The Financialist +:’What does Bernanke’s Jackson hole speech tell us?’

3rd September 2012

Federal Reserve Chairman Ben Bernanke, in his long-awaited speech at Jackson Hole last Friday, made it clear that the central bank stands ready to help the economy with further monetary easing. But as Dow Jones Newswires columnist Kathleen Madigan notes, Bernanke also recognized the headwinds facing the US economy – "challenges that may be immune to QE3′s tonic." To that end, here's what the web said about the speech:

Patti Domm, CNBC's Executive News Editor said the speech was a repeat of his past statements. "He basically laid out why he believes past Fed easing has worked and the risks of further easing, but he consoled markets by suggesting the Fed could do more."

Tim Duy, who regularly monitors the activities of the Federal Reserve and currency markets, meanwhile, thinks Bernanke's speech makes the odds of a third round of QE at the next FOMC meeting somewhat higher than he had previously expected.

Nevertheless, he says, "the backward looking nature of the speech and the obvious concern that the Fed has limited ability to offset the factors currently holding back more rapid improvement in labor markets, however, leave me wary that Bernanke remains hesitant to take additional action at this juncture."

Moreover, as John Mason points out, given the lag in effect of monetary policy, there is little the Fed can do to impact the state of the economy before the fall election or for the rest of 2012. "What incentive is there for the Bernanke Fed to do anything dramatic between now and the time Mr. Bernanke decides to leave the Fed?"

Still, The Washington Post's Zachary A. Goldfarb says the urgent tone of Bernanke's speech will leave investors disappointed if the central bank does not launch new stimulus at its Sept. 12-13 policymaking meeting. "Investors seemed hopeful, with stocks trending up by about 1 percent in the early afternoon."

Taken together, however, Nick Beams believes the latest Jackson Hole gathering has demonstrated that not only have the central bankers no solution to the crisis, they do not even understand the workings of the system over which they are supposed to preside.

"Tailoring his remarks for public consumption," he writes, "Bernanke couched his case for further handouts to the banks in terms of the need to bring about economic recovery and end the destructive effects of long-term unemployment."

"But while the Fed's quantitative easing has boosted financial corporations and lifted Wall Street, it has had no real impact on the economy as a whole."

Previously on The Financialist:

The great iron ore crash of 2012

Is a tax on wealth immoral

Currencies in a drought

The Financialist is a curated blog that helps you make sense of the financial news. Check out the full site:

The Financialist

Leave a Reply

Your email address will not be published. Required fields are marked *