SODOM & GOMORRAH: Federal Reserve Chairman Ben Bernanke held a rare public forum in front of military families. In his remarks, he defended the insane policies that have prolonged our economic misery.
Mr. Bernanke said that policy makers are “intently” focused on job creation. This should strike fear into the heart of every decent person. When the government focused “intently” on drug traffickers, they gave them automatic weapons to use on civilians. When government “intently” focused on poverty, they created a welfare system that is now on the verge of bankruptcy. The result of the government’s “intense” focus on job creation has been an official unemployment of 9%, but as we know the actual number is much higher since it doesn’t include those who have stopped looking for work or those whose benefits have expired.
The intense focus on job creation is misguided; as we have suggested elsewhere, the focus needs to be on production. When the economy produces what it should and allocates its resources efficiently, people find employment in optimal industries. Until that happens, we risk pushing people into professions they aren’t fit for, thus sabotaging their futures. When the Spanish government launched “create work” programs, they captured a lot of young, unemployed workers and forced them into low-skill jobs. As a result, they gained experience in these low-skill, low-pay areas and many remained there for years after.
Mr. Bernanke also insists that printing money is an activity entirely different than government spending. He’s wrong. Government spending in a time of deficit is done in one of two ways – through borrowing or through printing. Borrowing is simply borrowing against printed money in the future; printing is enduring that cost now. Both are inflationary. Both undermine trust in the monetary system.
Let us wait until Mr. Bernanke decides to intensely focus on fixing the monetary system. Then we’ll be in real trouble.