The difference between the Federal Reserve Board of Chairwoman Janet Yellen and that of her immediate predecessor Ben Bernanke is becoming clear. No more so than in their approach to the problem of joblessness.
President Barack Obama’s State of the Union was all about jobs. He said the word 23 times, often congratulating himself on having helped create 4 million. He urged a “year of action” to make more jobs, raise wages and create opportunities for social mobility. Then he set out on a jobs tour to persuade large companies to start hiring and pay more.
Every time Federal Reserve Chairman Ben Bernanke opens his mouth, the markets move. But few could have guessed that in an offhand remark he would add legitimacy to the Bitcoin, the virtual currency that competes with the American dollar as a reserve currency and an international trading medium.
Victories come in many sizes. The Battle of the Little Bighorn, for example, at first seemed an overwhelming win for the Sioux. But it soon became clear their success would not last. Who really won the Alamo? The Mexicans? Try telling that to a Texan. So, who won the Battle of the Shutdown 2013? The conventional view is that the Tea Party Republicans were seen off by the congressional leadership in both parties. Having made their protest, disrupted the nation and cost Americans a great deal in anxiety, time and treasure, they lost the battle — but promise to resume the war another day. Perhaps as early as January.
In his baccalaureate address at Princeton this year, the Fed chairman Ben Bernanke defined economics as “a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong.” He added, “About the future, not so much.” Put another way, economics is a science that can mean what economists want it to mean. As W.C. Fields replied when asked whether poker was a game of chance: “Not the way I play it.”
Now comes the hard part. Fed Chairman Ben Bernanke’s announcement that if the conditions are right he will wean the U.S. economy off quantitative easing within a year has already caused consternation in the stock market. Pumping money into the system by buying back government bonds at the rate of $85 billion a month has lately done little good, which is a persuasive reason to wind it down. But getting from here to there without incident is not going to be easy. It was simpler for Howard Hughes to land his gargantuan super-plane, the Spruce Goose.
Whisper it abroad: The U.S. economy is on the mend. Most recent indicators suggest that, five years after the start of the Great Recession, the “L-shaped” recovery is finally heading north. The stock market is booming, and home prices are on the upswing. The rising price of houses makes people feel richer, and consumer confidence is on the mend. Private borrowing is up, and consumers are starting to spend again.