I Am Become Ben, Destroyer of WorldsJoe Wiesenthal reports on Bernanke rage among hedge funders, and sure enough, here’s Paul Singer declaring not just that he dislikes Bernanke’s policies but that BB is destroying the very fabric of society.
I still don’t have this rage entirely figured out. In substantive terms, it’s really hard to justify. After all, the Fed is normally expected to cut rates when unemployment is high and inflation low; with unemployment high and inflation running below the Fed’s target, easy money is just what the textbook says you should be doing (and quantitative easing is just an attempt to get some traction with normal policy rates up against the zero lower bound). It’s the economic situation — an economy so depressed by private sector deleveraging that conventional monetary policy has reached its limit — that’s radical here, not the Fed’s response.
What about the self-interest of the hedgies? A guess may be that given they way they’re normally rewarded, with fees based on total profits (not profits relative to a market-average baseline — e.g., 2 and 20), they find themselves hurting financially from a low-yield world. Also, for whatever reason old hedge fund guys tend to be goldbugs and hyperinflation hypochondriacs — hyperchondriacs? — who are simultaneously sure that BB’s policies will produce Weimar redux and furious that so far they have done nothing of the kind.
Oh, by the way, I’ve been getting some taunting because gold is up some since I wrote about it. Indeed:
[gráfico]
Return to glory days, or dead ingot bounce? I guess we’ll find out.So anyway, the phenomenon of Bernanke rage is interesting. It probably has something to do with sexual orientation or childhood trauma, right?
krugman
