Miscellany: 12/1/09

Bernanke, Reappointment, and the Ron Paul Audit-the-Fed Kerfuffle

I have to admit that I have mixed feelings over Obama's renomination of Bernanke as Fed Reserve Chairman. Anna Schwartz, one of the great Milton Friedman's co-authors, points out what she regards as errors of commission (i.e., failing to act as bad cop to ward off inflation). She points out maintaining an artificially low interest rate for prolonged periods, as the Fed has been doing, sets the stage for recession-causing asset bubbles. She also points to what she regards acts of omission, e.g., the Fed failed to address valuation issues of mortgage-backed securities or derivatives, known well before the economic tsunami, and a convoluted plan of action (or was it simply seat of the pants?) during the economic tsunami, as it was unclear to the market why some companies were saved and others were allowed to fail.

"Helicopter Ben" Bernanke wrote a guest editorial in Sunday's Washington Post, entitled "The Right Reform for the Fed". (The nickname came from his reference to a famous Milton Friedman metaphor, that the government if necessary should drop currency from helicopters to avoid money supply contraction.)

Let me point out some points of agreement:

• "Our ability to take such actions without engendering sharp increases in inflation depends heavily on our credibility and independence from short-term political pressures. "
• "Looking to the future, we strongly support measures...to ensure that ad hoc interventions of the type we were forced to use last fall never happen again,,,,that the costs of failure are borne by owners, managers, creditors and the financial services industry, not by taxpayers."
• "The Federal Reserve...did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis. "

On the other hand, I'm less convinced, despite Bernanke's insistence otherwise, that existing audits for the Fed are a sufficient quid pro quo for Ron Paul's GAO audit, given vague descriptions of how nearly $500B in loans (especially to foreign central banks) ended up on the Fed's books. I think Chairman Bernanke is being a little disingenuous about his vision of regulatory empire-building, he has not convinced me or the market that the bewildering, seemingly arbitrary bailouts were principled (versus seat of the pants), I don't like the fact that he has remained largely remained silent during extraordinary, ineffectual federal spending (with inevitable inflationary consequences), I would like hear the Fed explain why, for the second extensive period over the past decade, it has maintained an artificially low interest rate, and why, after the S&L and Long Term Capital Management fiascoes, we didn't see more proactive steps by the Fed to explicitly control risk (and why we should believe they are controlling it better now), why the Fed did not anticipate liquidity issues with mortgage-based securities or diagnose the nature of artificial homeowner demand in propping up unsustainable housing prices, and I have yet to be convinced (despite Bernanke's spin) the nature and scale of last year's massive intervention was necessary to prevent a "second Depression".

Bottom line: no sale; pass the GAO audit.

Surcharges for the War?

Wisconsin progressive Democrat David Obey (wan-Kenobi) has devised yet another "soak-the-rich" tax; let's add a 1% surcharge to pay for Obama's mismanaged war on Afghanistan, to fight the "real war" against international terrorism. I have a counter-proposal: let's require anyone whom voted for Obey, other national Democrats and/or Obama to pay for their unprecedented spending spree and highest deficits in US history, which dwarf our outlays for the War on Terror... Our first priority in the federal budget is national defense, not in promoting the moral hazards inherent in progressive domestic policies.

Political Cartoon


No, Chuck Asay. I suspect that the White House Propaganda New Media Office has come up with suitable spin to explain the bows: Obama felt honor-bound to take a bow after a glowing introduction and wildly enthusiastic reception by the crowds...

Christmas Musical Interlude: Kenny Rogers & Wynonna Judd  "Mary, Did You Know?"

The second of two Kenny Roger duets in my Christmas song countdown... Besides the strong vocal performance (Wynonna Judd has great pipes), what I particularly like about this song (brilliantly conceived and written by Buddy Greene and Mark Lowry) is how it blends every parent's concern with the future of his or her child with the Christian beliefs of salvation through the life, teachings and works of Jesus Christ. (As an unpublished songwriter, I have always been intrigued by the greater cultural emphasis on Christmas versus Easter, despite the primacy of the Easter event in Christian faith; how many Easter albums have been released? I love a good swerve; if I had had the talent to perform (beyond my high school choir), I always thought I would first release an Easter album,,,)

Mary, did you know
that your baby boy will one day walk on water?

Mary, did you know
that your baby boy will save our sons and daughters?

Did you know,
that your baby boy has come to make you new?
This child that you've delivered,
will soon deliver you.

Mary, did you know
that your baby boy will give sight to a blind man?

Mary, did you know
your baby boy will calm a storm with his hand?

Did you know,
that your baby boy has walked where angels trod?
When you kiss your little baby,
you've kissed the face of God.

The blind will see
The deaf will hear
The dead will live again.
The lame will leap
The dumb will speak
The praises of The Lamb.

Mary, did you know
that your baby boy is Lord of all creation?

Mary, did you know
that your baby boy will one day rule the nations?

Did you know,
that your baby boy is heaven's perfect lamb?
This sleeping child you're holding, is the great I AM.