July 6, 2013
Not so long ago, the Federal Reserve tried to obscure its operations behind a fog of jargon and euphemisms. As Beltway legend has it, when a senator told Alan Greenspan that he understood one of his points, the longtime Fed chairman replied, “Then I must have misspoken.”
Greenspan’s successor, Ben Bernanke, has pushed the central bank and its members to be more direct. Bernanke held the Fed’s first-ever press conference in 2011, and in his testimony to Congress he’s tried to demystify the bank’s extraordinary efforts to boost the economy, which currently take the form of buying $85 billion of bonds each month and keeping short-term rates near zero. It was at one of those hearings, in May, that Bernanke first talked about the possibility that the purchases could wind down sooner than expected. The reaction was violent: Stocks, bonds, gold, and other assets sold off sharply at the prospect of the Fed’s fuel drying up, and a key measure of volatility surged 44 percent.
Bernanke and his central bank colleagues took to podiums and airwaves to calm the markets with comforting everyday imagery. Or tried to. “To use the analogy of driving an automobile,” Bernanke said in a prepared statement on June 19, “any slowing in the pace of purchases will be akin to letting up a bit on the gas pedal as the car picks up speed, not to beginning to apply the brakes.” Bernanke set the standard for muddled metaphors when he parried reporters’ questions that day. Certain economic data, he said, “are guideposts that tell you how we’re going to be shifting the mix of our tools as we try to land this ship on a, you know, on a—in a smooth way onto the aircraft carrier.”