Eager to justify his latest dose of "quantitative easing" (QE) amid increasing skepticism even in Washington where the false concept of getting something for nothing is religion, Bernanke proclaimed that lower interest rates wrought by QE will increase stock prices on the way to more consumer wealth and confidence. According to our Fed Chairman, this might boost spending, and "Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." One can't make this up.
But if the sentient among us could climb inside Bernanke's dopey dreams for a moment a la the film Inception, we might insert the part about production preceding demand so as to make his Utopian visions in the middle of the night whole. In Bernanke's case, it's apparent that he always wakes up before the production aspect enters his incomplete picture. Absent it, the increased demand that Bernanke presumes is no such thing. That's the case because the wealth effect that he naively believes to exist is non-existent.
As a result, Americans and the world will continue to suffer a Fed head that, with every utterance shows how very unequal he is to his job. A self-proclaimed expert on the 1930s, Bernanke continues to intervene in the economy despite clear lessons from that decade showing that government intervention then turned what should have been a brief downturn into a Great Depression.
For more: Bernanke Ignores Basic Laws of Economics | Value Expectations by The Applied Finance Group
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