Friday, August 26, 2011

Thank you, Mr. Bernanke

For saying in your Jackson Hole speech today that "most of the economic policies that support robust economic growth in the long run are outside the province of the central bank." And for not promising another round of Quantitive Easing. And for letting us know that you are well aware that "monetary policy that ensures that inflation remains low and stable over time contributes to long-run macroeconomic and financial stability."

It's past time for the world to understand that the big fixes now need to come from fiscal policy. Monetary policy has done all it can do to promote an economic recovery, and the Fed's focus going forward should be on ensuring that all the quantitative easing of the past several years doesn't allow the inflation genie to get out of the bottle.


Benjamin Cole said...

In the long run, yes. I guess if you go out a 50 years or so.

But explain Japan. Are we to believe that new structural impediments suddenly emerged in Japan in 1990, and have held down growth since?

For now, we need an expansionary, and inflationary monetary policy.

The overly timid and cautious Bernanke-san is channeling the Bank of Japan. This does not auger well for USA equities and real estate markets.

The hope is that Bernanke gave this speech to deflect knee-jerk criticism from the gold nuts and right-wingers, and will engage in less-understood expansionary measures, such as not paying interest on reserves.

What a pass we have come to. We have leadership satisfied with 1 percent growth, nine percent unemployment, and deflation in major asset values, such as real estate and equities.

We are being Japanned.

Benjamin Cole said...

In the department of "I saw green, and you saw blue."

Bernanke offers hint of Fed action
By Robin Harding in Jackson Hole, Wyoming
The US Federal Reserve “is prepared to employ its tools as appropriate to promote a stronger recovery”, chairman Ben Bernanke said in a speech at Jackson Hole on Friday, dropping a broad hint that the US central bank will soon do more to support an ailing economy.
But Mr Bernanke avoided the emphatic language he used in a similar speech last year, and offered no detailed discussion of the Fed’s easing options, suggesting that he wants to manage expectations carefully of how much the central bank might do.

He said that the Fed’s September monetary policy meeting would be extended from one to two days “to allow a fuller discussion”. That is likely to raise expectations of some further action at the meeting on the 20th and 21st.

So maybe we get QE3, or other actions. Or maybe we don't. But why should anybody clue is in? We are only citizens, taxpayers, and business people.