Watching Words

   Bellwether: A male sheep that wears a bell for the flock to follow.
   Economic bellwether: A bit of data that indicates the direction investors may take.
   Wall Street is less a barometer of economic health than of investor emotional health.
   Panic selling or irrational exuberance by turns can dominate stock markets.
   "When faith meets evidence, evidence doesn't stand a chance." -- Paul Krugman.
   "My head's made up. You can't confuse me with the facts." -- Chester A. Riley.
   Reality may have little effect on the so-called wisdom of the crowd -- or the flock.

   Buried somewhere in the obtuse language of the Federal Reserve Board's minutes of its last meeting is the hint that the U.S. economy is recovering enough so that the Fed may stop priming the fiscal pump by autumn. Then again, it may not.
   The minutes of the meeting said "participants continued their discussion of issues associated with the eventual normalization" of monetary policy -- whatever that means -- but that such a discussion "did not imply that normalization would necessarily begin sometime soon." Then again, it might.
   In any case, those at the meeting agreed that adjusting interest rates "should play a central role" in the normalization process, the text of the minutes said. Moreover, participants "expressed a preference for a simple and clear approach to normalization that would facilitate communication to the public and enhance the credibility" of the Fed's monetary policy.
   Editors always endorse "simple and clear" writing to "facilitate communication" and "enhance credibility." One wonders when the Fed will follow its own advice.

   Meanwhile, the American economy as measured by production (GDP), faltered earlier this year, but inflation (prices) rose and the labor force participation rate declined even as the unemployment rate dipped and personal consumption spending fell. This suggests that some folks stopped looking for work and that some workers couldn't afford to buy stuff they needed because prices rose even as output increased. So who is buying the stuff American industry produces? 
   
   Otherwise, Fed staffers at the June meeting advised the board that GDP growth would "rebound briskly" in the second quarter. Possible? Yes. Likely? Maybe. The U.S. economy began to slide last year, and fell off by 2.9 percent in the first three months of this year. Signals are entirely too mixed to expect a "brisk" turnaround during the April-June period.
   Meanwhile, central banks in other major nations are remaining cautious. The Bank of England voted last week to hold its key interest rate steady at 0.5  percent, and to continue pumping cash into its economy. And Canada's central bank, while seeing encouraging signs, still noted uncertainty over growth potential. In Mexico, the central bank voted to hold its key lending rate steady, despite hints of stronger growth and slack in the economy.