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Ben Bernanke versus Tim Cook: Who Gave Us a Clear Message?

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iphone 5 mockups (Photo credit: methodshop.com)

Ben Bernanke and Tim Cook are in totally different business. Dr. Bernanke is the chairman of Federal Reserve; the world’s most influential central bank. Mr. Cook is the CEO of Apple (NASDAQ:AAPL); the world’s most admired technology company. Last week, the two men took the center stage in the media frenzy. Dr. Bernanke announced QE3, the purchase of mortgage securities designed to reignite US economic and employment growth. Mr. Cook introduced Apple’s iPhone 5, continuing the company's lead in the smartphone market. Who gave us a clear message?

Based on Wall Street’s response to the two events, both men’s message was well received.  Wall Street cheered QE3 with equity and commodity market averages rising sharply for the week (NYSE:SPY +2%, NASDAQ:QQQ +1%, NYSE:GLD +2.5, and NYSE:SLV +4%). Apple’s stock jumped 1.2 percent for the week hitting all-time high.

However, Tim Cook did a better job than Ben Bernanke in explaining how iPhone 5 will change consumers’ daily lives. He stated clearly and loudly the advantages of iPhone 5 over iPhone 4S; bigger, thinner, lighter, faster, and more colorful.  By contrast, Dr. Bernanke failed to explain how QE3 would affect the average citizen. Most notably, he didn’t provide any estimates how much QE3 would add to GDP growth.

To be fair, it is easier to demonstrate what a technology product does rather than how a policy works. As Dr. Bernanke explained, QE3’s impact depends on many factors, especially on Washington’s actions on the impending Fiscal Cliff. Also, QE3 is based on untested theories rather than standard textbook knowledge. Besides, evidence suggests that prolonged low interest rates fuel asset bubbles rather than economic growth. This raises the question why Dr. Bernanke had to pursue such policy shortly before the November election? Does he know something about the economy we do not know?

The bottom line: We can expect a clear message from a company CEO about a tested product. But we cannot expect such message from a Central Banker about an untested policy.

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