"Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth."
So, back when things were more certain we were dead wrong about where we were headed....now that things are less certain we will remain dilligent to be wrong much more quickly?
It's like going back to a doctor who misdiagnoses you time and time again.
Experienced chess players often memorize the moves of the various "openings". When play devolves outside of the standard opening moves and variations, the players are said to be playing "out of book". When Bernanke says, Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth I'm skeptical. I think he is now playing "out of book". I doubt he's very confident about what impact his actions will actually have.
I think we're in for a prolonged bout of hyperdistagdeflation where assets must be madmaximized to avoid suboptimal human capital losses due to food commodity deficit effects.
The intended signal is: we'll raise rates to support the dollar. The currency markets today are not buying it.
If China can maintain its 8-11% GDP growth the next 2 years while the US goes into recession there is not so much need to worry about the world economy.
My worry now is that China can't with a weak dollar, very expensive raw material and energy prices, and a US recession.
I think what he's saying is 'From an acedemic perspective, we should be raising rates. From a polical perspective, we don't dare'. I think that he is discovering that when you're talking about looking at real time decisions, as opposed to theoretical, 20/20 hindsight, short term has a way of drowning out long term. It's very easy to state that people should have worried more about long term solutions instead of lurching drunkenly from one short term patch to the next. (I do that all the time) But immediate crises have a way of demanding attention to the exclusion and the detriment of long term solutions. Like banks offering above market rates for CDs which help immediate cashflow while hurting the long term balance sheet.
I parse this in line with some above comments. When they say "inflation" now, they mean "price inflation" not monetary. They are clearly worried about monetary inflation in terms of keeping the rate too low for too long, or a bailout of the GSEs that would mean they couldn't sterilize the amounts.
I think they would love to raise, and may sooner than you think. To do that they'd have to toss the financial markets to the dogs though. I actually think a .25 point rise would do little to change anything domestically, but would speak volumes on the currency exchange markets
Bernanke is trying to anchor inflation expectations to inflate out of this mess. So he will talk about inflation and do nothing in th hopes that perception will make inflation take hold. Deflation is the real problem at hand.
I agree with M o T, it is really deflation and Bernake wishes it could be inflation.
Plus there is another political side to talking about inflation.
Everybody but the rich is being squeezed by higher food and oil prices on one side, and lowering wages and employment and equity and lines of credit on the other.
Under such circumstances, it is easier and even necessary for ineffective leaders to talk about inflation for at least two reasons:
1) inflation is, on the face of it (if not in a deeper sense), the more readily understood term, and
2) calling the problem inflation externalizes its source to oil producers and thoughtless Chinese consumers of energy, whereas any attempt to explain deflation would direct people to focus attention domestically - on the disaster of deregulation, the massively unfair and morally hazardous nature of the tax regime (think hedge fund managers), and, worst of all, it would focus Americans' minds on their disappearing or shrinking jobs and equity.
Fighting inflation is believed to justify keeping wages down, making heroes of those who downsize companies (remember the Clinton boom years and the lionization of Chainsaw Al Dunlop, who never made any productive money in his businesses but was good at firing workers and raking in stock gains?).
What would happen if we all started to talk about deflation?????
Bush world:
"we're an empire now, we create our own reality."
Real world of deflation:
We're an overstretched, ruinously run, deeply in debt, and crumbling empire. Foriegn Central Banks call our Treasury Dept and the White House and their demands and concerns actualize the newly contracting reality we created for ourselves.
Not as pithy as the Bush motto, but reality bites.
El-Erian of PIMCO has a good piece in the FT, looking at the inadequate and conflicted ad hoc efforts of Paulson and Company...... concluding that it is a leadership problem, further mixes private and public in bad ways, etc and so forth
Thank goodness it's only a possibility, and even though it's largely Bernanke's fault he's going to ask for more money and more power to "fix" the mess he and his predecessor made.
I recommend that you go a step further with Ben's testimony and provide a list of key remarks that he stated today and will likely state tomorrow. Using his choice of words, I might add.
There is a lot there to chew on.
I assume that many of your readers may miss what he really said. Frankly, I was surprised at his candor.
We're in one helluva mess that will take many years to unwind if we don't sink the ship in deep water.
