Prominent former treasury secretaries, government economists and others come out to defend Federal Reserve Governor Lisa Cook

It is shocking how many prominent individuals are affected by the Trump Derangement Syndrome! Here in this amicus curiae a bunch of them came out in the open!

The allegations against Ms. Cook seem to be serious like mortgage fraud and other allegations, then this is quite possible serious enough to question her board membership. Did she claim two different homes as her primary residence when she applied for mortgage loans?

Breitbart Business Digest

BRIEF OF AMICI CURIAE FORMER TREASURY SECRETARIES, FEDERAL RESERVE BOARD CHAIRS AND GOVERNORS, COUNCIL OF ECONOMIC ADVISERS CHAIRS, AND ECONOMISTS IN OPPOSITION TO THE APPLICATION TO STAY THE PRELIMINARY INJUNCTION

Here is the list of the individuals:

"Ben S. Bernanke served two terms as Chair of the Board of Governors of the

Fed, as well as Chair of the Council of Economic Advisers under President George

W. Bush.

Jared Bernstein served as Chair of the Council of Economic Advisers under

President Joe Biden.

John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at

Stanford University’s Hoover Institution.

Jason Furman served as Chair of the Council of Economic Advisers under

President Barack Obama.

Timothy F. Geithner served as the 75th Secretary of the Treasury under

President Barack Obama, as well as President and Chief Executive Officer of the

Federal Reserve Bank of New York.

Phil Gramm served as Chairman of the Senate Banking Committee.

Alan Greenspan served five terms as Chair of the Board of Governors of the Fed, first appointed by President Ronald Reagan and then reappointed by Presidents George H.W. Bush, Bill Clinton, and George W. Bush. He also was Chair of the Council of Economic Advisers under President Gerald Ford.

Glenn Hubbard served as Chair of the Council of Economic Advisers under

President George W. Bush.

Jacob J. Lew served as the 76th Secretary of the Treasury under President

Barack Obama.

N. Gregory Mankiw served as Chair of the Council of Economic Advisers under

President George W. Bush.

Henry M. Paulson served as the 74th Secretary of the Treasury under President

George W. Bush.

Kenneth Rogoff is the Maurits C. Boas Professor of International Economics at

Harvard University and former chief economist of the International Monetary

Fund.

Christina Romer served as Chair of the Council of Economic Advisers under

President Barack Obama.

Cecilia Rouse served as Chair of the Council of Economic Advisers under

President Joe Biden.

Robert E. Rubin served as the 70th Secretary of the Treasury under President

Bill Clinton, after serving as the first director of the White House National

Economic Council.

Lawrence H. Summers served as the 71st Secretary of the Treasury under

President Bill Clinton, Director of the National Economic Council under President

Barack Obama, and Chief Economist of the World Bank.

Daniel Tarullo served as a member of the Board of Governors of the Fed and the

Federal Open Market Committee.

Janet Yellen served as the 78th Secretary of the Treasury under President Joe

Biden, Chair and Vice Chair of the Board of Governors of the Fed, Chair of the

Council of Economic Advisers under President Bill Clinton, and President and

CEO of the Federal Reserve Bank of San Francisco."

Has the Fed Fostered Fiscal Irresponsibility? Very likely, a purely rhetorical question!

Bad news, if confirmed! Clearly the Federal Reserve acted irresponsible accumulating so much federal debt since about the beginning of the millenium!

How much has the Fed contributed to price inflation in the US in recent years given its outlandish buying of government debt?

I selected these two instructive charts below, because they seem to illustrate what is wrong with federal government deficits and debt in the US. Unfortunately, the history goes only back to 1990, too short for my taste!

Indeed, it appears that the Federal Reserve has recklessly acquired/financed too much federal government debt with the beginning of the new millenium. Very bad, requires immediate correction by President Trump!

The analysis argues for a "fiscal policy that is not associated with automatic stabilizers (i.e., programs that automatically adjust tax or spending programs without changes in law or regulation to offset economic conditions)". This is certainly one of the accepted solutions presented in  textbooks of macroeconomics. Another technical term used in this analysis is "quantitative easing" in response to macroeconomic shocks by the central bank.

Caveat: I did not have the time to read this economic analysis.

Has the Fed Fostered Fiscal Irresponsibility? - EPIC for America "Evidence suggests that deficits are higher after economic shocks when the Federal Reserve buys government debt."

Unfortunately, the usefulness of this second chart is somewhat diminished, because it shows the percentage relative to public debt overall, but public debt holding increased dramatically as the first chart above shows. But make no mistake, a Fed holding of over 15% is way too much!

Trump economic adviser Stephen Miran was sworn in on the Federal Board’s board, but he did not resign as presidential adviser

This does not seem to be proper! The Federal Reserve is supposed to be independent from the federal government!

"Senate Democrats are introducing a bill that would bar Fed officials from simultaneously holding a separate presidentially appointed office.

The move comes hours after Trump economic adviser Stephen Miran was sworn in on the central bank’s board. Miran’s decision not to resign from the White House is a first in the modern Fed’s roughly 90-year history. The dual role raises concerns about the central bank’s independence as Trump pushes for interest-rate cuts. The bill is unlikely to become law because it would need to pass a GOP-controlled Congress and win Trump’s signature.  ..."

The Wall Street Journal What's news

"Stephen Miran was formerly a senior fellow at the Manhattan Institute and a senior strategist at Hudson Bay Capital, the global investment firm." (Source)

US Federal Reserve Backs Banks Joining Crypto Space, Banks Can Now Safely Offer Crypto currency tools

Good news!

Why So Many US Companies Are Going Bankrupt. Higher interest rates

Very recommendable! The long period of ultra low interest rates was reckless and irresponsible! Loading up on debt was cheap for too many businesses.

Even private hospitals are affected via private equity investments.

San Francisco Fed president, who reportedly earns over $420,000 annually: 'I don't feel the pain of inflation anymore. I see prices rising, but I have enough.'

That is indeed a jaw dropper! At least she was naively honest!

According to Wikipedia, Ms. Daly, an economist, considers the rather incompetent and mediocre economist Janet Yellen (currently Treasury Secretary under the demented and senile 46th President) to be her mentor.

Her Wikipedia entry does not even provide her birthday!

About her childhood: "By age 16, she was living on her own, working at doughnut shops and retailer Target, struggling to scrape together a full-time salary."

""I see prices rising, but I have enough that I can make substitutions ... I'm not immune to gas prices rising, food prices rising, I sometimes balk at the price of things, but I don’t find myself in a space where I have to make trade-offs because I have enough — many, many Americans have enough," she added."

San Francisco Fed president, who reportedly earns over $420,000 annually: 'I don't feel the pain of inflation anymore. I see prices rising, but I have enough.' - TheBlaze

China Targeted Federal Reserve to Build Informant Network and Access Data for over a decade, Probe Finds

That is a bit of unusual news! Besides buying farm land across the United States with sometimes national security sensitive installations/facilities nearby, this is apparently another avenue for Chinese espionage.

"China tried to build a network of informants inside the Federal Reserve system, at one point threatening to imprison a Fed economist during a trip to Shanghai unless he agreed to provide nonpublic economic data, a congressional investigation found.

The investigation by Republican staff members of the Senate’s Committee on Homeland Security and Governmental Affairs found that Fed employees were offered contracts with Chinese talent-recruitment programs, which often include cash payments, and asked to provide information on the U.S. economy, interest-rate changes and policies, according to a report of the findings released Tuesday.

In the case of the economist, the report said, Chinese officials in 2019 detained and tried to coerce him to share data and information on U.S. government policies, including on tariffs while the U.S. and China were in the midst of a trade war.

The report doesn’t say whether any sensitive information was compromised in what it said has been a decade long effort that began around 2013. Access to such information could provide valuable insights given the Fed’s extensive analysis of U.S. economic activity, its oversight of the U.S. financial system, and the setting of interest-rate policy. ..."

China Targeted Fed to Build Informant Network and Access Data, Probe Finds - WSJ The investigation by Senate Republicans found that the decade long effort included detaining a Fed economist in China

Federal Reserve Board - Board Members: A sign of mediocrity

Is it not extraordinary that we currently have almost 50% women on the board and almost 1/3 black Americans? What are their qualifications for this job?

The central bank of a country is a very important institution affecting the economy, the currency, interest rates, and government finances. Thus, selecting board members is crucial! Mediocrity is not a good choice!

