenspan's retirement provides Bush with a chance to make a non-ideological, legacy-building appointment. "When we have asked in the past who is integral to the direction on the economy," said former Bush campaign strategist and Matthew Dowd, "Greenspan always ranked in the top three," along with the President and Congress.
The White House may be downplaying its search, but Norquist claims that the lead role being played by Vice President Cheney, confirmed by NBC News, implies "the level of their understanding of how important it is."
The hard road to confirmation
Any opportunity for Bush to build his legacy is a possible soapbox for increasingly emboldened congressional Democrats. This is the partisan ice age of 2005 -- not 1987. In today's climate, even Greenspan might not make it out of committee on a unanimous vote, or win Senate confirmation by 91-2.
Senate leader Harry Reid, along with House campaign committee chair Rahm Emanuel, has criticized Greenspan as a political "hack" or shill for Bush economic policies.
Senate Banking isn't exactly the Judiciary Committee, notes Tom Gallagher, director of the Washington office of International Strategy & Investment, an economic research firm. Ranking member Paul Sarbanes, who's retiring next year, isn't quite as fiery as his Judiciary counterpart Patrick Leahy. Still, the party's ranks on Banking include lead Bush critic and Senate campaign committee chair Charles Schumer; former Wall Streeter Jon Corzine; and a presidential candidate, Evan Bayh.
"If Democrats believe the next Fed chair will also be a prominent spokesperson on non-monetary issues, then they may feel that it's fair game" to focus on the nominee's views on Social Security private accounts, deficits, or tax cuts, says Gene Sperling, national economic advisor to President Clinton. One senior Democratic Senate aide assumes the confirmation hearings "will be an opportunity to talk about Republicans' economic record."
Greenspan wasn’t always Greenspan
Even if Bush doesn't intend for his nominee to become a national commentator, he may not have much choice. Congress and the media are too inured to seeing the Fed chief in that role. "The next guy you pick, you could say well, that's not his job description, who cares what he thinks about Social Security reform," says Norquist. Still, "it would take you several years for someone to lose the credibility that Greenspan has built up."
The pick won't get much of a honeymoon, either. "Greenspan wasn't Greenspan" when he took the helm of the Fed, goes the popular saying. But it would be "tough for someone to attain that" level of credibility "in a short period of time," says Pat Toomey of the Club for Growth, a organization of fiscal conservatives.
But high home heating costs, inflation and increasing minimum payments for credit cards are expected to eat into pocketbooks this winter, and more economists are speculating about a possible recession in 2006. Bush's Fed chair will have to hit the ground running.
The small pool of likely nominees is thoroughly well-credentialed, so qualifications aren't expected to be an issue. But in the post-Michael Brown, post-Miers era, political independence and ties to Bush may be. Candidates Glenn Hubbard and Ben Bernanke are former and current heads of Bush's council of economic advisers.
Sperling says he's been betting on Hubbard, but that the White House "may be forced to think about it more carefully in terms of their recent troubles." Also, "Hubbard would be a popular choice among the president's base but would carry some risk of revisiting all of the fiscal choices made in the president's first term."
National Bureau of Economic Research chief Martin Feldstein "would be seen by many as the most qualified, but he carries some risk as one of the key champions of Social Security privatization."
Fed governors Roger Ferguson and Donald Kohn, on the other hand, are close to Greenspan, so Bush's selection of either would signal continuity -- if that's the message he wants to send. The Economist recently went so far as to endorse Kohn.
"A lot of speculation centers on what the [Miers pick] might suggest about the Fed, so people are looking for the Miers equivalent in the financial word," says Gallagher. "But given the problems Bush has encountered there, he probably won't repeat with another out-of-the-mainstream choice."
Elizabeth Wilner is political director of NBC News.
© 2005 MSNBC.com
URL: http://www.msnbc.msn.com/id/9740665/
10-18-2005, 08:16 PM
#7
Team Owner
Trending Topics
10-26-2005, 05:57 PM
#8
I feel the need...
Now that Ben Bernanke has been officially named as Greenspan's successor - it will be interesting how "lame duck" Alan will write the last chapter in his legacy...