"In light of the increase in upside inflation risk, we must be particularly alert ...
...that the inflationary impulses from commodity prices are becoming embedded in the domestic wage- and price-setting process."
If this isn't class warfare I don't know what is (I assume Ben didn't include CEO and hedge fund manager income as "domestic wage"). God forbid that working and middle class people get a break and have paychecks a least keep up with inflation.
I wonder if Ben has a clue about how most people react to an economic plan that is based on most people lowering their standard of living for the benefit of a few.
This guy seems clueless to the real world where people don't own jets and yachts. The only explanation is that he believes (hopes?) that oil and food will return to past prices and all will be well with the peon's budgets. Good Luck!!
Watch what they do, not what they say.
Translation: "Sorry guys, nothing I can do. You're on your own."
Yeah, where to run now? I think it's time to raise rates and start working through the pain...
In other words, for the slow to process: screwed.
Everyone who has bought the S&P 500 since November of 2005 is in a losing position
OK, now I am totally confused. Inflation or deflation, which is it? I thought Bernanke wasn't too concerned about inflation....
"Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth."
So, back when things were more certain we were dead wrong about where we were headed....now that things are less certain we will remain dilligent to be wrong much more quickly?
It's like going back to a doctor who misdiagnoses you time and time again.
Run this way! No, run that way! No, no, over here... no, over there... hurry, hurry.
This guy has 'leader' written all over him.
this reminds me of the "Upsizing The
Individual In The Downsized Corporation"
con job...we'll never learn.
Experienced chess players often memorize the moves of the various "openings". When play devolves outside of the standard opening moves and variations, the players are said to be playing "out of book". When Bernanke says, Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth I'm skeptical. I think he is now playing "out of book". I doubt he's very confident about what impact his actions will actually have.
I think what he's saying is 'From an acedemic perspective, we should be raising rates. From a polical perspective, we don't dare'.
Does this debunk the deflation theory?
Small bounce with no change in VIX....next leg down coming......
DAWG: Does this debunk the deflation theory?
No....we are in a deflationary period with higher commodity prices.
Now there is a threat of inflation if the U.S. bails out GSE's.....That would mean they have to start the printing presses.
Thinking we will do $1000 Gold today
question time
Error
We're all missing a key question. If the presses aren't fired up quickly...
Who will bailout the printers?
I think we're in for a prolonged bout of hyperdistagdeflation where assets must be madmaximized to avoid suboptimal human capital losses due to food commodity deficit effects.
cd
The intended signal is: we'll raise rates to support the dollar. The currency markets today are not buying it.
If China can maintain its 8-11% GDP growth the next 2 years while the US goes into recession there is not so much need to worry about the world economy.
My worry now is that China can't with a weak dollar, very expensive raw material and energy prices, and a US recession.
I think what he's saying is 'From an acedemic perspective, we should be raising rates. From a polical perspective, we don't dare'. I think that he is discovering that when you're talking about looking at real time decisions, as opposed to theoretical, 20/20 hindsight, short term has a way of drowning out long term. It's very easy to state that people should have worried more about long term solutions instead of lurching drunkenly from one short term patch to the next. (I do that all the time) But immediate crises have a way of demanding attention to the exclusion and the detriment of long term solutions. Like banks offering above market rates for CDs which help immediate cashflow while hurting the long term balance sheet.
I think he says they will not raise as long as core CPI remains at 2%
Blah blah blah blah blah, and..
Blah blah blah blah blah.
BTW, Dow is down 182 as I write this.
Oh, guess what hit $200.
It starts with an S
Followed by a K
Concluding with an F
(Actually, it hit $211.75 - and it's well before my target date of 11/04/08, but who's complaining)
569 visitors?
To the Bankerdome! Hurry! And grab the extra bottled water and canned food before you seal the hatch!
I parse this in line with some above comments. When they say "inflation" now, they mean "price inflation" not monetary. They are clearly worried about monetary inflation in terms of keeping the rate too low for too long, or a bailout of the GSEs that would mean they couldn't sterilize the amounts.
