Yesterday he was going to address the nation from the Rose Garden. After meeting with his economic advisers. Expectations were running high. Television networks kept announcing that he would be coming out at any moment. They had to repeat it over and over, because he was nowhere to be seen. The waiting was unbearable. I thought to myself that this was a bad sign.
Then, he did come out and kept having trouble with the microphone. Another bad sign, I thought. Finally he began to speak, but had to start over several times. I could sense that he was very tense. Another bad sign, I continued to think to myself. What did he say? A bunch of nothing. So, the stock markets were once more disappointed and started to sell off. I fail to understand how seasoned investors still believe in fairy tales, but that's another story.
Well, I shouldn't be unfair towards him. He did say something. He repeated the mantra that he has been stuttering for months: throw money at the economy. He just doesn't understand that, by doing that, is just delaying the final countdown. He was also very conspicuous by what he avoided to say: like a good socialist, he is definitely going to increase taxes. You could read it between the lines. Always the same recipe: go for the income side of the balance sheet, don't address the expense column.
The present crisis is nothing but a credit bubble. Cheap and easily available credit leveraged the economy to a point that individuals began to realise that, although, at some point, they had indeed felt wealthy, their wealth was illusionary and they were just indebted. What was more, the equity they held was nowhere nearly enough to cover their liabilities. Mark-to-maket accounting proved that. On a national level, two very expensive wars had also caused the federal debt to balloon. Do you solve your debt problems by creating more debt? Idiotic. You can only solve it by deflating the bubble.
Contrary to what many think, Mr. Bernanke does know what he is doing. I have read those shrewd little eyes. He has worked it out that, by maintaining interest rates at historical lows and fomenting a little inflation, say 4% (remember money printing, monetisation of debt?), in time the balloon will empty by itself. In fact, that amounts to negative interest rates. He is putting his finger up the rear end of every American, and the average American is sporting a silly smile on his lips. Being a specialist on the Great Depression, Bernanke is only terrified that Mr. Obama, with his little socialist formula of tax and spend, will repeat the mistakes that led to that terrible period.
So, Mr. Bernanke, you can. No, Mr. Obama, you can't. And the reason you can't is that you know nothing. The November mid-term elections will show that.
