Bernanke Press Conference Roundup
Federal Reserve Chairman Ben Bernanke did an unprecedented press conference yesterday. As VOA reported, Bernanke thought that stock price rises were sufficient proof that his last bout of "quantitative easing" was a boon to the nation. Others have disagreed.
So, why not QEIII then, Ben?
"The trade-offs are getting — are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It's not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we're going to have success in creating a long-run, sustainable recovery with lots of job growth, we've got to keep inflation under control. So we've got to look at both of those — both parts of the mandate as we — as we choose policy."
Why can't the Fed make my visit to the gas station more pleasant, Ben?
"There's not much that the Federal Reserve can do about gas prices per se…After all, the Fed can't create more oil."
It can create more money, though. But hey, in this Wizard of Oz show, please don't look at the inflationary machine behind the curtain when thinking about rising prices.
The Fed keeps buying more U.S. debt:
The Federal Reserve's balance sheet expanded to a record $2.695 trillion in the week ended April 27 from $2.690 trillion in the prior week, the central bank said on Thursday. The Fed continues to buy bonds to try to lower long-term interest rates….The report shows that the Fed's holdings of Treasurys rose to $1.413 trillion from $1.402 trillion in the previous week.
Ron Paul was not impressed:
When it comes to prices, it's never their fault. I mean, how many different things did he mention about why prices go up, why we have inflation? He never admits it's the inflation of the money supply that's the problem.
When he was asked about the dollar, he said, "Well you know, the person in charge for the value of the dollar is the secretary of the Treasury." Well, Bernanke can triple the money supply, and then he wants to duck the issue that he's responsible.
He says, "Our position is a strong dollar" … with constant devaluation, even while he spoke it was devaluing. Against gold, it went down 1.5%. It doesn't make any sense.
Bill Flax at Forbes calls Bernanke an "honest politician" in the worst sense:
Bernanke assures that the Fed can seamlessly unwind its unprecedented balance sheet expansion. As proficiently as Washington depletes other's balance sheets, it's doubtful they can efficiently navigate such treacherous rapids. Nobody could conceivably track the almost infinite variables muddling our floating fiat monetary policy.
A notoriously corrupt member of Lincoln's cabinet once quipped, "An honest politician is one who, when he is bought, will stay bought." Bernanke reduced the Fed to a political appendage. To secure re-confirmation, he struck a bargain with Senate Majority Leader Harry Reid. While manning the monetary policy dials, Bernanke agreed to forgo impartiality and err on the side of accepting inflation rather than risk upsetting the recovery.
Yesterday we learned Ben Bernanke will stay bought.
The Fed will "continue expanding its holdings of securities," i.e. it accepts inflation and will print more dollars; it will continue "reinvesting principal payments," i.e. it plans to maintain its bloated balance sheet; and interest rates will remain at "exceptionally low levels for . . . an extended period."
Bernanke plans three more press conferences this year.
Computer traders wondered how to quantify his blatherings to make a buck in real time.
In unrelated news, gold went up $20.20 yesterday (and another $9.20 today), and silver up $2.10 yesterday (and another .70 today).
A pre-opinion on Bernanke's performance, from China: tired of dollars.
And a "word cloud" of the speech. Appropriately, the looming specter is "inflation."