Goldman’s Q&A On Stanley Fischer As The Next Fed Vice Chairman

Since the bank that decides what happens at the NY Fed, and by implication, at the broader Federal Reserve system, is none other than Goldman Sachs, it would be informative to read what none other than Goldman thinks of Ben Bernanke’s thesis advisor Stanley Fischer, formerly head of the Bank of Israel, as the next vice chairman – as he is now actively rumored to become shortly. Conveniently, here is just such a Q&A from Goldman’s Jan Hatzius – the man who feeds Bill Dudley all his economic and monetary insights over lobster sandwiches at the Pound and Pence.

Q&A on Stanley Fischer

  • Stanley Fischer?formerly governor of the Bank of Israel and first deputy managing director of the IMF?appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports.
  • Fischer is a highly respected academic macroeconomist and policymaker, and would undoubtedly have a substantial amount of influence on the FOMC. When head of the Bank of Israel, he oversaw an aggressive monetary policy response to the crisis which included purchases of longer-term securities.
  • With respect to monetary policy at the zero lower bound, he has generally spoken favorably about quantitative easing but has expressed more skepticism about forward guidance. Nonetheless, we think forward guidance will continue to be a key item in the Fed’s toolkit.

Stanley Fischer appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports. According to some accounts, Fischer has already been offered the job by the President and has accepted it, although a formal announcement is not expected immediately.

Q. How does Fischer broadly think about the economy?

Fischer is a highly respected academic macroeconomist. He is credited with helping to lay the foundations of New Keynesian macroeconomics, which sought to place traditional Keynesian theory on a stronger microeconomic foundation. Subscribing to this school of thought, we believe that Fischer’s general view of the world is similar to that of Bernanke and Yellen, with a significant role for active fiscal and (more importantly) monetary policy. In fact, Fischer was Bernanke’s dissertation adviser in graduate school, and Bernanke recently referred to him as a “role model and frequent adviser.” As a result, we see little daylight between Fischer and the current core FOMC leadership with respect to their basic paradigm for thinking about the economy.

Q. How would his appointment affect the dynamics on the Committee?

Fisher is widely seen as a policy heavyweight, having not only run the Bank of Israel, but also served as the chief economist at the World Bank and First Deputy Managing Director (the number two position) at the IMF. Both his academic standing and policy experience suggest that Fischer’s views will be very influential on the Committee.

Q. What are the key points from his tenure as head of the Bank of Israel?

Under his tenure, the Bank of Israel aggressively cut its policy rate from 4.25% to 0.5% in the wake of the financial crisis. Starting in February of 2009, the Bank of Israel joined the Fed in undertaking purchases of longer-dated securities, indicating a willingness to adopt unorthodox monetary policy measures. The stated intention was to “extend the effectiveness of monetary policy onto longer interest rate maturities.” However, later in 2009 the Bank of Israel began hiking its policy rate, in advance of all major global central banks. We do not see this as necessarily indicating a “hawkish” policy bias on the part of Fischer, but rather a reaction to the fact that economic developments in Israel were substantially different from those prevailing in the G4 economies. The Bank of Israel did not adopt explicit calendar- or outcome-based forward guidance under his leadership.

Q. What are his views on balance sheet policy?

Fischer generally holds a favorable view on the effectiveness of balance sheet policy. As noted, the Bank of Israel began a program of longer-dated securities purchases under his watch. He also stated in a November speech at the IMF that one of the key lessons from the financial crisis, in his view, was that monetary policy is not impotent once the zero lower bound on short-term interest rates has been hit. He specifically highlighted the efficacy of the Fed’s QE?which he said was supported by a substantial amount of academic work?and did not explicitly mention forward guidance on the path of short-term interest rates.

