Fire Bernanke

What’s the definition of stupidity? Repeating anything from the Seventies. And yet:

BOSTON — The Federal Reserve chairman, Ben S. Bernanke, sent a clear signal on Friday that the central bank was poised to take additional steps to try to fight persistently low inflation and high unemployment.

“Given the committee’s objectives, there would appear — all else being equal — to be a case for further action,” he said in a detailed speech at a gathering of economists here.

Mr. Bernanke noted that “unconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.” But he suggested that the Fed was prepared to manage the risks associated with the most powerful tool remaining in the Fed’s arsenal of weapons to stimulate the economy: vast new purchases of government debt to lower long-term interest rates.

The problem with this economy isn’t low interest rates. (Actually, it is a problem — but not in the way the Fed thinks it’s a problem.) The problem with this economy is the fundamental uncertainty created by the endless tax and regulatory schemes foisted on top of it by this viciously anti-free market administration, and by this Congress, which wouldn’t recognize the Law of Unintended Consequences if it stole Nancy Pelosi’s gavel and banged them all about the head and shoulders with it.

So what’s the problem with low interest rates? Well — rates are so low that it no longer really costs anything to borrow money. And when something’s free, people get stupid. Because prices, as they teach in Econ 101, are information. Prices are signals as to what something is worth. So when the Fed tells everyone that the dollar is essentially worthless — people will behave accordingly.

Borrow money for free? Great — so why risk it in a business venture, when you can stick it into commodities? Because commodities, usually valued in dollars, will go up, up, up, as the Fed continues to print those dollars it then lets you borrow for free. Heck, people could just borrow some of that free money and just convert it into euros for instant profit. Oh, wait — people have been doing just that.

Let’s add something else to the mix. Yes, our economy is frozen in place, thanks to Obamacare, Obamataxhikes, and the undead threat of Cap & Obama. And now the Fed is promising inflation! It’s coming! Here’s yet another fundamental uncertainty — about the very value of the dollars you work and take risk for! — being added on top of everything else.

And Bernanke is doing it on purpose. Because he wants to help. Bernanke needs to go. Immediately. Before interest rates, the inflation rate, and the unemployment rate are all stuck in double digits.

We’ve heard this song before. It’s called “Stagflation.” I can’t remember all the words, but the chorus goes like this:

Misery Index
Misery Index
How’d you get so high?

Misery Index
Misery Index
Carter’s quite the guy!

I’d thought that That 70’s Show got cancelled back in 2006, but they’re still watching — and enjoying — the reruns in Washington these days.

The Keynesian fallacy is that you can get rich by spending money, so if you inflate the currency you’ll entice people into spending — and getting rich! But that’s just not so. All increases in wealth come from increased productivity. And under today’s economic regime, there is zero incentive to make the kinds of investment which lead to productivity gains. In fact, the incentive today is to park your money overseas or in commodities. Every new dollar printed either leaves the country or leaves the productive economy — and reduces the value of every existing dollar.

But Bernanke is going to print another trillion of them, maybe two trillion, before he figures this out.

It’ll take five years to dig our way out of this mess, and that’s if we get a Volcker and a Reagan come down the pike in the next two years. In fact, we should be able to see them on the horizon by now. Hello? Anyone? Hello?

I don’t pray, never have. But today I just might.