Jim Bruce

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  • Thank you FDL for a fun evening. I really enjoyed it, though wish I could type fast enough to keep up with all the great questions. Let’s do this again!

  • LOL I stand corrected. Ok just substitute any commonly held belief that is later debunked!

    As far as I know human sacrifice is still proven to be 100% ineffective in bringing rain, appeasing Gods and all other applications…

    This is what I think we may eventually think someday about the idea that convincing investors to overpay for stocks or Americans with stagnant incomes to overpay for homes would lead to some virtuous cycle of sustainable economic growth… Even after the biggest bubbles in US history in housing and stocks Bernanke still trots this idea out regularly – and isn’t really taken to task for it…

  • I don’t think the FEd has learned much about regulation. For one they’re just outmatched in terms of resources and competency and because the banks are set up with such complicated structures. And a recent poll that huff post reported (a secret poll of fed staffers) showed that many were still afraid to speak up about problems for fear of backlash from above..
    And I also worry that they are somewhat on guard for a repeat of the housing bubble.

    But to me the real risk is that they won’t have the imagination to see that it’s their own balance sheet activities that are creating risk in our markets right now. And that there may be no way to smoothly exit…

  • As Raghu Rajan said in the film “Everybody loves a boom!”

  • To me that should be the key takeaway from the film. That even if our economic leaders tell us they are 100% sure of what they’re doing, it’s important to understand that the FEd leaders during the Great Depression probably felt the same way and were equally seen as experts and authorities.

    I think years from now we will look on policies in recent years the way we now look upon the use of leeches in medicine or the way we view the Mayan priests sacrificing virgins for some reason or another.

    Economics is a very young science and like many innovations in flourishing it has spread like wildfire and I think we need to rethink some of the guiding principles that are now assumed to be 100% valid. But which a few years from now could seem completely foolish…

  • I thnk Clinton really benefited from the boom that Greenspan created. And Clinton was a very adaptable politician so the irony of supporting a supposed Randian didn’t matter. He and Greenspan really got along and Greenspan was viewed as a genius so I don’t think there’s anything Clinton DIDN’T like about Greenspan. They seemed quite fond of each other by all accounts.

  • I would have like to have an interview with Bill but we didn’t have the budget to go any further than we did. I feally love the clip we have of him. He’s the only person that I know of that really spelled out this key failure of the Fed. Bernanke and Boston Fed President Eric Rosengren and others have towed the line that the Fed lacked jurisdiction over wall street mortgage lenders because investment banks themselves were not bank holding companies (Until 2008 when they all needed huge baiilouts!).

    Hoepa was created in the wake of a similar real estate crisis in the early 90′s and was designed specifcally to give maximum authority to intervene with any mortgage lender.

    As Bill says in the film – they only used it in 2008! Mandating that lenders verify people’s incomes (avoiding liar loans) at a time when no bank on earth would provide a liar’s loan anymore…

  • Yes, Jekyll Island is a really remarkable story. They were worried that news would get out that there was a plot to create a central bank, so representatives of the wealthiest banks met on a private island using false names to keep it all hush hush…

    And it’s backfired for 100 years! I think the Fed’s current policies will inevitably lead to more support for the End the FEd movement in much the same way. IF you want your independence you should get out of the business of talking the stock market up I’d say…. Too few Americans benefit…

  • Oh certainly not all regional bank presidents are much better or different. I just think they are more insulated from political influence that can lead to short term benefits / long term disaster type policies that I think we’ve seen recently. Hard to say if Fed felt any political pressure to do these things though – I would just say it’s what public leaders being judged on short term economiic performance are gong to be biased towards… Greenspan I am confident wanted to retire with a strong economy and made sure of it. But he also helped ensure the crisis that followed in the process!

    Somehow we need to communicate to our leaders wheat I I think most American really desire. A sturdy reliable system that they won’t ever wake up and turn the radio on to find out he financial system has collapsed.

