Free Republic

So says famed economic analyst, Nouriel Roubini, The Federal Reserve is running the risk of creating another bubble, and needs an exit strategy from its credit easing policy, says former Clinton White House economist Nouriel Roubini. The sharp increase in the stock market and commodities, and narrowing of credit spreads since March, are partly due to a wall of global liquidity chasing assets and already causing asset inflation, Roubini writes in The Wall Street Journal.

All of it begs the question not only whether you or I will have two nickels to rub together, or two gold eagles, or a bundle of six month US Treasury bills, or a zillion shares of Apple, or a gainful vocation, or a roof over our heads, or a hot meal at the end of the day, or a safe place to sleep, or a country we can recognize. I’ve done my share of forecasting, with some episodes of notably bad timing. I don’t do it for grandstanding effect but to provide some basis for knowing what to do...

The Fed released its minutes a few hours ago. These are the most predictable minutes that I can remember. To no one's surprise the Fed kept the Fed Funds Rate at its current levels. Also to no one's surprise, the Fed analyzed the current state of the economy as bottoming out and steadying. Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by...

It's hard to fathom that the Federal Reserve might soon get even more power than they already have but an idea being floated now will do just that. Policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial institutions. The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives

That's the view from this particular blog. The free market understands that auditing the fed is a very dangerous line to cross. If crossed, U.S. inflation will likely skyrocket over the next decade to unseen levels. U.S. economy tanks. Bond investors lose money as interest rates rise. Stock investors earn negative real return as equity risk premium rises and aggregate PE ratio tank. The US Dollar erodes due to higher domestic inflation relative to foreign inflation. Gold and commodity prices rise.

Rep. Ron Paul said he has a commitment from the chairman of the House Financial Services Committee, Barney Frank, to advance the Texas Republican's legislation opening the Federal Reserve to broader federal audits.

If you've been to any tea party, then you've probably seen someone that supports H.R. 1207. That's a bill sponsored by Ron Paul that would mandate a full and complete audit. Now, if you're unfamiliar with the matter, you might be shocked. You'd probably assume that the finances and balance sheets of our own Central Bank would already be a matter of public record. Not so. The public doesn't know exactly what the central bank owes and owns. That appears to be coming to an end. H.R. 1207 is favored overwhelmingly. More than that, it gets support from a cross...

This morning Ben Bernanke said two very curious statements. First there's this one. We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans’ hard work and creativity can receive their proper rewards.

Reporting from Martha'S Vineyard, Mass., and Washington -- Federal Reserve Chairman Ben S. Bernanke, a scholar of the Great Depression who moved boldly last fall to prevent another economic catastrophe, will be nominated by President Obama to a second four-year term as head of the nation's increasingly powerful central bank, a senior administration official said Monday night.

There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression. Too many steel mills have been built, too many plants making cars, computer chips or solar panels, too many ships, too many houses. They have outstripped the spending power of those supposed to buy the products. This is more or less what happened in the 1920s when electrification and Ford’s assembly line methods lifted output faster than wages. It is a key reason why the Slump proved so intractable, though debt then...

Today's FOMC statement shows that while the politicians take blame and credit for the economy, the real economic puppet master of the economy is the Federal Reserve. Now, the Fed didn't change the Fed Funds Rate. It's still between 0-.25%. That's no surprise. The Fed essentially said that while things are still bad they are improving. In fact, the Fed referred to the economy as "leveling out". Here's their assessment of the economy.

The economic position that the United States is now in is the result of a series of economic bubbles. To explain the nature of bubbles, I'm going to start by talking about their history; I'm not going to go all the way back to Tulip Mania and John Law, but I do want to mention some things from the Roaring Twenties that might sound familiar to us today. Over the eight-year period of that boom, the money supply increased by 62 percent. All kinds of new appliances and gadgets were sold: refrigerators, phonographs, electric irons, toasters, and vacuum cleaners. Many...

AS Federal Reserve chairman, Ben Bernanke has committed serious sins of commission and omission — and for those many sins, he does not deserve reappointment. Let me begin with the former. It is standard practice for a central bank like the Federal Reserve to ease monetary policy to combat a recession, and then to tighten it as recovery gets under way. Mr. Bernanke so far has only had to do the first half, and has conducted a policy of extreme ease. The Fed’s Open Market Committee cut the federal funds rate in October to 1 percent from 1.5 percent, and...

During Congressional hearings yesterday, the Federal Reserve Chairman, Ben Bernanke, was again questioned vigorously by Congressman Ron Paul regarding more transparency at the Fed. Congressman Paul has introduced H.R. 1207 which would demand more transparency from the Federal Reserve. Currently, and shockingly, the assets, liabilities, and other investments of the Federal Reserve are not open to public scrutiny nor to the scrutiny of just about anyone. No one outside the circle of the Federal Reserve has any idea just how much, and what make up, the current investment portfolio of the Federal Reserve is and how it's doing. Here's how...

Ben Bernanke has taken to the Congress and the media to try and assure the country that when the time comes he will do all that he can to avoid inflation. These steps include: raising the Fed Funds Rate, reduce their balance sheets by about $200 billion, increasing the interest the Fed pays on reserve, and fourth they will sell back some of the securities they have bought, both recently and in the long term. All of these would be effective tools in curbing potential and likely upcoming inflation.

He may have faded from the national political scene a year ago, after his dark-horse presidential run came to naught, but Rep. Ron Paul ’s influence is still being felt in campaigns and policy debates across the country. Indeed, the latest legislative priority of the libertarian Texas Republican — auditing the Federal Reserve — has gained support in unlikely quarters.

That's a historical chart of the Prime Rate. Keep in mind that the Fed Funds Rate is 3 percentage points below prime. Starting in late 2002, the Fed lowered the prime rate to levels that were unprecedented, and, as I've said often, that lead directly to the crisis we have today, in my opinion at least. Today, the Federal Reserve pronounced that the weakened economy means that they will maintain their current interest rate levels indefinitely.

The Treasury Department will do something unprecedented next week and it may have serious ramifications for both U.S. Treasury bonds and the economy as a whole. The Treasury announced Thursday a record $104 billion worth of bond auctions for next week, part of its herculean efforts to finance a rescue of the world's largest economy. The sales will exceed the previous record of $101 billion set in auctions that took place in the last week of April and consist of two-year, five-year and seven-year securities. That record was matched by another $101 billion week in May. Though next week's total...

I haven't read the entire thing yet but the parts I read force me to oppose this framework. The two places within this new framework that will ultimately become a totaly nightmare involve the new regulatory framework that governs those companies that pose a "systemic risk" and also the new regulatory body that will help fight predatory lending.

When the Federal Reserve Chairman Ben Bernanke spoke at famed economist Milton Friedman’s ninetieth birthday, he praised the Nobel laureate for his work on the “permanent-income theory of consumer spending.” This seemed to demonstrate that he understood consumer spending was not dependant on current income, but instead was influenced by future expectations. But that was then and times change. Earlier this year, Chairman Bernanke did a complete about face when he supported Congress’ efforts to plunge the United States into more debt in the name of a fiscal stimulus. Bernanke 2.0 said he believed that because of the strong likelihood...