WASHINGTON, Oct. 5, 2015 – Friday’s inexplicable stock market rally continued Monday morning, with the Dow up close to 200 points and with the other major averages showing equally bullish results.
It’s too early for bulls to declare victory, however. Interest rate fears seem to be diminishing, at least short term, giving a boost to bond prices and beleaguered financial stocks. But the Middle East remains a steaming cauldron of trouble as Russia’s reckless but determined Vladimir Putin stirs the pot. And budget issues remain simmering and unresolved in an increasingly confused Congress, whose leadership, such as it is, remains very much in doubt, as does FY 2016 federal government funding. That issue will be the next thing that freaks out this skittish market.
Which gets us to today’s other interesting item. Former Fed Chief Ben Bernanke is all over the headlines this morning—no doubt at least indirectly promoting his new book—as he offers his now less-guarded opinions on what’s been going on since the U.S. morphed into Obamanation in January 2009.
At the top of the list, we’re pleased to say, is something we’ve been shouting—with near zero success—since roughly 2010; namely that the Fed did, is doing and can only do so much to right the economy, get people back to work, and bring the U.S. back from its now nearly 10-year financial and unemployment nightmare.
Yes, folks, it is—surprise!—up to Congress and the president to step up to the plate after their extended post-recession nap and actually do something to help our disastrously frozen economy in a substantial way. That’s one aspect of political Washington’s job, one they’ve abdicated during the Obama administration’s entire sorry excuse for two terms.
In both the Wall Street Journal and CNBC online, Bernanke opined on the subject more directly than he was required to do as Fed chair, where, working for the administration, he could only hint at the issue during his frequent appearances before Congress.
Interviewed on CNBC’s morning “Squawk Box,” “Former Fed chairman Ben Bernanke told CNBC on Monday that slow productivity growth is weighing on the economy. He also said there’s been too much reliance on the central bank to support the economy, and other policymakers in the government need to step up” (Italics by this columnist).
“The lower growth in the U.S. economy is not a hangover from the Great Recession, Bernanke said, noting that more capital investment is needed to boost growth.
“He also said long-term low or no inflation has risks. ‘If inflation is so very, very low that it’s close to deflation, the risk is that ordinary interest rates will be low all the time. … What happens where there’s a recession, there’s no where to cut.’
Discounting he’s giving credence to the argument that the Fed should have hiked already, Bernanke said, ‘That doesn’t make any sense. If you raised rates too early and kill the economy, that doesn’t help you.’”
Too bad we didn’t hear this kind of candor when Uncle Ben was in charge. However, Washington decorum, such as it is, generally prohibits much specificity when an appointed official like the Fed chair is critical of Congress and the president. That’s too bad, of course, because then it’s only students of wonky Washingtonspeak like yours truly can read between the lines, detecting subtle but severely critical comments where most can’t see them.
But it’s for that reason that we have consistently attacked in this column those political and media morons who’ve consistently blamed the Fed for not doing a good enough job to stimulate the economy and for tilting too much in the direction of the banks, whose CEOs continue to roll in dough.
Absolutely no one in the so-called major media has picked up on this issue, no doubt at least in part to provide cover for a Democratic Party that’s stonewalled anything at all that might resurrect America’s shrinking middle class. The Fed is tasked, by law, primarily with keeping the banking system whole and, secondarily, helping keep employment numbers healthy.
It’s understood, however, that the government’s elected officials also need to help the Fed by enacting policies—like lower taxes and no new entitlements—that will help a sick economy back on the path to growth and reduce the federal government’s enormous share of the pie so it can go back to the vastly more productive private sector instead.
It is this that Harry Reid’s and Nancy Pelosi’s do-nothing Congress never did—ever—right up until the time Reid was finally deposed from his leadership position as a result of the 2014 elections, though he still persists in his now backbench obstructionism.
In the meantime, Congress and the president rammed through, via dubious methods, the most gigantic and costly experiment in socialism since the time of FDR, based on what we now know were the lies and half-truths that the Democratic Congress and the president put over on the American people who never supported Obamacare anyway.
None of this, absolutely none of this, piggybacked on the Fed’s attempts to jumpstart the economy. That’s what we’ve been yelling about for years in this column, and now it’s what Bernanke is finally allowed to say as a private citizen.
Will the now Republican-led Congress be able to overcome its weak and cowardly old-line leadership and finally forge a new path to a renewed American prosperity? That’s a dubious prospect for a party that seems to suffer from PTSD after decades of mostly baseless lies, slanders and smears from clearly anti-American Democrats and from America’s worst president ever, amplified to a fare-thee-well by their academic and media stooges.
Until we get some policy clarity from an official Washington that’s collectively not worth another dime of its overinflated salaries, however, Bernanke’s comments today may very well go the way of the Maven’s frequent diatribes. The result of yet another session of can-kicking will be a market that remains in continuing turmoil, making investment decisions ever more difficult, even on apparently swell days like today.
Stay tuned. We might find something worth investing in if we look hard enough.