Jackson Hole

[rffrydr]

As a repost, it's well to remember that this escape to the timelessness of the far west, this distance above man and markets to see clearly, is where modern monetary policy is "delivered from on high." Where did that come from? The richest of the rich and the biggest "unprofitable" investment he ever made--an investment in his country and its future, Jackson Hole.



http://www.pbs.org/nationalparks/history/ep4/
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

And, on cue, appears a dove:

http://video.cnbc.com/gallery/?video=3000042403
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

http://www.bloomberg.com/news/2011-08-29/bernanke-turns-timid-in-krugman-view-of-princeton-colleagues-eyeing-japan.html

[rffrydr]

(Sun Valley) The ditzy chick gets Buffett to reveal just how optimistic he is:

http://www.bloomberg.com/video/72153912/
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

The presentations:

http://ftalphaville.ft.com/blog/2011/08/29/663971/the-jackson-hole-papers/



We are becoming a nation of the sick and sicker:

[rffrydr]

Brings back memories of my old semiotics lectures.




http://www.cnbc.com/id/44304045
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Lagarde gets center stage while Trichet leans back on his laurels:

[rffrydr]

After watching B. beholden to Congressional testimony these past few years I've seen him really come into his own sense of power--and that feeding back into new and necessary roughshod ways in the FED meetings.

In a reversal fate demands, Congress now needs the FED and I can easily imagine him fantasizing they come begging. Of course we still come first. But, sharing the FED's outlook on the economy, I look for him to keep the stimulus to conjectures until after the election. Remember QEII is not dead.

"Transparency" a la the dollar window and capital charges on panicked deposits need some housekeeping.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Sounds like a great speech and Fed policy at this point. I'll comment more about it in this weekend's commentary.
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Bernanke Blames Politics for Financial Upheaval

JACKSON HOLE, Wyo._ — The Federal Reserve chairman, Ben S. Bernanke, said Friday that the political battle this summer over the federal government’s borrowing and spending had disrupted financial markets “and probably the economy as well.”

In remarks that went well beyond his previous calls for Congress and the White House to address the nation’s long-term fiscal challenges, Mr. Bernanke suggested the process itself was broken.

“The country would be well served by a better process for making fiscal decisions,” he said.

Mr. Bernanke said he was “optimistic” about the long-run prospects for the American economy, and he gave little indication the Fed was mulling any increase in its economic aid programs, although he said the issue would be revisited in September.

But Mr. Bernanke, the nation’s most prominent economist, warned that the government had emerged as perhaps the greatest threat to renewed growth.

“The quality of economic policy-making in the United States will heavily influence the nation’s long-term prospects,” Mr. Bernanke said in the much-anticipated speech at a policy conference held each August at a resort in Grand Teton National Park.

The turn toward stronger language was welcomed by some observers of partisan battles in Washington that have pitted Republicans demanding spending cuts to reduce the federal debt against Democrats arguing for cuts and increased revenue.

A deal reached earlier this month to raise the maximum amount the government can borrow, in exchange for spending cuts of at least $2.1 trillion, would not reduce the debt to a level most economists regard as sustainable, and the chaotic political brinksmanship led Standard & Poor’s to remove long-term Treasury securities from its list of risk-free investments.

Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget, described Mr. Bernanke’s remarks as “an emergency intervention.”

“It was great to hear him weigh in so strongly,” said Ms. MacGuineas. “He’s saying what needs to be said, and hopefully people will listen because of the messenger.”

Mr. Bernanke’s speech comes on the heels of the Fed’s announcement earlier this month that it intends to hold short-term interest rates near zero until at least the middle of 2013, a reflection of its view that growth will not be fast enough during that period to drive up wages and prices.

Many investors had viewed that announcement as merely the opening of a new round of efforts by the Fed to bolster an economy that once again is struggling to grow. The government said Friday that it now estimated the economy expanded at an annual pace of just 1 percent in the second quarter, down from its initial estimate of a 1.3 percent annual pace.

Friday’s speech was eagerly anticipated because Mr. Bernanke and his predecessors have made a habit of coming to this conference, hosted by the Federal Reserve Bank of Kansas City, to clarify their views on the economy and monetary policy.

Last year, Mr. Bernanke used his remarks here to provide the first substantial indication that the Fed intended to renew its economic aid campaign. The central bank went on to buy $600 billion in Treasury securities between November and June, increasing its total portfolio of Treasuries and mortgage securities to more than $2.5 trillion.

This year, Mr. Bernanke noted that the nation faces significant challenges, including huge amount of unemployment and an unsustainable federal debt. But the speech marked a return to the Fed’s position earlier this year that it has largely exhausted the power of monetary policy and that the rest of government must do more through fiscal policy.

“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” Mr. Bernanke said.

While offering his standard disclaimer that the Fed would take any steps necessary to help the economy, he notably omitted any description of possible measures. He did say, however, that a scheduled meeting of the Fed’s policy-making committee in late September would be extended to two days from one day “to allow a fuller discussion.”

Instead of detailing options, Mr. Bernanke focused on fiscal policy. He reiterated his frequent call for fiscal reforms that focus on long-term reductions in the federal debt, while avoiding short-term cuts or tax increases that might impede recovery. He also said the government could help to speed recovery through steps that include “good, proactive housing policy.”

“Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if — and I stress if — our country takes the necessary steps to secure that outcome,” he said.

Mr. Bernanke elaborate only briefly on his suggestion for a different process to address these issues, suggesting that politicians should consider the establishment of “clear and transparent budget goals, together with budget mechanisms to establish the credibility of these goals.”

The sharp words on fiscal policy contrasted with Mr. Bernanke’s cautious tone on monetary policy. The Fed remains engaged in an unprecedented effort to stimulate growth through low interest rates and the vast portfolio of assets it has accumulated since the 2008 financial crisis. But Mr. Bernanke and other policy makers sound resigned that 25 million Americans cannot find full-time work, describing it as a problem that will take years to resolve.

The Fed is constrained by the intensity of political opposition to the actions it has taken already. The central bank has become a popular punching bag in the early stages of the Republican presidential primary. Mr. Bernanke opened the conference Thursday night with a brief speech, during which he mentioned that he had attended a rodeo with his wife earlier this week. The announcer, he said, asked the crowd to sing the national anthem even though many of them were angry about decisions made by people in Washington.

The Fed’s deliberations also reflect the reality that monetary policy exerts only a gradual influence on economic activity, so that central bankers must keep their eyes on the horizon. As the Fed believes that the pace of growth will increase, by the time a new round of stimulus would be felt, it might no longer be needed – and indeed could result in faster inflation.

The central bank aims to keep the pace of wage and price increases at a steady rate of about 2 percent a year. Inflation has climbed more quickly this year, but Mr. Bernanke reiterated Friday that the Fed expects inflation to “settle” at levels at or below 2 percent in coming quarters. That, however, means the Fed sees relatively limited room for additional stimulus. Three members of the policy-making committee dissented from the August decision to maintain rates near zero for two years because of concerns about inflation, the largest bloc of Fed dissent in two decades.

A growing chorus of economists argues that the Fed should allow higher inflation. Some say that the central bank should tolerate higher inflation to reduce unemployment. Others say that the inflation itself would be beneficial by easing the burden of household debt. Borrowers benefit from inflation because their loans can be repaid with cheaper dollars. But the Fed’s leaders so far have not given any indication that they find these arguments compelling.

[rffrydr]

Happy accident:

Jackson Hole: springing the liquidity trap

[rffrydr]

May lightning strike me down:

http://video.cnbc.com/gallery/?video=3000040586
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Today is the Tomorrow you worried about Yesterday!