Greenspan Visits Scene of Fed's China Crime: William Pesek Jr.
2005-10-23 13:21 (New York)
(Commentary. William Pesek Jr. is a columnist for Bloomberg
News. The opinions expressed are his own.)
By William Pesek Jr.
Oct. 24 (Bloomberg) -- To show he means business on China
opening its economy, U.S. Treasury Secretary John Snow recently
had a powerful prop on hand: Alan Greenspan.
While the Federal Reserve chairman retains an almost godlike
aura in Asia, even as debate rages about his legacy at home,
Greenspan's presence in China last week didn't help the White
House get its way. In fact, Snow seemed to retreat from his
campaign to force China to let the yuan rise.
The official U.S. line is that Snow's China trip was a
smashing success. Belying that stance is how Snow changed the
subject from China's currency to a longer-term goal of ``financial
modernization,'' whatever that means.
The trip did offer the Fed chairman a chance to visit the
scene of what history may show to be one of his biggest blunders:
China's asset bubble.
China's property market, for example, is white hot. Builders
will construct a record 4.7-billion-square feet or more this year,
up from 2 billion in 1998, the New York Times reported. In
Shanghai alone, there are plans for another 1,000 skyscrapers over
the next decade, on top of the 4,000 already there. Amid such a
boom, is it really surprising that China grew a faster-than-
expected 9.4 percent in the third quarter?
Globalized Fed
It may seem a reach to blame Greenspan and the Fed for
irrational exuberance in markets like Shanghai real estate. Yet
globalization has globalized the Fed. While it has 12 districts in
the U.S., its influence has never been greater. Think of Latin
America as the 13th district, Southeast Asia the 14th, Russia the
15th, China the 16th, and so on.
The Fed's policy of keeping interest rates low in the first
half of this decade fueled speculation in high-risk assets. Two of
its byproducts are a wealth effect on U.S. consumption and a cheap
capital-fueled investment boom in China. One can argue these are
the twin engines -- or bubbles, depending on your perspective --
for the global economy today.
Many observers have suggested this cycle will end with either
the Fed raising rates aggressively or with a financial meltdown
caused by unrestrained leverage. While the Fed has been raising
rates since mid-2004, history may not be kind to its accommodation
of speculative excesses that are a primary cause of bubbles in the
global economy.
Hot Money
One of the more obvious manifestations can be found in China.
In 2003, Andy Xie, Morgan Stanley's chief Asia-Pacific economist,
noted that speculative capital flows into Asia had reached a
record high, surpassing the previous peak in 1996, just before the
Asian crisis. In 1996, the big recipients of capital were South
Korea, Hong Kong and Southeast Asia. In 2003 it was China, and it
still is. Like the capital destinations of the 1990s, China
experienced an investment bubble.
The surge in speculative capital began in 2001, a year in
which the Fed began a campaign of cutting rates to 1 percent to
stimulate growth. Like clockwork, China's foreign-exchange
reserves rose by more than its trade surplus for the first time
since 1996. The inflows picked up speed and reached records by
2003.
The trend has manifested itself in a variety of ways,
including fueling a surge in the use of derivatives.
As Brad Setser, a U.S. Treasury economist who now works for
Roubini Global Economics in New York, points out, demand for
Treasuries by China's central bank -- and others in Asia -- has
held down U.S. yields. Low U.S. rates have encouraged a search for
returns that has fueled the growth in the market for
collateralized debt obligations, or CDOs.
Leverage and Risk
The upshot may be untold amounts of leverage and risk in a
global financial system struggling to keep up. And for that,
Greenspan's easy-money policies bear some blame.
Greenspan may, of course, have his own gripes with China. It
is the second-biggest holder of U.S. debt after Japan and its
steady purchases have helped depress U.S. yields, making the Fed's
rate hikes less potent.
The Fed has been working to mop up excess liquidity, raising
U.S. short-term rates to 3.75 percent. It surely has further to go
to restore sobriety to the global financial system. Few nations
may have more to gain from the process than China.
In any normal economy, higher interest rates would take care
of the problem. Because China lacks a robust secondary bond
market, its monetary options are limited. That prompted officials
in Beijing to rely on administrative measures like reserve
requirements and clamping down on property speculation.
