Wall Street, according to a Bloomberg survey, likes Ben Bernanke. Why would it not? The punishment the Street got for the financial crisis has been a flood of money.
The nation’s financiers have been rewarded for the housing crisis which has brought half the world economy to its knees. The thieves were given the keys to the cash vault because the den runs the financial system a.k.a monetary transmission mechanism. Economic orthodoxy, notwithstanding the law, keeps the Fed away from doing anything more than printing money. Main Street has been asked to take what it gets without complaining.
Economic recovery has brought into relief the topology of the new post-crisis Main Street. More low wage jobs have replaced middle incomes. Americans are dropping out of the work force and growth needs to be double of what it is for more jobs, whatever the wage level and quality, to be created sooner. The people are being asked to take what they can get at a sluggish pace over an extended period of time in an economy teeming with cash and legions of the long-term unemployed.
The distraction of scandal has displaced the politics of sequester in Washington in 2013 as China races to the top of the global economic ladder by 2016. Contentment in New York, not on Constitution Avenue – the nation’s Main Street, has become the barometer for America’s economic health as Bernanke is once again up for nomination by Barack Obama for his third four year term in 2014.
Fed Governor Sarah Bloom Raskin, recently speaking to government economists at the National Economists Club in Washington, D.C, while, contrary to scholarship, citing fiscal restraint for slower growth does not explain why the private sector cannot offset government tightening especially in an environment of ultra-easy monetary policy.
Bernanke, by blaming slow growth on the necessary fiscal contraction, is not being strategic. Fed should never dissuade Congress from controlling the purse strings especially when the Congress is rarely in the mood to do so. It is in the nature of American democratic politics that the elected representatives arrive at political compromises on fiscal belt tightening which are least detrimental to the economy.
No. This is not the economic recovery we want. Nor do we need Bernanke at the Fed.