Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Thursday, September 12, 2013

Central banks and illusions of independence By Reuven Brenner

By Reuven Brenner
While much attention is now paid to personalities of incoming central bankers, far less attention is paid to debating central banks' mandates in light of the unusual fiscal and financial intermediary roles they have been fulfilling since 2008.
The crisis revealed institutional voids that the central banks filled quickly. Such ventures by central banks have been tolerated in the past too: there is nothing new about quantitative easing (QE). The Fed practiced it during the 1940-51 under the Treasury's explicit command, though the technique had no name then. The
Fed stopped the practice when it became officially independent again in 1951.
1940 fiscal parallels and the Fed's independence
Federal Reserve chairman Ben Bernanke acknowledges that he is replicating the monetary policies of the 1940-1951, though takes no note of the unusual circumstances then.  Here is a quote from a 2008 speech:
... Historical experience tends to support the proposition that a sufficiently determined Fed can peg or cap Treasury bond prices and yields at other than the shortest maturities. The most striking episode of bond-price pegging occurred during the years before the Federal Reserve-Treasury Accord of 1951. Prior to that agreement, which freed the Fed from its responsibility to fix yields on government debt, the Fed maintained a ceiling of 2-1/2 percent on long-term Treasury bonds for nearly a decade. Moreover, it simultaneously established a ceiling on the twelve-month Treasury certificate of between 7/8 percent to 1-1/4 percent and, during the first half of that period, a rate of 3/8 percent on the 90-day Treasury bill.
The Fed was able to achieve these low interest rates despite a level of outstanding government debt (relative to GDP) significantly greater than we have today, as well as inflation rates substantially more variable. At times, in order to enforce these low rates, the Fed had actually to purchase the bulk of outstanding 90-day bills.
He fails to mention that during the 1940s, the Fed was carrying out fiscal policy under explicit Treasury orders.   The low interest policy - inflation was in the double digits - helped pay for World War II and the accumulated debt.
The Fed could do this then both because there was domestic political support for the war effort, and later, as support after the war was weakened, the global conditions stayed such that capital had few places to flow: the US was in the immediate post-war period the safest place.
However, the world stabilized and capital started to flow to Western Europe too. At the same time, the US abolished the Office of Price Administration in 1947, and the official inflation rate this Office's policy kept artificially low until then hit double digits. Public debates then started about restoring the central bank's independence. This was done in 1951, president Harry Truman's pressure to continue with the "QE" policies to finance the Korean War too notwithstanding.
There are similarities and differences between that decade and the situation today. READ MORE

No comments: