The economy was tanking and they “played dumb”!

The 2009 FOMC Transcripts are out. Last year I did a few posts on the 2008 Transcripts (here here). This year I started reading, but came across this bit right at the January 09 meeting.

After Lacker made his exposition, Bernanke intervenes:

CHAIRMAN BERNANKE. I am going to regret this, but I am going to ask you a question. [Laughter] Do you think the United States economy is at a Pareto efficient point at this moment?

  1. LACKER. Probably.

CHAIRMAN BERNANKE. With the best position we can be at right now?

  1. LACKER. Roughly speaking. All constraints taken on board.

I stopped reading there and then!

So I link to a summary of the Transcripts in Bloomberg. It´s all very “political”:

As President Barack Obama prepared to take office in January 2009, Bernanke recounted a meeting with members of the new administration that included a discussion of the Fed establishing an explicit inflation target.

“I did not detect any strong opposition on the substance, but they didn’t want to incur heavy political costs themselves or use up political capital at the beginning of the administration,” the Fed chairman said, according to the transcript. “Their view was that whatever we did needed to be very carefully managed to avoid getting blown out of proportion in the political sphere.”

It took another three years for IT to come into being! And the Fed has undershot the target ever since!

3 thoughts on “The economy was tanking and they “played dumb”!

  1. Thanks for the link to the transcripts. It clears up the “costs and risks” involved in balance sheet expansion they kept talking about, but we couldn’t particularly understand:

    Bernanke: “So we do want to discuss today a bit of the substance of what we would like to do. But I think we should all have a sensitivity—whatever steps we take—to the need to do it very carefully from a political perspective and perhaps think about the extent of the change, the step we want to take, to balance a more dramatic or discrete step against whatever additional costs or risks there might be from a political perspective.”

    Ouch!

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