I recently read a though-provoking no-holds-barred post mortem on Ben Bernanke’s tenure at the head of the Fed, and it’s safe to say that, no matter what you think about Bernanke’s strategies, some of the issues the author brought up really do have some worrying implications for the country’s economic future.
The piece describes the massive quantitative easing (QE) we saw under Ben Bernanke as a great “theft”, and suggests that future generations will be burdened with the massive debts that we have run up in recent years. Looking at some of the numbers the author references, it’s hard to argue with the notion that things are not exactly moving in the right direction. Consider the fact that, in Ben Bernanke’s time at the head of the Fed, we are paying more for trucks (up 27%), corn (109%), gold (up 128%), Big Macs (up 42%), Silver (up 126%), soy beans (125%), and U.S. government debt (104%). And the Fed’s balance sheet looks worse than ever! Meanwhile, the rich continued to richer and everyone else lost ground: the net worth of the top 7% of Americans (about 8 million households) went way up (28%), while the remaining 93% saw their average net worth go down 4%.
The reality is that you just can’t keep printing more money and throwing it at the problem—it’s kind of like trying to put out a fire by throw bundles of cash on top: it doesn’t matter how much you pile on, you are only making the problem worse. With the Fed’s policies tied (to some extent) to the unemployment rate, you start to wonder if we are stuck in a cycle that is going to be hard to break. For now, inflation is under control, but at some point this is going to catch up with us, and when that day comes, we won’t be the world’s currency anymore. I hope that doesn’t happen, because if it does, things could get pretty ugly.