Yesterday’s News and Today’s Confidence Games

Sundance 2008

Hey so Sundance 2008 kicks off tonight. We’re now, officially, yesterday’s news! A year ago today Laura and I (and many others! Lee, Bill Warren, Dad, etc.) were in Park City nauseatingly awaiting the first screening. Thankfully, we are past that phase and about to enter distribution, come what may.
I’m excited for others at Sundance. We’re eager, like a lot of folks, to see AJ Schnack and Friends’ new documentary awards launch. Not because we have high hopes for The Unforeseen we were surprised to even be mentioned. It’s just long overdue and documentaries aren’t becoming any less ambitious.

Considering the macroeconomic circumstances, The Unforeseen actually benefits from the delay in distribution. Six months ago “Subprime” wasn’t tip-of-tongue zeitgeist stuff, now it’s everywhere. It’s begging questions about what happened and bringing the American Dream to the forefront.

Today’s Congressional Session/Confidence Games

Today Ben Bernanke went in front of Congress doing everything in his power to pretend that a recession not only ISN’T happening, but that it isn’t GOING to happen.

From today’s New York Times:

WASHINGTON — A recession is probably not on the horizon, but quick passage of an economic-stimulus package plus aggressive action by the Federal Reserve are the appropriate prescription for the ailing economy, Ben S. Bernanke, the Federal Reserve chairman, told Congress on Thursday.

Skipping straight to the testimony transcript, check this out, particularly the bold stuff:

Core price inflation (which excludes prices of food and energy) has stepped up recently as well, with November prices up almost 2-1/4 percent from a year earlier. Part of this rise may reflect pass-through of energy costs to the prices of core consumer goods and services, as well as the effects of the depreciation of the dollar on import prices, although some other prices–such as those for some medical and financial services–have also accelerated lately.

Thus far, the public’s expectations of future inflation appear to have remained reasonably well anchored, and pressures on resource utilization have diminished a bit. Further, futures markets suggest that food and energy prices will decelerate over the coming year. Given these factors, overall and core inflation should moderate this year and next, so long as the public’s confidence in the Federal Reserve’s commitment to price stability is unshaken. However, any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank’s policy flexibility to counter shortfalls in growth in the future. Accordingly, in the months ahead we will be closely monitoring the inflation situation, particularly inflation expectations.

To say inflation isn’t increasing because food and fuel prices don’t count is one kind of misstatement. But what strikes me as so unnerving is how much emphasis Fed chief places on public expectations. I hope it bothers you to think that, should you come to doubt the Fed’s “Inflation-fighting capability” that the economic outlook could materially worsen. The economy as some kind of Schrödinger’s cat inside its chamber, neither alive or dead. This entire testimony has such a “these aren’t the droids you’re looking for…” quality to it.

Had this been Bernanke, it would’ve played more like this.

Trooper: How long have you had these droids?

Luke: Bout three or four seasons…

Bernanke: They’re up for sale if you want them… unless you begin to suspect that they’re actually the droids you’re looking for, in which case we will necessarily have to rescind our offer to sell them. Since your suspicions could greatly complicate our task of selling these droids, even the hint of suspicion could greatly complicate the sale… We will, therefore, be closely monitoring your immediate response.

Trooper: [BAFFLED BY THIS MOBIUS STRIP OF A RESPONSE] Uhhhhhhh…. let me see your identification.

Bernanke: Because a clear need to see his identification could be construed as a loss of confidence in his droid-selling capabilities, you must not be allowed to see his identification lest this in turn increase the risk that you might conclude that these are, in fact, the droids you are looking for.

Should such a conclusion be drawn by you, it must be stated that the risks to us as sellers of these droids would be materially increased. These risks, heretofore unseen, if acknowledged by us and factored into the cost of the product would require a higher price for the droids, thereby reducing and potentially eliminating the discounted sale price hinted at in our prior address.

Careful consideration leads us to believe you to clearly be in need droids and because we have already indicated an interest in selling to you, we must be be forced to conclude that to not acknowledge our mutual interests would undermine our credibility as sellers and your confidence as buyers.

Stated more simply, “These are the droids you are looking for…”

The problem with a transparent Fed Chief is of course seeing through him. Contrast that with the problems of a completely opaque one:

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