And Now, in Defense Of Helicopter Ben…

“Helicopter Ben” Bernanke took such a drubbing in the Rick’s Picks forum yesterday that we thought we’d jump off the beaten path to offer a few uncharacteristic words in his defense.  As forum regular Gary Leibowitz noted, going after the guy is “a natural emotional response during times like this. The frustration level is at an extreme. Rationally, how can anyone blame Bernanke for doing his job? There will never ever be a single person in such an important role that would do otherwise,” wrote Leibowitz. “Not a one. Imagine if you were placed in his position and actually had total control in implementing any and everything you think up. What exactly would you do different? Allow all the banks and financial engines to fail? Yeah that might feel good for the moment but what would be the result?”

In our heart of hearts, we’d have to agree. Had we been chosen as “Easy Al” Greenspan’s ill-fated successor, we’d probably have made all of the same mistakes that Mr. Bernanke has made – even knowing full well that they were mistakes. We’d have bailed out the banks by taking all that bad mortgage paper off their hands. We’d have done whatever it bloody well took to keep the assembly lines rolling in Detroit and Dearborn. And we’d have doled out hundreds of billions of dollars for road projects, transit systems, lab equipment and teachers’ salaries. After all, what’s the alternative? 

Only One Remedy

From a purely economic standpoint, there is and always has been just one remedy for the very dire straits we are in:  Let the economy crash, let the banks fail; and let every state, county and municipality fend for itself, even if they have to go bankrupt to jettison pension obligations that are guaranteed to crush us all someday.  But when was the last time anything in this country happened for purely economic reasons?  In fact, there is no such thing as “pure” economics – there is only economics polluted by politics to the point of breakdown.  Economist Adam Smith had all of the right ideas, and he laid them out for us in 1776 with timeless simplicity in The Wealth of Nations.  Unfortunately, the “invisible hand” the Scotsman said would bring about economically desirable results,  even when unintended or unplanned, has met its match in the most politically powerful idea of these, and most other, times – i.e., the concept of a free lunch.  As French economist Frederic Bastiat noted not long after Smith’s day, “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.” 

Just so. Unfortunately, we happen to be living at a time when “the great fiction” may have reached its apotheosis.  Under the circumstances, it seems most unlikely that replacing every Democrat in Congress with a Republican is going to change things one iota. That is notwithstanding the fact that tens of millions of voters – perhaps a majority of them by now – understand that virtually everything the government does nowadays to “help” us only digs us deeper into debt. How might that realization translate into political action?  Answer: It cannot. A Republican majority is doomed to have no more success turning the economy around than the Democratic supermajority currently in power. And although the voters will surely be on the right path in November when they replace scores of career politicians with ordinary people who have worked at ordinary jobs, it will take a Congress filled with good people at least a generations to lay a solid foundation for the rebuilding of an economy that has been corrupted beyond easy or painless remedy. 

Rick Ackerman

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Rick Ackerman is the editor of Rick’s Picks, a daily trading newsletter and intraday advisory packed with detailed strategies, fresh ideas and plain old horse sense. Access to it and to all other Rick’s Picks services is available via a free seven day trial subscription available by clicking here.