By Warren Mosler
I’m perhaps a bit harsher and more direct in my criticisms than Time Magazine when they named Chairman Bernanke their Man of the Year:
His latest speech shows he’s got ‘quantitative easing’ and monetary operations completely wrong as he believes the banks lend out reserves.
His alphabet soup of programs for the interbank lending freeze up completely missed the point that all the fed has to do is lend in the fed funds market which would have immediately solved the problem that never should have happened, and lingered for over 6 months and contributed to the last leg of the collapse.
He’s on the wrong side of fiscal policy, urging the Congress to balance the budget, at least longer term.
He’s on the wrong side of the trade issue, trying to engineer exports at the expense of domestic consumption, which is indeed happening, and causing our real terms of trade and standard of living to deteriorate.
He hasn’t even begun to consider the evidence that is showing lower rates to be deflationary rather than inflationary.
He still adheres to inflations expectations theory.
His unlimited dollar swapline program was an extraordinarily high risk policy that fortunately worked out, but never should have been done without discussion with Congress. In fact, last I read he still thinks it was low risk, not understanding that fx deposits at the foreign CB are not actual collateral.
If I had to select someone from outside the Fed for the next chairman Vince Reinhart is the only one I can think of that at least thoroughly understands monetary ops and reserve accounting, though we do have our differences on theory and policy.
*First published on Moslereconomics.com
