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Bernanke Pursuing Anti-Greenspan Strategy: Transparency

(via foxbusiness.com)

Former Federal Reserve Board Chairman Alan Greenspan clearly reveled in his reputation as a mystical overseer of U.S. fiscal policy, an oracle whose vision and judgment rose above the banalities of common economic debate.

In hindsight, that didn’t work out so well. It turns out real estate prices wouldn’t rise forever.

The 2008 financial crisis and its extended aftermath have put a significant dent in Greenspan’s reputation, not to mention the Fed’s. Now it seems Greenspan’s successor, Ben Bernanke, is on a one-man mission to restore that reputation.

A key element of Bernanke’s strategy has been increasing transparency related to Fed policy decisions and generally seeking to demystify the once-secretive entity, essentially taking the opposite approach as Greenspan.

Bernanke’s open-door policy has picked up steam as the U.S. economy has struggled to recover from the deep recession that followed the collapse of the U.S. housing market.

 

“I think the secrecy of the Fed hasn’t worked, especially in this past financial market.”

– Mark Williams, former Federal Reserve Bank examiner

 

First it was press conferences, unprecedented for the top policy maker of the U.S. central bank. Now, in a move announced earlier this week, the Fed plans to start publishing its forecasts for interest rates, presumably in an effort to provide business owners and investors greater clarity regarding future policy decisions that may spring from the Fed.

What this means is that the Fed, beginning at its January 24/25 meeting, will release interest rate forecasts provided by Fed policy makers. In addition, the Fed will release specific predictions from policy makers as to when the Fed might start raising interest rates.

Long-time Fed watchers recall that the Fed only started announcing its interest rate changes in 1994.

“I think (the shift toward transparency) is a good thing. It should help businesses gauge their activity based on the fact that the Fed won’t surprise,” said Peter Cardillo, chief market analyst at Rockwell Global Capital. “At least they’ll try not to surprise. Anything can happen.”

The thinking goes that if employers are fairly certain that interest rates are going to remain low for the foreseeable future, that certainty might serve as a powerful incentive to take advantage of these historically-low interest rates to borrow money for expansion.

“From that perspective, it might help employers to accelerate hiring,” said Cardillo.

Cardillo said Bernanke seems willing to take unorthodox steps, including opening up the Fed to closer public scrutiny, for several reasons. First, he’s “desperately trying to get the economy growing at a more respectable level,” according to Cardillo.

Second, Bernanke wants to restore the Fed’s credibility in the wake of criticism that Fed policy makers were asleep at the wheel as the U.S. credit bubble expanded at an alarming rate a decade ago as borrowing levels rose unchecked.

Finally, Cardillo believes a bit of certainty in the U.S. could provide some much-needed counterbalance to the pervasive uncertainty overseas, primarily in Europe where the long-running debt crisis has threatened a global meltdown for over two years.

Simply put, the Fed’s rate projections are intended to allow businesses to adjust to potential shifts in interest rates well in advance of the actual change.

Interest rates were lowered to a range of 0.25% to 0% over three years ago during the worst of the financial crisis in an effort to spur lending and give a boost to the ailing U.S. economy.

Historically low interest rates weren’t enough to lift ailing housing and labor markets, however, so the Fed got creative. First by introducing massive bond buying programs that pumped more than $2 trillion in cash into the economy, and later by shifting its portfolio to include a higher percentage of long-term securities. The latter was an effort to boost the moribund housing market by driving down mortgage rates.

Neither of these purely fiscal policies has had much of an impact.

In April, Bernanke held the first press conference ever by a U.S. Fed chairman. Then in August the Fed broke from its long-standing tradition of avoiding specific timelines by announcing it would keep interest rates at their current low levels until at least mid-2013. Each of these two transparency moves was intended to open up the Fed process and reduce uncertainty.

“I think the secrecy of the Fed hasn’t worked, especially in this past financial market,” said Mark Williams, a former Federal Reserve Bank examiner and a finance lecturer at Boston University.

Williams takes a less benevolent view of Bernanke’s transparency strategy, arguing that the Fed chairman seems determined to put the Fed back in control of the fiscal steering wheel.

The Fed has been dragged “kicking and screaming” to its new policy of openness, Williams said, pushed by markets that have grown skeptical of the Fed’s ability to influence the sluggish economy.

“Over the last 3½ years the markets haven’t been pleased with how central banks have handled financial crisis,” said Williams, citing both rounds of quantitative easing, the two programs in which the Fed bought massive quantities of government bonds.

“The Fed has become reactionary,” he said. “Instead of the market reacting to the Fed, the Fed has been reacting to the market. Bernanke wants to get back in control. It’s a perception game, a PR campaign.”

By releasing interest rate projections, the Fed is trying to get out ahead of the markets, Williams explained. In any case, Williams said he generally applauds the effort.

“Markets work best when they have timely, accurate and transparent information. The Fed is coming into the 21st century kicking and screaming, but at least it’s making the attempt,” he said.

Read more: http://trade.cc/wju#ixzz1inU6d64z

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Romney Up Big in N.H. as Lead Widens, Polls Show

By Steven Shepard

Updated: January 7, 2012 | 9:36 a.m.
January 6, 2012 | 6:44 p.m.

 Former Massachusetts Gov. Mitt Romney has a commanding lead in the Jan. 10 New Hampshire Republican primary, according to three new polls released Friday that show Romney could become the first nonincumbent to sweep the first two GOP nominating contests in the modern campaign calendar.

The three polls all show Romney—who currently holds a slender lead in Iowa—blowing out the competition next week in his adopted home state, while former Sen. Rick Santorum, R-Pa., has received only a modest bump following his surprising surge to a virtual tie for first place in Iowa on Tuesday. Rep. Ron Paul, R-Texas, is in second place in each of the three surveys, while former House Speaker Newt Gingrich is fading. Former Utah Gov. Jon Huntsman, who is staking his entire primary campaign on a strong performance in the Granite State, trails badly in each of the polls.

  • Suffolk University in Boston, which has been conducting a two-day tracking poll for Boston-based WHDH-TV since Dec. 30, released its first poll conducted entirely after the Iowa caucuses. The latest results—compiled from interviews with likely primary voters on Wednesday and Thursday—show Romney leading Paul, 40 percent to 17 percent. Santorum runs third, at 11 percent, while Gingrich is fourth, at 9 percent. Huntsman is at 8 percent, and Texas Gov. Rick Perry earns just 1 percent of the vote.
  • The University of New Hampshire Survey Center conducted a poll for WMUR-TV in Manchester, N.H., from Monday through Thursday. In the full poll, Romney led Paul, 44 percent to 20 percent, with Gingrich and Santorum tied at 8 percent. Huntsman is at 7 percent. But UNH also provided results for the last two days of the poll, following Iowa: Romney leads with 43 percent, followed by Paul (18 percent), Santorum (11 percent), Gingrich (9 percent), and Huntsman (7 percent).
  • A new NBC News/Marist poll, conducted on Wednesday and Thursday, shows Romney leading Paul, 42 percent to 22 percent. Santorum jumped to third place, with 13 percent, followed by Gingrich and Huntsman, each at 9 percent.

As in Iowa and other states, the New Hampshire polls show a significant drop in Gingrich’s support. In the NBC News/Marist poll, Gingrich has plummeted 15 points since late November, arguably the peak of his candidacy.

The polls also show the breadth of Romney’s lead. He leads across genders, among most age groups (Paul leads among those voters 18-34 in the UNH poll but not the Suffolk poll), and among those voters who identify with the tea party and those who do not.

The UNH poll crosstabs also break out the horse race by religion, and the poll shows that Santorum has not yet made significant inroads with Catholic voters, who made up 38 percent of the 2008 primary electorate. Santorum captures the vote of 10 percent of Protestants, and just 9 percent of Catholics.

Campaigning in Tilton, N.H., Romney sounded a note of caution about the results.

“I know some pollsters say I’m doing real well. Let me tell you, those polls, they can just disappear overnight,” he said. “What you say to a pollster is a bit like going on a date. It’s like well, I might try this but you know, getting married, that’s something else. So we need to make sure you’re working real hard and I’ll keep working real hard.”

Meanwhile, President Obama continues to face tough sledding in the Granite State. Just 40 percent of all New Hampshire registered voters approve of the job he is doing as president, according to the poll, equal to his poor approval rating in late November. Nearly half of voters—49 percent—disapprove of Obama’s job performance.

The Suffolk University poll surveyed 500 likely primary voters, for a margin of error of plus or minus 4.4 percentage points.

The UNH poll surveyed 631 likely primary voters, for a margin of error of plus or minus 3.9 percentage points. That includes 318 interviews conducted after the Iowa caucuses; those results have a margin of error of plus or minus 5.5 percentage points.

The NBC News/Marist was conducted by Marist College in Poughkeepsie, N.Y. The poll surveyed 2,263 registered voters, for a margin of error of plus or minus 2.1 percentage points. There were 711 likely GOP primary voters, for a margin of error of plus or minus 3.7 percentage points.

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The 99% Have Power….Now Use It !!!

Thanks to the interwebs corporate America is unsettled by the quickness with which a bad reputation can fly. When things go viral on the web it does hurt consumption.

This power coupled with collective consumerism has the ability to change corporations and their behaviors. Certainly a much better way to influence change as opposed to camping out or marching on Washington.

Here is my two cents: if you want to really change things then collectively we should not buy anything for a full quarter beyond the necessities.

Full article

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Another Rift Within the ECB Develops

The ECB has been viewed as a elite institution that would impose austerity and  keep the euro together against the wishes of taxpayers who are ultimately on the hook for all the sovereign debt. The taxpayer would also like to have a more democratic process in key decision making.

Well now Orphanides, a central bank policy maker, is siding with taxpayers stating the ECB and Euro Zone leaders should abandon supporting countries like Greece.

