Busted: Bankers and The Global Economy

October 20, 2008

Federal Reserve Questions National Stimulus

In addressing Congress this morning, Ben Bernanke gave a decent summary of national economic concerns aside from a few inaccuracies. The media is proclaiming that Bernanke is recommending a national stimulus plan. That is not exactly true. The fact is that Congress has been evaluating the possibility of moving on a second fiscal stimulus package for taxpayers. In the eyes of Bernanke,

“Any fiscal action inevitably involves tradeoffs, not only among current needs and objectives but also because commitments of resources today can burden future generations and constrain future policy options–between the present and the future. Such tradeoffs inevitably involve value judgments that can properly be made only by our elected officials. Moreover, with the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear. All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.”

For perhaps the first time, Bernanke reflects his concern to Congress regarding the continual expansion of the national debt while using that debt in a responsible manner. From Bernanke’s words, he is clearly not make any predictions for success or encouraging a taxpayer stimulus, instead leaving that decision to the “patient.”

Then, Dr. Ben makes the following recommendation:

Should the Congress choose to undertake fiscal action, certain design principles may be helpful. To best achieve its goals, any fiscal package should be structured so that its peak effects on aggregate spending and economic activity are felt when they are most needed, namely, during the period in which economic activity would otherwise be expected to be weak. Any fiscal package should be well-targeted, in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue; at the same time, it should go without saying that the Congress must be vigilant in ensuring that any allocated funds are used effectively and responsibly. Any program should be designed, to the extent possible, to limit longer-term effects on the federal government’s structural budget deficit.

It would seem that the Federal Reserve is hinting at a nationally supportive move, such as a national work program, perhaps modeled to some degree on work programs of the 1930’s. He is also pointing at the possibility of an enhanced U.S. employment program that will show measurable economic results. This is indicated in this statement:

Finally, in the ideal case, a fiscal package would not only boost overall spending and economic activity but would also be aimed at redressing specific factors that have the potential to extend or deepen the economic slowdown.

Bernanke also wants to improve credit exposure to American citizens in an effort to the boost the economy. Once again, Dr. Ben is specifying “easy credit” as the answer to economic growth. Hopefully, the next U.S. President will have enough wisdom to suggest that growing the economy through credit is a failed policy that government has encouraged in the past. Real economic growth is brought about the old-fashioned way: through hard work, wise decisions and a little patience. These concepts have become foreign ideas to many Americans. Easy credit is not an effective way to do anything beyond creating a permanent slavery condition for economic bodies of people. A financial slavery condition is not favorable to the American people or any other nation, but only to bodies that seek to empower themselves. ~ E. Manning


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