Wednesday, May 27, 2009

Between a rock...

Poor Ben Bernanke! On April 14, 2009, he gave a speech stating that the Fed was well aware of inflationary concerns and was ready to act upon them at the appropriate time:

I can assure you that monetary policy makers are fully committed to acting as needed to withdraw on a timely basis the extraordinary support now being provided to the economy, and we are confident in our ability to do so.

On one hand, Tyler Durden at ZeroHedge is wondering about how the Fed may have to further expand its balance sheet to accommodate the pace of Treasury and Agency issuance.

On the other hand, John Taylor (of Taylor Rule fame) has voiced concerns over rising government debt. Scott Grannis at Calafia Beach Pundit is wondering if the Fed should *gasp* tighten as the steepness of the yield curve is signaling rising inflationary expectations.

We are all watching you, Ben
This video, which circulated at the time of Bernanke’s appointment, was hilarious at the time. Now, it doesn’t seem that funny anymore (though it’s unclear who would have done a significantly better job as the Fed chair).

Whatever the Fed does, the market isn’t going like the results. These circumstances can’t be bullish for equities.


Morph366 said...

There is terminology for the no-win situation you have described in your last sentence from the field of psychiatry - double bind.

A double bind is... a situation in which successfully responding to one message means failing with the other and vice versa , so that the person will be automatically wrong regardless of response.

People (Markets) confronted with communications that are of this nature are prone to behave in an abnormal and potentially pathological manner.

A manic-depressive market is probably the appropriate response to such a deeply conflicted policy.

Unknown said...
This comment has been removed by the author.
Unknown said...
This comment has been removed by a blog administrator.
Anonymous said...
This comment has been removed by a blog administrator.
FeirFactor said...

That's great! I hadn't seen that before. LOL