“It became necessary to destroy the town to save it.”
U.S. major talking about Bến Tre, Vietnam
The Wall Street Journal doesn’t have a humor section, so “How the Fed Saved the Economy” appeared on the op-ed pages under the byline of Ben Bernanke, former chair of the Federal Reserve Board.
Anyone who has read even one of our blog posts knows that we would disagree with any claim about the Fed saving the world, especially given that the economy continues its slow-motion deterioration after nearly eight years and several trillion dollars’ worth of “saving” by the Fed.
However, Mr. Bernanke has a book to sell. And while it will likely appear in the non-fiction section, we’re guessing by its title that it is even more self-congratulatory and less fact-filled (if that’s possible) than his op-ed piece.
Even with his significant media experience, Mr. Bernanke may need heavy media training to be able to do his press tour with a straight face. The title alone is a laugh riot: The Courage to Act: A Memoir of a Crisis and Its Aftermath.
Courage? Really? People who show courage don’t normally have to write a book saying how courageous they are.
Whatever character traits the former Fed chair has, humility isn’t one of them. He begins his piece by noting that the Fed will soon (he thinks) be ending the “extraordinary monetary policies, adopted during my tenure as Fed chairman, to help the economy recover from a historic financial crisis.”
Pat yourself on the back a little harder, Ben, and you’ll break your spine.
Leading From Behind
The entire op-ed is almost as funny as a Fed policy statement. It claims, for example, that the Fed set an inflation target of 2%, “similar to that of most other central banks around the world.” In other words, the Fed set a 2% inflation rate as a target because other central banks did … and other central banks set a 2% inflation rate as a target because the Fed did. Or maybe it’s just another case of leading from behind.
He says that, “Reasonable people can disagree on whether the economy is at full employment” and mentions the 5.1% unemployment rate cited by the U.S. Bureau of Labor Statistics. During the Bush Administration, the unemployment rate was as low as 3.8%, so how can anyone who is reasonable and not trying to sell a book argue that a 5.1% rate constitutes full employment?
And, of course, the only reason the unemployment rate isn’t higher is that many Americans have stopped looking for work. Add them back in, and subtract underemployed part-time workers, and you’ll have the U-6 unemployment rate, which is 10.0%. Thank you, Mr. Bernanke, for saving the economy!
Would the unemployment rate be lower today if the Fed hadn’t tried to run the economy? We doubt that it would be higher.
Bernanke also compares U.S. economic performance with that of Europe, claiming that the comparison is valid, because Europe is “a major industrialized economy of similar size.” He argues that the U.S. used quantitative easing and recovered (slightly), while Europe didn’t use QE until recently and, as a result, hasn’t recovered. It’s like comparing the performance of a BMW with that of a Chevy, because they’re both cars and of similar size (just throw a few trillion into the BMW and it will run better than the Chevy!).
Would Europe’s economy be any better off if it had embraced quantitative easing when the U.S. did?
Maybe the fact that Europe is even more heavily regulated and more socialistic than the U.S. has something to do with its economic malaise. Is it really fair to compare the U.S. economy with that of a continent that includes Greece, Italy and Spain?
We’re not the only one who thinks the former chair is embellishing a less-than-sterling legacy. Other media, such as Forbes, USA Today, RealClearPolitics and NewsMax either ran Bernanke’s op-ed or turned it into a news story. Some reported Bernanke’s comments as news, while others gave their opinion of Bernanke’s opinion. As Dent Research put it, “Ben Bernanke Seems to Have Mixed Up ‘Saved’ With ‘Ruined.’ ”
What the Real World Thinks
Online, The Wall Street Journal piece attracted 923 comments. We didn’t read all of them, of course, but, except for one that claimed everything bad that’s happened since the beginning of recorded history is George Bush’s fault, the comments we read were dissing the former Fedmeister. Here are a few examples:
“Real US GDP per capita (which really is the most important measure) was 49,506 at previous high point, now is 50,855. Up 1.9%. Real German GDP per capita was 37202.96 at high point prior to Great Recession and is now 39,718. Up @6.8%. Next time we have a similar problem, can we please hire the German central bankers to help us out?”
“Ben tell us all about how you punished the people that broke the financial system using our financial system as a casino? Oh wait they are still in charge of the banks that are now many times bigger, with many times larger bets that are more guaranteed by the average taxpayer that is poorer thanks to rescued the wealthiest people around the global? Tell us about making Bubbles Bigger and keeping the same criminals in charge of the financial system? Real Estate is even higher in many place than Bubble 2.0.”
“With all due respect Mr. Bernanke, the economy is nowhere near full employment with 94 million people not working and a labor force participation rate as low as the Carter Administration. I do believe that the FED under your leadership did the best it could do given awful government policies from 2007 to now.”
“I am appalled that you think more government spending is the best remaining alternative in the event of another recession. Cutting taxes, cutting spending, reforming entitlements, repealing Obamacare, reining in the EPA are clearly better alternatives to grow the economy. The 2009 stimulus clearly failed to deliver.”
“My take is that Federal Reserve members are more politician with economic PhDs than the other way around. The net effect is to bend economic theory and practice to meet their individual and collective bureaucratic needs instincts. We are not their primary concern. Witness the Fed’s non-concern for savers and retirees.”
“The Fed can provide needed liquidity in a crisis but can do little to manage the economy over time. Unfortunately their hubris blinds them individually and as in institution to this reality. Bernanke’s comments demonstrate the need for legislation limiting the power of the Fed.”
“Better title would be…How I Saved the Richest and Destroyed the Rest and how to retire on $200k bribery speeches.”