Wednesday, February 15, 2006

Bernanke: Hot and Cold, Just the Way Goldilocks Likes It

At first blush, Bernanke's speech gives you the impression that we finally have a Fed chairman who can speak English.

But after closer inspection, I note some haze that is successful in confusing the issue just about as much as Greenspan's gibberish. For example:

"Experience shows that low and stable inflation and inflation expectations are also associated with greater short-term stability in output and employment, perhaps in part because they give the central bank greater latitude to counter transitory disturbances to the economy." (Reuters quotes, here on 02/15/06.)

Sounds like he's saying that a stable environment gives the Fed an opportunity to mess with it, but he couldn't have meant that, could he? And it makes you wonder just what "transitory disturbances" could coexist with "stable inflation," "inflation expectations" and "short-term stability." (Here's a hint:)

[Thanks to for the picture.]

Then we have this:

"In sum, achieving price stability is not only important in itself; it is also central to attaining the Federal Reserve's other mandated objectives of maximum sustainable employment and moderate long-term interest rates."

This sounds like he is saying that the Fed has chosen to concentrate on the control of symptoms rather than on the optimum health of the patient, or that the economy couldn't heal itself without doses of preventive medicine. If you ask me, it's the doctor's prescription drugs that sickening the patient.

But that's just my take.

Otherwise, contrary to my cartoon earlier, he's taken hold of the attention of everybody. At least for the time being. And I must say, he's much easier to read than his predecessor. Whether he's more transparent or not will remain to be seen. After all is said and done, he's just as we expected him to be. Clearer in phraseology, but just as opaque when it comes giving us an indication of how to plan for our future.

But then, isn't that what the Fed's for?


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