Jack Crooks discuses how some analysts are beginning to wonder is Bernanke is destroying the U.S. economy. In this issue of Money and Markets, Mr. Crooks takes a closer look at why the opinions of analysts are starting to change on the Fed and on Bernanke.
Jupiter, Fla. (PRWEB) July 20, 2008 -- Jack Crooks discuses how some analysts are beginning to wonder if Bernanke is destroying the U.S. economy. Mr. Crooks takes a closer look at why the opinions of analysts are starting to change on the Fed and on Bernanke.
That opinion may have gained greater support recently after Bernanke's two days of Congressional testimony. Accompanied by Treasury Secretary Henry Paulson and SEC Chairman Christopher Cox, Bernanke addressed the panel of Congressmen bombarding him with questions. While Bernanke gave the normal reassurances about the state of the economy and inflation, the subject of giving the Fed additional regulatory responsibilities made for a heated discussion. When it was Senator Jim Bunning's turn to address the Fed Chairman, he noted, "The Fed is the systemic risk."
Almost any economist will tell you that every boom period is followed by a bust period. And typically, the larger the boom, the larger the bust. But, according to Crooks, it seems like lately the Federal Reserve is disregarding the historical boom-bust cycle Making every effort to sustain the boom when it's already naturally run its course only delays the inevitable; the impending bust will feel all the more painful.
Many analysts, including Crooks, are beginning to believe the Fed needs to stop fighting the fire with bailouts and cheap money. Instead, they need to tighten up and let the market process work things out. The Fed has no doubt been in bailout mode. Just look at the obvious Bear Stearns backstop a couple months ago and now the Fannie Mae/Freddie Mac fiasco. And who knows how many other firms the Fed has saved by opening up the vault doors to nearly everyone.
The total borrowings of depository institutions from the Federal Reserve from 1980 until 2006 shows that eight billion dollars was borrowed in 1984, likely due to the economy's recovery from recession in years prior. This spike in total borrowings was also coupled with a brief surge of inflation after Fed Chairman Paul Volcker brought the inflation rate down from 13.5% in 1980 to as low as 3.2% in 1983. The total borrowings from 1980 to 2008 will show a spike to more than $170 billion dollars of borrowings reflects the newly created auction facilities.
"Bernanke recently admitted that the U.S. dollar needed to work off some of the excesses from the rally that began in the mid 1990s. That's part of why the bear market has extended so deep for the buck. Basically, if the Fed doesn't change its attitude and stop feeding debt creation, asset prices will spiral higher, and more pain will be crammed into the closet until someone or something knocks the door open," Crooks states.
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http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1988
About JACK CROOKS & MONEY AND MARKETS
John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.
Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.
Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.
Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.
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