Monday, June 27, 2011

Economic confusion - we are not alone

We wonder about the economy in a way that has become a national obsession. Are we just on a plateau with little clear direction, is there a cliff just beyond the sightline, or are we just catching our breath before making the next climb.

Do we wish that economics had been our course of study years ago? Do we hope that a trusted friend, smart relative, Bill Gross, or Warren Buffett will enlighten us? Do we waste our days listening to people with nothing more important to do than blather their time filling thoughts on CNBC, hanging on every word and changing our minds every 15 minutes? Do we miss Dylan Ratigan who didn't even pretend to have any idea what he was talking about? Well, at least we still have that Brit guy named Simon in the mid-morning who makes no sense at all.

We are certainly not to be criticized for hoping for answers and looking for guidance. Unfortunately there is none to speak of, so I guess fortunately we cannot consider ourselves alone.

After the Fed's two days of meetings this past week, I quote from Chairman Bernanke's public comments including some NYT synthesis.
---"We don't have a precise read on why this slower pace of growth is persisting. Some of the headwinds that have been concerning us, like the weakness in the financial sector, problems in the housing sector, balance sheet and deleveraging issues, may be stronger and more persistent than we thought."

Headwinds on the plateau but no way to measure them and no way to construct a consistent paragraph that says anything beyond what a smart sixth grader might know.

---"The Fed's policy board voted unanimously to maintain its two year commitment to hold a benchmark interest rate near zero 'for an extended period of time'. Mr. Bernanke said the language meant that it would not raise interest rates for 'at least two or three meetings'. Economists consider it likely that the central bank will hold interest rates near zero well into next year."

So as we sit waiting for some direction or insight, the government keeps robbing the elderly and all others on fixed incomes and penalizes savers at a time when they are at the same time they are blaming excessive borrowing for our woes.

---"Mr. Bernanke renewed his warning that short term cuts in government spending could retard growth, while at the same time urging a long-term deficit reduction plan, which he said could spur short term growth."

Say that again please. There was an old time Texas banker, a successful one, who often said "the long term is just a series of short terms".

This is not meant to belittle Bernanke and his serious attempts to deal with a difficult situation. He has made some tough decisions. The comments quoted here may well be the best that are possible at the moment. Unfortunately they reassure no one, and could be seen by some as having somewhat of a patronizing tone.


Anonymous kf said...

No choice but to stay in the game, even add at times and be opportunistic. That I do. Wish I was smart enough to part with some winning positions that I become too attached to, and then they retreat, still winners but not likely to get back to their highs anytime soon.

One rule here - by the time Jim Cramer, CNBC, Barrons, or the NYT mention a stock as a buy, it's already over - if statistics were kept on that my guess is that 80% of the time this statement is true.

2:41 PM  
Anonymous Anonymous said...

You should remember that Bernanke's public commments are primarily directed to Congress, whether directly addressed to them or read by their aides. Many members of Congress are illiterates in economics without question, and of course many other disciplines as well. Bernanke must take the greatest care with every word, and say less rather than more whenever possible.

Unlike his predecessor Greenspan he does not try to impress with cryptic academic and philosophical references, he does not make an effort to as opaque as possible, and he does not present himself as OZ.

You say he has made some "tough decisions" and that's right, and he has also made many correct decisions that his independence at the Fed allows him to make and take the abuse for later.

He's really an exceptional Fed Chairman if you rationally consider the incredibly challenging period of his tenure.

12:03 PM  

Post a Comment

<< Home