I agree with this story that Ed Ponsi wrote so I thought I would share
it.
Kirk
This past Monday night I watched the New England Patriots defeat the
New York Jets by a score of 45-3. My friend called me as the game ended.
"Did you see that?" he said, "the Patriots destroyed the Jets!"
"No, they didn't," I replied. "I saw the Jets leave the field, they were all still alive."
"Ed, are you nuts? The Pats slaughtered the Jets!"
"I don't think so. The Jets lost badly but seemed physically unharmed."
My point is, when someone tells you that the Patriots slaughtered the Jets,
you don't take that literally, it's a figure of speech. But it is well within the
boundaries of everyday parlance to say that the Pats slaughtered the Jets,
and when I say that, you know what I mean.
I'm alarmed by Bernanke's appearance on the U.S. news program "60 minutes",
in which he claims that the Fed is not printing money. Yes it is true that technically
speaking, money is not being printed, just as it is technically true that the Patriots
did not slaughter the Jets.
But it is disingenuous to suggest that the Fed is not expanding its balance
sheet - which we refer to informally as "printing money". He is using a
technicality to make people feel better about the Fed's actions. The money
is being created, but technically it isn't being "printed". The Fed creates the
money electronically, which is far more efficient than actually printing it.
Imagine going into your bank account and drawing some extra zeros on the
end of your balance, then transferring that money out of your account to pay
for purchases. This is how the Fed "prints money" in 2010.
In other words, Bernanke is using the same logic as I was in the Pats-Jets
discussion. In order to make you Feel Good about his actions, he is resorting
to wordplay and trickery. The Pats didn't slaughter the Jets, and the Fed isn't
printing money.
As if this weren't bad enough, Bernanke went on to claim that if not for the
Fed's actions, the U.S. unemployment rate might be 25%. It's interesting to
note that there is no way to prove or disprove this figure, since it appears to
be based on nothing more than the approximate unemployment rate during
the Great Depression.
How seriously should you take that 25% comment? How about if I told you
that if I were the playing quarterback on Monday night, the Jets would have
won the game? This statement also cannot be proven or disproven, since
it is also based on hot air.
Do you still feel good about Bernanke's appearance? If you're wondering
why he was on 60 minutes in the first place, it's because there is so much
opposition to what the Fed is doing to our money. The Fed arrogantly
assumes that you oppose their policies because you don't understand
what they are doing. They're wrong; the fact is, the Fed's policies are
unpopular because you understand all too well.
Last but not least, Bernanke made an informal announcement about an
expansion of quantitative easing. QE2 was initially planned for $600 billion
but now there will be additional stimulus. It appears that Bernanke believes
that he must drive interest rates below already historic levels, even though
this strategy has not worked thus far. Unfortunately, a lot of that electronically
created money sits idly in banks, as both the demand for loans and the desire
to lend money are on the wane.
The bottom line: don't be fooled by wordplay or lulled to sleep by tactics
designed to win support for a bad economic policy. Don't trust anyone
who tries to trick you with semantics. Bad policy is bad policy, period
Ed Ponsi