“Something happened in mid-December.”
It sounds like the subtitle for a horror movie. In fact, it was a crucial quote in a rather bullish economic forecast delivered today by a former Federal Reserve chairman.
While the current chairman of the U.S. central bank, Ben Bernanke, talked to senators at a hearing and was even-handed in his outlook for the economy and offered no real surprises, his predecessor, Alan Greenspan, adopted the role of U.S. stock market bull.
It was just about a full year ago that the President of the U.S. stood in front of television cameras and referred to the “tall guy behind me.”
The tall guy was Paul Volcker, that day near the crest of a remarkable political renaissance that saw the “Volcker rule” go from Volcker’s seemingly singular quest to official Obama administration policy. Eventually, it became a still controversial part of financial regulatory reform.
The “Volcker rule” bars commercial banks from engaging in certain types of proprietary trading. Volcker’s simple point: banks shouldn’t be taking big risks when their deposits carry government insurance. If they want to trade for their own accounts, they should stop being banks or spin off the units that do the trading.
The news today is that Volcker, now 83, is going to leave his role as head of the President’s Economic Recovery Advisory Board.
Mark your calendar. Federal Reserve Chairman Ben Bernanke will take questions from reporters in Washington on Feb. 3.
When the subject of a possible Bernanke press conferences was first raised – when minutes of an Oct. 15 Fed video conference were released – we applauded. We applaud even more now that it’s been decided that a press conference with teh Fed chairman will actually take place.
The best way for the Fed to counter the notion of critics that it’s an opaque institution with enormous power somehow out of synch in a democracy is to allow as much public exposure as possible.
Bernanke has shown himself adept in a variety of public settings. Look for him to steadfastly defend the Fed’s decision to embark on a $600 billion Treasury bond buying escapade to supplement the stimulative effect of two years of zero short-term interest rates.
In the October video conference, Fed officials discussed the possibility of occasional Bernanke press conferences. We think the more the merrier.
Watch the money supply.
That much-neglected-in-recent-years indicator of economic activity might come at least temporarily back into vogue as a way to gauge what the Federal Reserve thinks of the pace of progress of the U.S. economy.
That’s a bit of tea leaf reading from the minutes of the Dec. 14 meeting of the Federal Reserve’s policy setting Open Market Committee, released today after the usual lag. Before we delve further and broaden out the concept above with a quote from the minutes, we’ll make this assertion:
In the 1950s, the reknowned Nat King Cole sang a song called “Unforgettable.” For the U.S. economy, 2010 was the opposite, most forgettable.
Oh sure, a lot happened. But who remembers mile 18 in a 40-mile forced march? That’s if 2010 did represent mile 18. Maybe it was mile 23. It wasn’t mile 37.
Back near the start of 2010, Obama economic aide Larry Summers properly described the U.S. economy, calling it a “statistical recovery and a human recession.” The phrase outlasts Summers, who just left the employ of the administration.
All we need are jobs.
The U.S. economy, as described by the U.S. Federal Reserve and based on incoming data such as mildly encouraging holiday shopping to date, is doing all right. There is growth. The haves (those with jobs) are a bit more confident they will stay employed and are therefore spending more.
The have nots without jobs remain in too high numbers.
This time, the jab at the Federal Reserve comes from the Congressional left.
So it goes these days for the U.S. central bank, which, as we have noted, finds itself more centrally located in the political maelstrom than at any time in the past two decades.
For weeks, conservative Congressional Republicans, unhappy with the Fed’s plan to stimulate the economy by buying $600 billion of U.S. Treasurys, have been firing away. Now, the Senate’s lone socialist. Sen. Bernie Sanders, a Vermont independent, takes a turn.
Federal Reserve Chairman Ben Bernanke made clear he is ready for prime time.
In a presumed effort to counter critics of the U.S. central bank’s $600 billion Treasury bond buying plan to spur the economy, Bernanke took to the airwaves via a Sunday broadcast interview on the popular CBS news program 60 Minutes. Fed chairmen of an earlier generation would be shocked at the straight forwardness of it all, though leaders like to talk on television because they feel they can get their points more directly across.
Bernanke didn’t break any big news on 60 minutes, but that wasn’t the point.
When people talk about the U.S. Federal Reserve, or when central bankers talk about themselves, it’s instructive how often the word ‘effectively’ comes up. Effectively, as in virtually, but not official nor completely spelled out.
The Fed has no official target for where it wants the U.S. inflation rate, but effectively it’s around 2% or a bit below that.
The Fed officially has a dual mandate for price stability and to promote maximum, sustainable economic growth and employment. But, effectively, its goal – like that of other central banks – is to maintain price stability. Presumably, economic growth will flow from an environment of stable prices and expectations for modest future inflation.
A socialist U.S. senator and a central banker issued very separate critiques of the U.S. banking system, but in their own ways they both question the interconnectedness of the big-time, global financial system.
The seemingly odd couple consists of Sen. Bernie Sanders, the independent from Vermont, who was much in media demand on Wednesday, since he was key to forcing the Federal Reserve to reveal the names of the recipients of the Fed’s loan largesse during the dark days of the financial crisis. The other is Thomas M. Hoenig, the president of the Federal Reserve Bank of Kansas City and a lone, serial dissenter from the super-easy monetary policies of the U.S. central bank.
Both implicitly were praising a bygone time, when national politics and policies were not so out of sync with the fully global and totally tangled nature of the financial services world. It’s an open question whether U.S. decisions alone can challenge that structure and leave a vibrant financial services industry in its wake.
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