What Bernanke Had To Say

by: John Jansen June 03, 2008 | about stocks: UDN / UUP    

John Jansen

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

There some construction workers here at the nerve center of Across the Curve.com today and I had not paid proper heed to the markets until a few minutes ago.To thrust myself back in to the thick of things I just waded through Mr Bernanke’s morning speech.

I thought the most notable section of the speech was his comments on the dollar. The Chairman commented on the impact of rising import prices and consumer price inflation. The FOMC has taken pains to note that it is very concerned about inflationary expectations and I think it is significant that he wedded perceptions about the value of the dollar to a potential increase in inflationary expectations. It is also significant because the Fed usually genuflects in the direction of the Treasury when asked about dollar policy. This is as lengthy a commentary as I can recall anytime recently on the dollar by a Fed official.

Certainly some portion of the decline in the dollar has contributed to the jump in commodity prices and specifically the prices of oil. This might be a less than subtle attempt to fire a warning shot across the bow of commodity traders for whom there has been pretty much a one-way trade higher. Maybe, the rate of increase will slow or diminish if traders have some fear that the Federal Reserve is resuming its role as bond market vigilante.

The remainder of the speech did not break any ground. He has concerns about growth but he also has concerns about inflation. Those concerns have been duly noted in the most recent minutes and in speeches by his colleagues recently.

I think that the tenor of the speech reinforces the notion that rates will be on hold at 2.00 percent for quite some time.

Related Articles

This article has 10 comments:

  •  
    Jun 03 01:02 PM
    Ben is about at the end of his rope. Why would he stress the point of the strength of the U.S. dollar? It is the Treasury Depts. job to "manage" the strength of the greenback, NOT the Federal Reserve. Ben and crew have stepped on a lot of toes in the quest to de value it, now he is the "Great Green Hope"?
    Reply | Link to Comment
  •  
    Jun 03 01:46 PM
    My belief he is priming the market for rate increase in August. It's an election year. All of us here know at least some about the impact of government, elections and investment trends leading up to and shortly after election. Right now Main St. controls Washington's destiny and the prices of energy and food are the #1 voter issue. Sheer economics would tell me no rate increase in August and raising rates in 2009. During an election year, I believe FED will move in August. For those believing this will hurt housing recovery, the FED has no impact. Long-term rates are set by banking market forces for fixed mortgages not the FED. Right now banks are no longer continuing subprime business where ARM's are the norm. Banks are going back to save and invest economy and consumers are waiting for housing depreciation to buy based on personal income, not because the long-term rates are 5.5%
    Reply | Link to Comment
  •  
    Jun 03 02:07 PM
    Could be the Fed is expressing resignation that we will have to take the inflation ride simply. This is because the whole world is moving toward (achieved?) easy money as the medicine to avoid political hang-overs from failing employment etc?

    Congress is the bad actor here. No strategy can rein in a run away, power mad politician except public revolt. Are we there yet?
    Reply | Link to Comment
  •  
    Jun 03 02:33 PM
    iThinkBig has an interesting thesis - why not raise in August, rather than October? The outcomes are fairly "certain" as far as they can be so. Dems win huge in Congress, McCain wins, and redistributionist, foolish policies ensue. Raising rates then will not raise the ire of the incoming leftists and would bode well for him when he comes up for renomination.
    Reply | Link to Comment
  •  
    Jun 03 03:02 PM
    The main objective of Bernanke was to subtract the fear nad speculation as a result of a weak dollar to curb oil and other commoditity prices...no other reason
    Reply | Link to Comment
  •  
    Jun 03 04:17 PM
    Uhhh...If the Fed raises rates, they may as well hand out "CLOSED" signs for the banks to hang in their windows.
    Reply | Link to Comment
  •  
    Jun 03 04:24 PM
    P.S. The banks are borrowing more EVERY day now from the discount window than EVER. It's not going down, so when does this "save and invest economy" kick in? WAKE UP!
    Reply | Link to Comment
  •  
    Jun 03 11:18 PM
    Ecklebob, the save-and-invest economy kicks in right after all the banks hang out their "CLOSED" signs. When credit is cheap and plentiful, why save? I used to save, too, but with yields at 3% and prices rising at 10%, why bother? Today's savings accounts are denominated in ounces, bushels, and barrels. When the banks close or the Fed gets its head out, it'll be time to liquidate those positions and start investing again. And if Congress wants to stop people from buying commodities, everyone will just buy gold instead. If they try to stop that too, there are always foreign exchanges. They can't stop people determined to preserve their wealth from evading monetary policies determined to destroy it. The only answer is to change those policies.
    Reply | Link to Comment
  •  
    Jun 04 09:23 AM
    the irony of complaining about a weak dollar created by fed monetary policy

    talk about deflecting attention....
    Reply | Link to Comment
  •  
    Jun 04 09:32 AM
    Ben has not a clue about the dollar. It is not his job and if it were he reveals he has no real experience or understanding of the dollar problem.
    Reply | Link to Comment
More Comments on UUP ยป
Top Rated Comment Streams:

Numbers are net rating-

See all Top 100 »
More by John Jansen

Investment Resources
Money Management
Research
Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Bonds
Dollar/Currencies
Economy
Earnings