Q. What does he think about forward guidance?

In contrast to his statements on QE, he has recently expressed a more skeptical view of forward guidance. Specifically, he noted in September that “if you give too much forward guidance you do take away flexibility,” that “we don’t know what we’ll be doing a year from now. It’s a mistake to try and get too precise,” and that “you can’t expect the Fed to spell out what it’s going to do…because it doesn’t know.” These statements contrast with Yellen’s strong endorsement of forward guidance. In that sense, Fischer’s statements do pose at least some risk to our expectation that the FOMC will ultimately enhance its forward guidance by reducing the unemployment threshold to 6.0%. That said, such a limited number of statements are unlikely to capture all of the nuances of Fischer’s thinking on the topic. One can also argue that his criticisms apply mostly to calendar-based guidance and less to outcome-based guidance, which only requires the Fed to “spell out what it’s going to do” in a more conditional sense. In any case, we have little doubt that Yellen and Fischer would see eye to eye on the need to prevent a large tightening of financial conditions anytime soon, so the slightly greater uncertainty that might result from his nomination is mainly about tactics, not strategy.

Q. What is the likelihood of confirmation?

If nominated, we think Fischer would very likely be confirmed. In the unlikely event that his confirmation faced substantial opposition from Republicans, the recent change to Senate rules requiring only a simple majority to break a filibuster on confirmation votes ensures that he could be confirmed with only Democratic votes.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nuoxNkDG-Kw/story01.htm Tyler Durden

Goldman's Q&A On Stanley Fischer As The Next Fed Vice Chairman

Since the bank that decides what happens at the NY Fed, and by implication, at the broader Federal Reserve system, is none other than Goldman Sachs, it would be informative to read what none other than Goldman thinks of Ben Bernanke’s thesis advisor Stanley Fischer, formerly head of the Bank of Israel, as the next vice chairman – as he is now actively rumored to become shortly. Conveniently, here is just such a Q&A from Goldman’s Jan Hatzius – the man who feeds Bill Dudley all his economic and monetary insights over lobster sandwiches at the Pound and Pence.

Q&A on Stanley Fischer

  • Stanley Fischer?formerly governor of the Bank of Israel and first deputy managing director of the IMF?appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports.
  • Fischer is a highly respected academic macroeconomist and policymaker, and would undoubtedly have a substantial amount of influence on the FOMC. When head of the Bank of Israel, he oversaw an aggressive monetary policy response to the crisis which included purchases of longer-term securities.
  • With respect to monetary policy at the zero lower bound, he has generally spoken favorably about quantitative easing but has expressed more skepticism about forward guidance. Nonetheless, we think forward guidance will continue to be a key item in the Fed’s toolkit.

Stanley Fischer appears very likely to be nominated for the position of Fed Vice Chairman, according to multiple media reports. According to some accounts, Fischer has already been offered the job by the President and has accepted it, although a formal announcement is not expected immediately.

Q. How does Fischer broadly think about the economy?

Fischer is a highly respected academic macroeconomist. He is credited with helping to lay the foundations of New Keynesian macroeconomics, which sought to place traditional Keynesian theory on a stronger microeconomic foundation. Subscribing to this school of thought, we believe that Fischer’s general view of the world is similar to that of Bernanke and Yellen, with a significant role for active fiscal and (more importantly) monetary policy. In fact, Fischer was Bernanke’s dissertation adviser in graduate school, and Bernanke recently referred to him as a “role model and frequent adviser.” As a result, we see little daylight between Fischer and the current core FOMC leadership with respect to their basic paradigm for thinking about the economy.

Q. How would his appointment affect the dynamics on the Committee?

Fisher is widely seen as a policy heavyweight, having not only run the Bank of Israel, but also served as the chief economist at the World Bank and First Deputy Managing Director (the number two position) at the IMF. Both his academic standing and policy experience suggest that Fischer’s views will be very influential on the Committee.

Q. What are the key points from his tenure as head of the Bank of Israel?

Under his tenure, the Bank of Israel aggressively cut its policy rate from 4.25% to 0.5% in the wake of the financial crisis. Starting in February of 2009, the Bank of Israel joined the Fed in undertaking purchases of longer-dated securities, indicating a willingness to adopt unorthodox monetary policy measures. The stated intention was to “extend the effectiveness of monetary policy onto longer interest rate maturities.” However, later in 2009 the Bank of Israel began hiking its policy rate, in advance of all major global central banks. We do not see this as necessarily indicating a “hawkish” policy bias on the part of Fischer, but rather a reaction to the fact that economic developments in Israel were substantially different from those prevailing in the G4 economies. The Bank of Israel did not adopt explicit calendar- or outcome-based forward guidance under his leadership.

