“The Federal Reserve is an example not just of run-of-the-mill hubris but of the far more profound Pathology of Power.
The rule of law has been supplanted in the U.S. by self-serving propaganda campaigns serving State and financial Elites: this is the Pathology of Power.” The Federal Reserve and the Pathology of Power
Ben Bernanke is out of control. “Out of control” is an oft-used phrase, but in this case the term describes an important actor with a limited statutory role who is usurping the power of both the legislative and executive branch.
Back in school we learned that we had three branches of government, the legislative, the executive and the judicial. Each had checks and balances to ensure that power was not abused. We now have a fourth branch, the imperial Federal Reserve. Without our permission, this rogue branch is dictating economic policy for the United States. Mission creep is taking the Fed from its dual mandates of employment and stable prices to its own self-proclaimed mandate: economic stimulation (in direct contravention of the views of the newly elected Congress and the American public) and dollar devaluation. In QE2 it also has taken on the role of guardian of stock market prices. See Who Elected Ben Bernanke?
By law the Federal Reserve has two economic mandated goals: full employment and stable prices. The US Treasury, part of the executive branch, has a separate and distinct role, and is responsible for maintaining the value of the dollar and debt issuance. Venturing into the world of quantitative easing the Federal Reserve is usurping the role of the Treasury through debt issuance and the Congressional role of fiscal policy through back door economic stimulus.
Crossing a New Line
Michael Shedlock has long maintained that the Federal Reserve was the least competent part of government. Dr. Bernanke never saw the economic crisis; however, he maintained that past folly would not stop the Fed from grabbing even more power and bungling any economic recovery.
The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing. Fed Uncertainty Principle
In a recent speech at the European Central Bank, Chairman Bernanke launched into a direct attack on Chinese exchange rate policy:
Federal Reserve Chairman Ben Bernanke put aside traditional central bank niceties and launched a direct attack on the slow pace of China’s steps to strengthen its currency.
In a speech prepared for a conference at the European Central Bank on Friday morning, Bernanke said that China’s decision to undervalue the yuan has essentially thrown a monkey wrench into the global economic recovery. Bernanke Turns Up Heat on China Currency Policy
Dr. Bernanke then tied the Chinese policy to weak employment in the US:
“On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years,” Bernanke said.
The Fed could not rule out the possibility that unemployment “might rise further in the near term,” he said. This could bring an end to the tepid U.S. recovery, he said.
He pointed his finger at China’s slow adjustment of its exchange rate. Bernanke Turns Up Heat on China Currency Policy
Other Areas for Dr. Bernanke’s Deft Policymaking
If Dr. Bernanke is willing to lay the blame of high US unemployment on the Chinese perhaps he should also recommend changes to the US’s legislative regime that makes hiring difficult:
- Why not dismantle collective bargaining rights?
- What about those pesky environmental laws?
- Why do we need all these inefficient workplace mandates such as equal employment opportunity, family and medical leave, veterans’ rights, etc.?
- Why do we need a minimum wage?
- What about the newly imposed Obamacare costs?
- Why not change tax policy which favors overseas profits?
We have a timid, economically naive President and a divided Congress. Into the breach steps Dr. Bernanke, filled with academic sagacity, theory and dogma. Remember this is a man who said the subprime crisis was well contained, and who could not detect a housing bubble.
When Congress inquires into outlandish Federal Reserve policies, Chairman Bernanke brandishes as a mighty shield the need for independence. Even an audit of their books is viewed as a mortal threat. Well Dr. Bernanke, perhaps it would be better to stick with your narrowly defined and legitimate role and jettison the imperial “fourth branch” of government nonsense.
Note to Dr. Bernanke: If you want to be overly political and wield unauthorized power, expect your independence to be severely clipped. You cannot have it both ways.
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