Miss at Least One Meeting a Day

September was a great month for me, with a gain of 10%, and I added another 3% in October. However, as markets stalled in late October, like a jerk I took off some risk and then I missed another surge in the first 10 days of November and ended up flat for the month. In retrospect it was important to understand how committed the Fed was to more QE if the still fragile economy languished, deflation appeared, and employment didn’t continue to improve. Bernanke had intensely studied Japan’s nightmare and was desperately afraid of persistent imbedded deflation. He had seen how hard it was to eradicate. Get the big ideas right and stick with them.

Ed Hyman of ISI, the most acclaimed and best economist in the world, in particular emphasized Rogoff’s statement that the Fed must make it clear that they were not going to stop QE until they reached their inflation target. This tactic was right out of Chairman Bernanke’s book on Japan’s lost decades and the failure of the Bank of Japan to use unconventional tools like QE to cure the country’s malignant deflation. In the spring of 2012 Paul Krugman in a long essay in the New York Times raised this issue again, saying Bernanke had not followed his own advice, and on April 26 the chairman responded, saying, “The question is does it make sense to actively seek a higher inflation rate in order to achieve a slightly faster reduction in the unemployment rate?” Bernanke answered his own question: “The view of the committee ...

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