Yesterday, when Tim Geithner was being interviewed by CNBC’s Steve Liesman, he was asked about “monetizing the debt,” basically having the Fed print up money to pay for the government’s expenses.
Geithner was clear. There’s no risk of that in the United States of America, he said, because we’ve got a strong, independent central bank that’s commited to fighting inflation. Independent is the key here. Ben Bernanke doesn’t have to be a team player, and maybe he shouldn’t be.
Today he’s telling Congress to quit it with the spending already, but as Karl Denninger points out, if Bernanke really didn’t approve of all the spending, he could cut it with the quantitative easing and rate manipulation, and force the government to borrow at market prices. He doesn’t have to play along.
Rates would move up, but this would put a 1990s-style bond market slam-hold on President Obama’s and Congressional “drunken-sailor style” spending binge.
I only look at what people do – a good part of the time what people say is in fact exactly the opposite of what they’re doing, because they are trying to goad you into doing something stupid so they can say “Sold To You!“, sticking you with the bag.
I will buy that Bernanke is serious about his so-called “urgings” when he withdraws the idiotic attempt to support both MBS and Treasury issuance.
But really, given how close everyone’s working together from the White House on down to solve the crisis in the best way they know how, is there any chance that Bernanke would stay home from the party. Heck no.