1. Like most I was disappointed at the tone of Bernanke’s speech and in particular a few points were he strayed into obfuscation, seemingly in an effort to quite inflation hawks.
  2. Conversely there times when you are trying to explain economics to an audience and you know they aren’t going to understand your “real” answer, so you make up something that will make sense to them but also get them to the right answer. Bernanke also went this route a few times response to inflation but not so much in response to unemployment. These responses seem to reveal a deeper concern about how his remarks will be interpreted by inflation hawks.
  3. I couldn’t really get a sense for what he thinks inflation expectations mean. There seems to be a split among economists, between those who believe that “expectations” means what’s priced into financial assets and, others who take expectations more literally and think of it as something like “what the average person believes” I tend to side with the financial market view. Bernanke’s posture seemed to give credence to the second view.


  1. The headline on this report is sobering but the internals don’t look as bad.
  2. Government knocked over 1 point off GDP. About .69 of that was defense spending. State and local continued to drag at .41 percent. This represents important drag but when thinking about the conditions facing private business, GDP looks better.
  3. Equipment and software continues to be strong, adding .8 points to GDP. We have experienced a strong rebound in equipment and software, that would be indicative of a mini-boom if there wasn’t the drag from construction.
  4. Residential and non-residential structures continued their drag on GDP, knock .7 or so off of growth.



  1. The path doesn’t look that bad.
  2. The fundamentals still seem like they are shifting towards stronger growth. We are not seeing depressed personal consumption expenditures. We are not seeing industrial production stall out. We are not seeing no new investment in equipment and software.