Where the board members selected based on meritocracy or on something more like nepotism and favoritism. Was a gender quota combined with diversity & inclusivity?

Or if these 7 members of the board don't really matter anymore, then it is probably high time the board should be reduced from 7 to perhaps 3 members and save some taxpayer money!

Ms. Cook appointed by the 46th President does not have a very impressive curriculum vitae other than she was appointed by President Obama to the Council of Economic Advisors. Is she is the first black woman on the board like Ketanji Brown Jackson is now the first black female Justice on the U.S. Supreme Court?

Ms. Bowman appears to be appointed by President Trump. Her expertise in economics and monetary policy is in doubt.

Mr. Jefferson appointed by the 46th President. A very thin curriculum vitae.

Mr. Waller appears to be appointed by President Trump. At least he is a professor of macroeconomics and monetary economics.

Ms. Brainard appointed by President Obama. She has a varied and relevant professional career.

It appears the 7th board member position is vacant.

"The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years."

Federal Reserve Board - Board Members

Members of the Federal Reserve Board of Governors pose for a group photo on May 23, 2022, in Washington, DC. From left to right: Christopher Waller, Michelle Bowman, Chair Jerome Powell, Vice Chair Lael Brainard, Philip Jefferson, and Lisa Cook.

U.S. price inflation caused by reckless Federal Reserve

The Federal Reserve has purchased government debt by the trillions since 2008 thereby increasing money supply and expanded the balance sheet 16 times over the level before 2008.

Many economists knew or must have known that this can not go on and it will not end well! Especially not when other external shocks hit the U.S. economy (China Covid-19 lockdown, Russian war of aggression against the Ukraine etc.)

Between 2006 and 2018, the Fed had two awful Chairmen, i.e. Ben Bernanke and Janet Yellen! I have blogged about them several times.

P.S. It is very peculiar the Fed does not provide a time series going back further in time than end of 2002.

Federal Reserve Bank Balance Sheet Madness

Posted: 4/2/2020

Sometimes pictures say indeed more than a thousand words!

As you can see from the chart below, the Fed hyperinflated the balance sheet in several steps since 2007:

1. From about $870 trillion before the financial/real estate crisis of 2008 to over $2 trillion by November 2008
2. To under $3 trillion by July 2011
3. To about $4.5 trillion by October 2014
4. By September 2019 the Fed only managed to bring it down to $3.8 trillion
5. Now it stands at over $5.25 trillion and climbing

The size of the U.S. economy is about $21.7 trillion as of Q4 2019 measured in nominal GDP.

Where are the economists warning of such drastic inflation of the money supply when you need them! What are the highly paid armies of economists working for the Fed saying?

Sources (S):

1. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

The Fed Is A Bunch Of Cowards

Published: 9/17/2015

Today, the Fed Chairwoman Janet Yellen again failed to raise interest rates. The cowards at the Fed could not even raise it by 25 basis points to finally start the process towards higher interest rates.

I have blogged here many times about the irresponsible and reckless monetary policy pursued by Alan Greenspan, Ben Bernanke, and now Janet Yellen. So I will not repeat myself.

Janet Yellen Timid And Not Confident?

Giving Testimony

I watched this morning (2/27/2014) a few minutes of her testimony before the U.S. Senate today on TV. She was grilled by imposing and cock sure Senator Chuck Schumer from New York.

I don’t know what the Senator from NY was doing. He was reading his long winded, arcane questions off a script by holding his hands in front of his forehead and not looking at her at all. He was not engaging the chairwoman. Was he just trying to run out the clock?

Yellen’s Appearance

She appeared to be meek, intimidated and not confident at all to answer Senator Schumer’s questions. Was this just a typical female tactic or is this her nature?

What did the senators notice when they interviewed her one on one during the vetting of her candidacy?

The Next Chairperson Should Not Be A Professor

As one lesson learnt here, next time we should not choose a university professor to become the next chairperson of the Fed.

A person from the financial sector with real world experiences might be better suited.

Central Banks As A Systemically Important Financial Institution

Example Federal Reserve Board

If we agree that e.g. the Federal Reserve Board is such an institution, then who supervises the Fed, which has helped to trigger the real estate implosion, the financial crisis of 2008, and the sovereign debt crisis of Western countries.

