Bernanke On The Effects Of Oil Price Shocks, And Why The Fed Will Never Tighten In Response To Oil At Any Price

Tyler Durden's picture

Curious what Bernanke thinks of ongoing oil price shocks? Wondering how long before the great Chairsatan will tighten in response to $120 Brent? The shorts answer - never. But don't take our word for it. Here is a paper titled by the eponymous nemesis of printer cartridge conservation, titled "Systematic Monetary Policy and the Effects of Oil Price Shocks" written when the urge for genocide was just a germ, a seedling if you will, back in the good old 1997. In it, Bernanke, who was yet to make his epochal statement about paradropping crisp Benjamins, makes it all too clear why neither oil at $120 nor oil at $1,120 will be enough to push the FOMC to hike: "an important part of the effect of oil price shocks on the economy results not from the change in oil prices, per se, but from the resulting tightening of monetary policy.” And there you have it: it is not the natural price response to a period of extensively loose monetary policy that is the issue, it is the Fed doing the right thing and ending the spigot that will be the end of the economy, sayeth the Bernank. And somehow this man runs the world...

Full paper below:

Ben Bernanke And Oil Price Shocks