Bernanke Fears Mean Politicians Will Make Him Do Stuff He Already Did

  turning japanese

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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Josh was born and raised in Buffalo, New York, leaving him with a love of chicken wings and a tendency to say “pop”. He taught ancient Greek and Roman history to undergraduates before fleeing from academia in terror; worked for a failed San Francisco dot-com that neglected to supply him with stock options or an Aeron chair; lived in Berlin, where he mostly ate Indian and Ethiopian food; finished in third place on his sole Jeopardy! appearance (the correct answer was “Golda Meir”); and was named 2007 Blogger of the Year by The Week, for obvious reasons. Josh is the creator/editor of COMICS CURMUDGEON (which you should read) and does geeky editing and writing about geeky things such as "the Java programming industry for JavaWorld." He lives in Baltimore with his wife Amber and his cat Hoagie.

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