Bernanke's comments offer no enlightenment

By DAVID MOON, Moon Capital Management, LLC
September 4, 2011

When finance ministers and other really smart monetary government people descended on little Jackson, Wyoming (population of Teton County: 18,251) a little more than a week ago, the financial world eagerly awaited the public comments by Federal Reserve Board Chairman, Ben Bernanke.

Like three days at a fake Wild West show in Pigeon Forge, the speech – and most everything about the conference – was a big public performance.

Chairman Bernanke’s much anticipated speech spanned 3,500 words and was as exciting as an after-lunch lecture on the pros and cons of double-declining depreciation. He offered no further clear enlightenment about the possibility of further quantitative easing.

In keeping with tradition set by his predecessors, he actually offered no enlightenment about anything.

After most of his listening audience had surely fallen asleep, he slipped in a few words, however, about the inability of “fiscal policymakers” to effectively deal with the economy.

Huh? This is the guy that has futilely purchased $1.8 trillion worth of bonds, driven interest rates to zero, decimated the income of millions of retirees, threatened to do it again – and he is criticizing Congress and the President?

Ben, get a mirror.

Finance ministers, economists and their lieutenants from 12 Federal Reserve Banks met in a lodge made possible by John D. Rockefeller. To whom did they turn for advice about the plight of their people?

No one with Rockefeller’s economics savvy.

Three of the presenters were professors from Harvard University. The new head of the International Monetary Fund was there. Other speakers included professors from Cal Berkley, Michigan, Cornell, Brown and Oxford. The University of Chicago was represented by two professors. The agenda was rounded out by the president of the European Central Bank and the head of something called the Committee for a Responsible Federal Budget.

In other words, a bunch of Bernankes.

No problem can be solved with the same consciousness that created it. Our current recession was born in a womb of debt and nurtured with two decades of growing excess.

Some folks credit the government spending associated with World War II for ending the Great Depression. If that were true, why do a third of Americans blame the cost of fighting wars in Iraq and Afghanistan for the recent (current?) recession? If wars lead to economic expansion, it seems that the solution to our current problems would be pretty simple.

It might not be politically or morally palatable, but it would be simple.

But neither wars nor prolonged deficit spending creates economic strength. If it did, Switzerland would exist in perpetual depression. Instead, it has the most sound currency on earth.

Ben Bernanke has risked almost $2 trillion on an economic theory that proved impotent in the US in the 1970s and in Japan in the 1990s. Yet like a dog who apparently loves the beatings his owner delivers from time-to-time, we’ve once again turned to a failed economic theory.

To paraphrase Yogi Berra, if people don’t want to borrow more money, you can’t stop them.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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