There’s always something to howl about.

Know Nothing, Do Nothing Fed Inspires Confidence and Encourages Faith

The Federal Reserve released it’s August statement yesterday and pundits are scrambling to interpret what was and (equally as important) wasn’t said.  Financial market participants have a 10-15 year history of trying to “outguess” the FOMC and focus more on the commentary than the actual decisions.  The result has been volatile market movements directly after a word was changed from “probable” to “eventual” in the Fed commentary.

I’ve learned to trust Fed Chairman, Ben Bernanke’s judgement.  An astute student of Milton Friedman’s study of The Fed’s role in the Great Depression, Bernanke has taken considerable action to preserve a healthy banking system.  Free market enthusiasts would argue that his intervention is artificially  postponing the eventual asset deflation reflective of a dour economy.  I’d argue that his actions were necessary to promote confidence.

Confidence.

Sean Purcell and I discussed the press’ obsession with doom and gloom yesterday.  Last month a Qantas 747 lost a portion of its fuselage, had to quickly descend below the 10,000 “hard deck”, and make an emergency landing.  The 2.0 world gives us citizen journalism in the form of this passenger video.  Watch it and you’ll see a professional air crew inspiring confidence in faithful passengers.

The Australian News realized that “professional” and “rational” won’t sell fishwraps and elected to lead with “Terror As Huge Hole Cripples Qantas Plane“:

A QANTAS jet plunged 20,000 feet and was forced to make an emergency landing after a giant hole was ripped in the plane’s undercarriage, passengers say.

The Qantas Boeing 747, en route from London to Melbourne, via Hong Kong, landed safely today and a “gigantic” hole was discovered in the belly of the plane, near the wing.

Some of the 346 passengers on board told of debris flying through the depressurised cabin, and oxygen masks dropping from the ceiling. Some said the plane had plunged about 20,000 feet after a door “popped”.

“There was a terrific boom and bits of wood and debris just flew forward into first (class) and the oxygen masks dropped down,” Melbourne woman Dr June Kane told ABC Radio.

An option to “lead with the bleeder” rather than the heroism of the air crew.  I’m not minimizing the traumatic effect of a plane floor falling out.  While the “pucker” factor had to be huge on that jet, the pilot intervened and took action to avoid a disaster.   Coordinated efforts by the Qantas air crew inspired faith in the passengers.

Faith.

Last August, the floor was ripped off the fuselage of the credit market when American Home Mortgage was the first prime lender to close its doors.  Each subsequent mortgage company failure was like a panel of the fuselage flying off.  Bernanke descended below the hard deck by “plunging” the Fed Funds and Discount rates.  He called the tower and asked for assistance.  Oxygen masks were provided to help the weakest of passengers.  Yesterday, he got his air crew to serve us coffee rather than encourage panic.

Should that Qantas plane have fallen from the sky and sent hundreds of innocent souls to heaven?  It certainly could have been morally justified, considering the Qantas record for maintenance.  Preservation, perhaps, was on the top of the pilot’s mind rather than moral outrage as he elected to minimize the damage of past poor decisions.

Intervention is justified when fighting for your life.

The Fed said a lot in its know nothing, do nothing statement, yesterday:

Ladies and Gentlemen, this your Captain speaking.  We’ve experienced an equipment malfunction in the underbelly of the craft.  While the situation required us to drastically alter our course, we’ve been in contact with the tower and expect to make an emergency landing in the near future.  We ask that you remain in your seats at this time and fasten your seat belts.  The air crew will be coming around to offer you complimentary soft drinks.  There is a slight crosswind on the ground which may cause discomfort upon landing. The weather is a balmy 65 degrees on the ground and we expect to land shortly.  Sit back and enjoy the ride.  Thank you for flying…

The Fed pilot is inspiring confidence.  Maybe we should all have a little bit of faith.