Flexibility at the Fed

Good morning. It's great to be back from a few days of meetings and such in LA -- California dreamin', indeed.

So, did anything much happen while I was out?

The Fed left rates unchanged, acknowledging the slowing economy and still hyping its concerns about inflation. I think it's time to give Chairman Ben Bernanke some credit for getting expectations to settle down to a stable level. As I've noted before, he has built up a stash of ammunition and now has some flexibility. He can juice things further if the housing-catalyzed economic slowdown continues to take steam out of the economy, or he can raise again, building up yet more ammunition if the economy re-accelerates.

Speaking of the Fed and related monetary issues, the U.S. has a whole syndicate of economic bureaucrats meeting with their Chinese counterparts about currency issues and the giant U.S. capital surplus that China has to deal with. Some people call that surplus a giant U.S. trade deficit, but they miss the point. Regardless, it's just semantics, and the U.S. gets to consume much more than it produces every month, which is a pretty awesome place to be, all the doom-mongering around such reality notwithstanding.

At any rate, the meeting is reportedly more rambunctious than expected. Trying to game such meetings and the expectations surrounding them isn't my idea of a good use of brain cells, so I'll just note that communication among bureaucrats is what helps build diplomatic and political relationships. It's always better to build relationships with partners who want to trade, like the Chinese do, than to avoid such relationships. That said, let's just hope that the policymakers continue to stay out of the way of those of us who actually produce economic output and generate trade and allow us to do so at a growing clip.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.