Wednesday, March 21, 2012

Ben's lectures I

Moral: Wherein we give Ben a chance to speak for himself (and his roles - which, we hope, is more than fairy dusting upon a gab'd standard).
---                         Lecture 1, Lecture 2, Lecture 3, Lecture 4

Foreword: The George Washington University School of Business was the site of the FED's recent outreach. Lecture 1 (video - also available at of a 4-part series took place yesterday.

The following are notes and comments that were posted while watching the video today. The intent is to watch all four of these and to summarize at the end.

As we said earlier, he has an impossible task in his position, and we'll be a little more respectful this year. After all, he has not acted like King Alan.

Now, in one write-up on the lecture, there was mention that Ben joked about the 'gold' standard as this: moving something from a hole in South Africa to another hole. I'll be looking for that remark, so expect a comment about that bit (the notes will be marked with the corresponding time stamp from the talk). The idea is to get away from a gab standard, and there are many way to do this.

Other than that, I'm going to listen open-minded as one would expect. And, my comments, hopefully, will be fair.

Notes (italics, my aside, sometimes with links - times are elapsed minutes):
  • ~4:28 - looking at the broader contexts, including his area of the Great Depression
  • ~5:12 - Part 1, why central banks? Next week will get into the current issues.
  • ~8:00 - what do central banks? Stability, essentially (macroeconomic, financial)
  •       macroeconomic - think jobs, inflation                
  •       financial - bailouts to prevent runs
  • ~9:00 - usual tools? monetary policy (interest rate, mainly; but, print, or burn, money - using bonds) and liquidity (cheap loans, without due credit assessment - of course, last resort - do we all not wish for that?)
  • ~12:04 - third tool? financial regulation and supervision (not unique to the FED) to reduce risk
  •      side note (wasn't this the same guy who said that things were fine in the 2007 timeframe?)
  • ~13:07 - a look at early efforts, Sweden, 1668, most backed by gold (see below)
  • ~15:28 - financial panics (lack of confidence, runs - everyone wants their money, whatever that is
  •                            this part pulled out into a separate video (Financial panics)
  • ~21:17 - lender of last resort (bailouts to calm panics - uses Bank of England as example, quotes Walter Bagehot -ah, Bagehot says if there is collateral - in other words, don't enhance leveraging already gone awry, too, Bagehot says higher interest rate - Ben did not do that!)
  • ~23:42 - now to the FED's history, the functions were done privately before the FED, first the clearing house, daily exchange, they would close down and look at failures (if only we could do that), but private turned out to be inadequate, 1893 stands out
  • ~28:27 - finally, the FED, and gold's use to base money, ..., 
  • ~30:14 - here it is, gold, used as a standard: a waste of resources, dig a hole/move stuff/put into a hole (at least, you have something that is real!), of course, money supply is limited, why then a central bank?, says inflation (?), closer ties (sensitivities) between economies of countries (some would argue that is good, he admits), uses China as an example (tied to US currency - yes, we're in a big hole to them), ..., independence, he says, if not use gold? (chimera), speculative attackes? (ah, guy, we don't see these now?), didn't prevent panics (again, the FED does? - I get pangs thinking of how the FED treats savers), lack of credibility? (did not this last go-around take care of that for the central banks?), hallelujah, over the longer term, prices were stable (did you review your slides, guy?)  
  • ~38:01 - deflationary example, related to gold (sounds just like people being underwater now, what is the difference?)
  • ~39:50 - Williams Jennings Bryan wanted to add silver to gold, so that there would be a bigger basis (there are other elements! - it's called heterodox, what about an energy model? -- the cruxifix now is the Street (not Main) and ca-pital-sino
  • ~40:30 - President Wilson, and the FED is born, 1913, lender of last resort, and manage the gold standard, disagreement between Main Street and Wall Street (ah, never heard of such a thing) on control, so 12 Banks, BOGs in DC, equitable?   
  • ~45:00 - lucky for the FED, that its start was in the good times (Roaring 20s), but, then 1929!, global in scope, from 1929-41, stocks down, output and prices down, 25% unemployment
  • ~50:00 - why did it happen, according to Ben? WWI aftermath, gold, stock bubble (see Minsky), panic and collapse, ..., liquidationism (eliminationism? - what about the egos of the bankers, bonus mentality, ...?),   
  • ~52:08 - the FED failed (we knew this was coming): didn't ease monetary policy (rather, tried to stem speculation), policy tightening and inaction, also gold (1933 change eased deflation), didn't play lender of last resort (from whence the funds for this?, taxpayers, of course
  • ~55:25 - admits banks were insolvent, gives FDR's actions (1933, 1934) credit for Deposit Insurance (runs) and getting off of the gold standard (fire up the presses), these helped offset the FED's errors, says bank failures went to zero (oh yes, 1000s had already failed, so wouldn't those left be stronger?)  
  • ~58:27 - he's using modern concepts, and language, to argue FED failure (overlooking a whole lot of detail - no doubt, he's looked into these details, but he cannot compare now and then as closely as he has been allowed to do - subject to be discussed further - in other words, how are we different now - besides computation?), next time, he'll look at the central bank since WWII up to 2008/9 and show the reasons for his/their actions (can't wait!)
  • ~59:19 - questions 
  • first one: Ben notes that the one knob of interest rate cannot control the stock market and has a big impact on the economy (and savers, too, guy), in this case, the FED trusted the traders, too much
  • second one: gold standard, why the interest? is it possible? Ben says price stability (partly true, long run) and the removal of his role (yeah! oracle, in chief), Ben says that the practical side says there isn't enough gold, expense, the policy side (ah, Labour gets its nod) would make it difficult to try to keep employment up -- says that, historically, those countries who dropped the gold, as standard, recovered more quickly from the Depression; 
  • third one: double dip, despite FDR's intervention, Ben says premature tightening, fiscal and monetary, but there is controversy about that view; 
  • fourth one: recoveries take time, but people (especially politicians) have short term views,    Ben says to consider the Depression as an outlier, but, in general, financial downturns take longer - this latest, finance; do central banks cooperate? they did, recently, historically, there have been issues (used Europe after WWI, as an example), gold standard forces cooperation, somewhat, ..., now, hopefully, there would be more

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

04/03/2012 -- Response 1.

03/28/2012 -- New page covering the series and its material.

03/26/2012 -- From the Fed's media center (Lecture 1 PDFs - TranscriptSlides).

03/22/2012 -- Lecture II. Watched this real time and took notes. Before I write them up, I'll wait for the video (missed the old pause button).

03/21/2012 -- Next lecture is tomorrow, 3/22. Then, there are two next week.

Modified: 12/13/2012

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