Federal Reserve chairman Ben Bernanke seemed pretty chipper Tuesday afternoon. Another Federal Open Market Committee meeting decided to ‘stay the course’ and continue to keep interest rates low and the policy of the Fed buying U.S. bonds to fund the debt. Bernanke appeared unconcerned about the wave of market sell-offs following the crisis in Japan, nor with the price of petroleum nor with the rising rate of inflation. Old Ben didn’t mention Japan, and just commented that the economy “improving gradually” and the recovery is on “firmer footing”. But should Bernanke take a hint from Julius Caesar and “Beware the Ides of March”? Critics of the Federal Reserve System would sharply disagree with Bernanke’s assessments and policies.
While oil prices have come down recently due to the disasters in Japan, there are still many swords suspended over the global markets. In Bahrain, for example, the government announced a three-month state of emergency to crackdown on the Shia Islam majority of the tiny island nation. Saudi Arabia and several other Gulf states also are helping out, sending some 1,000 troops to Bahrain. The Saudis have also been flexing a strong arm with their own Shia population, much to the discontent of Iran.
The world markets plunged today as Japan’s Nikkei exchange lost 10.5% of it’s value Tuesday, which followed a loss of 6.2% on Monday. Over $600 Billion dollars in paper wealth evaporated. Japan’s central bank pumped another $180 Billion to stem the bleeding, but to no good. Some bond analysts are growing deeply concerned that Japan will soon start defaulting on their debt, which is double their GDP. If they start selling off the $800 Billion is U.S. Treasuries to stay alive, the ramifications could lead to the a global meltdown of the dollar.
But Ben Bernanke seems not to be phased by any of this. Nor did the Federal Open Market Committee meeting of the rest of the regional heads of the Federal Reserve System. The price of petroleum, inflation, lousy housing market and high unemployment be damned! The Fed will continue it’s policies of nearly zero interest rates and buying U.S. debt, since nobody else wants to. Get ready for a third round of quantitative easing! I would suggest Ben recall that warning to Julius Caesar, “Beware the Ides of March!” Bernanke and the rest are acting like it’s the Feast of Lupercalia!