On June 17, Barack Obama had one of his most awesome reality TV events of the year when he fired central bank chairman Ben Bernanke on PBS with liberal mope and host Charlie Rose moderating.
“He essentially fired Ben Bernanke on the spot and gave him a fairly tepid testimonial afterward,” said former Fed Governor Laurence Meyer, in an interview on CNBC the next day.
And the bankers have been in revolt ever since.
The government, meanwhile, has revised the economy’s performance downward. The newest do-over by government economists comes three months after they gave the economy one of the strongest readings since 2007.
“The economy grew at a 1.8% annual rate in the first quarter, the government reported Wednesday, well below previous estimates of 2.4% growth and missing forecasts,” reported USAToday.
Still, several voices that had been the strongest advocates for monetary stimulus have suddenly and inexplicably reversed course, saying that the limits of monetary policy to help the economy have been reached.
Left unsaid is that perhaps those limits were reached when Obama fired Bernanke.
For those keeping score at home, monetary policy is the policy that determines how much money is made available in an economy through both the money supply and the availability of credit. More money and lower interest rates, supposedly, equals more growth, so the theory goes.
This is different than fiscal policy, which has to do with how much the government taxes and spends on operations.
Last week the market got spooked because Bernanke, perhaps in reply to Obama’s bonehead handling of the termination of the employment of the Fed head, said that the central bank was revising its monetary benchmarks from a target rate of 6.5 percent unemployment to 7 percent unemployment.
“In this scenario, when [monetary stimulus] ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent,” said Bernanke last week according to Reuters, “with solid economic growth supporting further job gains.”
The move is curious given that the Federal Reserve chairman likely knew what we know now: that GDP would be revised downward by 25 percent, from a sluggish 2.4 percent to an anemic 1.8 percent.
It’s tough to create “further jobs gains,” when you can’t even support “solid economic growth.”
Historically, GDP growth is around 3 percent.