What The ‘Rising Dollar’ Accomplished (Apart From That ‘Unexpected’ Global Downturn)

Many if not most people were looking at Janet Yellen’s Jackson Hole speech hoping for some hint or clue as to her “hawkishness” or “dovishness.” As I’ve written before, that’s the wrong to look at the Federal Reserve and its policy. They want to raise rates simply because it’s been one hundred and nineteen months since they started lowering them.

Without further excuses provided by a rampaging “rising dollar”, as it did in 2015 and 2016, they just have to get on with it. The real message in her speech was more subtle, maybe too much. We can find it more easily in contrast to her predecessor’s prior appearances at Jackson Hole.

This year’s gathering is nothing compared to the one seven years ago in August 2010. Though the Great “Recession” had officially ended more than a year before, the economy wasn’t progressing as much or as quickly (sounds familiar) as it perhaps should have been given the size of the downturn and devastation. Then problems in Europe appeared that really had little to do with Europe.

Essentially markets and the media wanted Ben Bernanke to bail out the system again. QE1 had been terminated at the end of March 2010, and in between was a flash crash in US stocks and a whole lot of negativity in other markets – the same kind as became common in 2008.

Bernanke didn’t disappoint, of course, practically signaling that a second QE was coming (as it did). First, however, he had to get around the need for a second.

On the whole, when the eruption of the Panic of 2008 threatened the very foundations of the global economy, the world rose to the challenge, with a remarkable degree of international cooperation, despite very difficult conditions and compressed time frames. And when last we gathered here, there were strong indications that the sharp contraction of the global economy of late 2008 and early 2009 had ended. Most economies were growing again, and international trade was once again expanding.

Notwithstanding some important steps forward, however, as we return once again to Jackson Hole I think we would all agree that, for much of the world, the task of economic recovery and repair remains far from complete.