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Bernanke Speech Was Only a Minor Footnote to Enduring Crisis
Instead, Bernanke repeated how confident he was in the basic strengths of the US economy while acknowledging that the recovery so far had been less than he had hoped for and that eventual recovery would continue to be "slow." He chided Congress and the president for not using more expansionary fiscal policy and leaving too much of the burden of overcoming crisis on the Federal Reserve. He reiterated promises of very low interest rates for banks to borrow from the Fed for the next two years.
This all amounts to more of the same policies we have been seeing. The Fed has evidently decided not to change course, despite those policies' poor performance since the crisis hit in 2007. "Trickle-down" is indeed the right name for this program: shovel help to the financial top of the economic pyramid and hope it trickles some of its loot down to the mass of businesses and individuals. The immense cash hoards now accumulating in US banks and corporations stand as strong testimony - alongside so much other evidence - that "trickle down" economics is failing yet again.
Bernanke admitted what every observer knows, that the US housing market's current double dip into a second downturn is making economic matters worse. Yet nothing was offered there except ominous references to things eventually improving. They are ominous because "eventually" is a euphemism for the following: let housing prices drop until they are so low that even the falling wages of the US working class will enable some uptick in housing purchases and, so, an end to falling home prices. Meanwhile, the millions of US citizens who invested their only wealth in their homes will have lost a major part of that wealth and, thereby, both hobbled their economic futures and further stalled economic "recovery."
Bernanke's words amount to condemning the housing market and, thus, the economy as a whole, to enduring a rough economic cycle in the usual capitalist way. That is, let the system cut wages enough (by lasting high unemployment, above all else) and cheapen the material costs of business enough (bankrupt businesses must unload tools, equipment, space, etcetera, at fire-sale prices) to make it once again profitable for capitalists to hire workers and set up or expand businesses. Then, those workers may earn enough to afford the cheapened homes, and so on.
The policy options that Democrats and Republicans so loudly debate function mostly to distract people from the ongoing capitalist cycle's social costs. Their debates - like most media coverage of them - are wordy displays that blow smoke above the hard reality. What we are actually doing is waiting for economic destruction to cut deeply enough so that the profit motive can revive the economy it first knocked down.
The economic crisis that exploded in the US spread destructively via the market system that links the US to Europe. Now the economic problems inside each area have become mutually aggravating. Bernanke might have proposed more or better collaboration among central banks to manage their common problems and risks. Some concrete initiatives might have calmed capital markets at least a bit. Instead, silence: another opportunity was thus missed......
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