Courage to Act; Reflections on Fed Hubris; What if Whatever it Takes is Not Enough? Fed Troika?

Courtesy of Mish.

This past week, Ben Bernanke was in London promoting his book "Courage to Act". Today, Albert Edwards at Societe Generale pinged me with his thoughts.

Edwards writes …

Ben Bernanke is in London to publicise his book ‘The Courage to Act’. Although the various open events would have been fascinating, I thought it best not to attend. I would not have been able to control myself. In a repeat of the protest at the April ECB press conference I would have probably stormed the stage, thrown confetti money at him and been unceremoniously dragged out by security. But speaking to people who were there and reading the pre-vetted Q&A on the web, reminded me just how overconfident central bankers are to their very core – even after their actions are clearly ruinous. Bernanke again paraded his lack of insight of the Fed’s leading role in causing the 2008 crisis. Indeed he was self-congratulatory about the Fed’s success in averting another Great Depression, not accepting that they almost actually caused it! Central bankers are doomed to repeat the same mistake until they acknowledge their role in the last crisis and stop blaming everybody else. Unfortunately it now appears from recent comments that ECB President Mario Draghi is also demonstrating the same hubris. Indeed it is becoming clear that ECB QE is already failing.

It should not be forgotten that after Draghi's 2012 whatever it takes comment, he also said in the next breath “and believe me, it will be enough” in another demonstration of central bank overconfidence. Regular readers will know I have long been an extreme critic of central bank policies, particularly of the Fed and the Bank of England with their negligent pursuit of ultra-loose money policy in the mid-noughties policies that ultimately proved ruinous in the 2008 Global Financial Crisis. I believe the Fed and BoE have learned practically nothing from their previous mistakes and we are heading down exactly the same road to catastrophe as the financial markets creak and groan under the strain of QE-inspired, excess valuations. I would definitely now also put the Draghi ECB firmly in that same camp. Contrary to the Pavlovian salivations of the markets, the evidence is mounting that “whatever it takes” is not going to be enough.

Private Lending

Edwards cites private sector lending as evidence of ECB failure.

The goal of the ECB was to spur private lending and increase inflation. The ECB succeeded at neither, but it did create huge, destabilizing asset bubbles, as did the Fed.

Reader Comments

Reader Randy pinged me this morning with a question: "Have you read Bernanke’s book yet? Seriously Mish, I’ve never witnessed someone willingly display such hubris in my life. And it’s scary as hell."

No, I haven't read the book and do not intend to. I do not want one dime going to Bernanke.

Fed Troika

In a blog response to Fed Drops Risk Warnings, Opens Door for December Hike: Who's the Fed Fooling? You, the Bond Market or Itself? Reader John, offered these comments.

I watched Ben Bernanke today at the London Pimco Investment Summit. His comments were surprisingly frank: It takes ~80k jobs created a month to maintain unemployment, and if the two jobs reports between now and the December meeting are of the order of 150,000 or more the Fed should/will hike.

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