$42,000 Each That's What Bernanke Cost US Since 2007
Bloomberg circulated a report this morning on the total size of the bail out facilities run through the Federal Reserve and Geithner's Treasury. They estimate the total to be $12.8 trillion, or $42,105 for every man, woman and child in the country, 14 times the amount of currency in circulation, and just $1.4 trillion less than the Gross Domestic Product, which is what economists call everything produced and sold in the country last year. Since last November when the facilities under both departments amounted to $7.4 trillion, the amount has increased by 73%.
I think there is something wrong here. What do you think? Do you agree? Or do you think it is OK that the Federal Reserve Chief has accumulated this kind of power without feeling compelled to tell anyone exactly what he is doing or how?
We do hear regularly from the President, the Treasury Secretary and the Federal Reserve Chief too, that what we are working on, and need to accomplish, is what sounds pretty simple really, like a job for Roto-Rooter or some other franchised plumber outfit, my government, my plumber, unclogging the hair balls, or whatever that have congealed in that part of the securities markets where it is really dank and smelly and no one wants to go. Right there, where that messy securitization takes place. If we could find some product that works, $rano, for example, or black hole sealant, the flow would start again, banks could lend, people could borrow, and we could all flush in a unified and concordant national sigh of relief. An end to the pain would be in sight. And plumbers would become the new national heroes, opposite to just thirty six years ago, or so. What goes around, comes around.
Suppose we all live in multi-person households. At around 2.5 of us per household, Bernanke has created enough funding in the form of credit, it might appear, to pay for, yes, the math is real easy, more than two years of household consumption at the median $50,000 income of about per household. Tell us, please Mr Bernanke, just how many years worth of credit per household you think it is going to take to leverage a restart of consumption through us borrowing the money the banks are prepared to lend once they get securitization going again? Two years, three years, five years, ten years? How much are we going to have to ante up each, another $42,000, $84,000, or more? Shouldn't you let us in on what you want from us, or is it totally open ended?
Don't you have it all backward Mr Bernanke? You seem to have got it into your head that the way to go is to borrow from us so what you consider to be systemically important, the banks and some other even more weird stuff, can lend back some fraction back of the amount we all ponied up. Don't you realize that more than 600,000 jobs are being lost every month, and that the economy has been in a free fall dropping like a stone. Don't you think the people you are getting the money from are systemically important, Mr Bernanke? What is going to happen behind your CRT's at the Fed? Are you just going to have the staff keep on making up the numbers that you need to "prove" you are on the right track and know what you are doing? Wasn't the mission Congress legislated for you one focussed on inflation and unemployment?
How stupid or foolish do you think we all are? If the financial cost of restarting borrowing is much more than the pay-off will be, what on earth is the argument that it is not only worth doing, but necessary? Selling this combined foaming cleanser and degreaser down in DC to those ungrateful dead heads is one thing. Expecting regular folk to buy into this, after what you, and Paulson, and Greenspan, and all the rest have done, I mean, get over it.
If you have the power to do what you have done, and clearly you do, because Barney Frank and Chris Dodd won't touch you with a ten foot pole, and that's not out of a healthy fear of messing with the plumber, don't you have the power to do something else, something totally different?
How about beginning your own counter-cyclical program? Why don't you just give it a try? You wouldn't have to worry about congressional authorization and appropriation any more than you do now, you would just identify job producing projects in basic economic infrastructure, health care and education, and provide credit lines for the businesses that would be involved, excluding banks. You would just have to say it is part of your effort to protect what is systemically important under the too big to fail policy. You'd cook up some more facilities, give them 4-letter acronyms like the ones you use now, how about TART, or TIPP and TURT, they'd do wouldn't they?
The businesses, with support from you, by means of these new acronymically correct facilities, would be able to gear up supplies and stuff using letters of credit and commercial paper which would be backed by special facilities you would have created. Those businesses could hire people to work, and pay their wages, pensions and health insurance, all without worrying about the Senate Finance Committee and the Blue Dog Democrats in the House. The newly employed could spend their pay packets in the stores and shopping malls and pharmacies.
Money would start moving through the system again, and pretty soon it would find its way to the banks in the form of deposits. Except what you've been done has kind of put a real chill on the way most people feel about banks right now. You've made the banks into something worse than hedge funds
Leave that aside though, you wouldn't even have to handle the administration and President any differently than you do now. You could just say "We need to be patient, just a bit longer" and keep on telling them that the plan is working, and that people who say anything else just don't know what they are talking about. They probably wouldn't know the difference anyway, don't you think? You could run both these ventures together, the one you've got going, and the one I think you should get started. I bet you no one would notice, and even if they did they wouldn't dare call you to account because you might say "No".
You could do it all and preserve you modesty and humility, for you would not even have to take credit for it. One fine day, you could just put on a great big smile, and tell everyone, the magic of the market worked, the cycle turned, and everything is going to be OK. You just have to make sure the facilities you create are really big enough to do the job, but if you are doing half of the GNP every six months or so, and it is on an accelerating path, that shouldn't be too much of a problem should it? You haven't had any real opposition yet, so you could probably really go to town on this one. I'm sure you know it will probably take about 30% of GNP to really get things moving, but you shouldn't have any problem setting up anotherfive trillion dollar program, you've already got one that's $12.8 trillion under your belt.
I noticed when you gave that speech on TBTF and systemic problems on March 10th, you didn't really use words like President, administration, Senate, House, Congress, you instead spoke of , "Authorities", "Policy makers" and "Supervisors and Regulators". Is there a reason why you didn't mention the constitutional structure and people elected to constitutionally defined positions with responsibility for mere agencies of their own creation, like the Federal Reserve used to be before you made it into the world's central bank? I think it is pretty obvious there is such a reason, I think also it is something that you should actually address along with others, because there are ways of doing things here, and what you are doing isn't among them, in my view. I think there are others who might agree with that as we go along, don't you? It is kind of like asking a plumber to make a banana split. It might look good, but, like the rest of us, I doubt if you in your heart of hearts honestly know anyone who would really want to eat it.