There once was a hard working farmer and wife who both had never taken a day off from farming. Then they got a once in a lifetime opportunity to visit Paris. Since one needed to stay, they decided have the wife go, while her husband tended to the farm. After arriving in Paris, she called home to let her husband know she was OK.
"How is everything on the farm?" she asked.
"Our cow, Missy, died," he replied.
She was upset and commented, "How can you be so insensitive? Missy, was almost one of the family. Since I am so far away, you could have let me know in a gentler way."
"How could I have done that?" he asked, wanting to do better next time.
His wife explained, "Well, you could have prepared me for learning that she had died. On this first call, you could have told me the cow had somehow gotten up on the roof. On the next day, you could tell me that she jumped off and is limping. On the next call, you could tell me the vet needed to be called. And on the fourth call, I could find out she needed surgery. And finally, you could have said she died on the fifth call."
"I guess you're right. I should have used more sensitivity in how I told you," he agreed.
"Thanks for understanding. By the way, how is Mother?" she asked.
The newly enlightened farmer replied, "Today, she was up on the roof ...."
Since July, 2007, it feels to me that the Fed has been like the enlightened farmer when delivering news about the economy. In July, 2007 the economy climbed up on the roof, as subprime loan risk significantly increased. In August, 2007, it slipped and was limping, requiring the first of a series of interest rate cuts. In January, 2008, the vet needed to be called, to address a liquidity crisis. In March, 2008, there was surgery; to save Bear Stearns. Now, in April 2008, is the first official mention of the possibility of recession.
With respect to a recovery, Mr. Bernanke expects economy to return to growth by the second half of 2008. In other words, the possible recession will be shallow and short. At this point, I agree with the Fed's recovery position and hope they won't need to gently deliver bad news of a longer recession.
"How is everything on the farm?" she asked.
"Our cow, Missy, died," he replied.
She was upset and commented, "How can you be so insensitive? Missy, was almost one of the family. Since I am so far away, you could have let me know in a gentler way."
"How could I have done that?" he asked, wanting to do better next time.
His wife explained, "Well, you could have prepared me for learning that she had died. On this first call, you could have told me the cow had somehow gotten up on the roof. On the next day, you could tell me that she jumped off and is limping. On the next call, you could tell me the vet needed to be called. And on the fourth call, I could find out she needed surgery. And finally, you could have said she died on the fifth call."
"I guess you're right. I should have used more sensitivity in how I told you," he agreed.
"Thanks for understanding. By the way, how is Mother?" she asked.
The newly enlightened farmer replied, "Today, she was up on the roof ...."
Since July, 2007, it feels to me that the Fed has been like the enlightened farmer when delivering news about the economy. In July, 2007 the economy climbed up on the roof, as subprime loan risk significantly increased. In August, 2007, it slipped and was limping, requiring the first of a series of interest rate cuts. In January, 2008, the vet needed to be called, to address a liquidity crisis. In March, 2008, there was surgery; to save Bear Stearns. Now, in April 2008, is the first official mention of the possibility of recession.
With respect to a recovery, Mr. Bernanke expects economy to return to growth by the second half of 2008. In other words, the possible recession will be shallow and short. At this point, I agree with the Fed's recovery position and hope they won't need to gently deliver bad news of a longer recession.
For more on Reflections and Musings, check back every Saturday for a new segment.
Photo Credit: morgueFile.com, Mary R. Vogt
This is not financial advice. Please consult a professional advisor.
Copyright © 2008 Achievement Catalyst, LLC
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