Federal Reserve Chair Ben Bernanke gave his long awaited Jackson Hole speech this morning. Now all are reading between the lines on whether more quantitative easing will be done and picking apart every single word as if Bernanke speaks in cryptography.
First, here is the speech paragraph that will generate quantitative easing, or QE3 buzz:
In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.
Clearly QE3 is still on the table from this speech.
Next, Bernanke chastises the Tea Party for taking hostage the debt ceiling, thus holding ransom the ability of the United States to back its debt, all for political gain and agendas.
The country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals.
Onto other aspects of the speech. Bernanke notes long term problems, ignoring globalization and the trade deficit:
The United States faces many growth challenges. Our population is aging, like those of many other advanced economies, and our society will have to adapt over time to an older workforce. Our K-12 educational system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes. But all of these long-term issues were well known before the crisis; efforts to address these problems have been ongoing, and these efforts will continue and, I hope, intensify.
All of the above are true, but the question remains does Bernanke mean to confront the institutionalized, massive age discrimination in the workforce? Or confront the corrupt health system that puts obscene profits literally on the corpse of America?
Bernanke also again, points to the jobs crisis as the current short term emergency:
Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.
He also implies this needs to be addressed first and foremost and by Congress and this administration. Some may say the Fed is kicking the can down the road, but frankly Bernanke has repeatedly implied Congress and this administration are the ones who need to act. In other words, America needs a direct and indirect jobs program, not austerity for the short term.
Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank.
Translating Bernanke, this quote becomes: Obama and Congress get your ass in gear, quit your inane politics and enact a direct jobs program and deal effectively with the unemployment crisis now you sycophants!
Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability--which is the result of responsible policies set in place for the longer term--and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives.
Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face.
Frankly, all of the issues mentioned in this speech are real and while so many believe the Federal Reserve is the epitome of all evil, therefore all powerful, I suggest not so much. It really is up to this government to enact policies to get people back to work, something our government, with their multinational corporate lobbyist puppet masters are not willing to do.
Bernanke now S&P's new BFF
I love it when people have fun with Bernanke's speeches. This Canadian blog says Bernanke is S&P's new BFF.
I don't know about that but Bernanke is simply stating the obvious. That entire debt ceiling debacle was a complete embarrassment for the United States to the entire globe and showed the entire world what idiots we have as legislators.
No surprise when you have a mix of corporate puppets with some extreme cult mesmerizing the masses with pure economic fiction being elected into public office.
Misstating the Obvious
"Bernanke is simply stating the obvious"
"In his speech, Bernanke said the Federal Open Market Committee would consider its options at its next meeting in late September"
Classical government speak for kicking the can down the road...
TRANSLATION: "We don't know what the @#$%! we're doing. The wine and food was great and the fresh air here in Wyoming a wonderful change from the stuffy basement of the Fed, but we remain at a loss of what to do. I don't know what to tell you, I guess I really never did know what we were doing and I apologize for all the mumbo jumbo @#$%! we've been feeding you, but FOMC's job was never more than to do the bidding of the member banks, and we can't even save them... You're on your own,... sorry."
Pushing the wet noodle
100% agreement with Robert Oak's translation of Bernanke's remarks! As for spin that some of the speech indicating that QE is still on the table -- of course, everything is always on the table! Even if Bernanke had said that QE was off the table, it would still be on the table. Nobody ever takes anything "off the table" -- for sure not without something in return. Moreover, it would have been beyond the authority of the Chair or even of the entire Board to take QE off the table, a repudiation of the law authorizing powers of the Fed. What would that have been? Something like the "contract with America" or the current administrations "Dream contract"? Really, the QE spin is just a little gesture toward a falling gold market. The news is "no QE" and not all that complicated.
There's really no puzzle in Bernanke's remarks. The speech is being billed as a Greenspan-like puzzlement because that's easy for corporate-media "news" editors to approve (since they remember the old Greenspan spin) and also because corporate media wants to forestall pressure on Congress by building up empty talk about the Fed.
Right now, a major goal of corporate media is to take the public eye off of Congress and the White House so that the three FTAs can be enacted along with the corresponding TAA (for which Republicans will at least claim to be successful in demanding some kind of ransom to be paid to the MNCs, as usual).
The Fed won't do anything more about what is threatening to become the Second Great Depression -- which, hopefully, will just be more of the Great Recession. Why? -- because the Fed can't do anything more than it has already done!
Yes, it would have been interesting if Bernanke had said to Congress, "You idiots! Just enact the jobs part (the TAA), skip the FTAs!"
But, let's be just slightly realistic. In the first place, the Fed is supposed to be nonpartisan, even nonpolitical! Bernanke would have been pilloried, demands made for his removal!
Freedom -- use it or lose it!
