Federal Reserve Chair Ben Bernanke gave his long awaited Jackson Hole speech this morning. Now all are reading between the lines on whether more quantitative easing will be done and picking apart every single word as if Bernanke speaks in cryptography.
First, here is the speech paragraph that will generate quantitative easing, or QE3 buzz:
In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.
Clearly QE3 is still on the table from this speech.
Next, Bernanke chastises the Tea Party for taking hostage the debt ceiling, thus holding ransom the ability of the United States to back its debt, all for political gain and agendas.
The country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals.
Onto other aspects of the speech. Bernanke notes long term problems, ignoring globalization and the trade deficit:
The United States faces many growth challenges. Our population is aging, like those of many other advanced economies, and our society will have to adapt over time to an older workforce. Our K-12 educational system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes. But all of these long-term issues were well known before the crisis; efforts to address these problems have been ongoing, and these efforts will continue and, I hope, intensify.
All of the above are true, but the question remains does Bernanke mean to confront the institutionalized, massive age discrimination in the workforce? Or confront the corrupt health system that puts obscene profits literally on the corpse of America?
Bernanke also again, points to the jobs crisis as the current short term emergency:
Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.
He also implies this needs to be addressed first and foremost and by Congress and this administration. Some may say the Fed is kicking the can down the road, but frankly Bernanke has repeatedly implied Congress and this administration are the ones who need to act. In other words, America needs a direct and indirect jobs program, not austerity for the short term.
Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank.
Translating Bernanke, this quote becomes: Obama and Congress get your ass in gear, quit your inane politics and enact a direct jobs program and deal effectively with the unemployment crisis now you sycophants!
Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability--which is the result of responsible policies set in place for the longer term--and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives.
Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face.
Frankly, all of the issues mentioned in this speech are real and while so many believe the Federal Reserve is the epitome of all evil, therefore all powerful, I suggest not so much. It really is up to this government to enact policies to get people back to work, something our government, with their multinational corporate lobbyist puppet masters are not willing to do.