Bernanke Turns Obfuscatory

by: Felix Salmon

When Ben Bernanke appeared on “60 Minutes” in March 2009, he was immediately embraced by middle America and overnight became considered the foremost explainer of economic concepts to the nation. This time around, Bernanke’s much more embattled. And his answers are much less clear, much more political, and much more contentious. This is not how impartial technocrats should speak:

One myth that’s out there is that what we’re doing is printing money. We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way.

Yes, Ben, you are printing money. It’s how you pay for those Treasury bonds you’re buying. Greg Ip says so, and so does Scott Grannis, who helpfully provides this chart from the first round of QE:

Base weekly 97.jpg

Look at the y-axis, and you’ll see that $600 billion is a lot of money, even if it’s less than we saw in QE1. Clearly the monetary base is changing in a significant way.

Bernanke continued with this:

Pelley: Can you act quickly enough to prevent inflation from getting out of control?

Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.

Pelley: You have what degree of confidence in your ability to control this?

Bernanke: One hundred percent.

Bernanke’s first response doesn’t actually answer Pelley’s question: Pelley didn’t ask how long it would take to raise interest rates, he asked how long it would take to get inflation under control. Obviously, it would take longer than 15 minutes. How much longer, Bernanke doesn’t say. (And, sadly, Pelley doesn’t push him.)

And Bernanke’s second response is a lie. Or if it isn’t, he should be fired immediately. No central bank governor can or should ever have 100% confidence in anything: only a psychopath who will never change his mind can say that. The Fed’s ability to control inflation is a dark and mysterious thing; it’s not some kind of iron-clad law of physics.

Bernanke knows that he has friends at “60 Minutes,” and indeed they let him run down his talking points, giving no pushback along the way. He wouldn’t get away with this kind of performance if he started giving Trichet-style press conferences. Which is one reason I suspect that’s not going to happen.