Is Ben Bernanke is the only serous policy maker in the District of Columbia? Richard Lehmann at Forbes thinks so. He says, congress and the President are much too involved in re-election politics to address the mounting fiscal problems we face.
Lehmann says, Bernanke is expanding monetary policy in an effort to get the nation’s finances at the federal, state and local levels back into balance with expected revenues, including trillions in unfunded entitlements and mandates. He says, it’s unlikely this can be accomplished through growth and cost cutting. So the Fed clams it has settled upon inflation as the solution. Inflation is well known for its long term negative effects, but few ever speak of inflation’s short term benefits.
Lehmann says, inflation robs from those with wealth to benefit those with massive debts, such as Uncle Sam and states like California, New York and Illinois. It steals from taxpayers through higher nominal taxes while depreciating the value of their financial assets. It steals from pensioners and workers by devaluing the benefits promised and received. It also tends to drive appreciation in hard assets, such as real estate and gold.
The benefit of inflation now is that it should bolster the housing market and reduce the likelihood homeowners will walk away from their underwater properties. Inflation thus could be used as an economic reset button. The Federal Reserve gets to effect policy without public discussion and without anyone having to face an election.
Lehmann says, Bernanke can promise stable rates for the next three years in pursuit of this effort and thereby show how Fed policy is really “quite transparent.” When inflation finally reaches levels that can no longer be ignored, interest rates will be raised. But those raises will continually lag the rate of inflation on the radonale that we don’t want to hurt the economy.
Whether an inflationary policy by the Fed is right or wrong is a hard question to answer. In addition is this Bernake’s efforts or just what is going to happen because we cannot control our financial situation?
Lehmann says there are some possible inflation shelters: real estate, commodities, stocks, adjustable-rate debt and precious metals.
While the long-term effects of inflation are unpleasant, there are maybe no alternatives to our current situation. It is a possible way of returning some balance and reality to our current economic confusion. A free market can do that, though had we not borrowed so much money to forestall these events, I think it would have long ago been resolved.
Lehmann says, that as an instrument of policy inflation is a cowardly solution, but then, cowardice is what got us into this predicament in the first place.
I would call it cowardice and greed. Corporations who promised too much and would not deal with the unrealistic expectations of unions or wage expectations. Corporations who live for the next quarter and not their long term viability. Individuals who borrowed on their home mortgages for stupid luxuries and vacations, blindly wanting to believe there was no end to their home value that was never going to deflate. We are all to blame, especially for our personal inaction when we noted NOW and THEN that congress responds to bribes and not votes.
We have yet to dump the crooks and bums called congress and the White House. The only real candidate for change is Ron Paul and people are still clinging to the status quo that they hope will avoid inflation. This is True Cowardice. Change is always scary but there is no joy in life without challenge…. just a slow death.