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Bernanke: Banks must get better at foreseeing risk
WASHINGTON (AP) -- Commercial banks and other financial institutions need to beef up their ability to detect and protect themselves against risks like the credit and mortgage debacles, Federal Reserve Chairman Ben Bernanke said Thursday.
The trio of crises -- housing, credit and financial -- have exposed weaknesses in financial firms' so-called risk-management practices....
If only they could see as well as Bernanke.
Bernanke's thoughts at the top of the housing bubble/crisis:
October 27, 2005
Bernanke: There's No Housing Bubble to Go Bust
U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.
Bernanke's thoughts on the credit and financial crises:
August 7, 2007
Federal Reserve: FOMC Statement
Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.
Just 10 days later:
August 17, 2007
Federal Reserve: FOMC Statement
Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably.
10 days is a long time when predicting the future. Ask any weatherman.
Leading Index for Commercial Real Estate Decreased 5% in October; Up
Sharply YoY
-
From Dodge Data Analytics: Dodge Momentum Index Retreats 5% in October
The Dodge Momentum Index (DMI), issued by Dodge Construction Network, *decreased
5.3...
4 hours ago
5 comments:
Stag,
This is a neat site, especially for chart/data hounds:
http://www.economagic.com/em-cgi/charter.exe/crb/crb02+1956+2008+0+1+0+290+545++0
I don't see how anyone investing high up on a parabolic rise can expect decent long term rewards. Especially on a risk adjusted basis. I say - RUNAWAY!
BTW, the above site has some interesting data on Japan. The deflation call in Japan is puzzling. Asset prices fell as did consumer and output prices, yet money supply increased (not sure about total credit though). A great scenario for those with low or no debt who locked into real returns.
I suspect that Japan's zero interest rate policy is the result of trying to save a financial system founded on vastly over-priced assets. We may be addicted to low interest rates going forward too. I just hope CPI stays low as it did in Japan.
Something has to give.
Stag,
This is a neat site, especially for chart/data hounds:
http://www.economagic.com/em-cgi/charter.exe/crb/crb02+1956+2008+0+1+0+290+545++0
I don't see how anyone investing high up on a parabolic rise can expect decent long term rewards. Especially on a risk adjusted basis. I say - RUNAWAY!
BTW, the above site has some interesting data on Japan. The deflation call in Japan is puzzling. Asset prices fell as did consumer and output prices, yet money supply increased (not sure about total credit though). A great scenario for those with low or no debt who locked into real returns.
I suspect that Japan's zero interest rate policy is the result of trying to save a financial system founded on vastly over-priced assets. We may be addicted to low interest rates going forward too. I just hope CPI stays low as it did in Japan.
Something has to give.
MAB,
Something has to give.
You are making a deflationary argument and who am I to heckle? I'm all over the map on this.
From Artificial Boom to Real Bust
http://news.goldseek.com/DailyReckoning/1208889904.php
But we could be wrong in either direction. Either inflation or deflation could soon emerge victorious. Most analysts think inflation will be the clear winner - with big boosts, not only for commodities, but for the economy and stocks… and maybe even houses. They think the financial industry has bottomed out and will soon get back on its feet and begin inflating the whole economy.
The view Marc is putting forward is the opposite one - that deflation will be the clear winner, dragging the whole world economy into a slump, with lower prices for commodities as well as stocks and property.
I tend to ride the fence more often than not. The following seems the most likely to me.
We're not predicting this. We're sticking with our middle-of-the-road forecast…for neither worldwide prosperity nor worldwide ruin. But there are risks from both directions. And while most people expect a mild recession and quick recovery…almost no one expects the kind of global meltdown Marc imagines. We could see oil below $50…the Dow below 5,000…Wall Street wiped out…and 20 million US families busted.
Stag,
I wasn't making a deflation argument per se. Japan's economy seemed anemic, yet balanced. Low growth, low inflation and low interest rates, low unemployment. Life went on. Certainly not a depression.
Ideal for non-debtors. Debtors no doubt suffered. It's become abundantly clear to all how hard it is to refi an underwater asset.
One similarity with Japan is that I do think we are now addicited/dependent on low interest rates. We better keep our fingers crossed an that score.
MAB,
One similarity with Japan is that I do think we are now addicited/dependent on low interest rates. We better keep our fingers crossed an that score.
I have used the word "Hoover" twice since starting this blog. Once was a song parody from Versus. The other was an article about Japan's economy. Go figure.
http://illusionofprosperity.blogspot.com/search?q=hoover
That's probably one of the most amusing parts about doing a blog. Trips down memory lane are a hoover! Oops. Freudian slip. I meant hoot.
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