Tuesday, June 21, 2016

More gobbledegook from the Fed

I recently finished reading The Courage to Act by former Federal Reserve Chairman Ben Bernanke who wrote that one of his primary goals as chairman was to preside over a Fed that was more transparent than it had been under his predecessors.  

He then spent several hundred pages detailing meetings in which he and his staff agonized over the wording of statements that were intentionally vague in order not to send the stock and bond markets careening up or down crazily because the Fed had said something markets might possibly interpret as positive or negative about the economy.

The Fed under his successor, Janet Yellin, is, if anything, even less transparent. The markets are chomping at the bit to find out if and when the Fed is going to announce its next prime rate hike. Every statement – every speech, press release, verb and conjunction – is analyzed in the hopes it will provide some sense of where the Fed’s head is at. I can’t begin to imagine how much time the Fed spends crafting communiqu├ęs that basically say it is as clueless about the economy as the average Wendy’s counter person.

To enable officials to avoid angst over the wording of such statements, I’ve taken the liberty of creating a “mix-and-match template” the Fed can follow in the future. It gives them hundreds of ways to, in a few short seconds, wordsmith non-committal statements nobody will be able to figure out. With all the extra time they will save, Yellin and her governors will actually be able to get out of their ivory towers and mingle with the hoi polloi to get a sense of what is going on in the America world whose economy they control.

Today’s statement from the Fed

A rate hike is

( ) neither on nor off the table at this point in time provided
( ) something we may or may not consider should
( ) within the realm of possibility in the event
( ) not inconceivable with the caveat that

inflationary pressures

( ) do not exert untoward upward or downward momentum on
( ) remain low to moderate in that they affect
( ) are containable within the context of
( ) neither negatively nor positively impact

employment in

( ) both the public and private sectors.
( ) small, medium and large businesses.
( ) the broader economy.
( ) certain sectors.

A determination may be made at such a time as

( ) indicators show signs of weakness, moderation or growth.
( ) Goldman signals they have completed shorting every sector that would be negatively impacted by such an event.
( ) Haley’s Comet appears between Labor Day and Halloween in a year that ends with 7.
( ) the global economy appears sustainable.

Further information may be forthcoming subsequent to our next monthly meeting provided

( ) such a statement is deemed prudent for the sake of transparency to which we have signed a pledge signaling our collective commitment.
( ) headwinds and tailwinds neither subside nor increase to the extent such a statement is warranted.
( ) the Richmond Fed, which hosts our next meeting, serves Virginia ham on those delightful little cheese biscuits for which its private dining room is famous.
( ) we can agree on what we want to say.

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