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Chris Hayes: “Mr. Bernanke, are you trying to get Mitt Romney elected president?”

Chris Hayes kicked off his Saturday morning show on MSNBC with a clip of Ben Bernanke testifying to the House Joint Economic Committee. Bernanke insisted that the Fed is willing and able to step in to save our economy, “if financial stresses escalate.” Hayes then noted that, in spite of the fact that Bernanke is one of the world’s leading experts on the things that central banks can do to boost an economy, he has done absolutely nothing for the past eleven months. Hayes posed the hypothetical question: “Mr. Bernanke, are you try to get Mitt Romney elected president?”

The Wikipedia entry on Bernanke supports Hayes’ remarks and reasons for concern [emphasis mine]:

Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has published numerous academic journal articles. Before Bernanke’s work, the dominant monetarist theory of the Great Depression was Milton Friedman’s view that it had been largely caused by the Federal Reserve’s having reduced the money supply. In a speech on Milton Friedman’s ninetieth birthday (November 8, 2002), Bernanke said, “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna [Schwartz, Friedman’s coauthor]: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”[44] […] Bernanke focused less on the role of the Federal Reserve, and more on the role of private banks and financial institutions.[46] Bernanke found that the financial disruptions of 1930–33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand, identifying an effect he called the financial accelerator. When faced with a mild downturn, banks are likely to significantly cut back lending and other risky ventures. This further hurts the economy, creating a vicious cycle and potentially turning a mild recession into a major depression.[47 […]

In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic.[49] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.” (He referred to a statement made by Milton Friedman about using a “helicopter drop” of money into the economy to fight deflation.) Bernanke’s critics have since referred to him as “Helicopter Ben” or to his “helicopter printing press.” […] Bernanke has been identified by the Wall Street Journal and a close colleague as a “libertarian-Republican” in the mold of Alan Greenspan.[45]

So, what has Helicopter Ben done to address this crisis? Under his leadership the Fed has bought up roughly 10% of our $16 trillion national debt (“quantitiative easing”) and has loaned $7 trillion to banks at near-zero interest. Both of these maneuvers pump freshly issued money (i.e., credit in Fed accounts) to banks, which his research shows “are likely to significantly cut back lending and other risky ventures” when faced with downturns. None of his figurative helicopter drops, which would put money into the hands of everyone, e.g., no zero-percent loans to underwater homeowners. And for the past year, he has done nothing at all except to assure everyone that status will stay quo, i.e., low interest and low inflation.

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