Now He Tells Us

It’s been 12 years since Chairman Ben Bernanke of the Federal Reserve went on “60 Minutes” and declared “we could raise interest rates in 15 minutes, if we have to.” Since then, America’s central bank has given the country a reckless program of quantitative easing and zero interest rates and expanded its balance sheet to nearly $9 trillion from mere billions at the beginning of this century.Now comes Mr. Bernanke’s successor, Jerome Powell, to announce that he is no longer confident of a “soft landing.” That’s Fed-speak for trouble ahead, as the central bank tries to beat inflation without triggering a recession. Mr. Powell was quick to claim this isn’t the Fed’s fault. He cited “huge events, geopolitical events.” Nice try, but it’s hard to avoid the conclusion that the Fed’s inflation is, as always, a monetary event.That’s what makes Mr. Bernanke’s remarks in 2010 worth revisiting. He had just failed to foresee the 2008 financial crisis. “The crisis came from causes not captured by the new Keynesian models used at the Fed,” was the excuse he would later offer. “I wouldn’t have seen it in the data,” his colleague and successor Janet Yellen later confessed. “I’m sorry that light bulbs didn’t go off in my head a couple of years before they really did.” No wonder “60 Minutes” was so eager to talk to Mr. Bernanke. At the time, the Fed’s Quantitative Easing program was young. The Fed’s balance sheet stood at about $2.4 trillion, a fraction of its current level. Yet the Fed wanted to expand the program. Isn’t that “a terrible idea?” asked “60 Minutes,” noting “many people believe that could be highly inflationary,” even “a dangerous thing to try.” “Well, this fear of inflation, I think is way overstated,” Mr. Bernanke replied. “We’ve looked at it very, very carefully. We’ve analyzed it every which way.” Yes, there were “risks,” yet critics weren’t “looking at the risk of not acting.” Well then, was inflation “less of a priority” for the Fed now? “No, absolutely not,” Mr. Bernanke averred. “We’ve been very, very clear that we will not allow inflation to rise above two percent or less.”“The trick,” Mr. Bernanke said, “is to find the appropriate moment when to begin to unwind this policy. And that’s what we’re going to do.” Moments later came his boast that the Fed could raise interest rates in 15 minutes if it had to. The fact is that they couldn’t — or lacked the courage. Asked recently about today’s high inflation and why the Fed didn’t act to stop it sooner, Mr. Bernanke now observes it’s “complicated.” On May 16, the ex-chairman of the Fed asked on CNBC: Why did the Fed “delay their response?” He answered his own question by saying, “in retrospect, yes, it was a mistake.” Perhaps the Fed was afraid “to shock the market.” The actual reason was the Fed’s refusal to accept that the inflation was real. Its PhDs dismissed the prices as “transitory.” The unique circumstances in 2021 were “not in the model,” Mr. Powell said then. The same excuse from 2008. Yet the warnings were in the data. On the day George W. Bush was sworn to the Constitution, the value of the dollar was a 265th of an ounce of gold. In December 2005, it fell below a 500th of an ounce of gold, and the Sun issued its editorial, “The Bush Dollar.” When Mr. Bernanke became chairman, the dollar was valued at a 560th of an ounce. By early 2008 it had fallen by nearly half to a 960th of an ounce. It would fall to less than a 2,000th of an ounce.Which brings us back to Mr. Powell. He insists the Fed proved its ability to “adapt to the incoming data and the evolving outlook.” He has no standing to claim that the Fed knew what it was doing under his watch, or any of his predecessors. It’s been a shocking performance. The dollar is now at an 1,866th of a gold ounce. How could any of them be surprised at surging prices? They were looking at the wrong blasted data.

Now He Tells Us

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