Bernanke Isn’t Finished Cutting - By a Longshot

Bernanke could have made his Humphrey Hawkins testimony Wednesday before Congress simple by showing them this chart:

click to enlarge

Ever had a puppy that somehow got away from the leash? You know how every time you approached it to try to reattach the leash, it thought you were playing a game of “chase” and ran away? Well, the bond market is the puppy and the Fed is the frustrated pet owner. The poor Fed has been running around its lawn, dressed in nothing more than pajamas for almost two years in a futile effort to corral an errant (but cute) bond market.

Their next meeting is scheduled for March 18, less than a month away, and frankly this is getting ridiculous. They should just bite the bullet and do something to get in front of the bond market. This clumsy chase is undignified for such a hallowed committee of out of shape economists.

Bernanke is in a tough spot: control inflation or stoke growth to prevent a recession? He’s clearly ignoring inflation right now (and the emaciated dollar) for a full onslaught against the deepening recession. The only thing Bernanke can offer to mollify those pulling their hair out at the sight of inflation is that he’s keeping a lazy eye on it.

“The FOMC will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks”

The man is after my (financial) heart. I just wish he’d moved sooner and cut deeper.

Comments

[Robster:]

Are you long stocks then? Not a bad if simplistic analogy.

2008 Feb 28 10:18 AM

[Tom B:]

I wish Ben had a tenth as much concern for my increasingly worthless dollars as he seems to have for bailing out stupid builders who shouldn't have overstretched in the first place.

Can the Fed be impeached?

2008 Feb 28 11:11 AM

[vodka_tonic:]

i wish you had explained your chart more. why the spread and is it always like that?

2008 Feb 28 02:11 PM

[vboring:]

if they could just throw that whole "dual responsibility" thing out the window, we'd all be great, right?

just push the reserve rate to 0% and watch the economy perpetually blossom, just like it has been in Japan for 20 years now.

jackass.

some of us work for a living and get paid with these increasingly worthless dollars.

2008 Feb 28 02:46 PM