The editors at the Wall Street Journal let their hair down over the weekend and probably had a bit too much absinthe, to boot. That's the only explanation we can think of to explain the Times New Roman-text lashing thrown in the general direction of Ben Bernanke and the Federal Reserve. The lede:
So Federal Reserve officials are whispering to reporters that they will consider a "pause" after another interest-rate cut this week. Perhaps we should be more respectful, but this sounds like the alcoholic who tells his wife he'll quit drinking next weekend, after one more bender. What Chairman Ben Bernanke needs isn't a gradual withdrawal from easy money but membership in Central Bankers Anonymous.
The editors -- and wouldn't we really love to know precisely who? -- suggested that the rate cuts put forth by the Fed have done little to take the edge of off the current financial and mortgage crisis, instead placing credit for soothing the savage beast to the Fed's "discount window innovations."
The way to save a troubled banking system is to focus on specific problems via dividend cuts, new management, losses in shareholder equity, rights offerings and other new capital, and if need be public money through the Federal Deposit Insurance Corp. Meanwhile, the Fed's decision to open the general monetary spigots has inspired a global commodity boom unlike any since the 1970s. Oil has climbed to nearly $119 a barrel today from $70 in late August, a 70% increase. Farm and other commodities have seen a similar surge, with corresponding increases in food prices leading to shortages and riots in Egypt and other places, and to rice hoarding even in Southern California. The popular media explanation is that this price surge is a result of rising global demand, greedy speculators and human profligacy. All of a sudden, without warning, the world is said to be running out of food. After 30 years in intellectual hibernation, Thomas Malthus and the Age of Scarcity are back in style.
The rest of the editorial sort of teeters between giving Bernanke credit and taking it away at the same time, with the only part we can really agree with being an admonishment of the weak-dollar policy that has dominated the Fed's monetary policy decisions. (We've also been reporting for well over a week that the Fed is considering a pause in its rate-slashing campaign.) That being said, we're very surprised to see the WSJ forget that the rate cuts did have a more direct and almost immediate impact on helping hundreds of thousands of otherwise troubled subprime borrowers avoid the proverbial guillotine that was a looming rate reset. That particular bit of good news -- and it is good news, at least so far as it goes -- wasn't even deemed worth a mention in the missive. That said, we can't help but wonder if it is possible that the Fed has already focused on the needs of a few, at the expense of many. After all, as bad as housing is -- and will continue to get, BTW -- we're still talking about a minority of the homeowning public.