Economy | - Part 30

Meltzer on Bernanke

In this story at Reuters, Federal Reserve historian Allan Melzer shares a few thoughts on what lies ahead for incoming Fed Chair Janet Yellen following tomorrow’s departure of current Fed Chairman Ben Bernanke. One thing seems clear, as was the case for Alan Greenspan, we won’t know the full impact of Bernanke’s policies for years to come.

To Allan Meltzer, a leading Fed historian, no outcome looks good for Bernanke. “If they go too fast, we’re going to get a recession. If they go too slowly, we are going to get serious inflation. If they do neither, we could get both,” he said.

The first round of quantitative easing in 2008 and 2009 was heroic, Meltzer said. But the second and third rounds were “just a mistake, a serious mistake, that will have problems.”

“History will judge his response to the 2009 crisis very well,” he said of Bernanke. “They will judge the aftermath as being much too strong and unnecessary.”

Another thing that seems clear is that the image above will be an enduring one.

Bernanke Exit Polling

It shouldn’t be too surprising that this polling data from Gallup shows outgoing Fed Chairman Ben Bernanke trailing his successor badly in approval ratings. Views on former Fed Chief Alan Greenspan are surely much different today than they were when he left the post back in January of 2006, that is, before the housing and credit bubbles burst.

Very long-time readers might remember this series of posts from eight years ago:

Three Sins, One Gift – Sin #1
Three Sins, One Gift – Sin #2
Three Sins, One Gift – Sin #3
Three Sins, One Gift – The Gift

No similar offerings are planned this time around.

Fed Taper Continues, Bernanke Departs

In the last gathering of the Federal Reserve policy committee led by outgoing Chairman Ben Bernanke, the central bank announced it will curtail its money printing effort by another $10 billion, from $75 billion per month to $65 billion.

Short-term interest rates were left at between 0 and 0.25 percent and the Fed made clear they are likely to stay low for a very long time.

The policy statement contained no substantive changes from the December meeting as purchases of agency mortgage-backed securities were reduced from $35 billion per month to $30 billion and the buying of long-term Treasury securities will be lowered from $40 billion to $35 billion.

Chairman Ben Bernanke will step down on Friday, handing the reins of the central bank over to Vice Chair Janet Yellen and it seems that, in contrast to last fall, the policy committee did exactly what markets expected, perhaps in order to help smooth that transition.

The decision received unanimous backing from Fed policymakers that included new voting members Richard Fisher of the Dallas Fed, Narayana Kocherlakota of Minneapolis, Sandra Pianalto of St. Louis, and Charles Plosser from Philadelphia.

The last two policy statements are shown side-by-side below.


A Far Cry from the Official Jobless Rate

Federal Reserve officials have no doubt been talking about the U.S. labor market over the last two days as they get ready to conclude their policy meeting in a few hours, though they probably haven’t studied this graphic from Rex Nutting at Marketwatch that, like a few others, purports to be the nation’s “real” jobless rate at more than double the official rate.

Real Jobless Rate

A quick check of the Labor Department data shows that the above measure is even higher than the current U6 unemployment rate at 13.1 percent. It seems the difference between the two involves that category of workers who want a job but who aren’t looking.

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