Why is Ben Bernanke insist on printing dollars? Because he wishes “to regenerate the animal spirits of America’s now dormant asset-dependent economy,” writes Stephen Roach. Roach calls the strategy “very dangerous” and doubts its success. I would call it self defeating. I have yet to remember a time when an administration has tried so hard to awaken that spirit or that the American “animal spirits” have been more depressed. Why? Because the Obama administration’s massive experiment in behavioral economics had not not only been failing but had led to a lose of public faith in the credibility of the Fed and, indeed, in the entire country’s economic management.
Remember the infamous “green shoots?” From the very beginning of the current crisis, the administration tried to convince the American people to spend their last dollar by insisting that the economy is under mend. The number who were moved decreased with every false improvement pronouncement. It simply could not square with the reality of the average American or their understanding of their own financial prospects.
First and foremost, 17% of the American work force is jobless or underemployed. That means few outside the burgeoning Federal bureaucracy feels their job is safe. At the same time, their house is losing value, their savings accounts bring paltrier and paltrier returns, the stock market seems untrustworthy and their taxes are expected to rise.
If that is not enough to make them cautious consumers, their pension funds are in trouble and they are told they should not count on Social Security or Medicare to continue to cushion their retirement. Oh, yes, the Fed tells them that their is no inflation but food and gas prices are continuously rising as do restaurant and air travel prices. To add insult to injury, Ben Bernanke just announced that he is about to start printing money which means that every dollars they still own is going to be worth less.
No, this is not the way to awaken the American animal spirit. This is a way to convince more and more Americans to pay top dollar for gold! If that bubble bursts as it did in the 1970s, Americans are going to end up even poorer than they are today.
Much has been written about the elite/public divide. Not enough about the failure of this giant experiment in behavioral economics. You can not fool all of the people all of the time.