I was considering taking a break this weekend since I have been working quite a bit, hoping to spend my 4-day weekend with my family. I’ve done a terrible thing that put a wrench in my plans, however. Since my passions didn’t allow me to watch the Bernanke testimony video, I didn’t realize just how bad it was. And without considering it, I followed my regular routine of reading my favorite blogs upon arriving home for the day. It was a big mistake because while I had hoped to escape the trauma, news of the testimony is plastered everywhere. I can run, but I can’t hide; and now, never having had much control over my passions, I am sitting here beside myself hoping that Bernanke decides to take leave before his term expires and that the door hits him squarely in the buttocks on the way out.
There are plenty of posts about what Bernanke said in his testimony. I especially recommend reading the latest from Sumner and Nunes. There is plenty there to become extra motivated about, but I am going to cover the stuff that I am quite positive Bernanke knows, but isn’t talking about. He isn’t talking about it because it would expose himself as a large part of the current economic problems.
The Fed’s balance sheet is over $3T. Inflation is falling. Why? Where is the earth-shattering ka-boom from “running the printing press” from morning ‘til night? Where is the inflation doom and gloom of the 1970’s?
Perhaps the output gap is much larger than all the QE programs combined? No doubt it is much larger than any of the bean-counters in the Beltway imagine. Low interest rates mean only that money has been tight; and with no lift-off from the ZLB in sight, it is still tight. But Bernanke appears to be too interested in self-preservation and would rather perjure himself than admit to Congress that the Committee has been but peeing in the ocean with feeble QE programs and expectations management. The old order no longer works.
And from there it is likely possible to imagine the magnitude of the economic suffering that has been inflicted on average people as a monetary black hole was allowed to open up and devour everything not nailed down while the powers that be cowered and hid under their beds for years after the crisis, terrified of inflation as if it were some representative of Satan himself, as if a rise in prices anywhere, at any time is completely a monetary phenomenon.
Bernanke and his cohorts are full of… something that smells really bad. They were and are very wrong.
There is no justification for what they did, unless of course, one happens to be a Republican politician where their desired ends apparently justify the means of declaring economic warfare on innocent people. The Tea Party was a terrifying enough force for politicians, but it is a very sad reflection of how much influence average people have over politics as it has accomplished almost nothing other than momentarily leaving a few of the establishment types with dirty drawers. There is no achievable purpose, honor or benefit in a peevish obsession with inflation or lying about it to cover up the utter failure of explicit inflation targeting – at all.
PS: My conjecture about the meaning of the last clause of the Full Employment and Balanced Growth Act,
[The Fed] shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
means no tight money!