And so the great Jackson Hole moment has come and gone and is now in the hands of the pundits to parse Ben Bernanke's words and weigh his future options.
One of those observers is banking analyst Dick Bove of Rochdale Securities, who sees a Federal Reserve that is facing incredible pressures and is pursuing exactly the wrong policy path.
"I think the Fed is going to go into defensive mode, put the walls up, pull up the drawbridge," Bove says.
While postulation has already begun on what the central bank's September 20th meeting might bring, Bove would recommend lowering your expectations. "From a political, financial and an economic standpoint, the Fed cannot take any aggressive actions whatsoever," he says.
Part of that ''hand-cuffing'' is the result of threats and criticism from the current field of Republican presidential hopefuls who have been unleashing a torrent of attacks that have been well received on the campaign trails.
At the same time, a growing number of district bank presidents has moved into the dissenters column and been equally active in expressing concerns and views that differ from the Chairman's.
"Internal dissent at the FOMC is certainly unusual but I think the dissenters are correct in this instance,'' Bove says. "If you break it down, all of the dissenters were among the district bank presidents, while all of those voting with the majority were with the insiders." And for Bove's money, the district bank presidents have a better view of things.
At the same time, he says it's time for a new plan, a 180 if you will, that would lower bank capital ratio requirements and raise interest rates.
"We're going in exactly the wrong the direction," Bove says. Lowering rates, which makes it unprofitable for banks to lend, and raising capital ratios is "locking up money inside the Fed," he says.
In fact, Bove says there is an unprecedented amount of money that is essentially being held hostage by the Fed that could be better used in the economy.
"There's $1.6 trillion in bank deposits now sitting at the Federal Reserve," Bove asserts. "That is over 1,000 times greater than is normal. It is sitting there because bank capital requirements are too high and rates are too low."
Speaking of rates and that famous Bernanke promise to keep them low "for the next two years," Bove simply says that is impossible.
"If the economy is going to recover, interest rates in the global market are going to go up," he says, and in order for the Fed to maintain these artificially low rates, "it would have to print even more money than it has already in the past two years, and that is totally unacceptable."
As a result, Bove thinks there may have been a big misunderstanding.
"I don't think they said it," Bove says. "I think they said they would move to keep rates at this low level if conditions warrant."
Two years is a long time, especially in a presidential election year. But now that the Fed chairman has signaled that it is time for monetary solutions from Washington to join the fiscal stimulus that has already been applied, what we heard today in Jackson Hole may have been the sound of a hatch coming down on Ben Bernanke's bunker.
- Ben Bernanke
- Federal Reserve