Tag Archives: Craig Torres

Bernanke describes jobless recovery

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Yes, and this is a massive political risk.

The deficit is getting large enough to stabilize the economy at high levels of unemployment.

With flat employment growth, and 2% productivity growth, real GDP grows at 2% and unemployment stays north of 8%.

And the equity markets are in a very good place with costs under control and sales stabilized and rising.

So the financial sector booms while the real economy stagnates.

And fuel prices move higher as well.

Bernanke Offers Jobless Recovery as Humphrey-Hawkins Hopes Fade

by Craig Torres

Feb 23 (Bloomberg) — Bernanke Offers Jobless Recovery as Humphrey-Hawkins Hopes Fade delivering semiannual testimony required in legislation written by the late lawmakers, will describe a U.S. economy returning to growth next year without generating many new jobs. Even with credit markets thawing, Fed officials see unemployment persisting at 8 percent or higher through the final three months of 2010.


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Fed funds rate, control of

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Bernanke’s Cash Injections Risk Eclipse of Fed’s Benchmark Rate

By Craig Torres

Bernanke said in a congressional hearing yesterday that the expansion of the Fed’s balance sheet “makes it more difficult to control the federal funds rate.” It is “still an issue we are working on,” he told the House Financial Services Committee.

How about the Fed trading Fed funds and making a 1 basis point market in Fed funds. Yes, that would mean lending to Fed member banks without specific collateral, but Fed collateral demands are redundant, as other government agencies- FDIC, OCC, etc- are already responsible for monitoring all bank assets and capital, and presumably close down any and all insolvent banks.


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What’s next for the Fed?

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Bernanke may seek new ways to ease credit as Fed rate nears 1%

By Craig Torres

Oct. 23 (Bloomberg) — Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit.

All that’s left is the Fed buying longer term treasury securities to attempt to flatten the curve, get mortgage rates down, and add reserves.

This will ‘flood the market’ with reserves that now pay interest, so they can do this without a zero interest rate policy.

Their theory is that with more reserves banks will lend more, which is not the case, both in theory and practice, as Japan proved not long ago.

Instead of the Fed buying long term securities the treasury should simply stop issuing them and issue more bills. The treasury not issuing longer term securities is functionally the same as the treasury issuing them and then the Fed buying them. But with a lot fewer transaction costs.


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