Why Gas Prices Are Rising?

A lot of folks blame Obama. Republicans have tried the old mantra drill, baby, drill.  Always exploit American ignorance with cheap politics is the name of the game when you're a republican. Fortunately for them, there's a lot of ignorance to be exploited. There's no short term solution to high gas prices, only a long term solution, but once again, Americans don't often think long term. Anyway, here's what Ben Bernanke said yesterday and I've posted some other sources that explain gas prices:

CHAIRMAN BERNANKE: So first of all, gasoline prices obviously have risen quite significantly. And we of course are watching that carefully. Higher gas prices are absolutely creating a great deal of financial hardship for a lot of people.

And gas, of course, is a necessity. People need to drive to work. So it's obviously a bad development to see gas prices rise so much.

Higher gas prices, higher oil prices also make economic developments less favorable. On the one hand obviously the higher gas prices add to inflation. On the other hand, by draining purchasing power from households, higher gas prices are also bad for the recovery. They cause growth to decline as well. It's a double wham my coming from higher gasoline prices.

Our interpretation of the increase in gas prices is the economist basic mantra of supply and demand. On the one hand we have a rapidly growing global economy, emerging market economies are growing very quickly. Their demand for commodities including oil is very, very strong. Indeed, essentially all of the increase in the demand for oil in the last couple of years, in the last decade has come from emerging market economies. In the United States our demand for oil, our imports have been actually going down over time.

The demand is coming from a growing economy where we have seen about a 25 percent increase in emerging market output since before the crisis. On the supply side, as everybody knows who watches television, we have seen disruptions in the Middle East and North Africa, Libya and other places that have constrained supply. That supply is not made up and that has in turn driven up gas prices significantly.

This is an adverse development. It accounts in the short-term for the increase, all of the increase in our inflation forecast at least in the very near term.

There's not much that the Federal Reserve can do about gas prices per se. At least not without derailing growth entirely, which is certainly not the right way to go.

After all, the Fed can't create more oil. We don't control the growth rates of emerging market economies. What we can do is basically try to keep higher gas prices from passing into other prices and wages throughout the economy and creating a broader inflation which will be much more difficult to extinguish.

Again our view is that most likely -- of course we didn't know for sure but we will be watching carefully -- is that gas prices will not continue to rise at the recent pace. As they stabilize or even come down if the situation stabilizes in the Middle East, that will provide relief on the inflation front, but we have to watch it very carefully.

Sources:
The age of cheap oil is over.
Some blame speculators.
FTC says market fundamentals --supply and demand -- not illegal activity are causing higher prices.

Quantitative Easing 101

The Fed's current policy of "quantitative easing"essentially means it is printing money ($600 billion) to buy assets such as government bonds. The Fed isn't literally printing the $20 bills that end up in your wallet - it's doing the electronic equivalent. When it buys a $100 bond from a bank, it deposits $100 into the bank's account at the Fed. This electronic money is called reserves, and the Fed conjures it up out of thin air.

However, this money can lead to inflation only if banks lend it and consumers and businesses spend it. Banks lend when they have strong balance sheets and when credit-worthy customers demand loans. People and businesses spend when their incomes are growing and they're confident about the future. None of this has been true lately.

The Fed is trying to stimulate spending, but not by showering people with newly minted dollars. Rather, when the Fed buys bonds, it pushes their prices up and their yields down. Lower long-term interest rates will tempt some people to borrow. They will also make stocks more attractive. Higher stock prices will make consumers feel wealthier and spend more. If that spending outstrips the economy's productive capacity, inflation could result. But that's years away: The economy today is awash in idle factories and unemployed workers.

Read more in the Washington Post, which lists five myths about the Fed.

Bernanke to Congress: Do Your Job

It's now become hip to knock Ben Bernanke and the Fed, thanks to the new libertarian/tea party bent running through the republican party. For sure, Sarah Palin's knock of Bernanke was way, way, way over her head. Bernanke says if Congress was doing its job, he wouldn't have to step in so often. Watch his speech in Germany here.

Obama Speaks on Economy Following Bernanke Meeting Video

Obama's Giving Yet Another 'Most Important Speech of His Presidency'

Does the media realize how many times it refers to one of Obama's speeches as a make or break? Practically every time he gives a speech, they declare it at THE MOST IMPORTANT. Drama.
Chuck Todd says Obama's spending ALL DAY behind closed doors working on his speech. That's not true. It's just more dramatic effect. He meets with advisers in the morning and business leaders in the afternoon. Later he meets with Robert Gates.

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Geithner Says Job Growth Expected in the Spring

Timothy Geithner also says Ben Bernanke is likely to be confirmed.

Part 3 is more interesting than part 2, which you can see here. Geithner, who's been putting out the fire, says his great regret is not doing a better job of explaining and walking people through the recession.

Democrats Turning Into Ron Paul

David Brooks says democrats have turned into Ron Paul. They're railing against Ben Bernanke because they're all afraid of losing their jobs. What a bunch of losers. The republicans, they say, are gloating. What a bunch of losers.
Brooks hails healthcare legislation as dead. All these pundits sitting around criticizing. What a bunch of losers. These are good times. Obama certainly has brought change, just not the kind that everyone expected. I think it's all good. Brooks and Shields also get into a discussion on populism and the Supreme Court decision on campaign financing. Brooks and Shields both agree the decision is a bad one.

Ben Bernanke Time Magazine's Person of the Year

I sure am glad it wasn't Obama. Republicans/wingnuts don't need any more fodder. A tribute to Ron Paul:

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Bernanke Says Recession is Likely Over Unemployment Not

Federal Reserve Chairman Ben Bernanke said Tuesday that the worst recession since the 1930s is probably over.

