2/11/2011 Portland, Oregon – Pop in your mints…
If you have been reading about Federal Reserve Chairman Ben Bernanke's recent testimony before the House Budget Committee, you are probably beginning to think what we are thinking. The man is insane. Even Congress appears to be catching on to the fact that inflation is about to skyrocket. How could the man in charge of the world's reserve currency miss something so obvious? They wonder aloud. They ridicule him, scold him for keeping interest rates low, and call for him to cease and desist his most recent counterfeiting scheme, QE2.
Ben is being bullied. Congress needs to show that they are somehow "in touch" with suffering of the American people so they pick on him. The irony is that the FED is simply the enabler to the American Congress's insane policies and related spending habits. It is like a cocaine addict blaming his drug dealer for his addiction.
At one point yesterday Ben pushed back. While Paul Ryan (R-Wisc) was deriding him, with the benefit of hindsight, for implementing QE2, a roughly $600 Billion dollar money printing scheme, Mr. Bernanke noted that Congress was on pace to run a record deficit of $1.5 Trillion this fiscal year. What remained unsaid was that the FED is essentially funding the US Deficit by printing money. This is the type of activity that has caused some very unhappy endings throughout history. Yet, like Thelma and Louise, the FED and Congress are holding hands as they run the currency off a cliff!
But Congress and the FED are two very different characters with two very different goals. Congress is simply trying to get elected. The FED, on the other hand, is attempting to fulfill its impossible mandate to provide price stability and full employment to the American public. Since it cannot do both, it is currently sacrificing the former in favor of the latter.