Sunday, May 02, 2010

Let The Record Reflect

Without explaining the months-long delay -- something Congress should examine -- the Federal Reserve on Friday finally released the transcripts of its rate-setting meetings in 2004. The link is here.

I've read about half of the transcripts, paying particular attention to the comments of Greenspan, Bernanke, Geithner and Yellen. There's some pretty damning stuff, some of which is directly relevant to Yellen's upcoming Senate confirmation.

If those responsible for the disastrous policy mistakes that led to the bubble and bust had either been driven from office or had the decency to quit, these transcripts would be little more than historical curiosities at this point. Which means they are much more than that, unfortunately.


Anonymous KAIMU said...


Here Dino Kos, on Dec 14th, 2004 briefs Greenspan, Bernanke and Geithner on the growing trend into FNM and FRE and MBS. It seems even global central banks with high exposure to now toxic MBS had an early stake in the game to keep it going as long as possible, AAA or not! Everyone, including central banks wanted those "yields" from MBS that surpassed Treasuries. Who cares about risk when you're a central bank?

Anecdotally, those central banks with large reserve holdings have been growing both their Treasury and non-Treasury holdings for some time, though it’s fair to say that the growth rates of agency, MBS, and even corporate holdings have been faster than that for Treasuries.

Then Ms. Minehan of the New England District chimes in this:

Another risk involves the fiscal deficit. The latest government appropriations bill may have reined in spending and reduced the deficit in the short run. But it’s hard to see how the federal deficit can remain contained, given reasonable assumptions about discretionary spending growth; the resolution of the growing negative effect of the AMT (alternative minimum tax); the likely continuation of the Bush tax cuts; and the likely continuation, unfortunately, of the Iraq War, not to mention plans to address Social Security.

Then she gets into her reggae and crossing her fingers along with Dave Stockton here:

Now, as I consider both of these forecasts, I am reminded of Dave’s crossed fingers and also the reggae tune “Don’t Worry, Be Happy.”

Party on Dave!

5/02/2010 4:28 PM  
Anonymous KAIMU said...


I am a member of the NFIB, National Federation Of Independent Business. I follow their surveys in their SMART BRIEFS, which they issue every week via e-mail.

Here Mr. Ferguson comments on the NFIB surveys. I am glad to see that they consider "small business" a factor in the overall economy. What the NFIB is reporting now shows the US economy is miles away from recovery as the SMALL BUSINESS SENTIMENT SURVEY for March still shows a 86, which below 90 is a historical long term low.

So even in 2004 they were seeing signs that CAPEX, capital expenditure was disappearing. Not a good sign for a supposed "healthy economy".

This downshift in the forecast is reinforced by the current orders survey indicating that two major manufacturers of productivity-enhancing equipment characterized recent increases in orders as falling well below expectations. At 30 percent, the percentage of NFIB survey respondents planning to make capital expenditures is near the low end of its ten-year range. I’ve also heard from a private-sector contact of my own of a sudden weakness in demand for cutting-edge automated machine tools. This contact has an 80 percent market share for a key component that is used in nearly all automated machine tools, and he has experienced an unprecedented 30 percent cancellation for deliveries of that critical part in Q1 of next year and is expecting softness through almost all of 2005.

My take is always that the US FED and these FOMC meeting minutes reinforce my belief that these people in charge of our money are incompetent and guessing at best like the rest of us. In effect in 1913 and the default in 1971 on the gold standard allowed the US FED and its member banks to sell the idea that the "human condition" can replace the gold standard and braking mechanism on government largess.

What we see today is the US FED failing to maintain the US Dollar's "store of value". The dollar buys much less and is on a path to buying a lot less in the future. I consider that an "F" for the US FED report card. These people's main expertise is to shuffle paper and make the wealth of America and the accumulated capital of generations disappear. I would not hire Tim Geithner or Ben Bernanke to balance my checkbook!

5/02/2010 4:50 PM  
Blogger Bill Bennett said...

this one may take the cake, i. e. "only we fully understand". "We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said, according to the transcripts of a March 2004 meeting".

5/03/2010 3:13 PM  
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