Bernanke said the economy likely is growing now, but it won't be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.

"The recession is very likely over at this point," Bernanke said in responding to questions at the Brookings Institution.

The Fed boss also said he is confident that Congress will enact a revamp of the nation's financial rule book to prevent a future crisis from happening. NPR

Visit msnbc.com for Breaking News, World News, and News about the Economy

Surprise! It's Ben Bernanke

Obama said he wasn't going to make any news in Martha's Vineyard, but he decided it was a good time to reappoint Ben Bernanke, who by the way is a republican. Bernanke needs to be confirmed by the Senate. Note the missing tie that says "I'm still on vacation." I'm curious as to why Obama made this announcement now. Bernanke's term ends Jan. 31. All the Ron Paul supporters, who believe the Fed should be melted, are sure to be disappointed, but I'm sure they didn't expect otherwise.

After the Bernanke announcement, Obama went golfing:

Following the short announcement, the president traveled to the Mink Meadows Golf Club, a public nine-hole course on West Chop. His foursome for the morning round of golf included perennial golf buddy Marvin Nicholson, Michael Ruemmler of the advance team and Sam Kass, who works in the White House kitchen.

Word spread quickly this morning around Mink Meadows Golf Club that a certain chief executive was on hand for a round, according to a pool press report.

By the time President Obama made the turn on the 9-hole course around 10:30 this morning, crowds started to gather. At the course clubhouse, in front of the 9th green, desperate for a view, the crowd of about 50 onlookers was initially contained to the wraparound porch that fronts the dark-shingled clubhouse.

But after conferring further, Secret Security officers and course managers asked the crowd to move inside the building as the president approached.
MVT

Geithner Directs Obscenities at Financial Regulators

Timothy Geithner puts his foot down:

U.S. Treasury Secretary Timothy Geithner blasted top U.S. regulators in an expletive-laden tirade amid frustration over President Barack Obama's faltering plan to overhaul financial regulation, the Wall Street Journal said on Monday, citing people familiar with the meeting.

Geithner told regulators that "enough is enough," the newspaper said, citing one person familiar with the meeting last Friday with Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp Chairman Sheila Bair. Reuters

Chris Dodd Questions Ben Bernanke

Bernanke Notes Improvements

Read Ben Bernanke's op-ed in today's WSJ here.

Wacky Michele Bachmann Confounds Geithner

Remember her? During the campaign, she called for a witch hunt for anti-Americans and questioned Obama's patriotism. I can't believe the people of Minnesota voted for such a conspiracist.

And some confounding on the left from Maxine Waters. What exactly is her point?

Bernanke Speaks to Community Bankers

Part 2

Ben Bernanke on 60 Minutes-Video

This was enlightening. I can't say I understand everything but at least Bernanke seems human, smart and capable:


Making the money

Do People Even Want to Borrow Money?

The Federal Reserve begins two-day meetings on Tuesday, which means that the stock market could continue its track up or go back down, depending on how investors view the meeting. There is a chicken and egg thing going on. Will freeing up credit for lending boost borrowing for auto loans, homes and student loans, or are consumers and business wary of borrowing? That is what the Obama administration and the Fed are trying to fix. The TALF program will help get credit flowing but how do you get people to borrow? 

Sen. Bill Bradley on Obama's economic policy:

New Lending Program To Spur Auto, Student and Business Loans

IHT: The government launched a much-awaited program Tuesday to spur lending for autos, education, credit cards and other consumer loans by providing up to $200 billion in financing to investors to buy up the debt.

If the program succeeds, it should help bust through the credit clogs in place since last year and make it easier for Americans to finance large and small purchases at lower rates, Federal Reserve Chairman Ben Bernanke told Congress. That, in turn, would help revive the economy, he said.

Created by the Fed and the Treasury Department, the program has the potential to generate up to $1 trillion of lending for businesses and households, the government said. It will be expanded to include commercial real estate, though that won't be part of the initial rollout.

"There's a looming crisis in commercial real estate whereby owners of shopping malls, hotels, rental properties and many other types of buildings are unable to refinance or to pay for new construction because the (commercial) securitization market is completely shut down," Bernanke said during an appearance before the Senate Budget Committee.

The program will start off by providing $200 billion in loans to investors with the goal of jump-starting lending to consumers and small businesses. The program, dubbed the Term Asset-Backed Securities Loan Facility, was first announced late last year and originally was scheduled to start in February.

The program is called TALF for short. Funds will begin being disbursed March 25. Read the Treasury Department release about this program here.

More fun with Ben. He says AIG was a horrible company:

Bernanke: Recession Not Likely to End This Year

MSNBC: In testimony to the Senate Banking Committee, Bernanke said the economy is likely to keep shrinking in the first six months of this year. Housing, credit and financial crises — the worst since the 1930s — plunged the economy into its worst slide in a quarter-century at the end of last year.

Bernanke hoped that the current recession will end this year, but said there were significant risks to that forecast. Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.

Don't call it nationalization, which is a scary word with Swedish connotations (heaven forbid) and all the myths wrapped up in that, call it a private/public partnership, says Bernanke. Perhaps, in his speech tonight, Obama should give a tutorial on what nationalization is and is not. There are too many hard right people muddying things up with their small talk. It doesn't matter what you call it. If the banks aren't lending we lose.

Bernanke's opening statement:

Ben Bernanke Speaks at National Press Club

The Federal Reserve has taken "credit easing" measures, in addition to cutting short-term interest rates:

Part 2: