Counterparties: Bernanke’s polite finger-pointing
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The world’s most powerful monetary policymaker mentioned fiscal policy 23 times in his prepared testimony before Congress yesterday. The word cloud from Bernanke’s speech pretty much sums it up: Congress, Bernanke argued, has the power to boost the US economy and save us from the dreaded “fiscal cliff”.
If you haven’t been paying attention, Bernanke has spent much of the last few years very politely directing us to fiscal policy, arguing for deficit spending and, in pretty much the strongest language possible for a central banker, has begged for help propping up the economy. Tim Duy highlights something particularly pointed in Bernanke’s latest remarks: “Real federal government spending has also declined, on net, since the third quarter of last year, and the future course of federal fiscal policies remains quite uncertain”.
All of which should make Paul Krugman nod approvingly. In his column and blog Krugman argued that “Reagan was a Keynsian” and noted that total government spending adjusted for inflation and population was actually higher under Reagan than Obama. (Donald Boudreaux calls Krugman’s numbers “highly questionable”.)
Fareed Zakaria takes the spending argument a bit further:
For those who think President Obama’s policies have done little to produce growth, keep in mind that the single largest piece of his policies – in dollar terms – has been tax cuts. They actually began before Obama, with the tax cut passed under the George W. Bush administration in response to the financial crisis in 2008. Then came the stimulus bill, of which tax cuts were the largest chunk by far – one-third of the total. The Department of Transportation, by contrast, got 6 percent of the total to fix infrastructure.
To which President Obama basically replied today: “Blame Congress”. In a press conference, Obama once again called for Congress to pass the jobs bill he first proposed in September. – Ryan McCarthy
On to today’s links:
Spain expected to request bank bailout from EU on Saturday – Reuters
“Spain’s banks now own 67% of the country’s bonds”, the largest proportion in the euro zone – NYT
What the Soviet Union breakup can teach us about the euro zone crisis – Bloomberg
Member states went wrong by ceding the right to print money to the ECB – George Soros
Martin Wolf eviscerates the German finance ministry – FT