We seem to be the only country that keeps inflating our money supply when other nation's are paying down their debt. This bothered me a lot, because Asian countries say that money from QE2(our attempt to inflate the economy by having the Fed buy treasuries) is causing inflation in their countries.
I dropped by to see Ben Bernanke the other day to talk to him about why he still wanted to buy treasuries when the world is facing runaway inflation.
“As you know, I’m an expert on the depression,” he said.
“I heard that,” I said. “But we are the only country that isn’t trying to bring down its deficit. Other nation’s people don’t like it either, but it seems necessary that we do it too.”
“Have you read the material I’ve written on the depression?” Bernanke said.
“Some of it,” I said.
“Then I don’t understand why you’re asking me these questions,” he said.
“I don’t understand why we’re a debtor nation and aren’t doing anything about it?” I said.
“If I don’t keep buying Treasuries to inflate the money supply, the stock market might go down and we also might have a double dip,” he said.
“It sounds to me as if you don’t think the American people can put up with some pain now in order to avoid enormous pain later,” I said.
“Aren’t you an American?” he said. “The bankers want to have larger paychecks. Those on Wall Street want the market to keep going up. People whose houses are underwater don’t want to pay back what they owe on their mortgages,” he said. “The bankers and the people on Wall Street control this country and I’m not going to make them angry.”
“But one day, when we aren’t the world’s reserve currency, we’ll have to pay back all the people and countries we took money from.”
“Take a closer look at what I wrote about the depression and you’ll understand,” he said, standing up and walking out of the room.
I realized as I walked around Washington that I'd read all about it, but this time I was in a depression of my own. If only a country could take a Prozac.