An Unofficial Translation of Bernanke’s Jackson Hole Speech
by Gary North
It is far easier to translate Bernanke than Greenspan. Both men had this task: to deceive the public. Greenspan adopted verbal obfuscation as his technique. Bernanke has adopted boredom.
I hope this exercise will help you understand his speech of August 27.
CHALLENGES AND DAUNTING CHALLENGES
People who are unfamiliar with Bernanke’s strategy of downplaying everything, in good professorial fashion, may miss the significance of what he said.
On the whole, when the eruption of the Panic of 2008 threatened the very foundations of the global economy, the world rose to the challenge, with a remarkable degree of international cooperation, despite very difficult conditions and compressed time frames.
Translation: (1) “The world rose to the challenge.” Hank Paulson nationalized the mortgage market unilaterally. He let Lehman Brothers go bust, so as to catch Congress’s attention. Then he got Congress to bail out AIG and the largest banks. I cooperated. The FED swapped liquid Treasury debt at face for heavily discounted promises to pay that were held by the largest banks for which there was no market.
Then the Financial Standards Accounting Board reversed itself on FAS 157. Banks would not be required to list their assets at market value. This kept them solvent.
Then other central banks and politicians imitated Paulson and me by bailing out their largest banks. We set the pattern. They followed suit.
(2) “Despite very difficult conditions and short time frames.” Translation: The American banking system had locked up right under our noses, and nobody knew what to do. The domino effect pointed to what Greenspan in 1998 called “cascading cross defaults” internationally: the inability of banks to settle their accounts at the end of the day, because of money owed to them. Paulson spent time puking in his office bathroom, but he pulled it off in time. It was nip and tuck for a time.
Notwithstanding some important steps forward, however, as we return once again to Jackson Hole I think we would all agree that, for much of the world, the task of economic recovery and repair remains far from complete.
Translation: Everyone knows the economy is slowing. The two stimulus packages totalling $1.5 trillion barely reversed the recession, assuming it reversed at all. Meanwhile, the pantywaists on the National Bureau of Economic Research committee that decides when recessions end decided in April not to decide. That left me holding the bag. So the FED has declared that it ended in April 2009. Like it or lump it.
In many countries, including the United States and most other advanced industrial nations, growth during the past year has been too slow and joblessness remains too high.
Translation: The entire world economy is busted. Greenspan sucked the other central banks into pumping up their economies with inflation and low interest rates, and when our bubble burst, so did everyone else’s.
Financial conditions are generally much improved, but bank credit remains tight; moreover, much of the work of implementing financial reform lies ahead of us.
Translation: This is the best opportunity in 70 years to use government to take more power over the capital markets. A crisis is a terrible thing to waste. We got the country into this mess, and we’re going to take on huge new authority to make sure it never happens again. That’s the Keynesian way.