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Tuesday, April 10, 2012

Bernanke says stemming bank runs may be difficult, does anyone care?

When I read Ben Bernanke statement today, I was floored by this statement:

He reiterated a worry that he and other top policymakers have expressed about the continued vulnerability of money market funds.
"The risk of runs ... remains a concern, particularly since some of the tools that policymakers employed to stem the runs during the crisis are no longer available," he said.

Wow, did I just hear a nuclear bomb go off?   Risk of bank runs is still a concern?   But Ben Bernanke is the worlds hero, he saved the world from financial Armageddon.
A hero is someone who changes the world for the better, doesn't do delay tactics and the world still faces the same issues 4 years later!
But the world yawns, and all is good.   What I am unsure of is what does this signal from Bernanke?  Does this mean in the next financial market downturn, his hands are tied?

The argument among bloggers is about The fed's loose monetary policy, can it be kept up forever without consequence?   The thought is the rise of natural resource prices are to blame for loose money games.  And that Ben cannot keep up the same level of monetary loose policies for fear of sparking more civil unrest.
We are seeing in Europe pressure of a classic Deflationary collapse, and in America and China, inflationary forces at work.  The cause is debatable.

What is reality is immaterial.  What matters is what the Federal Reserve believes is reality, and how the behavior may change in the year to come.  If Ben believes that his monetary policies cannot be pursued to the same extent as in 2008, then we will have a change in financial markets, its only a matter of time.

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