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Sympathy for the Fed Chairman

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wsm logoThe Fed was also not shy about placing part of the blame for the sluggish economy at the feet of elected officials. The FOMC statement read:  “Fiscal policy is restraining economic growth.”

Many market participants and pundits took this as a reference to the partial government shutdown and debt ceiling debate. We believe that the Fed’s blaming of fiscal policy goes far beyond October’s developments.

During his Humphrey-Hawkins testimony last May, Fed Chairman Bernanke explained to members of Congress that “monetary policy is not a panacea.” Back then it was thought that Mr. Bernanke was referring to the sequester. Although the sequester-related spending cuts were on the Chairman’s mind when he made that comment, we believe that Mr. Bernanke’s concerns go beyond spending cuts. While we cannot read Mr. Bernanke’s mind, we are fairly certain that he is frustrated with the lack of pro-business and pro-growth fiscal/economic policies within the administration’s economic plan.

During the past few years, Mr. Bernanke has been portrayed as some kind of left-leaning Keynesian, ready and willing to use government spending to boost economic activity. This is a canard circulated by far-right-leaning pundits and politicians. We believe that this does Mr. Bernanke a disservice. It should be remembered that while servings as President George W. Bush’s Chairman of Economic Advisors, Mr. Bernanke was a staunch supporter of the Bush tax cuts as a way to stimulate the economy. Although the “Bernanke Doctrine” advocates printing money, lowering rates and devaluing the U.S. dollar as methods of stimulating growth, these are meant to be used in the context of prevailing fiscal policy. On several occasions, Mr. Bernanke has stated that the Fed must work within the constraints of fiscal policies.

We take this to mean: The policy tools the Fed uses and the magnitude of their use will be determined by the tailwinds or headwinds created by fiscal policies. Judging by the magnitude of monetary policy accommodation and the sluggish economic growth the U.S. has experienced during the recent recovery, it would appear that the economy is battling significant fiscal headwinds from policies which not only stifle growth, but do not reflect demographic and structural changes within the U.S. economy.

By Thomas Byrne – Director of Fixed Income – Investment Consultant

thomas bryneThomas Byrne brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets.

Employment

  • November 2012 – Present, Wealth Strategies & Management LLC, Stroudsburg PA
  • December 2011 – November 2012 – Bond Squad, Kunkletown, PA
  • April 1988 – December 2011, Citigroup and predecessor firms, New York, NY
  • June 1986 – March 1988 – E.F. Hutton, New York, NYThomas ByrneDirector of Fixed Income

    Wealth Strategies & Management LLC

    570-424-1555 Office

    570-234-6350 Cell

    E-mail: Thomas.byrne@wsandm.com

    Twitter: @Bond_Squad

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Thomas Byrne

Thomas Byrne serves ad the Director of Fixed Income for Wealth Strategies Management LLC. Thomas brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets. High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

1 Comments

  1. No sympathy here. In 2003 he was instrumental in pushing short rates to 1% thereby throwing igniting an unprecedented housing boom that led to a collapse. Today he continues to tightly control the price of money thereby pushing seniors and many others to take far more risk than they should be taking. He and his comrades (to me they are no different than the officiasl of the defunct Soviet Union!) grow M1 at 5% and let the market set the price of money. Bernanke’s ZIRP and QE policies will end badly on Yellen’s watch and he can blame Congress. But haven’t we seen this movie before?

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