I like to think of Ben Bernanke as the Caligula of Cash. That I hold him in low regard should be familiar to anyone with a passing familiarity with this blog. To me, his sycophantic tendencies were already on display when he offered his now-infamous deficits-don't-matter-because-there's-a-global-savings-glut hypothesis to put himself in the running to succeed Alan Greenspan as Fed Chairman during Bush the Younger's term. As countless others have pointed out, this piece of Cheneynomics is purposefully misleading. Also, many misunderstand my perspective while expressing disdain for Bernanke's treatment of currency issues. Unfortunately, I am still a dollar holder. As such, my primary concern as far as Fed policies go is shoring up the external value of the currency. That is, I am indifferent to whether the US unemployment rate is 5% or 50%. As long as the dollar remains a respectable store of value (fat chance of that now), I am pleased.
However, I should have known better about what'd be coming as this is a guy who's spoken of making helicopter drops of money. In this regard at least, what you see is what you get--an economolester of the first water. The results speak for themselves: now, commodity bubbles aplenty; in the future, serious doubts over America's continued economic viability as the bill for fiscal and monetary foolishness becomes even more apparent to those foolhardy enough to fund America, the world's biggest Ponzi scheme.
Simply put, the United States is a country that has run out of ideas. Inflating even bigger bubbles than those which got it into trouble is the Fed's idea of fostering economic recovery. As before, this fake prosperity is telling. Some commentators like to point out slightly improved incomes and household savings rates as signs of improvement. Both, however, are not due to wage gains. Instead, both stem from fiscal stimulus--tax cuts, rebates, and so forth. Unless these "money-for-nothing" gains are continued indefinitely, I do not see net improvements in America's economic well-being by substituting dodgy household finances for dodgy national finances.
In the final analysis, Bernanke is merely symptomatic of a country in decline. An old professor of mine--an American, mind you--used to deride people he called "fat, dumb, and happy." Putting the happy part aside for now, there are certainly plenty of fat people in America clogging their arteries and the health care system with their personal irresponsibility. As for the dumb part, well, "All Children Left Behind" is well underway as standardized college admissions scores continue dropping. It's all of a piece with what America has become: an instant gratification society. Like its former leader telling everyone to go shopping after 9/11, it all fits. Unwillingness to make sacrifices for the common good and lack of remorse in externalizing homegrown woes are the hallmarks of modern America. Don't worry, be happy; we'll just kick the can down the road and make future generations shoulder unbearable burdens. Live for today. Hey, Uncle Ben told us to do so.
In the next year, I will have more on how the rest of the world should discipline America. It is a menace to itself and everyone else that should be put in its place with undue haste.
BENEDICT XVI, THE ANTI-BERNANKE
What I find admirable about Benedict XVI is that he's the most un-Bernanke-like character you can come across. There is no carefree (careless?) hedonism about this person. Filling the shoes of a communist-shattering titan like Pope John Paul II was always going to be a hard task, but one he's handled with considerable aplomb. While still Cardinal Ratzinger, he was absolutely right in clamping down on all vestiges of Marxist thought infiltrating the church in the guise of liberation theology. Nowadays, of course, he has many more challenges to confront than the ideological ones that bedevilled him in the past.
In stark contrast to favoured Bernanke doctrines of justification ("global savings glut") and flippancy about serious concerns with global consequences ("helicopter drops of money"), we get real gravitas with Benedict XVI on contemporary issues. As leader of the Catholic church, you also get none of the Yankee parochialism you get from Bernanke, although this may be a somewhat unfair point.
Pope Benedict's encyclical Caritas in Veritae was released earlier this year to widespread notice. After a few year settling into his role, Benedict the doctrinaire unleashed his interpretation of globalization through a Catholic lens. Finding fault with neoliberals and anti-globalizers alike, his words of wisdom should resonate with all reasonable people:
The Church has always held that economic action is not to be regarded as something opposed to society. In and of itself, the market is not, and must not become, the place where the strong subdue the weak. Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations. Admittedly, the market can be a negative force, not because it is so by nature, but because a certain ideology can make it so. It must be remembered that the market does not exist in the pure state. It is shaped by the cultural configurations which define it and give it direction. Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man's darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.There is much more to gather from this tract. Although focused somewhat on Catholics (it is, after all, an encyclical), there are countless other substantial ideas offered here on topics such as multiculturalism, migration, economic governance, the environment, and more. As an aside, it's quite amusing when Tyler Cowen from the rational choice bastion George Mason University found the encyclical to be a "sprawling mess" in the op-ed pages of the Wall Street Journal. Such was to be expected. What is rat-choice in the end other than looking out for #1? In other words, you act like your own God. Moreover, Cowen's is not the most informed opinion in discussing the subject matter; he even cites predominantly agnostic Holland to offer a counter-example.
The Church's social doctrine holds that authentically human social relationships of friendship, solidarity and reciprocity can also be conducted within economic activity, and not only outside it or “after” it. The economic sphere is neither ethically neutral, nor inherently inhuman and opposed to society. It is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner.
Another noteworthy work from the Pope that has received somewhat less attention is his just-released text on the celebration of the World Day of Peace, 1 January 2010. This writing is more focused on environmental matters in keeping with the recent Copenhagen climate meetings. It expands on the encyclical by offering a view of how environmentalism fits with development:
It should be evident that the ecological crisis cannot be viewed in isolation from other related questions, since it is closely linked to the notion of development itself and our understanding of man in his relationship to others and to the rest of creation. Prudence would thus dictate a profound, long-term review of our model of development, one which would take into consideration the meaning of the economy and its goals with an eye to correcting its malfunctions and misapplications. The ecological health of the planet calls for this, but it is also demanded by the cultural and moral crisis of humanity whose symptoms have for some time been evident in every part of the world. Humanity needs a profound cultural renewal; it needs to rediscover those values which can serve as the solid basis for building a brighter future for all. Our present crises – be they economic, food-related, environmental or social – are ultimately also moral crises, and all of them are interrelated. They require us to rethink the path which we are travelling together. Specifically, they call for a lifestyle marked by sobriety and solidarity, with new rules and forms of engagement, one which focuses confidently and courageously on strategies that actually work, while decisively rejecting those that have failed. Only in this way can the current crisis become an opportunity for discernment and new strategic planning.Again, there's much more here as he links security matters to environmental ones among other things. Appealingly, he talks the talk and walks the walk. For all his affectations of environmental concern, US President Barack Obama rides around town in a car that gets less than 10 MPG and flies around the world in a jumbo jet. Methinks his carbon footprint is large--probably the largest in a famously wasteful nation. By contrast, the Pope is the head of the world's only carbon-neutral state.
Ultimately, the Pope's message is one we can believe in for good reasons: He doesn't construct naff narratives to curry others' favour but earnest ones borne of deep conviction and reflection. He doesn't believe in free lunches but in principled living. He doesn't tell others to act in a way he doesn't. As always, the straight and narrow is not always the most attractive path, but it's the one most likely to steer you away from the comfortable path to ruin. What if the Vatican were run "Anglo-Saxon" do-what-you-please style? Why, it'd be the Church of England--a mere shadow of its former selfishness. Whether in economics or religion, there are lessons here.
The evidence, then, is incontrovertible: "God's Rottweiler" mauls the competition. IPE Zone's Person of the Decade is none other than the former Cardinal Ratzinger, Pope Benedict XVI. Long may this great man enlighten us all.