Inflation Anyone?

Yesterday the Senate Banking Committee agreed, by a 17 - 7 vote, to recommend the confirmation of Ben Bernanke for a second term as Chairman of the Federal Reserve Bank. That such a gross error should be made by so many is regrettable, even if not unexpected, because the risk of future inflation is greatly increased if he is confirmed

Dr. Bernanke was an active conspirator with then Federal Reserve Chairman Alan Greenspan (Bubblespan) in the creation of the housing and debt bubbles of 2001 - 2007. Admittedly, since the beginning of the disaster, he has done much to prevent a total meltdown of the economy but his talents are not exactly unique.

Why, then, should we trust him not lead us into another financial disaster?

Dr. Bernanke is a student of the Great Depression. There is good reason to suspect that he has learned - all too well - the lessons of 1937 when over-enthusiastic monetary and fiscal tightening pushed the economy back to its knees. In 1937, the National Debt was hardly something that worried financiers and politicians. Nor were the risks of throwing money around particularly high as shown by our nation's ability to finance the costs of World War II. Now, our nation's indebtedness has financial and strategic consequences that should provide many sleepless nights for our leaders. In this situation, more is not better!

The risk is that Dr. Bernanke will keep throwing money at our economy without taking into account the fact that 10% unemployment, while undesirable, is far better than the inflation inflicted on Germany under the Weimar Republic or Zimbabwe under Dictator Mugabe. Million percent inflation (it could happen) leads inevitably to Depression-era unemployment rates.

On the other hand, for an overwhelmingly indebted nation, such as the USA, which can borrow in its own currency, inflation is a marvellous way of making debt disappear. In times when Kings and Emperors ruled, they understood this well and frequently debased the currency. Taken too far, however, the destruction of middle class wealth - the poor have no wealth to destroy and the rich can protect themselves - risks tyranny or violent revolution.

Dr. Bernanke was a significant contributor to our current economic problems. While he has partially, but only partially, redeemed himself in the past eighteen months, the risks of re-appointing him are unacceptable.

The full Senate should decline to confirm him saying: "Thank you for your service, Dr. Bernanke. Enjoy your retirement."