Peter Blane

your Bernanke and you

Posted in Consumer Confidence by wusspett on August 25, 2009
Tags: , , , ,

*sigh* it looks like we are in for another session of the Bernanke.  It’s not that I am necessarily upset that he is still the Fed representative to the public.  I’m not even sure why people pay so much attention to him.  He and his chairmen set monetary policy.  I say just let them be an economic indicator, and let it end there.

It’s interesting to me that the market is “upbeat” about this (see the “Bernanke” link above).  (People are so interesting to me.)  What really seems to be driving the market right now is that “things aren’t as bad as we thought they would be by now, so things aren’t ever going to be worse” thought process.  This thought process is optimistic in a time where things still look bleak.  In essence, it is “prepare for the worst, hope for the best” that will allow for improvement.  Unemployment is still high, house prices are decreasing at a slower pace, and foreclosures are still a HUGE risk for the next few quarters: “Americans fell behind on mortgage payments at a record pace last quarter, the Mortgage Bankers Association reported Aug. 20. The inventory of homes in foreclosure rose to the most in three decades of data” (see the “thought process” link).

I think it would be foolish to have any long positions at this point – unless they are call options or treasuries.  For me, I agree with what Peter Schiff said about the broken window” fallacy of economics, which argues that economic activity can be stimulated by the need to replace something that has been destroyed.  He says, “Digging holes just to fill them up does employ workers, but the work offers no benefit to anyone not receiving the wage. Absent government incentives, such a job would create no profit and could only exist as a result of a subsidy from someone else.”  Now, he was talking about “cash for clunkers“, but that’s another note for another time.


One Response to 'your Bernanke and you'

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  1. david blane said,

    yeah this is a good indicator that Bernanke is unfortunately our ‘best’ economic indicator. what irks me is that Obama Nominated a so-called ‘private’ Bank chairman. wait a minute! isn’t that proof enough that the fed is way to close to the federal government?

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