Let Them Eat Cake!

Bernanke's Job Is Cake Compared With Fukui's: William Pesek
Sept. 7 (Bloomberg) -- Few people in their right mind would want to be a central banker these days.

Put another way, if most people in their right mind wouldn't want to be a central banker, what does that say about Ben Bernanke? Dare I ask?

Rarely have monetary-policy makers faced a more daunting assortment of things that could go awry. They include a global credit crunch, swooning stock markets, out-of-whack currencies, hedge-fund blowups and whether to fret more about inflation or recession -- or both.

Inflation or recession? Or both? William Pesek, well said!

In 2000, then-BOJ Governor Masaru Hayami was widely derided for raising rates from zero to 0.25 percent. Pundits called him Japan's answer to Herbert Hoover. Yet Hayami was trying to force Japan Inc. to implement structural reforms. It didn't work and rates returned to zero in March 2001.

Think about that for a minute. 0.25% made him Japan's answer to Herbert Hoover? I think that gives a very accurate reading on just how overleveraged this global economy is and has been.

None of this is to say Bernanke has it easy. All eyes will be on him this month to see if he follows an Aug. 17 discount- rate cut with a reduction in the more important federal funds rate.

If Bernanke does, he may be accused of emulating his predecessor Alan Greenspan's penchant for bailing out investors in distress. If he doesn't move, he risks unnerving markets expecting a life-preserver from the central bank.

Bernanke's job really is cake compared to some. Perhaps we should think about that the next time he implies WE should eat cake. At some point we might even have to start paying more for it, but then again I'm a believer in the "recession or inflation or both" story. What would you expect me to say?

(This article was inspired by a comment posted by kwark.)