Fed Chairment Bernanke spoke yesterday at that Economic Club of Minneapolis. In his speech he recapped the financial crisis that has gripped the economy going back to 2008. While he did reinforce his belief that the recovery and end to the recession began back in June of 2009, he also disappointingly stated that "it is clear that the recovery from the crisis has been much less robust than we had hoped." Most notably is his remark that "The pattern of sluggish economic growth was particularly evident in the
first half of this year, with real gross domestic product (GDP)
estimated to have increased at an annual rate of less than 1 percent, on
average, in the first and second quarters."
Bernanke then proceeds in his speech to list various reasons for why the economy is so sluggish and explains the major headwinds that are apt to lead to even further slowness including fiscal drag and general uncertainty over Federal policy and taxes. Then he goes on to dismiss inflation as any threat in the near term, and by the time he is 4/5ths through his speech he has completely cleared the way for the Federal Reserve to take greater actions in order to focus on the other of its two mandates, "full employment." This is clear in the closing sentence of his speech, "The Federal Reserve will certainly do all that it can to help restore
high rates of growth and employment in a context of price stability."
You know what I got from his speech? A whole lot of nothing! (Or, maybe something much worse!) I didn't need a history or an economics lesson. Or, are we supposed to feel more confident because Bernanke can outline the series of events and issues so succinctly? If so, it didn't work for me at least and I don't think the market felt any sense of relief either. Frankly, knowing how we got here is a lot different than knowing where we are heading or what to do next!! Besides, the situation today is long past needing "Fed Speak" as way to address the many severe depressionary challenges the world faces!
Bernanke ... take a page from Christine Lagarde, the new Managing Director of the International Monetary
Fund, who warned today that the global economy is entering a "dangerous new phase" and that "as time goes by, there's a danger of (the economy) getting worse rather than better." Lagarde is pretty straight about the fact that "The world is collectively suffering from a crisis of confidence, in the
face of a deteriorating economic outlook and rising concerns about the
health of sovereigns and banks." It sure seems that Lagarde sees the need for "strong action and even refers to more action to support the recovery, including through unconventional measures."
I am beginning to sense fear in Bernanke of late. There appears to be a reluctance to take real action and to lean impotently on the power of speech. What's more, it is troubling to think that Bernanke's expressed surprise over the consumers' behavior are indicative of a Fed Chairmen who is confused and has lost self-confidence. For heavens sake Ben, do NOT lose your nerve now!!! This is NO TIME for you to be timid, let alone fearful of how your outspoken critics will respond to your decisions. With Obama and all of congress locked in all out political battle, and practically unable to tie their shoes, we need the one person on the planet who can take meaningful, albeit controversial, actions to move the economy forward to do so. Be bold Ben Bernanke. To quote a famous phrase used by the last man to face the challenge of a depression and a world war, "We have nothing to fear but fear itself!"
There is way too much inaction or negative action going on around the world when it comes to getting the USA and European economies on an upward trajectory! We need bold moves by the monetary powers around the world while we still have an economy that can be stimulated! And we need those actions put forth in a strong, confident, and collective voice! NOW!!!
