Ben Bernanke is rapidly digging himself down the chart of worst central bankers of all time. Captain Carnage, former Helicopter Pilot has vowed to raise the inflation tax again and again
Now getting to the outright bottom is very unlikely, because it’s filled with catastrophic blunders of hyper-inflation and depression. However, it’s not beyond possibility that by this time next year he will be rated the among worst central bankers in a developed nation in the post-WWII era. After yesterday’s hair raising double digits per year Producer Price Index, one would think that even Captain Carnage would realize that he’s not just pushing on a string, but wrapping a wire around our necks.
Now failure is a team effort, and the cult of blaming or praising central bankers for everything is well overblown. Instead, central bankers are either accommodative, neutral, or hostile to what the economy and fiscal authority are doing. In the end, central bankers have to decide whether the economy is going in the right, neutral or wrong direction. Most of the time, they should be neutral, and let the political and economic processes play out. Greenspan and Bernanke decided to be sluttishly accommodative to a poor fiscal policy of invade Iraq and do a no strings attached bailout of the stock market’s largest investors, and an economy that decided that it was time to build bloat into every part of the chain: food, houses and gasoline.
The first thing to remember is that market forces are always present, even in the most regulated and planned and top down of economies. Stop believing in the invisible hand, and it will slap you silly. And it is. The American public thought that it could grumble about Bush and take the cheap money. This, was a poor move. If you don’t like the management team, don’t go long the stock. And yet Americans went very long George W. Bush.
What is happening, as the wholesale price report makes very clear, is that finished goods are not going up, but that market forces are adapting: the pricing power is in the hands of resource producers, who are raising prices: 20%, ex-food, ex-energy. This means that inflation hasn’t been tamed, merely moved. Cheap production is being bought at the price of resource profligate development. The dollar you are saving on your tv, is coming out of your wallet at the gas pump, and not coming in in your paycheck. Yes you. Not some other guy. You.
Don’t like this backlash spin of the paper for oil economy, where your house goes down, but your bills go up? Fire the Fed.
Now there are limited things that a fed chief can do about this, but one thing he should not be doing is pouring dollars on a dollar glut. There are a series of reasons for this. One of the most important effect is in global stability rising food prices world wide. This means that power in other countries is moving from the general public, to the resource producers in those nations, and to those small channels of people who have access to western off-shoring dollars. This leads to rising inflationary pressures around the world, and those people… come here. If you want to know the root of the wave of immigration, documented and undocumented, it is right there in front of you: we are inflation taxing out of house and home millions of people around the world. They can’t eat where they live, so they go to where they can.
Want to solve this crisis? Fire the Fed.
In addition to creating global instability, it is also pulverizing the dollar. We stand within a breath of 2 dollars per pound sterling. The dollar slides to new lows against the Euro. Is the Euro over bought? Sure, but one possibility is that Ben Bernanke will just sell more dollars. And he has the keys to the printing press, and he’s not afraid to use them.
Don’t like Bernanke’s keys in your dollar? Fire the Fed.
What’s even worse of course is this process is not bailing out the housing market, prices continue to plunge