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Nothing happened in Jackson Hole, Wyo., yesterday.
Federal Reserve chairman Ben Bernanke said nothing new, offered no fresh ideas for helping the US economy and only repeated the fact that he’s concerned about the labor market and will take action when necessary.
Back in Journalism 101, our teachers told us not to start a story this way. You gotta grab a person’s attention and make him want to continue reading.
Unfortunately, Bernanke is stuck in a Groundhog Day sort of situation. He has awakened every morning for the past four years and faced the same problems — and then tried to deal with them with the same solutions and came up with the same unacceptable results.
Bill Murray will have to play Bernanke when this financial crisis is turned into a movie comedy.
And this has become my Groundhog Day, too — I write the same thing over and over, offer the same criticisms and posit the same suggestions. It’s no different for anyone else stuck in this thought warp.
Wall Street came away from Bernanke’s Jackson Hole speech yesterday feeling a little more confident that another Quantitative Easing would soon be announced.
QE, if you haven’t been following the latest in abbreviated doubletalk, is the policy by which the Fed prints additional money with which to buy US government bonds.
On the surface it looks like someone is really interested in owning government debt and this keeps interest rates low.
In reality, the Federal Reserve is merely a shill, buying bonds en masse in what is a disaster in the making.
Still, Wall Street likes QE because the first two versions led to healthy stock market rallies — followed by inevitable dips.
Stock prices were higher yesterday, and the fact that the Federal Reserve may have inched a teeny-weeny bit closer to QE3 had a little to do with it.
But the market’s gain was mostly due to the fact that yesterday was the last day of the month and professional traders like to gussy up their portfolios before they report the results to clients.
Yesterday’s gain in the Dow turned it positive for the month — mission accomplished!
So even if Bernanke had fallen off the podium in a drunken stupor, Wall Street would have probably found something positive to boost stock prices. (Maybe, when the chairman sobers up he’ll have new ideas, or maybe he will get fired and the next guy will do the job better.)
The stock market will have to sober up quickly because next Friday is when the August employment report will come out.
Will there be another QE? Sure, why not — unless, of course, the jobs report is too strong. Why? Because the Fed doesn’t have any better ideas.
Will it help the economy? Absolutely not.
The banks will be happy. The lower interest rates are, the less they have to pay to savers and the more banks earn. But if savers were getting higher yields they’d spend more money.
And that would help the economy.