Benny and the Jets

Posted on June 8, 2012


I noticed yesterday that Fed Chair Bernanke waxed sanguine about the matter of printing amounts of money that carry a ‘T’ after the sum. South Carolina Senator Jim DeMint was questioning Bernanke about the ‘moral hazard’ of holding interest rates at an artificially low level. The moral hazard of course being that doing so makes it just that more tempting to maintain the status quo and avoid the hard choices that need to be made in cutting spending.

Bernanke in response to DeMint, threw out some raw equations in terms of talking points for the sake of the discussion. According to the Chairman, if interest rates were raised by just one percent, the deficit would increase $100 billion annually.

The Daily Caller’s Caroline May, reports the following exchange:

“If we were to raise interest rates by a full percentage point, and ignoring the fact that most debt is of longer duration, it would not reprise, that would still only raise the annual deficit by something a little over $100 billion,” Bernanke said, noting that the amount is relatively small with an annual deficit of a $1 trillion.

“That’s real money,” DeMint responded.

“Trillion there, a trillion here,” Bernanke responded. “Yes, sir I agree with that. But what I’m saying is that the situation is — the deficits are so large, particularly going out over the next few years, irrespective of the level of interest rates, that I would think that Congress would have plenty of motivation to try to address that and that whether or not interest rates are currently 1.5 percent for ten years or 2.5 percent for ten years doesn’t make much difference.”

A casual observer would be hard pressed to discern whether Bernanke was making an argument for an increase in interest rates or holding tight to the rate at zero. Of course, the more incoherent the statement from the Fed in terms of telegraphing their next move, the more consistent with their general modus operandi.

There is, as you’ve noticed, quite a bit of speculation as to when QE4 might be arriving. If you’ve ever scratched your head trying to figure out how it can possibly be that during a recession; with enormous government debt, low consumer confidence, inflated P/E ratios, spikes in energy costs, massive (under-reported) unemployment and all the other factors including slow growth, that would mitigate against exuberant run ups of the stock indexes – that we’ve had 3 major jumps in the market in the last three years – you’re not alone. 

But financial experts have finally revealed the reason. Quantitative Easing – those big, fat Greek stimulus infusions. Thus we discover that the market is not driven by the fundamental factors and indicators now, but instead by manipulation by the Federal Reserve. 

I happened to catch Paul Krugman, the Keynesian economist and member of the ‘rat family’ on the Left (Bernanke and Axelrod are also members), being interviewed by Robert Siegel on NPR’s ‘All Things Considered’. Side note – ‘All Things Considered’ is a bit of a misnomer. They don’t consider ‘All Things’ and what they do consider is often not counterbalanced by any contrasting opinion on the Right. No surprise there. 

In any event though, Krugman was lamenting that Bernanke, Obama and the Congress don’t just go hog wild with more stimulus. I’ll have to essentially paraphrase the conversation, because of all the show segments for Wednesday, NPR seems to have wiped this one. Essentially Mr. Siegel asked Krugman, in slow pitch manner, “So you are really saying that the Fed ought to print quite a bit more money?” Krugman doubled down on the insanity; “Absolutely, austerity is only going to cause more problems in Europe – but unfortunately, the European Central Bank can’t print more money because unlike the United States, the ECB does not control the currency. But we can and should print more money, to stimulate the economy now and worry about the debt later.

This is the same old song Krugman has been singing for the entire duration of the recession. That the New York Times acts as a purveyor of this insanity on a weekly basis, tells you as much or more than you already know about them. Oh, well – what else is new?

‘A Trillion here, a Trillion there – New York City is the place where they say, “Hey Ben Bernanke, take a walk on the wild side”. And the colored girls go – do,do,do,do,do,do,do,do,dooooooooo’

Sorry, Lou – it was too easy, I had to do it.