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The nation will get a new Fed chief that has been decisive in his convictions in the past. Moreover, Big Ben (I hope I’m the first to give him that moniker and I hope I don’t regret it in the future) could be the elixir that Wall Street has been looking for. His credentials are impressive, he spent years at Princeton before working as a Fed Governor for three years and, of course, his most recent job has been the chairman of the Council of Economic Advisors. Yet, I think investors should be more impressed with his thoughts about the role of the Federal Reserve, how the Fed should communicate. In remarks made by Big Ben on October 9, 2003 at the London School of Economics, the new fed chairman made the following observations and comments:
“Monetary policy actions have their most direct and immediate effects on the broader financial markets, including the stock market…”
“Understanding how policy actions affect financial markets, as well as how changes in asset prices and returns in these markets in turn affect the behavior of households, firms and other decision makers.”
These comments acknowledge that the stock market is a barometer that not only reflects the mood of the economy, but could also dictate how the economy acts. After years of hearing that the Fed doesn’t watch the market it is refreshing to hear that maybe they do, and should.
Perhaps the biggest reason to be giddy about the new Fed chairman is his notion that there should be an inflation target. This means greater transparency and accountability at the Fed for its decisions, which didn’t exist under Greenspan, and resulted in two recessions that could have been avoided, and a current equities market that feels fractured beyond repair. According to Bernanke, and others, inflation targeting is a monetary policy that literally has no goals other than to control inflation by looking at everything.
Ben Bernanke understands supply-side economics and has voiced support for lower taxes, free trade and reforming the legal system. In addition there may be no greater authority on the cause of the Great Depression than Ben Bernanke. The timing couldn’t be better, as there is a great depression of expectations and hope on Wall Street and Main Street. I welcome Big Ben with open arms.
Charles Payne is founder and CEO of www.wstreet.com and appears regularly on FNC's Cost of Freedom Business Block.