Bernanke to Come Clean Thursday

Even Saint Louis Fed President Poole said Wednesday if you want to know what the Fed is going to do pay attention to what the Chairman says.  Well this Chairman is no Greenspan and no Volcker.  He is earning a reputation of one whose actions speak louder than his words.  But he may also be learning that language, beyond simply the FOMC statement, is as an important policy tool as the Fed funds rate. 

Even Saint Louis Fed President Poole said Wednesday if you want to know what the Fed is going to do pay attention to what the Chairman says.  Well this Chairman is no Greenspan and no Volcker.  He is earning a reputation of one whose actions speak louder than his words.  But he may also be learning that language, beyond simply the FOMC statement, is as an important policy tool as the Fed funds rate.  

 

There is no better way for a Chairman to garner respect for his/her spoken word than by moving a market with a speech.  So today is Bernanke’s trial by fire.  Markets are groping for leadership from the Fed and tired of being told the outlook is too uncertain for the Fed to have a fixed idea of what to do.  He and his colleagues get paid to know what to do when the outlook is unclear, even at the risk of getting it wrong.  

 

Bernanke needs to come clean Thursday and signal markets that a risk of recession is larger now than at any time since 2000 and the Fed is ready to respond in a significant fashion – hint hint cutting half a percentage point January31.  For those inflationphobes he can also make it clear (again) that if the Fed’s call on a hard landing is proven wrong, full reverse is an option in due course that can weed out inflation before it has a chance to root.  

 

If I am right about Bernanke today, he will no longer be known as Helicopter Ben but B-1 Bomber Ben.  The NY Times editorial Thursday said that the Fed has done all it can do because the housing market/credit crunch is more or less Fed-fund immune…it is time for Fiscal stimulus.  Trust me that the Fed has a near full payload of money supply bombs to drop ahead.  It is time B-1 Ben alerts markets that the bombing mission starts January 31. 

David Gilmore

Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More