This summer’s big thriller will be produced on Wall Street, not in Hollywood — and star Federal Reserve Chairman Ben Bernanke. (AP)
Tinseltown likes its summertime thrillers — and now it looks like Wall Street is going to get a blockbuster of its own this year.
The Hollywood on the Hudson adaptation will star Federal Reserve boss Ben Bernanke — but instead of a good old-fashioned whodunnit, the Wall Street version will be a “Will He Do It?”
The aging star of the film ad-libbed his way through another congressional interrogation yesterday by saying he may — or may not — scale back on his quantitative-easing (QE) program, which threatens to turn the US into a Third World economy, with out-of-control inflation, a middle class of savers that slips into poverty and a currency made by Charmin.
That last part is my opinion, not Ben’s. The Fed chairman simply sat before the Joint Economic Committee of Congress yesterday and said the same things he did numerous times in 2008 and 2009 and 2010 and 2011 and 2012: that everything was kinda going according to plan.
And the stock market responded in kind, hitting an all-time high of 15,542 on the Dow Jones industrial average midway through Bernanke’s take.
And where the economy did not stick with the script, Bernanke suggested that the Fed wasn’t to blame. Economic “head winds,” mostly caused by a hapless Congress (as if there’s any other kind), are really the cause of the economy blowing off course, he insinuated.
Bernanke, who is probably headed to the bureaucratic trash heap after the end of this year, did hint (ever so gently, so Wall Street wouldn’t be disturbed) that he might scale back on the printing of excessive amounts of money, which is exactly what quantitative easing does, if the labor markets improve in the coming weeks.
Cut to Act 2, Scene 1 at 2:15 p.m., when our superhero Ben and his band of governors released the minutes from their latest meeting.
It appears kryptonite must have been under the table, because Bernanke, in the minutes, seems weak and unable to keep his cohorts in line.
There is growing talk among the minor characters of reducing Fed spending with words like “tapering” and “scaling back” the $85 billion a month spending.
So in the fashion of a Hollywood thriller, our main character has stumbled. And suddenly the weakened chief is getting opposition from others inside the Fed who are emboldened. It was also disclosed yesterday in the minutes of the Fed’s last executive meeting that “a number” of governors are now leaning toward junking QE.
A little treachery and dissent always livens up a story. And that disclosure sent stock prices into a sharp reversal.
Equities lost their morning glory, selling off 170 points after the release of the minutes. They closed at 15,307, some 235 points from the Dow’s high of the day.
Time for the flashback. A while back, Bernanke said he would continue QE until the unemployment rate dipped below 6.5 percent.
He knew it to be a red herring, because as the economy improves, the unemployment rate rises, with more jobless seeking employment.
Trust me on this. I have seen this film many times, and that’s just the way the unemployment rate is calculated. The number goes down faster if people give up looking for work. And it rises, at least initially, when people start getting encouraged that they can find a job and begin looking again.
Now Bernanke is trying to correct his mistakes, put down the coup and come out victorious as the plot thickens in a way that would make even a sous chef proud.
So what Ben will really be looking at are the Friday employment reports to be premiered on June 7, July 5 and Aug. 2.
Right after those numbers are put out by the Labor Department, Wall Street will start jabbering about whether the figures are good enough for Bernanke to start backing off QE at the Fed’s June 18 and 19 meetings, or maybe when the Fed Open Market Committee meets again on July 30 and 31.
At this point I have to give you a spoiler alert like the movie critics do: If you don’t want to know what’s likely to happen this summer, stop reading right now.
Every movie needs twists and turns. And Wall Street’s summer will get more thrilling on June 7 and July 5. Here’s why.
Nobody will be expecting either of those jobs reports to be great. As we already know, Washington started laying off workers at the beginning of the year because of budget cuts that are gradually digging in.
But there is absolutely no way of knowing how the Labor Department’s seasonal adjustments will be affected this summer by the cuts enacted by Washington.
That should be enough of a plot twist for your average straight-to-video film. But I’m counting on a blockbuster here so Wall Street’s summer thriller will not only have the flawed seasonal adjustments but also another misdirection — just before THE END.