Bernanke is largely helpless.....the more he does at this point, the larger the mess becomes later. Had interest rates been raised earlier, it would have cooled this economy gradually. Now, market forces will cool it fast....really fast. Watch what happens when the US job market tanks....the pain, oh, the pain..... Ben will be so tempted to get in that helicopter and throw money out of it.....and indeed, that will help....short-term. Later, we'll be at 10-20% inflation as the dollar plummets. Heck, sit back and enjoy the crash....and watch Cramer go wild on "Mad Money"....err...wait, it's now: "Sad Money".
The last thing I hope is that QM keeps at current level; low 70s; it is last class of asset currently hold its value; Contra to popular believe; if QM start slipping from here; the market probably goes down more.
When Bernancke does his 'liquidity injections' - where does he get the money from? Does he create it out of thin air by pressing a few buttons? Of course nothing is free - that kind of stuff (liquidity injections) has created the massive inflation in the past few years that has hurt the poor and middle class more than anything else. So every time he injects, he is sticking it to the poor and middle class to bail out wall street banks hedge funds that can't trade for shit. The ECB and Fed have already done the largest injections since 911? What more do people want them to do? Lower rates down to 2-3% and start the whole RE bubble all over again? When I make a bad trade, no one bails me out.
So you agree that Bernanke is a weak Chairman? I guarantee you that Paul Volcker didn't sit around listening to Board members whining. I get your drift. Unfortunately, it's wrong. There are no doubt endless discussions and presentations by staff, who actually wield far more influence than some district bank president. But at the end of the day, it would be an extraordinary affront to the Chairman for the FOMC to outvote him on an issue such as rates. If Bernanke wants something badly enough, he'll get it.
The conclusion doesn't doesn't necessarily follow the premise. Paul Krugman is also a phd from MIT and he is demonstrably clueless. In fairness, he is afflicted with a terrible case of Bush Derangement Syndrome, and that may explain some of it.
As an import dependent economy -> lower rates = weaker dollar = massive inflation on imports. Again this hurts the poor and middle class more than anyone. The only think Ben can do is come out and say there will be massive losses but the risk is spread out thin enough that we will emerge out of this okay. I don't give a fuck if the average GS employee gets a $100,000 bonus on top of a $100,000 salary this year instead of the $300,000 bonus they got last year. But don't ask a guy working his ass for $20,000 a year to eat GS's loss.
I have to respectfully disagree. The poor and middle class could have taken down no doc interest only piggyback mortgages and bought multiple houses in Vegas, LA, Phoenix, etc. Then flipped them just like that guy on TV. That is known as the rising tide lifting all boats. Easy credit is the key to the American dream, but Bankruptcy Ben seems determined to crush it. I for one am not going to sit by and let one man press a crown of thorns on the brow of the working people of this country.