Is Helicopter Ben not practicing monetary and fiscal discipline?
Brian O'Keefe over at CNN Money interviewed Jim Rogers recently on his view on the global economy. Not surprisingly he was quite bearish on the US, specifically financials, which he's shorting quite heavily. That and he's bullish in China, not surprising again, given his slight love affair with that market. The recession question is always debatable.
However, he did mention the Fed's emergency rate cut of 75 bps and the recent official 50bps as "out of control".
"Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."
Though I may disagree with the "one of the worst recessions", I do question Bernanke's motives and decisions. Rate cuts aren't magic pills that will help this market in the long run. Thoughts?
Answers
788 points
DaveDiggz answered one year ago …
Bernanke is an academic who's learning on the job, bottom line. Rate cuts are obviously not the answer over the long term, in fact I've seen questions on TickerHound alluding to the fact that we may be running out of "rate cut ammo". The only thing that's keeping Bernanke from looking like a complete idiot is that we're maintaining employment rates - once those drop, watch out!
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2183 points
ChaosNantuko answered one year ago …
I think rate cuts may work long run, but we won't see anything short term. Bernake knows if he doesn't cut enough, then it won't work, and everything will tank. Thing is, he has no idea how much is enough. That can lead to two cases.
a) He's just doing what people expect him to do, and panicing every now and then and doing an emergency cut (hearing about the bond insurers could've caused him to panic and that may be why we got the emergency cut last time. pure speculation)
b) He's ignoring everyone else, and doing what academia says he should do, or what he himself believes is the best way to handle the situation.
I'm hoping its the latter, but the events seem to be unfolding otherwise. Regardless, i rather have him cut to much then too little, because while a bit of inflation can be dealt with by just drastically increasing the rates again once the problems finished, a recession/depression could be more long lasting, and more damaging. That may also be the line of thought he's on.
Slightly off topic, but I would say the USA isn't really in a recession right now. As far as i'm concerned, if it hasn't effected the general public yet (and employment is being maintained right now, so i'd say it hasn't), then its more of a "wall street" recession, not an actual recession.
