THE BOYS FROM BRAZIL AND THE WESTERN AVENUE APPROACH TO MONETARY POLICY

11/5/10

Brazilian Finance Minister Guido Mantega is weighing in on the Fed’s seemingly unbridled enthusiasm for quantitative easing, now known in a media/big business world whose greatest proficiency is the manufacture of banal excuses for witticisms, as “QE2.” Mr. Mantega states (Wall Street Journal, 11/5/10, page A6, “Fed Treads Into a Once-Taboo Realm.”)

“It is doubtful the Fed decision will produce any results. Throwing money out a helicopter doesn’t do any good.”

We are now being lectured, and with more than ample justification, about our monetary profligacy by the Brazilians? Some of us are old enough to remember not only Brazil’s 850% inflation rates of the ‘90s, but also the medal bedecked Latin American dictators of yore, who, when faced with protests that their treasuries, plundered in efforts to ingratiate the junta caudillos with their often restive and problematic populations, lacked the money to embark on the latest image enhancing boondoggle, simply barked “Print more!” We are appalled that those with such a sorry history of monetary excess are now in a position to warn us that we on the road to economic perdition.

Obsequious Ben Bernanke, however, assures us that he has the situation under control, that he is no generalissimo affixing a turbocharger to the printing presses. He says that the Fed’s monetizing of the public debt will continue only as long as inflation stays below 2% and will stop when the economy gets going again or if inflation rises too much. He promises.

One who, like yours truly, spent far too much of his youth in the saloons that line the western side of Western Avenue, hears, in Mr. Bernanke’s protestations, echoes of pledges by enthusiastic patrons of those establishments, who assured their fellow revelers, and themselves, that they would only have maybe five or six beers, or maybe eight or nine, and then go home. As closing time approached, those ill-fated pledges were usually replaced by repeated suggestions that a visit to one of the neighborhood’s famous 4 A.M. (5 A.M. on Fridays and Saturdays) watering holes would be a meritorious endeavor.

One hopes that Mr. Bernanke did not study monetary policy on Western Avenue.