A Culprit Of The Great Recession

Anybody who claims that the Fed or its then Chairman Bernanke prevented worse do not know what they are talking about.

Cheap money has been and still is a reckless policy conducted by the Fed. The Fed completely failed to prevent the drastic deterioration of lending standards before the real estate bubble burst. I have written a number of blog posts about this subject (see e.g. here, here).

A Systemically Important Financial Institution

This is the latest regulatory boondoggle our mostly inept political leaders came up with. It is a typical overreaction we have seen so often. It is telling that our political leaders apply SIFI only to financial institutions other than central banks.

To divide financial institutions in this way will not prevent the next financial crisis. On the contrary, such arbitrary distinctions will be circumvented. New financial institutions or instruments will be created as necessary.

Large Financial Institutions Are Treated As Utilities

Anyone who still continues to allege that the financial sector was not regulated or was wrongly deregulated is a fool.

Thanks to acts like Dodd-Frank Wall Street Reform and Consumer Protection Act  our political leaders have essentially nationalized large banks. This particular act has also severely and unnecessarily impacted much smaller financial institutions other than the big banks e.g. debt collectors.

Alan Greenspan - A Panderer To Power

New Book By The Mises Institute

See here for details. However, the book appears to be published already in 2009 by McGraw-Hill. The full title is “Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession”. Amazon here.

I have to admit, I have not read the book only reviews and descriptions of the book. However, I have recently come across reports that suggested that in his earlier career Alan Greenspan appeared to be a fierce advocate of free markets etc.

Excerpt From The Blurb

“Drawing upon a vast array of original sources, the author leaves little room for doubt: either the “economic genius of our time” was oblivious to the hazards of his irresponsible policy decisions or he knew full well what he was doing, but chose, as he had throughout his career, to put self-interest above the public good.” (emphasis added)

There is little doubt in my mind that Alan Greenspan’s recklessly low interest policy which lasted for way too long is a major contributor to the Great Recession, the financial crisis of 2008, and the sovereign debt crisis.

His successor, Ben Bernanke, is his foolish and irresponsible apprentice!

Eugene Fama Believes The Fed Is Not Responsible For Near Zero Short Term Interest Rates

Update As Of 12/14/2013

Meanwhile, Prof. Eugene Fama gave a second interview to a leading German language newspaper. On 12/7/2013 appeared an interview with him in the Frankfurter Allgemeine Zeitung titled “‘Der Markt ist rational, das glaube ich immer noch’”. In the meantime (12/18/2013), a member of the editorial staff of the FAZ has confirmed to me that there is no English version of it and that the content of the interview is as accurate as reasonably possible.

Again Prof. Fama denied that the extreme low interest rate policies of central banks had anything to do with the recent real estate bubble or financial crisis or sovereign debt crisis. Central banks could not prevent the current low level of interest rates nor do they have any significant influence on it in his words referring to the same research paper of his as before (see below).

Update  As Of 11/12/2013

Meanwhile, I have inquired with the editorial staff of the Neue Zuercher Zeitung and was assured that the wording of the interview with Prof. Fama is as accurate as reasonably possible. An English version of the interview is unfortunately not available.

Thus, I would have to research whether Prof. Fama in the past has voiced any similar notions previously.

Eugene Fama

He won this year’s Nobel Prize in economics. I am not very familiar with Fama’s work or with other interviews or papers with or by him.

Interview With The Neue Zuercher Zeitung

Just read his interview with the leading Swiss newspaper NZZ dated 11/9/2013.

Here is the relevant excerpt from his interview:

“[Question:]Angesichts der Tatsache, dass das Wirtschaftswachstum in den USA zunimmt und sich die Arbeitslosenrate erholt, finden Sie es in Ordnung, dass die Zentralbank an ihrer Nullzinspolitik festhält?

[Answer:] Das Fed ist nicht verantwortlich dafür, dass die kurzfristigen Zinsen fast null sind. Sie hat – wenn überhaupt – im Vergleich mit den Marktkräften lediglich einen geringen Einfluss auf die Entwicklung der Zinsen, wie ich jüngst in einem Aufsatz gezeigt habe.

