Old Trader's  Instablog

I seem to recall, way back when Bernanke was appointed the head of the Fed, a promise to speak clearly. I well recall the "good old days", when economists, analysts, and various financial pundits would agonize over every word Greenspan uttered...nay...even probably agonized over every punctuation mark in written transcripts of his utterances, in an effort to discern exactly what he meant, and his intentions, as well as his famous (infamous?) remark about if the listener understands him, he's not being obscure enough. Maybe its me, but either Ben isn't speaking clearly enough, or else old habits die hard, and the various scribes of Mammon torture and tease every Fed statement in their efforts to discern what the future may hold.

One thing I will grant Ben, is that he's holding the Fed governors on much looser leashes; allowing them to comment on a fairly regular basis, unlike back when Alan was calling the plays. I'd say that listening to what their thoughts might be would likely be more fruitful, in terms of predicting which way the Fed might be leaning.

But of greater import, is the continuation of "easy money" policy. Even ol' Alan has finally 'fessed up (albeit reluctantly) that he might have been a tad too lenient with the country's purse. I'm not completely certain that "this time is different", in terms of the degree of distress in the economy. After all, the LTCM debacle arguably posed a comparable amount of systemic risk, in terms of large financial firms collapsing like a house of cards on a windy day. Government intervention, while preventing the collapse, ended up coming back to bite us in the butt. It looks like Ben is so wrapped up in studying the Great Depression, he might well be ignoring more recent examples of events and remedies, which might be equally illuminating.

I find myself wondering if, in the near term...like within the next few months, a .25% rate hike wouldn't a timely "shot across the bow", as far as showing everybody that the Fed has no intention allowing wholesale reflation of asset bubbles to occur. And I'd guess it would do more to support the dollar than a month of Sundays worth of Timmy's jawboning about a "strong dollar". I realize that it would, at least initially, knock the props out from under the market, the price of gold, and the price of oil, but I don't think that .25% would do anything to actually delay the arrival of any REAL recovery of our economy.