We had no alternative, says Bernanke

Vi närmar oss nu med stormsteg en situation som närmast kan beskrivas som "competetive curreny devaluation".

"The US authorities have no option but to prevent the disorderly failure of a large financial institution in current market conditions, Ben Bernanke said on Friday as he called on legislators to make dealing with the problem a top priority of regulatory reform.

Speaking for the first time since the Federal Reserve shocked markets by announcing plans to buy Treasury securities and more than double its purchases of mortgage-related securities on Wednesday, Mr Bernanke said the Fed was “generally encouraged” by the market response to its actions. He highlighted the decline in mortgage interest rates due to falling yields in financial markets.

The Fed chairman said the central bank was buying assets, including government debt, to support the economy and the time would come when it would no longer need that help. “We will at that point taper off that support,” he said, although he made no mention of selling securities back into the markets.

Mr Bernanke told the Independent Community Bankers association he shared widespread frustration with financial institutions that had been revealed to be too big or too interconnected to fail. But “given the interconnected nature of our financial system and the potentially devastating effects on confidence, financial markets and the broader economy that would likely arise from the disorderly failure of a major financial firm in the current environment, I do not think we have had a realistic alternative to preventing such failures.”
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Quantitative easing explained
His comments will strengthen the belief that the US authorities will support all the systemically important banks currently undergoing stress tests as going concerns in the private sector, even if they end up with large government share­holdings. But a narrow reading of his words would not rule out the controlled bankruptcy of such a bank via the Federal Deposit Insurance Corporation, which can exert emergency powers to stand by various obligations at a time of ­crisis.
He said regulators must “vigorously address the weaknesses at major financial institutions with regard to capital adequacy, liquidity management and risk ­management”. He said systemically important firms “must receive especially close supervisory oversight”. He called for “close attention to compensation practices” and a similar statutory framework “for all systemically important financial firms organised as holding companies”.
Regulators would also have to “vigorously exercise their authority to help ensure the safety and soundness of nonbank firms whose failure could threaten the stability of the financial system”.
He said further efforts were needed to improve the financial infrastructure, and called on Congress to create a special insolvency regime that “permits the orderly resolution of a systemically important nonbank financial firm”, such as AIG.
Policymakers should look to see whether capital rules could be made to damp rather than amplify the economic cycle, he said, and officials should also re-examine the appropriate level of loan loss reserves to be held over the cycle.
People familiar with the international discussions at the G20 level told the FT there was broad consensus around the issues Mr Bernanke raised."
http://www.ft.com/cms/s/0/c89ccc28-157e-11de-b9a9-0000779fd2ac.html?nclick_check=1

Quantitative easing is here with a vengeance. Japan, the UK and Switzerland are doing it. Now the US is too, with Canada and Sweden expected to follow next. There are important differences, though, between the monetary policy of the US and the rest. Not all QE is equal.
Ostensibly, all central banks using QE are targeting the quantity of money in the system - hence "quantitative easing". What they really seem to want to do, however, is to influence other key variables, such as bond yields and, in some cases, the exchange rate. Both fall sharply when QE is announced.
http://www.ft.com/cms/s/a9e3a774-14ee-11de-8cd1-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F1%2Fa9e3a774-14ee-11de-8cd1-0000779fd2ac.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3DQuantitative%2Beasing%2Bsweden%26aje%3Dtrue%26dse%3D%26dsz%3D

Ben Bernanke's Greatest Challenge - Part 1
http://www.youtube.com/watch?v=pLCVqW67tg0

FED unleaches greatest bubble of all
http://intheendwerealldebt.blogspot.com/2008/12/fed-unleashes-greatest-bubble-of-all.html

Financial Sence News Hour
March 21, 2009
3rd Hour with Jim & John
Part 1
- The Weimar Way
- Resource Scarcity: Water, Food & Energy - All Related
http://www.financialsense.com/fsn/main.html


Dying of Money: Lessons of the Great German and American Inflations by Jens O. Parsson (Author)
http://www.amazon.com/Dying-Money-Lessons-American-Inflations/dp/0914688014/ref=sr_1_2?ie=UTF8&s=books&qid=1237639308&sr=1-2

When money dies: The nightmare of the Weimar collapse y Adam Fergusson (Author)
http://www.amazon.com/When-money-dies-nightmare-collapse/dp/0718302141/ref=sr_1_1?ie=UTF8&s=books&qid=1237639308&sr=1-1
http://www.amazon.com/Dying-Money-Lessons-American-Inflations/dp/0914688014

The Economics of Inflation (A Study of Currency Depreciation in Post-War Germany) by Costantino Bresciani-Turroni
http://www.amazon.com/Economics-Inflation-Currency-Depreciation-Post-War/dp/B000XJG6IS/ref=sr_1_2?ie=UTF8&s=books&qid=1237639444&sr=1-2