Ben Bernanke Secured His Place In History
He sure will go down in history as one of the worst and most reckless governor of a major central bank of all times. At the same time this Princeton professor will also have the honor to be one of the worst influential economists of all times.
This week Ben Bernanke did it again instead of resigning immediately he continued his reckless policies. A Wall Street Journal op-ed article captured it quite well.
Ben Bernanke Committed Again Multiple Counts Of Recklessness
As I said before in other blog posts (e.g. here, and here), money and credit should never be cheap as it only fuels speculation, overinvestment, government overspending. Interest rates are the price of money, they are also a rate of return. Savers, insurance companies, other countries (e.g. South Korea) etc. are hurt by excessively low US interest rates. In the presence of extremely low interest rates massive amounts of capital will be misallocated. Any economist who does not understand this relationship is lousy.
Ben Bernanke Is An Accomplice In Covering Up Profligate Government Spending
Bailing out the government by buying large amounts of government bonds and keeping interest rates so low is a sure recipe for higher inflation. In their latest statement, the fed even admitted that they are willing to allow inflation to go up by 0.5 percentage points. Do these highly compensated amateur economists at the Fed really believe inflation is dead or that they are capable of controlling it should inflation begin to accelerate? Why do these Fed economists think that more monetary easing will stimulate economic growth?
Reportedly, the Congressional Budget Office estimates that every 100 basis points increase in interest rates adds $100 billion a year to government interest spending.
Ben Bernanke Inflated The Fed’s Balance Sheet Fourfold To $4 Trillion
In the next 12 months or so, the Fed plans to buy another trillion dollar of government bonds and mortgage backed securities. That is insane! When Ben Bernanke started as governor the Fed was holding less than a trillion dollar of such securities, by the end of 2013 it will be about four trillion dollars or more. To put this into perspective, the annual US GDP is about $15-16 trillion.
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