With dissension in the ranks growing, the dovish bent for central bank policy was saved late last week by New York Fed President William “You Can’t Eat iPads” Dudely after Fed head James Bullard started talking about pulling up short on QE2 and then Narayana Kocherlakota said it might be better to raise interest rates sooner, rather than later.
Fed Chairman Ben Bernanke was no doubt watching all of this and is now probably forced to consult his Fed Hawk-O-Meter more often than usual as he gets ready for his first post-FOMC press conference later this month. Here’s what things might have sounded like if that press conference had been conducted on Friday, at least the version offered up by Dave Cohen over at Decline of the Empire.
An unusually relaxed Ben Bernanke waved off fellow FOMC members Bill Dudley and Janet Yellen today to talk to the assembled press. Fed policy remained unchanged after the meeting, but the Chairman seemed eager to talk.
“Still printing money and accommodating the banks, folks,” Mr. Bernanke led off, “still blowing bubbles. I’ll take any and all questions.”
The Chairman had no trouble believing that higher energy and food prices were punishing Americans, but had previously denied that Fed policy was responsible for the price increases. He was singing a different tune today.
“Oil prices? Food prices? If you’re printing money and trashing the dollar like we’re doing, and you give speculators a big bunch of those new greenbacks to play with, they’re gonna’ do what gamblers do—jack up the price of everything! Oil, corn, gold—you name it. No surprise there.”
Bernanke continued. “A fiat money system? With fractional reserve lending? You gotta’ love it! I mean, I still can’t believe those Arabs give us their precious oil for our worthless paper. But nothing happens without a credible threat of inflation. That’s our view.”
The Fed chief’s last comment was “I am the invisible hand!”, a statement that, like a lot of other things associated with the Fed, would be much funnier if it weren’t true.