Ben Bernanke's speech yesterday was very well-received by the Blognoscenti and the Twitterati who cover economics and finance; they found it to be his most forthright and unapologetic in terms of laying out the body's shorter-term objectives to lower unemployment.
The format of for the Fed Chairman's remarks was a rhetorical Q&A, these are the five questions he asked and answered:
- What are the Fed's objectives, and how is it trying to meet them?
- What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
- What is the risk that the Fed's accommodative monetary policy will lead to inflation?
- How does the Fed's monetary policy affect savers and investors?
- How is the Federal Reserve held accountable in our democratic society?
My friend Joe Weisenthal called this a dazzling speech in that it was heavy on myth-busting and took some of the more popular conspiratorial delusions about the Fed's activities and aims head on...
...what we liked about the speech was the sheer volume of myths and misconceptions that he debunked or clarified in a short period of time.
Myths about the Fed are legion (repeated ad nauseam by pundits and politicians) and it seems that Bernanke realizes that the more exotic Fed policy becomes, the more he must inevitably debunk memes in order to justify his actions. Lowering rates during normal times is fairly uncontroversial and easy to understand. Buying bonds on an unlimited basis while indicating that rates will be kept low for years requires some 'splaining. Today's mythbusting is an extension of something he did at his September 14 press conference...
I highly recommend that everyone reads the whole speech at some point this week, no matter how sophisticated (or unsophisticated) so as to truly understand the mind and workings of the FOMC right now.
Full text here: Federal Reserve Board