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Semantics save the Fed chief

| Sunday, Feb. 18, 2007

Semantics is defined as the meaning or the interpretation of a word, sentence or other language form.

In his textbook, "The Use and Misuse of Language," the now-deceased San Francisco University professor of English and U.S. senator from California, S.I. Hayakawa, taught his students how to carefully craft words and phrases so that readers could not possibly misunderstand what they meant. Hayakawa's book was unique because despite being a college textbook, it was enjoyable reading. Hayakawa practiced what he preached.

Somewhere along the line, Federal Reserve Chairman Ben Bernanke certainly learned the lessons Hayakawa taught.

Bernanke's most recent writing came in the form of his testimony to the Senate Committee on Banking, Housing and Urban Affairs last week.

Bernanke's 2,739-word presentation outlined, as the law prescribes, current U.S. economic conditions and how they relate to the Federal Reserve's credit policy.

According to Bernanke, the U.S. economy is in generally good condition, albeit with a few near-term problems that he felt could be handled relatively easily.

At first glance, the Fed chairman's prepared remarks appeared to be simple statements of facts with occasional assumptions about possibilities thrown in as he tried to offer his view of economic prospects. But it was in those assumptions that Bernanke crafted his presentation carefully so that no one mistakenly would think he was presenting a Pollyannaish economic forecast.

Knowing that many of the items he addressed had political implications, Bernanke had to shape his presentation well. With a minimum wage bill close to coming up for a vote, wage-related issues were particularly sensitive and had to be treated carefully so that he could not be accused of harboring any political bias.

Although the federal budget deficit and entitlements came up in the question-and-answer portion of his testimony, the most interesting aspect of Bernanke's presentation was that he totally avoided both issues in his formal remarks despite having written and spoken about both subjects often in recent months.

Despite having the opportunity to prepare his formal remarks carefully, Bernanke probably knew that making either of these two topics part of his remarks would send his testimony down a path he did not care to travel. Not even the most careful application of semantics would have enabled him to avoid being embroiled in a debate he did not want.

Hayakawa's one term in the Senate put him squarely in the middle of Washington's daily battles. Theoretically, Bernanke is exempt from this fray, but he knows, as did his predecessors, that the Fed chairmanship often is entangled in political wrangling over economic issues.

As skillful as Bernanke was last week in avoiding direct involvement in the budget debate, he probably will not be able to escape being dragged into it at some point, particularly as posturing for the 2008 presidential election hits full stride. It will be particularly important for him to use his language skills well.

If the stock market is going to prosper through the balance of this year, it will have to avoid listening to numerous less-than-careful comments from aspiring presidential candidates. Mere talk is not likely to be enough to detail the market, but less than impeccably crafted wording in the 2008 fiscal budget could.

Of course, what one person may consider carelessly crafted wording may in fact be exactly the opposite in a political setting.

At this critical stage in the budget process, it is somewhat comforting that the Fed chairman will be around to let the market and everyone else know when some language might be used to our collective regret.

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