Bernanke: Back to Clark Kent

August 11, 2009

Having averted a disaster, cartoon superheroes typically revert to their bland civilian identities. With the recession loosening its grip, Ben Bernanke is trying a similar trick.

After a period of heroic boldness and creativity, the Fed is determined to be dull. Wednesday’s statement from the Federal Open Market Committee may well be calculated to bore.

Yet Bernanke’s reversion to Clark Kent is premature given the dangers still posed by a fragile U.S. economy. The Fed’s more timorous approach in recent months seems due to an increasingly hostile political environment combined with an improving economic one.

But until the United States is well on the road to recovery Bernanke should try to hold on to his swashbuckling spirit.

The Fed has every reason to be politically intimidated. Relations between lawmakers and the Fed are close to an all-time low.

Much congressional ire has been focused on the Fed’s role in bank bailouts. There has been nervousness over its expanded balance sheet, which more than doubled during the crisis to around 14 percent of GDP.

For some Republican Senators such as Jim DeMint, the Fed’s purchase of U.S. Treasuries has been aiding and abetting “reckless” spending by Obama. DeMint is not alone in believing that credit easing is a covert means of devaluing the dollar. In the House an increasing number seem willing to listen to obsessively anti-Fed Congressman Ron Paul.

It is a bad time for the Fed to have so many enemies. As lawmakers mull an overhaul of financial regulation, the stakes are high.

Firstly, they could refuse to bestow responsibility for “systemic risk” supervision on the Federal Reserve — a role Ben Bernanke seems eager to secure. The central bank already looks likely to see its powers over consumer protection taken
away. (Both decisions may be good for America but they would be defeats for the Fed.)

More worrying still, support has been building to give the investigative arm of Congress the right to audit Fed policy. A Ron Paul-inspired bill to do just this recently attracted 276 co-sponsors in the House.

Allowing the Government Accountability Office to second-guess Fed monetary policy decisions would be more than just a territorial loss for the Fed; it would be bad for the nation too.

“Headlines declaring that the investigative arm of Congress had cast doubt on the latest rate hike, for example, would certainly undermine the perception of an independent Fed,” says Vincent Reinhart, a former Fed official and now a scholar at the American Enterprise Institute.

Lawmakers could also strip Fed regional bank presidents of a vote on monetary policy, leaving just the Congress-approved Fed governors in charge. This would be another erosion of Fed independence.

With these swords hanging overhead, the Fed can be expected to take the safest path. All care will be given to restore the image of prudent, gray-suited central bankers.

The Treasury purchase scheme — the most controversial of the credit easing policies — will most likely be allowed to expire, followed shortly afterward by the mortgage-backed security program.

It is disappointing that the Fed is willing to tolerate the gloomy economic outcome it has been forecasting. A final burst of credit easing would not be without risks, economic as well as political.

But it could help ensure that any economic recovery will be self-supporting. More creative action to support the commercial mortgage-backed security market would be especially welcome. Meanwhile, providing further details of the exit strategy would allay fears that the Fed is going too far.

Hard as it may be, the Fed should try to block out the noises coming from Congress. Even if it means taking more political heat, Bernanke should not be willing to accept an anemic recovery and high unemployment.

15 comments

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“Lawmakers could also strip Fed regional bank presidents of a vote on monetary policy, leaving just the Congress-approved Fed governors in charge. This would be another erosion of Fed independence.”

Where in HR1207 is this worded? I can provide a link to the resolution if you have trouble with Google.

Posted by Quentin | Report as abusive

It seems from the headline that all is well in the American economy and our Superman (bernanke lololo) can go back to his old self… Nothing can be further from the truth. THis is more about attempting to dissuade people from believing in HR1207. Rather than being just merely audited, the fed should be completely dismantled and America should return to the gold standard. Private banks telling the world what paper is worth is one of the largest scams going next to free/fair trade and global warming. Thank God for Dr. Paul.

