When Fed Chairmen speak, the public is supposed to listen; and, historically, they have. Yet, Chairman Bernanke's remarks at his historic first press conference were met by a tidal wave of skepticism. Although many of the mainstream outlets, especially those lucky enough to be granted question slots, characterized his performance as "serious" and "masterful," most rank-and-file Americans were left with a very different impression.
Any casual glance at the broad internet coverage of the event shows that the public is deeply skeptical of Mr. Bernanke and the actions he is taking. If that skepticism runs more than skin-deep, it could herald a fundamental change in American politics and a restoration of sound finance in America. Already politicians seem to be taking notice.
The struggle over raising the national debt ceiling has prompted many members of Congress to talk about a negotiated and practical plan to slash government spending. The early posturing has begun. While much of it is merely window dressing, as politicians continue to escalate their rhetoric, they will eventually be forced to actually do something to make good on their promises. Their mouths are writing checks that their budget proposals may have to cash.
Back at the Fed's first-ever press conference, Bernanke relied on the gravity of his office to awe his listeners and assure markets. No doubt that he believes that increased 'transparency' will translate into support. On this point, he has miscalculated. He trotted out a key series of officially manipulated statistics that show inflation to be under two percent and unemployment to be under nine percent. But Americans are aware that the prices they pay for the things they actually need are rising much faster. While the prices of electronics and houses may have fallen, the 'basics' have risen dramatically. Indeed, over the past two years, the oil that powers our cars has risen by 74 percent, the corn we eat by 189 percent, and cotton, the self-proclaimed "fabric of our lives," by 380 percent! No wonder the body politic suspects the Chairman may be out of touch with reality.
On the unemployment front, the Fed strangely discounts those who have given up looking for work from its metrics. This instinctively strikes most people, myself included, as rather bizarre. If this despondent class is added to those hopeful souls who persist in the futile mailing of countless resumés, the real unemployment figure currently sits around 16 percent - 7 points higher than the Fed's figure!
But even as Bernanke pointed to these watered-down economic figures, he refused to consider them to be anything but temporary. He assured all that the prolonged malaise does not prove that current Fed strategy has been ineffective. Bernanke sought to fend the blame for higher oil prices away from a weak US dollar and onto increased world demand.
Finally, the Fed Chairman attempted to convince his increasingly skeptical audience that he wanted a strong dollar. The Internet erupted in response, saying: "if you want a strong dollar, why are you doing almost everything possible to weaken it?"
Indeed, Bernanke is the Chief Architect of Dollar Destruction. It seems that everyone in America understands this except the Chairman. Even the European Central Bank has expressed its deep concern at America's weak dollar policy. In the private sector, the University of Texas has invested $1 billion in physical gold. This represents an unprecedented vote of no confidence in this Administration's stewardship of fiscal and monetary policy.
Some cynical observers have suggested that the Fed is debasing the US dollar deliberately to cheat creditors and subsidize exports. Still others postulate that the Fed is trying deliberately to ferment an international currency crisis. The aim of this effort would be to introduce a new international currency, presumably to be administered by the IMF, before political pressure to accept the Chinese yuan as the next primary reserve becomes overwhelming.
Whatever his real motivations may be, Bernanke's pronouncements are becoming so poorly tethered to reality that more and more citizens are coming to understand that the emperor has no clothes, that the man behind the curtain has no idea what levers to pull. Paradoxically, this bodes well for the future of American politics. Newfound skepticism could finally lead to major political changes that the country so desperately needs.
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