Fed Chairman Ben Bernanke is looking at the whole picture.
Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington, Thursday following the Federal Open Market Committee meeting to present the FOMCâs current economic projections and to provide additional context for the FOMCâs policy decision. It isn’t easy being Goldilocks. Especially in a nation full of amateur cooks and food critics, all of them believing that they know the secret to making the perfect porridge.
But it’s Goldilocks that the chairman of our nation’s Federal Reserve Bank is always trying to be, managing to keep the economy not too hot, not too cold, but just right.
The Fed, of course, has a dual mandate: keeping a lid on inflation while maintaining a growing economy. In traditional times – which these most decidedly are not – a booming economy would bring with it some degree of inflation. As businesses grew and jobs were added, the standard laws of economics would force wages up. Prices would soon enough follow, and inflation would risk becoming a problem. Keeping interest rates artificially low in such a situation might well create a bubble — in stocks, in commodities, in housing. Anyone old enough to be reading this knows all about that.
On the other side of the ledger, failing to keep an eye on the need for growth, focusing entirely on inflation no matter the situation, might well end with a stagnant overall economy. Low inflation, but little growth. And high unemployment.
Everyone knows that story, too.
Fed Chairman Ben Bernanke wants to see some growth. By coaxing his fellow regulators to enter into an open-ended bond-buying operation – to the tune of $40 billion per month – Bernanke announced – loudly and clearly – that the Fed is looking at the whole picture.
Reactionaries and Republicans and the party nominee, Mitt Romney, acted as though the Fed chief was making up new rules as he went along. In fact, he’s doing his job as best as he can – given the difficulties of our time. In our current economy, only a bit more tepid than ice cold, using the tools he’s got only makes sense.