Posted on 10/28/2005 7:39:39 AM PDT by TopQuark
Questions for Ben Bernanke
By N. GREGORY MANKIW October 28, 2005; Page A12
As the confirmation hearings for the new Fed chairman approach, senators and their staffs are busy compiling questions for Ben Bernanke. The most intriguing questions, however, are not the ones that come from senators. They are, instead, the questions that Mr. Bernanke must be contemplating quietly on this own.
There should be no doubt in anyone's mind that Mr. Bernanke is superbly qualified for the job. I have known Ben for 20 years, and there is not a monetary economist alive who commands more respect among professional economists for his deep, broad intellect and rock-solid judgment. (OK, maybe Milton Friedman, but at the age of 93, he's probably not available.) While the Senate hearings are important and senators must perform their constitutional duty of evaluating the president's choice, the outcome is simply a forgone conclusion. Mr. Bernanke is to the Fed what John Roberts was to the Supreme Court -- a candidate whose credentials are impeccable.
Once the hearings are over, Mr. Bernanke must decide where he wants to lead monetary policy and what kind of Fed chairman he wants to be. Here are three questions he must be asking himself.
• "How can I advance inflation targeting?" As has been widely reported, Mr. Bernanke has long advocated inflation targeting, under which a central bank sets a numerical target for the inflation rate. He will soon be in a position to put his monetary policy where his mouth is.
(Excerpt) Read more at online.wsj.com ...
I can't wait for his helicopter to start dumping money over my house! Yippee!
Just my personal opinion, people. But nobody listens to me. After all, I'm just a geezer.
I encountered a Brit expat at lunch yesterday, who has a business here in town, and he was fairly pleased that Bernanke was going to back off of the interest rate increases. I asked him where he had heard that, and he said one of the cable news outlets. I haven't heard this, myself.
My perception of the economy is skewed, as everyones is, by the performance in my region, which is southeast. We're still struggling with international competition, and new hiring is consistently counterbalanced by job loss in other areas. Unemployment is not at all bad, all things considered, around 5.1%, but things aren't exactly coming up roses here. Just sort of muddling along is the best description I can come up with. So, I tend to agree that backing off the consistent rate increases would be a good thing. But, we don't have anything close to bubble conditions with real estate here. Appreciation has been around 3% a year since the late 90s, up to this year; now, we're projected for arouind 7% on the year for 2005.
Continuing with historically low interest rates sounds like a good thing to me, in my own situation. But, it would likely make a painful correction in high-appreciation markets even more likely. So, I don't really know how to react to this, even if true.
Can somebody confirm that Bernanke is of this opinion?
As I mentioned to you on another thread, the Fed does not and cannot do ANYTHING about the price of any particular class of assets, whether it is stocks, bonds, gold or real estate.
He may be asked what he thinks about the bubble but not what he intends to do about it, because the answer is known in advance: he can do absolutely nothing.
He mistook an opinion expressed by some pundits for a reported fact. No Fed board member will ever tell you in advance what (s)he is going to do. Moreover, none of them even knows what he is going to do: that depends on the data received by the time of future decisions.
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html
TopQuark -- wait and see what happens. I do not want to dispute your post here. Just wait and see. One scenario that may unfold: The U.S. dollar falls on news of Scooter's indictment. By late this afternoon, some people may decide to start selling their stocks. New Grand Jury begin to hear the propective case against Cheney. Stock markets go ape, start falling rapidly, the go sideways and then fall again. In the meantime, the real estate bubble pops. Prices have already fallen 15% or more in Northern California in the past 30 days.
Anything can happen.
The scenario you describe is quite possible. Probable? I do not know enough of data to have an opinion.
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