Q. What are his views on balance sheet policy?

Fischer generally holds a favorable view on the effectiveness of balance sheet policy. As noted, the Bank of Israel began a program of longer-dated securities purchases under his watch. He also stated in a November speech at the IMF that one of the key lessons from the financial crisis, in his view, was that monetary policy is not impotent once the zero lower bound on short-term interest rates has been hit. He specifically highlighted the efficacy of the Fed’s QE?which he said was supported by a substantial amount of academic work?and did not explicitly mention forward guidance on the path of short-term interest rates.

Q. What does he think about forward guidance?

In contrast to his statements on QE, he has recently expressed a more skeptical view of forward guidance. Specifically, he noted in September that “if you give too much forward guidance you do take away flexibility,” that “we don’t know what we’ll be doing a year from now. It’s a mistake to try and get too precise,” and that “you can’t expect the Fed to spell out what it’s going to do…because it doesn’t know.” These statements contrast with Yellen’s strong endorsement of forward guidance. In that sense, Fischer’s statements do pose at least some risk to our expectation that the FOMC will ultimately enhance its forward guidance by reducing the unemployment threshold to 6.0%. That said, such a limited number of statements are unlikely to capture all of the nuances of Fischer’s thinking on the topic. One can also argue that his criticisms apply mostly to calendar-based guidance and less to outcome-based guidance, which only requires the Fed to “spell out what it’s going to do” in a more conditional sense. In any case, we have little doubt that Yellen and Fischer would see eye to eye on the need to prevent a large tightening of financial conditions anytime soon, so the slightly greater uncertainty that might result from his nomination is mainly about tactics, not strategy.

Q. What is the likelihood of confirmation?

If nominated, we think Fischer would very likely be confirmed. In the unlikely event that his confirmation faced substantial opposition from Republicans, the recent change to Senate rules requiring only a simple majority to break a filibuster on confirmation votes ensures that he could be confirmed with only Democratic votes.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nuoxNkDG-Kw/story01.htm Tyler Durden

Brickbat: What You Can’t See

A French court has
ordered Google, Yahoo and Microsoft not to list 16 video-streaming
sites in anysearch results.
It also ordered several ISPs to block customers from accessing
those sites. The court said the sites violate French intellectual
copyright laws.

from Hit & Run http://reason.com/blog/2013/12/12/brickbat-what-you-cant-see
via IFTTT

Brickbat: What You Can't See

A French court has
ordered Google, Yahoo and Microsoft not to list 16 video-streaming
sites in anysearch results.
It also ordered several ISPs to block customers from accessing
those sites. The court said the sites violate French intellectual
copyright laws.

from Hit & Run http://reason.com/blog/2013/12/12/brickbat-what-you-cant-see
via IFTTT

Barbara Branden, RIP

Barbara Branden, the first biographer of Ayn Rand with her
penetrating and humanizing
The Passion of Ayn Rand
(1986), has died at age 84.

Branden and her then-husband Nathaniel Branden were Rand’s
closest associates and friends during the years she finished
writing Atlas Shrugged and the years when the Nathaniel
Branden Institute began teaching the principles of Rand’s
Objectivism in lecture form to a wider world.

Branden’s understanding of Rand arose from her own very personal
intertwining with Rand’s life–one that came to a sad end around
the time Nathaniel told Rand he could no longer continue an affair
with her (one conducted with the knowledge of Barbara and Rand’s
husband Frank O’Connor).

Despite this strange personal entanglement, Branden still set
the standard and provided the basic context and shape of the story
of Rand that later books have approached from different angles, yet
never fundamentally contradicting or exceeding Branden’s
brilliantly crafted and, yes, passionate story of a woman who was,
as befit her philosophy, both body and mind, with all the
difficulties inherent in that condition.

