Fed chief Ben Bernanke doesn’t see a bed of roses carpeting the economy in the future, but he doesn’t see another recession either. So, he’s recommending we stay the course. Good enough. As I’ve noted before, the economy is going through a significant reshuffling and recalibration of assets as a result of the housing bust and financial crisis. It’s going to take a while to sort it out, and misguided fiscal stimulus, whipsaw budget policymaking, and an anti-business policy climate (including in key agencies such as the National Labor Relations Board) are not helping.
Right now, the economy needs policy stability, not ad hoc actions by the Fed (through monetary policy) or the federal government (through fiscal stimulus). While I would not go so far as to say the “fundamentals” of the economy are sound, as Bernanke did in Jackson Hole, Wyoming, the most prudent policy is to provide clear, transparent information to markets about policy to minimize uncertainty and let the private sector get back to what it does best: identifying opportunities for new value creation.
— Samuel R. Staley is associate director of the DeVoe L. Moore Center at Florida State University and a senior research fellow at the Reason Foundation.
It is not uncommon for the victim to freeze just before the train hits him.
Reply to this commentLinkReport Abusewith interest rates frozen at unnatural levels how is it possible for business to identifying opportunities for new value creation ? A part of that evaluation is the cost of money and for that you need a real world number, not a number held artifically lower with Bens foot on the scale.
Reply to this commentLinkReport AbuseI have an opportunity to expand, which would require a business loan, but I stand pat because I have zero faith in Bernanke's claim to keep rates low till 2013. There is near total unpredictability in all government related business spheres: tax, interest rates, and regulations.
I have the brass for risk, but not the cranial jello required in this environment.
Reply to this commentLinkReport AbuseExactly. Zero interest rates do not provide clear, transparent information to markets. They maximize uncertainty: when will they rise?
Reply to this commentLinkReport AbuseYes, the Fed has already done everything possible (to the point of absurdity) on the monetary side. As long as the fiscal and regulatory sides are what they are - the best advice is to just hang on and try not to break too many bones tumbling down the hill. November 2012 can't come soon enough.
d(^_^)b
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"Because the Only Good Progressive is a Failed Progressive"
You mean, don't do anything stupid, or that you may regret...again?
Reply to this commentLinkReport AbuseI disagree a bit with the post-- what the economy needs is NOT status quo, it NEEDS Obamacare repealed, EPA power plant regs repealed, Dodd-Frank repealed, and a rational tax code enacted with flatter rates lower rates and no special exemptions that raises 18.5% of GDP and spending cut to 18% of GDP. IF we do that, the economy will expand and create jobs.
Reply to this commentLinkReport Abuse"Stay the course!" Wasn't that what the Captain of the Titanic said just before hitting the iceberg??
Reply to this commentLinkReport Abuse"Stay the course" is excellent advice FOR Mr. Bernanke, left to his own devices he would be making new mistakes. This, at least, constrains him to repeating the old ones.
Reply to this commentLinkReport AbuseAlways the confidence fairies.
Reply to this commentLinkReport AbuseI understand your endorsement of "stay the course" references only monetary policy, and not specific policies or priorities of the present regime.
Bernanke cannot, of course, say publicly that he expects recession to return. It would bring it tomorrow, in spades. But he's not a stupid man, so he surely understands the housing problem is still a couple of years from being worked through, and until the excess supply is processed we cannot rely upon new home construction, since WWII the major domestic component of recoveries, to rebound.
Ben didn't say he would, but he didn't say he wouldn't, either. If he can maintain that demeanor, he might establish himself as another Greenspan, whose inscrutability was so mesmerizing the market rose or fell depending on the color tie he wore to hearings.
If he wants to be another Volcker, he'll need to bite the head off a live aide after saying it.
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