Bernanke versus Greenspan: 0 - 2

Publié le par Jean-Pierre Chevallier

In the match which opposes Bernanke to Greenspan, there is not 1 to 0, but Greenspan wins at least by 2 points versus zero!
Indeed, since Ben Bernanke chairs the Fed, the weekly variations of M2-M1 are much more important than before.
In Greenspan’s time, M2-M1 increased by $20 billion or dropped by $10 billion from one week to another to the maximum, while seldom leaving this band.
Since February 2007, these variations largely exceed these limits: the increases and the falls go up to $50 billion a week to the other!
Drop by $
49.8 billion on March 5, 2007, $41.5 billion on April 30 and $29.6 billion on June 4 (at these dates, compared to the previous week).
Increase of $35.4 billion on February 26, $44.9 billion on June 18, and especially $25.6 billion on August 13 and $49.7 billion on August 20, i.e. more than $75 billion in two weeks! More after attacks of September 11!

Figure 1: http://s3.archive-host.com/membres/up/2107676425/20070903USM2M12000.gif

*

These variations of great width mean that Americans do not know which will be their future.
Sometimes, they have confidence and they spend their money while consuming or while investing in the house of their dreams, sometimes, they fear that their situation is deteriorating, and they save more.
Alan Greenspan well controlled the situation, even after 9/11: variations of M2-M1 were very weak (only + $50 billion) after the fall of the rates of 50 basic points on September 17, 2001.
With Greenspan, the Fed had a little reduced these variations which create a certain disorder in the markets. Americans had confidence in the boss of the Fed.

*

Ben Bernanke does not control the situation.
Americans do not know where they go.
Ben Bernanke should have made like Greenspan: lower by 50 basic points the rate of the Fed during the last meeting on August 7 instead of injecting liquidity since this date.
These uncertainties unnecessarily increase the volatility of the markets, and the maintenance of too high rates of the Fed creates a recession announced by Greenspan, and… by me!
Ben Bernanke is still likely to lose the next match.

*

Note: Since 2000, the weekly increase in M2-M1 is stable: $5 billion on average!

***

Commenter cet article