Insanity: def. doing the same thing over and over again and expecting different results –Albert Einstein
Ben Bernanke, Chairman of the Federal Reserve since 2006, spoke to the Senate Banking Committee today defending the current economic stimulus campaign with general economic optimism. There is definitely reason for concern with the current situation as “The Fed, which has amassed almost $3 trillion in Treasury and mortgage-backed securities to promote more borrowing and lending, is expanding those holdings by $85 billion a month until it sees clear improvement in the labor market. It plans to hold short-term interest rates near zero even longer, at least until the unemployment rate falls below 6.5 percent.”
Have no fear, Bernanke smoothed over worried investors that feared the Fed’s policies are encouraging excessive risk-taking and those that thought it would be difficult to unwind the extensive purchases, though some Senators still questioned the potential costs of the low-interest program. Bernanke’s aggressive defense of interest policies reminded me of Enron’s desperate attempts to convince investors and the public that they were undervalued.
One quote that actually made me more concerned thinking back to the weekend that changed wall street:
“To this point we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation.” -Ben Bernanke
|Chairman||Years||Average inflation rate (%)|
|Daniel R. Crissinger||1923-27||0.9|
|Roy A. Young||1927-30||-0.9|
|William McChesney Martin Jr.||1951-70||2.2|
|Arthur F. Burns||1970-78||6.2|
|G. William Miller||1978-79||8.8|
|Ben S. Bernanke||2006-Present||2|
So did the collapse of Wall Street really teach us anything? Is the Fed continuing policies encouraging Moral Hazard? Are we really encouraging a shift from short term focus to long term benefits or keeping policies the same in hope that firms will make the right decisions for themselves… Sounds like insanity to me Mr. Bernanke.