Last Updated: 2 June 2023
I’m not quite sure what you would have Bernanke do, Paul.
Your histrionic assertion that Bernanke is a modern-day Lenin set on debasing the U.S. currency is odd, and ignores what Bernanke has actually said as well as what he is trying to do. Here’s the quote that’s being referenced by folks, from the Wall Street Journal:
“I think it’s entirely unfair to attribute excess demand pressures in emerging markets to U.S. monetary policy, because emerging markets have all the tools they need to address excess demand in those countries. It’s really up to emerging markets to find appropriate tools to balance their own growth.”
To which you respond:
“The US, it seems, is putting national economic priorities first while also wanting a primary role in international affairs and in the Middle East in particular. But until the Fed starts accepting responsibility for the worldwide after-effects of its quantitative easing policies, political unrest is likely to spread and worsen.”
You’re making a few mistakes here. First, you’re assuming that the U.S. is anything but pleased about the current wave of unrest in the Middle East. A survey of U.S. newspapers and editorials would show widespread support for the revolutions in Egypt and elsewhere. There is concern, of course, for people who are in harm’s way; concern for the long-term outcome; concern that agricultural inflation is driving up costs and contributing to the unrest; but generally, positive views that repressive regimes are being overthrown.
Second, you’re arguing that the Federal Reserve should do something other than put national economic priorities first. Inflation in the U.S. is extremely low, and unemployment is extremely high; Bernanke seems to be doing a reasonable job trying to reconcile those two.
Bernanke is right that emerging market economies have the ability to address excess demand. China could significantly stamp out homegrown inflation by allowing its currency to float freely in the international markets. Other emerging economies experiencing rapid growth and high inflation could tighten credit (which would in turn boost their currencies) and control inflation as well.
But the final mistake is to lay the blame for inflation in materials prices on the U.S. economic policy. The core drive of commodities prices right now is demand from emerging markets, matched up against uneven supply (wheat harvests fell significantly last year, for instance, while crude oil production is in decline).
Does the U.S.’ easy-money policy foster rapid growth in the price of materials? I’m sure it contributes. But overs-toked emerging markets growth contributes as well, and to focus unilateral blame on Bernanke – who in the end is simply doing his job for U.S. taxpayers – seems odd.