I was talking to a friend of mine about the key monetary problems facing our nation. He sighed and agreed with me but he remarked that the problems were quite complex, and in reality difficult for most people to understand. This is a problem since the US is a democracy, and perhaps the only solution is a better informed electorate.
To that end, I have invented the Federal Reserve Football League. Imagine that the United States is a football team. We compete against all of the other teams in the world and of course the perennial winners such as China, Japan, Europe as well as upcoming teams such as Brazil and Russia.
Different than a football game, the games are played real time and all the time. The scoreboard and the winning teams are determined by unemployment and GDP growth rates. The teams with the lowest unemployment and the highest GDP growth rates win and the others lose.
The problem for anyone that keeps track of these things is that in the last 5 years, the American team is losing. During the recession of 2008, the US team slowed to a grind while the teams of Brazil and China forged ahead.
Just like in football, the press plays a huge role and they applied huge pressure on our coach, Ben Bernanke, to improve the team’s performance NOW. So Ben Bernanke started trading draft picks for veterans. He traded the American team’s first round draft pick for the next 5 years, for a bunch of very high paid albeit older stars. Just like in football and perhaps Dan Snyder and the Washington Redskins, this type of strategy rarely works, and the American team still is not winning vis a vis the competition.
Bernanke is frustrated but he doubles down on his strategy, and he trades away the next 5 years of first round draft picks. Of course, because the draft picks are so far into the future, the stimulus to the team is marginal, and the team still cannot compete well against the new superstars in China and Brazil.
So this is where my analogy ends. Bernanke has forced interest rates to 0% for over 5 years now with marginal results. Just like in football, if you trade away all of your draft picks for players, you are sacrificing the future for the present. That is what Bernanke is doing today. He is discounting the future of our young people and that of the country. It is hard to imagine a football team that has traded away the next 10 years of draft picks but that in essence is what Bernanke has done to our country.