Fed Chairmen have a long history of secrecy, carefully crafted statements, and a complete lack of transparency—thus it was understandable that Federal Reserve Chairman Ben Bernanke’s “press conference” at the National Press Club was reason for some excitement. Following his speech, Bernanke was to answer journalists’ questions.
As it turned out, what could have been a great chance for members of the press to ask Bernanke some tough questions about the Fed’s shady dealings ended up looking more like canned questions lofted to Bernanke. But one question stood out, in which the National Press Club Chairman asked Chairman Bernanke whether or not the Federal Reserve’s asset purchase program had anything to do with the growing political unrest in Egypt and around the world or spiking food prices, which have hit all time records according to the United Nations Food and Agriculture Organization (see 28:13 in the video below).
Bernanke pushed back, claiming that food prices had nothing to do with QE2 or anything that the Fed had done to prop up the U.S. economy. According to the Chairman, rising food prices in emerging markets had more to with rising prosperity and a desire to consume better foods.
He claimed that rising food prices were emerging markets’ problem:
“I think it’s entirely unfair to attribute excess demand pressures in emerging markets to U.S. monetary policy, because emerging markets have all the tools they need to address excess demand in those countries.”
So basically, deal with it.
Maybe Helicopter Ben doesn’t realize that the Egyptian pound is in a managed float with the dollar, meaning that when the dollar falls, the Egyptian pound falls. Maybe he doesn’t realize that the main reason for Egypt’s managed float is that Egypt’s biggest export market is the United States—and its biggest export product is oil, which is priced in U.S. dollars. If Egypt allowed its currency to appreciate, it would effectively reduce its oil revenue, make all its other exports more expensive to foreigners, and make tourism more expensive for visitors.
But the Fed claims no responsibility for those prices.
On the other hand, Bernanke took complete credit for rising asset prices, like the stock market, and reducing their price volatility, which is a widely used proxy for risk.
So, somehow, he can create currency that raises some prices but not others. Oh, and don't worry about it, he can control which prices go up.
But the broad United States stock market, as measured by the S&P 500, is up 17.5% since Chairman Bernanke announced QE2, while commodities, as measured by Thomson Reuters/Jeffries CRB Index are up 18.8%. Yes, stock prices have gone up, but measured by their purchasing power vis-à-vis commodities, they have lost value.
It’s insane to think that the Federal Reserve and Ben Bernanke can control which prices rise and which don’t. It’s insulting to free market intelligence that he would claim such power.