Chinese Clampdown
On Oct. 21, China's central bank announced plans to reverse a
policy of keeping money-market interest rates low as part of plans
to stimulate development of the corporate bond market. Another
benefit of such a move would be to take money out of the economy.
Further Fed's rate hikes may help. Greenspan probably isn't
preoccupied with China's liquidity excesses. It's doubtful he'd
even acknowledge a relationship between Fed polices and China's
challenges, given how artfully he's sidestepped responsibility for
excesses in U.S. stocks, housing and Treasury yields in recent
years.
Globalization suggests Fed policy decisions play a bigger
role in China's outlook than folks in Washington may realize. It's
nice that Greenspan got a closer look at that phenomenon.
source: bloomberg.com
Greenspan Visits Scene of Fed's China Crime: William Pesek Jr.
2005-10-23 13:21 (New York)
(Commentary. William Pesek Jr. is a columnist for Bloomberg
News. The opinions expressed are his own.)
By William Pesek Jr.
Oct. 24 (Bloomberg) -- To show he means business on China
opening its economy, U.S. Treasury Secretary John Snow recently
had a powerful prop on hand: Alan Greenspan.
While the Federal Reserve chairman retains an almost godlike
aura in Asia, even as debate rages about his legacy at home,
Greenspan's presence in China last week didn't help the White
House get its way. In fact, Snow seemed to retreat from his
campaign to force China to let the yuan rise.
The official U.S. line is that Snow's China trip was a
smashing success. Belying that stance is how Snow changed the
subject from China's currency to a longer-term goal of ``financial
modernization,'' whatever that means.
The trip did offer the Fed chairman a chance to visit the
scene of what history may show to be one of his biggest blunders:
China's asset bubble.
China's property market, for example, is white hot. Builders
will construct a record 4.7-billion-square feet or more this year,
up from 2 billion in 1998, the New York Times reported. In
Shanghai alone, there are plans for another 1,000 skyscrapers over
the next decade, on top of the 4,000 already there. Amid such a
boom, is it really surprising that China grew a faster-than-
expected 9.4 percent in the third quarter?
Globalized Fed
It may seem a reach to blame Greenspan and the Fed for
irrational exuberance in markets like Shanghai real estate. Yet
globalization has globalized the Fed. While it has 12 districts in
the U.S., its influence has never been greater. Think of Latin
America as the 13th district, Southeast Asia the 14th, Russia the
15th, China the 16th, and so on.
The Fed's policy of keeping interest rates low in the first
half of this decade fueled speculation in high-risk assets. Two of
its byproducts are a wealth effect on U.S. consumption and a cheap
capital-fueled investment boom in China. One can argue these are
the twin engines -- or bubbles, depending on your perspective --
for the global economy today.
Many observers have suggested this cycle will end with either
the Fed raising rates aggressively or with a financial meltdown
caused by unrestrained leverage. While the Fed has been raising
rates since mid-2004, history may not be kind to its accommodation
of speculative excesses that are a primary cause of bubbles in the
global economy.
Hot Money
One of the more obvious manifestations can be found in China.
In 2003, Andy Xie, Morgan Stanley's chief Asia-Pacific economist,
noted that speculative capital flows into Asia had reached a
record high, surpassing the previous peak in 1996, just before the
Asian crisis. In 1996, the big recipients of capital were South
Korea, Hong Kong and Southeast Asia. In 2003 it was China, and it
still is. Like the capital destinations of the 1990s, China
experienced an investment bubble.
The surge in speculative capital began in 2001, a year in
which the Fed began a campaign of cutting rates to 1 percent to
stimulate growth. Like clockwork, China's foreign-exchange
reserves rose by more than its trade surplus for the first time
since 1996. The inflows picked up speed and reached records by
2003.
The trend has manifested itself in a variety of ways,
including fueling a surge in the use of derivatives.
As Brad Setser, a U.S. Treasury economist who now works for
Roubini Global Economics in New York, points out, demand for
Treasuries by China's central bank -- and others in Asia -- has
held down U.S. yields. Low U.S. rates have encouraged a search for
returns that has fueled the growth in the market for
collateralized debt obligations, or CDOs.
