Monday, June 12, 2006

Bernanke doin' his best to make you and me poorer...

I think it's interesting how when Bernanke's appointment was announced many people characterized him incorrectly as an "inflation dove" based off of a speech he made one day where he said something to the effect that we don't need to worry about deflation because the Government "owns this thing called a printing press" and can "drop money out of helicopters" if necessary to fight deflation. It seems to me in retrospect that those comments were extremely hawkish. What he was really telling us at the time was that he doesn't take deflation seriously as a threat at all, and is only going to be focused on inflation concerns. I get the sense that many commentators still think he is really a "dove" deep down and that he will return to his true "dovish" nature once he is done "flexing his muscles" to get some "hawkish street-cred" as a new fed-chair.

In less than a month trillions of dollars have disappeared from the economy through the stock market decline. At least as much wealth has probably evaporated in the real-estate market as well, but that won't be fully appreciated until later due to the relative illiquidity of the real-estate market as compared to the stock-market. Sounds like some serious deflation happening in this economy here...doesn't it? Unfortunately, Bernanke won't see any of this because he evidently doesn't believe in deflation and is going to be watching out-dated inflation measures that have oil prices as an input...but alas there is nothing Bernanke can do to lower the price of oil other than destroy the economy. The stock market seems to think that this is exactly what he is going to do.

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