Sunday, June 22, 2008
This op-ed piece in yesterday's Wall Street Journal is the first official "Bernanke Mess" sighting that has come to my attention. Remember the rule as it has been applied to "Greenspan Mess" sightings in the past - the two words must appear within 100 words or two paragraphs of each other to qualify.
Actually, paraphrasing Dr. Peter Venkman (Billy Murray) in Ghostbusters, this is more of a "guideline" than a "rule".
Bernanke's Market WeekThe anonymous author then goes on to talk about Fed credibility for a bit - it could be a very interesting week ahead.
The Federal Reserve's Open Market Committee meets again next week, and one of its jobs will be to clean up the mess the Fed made this week.
Earlier this month, Chairman Ben Bernanke signaled a turn in Fed policy to include a focus on maintaining a "stable" dollar. Sure enough, the dollar strengthened, the price of oil fell and stocks crept up. Then earlier this week, someone in the upper reaches of the Fed began leaking to the press in advance of next week's FOMC meeting that Mr. Bernanke saw no reason to raise interest rates this month, or indeed until the autumn.
Sure enough, oil shot up and gold rose back above $900 an ounce, with equities tanking in turn on stagflation fears. Throw in renewed worries over credit problems in the banking system, and the markets had a very ugly week.
What we can't figure out is what in the world Fed officials are thinking, assuming that's even the right word...
This week's cartoon from The Economist: