Text size

"NEVER COMPLAIN AND NEVER EXPLAIN" is attributed to Benjamin Disraeli but this stoic expression from the nineteenth century British prime minister also been uttered by many other since, including notably Henry Ford II, the late scion of automaker's founding family. It also used to be the unspoken motto of Federal Reserve chairmen, who traditionally obfuscated rather than elaborated on the workings of monetary policy. Rarely, if ever, did they ever respond directly to their critics, least of all on prime-time network television.

Ben Bernanke has chosen to break with that history. Sunday, the Fed chairman made his second appearance on 60 Minutes, a follow-up to his initial, precedent-breaking interview on the venerable CBS news magazine in early 2009.

Back then, it seemed as if he were starting his campaign for reappointment to a second term as head of the U.S. central bank after the worst financial crisis since the 1930s, something no Fed chairman had done openly. Bernanke did gain a second term in January 2010 but only after significant opposition from the Senate, which typically had approved past Fed nominations nearly unanimously.

Now, Bernanke felt compelled to defend the Fed's current policies, which also are attracting extraordinary opposition. Not that the central bank has never heard criticism on Capitol Hill. But QE2, as the Fed's plan to purchase an additional $600 billion in Treasury securities, has drawn fire for being potentially inflationary, in contrast to the past criticism that the monetary authorities usually were being too tight fisted.

Getting his message out on prime time to viewers that don't generally watch business news let alone read the financial press was a great advantage to Bernanke. So, too, was being interviewed by a coifed correspondent whose knowledge of economics and monetary policy appeared no deeper than his producer's talking points.

So, he let Bernanke off with some whoppers and didn't challenge him with follow-up questions that would have gotten to the heart of the controversy over QE2, which was the reason for the Fed chairman's TV appearance.

Forget about Bernanke's silly assertion that the Fed's purchases of $600 billion of Treasuries didn't amount to "printing money" because currency in circulation had not risen. Had the former chairman of Princeton's economics department had gotten that answer from an undergrad, Bernanke probably would have winced. Currency is the least relevant component of the money stock, except to drug dealers and other sorts who favor cash transactions. And for those who watch the money supply, various measures show signs of growth in recent months after their previous stagnation or outright contraction.

"What we're doing is lowering interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster," Bernanke explained to his inquisitor, who failed to ask the obvious follow-up question: "So, why are interest rates higher now after QE2?"

The key 10-year Treasury note yield is up to nearly 3% from 2.50% just after the Federal Open Market Committee announced the policy change in early November. Mortgage interest rates have climbed to three-month highs and applications fell the most this year in the latest week. So, what's the problem?

Even more caustic that Republicans from Sarah Palin on down have been foreign officials from everywhere from Brazil to China. Wikipedia didn't need to leak what German Finance Minister Wolfgang Schaeuble really thought of Bernanke's policy: "clueless." These officials from abroad basically accused the Fed of deliberately debasing the dollar as the primary means to stimulate the economy, a serious charge against the central bank that oversees the world's main reserve currency. Mr. Bernanke, how do you respond?

Since the Fed chief began to discuss increasing the central bank's purchases of Treasuries at a speech at the Fed's Jackson Hole, Wyo., conference in late August, gold is up nearly $200 an ounce, to a record $1424 an ounce Monday, the day after the 60 Minutes interview. Silver, meanwhile, is up by more than half, topping $30 an ounce. If faith in the dollar hasn't been hurt by U.S. policies, why are these alternative currencies up sharply?

Finally, the FOMC indicated that the Treasury purchases would spur the economy by their positive impact on asset prices. The stock market is up about 15% since the Jackson Hole speech. Since then, crude oil is up even more, rising some 18%. While the $1.1 trillion added to the value of U.S. equities in the past quarter (per Wilshire Associates), which appears to have had a salutary effect on luxury retailers, how will the sharp rise in the prices at the gas pump help the economy. Wasn't $4 gasoline what sent the economy spiraling into recession before the credit crisis of late 2008? And didn't that jump in gas prices follow aggressive Fed easing?

It's clear that such impertinent questions don't make for good television, at least not in prime time Sunday evening. Such queries may become more prevalent in congressional hearings, especially with a Republican majority in the House. As we used to say in Brooklyn, wait 'til next year.

E-mail: randall.forsyth@barrons.com