Greg Ip's Frontpager
Jude Wanniski
April 29, 2005


To: Ben.S.Bernanke@***.gov
Re: Greg Ip's frontpager

From Jude Wanniski, 11:50 am, 4/29/2005

Rats. I thought you would continue at the Fed until confirmed.  Jude

At 12:14 PM 4/29/2005, you wrote:

I have formally recused myself from making monetary policy as I have now been nominated to be in the administration.    Ben

To: Bernanke
Subject: Greg Ip's frontpager
Bcc: Bob Mundell
10:26 am, 4/29/2005


Did you note the futures market early this morning showed the Dow up 57 points, where it opened for a few minutes before sliding to red ink?

Actually, the futures market was flat last night at midnight, but shot up the 57 points after the Senate narrowly passed the budget resolution, which cleared the way for extension of the capgains tax cut. The market this morning confronted Greg Ip's WSJ leader, which strung several Fed quotes together under a headline indicating "Fed Sees Inflation As Bigger Threat Than a Slowdown."  The inside NYT piece by Eduardo Porter more or less said the same thing but was not as conspicuous.

Ip's last line: "But no Fed official has yet suggested that rates are close to neutral, which would imply the Fed was almost finished raising them."

Don't you think it's about time for you to take the lead in making that suggestion, if no one else will?  You of course don't have to answer this question and I don't expect one, but you of course know that if I were in your shoes, that is what I would do. The markets continue to tell you that they are not happy with the policy, which inevitably leads to slower growth and more inflation, not less. "Stagflation Fear Puts a Chill Into Blue Chips," reads the headline on the front page of the WSJ "Market & Investing" page C-1, with E.S. Browning writing: "The bears are closing in on Goldilocks."

My guess is that Greenspan is not going to be the first out of the box but will lay back and see what the rest of the crew says and the Greg Ip piece indicates the voting will be to fight "flation" instead of "stag."  There is no downside to you fighting "stag" at this point.  We would have a "Bernanke Rally" on Wall Street. Maybe the first of many.