House of Paine

bernanke's optimal credit machine

how  should the fed
 decide about interest rates
          and  money supply ?


bilge ben sez:
               plug in the best model 
    NOW PLAYING around town 
and let it rip up the data
and spit you out
 "the optimal   gage number settings  " ....

problem:

 if these models were a brake system 
they'd
work  fine so long 
as you  really just want to
        take 
your foot off the gas 

but fuck 
if you 
         need to actually stop 
              especiallly stop  fast .....



============================================
 




nyt:


"One tenet of Mr. Bernanke's philosophy
 could not be clearer: 
 the central bank should use a model
 not just hunches...."



 " private-sector forecasts 
may contain information useful 
to the central bank
but ultimately the monetary authorities
 must rely on an explicit
 structural model of the economy 
to guide their policy decisions."

some bernanke results 

"there was little advantage 
in waiting for "final" figures 
 preliminary figures work  just as well 
for economic forecasts"



"Greenspan was famous for looking
 at all these strange things 
like boxcar shipments," 

but BEN....LIKES 

 "indicators motivated by theoretical considerations," 

"like banks' loan commitments"

nb loan commitment rates
(both  number of units and 
  distribution by size and sector 
is  tracking the credit system 

and becomes the battle map 
 for any 
  fedskin hands on
    crank down rationing intervention

by locale sector  or size 

-------------------------------------------------------

NOTE OF CAUTION 
          by the nyt :

"Though models can explain various facets 
of the economy's behavior
 even several at a time
 no one has come up with a single formula 
that explains virtually everything "

---------   BACK TO REPORTER FLYING  OVER TARGET 
                            BIG BEN'S MODEL---------------


  ghost bombardeer 

one Rudiger Dornbusch

dead dean of open macro theory 

who  dropped an egg

right down 
  
 BIG BEN's chimbly 


wild rudy:

" this  model

 lacks the key  feature.....RATIONING "


dorn continues :

 " in monetary management
  the interesting issue 
  is not the gentle part
 of the trip
      but rather when the system  crashes " 


god love ya  RUDY 
yes yes the singularity
the wild spiral up or down

do you 
 crunch 
or flood ???

that reality
that earn your pay today pal
moment
 knocks  any model  cock eyed 
 
 when the fed chair
 sends hiz  sluggers 
out to force the recalls and the turn offs 

when by policy

   credit and liquidityare alowed to  dry up
and stay dried up 


aahhhhhh

high and dry ville 


 citizen pinky has ben there ....

twice 

--------------------------------------

dorn:

"Neither of these considerations ..."

ie 

to leave  dry    some 
and  there by 
           crush em out 
   
while  saving others
by refloating em 


"....neither  has a place 
in the Bernanke  model
 it's just price-based 
and lacks rationing and liquidity," 

and 
that is  to leave out 
the pot holes
and the miracle cures


credit policy
can grant firms an arbitray non merit based
stay 
or simply ratify 
  the coming execution

 


the notion of 
rationing 
shows credit is not always a  fluid 
come a freeze
and 
theres no more
 hydro dynamics 

turning up or down  
 the policy  interest rates
does not tell the tale

 some cut off dick 
ain't just paying more
for it 

he ain't gettin it anymore ..at all

 
that fluid analogy brakes down 
when the flow contiunity brakes down
at least 
to certain  unfortunate needy nodes 


but the real 
problem is his

zap enough nodes

and the freeze up 
spreads thru the receivables payables network

ie

firms' interconnections ....

their mutual crdit
commercial vs bank credit 


i'll add 
 a note here
 on the  two types 
 of credit
commercial and  bank 

like castor and pollux one is mortal
 the other not ... 

but not before 
 i've rested my hang over ....

boy did that bastard mickey me

but eh 

  i bet he's sore from the ride ....

----------------------------------
sum up :


dorn:

" at times of crisis its all about rationing "

that is 

when you're forced to use  the real brakes !!!!!!!!!

not just takie  your  foot off the gas 

--------------------------------------------------------

MR. B :

" monetary policy might be most powerful
 during periods of tight credit
 because of its effects on banks' balance sheets"

----------this is a little cryptic

but it means "when we force  credit rations to a lower level "

when this  happen white man ???

" just before,
 during and for a while  after a crash
                in the financial  markets "



but here he gives up the pretense 

Mr B conceeds 

"these are the times  that are most difficult to model"


translation of "most difficult"
           
                    not modeled at all ........

which amounts to saying

the models the ivys  love to brandish 
 are parade ground swords only 

and these pangloss types

are telling 

a bed time story

adding up to

  " yes becky
  daddy'll know well ahead of time
 precisely when the bad shit
 is  going to happento u 
and whats more  I know 
exactly what to do to prevent  it...."

"what's that daddy "



  " make u wear garlic  at all times "

--------------------------------------------
news flash

from later in the article




here's mistah ben sah

 reluctantly conceeding 
 the unmerited 
massive credit  relief package  
must be kept handy 

  MR B: 

"under some circumstance, 
government 'bailouts' 
of insolvent debtors ...."

god damn 
"a non market "allocation
ie a discretionary  irrational ration 

"....may be a reasonable alternative 
in periods of extreme financial fragility"

if you're asking

 reasonable alternative to what

he means

to triggering a  total collapse of the afflicted entity
  and an insuing systemic  panic  


---------------------------------

god there's more nuggets 

here's 

a "friend "of B's 

PROF ROMER:

" Ben  Bernanke will know  just when
      to discard his models"

 "just when" ??


as in
  when his real job  begins 

for green slime that happened only 
twice early on 

87 and 89 

and then again in 97

no the dot pop was a no sweat 


and the hut lot bubble

a sadistic glee 


more
prof R :

. "He of course understands 
that even in normal times
 the best model is just a guide " 

not sure ..but i tnink
this means

  prof r knows
mr b 
 knows 

his model 
even if activated

would 
 bare the same relation 
to the  real economy 
as  
  baby's
  steering wheel
on its  car seat 
does to dad's  oldsmobile 


prof r :

 "If something extraordinary happens
 like either Russia goes under
 or the stock market goes down 
by 20 percent
 anyone with a modicum of common sense
 knows that the model's not going 
to be a reliable guide"

              dull repetitive  and  clear 

but  hey check out this  bitteraweat  tidbit

for those who are still here

 PROF R ....

" Ben is the best person you could choose  (...)*   basically." 


       "BASICALLY " ???

      that splinters the shaft some now don't it 




*  (...) added by moi for empfataciosity  con grosso