If this post gave anyone hope that the worst of the economic crisis was behind us, the following paragraph might serve to bring everyone back down to earth. Despite better job numbers and positive outlooks from a number of economists recently, Fed Chairman Ben Bernanke's view is that there are still rocky times ahead for the economy. In comments to the Economic Club of Washington, Bernanke explained his view that 'formidable headwinds' will lead to no better than a moderate growth rate going forward. On the bright side, he noted that inflationary forces remain under control for the time being.
Any time a Fed Chair comments on the future, it is valuable for market and economic observers. However it is the Chairman's comments about the Fed's role in the recent financial crisis that are the most interesting to analyze. As it has been noted on this page previously, Bernanke has a fight on his hands with respect to the independance of the central bank he leads. It seems that every time he has had a speaking engagement recently, he has trumpeted the moves that the Fed made in the wake of recent financial turmoil and emphasized the fact that it is independance that has made these reactions possible. This is undoubtedly all part of a strategy to keep the Fed's ability to react quickly and creatively to problems firmly in lawmaker's minds.
Assuming arguendo that Bernanke is indeed playing a political game when he reminds everyone of the value of an independant Fed leads to the question of how this strategy tempers the Chairman's outlook as long as his reconfirmation is in the air. It also perhaps highlights the problems that can occur when political appointees are fighting for their lives. Could it be possible that Bernanke wants everyone to remember the worst of times and the fact that the Fed had the ability to counter them? It is certainly possible. Who wouldn't want to remind their bosses of how valuable they were when given the opportunity? Though the Fed, for now, remains much more independant than most other government entities, observers should be at least consider Bernanke's current position when analyzing his comments. They should also be cognizant of the fact that he may be, even if subconsciously, making sure that Congress remembers that it could do worse than a Great Depression historian if further bad times are ahead.