Perhaps he will fall victim to the next big sex scandal….

Full article

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Who is Richard Cordray?

Read here:

After months of pushback from Republicans in Congress, President Obama has finally decided to go over their heads and appoint former Ohio Attorney General Richard Cordray head of the Consumer Financial Protection Bureau without them.

So who is he?

We’ve written a lot about him at Business Insider. Partly because, no matter what side of the aisle you’re on, there’s no denying he’s incredibly impressive. Cordray is an undefeated, five-time Jeopardy! champion (he won $45,303), has a masters in economics from Oxford University, and was also editor-in-chief of the University of Chicago Law Review.

After law school he clerked for Supreme Court for a Reagan appointee, and represented the U.S. government before the Supreme Court there three times — once for George H.W. Bush and twice for Bill Clinton. That was all before running for AG of Ohio (a swing state) as a Democrat.

So what’s the problem with Cordray? There are two, one is an old Washington problem, and the other is purely Wall Street’s:

1.Republicans said they would never support anyone to head the CFPB — Period —that is, unless the White House made serious changes to the agency. (Politico)

2.He doesn’t just go after Wall Street Institutions. He goes after individual executives as well.
Let’s expand on point 2 with some more examples of how Cordray fought Wall Street as Ohio AG:

•In 2009, representing several state public pension funds, he reached a settlement with Hank Greenberg and other AIG execs that blew the SECs settlement out of the water. Cordray got $115 million, the SEC got a mere $15 million.
•The following year he settled another suit against AIG itself (also for Ohio) for $750 million. Some reports said the insurance company would actually be paying out $1 billion.
•And then there was the Bank of America Merrill Lynch merger. Cordray sued on behalf of Ohio pensions on the grounds that BofAS concealed billions of dollars of Merrill Lynch losses from their clients before the merger. The case settled for $475 million.
When we talked to him about the Merrill/BofA case in 2009, he, of course, explained the why he was suing, but also revealed why he’s such a threat:

My understanding of a bonus is that it’s a special reward for superior performance. There wasn’t any superior performance for special reward; nonetheless, they (BofA and Merrill execs) wanted the bonuses. They ultimately, as best we know, got approval to pay out somewhere between $3 and $4 billion in bonuses, which was a very material element to the value of the merger. That was not disclosed to investors.

…we’ve also pursued some of the top executives — not just the corporations themselves. We do think that they bear their share of the blame — we think that they need to be held accountable as well. We think that that’s a principle that sends a message to other corporate executives on Wall Street that is a further disincentive for this kind of thing in the future.There’s your new sheriff, Wall Street. As we reported earlier today, it’s likely Republicans will fight Obama’s appointment in Court. In the meantime, Cordray will be able to nice and comfy at the CFPB.

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Questions about OWS influence arise after Iowa

DES MOINES, Iowa (AP) — With several attention-grabbing protests before Iowa’s caucuses, Occupy Wall Street activists proved their movement did not end when its encampments in big cities dispersed. But they also showed the group hasn’t matured into a political force, and it’s not clear whether it will become a liberal counterweight to the tea party this election year.

Following Tuesday’s vote in Iowa, on which the movement had little impact, Occupy organizers are pledging to stage more protests in New Hampshire and South Carolina as the presidential nomination process moves east. But the smaller-than-expected crowds, a muddled message that was mostly ignored by candidates, and tactics that seem to limit their appeal raised questions about its long-term viability.

“This is a sign that the way they have been trying to do it probably isn’t going to work,” said Dave Petersen, director of the Harkin Institute of Public Policy at Iowa State University, who said Occupy’s only discernible impact was tighter-than-usual security at Republican events. He said the group needed to develop leaders and a more coherent message if it wanted to make the transition from a grassroots movement to an electoral powerhouse.

Occupy protesters credited their Iowa counterparts with keeping the movement going even as they questioned tactics such as heckling candidates and blocking campaign offices.

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Greenspan: U.S. Faces a “True Revolution”

“The United States faces a “true revolution” in the choices it will have to make to secure its fiscal future now that the welfare state has run up against a “brick wall of economic reality”, former Federal Reserve Chairman Alan Greenspan said on Wednesday.

In an opinion piece for the Financial Times, Greenspan argued that the political landscape in the United States was more divided than ever, resulting in political paralysis as the Tea Party’s influence had created “an effective veto of new legislation before the current heavily Republican House of Representatives”.

The failure last year of the Super Committee — a congressional committee tasked with finding spending cuts to cut the United States’ ballooning budget deficit — to reach a deal underscores this shift in U.S. politics, Greenspan said.

“A political tsunami has emerged out of our past in the form of the Tea Party, with its ethos reminiscent of rugged individualism and self-reliance,” Greenspan wrote.”

Full article

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Government Subsidies Need to Change

 

[youtube://http://www.youtube,com/watch?v=cXH331pz6OM 450 300]

Don’t forget about the food stamps that can buy soda and junk food in most states, but not protein powders and other healthy stuff from the local health food stores.

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