“When Alan Greenspan talks to Congress Wednesday, bond traders listen. Of course, they often don’t know what they’ve heard until it’s explained to them,” writes Jess Eisinger in today’s Wall Street Journal.

“Here’s a guide of things to look for:”

“Inflation? Deflation? Stagflation?”

“Mr. Greenspan is likely to spend most of his time enumerating the reasons the economy is so strong. He’ll also discuss the slack in labor markets and a lack of current inflation. Last week, Fed governor Ben Bernanke implied low inflation could be starting to cause problems for the economy. ‘Mr. Greenspan has never told us how the Fed should behave in world of strong growth but declining inflation due to productivity shocks,’ says Bank of America’s Mickey Levy, who’d like to hear the answer.”

“Is there a difference between being ‘patient’ and being willing to wait for a ‘considerable period’? In its last statement, the Fed changed the language in its release, striking the phrase ‘considerable period,’ which had become such a well-known phrase the kids were text-messaging it to each other. The Fed substituted that it can be ‘patient.’ (Easier to text-message.) The markets perceived that to mean the Fed wanted to free itself to consider when it may raise interest rates, now expected by August.”

“What the heck is going on with the labor market? It’s not often that people get to hear a knight commander of the British Empire talk about burger flipping. In his testimony, Mr. Greenspan is highly likely to address the flaccid job market. He probably will be pressed by politically feverish pols on hot-buttons like outsourcing, offshoring and the inconvenient circumstance that when productivity rises quickly, corporate profits look fabulous and job growth is curtailed.”

“It’d be fascinating if Sir Alan addressed the bubbling debate about the two different pictures of the job market from the household and establishment surveys. He is thought to put more faith in the much larger, but currently bearer-of-bad-news Establishment survey, but to actually say so might be considered ill-form by a White House nervous about the labor market.”

“Is worrying about the deficit, like, so ’80s? The U.S. has the highest budget deficit in history in dollar terms (but not in percentage of GDP). But the bond market doesn’t care. It would if Mr. Greenspan said it should. But he won’t say anything too pointed, considering it’s an election year and he is nothing if not sensitive to the delicate feelings of those in power.”

http://online.wsj.com/article/0,,SB107645053947825985,00.html