Scott Spiegel

During President Obama’s recent 10-day Asia Fantasia expedition, the leaders of the G-20 seemed to demonstrate a modified version of the Golden Rule: Don’t do unto Obama what he never had the courtesy to do unto you.

Namely, don’t adopt his crackpot ideas on economic policy—pumping billions more in currency into your economies—in the same way he didn’t stop the Federal Reserve from enacting similar measures when the world warned him not to the first year-and-a-half of his presidency.

Also, don’t jump on the Obama bandwagon of loudly scolding China for its currency manipulation, when the U.S. is doing the same or worse via cockamamie quantitative easing and currency devaluation schemes.

You know your president’s “progressive” ideas are behind the times when the Communist Chinese Foreign Minister rebukes him for relying on “outmoded central planning.”

On his mega-expensive trip to India, Indonesia, South Korea, and Japan last week (which didn’t cost $200 million a day, no way!), Obama failed to achieve a free trade agreement with South Korea, which was supposed to be one of the highlights of his trip.

Kind of reminds you of how Obama’s excursions to Copenhagen were supposed to hand Chicago the 2016 Olympics and the U.S. an international climate change summit, and his jaunts to New Jersey, Virginia, and Massachusetts were supposed to produce electoral wins for John Corzine, Creigh Deeds, and Martha Coakley.

But at least Obama got to dance awkwardly on camera with Indian toddlers!  Also, he had time to thank Indonesia for the sacrifices of their “great nation” on Veteran’s Day.

The San Francisco Examiner’s headline says it all: “Diplomatic success and economic failure on Asian trip show limits for Obama on global stage”—or, “Once again, Obama flashes his pearly whites, charms the pants off people who don’t know better, and fails miserably to get what he wants.”

Cranky Fed officials shot back at international criticism of Reserve policies, arguing that QE2 and inflation-promoting measures are necessary to get the economy going.  How many times have we heard that one before?

These days the Fed isn’t even pretending their latest round of mad experimentation won’t be their last.  Charles Evans, head of the Federal Reserve Bank of Chicago, mused that the Fed’s recent decision to buy $600 billion of government debt was a “good place to start” but “I would continue to want to apply accommodative monetary policy until I had some confidence that that situation was changing.”  Eric Rosengren, head of the Federal Reserve Bank in Boston, hints, “[I]f the economy were to weaken and we were to get further disinflation and a higher unemployment rate, then we would have to reflect on whether we should take additional action.”

This week, Obama will be attending economic summits held by members of NATO and the European Union, where he will be lucky not to have his policy ideas served back to him via a swift palm to the cheek.

Obama’s fiscal and monetary policies aren’t popular in Asia, but they’re certainly even more detested in Europe, where the economies of Greece, Spain, Ireland, and Iceland have already tanked and others are on the brink of ruin.

To summarize our president’s recent forays onto the global stage: Obama is off to Europe for another shot at redeeming his image after failing to redeem his image in Asia, which he attempted after failing to redeem his image as a popular leader in the midterm elections.  Where’s he going to go after he fails in Europe—where is there a place where residents don’t already hate him and haven’t been materially harmed by his policies?  Mars?

As Reuters put it, “If President Barack Obama is not yet convinced that his international star power has faded, his next round of transatlantic summitry should clear up any lingering doubts.”  As I put it, “If Reuters thinks that Obama’s next round of transatlantic summitry will have a humbling effect on the president, they haven’t met Obama.”

British Prime Minister David Cameron, French President Nicolas Sarkozy, and German Chancellor Angela Merkel have already sent out advance notice to Obama that Western Europe is not about to go the way of the American Recovery and Reinvestment Act.  So all-in-all I think it’s going to be a big success.

The world supposedly once hated President George W. Bush for his “cowboy diplomacy.”  What’s the appropriate metaphor for Obama—a sleazy, destructive friend who encourages you to blow all your money in Vegas?



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• Europe is next test for weakened Obama (reuters.com)
• TR’s Lessons for Obama (foxnews.com)
• Strikeout in Seoul (tech.mit.edu)
• Obama leaves Asia reflecting on power shift (globalnation.inquirer.net)
• Obama: Federal Reserve $600 Billion Stimulus Not Designed to Weaken Dollar (current.com)

Critics of Federal Reserve Chairman Ben Bernanke’s performance in his first term blame him for failing to recognize the threat of the looming subprime lending crisis; his supporters laud the aggressive policies he enacted in response to the crisis.

I fault him for both.

Before the crisis, Bernanke helped Fannie Mae and Freddie Mac executives cover up their scheme to hide trillions of dollars in junk mortgages and give themselves enormous bonuses.  In the process, he failed to address the growing housing bubble that precipitated the financial crisis.

