by Mitch Kokai
Senior Political Analyst, John Locke Foundation
… the latest Bloomberg Businessweek offers some. The latest example of Fed-related folly? Markets have become so addicted to easy-money policies that members of the Federal Reserve have been trying to disguise the fact that they will eventually need to turn off the spigot.
[FED chairman Ben] Bernanke and his central bank colleagues took to podiums and airwaves to calm the markets with comforting everyday imagery. Or tried to. “To use the analogy of driving an automobile,” Bernanke said in a prepared statement on June 19, “any slowing in the pace of purchases will be akin to letting up a bit on the gas pedal as the car picks up speed, not to beginning to apply the brakes.” Bernanke set the standard for muddled metaphors when he parried reporters’ questions that day. Certain economic data, he said, “are guideposts that tell you how we’re going to be shifting the mix of our tools as we try to land this ship on a, you know, on a—in a smooth way onto the aircraft carrier.”
When that didn’t help—stocks and bonds plummeted even further—a second Fed official suggested the situation was really more like smoking. “It seems to me the chairman said we’ll use the patch—and use it flexibly—and some in the markets reacted as if he said ‘cold turkey,’?” said Atlanta Fed President Dennis Lockhart.
A third official, Richmond Fed President Jeffrey Lacker, conjured a boozy party: “The Federal Reserve is not only leaving the punch bowl in place, we’re continuing to spike the punch.” That’s because the economy is “in a tug of war,” a fourth Fed executive said. A fifth steered things back to the highway: “If we were in a car, you might say we’re motoring along, but well under the speed limit.” That’s despite, as a sixth said, the biggest investors acting “somewhat like feral hogs.” Well, that clears things up.