On April 27, Ben Bernanke gave his first ever press conference to the American people. His goal was two-fold. First, he wanted to reach out to us by "increasing transparency" for the historically secretive Central Bank. Second, he wanted to do no harm. That is, he did not want to significantly rattle the markets. In both, he succeeded.
But for those of us who wanted more -- like reassuring the American people about the future of our economy -- he notably failed.
Americans are rattled not only by a slow job market, but also by the eye-popping prices at their supermarkets and gas pumps. This week, diaper giant Kimberley Clark will increase the prices of its Huggies diapers by 7 percent and wipes by 3 percent, and the same is expected of Procter and Gamble's Pampers line. According to The Wall Street Journal, retailers were told to expect price hikes in May on items like Scott tissue (up 7 percent), Charmin tissue (up 5 percent), and Glad trash bags (up 9.5 percent).
In similar fashion, Coca-Cola prices are up at home and abroad (in some countries more than 20 percent) as are the prices of the delicious Big Mac (up to $4.34 in New York).
These are real increases in the cost of living that real Americans face -- not some archaic measure of inflation that doesn't even take into account rising prices of food or energy.
People are angry and worried. If you want to see how angry, just Google "diaper" and "angry" and observe a long list of irate mothers blogging about diaper prices, including one in which a mother indexes her purchases for the year.
Retail prices are up because commodity prices are up. Commodity prices are up because demand is up, because the Middle East and North Africa are exploding, and because inflation is up all around the world. As a result, corporate profits are down. Big multi-nationals (like Coke and P&G and Kimberley Clark) say they had already cut expenses to the bone during the recession, so there's nowhere left to go but to the consumer.
Despite the way Main Street is feeling, Wall Street seems to be surviving just fine. Stocks have been picking up gains in the last few weeks, largely due to record earnings from -- you guessed it -- increased world-wide demand, reduction in corporate expenses (laying off workers) and higher revenues (from higher prices charged to consumers).
Another reason that the stock market is buoyant is that the Fed is artificially keeping interest rates low (low rates of borrowing for business) and money supply plentiful. Bernanke told the press today that given the choice between spurring the economy and inflation, he chooses spurring the economy. Inflation, he said, is a "transitory "problem -- not a pervasive one.
The problem is that the benefits of Bernanke's low interest rates and QE isn't filtering down to regular folks. As Alan Greenspan said recently of QE: "I don't think it's had very much of an effect on the economy. I think it's bloated the balance sheet of the Federal Reserve and bloated the balance sheets of commercial banks, who hold deposits at the Federal Reserve. But there is no real evidence yet that those monies are going out and circulating in the economy and being a driving force there."
There you have it from the ultimate horse's mouth. Most of those printed dollars from the Fed sat on the books of banks, improving their asset value and stock price rather than going out to make loans to the small businesses and homeowners who needed it.
Currency markets -- on the other hand -- had a different reaction to Bernanke's words. Gold and silver are still reaching all time highs and the dollar is as flaccid as ever. That reflects, at least in part, a lack of faith in the American economy as well as a real fear of rising inflation.
A falling dollar, rising prices and slow job growth. Main Street doesn't seem to be able to catch a break -- either with our politicians who are bankrupting us or the Fed who is still unwilling to acknowledge price inflation.
Follow Meredith Bagby on Twitter: www.twitter.com/bagbyreports
Robert Reich: The Wageless Recovery
Richard (RJ) Eskow: Bernankemania! Empty Golden Words From the Temple's High Priest
Ben Bernanke - Wikipedia, the free encyclopedia
Federal Reserve Chairman Ben Bernanke Holds First Ever Press ...
Bernanke warns against steep budget cuts | Reuters
Bernanke Cautious on Economy as Oil Prices Rise - NYTimes.com
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The Fed did no harm during this news conference ???? Just look at the dollar index and gold indeed during his press conference: the dollar plummeted and is continuing to do so and gold is hitting all time highs. Just because the stock market went up, all is well ???
How does this help ordinary workers who have to buy food and gas ???
The Fed is totally disconnected from any kind of daily reality and is denying that inflation exists, is caused by it, and when it does acknowledge anything it is deemed "transitory".
Who here cannot say they are not being harmed by this intentional policy of money printing ?
I watched the conference, he was a neutral in his prepared taxt and in answering questions as he has ever been in any printed statements.
The problem with the FED is, that over the years they have altered the formula for calculating inflation, GDP, GNP Exports etc.. to such a degree the numbers are often detached from obvious realitys.
Changing the formulas have in other words be manipulated to show a predetermined prejudice for the wished for result...
1. Prior to the conference, he said that inflation is moderate, then when it is not moderate that it is "non-core" and then when it is "non-core" it is "transitory". At the conference he repeated the "transitory" comment and went further: if it is not "transitory", then if the rate of increase decreases, then according to him it will be going down.
2. Also, there is no real sense for any rate rises occurring before the end of the year, which was new.
3. The response from the markets to these sentiments was simple: with inflation so obviously existing, and the Fed intent on debasing the dollar and interested in low treasury rates (through directly buying treasuries if necessary) --- BUY PRECIOUS METALS AND OTHER CURRENCIES.
Lastly - when he said during the conference that inflation was transitory he covered his mouth which is body language which occurs when someone is lying.
What a laugh - ask anyone from Argentina, they have seen this show before.
Oil is rising because of 2 factors, increasing demand and decreasing supply.
It's not going to get better no matter what the Fed does, they can't control these two factors. All they can control is the price of money.
A good understanding of EROEI is an absolute
necessity if one wants to have any real perspective about the energy
crisis we are facing.
Blaming speculators is kick-the-can down the road so we don't have to think about the real issues