Monday, August 31, 2009

Strong Opinion On Bernanke Re-Appointment

Christopher Wood, the admired strategist at the CLSA, the Asian brokerage unit of Calyon/Credit Agricole, wrote last week in "GREED & fear":

... Billyboy has secured re-appointment to the Federal Reserve for another four-year term as chairman after a rather noisy lobbying campaign conducted via the press. There will now be an equally noisy nomination process in Congress. GREED & fear should make it clear that there is no support here for Bernanke’s re-appointment even if he is in no way as culpable for the grotesque excesses of the credit bubble as the unlamented Pinball. Still it is appropriate that as the high priest of mechanical monetarism he should be left to deal with the reality of an intensifying liquidity trap as his policies are rendered impotent.

The news on Billyboy has also coincided with the premature celebration of the end of the financial crisis. The crisis is not at an end as the American economy is not going to recover in the real sense of the term. Meanwhile, Billyboy’s trick box of liquidity extensions, guarantees, and purchases of garbage securities have done very little to help the ordinary American wage earner and done a lot to allow Wall Street’s proprietary trading desks to make lots of money gaming the system.

When the full reality of this becomes clear to Joe Six Pack the reaction will be ferocious. This
will be detrimental not only to the already battered reputation of the Fed but also to the already fast shrinking credibility of the Obama administration which under the influence of Tiny Tim the bailout king has been comprehensively captured by Wall Street. No wonder Obama’s activist supporters, increasingly frustrated by the president’s failure to make the case for socialised medicine, are starting to freak out.
It is not only about the Ben, it is also about the so popular "moral hazard" trade lately ...

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