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Dr. Bernanke's Magic Elixir for the Economy

The opinions expressed by columnists are their own and do not necessarily represent the views of

Ben Bernanke is proving a fitting successor to Alan Greenspan as chairman of the Federal Reserve System. Unfortunately.

The Fed's previous chairman and guru-in-chief drove interest rates down till he could scarcely get them any lower without diving into the negative numbers. It was a very popular policy. Booms always are till they go bust.

Mr. Greenspan, who in his salad days was an ardent gold bug and admirer of Ayn Rand (but I repeat myself), worked his way up to become America's fiscal genius du jour. Till his panaceas proved as reliable as panaceas usually do.

Ah, but there was a time earlier in this shiny new, fraudulent century when every word Alan Greenspan spoke was studied and weighed and analyzed -- much like fool's gold before the prospector realizes he's got only iron pyrites.

Still, for a while there, Mr. Greenspan's name was spoken with awed reverence every time he delivered himself of cryptic comments worthy of Chauncey Gardiner -- the character played by the still missed Peter Sellers in "Being There."

You may remember that late-'70s movie. The basic plot: A simple-minded gardener, thrown out of a job after his wealthy employer dies, is hailed as the financial genius of the age when his vacant comments are taken for Zen-like wisdom.

The film is supposed to be a comedy but there is something infinitely sad -- and all too relevant -- about it. And about the world's eternal eagerness to believe in simple solutions to complex problems.

Peter Sellers' performance needs to be seen again by anyone tempted to attribute omniscience to the latest inscrutable financial genius to appear on the American scene, whether it's a Bernard Baruch pontificating on a park bench in the '30s or a Warren Buffett, the folksy Omaha Flash, holding forth in these uncertain times.

These days the problem is how to help the economy recover from the last set of solutions. Remember them? They were doozies. Like having Fannie Mae and Freddie Mac back up tons of worthless mortgages. Which meant they'd be insured by the full faith and credit of the U.S. government! Well, sort of. But they could always be bundled together in large enough volumes to eliminate any risk to the buyer. What could possibly go wrong?

We all found out soon enough. For now it's the fixes that need fixing. And the simplest fix is as at least as old as the Weimar Republic, which didn't last long, either. Just start up the printing presses! If money's short, paper isn't. Just turn it into currency, or bonds, or whatever form the magic ever-expandable money supply takes nowadays. M1, M2, M3 or M-anything.

The country's latest apostle of Weimarization is Ben Bernanke, whose crew at the Fed (with the exception of the usual few spoilsports who know some history) have decided to buy another $600 billion of Treasury bonds, which should allow the banks to make another $600 billion in loans, which should get the economy's wheels spinning again. Sure result: Happy Days Are Here Again!

Never mind that banks are already sitting on mountains of cash, hesitating to invest it in an economic/political climate in which everything from next year's tax laws to the future of the country's health care is up in the air.

But why bother with details? Just get the Reichsmarks -- excuse me -- the dollars -- flowing again. And if that doesn't work, if things are still a tad sluggish, just print more of them!

Alas, the more printed, the less each is worth, till a whole society can be drowned in worthless money. "Only government," Milton Friedman noted, "can take perfectly good paper, cover it with perfectly good ink, and make the combination worthless."

For an object lesson in what can happen to the best-laid inflationary plans in real life, and in the all too real economy, see the history of the definitely former Weimar Republic.

For a more recent example, there's the Panic of 2008-09, whose after-effects are still with us. But we're supposed to believe that the same inflationary approach that led to that financial collapse will get us out of it. Just try a dose of Doctor Bernanke's magic elixir -- a whopping big, $600-billion dose -- and the economy will be cured!

Whatever brief high this medicine produces, it may soon enough prove the kind of cure that assures only a relapse.

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