Ben Bernanke is stupid.
I’m not being glib. The definition of stupidity backs up my assertion to the letter. Most dictionaries will tell you that stupidity has nothing to do with intelligence, but rather, it has to do with the quality of your decision making and your inability to learn from mistakes.
And though Ben Bernanke’s decisions have almost universally failed to achieve the Fed’s goals of low unemployment and manageable interest rates — he insists on doing the same thing over and over again.
Some of you might think I’m being unfair. After all, what are my credentials to question the mighty Bernanke?
And you might be wondering what my solution would be to really solve all of these problems.
For the record, it helps to look at what Ben’s true goals are with his endless rounds of money printing. He claims that he wants to boost housing prices and stock prices. If he can achieve these goals, he thinks people will be more likely to buy houses, to expand their businesses, and to generally spend more money.
If people spend more money, that will lower unemployment and he’ll have more leeway to raise interest rates into more normal ranges.
That’s what he really thinks.
And he will ultimately continue to fail.
But let’s think of a real way we could achieve the goal of making people feel more bullish about their stock and home ownership – even people who have sworn off investing in these sectors entirely.
During the Great Depression, this country faced a similar crisis. People had been burned not so much by real estate or stock prices (though both plummeted), but were leery of putting their money in banks.
In order to make people feel like banks were a safe place to put their money, the federal government created the Federal Deposit Insurance Corporation (FDIC).
Now, the risk that a bank would go under and you’d lose your entire deposit was completely assumed by the federal government and its regulation of the entire public banking sector.
Wouldn’t a Federal Homeowners Insurance Corporation or a Federal Stock Owners Insurance Corporation make everyone feel much better about putting their money in houses and stocks?
It sure would. But to what end? Is it really in the public’s interest to backstop every home purchase, every stock purchase and every savings account deposit? Is loss something that we need to protect everyone from, at any cost?
Of course not. And it’s just as ridiculous to think that the government can save us from any calamity as it is to think that the Fed can print this economy into boom times. Or even that it would be a good thing for every risk to be taken out of the market. Without risk, there’s no reward.
I’m a fan of insurance. And what most people don’t realize is that there is a form of stock market insurance that anyone can use for themselves.
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