Bernanke Outflanks the Texas Generals

11/11/2011 11:24 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

The Fed chief’s trip to the home state of Ron Paul and Rick Perry spoke a lot louder and clearer than his harshest critics, writes senior editor Igor Greenwald.

Ben Bernanke went to Texas yesterday, and Rick Perry wasn’t there to treat him ugly.

The Federal Reserve chairman came to explain his institution’s mission to Army troops and any would-be Lone Star vigilantes.

Meanwhile, the Texas governor who had threatened Bernanke and branded any further money printing “treasonous” back in August appeared to have let his karma shoot his dogma. He was on Letterman reading a top ten list of “Rick Perry excuses,” after blanking on one of the government departments he would eliminate in another costly debate gaffe the night before.

Perry’s amnesia briefly spared the Department of Energy, which is ironic for a candidate who has made energy the centerpiece of his economic agenda. The Department of Energy doesn’t even regulate fossil-fuel drilling—that’s the Interior’s job to bungle. But it does provide reactors for the Navy and nuclear warheads for missiles, public services even Republicans may care about.

Or maybe not. Every candidate at the Michigan debate bent over backwards to demonstrate disdain for the government they seek to lead.

Every question about the financial crisis brought forth disavowals of any further “bailouts.” Every problem was deemed to stem from too much government and to require more free marketry as the solution.

Perry’s slippery plan to cut out three government departments was trumped by Ron Paul’s pledge to excise five. And no government agency aroused more ire than the Fed.

Asked for solutions to long-term unemployment, Newt Gingrich said, “Well, first of all, I think Ben Bernanke is a large part of the problem and ought to be fired as rapidly as possible.” [APPLAUSE]

The question did cite Bernanke’s description of the problem as a crisis. Gingrich then went on to blame the unemployment on the banking bailouts.

“So, I’m glad that Ben Bernanke recognizes some of the wreckage his policies have led to,” concluded the former House speaker.

Paul later chimed in with his trademark call to “end the Fed.” And Jon Huntsman promised Rick Santelli he would “clean up” the Fed’s balance sheet.

So that’s the mood music that brought Bernanke to Fort Bliss Thursday, to explain to soldiers that “supporting job creation is half of our marching orders, so to speak,” alongside controlling inflation.

The maximum employment half of its mandate is the one the Fed has had most trouble meeting, noted the chairman. He explained how asset purchases promote that goal, and continued with pointed reminders that the Fed could use some help from the rest of the government, without singling out the deadlocked Congress.

The troops gave the monetary-policy chief the respect he no longer gets from politicians. They also allowed him to deliver a message to Perry and Paul, both Texans, as well as Bernanke’s loudest internal critic, Dallas Federal Reserve President Richard Fisher.

The message is that the Fed won’t be intimidated out of buying more assets, if and when it deems the time right. That’s not now, because Bernanke would rather avoid another spike in energy and food prices. But the economy won’t need to falter next year for the Fed to act—it merely has to plod along the current unemployment level.

The Fed’s recently reduced consensus forecast pegs the jobless rate at 8.5% by the end of 2012. Bernanke’s message in Fort Bliss was that he won’t let that come true while idly standing by.

If that’s what Perry sought, he can forget it.

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