James Grant is one of our favorite commenters, and it's not just because we have a soft spot for contrarians. Today the Wall Street Journal asked Grant whether Bernanke has credibility. Grant's answer: Of course not; he works for the Fed, doesn't he?
If the U.S. Department of Agriculture announced, "The price of corn will henceforth be $4 a bushel, and we will meet every six to eight weeks to reconsider, but trust us on this," there would be no end of indignation. People would protest this impudence on the part of bureaucrats.
We call Fed policy makers "central bankers," which is so much more dignified than "bureaucrats." But it is the same proposition. The Fed says it will fix the price of money at a level that will maximize employment and minimize the rate of the rise in prices -- except not too little; we want it to be about 2% -- and make the stock market go up at a nice rate and keep the banking system intact. How can it be credible?
If people think more closely about what the Fed purports to do and exercise skepticism about the capacity of everyday human beings, I think they wouldn't be hanging so heavily on Mr. Bernanke's every word and wondering whether he has credibility. He's in an incredible line of work.
Does Ben Bernanke Have Street Cred? [Wall Street Journal]