We sure wouldn't want elected officials interfering with THIS

Federal Reserve Chairman Ben Bernanke flew to Japan this week for a tour of that nation’s various soiled-panties-dispensing vending machines, but he needed to do something “work-related” so he could deduct the tickets on his taxes, so he ended up stopping by a Tokyo conference on “the future of central banking” and gave a few off-the-cuff remarks to the finance nerds who were partying there. It turns out that Bernanke has some Very Serious Thoughts about why central bankers like himself ought to be able to stone cold set interest rates how they like, rather than having pesky politicians tell them what to do. What nightmare scenario does he envision, in a world where a central banker’s only job is to set the giant FEDERAL FUNDS RATE lever to the number the chair of the House Banking Committee dictates?

Restricting banks’ ability to execute monetary policy would lead to economic instability and “boom-bust cycles”.

Politicians generally prefer holding interest rates low, as a means of stimulating the economy and boosting jobs.

“Such gains may be popular at first, and thus helpful in an election campaign, but they are not sustainable and soon evaporate, leaving behind inflationary pressures that worsen the economy’s long-term prospects,” Mr Bernanke said.

“Thus political interference in monetary policy can generate undesirable boom-bust cycles that ultimately lead to both a less stable economy and higher inflation,” he said.

Hmm, yes, historically low interest rates resulting in terrible boom-bust cycles — that scenario doesn’t sound like the last 15 years at all, does it? Thank goodness there was no political interference in the Fed’s work, during all that time. (Oh, wait, there wasn’t really any inflation during that period, so Ben Bernanke and Alan Greenspan are heroes! Terrible asset bubbles caused by low interest rates never hurt anybody! Lord knows your morning editor doesn’t actually want Congress running this shitshow, but come on, Ben, think about this stuff you say, and its relationship to things that happened recently, and that we can remember.)

Meanwhile, James Bullard, president of the Federal Reserve Bank of St. Louis (which is in charge of “real America”), gave a speech in London saying that the ongoing eurozone freakout probably wouldn’t derail the US recovery, but heck if it just might, you know, because those Europeans, boy howdy do they have some problems. The key question is: Why are so many Fed bankers fleeing the country? Do they fear that Rand Paul will fire them all and replace them with some guy whose only job is to guard the vault of gold Ameros? They probably should fear this, actually. [BBC/NYT]

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  1. It’s not boom or bust.

    In the terminology of the libertarian invisible hand of the free market, it’s handjobs or fisting with a spiked glove. Well, it’s mostly fisting with a spiked glove.

    In Japan I think it’s called Sailor Moon/Hello Kitty or Mutated Tempura Shrimp Octopus Hellbeast that shoots lasers out its ass.

  2. Maybe this strange obsession with inflation is some weird generational thing, since I’ve read there were some big problems with high inflation back in the 1970s. Newsflash, alleged financial geniuses: we do not have any problem with inflation today, in fact we’re facing a threat of deflation.

    But no, we can’t to bring up the economy and boost jobs because that might lead to scary inflation. Um, I may not be a supposed fiscal expert, but the whole point of federal fiscal policy should be to boost the economy and employment; inflation should only be feared in that it may financially harm people, not in an and of itself.

  3. That’s a boring talk. He should have borrowed Palin’s standard speech and a few of her event-tailored jokes. The audience would have love it!

  4. …because those Europeans, boy howdy do they have some problems

    Isn’t the world of finance nerds really Howdy Doody Time? Bernake is Mayor Phineas T. Bluster, Larry Summers is Dilly Dally, Henry Paulson is Capt. Windy Scalibut, Elizabeth Warren is Princess Summerfall Winter Spring, and Timmy Geithner is Flub-a-Dub. Isn’t it all fantasy, with the strings/chains pulled/jerked by the invisible hands of Adam Smith’s market? Greenspan is Tommy Turtle, also.

  5. [re=585431]ManchuCandidate[/re]: I was gonna piss and moan over the repetition of anime/manga stereotypes, but hell if I wouldn’t watch the shit out of that devil tempura show.

  6. [re=585436]JMP[/re]: Inflation reduces the purchasing power of the vast hordes of Ameros our economic masters keep stuffed under their mattresses while high unemployment simply lowers the wages of those unfortunates forced to participate in their monthly human skeet shooting rituals

    ” My people? I love my people! Pull!”
    ” Aaaaiaah!”
    ” Give that man his fiver and load up another.”

    Thus “inflation” bad, high unemployment? Good!

  7. Yeah, um, Bernanke is a decent guy (no he’s not) and all but he’s flat out lying here.

    There once was a man named Lucas who told all the world that the business cycle could be tamed by wise men in charge with great power. That was in the early 2000’s. Then, there was this stuff no-one likes to talk about (because it showed that economists were, by and large, full of shit).

    You’ve gotta have solid brass balls to then go out and say the same thing though. Bah, sub-prime was just a blip and everything is fine. You can live in a cardboard box and those who survive will be stronger!

  8. This post is a fail. Mistakes made by Central Bankers should be made by Central Bankers. If those mistakes are soon to be made by Central Bankers and retarded (oops, “intellectually disabled”) Congress-persons, then we’re really fucked. Bukake-style fucked.

  9. [re=585436]JMP[/re]: Let me help you out here. Since the Blessed St. Ronnie single handidly slayed the inflation dragon by putting the entire working class out on the street, companies no longer have to provide their employees those pesky “cost of living” raises to keep up with rising prices. Now they can give the CEO’s bigger bonuses! Win-win!
    Now you know why they fear inflation.

  10. Inflation is the Worst Thing because it is generally good for renters and debtors and bad for the Masters of the Universe. See, average dumb assholes like me tend to have little to no money invested or put aside or owed me, but I do have fixed amounts of money I owe, like bills and loans and mortgages and rent. If inflation occurs over a period of time where I owe $1000, I come off better for inflation at the end because the value of that debt decreased. On the other hand, if people owe me money and I have money in the bank and in stocks, my profit margin on those sources of income decreases because the value of what I received decreases.

    This is why economists think that inflation is the worst thing ever, because it cuts into Goldman Sachs’ profits on those sexy derivatives.

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