If Ben Bernanke were running TV ads, taking polls and holding town hall-style meetings, it wouldn't be any clearer that he's conducting an explicit reelection campaign for another four-year term as Federal Reserve chairman come next January. Oh, wait a second, he just did hold an unprecedented town hall meeting. And it was one worthy of a presidential candidate charming primary voters in Iowa.
The Great Debate
The U.S. policy of keeping zombie financial institutions alive is so clearly failing that it is now attracting attack from inside policymakers’ circle of covered wagons.
For the world monetary system, the financial crisis which erupted in the summer of 2007 is a cataclysmic shift that will prove every bit as significant as the outbreak of the First World War (which heralded sterling’s demise as a reserve currency) and the suspension of gold convertibility in 1971 (which marked the end of bullion’s monetary role).
Like the sorcerer’s apprentice, Federal Reserve Chairman Ben Bernanke and his predecessor Alan Greenspan have unleashed a series of ever-larger asset bubbles they cannot control.
One of the many comfortable but unreliable certainties now coming unglued is the idea that U.S. Treasury interest rates are the paramount benchmark, a measure of “risk free” investment, an idea at the heart of finance.
Quietly, without fanfare, the Federal Reserve has turned on the printing presses. The central bank is flooding the market with enough excess liquidity to refloat the banking system — and hopes to generate an upturn in both economic activity and inflation in the next 12-18 months to prevent the economy falling into a prolonged slump.