Posted by jason | Report as abusive

Look, we know the major banks own the Federal Reserve. The bank CEOs sit on various board and pretty much tell the Fed chairman what to do. The US Federal Reserve system is a rigged money printing racket. Endless trillions of Federal Reserve Notes and computer credits pretending to be sovereign dollar currency. It’s official goal of control inflation and promote economic growth can be used in comedy gigs all around the world. The whole setup is a joke. It has no more credibility in the eyes of the world (nothing personal Bernanke). Only the Congress, that organization of idiots, is still playing games with it. In their dance of tango, the music of self-serving power never stops. In the end, absolutely nothing is changed for the better. The Federal Reserve, as always, gets away with murdering the economy. But maintain the absolute power of its owner, the bankers.

Posted by The Real Deal | Report as abusive

________

Read “Bernanke’s Iron Fist.”

Abstract:

I am going to show here that central banks have excessive powers which are coherent neither with democratic principles nor with morality. Their existence can not be justified from a mathematical point of view.

Worse, in light of the exercise of their extraordinary power by Bernanke, I argue that they can pose a real threat to democracy, peace, privacy and individual freedom.

Because of the immediate dangers that are evoked in these lines I strongly suggest that you reproduce my deeds.

“I will argue here that, to the contrary, there is much that the Bank of Japan, in cooperation with other government agencies, could do to help promote economic recovery in Japan.

Most of my arguments will not be new to the policy board and staff of the BOJ, which of course has discussed these questions extensively.

However, their responses, when not confused or inconsistent, have generally relied on various technical or legal objections—- objections which, I will argue, could be overcome if the will to do so existed.“

Prof. Ben Shalom Bernanke
Japanese Monetary Policy: A Case of Self-Induced Paralysis?
For Presentation at the ASSA Meetings, Boston MA,
January 9th, 2000.

Revoke Bernanke: Sign the Petition to Request from President Barack Obama That He Removes Ben ‘Systemic Risk’Bernanke From Office.

In my Tract: The Age of Turbulence: Plea for a New Economic Order I prove that after an unknown period of Irrational Exhuberance, which will inflate the Mother of All Asset Price Bubbles, we will have a Keynes’ Liquidity Trap, The Crash and The Deep Depression.

In fluid dynamics, turbulence or turbulent flow is a fluid regime characterized by chaotic, stochastic property changes. This includes low momentum diffusion, high momentum convection, and rapid variation of pressure and velocity in space and time.

It owns most of the discontinuous and chaotic properties of a Market Crash and of a Keynes’ Liquidity Trap.

There is a remote possibility that The Crash and The Deep Depression, in a pattern similar to the one that brought Hitler to Power during The Great Depression, would allow the installation of a totalitarian regime, Adventures in a New World [Order].

“But the essential issue here is one of insurance, with a relatively modest premium, against a potentially catastrophic, very low probability event.

With that, Peter, would you outline your proposals to us?”

Chairman Alan Greenspan
Meeting of the Federal Open Market Committee.
August 24th, 1999

First, and with all due respect, Sir, my name is not Peter. My name is Hamou, Shalom Patrick Hamou.

I propose a plausible alternative to The Deep Depression, The Adjusted Credit Free, Free Market Economy, our New Economic Order.

It is a fair, prosperous and stable economy that protects its participants from the consequences of The Deep Depression.

That economy is both liberal and libertarian.

That New Economic Order does not discriminates and guarantees the individual freedoms of its participants.

I have designed a system by which The New Economic Order can gather momentum for a successful and quick implementation:

In order to reserve your option to participate you just need to register anonymously, before The Crash, the serial number of a €5 bank note in our Public Cra$h R€gi$t€r It is Free!.

This rapid implementation will prevent potential Adventures in a New World [Order].

By the way, I have just updated a paragraph of my Tract: Model of the Yield Curve. That Model is different than the generally accepted definition it is also more precise.

The Movement for the New Economic Order Against the Adventure in a New World Order.

