Wednesday, June 16, 2010

Further Reaction To Ben Bernanke's Puzzlement

Bernanke admitting that he was puzzled by gold's rise has had legs. It's also let loose some complaints about his performance as Fed chair so far. One of many examples is an opinion piece in Commodity Online. Its author takes some time to rake over Bernanke's overall record:
First off, I have to applaud Chairman Bernanke for admitting he doesn’t understand something in public. The only problem is that he reserved this admission to Gold’s performance, instead of applying it to the entire US economy, financial system, derivatives, inflation, human behavior, investor psychology, and a slew of other topics.

Indeed, so far the guy’s record has been 100% accurate… if you basically interpreted what he said as the exact opposite of reality. In the past three years he’s told us that the sub-prime mortgage Crisis was contained, that there would be no spillover into the US economy, that the financial markets were sound, and that the US economy was stronger than ever… right up until the entire financial world imploded.

Regardless, at least he’s finally admitting he doesn’t understand some things. Hopefully, this is the beginning of a new pattern in his speeches: admitting his mistakes....
After reviewing what the Fed has done over the last three years, the author points out that other commodities are falling because they advanced on hopes of a recovery that isn't panning out as expected.

In other words, the commodity market as a whole is forecasting stagflation ahead.

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