Bernanke speaks with forked tongue

[Jaxon]

This guy is supposed to be a plain speaker? I long for the good old days of Greenspeak.

This is how the Fed used to convey their bias:

November 15, 2000

Nonetheless, to date the easing of demand pressures has not been sufficient to warrant a change in the Committee's judgment that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.

That is clearly a tightening bias. Then on Dec 19 2000 they switched, and let us know with plain language:

Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee consequently believes that the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

Easing bias, right?

But now we get this:

Jan 31, 2007
The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

OK, they said "firming" but the entire sentence they chose to use over and over really means nothing more than, "well, it sort of depends."

And now they change it to the internally inconsistent:

March 21, 2007

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

They changed "additional firming" to "policy adjustments." An adjustement could still be a firming, and since it all still depends on "incoming information" has anything really changed? If, as they say, " the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected," how can they possibly change their "bias" (even though they no longer use this term) from tightening to neutral?

They need to speak a little bit more clearly.

 

[markcuban]

i think the mandate is confusion. baffle em with bullshit. the fed is painted into a tight corner. they are just praying for a miracle imo. cant raise rates or lower them...have lost ability to respond because of overleverage...

 

[ByLoSellHi]

Abolish the central planning style federal reserve, and let the market determine interest rates.

The fed is a government instrument tha obfuscates and adds layers of complexity to our financial system that doesn't need to be there.

Central banking/planning is soooo Bretton Woods.

 

[MattF]

Quote from markcuban:

i think the mandate is confusion. baffle em with bullshit. the fed is painted into a tight corner. they are just praying for a miracle imo. cant raise rates or lower them...have lost ability to respond because of overleverage...

they can't speak clearly...if they do, all hell will break loose when people realize that it's been a lot of fronting...so they have to try and keep things relatively in check.

 

[Ivanovich]

Quote from ByLoSellHi:

Abolish the central planning style federal reserve, and let the market determine interest rates.

The fed is a government instrument tha obfuscates and adds layers of complexity to our financial system that doesn't need to be there.

Central banking/planning is soooo Bretton Woods.

Oh yeah, the market is far more rational when it comes to planning and execution!

 

[ByLoSellHi]

Quote from Ivanovich:

Oh yeah, the market is far more rational when it comes to planning and execution!

I don't know if you're being serious or sarcastic.

If you're being sarcastic, what would you call yesterday?

What drove the rally? Fundamentals or confusion (caused by the fed)?

 

[S2007S]

Quote from ByLoSellHi:

I don't know if you're being serious or sarcastic.

If you're being sarcastic, what would you call yesterday?

What drove the rally? Fundamentals or confusion (caused by the fed)?

99% confusion 1% fundamentals

 

[Maverick1]

Quote from MattF:

they can't speak clearly...if they do, all hell will break loose when people realize that it's been a lot of fronting...so they have to try and keep things relatively in check.

And so they 'say' nothing at all. Kind of like the forecaster who says market will go up if it doesn't go down and vice versa.

Like Cuban said, dazzle em' with a steamin' pile is the modus operandi now.

 

[annaland]

Quote from Jaxon:


They need to speak a little bit more clearly.

The first time Bernanke addressed the interest rate issue (March '06, i think) the markets reacted way more than was intended by the fed. Stocks and bonds dropped and the treasury rate rocketed. Bernanke learned the hard way to be careful of what to say while markets are open and information shocks are intensified. This is why he is now saying a lot while not saying anything at all.

 

[dhpar]

Quote from ByLoSellHi:

I don't know if you're being serious or sarcastic.

If you're being sarcastic, what would you call yesterday?

What drove the rally? Fundamentals or confusion (caused by the fed)?

I am with Ivanovich on this one (assuming he is sarcastic). Yes - there are times when fed is not needed in monetary policy (in fact likely 99%+ of time) but I still see some value added in remaining 1%. If things turn really ugly (panic^5) what do you do?
That said I would like to have fed acting only in times of extreme problems (somehow defined). During normal times they should concentrate on smooth working of payment system, guard low inflation and maybe do some regulation.
This topic is however extremely controversial - you can decide to defend extreme positions (like metal standards, private money etc.) or you can try to be practical in the current status quo. There were a lot of (good) threads on this forum on this topic...

disclosure: I was horrified with the statement yesterday....