Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: “Bernanke Plan A Disaster”
by ilene - November 2nd, 2010 2:50 pm
Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: "Bernanke Plan A Disaster"
Courtesy of Zero Hedge
By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke’s feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke’s case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America’s by its economist overlords. Which brings us back to the amusement part. Here are Farrell’s always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.
From Paul Farrell’s latest: Sell bonds now, Fed’s QE2 is doomed to fail.
Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.
The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”
Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.
“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.
And Warren Buffett agrees,
by phil - October 26th, 2010 8:10 am
This was an interesting event!
On May 17th 1792, twenty-four stock brokers met under a buttonwood tree outside 68 Wall Street and agreed to set up the New York Stock and Exchange board. The tree was a symbol of Wall Street, but also, it was where people originally met to trade, to discuss and to argue.
The Economist has done an excellent job of keeping the tradition alive by bringing together top global financial executives, policymakers, global regulators and opinion leaders to discuss and debate proposed guidelines for the financial community, seeking to bridge fundamental financial issues with macroeconomic and geopolitical viewpoints.
As I mentioned yesterday, I usually don’t like conferences but not only did I find myself sitting between BOE Governor Mervyn King and Nobel Prize winner Joseph Stiglitz but we got to watch my favorite economics rap video together and even met the guys who created it from EconStories, who have lots of good videos on their site (of a more serious nature).
The conference itself does not take itself too seriously. Even Nassim Taleb was able to make a few jokes while explaining to us why the financial system is irrevocably screwed up unless we give it a major overhaul. Taleb’s main points were:
- People are inherently greedy.
- The Financial Crisis was caused by and increase of hidden risks that was encouraged by the rules set forth in Basel II
- Multiple exposure to low-probability, high-risk events accumulate to high probability of bad outcome (Taleb’s "Black Swan").
- Bonus packages and compensation encourage very bad risky behavior. Stock options that offer potential upside and no downside encourage the maxing of risk-taking by potential beneficiaries.
- This leads to a banking system where all the traders get rich and all the investors become poor.
- There is a general,.chronic underestimation of risk and business schools reinforce this bad behavior.
- Regulation gives investors a false sense of security.
- Capitalism must be symmetrical – bonus without penalties (clawbacks, etc.) must be eliminated.
When I am at one of these conferences, I like to watch the audience reaction to what is being said. Here we have a gathering of the World’s movers and shakers and sometimes the reaction to what is being said is more important than the thing that is said. For instance, my note on Taleb’s comment that regulations give investors a false sense of security is that…
by ilene - October 7th, 2010 2:37 am
Courtesy of The Pragmatic Capitalist
Nobel Prize winner http://globaleconomicanalysis.blogspot.com explains why the global imbalances will continue to cause problems in the global economy and why the Fed’s policy of dollar devaluation will have unintended consequences. Ultimately, he sees the Fed making matters worse:
Stiglitz’s thoughts on a possible trade war:
“I think there is this concern. The interesting thing is the United States was one of the first countries to say that of the sources of our recovery would be exports. The problem is that the unintended consequences of economic turmoil, bad economic policies, is what we’re seeing.”
“When the U.S. lowers interest rates, when the U.S. floods the world with liquidity, the effect of it is to try to lower the dollar and cause other countries currencies to appreciate.”
On whether Stiglitz would blame the U.S. for causing other countries’ currencies to appreciate:
“I don’t know if I want to blame [the U.S.] It’s the unintended consequence. But it is the consequence of our policies. What is happening now is this curious thing is that Fed policy was supposed to re-ignite the American economy, but it’s not doing that. And so the flood of liquidity is going abroad and causing problems all over the world.”
Stiglitz on his previous comments that Germany should abandon the euro and that the euro should be devalued:
“There’s a lot of currency misalignments. There are large surpluses on the part of Germany, for instance, and those have to be corrected. There are two problems going on. One of them is a problem of a flood of liquidity that’s causing bubbles, causing turmoil in many of the more successful emerging markets. And then there’s the other problem of the global imbalances. They’re related. But they are really two distinct problems.”
“The worry is that the flood of liquidity is going to cause what is sometimes being referred to an emerging market bubble. Money is going in. The worry is that it will cause a real estate bubble, in one developing country or another.”
“The problem is very easy to understand. There’s a flood of money into the financial sector. It’s asking, Where is the best place in the world to go? In a world of globalization, the answer is not in the United
by ilene - September 28th, 2010 2:19 am
The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
Editor’s Note: The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
When we analyze our current crisis, focusing on the past few years of economic activity blinds us to the history and context that are vital to understanding the root cause. What we have been experiencing is not the result of an unforeseen economic crash that appeared out of the blue with the collapse of the housing market. It was certainly not brought on by people who bought homes they couldn’t afford. To frame this crisis around a debate on economic theory misses the point entirely. To even blame it on greedy bankers,…
by ilene - March 7th, 2010 7:19 pm
Courtesy of Tim Iacono at The Mess That Greenspan Made
You have to give Nobel Prize winning economist Joseph Stiglitz credit for his candor in some remarks he made yesterday at a conference where financial market reform was discussed.
