Jackson Hole, Bernanke and Lagarde

I returned from the Jackson Hole Federal Reserve Economic Symposium having listened to Federal Reserve Board Chairman Bernanke and International Monetary Fund Managing Director Christine Lagarde make very different speeches.

I thought Chairman Bernanke’s speech was brilliant for two reasons. First, he expressed long-term optimism in the American economy. While he acknowledged strong headwinds and a fragile economic recovery, he left no doubt that the chairman of the Federal Reserve was confident in the long-run strength of the American economic engine. In other words, we will prevail. 

Second, he expressed his long-range confidence by not announcing any new extraordinary steps to further stimulate the economy. While leaving the door open to further monetary policy steps to aid the recovery, the chairman made it clear that it is primarily fiscal policy that needs to be addressed to aid the long-term economic recovery. I applaud the chairman for delivering a speech that set just the right tone and expectations. And I commend him for expressing confidence in the American economy and its people.

Managing Director Lagarde closed the conference with her speech. It was a stark contrast to the speech delivered by Chairman Bernanke. Ms. Lagarde’s speech was a call to action for the European nations to take immediate and bold steps to shore up their banking systems, address their sovereign debt problems head on and commit the continent to not allowing the European Union-member nations to again slip into a 2008-type calamity. Her speech was bold and very frank in its views. It garnered worldwide attention and triggered responses from the president of the European Central Bank and other financial officials in Europe.

What a contrast, optimism in the long-run prospects of the American economy from Chairman Bernanke and an urgent call to action from the managing director of the IMF. It was a remarkable conference, and I was privileged to have been asked to attend. It was also Tom Hoenig’s last Economic Symposium as president of the Kansas City Federal Reserve Bank. And he is a pretty remarkable fellow in his own right. Godspeed Tom Hoenig, and thank you for your nearly four decades of service to the 10^th Federal Reserve District, to the Federal Reserve itself and to the people of the United States. Job well done, sir.