Bernanke got an open letter
This is rare. Only happens when there is great cause of concern.
Open Letter to Ben Bernanke
The following is the text of an open letter to Federal Reserve Chairman Ben Bernanke signed by several economists, along with investors and political strategists, most of them close to Republicans:
We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.” In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.
We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.
The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.
Cliff Asness
AQR Capital
Michael J. Boskin
Stanford University
Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)
Richard X. Bove
Rochdale Securities
Charles W. Calomiris
Columbia University Graduate School of Business
Jim Chanos
Kynikos Associates
John F. Cogan
Stanford University
Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)
Niall Ferguson
Harvard University
Author, The Ascent of Money: A Financial History of the World
Nicole Gelinas
Manhattan Institute & e21
Author, After the Fall: Saving Capitalism from Wall Street—and Washington
James Grant
Grant’s Interest Rate Observer
Kevin A. Hassett
American Enterprise Institute
Former Senior Economist, Board of Governors of the Federal Reserve
Roger Hertog
The Hertog Foundation
Gregory Hess
Claremont McKenna College
Douglas Holtz-Eakin
Former Director, Congressional Budget Office
Seth Klarman
Baupost Group
William Kristol
Editor, The Weekly Standard
David Malpass
GroPac
Former Deputy Assistant Treasury Secretary (Reagan Administration)
Ronald I. McKinnon
Stanford University
Dan Senor
Council on Foreign Relations
Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle
Amity Shales
Council on Foreign Relations
Author, The Forgotten Man: A New History of the Great Depression
Paul E. Singer
Elliott Associates
John B. Taylor
Stanford University
Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)
Peter J. Wallison
American Enterprise Institute
Former Treasury and White House Counsel (Reagan Administration)
Geoffrey Wood
Cass Business School at City University London
Taleb calls Bernanke “Doctor Stretcher”
Albeit his extreme views sometimes, Taleb is interesting to watch. He is the author of the widely popular book “The Black Swan”.
In this interview, Taleb calls Ben Bernanke ‘procrustes’, Greek word for Dr. stretcher.
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The Fed is repeating its mistakes – interview of Stephen Roach of Morgan Stanley:
How much has Chinese Yuan really appreciated?
According to Economist Magazine, adding rising labor cost, Chinese Yuan has appreciated by nearly 50% against US dollar since 2005.
A real exchange rate takes account of price movements in each country. If prices rise faster in China than in America, China’s real exchange rate goes up, even if its nominal exchange rate stays the same. That’s because higher prices at home make China’s firms less competitive abroad, just as if their currency had gone up.To calculate the real exchange rate, you need a gauge of prices in each country. Many economists use the consumer-price index (CPI). But the CPI contains lots of goods and services (such as housing rents) that cannot be traded across borders.
Our measure of the real exchange rate, which we will regularly update, offers a more direct measure of competitiveness by looking instead at unit labour costs: the price of labour per widget. These costs go up when wages rise or productivity (widgets per worker) falls. In American manufacturing, unit labour costs have risen by less than 4% since the first quarter of 2005, according to the Bureau of Labour Statistics. In Chinese industry they have risen by 25% over that period, according to our sums.
Easiest place doing business
The new World Bank ranking of world economies on ease of doing business. The US is ranked No. 4, China 79; Singapore NO. 1 and Hong Kong No. 2 and Denmark No. 6.
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Bernanke explains the Fed’s action:
The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.
This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
John Ryding comments:
Interview of Julian Robertson of Tiger Management
One year after his first interview with CNBC, Julian Robertson, legend investor and Chairman of hedge fund Tiger Management, came back with his view on the Fed’s QE and fighting on obesity.