I think they would love to raise, and may sooner than you think. To do that they'd have to toss the financial markets to the dogs though. I actually think a .25 point rise would do little to change anything domestically, but would speak volumes on the currency exchange markets
Ben: Hey, Rock, I want you to meet my friend Hard place; we'll be sitting together on this train for awhile.
Rock: What train is this anyway?
Hard Place: The Old 97, why do you ask?
um...um...um....um...um...
they're some tough questions.
I actually think a .25 point rise would do little to change anything domestically, but would speak volumes on the currency exchange markets
Exacttly. And do it in a emergency meeting to shake speculators like me up(or out.)
Bernanke is trying to anchor inflation expectations to inflate out of this mess. So he will talk about inflation and do nothing in th hopes that perception will make inflation take hold. Deflation is the real problem at hand.
dk1: Thanks for posting that, dood.
I agree with M o T, it is really deflation and Bernake wishes it could be inflation.
Plus there is another political side to talking about inflation.
Everybody but the rich is being squeezed by higher food and oil prices on one side, and lowering wages and employment and equity and lines of credit on the other.
Under such circumstances, it is easier and even necessary for ineffective leaders to talk about inflation for at least two reasons:
1) inflation is, on the face of it (if not in a deeper sense), the more readily understood term, and
2) calling the problem inflation externalizes its source to oil producers and thoughtless Chinese consumers of energy, whereas any attempt to explain deflation would direct people to focus attention domestically - on the disaster of deregulation, the massively unfair and morally hazardous nature of the tax regime (think hedge fund managers), and, worst of all, it would focus Americans' minds on their disappearing or shrinking jobs and equity.
Fighting inflation is believed to justify keeping wages down, making heroes of those who downsize companies (remember the Clinton boom years and the lionization of Chainsaw Al Dunlop, who never made any productive money in his businesses but was good at firing workers and raking in stock gains?).
What would happen if we all started to talk about deflation?????
Bush world:
"we're an empire now, we create our own reality."
Real world of deflation:
We're an overstretched, ruinously run, deeply in debt, and crumbling empire. Foriegn Central Banks call our Treasury Dept and the White House and their demands and concerns actualize the newly contracting reality we created for ourselves.
Not as pithy as the Bush motto, but reality bites.
El-Erian of PIMCO has a good piece in the FT, looking at the inadequate and conflicted ad hoc efforts of Paulson and Company...... concluding that it is a leadership problem, further mixes private and public in bad ways, etc and so forth
We are screwed until January 2009.
"The possibility of higher energy prices..."
Thank goodness it's only a possibility, and even though it's largely Bernanke's fault he's going to ask for more money and more power to "fix" the mess he and his predecessor made.
CR,
Your web log is doing very well. Congrats.
I recommend that you go a step further with Ben's testimony and provide a list of key remarks that he stated today and will likely state tomorrow. Using his choice of words, I might add.
There is a lot there to chew on.
I assume that many of your readers may miss what he really said. Frankly, I was surprised at his candor.
We're in one helluva mess that will take many years to unwind if we don't sink the ship in deep water.
"In light of the increase in upside inflation risk, we must be particularly alert ...
...that the inflationary impulses from commodity prices are becoming embedded in the domestic wage- and price-setting process."
If this isn't class warfare I don't know what is (I assume Ben didn't include CEO and hedge fund manager income as "domestic wage"). God forbid that working and middle class people get a break and have paychecks a least keep up with inflation.
I wonder if Ben has a clue about how most people react to an economic plan that is based on most people lowering their standard of living for the benefit of a few.
This guy seems clueless to the real world where people don't own jets and yachts. The only explanation is that he believes (hopes?) that oil and food will return to past prices and all will be well with the peon's budgets. Good Luck!!
Let them eat cake.
Jim
"Helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve," Bernanke said.
And how, pray tell, does this fit into the the Fed's dual mandate of protecting employment and price stability?
I think Bernanke needs to go back and re-read the Fed charter. To be reminded that it says nothing about protecting his friends in financial services.
Yuck, I don't know about all that. If you noticed, Bernanke was very careful -not- to use the word "recession," but things like "the economy has continued to expand." What exactly does that mean? I was pretty entertained by this translation of BB's speech: Federal Reserve Chairman Ben Bernanke throws his hands up, admits we're in a financial shit storm - 236.com - News
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