Taking a Look at Bernanke's "Plan"

SmartMoney ^ | December 18, 2009 | Donald Luskin

[PaulAllen]

Bernake: If declines in the dollar and increases in commodity prices were creating upward pressures on consumer prices and causing expectations of future inflation to rise, those developments would be taken extremely seriously by the Committee and would have to be balanced against the high rate of unemployment that you posit in your hypothetical.

Luskin: This is no hypothetical -- it's happening right now. We have a 10% unemployment rate, the dollar is falling, gold is a week or two off all-time highs, and oil prices have more than doubled this year.

So why is the Fed running the easiest monetary policy in its nearly 100-year history while ignoring the clear inflation warnings being given by currency and commodity markets? There can only be two possible answers...

Here's how Bernanke wraps up his answer:

But the clear lesson from the experience of the 1970s and from that of other countries is the high cost that a nation pays in terms of macroeconomic performance when it loses sight of the importance of maintaining a credible plan for the achievement of price stability and maximum sustainable employment in the medium and longer terms.

...In case you aren't old enough to know about the 1970s, or are too old to remember, let me tell you: It was all about low employment and high inflation at the same time. And why? Because the Fed made the same mistake Bernanke is making now; it thought it could stimulate the economy with easy money. It turned out that it couldn't, and it caused a lot of inflation in the process of trying and failing.

[PaulAllen]

Good as Gold February 3, 2006 http://www.smartmoney.com/investing/stocks/good-as-gold-18980/

[KoRn]

Looking at the decisions that Helicopter Ben and Terrible Timmay have made, you have to wonder whether or not they are thinking even one step ahead. Everything they are doing might hold things together for the moment, but could lead to disaster in a few years.

[element92]

sadly, Republicans do not offer much for
alternatives

[Fee]

The US has no choice. To do the right thing is to let the banks fail and real estate foreclose, so people who have money on the sideline rush in and buy these assets. This means higher unemployment and more suffering, but it allows us to hit the bottom quickly thus starting the recovery process. The political price is the party in power will lose the next election because the opposition will take advantage of the suffering. No political party or POTUS will do this, so there is only one option left, spend money to stabilize the system, and inflate our debt away. The Fed in the next ten plus years will balance between deflation and inflation and they hope something unforseen does not happen to cause our financial system to collapse and meltdown.

[The Comedian]

Obama chose Bernake.

'Nuf said.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[element92]

to post 4.

exactly right
well written

[PaulAllen]

That is a very important observation. I have seen it too many times. I also remember Clinton chuckling when he turned the Presidency over to Bush, that there would be some economic challenges. Of course when he got in it was set up just right, we had a surplus and everything.

The Kennedy/Reagan/Bush (KRB) Tax Policy Paradox* Richard H. Day

The growth of the later Reagan and Clinton years was stimulated in part by the tax reductions instituted in the 1980s. The fiscal restraint of the Clinton years enabled the increasing tax revenue to reduce the deficit and then produce a surplus. http://www.bus.ucf.edu/seminars/public/current/eco/downloads/2006_11_09_01_02.pdf

[rbg81]

Its all about sweeping the mess under the rug—until the rug explodes in a massive, volcanic explosion of crap.