Romney Goes Ron Paulie-Bananas on Bernanke and the Fed

I am severely crazy, and I approve this message.

Look up Mitt Romney and desperate in Google and you won't require Nate Silver to discern the probability of the winner of the 2012 presidential election in November.

Romney's desperation is clear by his abandonment of Etch-a-Sketching toward the right-center, in favor of:

• a full-blown, racist-right move to his low-information base
• incoherent attacks on Obama's foreign policy, in the face of murderous violence
• moving forward with long-term GOP project of phasing out Social Security and Medicare
• and his bizarre embrace of Ron Paul and the John Birch Society's scorn of the Federal Reserve System

Notes Paul Krugman:

Last week Ben Bernanke, the Federal Reserve chairman, announced a change in his institution’s recession-fighting strategies. In so doing he seemed to be responding to the arguments of critics who have said the Fed can and should be doing more. And Republicans went wild. ...

So last week we learned that Ben Bernanke is willing to listen to sensible critics and change course. But we also learned that on economic policy, as on foreign policy, Mitt Romney has abandoned any pose of moderation and taken up residence in the right’s intellectual fever swamps.

Ed Kilgore terms Romney's serpentine "econo-manic campaign" (nearly identical to the campaigns of W. Bush, McCain and the other great deregulaters) as demonstrating a movement "so locked down on tactical day-to-day maneuvering that it’s lost sight of any coherent strategy or rationale-for-candidacy."

So now, Romney wants (and openly advocates) the Federal Reserve Act of 1913 declared as creating a mere inflation-fighting tool, no matter the legislative and administrative history of the law and the function of the Federal Reserve System.

Honest money

Who needs monetary policy? We need "honest money," as Paul Ryan phrases it, whatever that would be in GOP land.

As Brad DeLong puts it in his Paul Ryan calls for fewer jobs and higher unemployment in America: "'Honest money' is a Ron Paul dog whistle: the good productive workers, the bad exploitative usurers, the necessity of a hard-money depression to cleanse the monetary colon--you know the drill."

Continues Kilgore: "Long-time if somewhat muted (at least outside the Ron Paul campaign) Republican muttering about stimulative monetary policies broke out into the open in the Romney campaign’s reaction to the Fed’s QE3 announcement [last week]."

This is the same Fed that saved the country in the great crash of 1987 when we "'came within an hour' of the disintegration of the stock market," as noted by Felix Rohatyn, a partner of Lazard Freres and Company. (Johnson. Sleepwalking Through History, America in the Reagan Years; W.W. Norton Company, 1991. p. 381) [A reviewer of Haynes Johnson's book writes, "A readable critique of the fatuous illusions foisted on a willing society by American leadership in the 1980s." (Hyland. Foreign Affairs; Summer 1991)

Fatuous illusions indeed.

Haynes Johnson also notes, "In that moment of maximum peril (in 1987) the Federal Reserve Board in Washington stepped in forcefully and dramatically, [announcing its 'readiness to serve as a source of liquidity to support the economic and financial system.'"]

Damn stimulative forces! I say, let 'em crash.

Not the first time the Fed has saved the system, though 2008 has evidently fallen into the black hole where facts and history no longer exist.

And 1929? Pay no nevermind.

Those 18th, 19th and 20th century recessions. God and the Magical Market made sure nothing bad happened to good, Christian Americans; though 1987 was a bit scary—Satan, no doubt.

Joseph Stiglitz and Paul Krugman; they're just part of those liberal elitists calling for our country not to commit economic suicide: Trying to control our lives, just like them liberals!

Probably went to college too. (See Jacob Hacker and Paul Pierson. The New York Review of Books)

What a couple of snobs, Rick Santorum might say.

Political journalists seriously ought to ask of Romney: Are you totally deranged?

To which Romney might reply, 'Look, I need my base, folks. It's my only shot at this thing.'

GOP Concerns the Fed over the Economy

The Republican Party has made clear it will head off any jobs stimulus plan animated by its my-way-or-off-the-cliff fiscal policy, and its brand of political fundamentalism on coming budget talks. This stance has the Federal Reserve concerned.

The New York Times reports, "Fed officials also have indicated a desire to insure against a pair of looming risks, that events in Europe will freeze global financial markets and that the political stalemate in Washington over fiscal policy will undermine the domestic recovery."

Understated as usual, the Federal Open Market Committee made clear that it stands ready to act to promote stability and job growth, even as the GOP carps.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. ... To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy," reads the Fed's statement.

Translated, this can interpreted as meaning the Fed, with the likely coordination of the Treasury Dept, will not let the Republican Party terrorize the U.S. and world economy. “We are prepared to do what is necessary,” Fed’s chairman, Ben S. Bernanke said, repeating a promise that has become his byword. “We are prepared to provide support for the economy.”

From the Federal Open Market Committee

Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.

Statement Regarding Continuation of the Maturity Extension Program

License granted for a total war on recession

Update: Wall Street Journal: "We are running out of the traditional ammunition that's used in a recession, which is to lower interest rates. They're getting to be about as low as they can go. And although the Fed is still going to have more tools available to it, it is critical that the other branches of government step up."
- Barack Obama in a news conference in which he called for a government spending stimulus program.

The incoming Obama administration has just been granted a political license to pursue virtually anything it wants in fiscal policy in light of the seriousness with which the Fed is addressing the economic situation facing the world.

Reducing its key rate to a historic low, near zero, the Fed said it would use “all available tools” to fight the recession; in other words War against the recession by any means necessary.

Reads the Fed's statement:

For immediate release

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.

Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.

Wall Street Looks with Concern, Fed Action Called "Emergency'

- Breaking Financial News - New York Times -

Update: Fed Cuts Key Interest Rate 3/4% - The Fed's cut in the federal funds rate is the "most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory," reads the Times in a breaking story.

The Chicago Tribune reports:

The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession.

A disastrous, imperial foreign policy, a historically bad fiscal policy, a devastating blow to civil rights, and now a looming recession and downturn in the stock market.

Makes me wonder what god was thinking when, as Bush has attested, god chose Bush to be president.

From AmericaBlog:

Asian and Australian markets fell hard for the second straight day including a 5.6% drop in Tokyo, 7% in Australia, China 7.2% and Hong Kong a brutal 8.7%. The Hong Kong market has lost over 21% in 2008.

European markets collapsed on Monday, though at midday, are slightly down.

Wall Street is pointing in the direction of a painful day with futures down 4%.

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