Balancing Inflation and Growth Part 3 of 13

Indeed, as I speak, central bankers here and across both the pond and the channel feel besieged by a seemingly insurmountable foe delivering retribution for our having been complacent, if not smug, during those happier days. Like Henrys troops at Agincourt, it may appear that we face overwhelming odds. Yet I am not overwhelmed.

Why not, you ask? How to trade commodities allows me to invoke another of your English ancestors in reply. Winston Churchill once asked: Why is it that the ship beats the waves, when they are so many and the ship is one? The reason is that the ship has a purpose. Tonight, I wish to give my view of the purpose of the Federal Reserve.

Needless to say but I will say so any way the views commodity market trading I express this evening will be my own and not those of any other member of the Federal Open Market Committee or any official of the Federal Reserve System. This is but one mans soliloquy.

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Balancing Inflation and Growth Part 11 of 13

One would like to think that as the economy slows, inflationary pressures will do likewise. But we cannot always be sure they will, given the globalized commodities trading system nature of the U.S. economy. Demand-pull pressures abroad have an increasingly potent influence on our domestic economy. Traditionally, a central bank would expect slack to develop as the economy under its jurisdiction weakened, leading to less demand for most inputs and an easing of price pressures. We no longer operate in a traditional economy. Domestic inflation developments have become increasingly less sensitive to domestic measures of slack. In an open, globalized economy, capacity utilization and inflation pressures need to be measured, or at a minimum, understood in their global context.

You cannot think in a purely domestic context about the pricing of oil or steel or soybeans or pulp or shoes or clothing or even what I consider to be one of lifes essentials, beer, because innovations in transportation and communications technology have all but eliminated national borders for almost any product for which trade barriers were negotiated away during the 1980s and 90s. More commodity training books vexing for economists and econometric modelers, the information technology revolution and the spread of the Internet have blurred the once-clear distinction between easy-to-trade goods and difficult-to-trade services.

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Balancing Inflation and Growth Part 13 of 13

To some, this may appear a Hobsons choice. I dont see it that way. Our obligation is to prevent inflation in order to sustain long-term employment growth and commodity trading company. I believe that the best way to cut through the treacherous economic waves that are upon us and keep our ship steaming forward is to stick to our purpose.

That about says it all for tonight. Let me bring this back to London. Recently, the New York Times ran a delightful article on your search for a motto or commodity quotes that captures the essence of Britain. My favorite was Nemo me impune lacessit, which loosely translatedaccording to my Texas Latinmeans Never sit on a thistle. Tonight I may have taken the risk of sitting on the thistle of opprobrium of those of you who wished to hear a more felicitous speech. But Charlie Beans advice was to just tell em what you think. That is what I have done, and I thank you for allowing me to do so.
In the time that remains this evening, I would be happy to take questions and, in true central banking fashion, do my level best to avoid answering them.

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