From The Hourly G:This morning, there are two radically different views on a speech Federal Reserve chairman Ben Bernanke gave on Thursday - the view from the mainstream media in the United States, and the view of the mainstream media in the rest of the world.
Both are referring to the same speech The Bernank gave at a luncheon at the National Press Club in Washington - but the American media is focussing on an obvious political nonstarter: The idea that the budget ceiling will not be raised.
The foreign media, on the other hand, is focussing on something that really matters: How the U.S. is exporting inflation, especially food price inflation, which is leading to social unrest.
Bernanke’s vehement denial of the obvious is what the media in the rest of the world is talking about.
Compare:
The New York Times reports in the lead of its story,
The Federal Reserve chairman, Ben S. Bernanke, warned Congressional Republicans on Thursday not to "play around with" a coming vote to raise the government’s legal borrowing limit or use it as a bargaining chip for spending cuts.
In remarks after a luncheon speech here, Mr. Bernanke sided with the Obama administration in the fight over the debt ceiling, which the government is on course to hit in April or May, saying it should be raised without conditions. Some Republicans have insisted on immediate spending cuts in exchange for raising the limit.
It was the first time that Mr. Bernanke, who in contrast to his predecessors has avoided taking sides in partisan debates on fiscal matters, had spoken out on the debt ceiling issue. His willingness to do so suggested a desire by the central bank to prevent Washington lawmakers from toying with bond markets that have been volatile since the European debt crisis last year.
Contrast those lead paragraphs with these from the UK’s Telegraph (not exactly a bastion of Lefty thinking):
Ben Bernanke, the chairman of the US Federal Reserve, has dismissed the idea that the central bank’s policies are to blame for the rise in global food prices to a record high that helped trigger political unrest in Egypt.
Mr Bernanke said that the rapid growth of developing economies was behind the increase in food prices, rather than the Fed’s decision to embark on a second, $600bn (£371bn) round of printing money. "Clearly what’s happening is not a dollar effect, it’s a growth effect," Mr Bernanke said in a rare question and answer session with journalists at the National Press Club in Washington on Thursday.
The United Nations Food and Agriculture Organization (UN FAO) has warned that high prices, already above levels in 2008 which sparked riots, were likely to rise further.
The Times and the rest of the American mainstream media is focussed on a non-issue - while the rest of the world is focussing on something that matters: Food price rises, and the perception that America is exporting inflation.
The American financial media’s thing about the Federal government debt ceiling is sort of silly - everyone knows that the debt ceiling will be raised.
The last time either party brought issues of government finances to a head - back in 1995, with the two Federal government shutdowns - the political cost was catastrophic for the party that pulled the trigger, in that case Newt Gingrich’s Republicans.
So for all their posturing, everyone knows the history. When it gets to crunch time, the Republicans won’t make the same mistake twice: They’ll fold, and sign off on raising the Federal government debt ceiling.
The debt ceiling is a non-issue: It’s political theater. Perhaps the U.S. mainstream media is focussing on it precisely because it is theater, and not substantive.
But food price inflation is real. The riots in Egypt are real - and they have nothing to do with "muslim extremists", or even Mubarek’s dictatorship: They’re about food prices, plain and simple, which have been steadily rising ever since the Federal Reserve’s loose money policies and various versions of QE have driven commodity prices to the moon.
American media is concentrating on political theater - fiddling while Rome burns, as it were - while foreign media is focussed - rightly - on what matters: The cause of mass unrest.
The Hourly G fully expects severe, high inflation to kick the American economy in the short term. Because the mainstream media is playing down fears of inflation, and (as in the case above) ignoring altogether the likely culprit for food price inflation, which is causing civil disturbances around the globe, expect the American people to be vastly surprised when inflation boils over.
This inflation shock that’s coming might well prove to be worse than the inflation shock of ‘79.
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