NP but The Confidence Man: Bernanke

[alice wellintown]

The move by Ben, now called QE3 is not the first, notice that there
were other measures taken, including QE1 and QE2, and Twist, and these
are only extraordinary steps taken by the Fed. Indeed, the Fed, prior
to Ben, ignored employment, was fixated on inflation targets. So, the
characterization of the Fed as one that has not moved agressively, and
taken major risks, to shore up the economy is false. In fact, the Fed
has been agressively buying Treasuries and MBS for years, it has
purchased Trillions in T and MBS. The only change here is the
language, the Fed saying it will keep these programs in place until
the jobs and housing markets show marked improvement; this, of course,
has been the program all along. That the Fed will target an employment
rate, a rate its conservative projections sees in a range well above
its target for another two years or so, and this will mean we will be
looking at another face, for Ben will not stay on, is not really new;
it's just, again, more explicitly stated, and this is a powerful force
that will give a boost to investors and risnk asset investment. As mtg
rates slide down a bit here, we should see further improvement in
housing as prices stabilize and even move upward in some regions of
the country. The trade-off that Ben acknowledged in his talk, the pain
that risk averse savers will suffer, the fixed income folk, those in
retirement, is a concern, a risk too. But what is needed is a move by
the congress. The rating agencies are all moving to lower the debt
rating of the US; that will not have a great impact, as the T remains
the save harbor, but as the world shakes off this crisis, that debt
premium will shrink to normal lspreads. We have a chance to address
the fiscal issues now, as Obama will surely win the election after
Ben's mighty push, but it is on congress and not the Fed.

> Last year a small but elite group of monetarists began clamoring for
> the Fed to take similar steps. Now what the Fed did yesterday isn’t
> that robust. It didn’t commit to higher inflation, but it did commit
> to keeping interest rates low even after unemployment starts falling.
> So what you heard yesterday was relief, but also frustration that it
> took so long.