Good As Far As It Goes
I noticed beginning late last year that Bernanke was being the most truthful of all of the big guns in DC re how long it will take to return to full -- a minimum of five years. [Probably more like ten, based on how things are going now.] He said the things Obama and Congressional leaders should have been saying throughout 2010 and this year too and I will always be grateful to him for that. His brief statements about our unemployment emergency were unacknowledged and were not acted upon in any effective way, as we all know. But at least he did something besides hide!
That's what things have come to: being grateful to the 30 second truthtellers and crumb-throwers.
Based on what he said today, I'd say what we need is someone to get out in front of Bernanke and be a little bit more forthcoming -- in other words, to say what he'd like to but feel he cannot.
Is there someone able and willing to fill this role? I do not know. I just know that I wish to God there was such a person.
Do you realize how pathetic it is to hope not for real leadership and candor about where we stand, but for someone who will just toss us out a few more crumbs than the rest who give us nothing or mislead us.
I wonder how much longer we can keep America the same America we used to know and still love at this rate?
"He said the things Obama and Congressional leaders should have been saying throughout 2010 and this year too and I will always be grateful to him for that. His brief statements about our unemployment emergency were unacknowledged and were not acted upon in any effective way, as we all know. ... how pathetic it is to hope not for real leadership and candor about where we stand, but for someone who will just toss us out a few more crumbs than the rest who give us nothing or mislead us." -- Jersey
It's a strange thing that corporate media can be covering Bernanke's Jackson Hole speech as passing the buck to Congress -- with no risk to corporatist interests of upsetting even the slightest little tea cup in their feeding-frenzy party. How this can be is really simple -- Bernanke did not indicate specifically what it is that Congress is supposed to do. He just indicates that Congress and their big money supporters can have their cake and eat it too ... by seeking a big happy "bipartisan" compromise as soon as they reconvene in September.
I think it's clear enough that Bernanke is saying no to QE, and no one thinks it could possibly work anyway. But otherwise, you tell me, is he saying yes or no to Warren Buffet's call for raising the high bracket income tax rate and for eliminating egregious tax loopholes? Did he say yes or no to cutting off unemployment benefits for millions of working families? Did he say yes or no to HARP and other relief for mortgagees holding 'negative equity'? Did he say yes or no to anything?
Oh yes, tax and spending policies should "increase incentives to work and to save" and "stimulate private capital formation". My translation of Bernanke: "No tax increases (equals no revenue increases) but another cut in the capital gains tax would be good."
Then there is the phrase that Robert Oak emphasizes, namely "provide necessary public infrastructure." Okay, so will we see unfunded expansion of investment in highways and bridges? Paid for, not by taxes, but by bonds backed by state and federal government? Oh sure, just the thing now in the year 1956, ooops, did I typo '1956'? Oh yeah, it's now 2011 ... hmmmm. Or will we see privatization of public infrastructure by foreign financial interests, eased along by WTF 'free' trade agreements? Bernanke did not exactly say, did he?
Reading between the lines, the one thing Bernanke is 'clear' about is the need to "encourage investments in the skills of our workforce and promote research and development." My translation or Bernanke: "Enact the Trade Adjustment Assistance (TAA) part of the FTAs pending as soon as Congress reconvenes AND the FTAs (of course) ... and don't forget 'necessary' reform of patent law."
Reminds me of Red Skelton's joke about 'Freddie the Freeloader' and another skid-row drunk waking up in an alley. As they shake off the night's sleep, starting off toward the street, Freddie's friend tugs Freddie's arm and points out, "Vommick!"
Freddie says, "Yeah, I know ... careful, don't step in it!"
Economy reform starts with Congress NOW!
While the entire concept of "Jackson Hole" is disgusting
I'm not a fan of Bernanke but frankly, I don't see him saying "Republican" types of things here.
But it would be nice to see some government official somewhere confront all of those CEOs and billionaires to start giving back to America and hiring Americans.
That, we don't see anywhere.
But in terms of policy positions, I don't see Bernanke recommending draconian cuts to Medicare and SS.
I mean he makes a point to say the problem is costs and the problem is costs, we've been pointing that out on this site since it started.
I know everyone wants to hate Bernanke and $1.2 trillion in secret loans half going to foreign banks, plus the entire TARP/AIG/GS "takeover" and on and on, I get it.
But recently, he seems to more be pointing to policies this site and many economists say are desperately needed.
Maybe he's a better mirror these days and one just sees their own reflection in his words (which is an art form), but that's my take.
BTW: you're bold happy ;)
Locale in terms of time
BTW: Okay, cutting back on bold
All politics is local, these days often more as to time than as to place. The Jackson Hole conference didn't take place in a political vacuum and has nothing to do with the beautiful mountain views. The reference locale isn't in terms of geography, it's in terms of time.
So we look around at the time frame and what do we see, next thing coming up? The TAA and three FTAs pending as soon as Congress reconvenes in September! That's the political locale in time -- from the last week of August through the first week of September after Labor Day. There's a sense of urgency.
