Trouble at the Top

by
Gary North
GaryNorth.com

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by Gary North:
Investors
Say: ‘Mises Was Right!’



The head of
the Federal Reserve Bank of St. Louis has been cautiously critical
of Bernanke’s remarks on June 19 regarding the possible early exit
by the Federal Open Market Committee from QE3 later this year. Bernanke’s
remarks sent world stock and bond prices lower.

A
press release
explains his concerns.

In his view,
the Committee should have more strongly signaled its willingness
to defend its inflation target of 2 percent in light of recent
low inflation readings. Inflation in the U.S. has surprised on
the downside during 2013. Measured as the percent change from
one year earlier, the personal consumption expenditures (PCE)
headline inflation rate is running below 1 percent, and the PCE
core inflation rate is close to 1 percent. President Bullard believes
that to maintain credibility, the Committee must defend its inflation
target when inflation is below target as well as when it is above
target.

Bullard has
to know this is utter poppycock. The Committee does not “strongly
signal” anything, ever. It always hides behind bland bureaucratic
verbiage
– and not just bureaucratic verbiage: boilerplate
bureaucratic verbiage. The FOMC’s language has been identical all
year. I have cited these statements word-for-word here.

The FOMC has
repeated the price inflation figure of 2% all year. It never adds
any explanations. It never holds press conferences. It simply hides
behind boilerplate. Here is what it always says:: “. . . this
exceptionally low range for the federal funds rate will be appropriate
at least as long as the unemployment rate remains above 6-1/2 percent,
inflation between one and two years ahead is projected to be no
more than a half percentage point above the Committee’s 2 percent
longer-run goal, and longer-term inflation expectations continue
to be well anchored.”

Bernanke’s
public statement raised the acceptable unemployment figure to 7%.
In a
28-page statement
– he said this:

Although
the Committee left the pace of purchases unchanged at today’s
meeting, it has stated that it may vary the pace of purchases
as economic conditions evolve. Any such change would reflect the
incoming data and their implications for the outlook, as well
as the cumulative progress made toward the Committee’s objectives
since the program began in September. Going forward, the economic
outcomes that the Committee sees as most likely involve continuing
gains in labor markets, supported by moderate growth that picks
up over the next several quarters as the near-term restraint from
fiscal policy and other headwinds diminishes. We also see inflation
moving back toward our 2 percent objective over time. If the incoming
data are broadly consistent with this forecast, the Committee
currently anticipates that it would be appropriate to moderate
the monthly pace of purchases later this year. And if the subsequent
data remain broadly aligned with our current expectations for
the economy, we would continue to reduce the pace of purchases
in measured steps through the first half of next year, ending
purchases around midyear. In this scenario, when asset purchases
ultimately come to an end, the unemployment rate would likely
be in the vicinity of 7 percent, with solid economic growth supporting
further job gains, a substantial improvement from the 8.1 percent
unemployment rate that prevailed when the Committee announced
this program (pp. 4-5).

On his own
authority, he simply scrapped the FOMC’s official statements. But
Bullard held back. He did not say what Bernkanke very clearly did.
No Federal Reserve regional bank president has had the guts to say
this. Bullard pretended that the FOMC was secretly behind Bernake’s
statement. He pretended that the FOMC had authorized this unlilateral
revision of its official boilerplate
.

Read
the rest of the article

July
2, 2013

Gary
North [send him mail]
is the author of
Mises
on Money
. Visit http://www.garynorth.com.

He is also the author of a free 31-volume series, An
Economic Commentary on the Bible
.

Copyright ©
2013 Gary North


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Republished with permission from:: Lew Rockwell