Branden was a living and bracing example of how one needn’t
either blindly worship or ignore the humanity of Ayn Rand to admire
and promote her philosophy. While the very existence of a book
telling a true story of Rand the woman created great controversy
and division in the Objectivist world in the 1980s, as generations
arise who never met the woman herself, such controversies will fade
to historical ephemera. But the monument of understanding and
appreciation Branden crafted with such skill and care will
remain.

Branden remained through all her personal contretemps with Rand
an enthusiastic appreciator, and spreader, of Rand’s best message
to the world, which Branden summed up brilliantly and affectingly
in her book as this: “In Ayn’s presence, and in her work, one felt
that command: a command to function at one’s best, to be the most
that one could be, to drive oneself constantly harder, never to
disappoint one’s highest ideals.”

In her biography she painted a full and compelling picture of
the woman, and the ideas, that inspired that passion.

On a personal level, Barbara was unfailingly kind and helpful to
me above and beyond the call of interview subject duty while I was
researching my book
Radicals for Capitalism
and remained a friend of
Reason magazine and the Reason Foundation til the end.

Her friend Jim Peron
provides an obituary at

Huffington Post
.

from Hit & Run http://reason.com/blog/2013/12/12/barbara-branden-rip
via IFTTT

How to Write a Column About Nelson Mandela, If You Are Thomas Friedman

How to write a column about Nelson Mandela,
if you are Thomas Friedman
:

Where is the Palestinian Ben Kingsley?1. There’s no need to spelunk through the
man’s life for something to write about. Remember that
movie Invictus? The one where Morgan Freeman played
Mandela? Talk about a scene from that. You can even quote one of
Freeman’s lines, because why bother digging up anything the actual
Mandela actually said?

2. Don’t bother interviewing any experts on South African
history or politics. Just talk with the author of a
management self-help book
. He’s sure to have lots of insights
into Mandela’s leadership secrets, so give him several paragraphs
to express himself.

3. It’s good to take a look at the big picture too, so you
should suggest that the failures of democratic movements in Egypt,
Ukraine, and elsewhere show that they need “a leader, but the right
kind of leader.” Like Morgan Freeman, I guess.

from Hit & Run http://reason.com/blog/2013/12/12/how-to-write-a-column-about-nelson-mande
via IFTTT

Chinese State-Run Media Embarrasses Itself By Proclaiming “Unexpected Benefits Of Smog”

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

In case you weren’t aware, several of China’s major cities have experienced record-breaking, extremely dangerous levels of smog in recent days. For example, here is a shocking picture of Lianyungang, China:

Screen Shot 2013-12-11 at 11.44.18 AM
Photograph: Chinafotopress/Getty Images.

So how did China’s state-run media decide to respond to this environmental and public health disaster? With ridiculous propaganda about the “unexpected benefits” of smog of course. You have to see this to believe it.

From The Guardian:

China’s noxious air pollution has made people smarter, funnier and impervious to missile attacks, the country’s official media reported this week, as a toxic cloud covering half of the country began to lift.

 

On Monday the website of the state broadcaster CCTV published a list of five “unexpected benefits” brought by the smog.

 

It said the haze had unified Chinese people, as they found solidarity in their complaints; equalised them, as both rich and poor people were vulnerable to its effects; enlightened them, as they realised the cost of rapid growth; and “made Chinese people more humorous”, as smog-related jokes proliferated on the internet.

 

It had also helped to educate people, it said. “Our knowledge of meteorology, geography, physics, chemistry and history has progressed.”

As I have said many times before, The Onion is a short.

This year China has registered its highest pollution levels in 52 years, according to state media. More than 100 Chinese cities spanning half the country spent early December enveloped by smog. Both articles attracted such vitriol online that the media outlets quickly took them down. By Tuesday afternoon “benefits of smog” was a trending topic on China’s most popular microblog, Sina Weibo, racking up 240,000 posts.

Priceless.

Full article here.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vMEnnznoRSw/story01.htm Tyler Durden

Chinese State-Run Media Embarrasses Itself By Proclaiming "Unexpected Benefits Of Smog"

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

In case you weren’t aware, several of China’s major cities have experienced record-breaking, extremely dangerous levels of smog in recent days. For example, here is a shocking picture of Lianyungang, China:

Screen Shot 2013-12-11 at 11.44.18 AM
Photograph: Chinafotopress/Getty Images.

