Bernanke - Fed Boss

Inflation Watchdog

That is what being Chairman of Fed is all about. Keeping the dollar stable. The fact is that national debt means nothing when you can print your own money. The US government can pay for anything anytime it wants without answering to anyone. When it has its own currency it can do that. Its just paper. The one problem that the government does have is that the more it prints, the less valuable it becomes as people catch on. Believe me people do catch on. Not only that, but they anticipate it and try to raise prices ahead of inflation. Everyone knows that prices are always going up... except in a recession of course. Recessions are inflation busters.


The Fed has one job, to control inflation. It has a lot of means at its disposal. The most public being adjusting interest rates. That is just so easy to understand that everyone focuses on it. The fed states the Fed Funds Rate clearly. Just as public but less easy to track are they buying and selling of treasury bills. What is less publicized is how much money the Fed makes available to the govt and to banks to loan out. Does it even matter as long as the dollars value is stable. I think not. If the govt can print money to pay its debts without devaluing my saving, that is truly wonderful. It is an economic miracle of modern economics. When the dollars starts to fall, the Fed has a job to do... protect the value of my cash savings.

As watchdog the Fed is usually at odds with the president and congress who would prefer a very loose money supply. The patten I believe I am seeing is that Fed Chairmen are very tightassed in their fist few years until they get comfortable with the people in Washington.

Greenspan was so tightassed that he cost George Bust Sr his reelection when he tightened the purse strings in his reelection year. Greenspan was far more relaxed with Bill Clinton and very Relaxed with George Bush Jr. No doubt Greenspan was able to justify a very loose policies while we had two wars going on. That is the purpose of having paper money not backed by anything. You can finance your own wars.

Bernake came in at the end of the Bush Jr years and not doubt felt subordinate to him. However with a new president in town Bernake must now feel like a free man. Free to be the Great Inflation Watchdog we has always wanted to be. I feel sorry for Obama in this respect. I don't think he will get much sympathy from Bernake who who most likely wants to play the role of the Great Inflation Buster.