“It’s an up, down, serious, slowing, manageable but growing mess….so probably we won’t help any more”
I always used to think that Alan Greenspan took the biscuit when it came to confusing people. But with Al, it was the twisted-syntax management babble that gave us all so much trouble. Ben Bernanke yesterday unveiled his own media technique: the stream of contradiction.
When The Slog went to bed last night after penning a post-FOMC press release memo, it was very much being billed by the ‘trade’ media sites as ‘things are OK, bit worried about inflation, no decision on when to withdraw QE2’. We all came to that conclusion because, hell – that’s what the press release said. But as I suspected last week, Ben chose to differ from the consensus.
The BBC called Ben’s press conference ‘unmemorable’, a remarkably polite way of saying that it bamboozled pretty much everyone with an analytical dimension to their personality. Beeb politeness turned to generosity as the site continued, ‘that’s just as Mr Bernanke would have wanted’. The FT editorialises similarly this morning with the suggestion that Ben offered, ‘….the Federal Open Market Committee’s collective view (or what [Bernanke] deems it to be) as against the sometimes divergent opinions of its members’. And the press release. Don’t forget the press release.
But for the UK financial media as a whole, it was soon ‘don’t mention the press release’. Then, after more thought, ‘and don’t mention the falling growth forecast alongside the end of QE2 in June’. And finally, ‘don’t mention the continuation of Zirp alongside a doubled US inflation outlook’.
The specialist financial media pull this kind of stuff because they have fallen into the worst trap that can snare any journalist: pretending to understand, by agreeing. There are still very few mainstream titles prepared to come out and call a spade a spade. We all know what spades do: they dig holes. Last night, Mr Bernanke dug the hole slightly deeper, but hinted that he’d start refilling it one day soon. Once he could find some soil.
The Slog called the June end to QE2 earlier than most, but this was based solely on an observation of the changing complexion and opinions of the FOMC members. My hunch now is that Bernanke will do what he and Geithner pulled after QE1: secretly continue to buy seriously toxic crap that the banks want rid of, but just not quite so much of it as before. ‘The Fed has chosen an interesting time to start news conferences. But the news here was more in the fact it happened than in anything that was said,’ opines the New York Times this morning. I think that nails it pretty well.
So let me draw together the strands of Fed strategy ‘going forward’ – if I can use that phrase with any confidence. Ben Bernanke told us he was sure the US would return to its heyday of growth, but it faced a serious debt problem. Both QE’s have of course made that debt worse, as well as devaluing the Dollar. He hinted that QE2 would end within eight weeks, despite falling economic growth. He reaffirmed the lack of need to tighten things fiscally, despite a doubling rate of inflation. He offered no solution to the obvious evidence of sluggish job-creation, the rapidly rising rate of property repossession, and the latest data showing that house prices continue to fall.
Despite recent talk of the UK and US having divergent strategies for dealing with the coming catastrophe, the reality is that it would be hard to get a Dollar bill between where Ben Bernanke and Mervyn King are as of this morning. No more QE, no real signs of a turn-round, no sign empirically of real cuts in central expenditure, and a tendency to say, behind their hands, “It’s all the legislators’ fault really.”
But here’s the really good bit: Ben’s impenetrable logic was given a thumbs-up by the markets, with the Dow Jones index closing up 95.6 points, or 0.8%, to 12,690.96. The Hang Seng was also up 0.4%, and the FTSE rose 0.3% in early trading, back over the 6000 mark again. Such is the attraction of free money.
And to complete the wobbling, elliptical U-bend of surreality, Gold is still forging ahead at $1530. Thank goodness some people can tell poo from putty.