So how did China’s state-run media decide to respond to this environmental and public health disaster? With ridiculous propaganda about the “unexpected benefits” of smog of course. You have to see this to believe it.

From The Guardian:

China’s noxious air pollution has made people smarter, funnier and impervious to missile attacks, the country’s official media reported this week, as a toxic cloud covering half of the country began to lift.

 

On Monday the website of the state broadcaster CCTV published a list of five “unexpected benefits” brought by the smog.

 

It said the haze had unified Chinese people, as they found solidarity in their complaints; equalised them, as both rich and poor people were vulnerable to its effects; enlightened them, as they realised the cost of rapid growth; and “made Chinese people more humorous”, as smog-related jokes proliferated on the internet.

 

It had also helped to educate people, it said. “Our knowledge of meteorology, geography, physics, chemistry and history has progressed.”

As I have said many times before, The Onion is a short.

This year China has registered its highest pollution levels in 52 years, according to state media. More than 100 Chinese cities spanning half the country spent early December enveloped by smog. Both articles attracted such vitriol online that the media outlets quickly took them down. By Tuesday afternoon “benefits of smog” was a trending topic on China’s most popular microblog, Sina Weibo, racking up 240,000 posts.

Priceless.

Full article here.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vMEnnznoRSw/story01.htm Tyler Durden

The Federal Reserve: 100 Years Of Boom And Bust

"If we evaluate an organization's performance by what it promised when it was created, the Federal Reserve has clearly failed the American people," is how Murray Sabrin concludes this documentary on the first 100 years of the Fed's reign. The sad truth, he details, is that "the USD has lost more than 95% of its purcahsing power since the Fed was created and the cost of living has skyrocketed since Nixon severed the last linkage between the USD and gold in 1971." In short, the revolution of 1913 shifted power from individuals, communities and states to the federal government and its powerful allies in the private sector.

 

 

Submitted by Murray Sabrin via dshort.com,

Before we view the documentary, I'd like to put 1913 in historical perspective.

1913 was, in many ways, one of the most extraordinary years in American history. In fact, according to one analyst a revolution took place in 1913.

1913 began with the ratification of the 16th amendment, which gives the federal government authority to tax the income of the American people directly. We will explore the income tax on April 17 next year at a symposium I will moderate. So save the date April 17 at 7 PM in the Trustee's Pavilion.

In April of 1913, the 17th amendment to the Constitution was ratified ending the selection of US senators by state legislatures. Now the U.S. Senators would be elected directly by the people.

And on December 23 President Wilson signed the Federal Reserve Act giving the United States a permanent central bank.

All these events took place at the end of what is known as the Progressive Era, a time of supposedly great reforms to benefit the common man. Half a century ago historian Gabriel Kolko challenged the orthodox view in his trailblazing book, The Triumph of Conservatism. Kolko argued that the progressive era was in reality a time when big business interests used the power of the federal government for their own benefit at the expense of the general public.

One of the last so-called reforms of the era was the creation of the Federal Reserve.

In short, the revolution of 1913 shifted power from individuals, communities and states to the federal government and its powerful allies in the private sector. Hence, the Progressive Era expanded crony capitalism in America.

The documentary, The Federal Reserve: 100 Years of Boom Bust, explores the impact of the Fed on the US economy for the past century.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/K33Vm-isdgE/story01.htm Tyler Durden

What America’s Companies Really Think

If one believes the various US diffusion indices – among which key are the assorted regional Fed surveys the monthly PMI data – and listens to the pithy soundbites of their respondents, the US economy has hardly ever been better (of course, that 60% of “growth” in the past year has been due to inventory accumulation on hope that the consumer end demand will finally come is neither here nor there). However, we don’t exactly believe said indices. Instead, to get a true sense of what is going on, it is always better to listen directly to those who are not only deep in the trenches, but are also accountable to their shareholders every quarter: the various CEOs and CFOs of America’s public corporations. Below, courtesy of Bloomberg chief economist Rich Yamarone, who has compiled a selection of Q3 earnings call soundbites, is an indicative snapshot of the US economy as seen most recently through the prism of executives in a wide range of industries.