Leverage and Risk
The upshot may be untold amounts of leverage and risk in a
global financial system struggling to keep up. And for that,
Greenspan's easy-money policies bear some blame.
Greenspan may, of course, have his own gripes with China. It
is the second-biggest holder of U.S. debt after Japan and its
steady purchases have helped depress U.S. yields, making the Fed's
rate hikes less potent.
The Fed has been working to mop up excess liquidity, raising
U.S. short-term rates to 3.75 percent. It surely has further to go
to restore sobriety to the global financial system. Few nations
may have more to gain from the process than China.
In any normal economy, higher interest rates would take care
of the problem. Because China lacks a robust secondary bond
market, its monetary options are limited. That prompted officials
in Beijing to rely on administrative measures like reserve
requirements and clamping down on property speculation.
Chinese Clampdown
On Oct. 21, China's central bank announced plans to reverse a
policy of keeping money-market interest rates low as part of plans
to stimulate development of the corporate bond market. Another
benefit of such a move would be to take money out of the economy.
Further Fed's rate hikes may help. Greenspan probably isn't
preoccupied with China's liquidity excesses. It's doubtful he'd
even acknowledge a relationship between Fed polices and China's
challenges, given how artfully he's sidestepped responsibility for
excesses in U.S. stocks, housing and Treasury yields in recent
years.
Globalization suggests Fed policy decisions play a bigger
role in China's outlook than folks in Washington may realize. It's
nice that Greenspan got a closer look at that phenomenon.
source: bloomberg.com
11-01-2005, 07:43 PM
#9
I feel the need...
Stagflation2, the sequel: starring Guns & Butter, screenplay written by Dubya, coming soon to a theatre near you... 
Bernanke May Be Caught Between Inflation, Slowdown Concerns
2005-11-01 00:12 (New York)
By Scott Lanman
Nov. 1 (Bloomberg) -- The Federal Reserve, by raising
interest rates today and at its next two meetings, will ensure
that Ben S. Bernanke faces the toughest question of his career
when he becomes chairman next year: What next?
Bernanke, if confirmed by the U.S. Senate, will probably
take office Feb. 1, when futures contracts suggest the Fed's
benchmark rate will have topped out at 4.5 percent after 20
months of increases. At the precise moment investors will most
want evidence that he is a dedicated inflation fighter, he may
have to keep rates steady lest he trigger an economic slowdown.
``It might be a little awkward for him to pause at 4.5
percent if the last move by the maestro was to raise rates,''
said Paul Kasriel, director of economic research at Chicago-
based Northern Trust Corp., using Fed Chairman Alan Greenspan's
nickname from the 2000 book ``Maestro,'' by journalist Bob
Woodward. ``Bernanke's going to have to prove his anti-inflation
colors.''
Fed officials, including Greenspan, say they must bring
their main interest rate to a level that neither spurs nor
restrains the economy. Greenspan, 79, has raised the rate closer
to that ``neutral'' level, while saying he doesn't know
precisely where it is. Bernanke may have to make that call.
Continuity With Greenspan
When he was nominated by President George W. Bush on Oct.
24, Bernanke, 51, said his goal would be ``to maintain
continuity with the policies and policy strategies established
during the Greenspan years.''
Unlike Greenspan, Bernanke may be facing a slower-growing
economy. Kasriel and other economists predict higher borrowing
costs and energy prices will slow U.S. economic growth in the
second half of 2006 after a first-half boost from rebuilding
tied to Hurricane Katrina. Bernanke's dilemma is that inflation
may also be higher than policy makers prefer because of rising
energy prices.
Even if slowing growth suggests a pause in the cycle of
rate increases, Bernanke may want to raise rates to keep
inflation under control and to cement the Fed's credibility,
said Ken Mayland, president of ClearView Economics LLC in Pepper
Pike, Ohio.
``If the Fed is wrong and inflation runs too high, out of
control, there can be a catastrophic loss of confidence in the
Fed that has national and international implications,'' Mayland
said.
