The post I wrote yesterday about the supposed stupidity of monetary policymakers needs some clarification. I didn’t intend to imply that I believe the FOMC members are catering to special interest groups. I don’t believe that.
I just don’t buy that Bernanke and other Board of Governors members are stupid or ignorant; rather, they are incompetent for the job. It takes more than knowledge to be able to translate an idea into reality; it takes a thought leadership ability that at least Bernanke lacks, or perhaps lost as a result of the financial crisis – in being wrong, he lost credibility. In other words, Bernanke has little control over what is going on and hasn’t had it for a while. It does not matter what he thinks, while other members of the FOMC are bowing to political pressure in the power vacuum left by weak leadership at the top. Monetary policy is, therefore, likely being conducted by the political zeitgeist instead of intellectuals.
That is what I believe is driving the entire monetary problem, at least in the US, and possibly in Europe as well.
If that is the problem then, it is worth asking why Bernanke is still there after the problem has spun so far out of control, there is no way he can put the genie back into the bottle; and his strongest inclination is to also bow to political pressure instead of educating, as he used to do so well before entering public service. The reasonable and most effective way to get to a solution under these circumstances, then, would be to resign. But it takes an ability to recognize the state of failure and an enormous amount of courage to do it. Bernanke is still the Fed Chairman due to sheer hubris and conceit; thus monetary policy is ineffective at the ZLB because he is an ineffective leader and refuses to do the proper thing and resign.
And so I really wish that my intelligence would stop being insulted by people whom I admire. I’ve had more than enough of it while those on the FOMC clown car seek to cover up the fact that Bernanke is a has-been in the leadership department rather than solve the largest monetary disaster since the Great Depression.