By default or design, Ben Bernanke may effectively be the most corrupt individual ever to head up the Federal Reserve. Although he didn’t use the word “corrupt,” there’s not much other conclusion to reach after reading Camden Fine explain the Fed’s perma-low-rate policy in today’s WaPo:
In my view, the Fed’s policy is nothing more than a backdoor bailout for the Wall Street mega-banks and investment houses; it amounts to the back of the hand for the community banks of this country. The Wall Street money houses are basically getting free money that they can hedge and arbitrage worldwide to make baskets of money, while local banks are stuck with deposits costing more than the federal funds rate, sluggish loan demand and a 2.20 percent 10-year Treasury. For the extended future, earnings contractions will accelerate as the investment portfolio prepays and runs off, and capital will be difficult if not impossible to raise, stifling growth on America’s Main Streets.
You need to remember that Bernanke is making it impossible for lower- or middle-class Americans to save money on purpose. That’s the stated policy of the Fed, to get the economy “moving again.” It’s the high-finance version of slaughtering perfectly healthy pigs during the New Deal, to protect farmers.
But I’ve said it before and I’ll say it again: You don’t get rich by destroying wealth. But that is precisely what Bernanke is doing. He is impoverishing the middle class and retirees to entice them into spending money today instead of saving it for tomorrow.
You see, after decades of living off easy credit, that’s all the government has left to get things moving again in time for the next (or any) election. Things have gotten so bad, Bernanke can’t even create the inflation he wants by printing up trillions over the last three years, and keeping interest rates artificially low for half a decade or longer.
The only real way out of this trap is to get back to what we once did so well: Defer consumption, earn interest on our savings, and use credit sparingly. Bernanke’s policy — all of Washington’s policy — is rapid consumption, zero interest, and easy credit. Yet that’s exactly what got us into this mess.
As an accomplished drinker, I can tell you: A little hair of the dog after a binge only delays the inevitable — and makes it worse, too. It’s childish even to try it.
Are there no grownups in charge of anything in our nation’s capital?