Wikinvest Wire

Some "tough love" from Ben Bernanke

Tuesday, September 16, 2008

Well, it seems as though Fed Chief Ben Bernanke has "grown a pair" over the last six months, today's FOMC meeting having come and gone with nary a hint of coddling for financial markets - that is, financial markets that many feel are in the middle of a global meltdown and in dire need of rescuing.

The last two policy statements, shown side-by-side below, acknowledge the recent developments (e.g., the nationalization of $5 trillion in mortgage debt, the demise of Lehman, Merrill, and, soon, AIG) but fail to provide any shift toward easing, let alone a half-point rate cut as some were expecting.
IMAGEThe characterization of the financial market conditions changed from "under considerable stress" in August to the strains having "increased significantly".

Almost as if, nothing's really changed.

This was a bold move - one that hopefully won't backfire.

Recall that "tough love" was also offered up about a year ago last summer, only to be withdrawn in favor of coddling a short time later.

If short-term rates weren't already at the freakishly low level of two percent, one might say that, "This is central banking the way it's supposed to be done."

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Anonymous said...

Bill Gross just called the wording on inflation "other worldly" given all the asset deflation going on.

Anonymous said...

Bernanke is just saving his ammo because he knows that there is more to come.

fish said...

That Bernanke has "Grown a pair" is far too charitable. In holding interest rates constant he is much more like a man who has stepped on a landmine that will detonate when he removes his foot......Benny doesn't dare move! Shedlock referred to it as "Zugzwang" the position where any move or action taken only further degrades ones position .

Tell me again why he wanted this job......?

Tim said...

Tell me again why he wanted this job......?
I've long thought it was either hubris or naïveté - I'm pretty sure it's the latter.

Anonymous said...

If he was smart enough to know what he was getting into, he would have been the right person for the job but then he wouldn't have taken it would he ?

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