October 25, 2005
From the desk of Jane Galt:Bernanke for the Fed
What does it all mean, I hear you cry? The Economist sums it up.
Posted by Jane Galt at October 25, 2005 11:18 AM | TrackBack | Technorati inbound linksJane Galt writes:
The 'Economist' sums it all up.
The "Economist" writes this, about Alan Greenspan:
During his tenure, the spectre of inflation was finally banished as he continued and extended the hawkish stance of his predecessor, Paul Volcker.
I wonder upon what planet the author lives?
Moving from fantasyland to the real world, it seems likely that when the torrent of debt the world has seen for years finally washes back in our faces, it will be Bernanke who gets the blame, rather than Easy Al.
As for me, I'm going to keep my eyes upon the skies...
A different planet than you... but I think that says more about you than the author. :)
Well, on the front page of today's WSJ there's two different stories that strongly imply Bernanke will specifically target inflation, although the mechanism he'll use is still not clear. I'll grant that Greenspan issued a lot of liquidity in 1987, again before 1999 (the Y2K boogeyman) and to a lesser extent after the NASDAQ crash, but is it really a "torrent of debt"? What should he have done, let the market crash in 1987?
"What should he have done, let the market crash in 1987?"
Yes. By not allowing the markets to deflate their own bubble he's essentially spoiled an entire generation into thinking it's their God-given right to 10-15% annualized returns. It's not, and history shows it. So, like spoiled kids who grow up to be spoiled adults, when reality rears her ugly head the consequences will be far more drastic than if he'd popped Wall Street's ego back in '87.
Talk is cheap, and Bernanke is good at talking. Recall the speech he gave in which he felt that there was no form of deflation that could not be papered over; "We have this thing called a printing press", he said, recalling for some of us the days in Germany when printing presses ran 24 hours a day, 7 days a week and still couldn't print Weimar-marks fast enough to keep up with hyperinflation; when people took a wheelbarrow full of paper currency to buy food, and wound up with next to nothing, but did so anyway because to wait a day would mean buying even less.
Bernanke likes inflation. He just doesn't want it to get "too high", whatever that means. If a pickpocket takes my wallet and gives it back to me with half of the money gone, he's still a thief. Bernanke is not an inflation "hawk", and Greenspan wasn't either.
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