Sunday, August 28, 2011

Fed Chairman Bernanke: We Will Do Nothing Because We Can Do Nothing, But Don’t Worry, the Fed Will Meet In September to Continue Doing Nothing

A Speech Filled with Higher and Higher Platitudes

The Federal Reserve System has a lot of money.  So every year they have a grand meeting in the Grand Tetons to talk about grand monetary policy.  This year the conference received unprecedented attention because of the stalled U. S. economy, the increasing political attacks on the Fed by Republicans (who are afraid the Fed will do something to help the economy and so help Democrats), and the issue of whether or not the Fed would make any policy changes to indeed help the economy.

Mr. Bernanke and Mr. Trichet,
Head of the European Central
Bank - Probably Not Discussing
Their Collective Failures

The Key element in the conference is the speech by Fed Chairman Ben Bernanke.  This speech took place Friday morning.  It was notable, indeed historic, for even though the Fed has  mandate to promote price stability and economic growth, the message from Mr. Bernanke this year was “Good luck folks, your on your own.”

the speech, delivered at a policy conference held each August in Grand Teton National Park, marked a return to the Fed’s position earlier this year that the Fed has done most of what it can, and that the rest of the government must do more.. . .

“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” he said.

This may be what Mr. Bernanke feels and it may be his response to Republican critics.  As for the economy,

“With respect to longer-run prospects, however, my own view is more optimistic,” Mr. Bernanke said in his prepared remarks. “The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years.

Really, because everyone else thinks that the growth fundamentals of the U. S. have been drastically altered downward by the shocks of the past four years.  The biggest shock being that Mr. Bernanke thinks that is not the case.  Here is the latest report on the economy.

              The latest sign of trouble for the economy came Friday as the Commerce Department     revised down its already low estimate for second-quarter growth in gross domestic product. The economy grew by annual rate of only 1% in April through June, not the 1.3% rise that was previously estimated. That was after GDP increased by just 0.4% in the first three months of the year.

Brushing aside any constructive ideas, Mr. Bernanke went on to say  meaningless things like this.

“The country would be well-served by a better process for making fiscal decisions,”

Thus angering the large group of policy makers who think the economy would be well served by have a worse process for making fiscal decisions.

And jumping right into another controversy he astonished listeners with his bravery and insight when he said with respect to the deficit and the budget there should be

clear and transparent budget goals, together with budget mechanisms to establish the credibility of these goals.”

Thus angering the huge block of people who thing there should be fuzzy and opaque budget goals with no mechanism to establish their credibility.  What political courage!

But not to despair

Mr. Bernanke made his standard announcement that the Fed would take any steps necessary to help the economy, and he said the issue would be discussed at the next meeting of the Fed’s policy-making board, in late September.

So all is well, the Fed is going to discuss things at their next meeting.  Well thanks anyway Ben, but don’t call us, we’ll call you.

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