The Verbal Dollar

The scariest moment of the next quarter will be April 27, when the chairman of the Federal Reserve, Ben Bernanke, will give the first of the four-times-a-year press conferences that the Fed, in a break with tradition, is vowing to hold. That is the report from Fast Money’s John Melloy, who quotes a founder of TradeMonster.com, Jon Najarian, as saying that he would anticipate “a giant ramp up in volatility” ahead of Mr. Bernanke’s press conference. “Traders react to one word removed from a paragraph in the policy statement and now he’s going to hold a press conference?”That may be why there had been a tradition of silence among central banks. It goes back at least to the Bank of England. Once, in 1929, its deputy governor was asked to explain the silence. His interlocutor, Lord Keynes himself, was serving on a parliamentary committee looking into the looming depression. He asked the Bank of England’s deputy governor, Sir Ernest Harvey, whether it was a practice of the bank never to explain what its policy was. Sir Ernest suggested that it was the bank’s practice to “leave our actions to explain our policy.” When Keynes plowed on, Sir Ernest famously explained: “To defend ourselves is somewhat akin to a lady starting to defend her virtue.”The editor of Grant’s Interest Rate Observer, James Grant, who reminded us of that exchange, has a newspaperman’s skepticism of Mr. Bernanke’s plan to start defending the Fed’s virtue. He speculates that perhaps Mr. Bernanke “is reacting to the smoldering populist rage over the inflation he refuses to acknowledge.” He notes that the Bank of England, in “its glory days managing the pre-World War I gold standard,” said “next to nothing” but did “conscientiously exchange bank notes for gold, and gold for bank notes, at the statutory rate. Compare and contrast our Federal Reserve, which prints acres of money, manipulates stock prices, suppresses interest rates — and can’t seem to stop talking.”Call it the verbal dollar. It seems to be the opposite of the gold standard, and why not, since gold and silence are linked. The Web site phrases.org.uk has a whole essay on the etymology of the aphorism “silence is golden.” It turns out, phrases.org reports, that the first use of the phrase in English was from the poet Thomas Carlyle, who in 1831 translated the phrase from the German in Sartor Resartus, in which a character expounds on the virtues of silence. He spoke of how “all the considerable men . . . forbore to babble of what they were creating and projecting.” Speech is great, he wrote, “but not the greatest.” And then he cites the Swiss inscription, “Sprecfien ist silbern, Schweigen ist golden [Speech is silver, Silence is golden].” No wonder the markets are scared.

The Verbal Dollar

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