Seeing Softness
Kasriel said Bernanke may also face pressure to do the
opposite. ``If he starts to see softness in the economy, and if
in fact inflation is moderating, he will want to cut rates a
little bit in order to have a soft landing,'' Kasriel said.
Later today, the Fed's policy-making Open Market Committee
will probably raise its benchmark lending rate a quarter point
for the 12th straight time, to 4 percent, according to a survey
of 88 economists surveyed by Bloomberg News. That would be the
highest level since June 2001.
Economists in the survey, which was conducted last month,
expect that after two more increases, the rate will hold at 4.5
percent for the rest of 2006.
At least a half-dozen Fed officials in recent weeks have
said rising energy prices are increasing inflation risks. Fed
governors including Vice Chairman Roger Ferguson and Donald Kohn
say the current policy of raising rates at a ``measured'' pace
is the best way to keep prices stable. Such comments take most
of the suspense out of today's decision.
Wider Measures
Fuel costs aren't yet pushing up wider measures of
inflation. The Fed's preferred price gauge, the personal
consumption expenditure index excluding food and energy, rose at
a 1.3 percent annual rate in the third quarter from the prior
three months. That's the slowest gain since a 1 percent increase
in the second quarter of 2003. Prices rose 1.9 percent from a
year earlier.
Greenspan said in an Oct. 18 speech that rising fuel costs
have drained consumers' purchasing power and ``will undoubtedly
be a drag'' on the global economy. Record prices for crude oil,
gasoline and natural gas following Hurricanes Katrina and Rita
were ``an accident waiting to happen'' because energy production
capacity has lagged behind global demand, Greenspan said.
Energy costs are already biting into consumer spending. The
retail price of a gallon of gasoline has risen 45 percent since
the start of the year, to $2.65 in the week ended Oct. 24.
Gasoline purchases accounted for almost 4 percent of all
consumer spending in September, compared with about 3 percent in
June.
Heating-Oil Households
Households that use heating oil can expect to pay 32
percent more this winter than a year ago, according to Energy
Department forecasts. A report from the Commerce Department
yesterday showed consumer spending fell in September for a
second month when adjusted for inflation, the first back-to-back
declines in 15 years. Consumer confidence fell in October to its
lowest in 13 years.
If rising fuel costs keep core inflation at or above the
2 percent annual level that Fed officials say is the top of
their comfort zone, Bernanke has said he may push for higher
rates.
``If inflation has been near the high end of the acceptable
range and policy makers foresee the significant risk that
inflation and inflation expectations may rise in the future,
then stronger action in the form of tighter monetary policy may
prove necessary,'' Bernanke said in October 2004.
Allen Sinai, chief economist at Decision Economics Inc. in
New York, said Bernanke will probably choose inflation fighting
over faster economic growth.
``Facing the potential loss of price stability, the Federal
Reserve may be more than willing to trade off less growth in
return for'' lower inflation, said Sinai, who expects growth to
slow to 2.75 percent in 2006. The economy grew at a 3.8 percent
annual rate in the third quarter and has exceeded 3 percent for
10 straight quarters.
Mayland said overseas investors will also be watching how
Bernanke deals with rising inflation. With so much of the U.S.
budget and trade deficits financed by foreign investment, ``you
require the absolute confidence of investors around the world,''
Mayland said. ``Lots of bad stuff can happen'' if you lose that
confidence, including a fall in the value of the dollar.
--With reporting by Craig Torres in Washington. Editors: Miller,
Abruzzese, Jaroslovsky, West.
source: bloomberg.com
Bernanke May Be Caught Between Inflation, Slowdown Concerns
2005-11-01 00:12 (New York)
By Scott Lanman
Nov. 1 (Bloomberg) -- The Federal Reserve, by raising
interest rates today and at its next two meetings, will ensure
that Ben S. Bernanke faces the toughest question of his career
when he becomes chairman next year: What next?
Bernanke, if confirmed by the U.S. Senate, will probably
take office Feb. 1, when futures contracts suggest the Fed's
benchmark rate will have topped out at 4.5 percent after 20
months of increases. At the precise moment investors will most
want evidence that he is a dedicated inflation fighter, he may
have to keep rates steady lest he trigger an economic slowdown.
