In this mid-term election season in the United States, President Obama has blamed everything else related to the state of the economy on Bush 43. It makes sense to also blame the appointment of Ben Bernanke as Chairman of the Board of Governors of the Federal Reserve System on Bush 43 as well.
Almost everything that Bernanke has done has been wrong. The only thing people can really give him credit for is for throwing enough spaghetti against the wall in late 2008 so that some of it would stick to the wall. But, even this action may have resulted in action from an emotional scare that was something less than rational. See “The Bailout Plan: Did Bernanke Panic?”
Now we stand on the verge of another round of spaghetti tossing. The Fed, and many other central banks around the world, are meeting this week. “This week’s meetings are the greatest concentration of monetary-policy action by leading central banks since the first week of October 2008, when they met in emergency sessions to fight the global financial crisis.” (See here.)
The Washington Post puts it very bluntly: “Federal Reserve’s Bernanke on Line with New Move to Boost Economy”:
The Federal Reserve is preparing to put its credibility on the line as it rarely has before by taking dramatic new action this week to try jolting the economy out of its slumber.
This action just re-enforces the desperation of current policy makers. Their model is wrong, yet they persist in trying to make it work. (See here.) People are always their most desperate when they are losing control. In an effort to re-gain control they try more and more of the same old medicine.
How do you like this quote? “We’re very concerned about what to do. One thing we know is that when the bond rally ends, it will not end well.” This quote is attributed to Bob Michele, the chief investment officer at JPMorgan Asset Management. (See here.)
In addition, this behavior on the part of the Federal Reserve System and of the Obama administration is undermining confidence in political relationships around the world.
Traders are losing confidence in Group of 20 finance officials’ pledge to avoid foreign-exchange manipulation, less than a week after the leaders vowed to stop devaluing currencies to prop up their economies.
This comes after the feeble attempts of Treasury Secretary Geitner to get China to act in the interests of the United States. Again, this can be seen as a seemingly desperate try to put the blame on someone else.
The G-20, under these circumstances, is incapable of making an enforceable pledge. (See “The Do-Nothing G-20".)
As long as the United States continues to persist in its current policy stance things will not change. The Obama administration, plus the Federal Reserve, has made it very clear what their policy is going to be. And, since the rest of the world knows what the Federal Reserve policy will be, the rest of the world will act accordingly,
Consequently, this just makes the United States a sitting duck!
But, Bush 43 appointed Bernanke. Oh, yes, President Obama re-appointed him, but like TARP and some other things, a president cannot just eliminate the past. A president has live with some of the decisions of his predecessor. Right?
The world is waiting for the results of the meeting of the Board of Governors of the Federal Reserve System on November 2 and 3. The European Central Bank, the Bank of England, the Bank of Japan and the Reserve Bank of Australia also have meetings scheduled for this week. We may look back on this week as another significant date in the history of the Great Recession of 2008-2009 and its aftermath.
Unfortunately for President Obama, the legacy appointment of Ben Bernanke may play a large role in the definition of his place in history.