Good morning. The announcement effect of the Fed's first tiny taper is behind us. The sun still rose in the east this morning, and I'm still here. On to your daily reads.
Finally the dreaded taperbecomes reality
And it wasn't so bad after all. Major U.S. stock indexes closed at new highs after the Fed announced a $10 billion reduction in its $85-billion-a-month bond-buying program. Future reductions -- or increases, should the economy falter or inflation fall -- are "data dependent," Fed Chairman Ben Bernanke stressed at his press conference. The announcement came on the heels of upbeat economic data. In the past month, stocks seem to have abandoned their bad-news-is-good-news mantra and embraced better economic news, which is why the Fed was comfortable starting to taper its asset purchases. In order to soften the blow, the Fed embellished its pledge to keep the funds rate close to zero at least until the unemployment rate hits 6.5 percent. The new guidance is "well past the time." Got it. Thanks.
Down memory lane with Bernanke
You may want to print this lengthy piece to read by the fire. The Washington Post's Neil Irwin, who has covered the Fed for seven years, weighs in with his assessment of how history will treat Ben Bernanke. From his initiation into a world where saying "no" to Maria Bartiromo caused a dive in the stock market, to his failure to grasp the depth of the crisis, to his aggressive response once he did, Ben Bernanke and the Fed "rescued the U.S. and global economies from the abyss and prevented a second Great Depression, exhibiting courage and creativity," Irwin says. Alan Blinder once called Alan Greenspan "the greatest central banker who ever lived." I wonder what he'd say now.
Don't forget Bernanke's role as the great communicator
The Wall Street Journal's David Wessel takes a different angle on Bernanke's lasting impact. "It will be seen in the way the central bank views and talks to the public whose interests it is supposed to serve," he writes. Bernanke "avoided the mumbling of his predecessor," Alan Greenspan, who reveled in opacity. Greenspan, who wasn't an academic, was never schooled in rational expectations theory. The current Fed, not to mention central bankers in Europe and Asia, have all swallowed the expectations dogma. Don't get me wrong. The central bank should clearly state its objectives and how it plans to achieve them. Too much talk runs the risk of being hijacked by an uncertain future. It was only three months ago that traders were swearing at Bernanke for misleading them.
Economics for dummies? No, economics for kids
Economist Miles Kimball created a Macroeconomics 101 story book for children. (There's a companion coloring book as well.) There are no formulas, no complex equations, and no model-based forecasts. It's just a story about the ups and downs of the economy. Who said this stuff had to be complicated?
Health care for dummies
Confused about the Affordable Care Act? Don't know a Cadillac tax from a Chevy? The American Action Forum has a dictionary to explain everything you want to know.
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