``It might be a little awkward for him to pause at 4.5
percent if the last move by the maestro was to raise rates,''
said Paul Kasriel, director of economic research at Chicago-
based Northern Trust Corp., using Fed Chairman Alan Greenspan's
nickname from the 2000 book ``Maestro,'' by journalist Bob
Woodward. ``Bernanke's going to have to prove his anti-inflation
colors.''
Fed officials, including Greenspan, say they must bring
their main interest rate to a level that neither spurs nor
restrains the economy. Greenspan, 79, has raised the rate closer
to that ``neutral'' level, while saying he doesn't know
precisely where it is. Bernanke may have to make that call.
Continuity With Greenspan
When he was nominated by President George W. Bush on Oct.
24, Bernanke, 51, said his goal would be ``to maintain
continuity with the policies and policy strategies established
during the Greenspan years.''
Unlike Greenspan, Bernanke may be facing a slower-growing
economy. Kasriel and other economists predict higher borrowing
costs and energy prices will slow U.S. economic growth in the
second half of 2006 after a first-half boost from rebuilding
tied to Hurricane Katrina. Bernanke's dilemma is that inflation
may also be higher than policy makers prefer because of rising
energy prices.
Even if slowing growth suggests a pause in the cycle of
rate increases, Bernanke may want to raise rates to keep
inflation under control and to cement the Fed's credibility,
said Ken Mayland, president of ClearView Economics LLC in Pepper
Pike, Ohio.
``If the Fed is wrong and inflation runs too high, out of
control, there can be a catastrophic loss of confidence in the
Fed that has national and international implications,'' Mayland
said.
Seeing Softness
Kasriel said Bernanke may also face pressure to do the
opposite. ``If he starts to see softness in the economy, and if
in fact inflation is moderating, he will want to cut rates a
little bit in order to have a soft landing,'' Kasriel said.
Later today, the Fed's policy-making Open Market Committee
will probably raise its benchmark lending rate a quarter point
for the 12th straight time, to 4 percent, according to a survey
of 88 economists surveyed by Bloomberg News. That would be the
highest level since June 2001.
Economists in the survey, which was conducted last month,
expect that after two more increases, the rate will hold at 4.5
percent for the rest of 2006.
At least a half-dozen Fed officials in recent weeks have
said rising energy prices are increasing inflation risks. Fed
governors including Vice Chairman Roger Ferguson and Donald Kohn
say the current policy of raising rates at a ``measured'' pace
is the best way to keep prices stable. Such comments take most
of the suspense out of today's decision.
Wider Measures
Fuel costs aren't yet pushing up wider measures of
inflation. The Fed's preferred price gauge, the personal
consumption expenditure index excluding food and energy, rose at
a 1.3 percent annual rate in the third quarter from the prior
three months. That's the slowest gain since a 1 percent increase
in the second quarter of 2003. Prices rose 1.9 percent from a
year earlier.
Greenspan said in an Oct. 18 speech that rising fuel costs
have drained consumers' purchasing power and ``will undoubtedly
be a drag'' on the global economy. Record prices for crude oil,
gasoline and natural gas following Hurricanes Katrina and Rita
were ``an accident waiting to happen'' because energy production
capacity has lagged behind global demand, Greenspan said.
Energy costs are already biting into consumer spending. The
retail price of a gallon of gasoline has risen 45 percent since
the start of the year, to $2.65 in the week ended Oct. 24.
Gasoline purchases accounted for almost 4 percent of all
consumer spending in September, compared with about 3 percent in
June.
Heating-Oil Households
Households that use heating oil can expect to pay 32
percent more this winter than a year ago, according to Energy
Department forecasts. A report from the Commerce Department
yesterday showed consumer spending fell in September for a
second month when adjusted for inflation, the first back-to-back
declines in 15 years. Consumer confidence fell in October to its
lowest in 13 years.
If rising fuel costs keep core inflation at or above the
2 percent annual level that Fed officials say is the top of
their comfort zone, Bernanke has said he may push for higher
rates.
``If inflation has been near the high end of the acceptable
range and policy makers foresee the significant risk that
inflation and inflation expectations may rise in the future,
then stronger action in the form of tighter monetary policy may
prove necessary,'' Bernanke said in October 2004.
