- The man tapped by President Bush to replace Alan Greenspan
as chairman of the Federal Reserve system is noted for never once having
expressed disagreement with anything said by the United States, top banker.
Yet it is known Ben S. Bernanke is not just a Greenspan clone. In some
ways he is worse than his onetime boss.
- Bernanke will likely take over on Feb. 1, the day after
Greenspan's term ends. But what sets the two apart is the fact that Bernanke,
unlike Greenspan, is a noisy, and, some say, insane, advocate of increased
- Many patriots fear the new Fed head will overuse the
monetary printing press, which is completely controlled by the privately
owned and controlled Federal Reserve.
- Bernanke's recent statement that he plans to continue
his predecessor's inflation-fighting policies contradicts his past remarks
that he will print as much money as the govern-ment wants to spend.
- Should price levels start to sag, declared then-Fed governor
Bernanke, the Fed would prop them back up - if neces-sary, by the expedient
of dropping dollar bills out of heli-copters.
- In fact, in a speech in November 2002, Bernanke related
this gem to a gathering of economists: "Japanese deflation will not
happen in America because the U.S. government has a technology, called
a printing press . . . that allows it to produce as many U.S. dollars as
- Any action resembling this, or even just such crazy talk,
could cause foreigners and others to lose any remaining confidence in the
U.S. dollar and dump U.S. investments and dollar reserves. Since dollars
are not backed by silver, gold, or anything else, if that confidence is
lost the econo-my will crash.
- Outgoing Fed Chairman Greenspan, who has held the post,
the most influential economic policy job in the world, for 18 years, is
much touted for his alleged oracular wisdom.
- But what is this guru's legacy?
- It includes a bloated housing bubble and an already burst
- To preserve the nation from so-called "stagflation"
- where economic growth stagnates while prices go up - the Fed instigated
a real mortgage inflation.
- Thanks in part to Greenspan's influence, keeping interest
rates low, which allowed Americans to buy houses they could not afford,
America's consumers are now overextend-ed, and the gap between household
debt and savings has never been wider.
- Is Greenspan truly a sage, or is he just a crude loan
shark who kept putting off the inevitable financial ruin by loaning out
even more money to Americans who are one pay-check away from bankruptcy?
- The record shows Greenspan is far from infallible. The
early-1990s real estate and banking problems caught Greenspan by surprise.
So did the late-1990s stock market bubble.
- And while Greenspan may have quietly scolded the profligate
spending habits of Congress, he has done little to cool the artificial
and dangerous housing boom.
- Greenspan has pushed investors to take risks he now counsels
against. He delivered his famous "irrational exu-berance" warning
in 1996, claiming the market was getting too frothy. Then he flip-flopped
to the dubious proposition that the exuberance was really not so irrational.
- Greenspan's policies have also robbed retirees, poor
folks and the middle class - while making the rich richer.
- Greenspan is also noted for his betrayal of the elderly
on Social Security. In 1983, Greenspan chaired the commission that convinced
Congress to raise the payroll tax that funds Social Security. He said the
tax hike would ensure the Social Security system's solvency.
- The higher tax fell heavily on low- and middle-income
taxpayers. Sure enough, the tax hike built up a surplus in the Social Security
trust fund. With this surplus in place, Greenspan flip-flopped in 2001
and endorsed the Bush administration's tax cuts, whose benefits went overwhelmingly
to the richest 1 percent of taxpayers, those who make more than $373,000
- Those tax cuts contributed to soaring budget deficits.
- Greenspan then insisted we need to cut Social Security
benefits in order to restore "fiscal discipline."
- In other words, Greenspan jacked up taxes on working
people, adding to the budget surplus, and then endorsed squandering that
surplus on giant tax cuts for the rich.
- So, if Greenspan has been characterized as "good
for America" by the mainstream press, Americans should keep a close
eye on their savings and a tight grip on their wallets when Bernanke takes
the helm of the country's economy.