This article appeared a couple of days ago, as my wife and I were packing up to leave our retreat in the north woods, so I was too busy to comment at the time, but this was too good to pass up. The gist of this article is that the Federal Reserve and other top economists from around the world were meeting at a plush mountain resort to contemplate just what the heck has gone wrong with the economy. They are postively bewildered at their impotence in stopping the downward spiral of economy. They’re like a group of teenage boys, plotting how to impress their girls with a good time, without a dollar between them. Lots of great ideas for impressive dates, but no dough to pull it off.
What struck me most about this article is how it gets to the heart of the question I asked on the back cover of Five Short Blasts. (Clicking the link will take you to a page where you can view the back cover.)
Why are Americans’ incomes and net worths mired in a three-decades-long decline? Why are jobs with decent pay and benefits becoming so scarce? Why are affordable health insurance and a financially-secure retirement fading from the “American Dream?” Why, in spite of thousands of economists guiding our nation’s economic policies, is our national debt skyrocketing? Is it possible that the economists are missing something?
So here they are, all of the top economists gathered in one spot, and absolutely clueless about what is happening and why their macroeconomic models are failing. How much more clear could it be that economists are, in fact, missing something extremely important? Why do we tolerate such abysmal failure from this one field? This kind of performance in any other field, be it the medical field, the high tech industry, or whatever, would result in heads rolling.
Ben Bernanke seems to be highly respected by fellow economists, but I find the man to be absolutely rigid and unimaginative. He is a wind-up globalization cheerleader. Wind him up and set him on the floor and he will run in circles and incessantly babble words and phrases like “globalization,” “open markets,” “recapitalization,” “currency valuation,” “soveign wealth funds” and so on, a bearded version of the Chatty Kathy doll that chanted “mama” and “feed me.”
Our next president would be well advised to toss these unthinking, robotic disciples of 18th century economic trade theorists back into the toy box and replace them with people who know their way around a balance sheet and can recognize budget deficits and trade deficits for what they are – a huge drag on the economy. We could get better economic advice from anyone at AccountTemps.
Following this article, it was reported that Bernanke was advocating some sort of super-regulator role at our major financial institutions – regulators who had a pulse on the broader economy and not just a myopic vision of what was happening in their little piece of the economy. This is just rich, Bernanke proposing regulators to do for financial institutions what he doesn’t have the common sense to do himself – impose some fiscal discipline. Not once has he ever been heard to utter a peep of concern about our trade deficit. If red ink on the national balance sheet doesn’t matter, why should it matter to banks or brokerage houses?
Here’s some key quotes from the article:
“A year ago there was a real sense of uncertainty and confusion. People were perplexed by the turmoil that had come on quite suddenly. I would say the mood this year is one of greater clarity…let’s call it a bit more somber,” said Lipsky, the IMF’s first deputy managing director.
Yeah, that’s great progress. Somber resignation replaces uncertainty and confusion.
Fed officials say that it will take a prolonged period for the harm done to confidence by the collapse in the U.S. housing market to wash through the system. Bernanke acknowledged that there would no quick fix.
In other words, they don’t have a clue.