The chatter about Bernanke moving the markets is front and center on CNBC today. His moving the market started a while ago with comments he made, then took back, then was countered by various Fed governors and then supported by other Fed governors. That last sentence is confusing by design just like Bernanke's start
I think a new question is emerging. Under Greenspan, after the irrational exuberance incident he made an effort to avoid disrupting capital markets. Based on how Bernanke has started out, it seems like he does not care about roiling the market. The market was already down when he started speaking and while it is impossible to know how much his comments contributed to the further selling in the last hour, it seems like he does not care about disrupting the markets. Can this be?
That he does not understand (the Maria episode notwithstanding) seems unlikely but one concern that many people had about him (including me) was his background as an academic.
Frankly, I am still trying to form an opinion on this. I am hard-pressed to think his comments can determine where the market goes but that he could increase short-term volatility as a function of the clumsiness of being new to the job does seem to fit for now.
So much for do no harm.
Wikinvest Wire
9 comments:
While I do not believe it the case 100% of the time ( wife started private school for underpriveliged children ), I have to wonder about B's academic background. From what I have seen, things are a LOT different in the real world than they are in the classroom.
Scary.
true that
Your comment just points up the folly of having a central banker attempt to manipulate the economy and the markets. No matter how "smart" Bernanke is, there is no way that he is smarter than the collective intelligence of the market. As a result, all he can do is cause further distortions that will ultimately need to be reversed.
The Soviets attempted to run their economy from a centralized agancy - Gosplan. It didn't work and neither can the Fed as an economy manager. The Fed should stick to providing money commensurate with economic growth and leave it at that. Keynesian manipulation will cause huge problems as the resultant unserviceable debt slowly strangles the economy.
I.L.L.
While I agree with your conclusion I hope you are wrong about the Fed trying to do that.
It sure is puzzling. The surest way to cause a hard landing in the housing boom is to drive up rates. With all those adjustable rates out there, the Fed cannot want that. There must be something else.
One theory is that too much money is flowing into commodities. Unlike previous bubbles in tech stocks and real estate, where the bubbles funded consumer spending, a bubble in commodities will have the opposite effect, reducing discretionary consumers funds.
My guess is that the Fed is deliberately introducing volatility in the market to scare off investors (Hedge Funds in particular) from creating a commodity bubble.
The timing of Ben's statement, plus St Louis Fed's Poole, comes on the heels of Barron's front page bullish story on commodities.
Please note, my guesses are sometimes not very accurate, you are forewarned.
OG
that they have something in mind, yes.
that it is confusing to the markets, yes.
that they will ultimately be correct with this, ahem.
The word "stagflation" is getting thrown around. It really is the 70s again isn't it? What worked in the 70s? Commodities, gold, energy? Anything else?
the thing that really worked was trading. In the process of "going no where" from 1968 to 1982 there were some fantastic up years and catastrophic down years
Noticed FXI up today...
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