Congress hates its 82% disapproval rating, with 14% approval. The plan is to win praise from media by trying something new -- getting along or at least looking like they're getting along. It's a delicate situation, and I would like to see it become much less delicate -- I'd like to see it more crude and rude.
The delicate situation is the uneasy deal struck between Boehner and Obama that first there will be a vote in the House on the TAA, and then votes on the three FTAs. This involves Boehner trusting the Democrats, and that's why he has been leaning publicly on Obama to help out on passing the FTAs -- because Boehner fears that after he talks enough reluctant populist House republicans into voting AYE on the TAA, then along will come enough progressive Democrats joining with populist protectionist Republicans to break up the Obama-Boehner unholy alliance and stop the three FTAs dead in their tracks.
There's a major requirement for trust involved, and Boehner, knowing that any Democrat would be a fool to trust him, is suspecting that he's a fool for trusting Obama that he (Obama) can command the necessary Democrat votes. Obama may even pull a switcheroo -- just as Boehner had all those problems with the Tea Party gang, so Obama may have no end of problems with populist progressive Democrats. The TAA demand could get bigger and bigger.
What do we think Bernanke means here? Like when he says, "Fortunately, the two goals of achieving fiscal sustainability--which is the result of responsible policies set in place for the longer term--and avoiding the creation of fiscal headwinds for the current recovery are not incompatible."
He means Republicans and Democrats in the House (the Senate already has an 'agreement to agree' in place) can and should unite behind both the TAA and the FTAs -- the FTAs being, according to conventional wisdom, "responsible policies set in place for the longer term." Similarly, a specially authorized expenditure for the TAA is exactly the kind of thing we need for "avoiding creation of fiscal headwinds for the current recovery."
In the context of all this, I read Bernanke as saying, "There's room for compromise, for everybody to get along." Which, in the temporal context, can only mean "Vote AYE on the TAA ("encourage investments in the skills of our workforce") and then vote AYE on the FTAs, of course. For the FTAs, he knows there's reaction to the patent law proposals, so he throws in "promote research and development." He's speaking code -- which is fairly easy to break in the context. "Encourage investments in skills of workforce" means we need the TAA so that the people who lose jobs can be trained to take higher paid jobs in high tech. Of course, that's a canard, but that's what this is about.
The one place where I have used the term 'Republican' is where I say "Republicans will at least claim to be successful in demanding some kind of ransom to be paid to the MNCs, as usual." I think that's true, assuming things go according to plan. They see that the Democrats are getting something they want (TAA), something maybe even unions want, something they can work with politically in their districts, so Republicans want something too. Maybe there will be enough Republicans wanting the TAA, I don't know, but Boehner won't want to be seen as so doggone reasonable that he is willing to just go along with Obama in order to get the FTAs and look like Mr. Nice Guy all of a sudden. Obama is known to want the FTAs too -- so both parties presumably will be awarded the same payoffs. But to counterbalance the TAA, what will Boehner be able to show as what Republicans got? Nothing for nothing? That's why I say about the TAA, "Republicans will at least claim to be successful in demanding some kind of ransom to be paid to the MNCs." Maybe some kind of cut in capital gains tax, maybe another round of expedited depreciation, who knows?
The flea in the ointment is mainly Ron Paul. He is almost certain to vote against the FTAs and the TAAs. Ron Paul's sometime ally, Dennis Kucinich, is lining up opposition on the Democratic side of the aisle. Probably neither Paul nor Kucinich could care less about the Obama-Boehner deal.
Anyway, my take on Republicans and Democrats on the pending TAA and three FTAs is at my comment titled "Congress -- connect the dots?" -- and on the factual side and analysis of the FTAs, you (Robert Oak) have been ahead of me all along, as indicated in your response "no one wants these FTAs beyond U.S. Chamber, MNCs".
I think that quite a few someones with a lot of money and influence do want, and expect to get, these FTAs. It's all been arranged in the Senate. The House vote will test whether Boehner and Obama can get anything done, or it's only the Super-Congress now.
If the Boehner-Obama deal can be stopped, that will be a victory for democracy and for America -- much more interesting than the way things have been going.
Freedom -- use it or lose it!
you're seeing what I am reading
I feel like traders are still stuck on Greenspan, who must speak in code for if anyone really follows him, frankly he's a complete economic idiot. He's all for wage repression, middle class destruction and lest we not forget the entire set up to create the real estate bubble and denial..
although as I recall Bernanke was in the same denial bubble.
I always link up to the actual speech, data, government agency and so on in these articles so everyone can simply read the words directly.
But we have multiple speeches by Bernanke along these lines, it's clear he is saying Congress, this administration needs to do a very directed, very specific policy modifications to stimulate the economy.
That was what was wrong with the "Stimulus", it was so loaded with political favors, loopholes and stuff that was just "spending". Well, spending is stimulative but it's not real Keynes by a long shot. Not very effective or "bang for the buck".