Enlisting EA Sports To Save Us From the Federal Reserve
As most readers know, EA Sports is the wildly successful creator of home video games that allow the sports fan to "coach" his or her team of choice. Along somewhat similar lines, Fantasy Football leagues offer the same fan the chance to act as general manager.
The beauty of both is that any damage is limited to the individual. Whatever the vanity or ego of the participant, bold ideas about how to win at Madden 2012 or in the office fantasy pool don't harm the innocent.
The same can't be said for the vain actions of the Ben Bernanke-led Federal Reserve. Bernanke combines a stunning lack of self-awareness with a tragically arrogant sense of genius that has him performing myriad experiments backed by the deep-pocketed Fed; the difference here that Bernanke's medicinals make us all ill.
Regarding last week's Fed meeting and the subsequent floating of the Fed's latest plan of action, frightened readers can at least be confident that it won't work. Implicit in Bernanke's promise that the Fed will cease buying bonds when the unemployment rate reaches 6.5% is the not-so-hidden truth that so long as Bernanke's at the Fed, quantitative easing will be the rule.
That's the case given the inescapable reality that there are no jobs without investment first. Just as capital gains taxes are a barrier to investment for them reducing any potential returns, the devaluation of the dollar which is the goal of quantitative easing is a similar tax on the investment that leads to company formation and hiring. Job-creating investors are buying future dollar income streams, and devaluation is a deterrent.
Put plainly, quantitative easing will continue because it's anti-job creation. At best, and this assumes the previously made predictions are wrong, 6.5% unemployment will be "achieved" for driving down the real cost of labor so much that hiring becomes incredibly cheap. In short, QE will only work insofar as it makes the paychecks earned from labor extraordinarily unattractive.
Considering the alleged wrinkle whereby Bernanke says he will tie QE to the rate unemployment, here he's simply acknowledging what's always been true about him being wedded to the Phillips Curve. The latter model suggests that economic growth is the driver of inflation; Bernanke's point with 6.5% unemployment that anything below it will stoke the flames of inflation.
The problem there is that Phillips Curve thinking is completely bogus; so bogus that any reader could with a few minutes of thought explain why low unemployment would in no way drive up inflation. If any reader is stuck, below is a quick explanation:
Whether I'm buying a movie ticket, plane ticket, filling my car with gasoline made expensive by policies in favor of devaluation, or depositing an increasingly devalued paycheck at the bank, I never anymore deal with a live human being. Thanks to innovations of the free market variety, the wage pressures presumed by Bernanke's Phillips Curve model have been rendered meaningless.
Assuming no innovation, and the Fed's devaluations tautologically signal less innovation (remember, entrepreneurs are reliant on investment), there would still be no wage pressures wrought by low unemployment in the States. That is so precisely because the United States is not an island. Instead, producers here interact with the global labor force, and any labor shortages stateside will be erased by eager workers who don't reside in these fifty states. To offer up but one of countless examples, Boeing's 787 Dreamliner is presently being manufactured in seven different countries around the world.
The Bernanke Fed falsely believes that inflation is caused by too much growth, but the reality is the opposite. A strong dollar is the antithesis of inflation, it's what attracts investment, and investment is what brings unemployment down. One reason unemployment is high today has to with the fact that the dollar is very weak (think inflationary - gasoline and food costs are spiking for a reason), and the weak dollar once again is a repellent to job-creating investment.
Back to a non-sports way for EA Sports to save us from the Fed, how about manufacturing a video game for the central bankers and their enablers in the economics profession whose machinations so cruelly weigh on economic growth? Anything to occupy their minds so that they stop causing so much damage.
To keep them engaged, EA's designers could even tweak the game so that quite unlike the real world where adolescent attempts to stimulate growth through the buying of bonds never work, in the EA competition they would. EA Sports is ultimately its own fantasy whereby someone good with a joystick can achieve outcomes that never reveal themselves on the field (think the Detroit Lions winning the Super Bowl), so why not craft EA Quantitative Easing in which the winners print money? Quantitative easing is surely the policy of the adolescent, adolescents reside in a "Everyone Gets a Trophy" world, so why not give the perennial losers at the Fed a chance to actually "win" something?
If so, the mad scientists of the economics profession who foist on us their juvenile musings about "credit creation" and growth will do so in a controlled setting whereby their immaturity will only harm them. Just as the unskilled Madden 2012 player will make the New England Patriots look bad without harming the actual Patriots, delusional economists who regularly make the simple (economics) difficult will no longer victimize all of us with their confusion.
Sadly, what's proposed here is a fantasy. Back in reality, the individuals who comprise the U.S. and global economy will continue to suffer Ben Bernanke's totally discredited solutions to what ails us. But let's not fret. Bernanke's failures are his undoing. From his naivete will eventually emerge monetary normalcy.