"Counterfeiters are generally reviled and for good reason." - Murray N. Rothbard, The Case Against the Fed
What economic fate Americans have. You could hardly conjure a more questionable one when it comes to monetary policy. We've had 18 years of the Maestro Man and now we're getting Helicopter Commander, Ben Bernanke, the new Fed chairman select.
It's a gray, dreary winter afternoon in the not too distant future. The stock market has plummeted and housing prices went south with the flock of migrating birds several months earlier. Unemployment is nearly as high as a spring stack of Kansas wheat and business activity is moving slower than an Alaskan glacier.
A lonely unmarked black helicopter hovers over the canyons of Gotham. Several miles above the helicopter a pair of jet fighters crisscrosses the bleak, wintry sky. Suddenly over the racket of the rotating blades the intercom crackles to life.
HC: What the hell are you guys doing back there?"
Crewmember (Obviously out of breath and somewhat startled): "We're doing our best, sir!"
HC: "Well, what's taking so long?"
CM: "We're dumping the stuff as fast as we can, sir."
HC: "All right. Just hurry it up. Drop the rest of that crap and let's get out of here. It's getting cold. I've got an FOMC meeting to chair tomorrow and a trip up to Capitol hill later in the week."
CM: "Yes, sir! We only have three bags of money left to go, sir."
HC: "How many is that for the day?"
CM: "I don't' know, sir. I lost count."
HC: "OK. Just close that damn door as soon as you can and let's get the hell out of here. I'm freezing."
CM: "Yes, sir."
On the streets below an icy wind wends its way between the tall buildings as thousands scramble to pick up the nearly worthless paper. Gotham City has seen its share of ticker tape parades in the past, confetti raining down on the cheering multitudes, but none to match this spectacle. The air is filled with dollar bills floating to earth. Suddenly a bullhorn appears at the slightly ajar door of the helicopter and a reverential, academic voice momentarily disrupts the commotion.
"Don't panic. We'll be back soon and dump some more!"
The bullhorn quickly disappears inside. The door slams shut and the intensity of the rotating blades increases. Then the helicopter makes a sharp u-turn and eerily fades into the overcast sky behind the huge buildings.
During the Greenspan years the monetary based increased at an annual rate of 6.8 percent from approximately $234 billion to roughly $783 billion. Money supply as measured by M3 during that time shot up 179 percent, going from $3.6 trillion to more than $10 trillion, given the most recent figures, a 5.8 percent annual increase in M3 during Greenspan's reign of monetary terror. That's a lot of liquidity sloshing around, looking for places it may not need to go since it could prove troublesome once it gets there.
The current account deficit, then at a record level of 3.5 percent of GDP, now hovers near 7 percent. Private sector debt has increased from 120 percent to 153 percent of GDP. U.S. personal saving rate during the Greenspan years has dropped from roughly 8 percent to -1 percent.
Though some argue this is not a problem, it remains to be told. Now along comes Ben Bernanke, a guy many feel, for whatever it's worth, is more of an inflation hawk than Sir Alan. In some ways that's a bit like saying he's the smartest kid in the dumbest row at school. And one wonders how long it will be before that becomes a sticker on the rear bumper of some proud parent: "My son is the smartest kid in the dumbest row at St. Stupid's."
When the hot money typhoon swamped those Southeast Asian Tiger economies in the late 1990s, one local leader blamed the currency boys. Greenspan over the years has conjured up his own villains, irrational exuberance being one of the most famous, since it was an indirect way of blaming investors. If the unthinkable becomes fact, it will be interesting if not downright amusing to see at just whom Bernanke wags the finger. In a sea of uncertainty one thing remains certain, it will not be the Federal Reserve Board in these United States of America.