Economy | - Part 30

The Big Banks are Doing Fine

Among other news about spying and Dennis Rodman’s latest escapades in North Korea, Bloomberg reports that bank profits in 2013 rose to a seven year high.

In what is yet another somewhat disturbing sign of the times, profits would have reached an all-time high last year if not for the nation’s biggest banks having to set aside many billions for legal costs and penalties associated with their prior misdeeds.

The Road to Becoming a Fed Chair(wo)man

Via this item at the Wall Street Journal comes this graphic history of how Federal Reserve Chairs have been approved over the years.

Click to enlarge

Of course, the near party line vote for Yellen has led to more headlines about the political polarization in Washington and she is likely to have some interesting exchanges with Republicans in the years ahead. What’s notable about the above graphic is the overwhelming majorities for the first terms of every Fed Chair except Yellen.

How to Keep Growth Alive

It occurred to me after reading the following paragraph from this commentary by Ambrose Evans-Pritchard at the Telegraph the other day:

Former US Treasury Secretary Larry Summers says the US is trapped in “secular stagnation”, a bad equilibrium where the interest rate needed to keep growth alive may be as low as minus 3pc.

…that there must be something fundamentally wrong with a financial system and economy where negative rates of interest are necessary.

You don’t hear a peep about the idea that there might be something fundamentally wrong from the mainstream economics/finance crowd and Pritchard is clearly part of that group as should be clear after reading the paragraph that followed:

It takes fresh bubbles to keep the show on the road, and it threatens to become “chronic and systemic”. This is our brave new world. If Mr Summers is right, we need to go to the next stage of QE. Rather than relying on more bond purchases, the stimulus could be injected into the veins of the economy, or into the “income stream” in the words of the late Milton Friedman.

Once again, the experience of Japan’s Takahashi Korekiyo in the 1930s is cited as a shining example of what unlimited quantitative easing can accomplish. Once again, it’s worth providing the additional context per Takahashi’s Brilliant Feat … and Demise.

This chart from an item at Sober Look seems to have popped up all over the place in the last day or so, serving as one more shining example of how the Federal Reserve’s ongoing money printing extravaganza hasn’t yet helped Main Street very much.

Of course, QE’s main architect, outgoing Fed Chief B. S. Bernanke disagrees, the latest example being  Bernanke Pushes Back on Idea QE Hurts Main Street at the Wall St. Journal.

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