The Nobel Prize for Ben Bernanke

The decision of the Swedish Academy to award the Nobel Prize in economics to Ben Bernanke — in many respects the author of the inflation that is choking America and much of the West — is a move that transcends irony and enters the realm of farce. It comes as the global economic establishment is doubling down on the fiscal manipulations — fiat currencies, artificially low interest rates, quantitative easing — that led to the current crisis.It’s worth noting how Mr. Bernanke was warned that his brainchild, a program of asset purchases by the Federal Reserve given the euphemistic title of quantitative easing, would “risk currency debasement and inflation.” That was the message in November 2010 from a group of economists, investors, and political thinkers in an open letter, published in the Wall Street Journal. It fell on deaf ears.A month later, Mr. Bernanke sat for what CBS News called a rare interview to defend his program on “60 Minutes.” The central banker was launching a mere — by Fed standards — $600 billion in asset purchases. Eventually, though, it ballooned to nearly $9 trillion of acquisitions by the Fed in its drive for quantitative easing. “Some people think the $600 billion is a terrible idea,” Scott Pelley gently asked the chairman.“Many people believe that could be highly inflationary,” Mr. Pelley added. “That it’s a dangerous thing to try.” The future Nobel winner crooned words of reassurance. He conceded critics were “looking at some of the risks and uncertainties with doing this policy action.” Yet these objectors to Mr. Bernanke’s innovations failed, in his view, to see the big picture: “What I think they’re not doing is looking at the risk of not acting.”The chairman waved off fears of price increases as a result of the Fed’s unprecedented intervention. “Well, this fear of inflation, I think is way overstated,” he averred. “We’ve looked at it very, very carefully. We’ve analyzed it every which way.” Yet this was after Mr. Bernanke’s own failure to see any warning signs of 2008’s financial disaster. “The crisis came from causes not captured by the new Keynesian models used at the Fed,” was his excuse.In retrospect the most striking aspect of Mr. Bernanke’s performance on “60 Minutes” was his confidence — some might call it hubris — that he and the Ph.D. economists running the nation’s central bank could snap their fingers and reverse the process they were initiating in the event that inflation should arise. “The trick is to find the appropriate moment when to begin to unwind this policy,” he said. “That’s what we’re gonna do.”Again Mr. Pelley asked about the value of the dollar. “Is keeping inflation in check less of a priority for the Federal Reserve now?” he asked. “No, absolutely not,” the chairman dissembled. “We could raise interest rates in 15 minutes if we have to.” Well, not quite. Mr. Bernanke’s was a failed tenure — in which the value of the dollar fell 53 percent to a 1,251st of an ounce of gold. It was the second-worst performance of any Fed chief. Fast forward to the present, with the Fed having an unleashed inflation on a scale not seen in 40 years and Mr. Bernanke’s successor still struggling with how, or whether, it can be contained. Far from being able to reverse its inflationary policies in “15 minutes,” the Fed now looks like it could require years, if it is possible at all with the current system of fiat money. Asked to explain what went wrong, Mr. Bernanke said: “It’s complicated.”Visiting CNBC back in May to hawk his new memoir, Mr. Bernanke was queried about the missteps by the Fed, of whose ability to quell any inflation he was so confident in 2010. “The question is why did they delay that. … Why did they delay their response? I think in retrospect, yes, it was a mistake,” he observed. He went on to hazard a guess that the Fed was afraid “to shock the market.” A far cry from Mr. Bernanke’s posture in 2010. “We’ve been very, very clear that we will not allow inflation to rise above two percent or less,” he said. “You have what degree of confidence in your ability to control this?” Mr. Pelley asked the chairman. “One hundred percent” was the reply. Yet when it came time to act, the Fed lacked either the ability, or the courage, a failure now being honored by the Nobel prize.

The Nobel Prize for Ben Bernanke

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