August 11, 2007

UNLESS THE ENGINEER YOU CHOOSE TO BE...:

The Fed's Dr No refuses to come to Wall Street's rescue: Inflation is the key for Bernanke, however loud traders squeal. (Peter Coy, 12 August 2007, Independent)

Cool, calm and collected, Ben Bernanke, the Federal Reserve chairman, is driving Wall Street batty. When traders scream about a recessionary "credit crunch", the former professor acknowledges their concerns but predicts continued economic growth. When they plead for easier money, Bernanke and fellow rate-setters firmly hold the line.

"Scandalous," sputtered one North Carolina market strategist. Jim Cramer, the TV stockpicker, nearly melted in a pool of his own sweat on a recent programme, saying Bernanke had to flood the system with money to stop financial Armageddon. Shouted Cramer: "He has no idea how bad it is out there!"

The Street may be dismayed by Bernanke's sangfroid, but it shouldn't be surprised. This is exactly the kind of policy he has spent his entire career arguing for. At Princeton University, where he taught from 1985 to 2002, he said central bankers should avoid getting caught up in the gyrations of the financial markets and focus instead on measures of the real economy, such as growth and inflation.

The Fed should set a target rate for inflation and then steer monetary policy to hit that target – an approach that would change central bankers from financial demigods into something more like engineers.


...is Casey Jones.

Posted by Orrin Judd at August 11, 2007 8:30 PM
Comments

Jones tried to put on as much steam and speed as possible to make up for lost time and then, suddenly, upon realizing deadly collision was imminent, tried to stop train in time (he didn't and was killed, though sacrificed himself to save other passengers and teammate). I don't quite get the analogy. Unless it is simply one about overcompensation and then too little too late.

Posted by: John at August 11, 2007 11:04 PM
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