Bernanke Must Come Clean on ‘the Big Lie’ Says Whalen


Expectations are for courteous questions and familiar answers when Federal Reserve chairman Ben Bernanke sits before the Joint Economic Committee in Congress today. After all, it's not as if the two-term Fed chief doesn't have his story down by now. What that means is that he should be able to reiterate his outlook of cautious confidence and reassure the world that things are improving and that the Fed will be able to extract itself from its easy money stance when the time is right to do so.

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But for Fed watcher Chris Whalen, a managing director at Carrington Investment Services, the world would be well served if Bernanke came clean on the short-comings of his global inflation strategy.

"The big lie among all the central bankers is that they can do something to help grow jobs and get the economy back to where it was," Whalen says in the attached video. "Despite everything they've done for the past five years, the pool of credit is shrinking," he says, and in many markets, is actually deflating.

To be fair, Whalen says it's not just Bernanke who is blowing new asset bubbles, he thinks it's a global condition. And nowhere is it more conspicuous than in Japan where he likens the country's new inflation-creation policy by way of a weaker Yen to a ''deliberate act of economic war."

"There's a lot of factors which are forcing countries to essentially compete with one another, so it's hard not to have a trade war," he says, implying that there is destined to be winners and losers as a result of globally coordinated monetary intervention he calls neo-Keynesian economics.

"This is a long term problem. This is the 2000s we're talking about. You've had a series of financial bubbles instigated by the Fed that kept lowering interest rates over time," he says, noting that the unprecedented monetary intervention of the Bernanke-era might be reflating some assets (stocks, real estate) but has really only stabilized the economy, rather than restore it.

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