Moby Dick

In recent weeks, a chorus of big-name investors have taken to the media to rage against the “loose money” policies of the Federal Reserve and Ben Bernanke.

Bernanke, these investors rant, is ruining the country.

Benanke’s policies are debasing the currency.

Bernanke’s policies are creating class warfare.

Bernanke’s policies will lead to runaway inflation.

Bernanke is creating a “fake” stock-market rally.

And so on.

To listen to these Wall Street big shots, you’d think that some of the things they’re saying will happen were actually happening. But they aren’t.

Stan DruckenmillerStan Druckenmiller: One of many big-name investors who is trashing Bernanke.

For now, anyway, inflation remains relatively low, the dollar remains relatively strong, the stock market is rising, American companies have record-high profits and profit margins (which is actually not all great), and society is hanging together.

So, what’s the real cause of the Bernanke hate?

In a long essay, professor Brad DeLong of Berkeley explains.

These big shot investors have bet against Bernanke.

They have bet that Bernanke’s policies will lead to all of the things they say they will lead to, forcing Bernanke to change his ways–and they have been dead wrong.

They are losing money on their bets, and they are so furious about this that they have taken to the media to try to increase the pressure on Bernanke to do something different and stop costing them money. 

In short, these big investors have been wrong.

But instead of just admitting that they have been wrong, and taking their losses, they’re using their reputations and influence to try to increase the pressure on Bernanke and¬†convert their losing trades into winning trades.

DeLong also points out that some of the things the investors say will be so horrible–higher inflation, for example–are actually things that the Fed and the country want. Higher inflation will reduce the real value of the massive debt the country is now carrying. Also, higher inflation will likely be caused by lower unemployment and wage increases, and lower unemployment and wage increases are something that almost everyone should want (except, perhaps, these investors).

An ongoing public debate about Fed and government policy is healthy: We should always ask ourselves hard questions. But some analysis is more objective than other analysis. And the public analysis of big investors, it should be remembered, is often just another way for them to try to make money.

Read Brad DeLong’s essay here >

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