Allen Sinai, chief economist at Decision Economics Inc. in
New York, said Bernanke will probably choose inflation fighting
over faster economic growth.
``Facing the potential loss of price stability, the Federal
Reserve may be more than willing to trade off less growth in
return for'' lower inflation, said Sinai, who expects growth to
slow to 2.75 percent in 2006. The economy grew at a 3.8 percent
annual rate in the third quarter and has exceeded 3 percent for
10 straight quarters.
Mayland said overseas investors will also be watching how
Bernanke deals with rising inflation. With so much of the U.S.
budget and trade deficits financed by foreign investment, ``you
require the absolute confidence of investors around the world,''
Mayland said. ``Lots of bad stuff can happen'' if you lose that
confidence, including a fall in the value of the dollar.
--With reporting by Craig Torres in Washington. Editors: Miller,
Abruzzese, Jaroslovsky, West.
source: bloomberg.com
02-08-2010, 07:33 PM
#11
I feel the need...
Alan Greenspan fights back
(Fortune Magazine) -- When the Senate grudgingly reconfirmed Ben Bernanke as Fed chairman two days before his term expired, he was only a stand-in for the man 30 senators were really mad at. "I knew that he would continue the legacy of Alan Greenspan, and I was right," said an angry Jim Bunning, a conservative Republican from Kentucky who voted no. Fumed Bernie Sanders of Vermont, the Senate's only (admitted) socialist: "He said it publicly -- I want to follow in the footsteps of Alan Greenspan. Alan Greenspan's philosophy is a disaster." Jeff Merkley (D-Ore.) said Bernanke "helped set the fire that destroyed our economy." Only helped, that is -- and we all know whom he helped.
Seldom has conventional wisdom on so recondite a topic -- Federal Reserve interest rate and regulatory policy from 2002 through 2005 -- converged so thunderously on one person. Greenspan, in his final four years as Fed chairman, kept rates too low and regulation too light, goes the argument. The result was the housing bubble.
The bubble's inevitable bursting caused the worst financial crisis in 80 years, bank failures across the land, the longest recession since the Great Depression, towering unemployment, and economic misery for millions.....
Seldom has conventional wisdom on so recondite a topic -- Federal Reserve interest rate and regulatory policy from 2002 through 2005 -- converged so thunderously on one person. Greenspan, in his final four years as Fed chairman, kept rates too low and regulation too light, goes the argument. The result was the housing bubble.
The bubble's inevitable bursting caused the worst financial crisis in 80 years, bank failures across the land, the longest recession since the Great Depression, towering unemployment, and economic misery for millions.....
04-08-2010, 04:52 AM
#12
I feel the need...
Greenspan’s Delusions Get Much Worse With Age
In case you missed the first legacy tour, former Federal Reserve Chairman Alan Greenspan is back for Part II.
Starting with an academic paper presented at the Brookings Institution on March 19 and followed by several TV interviews, “Dr. Greenspan,” as his interviewers politely refer to him, has acquired the clairvoyance he lacked at the Fed.
Asked in a Bloomberg TV interview about a possible bubble in China, Greenspan said there were “significant bubbles in Shanghai and along the coastal provinces” and “some of that in the hinterlands.”
He of the Can’t-See-a-Bubble-In-Advance School now recognizes region-specific bubbles halfway around the world?
Starting with an academic paper presented at the Brookings Institution on March 19 and followed by several TV interviews, “Dr. Greenspan,” as his interviewers politely refer to him, has acquired the clairvoyance he lacked at the Fed.
Asked in a Bloomberg TV interview about a possible bubble in China, Greenspan said there were “significant bubbles in Shanghai and along the coastal provinces” and “some of that in the hinterlands.”
He of the Can’t-See-a-Bubble-In-Advance School now recognizes region-specific bubbles halfway around the world?
04-08-2010, 05:02 PM
#13
Карты убийцы
Paul Volcker picked his nosed today and is still waiting for the stagflation forecasts. Hell since we are talking about 2005 circa Fed, lets bump it somemore and discuss Marriner Eccles.
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