[Translation: Q: Do you agree that the central bank continues with its zero interest rate policy? A: The Fed is not responsible that the short term interest rates are almost zero. The Fed has, if at all, only limited influence on the development of interest rates compared to market forces as I have demonstrated in a recent paper.]”

Prof. Fama’s answer dropped my jaw a bit as I am a former economist myself.

Counterfactual: What would happen if the Fed decided this week to raise the Federal Funds rate by 2 percentage points effectively immediately. Would Mr. Fama then argue that given the current market forces short term interest rates would stay low for a significant period and not follow?

Fama’s Research Paper In Support Of His Assertion

The full text is available here: http://raps.oxfordjournals.org/content/early/2013/08/02/rapstu.rat007.full.pdf. He specifically referred to this paper in defense of his answer above.

I did not take the time to read the full paper titled “Does the Fed Control Interest Rates?” as it is 20 pages long and filled with lots of dazzling econometric work, which I do not claim to fully understand.

Fama comes to the conclusion e.g. “This suggests that there is lots of variation in open market rates beyond Fed control.” (emphasis added) I grant him that immediately. Of course there is lots of such variation. This triviality has been known for decades if not longer. Actually, this is the usual outcome of any econometric study of real world time series data of economic relevance.

Not enough, he also concludes:

“The estimates of regression (1) in Table 2 show that open market rates have little or no tendency to move toward TF on a day-to-day basis. This is clear evidence that the day-to-day variation in open market rates has little to do with the Fed’s target rate. This result is also consistent with the stronger hypothesis that the Fed has little control of open market rates.” (emphasis added). Here Prof. Fama is stressing another triviality that occurs indeed on a day-to-day basis.

In his paper, Prof. Fama also suggests “Thus, judging the power of the Fed over rates largely depends on determining the extent to which changes in TF are due to active attempts by the Fed to control rates versus passive adjustment to market forces.” (emphasis added). I agree, there probably were periods during which the central bank responded in a more passive way, but that does not mean the Fed has no or only little control over short term interest rates.

He completely misses the point. Government run central banks do not try to control short term interest rates on a day to day basis, but as we have now so painfully learnt they keep short term interest rates ultra low for many months if not years to fuel speculation and profligate, reckless government expenditures and deficits.

Previous, Related Blog Posts

Here and here.

Buffoon Buffet Is Making Headlines Again

A Buffoon

See more about that in my previous blog post here.

He Wants Bernanke To Stay On

Warren Buffet was all over the news again domestic and international, see e.g. here. He endorsed Ben Bernanke to continue for another term.

The reckless chief of the Fed should have resigned a long time ago. See my previous blog posts here, here, or here.

Fed Is Greatest Hedge Fund In History

However, Mr. Buffet is quite right to call the government run Fed has become the “Greatest Hedge Fund In History” under the auspices of Ben Bernanke.

Which raises at least one fundamental question whether any government run central bank ought to make profits in the financial market? E.g. the German Bundesbank was also famous for its frequent and significant annual profits which were then transferred to the German federal budget.

Or should government run central banks (e.g. Fed, or EZB) be allowed to buy government treasury bonds at such an extent that their balance sheet triples in a few years like it has happened in the wake of the Great Recession?

Buffet A Latecomer

Where were Mr. Buffet when the Fed started to become the “Greatest Hedge Fund In History”? He is coming a little late to the party. I wonder whether he waits with his investments until several years later?

Macroprudential Monetary Policy – A Ghastly Neologism

Just Another Word For Micro-Management Or Meddling

In a recent Wall Street Journal Opinion page piece titled “John H. Cochrane: The Danger of an All-Powerful Federal Reserve/'Macroprudential' policy thinkers want central banks to micromanage the entire financial system.” (subscribers only) by John H. Cochrane published on 8/27/2013.

In this article we are referred to a recent IMF paper by the title “Macroprudential Policy: An Organizing Framework” published in March 2011.

To quote from the IMF paper Macroprudential Policy is (emphasis added):

“Macroprudential policy seeks to limit systemic, or system-wide, financial risk. Defining elements of macroprudential policy are its objective, its scope of analysis (the financial system as a whole and its interactions with the real economy), its set of powers and instruments, and their governance (prudential tools and those specifically assigned to macroprudential authorities). Macroprudential policy is a complement to microprudential policy and it interacts with other types of public policy that have an impact on systemic financial stability.”

Financial stability is an oxymoron. Economies and their financial systems are dynamic systems.

A Bit Of History

From Wikipedia we learn “As documented by Clement (2010), the term "macroprudential" was first used in the late 1970s in unpublished documents of the Cooke Committee (the precursor of the Basel Committee on Banking Supervision) and the Bank of England.”

Since we know that the so called Basel Accords are a major contributing factor for the Financial Crisis of 2008 and subsequent Great Recession, because e.g. mortgage and sovereign debt were declared safe, we should remain very skeptical. I previously blogged about this subject here.

 To Believe That Bureaucrats Or Economists

Can Handle The Next Financial Crisis Is Foolish

The author of the above mentioned WSJ article correctly pointed out that “central banks don’t have a great track record of diagnosing what they later considered “bubbles” and “systematic risks”. The Fed didn’t act on the tech bubble of the 19990s or the real estate bubble of the last decade. European bank regulators didn’t notice that sovereign debts might pose a problem.”

Had the Fed simply enforced a minimum 10% down payment rule for the purchase of any residential home (like in Canada), then very likely there would not have been such a real estate bubble.

Had the Fed not pursued such a reckless low interest rate policy for too long, there would not have been a real estate meltdown. And the Fed is a repeat offender under Bernanke!

I have previously written a number of critical blogs about the Fed here, here.

Federal Reserve Undermines Credit Markets

Another Sign That Ben Bernanke

Ought To Step Down ASAP

I have in other, previous blog posts argued that Ben Bernanke is perhaps the worst Fed Chairman in its now 100 year history (here, here, here, here, here). Maybe I am already a bit obsessive with this guy in my blog posts, but he and his predecessor are perhaps the foremost culprits for massive government failure that caused and prolonged the Great Recession.

However, this man does not take responsibility for the worst recession and recovery in decades!

The Fed Squeezed The Repo Market

Thanks to a Wall Street Journal opinion page piece by Andy Kessler titled “The Fed Squeezes the Shadow-Banking System” (subscription required) published on 5/23/2013 I became aware of this issue.

The article uses the term “rehypothecation”, while for the purposes of this blog I chose the term “repurchase agreement”. I may be ignorant about the differences, but I am not a financial economist and I am pressed for time.

To summarize the article, due to the aggressive buying of large amounts of Treasuries (the Fed holds about $1.8 trillion of US Treasury bonds) and mortgage backed securities, the market for repurchase agreements is partially dried up. According to the article such repurchase agreements are similar in effect as the fractional reserve banking multiplier on credit and money availability in the economy. In particular, highly liquid and fungible Treasury securities serve as collateral in repurchase agreements.

Thus, it is very likely that the Fed has acted counterproductive rather than stimulating the economy it throttled it. There are so many things that this preeminent economist, i.e. Ben Bernanke, does not understand about economics.

The Federal Reserve Is An Incompetent Servant Of Two Masters

A Servant Of Two Masters

Here is the interpretation as it applies to this blog post:

1.       A servant of two masters will have a hard time to serve both masters well.

2.       Under some circumstances it is conceivable that the servant can play the two masters and pursue his own interests. This applies in particular in this case since the two masters are only economic concepts.

A Desperate Ben Bernanke

Economics professor Ben Bernanke this week (on 12/11/2012) took an unfortunate ambivalence of US monetary policy to a new low when he linked the continuation of recklessly low interest rates to an unemployment rate target.

Is Bernanke obsessed with proving that Milton Friedman got it wrong?

A Bit Of Background

1978 the US Congress passed the Full Employment and Balanced Growth Act which among many other things requires the Federal Reserve to achieve simultaneously full employment growth and price stability. By the way, this big government law should be repealed the sooner the better.

Economists have for a long time debated whether a central bank has the means to achieve two disparate economic goals at the same time with limited instruments at its disposal. For decades, the consensus among economists (if there ever is such a thing among economists) is that a central bank is better at maintaining domestic and external monetary stability than stimulating economic growth. Monetary policy should be rule bound and predictable. This fact is well known among economists for decades.

Ben Bernanke - The Worst Central Banker Ever

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.

Here are two more links to my previous blog posts covering US monetary policy: here, here.

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.