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Britt Combs: Bernanke Baffles 'em with Balderdash

Fed chairman preaches nonsense to inspire confidence

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By Britt Combs | The McDowell News

Published: July 28, 2009

There's an old saying that gives practical advice on what to do when you run out of ideas and others are catching on to your racket. "If you can't dazzle them with brilliance, baffle them with (balderdash)."

That has become a full-time occupation for Fed Chairman Ben Bernanke. Conventional "wisdom" is that Bernanke, who is up for reappointment soon, is lobbying for his job in a tough economic climate. But it might more accurately be argued that he is lobbying for the very survival of the Fed.

From its creation nearly a century ago, advocates of central banking have argued that the people and their democratically elected representatives are too stupid and corrupt to manage a national economy (and that an economy needs management, which is in itself an assault on the free market and the most basic fundamentals of liberty). They say that economics is such a terribly complex and esoteric science it borders on the Black Arts. There is more of Lovecraft than handicraft, they would argue, to the "dismal science."

At his PBS "town hall meeting" last weekend, Bernanke broadly implied that science and economics are unrelated: "Economic forecasting makes weather forecasting look like physics," he said.

And that's the crux of most arguments for the Fed: even if you're a genius you can't understand economics; you need a high priesthood of initiates to deal with this in dark temples. You mustn't question or audit our activities, our holdings or our profits. When the dark powers of the outer spheres work their voodoo, be it on Wall Street or Main Street, we will respond with our own dark wisdom.

Bernanke's public appearances are unheard of for a Fed chairman, and are particularly bizarre for someone who, as he does loudly and repeatedly, maintains the people have no business scrutinizing the Fed's activities, as that would jeopardize the vital independence the nation's biggest power broker must have.

Why make public appearances if you are, and should be, above public opinion? The notion that he's lobbying for his job in the wake some high-profile blunders (like completely missing the bust of the housing market bubble, for example) makes no sense. Even if the public liked him they still wouldn't care if he were replaced. No one is going to march on Washington, demanding another term for him. As he has gleefully pointed out, a Fed chairman should not be (theoretically) subject to political pressure (giggle).

A Fed chairman's job is based, not on his ability to explain things to the American people, but to deliberately obfuscate as much as possible, to make the understandable as vague and incomprehensible as necessary to get the people to butt out. Baffle them with (balderdash). Talk until their eyes glaze over and they figure you must have a handle on it.

Bernanke is having to perform the unsavory task of talking to the plebeians in order to inspire "consumer confidence," that much needed and much measured willingness of the suckers to borrow money to make big purchases of gadgets and trinkets that will lose nearly all their value the moment we take possession of them.

For Bernanke, consumer confidence is based entirely on his ability to convince us that he can and will utter the dark incantation to pull back all the vast quantity of bogus counterfeit dollars he has printed and dumped on banks in the past year, and return them to the netherworld.

And it's not just consumer confidence, not by a long shot. He must convince the Chinese, holders of vast, unspeakable amounts of U.S. Treasuries, that he can tame inflation whenever he takes a notion.

Bernanke said he hated bailing out banks and financials, but didn't want to repeat the Fed's mistake of maintaining a hands-off approach in the 1930s. It sat back and watched banks fail, he said, and look what that got us. He didn't want to "preside over the next great depression."

But that's a lie. The Fed and the government repeatedly, systematically and dramatically expanded the money supply and eased credit restrictions since 1924 to provide artificial stimulus to a struggling economy.

They created the boom that led directly to the stock market crash of 1929. The Hoover and Roosevelt administrations and their buddies at the Fed resorted to stimulus after stimulus, heaping more and more debt, more restrictions and more distracting misery on the people. They halted the market's every attempt to shed bad banks, bad businesses and bad labor agreements. The result was a depression that lasted well into the 1940s.

He and his predecessor, Alan Greenspan, have issued dire warnings of what could happen if Rep. Ron Paul's bill to audit the Fed were to pass. At the town hall meeting, Bernanke said the Fed's "independence" (meaning complete lack of accountability) is "critical to the stability of the economy."

This is stability?

"I don't think the people want Congress making monetary policy," he bleated. That's true, and that's why the Constitution used to include Article I, Section 8, Clause 1, but that was simply thrown out in the name of wise monetary policy, stability and prosperity when they chartered the Fed.

Some wisdom! Some prosperity!

It was Greenspan who created the real estate bubble with his creation of cheap and easy money. Bernanke was left to hold the bag. He could have acted to restore sanity, tighten credit restrictions, raise reserve requirements and eliminate the "moral hazard" that allowed lenders to write sub-prime mortgages.

He chose to let the good times roll. We shall reap the whirlwind.