The Boredom of Ben Bernanke

“The best econometric evidence strongly suggests that, at this particular juncture in time, Washington can borrow almost as much as it needs to refloat or re-flate the economy (to provide the growth spark that is not yet forthcoming from consumers and businesses) without increasing the relative burden of that debt on the country.” Sanford Rose

Dolors & Sense

by Sanford Rose

KISSIMMEE Florida—(Weekly Hubris)—6/25/2012—The Chairman of the Fed must be bored. Every month he goes before the press, mouths the requisite anodynia and takes the obligatory repetitive questions—questions that are frequently answered by: “. . . as I said in my previous reply.”

It must be tiring to make the same points ad nauseam.

The economy continues to underperform.

It is being enfeebled by lackluster job creation, which is the consequence of the apparently never-ending slide in housing prices (except expensive houses), the continued tightness in credit, the European  and Asian slowdowns and what is called US fiscal drag.

The last item would somewhat surprise a general audience bombarded by Republican accusations of government profligacy.

Yet the government was never extravagant. Inadequate stimulus at the federal level was largely nullified by retrenchment at the state and local levels. Now there is even less help from Washington.

But never was there greater need for that help and greater opportunity for its successful application.

Mr. Bernanke provides money. He cannot guarantee that this money will be spent. He does not let contracts for construction. He does not hire teachers. He does not retrain those whose work skills have obsolesced.

The money Mr. Bernanke provides (through increments in bank reserves) must be spent and re-spent by consumers, businesses and the government.

Consumers are holding their own, but they are loath to commit to big-ticket items, save cars, and they won’t touch houses. (Even if they were disposed to go house hunting, the now draconian mortgage-underwriting and property-appraisal standards of banks would generally abort the hunt.)

Businesses are waiting on consumers and thus holding trillions in idle cash.

State governments can’t spend; they must balance shrinking budgets, a nail-biting exercise.

Washington is not required to balance, at least in the short run.

The best econometric evidence strongly suggests that, at this particular juncture in time, Washington can borrow almost as much as it needs to refloat or re-flate the economy (to provide the growth spark that is not yet forthcoming from consumers and businesses) without increasing the relative burden of that debt on the country.

That’s because the taxes from the growth induced by the employment of this borrowing would offset, or more than offset, the interest cost of servicing the debt.

Republican bleating to the contrary, this is what Washington must do. It would relieve a lot of stress in the country.

It would also lighten Mr. Bernanke’s step and make his news conferences far less boring.