Paul Krugman, IMHO righteously, took no prisoners today in his NY Times op-ed skewering of Fed Chairman Ben Bernanke's Federal Reserve Board: "
Paralysis at the Fed."
The Nobel Prize-winning economics professor offered up a virtually complete takedown of his former Princeton economics department chair, comparing the Fed's inaction at their Open Market Committee meeting, earlier in the week, with the Bank of Japan's "self-induced paralysis," which brought on that country's "lost decade," ten years ago.
Krugman went "
there," saying Bernanke's Fed is "dithering" while Rome burns:
"...the Fed -- which is required by statute to promote 'maximum employment' -- isn't doing its job."
Here' s University of Oregon economics professor Mark Thoma's overview of Krugman's commentary: "Paul Krugman: Paralysis at the Fed."
Paul Krugman: Paralysis at the Fed
Mark Thoma
Economist's View Blog
Friday, August 13, 2010
Fiscal policymakers deserve their share of the blame for not responding adequately to the crisis, and I blame them first foremost, but monetary authorities have not responded adequately either. Disappointingly, and to the disadvantage of those hoping to find employment sooner rather than later, the Fed hasn't even taken the steps that Bernanke urged Japan to take when it faced similar circumstances...
Krugman all but called Bernanke a hypocrite, referring to a paper he authored in 2000, "Japanese Monetary Policy: A Case of Self-Induced Paralysis?" which was a "stinging critique" of the Bank of Japan's (the Japanese counterpart to our Federal Reserve) directionless monetary policy, at the time.
Paralysis at the Fed
PAUL KRUGMAN
New York Times
August 13, 2010
...the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates -- the usual tool of monetary policy -- were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.
That was malfeasance, declared the eminent U.S. economist: "Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism."
--SNIP--
What's going on here? Has Mr. Bernanke been intellectually assimilated by the Fed Borg? I prefer to believe that he's being political, unwilling to engage in open confrontation with other Fed officials -- especially those regional Fed presidents who fear inflation, even with deflation the clear and present danger, and are evidently unmoved by the plight of the unemployed.
--SNIP--
...the fact is that the Fed -- which is required by statute to promote "maximum employment" -- isn't doing its job. Instead, like the rest of Washington, it's inventing reasons to dither in the face of mass unemployment. And while the Fed sits there in its self-inflicted paralysis, millions of Americans are losing their jobs, their homes and their hopes for the future.
Back on Wall Street...
Goldman Sachs is now publicly stating that they see a 25-30% chance of an imminent double dip recession. Or, as Zero Hedge put it:
...In other words, the US has a little chance to double dip because it never emerged. And again, we are back to the question of whether or not we have an ongoing recession in a bigger depression.
And, former chief Merrill Lynch economic analyst (and well-known "doom and gloomer") David Rosenberg stated in a televised Wall Street Journal interview today:
"If you don't believe there's going to be a double dip, it's because the first recession never ended. If there is going to be a double dip, the odds are certainly higher than 50-50."
Meanwhile, Ben Bernanke and the Federal Reserve Board "dither"...
# # #
Diarist's Note: Fed Chair Ben Bernanke's a Republican. Treasury Secretary Tim Geithner's a registered Independent. Per my diary from Thursday, the conventional economic consensus is that it's anticipated that the economy will get worse--not better--over the balance of the year (in the lead-up to the mid-terms), and into 2011. How people could possibly conflate that with "Obama-bashing" is beyond the pale. For the record, I plan to vote for the re-election of the President in 2012. And, IMHO, anyone that thinks that posting diaries on Daily Kos which are critical of the way the economy's being managed, at the moment, is somehow (incredulously) adversely affecting public sentiment are nothing less than grossly out of touch with reality. Then again, everyone's entitled to their own opinions. That's what blogging's all about. But, if you're going to tell others in the middle of a 200 m.p.h. hurricane that it's sunny and calm outside, then you're--inevitably--going to run into a credibility problem.