Is it only me, or does the whole global financial crisis seem like we have fallen down a rabbit hole and are sliding through a curious hall with lots of locked doors in many sizes?
According to Bernanke’s testimony to Congress last Thursday, the Federal Reserve “stands ready to act to protect the financial system and the economy in the event that stresses from the European crisis escalate.”, yet he failed to describe what acts they may take.
“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely,” Bernanke said in testimony prepared for delivery to the Joint Economic Committee of Congress. Monitored closely?
“Action is needed to stabilize euro-area banks, calm market fears about sovereign finances, set in place a workable fiscal framework and lay the foundation for long-term growth,” Bernanke added, but failed to mention how anyone might go about doing that.
The Fed chief’s testimony was largely in line with expectations. Central-bank watchers did not expect Bernanke to show his hand about what the Fed might do at its next policy meeting. Ah, we wait for the next “policy” meeting. Apparently, as long as Bernanke never actually discusses policy, and only what the Fed is ready to do, then the markets will stay relaxed and avoid panic. Sort of like finding Alice’s “DRINK ME” bottle.
“Based on these comments, we do not believe the FOMC has made up its mind about the need for further stimulus,” said Michael Gapen, a senior U.S. economist at Barclays Capital. Yes, they’re still thinking, I guess.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said Bernanke only promised to act “if the sky falls.” That will be really great timing. God forbid we should act to actually prevent anything. I mean, are you KIDDING me?
Financial-market stress due to Europe and concerns about the loss of momentum in the U.S. economy has raised expectations that the Fed would do more to stimulate the economy. Last week, several key Fed officials said they were open to more easing if warranted. Nice. They’re open to it.
In his discussion of the domestic economy, Bernanke stuck to his April forecast that growth will continue at a moderate pace. He said the recovery had been bolstered by consumer spending, as consumers had more money to spend given the drop in gasoline prices. OK, average consumer drives 80 miles a week. Average car gets 22 mpg. Average price of gas is now $2.95. Average price was $3.45. Savings of $8/month. And, THIS is the “more money” consumers now have to spend?
Business caution continued to restrain the economy, he noted. That is Fed code for: austerity at the corporate level (not spending and no credit) is KILLING this country.
Bernanke suggested some of the apparent slowing in economic data, including last Friday’s weak jobs number, might be due to unusually warm weather this past winter, which may have brought forward some activity. Ah yes, it must be the weather. Couldn’t be because corporations are squeezing unprecedented productivity out of workers who are now doing two jobs instead of one? And, these are captive workers who have no other jobs to go to.
Bernanke also again called on Congress to set in place a sustainable fiscal policy. He said the severe fiscal tightening that will occur at the beginning of next year unless Congress acts — the so-called ‘fiscal cliff’ — would pose “a significant threat to the recovery” if allowed to occur. And …. ????
And then, he ate two more of those funny mushrooms that have been circulating through Washington this week, and wandered back down to the Eccles building to search for that “mad” tea party and the March Hare. I guess.