[lbo-talk] CNN Breaking News

[Marvin Gandall]

Micheal Pollack wrote:
>
> On Wed, 26 Oct 2005, Doug Henwood wrote:
>
>> Grant doesn't represent the mainstream of the bond market. His is a 
>> relatively marginal and highly ideological view - and his forecasting 
>> record is pretty mediocre.
>>
>> Point by point:
>
> Points well taken.  But do you think there is a chance that the otherwise 
> inexplicable view you saw yesterday -- that there are elements of the bond 
> market that consider Bernanke inflationary -- may indeed flow from a 
> memory his 2002 speech?  It was indeed somewhat aggressive and unorthodox. 
> Most in the stocks would say it was those things in a good way.  It 
> doesn't seem far-fetched that bondholders might think it was those things 
> in a bad way -- 
> i.e,. too afraid of deflation risk and not afraid enough of inflation risk 
> = soft on inflation.
>
> Michael
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Don't know whether it's been pointed out yet or not, but Bernanke's speech 
was made at the height of concerns in 2002 that the US was poised on the 
cusp of a Japan-style deflation, following the bursting of the dot com 
bubble. So, in context, Bernanke's speech really wasn't that "agressive and 
unorthodox" and was consistent with the Fed's frantic rate-cutting which 
lasted until it reversed course last year.  The subsequent sharp drop in 
mortgage rates fuelled price inflation in the real estate market and related 
consumer spending tied to mortgage refinancing. How quickly we -  or they - 
forget...