Federal Reserve chairman Ben Bernanke gave the first Federal Reserve press conference in history yesterday. He didn’t say anything terribly exciting, which was the point. It was an exercise in spin – some of it political, and some intended to promote calm and stability.
The impulse to promote stability is understandable. The Federal Reserve building does not look good when surrounded by peasants with pitchforks and torches. The American economy wouldn’t be improved if Bernanke had staggered onto the stage with one hand clutching his heart, and the other holding an open bottle of cardiac medicine, from which a shower of little white pills flew into the audience. That certainly wouldn’t do much for bond sales. Maybe it was a bad idea to let our debt situation degenerate to the point where the Federal Reserve chairman has to do infomercials to sell bonds.
The Chairman spoke of his confidence in the long-term strength of the American economy, which seems like the sort of thing he could significantly damage by not talking about it. There are many serious and dire warnings to be issued about the economy, but I don’t know that the Federal Reserve chairman is the person who should be issuing those warnings – not when he can make the financial markets feel queasy by just raising an eyebrow.
On the other hand, we could have done with a little less happy talk about the “Qualitative Easing” monetary policy. It’s a failure – nothing of significance was achieved, and printing money has made everything more expensive through inflation. Pretending that this policy somehow met expectations is not soothing, it’s disingenuous.
Bernanke was repeatedly asked about inflation, especially the rising cost of food and gas – which are deliberately excluded from the government’s analysis of “core” inflation. That’s why Bernanke can get away with saying inflation is relatively low. The things that would make it higher have simply been erased from the formula.
Not only is this cold comfort for those watching the numbers on gas pumps turn into a blur, it also distracts us from the effect that rising food and gas prices eventually have on the rest of the consumer economy. How much are you going to buy at the mall when it cost you over twice as much for the gas to drive there as it did two years ago, and your trip to the grocery store already emptied your wallet?
Senator Ron Paul of Texas, a longtime critic of the Federal Reserve (and I mean that in the same sense that the Terminator is a longtime critic of Sarah Conner) damned Bernanke’s performance with faint praise on the Wall Street Journal’s “Marketwatch,” saying he “does a good job for what he has to do, and that is try desperately to make a very, very failed system sound plausible. But from my viewpoint, it isn’t plausible. It’s not workable.”
Paul noted that Bernanke claimed “our position is a strong dollar,” even as the dollar was losing value against gold. Also, for the guy who turns the crank on the Treasury’s printing press, he spends a lot of time insisting the value of the dollar is someone else’s responsibility.
One particularly objectionable point came when Bernanke said the rising price of fuel was due to “largely non-monetary factors” such as trouble in the Middle East, and rising international demand. No, what it’s ultimately due to is America’s failure to develop our own energy reserves, and that is a deliberate policy of the current Administration.
The Fed chairman expressed some hope that the recent warning about danger to our credit rating would inspire Washington to action. Never let it be forgotten that the Administration tried to suppress that report… and never forget that absolutely none of our current problems are due to “inaction” from Washington.