Simon Property [SPG] Earnings Call 10/25/13: “…it is clear that the economy has slowed. You’ve seen it with wages, you’ve seen it with employment. Needless to say we don’t have to get into what’s going on in terms of leadership in our country, none of which we use as an excuse, because we put blinders on to the best of our abilities when it comes to that kind of stuff. But we’re operating at a high level in a very slow growth economy, and we’re outpacing the growth in the economy and that’s all that we can do, but we are affected by the economy.”

Caterpillar [CAT] Earnings Call 10/23/13: “….while it looks like there’s a good chance that the world economy could improve next year, there’s still much risk and uncertainty. The direction of U.S. fiscal and monetary policy remains uncertain, and the climate in Washington is divisive. Eurozone economies are far from healthy, and China continues to transition to a more consumer demand led economy. In addition, despite higher mine production around the world, new orders for mining equipment have remained low. As a result, we’re holding our preliminary outlook for 2014 sales and revenues flat with 2013, in the plus or minus 5% range.”

DuPont [DD] Earnings Call 10/22/13: “The macroeconomic environment and in particular global industrial production is improving sequentially, but at a slower pace than we expected three months ago. As a result, we recently lowered our global industrial production outlook for 2013 from 2.5% growth to slightly under 2%.”

Brinker International [EAT] Earnings Call 10/23/13: “The malaise we’ve seen in the category didn’t let up this quarter. Consumer sentiment is guarded at best and consumer confidence remains somewhat volatile. And there’s some evidence that guests have shifted some of their spending to larger ticket items like homes and automobiles. And while we believe this is a temporary phenomenon, but one that has certainly impacted casual dining here in the short term. And while employment rates are showing signs of improvement, casual dining in particular is being impacted by struggles many young adults are facing, particularly those in that 18 to 24 age range. Many are graduating college significantly un- or underemployed, weighted down with debt and often moving back home with their parents. And as a parent with two of those, it’s a scary thought.”

Air Products [APD] Earnings Call 10/29/13: “Economic activity in the second half of 2013 was slower than we had initially anticipated in most regions. Given the current economic conditions, we are planning for economic growth to be modest again in 2014. Globally, for the regions we operate in, we are forecasting manufacturing growth of 2% to 4%. In the U.S., uncertainty in the economy remains, despite the government restart. The combination of unresolved fiscal challenges, weak job growth, low consumer confidence and diminished global demand are likely to continue to act as a headwind on economic growth, despite the positive drivers of lower energy costs and strength in housing. We are forecasting a range of 2% to 4% growth.”

Revlon [REV] Earnings Call 10/24/13: “Total company net sales in the third quarter were $339.4 million, an increase of 1.1% excluding the impact of foreign currency fluctuations as compared to last year. This increase was primarily driven by higher net sales of Revlon color cosmetics despite low year-over-year new product net sales particularly in the U.S. as well as higher net sales of Revlon ColorSilk hair color and Revlon Beauty Tools.”

Timken [TKR] Earnings Call 10/24/13: “It’s now clear to us that the weakness in several of the key markets we serve, including the emerging market infrastructure, mining and energy exploration, is more a structural and will be longer lasting than we had expected. This leads us to believe that the slow steady improvement in demand that we’ve seen thus far in 2013 will extend well into next year. This situation has been exacerbated in the third and fourth quarter of this year by seasonal reductions in demand in some sectors.”

AutoZone [AZO] Earnings Call 9/25/13: “A key macro issue facing our customers today is the reinstitution of payroll taxes back to historic norms. This reduction in our customers’ take-home pay began at the beginning of the new calendar year and at this point it has been difficult to objectively quantify the ramifications of this change, however, we believe this is and will continue throughout the year to be a headwind to our consumer’s spending habits.”


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/yART7dufQGM/story01.htm Tyler Durden