The BBC reports Ben Bernanke, Former US Federal Reserve Chief, Wins Nobel Prize.
Ben Bernanke, who led the US central bank during the 2008 financial crisis, is one of three recipients of this year’s Nobel prize in economics. The Nobel Foundation chose to recognise work by Mr Bernanke about the importance of preventing runs on banks.
He shared the prize with economists Douglas Diamond and Philip Dybvig.
The Nobel Foundation said their research had “improved our ability to avoid both serious crises and expensive bailouts”.
Exclusive Bernanke Interview
In an exclusive MishTalk coup, Ben Bernanke agreed to an interview.
Mish: Why do you think you won the Nobel Prize?
“To learn how to save the economy, we first had to wreck it. That’s the real reason I won the prize,” said Bernanke. “And boy did we wreck it.”
“I expect to win another prize in 2025,” added Bernanke.
“I paved the way for the Powell Fed to learn from my mistakes. QE and bank bailouts created and even bigger housing bubble under Powell than I created.”
“Best of all income inequality is at record levels, and banks will remain profitable thanks to record amounts of free money we currently give banks.”
Mish: Is free money the secret sauce?
“Of course,” he replied. “That took a while to figure out, but once we had the right formula, we realized there would not be another banking crisis in my lifetime, at least in the US”
Mish: How much free money it might it take to prevent another crisis?
Bernanke responded, “Why does it matter? We will do whatever it takes, legal or not,” said Bernanke, adding that he only had time for one more question.
Mish: What about the bottom 80 percent?
Bernanke said “You really don’t get it do you? We have proven beyond a shadow of a doubt the bottom 80 percent don’t matter at all. Taking care of the top 1 percent trickles down to the next 9 percent. Then the next 10 percent is the middle class.”
“No one else matters, and that’s what my policies prove,” said Bernanke as he rushed out the door to accept his well-deserved prize.
Free Money Via QE
The Fed forced money down banks throats and it now pays interest on those reserves parked at the Fed.
Free Money Calculation
The Fed gives taxpayer money to banks at an annualized rate of 3.15%.
3.15% of $3.3 trillion is $103,950,000,000. The Fed is shrinking its balance sheet but with every rate hike bumps up the interest it pays on reserves.
The Fed reports this data monthly, last updated in September for August.
The Strong Dollar is Getting on the Nerves of Foreign Central Banks
In a related post please note The Strong Dollar is Getting on the Nerves of Foreign Central Banks
I wanted to ask Bernanke about the dollar. Alas, my allotted time ran out.
Finally, In case you have not figured this out, this interview is a spoof.
This post originated at MishTalk.Com.
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Mish
The shift (mislabeled disintermediation) by the public from indirect investment through the banks, to direct investment or investment via the nonbanks, does not apply to the commercial banks ever since Franklin D. Roosevelt’s 1933 Bank Holiday.
Savings flowing through the nonbanks never leaves the payment’s system as anyone who has applied double-entry bookkeeping on a national scale should already know. There is just a change in the ownership of pre-existing DFI deposits within the payment’s system.
Ever since 1933 (Roosevelt’s “Bank Holiday”), the Federal Reserve has had the capacity to take unified action, through its “open market power”, to prevent any outflow of currency from the banking system.
Bernanke introduced the payment of interest on excess reserves. Banks are not intermediaries. The banks can outbid the nonbanks for loan funds, but not the other way around.
Powell repeated Bernanke’s mistake in the Sept. 2019 repo spike (payment on interbank demand deposits higher than 1yr treasury bill or money market rates).
The TLGP and the remuneration of IBDDs induced nonbank disintermediation (where the size of the nonbanks shrank by $6.2 trillion, whereas the commercial banks were unaffected, growing by $3.6 trillion during the same period – even while higher countercyclical bank capital cushions drained c. $1 trillion).
Virtually all demand drafts cleared through “total checkable deposits”. But Powell deemphasized the role of money in the economy.
To obfuscate his ruse Powell eliminated reserve requirements (whereas Dr. Richard Anderson said: “reserves are driven by payments”) and destroyed deposit classifications.
Powell eliminated the 6 withdrawal restrictions on savings accounts, which isolated money intended for spending, from the money held as savings.
Bernanke is lying about the “wealth effect”. Funds dissipated in financial investment (the transfer of title to goods, properties, or claims thereto), as opposed to real investment.
The BOE needs to drain the money stock and simultaneously drive the banks out of the savings business (a countercyclical move which doesn’t reduce the size of
the payment’s system). The 1966 Interest Rate Adjustment Act is the template. It increased the supply of loanable funds, lowering long-term rates, decreased unemployment, and reduced inflation (staving off a recession as Powell said).
Banks
don’t lend deposits. Deposits are the result of lending. Ergo, all bank-held
savings are frozen (causing secular stagnation). Rather than bottling up
existing savings, the monetary authorities should pursue every possible means
for promoting the orderly and continuous flow of monetary savings into real
investment.
Bernanke’s “wealth effect” is exactly
the opposite of what he claims. Funds dissipated in financial investment (the
transfer of title to goods, properties, or claims thereto), as opposed to real
investment, represents a leakage in National Income Accounting. In the circular
flow of income, voluntary savings require prompt utilization if the circuit
flow of funds is to be maintained and the deflationary effects avoided (a deceleration in velocity, or secular stagnation and negative real rates of interest).
FINANCIAL speculation, stoking asset bubbles,
provides a relatively insignificant demand for labor and materials and in some
instances the over-all effects may actually be retarding to the economy.
Compared to REAL investment, FINANCIAL
investment is rather inconsequential as a contributor to employment and
production. Only debt growing out of REAL investment or consumption makes an
actual direct demand for labor and materials.
with the money supply. No, Bernanke “did it again”.
over-simplified monetarist doctrine that posits a direct relationship between
the money supply and prices” in his book: 21st Century Monetary Policy.
the award. He was directly responsible for the GFC. Dec. 2004’s money #s
weren’t exceeded for 4 years. That is the most contractive money policy since
the Great Depression. M1 NSA money stock (the “means-of-payment” money supply) peaked
on 12/27/ 2004 @ 1467.7 and didn’t exceed that # until 10/27/2008 @ 1514.2.
“reserves are driven by payments”
As I said in response to Powell
removing legal reserves: “The FED will obviously, sometime in the future,
lose control of the money stock.” May 8, 2020. 10:38 AMLink
Now, they are talking about giving this year’s “Peace” Prize to Zelenskyy, a guy who literally keeps saying, “We need more weapons” almost every day!
And you forgot to mention the peace prize given to Yasser Arafat, really, they couldn’t find someone with a better record of peaceful actions