Unconfident Confidence

When the going got rough, Bernanke…blamed the weather? It was September 24, 2008, amidst financial chaos the likes of which the entire world hadn’t seen since the early thirties. Hauled up before Congress’ Joint Economic Committee to explain what was going on, or attempt some kind of reasonable sounding explanation, Bernanke pointed to a few positives out there despite so much wreckage piling up.

This was the week following Lehman and AIG, the repo shocks still reverberating underneath yet to fully process the real liquidity withdrawal soon to rock Wall Street and Main Street alike. Still not even expecting a recession (though a pretty nasty one had already begun almost a year before all this), the sharp drop in oil and therefore gasoline prices since that summer could, Bernanke testified, help buoy consumer sentiment.

Hey, he had to hang his hat on something. If only Hurricane Ike hadn’t gotten in the way of this quickening commodity crash.

On a more positive note, oil and gasoline prices–while still at high levels, in part reflecting the effects of Hurricane Ike–have come down substantially from the peaks they reached earlier this summer, contributing to a recent improvement in consumer confidence.

Janet Yellen, his successor, would make a similar claim six and seven years later. Falling oil prices seem like a good thing, a tax cut-like boost in spending power. But why had commodity prices, especially oil, been set on a course to crash (twice; in 2008, then again in 2014) to begin with

Any positive impacts from lower prices at the gasoline pump would be easily set aside, in the negative way, by the underlying problems deflationary commodities would really represent. Not subprime mortgages, or some supply glut, rather the repeating acute phase of an fundamental global dollar shortage causing such worldwide tightening to begin with

That’s not usually how consumer confidence, at least, is perceived as actionable, but in September 2008 the guy couldn’t mention stock prices as the usually positive contributing force against the chaos

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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