    YEs quick booms are appealing but I think most Americans -esepecially now would say give me long term sustainability over booms/busts….

  • I’ve been too busy to follow the CFPB so far. But I think just the idea that there is one is a huge step in the right direction. The funny part is that the Fed was charged with protetcting the rights of homeonwers when the HOEPA legislatino was passed in 1994 – and they did perhaps the worst job you could ever imagine in 2002-6. So it’s not enough to just have the idea. Hopefully the implementation will lead to much less fraud and abuse in the mortgage sector

  • I think you could argue the fiscal cliff and govenment shut down each gave the Fed a reason to be more stimulative than otherwise. YOU might even say the latest decision not to taper was influenced by the looming threat. I think Congress is a mess. But the Fed overcompensating by creating a giant stock boom isn’t a very good solution!

  • Yes there’s an awful lot of confidence amongst the 3% and I think it’s because there’s so much job secuirty in the academic world. I think if we look at the shape of our economy you’d say the status quo has done a terrible job. But only very close to the crisis did I see the humbleness that I think is appropriate given the track record…

  • Absolutely. I think we need economic leaders who have wisdom and emotional and social intelligence. greenspan and Bernanke are very good at math but I don’t think they hold up well in those other categories and that’s how they could be as blind as they were to the problems in 2003-6 for example….

  • That’s an interesting survey I’d like to see the details. I guess in my reading of the blogsphere and twittersphere and other places where the academic economic establishment hold forth I see a narrow debate about current policy and then some outlier views such as MMT or the more hawkish crowd. But the status quo seems to me to be pretty pervarsive and I think part of the problem is it’s harder to get tenure or Fed consulting jobs if you are flouting conventional wisdoml…

  • I agree that the Fed’s not acting in public interest – but I think it’s publicly appointed officials choosing this path more than the private bank presidents – who would not have voted for bailouts and QE – but who don’t have the voting power the Board Governors do…

    As to the FEd financiing infrastructure I agree that would be the first thing we should do as a nation but the question becomes whether that’s something a central bank should fund. I think historically it’s a slippery slope when central banks engage in fiscal policy.

  • One of the great ironies of Fed policy is that wage inflation is viewed as self-reinforcing, but other types of price rises are not. So if gas, food, energy, housing and stock prices rise (as they did pretty rapidly in 2002-5 for example, the Fed is fairly complacent or comfortable with that. But if wages began rising rapidly they’d likely raise rates for fear of an inflationary spiral.
    The Little Guy is the last to see the benefits of Fed policy and the first to see the cost.

  • I think Janet Yellen is seen as someone both sides will support. I also think she’s the right kind of personality to lead the Fed. I disagree with her policy choices but I think certainly when compared with Larry Summers she seems like a good choice.

  • I think the view that economics is a science and the faith in math and modeling has gotten us into a lot of trouble. And not just the US. If you look at countries around the world there are huge imbalances in many places, and many of these imbalances went unobserved by policymakers who are all trained in very similar programs at the usual schools in the US.

    My goal in making the film was to question conventional economic wisdom and to call in common sense reason and judgement which I think have gotten left at the door by Fed policymakers who prefer 25 page equations!

  • I’d vote for Peter Fisher or Bill White. Actually I’d like them both. Bill to me is the academic economist who has been way ahead of many of the issues that have engulfed us (worrying in 2003/4 about debt levels in the US and financial stability) and Peter understands bond markets better than anyone I’ve ever known.

    I think a New Chair needs new ideas and a better understanding of how markets actually work – so he or she can better understand the impact of the Fed’s policies

  • I think the structure of the Fed is so complicated and it’s led to a lot of misunderstanding over the years… I think it would make sense to take away the private ownership of the regional banks just for PR reasons but i honestly feel that the Private bank Presidents often have the long term public interests more in mind when making policies… people assume that public servants have the public interest at heart but then if you ask them – how about Congress it’s quickly apparent that few people think Congress serves anyone but themselves or special interests….
    complex issue

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