Bernanke: The Wizard of Oz

The largest systematic example of inertia since the planets began to orbit stars is the US economy. Its gigantic weight makes it hard to turn, either in the direction of expansion or contraction. When the US economy does move, it picks up speed at a frightening rate.

In his testimony before the Senate Committee on Banking, Housing, and Urban Affairs, the Chairman of the Federal Reserve, Mr. Bernanke, did say that his agency expected a gradual resumption of growth in the second half of 2009. He qualified his remarks, as any sane person would do, later in his testimony by pointing out that the actions being taken by the government to stimulate the economy would have to be successful for the Fed’s predictions to come true. The experience of reading or hearing  his confusing analysis  cause one to feel like they have fallen into a comfortable sleep only to be awakened by an ogre.

Bernanke’s testimony was not any testimony at all, at least in any classic sense. He was not sworn in by a bailiff and did not swear to tell the truth. He is lucky in that because he exercised his right to dissemble not having promised to do otherwise.

What Bernanke said boils down to the fact that if the government fixes the economy, it will get better. If the government cannot fix the economy, either because it uses the wrong methods or it is too intransigent to be fixed at all, things will get worse.

Wall St. and the general population are rarely well-served by experts who take their opportunities to speak in public only to offer false hope. It is part of the normal glad-handing of politicians to make promises and kiss babies, but it is bad practice for the head of the US central bank. People remember the parts of comments that are hopeful and forget or ignore the unrelated, qualifying coda. When many millions of jobs are on the line, the only thing people are capable of remembering is the part where the famous expert says things will get better.

The Congress needs to have a parade of the government’s financial leaders in front of their committees at least once a quarter. It gives the members a sense that they are doing the right thing by cross examining experts about facts that legislators are too unschooled to understand, like monetary aggregates and other academic analyses of the inner workings of the economy. The way it operates now, is that these hearings  simply end up being public events where a room full of tone-deaf peasants listen to Maria Callas sing Madama Butterfly.

It would be smarter if Congress and the heads of the country’s financial agencies just left the public alone. No one needs to tell the average man what is going on. He can see it in his office and at the local mall. If he wants to look at monthly numbers on housing prices and unemployment to get his bearings, he has done all he needs to do. Average Americans do not need an Oracle whose predictions are both hard to interpret and may only lead to false hope.

Douglas A. McIntyre