Not knowinng the rules for FOMC chairman, I found myself scanning the US Government’s website this morning (www.federalreserve.gov) to find out if the Op Ed article that Bernanke sent to the Wall Street Journal earlier this week was published on the government’s site. I have been unable to find the letter, this of course does not mean it isn’t there, but if it is, it is not easy to find.
Just In Case You Missed It
The Wall Street Journal printed a letter (Op Ed) on Tuesday written from Mr. Bernanke concerning inflation. The thesis of this letter was to let readers know that Big Ben felt the Fed had adequate resources to halt future inflation when, and if, it arrives. Our first thoughts were of surprise, “Wonder why he wrote this?” Bernanke, later that morning had a Monetary Policy Report to congress, but inflation is not the topic of this report.
We certainly like Mr. Bernanke’s open door policy, (Can you ever imagine Greenspan doing a 60 minute interview or writing such letters while head of the Fed?), but we are still puzzled at the reason for the letter.
Possible Reasons for the letter
- Someone important expressed concerns ie China. As the largest holder of our debt/bonds, China has great interest in not having inflation in the US, as the most likely outcome is much higher interest rates, thus a lower value in their holdings.
- Maybe he was addressing inflation rhetoric, such as ours. The headlines as of late have been full of inflation worries.
- Possibly Bernanke wanted to talk interest rates down, feat accomplished, as interest rates dropped dramatically after his letter, giving housing more time to well itsself.
- Maybe he read our four part series on inflation and saw our probabilities, not a chance! HA
No matter what the reason, we feel it necessary to review our analysis of inflation concerns and respect Bernanke’s comments, since they come at a time when the Fed has been more on record concerned about a slowing (deflation) than inflation. We still hold to our probabilities of inflation (see four part series athttp://street-cents.com/wp-admin/post.php?action=edit&post=797) but if forced to make a change we would up our chances of a future recession, and lower our possibility of inflation. Again, no changes at this time.
Puzzling, interesting, but certainly worth noting ! JK