__________

“obsessively anti-Fed Congressman Ron Paul”

the adj. here is unnecessary, the man comes from a different cloth. an entire school of economic theory is devoted to the same crusade. there are many valid arguments, and even many more sane, intelligent, sophisticated scholars/practicioners to discret this discussion on the basis of one man being a “conspiracy nutball”- which you and many others seem to infer.

grow up

Posted by dvictr | Report as abusive

Th

Posted by Gordge Hanton | Report as abusive

I think the biggest issue today that’s preventing everyone except for the top 1% of wealthy people from having a stable, sustainable existance is the general lack of understanding of how the Fed actually operates and why exactly it is such a bad thing. Many people think the Fed is good because it controls inflation and deflation by adjusting borrowing rates. What people should understand is that without a dollar backed/secured in gold or something of actual value, inflation has to happen. This makes the money working people save for retirement worth much less when the time comes and every year up til then.

When money is borrowed from banks/lenders, they only need 10% of what is lent out as actual capital. But, what usually happens is that bank gets that loan deposited back into the bank which it can then use to loan MORE money, since a loan can then be granted with that deposit as a 10% security. Where exactly did the money come from that they are lending since there’s only 10% to back it up? THIN AIR. It was created by the banks or the Fed depending upon who is doing the borrowing.

Every dollar in circulation is owed to someone. Everything we have saved is a debt to someone else because of the money creation process in place by having the Fed and money not backed in something tangible like gold. Fun fact: if all the debts in the US were paid off there would be exactly ZERO dollars in circulation. So how do banks survive? By creating more debt and expanding inflation.

There’s a reason Ron Paul’s obsessed with roasting the Fed, that is because he’s sick and tired of our money being devalued and retirement savings being worthless and our savings being used to swindle us and blatently transfer wealth from savers and seniors to bank executives like BofA, Countrywide lenders and Wall streeters.

It doesn’t have to be the way it is. = Gold Standard

Hope that helps anyone… pass it on…

Posted by andyo | Report as abusive

Bernanke is superman? It is the federal reserve that caused this depression and now he is a savior? All of your tax money is going to pay the private international bankers that OWN the Federal Reserve Corporation. Yes it is a private bank designed to MAKE MONEY not support economic stability. After all the bailouts and secret loans it will be amazing if the US has any ability to buy anything in the future. Bernanke and the corporation he represents has raped and pillaged the US for long enough. END THE FED!

Posted by robert | Report as abusive

It’s nice to read the comments and see that this type of covertly deceptive article no longer goes undetected.

“Allowing the Government Accountability Office to second-guess Fed monetary policy decisions would be more than just a territorial loss for the Fed; it would be bad for the nation too.”

How dare the servants of the people challenge the Fed?

Posted by Peter | Report as abusive

Comparing Bernanke to Superman is like comparing bullsh– to caviar.
Why dont more Americans understand they are getting ripped off by a private bank.

Posted by LS | Report as abusive

Why is it that people who don’t believe the Federal government should be involved in regulating the money supply, think that they will somehow be able to establish a sound currency based on a highly speculated commodity?

The same people who don’t believe that the currency has any meaning on it’s own somehow still cling to the notion that the Federal Government alone can adopt a standard and seem to forget they will have to convince the entire world that all countries would have to revert to the gold standard as well, or it won’t work.

Do they really think the entire world will listen to the U.S. let alone to them? The gold standard was never able to deter inflation.

Posted by Paul Rosa | Report as abusive

Superhero??? More like criminal who pulled off a grand heist with his other Star of David-Goldman cronies. Bernanke should be taken to fired… upon.

Posted by Jose Trujillo | Report as abusive

“Lawmakers could also strip Fed regional bank presidents of a vote on monetary policy, leaving just the Congress-approved Fed governors in charge. This would be another erosion of Fed independence.”

Independence is relative…the FED maybe independent of the USG but its certainly not independent of private banks. Which of the two is more likely to look out for our countries well being? Which of the two does the population have more influence one?

“Allowing the Government Accountability Office to second-guess Fed monetary policy decisions would be more than just a territorial loss for the Fed; it would be bad for the nation too.”

Christoper Swann, perhaps you could author a follow up article on why allowing gov’t oversight would be bad for the nation?

Posted by Concenred Person | Report as abusive

The fed is evil…evil is not good…Bernanke is an agent of evil. All those who support the fed are either evil or stupid. Congress made a mistake is 1913. Congress needs to fix their mistake.
I suggest Mr. Swann read this to himself at least three times a day until reality sinks in.

Posted by A. Fisher | Report as abusive

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