His solution was worse.  Having learned the wrong lesson from the Great Depression—that the government prolonged it by not intervening more, rather than intervening too much—Bernanke radically expanded government’s power and “reinvented the Fed,” as Time magazine put it mildly in their recent cover story on Bernanke.

Time glowingly continued: “[H]e conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies… lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash… revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation.”

“Conjured up,” “blasted,” “engineered,” “revolutionized,” “breathtaking,” “shopping spree,” “blew up,” “desperate improvisation”—somehow these don’t sound like particularly reassuring terms for investors in the world’s largest financial system.

Bernanke isn’t finished.  The Federal Reserve has been buying up Fannie and Freddie securities to try to keep mortgage rates artificially low and stimulate the housing market.  The program is set to end in March, but Bernanke is toying with the idea of propping up the housing industry indefinitely.  Sound familiar?

The question is whether the Senate will reconfirm Bernanke for another four-year term before his first term expires on January 31.

Dumb arguments for keeping Bernanke abound:

•    The Financial Times of London reports, “Economists warned that a rejection of Mr Bernanke could be seen as a threat to the central bank’s independence.  US Treasury yields were little changed but stocks fell more than 2 per cent” due to uncertainty regarding reconfirmation.

Come on—it’s at least as plausible that stocks plummeted last week because of Obama’s announcement that he was going to impose a new tax on banks to subsidize the Troubled Assets Relief Program (TARP).  (Especially given that the Dow Jones Industrial Average slipped 219 points while Obama was still giving his speech.)

After Bernanke’s prospects improved over the weekend, Obama’s boosters at the Associated Press helpfully divined the trend in the stock market for us: “Amid the news, the Dow Jones industrial average rose 24 points.”  Well, the Dow was down 3 points on Tuesday—I think this means Bernanke’s chances are dimming.  What say ye, Associated Oracle?

•    Mohamed El-Erian, CEO of bond investor Pimco, declared, “A No vote on Bernanke would be viewed by markets as adding yet another uncertainty in an already fluid economic and policy environment.”

Give me a break: Ben Bernanke-Tim Geithner-Larry Summers form the very Axis of Uncertainty.  The Obama administration has demonstrated that it is capable of deciding, in any given week and depending on its poll numbers, to announce any manner of blanket economic policy to try to shore up its popularity.  This is exactly what causes uncertainty in the market: whimsical manipulations from disconnected puppet-masters on high.  Sowing a little uncertainty about whether King Caprice’s minions will remain in office is the surest prescription I know of for assuaging the market.

•    Obama’s team “saved” the economy, so it’s best to keep the same leadership in place.

Obama’s team didn’t save anything—it wasted a trillion dollars and slowed down the real recovery.  Obama claimed that unemployment would reach 8.0% if we didn’t pass his stimulus bill last spring.  We did, and unemployment is at 10.0% and projected to increase.  The last people who should still be in charge of our monetary policy are the people who helped Obama implement his disastrous recovery strategy.

•    Chris Dodd, the Senate banking committee’s chairman, announced that booting Bernanke would hurl our financial system into a “tailspin.”

Chris Dodd certainly knows something about sending the economy into a tailspin.  Given his role in the subprime lending crisis, I say his vote on any financial matter from now until his retirement next January ought to automatically count as a vote for the opposite of whatever side he’s on.

•    Dick Durbin, Senate Majority Whip, pointed out that conditions that led to the financial crisis were in place before Bernanke took office.

Yes, and if Noah had deliberately drilled a hole in the bottom of his ark, I think he could credibly claim that conditions that led to the Great Flood were in place before his time at sea.  But that doesn’t mean he would bear no responsibility for having made things worse.

Paul Krugman, whom I never thought I’d quote (except mockingly), recently wrote, “Before the crisis struck, Mr. Bernanke was very much a conventional, mainstream Fed official, sharing fully in the institution’s complacency.  Worse, after the acute phase of the crisis ended he slipped right back into that mainstream.”  Granted, Krugman is only partly talking about Bernanke’s failure to head off the imminent lending crisis.  He’s also talking about Bernanke’s failure to push for cumbersome bank regulations and inflate the currency, goals Krugman seems to think worthwhile (we are talking about a New York Times columnist, here); but the general characterization still applies.

Krugman continues, “During the run-up to the crisis, as financial abuses proliferated, the Fed did nothing.  In particular, it ignored warnings about subprime lending…  Mr. Bernanke didn’t acknowledge that failure, didn’t explain why it happened, and gave no reason to believe that the Fed would behave differently in the future.”

I’m mystified as to why so many in Congress are reluctant to sack Bernanke for poor performance.  Perhaps it’s because they fear it will remind their constituents that they may apply the same standard to their elected officials.

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