Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.That's the tantalizing intro. Now go read the rest of the article to get the juicy details as Krugman bashes Bernanke about the ears for being the hypocrite he is, and for leaving the great mass of Americans to suffer because Bernanke doesn't have the courage to do what Bernanke of 10 years ago claimed he would do.
At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.
That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”
Who was that tough-talking economist? Ben Bernanke, now the chairman of the Federal Reserve. So why is the Bernanke Fed being just as passive now as the Bank of Japan was a decade ago?
My theory of why Bernanke is such a gutless wonder? He is like the rest of the Republicans. He actively wants to destroy the economy so that the Democrats will lose the upcoming November elections. He and the rest of the Republican prefer power over a stable and prosperous society. He would rather starve half the population so the ultra-rich can feast rather than grow the pie and let everybody have a little happiness.
To finish his article, Krugman throws a bit of the blame on Obama:
Last, but not least, policy is suffering from an act of neglect by President Obama, who waited until his 16th month in office before offering a full slate of nominees to fill vacancies on the Federal Reserve Board. If he had filled those slots quickly — his nominees still aren’t in place — the Fed might be less passive.Yep, Mr. "Change you can believe in!" hasn't done much to change the horrible Great Recession. He's been too busy "surging" in Afghanistan and finding reasons to not shut down Guantanamo, and to "encourage" the Republicans to parley over healthcare, etc. This is what I would characterize as "fiddling while Rome burned".
But whatever the reasons, the fact is that the Fed — which is required by statute to promote “maximum employment” — isn’t doing its job. Instead, like the rest of Washington, it’s inventing reasons to dither in the face of mass unemployment. And while the Fed sits there in its self-inflicted paralysis, millions of Americans are losing their jobs, their homes and their hopes for the future.