Asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases.
-Excerpt Federal Reserve Statement
September 18, 2013
Earlier this week the Costa Concordia was lifted off its side in an exhausting and complicated procedure that will now allow the former cruise ship to be moved and sold off for scrap metal. Watching the delicate procedure, one couldn't help but wonder if Ben Bernanke is steering our economy too close to rocks and sooner or later may upend the entire nation on its side with a bloated Fed balance sheet, runaway inflation and lost faith in the ability of money printing to bring happiness or stability.
It's a good analogy but there's an even better recent tragedy that serves as a parallel between reckless Fed policy and the misguided arrogance of Ben Bernanke.
In March 1976, a third reactor was turned on at the Fukushima Nuclear Power Plant to much applause and great hope. Its earthquake-proof frame was applauded, and its young architect, Uehara Haruo, an academic like Ben Bernanke and the former president of Saga University, admitted risks of a China Syndrome-like meltdown when the accident happened, and Tokyo Power Company covered up obvious problems. I'm not sure if he ever came clean about the initial arrogance of the design, but he was clear and honest when the incident occurred.
Yesterday, Ben Bernanke had a chance to be clear and honest but stayed with a program based on his theories about monetary policy instead of an economic reality riddled with obvious problems. At some point one must consider if the risks are greater than the rewards, which for me is a no-brainer as there would be no central bankers in my perfect world. There would also be no bailouts of gargantuan banks followed by lax accounting standards that allow for paper profits. Be that as it may, there is a Fed and they have goals.
The Ben Bernanke Fed is desperate to jump start a sustained economic recovery that's a lot more than "things are getting better." To that extent Bernanke said early in his press conference that fiscal policy was hurting the economy, which means the Fed has to do even heavier lifting than normal. In other words an organization that can create money out of thin air is pushing to create the most cash it ever has. This brings me to one of the reasons I thought there would be a dollop of tapering. The risks are huge ... the Fed balance sheet is a ticking time bomb.