Dr. Mark W. Hendrickson, FloydReports.com
As chairman of our country’s central bank, the Federal Reserve Board, Ben Bernanke is expected to put the economy on a sound footing and foster strong economic growth. Unfortunately, Bernanke faces “mission impossible”—partly because the policies implemented by Congress, the president, and bureaucrats account for much of what happens to the economy, and partly because the Fed has already done most of what it can do.
The Fed’s favorite policy for stimulating economic activity is to lower interest rates to encourage individuals and businesses to buy more things and hire more workers. The problem today is that the Fed has already lowered interest rates about as much as it can. Currently, interest rates for U.S. Treasury debt obligations of one-year and shorter durations are at zero percent, and 10-year debt instruments yield only 3.125 percent. Despite these historically low rates, economic activity remains sluggish.
At his June 22 press conference, Bernanke said: “We don’t have a precise read on why this slower pace of growth is continuing.” His critics have been merciless and vicious in heaping scorn and derision upon him. Some have labeled him an “idiot” or “evil.”
While I am no fan of Ben Bernanke or the Federal Reserve System, the name-calling is revolting. Intellectuals can be blinded by their theories, and one of the blind spots that Keynesians like Bernanke have (one shared by many members of the Chicago monetarist school) is that rapid expansion of monetary reserves is crucial to counteracting a recession. As the quick recovery from the severe economic and….