Money from Bernanke

I heard and read some interesting news this week and it just seemed that it needed commentary.

On Sunday's 60 Minutes, Ben Bernanke was interviewed. During the interview, there was an exchange between the interviewer and Mr. Bernanke. Responding to a question about whether the U.S. Was printing money, Mr. Bernanke answered in the affirmative, and further indicated that the Federal Reserve was attempting to increase the United States money supply.

Yesterday the news came out that the Federal Reserve was buying up U.S. Treasury Bonds – which is a very direct way for the Reserve to inject additional cash directly into circulation. The word is that it will be on the order of $350 billion. And that's on top of the money the Government is adding to the supply through deficit spending on the American Recovery and Reinvestment Act (not to mention the TARP funds to banks).

I'm very much taking a 'Wait and See' approach to this. As I pointed out during an earlier post, my understanding of economics indicates this is exactly what the Federal Reserve should be doing. And since it is economists (Mr Bernanke is a graduate of MIT and a former chair of the Princeton Economics Department) that are making this latest decision, it gives me a little hope that it is the correct thing (rather than if it were politicians, since there are usually counter motives at play.)

So, do I know this is the correct thing? No. But, I'd put my money on the people who study these things. It came out during the interview that Mr. Bernanke has studied the Great Depression in depth, and in a sense, has prepared for this sort of financial meltdown all his life. Let's hope he's drawn the right conclusions!