At the annual Jackson Hole, Wyoming all-expenses paid, extravaganza for the barons of global financial markets, Federal Reserve Chairman Ben Bernanke displayed complete ignorance of market economics and unadulterated adulation for socialism.
The American economy is faltering in its economic recovery from the 2008 recession for several reasons. The most important impediments to recovery are (1) a monetary policy that has flooded the system with high-powered money that will convert to serious inflation the moment that significant recovery commences; (2) fiscal policy that has flushed trillions of U.S. dollars down the toilet, significantly worsening a federal debt crisis that hangs like an albatross across the private sector of the economy; (3) massive over-regulation of the private sector that deters new business initiatives and curtails hiring incentives among already-established companies; (4) an inefficient tax system designed to create tax exemptions for special interest groups while imposing high marginal income tax rates on hard-working successful firms and individuals.
A Federal Reserve Chairman who understood the model underpinning this assessment would recommend the following policy reforms as the basis for effective economic recovery: (1) the slow but persistent tightening of the monetary corset designed to eliminate the excess overhang of high-powered money; (2) serious stress-testing for all major U.S. banks designed to remove access to the Federal Reserve for any financial institution that fails to maintain a well-defined, substantial Tier One capital ratio; (3) a systematic tightening of the federal fiscal corset designed to move the budget into a sustainable balance and to reduce federal spending to 20 per cent of gross domestic product by 2014; (4) significant deregulation of the private sector- major financial institutions excepted – including the elimination of the minimum wage; and (5) tax reforms designed to eliminate all tax exemptions and to lower marginal rates for all households while raising overall tax revenues to 20 per cent of gross domestic product by 2014.
Ben Bernanke’s remit, of course is limited to items (1) and (2) on that list, but his voice might count for something on items (3)-(5). At least he would be making a good Paul Volcker try to rectify policies that are driving the U.S. economy into an economic black hole.
Instead, Ben Bernanke flunked the test completely. The thrust of his remarks favors a continuance of monetary over-expansion, continuance of the monetary coddling of failing banks, a new injection of Stimulus IV, the propping up of property prices across the nation, and the abolition of the Bush tax-cuts, without any consideration of fundamental tax reform.
Repeat the academic year, Mr. Bernanke, and learn some real economics from scholars who understand how free market economies actually operate.