Where are the Adults at the Fed?

On Tuesday morning, Chairman Bernanke made a watershed appearance in which he stated that the Fed was aware of the delterious effect of the weak dollar and promised that they were on top of it.  This is the statement everyone was looking for after the April meeting of the Monetary Policy Committee but did not get.

People took the Fed chairman at his word and started selling the Euro.  This had the happy effect of driving down oil prices as well as the prices of many other commodities and it looked like the country was going to fare well.

Fast forward to this morning and the adjournment of the ECB policy meeting, after which Trichet made unbelievably hawkish statements about raising rates in Euroland which basically undid all of the work the Fed did on Tuesday.  The result?  Oil is up $5.50 today, the largest dollar gain ever.  Corn, Soybean and other commodity prices skyrocketed.  The Euro is just under 1.5600 now up from 1.5360 after this mornings data, and only a few ticks below where it was when Bernanke began speaking on Tuesday.

Are you telling me that Bernanke did not inform Trichet that he was going to make a watershed statement and could you please please not piss all over it?  Or that he did, but Trichet pissed all over him anyway?  This is just unbelievable.

This episode is further evidence that Bernanke is in over his head.  For the statements of the two most important Fed chiefs not to be coordinated, at the urging of our central bank if necessary, in this time of dangerous price inflation is well over the line of negligence into the region of incompetence.

As I have said before, the United States would be better off with a Fed chairman who was more hawkish and had some idea how to manage their public statements to good effect.  Obviously the major statement made the other day was not intended as a major statement.  My mistake in thinking that the Fed actually saw the light.

To be clear and transparent, I took a huge hit when the dollar got crushed this morning.  But I did so because I assumed the Fed chairman knew what he was doing.   He obviously does not.

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