Did you watch the season finale of The Walking Dead last night, or Ben Bernanke on 60 Minutes. Or could you tell them apart? Killing zombies is much more clear cut than keeping zillions in zombie “assets” on the books of the Federal Reserve. I can’t match Felix Salmon’s takedown of Chairman Ben over his statement’s that the central bank isn’t “printing money” and he’s “100 percent” sure he can stop runaway inflation:
“Yes, Ben, you are printing money. It’s how you pay for those Treasury bonds you’re buying…” And, “No central bank governor can or should ever have 100 percent confidence in anything: Only a psychopath who will never change his mind can say that. The Fed’s ability to control inflation is a dark and mysterious thing; it’s not some kind of iron-clad law of physics.”
The appearance comes a week after the Fed released the many banking and corporate beneficiaries of its lending facilities during the 2008 panic and after. This was not because of Bernanke’s desire, when he replaced Alan “Bubbles” Greenspan, for greater transparency. It was because it was mandated by the new Dodd-Frank law. The 60 Minutes appearance, Bernanke’s second, was no doubt partly because he wants a more open Fed, after his fashion. But also because the central bank faces perhaps the greatest challenge to its independence since it was established in 1913.
The pressures of the Great Recession and its lingering overhang of misery have made the Fed enemies on the right and the left in Congress. With the Tea Party in the Republican-controlled House, another unpredictable element is introduced. Yet contrary to myth, the days before the Federal Reserve System were not palmy times of economic happiness. Panics and depressions were much more common. Bernanke’s “whatever it takes” approach to avoiding another Great Depression has made people beyond the tin-foil hat club uneasy and angry for one reason: It didn’t seem to help average Americans facing job loss foreclosure, while bailing out the fatcats who created the crisis in the first place.
When Bernanke said the recovery might not be self-sustaining, one had to wonder if he fully comprehends the magnitude of the challenge we face. Sure, he’s a brilliant man backed by some of the best economists and research in the world. But he’s also a creature of the conventional wisdom that is pre-Great Recession. This is no post-World War II business cycle. Record corporate profits and the worst employment situation since the Great Depression are going on at the same time. To his credit, Bernanke gave a nod to the damage of widening inequality. But does he really understand how the Great Disruption is cleaving America? Or even the danger of the zombie “financial services” industry’s many bad bets, frauds and “innovations” that have yet to wind down or explode.
It makes you wonder what the Fed governors say privately. Or do they just stagger around, moaning as they stalk human flesh?
Today’s Econ Haiku:
Korea trade pact
Will it create some jobs here
Or a sucking sound?