Friday, August 27, 2010

Preaching to the Wrong Choir

I suppose I cannot deny the members of the Federal Reserve the right to go off on a retreat, in order to take stock of things in the middle of really bad economic times. At most I would question their doing this in the resort conditions of Jackson Hole, rather than meeting through a video conference that would enable each representative to maintain the duties of "minding the store." I am more concerned that this elite environment should be where Chairman Ben Bernanke gives what is basically the economic equivalent of a State of the Union address at a time when those ("on Main Street," as I like to say) are feeling the most pain and have the biggest stake in just where economic matters stand.

On the other hand I would guess that the final paragraphs of the BBC report of Bernanke's Jackson Hole address would not play very well on Main Street:

In his review of the US economy, Mr Bernanke expressed particular surprise at the rise in the savings rate of US consumers, and the sharp rise in the US trade deficit.

He also noted that business investment in structures - such as commercial real estate - had failed to rebound.

In order for the recovery to be sustained, he said, consumer spending and business investment needed to pick up more quickly.

Why is he surprised that consumers are trying to save more and consume less? Most of them are either in debt or on the brink, doing all they can to keep the problem from getting worse. Furthermore, why is he focused on business investment in the "structures" of commercial real estate when just about every aspect of our country's infrastructure is in jeopardy, due, at least in part, to the failure of both public and private sectors to commit resources to doing anything about the problem?

While his office may be in the District of Columbia, Bernanke's address is very much a statement from what I have previously called "the constructed reality of Planet Wall Street." Bernanke has not previously received a Chutzpah of the Week award for his steadfast conviction that this "constructed reality" is the only reality he is willing to acknowledge, although he came close with a position statement he delivered when the Bush Administration was still in power. Thus, this should be the week to make up for lost oversights. I only wish someone would pay to fly me to his elite environment, so I can at least get a taste of it while presenting the award!

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