The annual Jackson Hole Economic Summit will begin next week, starting on Thursday, August 30th running through September 1st. Fed Chairman, Ben Bernanke, will give his remarks at 10AM on Friday the 31st. Much hinges on his comments, as the financial world will tune in to get a glimpse of his thoughts regarding Fed perspective and initiatives, as well as possible future economic policy in the US.

Over the years, the Federal Reserve has become an increasingly political machine. The no-replacement job security of the Fed Chairman is supposed to insulate him from political pressure, but we all know empirically that it doesn’t appear to work that way. In my estimation, he will try to paint as rosy a picture as possible without appearing dangerously out of touch with reality. He will want to appear in control, and effective in his past policy efforts. So there should be a fair amount of self-justification, as anyone in his situation would do. Given the economic languishing we all see, he should argue that we are on the right path, we have made all the right moves, and we simply need more time. He should make an argument for greater quantitative easing, but should stop short of recommending any robust intervention. This would communicate that we are dangerously close to tipping back into recession, and risks the “fear we have is fear itself” argument. Additionally, the rising influence of the Tea Party movement should not be under-estimated, especially given recent election turn of events. The Tea Partiers would rail at the thought of more deficit spending, and it’s hard to argue with their logic (a bigger shovel is never a way out of your current hole).