In order to promote greater transparency, the Fed recently decided to hold press conferences after its monthly meetings.
One might have believed that to be a good thing.
But last week, as soon as Bernanke took to the podium, one quickly discerned that "greater transparency" may be a euphemism for "proof that we're flying by the seat of our pants."
The Fed chief has no sooner opened his mouth than the market began to plunge. Bernanke went on to admit that he had no idea as to what forces are undercutting the U.S. economy. Nor did he offer any solutions.
"We don't have a precise read on why this slower pace of growth is persisting," he explained.
Cue market drop.
Perhaps we should revert to being left in the dark. Then, at least we believed the Fed had a plan. There seemed to be a correlation between the air of mystery and our level of respect.
Last week, Bernanke looked like the skipper whose ship enters stormy seas. His passengers ask what they might expect.
"Rough seas," he answers.
Bernanke is no Churchill. But, the Fed chief's oratorical skills are hardly the point. We are stuck in a Catch-22 in which the bad labor market requires an improving housing market. Conversely, a terrible housing market requires an improving labor market.
Add to that haiku the fact that inflationary energy and food prices have had a corrosive effect on incomes, and you begin to understand the pessimism.
No, that's not vertigo, silly. That's what economists call "income effects."
The income effect is a change in consumption resulting from a change in real income. People forced to pay $4 for gas, or $25 more on groceries, have less to spend elsewhere. Thus, they feel poorer. And confidence drops.
Now, when the stock market rises (ditto for housing, bonds, etc.), those owning appreciable assets feel better about their stead because as net worth increases. Economists call this "wealth effects." And when it increases, it can offset the income affect.
But sometimes, both decline. Which can be a problem. The less sanguine we become regarding the economy and our place within it, the tighter we batten down the hatches. Which gives way to less spending. And then less hiring. And more inspirational speeches by the Fed chief.
This job market has to increase at some point, right?
In the 20 years leading up to the 2008 meltdown, the U.S. added 27 million jobs. Most of these were in the "non-tradable" side of the economy. Government. Healthcare. Construction. Retail. Hospitality. These goods are consumed as they are produced. Most have a domestic service orientation.
The "tradable" side of the economy generates exportable goods and services. As emerging markets developed, we had more products and services to export. But now, the skill level within emerging economies has risen. They have begun to provide for their own higher level necessities.
So, what can we do?
We can begin by expanding the size of the tradable sector. Increase programs and funding for the enhancement of advanced job skills. Create new, high level manufacturing jobs in newer, higher tech industries. Think advanced manufacturing. Environmentally friendly programs. Alternative energies and technologies.
Push people up the totem pole, as opposed to asking them to compete with low-paid foreign laborers.
Further, we need to incentivize companies to more rapidly develop these areas. Wage levels in markets like China and India are increasing. Add in the logistics of developing products overseas, and you see an opportunity to discuss the repatriation of traditional manufacturing efforts.
But, we need tax breaks to offer companies which might consider maintaining or redeveloping domestic manufacturing bases. Grants for the rapid escalation of research into serious, eco-friendly, alternative technologies. Endowments seeking to promote training for a new wave of advanced service technicians. Trainers. Support networks. And so on.
What will it take?
A serious-minded, forward thinking approach involving the collaborative efforts of the private, public and educational sectors. Defining objectives. Establishing plans. And executing them, arm in arm.
The U.S. possesses the sharpest minds and most proactive executives the world has to offer in its universities, corporations and non-profit arenas. Americans rank among the top critical thinkers in the world. Could not the government exert some leadership and bring these minds together? Isn't that what government is supposed to do?
Instead, headlines are dominated by our political duopoly's daily bickering over partisan ideology. This constant media cage match as the two major political parties (where else in our lives do we only have two choices?) fight for public relations supremacy -yet get nowhere.
One begins to understand how the centrally controlled emerging nations have made so much progress so quickly. No bickering. Their priorities are what ours used to be: fighting each day for a better standard of living.
And us? We just fight each day. To stay in office. To show how stupid the other party is. To capture the most favorable headlines.
Until our government pulls together the best and brightest in order to provide solutions, we will continue to find that our problems have no intention of solving themselves. Catch-22s don't just unravel. They persist. Ask Joseph Heller.
We will pacify ourselves with all of the empty rhetoric of the coming election cycle. Being no closer to the solutions than we were during the last election cycle. No better nor worse off than before.
A cold shower has never been more called for.
Till then, we will continue to prune up in this bathtub of uncertainty. Lying in a state of semi-comfort, though approaching a lack thereof. As if the memory of how warm the water once was remains enough to prevent us from climbing out. Stay tuned.