As recounted in this story over at the Huffington Post, he said a few things that should be patently obvious to anyone with a working knowledge of how the Federal Reserve system really works, yet, even to me they somehow seemed shocking.
"If we had seen a governance structure that corresponds to our Federal Reserve system,we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," Stiglitz said during a conference on financial reform in New York. "It’s time for us to reflect on our own structure today, and to say there are parts that can be improved."
To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest -- a result of the banks being partly governed by a board of directors that includes officers of the very banks they’re supposed to be overseeing.
What’s even more egregious is to think that, not only does the Federal Reserve supervise the very banks whose CEOs sit on its board, but that, even after their disastrous track record as a consumer watchdog over the last decade or so, that power appears likely to stay with the central bank despite loud protestations from those with no lobbying clout.
Clearly, the system can not be reformed from within – that much should be clear by now.
by ilene - January 20th, 2010 11:43 pm
Courtesy of Lynn Parramore at New Deal 2.0
Roosevelt Institute Senior Fellow and Chief Economist Joe Stiglitz told CNBC yesterday that we’ve got something he calls “ersatz capitalism,” in the US, and it isn’t pretty. The version of capitalism we’ve ended up with is a flawed, unfair system that socializes economic losses and privatizes the gains.
“‘An awful lot of people are not managing their own money,’ Stiglitz said. ‘In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences.’
‘Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs,’ he said.”
As Stiglitz sees it, this upside-down economic paradigm is a symptom of a deeper, society-wide problem. In a recent piece in Mother Jones, he writes:
“We have created a society in which materialism overwhelms moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together to address our common needs. Market fundamentalism has eroded any sense of community and has led to rampant exploitation of unwary and unprotected individuals. There has been an erosion of trust — and not just in our financial institutions. It is not too late to close these fissures.”
Is Wall Street shaping us into a monstrous image of itself? he asks. The answer is disturbing. Stiglitz cites the example of compensation as a place where our values have gone haywire:
“There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself…The bankers knew — or should have known — that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.”
by ilene - January 11th, 2010 8:08 pm
Courtesy of George Washington
Joseph Stiglitz says that Wall Street is hyping up the economy to sell more stock.
Has it worked?
Well, the stock market certainly has rocketed up from its March lows.
But many investors are still avoiding equities.
We’ve never seen this before – such a huge rally, and the little guy is out.
In other words, the stock market rally is due almost entirely to hedgies, pension funds, banks and other institutional investors, and not every day investors.
TrimTabs notes that small investors pulled out $14 billion net from stock mutual funds from the beginning of last year through mid-December, on top of a net $245 billion withdrawn in 2008.
Given that – as pointed out by the above-linked article – individuals held 80% of the $19 trillion in stock in U.S. companies, both private and public, at the end of September – according to the Federal Reserve – recovery will not happen so long as the little guys are sitting on the sidelines.
TrimTabs notes that most of $592 billion taken out of money market mutual funds last year has gone into bond and bond-hybrid funds instead.
No wonder David Rosenberg is saying:
- "People have been lured into two bubbles seven years apart, and for a lot of them it’s over."
- "The bulls say if the market is up this much without retail investors, just watch when they come in, but it isn’t going to happen."
- Investors who have not been spooked or angered by the market are probably too poor to buy anyway.
by ilene - December 31st, 2009 11:16 am
The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.
The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.
by ilene - November 22nd, 2009 9:22 am
Courtesy of Tyler Durden
Alan Greenspan’s economic legacy is slowly but surely deterioration from that of one created by a "Maestro", to the deranged hungover flashbacks of the most inept monetarst dilettante and plutocrat puppet in the history of fiat capitalism. And with ever increasing honest and truthful observations as those shared by Naomi Klein and Joseph Stiglitz in the 1 hour + program attached, courtesy of Fora TV, only the remnants of the quickly evaporating close circle of Bernanke and Co., will have anything favorable left to say for the man who took the mundane task of building bubbles and converted it into rocket science so complex that only a few people at Goldman Sachs figured out how to benefit from it. We encourage all readers to spend some time watching the program before, just like Barney Frank and other bribed politicans, deciding that changing the status quo vis-a-vis the Fed is a step in the "wrong direction."
10 minute excerpt below:
Watch the full program or select from the following clips. We would like to draw your attention to clips 2, 7, 11 and 13
02. Flawed Economic Model
03. Economic Power and Ideology
04. Collapse of Trust in Legal System
05. Legal Means of Assistance
06. Effects of Bailout
07. How This Crisis Came About
08. New Unregulated Markets
09. Modern Capitalism Separates Ownership and Control
11. Government Controlled by Banking Interest
12. Property Information System
13. Protection of Wealthy and Powerful
14. Documentation of Who Owns What
15. New Orleans Troubles
16. Foreclosures are Economic Katrinas
Art: Courtesy of Dangerous Minds
by ilene - October 1st, 2009 12:40 pm
Courtesy of Prieur du Plessis at Investment Postcards from Cape Town
James Surowiecki spoke with Professor Joseph Stiglitz, the Nobel Prize-winning economist, about the mishandling of the financial crisis, the relationship between government and markets, and the future of capitalism around the world. They met last month at Stiglitz’s office at Columbia University.
Source: James Surowiecki, The NewYorker, September 28, 2009.