Zachary Karabell: Ben Bernake's Out of Touch Speech

August 26th, 2011

The Daily Beast
By Zachary Karabell
August 26, 2011

No Ben to the rescue. The hugely anticipated speech by the Fed chairman proved to be remarkably vanilla, which should have surprised no one. Bernanke reiterated a series of themes that have been well iterated in recent weeks: that growth has stalled but is poised to rebound in the second half, that housing remains a drag on the slow economic recovery, that unemployment is disturbingly and dangerously high, and that better government fiscal policy to address short-term economic weakness and long-term deficits is essential.

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The only thing financial markets really cared about was whether there would be a hint of a new round of “quantitative easing,” known affectionately as QE, the last round of which, QE2, somehow appropriated the name of luxury liner. The results of QE2, however, were underwhelming for passengers in steerage, while temporarily making life that much easier for the staterooms. Stocks went up; employment and income did not.

On Friday morning, Bernanke promised no QE3, and given the excess of controversy and the dearth of tangible long-term benefit of the last round, that is a good thing. (The markets seem to have felt the same way, and rallied immediately after.) Instead, he stated blandly that the Fed “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.” Ooh, two days instead of one. Hosanna.

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